I’ve always thought that the Oil-For-Food scandal and the parallel scandal (promoted mainly on the left of the blogosphere) about corruption in Iraq’s postwar reconstruction were overblown. Under the circumstances, corruption was inevitable in both cases.If you supported feeding Iraqi children or attempting to repair the damage caused by the war, you had to expect, as part of the overhead, that those with power in Iraq would seek to skim money off the top, and that they would find willing accomplices in this task. Having said all that, corruption shouldn’t be passively accepted. It’s a crime and, wherever they can be caught, those guilty of it should be punished.
By far the biggest fish to be caught in the net so far is Australia’s monopoly wheat exporter, AWB, which was, until 1999, the government-owned Australian Wheat Board. It has become evident that AWB paid hundreds of millions of dollars to Saddam’s regime, and it has now been stated in evidence that the deals in question were discussed with Australia’s foreign minister, Alexander Downer.
Based on past experience, particularly the Children Overboard case, we can be pretty confident of the following
* Both Downer and Howard knew that the AWB was paying kickbacks to the Iraqi regime
* This information was transmitted in a way that preserves deniability, so no conclusive proof will emerge
* No government minister will resign
* Endless hair-splitting defences of the government’s actions in this matter will emerge from those who have previously made a loud noise about Oil for Food.
On the point of resignation, I’d note that the information that had come out before today, showing the AWB up to its neck in corruption, would have been enough, under any previous government to require ministerial resignations, on the basis of the doctrine of ministerial responsibility. But that doctrine is now obsolete in Australia. If anything short of a criminal conviction is considered sufficient to justify an enforced resignation under present conditions, I’m not aware of it.
“Gandhi” has a bit more
John Quiggin 
Also noted that the AWB (current incarnation) sought to bring on their AGM early prior to the current inquiry, major agenda item, increases in Director and Management salaries (Source AFR). Cute! Guess you need the extra remuneration to allow for being caught at doing something illegal. Hope the wheat growers of australia are pleased with services rendered
Not diffcult to have such a jaundiced view of the integrity of present day politicians to agree that after much huffing and puffing, no one will be held accountable, no one will resign, and life on the good ship lollypop will continue.
I was wondering if John (or any other reader) had a view about the monopoly status that AWB has for all wheat exports out of Australia. The Iraq oil-for-food kickback scandal may seem unrelated, but part of me wonders if this apparent corruption is part and parcel of a culture that can develop in a monopolist situation.
Even though I’m generally not keen on monopoly arrangments, I’ve always supported the so-called single desk arrangement, as I assumed this gave the best price for farmers (and was told this by farmers too I might add), but this incident has made me wonder – both about whether the ‘best price’ argument is true, as well as whether there are other costs from the monopoly arrangement.
Wilson Tuckey has lately called for an end to the arrangement. I don’t normally take my views on economics (or anything else) from Wilson Tuckey, but his seat does cover the heart of the wheat belt in WA, so if nothing else I presume he is reflecting the views of some of his constituents.
I think that enforced monopolies generally kill innovation. Unenforced monopolies have to respond to innovation or else lose their monopoly status. We have seen the latter with the likes of Microsoft.
I have no problem with wheat farmers forming a sellers cartel, however for legislation to enforce such a situation seems daft to me. Cartels are reasonable in certain circumstances, however proping them up with laws and government backed institutions compromises freedom, innovation and efficiency.
Ironically if the AWB is stripped of its special status then farmers who do form a sellers cartel through their own innovation and co-opeartion will probably be operating illegally.
It seems that when it comes to cartels we either ban them or else protect them with special laws.
I’ve always been dubious about the claims made in support of the AWB monopoly, most of which seem to assume that, without the AWB, wheat would just rot in the silos for want of buyers. However, I’ve never regarded it as a high-priority issue.
Now I suspect it’s a moot point. AWB is unlikely to recover from this scandal (given that the government is obviously keen that AWB should wear all the blame), and it’s hard to see a replacement being set up.
John,
If the AWB is shut down or loses its special status then how would you feel about a group of farmers forming their own new cartel? Should it be permited? Should cartels in general be permitted?
Regards,
Terje.
I thought the purpose of the AWB was to exercise market power on world wheat markets, in so doing securing higher prices for Australian wheat farmers than they would get if they sold their product as individuals.
It is doubtless true that the government will try to pin all the blame for this scandal on the AWB, but the AWB executives are experienced players in the political game. I’d be surprised if they don’t take the view that if they are going down, they are going to take as many ministers down with them as they can. I’d be equally surprised if they haven’t stored away the necessary evidence that will assist them with this objective.
Terje,
Generally cartels are bad for the reasons already stated. From a policy perspective we should be worried about cartels only to the extent that they detracts from the welfare of Australians. So, for example, a cartel consisting of manufacturers of a product consumed primarily in Australia would distort the market for that product to the detriment of consumers (ie. by artificially raising prices and thereby preventing capital being more productively employed elsewhere, ie. there would be a reduction in overall allocative efficiency). Conversely, if the product is primarily exported, then from an Australian perspective we should not be worried that the cartel can fix prices or limit output (for this reason, the Trade Practices Act does not prohibit anti-competitive arrangements where the arrangements relate exclusively to exports).
I would think that, were it not for the wheat-specific single-desk legislation, the formation by wheat farmers of a sellers’ cartel would be prohibited by the TPA to the extent that it related to domestic sales. This is as it should be.
I don’t see anyway out of paying bribes in countries like Iraq either — I presume its culturally appropriate and expected, as it is in many countries.
Given that many Australian companies do business in countries just as bad for bribe taking (like China) and don’t get caught (excluding QUT), I think therefore the problem was that the AWB was incompetent in finding a way of indemnifying itself against knowing the bribe was paid.
Bribes may be culturally expected but I can’t see how they are ever appropriate. Its like saying that crime is culturally appropriate in Mafia territory.
Andrew, I can’t remember the issues but Tuckey’s call coincided with a famers’ cooperative from WA being denied an export licence by AWB veto. It was reported in the Fin.
The news that Mark refers to is reported here:-
http://www.abc.net.au/rural/content/2006/s1544122.htm
http://www.wabusinessnews.com.au/en-story.php?/1/33664/WA-grain-harvest-reaps-12-5mt
EDITED EXTRACT:-
There’s a difference between accepting that some corruption will occur in certain circumstances, and being ok with the scale of corruption that has gone on.
If the figures tossed around for the scale of Halliburton’s take are true (and I’m not in a position to say if they are) they constitute an arguement against the war, while I accept that much smaller amounts of graft would not make for a political arguement.
And Uncle Milton – I hope you’re right, but your conclusion relies on these guys being smarter than Downer and Howard. Not that hard in the first case, but less likely in the second.
You gotta laugh!
I remember that there was outrage because Iraq wasn’t going to take some of our wheat just prior to us commencing to bomb them! And this clamour was from Howard, Downer et al too.
So not only did we willingly pay bribes, but we positively insisted on doing so!
IAFOW: it’s a funny old world.
By the way, I thought endemic corruption was one of the factor adduced as inhibiting economic growth in less developed countries. Aren’t we then abetting this inequality to our own advantage?
Notwithstanding the Wheat Marketing Act how AWB missed the ACCC whilst Telstra was forced to share its market is a mystery (to me).
There appears to be no reason why the marketing of grain cannot be opened up to competition.
“how AWB missed the ACCC whilst Telstra was forced to share its market is a mystery (to me).”
This mystery is easily solved.
The National Party did it.
“Bribes may be culturally expected but I can’t see how they are ever appropriate. Its like saying that crime is culturally appropriate in Mafia territory. ”
I think they are appropriate in some circumstances, like getting food to the needy. In the longer term, establishing foreign entities in some of the more authoritarian countries may also force them to pay more heed to the suggestions of other countries. Would, say, the movement toward a more decent political situation in China have progressed as far as it has if they had not let all the foreign entities in ?
In addition, if I give money to a third party, who then does the culturally expected bribing out of my knowledge (which I believe is how many foreign companies get around the liability for bribery problems in China), is that a bribe ?
“no one will be held accountable, no one will resign” – Mike
How can you say such a thing, Mike! This is such a big scandal that I’m sure that at least two or three lower-level employees will lose their job or even go to jail. But all those above them – from ministers down – had of course nothing to do with it, were inexplicably left ignorant by their subordinates, can’t be expected to read every Minute given to them for signature, are suffering from understandable lapses of memory about past details, etc.
Of course the culpability goes far higher than the AWB & perhaps the ozzi govt.
All aspects of contracts & transactions under the oil for food programme had to be inspected and approved by the UN.
The UN found nothing wrong with the AWB contracts.
Steve, if you read the reports you’ll find that the AWB was very concerned in case the UN found out what was going on. They were equally concerned to make sure that DFAT and the Oz government were kept informed.
We live near and trade with a region, in most of whose countries you can’t do business unless you pay somebody or other. It’s just the way it is, and savvy Aussie businesses understand this. So the AWB, being street-wise padres, probably didn’t bat an eyelid. If they didn’t pay they mightn’t have gotten the sales.
If no Australian businesses paid kickbacks, our exports would be in poorer shape.
JQ: Stupidity does not of course let the UN off the hook, they had the responsibility to ensure all was above board, nobody else was responsible for the oil-for-food programme, the UN is squarely in the frame.
Paul Kelly: If the AWB had not paid the “trucking fees” the wheat sales to Iraq would not have happened. Wheat exporting is an extremely competitive business, and if Australia did not want the sales, plenty of others would have gleefully taken over a customer who had historically belonged to Australia.
Andrew Bartlett: If farmers told you the Wheat Board ensured the best price for farmers, then they must have been old enough to remember the days before the Wheat Board existed (more than 60 years ago), and they would have been referring to “stability” in pricing, rather than “best possible” price.
The Wheat Board has always been very arbitrary about which wheat it will accept, has always charged extremely high fees, for “freight” and has had the power to refuse permission for a domestic sale (usually to a feedlot) in which the farmer would have recieved a higher price and the purchaser a lower price than the respective prices which they had to pay/recieve via the wheat board. Payments to farmers have taken up to 9 years, as wheat was usually sold on terms, especially to Iraq, USSR and others.
The Wheat Board brought farmers all the downside of a centrally planned and regulated system, whilst still having act (on a man to man personal risk basis) as financier to some very big governments. Did these governments always pay up? No.
The Wheat Board did bring some hope to farmers, who otherwise would be having to (as an unsubsidised full fee paying individual) find their customers on a world market by competing against the US, Canadian and European Governments, and subsidy muscle such as those governments use make competition almost impossible.
Steve, um, that’s what I said you goose.
Paul Kelly: *honk*honk* be careful to not incur my wrath. A goose bite is no joke, better to call me a less aggressive animal name. Besides, was only muddying your concise and sharp point by expanding it.
I agree with Uncle Milton. The case for an AWB monopoly is the standard argument for an optimal export tax on an export where Australia has monopoly power. There are surplus losses to Australian consumers but these are less than the gains to growers.
This answers the question why it is treated differently from a domestic monopoly which imposes net deadweight losses on residents.
I suspect the monopoly power is not great so the premium Australian growers get will not be large. But it would generate enough power to pull the sort of shady deals the AWB apparently has been pulling. Individual growers and small scale selling organisations can’t do this.
By the way John, the ‘AWB Overboard’ caption deserves some sort of award for witty headlining.
Yes Harry, JQ is suddenly revealing an almost Tim Blaire-esque skill for sub-editing! (Has anybody that pair together? AHA!)
It is unfair to solely blame the Nationals with the AWB, it was formed in the late ’40’s and further refined in response to the McColl enquiry in the mid ’80’s after the collapse of rural commodity prices.
It is obvious some system of audit needs to take place, however the issue of enducements may restrict negotiations. Perhaps now is the time to open the system up.
* Endless hair-splitting defences of the government’s actions in this matter will emerge from those who have previously made a loud noise about Oil for Food.
Don’t forget the outcry from people who previously shrugged of the corruption as an invevitable part of middle eastern culture.
Regarding questions about the role of single desk marketing for farmers, the explanations by Uncle Milton and Harry Clarke are correct. The role of AWB and the monopoly was to force aggressive foreign negotiators to negotiate through equally savvy Australian negotiators, instead of being able to pick off individual farmers and push the prices down.
Andrew and JQ, you should be aware that there’s been a spirited campaign over the past few years by foreign buyers and by middleman agents here in Australia to break down the selling cartel.
It is precisely the same mechanism as we’ve seen in the IR changes. Powerful owners of capital want to bargain down the power of producers (workers), and are aided by greedy middleman agencies.
In the wheat communities, this campaign has won selected support, usually from farmers with high quality grain. Those farmers can get higher returns at the moment. However it seems clear that as soon as the market is broken up, the buyers will play farmers off against each and drive the farm price way down.
Also, farmers with average or low quality grain would lose heavily under the new arrangements. The quality of grain varies each year, and depends on the soil, the pattern of rain and partly on the farmer’s management. The AWB grades the grain and sells it an organised fashion for different usages. In a completely deregulated market, some of that grain would indeed never be sold.
The AWB also provided financial reliability to farmers, being trusted as much as a bank. This is quite important given that a farmer is trusting the organisation with deliveries up to a few hundred thousand dollars. Farmers spend weeks harvesting and driving their loads to silos at nearby rail heads, and then must trust that a cheque for their annual work will arrive in the mail.
Tony,
Could it be argued that AWB’s market knowledge and relationship with farmers reduces a lot of the information and transaction risks a third party financier would factor into the lending cost?
EG a bank has to consider the possibility the information they receive on the likely return for the crop is inaccurate and has toconsider the possibility of a default by the grain handler engaged by the farmer.
So, Tony, what you are saying is that the current system subsidies the lower quality production at the expense of the high quality and also that farmers are too silly to band together of their own accord to get the price that the market will bear?
Sounds to me like you have made a convincing case for its abolition.
Some here, seem willing to accept that it is OK for business to allow some corruption, as when we deal with some countries, it is in their culture that corruption is part of doing business. Without some corruption we would not sell anything???
However, our government should not ever, be involved in same. Even to appease our farmers.
Andrew Reynolds Says:
Jeez this libertarian crap gets tiresome. You appear to be advocating that the AWB be abolished, and be replaced by, wait for it… exactly the same thing.
What a major victory that would be for the libertarian cause. Yawn.
A goose bite is no joke, says Steve at the pub.
Very true, especially if they are nesting or have young, when they are utterly fearless. I speak from painful personal experience. I have kept geese in the past and they are better watch dogs than dogs, it is impossible to sneak unnoticed past a gaggle of geese. But they are lovely graceful animals, and make good pets when properly domesticated. If anyone is thinking of getting some be warned, they need a fair bit of space, a decent sized pond (especially if you want them to breed), and live for a long time, much longer than dogs or cats.
Sorry for going off topic. Normal service will now be resumed. 🙂
Ian Gould, yes, that makes sense. The way the AWB has operated has meant more efficient financing of huge amounts for farmers, and the trust placed in the AWB by farmers has reduced a lot of transaction costs all round.
Andrew Reynolds, the point is that yields and quality vary randomly each year for farmers, so that the few farmers delighted to receive a high return this year from deregulated buyers would be disadvantaged from the system in the long run. Firstly, prices in general would fall, even for top quality grain. Secondly, on the years when their grain is poor, they would suffer even more.
Also, it’s not so much that good grain subsidises lower quality at the moment, but that the whole system benefits from orderly marketing. For example, some grain goes to flour, some to malt, and some to animal feed.
Your question about farmers being too silly to band together doesn’t really make sense, because that’s what the AWB is. It’s actually quite like a union, although farmers and the National Party don’t see it that way.
I’m happy to provide a bit of information, but I have to point out there are experts in agricultural economics floating around. I’m not one.
SJ is right. The case for establishing an AWB is based on the idea that a competitive farm sector can bring increased advantage to Australia if it does ‘band together’ and act as a monopolist. That is what the AWB does. If it acts as a monopolist it can extract the optimal rents payable to Australia. It can alternatively charge the competitive price but levy a tax which brings the international price up to the monopoly level. Same thing. So you are proposing what you set out to attack.
Pushing for free markets everywhere irrespective of public goods, externalities and, in the case of traded goods such as wheat and air services where Australia has monopoly power, is almost as dumb as the socialists who want the state to run everything.
The AWB isn’t an angel and seems to have broken the law. If so it should be punished. But in terms of accessing efficiency gains they are good for us Aussies. That’s why we have them.
Amazing stuff. The largest act of known corruption in modern history, in which Claudia Rosetti has demonstrated that the Secretary General of the United Nations was on the take, where the President of France was on the take, the PM of Canada was on the take, the President of Russia was on the take, and ‘it is overblown’ and ‘the largest fish caught is the AWB’.
This is a scandal the left as been near-frantic to avoid for YEARS, because the linkages show the UN to be rotten to the core with corruption, and the favourites of a National Socialist dictator to be socialist European governments and darlings of the left like the vile toady to fascists, George Galloway.
How long have you been following this? Five minutes? Do you even know that the entire UN side of this was run out of Annans own office, at his personal order? Have you been following Annan’s transparent effort to cover it all up?
And now that it might potentially touch someone – anyone – other than a socialist, UN internationalist or socialist fellow traveller, you are all over it.
John, your polemical nature is showing.
MarkL
Canberra
MarkL perhaps you’d like to refer to the points in the Volcker report where these claims are substantiated. I didn’t notice them, and neither did the Washington Post.
MarkL,
I’m not sure about OFF being the ‘largest ever’ act of corruption. My reading of the ‘Reconsruction’ of Iraq suggests that OFF is a minnow in comparison, if the comparison is purely in dollar terms.
Even if the view was restricted to just the UNs activities, surely the Iraqi sanctions regime was one of the gravest indictments of the UN. This was a failure measured in lives lost rather than cash skimmed.
The scandal was that OFF was introduced as a very partial and always insufficient answer to the suffering of ordinary Iraqis under UN sanctions.
I haven’t been following the wheat marketing story closely, but I recall hearing on Radio National years ago that WA farmers were unhappy with AWB and wanted to set up their own organisation. WA produce a lot of Australia’s wheat (50% or more?) and I suspect AWB is an ‘Eastern states’ show and doesn’t meet their needs as they see them.
I believe that Canada and a few other countries also have single-desk arrangements. In the WTO the elimination of single-desk selling has been sought by the US and EU for ages. The US reckons it is a hidden government subsidy.
I couldn’t ever understand the rationale for privatising AWB. A government-owed corporatised entity, yes, or a farmer-owned co-operative. Now that it is privatised I think there would be sense in allowing one or two other corporates in on the game. I think the AWB operates on some kind of government licence, so it would be easy to call tenders, which they probably do now, on the basis of letting in some competition.
On corruption, my only point is that when people complain about corrupt third-world governments there is almost always a first-world connection. First-world governments have not been diligent in stamping it out. I think the UN has a convention on it now which, I understand, none of the G8 have signed up to.
Western Australian farmers sell their wheat to CBH, which is then forced to get AWB to sell all of it that wants exported.
Not only are they not allowed to sell it to overseas buyers, they aren’t even allowed to move their own wheat to their own flour mills in other countries.
In the latest episode, AWB rejected CBH’s proposal to move wheat to SE Asia, even though they wouldn’t even be encroaching on AWB’s business by doing so.
http://www.theaustralian.news.com.au/common/story_page/0,5744,17763748%255E643,00.html
But you’re right, I don’t see how this monopoly situation could possibly hurt farmers.
*Bites Knuckle*
SJ, Harry Clarke and the rest – there is a big difference. It is this – I know this is a big step for those who believe that every thing that should not be compulsory should be banned, but wait for it – freedom.
A big step, guys, but perhaps you should try it some time. If a farmer decides to sell independently, great. If they want to sell to (for want of another name) a co-op, they can.
Big intuitive leap, guys, but try it some time.
.
Tony,
If a farmer cannot make sufficient a profit from his or her farm, perhaps they should not be farming. Find another farmer or return the land to the bush if it cannot be farmed – it makes good sense environmentally, too.
It is what happens in all normal businesses. For some reason the National Party has managed to convince many on the left (and many on the right) that they deserve more support than and different regulations from businesses. It is silly.
Andrew, You still don’t get it.
A monopoly maximises benefits to producers. Consumers lose but firm benefits are maximised and the issue with wheat is that most purchasers are not Australians. One of the problems with forming an AWB that prices above marginal cost to maximise the national advantage is that individual producers have to restrict their output. Individual producers then have incentives to produce a bit more and sell beyond monopoly production. Giving ‘free choice’ on whether a farmer sells to the AWB undermines its potential to extract monopoly rents from foreign customers. Moreover without the requirement to sell to the AWB a producer has incentives to sell outside it even though all producers are best off selling within it. As the standard prisoners dilemma, shows all then lose in the sense that the collective surplus accruing to growers falls if they fail to act cooperatively to realise the monopoly output.
Again the benefits to Australian producers might not be great, there could be X-inefficiencies, some losses to Aussie consumers, losses to the world economy as a whole and so on but, ignoring these issues (and neither you nor anyone else has raised them) ‘freedom of choice’ will disadvantage all Australians. And that is what this nationalistic argument is about — benefits to Australia.
I still dont see how you could determine that a monopoly would provide the best possible service to the producer – are there any other parallels?
Harry,
A voluntary monopoly on the part of producers may maximises benefits to producers. An enforced monopoly imposed on producers may in fact benefit the monopoly organisation, the buyers or it may benefit the producers as you suggest. With no exit mechanism in a compulsory arrangement then producers have little means to register their discontent.
The same is true of trade unions that are compulsory. Over time they may come to represent interests rather than those of their members. Members can become merely a “means” rather than the “ends” of the organisation.
OPEC is a cartel between nations. However each nation has an option to leave the cartel. As such the cartel continues to perform in the interests of the members.
AWB should probably continue to operate as a producers co-op. However membership should be optional.
Regards,
Terje.
This scandal dwarfs practically every other example of misgovernment by the Federal Government that we have endured in recent years, as grave, unprecedented and unforgivable as many of these have been.
As Kevin Rudd pointed out this morning, when interviewed on Radio National, our country has effectively been giving money to the Saddam Hussein regime which must have increased its capacity to buy weapons which have then been used against our own troops during their participation in the subsequent illegal invasion of that country.
If Gough’s Government had ever been implicated in such a scandal, I don’t see how it could have lasted for more than 5 more minutes in office.
Why aren’t we all demanding this Government’s immediate resignation?
I must say the elephant in the room seems yet again to be escaping attention. The international wheat market is entirely corrupted by the US (the world’s largest producer) subsidising production and dumping product on the international market. Australian producers are in fact amazingly efficient – US producers aren’t slouches either and Australia has to sell at the artificially depressed world price. Most of the larger international buyers also operate buyers’ cartels and import monopolies – eg in the current context pre-invasion Iraq. Given that the market is already corrupted, it makes perfect sense for Australia to have a producers’ monopoly. And a monopoly is a monopoly – so the arguments about what one WA business can or can’t do is redundant and a bit silly. Arguing the theoretical merits of level playing fields don’t make much sense when the field of play is more suited to rock climbing.
Harry, Uncle M, do you really think australian wheat constitutes a monopoly? – it is a small fraction of the total amount of wheat traded in the world annually. There’s a highly competitive market in wheat, and we are not the world’s biggest player by any means; there’s both other government marketers and also much larger private companies selling wheat (eg Cargills). There’s no empirical evidence that I’ve seen (as opposed to assertion) of australian producers gaining monopoly rents through the so-called “single desk” policy in markets where it sells without the benefit of other government interventions. There is an edge in some markets for specialised wheats (particularly hard wheats) that derives from the quality and reliability of the australian product, but that’s due to the efforts of the wheatgrowers, not the AWB.
However the picture gets confused when you consider the middle east markets because one of the underpinnnings of Australia’s wheat sales there is what is known as national interest cover provided by EFIC which allows the AWB to sell to buyers on generous credit terms. that is, the governnment is subsidising sales into the region via insurance arrangements: a slightly less transparent form of subsidy, but a subsidy all the same. The cover makes australian wheat more “competitive” in appearance, but in reality it is the australian taxpayer who is picking up the risk. To put it another way – the only markets where there is any evidence of Australia gaining a premium through an AWB monopoly is those in which the customers don’t actually pay up (slight exaggeration – sometimes they do pay – but there is a much higher risk). When the AWB was in government hands there was an extremely close relationship among all the players – DFAT, EFIC, AWB and others – which makes it impossible to believe that the government was not intimately involved in the dealings which are the subject of the current inquiry
rog, the reason why the ACCC does not intervene is that the policy is established by legislation; without that, yes of course, if any company such as the AWB were attempting to force all growers to operate through only it and forcing other buyers out of the market it would be completely illegal.
andrew, the links between AWB’s status as the monopsonist purchaser of australian wheat and the possibility of corrruption have already been drawn in some of the media reports; and without the government backing it receives, via its legislated protections, arguably there would be a different culture in the AWB: but against this you have to note that there have been some very dubious actions by private grain companies in various markets, and by other private corporations (halliburton comes to mind) in Iraq. On the broader question of whether the AWB should maintain its single desk status, there’s not much evidence that it brings benefits to australian growers beyond what they could achieve via forming grower cooperatives for themselves. some australian wheatgrowers remember that in pre-AWB days there were unscrupulous buyers who exploited information gaps about prices and conned unwary farmers – but there’s less likelihood of that today. Worth noting another parallel here. It used to be thought that grain storage and handling had to be government controlled and/or tightly regulated (this makes a big difference to prices – good wheat goes bad quickly if stored incorrectly). there were fears about what disasters might happen when these arrangements were undone in the mid 1980s following a royal commission inquiry, but inn fact deregulation of grain storage, handling and transport appears to have been a good thing for the industry.
The rural socialist ghost of Black Jack McEwen hovers over the monopoly arrangements of the Wheat Export Authority.
And a quick Google reveals many National Party apologies for this restriction of trade based on the pragmatic calculation that the end to the monopoly would spell an end to a cartel that maximises returns to wheat growers.
I guess this is the same argument that used to support the practice of closed shops in work places. Single-member electorates give disproportionate power to economic interests based on a monoculture like wheat farming.
Hal9000’s point about the corrupt nature of international wheat marketing is well taken.
Why should Australian wheat farmers be the only major exporters of that commodity to expose themselves to the consequences of the restrictive practices of others?
The only answer to that question is that it hasn’t stopped Australian governments since the Hawke government from doing just that to much of Australian industry.
Seems that the realpolitik consequences of single-member electorates is the independent variable in the unique ability of Australian wheat exporters to retain their government-mandated monopoly.