The system isn't broken – it's working against you

Australia’s state institutions weren’t designed to protect you – they were built to protect capital.

Wealth inequality has reached historic proportions. The banks are posting record profits in the midst of a housing crisis, and teachers are paying more tax than multinational gas corporations.

But attempts to explain why things are bad often boil down to surface-level arguments: that Labor is timid, adopts the wrong ideas, or, at worst, is influenced by corporate donations and lobbyists. What if the broader structures of Australian government and the economy can tell us something about what is going on?

Understanding the state – spanning government departments, parliament, security services, and ‘independent’ institutions like the Reserve Bank and Productivity Commission – is key to grasping why big corporations dominate Australia’s political system.

No such thing as an ‘independent’ state institution

For starters, the modern Australian state developed within a global capitalist system. That process fundamentally shaped it.

As a result, it relies on the growth and profitability of this capitalist system. This is not just in terms of taxation revenue generated from profits and wages; the operation of the state itself is embedded in capitalism. For instance, governments borrow money by selling bonds to private investors and corporations, with prices effectively set by financial markets.

State institutions will ultimately prioritise the maintenance and growth of capitalism. This is why, for instance, the RBA gave commercial banks an additional $100 billion by buying financial assets from the banks (called quantitative easing) during COVID, which in turn pushed up asset prices (including house prices) and gave the banks bigger profits. This also increased inequality because very rich people own more assets.

Political parties don’t ‘corrupt’ an independent state. Instead, over the last century, Labor has become integrated into the governing logic of Australia’s capitalist state.

This is why focusing on the corrupting influence of lobbyists and donations on Labor and the Liberals gets things backwards.

Lobbying is the symptom, not the cause of a dodgy system

The fact that Labor and Liberal politicians go on to work as corporate lobbyists is frequently pointed to as a cause of ‘corporate state capture’.

But Labor isn’t making decisions that favour the banks or mining companies because a few ex-colleagues had a few chats over a glass of expensive wine. Trust me, they’re not that convincing.

The banks don’t wield so much power because former Queensland Labor premier Anna Bligh is the CEO of the Australian Banking Association. Bligh is there because the banks already hold enormous power over the economy. Of the five most profitable corporations in Australia, the big banks are four of them, and the total value of these four corporations alone is equivalent to roughly 38% of Australia’s GDP.

Of course, lobbying and corporate donations do buy influence. Various corporations are fiercely competing for everything from government contracts to favourable tax and regulatory decisions. But it’s because of the nature of the state – and the nature of Labor and the Liberals as political parties – that such a lobbying industry exists at all.

In other words, lobbying exists precisely because the state is already wired to serve corporate power. Lobbying just becomes another process by which the state determines how to best serve corporate interests.

As Christopher Pyne, ex Coalition defence minister-turned-lobbyist for defence contractors, said: “Lobbyists are a critical part of the system of Westminster government … The system would be the poorer without lobbyists. Anyone who doesn’t understand that, doesn’t understand how government works.”

Neoliberalism and the Australian state

We’re often told that the neoliberal right wants smaller government and lower taxes, while the left wants a bigger state.

But neoliberalism is not about small government and lower taxes. As the British academic David Harvey says, it was, and still is, about establishing the political dominance of big corporations and billionaires by breaking the power of organised civil society resistance, in particular organised labour, and expanding private markets and logic into public and social life. And the instrument for achieving that in Australia is the state.

For instance, government spending as a proportion of GDP has actually stayed roughly level since the 1980s, even going up in the last decade of Coalition governments.

Why is this the case? Well there is enough historical data now to conclude, as French economist Thomas Piketty has, that the historic falls in wealth and income inequality that occurred post-World War II was the exception. The current soaring wealth inequality is in fact capitalism’s norm. So is the concentration of wealth and power in the hands of a small few, and the destructive nature of the profit motive for human wellbeing, the climate and environment. The current system is working as designed.

But managing these contradictions is expensive and difficult and liberal democracies requires governing parties to acquire some form of passive public consent for this system, by way of elections. Governments must soften the harsher blows of capitalism, win public consent and prevent capitalism collapsing under the weight of its own contradictions.

Take electricity: three separate federal agencies exist just to make the dumb idea of a privatised electricity market work. Or childcare: over 75% of the $14 billion of yearly federal subsidies go to for-profit childcare providers. Public money is still being spent on services, but in support of for-profit models that integrate the private market into every aspect of our lives, causing harm and costing us money.

The requirement for passive consent is also why major neoliberal reforms often occur under Labor governments – think the massive wave of privatisation (including childcare!), financial deregulation and restrictions on union rights that occurred under the Hawke and Keating governments.

Labor’s union ties and ‘progressive’ image allow it to convince enough working people that Labor has their best interests at heart, drawing social groups that may otherwise resist pro-corporate reforms into the logic of the capitalist state.

It’s time to start asking the right questions

So, if we want real change, we need to start asking the right questions. Like ‘how do we build a set of institutions and large civil society organisations capable of counteracting the power of the Australian state, Labor, Liberals and the vast network of corporate lobby groups, think tanks and mainstream media outlets that uphold the status quo?’

‘What would it mean to govern when the Australian state itself would resist meaningful change that favoured everyday people – especially if such change threatened corporate interests?’

They’re big questions. But if we’re serious about systemic change, we need to start answering them.