Ford exits Manufacturing in Australia – If only government invested in Innovation and education not propping up dying industries.


Despite a self-identified status as a recovering economist I rarely comment on macro-economic issues in Australia. Even though I am Keynesian inclined, I have held long-term concerns over the nature of subsidy (by Liberal and Labor) into specific and typically imperfect sectors the Australian economy. The poster child for this is of course the auto manufacturing sector.

In the last 10 years, Holden (a subsidiary of General Motors) has received nearly $2Billion in support from the federal government, even in years when the Australian subsidiary paid back a profit to the US headquarters. The flawed strategy is compounded when you add to this amount money spent on Ford, Toyota, Mitsubishi and Nissan when it manufactured locally. It has come to a head today with the news of Ford shutting down manufacturing in Australia of vehicles with the loss of 1,500 direct jobs despite the history of being propped up by Canberra. (As an economist I realise that there is going to be a multiplier effect on the job loss and certain communities severely impacted. This is regrettable).  Clearly there has been much hand wringing, concerns over jobs and Australia’s status as a manufacturer. Most of it is a distraction. We do not manufacture commercial planes, enterprise PC’s, Televisions or I-Pads for that matter? We are also one of the 10 wealthiest economies in the world. (with the exact number depending on who you listen to)

Quite simply an economy, be it a town, city, state or nation, has to play to natural strengths now and in the future, not rely on past glory. In Australia, the opportunity is the natural resources sector, professional services, healthcare amongst other sectors, with the capability to provide value added services and outputs. This economy is where the focus must be, rather than past glories.

The bottom line is that the billions of dollars spent on subsidising industries that are a drain on the economy should have been invested firstly in job reskilling for affected workers, then in investment in education, and innovation. Instead of firms such as Atlassian, MicroMine, Cochlear being one-offs, we could have had an innovation based economy where Australian based, global game changers were the rule not the exception. One hopes that we can evolve to this sooner rather than later.

 

If you require further information, please contact Phil Hassey,  Founder capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology in emerging markets. Phil may be contacted by email below,

phil@capioit.com

About capioIT - Phil Hassey

capioIT is an advisory firm focused on helping organisations to understand emerging technology in emerging markets. CEO Phil Hassey established the company in 2010
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2 Responses to Ford exits Manufacturing in Australia – If only government invested in Innovation and education not propping up dying industries.

  1. Adam Jura says:

    Phil – good post.. do you think there’s any correlation between hand wringing and the degree of unionisation within these struggling industries? i.e. we only hear about manufacturing’s decline due to the vocal union representatives? Is it perhaps not just a case of industries such as auto feeling like victims, but unions in general as well? Would a non-unionised industry fade away more quietly?

    • Thanks Adam,
      It is interesting. Arguably the oldest and thereby typically most vulnerable jobs tend to have an organised labour angle, so Auto workers and Steel workers fit that criteria. They organised because they were low skilled and vulnerable. They disappeared because they were (relatively, and respectfully) low skilled and vulnerable. Protectionism is everywhere from Pharmacy Guilds, to the Auto workers union. Looking at other industries, traditional store front retail is disappearing in key sectors, and the workers have reasonable levels of unionism, so it is not always the case. The key might be that politicians of both parties tend to like to be seen photographed with workers who can have sparks in the background rather than servers. Society lags in the perception of what really matters in an economy. In my academic youth I studied the steel declines of Wollongong and Newcastle. They had actually slowly reduced before they disappeared, so the broader society over stated the impact of the decline as they only saw the headlines.

      I hope it makes sense, I am talking economic theory on a Friday afternoon …..
      To be fair the National Party started in effect as a farmers union as well, so it is not always a left/right scenario.

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