Features Australia

The Rorting Twenties

Covid: robbing the poor to give to the rich

29 May 2021

9:00 AM

29 May 2021

9:00 AM

We are now in the rorting Twenties. Wealth is being concentrated among a few global billionaire elites and large companies while many young people are set to be the first in centuries who are worse off than their parents.

This dangerous shift is being enabled by governments across the Western world who, for some time, have worked to centralise and consolidate political, economic and cultural power. The lockdown recession imposed by governments last year exposed and exacerbated these dangerous shifts.

It was always going to be the case that lockdowns would harm small businesses and working people and benefit larger corporations. The arbitrary distinction between ‘essential’ and ‘non-essential’ businesses saw small florists forced to close, for example, while supermarkets were allowed to stay open and sell flowers, helping them to entrench their position by prevailing over their competition.

This causes a perverse incentive for the beneficiaries of lockdowns to advocate for them. As some cynically suggested in early 2020, there was a reason the Jeff Bezos-owned Washington Post was publishing frightening articles about the severity of even ‘mild’ cases of coronavirus and contributing to the public’s panic. If governments imposed strict, extended and repeated lockdowns, Amazon, another Bezos-owned corporation, would be able to further entrench its position at the expense of bricks-and-mortar stores.

And this is precisely what happened. At the beginning of 2020, Amazon’s market cap was around $US940 billion. It increased rapidly between April and August of 2020 and is now in the region of $US1.65 trillion. According to the Forbes 2021 billionaire list, Bezos’ personal net worth increased from $US113 billion to $US177 billion between 2020 and 2021.

Lockdowns now rank as the most effective wealth concentration policy known to man. As Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management, wrote for the Financial Times on 14 May: ‘The total wealth of billionaires worldwide rose by $5tn to $13tn in 12 months, the most dramatic surge ever registered on the annual billionaire list compiled by Forbes magazine.’

Again, it is unsurprising that this happened. As Institute of Public Affairs Executive Director John Roskam wrote for the Australian Financial Review last May, those deciding how to approach the coronavirus crisis and the subsequent economic recovery thought it best to only listen to ‘those who inhabit the cosy club of the Qantas Chairman’s Lounge: big business bosses, public servants, and former union officials and Labor politicians’. The voice of small business was completely missing from the National Covid-19 Coordination Committee, Roskam noted, despite the fact that eight per cent of all small businesses in Australia had completely stopped trading by the end of March due to the lockdowns.

The result of the lockdown measures has been a consolidation of our economy. We are left with fewer businesses and bigger businesses, which is a continuation of the recent trend.

The political class and public sector elites are facilitating this shift. Earlier this month, the deputy chairman of the Australian Prudential Regulation Authority, Helen Rowell, said that the ‘emerging [superannuation] industry view’ was that super funds with less than $30 billion in assets under management should be consolidated into larger funds which can ‘deliver stronger investment performance and lower fees’, indicating that the regulator would prefer mergers with ‘larger, better performing partners’. In other words, Rowell would like to see the 142 APRA-regulated super funds consolidated into a handful of mega-funds.

There are a number of arguments why this would be a bad policy from a technical perspective. Who decides what a ‘better performing’ fund is? And should Australians not have the option, for example, of choosing a fund which may have a relatively lower annual rate of return, but which has a large cash holding to seize any opportunities presented in the wake of a market crash?

But more importantly, APRA should not be facilitating the consolidation of wealth and power because it risks undermining our democracy.

As the American Supreme Court Justice Louis Brandeis once noted: ‘We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.’

We have already seen a consolidation of super funds, and it would be irresponsible of APRA to further accelerate this. An analysis of their own data shows that, between 2004 and 2019, the number of industry, public sector and retail super funds declined by 57 per cent, while total assets under management increased by almost 400 per cent.

This is representative of the broader consolidation that has taken place in recent decades. And it poses a very real threat. If a bad actor were to gain influence over a super fund chosen at random, it would be better that we had 100 super funds controlling $30 billion each than only five controlling $600 billion each; the former would be able to do far less damage than the latter.

That is one of the key points of Edmund Burke’s ‘little platoons’, namely, if power is concentrated in one place, then it takes only one bad actor to take control and shape the whole society as they see fit. This is what we are seeing with the newly proposed changes to the National Curriculum: a small group of activists is on the cusp of ensuring that every schoolchild in Australia is taught the dangerous ideology of identity politics.

If each school, or even each state, decided their own curriculum this would never happen as, if power is dispersed, it is much harder for activists to gain system-wide control.

Over the rest of the decade, we will see the political and social distributions caused by concentrating political, economic and cultural influence. Lockdowns were the precursor to the rorting Twenties that are still to come.

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Cian Hussey is a Research Fellow at the Institute of Public Affairs.

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