The final collapse of Ansett is more than just the death of an airline. It's the most visible sign yet of the destruction of the core deal making paradigm that has driven Australian business since World War 2. In the post war business environment great fortunes have been made on the back of the big business, big government and big union orchestration of the Australian economy. Save for a few areas this is now largely defunct.
The Australian business deal making operated on simple rules hidden within smokescreens of employer-employee antagonism. It worked this way. Ambitious business people would establish favoured relations with key union officials. Deals would be struck for the management of the workforce and legalised through the industrial relations system. Most importantly the IR system prevented outsiders from achieving work arrangements that were better than that enjoyed by favoured business insiders. In addition industrial action could be targeted against competitors assisting growth and sometimes near market dominance of the favoured.
Naturally the dynamics were more complex than this simple explanation. In any one industry several players could achieve inside runs. Favours would come and go and key players would change. The extent and nature of deal making varied from industry to industry. The system was sometimes propped by tariff protection and direct government handouts. The deal making was always an art rather than a science and involved elements of political intrigue. Party political disagreements masked the undercurrent of political bipartisan that enabled the favoured to succeed with any government.
The system had its' high mark under the Kelty Accord years. But that has passed and now three comparatively recent events attest to the extent of this deal paradigm demise.
First the union movement suffered dramatic membership collapse during the Accord period. From the union perspective, business won while unions lost. Around 1994 the ACTU formally dumped the Accord and set on a new strategic direction. Published on their web site in 2001 the new strategy reasons that membership will increase only while unions engage in war with business. Their aim is to "neutralise" management. This is being done through a combination of shop floor activism, management takeover through enterprise bargaining processes and shareholder activism using superannuation and other financial funds leverage.
Second, Chris Corrigan showed no respect for the old paradigm and recognised the latent, financial value sitting on Australia's wharves. Corrigan played by new rules and at the height of the war with the MUA Patricks share price collapsed. But once the deal on Patricks terms was set, values were realised, the share price soared and new fortunes were made.
Then came Ansett, an old deal paradigm of the greatest order! The problem was that the old deals had created a financial dinosaur incapable of facing competition. The attempt to revive Ansett under administration was a last, desperate attempt by old paradigm players to reassert a deal of old. The failure shows the extent to which game rules have changed.
Yet the old paradigm is not totally dead. The car manufacturing industry is principally dependent on the old rules supported by at least $700 million a year of taxpayer subsidies. Evidence of corporate payoffs emerging in the Cole Commission, with much more to come, may show the extent to which industrial relations is all about competition management by insiders in the commercial building industry. But because it's not possible to import skyscrapers and violence is a building industry old rule enforcer, this sector will be slow to change.
For everyone else new rules apply which should not be confused with attempted remakes of the old. The "ethical" investor rush looks like a fit into this category.
What can be sure is that new fortunes will be made by those who understand and manage within the new Australian business rules. Some fortunes are currently in the creation. Other players are yet to realize where latent potential hides where once old rules applied. And the new game isn't as predictable as the old!
Finally, from the failed Ansett revival attempt there is a lesson for those who have acquired fortunes under the old game. They must take care not to blow their money by living in the past.
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