Australian Fabians Review
Australia’s dependency on commodity exports leaves us dangerously vulnerable. But there is another way.
Economically, Australia is vulnerable. At its peak in the 1960s, Australian manufacturing had been the nation’s largest employer. However, decades of neoliberal economic policies have hollowed out the nation’s manufacturing capacity, damaging our future prosperity. Luke Gosling, the Member for Solomon, put it succinctly in June of last year: ‘we woke up to the painful reality, decades too late, that we had traded off key assets of our sovereignty and self-reliance in an unthinking search for economic efficiencies and a balanced budget’. This essay argues that Australia’s current economic dependence is intolerable and presents a valuable opportunity for the Labor Party to tap into the rising economic nationalism of the Australian people, which the COVID-19 pandemic had stirred. If it is anything like the past, this approach may allow the Labor Party to build a diverse electoral coalition. I argue that the Labor Party’s proposals in this area are vastly superior to the Liberal’s faux concern over Australia’s sovereignty, but more must be done, and more details provided.
The sheer extent of our dependence is an embarrassment. Shamefully, according to the Australia Institute’s Centre for Future Work, Australia ranks the lowest of the OECD countries in terms of its manufacturing self-sufficiency. In fact, the Centre’s report refers to Australia as an ‘extreme outlier’ compared to others in the OECD. It is disgraceful that Australia’s sovereignty, which should be the highest priority of any ruling government, has been treated as a non-factor in government policy. Moreover, the Growth Lab at Harvard University, which specialises in analysing industrial development, has ranked Australia’s economy as the ninety-third most complex economy in the world. Australia fell twenty-nine places since 2000. These facts exemplify what many experts have been saying for years: our economy is too reliant on unprocessed raw material exports. Because of this, our economy is undiversified and vulnerable. Professor Roy Green, a specialist in this area, put it more bluntly: ‘we sustain our First World lifestyle with a Third World industrial structure’. This unacceptable situation will impact our future prosperity, and it is dangerous for our security.
A strong manufacturing sector is vital for national prosperity. We cannot overstate this fact. The recovery of the sector can help to create good, stable jobs. For instance, according to Grant Thornton (2020), if we aim to increase our manufacturing as a percentage of GDP to just the OECD average, we will create an additional 1.7 million skilled and semi-skilled jobs. Not only is the sector critical for future jobs, but it is also a crucial source of innovation for our nation’s future. Unfortunately, the hemorrhaging of industrial capacity in many Western nations has had a detrimental impact on this front. A former CEO of Intel, Andrew Grove, complained about this in the American context:
“Our pursuit of our individual businesses, which often involves transferring manufacturing and a great deal of engineering out of the country, has hindered our ability to bring innovations to scale at home. Without scaling, we don’t just lose jobs – we lose our hold on new technologies. Losing the ability to scale will ultimately damage our capacity to innovate.”
This is why reviving Australian manufacturing must be a central pillar for any reconstruction strategy. Without a concerted effort to do this, Australia’s vulnerabilities will persist.
The Australian people want these vulnerabilities to be addressed and the rampant globalisation that has defined the preceding three decades to be rethought. The rising nationalist economic sentiment within the public has become more conspicuous, catalysed by the pandemic. Revealingly, a Gallup poll commissioned last year showed that 89% of Australians wanted more products to be made locally, and 52% of Australians preferred Australian-made products. Our over-reliance on other countries, creating jobs, and supporting Australian business were all listed as significant reasons behind these sentiments. Not only did a YouGov survey commissioned by the Australian Workers Union (AWU) show similar results, but it also demonstrated that a large majority of Australians believed that COVID-19 should be a wake-up call to Australia’s over-reliance on other nations – particularly China. Finally, 68% of Australians reported that COVID-19 has made them more likely to buy Australian-made products. Therefore, it is clear that the rising economic nationalism of the public, while not universal, has become at least electorally potent. This nationalism must be embraced, and policies must be proposed to revive Australia’s industrial capacity and restore the nation’s economic sovereignty.
It seems that the Liberal Government has noticed the electoral importance of reviving Australian industrial capacity and sovereignty, as they have moved to occupy this ground. However, this is all empty rhetoric with no substance. For example, in late 2020, the Government allocated $1.5 billion for the manufacturing sector to help shore up local production. However, in the overall scheme of the budget, it was a mere drop in the bucket. It was nothing compared to decades of decline – much of it under the watch of Liberal governments. Outside of this, the Government committed to injecting $1.3 billion over four years to help scale up manufacturing businesses. The four-year timeframe shows the Government‘s short-sightedness and the lack of seriousness with which they treat this issue. Recently, the Government announced plans to develop domestic defence manufacturing facilities to regain some of our lost ground. The fact that this project relies on the involvement of foreign-owned defence companies seems to have escaped the Liberal’s notice. It seems likely that the Government has no conception of what national sovereignty actually entails.
In comparison, the Federal Labor Party’s proposals are vastly superior in ambition and sense. The creation of a $15 billion ‘National Reconstruction Fund’ for manufacturing, by itself, completely overshadows any Liberal proposal so far. This is a necessary and prudent investment. The Fund’s priorities are broad, from improving domestic mineral processing capabilities to improving our local car, train and shipbuilding. The proposal to establish a national rail manufacturing plan promises to build Australian trains by local workers using local materials. Significantly, this proposal clearly understands that it will be challenging to build up Australia’s industrial capacity to be competitive without stable demand for local products. Also of note is Labor’s commitment to reinvigorate vocational training to address Australia’s skill shortage. It seems that these proposals have come about due to heavy pressure from the Australian Manufacturing Workers’ Union (AMWU) and the Australian Workers’ Union (AWU), which have both given these proposals their broad support.
The great strength of Labor’s proposals is that they address the problem more holistically. This is only possible because Labor’s ideological underpinning and historical tradition of economic nationalism allows it to understand the problem for what it is: a creature of unfettered capitalism and neoliberal globalisation. Labor must remember its history and its past success when it embraces economic nationalism, because national solidarity is crucial to restraining the unfettered global capitalism we have seen.
Gough Whitlam emerged victorious in 1972 and ended twenty-three years of Liberal Government, after tapping into and galvanising the public’s economic nationalism of the late 1960s and early 1970s.
Like today, Australia’s dependent position on foreign capital had catalysed nationalistic sentiment. A central element of this nationalism was the perception that Australia was merely a quarry for wealthier nations, which has not changed. In a scathing speech while Deputy Leader of the Labor Party in 1966, Whitlam condemned the Liberals, saying that they should ‘hang their heads in shame’ for handing Australian mineral wealth to foreign countries who process them for profit. He said that foreigners ‘do Australia the honour of employing them to dig up their own wealth to be exported overseas’.
While the world of the 1970s is different to today’s, and while the same electoral strategies Whitlam employed may not work for Labor now, this historical episode contains an important lesson: the cross-cutting nature of nationalist economic policies and its ability to unite diverse societal groups, such as workers, unions, business owners, and manufacturers. We must not forget this.
Despite Labor’s superior proposals, more must be done, and more details must be provided.
As John McKay argues in his Australian Fabians monograph, for Australia to be successful, ‘industrial policy needs to incorporate the entire economy – indeed the entire society – and certainly not just manufacturing industry’. It may be necessary to look at the success of other nations in this field, particularly Southeast Asia. One successful policy from Taiwan that could help is the idea of shared production facilities. As Dan Breznitz and David Adler describe, these production facilities are co-sponsored by the state. They are where multiple start-ups and entrepreneurs can perfect and experiment with the newest production technology. Establishing a production facility for start-up manufacturers is an expensive obstacle, and this initial cost is one reason these businesses offshore their production. Shared production facilities help to prevent this from happening.
The Labor Party must seize this moment of economic nationalism. The re-emergence and re-assertion of the nation-state in the era of coronavirus is one of the silver linings of this ordeal, as it is only through the prism of national politics that a social democracy can be built.
Adam Scorgie is a Masters student at the University of Adelaide researching economic, political and cultural nationalism. Adam won the 2020 John Curtin Research Centre Young Writers Prize. @AdamScorgie
Series: Australian Fabians Review - Issue 2
Author: Adam Scorgie