This weekend the Liberal Party of Australia celebrates its 75th anniversary. The Liberal Party is not just the Party of Menzies, it is the Party of Greiner and Kennett, the Party of reform and ideas, the Party of people not vested interests.
Most importantly of all it is the Party of the liberal ideal. And today, more than ever, the torch of this first revolution must burn brighter because the forces of illiberalism, and the darkness they bring, are gathering.
It is long past time for us to reclaim the notion that firms should put people before profit, because without people there is no profit. As Adam Smith pointed out two centuries ago no one can make a profit without first offering a product or service that another person wants. As he said this one thing turns private vice into public good. An attack on profit is actually an attack on public good.
Yet this slogan has not seeped in. We need to continue to focus on ensuring that we are not removing choice from individuals, and placing it in the hands of regulators. For once you accept that profit is not good, then who is to determine what a person needs? Typically the answer has been regulators.
Andy Haldane, a Bank of England economist has pointed out that in 1980 for every regulator there were 11,000 bankers, by 2011 it was 300. Did all these new regulators make consumers better off, or improve product choice and service? The evidence says it did not. In Australia, ASIC now accepts that the disclosure regime caused consumer harm.
That is why this Government continues to focus on empowering individuals and providing them with the tools to make better informed decisions and taking personal responsibility. The Consumer Data Right which was passed earlier this year does just this – it empowers consumers to use their own data to get a better deal. Putting Members Interests First is another piece of legislation that was recently passed which allows people under 25 to opt-in as to insurance through their superannuation fund.
When business leaders spend more resources designing products that meet regulatory whims rather than meeting the needs of people, we have a problem. When regulators feel like they need to issue regulatory guidance on how boardroom notes are taken then we have gone past any reasonable understanding of consumer protection.
So is it any surprise that in the United States the most profitable investment a firm can make is in lobbying? Jesse Norman recently pointed out that some lobbying efforts in the United States had a return on investment of 1200 per cent.
Which makes you wonder how much of this is a driver of the lower productivity that we have faced in the post GFC era. Those people who have traditionally allocated capital to areas of our economy that could most benefit from it, have been spending increasing amounts of time dealing with legal requirements, such as how boardroom notes are taken, rather than new products or services.
The director and officer liability insurance market is a great example of innovation killing lawfare. Overseas litigation funders, who in many cases cannot do in their own country what they do in Australia, are getting returns in this country of close to the 1000 per cent mark. The number of shareholder class actions have quintupled over the last decade, the cost of director and officer liability insurance has gone up 500 per cent in the last two years.
Hard working Australians are seeing their returns cut, but more seriously over the long term businesses in Australia are becoming more cautious, less innovative, and the losers from that are all of us: investors, consumers and Australians.
This Liberal Government knows that if we are to overcome the challenges and seize the opportunities of this century then innovation must be enabled not disabled. Too often our challenges seem intractable because the argument is framed as being between the candle and the darkness when the answer is the light globe.
We need to keep incentivising people in business to take well informed risks without fear of legal regulatory retribution. This is how we will overcome the challenges of climate change, productivity, creation of meaningful employment, education and the many other opportunities before us.
So as the Liberal Party approaches the last quarter of its first century we are reminded that the only way to a fair country is through freedom, for no one person knows the path of happiness for every person; that care and compassion comes not from the generosity of the state but from those who know and love us; that history’s surest pathway to serfdom is by replacing equal rights with equality of outcome; and this is the only way anyone has created a just society.
Jason Falinski MP is the Federal Liberal Member for Mackellar