Could Australia have prospered post-GFC by ignoring the fashionable economic nostrums. While the chief retailers of high economic couture here in Australia urge us to abandon producing things for service industries (or worse green industries), Joel Kotkin points out that the opposite strategy has prospered best in recent years.
Something strange happened on the road to our much-celebrated post-industrial utopia. The real winners of the global economy have turned out to be not the creative types or the data junkies, but the material boys: countries, states and companies that have perfected the art of physical production in agriculture, energy and, remarkably, manufacturing.
And who are these winners?
The strongest economies of the high-income world (Norway, Canada, Australia, some Persian Gulf countries) produce oil and gas, coal, industrial minerals or food for the expanding global marketplace. The greatest success story, China, has based its rise largely on manufacturing. Brazil has been powered by a trifecta of higher energy production, a strong industrial sector and the highest volume of agricultural exports after the United States.
And when you examine large countries, like the USA, in regional terms?
Things are really looking up for the material boys here in North America. Over the past decade, the strongest regional economies (as measured by GDP, job and wage growth) have overwhelmingly been those that produces material goods. This includes large swaths of the Great Plains, the Gulf Coast and the Intermountain West, three regions that, as I point out in a recent Manhattan Institute study, have withstood the great recession far better than the rest of the country.
By contrast, the pin-up boy of the green energy crowd California, is broke and has a, mediocre economic track record.
So it wasn’t the world’s best treasurer who did it at all, but industries that have always been Australia’s strength and which, via the measures like the ill-conceived mining and carbon taxes, he has done his best to strangle.
NSW Labour dilettantes trumpeted the advantages of the service industry, and indeed presided over converting that economy from manufacture, to the service industry.
As one might expect, the GFC hit NSW’s financial service industries the hardest; likewise the UK, which went down a similar road, under new Labour and Tony Blair.
Germany was and remains the stand-out European economy. It sensibly, kept its manufacture base, and indeed expanded it, on the back of R+D and technical innovation.
At one point, that manufacture based economy, was going so well, that they had to import guest Labour.
Make no mistake, rising debt levels, around the world, mean we likely face another possible GFC, within the next two years.
Yet we continue to bleed manufacturing jobs to Asia. The only jobs that might see us survive another economic downturn, and the accompanying deterioration in our terms of trade.
What we need, with urgent alacrity, to prepare ourselves, is very cheap energy!
Given govts can borrow for a lot less than private enterprise, it ought to be Govt(s) that supply this essential service.
We need to ditch the disingenuous Green propaganda, about nuclear waste, and simply embrace nuclear power.
Thorium would seem the best option, given thorium uses up around 95% of available fissionable material, produce far less waste, which is far less toxic and eminently suitable long life batteries for the space industries. Whereas, oxide reactors use less than 5% of their fissile material.
I read recently, on this site, I believe, an interesting article, which quoted a book, titled, thorium cheaper than coal.
With cheaper than coal fired power, not subject to a carbon tax or trading scheme, we will be able to power very rapid rail.
This will allow overland freight forwarding, at the lowest rates in the western world.
Deliberately advantaging cooperative enterprise, with very low cost venture capital and tax breaks, will allow us to develop a very low cost manufacturing model, that will allow us to successfully compete on more than favourable terms, with the emerging economies.
And indeed, survive the next GFC.
Sure there’s significant lead time required to embrace nuclear power. But only because we cannot conceive of mothballing some coal fired power.
However, we don’t need to abandon all coal-fired power, just de-privatise it. Australian manufacture has enough problems competing on a global market, without also being mugged by price gouging parasites?
It is not as if that would disadvantage any Australian corporation, given most if not all privatisation, incorporates mostly debt laden foreign “investors”, who then expect Australians to pay a premium for power, in order to draw down the billions in debt, they generally rely on, to fund their purchases.
If we have to repay these debts, as a completely captive market, then the public model, with its lower funding parameters, surely seems to be more pragmatic or less expensive option.
Certainly, there are no examples, I can find that have ever made the privatisation of power provision, less expensive or more efficient? [The Emperor’s new clothes?]
Without the timely reintroduction of very cheap power, it seems impossible ask, to rebuild our manufacturing base.
If we were to start next month, we could likely build (a) thorium powered, power plant(s) in less than two years.
It’s not rocket science, but rather, an old technology that has been around since the fifties.
The only problem with the public service provision model, in the past, has been too much Govt control and or, an incompetent Govt hand, in the till, helping itself to funds, some of which would have been essential operating funds.
Corporatism, and independence, would remove the Govt hand in the till, and duopolies, compelled to compete, for market share and or executive bonuses, would eliminate the monopoly factor; or the lazy service provision it seems to engender.
Very cheap energy, quite massive tax reform and simplification, would likely see the high tech manufacturing industries, beating a path to our door.
We can’t rely on gas, given we are set to export most of what we currently produce! Consequent supply and demand outcomes; means, we can expect a doubling of gas prices, in the near or medium future.
Our corporate leaders understand this; and given no change, only left with even more massive off-shoring, as their only survival option.
Alan B. Goulding.
Comment by Alan B. Goulding — March 10, 2013 @ 1:38 pm
Plus a decent dose of keynesian intervention Graham which saved the country from massive unemployment which has permitted the ongoing economic sustainability.
Comment by barney — March 11, 2013 @ 10:25 am
Yep, there have always only been so many people who want their washing done. In tough times some of those will start doing their own washing, & some, heaven forbid, will get by in dirty clothes.
All those economies, competing to take in each others washing will have very little work, & that will be at very low prices.
If we want to eat, someone has to produce food, & if we need to transport that food, someone has to build the truck. Our “natural advantage” was always our cheap, abundant power, & we are fools to forget it.
How often do we have to show these twits that with our natural resources we should export aluminum, not bauxite, & cars, not iron ore, & coal. it is just common sense.
Comment by Hasbeen — March 11, 2013 @ 2:00 pm
Yes Hasbeen, we should value add virtually all that we currently export.
Cheaper than coal-fired power, would allow our steel industry to more than recover, given we invented the single stage, direct reduction method, that uses arc furnaces to turn iron ore, directly into steel.
Very cheap clean energy and cooperative enterprise, would allow us to take many finished steel markets from the emerging economies. [The great American economy, was founded on the back of steel manufacture and very cheap energy!]
We also invented the pulsed laser light system, that enriches yellow cake, to power grade fuel; for far less than the centrifuge system. [ We seem to have handed that technology over to the yanks, for little or nothing?] Meaning, we could cancel that stupidity, and be exporting value added fuel rods, not yellow cake; at prices others simply couldn’t compete with!
And we could earn many billions annually, by accepting back the waste product, and storing it safely, in one of our arid deserts
Currently, waste fuel rods are hung in large pools of water, until they cool sufficiently to be stored in more permanent arrangements, then encased in ceramics, which are packed into stainless steel drums, which are the housed in very large cast iron casks, weighing many tons!
A remotely controlled loco, reportedly sped up to 160 kilometres per hour, and deliberately slammed into one of the casks, caused no damage to the cask, but wrote off the loco.
The green hysteria about the waste, is just that.
We currently lead the world in moulded carbon fibre, most of which could be car body panels, propeller blades, termite and fire proof house frames, and all manner of extremely durable light weight products.
We also have, at least for now, the locally invented ceramic cell, which performs well on CNG!
Economies of scale, would allow these solid state devices, with no moving parts to wear out, to replace conventional engines in hybrid vehicles, without adding to the total build cost!
The ceramic cell produces electricity and mostly water vapour, as exhaust!
My bet is, a very durable, gas>ceramic cell powered electric vehicles, would find huge overseas markets. But particularly, where there is a seemingly insoluble and massive smog problem!
Some of our gas supply Barons, are on the public record saying, even with a fuel excise imposed, they could supply vehicle quality domestic NG, for just 40 cents retail, per cubic metre.
Which by the way, has the same calorific value, as a litre of petrol.
We do need however, to locate and reserve some of our copious gas, as solely for the domestic market. We can’t legislate that, but we can create public companies, to drill and find this gas.
The oil industry, uses private contractors; therefore, so can we.
Alan B. Goulding.
Comment by Alan B. Goulding — March 12, 2013 @ 4:40 pm
Australia in all reality has been sold out by mostly Labor Govts.They sold off 4 State Govt banks and the Commonwealth,that used to keep our taxes low via the fractional reserve system of banking.
It works this way.For every $10 of deposits banks can create from nothing $ 100 worth of loans.As you repay the principal 90% of this enters oblivion while the banks get to keep the interest.This is why banks make us pay the interest first and the principal last.
This new money created by the banks becomes new deposits in others banks,thus we have a multipfier effect that creates inflation.The solution to inflation is higher interest rates or poverty for the masses.
Banks by creating from nothing the money to equal our increases in productivity + inflation own us.We are their debt slaves.
Comment by Ross — March 14, 2013 @ 8:02 pm
No Manager, worthy of that title, would sell off cash cow income earning assets!
Yet, that is what govts of all political shades, seem to have done; the worst example being the privatisation of power.
Retained in public ownership, power companies provide social and economic benefits, no private model can match.
A bank manager friend, (retired), once confided, that just prior, to the 87 recession/stock market crash; he, under head office instructions, had loaned out 47 times more than the branch owned, in either assets or capital!
Yet federal Govt, which which owns the federal reserve and print money, force themselves to borrow against expected returns, to fund income earning infrastructure.
Interestingly, the big four all seem to share the same major four shareholding cohort?
Too many govts seem populated by complex rationalists, who always seem to apply band aid solutions, via yet another layer of complexity, which in turn, creates a new round of increasingly complex problems.
A very wise republican said, when guest on Q+A, “that at some point, complexity always becomes fraud”!
This very complexity has allowed companies like Google to earn many billions, in our market place, yet only contribute a few hundred thousand in tax!
And given our complex rules and arrangements, all perfectly legal, it would seem?
Then we wonder why cash strapped govts need to sell off the family silver or the farm, to afford to fund public service.
This latter phenomena, a result of globalisation and off-shoring!
And seemingly only ever results in a second-third grade service, gold plating and price gouging? Hardly a superior outcome!?
We need to vastly simplify our tax system, and replace all that convoluted complexity, with a very simple stand alone, unavoidable expenditure tax; collected via the banking/financial sector.
This would remove the need for compliance and often onerous compliance costs, which are currently larger than the virtually painless tax impost, we would actually need to level, against all business done in our domestic market place. A win/win outcome!?
This would simply raise tax, without any exception whatsoever, against all commercial endeavour/enterprise/importation, financed or done here, and not that done elsewhere, thereby eliminating the possibility of double dipping, or taxing genuine offshore earnings.
Meaning, we could also abandon things like the double tax act of 1953, which no longer serves us or our trading partners!
Look, some of the multinationals, accessing our domestic market place, have annual budgets larger than many sovereign nations.
We could, if we were as half as smart as we think we are, reform our tax and tax code, to not only ensure everyone pays a fair share, but the lowest tax rate in any of the developed economies. [Look, 50% of something is a huge improvement on a 100% of nothing!] [It patently is not a case of can’t, but one of won’t?]
Couple that to carbon free power that is cheaper than coal, and our manufacturing economy, and that which will be left after all the mines shut down, will be sent into overdrive and turbocharged.
Once again, I’m talking pragmatism, not socialism, cooperative capitalism, not extreme capitalism; and the fair go, we Aussies pride ourselves in! Rather than, I’m all right jack, the rest of you can go visit the nearest taxidermist; and or, self harming, rat eat rat exploitation; and or, the downward spiral, toward the lowest common denominator!
Alan B. Goulding.
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