Politics enters the age of disruption

Modern politics is being disrupted by change as greatly as any business

One of the key features of modern western nations is how stable politics is with very few major parties being less than fifty years old and many boasting a history lasting back a century or more.

Now in the US and Australia we’re seeing the slow motion implosion of the established parties of the reactionary side of politics – it would be misleading to describe the schoolboy ideologies of most American Republicans or Australian Liberals as being ‘right wing’.

Tony Wright in the London School of Economics blog asks What Comes After the Political Party?

Wright’s view is political parties are doomed to extinction as their memberships dwindle and this is an opinion shared by many watching the declining participation in formal politics over the last fifty years.

One result of that declining participation has been the steady increase in power of the machine apparatchiks who’ve increasingly replaced boots on the ground with corporate funding.

The consequence of that increase in power has been a steady disconnect between the concerns of the electorate and the priorities of the party leadership.

In the US that disconnect resulted in the Republicans blindsided by the rise of Donald Trump and the Australian Liberal Prime Minister increasingly looking like Grandpa Simpson as his party shuffles towards what increasingly looks to be a ballot box disaster.

Both parties are likely to rip themselves apart as the contradictions of the modern reactionary movement – dismantling public services while increasing government powers – come home to roost with the ideologues and pragmatists within the organisation fighting bitterly.

The truth is political parties are no more permanent than businesses, or indeed nations, and in a time of economic change it isn’t surprising old parties die and new ones are formed.

While political parties won’t cease to exist, the new political parties that will rise from the wreckage of today’s will be different in both their philosophies, organisation and membership.

Parties that were formed in the horse and carriage days or the early era of newspapers and radios are always going to find the internet era to be a challenge, that they are being run by men whose political theories haven’t moved for fifty years only guarantees their demise.

In many ways, what’s changing politics is exactly what’s changing business. However the politicians and their supporter seems far more oblivious to change than their commercial counterparts.

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How Australia’s nanny state hurts business and society

Australia has changed in the last quarter century as governments of both persuasions have found it easy to legislate rather than lead. The nanny state has had effects on business and society in general.

It’s becoming popular to describe Australia as a ‘Nanny State’ as governments respond to moral panics and the need to do something about anything from bicycle helmets to unpasteurized cheese.

Unquestionably Australia has changed in the last quarter century as governments of all persuasions have found it easier to legislate rather than lead. This has had effects on business and society in general.

A good example of how the regulations have built up over the last twenty years in Australia is a sign at my local beach.

the Australian nanny state is shown in signs at balmoral beachThat’s a fine welcome and it compliments the $7 an hour parking fees the local council levies. In itself, those parking fees are a good example of the price pressures driving Australia’s high cost quandary.

Drinking on Sydney ferries is banned in Australia's nanny state

Possibly the saddest regulation is the alcohol ban on ferries. Twenty years ago it was normal to see a group of friends unwinding on the way home from work with a cold beer or wine. Today you can’t do that because some bureaucrat decided drunks were a problem and rather than enforce existing laws it was easier to ban drinking entirely.

The press and moral panic

Much of this nannyism is being driven by the media who drum up hysterical reports demanding ministers do something. In turn the government’s panicky PR obsessed apparatchiks respond with pointless and unnecessary laws and rules. Often duplicating those that already exist.

A good example of cynical media hysteria was the story of Malea, a Sydney mum minding her own business while legally cycling with her child in a trailer.

While out riding a discredited journalist filmed Malea and passed the footage onto a current affairs TV show which portrayed her as a reckless mum and demanded such behaviour be banned.

Fortunately in that case the politicians ignored the confected outrage, but that’s the exception rather than the rule.

Doing something

The media though doesn’t have to force Australian politicians into adopting the nanny reflex. Often governments will create their own outrage in order for attention deprived politicians to get press coverage.

A good example of this was the incompetent Carr government which decided its contribution to the War On Terror after the 9/11 attacks would be to turn the Sydney Harbour Bridge into something similar to what welcomes Guantanamo Bay detainees.

The Australian nanny state is shown by the Sydney Harbour BridgeIt’s worthwhile comparing the same view on San Francisco’s Golden Gate Bridge and ask which is the greater terrorist target?

San Francisco's Golden Gate BridgeWhen Sydney genuinely was a larrikin city, climbing the Harbour Bridge in the dead of night was a rite of passage. Today, if you can get around the security guards, barbed wire, CCTV and motion detectors you risk a $3,300 fine and being branded a terrorist.

If you try to climb the bridge and get caught, the fine is only half that of stepping on the hallowed turf of the Sydney Cricket Ground.

At the cricket, if you’re foolish enough to bounce a beach ball, start a Mexican Wave or sing out of tune and you’ll be out before you can say “Shane Warne is a safe driving ambassador.”

The Age newspaper gave a good example of Australian sports administrators’ Stalinist mindset in this fawning article which gloats over the efforts MCG staff go to in harassing their customers.

On level three of the Members’ wing is a secure room with the best seats in the house, although the occupants only manage an occasional glance at the game on hand. It is the MCG command post, where ground security, police and Securecorp officers constantly watch a bank of computer monitors and camera screens.

Dohnt says the camera operators will check the froth on a punter’s cup of Coke to see if it has been topped up with smuggled grog.

Forcing cricket fans to buy overpriced drinks or visitors to spend over $200 to climb the Harbour Bridge brings us to the core motivation behind many of Australia’s nanny state regulations – protectionism.

Hidden protectionism

Many Australian Nanny state rules are to protect businessThis sign, which is attached to the back of the one at the beginning of this story, bans vendors who sell from boats. It’s questionable whether the council actually has the power or resources to enforce this ban but if it helps the local shopkeepers then so be it.

One of the hubristic traits of Australian exceptionalism is that the nation is a ‘free trade’ economy hard put upon by sneaky Japanese, American and European protectionism. The reality is Australia is just as good as Japan or the EU in introducing sneaky regulations to protect the well-connected locals.

A very good example of this is bananas where the Australian domestically produced product is substantially dearer than imported bananas sold in the US, UK or Europe.

In early 2011, Cyclone Yasi devastated Australia’s banana crop and prices soared. Not one imported banana was allowed in to ease the shortage. Remember that the next time you hear a politician or journalist boasting about Australia’s free trade credentials.

business is hurt by nanny state rules

Banana prices are another example of the costs passed onto Australian households and industry through nanny state regulations. Compliance costs are real and add to the cost of production and employment. They are another reason why Australia has become a high cost economy.

More importantly, those regulations tend to favour incumbents making it harder for entrepreneurs and new entrants into markets making the economy even less flexible.

The burden of regulation is also unfairly dropped upon the smaller business who don’t have the resources to comply with or challenge unfair rules. The Howard government was very good at this with slapping small business with the responsibilities of raising the GST and complying with draconian laws like Workchoices.

At this stage it’s worth noting that the Australian nanny state isn’t a Labor party creation, it’s come from both sides of politics and often because poorly drafted laws require mountains of regulations to overcome the legislative flaws.

Workchoices was probably the best example of badly thought out laws where the Howard government panicked into slapping a whole level of punitive rules for businesses who failed to keep log books of staff hours worked – the legislation was so bad that had it not been repealed by Rudd, the sight of bundy clocks would have become common in Australian offices.

Nanny and risk

One of the unfortunate effects of the nanny state is that it saps the entrepreneurial spirit – why take risks when nanny is there to support you?

There is an unintended effect of this though – because we think nanny will always protect us we lose the ability to evaluate risk.

Where this is most obvious is in financial matters. Too often people are fooled into investing in dodgy schemes because they think that regulators will protect them. They find out this isn’t the case when the money is long gone.

That failure to understand risk though becomes pervasive through the community as the nanny state mentality becomes established. We could argue that inability to identify risk was the core reason for the global financial crisis.

The future nanny state

While the nanny state has been rampant around the world for the last fifty years, its days are numbered as cash strapped governments find they can no longer bear the cost of maintaining armies of bureaucrats to enforce silly rules.

As society deleverages from the excesses of the credit boom, governments are going to find revenues falling short and while it won’t be the first casualty of the new austerity, the nanny state will almost certainly be a victim.

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Desperate Ken and market realities

Adam Smith’s invisible hand of the market is giving some people a nasty slap over the head.

Ken Slamet has a problem, his in-laws are trying to sell the family house and no-one will give them the price they want.

The house at 228 Warrimoo Ave has been on the market through an agent for more than 100 days, pulling in ridiculously low offers, Mr Slamet said.

Depending on the deposit, Mr Slamet is seeking between $1.5 million and $1.6 million for the house his wife grew up in.

One would argue that those “ridiculously low offers” are actually Mr Market giving Ken and his in-laws a slap of reality. They are simply asking for too much money.

St Ives, a suburb on Sydney’s Upper North Shore, is going through demographic change. In 1960s and 70s St Ives was the suburb for successful stock brokers and bankers, however in the 1980s and 90s that demographic decided they wanted to live closer to the city and Harbour and suburbs like Mosman and Clontarf became their areas of choice.

For Ken’s in-laws and their neighbours, this is bad news as few other people can afford 1970s mansions on large blocks within 30km of Sydney. Those who do manage to sell often find the buyers are developers who sub-divide to build townhouses or apartment blocks, madness in a congested, car-dependent suburb with poor public transport links.

Adam Smith’s invisible hand of the market is giving those holding properties that were attractive to stockbrokers in 1972 a nasty slap over the head in 2012.

Ken though has a solution for his problem – he’s offering a rent to buy scheme at a mere snip of $2297 per week. An amount 70% higher than the average Sydneysider’s gross income and a whopping four and half times the city’s average rent of $500.

Good luck with that.

The real problem is that Ken’s in-laws are stuck with expectations higher than the market reality. Like many of us in the Western world, they believe their assets are worth more than they really are.

As the global economy deleverages there will be many more people like Ken’s family. For many the transition to a less wealthy lifestyle is going to be tough.

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