The Blue Wave Is Questionable: Why That's Good For American Competitiveness

Posted: Apr 26, 2018 10:48 AM

Recent polls and reports are questioning the mainstream “Drive-By” media’s narrative of a Democrat “Blue Wave” at the upcoming Congressional elections in November. For instance, in a March Axios poll it was predicted that:

“Five Senate Democrats would lose to Republican candidates if the elections were held today and three have approval ratings under 50%.”

Also, in a recent Rush Limbaugh segment the question was asked: “Where’s the Evidence of the Blue Wave?” The answer is in part:

“[T]he polling data on the economy and the tax cuts and who gets credit, that’s also trending in Trump’s direction. [P]eople are seeing larger paychecks because of the tax cut. There are new jobs being created. There’s a general uptick and trend in matters of the economy.”

Politics and government have a massive influence on business and finance, particularly through the Washington “swamp” systems of tax-and-spend, regulate-and-hinder and print-and-lend (money). So the November mid-terms is something for not just “Wall Street” to watch, but more importantly for “Main Street” to influence.

As I recently wrote for Townhall Finance in “New Data Shows Competition is Making America Great Again”:

“President Trump and his Administration are starting to ‘make competition great again’ [through] policies that increasingly get Big Government out of the way of ‘Main Street’ investors, businesses and families [such as] reducing taxes and regulations.”

But I concluded that:

“[T]here so much more that can, and should, be done when it comes to competition. Congress and the Administration needs to look no further than Australia and their highly successful pro-competition reforms from the mid-1990s to mid-2000s in energy, transport and water. These reforms were called National Competition Policy (NCP).”

Regarding NCP, I stated in a magazine piece on “Australian Economic Reform” for the Cayman Financial Review:

“I was one of the leaders involved in promoting, guiding and implementing Australia’s [NCP] in the mid-1990s to mid-2000s. NCP: • brought cost benefit analysis [CBA] to the forefront; • incentivized state and local governments to implement NCP through annual performance payments; and • focused on the economically significant industries of electricity, gas, ports, public transport, rail, telecommunications, water and sewerage.”

The NCP reform mechanisms, in summary, were as follows:

  1. removing anti-competitive regulation and legislation;
  2. separating the non-monopoly from the monopoly parts of large State-Owned Enterprises (SOEs), which are a little different from Government-Sponsored Enterprises (GSEs);
  3. providing competitive neutrality for non-monopoly SOEs;
  4. formalizing prices oversight for monopoly SOEs;
  5. creating a third party access regime for monopoly infrastructure, whether SOE or not; and
  6. extending the anti-trust laws to all SOEs.

The Australian federal government has a fairly unique and rigorous, as well as surprisingly free-market-friendly, Productivity Commission (PC) and National Competition Council (NCC). The main role of the PC, under NCP, was to predict and assess the economic performance flowing from this. The NCC’s key function was to manage the NCP incentive payments to state and local governments.

Regarding competition payments, the NCC says on their NCP website:

“The payments were made to the states and territories (on a per capita basis), where they achieved satisfactory progress against their reform commitments. The payments were the means by which gains from reform were distributed throughout the community. The payments recognised that, although the states and territories were responsible for significant elements of [NCP], much of the direct financial return accrued to the Australian Government via increases in taxation revenue that flows from greater economic activity.”

Regarding competition performance, the PC said in their 2005 “Review of National Competition Policy Arrangements”:

“Australia’s economic performance has improved markedly since the early 1990s. A key feature of this improved performance has been a surge in productivity growth. The productivity boost yielded the equivalent of an additional [annual] $7,000 to the ‘average’ Australian household. Notwithstanding difficulties in establishing causality, a range of indicators strongly suggest that microeconomic reform in general, and NCP in particular, have been principal contributors to the improvement in Australia’s productivity performance.”

In CBA terms, there was a massive net benefit – ie benefits over costs – or value for money from NCP – ie competition performance above competition payments. Thus, the ‘sowing’ of $5.5 billion (Aus$) in taxpayer payments during the NCP decade conservatively ‘reaped’ more than $1 trillion (Aus$) in extra family income. This economic return was of “Biblical proportions”, well over a hundred-fold.

As a free-market economist, I never ever favor more spending of taxpayers money. However, at least the NCP expenditures were in aid of promoting less government ownership and control and thus more private freedom and competition. And more competition means lower prices. As the PC reported:

“The prices of several key economic infrastructure services have fallen in real terms since the early 1990s. NCP and related reforms have been significant (and sometimes major) contributors to those price reductions. This is most evident [as follows]: • port service prices fell by up to 52% between 1990-91 and 2000-01; • rail freight charges decreased by up to 42% between 1995-96 and 1999-2000; • telecommunications prices fell by up to 29% between 1996-97 and 2002-03; and • electricity prices declined by 19%, on average, between 1990-91 and 2003-04.”

Australia is a great country, and NCP is a one of the main reasons for this. America can not only be “great again”, but can even become “exceptional” as it once was. A big part of what made “American exceptionalism” truly exceptional, was competition. A national policy to “make competition great again” in America should be guided by the following principles: #1) allowing for as much competition as possible; #2) allowing for as much private sector as possible; #3) allowing for as much government decentralisation as possible, from federal to state to local; and #4) subjecting all significant expenditure of taxpayers’ money to CBA, including a “blue team versus red team” approach.