In Vanity Fair in 2012 Professor Joseph Stiglitz reflected on the prolonged economic downturn in the United States, comparing it with the Great Depression. He argued that in both cases, the origins lay not in finance, but in the dislocation that arises from a fundamental shift in the nature of the ‘real economy’.
“The problem today is the so-called real economy. It’s a problem rooted in the kinds of jobs we have, the kind we need, and the kind we’re losing, and rooted as well in the kind of workers we want and the kind we don’t know what to do with. The real economy has been in a state of wrenching transition for decades, and its dislocations have never been squarely faced.”
Despite our habit of referring to the continuing global recession as a global “financial crisis” – and putting it in the past tense – Australians are familiar with this problem.
In the last six months we’ve seen the near collapse of vehicle manufacturing in Australia, and significant pressure on other manufacturers like SPC. Print and electronic media businesses regularly report job losses, while in the service sectors, ‘middle class jobs’ in engineering, accounting and law are exposed to global competition from skilled labour in emerging economies. Just as they are in the United States, globalisation and technological change are transforming our economy.
Daily news bulletins focus on the macro indicators for economic health. In our suburbs and towns the more pressing question is about the practical shape of the real economy – where will the jobs come from?
So I wasn’t surprised that this was one of the first questions for Stiglitz at the Chifley Research Centre roundtable last month in Canberra.
In answering, Stiglitz pointed to the role of government in economic transition. He argued for an explicit examination of industry policy, noting that infrastructure spending decisions, public investment in human capital, and regulatory decisions inevitably combine to support one sector over another. The real question, as he put it, is whether you favour a certain type of economic development by accident, or by design. In economic transition – government matters.
It’s a perspective that mirrors a sharp divide between Labor and the conservative parties.
The conservative response to the manufacturing job losses earlier this year was not only cold, it was typical of an ideological blindness to the real opportunities for government policy to squarely face those dislocations Stiglitz has described and we all see and feel.
As Queensland LNP Senator Matthew Canavan told reporters earlier this month:
“The way we’re going to make a car in the future is we’re going to grow wheat, we’re going to grow cotton, we’re going to grow beef, we’re going to put in on a boat and wave goodbye to it. Then magically another boat will come in the other direction with a car on it, probably from Japan.”
That’s not just a former chief of staff to Barnaby Joyce talking – that’s a former Director of the Productivity Commission talking. It’s rare to see such rigid, outmoded economic thinking expressed so clearly.
Labor has always imagined a more ambitious future for Australia’s economy than the conservatives.
In government, Labor rejuvenated a modern industry policy; the Prime Minister’s Manufacturing Taskforce drew on our best researchers and practitioners to drive new thinking about the respective roles of government and business in driving innovation and productivity. More broadly, the Asian Century White Paper consciously located Australia’s economic development in the context of our strategic, diplomatic and trading relationships.
Labor’s challenge in opposition is to maintain momentum on this agenda – building and refining our approach to developing contemporary, relevant industry policy to support Australian workers and industries through this period of transition.
To quote the PM’s Manufacturing Taskforce, “Australia’s future will be brighter with a broad-based national economy, built on more than a few industries in more than a few regions.”
Or as Stiglitz put it, in that same edition of Vanity Fair back in 2012: “The private sector by itself won’t, and can’t, undertake structural transformation of the magnitude needed. The only way it will happen is through government stimulus, designed not to preserve the old economy but to focus instead on creating a new one.”
IMAGE CREDIT: Australian Unions