Australia is rushing full tilt into a new era of protectionism that means less spending on government services, more poorly paid jobs and fewer opportunities for exporters. And there’s a bipartisan consensus for it.
Yesterday Anthony Albanese unveiled a National Reconstruction Fund worth $15 billion to fund manufacturing projects via loans, co-investments and guarantees, with the intention of generating a return for taxpayers. Areas targeted would be food, renewable energy, medical supplies, transport equipment. It would, Albanese said, “harness the power of government purchasing to grow existing industries”.
His argument was two-fold: that Australia needs to become more self-sufficient in manufacturing, and that too much investment flows into “real estate or is returned to investors as higher dividends”.
He’s right about real estate investment, though the way to address the attractiveness of real estate might be to remove the billions in taxpayer subsidies that flow into the property market, not create new subsidies for sectors that pay the price for that.
Self-sufficiency is the new fashion in the post-pandemic world. Having discovered our dependence on global supply chains — and especially supply chains tainted by links with the nefarious China — everyone is now committed to onshoring supply chains and reviving manufacturing of “essentials”. An Australia Institute Centre for Future Work report last year showing Australia had the lowest level of manufacturing self-sufficiency in the OECD was reported as evidence that globalisation had to be thrown into reverse in Australia.
The government unveiled its own manufacturing fund last year, albeit a lousy $1.3 billion over a decade, targeting a similar list of “priority areas” like mining, medical suppliers, food manufacturers; “clean” (i.e. not renewable) energy investment and projects in space and defence.
Today the government is announcing another handout for manufacturing, this time in defence, with a $1 billion missile manufacturing plan. The $1 billion is just a downpayment — one estimate is that the government will have to spend tens of billions in coming decades on “hypersonic weapons that exceed the speed of sound”. Part of that will be the huge premium that comes with building them in Australia, on top of the huge profit that large multinational defence contractors will earn. The delays, blowouts and debacles that characterise existing local defence projects never seem to get mentioned when big new defence announcements are breathlessly reported in the media.
At least with defence manufacturing you get to throw the word “sovereign” around. ““It’s an imperative we now proceed with the creation of a sovereign guided weapons capability as a priority,” Scott Morrison said in announcing the future target of scathing ANAO reports and critical media coverage.
“Sovereign” is the new “security” — the word you could append to any industry (food, energy, water) to indicate it deserves some form of special government intervention.
The self-sufficiency invoked by both Albanese and the government in justifying support for manufacturing has much in common with the thinking behind throwing terms like “sovereign” around: we can’t trust foreigners; every import is a sign of weakness, a dollar lost overseas that could be supporting Aussie jobs for Aussie workers.
We know where this leads. We saw it in the 1930s. When all our trading partners start to think the same way as us, markets for our exports dry up, killing off the jobs of workers in export industries. For a long time Australia had a trade deficit that subtly encouraged this sort of anti-trade thinking. But now we run a massive trade surplus: trade surpluses popped up now and then in the Labor years but in 2017 Australia entered an extended period of rising and now massive trade surpluses.
Much of that is down to our success in commodity exports and particularly minerals. Shipping off minerals, though, isn’t people’s idea of a successful trading nation — despite the fact that our big mining companies in Western Australia are the world’s most innovative large-scale mining operators. The eternal cry — one repeated by Albanese yesterday — is that we should be making stuff from minerals, not just shipping them offshore. Manufacturing exerts a hypnotic power over policymakers, as the kind of “real” economic activity we should be doing instead of efficiently digging up rocks — and certainly instead of being a service economy, which is what Australia has become.
Far from suffering as a result of the decline of manufacturing as a source of economic activity and jobs, Australians have grown wealthier on the transformation to a service economy, running thirty years without a recession and the enduring a much shorter and shallower period of high unemployment as a result of the pandemic. And the demand for future labour is about the demand for services workers — in health, in education, in professional services — rather than in manufacturing. That’s where we desperately need skilled workers.
And that’s where we’ve seen what little wages growth we’ve had in recent years. Manufacturing is low paid, low-skilled work, with low wages growth. It’s not the answer we need for an economy where the biggest challenge is pushing up wages growth and inflation.
Advocates like to talk of Australia having opportunities in high-skilled, elaborately-transformed sectors. But how high-tech and high-skilled is making PPE gear, now a fetish for both sides of politics? Do we want our sons and daughters to grow up to an exciting career in making face masks and surgical gowns?
They can be manufactured by low-skilled workers more cheaply and more efficiently, meaning we pay less for them, elsewhere. The money we save from spending on cheaper imports can be spent elsewhere in the economy, most likely in services where Australians do have a competitive advantage and wages growth is higher.
These basic points about the dangers of protectionism used to be taken for granted in national discourse about trade and industry policy, but they’ve now dropped entirely out of circulation. Meantime, taxpayers’ money gets directed toward an ever-greater array of local manufacturing and the world turns its back on free trade — a dangerous outcome for a country like ours that relies so heavily on it.
Is Australia barking up the wrong tree with its manufacturing push? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication in Crikey’sYour Say section
You are I think wrong about advanced manufacturing, especially our competitive advantages. Labor costs worldwide are becoming less delineating as process line automation and ‘whole of system’ logistical/supply chain management kicks in. ‘Advanced Manufacturing’ is as much about systemic efficiencies as is it about plant line gizmos and process jazzmos and making sexy new hi-tech widgets. It’s feedstock transport/storage savings and efficiencies, it’s JIT production and retail-targeted economies-of-scale; it is, above all else, reinventing mass manufacturing as sustainable manufacturing. That especially is where I think First World economies can find their competitive space again. Not out of any fluffy-wuffy save-the-world-for-Greta godliness (though that too). But because the world’s investment and industrial risk calculus has profoundly changed. Pumping muck into Third World rivers and atmospheres, sending 10 year-olds down mines and into death trap factories – which is how Third World manufacturing has been so ‘competitive’, right? – is no longer a strategic investment play. It was no bleeding heart indulgence that, at their AGM last year, the very first Tesla ‘investor resolution’ put to Musky by his rich Western shareholders was: ‘When are we going to stop using Congo cobalt?’ This stuff is hard-headed global economics now. Green sustainability and CSR is a Capital Investment determinant, a shifting of Main Game imperatives on the same disruptive scale that ultimately made slavery no longer a ‘competitive’ manufacturing input.
It means that what we think of as ‘traditional’ Third World ‘competitive advantage’ in manufacturing…pretty soon won’t be. First World investment patterns, shaped by First World green-fiscal political will and policies, the price of project insurance, and the price of project insurance re-insurance – will…arbitrage it away. Critically, all those hitherto ‘dirty and inhuman, but cheap’ Third World economies, having become the global powerhouses of mass scale manufacturing, will (are) very quickly re-tool to become…not so dirty and not so inhuman…and not quite as cheap. So while we’re sitting here assuring ourselves (as always) that ‘we just can’t ever compete’ with these cheap (racial subtext: inferior) Third World workers…in fact their economies are hauling themselves into the middle class, making stuff cleaner and smarter every day. While praying that we keep failing to take advantage of our proximate feedstock supply chains, our first rate education and R&D assets, our political stability and our democratic vitality…all crucial ‘Advanced Manufacturing’ component-elements of our economy which very much are ‘competitive with theirs.
If one were less charitable one might even call your ‘how can we ever compete?’ analysis a…tad…hmmm… racist? Brown or yellow people don’t like working in crappy sweatshops for stuff-all pay any more than white people, presumably. Luckily, I’m charitable. I do think Labor ought to be acknowledged for recognizing this shift in what ‘manufacturing competitiveness’ will mean going forward as the opportunity it is, and applauded for having a crack on the value of ‘value-adding work’. It is, let’s face it, the meat n’ spuds turf of ‘Labor’ Parties.
Some of us our old enough to remember when “Made in Japan” was a perjorative description of an imported product. Then it came to signify quality, and now the Japanese brands try to disguise the fact that their products are made somewhere else. China is going the same way, as its middle class grows.
The labour demand for advanced manufacturing is greatly less than previous manufacturing. Her’s a thought for Labor: promote the idea of a high-skilled workforce in child care and aged care, and also increase the resources to enable that high-skilled workforce to deliver services. Oh, wait, how silly of me. They are female-dominated workforces and no bloke currently working in a “real” job in manufacturing would want to work there.
.
Agree 100% with the latter, absolutely child care and aged care are high skilled (am biased, having done lots of both).
Take your point on the latter, but also there’s still and will always be plenty of skilled labour demand in manufacturing. Just tends to be less on the process lines and more weighted to the rolling R&D, systemic, whole-of-supply chain, product and market development etc elements. It’ll include the whole ‘circular economy’ manufacturing landscape and cycle: sustainable mining, site regeneration, scope 3,4 + emissions calculus/mitigation, continual market and product evolution/innovation, data and communications integration, energy and distribution efficiency, recycling…think about ‘Advanced Manufacturing’ less as a linear industrial process (Feedstock-Value Add-Sale-Use-Discard) and more of a ‘Multi-disciplined Framework for Sustainable Consumption’.
There will be (already are) key roles in manufacturing for environmentalists, sociologists, investment analysts, educators, creative artists, story-tellers, etc.
Building things that last and are easy to repair.
No doubt there are stacks of green jobs, urgently-needed park rangers; investment in alternatives and in decent farming, with farm workers on good wages and conditions: for no more land clearing. I agree with Bernard only on service jobs crying for replenishment, but he is dreaming if he thinks retail workers are well paid or aged or child carers are either (institutional sexism and racism). Service work isn’t countable, so we’re measured uselessly: look at casual tutors in my field. Another point is about “free trade”. Bernard has made zero connection to the capitalist scandal of dozens and dozens of mega containers ships, with more disasters waiting to happen, usually run with poorer countries’ indentured labour crews. They spew out fuel to ram these brutes through rough oceans, and ship owners are gearing to blame Egypt for the Suez Canal not being “wide enough”. Racism? Sure, and lots more to come.
Thanks Jack. Bernards article was like ‘a fart in a lift’ i.e. wrong on so many levels. Beautifully dissected by you.
roflmao
I was unaware a fart could be dissected. Clearly Jack R has magic powers! 😉
Him
A pretty good demolition, Jack. BK seems to be stuck in some glorious past, the principle value of which wasn’t importing cheap goods, but really exporting dirty, dangerous work and the environmental mess left behind. Yes, their labour was cheap because there were no labour standards, unions or health and safety. So our whitey lives were so much more important.
As green values are more implicitly priced and the former cheap Asian labour moves into middle class expectations, those comparative advantages are lost. Further, so much manufacturing these days is hugely capital intensive. Labour makes up a much smaller part than days gone by, and much of that labour is more highly skilled than production lines drones. Think professions, like engineers, and people who are well paid like boilermakers, all of who end up as engineers these days anyway. Bernard’s model of how the world works is broken, reality moved on.
You are correct. We just need to apply control systems science to enable this.
Guess who was sniffing around the Congo while the rest of us were not allowed to leave the country during the height of the pandemic? Could it be the same BILLIONAIRE rat who doubled his fortune during the pandemic? The same UNELECTED rat given the keys to the country? The same rat who runs a tax avoidance scheme he calls a philanthropic organisation? There same rat who refuses to pay traditional Owners their royalties until they sign the agreements HE wants? Oh my.
Yes, I am no effusive fan of that particular chap. Most Australian billionaires talk a big talk on Advanced Manufacturing and ‘sovereign’ self-reliance, etc… but when it comes to the hard yakka of sinking strategic investment dollars into slow-return projects over decades, they tend to get bashful. Twiggy is partics is also the master of self-promotion as a rugged individualist, while sucking the teat of taxpayer subsidy, public investment and other people’s hard, prescient work. Like you and many others, I am underwhelmed by Minderoo’s noble boilerplate rhetoric on ending slavery in DRC while simultaneously inking multiple deals with the regime.
Yep- those born lucky people in WA- the queen & king of giant holes have inflated egos & truely believe that luck had nothing to do with their exceptional fortunes.
Yes, excellent response! Thank you for writing it.
An economy based on ripping stuff out of the ground or from the top of the ground and exporting it for some other country to actually turn into products and ship back, and only doing service industries apart from that, is missing an important sector – and I don’t see how operating like we currently do helps with social justice (people here need jobs, plus it’s not right to have any of our stuff manufactured in slave or close-to conditions for workers, just because it’s offshore) and with lowering our carbon footprint (shipping counts, folks).
…and in postscript, obviously the home-manufactured products will be more pricey than the slave-labour-or-near-it products that cost a pittance, but perhaps if we had a focus on quality and ability to be repaired, we’d be back to the comparative sanity of having long-lasting products that we can fix when something goes wrong (I’m showing my age), as opposed to low-quality stuff with inbuilt obsolescence that’s thrown into landfill soon after and is creating an environmental crisis, and that can actually be more expensive to purchase repeatedly than one quality product once…
Precisely. Other, less obvious, outcomes of more local manufacturing would I think be got beyond even those ancillary effects (local follow-up repair and servicing opportunities, parts supply/demand, more responsive local market development.) Could be showing my age too, but my gut feeling is that local manufacturing also creates better, more balanced, rounded and mutually supportive communities. Manufacturing independence better allows societies to allocate individual skills and work needs, find a place for and value in everybody, adding ballast to societies and underpinning a sense of mutual care and sustainability in a way that it is the consumption antithesis of the FIFO/Amazonian ‘Fulfillment Centre’ approach. (And have you ever heard a more repulsively mocking mercantile label for a ‘shop’ than that?! Makes you feel, as a manufactured goods consumer, like a French goose getting force-fed to bursting for fois gras…)
The way neoliberalism has reduced every component of the manufacturing supply chain – especially value-adding labour – to an ‘input unit commodity’ is one of the great destructive stories of our age. Because that inhuman philosophy has subsequently oozed like a pus into every part of the economy (public and private), and indeed, human existence. With the most most savage impact on health services, the caring and teaching vocations…and maybe also general human interaction in the workplace, too.
I think you’re right about the community benefit of local manufacturing (and growing, etc, as the farmers’ markets are showing). Also, the human brain evolved to be able to connect meaningfully with a rather lower number of people than >1,000 at a time, and it’s so much easier to ignore poor work standards for people you never see than for those in your own circle, with whom you have a meaningful relationship.
…sadly even in a community, many people are so socially stratified (and often, so busy) that they don’t connect much with people who might be adversely affected by various policies. And mathematically, the bigger the pool, the more likely this is.
On the other hand, the more local your ecosystem, the more interconnected (and transparent) it is – and whichever way you cut it, it’s lack of meaningful human connectedness that’s driving so many of our ills, including social injustice and poor mental/emotional health.
100% with you re the cancer of neoliberalism, and globalisation too. I’m not suggesting that people become more insular and parochial or that there should be no international trade – done the right way it’s a globally connecting thing, like the Internet, which is simultaneously a cesspool and a way to connect meaningfully with others on a global level.
But global trade done to promote a race to the bottom for work and environmental standards, animal welfare etc isn’t morally defensible, and we’ve got to collectively turn this Titanic around. I spent much of last year doing a rather belated deep-dive into Naomi Klein’s This Changes Everything, which I can highly recommend to anyone who wants to know why it is that many thinking people have huge issues with neoliberalism and globalisation. It shows very lucidly how these things erode our ability to make choices as communities and on an individual level that we need to be able to make for social justice and good stewardship of the biosphere. I’d recommend that to anyone who’s got a space in their bedside book pile and hasn’t gotten around to this one yet – but make sure you don’t read too much of it in a sitting, because it may seriously depress you…
Thanks again, Jack R, for excellent analysis, catalysing meaningful discussions and being forthright. It’s not always appreciated by the public, and of course none of us are perfect, etc – but it’s really important for fostering wider thinking and deeper engagement, which as citizens it’s so important to do. ♥
PS: “Fulfilment centre?”
…that PS was supposed to have a vomit emoji next to it, but it didn’t translate! 🙂
Yes, I did assume you weren’t quoting it in any admiring way! Crikey really needs to expand its palette of emojis…
Your analysis is a ripper, spot on. Klein’s stuff can occasionally be laborious but her relentless eye for for detail, energy and passion is an operational template for all. Neoliberalism, and all the de-humanising, civic atomisation and individual isolating it has Trojan Horsed into our lives, may seem like an unstoppable leviathan. But I think it’s actually quite fragile, and that the world is crying out for a return to community. Don’t ever stop believing in and fighting for it! Chrs Sue.
What rubbish. Bernard doesn’t seem to have any idea what a manufacturing industry actually looks like. Most of our modern manufacturing industries are highly automated, just like our mining and extraction industries. I’m sure we’re not talking about garment industry workers so much as production-robot designers and technicians, plant engineers, and so on.
Think a couple of steps ahead: ways to make use of large excess power capacity. Shipping it overseas as amonia isn’t the only option.
Not everyone has the ability to be a computer programmer or an engineer.
These are the people who are left behind and facing an increasingly precarious future because of automation and the obsession with productivity.
It isn’t all programmers and engineers. The more that’s going on the more ancillary work there is. You don’t get any of that unless you have the industry in the first place.
Agree – and this point needs to be front and centre to ensure that Shaun’s salient point is part of the package.
“Do we want our sons and daughters to grow up to an exciting career in making face masks and surgical gowns?”
Oh, no, I’d hate my children to have low-skill work in a regulated, reliable, probably unionised environment when instead they could make coffees in a casualised, non-unionised, insecure workplace. It would be so wonderful.
lols!
Yep, smashed it out of the park.
Imagine if a billion dollars was spent on social housing?
Or nursing homes?
Or disability support?
No,let’s give it to foreign multi-nationals so we can kill people.
When the seppos order us to, obviously.
You can quibble about amounts, but those are all things that the government already spends many, many billions of dollars on. The amount being discussed here would not be noticed in the noise. Perhaps it won’t go very far in supporting a manufacturing industry re-start either, but arguing that we should be shovelling more into the pockets of builders and nursing home managers is at least arguable, I think. Health and welfare already represent more than 60% of the budget.
Thats where all the jobs are and more money spent looking after the elderly and disabled creates a lot more jobs.
Conflating this with more money for nursing home managers deliberately misses the point.
Pre-fabricated houses helps manufacturing and the homeless.
Who is helped by weapons of mass murder besides shareholders?
Weapons was the government’s and your point. Albo is talking about all of the other manufacturing industries. Well, I am, anyway.
Talk about deliberately missing the point!
Compare the money spent on toys for the swinging dicks in the military with the money spent on shelter for poor people.
One is an imaginary requirement met in the far future
(when the lead/acid battery powered submarines are finally built, and when the new fighter jets are able to leave their climate adjusted hangars)
The other is an immediate and necessary human right
(as defined by the UN).
But guess where the photo ops are.
Hope I clarified my point.
And I second your points, well said.
Not to mention that money spent on social housing actually comes back over time. There’s not a town in the country that doesn’t need social housing, so jobs would be very wide spread and wide ranging. Manufacturing would go through the roof. People on low incomes, who will probably never own their own homes, can live with dignity without punitive rentals. You know, just like our grandparents could when we still had council housing!
And then lets crack the cruelest joke of all and call them sovereign missiles.
The US mafia that arrived with the Yanks during the Vietnam war & empowered the Saffrons of Sydney now run the country.
I must admit I agree with Jack Robertson. The way you are talking Bernard these are low end manufacturing industries, no one is saying that, Labor is talking about all sorts of manufcaturing from the simple manufacturing to the complex. High end industries like Automotive, Renewables and Metals etc, not all manufacturing industries are low payed and low skilled, certainly not the ones I’ve seen.