by Patrick J. Byrne
With the death of Holden, the disruption of global supply chains by covid19 (coronavirus) and the United States’ fundamental “reset” of its foreign policy towards China, Australia must now rebuild its manufacturing and rural sectors in the national interest.
Together, these events uncover the disastrous cost of misplaced free-market doctrines and radical free trade policies, on the belief that mineral and rural exports would earn enough to pay for the vast array of manufactured goods that Australia imports.
Costly green-energy policies have added to the failed policies that have denuded the Australian landscape of manufacturing industry and threated our rural sector.
The demise of Holden represents the loss of almost the entire motor vehicle production capacity of Australia that was built up over the 20th century.
To keep the car industry, all the Federal Government had to do was make subsidies to the industry, which were far less per capita than the subsides given to U.S. and German companies, conditional on these foreign-owned companies becoming 51 per cent Australian owned.
Instead, an industry that once boasted hundreds of thousands of well-paid, full-time secure jobs, was shut down.
Last year (November 16, 2019), News Weekly reported on the landmark Harvard University study of the importance of a modern economy’s economic complexity, where the interaction of a wide range of industries leads to innovation, new products, technology and industries that grow a nations productivity and economic output.
The Harvard study found that Australian exports are made up overwhelmingly of primary products and simply transformed products – minerals, energy, food, alcohol, wool, tourism and metal products. Australia’s economy was rated 93rd in complexity, one above Pakistan’s and just below Senegal’s.
Commenting on the study, The Australian Financial Review’s Aaron Patrick concluded: “Australia is rich and dumb, and getting dumber.”
But we are not earning enough to pay for our imports. In 2017, the export of minerals and fuels (gas and coal) valued at $191 billion (47.4 per cent of all exports) paid for $216 billion worth of elaborately transformed manufactures – machinery, computer and advanced technology equipment, consumer whitegoods (refrigerators, washing machines, televisions), other household wares, motor vehicles, etc. In addition, Australia now imports nearly all its liquid fuel needs.
Is it any wonder that many young Australians regard themselves as disenfranchised, facing 17 changes of job and five changes of career throughout their working lives as they struggle to live a normal family life?
Now the chickens have come home to roost for two reasons.
As The Economist magazine has described, covid19 had led to the shutdown of a vast array of highly integrated, multinational companies’ supply chains that have become dangerously dependent on a single country, China. For example, Apple relies on China’s Foxconn to make most of its products but, with workers accommodated eight to a room at its Shenzhen plant, production could be disrupted for a considerable time.
Moreover, China makes 40 per cent of the world’s textiles and apparel, 26 per cent of the world’s furniture exports and a big part of the world’s electronics and white goods. To feed its hungry industries, China takes almost half of the world’s mining imports.
Second, the U.S. is undertaking its biggest foreign policy “reset” since the start of the Cold War, with a major overhaul of its strategic, economic and diplomatic policies towards China and Russia.
Trump has applied economic “shock therapy” to the previous mind set that claimed U.S.-Chinese economic relationships could not afford disruptions. Not only has he reset trade policies with China, the 2018 Better Utilisation of Investments Leading to Development (BUILD) Act will offer countries alternative financing to Beijing’s Belt and Road Initiative.
The U.S. plan to have Japan and India as the eastern anchors to its strategy points to the need for Australia to build closer economic ties with India as part of a strategy to “firewall” the nation from China.
Equally, Australia must now undertake major new infrastructure policies and advanced industry policies to reduce its reliance on imports from China. This will be possible only if a national development bank is created to fund a new nation-building enterprise.
If Australia is to maintain its sovereignty and standard of living and remain a prosperous, property-owning democracy, politicians and bureaucrats have to realise that the days of grievously misplaced free-market economics are over.
Patrick J. Byrne is national president of the National Civic Council.