It has not been a good week for the government.

I don’t mean that in the standard, “poor optics” sense that often is used when commentators talk about who won or lost the week. Yes that too has been poor. After all this is a government led by a prime minister and treasurer who stridently criticised calls for a banking royal commission, and whose judgement on that matter has been shown to be utterly inept.

And their response this week has been to double down on the ineptness.

The line from the government has been to demand praise by ludicrously suggesting that the terms of reference they proposed were broader than what the ALP or the Greens wanted, and are actually the reason why we have heard testimony this week from AMP, CBA and Westpac.

Scott Morrison told reporters that the evidence this week “demonstrate that the Government was right to ensure that when the Commission was put in place that it wasn’t just looking at the banks, that it needed to be a broader inquiry which looked certainly at these issues and also superannuation which is yet to appear before the Commission.”

The prime minister in London parroted this idiocy as well, telling reporters the royal commission “was established on very broad terms of reference, much broader than those that have been proposed by our opponents.”

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The revenue and financial services minister, Kelly O’Dwyer, was also very much in step, telling the ABC’s Sabra Lane that “I think it is right that we have a broad inquiry that can look into all aspects of misconduct in the financial services sector. The ALP had argued for a very narrow one: simply into the banks. The revelations that, obviously, we have heard about AMP are included in scope because of the inquiry that we have put in place.”

The line is not even just misleading, it contradicts what O’Dwyer said just four months ago in December.

Responding to criticism of the inclusion of superannuation funds into the terms of reference she noted “previous calls for a Royal Commission by both the Labor Party and by the Greens had also called for superannuation to be included in a banking inquiry”.

So in December she highlighted the ALP’s argument for a broad terms of reference, but now she, Turnbull and Morrison would have us believe the ALP did not want a broad terms of reference.

One day perhaps this government will not treat voters like fools, but it seems we shall have to wait a bit longer.

But the real problem for the government is not just that they look shifty, or that they are losing airtime in what should be a time when the talk is about their budget.

The problem is that the past two weeks have provided ample evidence to show that their foundational belief about how the economy should operate is in complete tatters.

Yes, it was a bad week for the government, but it was an even worse one for unfettered capitalism.

What we have seen this past fortnight with the banking royal commission and the revelations about the live sheep trade is what happens when so called free markets operate without, or with no fear of, regulatory control.

There is no benevolent invisible hand leading companies to produce optimal outcomes for the economy – merely a hand that drives action towards higher profits at whatever cost.

2,400 dead sheep? Charging dead people for financial advice? This is not a shock, it is capitalism working as intended. It is businesses who lobby for lower regulations (it’s a competitive burden, don’t you know!) taking advantage of lower regulations.

This is not just an Australian phenomenon – it is why this week Facebook announced it was shifting responsibility for its non-North American users from Ireland to the US to avoid the strict privacy regulations in place in the EU.

Don’t worry, the company said “we apply the same privacy protections everywhere.” Yes, and they just happen to want to move to a jurisdiction where those privacy protection standards are lower.

It is the same with those who argue for the removal of penalty rates and the minimum wage – “it’s regulations holding back employment”, they cry! And yet we already have a plethora of cases of wage theft where low-paid workers are being underpaid. It doesn’t take a genius to figure what will happen to their wages should the minimum wage and penalty rates be removed.

Businesses don’t argue for less regulations so they can spend more on wages.

Capitalism is founded on corporations taking advantage of having more power and information than their workers and customers.

It underpins the fraudulent reasoning for the government’s proposed company tax cut for big businesses. Do you really think these businesses, which have consistently ripped off their own customers, will be using such a tax to reward their workers and customers, or will they use it to reward themselves?

Underpinning the Liberal party’s ethos is that governments need to get out of the way to let businesses thrive.

The problem is in these past two week we have seen how they like to thrive.