The new economy is different: oligopolies beware or be gone

People are simply sick and tired of too many big businesses not paying their tax.

So what can we do? It’s time we revisited the terms “old economy” and “new economy”.

The new and the old

The latest “new economy” is one that is agile and global, where business partnerships between small and medium businesses are formed across oceans, over borders and between cultural divides; where the speed of communications is a key; where goods and chattels are combinations of many parts from many places; where tax collection is now an international issue.

Agility, transparency, quality and speed must rule in the new global economy.

The “old economy”? That is based on business and union oligopolies; on behind closed doors manipulation of governments; on rusted-on ideologues; on words not actions; and in more recent days, we have seen that it is also based on dodging tax.

The political landscape in Australia for the last five years probably reflects the change we are going through. Governments and leaders have changed faster than at any other time in our history. This reflects the profound switch needed in politics from listening to and obeying dominant businesses and dominant unions to one where the economy is managed for all and is enables and enhances change. The economy will perform or struggle on the performance of many medium and small businesses.

Most of the big traditional institutions are trying to maintain their influence and power when it is obvious times have changed. Disruption will eventually empower others and remove the overwhelming influence of the few big players. They will still be influential but not so much and this, this they cannot handle. Can we as a society handle this change or will it handle us?

These changes have placed pressure on prime ministers, on treasurers and on leaders in state governments. The community has demanded better management of change and when that is not delivered the community use their votes and political change occurs either through elections or through opinion polls forcing internal change. That will continue to happen until a politician or two, or a party, sees sense and deals with the change and embraces the new economy and is able to communicate and engage with people on that basis.

The challenges we face

Resistance to the threats and bullying of the old order will be difficult but must be met.

We have achieved some of the change needed to embrace and manage the new economy. The development of free trade agreements (FTAs) is one key to managing the change but we need other outcomes and other internal changes in Australia if the FTAs are to be of benefit.

The FTAs also highlight the need for international tax agreements and enforcement. Some may say that is too hard as tax is too complicated, yet FTAs are incredibly hard to negotiate; we can do the same with tax. There is also the issue that the voter, the everyday person, is demanding the tax system has integrity. It is interesting that those resisting change are often the biggest and the most wealthy, the ones who can manipulate their systems for their own good not the good of the country.

Another key area is communications. Our systems are slow and expensive to use. The National Broadband Network has been hobbled and needs more support. The reluctance of Telstra to share infrastructure is holding back competition and stopping lower prices; the communication infrastructure that has been funded by the taxpayer should be made available to all service providers if change is to be embraced.

So how are governments and political parties fairing? Recently the Turnbull government focused on an “ideas boom” and that is good news. But will it be words or actions.

Importantly, the government through Scott Morrison and Kelly O’Dwyer will make a key amendment to competition policy to enable change and to enable those with agility and vision to move with more confidence. To do so they had to ignore the threats and the influence of dominant players like Wesfarmers, Woolworths and the Business Council of Australia. These powerful “old economy” behemoths appear to be so terrified of change they claim innovation will be stifled by the amended laws.

“Old economy” ideologues are like many in history who were afraid of losing their credence – they fight against change like King Canute fought against the tide.

But the outcome of not totally embracing change is continual crisis – political and economic crisis.

The Global Financial Crisis was caused by a very few big businesses looking for easy money and a lazy ideologically driven regulator in the US. These organisations had lived high on hubris and false analysis for too long and had lost their ability to change to suit new conditions. The outcome was suffering for the many but there was not as much pain for the wealthy and dominant few.

Australia is in a post mining boom era with an ageing population. This was foreseeable and predictable but ignored for too long. Now we have to make up for time lost to these laissez faire ideologues.

It is not just small and medium business that can react faster; the smaller unions are able to react more quickly as well. These unions are not yet powerful enough in the world of unions to have the influence needed.

The old economy “laissez faire’ ideologues need to retire. The mess that is the education sector, particularly Vocational Education, comes from poor policy based on their ridiculous slogan “the market will decide”. The creation of productivity-sapping oligopolies (businesses and unions) came from that same ideology. We need to move on and ensure skills development happens for small and medium business. Employment services need to be dynamic and available. Labour market reform must include better microeconomic reform and management.

There are many things to address and change but let’s look at a few of the key regulators and one policy maker.

Change is happening

Change has been embraced by Fair Work Ombudsman Natalie James, who, held back as she is by poor work place regulations, engages and educates and works with community. She understands the business community is not a natural enemy of fairness.

The Australian Competition and Consumer Commission has emerged from a period of dormancy and under its current chairman is looking to ensure competition can be maintained during these times when many dominant institutions are behaving badly as they struggle against the rip-tide of change. Globalisation and technology changes demand our competition regulator continues to be proactive.

However, the Fair Work Commission (FWC) needs major reform. The FWC commissioners have been appointed for life like the peers of old England and they are holding back the economy. The FWC is dominated by past employees of the dominant “old economy” players: big unions and big business.

The president of the FWC Iain Ross has a vision that is sound and based on change management and he should be given more power to remove the deadwood and bring in dynamic independent lawmakers for the modern workplace. And the modern workplace can be anywhere – a lounge room, a car, a truck, a computer or an office. A workforce can be spread out across nations and is constantly changing.

We know the worker must always be protected from the few dodgy employers, as employers need to be protected from the few dodgy employees. However, complexity and obsolete rules will make matters worse, not better. With a professional and proactive Fair Work Ombudsman and less complex regulations from the FWC, we should be able to have more flexibility, reward for effort for workers and business people and more job opportunities.

The emerging “new economy” opportunities around B2B communications is also one that can save billions of dollars in time and expenses and also create a better paper/electronic trail when tax affairs are being investigated. E-invoicing in particular is a vitally important function that must be available on open source technology platforms if savings and transparency are to be achieved. There are some dominant businesses based in the “old economy” who want to control B2B for their own purposes, this must be resisted.

SMEs can help lead this change

The small and medium business sector has some informed people who get the bigger issues and experience the day-to-day tussle. They must be engaged better in change management.

Below are some comments I received from one of our members – Mark McKenzie at the Australasian Convenience and Petroleum Marketers Association:

The demise of large-scale manufacturing and the re-emergence of small cottage ‘manufacturing’ using the internet channel and 3D Printers to access local, regional, national and world markets highlights the growing significance of micro business to the economy.

Growing accessibility of telecommunications services, such as the internet are leading people away from a single job to employment that comprises a portfolio of jobs and these jobs are not dependent on living in a city per se. This has ramifications for the design of jobs into the future – that is, people working in big business and running a small business at the same time. Also, small job growth can be used to reduce settlement pressure on our larger cities.

Ageing of the workforce, many of whom are still healthy and productive, means that we should no longer write-off the over 65 segment of our workforce. Increasingly, this segment is using part-time or casual employment to supplement their retirement income.

Food security concerns, as they relate to supply of product into major markets like China also creates opportunities for niche supply markets in Australia that are likely to be lucrative – provided we don’t sell all of our agricultural enterprise (and productive land) to overseas interests.

The above trends point to the needs for governments (of all levels) to continually consider policies and programmes that support and strengthen innovative micro enterprise and small business in Australia.

The above comments highlight three areas of transition: the demise of large scale manufacturing; accessibility of telecommunications; and the ageing of the workforce. This will see small business become a much larger contributor to national input in the “new economy” than traditionally occurred in the “old economy”.

In the end too many powerful people make statements about change and innovation but their actions do not match their words. We need to empower small and medium businesses; stop the laissez faire approach that is actually lazy and creates unfairness; actively and aggressively support skills development through industry associations; ensure simplicity of regulation; and become aggressive against big businesses that misuse their power and also dodge their responsibilities.

Then we might have leaders and governments that last longer and get things done.

Peter Strong is chief executive of the Council of Small Business of Australia. 

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Rod Fraser
Rod Fraser
4 years ago

Thanks Peter. Small is beautiful. When you understand the power of teams and the ideal size of teams is 3-8 it embraces small and medium sized businesses. This is the ideal size for agile, lean or scrum methodology to be applied where productivity gains of 300% – 1200% are not uncommon in less time with less effort. In the UK there is a whole movement called Scale Up UK where they are focused on fostering a full spectrum entrepreneurial ecosystem of startups and scale ups. In the USA places like Milwaukee are leading the world with Scale Up Milwaukee. In Boulder Colorado we have seen things like Start Up Weekend come to the world. Melbourne has been leading the way in embracing these efforts. We need our governments to stop talking, politicking and throwing money about in empty ways. Like you said talk is cheap. We need action with real substance. I have been in business since I was 18. I am 55 now. I am still waiting for any Australian government to do anything of substance that actually supports me in a meaningful way. Thank goodness disruption is happening and we have gone global which ironically gives us a path forward at a local level. We have been at the whim of a government budgetary cycle that tinkers at the edges and makes the already complex more complex often with so called unintended consequences that cripple SME’s daily. Our politicians only acting if it serves their politics. It’s time to serve the people not just the powerful. I just wonder when our politicians and the big end of town get that there has been a massive shift. This is a demand driven world now. The consumer has the power. Time to wake up to a new reality and I totally agree SME’s can lead the way. The new world is designed for them if they do something about it. Small is beautiful.