IN looking at this article I wonder how deep do we have to go to present a different point of view. I suppose the most obvious place to start is at the beginning.
Tim McLean in his ‘A New Deal for Manufacturing- Where we went wrong and the things that work’ he refers to it as ‘Avoiding the Mistakes of the Past’ commencing with what happened after WW2.
But let’s not forget Australia
-had suffered significantly for the best part of a decade before WW2 in the Great Depression; mass unemployment, low wages, a zero/low growth economy
-followed closely by WW2, funded national war economy on public debt where Australia did far more than most with a small population; Australia’s factories made everything
-while 27,000 service men and women died and 23,000 others were wounded from a population of only about 7.2 million
-after the war Australia struggled, tens of thousands of servicemen and women returning to civilian jobs, high national debt, competing priorities and a nation wanting a better life
-the pressure was on for Australia to take as many displaced persons, refugees and migrants as we could process
-the Cold War started and put further pressure on Australia to be self-sufficient in a host of areas and dutifully agree to permit atmospheric A-bombs tests on our soil
–Ford and GMH expanded rapidly (followed by several other car makers); big ticket items like the massive Snowy Mountains Scheme started and dams and bridges for the growing capital cities commenced with the birth of the ‘baby boomer generation’
–Australia was indeed a world leader in manufacturing among them making specialist plastics, many such innovations fueling massive and cheaper production elsewhere closer to bigger markets
.similar situations happened with the making of, for example, penicillin,
the Hills hoist clothes line, solar hot water systems, farm machinery and many other items in every-day use
Indeed has any Australian manufacturing ever held its own even with a comparative advantage?
Not really. Why is this so?
-is it about where we are geographically, so far from the big markets?
-is it about large multi-national companies having the capacity to take the means of production on a massive scale to low wage, low cost, low tax locations?
-Australia also had other agenda items; it has not always been about business. we had free education from the 1870’s; as early as 1927 we had ‘child endowment’ payments and a host of other social advances that have been the envy of others
Sure change happens, policy settings are not always right but Australia’s industries have not always got it wrong; we seem to have a propensity to blame ourselves.
It hasn’t always been about ‘small scale uncompetitive factories’ or ‘inflexible industrial relations‘ or ‘woeful productivity’.
It also happens to be about a lot of other influences.
-unlike Japan after WW2 Australia’s taxation system had become even more complex. We taxed savings. They didn’t, and so the pool of funds available for investment grew quickly
AFTER WW2 much of the productive machinery was destroyed in Europe and in parts of Asia so they had to invest in the latest plant and equipment whereas in Australia we continued using what had got us through the war; money was so tight we didn’t have the capacity to replace what we had and meet demand at the same time.
Besides the US was keener to shore up other countries and the fortunes of industry from the threat of communism than to help Australia re-tool
The decline of manufacturing in Australia, there’s more to it, a lot more!
Here are some
Besides tariffs being lifted there were other agendas at work; some not to be ignored included:
-the rise and rise of the multi-national/trans-national corporations who had the capacity to tell governments what they wanted, including favourable tax concessions that if not available simply embarked upon elaborate schemes including transfer pricing to achieve their objectives
-many Australian companies saw the need to invest in new plant and equipment; some got on the queue in the US, Germany or Japan to purchase the latest machinery only to find those either side of them waiting to order were businesses from some of the poorest countries, keen to compete with a tenth of the costs we have plus their governments were often underwriting the deal
So much for a level playing field; another myth
What about profits, yes what about them
-when a well-known Australian clothing manufacturer went off shore the retail prices of their products did not fall whilst the cost of making it dropped by more than 50%
-sometime before we ever spoke of ‘greed is good’ business had in many respects already adopted the view of the ever-growing market; it was no longer good enough to sustain profits, there had to be growth, all the time; and so began the race to the bottom
Common ground, so true
–Australia happens to be such a small market for just about everything and so far away
-Companies in Australia are often dependent on overseas suppliers and so key competitors can simply move in and make it impossible for us to retain our market
-call it corporate incompetence; the deliberate demise of much of Australia’s manufacturing was far from being transparent, indeed it seems more akin to theft or fraud, or both
The ‘branch office’ mentality, this is so well put, but why didn’t the author mention Shanghai or Guangzhou?
–Australia’s competitors vertically integrate; they have the means to do so, often it’s not only a pension fund but a government supplying the money
–Australia has largely failed to protect anything whether key resources, infrastructure, productive farmland or intellectual property
Indeed the author nails the issues from this point squarely especially about government procurement, R & D and going off shore
However, there’s always at least one … (here’s a few)
–Australia has also failed to protect its domestic housing stock from being purchased by foreigners*
-Australia has failed to enact the second tranche of the AML, a grave mistake or is it deliberate?
What about the future?
-Australians, at least some of us, hopefully, a growing number will take a closer look at what we are buying and where we can we will buy the Australian made product, and if it doesn’t happen to be there we will increasingly ask why it isn’t.
-Trust earnt is trust indeed, trust lost must not be forgotten