A highlight of our trip to New York after Christmas was a visit to the Tenement Museum down on the lower east side, where the movie Gangs of New York was set. It was the area where successive waves of Irish, German and Russian immigrants first settled, crowded into tenements. We were taken around the corner to see inside a tenement building restored to its original condition. As we climbed the back stairs, we were shown a row of dunnies and a water tap in the backyard. This, we were told, was one of the first tenements required to have outside toilets and running water under a new city ordinance.
Can you imagine any developer today thinking they could get away with building multi-storey units without adequate (indoor) toilets and plumbing? Unthinkable. But I can imagine the fuss the developers of that time would have made when the city government – no doubt acting under pressure from citizens worried about the spread of disease – was passing the new ordinance.
These excessively luxurious requirements would be hugely expensive and could send some tenement owners bankrupt – owners who had families and elderly parents to support. The additional cost would have to be passed on to tenants, of course, making rents prohibitive. Some families would be forced onto the street.
I bet few of those dire predictions came to pass. Why? Because business people still play this game and once the bitterly opposed legislation goes through and the new status quo is accepted, the exaggerated forebodings are soon forgotten.
Another highlight was a tour of Carnegie Hall. Once, when it fell on hard times, someone acquired it with a view to tearing it down and building high-rise apartments. A public outcry stopped it. Then, our guide reminded us, there was the time Jacqueline Kennedy Onassis led the fight to stop Grand Central Station being replaced by an office block. It reminded me of how that ratbag commo Jack Mundey – being quietly urged on by respectable National Trust-types – was frustrating go-ahead developers all over Sydney.
Just think how better off we’d be today had those those pillars of industry not been prevented from doing away with the crumbling old Queen Victoria Building – with its verdigris domes and rickety lifts – and building a shiny new office block. Gosh, by now we’d be ready to tear it down and build a taller one. And just think how many jobs that would create.
Do you see where this travelogue is heading? I’m an unfailing believer in the capitalist system. We’d all be much poorer than we are were it not for those ambitious, hard-working, enterprising, optimistic souls who set out to make themselves rich by engaging in some business. But that doesn’t stop them being thoroughly self-interested and often short-sighted. Whatever new project it is they’ve decided will make them more money, they want to get started yesterday and get terribly angry with those who won’t step out of their way and let them get on with it.
My point is, it was ever thus. Market economies work best – and all the people within them do best – when governments act on behalf of the community in setting boundaries within which entrepreneurs are free to be entrepreneurial.
It’s the community’s economy, and it’s the community that decides the rules that ensure businesses make their profits – good luck to them – in ways that do more good than harm to the rest of us.
The huge hurt and cost of the global financial crisis – from which the world is still recovering, 10 years later – is but the latest reminder of something we should have known: how easily an economy can run off the track when we fall for the line that self-interested, short-sighted business people should be free to do as they please.
I remind you of all this because we’re just emerging from a period of more than 30 years in which the Western world flirted with the notion that economies work best when businesses are given as free a hand as possible.
The present royal commission into the misbehaviour of the banks is just one response to the consequences of that ill-considered notion.
You have to be at least in your 50s to remember the world as it was before then, when governments felt free to limit businesses’ freedom of action in respects they judged necessary and to impose obligations on them. Where do you think the minimum wage, four weeks annual leave, long service leave, sick leave and many other employee benefits came from? Governments decided to impose them on business so as to ensure workers got their share of the benefits of capitalism.
Many of our young people are deeply pessimistic about the working world they’re inheriting – the “gig economy” where most employment is “precarious” – because they’ve grown up in a world where businesses seemed to be free to do whatever suited them. They think the gig economy would be a terrible world to live in. They’re right, it would. Which is why I’m sure it won’t be allowed to happen. Governments will stop it happening.
Why will they? Because workers have infinitely more votes than business people do. In the end, the economy is moulded to serve the interests of the many, not the few. Governments keep getting thrown out until they get that message.
Ross Gittins is the Sydney Morning Herald’s economics editor.
First published in the Sydney Morning Herald, 6 March 2018.