Perks of the job Who’s corrupting who?
Peter Swan AO FRSN FASSA
Professor of Finance at UNSW Australia Business School, University of New South Wales
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In an 1887 letter to Bishop Creighton, English politician Lord Acton famously noted, ‘Power tends to corrupt, and absolute power corrupts absolutely.’
One of the key battle lines in the 2022 election was the issue of political integrity and corruption. This was a key element of the electoral platform of the Teals and Labor which was manifest in the creation of the National Anti-Corruption Commission. Yet lo and behold, despite the establishment of such a body, suggestions of corruption have increased rather than decreased. How can this be?
It is because of the strong connection between expanding government and the rise in both subtle and overt forms of corruption. The more sugar on the table, the more numerous are the cockroaches which appear.
A perfect case study of the add-sugar-attract-cockroach effect has been the politician and senior public servants flight upgrades and premium lounge upgrades story recently re-energised by Joe Aston in his book, The Chairman’s Lounge. One particular allegation made by Aston was the flight upgrades given to Anthony Albanese when he was transport minister and shadow transport minister.
Questions have subsequently been raised asking whether Qantas upgrades and travel perquisites for Albanese and other government officials unduly influenced public policy. Unfortunately, this focus misses a larger issue. The question isn’t if Qantas has influenced government officials but rather how the Australian government has influenced Qantas and Australian business broadly.
It is abundantly clear, when assessed against Qantas’ 80 per cent share of government travel, that its system of soft influence has been a brilliant strategy, brilliantly executed. However, Qantas’ strategic opportunity only exists because of the government’s expanding control over Australian business. As government spending and regulatory reach grow, so does its ability to shape and determine the success or failure of businesses. A loan guarantee here, a bailout there. A regulatory concession for one group, a ministerial decision to prevent a new mine for another group.
So, who is really corrupting whom?
An examination of politician disclosures reveals a wide array of gifts beyond those from Qantas. Concert tickets, sporting event tickets, artwork, books, international study tours, alcohol, subscriptions, and even gym memberships. Disclosing gifts doesn’t rule out that the gift giver has benefited in return.
Why else would such gifts be offered?? These aren’t gifts and gratuities given to customers, shareholders, employees or suppliers, so why are politicians and government officials recipients? Claims of complying with rules also does not cut it when the rules are written and maintained by the beneficiaries of such gratuities.
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The strong correlation between government size and corruption is well documented. Recent illustrations include Venezuela and Argentina, countries with massive public sectors and high levels of corruption.
A century ago, Argentina was among the world’s wealthiest nations, but years of populist policies, unchecked spending, and deficit-financing led it to poverty. Similarly, Venezuela, with the world’s largest oil reserves, now suffers mass poverty and extreme inflation due to the Bolivarian revolution of Hugo Chavez and his successor Nicolás Maduro.
Meanwhile in Australia, public sector employment already exceeds 2.5 million out of a workforce of 14.5 million. The payroll of these 2.5 million exceeds $232 billion per annum and does not count those whose work depends on government, like regulatory compliance workers, consultants to government, or the volumes of ‘care workers’ dependent on the beneficence of the state.
Large governments also centralise power and resources, allowing a smaller group of people to make decisions that impact many.? The Commonwealth government now collects over 80 per cent of Australia’s taxes, enabling it to subsidise and prioritise entities at its discretion. From bank guarantees to regional airline subsidies to community sporting field grants to cuts to student loans for high-income earners. Even investments in high-risk, unproven quantum computing startups are now in scope. Especially when such companies are represented by former government officials.
Oversized government in Australia has also encouraged ‘rent-seeking’, where individuals and groups seek profit through political influence rather than productivity. With access to ever increasing resources, contracts, and regulatory authority, the government has become a target for those seeking to benefit without adding real value. It’s no surprise that the workload of anti-corruption commissions has proliferated alongside government expansion.
The increasing presence of Canberra’s ‘orange lanyard’ class, lobbyists who traverse Canberra’s corridors of policy and power, further demonstrates the importance of maintaining favour with government. Hardly a week passes without news of former politicians or public servants cum lobbyists meeting or socialising with current politicians or public servants.
The growing need to curry favour is intensified by the tendency of politicians to act, whether or not action is needed or effective, often based on the advice of the last person with whom was spoken.
In the mind of the modern politician and public servant, it seems that no economic or social problem can withstand a law, regulation, tax, or subsidy. After all, come election time, politicians prefer to point to activity rather than tangible outcomes.
Gift-giving and influence-peddling are far from victimless crimes. Such practices erode public trust in Australian democratic institutions and ultimately burden consumers, who face higher costs due to inefficient resource allocation. As government involvement deepens, former politicians and public servants, people with limited business experience, increasingly populate corporate boards and management teams, especially in regulated sectors like finance, media, healthcare, and gambling.
With smaller, more limited government, such government relations strategies would be unnecessary. But in today’s climate, large companies view government relations not as an option but as an existential necessity.? A development which may be strategically savvy but economically and democratically pernicious.
In their book Why Nations Fail, this year’s Nobel Prize winners in economics, Daron Acemoglu and Jim Robinson, explained that among the key reasons for Britain’s remarkable rise in the 18th and 19th centuries was a constrained government and the development of institutions that promoted broader participation and shared economic prosperity. Acemoglu and Robinson’s work goes towards explaining how Australia’s recent declines in living standards and increases in the cost of living relate to a rapid growth in government.
As Ronald Reagan said in 1986, ‘The nine most terrifying words in the English language are: I’m from the government, and I’m here to help.’ It is a vicious cycle. The more government shows up to help, the more help is required. Until there is only government.