Industry policy has suddenly become quite fashionable – or it has as a talking point, at least. Not since the 1980s has there been quite so much discussion of the relative merits of ‘government intervention’ or the possible advantages and disadvantages of ‘leaving things to the market’.
It’s not hard to see why. The Coalition government is embarking on an economic experiment that will determine the life chances and living standards of thousands, perhaps millions, of Australians.
One of the most fundamental issues that divides industry policy enthusiasts and their opponents is the possibility that some forms of economic activity are simply more important than others. In this regard the argument goes, manufacturing matters because it allows productivity gains, technological spillovers and helps to determine wage levels across the economy. It is also a critical source of innovation on which future wealth creation depends.
While the definition of manufacturing is more complex and blurred than it has ever been before, there is no doubt that it is an activity that has been associated with the development of all wealthy (and powerful) societies throughout history.
Equally importantly, every country that has ever become a successful manufacturing economy – including bastions of free market ideology like the UK and the US – did so with the help of a powerful, protective and supportive state.
Even if we accept and recognise that historical reality – and many don’t, of course – the question is whether such a role for governments is any longer appropriate when capital and companies can easily move around a supposedly borderless world. Workers on the production line at one of the rapidly diminishing band of multinational car producers in this country clearly think it is. They may have a point, despite the obvious self-interest.
While there are still things governments can do to assist or protect local producers if they choose to do so (as many states in competing economies still do), it is evident that the Coalition has decided that those businesses that cannot survive on their own probably shouldn’t. The Abbott government is plainly not persuaded by either the idea that manufacturing has special strategic qualities or that it should use taxpayers money to prop-up the ailing off-shoots of foreign companies.
And yet it is hard not to see ideology at work in all this. Not only do the basic claims about the efficacy of market forces reflect a particular philosophical position, but they are being inconsistently applied. The manufacturing sector is out of favour partly because it is also the heartland of organised labor in Australia. There are few votes for the Coalition in such electorates.
Despite the fact that the union movement is a shadow of its former self, the Abbott government is clearly intent on giving its long-time political opponents a good kicking while they are down.
Australia’s rather tribal politics were ever thus, perhaps, but the very different treatment of another enfeebled part of the economy is striking. The agricultural sector has a powerful advocate inside cabinet in the form of Barnaby Joyce. Manufacturing has no such champion.
But even tougher questions might be asked about the viability of many of the family-owned businesses that are currently struggling to survive in the bush as they contend with ‘exceptional circumstances’.
There is a particular irony in all this. The Coalition is famously reluctant at best, downright skeptical at worst, about trying to address climate change. But for those of us who do accept the scientific consensus about the possible impact of climate change on agriculture, it seems clear that current weather patterns are not aberrations but the new normal. In such circumstances, bailing out marginal producers does no one any favors and simply delays the inevitable for one more electoral cycle.
The dramatic contraction of manufacturing and the seemingly inescapable problems confronting agriculture have one thing in common and raise a profoundly important question: how will future generations of Australians make a living?
If governments are going to leave it to market forces to answer this question it is probable that – in boom times, at least – we may come to rely more on the resource sector.
There is one big problem with this idea, however. Even if we put to one side the fact that the gains from the resource boom have been primarily appropriated by a remarkably small percentage of the population, the resource sector is a very small employer. Mining only employs about 2 per cent of the workforce.
The great advantage of the manufacturing sector, by contrast, is that it has provided fairly large numbers of well-paid blue collar jobs that have provided the foundation for more broadly based wealth and economic activity.
Hairdressers in Australia earn more than their equivalents in Bangladesh because of they are part of a wealthier nation, not because they are more productive, talented or have more capital-intensive scissors.
It may be true that the service sector is a lot more important than it once was, but there has to be a limit to how many of us can spend our time providing the ‘personal services’ that higher wage levels permit. Do we really want to see the return of a servant class?
The Coalition may not feel much sympathy for the unionised workers at Ford or SPC Ardmona, but they ought to think carefully before letting their jobs disappear. Unemployed autoworkers won’t seamlessly transition into jobs in the resource or service sectors. Neither a skilled workforce nor the communities of which they are a part are things to be thrown away lightly.
There is such a thing as society and it needs long-term vision and a plan for broadly-based economic development if it is to be sustained.