Market forces vs the government

Dr Richard Denniss,

Chief Economist at The Australia Institute

For decades, neoliberalism has fuelled enormous scepticism about the role of government. Whereas the ‘invisible hand’ of market forces is used as a synonym for efficiency and progress, the ‘dead hand’ of bureaucracy conjures up waste and delay. But after decades of bad press, the COVID-19 pandemic seems to be restoring Australia’s faith in government.

Almost nobody, in Australia at least, trusts the market to solve a pandemic. Over the past months, Australians have assumed that their elected representatives, and the bureaucracies they oversee, will solve all manner of problems on our behalf. And, by and large, the Australian public’s faith in government has been well placed.

It was the federal government, not the travel industry, that suddenly closed our international borders on March 2020 to slow the spread of the virus into Australia. It was the state premiers who closed our state borders to slow the spread within Australia. And, via the formation of the National Cabinet, our state and national leaders have delivered clearer messages, simpler rules and more effective policies than almost any other government in the world.

Needless to say, mistakes were made. Passengers should not have disembarked from the Ruby Princess, Melbourne’s hotel quarantine system should have been better, aged care homes should have been provided with better information and more support, and the tracing app developed by the federal health department has been a waste of time and money. But, despite the mistakes, Australia is largely virus-free with an economy that is starting to grow again. And trust in Australian political leaders has risen to record levels. State premiers, in particular, have surged in popularity as they stepped in to protect their residents.

Nobody thinks that ‘market forces’ could have done a better job of protecting Australians from COVID-19. Indeed, the sharpest criticism from the Coalition of Daniel Andrews is that he relied too heavily on private security guards and didn’t rely heavily enough on the Commonwealth’s offer to provide troops to guard the hotels. Think about that. Daniel Andrews is being criticised for not relying on the public sector enough!

When the vaccine arrived did we ‘leave it to the market’ and drug companies to set whatever price they wanted? Or did we develop clear (bureaucratic) rules for which vulnerable groups and key workers will get it first? Governments aren’t perfect and neither are markets. We have always relied heavily on governments to provide health, education and transport infrastructure and we have always relied heavily on markets to provide food, clothing and entertainment. Different countries, at different points in time, make different choices about how and when to rely on the government, with voters ultimately having the final say.

While it is clear that the COVID-19 pandemic will have a lasting impact on Australia’s economy, society and democracy, what is not clear is what shape that impact will be. Will we wind back the deregulation of our privatised aged care system that led to the untimely death of so many vulnerable Australians? Will we invest more heavily in public health? Will we expand and modernise our public transport system to make it less crowded? Or will we just go back to cutting taxes and cutting spending on services?

The economic language of neoliberalism has had a profound impact on our public debates, our public institutions and, perhaps most importantly, our collective expectations of what governments can and can’t do. But as any Australian who watched the enormous death toll and economic destruction that took place in the US and much of Europe could see, the COVID-19 pandemic has made it clear that government intervention, political leadership and a strong sense of community are essential for addressing some problems.

It’s not inevitable that Australians will translate their new-found faith in governments into support for more government action on issues like climate change, inequality or the liveability of our cities. But it’s not impossible.