Game of Mates: How Favours Bleed the Nation
By Cameron Murray & Paul Frijters
Game of Mates tells the story of two Australian men, the working-class Bruce and the capitalist James — two imaginary but emblematic men with very different lives.
Written by economists Cameron Murray and Paul Fritjers, these two archetypal characters are used to tell the story of economic theft across Australia.
But before looking at the lives of Bruce and James, the book explains how one of today’s key sources of wealth, namely property and land owning, came into being.
Before the arrival of Europeans, there was no concept of owning land. Historically, land-owning reaches back to James Ruse, who was given land near Parramatta — Australia’s first property deal — on which he made a handsome profit when he sold it for roughly $1.5 million in today’s money.
In honour of Ruse, the authors call their modern capitalist villain archetype “James”.
The story really begins when the working-class Bruce takes his car on a toll road built via an accounting trick called public-private partnership (PPP), in which private companies would often not put up much private money. For example, the $223 million loan for the Sydney Tunnel was never paid back.
In short, other people’s money — Bruce’s tax money — paid for it.
Meanwhile, James rakes in toll fees each time Bruce drives through the tunnel. An ingenious system in which James wins twice and Bruce loses twice, first via his misspent taxes, second by the toll he pays.
James also offloads what economists call “externalities” (offloading costs onto others) onto Bruce. For Sydneysiders trying to by-pass the tunnel, James’ mates are at hand to engineer traffic so that people have to use the tunnel to avoid traffic jams. Such deals are sold by Australia’s corporate media as win-win partnerships.
James has invented many ways to cheat the public, such as lucrative contracts for road maintenance. The book describes a vast network of mates involving banks, construction companies, investment funds and middle-men, including former politicians.
The total cost of this model comes to $42.8 billion in infrastructure. Rather than “a rising tide lifts all boats”, as supporters of neoliberalism promise, there is a gigantic vacuum cleaner sucking up Bruce’s money to deliver it to James.
The book says of James: “He is a charming Queenslander who went to the right school, was president of the student union and has both politicians and top civil servants in his contact list. He is a professional in the Game of Mates.”
James’ informal crypto-Mafia-like network of mates depends on the art of mutual favours and gift giving (“grey gifts”). An example is ex-NSW premier Barry O’Farrell’s infamous expensive bottle of wine, delivered as a gift, that he claimed he could not recall when fronting an Independent Commission Against Corruption inquiry in 2014.
The key is who controls the honey pot of tax money under the motto “no money, no honey”. It takes the form of government-granted monopolies and exhorbitant parking fees at Sydney Airport.
One of the biggest honey pots for James is the euphemistically labelled superannuation industry — an industry with no production. In this scam, the government compels employers to take 9.5% of their workers’ wages and hand this over to the “financial service” industry with which to gamble (“invest”).
One can compare Denmark’s and the Netherlands’ system to Australia’s superannuation. Their super fees are at 0.1%, James’ at 1.2%.
With total superannuation fees running to about $16.9 billion in the 2013 financial year, that is an astonishing windfall for James at Bruce’s expense.
This is legalised daylight robbery. James’ mates in politics set the rules in the game of mates. James’ mate networks operate with money, campaign financing, in-kind gifts, scholarships, etc.
There is also the revolving door of politicians turned CEOs, corporate lobbyists, advisors, members of board of directors, etc. James’ game of mates is not a grand conspiracy but a fine-tuned interest symbiosis involving capital, politics and the media. They provide the money (capital), the rules of the game (politics), and the ideological diversions and cover-ups (corporate media).
The game of mates naturally extends to mining. Railways are built for the James’ who own the mines. James also offloads the environmental devastation caused by mining onto others, sometimes selling off abandoned mines for token amounts to shell companies to avoid such costs.
The costs to the community are externalised — offloaded onto Bruce. At the same time, Bruce gets very little tax from such corporations and is left to deal with large-scale environmental vandalism.
The grease that lubricates this machine is money, which is where Australia’s banking oligopoly of the Big Four enters the game of mates. The four major banks have a near complete control over the market in a government-sanctioned monopoly.
Australian banks also explicitly rob their customers with fees and charges. James’ biggest scam remains mortgage interest rates.
In Australia, the variable rate on mortgages is about 5.5%, while the central bank interest rate charged to commercial banks is 1.5% — a 4% premium. Given that Australia’s total private mortgages are more than $1.6 trillion, 4% on this adds up nicely for James while emptying Bruce’s pockets.
No wonder James laughs all the way to the bank while Bruce is left with a housing affordability crisis engineered by James.
Key to the game is cloaking it in myths. For that, James’ mateship trio of politicians, corporate media and capital is important. James has strong allies in the media — another group of mates. Sixty per cent of Australian metropolitan newspapers are owned by News Ltd — a “Murdocracy”.
But the game involves more than Rupert Murdoch. The network also works by exclusion: don’t follow the rules and you are out. Esteemed journalist Michael West spent his time at the Sydney Morning Herald as a Senior Business Reporter asking questions that rattled many James’. He was shown the door in 2016.
James’ corporations have also collectively excused themselves from paying taxes. Bruce’s tax burden has grown as billions of dollars in annual taxes are dodged by multinationals.
Some estimates put the cost to Australia of international tax avoidance at about $6 billion a year. Industry whistleblower George Razvany, however, estimates the true losses are closer to $50 billion each year.
The game of mates works equally well in Big Pharma, with the book showing how blatantly pharmaceutical companies rort the system. It also works for Australia’s “Colesworths” supermarket duopoly.
It also works with universities. There, the game of mates started with cleansing the university senates of academics. Now only one in six university senate members holds a PhD. This marks the triumph of “Managerialism”.
James successfully stacked university senates, the body that legally owns the universities and that supposedly employs him and decides on his salaries, with mates. After that, it was plain sailing.
James increased his own salary to levels unseen anywhere else in Western academia. He hired legions of administrators to keep the academics off his back by keeping them busy with compliance, regardless of its relevance to research and teaching.
James also discovered a goldmine with students, charging huge fees for second-rate courses, fleecing them further with his on-campus accommodation. Each academic also has one-and-a-half to two administrators while in the US there are three academics per two administrators.
On top of that, the administrative workload of academics has grown by around 25%. Our tertiary education is also twice as expensive as it should be. It is keeping Bruce’s children increasingly away, or extracting substantial fees.
Australia’s overpaid vice-chancellors salaries averaged $873,600 in 2015, with nine of the 38 university leaders earning more than $1 million. University of Sydney vice-chancellor Michael Spence tops the list with a salary of $1,385,000.
James’ game of mates — to which university vice-chancellors now belong — is built on networking relationship management and government relations.
Today, one of the key jobs for James is to do anything to prevent the population from noticing they are robbed in broad daylight. As a consequence, the role of company directors and university vice-chancellors, is now more about relationship-building than about their expertise in make their products and running their business.
Australia is a class society with an elite that robs the rest, who scramble to salvage some self-esteem by secretly hoping to join that elite.
US billionaire Warren Buffett famously said “there’s class warfare, all right, but it’s my class, the rich class, that’s making war, and were winning”.
In this class war, James robs you of nearly half your wealth. Still, many previous generations, here and around the world, have fought their Jameses and won. It is our turn now.