Hello & Welcome Speech: Punch Lane Launch

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Andy Moore, President of Prosper Australia.
May 31st, 2013

We are here tonight for the launch of a new look and invigorated think tank – Prosper Australia’s new Punch Lane address – as we migrate closer to the corridors of power at the state legislature.

Tonight we unveil a new logo – a new website – our new head quarters. We welcome new members of the executive & new members of any kind.

I’ll be doing three things tonight – one is welcoming you all here. Two: I’d like to share a little something with you. And three – I need to thank quite a few people properly for the contribution they have made to Prosper Australia in recent months. Then Gavin, David & Karl will give you a short presentation of their material.

But let me start with something from Geoff Mulgan’s latest book:
The Locust & the Bee

Capitalism – at its best – rewards creators, makers, and providers: the people and firms that create valuable things for others – like imaginative technologies and good food, cars and healthcare which, at their best, delight and satisfy. Its moral claim is to provide an alternative to the predatory, locust like tendencies of states and feudal rulers. It rewards the people who work hard and innovate – and by doing so makes everyone better off, more than any other economic system in human history.

But capitalism also rewards takers and predators, the people and firms who extract value from others without contributing much in return. Predation is part of the everyday life of capitalism, in sectors as mainstream as pharmaceuticals, software, and oil, where people’s money, their data, their time, and their attention are routinely taken in fundamentally asymmetrical exchanges. It’s commonplace in the behavior of slum landlords and loan sharks, in pornography, and prostitution. Beyond the boundaries of the law, organized crime syndicates extort hard earned money and fuel addiction to drugs. Within the law, a large proportion of financial activity exploits asymmetries to capture – rather than create value; and over the last twenty years that proportion has risen, as capitalism shifted the balance of returns away from production and innovation and towards speculation.

The sharpest thinking in modern economics – including in this room – grapples with the complexities of ‘economic rent’ and predatory behaviour. Political scientists have shown the ubiquity of predatory behaviour and have shown that tension between productivity and predation explains much about the uneasy politics that has always surrounded capitalism – and why the liberal dream of markets left to govern them-selves turned out to be a chimera.

Yet much writing about the economy and capitalism is either ignorant, or oblivious of these tensions. The critics of capitalism are blind to its creativity, while its complacent advocates resist any suggestion that the system might sometimes reward predation – or, that the creation of value for some might destroy it for others. Capitalism has never been as creative as it is now.
But it has also never been as predatory.

No one legislated capitalism. No one planned it. Even the word was invented by its critics; not by its advocates. The capitalism described by Adam Smith has only a tenuous connection to the capitalism of today. Yet capitalism is for all that a common property, part of the world’s commons, like literature, science, or the great religions. It is a system with extraordinary power, and we should all be interested in where it is heading.

One of the ways you can get a sense of predation is through the study of how firms and others extract economic rent: defined as ‘directly unproductive profit seeking activities’. This use of the word rent to describe predatory behaviour goes back to Adam Smith, who distinguished between three types of income: profit, wages, and rent. His starting point was that profits, like wages, result from mutually beneficial trade, whereas rents result from asymmetries and the exploitation of assets that aren’t in themselves productive (landowners for example benefit from rent, even though it is only the labor done to their land that makes it useful). In this view profits are good, while rents are bad.

Although land may play a smaller part in economic life today, rents of all kinds are arguably much more important, and since the 1970s the phrase ‘rent seeking’ has come to be used to describe any type of strategy to derive income through means other than the creation of value. The theoretical understanding of predation has advanced a good deal over the last forty years. But it still remains largely absent from the everyday account of market economies.

Here at Prosper – we play a vital role as a function of civil society. Unlike the dominant NGO’s like the Salvo’s or the Red Cross – we are attempting to address the root causes of predatory behaviour. We recognize all the symptoms others attempt to deal with – but we know they are unsolvable while the system is structured to reward speculation above productive activity.

A parallel to predation is the related phenomenon of free riding. It’s often possible to benefit like a predator without acting like one. A free rider gains without contributing. They may be part of a team, or a family, where others do the hard work. Given how much of our history has been spent living in small groups and families, its not surprising that we are acutely sensitive to free riding, and quick to resent or punish it. But in complex capitalist societies free riding may be harder to spot.

Capitalism has triumphed, crashed, adapted, triumphed, and crashed once again, and then bounced back: mainly because of choices made to feed it. Even when it runs into the sand, most want nothing more than that it should get moving again. The economic system that dominates the world economy has penetrated our culture, our politics, and perhaps even our souls, to such an extent that it now appears a fact of nature. Its main challengers have been outrun, and its critics have grown hoarse through frustrated repetition. So what comes next? And who will triumph, the predators or the creators?

Prosper Australia is uniquely placed to help shape the right outcome at this moment in time. We have a new home – a new look and a great resource in our staff and executive membership. We know that what we are doing – and what we are fighting for – is on the right side of history.

I want to remind you all that we are not searching for something new here. We’re not pushing a systemic reform from the fringe. Instead of being considered radicals – we are actually quite conservative. What we want is something we have had before – and that worked well for us. Is it really so hard to imagine Australia returning to a system of federal land tax. This is the reason the ATO was brought to being in the first place. It’s a return to first principles. Of course there is much work to do in identifying and creating public policy around the collection of rents as the sole form of public revenue. But this is where Prosper finds itself – at the forefront of the greatest economic reform this country will see in the near future.

Accordingly, we are here tonight to launch the new look to Prosper Australia.

Welcome everyone to Prospers new home!

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