Tuesday, December 03, 2013

Qantas:  the spirit of Australian nationalism

It's hard to believe but — if what the Treasurer Joe Hockey said last week is accurate — the government is seriously weighing up the partial renationalisation of Qantas.

That's one option, anyway.  Qantas CEO Alan Joyce has been complaining that his competitor, Virgin, has an unfair regulatory advantage.  Virgin does not suffer under the Qantas Sale Act, which limits access to foreign investment.

So renationalisation, and the taxpayer funds it would require, would prop up the airline against its competitor.

Another option, also being considered by the government, is more straightforward:  amend the Qantas Sale Act which is creating the problem in the first place.

An easy choice, you'd think.  But apparently the Abbott Government can't decide whether it prefers state socialism or free market capitalism.

How on earth did the government get into this extraordinary jumble?  Tony Abbott said he hopes the airline stays strong as "Qantas is a great Australian icon".

The Australian aviation market has been indelibly shaped by the same simple, superficial nationalism which constrained Australian industry throughout the twentieth century.

The government this week demonstrated we haven't shaken that out-dated industrial ideology.

Why else would the Coalition — a party that claims to be for free markets and an open economy — even suggest that it was contemplating, for a single second, in a partial way, the nationalisation of a private company?

For most of the twentieth century, the airline industry was dominated by ''flag carriers''.  These were big airlines, owned or sponsored by national governments, servicing international routes.  Think British Airways, Lufthansa, Malaysia Airlines, SwissAir, Singapore Airlines, Aeroflot.

Flag carriers served many purposes.  They were supposed to be semi-official ambassadors for their home countries.  An attractive national airline was supposed to impress the rest of the world.  A nice, financially stable, globe-trotting airline was a sort of demonstration of national virility.

Qantas was one of these.  It was nationalised in 1947 by Ben Chifley's Labor government.  Lots of countries set up their own flag carriers in the post-war era.  It was the era of national champions and "scientific" industry policy.  A bonus:  a government airline could be easily mobilised in case of war.

Of course, along with this model came heavy levels of protection, little market competition, and extremely high prices.  The flag carriers suited the purposes of politicians rather than consumers.  The airlines flew uneconomic routes just for the prestige they offered.

When the market for air travel was deregulated, the old flag carriers were left holding the can.  They were over-extended and uncompetitive.  They were over-unionised and over-politicised.

No wonder low-cost no-frills airlines have ripped the market apart.  They're not bound to any national feeling — or to the political controls that come with such feelings.

When it was privatised, Qantas was saddled, unreasonably, with restrictions on how much capital it could raise from foreign sources.  The Parliament just couldn't bring itself to let the flag carrier fall into foreign hands.  Qantas was too special.  Australia needed to keep its flying symbol.

Most foreign investment restrictions are driven by a combination of xenophobia and paranoia.  GrainCorp is just the latest victim of this anti-foreign bias translated into public policy.  But the Qantas Sale Act lacks even that boorish logic.

Our politicians are happy to privatise state-owned firms but unwilling to accept the lack of political control that privatisation implies.

And our politicians like holding onto Qantas.  Patriotism is their profession.  Trite orations on Australia's national dignity are the bread and butter of politics.  They don't pay for their flights, anyway, and they get access to the Chairman's Lounge.

On the weekend, Alan Joyce demanded the government revoke Virgin's international flying licence.  This is an obvious ambit claim.  Cancelling Virgin's licence is unimaginable.  Joyce must know this.  He doesn't think the Qantas Sale Act will be changed, but he clearly thinks he can get something.

We'll know Qantas is playing hardball when they start re-running the ''still call Australia home'' ads.  Samuel Johnson said patriotism is the last refuge of the scoundrel.  For the crony capitalist, it's the first.

Just a year after Ben Chifley nationalised Qantas he launched the first wholly Australian-made car, the Holden FX, helpfully subsidised by the Australian taxpayer.  In the words of the National Museum, the Holden "was a vivid manifestation of Australian dreams of prosperity".

We're in a bind with our automotive industry because, like airlines, cars are also seen as a sign of national prestige.  Real countries make cars and have planes that operate out of Heathrow.

But we've seen how fruitless a century of automotive protectionism has been.  Australia has expended billions in tariffs and direct subsidies to prop up those firms, and they're still on the brink of collapse.

Qantas' privatisation was left uncompleted.  The government can deal with the problems caused by partial privatisation in two ways.

It could abolish the absurd, nationalist and anachronistic restrictions on foreign investment in the Qantas Sale Act — completing privatisation and increasing Qantas' competitiveness.  Or it could commit Qantas to the cycle of subsidy and decline that has entrapped our car industry.

It's amazing the Coalition government even thinks that is a real choice.

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