|CPDS Home Contact||The Futility of 'Backing Australia's Ability 2' Smart State: Some Informal History Strengthening Innovation in Australia By Challenging Interests Who Resist Change|
The Smart State programs have been only one example of the lack of practical realism in Queensland's public policies. In particular Smart State:
More practical and effective alternatives are available.
General Policy Weaknesses
Queensland has traditionally suffered from a lack of public or private institutions able to develop sound strategies for the development of a productive modern economy.
Evidence that there is a general problem is outlined in Queensland's Economic Strategy, which also suggested the nature and weaknesses of traditional strategies and recent populist alternatives; and the need to do better in future. A traditional emphasis on simply exploiting natural resources arguably both caused (and resulted from) this lack of capable economic institutions (see Queensland's Weak Parliament). The effect of Queensland's rich natural resources was to strengthen the position of 'elites' who provide poor economic leadership (see Resource Curse Hypothesis). This chronic problem was both illustrated and exacerbated by poorly conceived and incompetently managed Public Service 'reform' in the 1990s (eg see Towards Good Government in Queensland, and The Growing Case for a Professional Public Service).
The poverty of policy inputs to the political process was highlighted in an article about Queensland's political Opposition in mid 2001 (Koch T. 'Politics of despair', Courier Mail, 28//7/01). However the need for a serious effort to provide raw material for relevant public policy was also illustrated by the Opposition's call at that time for state spending on research facilities under the Smart State program to be spread around the regions more (see Franklin M. and O'Malley B., 'Horan seeks regional stake in Smart State, Courier Mail, 13/7/01).
Such an Opposition proposal missed the point that Smart State has been only a 'pretend' program which gained political applause from benefited interest groups at public expense - without ensuring that members of those interest groups became more economically effective by being better able to meet their customers' demands. Thus spreading the program around more couldn't do anyone any real good.
Aiming at the Wrong Target
Smart State differs in detail (but not in substance) from similar programs which have been deployed in other states and nationally (eg consider the federal government's 'Backing Australia's Ability' agenda and the federal oppositions' Clever Country' proposals). However the net effect is that Australia's innovation-capability ranking seems to be declining rapidly . Similarly business spending on R&D (except in manufacturing) has declined somewhat , and has been falling behind growth of the economy 
One observer described Smart State as funding 'research into biotechnology and information technology to attract or create spin off businesses' (Franklin M., 'Toothy optimist flogging a dead horse on jobs', Courier Mail, 23/6/01).
Though it is more than this, the quickest way to see why it must be inadequate is to recognize that the Smart State strategy has mainly provided increased 'smart' inputs (eg research and education) to an economic system that remains unable to use them profitably. Thus those expensive inputs are most likely to merely contribute to the offshore commercialization of local technology and to a brain drain.
Queensland’s / Australia’s traditional problem in succeeding with innovation was not any shortage of publicly funded education or basic research (though politically-driven reorganization and funding cuts have partly disabled Australia's tertiary education and basic research systems over the years).
In particular Queensland has never had any lack of technological opportunities which could have provided the basis for 'Smart' industries. For example an informal survey by the author of innovative activities in Queensland in 1985 (based on peer review) revealed:
Thus the main problem was (and remains) in the massive gap in the capabilities and organization within the market economy (ie private sector) to make a commercial success of innovation (eg problems in access to financing skills, and in the lack of a pool of people with experience of turning innovation into successful enterprises). All research during the 1980s revealed that nationwide a similar lack of competency and organization to commercially exploit available opportunities was the main constraint.
The areas where government is spending most money under Smart State will do virtually nothing to overcome the most critical constraint (though it may have some marginal benefit).
... Technical Weaknesses in Developing Commercial Competencies
Technical defects in the Smart State approach to developing commercial competencies to exploit 'smarter' economic inputs were first apparent in Innovation: Queensland's Future, a document produced by the Department of State Development in association with the 1999-2000 state budget. Though it included a long overdue recognition of the importance of innovation to Queensland's ability to profit from, rather than be the victim of economic change, it's obvious defects included:
In practice there have been serious problems in efforts to develop commercial capabilities.
As argued in The Economic Futility of Backing Australia's Ability 2 far more is likely to be achieved in developing an embryonic innovation system by starting at the market end (ie with 'market pull' on modest innovations made available to customers of established firms and industries, rather than 'advanced technology push', as this would give the business community the opportunity to crawl before it is expected to run).
.. Financial Limitations
A practical problem for Smart State is that, while economic theory correctly identifies the economic spill-overs which justify public investment in education and basic research (ie fact that public benefits are not reflected in the private benefits of any particular individuals), the States who are now competing to provide research facilities and incentives suffer from the same problem because their tax bases are too narrow to enable them (as compared with the Commonwealth) to capture the revenues from a more productive knowledge-based economy.
This is particularly significant for Queensland given its potentially perilous financial predicament when current economic / property boom subsides (see Queensland's Challenge, February 2001), symptoms of which have been further revealed in subsequent state budgets (see About Queensland's Budgets).
Partly because of those financial constraints it is (in 2003) becoming critical that Smart State succeed in enhancing the Queensland economy - and thus in upgrading the state's tax base. And, in fact, Smart State is being claimed to have accelerated productivity growth in Queensland's economy .
Unfortunately, while the latter would be a most appropriate goal, the evidence appears suspect primarily because the effect of substantial devaluation of the $A against the $US in which most commodity exports are priced on creating the impression of rapid economic and productivity growth (which will be particularly significant in Queensland's more export oriented economy) does not seem to have been considered - see Does Productivity Growth Confirm Smart State?.
It appears that Queensland's government may have fallen into the the most basic trap in the development of its Smart State agenda - ie it seems to have consulted with various interest groups, and they knowing what they would be likely to be doing in a 'smarter' economy, asked government to pay them to do it. The result seems to have been the creation of expensive business and technological 'welfare' programs rather than an integrated innovation capability within Queensland's economy as a whole.
A Practical Alternative
Development of market-focused innovation-commercialization capabilities (which have a systemic character in that they require complementary arrangements in many different types of organizations) should be possible through appropriate strategic management.
An arrangement to 'bootstrap' higher-level innovation- commercialization capabilities in Queensland was developed by the Institution of Engineers (Queensland) in an indicative 1999 proposal for an Engineering Enterprise Development Centre.
Revised August 2003
|Overcoming impediments to achieving Smart State goals||
Attachment A: Overcoming impediments to achieving Smart State goals
Submission emailed 11/7/05
Professor Peter Andrews
I should like to make a formal submission to the expert / leaders group which I understand (from a recent media report) has been established to chart future initiatives and advise Queensland's new Smart State Council, which also includes various state government ministers.
I would like to endorse the goals that this group has been set. They seem vitally important in order, for example, to:
I should also like to submit that the key to overcoming obstacles to Smart State goals is to shift the strategic focus towards the creation of basic innovation systems within the mainstream economy to meet demand in existing markets or new global niches. This implies a strong focus on developing commercial capabilities, and a limited initial focus on identifying leading edge trends in education and R&D.
Potentially-valuable innovative ideas have always been widely available in Queensland. The primary obstacle to achieving Smart State goals has been the lack of commercial competencies and organization to profit from them, rather than the absence of high quality education or R&D. Once such innovation systems exist, then demand for, and the economic benefits of, high quality education and R&D will be dramatically increased.
Methods that could be used to create effectively functioning innovation systems are suggested in A Commentary on Smart State.
The need to adopt what could be called a 'market-pull' strategy is argued in The Economic Futility of Backing Australia's Ability 2. It suggests that such an approach would provide more energy and a more realistic sense of direction than the 'technology-push' strategy which has achieved little over the past 20 years. The latter document also comments on the need for a change in leadership style, if efforts to develop better real-world innovation capabilities (which is one of Smart State's core goals) are not to continue to be frustrated.
The above comments are based on a study of this subject for over 20 years, the authorship in 1983 of a major report to the Queensland Government on how something like the goals of Smart State might be achieved, a brief period as Queensland's Director of Technology Policy and long study of worldwide experience and theory concerning economic development generally.
|Industry Clusters Based on Engineering: Some Lessons from History||
Industry Clusters Based on Engineering: Some Lessons from History - email sent 24/5/13
Professor Graham Schaffer,
Re: ‘Queensland the Smart Engineering State’, Ingenuity, Issue 3, May 2013
Jonathan Cosgrove kindly sent me a copy of Ingenuity, and I should like to put forward some suggestions about giving substance to the worthy aspiration expressed in your article, namely:
My suggestions include:
By way of background I note that I am a 1967 UQ Civil Engineering graduate and worked in the 1970s in the Coordinator General’s Department when whole-of-government methods for strategic change (that are in some ways equivalent to the development of clusters in a market context) were being led by Queensland's Coordinator General (and studied related issues as the basis for a master’s thesis). I was also the author of the first Queensland proposal (and one of the very early Australian proposals) for achieving the sorts of outcomes that your Ingenuity article referenced (Towards A Strategy for Technological Development in Queensland, Coordinator General’s Department, 1983, unpublished). Moreover I had opportunity over several years to do a lot of research into international approaches to economic development (including apparently ‘reverse engineering’ the intellectual basis of East Asian economic ‘miracles’). I also had the opportunity to experiment with what could be called ‘strategic market management’ in relation to stimulating the development of several opportunity areas that are equivalent to (though not the same as) the specialised engineering services that your article referenced. An overly brief (and informal) history of what happened is outlined in Smart State: Some Informal History.
The latter include reference to:
The former (EEDC) proposals were greeted with a loud silence by Queensland’s engineering fraternity. Engineering in Australia is quite different to that in (say) Europe, where engineers are expected to be the core drivers of technically-oriented enterprises (and are thus expected to take the economic lead). In Australia, by contrast, engineers have traditionally seen themselves in a dependent role, ie as technical service providers to enterprises that are run by accountants, lawyers or foreign investors. Until this is overcome (which engineers can’t do on their own, and certainly can’t do by seeking political support) it seems most unlikely that engineering will make the sort of economic contribution that is now essential.
I would be interested in your response to my observations.
|Dumb Ways of Being 'Smart' In Queensland's History||
Dumb Ways of Being 'Smart' in Queensland's History - email sent 15/2/15
Re: A Smart Way for Growth, Sunday Mail, 15/2/15
Your article points to Queensland’s need to diversify its economy into knowledge based functions. I should like to point out that Queensland has had this aspiration for the past 3 decades, but has achieved much less than it could have because the methods that have been used have been ‘dumb’ (ie they emphasised capacity development via political ‘push’ rather than market ‘pull’ – and the former is much less likely to be sustainable / economically productive). By way of background I note that in 1983 while working for the then Premier’s Department I wrote the first report on diversifying Queensland’s economy into knowledge intensive functions, and have observed with some interest Queensland’s inability to date to make much progress.
My Interpretation of your article: Some years ago there was a debate about a ‘big Australia’. Now international migration has doubled to 400,000 pa. Baby boomers are retiring and need to be replaced. Thus cities are growing rapidly – especially in Queensland. This will require Queensland to change. The Gold Coast will have a population of 1m – and this can’t be based on tourism and retirement. This requires long term strategic planning. There is a need to know what sort of place Queensland wants to be by 2050. Australia used to ride on the sheeps back – but those days are past. Queensland used to prosper on the basis of tourism, lifestyle and retirement. But the rest of Australia has moved in the direction of knowledge work. Queensland needs to think differently about its future. Knowledge workers might be attracted by Queensland’s energy, vibrancy and can-do capability. Upgrading Queensland’s cultural facilities might make a difference. There is a need to shift into knowledge industries. ‘Smart State’ is the right sentiment. But there is also a need for enterprise, energy and self-belief.
The best way to develop knowledge industries (or other high productivity functions) in Queensland and its regional cities is probably to develop competitive advantages in those functions by a market-oriented process to accelerate economic learning. How that might be achieved was suggested in Reinventing the Regions (2010) and Re-imagining the Federation to Develop New Cities (2010).
There has never been any problem attracting knowledge workers to Queensland. In the 1980s it was easy to identify hundreds of operations that might have been the foundation of knowledge industries in SE Queensland - almost all of which were a product of interstate migration. What was missing (and unfortunately still remains deficient) is the commercial competencies and organization - and other support functions - needed to enable those seeds to grow.
Queensland has had a ‘Smart State’ aspiration for years – but has been anything but ‘smart’ in trying to achieve it. Governments have tended to focus on increasing the supply of ‘smart’ inputs (eg education, training, research) into regional economic systems that were insufficiently developed to use them productively, or providing direct ‘assistance’ services that blocked the development of the market economy (eg see Commentary on 'Smart State': Illustrating Queensland's Lack of Serious Public Policy, 2003 and The Futility of 'Backing Australia's Ability 2', 2004). An apolitical emphasis on stimulating market-driven development of embryonic industry clusters would have resulted in an increasing demand for those ‘smart’ inputs (rather than a supply of inputs which were politically favoured but not necessarily what was best from an economic viewpoint).
In some respects Queensland’s ‘Smart State’ agenda was about increasing electoral support (by being seen to do something trendy, or to gain endorsement from the influential providers of the ‘smart’ inputs such as universities) rather than about actually developing Queensland’s economy (see Smart State: Some Informal History, 2012).
There is no doubt, as your article suggested, that cultural facilities might improve a region’s attractiveness to sophisticated people – but once again this is probably best the result of demand rather than a politically-driven supply. The benefits of ‘cultural facilities’ are real, but probably not as great as enthusiasts sometimes claim (see The Value of Creativity and Culture, 2005). Queensland had a focus for many decades on government provision of industrial estates to attract ‘industry’ (which would parallel the view that it might now be ‘cultural facilities’ that might encourage ‘low-flying knowledge industries’ to land). However there were undoubtedly smarter ways to build real industrial capacity – which would have created a real demand for industrial estates (see The Seven Secrets of Failure, 2000).
Finally I would be very cautious about recommending a ‘strategic planning’ process to determine what sort of place Queensland should be. Strategic ‘planning’ will produce an answer that accords with the assumptions of central planners – and tend to suppress options / initiatives that the ‘planners’ don’t know about. SE Queensland has already had a not very effective strategic ‘planning’ process (see SEQ 2001 - A Plan for an Under-developed Economy, 1994). Strategic ‘management’ is a better option (see Strategy Development in Business and Government, 1997). The latter involves ‘asking the question’ in a way that allows diverse stakeholders to collaborate in finding their answers which can be integrated into a coherent whole, rather than the a central planner guessing the answer on the basis of consultation.
|Queensland's Preference for Economic Futility||
Queensland's Preference for Economic Futility - email sent 14/6/16
Re: Queensland budget 2016: Premier makes good on innovation promise, Brisbane Times, 13/6/16
Your article pointed out that Queensland’s Government has provided additional money in its 2016 budget for an Advance Queensland program to boost innovation. It also listed a large number of small spending initiatives to either stimulate the development of innovative options or support / attract innovative businesses. In another article, you noted that Queensland’s Premier and Treasurer did not seem quite sure how the Advance Queensland program would work.
History suggests that they need not bother trying to understand. The Advance Queensland program seems to parallel the sorts of things that have often been done in the past to achieve a political purpose (ie to make the electorate believe something is being done) but ultimately proved to be largely a waste of time and resources (eg see Queensland's Biotechnology Bubble, 2002 and 'Smart State': Illustrating Queensland's Lack of Serious Public Policy, 2003).
Queensland has always had a large number of potentially constructive innovative options because of the inventiveness of its people. What it has lacked has been the commercial competencies and organisations in its business community to turn significant numbers of those potential opportunities into successful internationally-competitive enterprises - and thus create an economic environment able to provide market-based support for ongoing innovation. Methods to overcome that obstacle have been available for decades (see Another Approach to 'My Big Idea' , 2016). However they never got beyond the stage of reasonably successful non-political experimentation because of Queensland’s apparent preference for the economic futility of politically-driven efforts to stimulate and support innovation.
It may be that at some time Queensland will get serious about economically-significant innovation – but it seems that 2016 is not the year that this will happen.
|Appalling Queensland Governments||
Appalling Queensland Governments - email sent 19/12/16
Re: Queensland premiers: Who has been the best?, Brisbane Times, 12/12/16
Your article suggested that Peter Beattie should be regarded as Queensland’s best premier because he introduced the Smart State policy which: (a) recognised that rocks and crops were an insufficient basis for Queensland’s future; and (b) has been transformative. The ‘runner up’, you apparently implied, was Wayne Goss who re-invented Queensland’s polity.
On the basis of an inside view on the issues your article referred to (see Smart State: Some Informal History, 2012 and CV) I should like to suggest that your conclusions are well wide of the mark. While working for Queensland’s Coordinator General I wrote the first report on Queensland’s need to transition to something like a ‘smart state’ in 1983 (Towards a Strategy for Technological Development in Queensland). I can assure you that the need for such a transition was well accepted politically in the late 1980s even though Queensland’s political, business and academic institutions could not envisage anything but more-of-the-same methods to achieve that goal that had always been used (ie direct government ‘assistance’ to potentially innovative enterprises – which was a significant obstacle to the development of market-based commercial support). Because of the character of Queensland's economy, business in that state was highly dependent on government or natural resources and strongly resisted taking any independent leadership role in enhancing the economy as a whole. A Western Australian study [Ref being sought] suggested that small business / farmers tend to rely on outside experts rather than having any capacity to themselves work out optimal strategies - and this certainly seemed to characterize Queensland's business community.
Everyone who seriously studied the issue in the 1980s was aware that Australia’s / Queensland’s major obstacle to a ‘smart’ economic transformation was the lack of the commercial competencies and market organisation needed to create internationally competitive enterprises out of the many potential ‘smart opportunities’ that were a product of Australians’ innate inventiveness. And methods that were likely to be effective in overcoming that obstacle were: (a) identified by senior public servants I worked with; and (b) incorporated (as ‘market facilitation’) into the Ahern Government’s 1988 Quality Queensland strategy. In the late 1980s I had opportunities to experiment with the use of methods to facilitate change in a market context (ie enabling networks of enterprises to discover opportunities from collaboration in establishing new economic capabilities). Such methods probably had the potential to transform Queensland into something like a real ‘smart state’ (in terms of increased ability to benefit economically from available ‘smart’ opportunities) in the early 1990s - providing the process could be divorced from political 'push' (ie interest group controlled outcomes) and thus be driven by market 'pull'.
However this proved impossible because the 1989-1996 Goss Government was only interest in ‘re-inventing Queensland’s polity’. It seemed to believe that achieving this required abuses of power to politicise senior positions in the public sector (ie to ensure that ‘senior’ positions were occupied by (often inexperienced) cronies or ‘yes men’). That administration thereby:
It can be noted that Peter Beattie succumbed to pressure to give up his role as premier in 2007 because his administration was seen as ‘crisis ridden’ (see Queensland's Next Successful Premier, 2007). While Mr Beattie often had to try to clean up crisis because of the structural obstacles that had come to constrain effective government in Queensland, even worse features of his premiership were arguably:
In 2015 an observer provided an insight into how ‘transformative’ Mr Beattie’s Smart State agenda had actually been in practice by suggesting that it would be a good idea for Queensland to diversify its economy into knowledge based functions (see Dumb Ways of Being 'Smart' in Queensland's History, 2015). The Queensland Government took this advice to heart by re-invigorating a form of the ‘Smart State’ agenda through an Advance Queensland program in 2016. Unfortunately this continued to use much the same tactics that had proven ineffectual for almost 2 decades (see Queensland's Preference for Economic Futility, 2016).
Currently several states (including Queensland) appear to believe that large further infrastructure investment can get them through a period of weak economic performance (see Crowe D., Taylor P., and Schliebs M., States stuck in slow lane seek billions for infrastructure, Weekend Australian, 12/12/16). And the federal government seems to believe that something similar would be the key to ‘unlocking the north’. Such proposals reflect a failure to recognise that Australia is increasingly being warned that it is at risk of a financial / banking crisis because of: (a) a high level of dependence on increasing debt to sustain growth through unproductive investment; and (b) the emergence of the world’s (first or second) highest debt / GDP ratio (see Australia's Risk of Financial / Banking Crises as Growth is Driven by Rapidly Rising and Often Misdirected Debt). The fact that China, Australia’s largest export market, seems to be at risk of an even greater debt crisis (see Importing Risks from China) compounds Australia’s risk from reliance on rapidly rising debt to sustain growth.
In the present environment, investment to stimulate growth will thus preferably be in activities with high productivity (ie those likely to produce a large increase in GDP relative to any increased debt fairly quickly – in order to reduce the national debt / GDP ratio). As noted in Alternatives to Monetary Policy (2016) this is unlikely to be associated with infrastructure investment, and can probably best be achieved by the use of methods to build up competitive advantages like those advocated and trialled by senior public servants in the late 1980s before Queensland’s machinery of government was crippled by the Goss administration.
I would be interested in your response to my speculations