Can-Do Capitalism and a Do-Nothing Government

Prime Minister Scott Morrison talks of ‘can-do capitalism’ and last week offered a $2 billion sweetener to industrial research, while others talk of a ‘do-nothing government’. Here Lance Worrall looks at the policy changes forced on the nation by a pandemic, and what it means for a new industrial policy as not just sectoral support, but society-wide directions-setting.

Worldwide, citizens, governments and nations are re-evaluating what Government can and should do. Through the pandemic, yesterday’s certainties have resurfaced as today’s problems.

Neo-liberalism said Government was the problem.

But in pandemics citizens depend on services and protections that privatised markets will never provide everyone. Only Government can.

And to meet that life or death need across the whole population – after decades of privatisation and hollowing-out – nations’ public sectors have had to regain lost capabilities.

Governments are now reorienting policies in light of the pandemic, and rejecting past ‘certainties’ to embrace positive models of active government, addressing systemwide challenges such as climate change and decarbonisation (see note 1).

Industrial policy has been rediscovered not just as support for certain sectors, but as a powerful intervention in much larger problem-solving and society-wide directions-setting.

Governments are embracing ambitious, directional industrial strategies aimed at specific sectors with higher returns to society, to promote decarbonisation, inclusive growth, reduced inequality and greater national sovereignty to secure the essential needs of the population (defence, health, energy and essential materials, food, and environmental sustainability and climate response).

The most striking recent example has been the Biden Executive Order on 100-Day Supply Chain Review and Sectoral Supply Chain Assessments .

But not yet in Australia. The PM’s National Press Club address was his attempted election-reset against multiple large scale failures in pandemic leadership, alongside other well-publicised political problems.

Instead it highlighted the continued lack of economic direction, policy initiative and leadership.

In place of the industrial strategies required, came an announcement of another piecemeal program, the University Research Commercialisation (URC) Action Plan. This commercialisation program aims to improve research-industry linkages and paths to new products and markets.

Described as ‘a game changer’ by Acting Minister Stuart Robert, it reeks of being a political fig leaf, and adds to the patchwork of disjointed programs, some of which also owe their existence primarily to political need.

The latest announcement joins the under-scaled Modern Manufacturing Initiative or MMI ($1.4 billion over four years) and other worthwhile but discrete initiatives (Cooperative Research Centres and Growth Centres), which are disconnected from any set of national missions and objectives.

The MMI acknowledges the case for some sovereign capability to meet domestic medical and pharmaceutical requirements in case of another crisis, together with a weak focus on certain other sectors.

But there is no national strategy to set future directions. The pandemic underlined our low levels of economic self-sufficiency to an anxious Australian public.

Australia’s manufacturing GDP share stands below 6 percent. Only one OECD member country is lower: the tiny tax haven of Luxembourg. We produce the lowest proportion of our own consumption needs for manufactures, and have the lowest manufacturing self-sufficiency, in the OECD  (see note 2).

Australia has declined to levels of ‘economic complexity’ typical of a developing country (87th of 133 countries, a 20-place decline over the previous decade) (see note 3).

In significant ways we have regressed to our pre-industrial status as an exporter of unprocessed raw materials, allowing value adding activities to occur offshore, and becoming increasingly vulnerable to external shocks, like action against climate change by our trading partners and allies.

Australia has no national industrial policy, putting us increasingly out of step with other advanced economies.

Early in its life, the present government goaded the automotive majors to leave. When they did Australia lost its most sophisticated complex value chain. The policy response was negligible.

The AUKUS announcement seems to have upended the promise of sovereign capability and local production of the next generation of submarines for the sake of subservience to the US and a photo-op.

And for a decade, the present government has actively locked us in to declining forms of resource extraction and discouraged the immense economic opportunities from decarbonisation.

Shrill, powerful voices in government, media and some extractive industries claim climate action and attempting greater domestic production and domestic value adding, actually threaten industrial growth.

The reverse is true. The zero carbon transition is central to Australia’s prospects for reindustrialisation, because of Australia’s abundance of renewable energy sources and the requirement that production of things like green steel and aluminium happen close to the energy source. Decarbonisation favours reshoring of processing.

Australia has world-significant deposits of high-value resources and energy sources, which apply to both the energy inputs required by decarbonisation and new production opportunities requiring new minerals and materials we have – titanium, graphene, silicon, copper, nickel, lithium, and others. Australia can once again be the processor of its own raw materials.

Australia cannot face the future without a comprehensive plan for reindustrialisation – that is, without the National Industrial Strategy and the National Industrial Strategy Commission called for in @AuManufacturing and the Australian Manufacturing Forum’s New Deal Plan for Manufacturing contributions in 2020.

(Editor’s note: in 2020 @AuManufacturing and the Australian Manufacturing Forum Linkedin networking group crowd sourced from manufacturer members and readers a New Deal Plan for Manufacturing, which informed the inquiries of the National Covid-19 Coordination Commission. Summary and recommendations here.)

The bottom line – a genuine plan for today should start with value adding to our minerals and resources and decarbonisation as our biggest reindustrialisation opportunities.

Notes:

1. A must read: https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf
2. Stanford, Jim. A Fair Share for Australian Manufacturing: Manufacturing Renewal for the Post Covid Economy. The Centre for Future Work: Australia Institute, 2020.
3. The Growth Lab at Harvard University. “The Atlas of Economic Complexity.” 2021. https://atlas.cid.harvard.edu/countries/14/growth-dynamics.

Lance Worrall was a policy adviser to Mike Rann as both Opposition Leader and Premier of South Australia. He has been a senior public servant and most recently worked on industrial transformation initiatives for the Innovative Manufacturing Cooperative Research Centre and Flinders University. He is the author of many reports on economic and industrial development.

Picture: Lance Worrall

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