Stephen Rix
The retreat from public ownership
The sale of a merged Qantas/Australian Airlines marks the latest development in the sorry saga of federal ALP retreat from ALP policy on public ownership. Such retreat is indicative of the ALP's accession to a form of conservative economics and repudiation of basic notions of people's ownership of productive resources.
The policy shift made by the federal ALP also, ironically, involves a recognition that many of the public enterprise arguments advanced by progressives over the last 10 years were basically correct.
It is first necessary to directly confront one of the more popular/populist arguments advanced by the government. That is, that the government has no business being involved in activities such as airline operation because only a very small proportion of the population utilise air travel due to its cost.
There are few arguments which appear — superficially — to have as much legitimacy as this. However, the Compass experience indicates that if prices are lowered, then there is a large market "out there".
Deregulation of the industry was not a necessary precursor to the extension of the market. The federal government could have created the conditions for market expansion by, for example, ordering Australian Airlines to reduce prices or by changing the basis on which decisions were made regarding regulated prices under the two airline agreement. While it is clear that the sort of price competition which Australian, Ansett and Compass were engaged in was not sustainable, it is equally clear that there was scope for substantial price reduction.
Second, the notion that the public sector should not be involved in activities such as airlines is based on the belief that the public sector should be involved only in the provision of welfare services. Should such an argument be accepted, the public sector will be rapidly transformed into delivering services or goods from which no revenue whatsoever can be obtained, forcing governments to rely entirely on taxation.
We have become accustomed to dealing with a seemingly simple question posed by conservative economists and others: where should the public sector be involved? They then establish a severely limited public sector by a process of negative definition (for example, the public sector should be involved where the market does not exist, or where the private sector will not enter).
It is time to ask another question: where should the public sector not be involved? A starting point might be to say that the public sector should not be involved where it can be definitively conomic, political or environmental advantage accrues from public ownership.
Finally, the irony of the government's decision to amalgamate Qantas and Australian Airlines before sale is that the advocates of such amalgamation before privatisation were howled down by the advocates of privatisation at the time. We can only assume that the economic rationalists in Canberra are less "scientific" than they like to claim.
[Stephen Rix is a co-author of Politics and the Accord.]