On April 14, the Knowledge
Nation 2016 Summit was convened in Sydney, involving leaders in science,
technology and innovation, to consider how Australian society may be successfully
transformed into a prosperous, globally competitive, knowledge-based economy. Elena
Douglas, Convenor of the Summit, outlined the nature and urgency of this
challenge in The Australian (‘Yes, we
have innovation skills, but we must foster entrepreneurialism’, April 14, p.
12).
Although Elena Douglas highlights a number of home truths
about the Australian economy and business culture which obstruct economic
revitalisation, there are also a number of significant factors which she does
not discuss, but which are central to any serious attempt to foster such a
transition.
Acknowledging the quickening pace of technological
innovation in the world economy, it is argued that Australia needs to become an
‘agile’, innovative economy, which will require a new sense of purpose and
collaboration between government, business and educational institutions. Cultural
obstacles are identified – lack of ambition (the ‘lucky country disease’), and a
business culture too focussed on short-term return.
Much of this criticism is valid particularly in relation
to an Australian business culture preoccupied with short-term economic return. A
longer-term view of the Australian economy and governance since the 1980s,
however, points to a number of other uncomfortable truths which need to be
faced up to by national leaders if any genuine progress towards economic and
cultural renewal is to be realised.
The neo-liberal orthodoxy which has dominated Australian
business and government thinking since the 1980s represents a major barrier to
economic innovation and renewal. Too great a reliance upon market processes
alone has resulted in the hollowing out of the Australian economy through the widespread
destruction of existing enterprises and a failure
to deliver new ones with higher technological sophistication and global
reach. That this failure has been met with calls for an
even greater reliance upon small government and deregulated market processes is
an impediment to national economic renewal. Basic lessons have not been learned.
At the same time, other economies in Pacific Asia have
modernised - developed new, globally oriented and knowledge-intensive
industries from relative economic backwardness and left Australia behind. We are
left with no alternative, but to import virtually all elaborately transformed
goods that we associate with our First World lifestyle. In return, for the most
part, we depend on mining and agriculture for export income. A key observation, however, is that these
economies – South Korea, Japan and China, have not engineered this success on
the basis of crude free-market principles, but coherent, mercantilist national strategies. These societies have not relied
upon ‘comparative advantage’ as determined by market forces, but have created their own advantage through
strong pro-active government, focussed government-business collaboration and an
unswerving sense of national purpose. Former US Assistant Secretary of Commerce,
Clyde Prestowitz, has highlighted this dilemma. The trade policies of the free
market West have become increasingly divorced from reality. The reality, he
argues, is a global economy where “roughly half the countries are more or less
free trade driven, while the other half are neo-mercantilist (Prestowitz,
2009).”
Furthermore, before there can be any paradigm shift in
investment priorities from short-term to strategic long-term innovation
outcomes, there has to be an honest recognition of the extent to which
Australian business elites have become dependent upon quick returns from crude,
low-level capital widening based on rapid population growth and city building. The
economic pie does get bigger, but the growth is largely ‘more of the same’,
doing what we do already, but on an ever larger scale; with declining GDP per capita.
So entrenched has this approach become that, in its 2015
Intergenerational Report, the Australian Treasury calculates that nearly half of Australia’s modest expected annual
economic growth to the year 2054-55 will be due to continued high population growth. It is worrying that the
Australian Treasury engaged in outright political deception in overemphasising
the negative implications of reducing population growth, while largely ignoring
the serious social and economic problems of high population growth.
It is simply muddle-headed to bemoan the Australian
business culture’s fixation on short-term financial gain and upon the domestic
market rather than global competitiveness, when the primary economic strategy of the Australian Government and the
Australian Treasury is to facilitate, encourage and reward such entrepreneurial
backwardness. Moreover, powerful business interests (retail, housing construction
and banking), which have benefited from this failed strategy continue to successfully
lobby government for its perpetuation.
Nevertheless, crude growth is politically seductive; it
has created an illusion of prosperity and even the illusion of good governance
– an economy that is ‘the envy of the world’. It is worrying that the Prime
Minister, Malcolm Turnbull, on his recent visit to China bragged about the
“remarkable resilience” of the Australian economy in context of the Global
Financial Crisis and its aftermath. The fact is that Australia faired
reasonably well through the GFC because of a mining boom propped up by Chinese
iron ore demand and reliance upon a high population growth capital widening
strategy. The reality is that, when the Chinese demand for Iron ore rapidly
subsided, the Australian economy was exposed as ill-equipped and underdeveloped
in the global high-tech stakes. In terms of economic modernisation, high
population growth and city building is now exposed as a road to nowhere.
The Federal Government’s response to this is woefully
inadequate. Instead of a robust hands-on approach by government, as practiced
by our successful regional neighbours, the Federal Minister for Industry,
Innovation and Science, Christopher Pyne’s key initiatives for correcting the
situation have been to offer tax breaks for start-up firms, to flag the
creation of a special visa to attract smart minds from overseas and to reprimand
those who suggest that the Australian Government might spend more on public
research and development. A whole hearted commitment to Australia paying for
and generating its own human capital seems to be beyond the Minister’s and the
Government’s expectations.
Australia is now behind the eight ball in the economic
modernisation stakes. The 1990s and the recent mining boom have been an era of
lost opportunity for Australia. Until our economic and political elites can
face up to this, talk fests and any amount of hand wringing about Australia’s
falling position in global knowledge economy rankings will likely fail to rectify
the situation.
The contradictions are staggering. While the Federal
Government insists that the public research sector has to pay its own way
through stronger links with private industry, its continuing commitment to high
population and crude growth sees a disproportionate share of Australia’s
limited wealth being diverted into urban infrastructure and other spending in
our ballooning capital cities.