Reaping the rewards of a fair go for small business

There's a compelling moral argument for reviewing Australia's competition laws in favour of small business, ensuring a system that is equitable and just for all.

The Abbott government’s review into competition laws organised by Small Business Minister Bruce Billson shouldn’t just be considered as a revisiting of the laws' technicalities. The design of competition laws say a lot about the moral authority of the very system of market capitalism. 

It’s this big-picture understanding of the moral reasoning behind competition laws that should be the starting point and backdrop to the review.

There’s a new thesis on capitalism that’s exciting economists. It’s being described  as a "watershed" and a "rewrite of 200 years of economic thinking".

Certainly, people who despise capitalism will flock to read Capital in the Twenty-First Century by French academic economist, Thomas Piketty.  Piketty claims not to be a Marxist but a forensic analyst using solid data to draw conclusions. Piketty’s point is that modern capitalism is increasing economic inequality, not reducing inequality.

I haven’t read Piketty’s 700-page book, just several commentaries. But already it’s obvious that Piketty is drawing a much wider audience and serious interest than just anti-capitalist activists. The reality is that any system that creates inequality has low moral and political authority and will be attacked.

This is where the Billson competition review is significant.

Competition laws interfere in economic relationships with the intention of preventing collusion, monopoly privilege and other activities that distort markets and lead to economic inequality.

The review and the actions that flow from the review will say a lot about the moral positioning of the Abbott government. It’s a test of their ability to set laws that facilitate economic growth and, at the same time, enhance economic equality. In this respect the review is (co-incidentally) a homespun Australian response to Piketty’s thesis.

I look at it this way because Billson is dealing small business perspectives into the review process at its core. This is in conflict with big business interests, as I discussed in my first commentary on the competition review (Abbott’s competition review will weigh on big business, April 2). Australia’s big business lobbyists are openly worried and expressing concern that the review is a set-up designed to favour small business people over big business.  

I’m a guilty party in this respect. I, along with others, had been openly pushing the Abbott team when they were in opposition to put small business people at the centre of their economic thinking. So far, we’re pretty pleased with how things are unfolding.

For example Billson’s Small Business Ministry is located in Treasury at the core of government economic policymaking. It’s not an afterthought, sitting as a tag onto to some super department, as has traditionally been the case.

To date, competition law has almost exclusively focused on economic relationships between business and consumers. Billson is directing the review panel to take an additional perspective: to also consider relationships between 'big' business and 'small' business. This is evidenced in the review’s terms of reference.

For those of us lobbying for years for small business, we feel we’re winning some points. We maintain that small business people (the operative word being 'people') are mostly in no different a situation to consumers when dealing with big business. 

This seems to have been accepted. If so, the policy implications for competition law are significant. If big business is required to treat small business people in much the same way that they treat consumers, many in big businesses are going to have to radically change their behaviour. (In this category of 'big', we also include government.)

Here’s the 'equality' argument. Taking Piketty’s thesis, the moral authority of market capitalism heavily rests on whether or not the system delivers high measures of economic equality.

Competition laws traditionally focus on protecting consumers as a key mechanism to achieving equality outcomes.

By considering small business in a similar light as consumers (when dealing or competing with big business), competition laws can advance the cause of market capitalism in delivering for the entire community. 

This is so because of the dominant scale of small business, where around 7.5 million of Australia’s 11.5 million workers own, run or work in small businesses. Give this sector an 'equitable go' under competition laws and the capacity for wealth creation combined with wide wealth distribution will be greatly advanced.

This is the moral positioning argument we’ll be putting to the competition review.

Ken Phillips is executive director of Independent Contractors Australia and author of Independence and the Death of Employment.

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