Background Data to Innovation, Technology and Wealth Creation Institute
Proposal
See also [Working
Draft of] Australia's Strategic Positioning
Strategic Positioning Data
FOLDER 1
PRE 1.1: Federal government is under pressure to examine rail and port bottlenecks following ABS data showing that imports exceeded exports by $2.66bn in November. This was 37th monthly trade deficit in a row, and one of largest. RBA warned that bottlenecks were preventing miners taking advantage of China boom. Manufacturers also suffer constraints because of China boom. (Garnaut J., 'Rail and sea snarls blamed for trade loss', SMH, 12/1/05)
Comment: Rail and port bottlenecks affecting minerals / energy reflect that (a) no one expected boom - partly due to erosion of capabilities connected with that sector and (b) machinery for developing infrastructure has been incapacitated by both federal / state financial imbalances (since 1970s) and attempts to adopt 'business-like' approach to 'public-goods' infrastructure in 1990s. China / India etc are are major challenge to medium technology manufacturers. However the prospects of a (financial / environmental / political) crisis derailing China's growth seem pretty high.
PRE: 1.2: Australia had large trade deficit in November 2004. Some exports have risen, while a strong economy resulted in imports surge. ALP suggested the situation resulted from lack of trade and industry strategy - arguing that multilateral trade strategy (reinforced at regional level) had helped. Resource exports are limited by lack of port capacity. Manufacturing exports are struggling with high $A. Imports increased in most categories - with those from China amounting to half increase. If Australia does not correct deficit, then it will lose attractiveness for foreign investment (Uren D 'Massive deficit made in China', A, 2/05)
Comment: Current account deficit is a complex issue. Trade deficit is the mirror image of capital surplus - and this has to do with the productive use of capital. There is a large capital inflow from Asia to US (and also Australia) with offsetting trade deficit because capital is used more productively in the latter, and relatively unproductively in Asia. Many would argue that US economy is in trouble because it has a large CAD and high foreign debts. But US has a sound balance sheet - ie the excess of asset values over debts. The real financial problem is in Asia (despite its current account surplus and accumulated foreign reserves) because balance sheets are very bad. Australia's situation needs to be assessed in global context. None the less the need to boost competitiveness is very real. $A does not have protection which $US has of being global reserve currency.
PRE: 1.3: RBA is expected to lift interest rates as a consumer splurge produced record trade deficit. Economic growth and home sales seem to have stalled. Consumer demand is being fuelled by debts. (Uren J., 'Surge blows out trade deficit', A, 1/3/05)
PRE 2.1: There seems to be political conspiracy not to discuss economic problems, though Australia's exports stagnate and 15% of male workforce is unemployed. There was concern in 1996 about foreign debts, but this is now ignored. Only 250 companies like Vision Systems (VSL) / Resmed / Cochlear would balance Australia's trade account. Australia is remote from global centres and small scale. VSL has 15 different companies worldwide contracting research in medical instruments - and also selling manufactured products. To be viable Australian manufacturing must sell very valuable (not cheap) products to world market. It is impossible to compete in products / services that are not intellectually intensive. 90% of VSL's output is exported. Marketing costs 20-25% of sales, while R&D costs 12%. One has to operate on customers time zones. Operations like this are vulnerable during tough times, if they aren't located near their corporate HQ. It is still possible to get enough bright scientists and engineer - and they can earn far more than the average GP, though this is not the popular image. However as a society Australia graduates far too few such people. China now graduates more such people than the US - so in a decade Australia will be competing with them on the basis of innovation not just cost. Tax incentives could be given for R&D and HECS needs to be abolished on science and engineering courses, as an incentive - ie that science should have same status in Australia as sport. A lot of people are lost intermediate professions (law and accounting) at end of secondary school. But there is a desperate need to be competing in global trade in terms of brains. Australia can still sell mineral and ag products, but trade profile is changing - and the world really most wants to buy goods and services that are intellectually based. There were problems with R&D tax concessions in 1990s, so scheme was shut down. There is a need for larger tax concessions, and for targeting so cost is not too high ('Manufacturing the future?', Radio National - interview with Jim Fox, Vision Systems, 19/9/04)
Comment: Advice offered here is good from a business viewpoint, but not necessarily from economic viewpoint. Governments like those in Australia are structurally incapable of effectively targeting anything that is likely to be economically productive.
PRE 2.2: Economists recently labelled Ireland as the most desirable place to live - and rated Australia 6th. Both are laissez-faire economies which rank low on OECD scales for treatment of workers and low percentage of GDP controlled by government. Both have high levels of casual and part-time labour, and limited worker protection. But Ireland and Australia are going in opposite directions in terms of innovation and research and worker protection. The European social model has had major impact on Ireland - and it is now regulating rather than deregulating. Inequality in Ireland is still more than desirable. US also has low labour protection. Did US high-tech firms set up in Ireland because labour laws favoured capital? It was of marginal impact. Ireland was a basket case on entering EC - and bringing macro-economic stability through social partnership helped as basis for new policy emphasis on education and research. At first this involved exploiting low labour costs to access EC market, but in 1990s far sighted bureaucrats focussed on creating enterprises successful in themselves. But Ireland was technology taker, not technology maker. Cheap cost advantages are no longer available. It is now hot spot for European technology investment - where there is a ned for access to highly qualified adaptable labour. This is reverse of Australia which has been lucky again due to China market growth benefiting primary commodities. Irish government is interventionist and has 'industry plans'. This involves great respect for market environment. Ireland survived 'tech wreck' with only slowdown in growth. In that period government set up review of industry policy (eg of that through Enterprise Ireland to develop supply chains and industry clusters ). The review was done on the basis of a social partnership. This showed a lack of success in developing its own R&D / innovation capability. To remedy this, large spending increases are proposed on education and R&D (similar to Finland which pursues a knowledge foresight approach), and also a technology transfer system. Ireland (like Australia) also suffers from a lack of ability to commercialize R&D - and is again intervening to bring universities together to cooperate. Ireland needs this to compete with cheaper labour in Eastern Europe. Australia's position is poor by comparison (with low R&D spending; large ETM importer; limited IT manufacturing). Australia now sees China as its 'North Sea oil' which sustained UK under Thatcher government. UK has now copied policy for innovation from Ireland. Australia is not investing in areas that will sustain growth and innovation in the long term. Australia's current account deficits will have adverse effects. Ireland now has large current account surpluses. Irish interest rates are controlled by ECB and are low - which creates incentives for investment. US investment is still sought - but selectively - and around Intel plant industry policy agencies will develop clusters of Irish firms to feed the plant and develop their own innovation capability that will be viable after Intel has left. People with children would be better off in Ireland than in Australia ('The Celtic tiger', transcript of National Interest program in which Terry lane interviewed Roy Green - dean of faculty of commerce at University of Ireland 12/12/04)
Comment: The question of whether government can have useful industry plans depends entirely on how they are managed - ie whether the outcomes are determined by political aspirations reflecting the desires or influential interest groups or determined by market requirements. Industry policy is not possible in US (for example) because of its strong interest group politics, but was more feasible in Japan because policy was orchestrated by bureaucracy to be market oriented and political pressure was excluded. Attempts to develop innovation capabilities in Australia have been crippled by dominance of science / education lobbies (see Upgrading Australia's Economic Leadership).
European concept of role of state (under Roman law) tends to make industry policy more feasible than under British law (eg because state is dominated by professional bureaucracy and is seen to be above interest group pressure). The social partnership arrangements envisaged depend entirely on philosophy about the nature of the state - and have disadvantages as well as advantages.
The establishment of Enterprise Ireland system to build supply chains and industry clusters could have been achieved in Australia but for the politicisation and de-skilling of the state public sector by Governments like Kennett, Greiner and Goss. Experiments with this were being done in the mid 1980s.
The basic point is that unless the character of Australia's political system is changed so that its does not simply reflect populist pressures, there is no way that industry-related policy can be effective. This requires competent inputs to the political system that are both external (ie via civil institutions) and internal (ie via a competent bureaucracy)
Ireland's proposal to build cluster of innovative firms around major industrial plant might work, or it might fail. It all depends on how it is managed.
In Australian situation I have been arguing for over two decades that similar outcomes can only be achieved if they are undertaken by apolitical institutions (see Defects in Economic Tactics Strategy and Outcomes). Ways for achieving productive gains were demonstrated in the late 1980s and protocols for institutions through which such outcomes might be achieved under a British law tradition were created in the US in 1990s.
It is of serious concern that we are still struggling to develop innovation capabilities - the need for which was obvious in early 1980s. There has been no serious effort to discover what is required for the next stage in development (which others have worked on over the past 25 years - and which have emerged because of the rapid progress in China / India).
PRE 3: Australia has much to be thankful for, yet lives in part of the world that is in shock as a result of tsunami. Australia is a land of opportunity for those who are prepared to pursue their dreams. There is a need in future for attention to 5 issues: people; water; infrastructure; education and social investment / philanthropy. Australia's foundation for next 50 years involves people and water. A population target of 50m has been advocated for 2050. It would be good for economy, employment, defence and security, the environment and social / cultural development. Past waves of immigration need to be renewed to compete and prosper in future. Immigration and refugee intakes are up, yet Australia has not been ruined. Population growth should be 2% (!% from both natural increase and immigration). Australia should win back many of its diaspora - who are amongst best and brightest. Federal Government should create a senior cabinet position for population planning - which would include immigration and decentralization - which means getting infrastructure right. Australia has a water management / distribution problem, not an overall water shortage. Water needs to be managed on a transparent balance sheet basis which reflects its true value. The environment needs to be counted as water customer. Governments and businesses need to forge practical alliances. Some business sector ideas and practices need to be embraced to stop wasteful water loss, and improve production / environmental quality. Australia is lagging on infrastructure spending. There is a need to end obsession with low government debt. Productive debt is good. Australia should ratify Kyoto protocol as soon as possible. This would lead to infrastructure advantages by forcing older resource industries to modernise and use new technologies. Spending on knowledge infrastructure is also important (education and R&D). Business spending on R&D is low by OECD standards. In 2000 Canadian Government set aside $1bn to establish Canada Research Chairs program - to establish 2000 new research positions. A government business JV to establish 500 new chairs would make a major difference. Government should provide the funding, and business should provide entrepreneurial mentors. A US idea of special bonds on which interest would be tax free if used to pay for education could help families meet the cost of education. Public companies need to seek shareholder approval for philanthropic activities. This would produce benefits to community and also to company. There should also be a social compact between companies and government to encourage more corporate social involvement. A tax rebate for companies making substantial social donations would be of value. A final proposal involves establishing 'Australia Plan' as a Colombo Plan in reverse, which encourages younger Australians to engage productively in the region. (Pratt R. Australia Day Address, 19/1/05)
Comments: Population target issue is subject of uncertainty. Australia genuinely has soil and water constraints on numbers, but these are unlikely to be as low as pessimists suggest, and can probably be increased by better management. Dealing successfully with infrastructure requires much more than increased spending. It requires creating machinery which is capable of doing this which has progressively been demolished by politicisation and efforts to take a 'business-like' approach to government. Kyoto protocol is not the only way to achieve the technological transformation needed - and has been bypassed by events. To lift business R&D requires development of innovation system. Method suggested to increase numbers of research chairs and then try to make academics into entrepreneurs is the 'frolic' that Evan Thornley criticised. Other proposals seem sound. Managing water (including environmental water) on a balance sheet may improve situation, but it leaves humanity trying to manage the environment which is intrinsically impossible. In this respect any such proposal will be opposed by greenies and Islamists.
PRE 4: Cooperative education can be a basis for future technology, wealth creation and innovation. CER region has a small, aging population. While numbers with university qualifications have increased the numbers with a science base has decreased. Export wealth is still based on biological and mineral commodities, and domestic wealth generation on services. Technology is being imported. To maintain status need to create wealth through innovation - which requires Total Technology (ie the technical, economic, social and cultural basis for innovation). Multinational companies who conduct R&D elsewhere dominate CER. There are few CER firms that are major international companies. However there are many smaller firms. Thus there is a need for specialists dealing with innovation in larger firms, and multi-skilled individuals for the smaller firms. Also top management needs Total Technology skills. Australia's chief scientist advocated employing 500 science graduates in SMEs to help overcome this problem, but government funding was not provided. NZ has started teaching Technology in schools - starting at low levels. It is problem solving and project based. Moves have been made to develop apprenticeships and education for young people who will be future technicians. There are also Bachelor of Technology degrees which provide basic engineering knowledge and that required for other aspects of technological development. An appropriate balance between professional skills and sub-professional skills is needed, which requires coordination between university and TAFE education. A project is suggested involving (a) literature survey on wealth creation; technology education (b) assessment of present education related to wealth creation (c) needs of industrial enterprises (d) assessment of career advisory services (e) assessment of Learning Centres to upgrade inadequate schools science and maths backgrounds (f) prediction of possible education and training and cooperation (Earle M., 'CER Technology and Innovation', 12/1/04)
Comment: Rather than teaching individuals total technology - and then putting them into hostile economic environment - there would be more to be gained by accelerating real economy's learning about total technology.
It is not certain that hierarchy of skills can be ensured by coordination amongst education and training institutions as the latter do not determine how many people study this or that. This is determined by students and their parents. Thus probably the goal should be to inform the community.
PRE 5: Proposal to HREOC to undertake an educational flow study for NSW. This referred to Community Network proposal for disadvantaged young Australians which highlighted: 50% of workforce come from poor homes; 50% of 55-64 age group not in workforce will have valuable skills but are not in workforce; and aging of population. Work similar to that proposed has been done before. It could contribute to goals of ALP's Youth Guarantee program. Pioneering work by Dusseldorp Skills Forum over many years has been useful. A meeting of interested parties is suggested (Mack J., 'Wealth creation: innovation and technology - The supply of technological skills', 7/6/04)
PRE 5.1: It is incredible that after a decade there is still no reasonable data flow linking patterns of study at school to aspirations and post-school experience (Walsh B 'STEP / SCOPE / CERTECH Experience: 1974 -1990)
Comment: Data is only needed for 'planning' (ie decision making) if someone is doing so. The key issue is not whether an information system is set up, but whether there is an organization (s) which 'plans' (and thus uses the information). Massive changes that have taken place in public administration (to create what are little more than politicized pseudo businesses) need to be considered in this regard.
PRE 5.2: Tensions in family life will add to numbers of children with behavioural problems and learning difficulties. Prosperity gained from economic reform has been unevenly shared, so that 50% of potential workforce now comes from poor homes. Poverty implies insecurity and inequality in relation to education, training and work opportunities. Australian economy must become increasingly knowledge based. The disadvantaged half of young Australians will not be able to participate - and will find their lives linked to welfare. With an aging population it is essential to boost the productivity of younger people. The establishment of a community network to raise the expectations of disadvantaged young Australians is proposed (Mack J., and Walsh B., 'Proposal for a Community Network for Disadvantaged Young Australians', 1/4/04)
Comment: Something like this seems to be needed. To get there requires (a) developing a vision in minds of community that recognizes the problem and the opportunity and (b) building existing organizations that are doing something similar into a network.
PRE 5.3: In 1976 Schools Commission suggested that few research efforts are translated into better school practice - and there are fewer examples tertiary and school systems in purposeful long term attacks on problems. The Committee of Inquiry into Technological Change in Australia suggested the establishment of national programs to monitor literacy and numeracy. Attempts between 1974 and 1990 were made to devise computer based / counselling / management information flows to improve the education to work flow. This required imagination drive and persistence of key players, and active involvement of education, government and private sectors. But these projects never gained sustained educational or government support. For such efforts to be of benefit, they need government support (Walsh B 'Education to work: The place of counselling / management information', June 2004)
Comments: Implementation failure identified by Schools Commission is very common. Experience of reform failure in Queensland in 1990s strongly suggested that it tends to arise from over simplistic assumptions made by inexperienced reformers about the systems they are dealing with.
There is a shambles now in provision of infrastructure services - which is leading towards proposals for private sector provision because government systems have broken down.
There seem to be two major factors in breakdown in effective public sector delivery (a) federal state fiscal imbalances which grew most severe in their impact after 1970s - and which were the base for Schools Commission etc - and made it essentially impossible for states to take serious responsibility for their nominal functions and (b) politicisation and competition policy experiments in 1990s which significantly undermined public sector professionalism and ability to deal with infrastructure systems as a whole.
PRE 6: Commonwealth Chief Scientist suggests that government articulate a vision of a preferred vision for Australia's development - involving knowledge-based industries. OECD observer noted their significance. Other reports show that more than fiscal measures are needed. Analysis also shows the extent of social welfare dependence and the large numbers of children from poor homes - which suggests the need to monitor their ability to achieve high education levels. Knowledge based growth is now Australia main challenge. To develop the supply and demand of technological skills, members of the community need to increase their own technological literacy. Declining numbers have been attracted to engineering and physical sciences. Government policies have encouraged this trend - a situation that is not repeated elsewhere. Technological skill profiles need to match those elsewhere with higher numbers of sub-professional skills. Industry government and education need to collaborate to ensure good information is available to guide development of education and training systems. The cumulative and generational impact of high unemployment is causing a loss of confidence within society. Indicators of well-being of young people are poor, as are indicators of social stresses. A Queensland Enterprise Network would provide a focus to galvanise leadership, cooperation and coordination at community, regional and state level for social recovery through knowledge based endeavour. It would (a) undertake social mapping (b) disseminate this information to community networks for their information (c) examine secondary-tertiary student flow (d) establish learning centres for early school leavers and (c) give special attention to the needs of indigenous peoples. In the medium term it would (a) promote technological literacy (b) develop integrated strategies (c) promote regionally significant innovation and (d) promote and foster local and community initiatives (Hollingworth P., 'Proposal for a Queensland Enterprise network', October 1997)
Comment: Something like this would be of value to improve supply of technological skills, but will be of no significant benefit until demand for them is created
PRE 7: There is a need for fairer distribution of Australia's wealth. However wealth creation is an even higher priority. It is of concern that over the past 20 years there has not been sufficient cooperation and coordination between industry, government, research organisations and education needed to add value to Australia's resources [Quote] ('Round Table on Wealth Creation and Social Justice', IEAust and Australian Enterprise Network, 24/5/1995)
Comment: The lack of effective cooperation / coordination is largely a consequence of the domination of the policy process by science / education lobbies which has resulted in a focus on the supply side (of education and R&D), when it has been obvious for 20 years that the real problem has been on the demand side (ie the commercial competencies and organization to use those inputs). The skill base which was emerging in governments the 1980s which could have orchestrated the necessary commercially-focused cooperation and coordination was purged because the political system continued to rely on advice from the science / education lobbies (see The Economic Futility of Backing Australia's Ability 2).
FOLDER 2
POST 1.1 /1.2 Diagrams
Comment: It is unclear what these are supposed to represent. Would they be the structure of proposed Institute or of some other collaborative arrangement?
POST 2.1: After a decade of remarkable economic performance, a new round of labour market reform is intended. How will benefits be provided to increasingly mobile / decentralised workforce, and with what sorts of investment? Unemployment is driver of all forms of social dislocation. Real unemployment is not just over 5% the official figure. Adding unemployment, disability and sole parent benefits shows higher unemployment rates than ever. 1/6 of children grow up in jobless households. This unemployment coincides with real skill shortages - because there are long lead times in supply of skills while demand can change quickly. But unemployed are blamed for their plight. Less than 1% deliberately avoid work. With next recession, unemployment will double. Australia has rapidly growing economy - partly because of fast growing consumer debt. Australians should be saving to invest, but are borrowing to consume. Given high debt levels, increased interest rates will generate recession. Always in the past Australia had trade deficits when commodity prices were low, and surpluses when they were high. Now with record prices, there is a record trade deficit. When prices start to fall, there will be real problems. Floating exchange rate is said to be able to deal with this. This will make remaining Australian companies very cheap to buy, and increase inflation / interest rates. This will lead to 500,000 increase in unemployment. Solution to this is seen to be become like US (noting trade deal with US, labour market deregulation, cut minimum wages, create Silicon Valley by government spending heavily on backing Australia's ability). But US economy is much bigger. Australia (being much smaller) needs more exports - but has one of the lowest levels of exports of all OECD countries - with only US (who can afford this) having lower export percentage. It is vital to gain economies of scale. Trade deal with US won't solve the problem - and may result in net losses as Australian firms can't compete. Trade only benefits both economies if they have very different levels of wealth. When these are similar, those with economies of scale or faster productivity growth get most benefits. Labour market deregulation is not key to productivity. Regulation is much stricter in California than in Australia. Scale economies are reason that US productivity exceeds Australia. Higher wages are a consequence of exporting for Australia, not a barrier to exports. The problem with trying to become next Silicon Valley runs into problem that many others are trying to do this. Also most R&D in Australia is not done by companies with real markets and brands. University R&D is valuable, but quite separate from business development of real value. The latter only exists in some niche medical areas. Education exports have been growing rapidly, but receiving no focus or profit reinvestment for growth. Apart from miners there are few companies exporting more than a few $00m pa. Unemployment is much worse than claimed, likely to rise in recession; trade is based on 30 year out-of-date theory; economy is small scale; and R&D efforts lead nowhere. Fixing this requires investing more and consuming less; stopping trying to pick sunrise winners but rather back existing winners; focusing on creating an environment in which market solutions will work (through tax reform and competition policy). Driving exports into trade surpluses would improve situation - as has been done by Asian Tigers in 1980s and 1990s. Firms would no longer be constrained by small size of domestic market. Trade surpluses would increase $A value and make imports cheaper. Achieving this requires large increase in savings to invest, to build not only technology but also brands, sales and distribution channels and customer savvy needed to gain leadership position in those industries. This requires shift in focus from consumption to investment, from picking winners to backing existing winners, from ideological frolics in IR and education to core priorities such as skills and infrastructure. There is a need for a national economic strategy which is not just 'let the cards fall where they may'. Government should not pick winners, but back winners. There was an intention to close down support for wool industry - which is still a successful export, and emphasise something else where there are no customers, markets, brands or distribution channels. Fixing the strategy allows policy to be derived (for tax, competition policy, labour market, immigration). Australia's services industries have grown because they have natural protection - and have exploited their market power without involvement in exports. This is where competition policy should be applied. There is a difference between foreign investment that creates real jobs and export capacity, and that which is just a means of importing more effectively. To build export industries, they will need to be close to existing export industries. Australia gained strong position in export education, but this has not been developed - merely treated as a cash cow. Now others are waking up to opportunity. [There has been no encouragement to students to attend university - and in fact a disincentive in the form of HECS debts]. Increasing educational participation by one year typically increases GDP by 1%. It is impossible to have a strong economy that is not based on a fair society - though government suggests that there is a trade-off. Modern management texts (and capitalism) are all about investing in people. [Dysfunctional federalism has adversely affected the relationship between child care and pre-school education. The establishment of technical schools could have produced useful outcomes - eg if something like Skills Centres has been established. But technical school system that has been established will struggle to get off the ground. A minimum of 25,000 pa extra trained trades-persons are needed, but system will only delivery 7,000 by 2010. Arrangements could have been made to share equipment with firms who are losing orders due to lack of sophisticated equipment]. Reducing tariff barriers resulted in a major shift into ETMs - but support for this was dropped in 1996 and since then growth has fallen to zero. Jobs have to be created in things that are connected to customers. Universities need to produce great minds and great ideas, but this is hard to grow unless it is related to existing strong industries. There is a need to rejuvenate institutions within society (eg political parties, chambers of commerce) to develop new leadership (Thornley E. 'Innovation at the Workplace', Big Ideas, Radio National, 15/5/05)
Comments: Trade deal with US will force firms to lift their game. That is the main benefit. Scale is not the only basis for boosting productivity - and is unlikely to be the basis that Australian firms can rely on. Flexibility is a key to productivity - but there is no evidence that making employees operate as individuals is the most effective path to overall organisational flexibility. It is likely, for example, to undermine teamwork.
Export surpluses of Asian tigers are driven by losses in their financial system (see PRE 1.2). Japan has had huge export surplus in 1990s and stagnant economy - because of financial system problems. Suggestions here amount to something like a mercantilist economic strategy (ie economic success is achieved when one stockpiles a large pile of 'treasure' or has a strong economic supply capacity). This view dominated in Europe in 18th? century before Adam Smith's 'wealth of nations' pointed out that an integrated system of supply and demand was the key to real strength.
National economic strategy should not be picked politically. The idea of backing winners was advanced at one stage (in 1970s or 1980s) in Canada - but Canada has not gotten anywhere. I have a document somewhere that both advocates and critiques this proposal.
Problems in skills development could be a result of character of TAFEs - which reduces responsiveness because they are mainly supplier driven. European models involve arrangements which are far more responsive to industry. Part of the problem in Australia is probably the lack of institutional capacity by which industries can even work out what their future needs are likely to be.
POST 2.2: Proposals exist to rewrite Australia's IR laws. The PM argues that this will create jobs, lift productivity and wages. However economy has been growing strongly, with low industrial disputes. There are more important economic priorities. ACTU will contest changes on basis of democratic values and belief in fairness. New deal emerged in US in 1930s because people in Europe were turning to extreme right or left because of Depression - which threatened democracy. Public spending was targeted to create jobs, and labour laws were introduced. This concept was embodied in ILO in 1948-49. Australia had similar arrangements before the US New deal. The award system and union representation were means to protect fairness in 20th century. These rights and democratic traditions are threatened by proposed IR changes. They would benefit business at expense of workers. Protection against unfair dismissal would be lost by many. Also rules for agreement making in every workplace would be changed. There would be only five minimum conditions (wages; 2 weeks leave; sick leave; hours of work and unpaid parental leave). Many rights would be lost. AWA's would threaten take home pay - because employees do not have equal bargaining power. Employees wishing to bargain collectively would be discriminated against. US style working poor are likely to emerge under these arrangements. Minimum wages will fall. In construction industry many normal union activities may be unlawful. Government says that business can be trusted to do the right thing. But workers rights must be legally enforceable, not dependent on charity. There is no economic case for new IR approach. IR has not held economy back eg Australia has grown faster than US and OECD average. Profits are up 70% in real terms since 1991. Australia has risen to 11th in OECD table for GDP / capita.. Government is using IR to draw attention away from its failure to develop / modernise economy. Skill shortages have been neglected - leading to a capacity constraint. Instead of a response, student unionism and collective bargaining in tertiary education have been attacked. Business investment in R&D is important - but has grown at 2.6% since 1996 compared with 11.4% pa over previous decade. Unless this (which is even worse in manufacturing) is corrected there will be slow growth in high value exports, generation of high skill jobs and sluggish performance in tradeable goods. There is also under-investment in social and economic infrastructure - as shown by study by Australian Council of Infrastructure Development and Econtech. A $24bn backlog was identified with a potential increase in GDP of 1% pa (and exports of 2% pa) if investments were made. Money has been found for election handouts but not for infrastructure. Export performance has been poor, and foreign debt has grown to $425bn. Growth seems unsustainable, because it has relied heavily on household debt and consumption. Population aging is a problem. Australia needs investment- led reform of economy focussed on supply side to produce the next productivity revolution. ACTU is looking at collective bargaining rights in other advanced economies as prospective model for Australia (Combet G. 'Industrial relations: Employee Rights and the Economy', ACTU, Speech to national Press Club, 6/7/05)
Comment: Arguments in relation to IR proposals could be based also on the fact that individual agreements are unlikely to be the best path to organizational flexibility (because competition could slow organizational learning). The whole problem is that neither the proponents nor opponents of IR change have done any serious work to identify what sorts of models might work to ensure both organizational flexibility and fair distribution of business income.
The real capacity constraint on Australia's economy is neither infrastructure nor skills - which are merely inputs to economy. The main constraint is on the ability of the economy to transform those inputs into economic value added (ie the problem is in productivity). There is seen to be a need for more low grade inputs so as to increase production / income to match spending. The real requirement is to use inputs that are available more productively. Creating a serious innovation capability is one way in which this could be achieved.
Lack of infrastructure investment by federal government reflects its unrealistic assumption that this can be achieved by private sector if only an appropriate regulatory regime can be established.
It is very doubtful that an investment-led reform of economy would be appropriate - because this would not achieve the necessary change in the relationship between inputs and value added.
POST 2.3: Change and improvement is ongoing in agriculture. Farmers now recognise the need to look after natural resources, maintain soil fertility, use water carefully and gain biological advantages of rotation farming. The difference between past and present agriculture is research and translating this into farming practice. Research will continue to find better management techniques and products to meet increasingly differentiated specifications of global markets. Improvement is critically needed because of growing world population (which requires more food, and greater environmental empathy) and need for greater nutritional quality. Biological research has allowed understanding of workings of genes - and how plants function in their environments at molecular / cellular level. This is critical to crop performance and food production. Understanding genes has allowed reduced use of pesticides for cotton. These changes support a large industry. To be competitive there is a need to keep moving - pausing will kill an industry. The imperative to improve applies to other crops - eg canola where transgenetic technology is being considered (but is currently banned). This gives Canadian producers considerable advantages. The industry as a whole , not just individual growers needs to be involved in changing this - as occurred in the case of cotton where the Australian Cotton Growers research Association interacted with both researchers and government regulatory bodies. The canola industry could do the same. In the case of cereal crops, breeders have enormous challenges ahead of them to meet challenges of diseases and environmental stress. This may require some transgenetic technologies. One challenge to cereal industry where transgenetic technology will be critical relates to issue of public health. Diseases of western society are consequence of lifestyle changes - including diet. There are many diet related diseases. Changes to food can guard against these. Diabetes could be reduced if cereals had a low glycemic index. Cereal grains (which are not far removed from wild plants) could be modified. For example, a change to one gene in barley has resulted in a lower glycemic index. Starch, proteins, fatty acids and antioxidants could also be adjusted to better fit human nutritional requirements. Plants can now be taught to make omega 3 fatty acids that are now mainly gained from fish - which they in turn get from ocean algae. Genes can be taken from these to produce omega 3 oils that are important for cardiovascular and other body systems. Food will increasingly be a component of preventative health systems. Genetically modified foods should be as safe as they now consumed. There are 80m ha of GM crops worldwide, and Australian producers face increased challenges from imports. Consumers won't value products just because they are grown with less use of pesticides - but only when there are direct health benefits. The same applies to export markets - where there is a need to ensure that whole business chain is integrated. There is a need for effective management, In the case of cotton the transgenetics were a big success because farmers adopted good management protocols. Biotechnology has already led to agricultural successes and will lead to more. For biotechnology, as with any other business system, there is a need for a realistic business plan. There is also a need for effective communication between community, business and Parliamentary decision makers - so benefits and costs can be assessed and decisions made on the basis of evidence (Peacock J. 'Tomorrow's agriculture - we need to work things out', National press Club Address, 27/7/05)
Comments: Agriculture is now far better organised than it was (ie able to address vertical integration issues). None-the-less it faces immense challenges and is losing market share. The proposals that biotechnology can improve food is undoubtedly true in parts, but contains risks. Human biological and food biology systems are too complex for understanding. Experience suggests that 'Good ideas' can have unforeseeable adverse side effects. This applies to all complex systems. Thus there is a counter emphasis on natural foods and alternative ideas about science (some of which seem to be central to ideology of Islamist extremists, as well as to greenies). Article suggests the need for good management - but does not say what this would mean.
Innovation is equally important to viability of resource industries and globally focused SME - for which institutional capabilities are much weaker than for agribusiness
POST 3.1: Continued declines in enrolments in sciences and mathematics at secondary and tertiary level coupled with few science graduates selecting a teaching career mean that there is a need for rigorous workplace planning for teaching of sciences in schools (Brown T., etal 'Who's teaching science?', Australian College of Educators, May 2005)
Comment: Recognition of the need for many elements in the supply chain to be right within education institutions is of value. However the supply chain is not confined to education institutions and thus can't be controlled entirely internally. The best way to boost the supply chain for science graduates is to increase the demand for them by (a) enabling community and business to perceive the opportunities and (b) enabling economy to use them more productively.
POST 3.2: Maths students in some states are missing out on learning core skills, while others are being taught too late according to Australian Mathematical Sciences Institute. There is a lack of consistency in curriculum and assessment between the states (Slattery L and Taylor P 'States in disarray on maths teaching', A, 23/6/05)
Comment: If Queensland is anything to go on, the states are in disarray on everything. The dysfunctions that are publicly recognised in Queensland Health are pervasive across the whole public sector. The problem arose from the elimination of accumulated knowledge and skill bases in public services (whose significance was not appreciated) in the process of politically driven and politically-self-interested 'reform'. This is the reality of the embryonic 'banana republic'. This is the core of (a) the absence of further attempts to develop progressive policies (because much of this traditionally derived from public services) and of (b) the fact that future economic reform is conceived as simply requiring a continuation / tidying up of efforts over the past 2 decades.
POST 3.3 Maths lessons are being infiltrated by sociologists who are replacing the teaching of fundamentals with a vague 'learning by experience' approach. Mathematical Sciences Institute argued that this method (introduced in WA under banner of outcomes based education) was contributing to nationwide decline in maths standards. Social scientists have frozen discipline specialists and good maths teachers out of the curriculum development process. Curriculum Council of WA argues that new system is based on finding out what children already know and building on that (Slattery L 'Fun misses maths essentials', A, 7/8/05)
Comment: The problem here is that there are many different ideas being developed, and the political system has no way to distinguish the trendy from the substantial.
POST 3.4: An aging population and declining secondary school rolls matched by demand for knowledge based work raises serious questions. Where can the necessary skills be found? Scholarships for maths. Establish tertiary learning centres offering introductory maths, chemistry and physics followed by bridging course to enable students to proceed with technological courses. Extension of courses leading to technological awards. There is a need to shift from resource to brain-based exports. National flow statistics to be generated (Implications, Certech, ????)
Comment: Even more important than increasing the supply of such trained people is to lift the ability of the economy to use them productively - as otherwise they will be under-employed or contribute to brain drain
POST 4: Almost 50% of men end their working lives being dumped from their jobs. Claims about smooth work to retirement transitions are not the reality for many. Those out of the workforce after 55 struggle to re-enter and face reduced pay. The Federal Government is pushing the idea of older people working - but Older people Speak Out lobby group says this will require changes in attitudes. A huge pool of talent remains unused (Passmore D. 'Retire? The sack is more likely', SM, 17/7/05)
Comment: The talent pool associated with older workers may be unemployable because they are a threat to the credibility of younger managers with less knowledge and experience. In government at least and in Queensland at least, connections tend to be more important in advancement now than competency.
POST 5.1: ALP is economically illiterate and culturally left-wing and middle Australia is not interested. ALP had success under liberal policies under Hawke as PM. Successors have pursued various forms of political correctness and re-regulation. Electorate knows that its prosperity depends on continuing liberal economic reform. Unions have opposed liberalization. Because of rise of inner-city residential Left ALP holds all seats with universities. This section of community is also powerful in university humanities faculties - which is often seen to have agenda derived from 1960s and 1970s (eg anti-male feminism; anti-Americanism; cultural relativism; postmodernism; ethnic separatism; sexual liberation; national and personal guilt) - which has little working class support. They also oppose economic liberalism that would generate growth - partly because they are now employed in remaining protected, state subsidized sectors (eg universities, state education systems, welfare and health sectors, arts and media). Federal ALP votes now depend heavily on people of non-English speaking background - which has influenced policies on multiculturalism, migration and candidate selection - and other seats are lost because of this (especially given war on terror). ALP is a party of sectional interests. To overcome this ALP needs to become more attuned to modern liberal economy and society. This could have happened under Latham. (Catley B 'The ALP needs to become a more liberal party', A, 1/8/05)
POST 5.2 BCA and Access Economics suggest that Australia could be third richest country in 20 years given new structural changes. This would allow 30% cut in taxes, and still meet demands on budget of aging population. This can be achieved by building on existing reforms in areas such as increasing productivity, workforce participation, better infrastructure planning, more education and training investment and more migration. Unless further changes are made report argues that Australia could slip to 18th place. Changes to improve workforce participation include: welfare-work changes; more flexible workforce,; older people and those with disabilities to work more; higher eligibility requirements for pension and superannuation benefits; education and training (Dodson L., 'Economy could be world's third richest', SMH, 7/8/05)
Comment: The mainstream view of Australia's future reform agenda involves a continuation and elaboration of changes over the past 20 years which have led to unbalanced economic success and severe adverse side effects. They clearly need reconsideration (see [Draft of] Australia's Strategic Positioning)
OTHER
Australia has many advantages. Yet there is a spirit of increasing divisiveness - which is particularly illustrated in youth unemployment. Also job prospects of unemployed over 50 are bleak. The problem is a lack of vision about future -which results in numerous division in society. There is an entrenched attitude of not doing new things. Negative and divisive behaviour may be the result of western capitalism. This results in the formation of interest groups which seek to promote own position. The human rights aspects of democratic Westminster tradition may have contributed to this. There is a need for fairer distribution of wealth, but an even greater need to increase wealth creation. It is of concern that over 20 years there has not been sufficient collaboration and coordination to add value to resources. 60% of export earnings of some countries are in brain based industries. In Australia it is about 5%. There is a need for attention to: macro-economic issues; micro-economy; innovation and invention; and transnational world economy. There is a vital link between education, technology and economic competitiveness. There is a need for attention to (a) effect of technological innovation on various sectors to identify the education and training effort needed. Warnings have been given about this. There is a need for a wider range of options to be available to those proceeding to tertiary education. Political leaders too often play to media audience in order to get competitive advantage. Australia has not developed an ethic of shared responsibility and interdependence that places moral responsibility on all to work together for common good. Political, social and economic institutions need to make common cause and work together. This can't be done through committees - which seldom achieve much. The segmentation of functions is a problem. In the past men saw life under a sovereign God as one whole and indivisible. There was a need for development of secular politics - which has segmented society. There is a requirement for all, irrespective of culture and class, to share knowledge, skills and wealth in common good. Loss of communitarian ethic (and of shared values) is a serious limitation. Religion's central function is to offer a sense of unity, cohesiveness and purpose to life. As a nation Australia must become much clearer about overall goals and directions and about faith and ethical values that are the basis of our common calling. All must work together to become a just, sustainable, participatory and efficient country. The establishment of an Australian Enterprise Network is envisaged to address this. ('Hollingworth P., 'Country and Calling', 16/9/1992)
Comment: Divisiveness is not solely due to capitalism. It is also due to political system. There is a need to distinguish between vertical groups (ie those with complementary capabilities) and horizontal groups (ie those with similar capabilities). A business is an example of a vertical group, while a union or business association are examples of horizontal groups. Capitalism requires competition / divisiveness in perusing own interests between different vertical groups, while interest group politics requires competition / divisiveness in perusing own interests between different horizontal groups. Both are needed to get balance.
Lack of collaboration / coordination was mentioned under PRE 7.
Ideas in this about basis for creation of communitarian ethic are of value - but hard to put into practice because of fragmented value systems. It seems possible that PH gained the job as GG because PM liked the general ideas in 'Country and Calling' and hoped to hear them advanced.
Do the capabilities exist to generate the technological skills required by a changed world economy - one in which material living standards and social / welfare goals depend not on material and energy intensive production, but on knowledge and technology intensive activities. For years external and internal deficits have been accumulating. About 10% of the labour force need to contribute in future in ways they currently do not. Global economic shifts (to knowledge intensive production; to exports by traditional food importers; towards rapid growth in non-farm production; to capital movements rather than trade) impact on NZ. There is thus a need to do more than adapt skills appropriate to traditional industries (Massey Uni, CIT, Industries Development Commission' The Supply of Technological Skills to a Changing Economy', Oct 1986)
Comment: The pressure for economic change is the main basis for emphasis on market mechanisms - because they are seen to be effective in managing this. If one wishes to develop arguments for the need for government or anyone else to do anything about economic change, then there is a need to show the ways in which markets fail to properly do cope with change. Suggestions about inadequacies in market mechanisms are the subject of Defects in Economic Tactics, Strategy and Outcomes.
NZ is facing economic change - and there is a need for new skills. The document traces student flows from Form 3 through to tertiary education. It deals with: overall demographic data that influences secondary and tertiary education; decline in education participation at higher levels; shows subject spread by sex and type of school; shows maths / science subjects similarly; indicates trends in subject selection with implications for tertiary education; provides information on graduation patterns, tertiary intakes and output of technological skills. It presents facts rather than opinions ('The Secondary -tertiary student flow 1979-1986 and the implications for a changing economy', Certech, 1987)
Comment: This seems to be the foundation for a 'strategic planning' methodology which tended to fall out of favour for reasons outlined in Strategy Development in Business and Government. The ability to understand what would drive changes in the environment became as important in appropriate strategic positioning as hard data.
An independent, university based Public Policy Research Foundation would be established in partnership with the private sector to reinvigorate and champion balanced public policy debate by providing independent and objective research on the need, scope and potential for the ongoing modernization of the Australian economy (Withers G., 'Public Policy Research Foundation at ANU: A Proposal', August 2002)
('Proposal for a Queensland Enterprise Network', )