Friday, April 15, 2016

Australian Business Culture Doomed to Remain in the Stone Age?

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.

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