Car industry subsidies in perspective

ScreenHunter_26 Apr. 10 20.33

Cross-posted from The Conversation

Holden’s announcement of job cuts on Monday demonstrates the dual impacts of the strong Australian dollar and import penetration upon the beleaguered domestic automotive industry.

400 jobs will go in Adelaide, with 100 in Victoria cut as well.

A myopic view of the industry is that it is merely about vehicles. However, local manufacturers Toyota, Ford, and Holden are only one part of a much broader automotive components manufacturing industry,

Holden has received $1.8 billion in industry assistance in the last 10 years. That works out at about $8.10 for every Australian man, woman and child, assuming a population of around 22 million.

An informal poll in The Age indicates that as many as 75% of readers are opposed to the maintenance of government subsidies and bail-outs to the industry. It’s clear that any parochialism or sentimental attachment to locally made cars is a relic of the distant past.

Yes, I am fully aware of ERP, the effective rate of protection, which is a complex multiplier based upon the direct and indirect flow-through costs of tariffs and other forms of protection for a given industry sector.

However, as Kim Carr noted recently, the industry, cumulatively, received subsidies amounting to less than $18 per person over the last decade. So it cost you, the long-suffering Australian taxpayer, the princely sum of $1.80 per annum to prevent the collapse of plants like Elizabeth, Fishermans Bend, Altona, Geelong and Broadmeadows.

But the flat-earth policies of the free-trade think tanks, who opine that subsidies should be removed at all costs, invariably have no solutions to the systematic deindustrialisation and large-scale unemployment their prescriptions will inevitably bring. (A solid counter-argument to this perspective is advanced by Kalfa and Gollan here.)

These “free-traders” ignore the deep asymmetries wrought by industrial subsidies that persist throughout the rest of the world economy. They propagate the Ricardian fallacy that whatever cannot be produced efficiently locally should be imported.

Imports, in this case, of subsidised cars.

You. Are. Subsidised.

Think this $18-per-capita car subsidy is too much? Think again.

You — yes, you — subsidise the banks to the tune of $763 per annum, plus all the fees and charges they generously impose upon you. Not quite the chunk of change ($83 billion) the US government affords its banks in subsidies, but still.

And the mining industry doesn’t have clean hands either. They get at least $4 billion per annum. Queensland alone spends $1.4 billion in subsidies.

Let’s be clear about this: virtually every industry in Australia is subsidised, directly or indirectly, via government hand-outs.

We’ll try a little quiz first. Tick any box that applies to you:

Your child care.

Your private (and public) health insurance.

Your wheat. (The Australian Wheat Board runs a single desk that avoids a genuinely free market in wheat export sales. And does deals with the late-lamented Saddam, occasionally.)

Your private schools.

Your universities.

Your accountant.

Your private-sector big law firm, which would require oxygen if starved of government contracts. A Victorian government-commissioned report (by Boston Consulting) notes that, “up until now the provision of legal services has largely been an unsupervised feeding trough for law firms.” (It’s now a supervised feeding trough.)

Your National Broadband Network. (My telecoms engineering friends are still giggling with delight at the mere thought of the NBN and have all ordered new 7-Series BMWs.)

Your first home.

Your nursing home.

Your negative gearing.

Your ABC.

My salary.

Your salary.

Your superannuation tax breaks.

Actors and the arts in general (don’t me get started; I’ll end up sounding like Jack Hibberd).

Corporate welfare.

Don’t kid yourself if you’re in business. Tax breaks infiltrate every part of the scaly Australian subsidy serpent. Virtually every business input is tax deductible. For example, that “company” car you drive around at weekends? The “home office” with a chunk of the domestic mortgage on it as a business expense? If you’re not doing this, then you’re paying far too much tax.

True, sectors like dairy have very low subsidies (the second-lowest in the world). But don’t make the mistake of thinking you didn’t pay for dairy industry rationalisation: you did.

From 1995, under the National Competition Policy (NCP), taxpayers funded billions in rationalisation across a range of industry sectors. One of the objectives of the NCP was to drive Queensland dairy farmers off the land, compensate them with a fistful of dollars, and hand the dairy industry over to Victorian dairy farmers, who then have their teats sucked dry as the supermarkets screw them on milk prices to the point of bankruptcy. Good to see the ACCC doing such a fine job regulating predatory behaviour.

Unless you have no children, live in a cave, avoid Weet-Bix, The Marriage of Figaro, and Dimboola, while consuming only dairy products, You. Are. Subsidised.

No guru. No method.

I am not in any sense defending the poor business decisions by the industry, or the incompetent government policy that has prevailed since John McEwan was Trade and Industry minister. Federal and state governments locked themselves permanently into a system of auto industry subsidies and protection from 1948. Whitlam slashed tariffs across the board, but delivered no industry plan. John Button rationalised the industry, but set Soviet-style production quotas and sought no innovation. Howard, Rudd and Gillard merely trod water.

The reason the industry failed to innovate behind high tariff walls was because it catered virtually exclusively for the domestic market for the first few decades of its existence. Governments were equally to blame as they did not attach conditionality to the complex system of tariffs and subsidies that could have compelled the industry to invest in new technologies or truly innovative products.

In the 1970s, Ralph Sarich’s noteworthy Orbital engine, while lauded, never took off. Sarich nevertheless developed new engine technologies, inking licensing agreements with GM and VW. Sarich ultimately transformed Oribtal into a billion-dollar company on the New York Stock Exchange. Orbital products are now utilised by one of China’s major auto firms.

Except that Sarich didn’t achieve this in Australia. He had to go offshore. No one was interested, even though Sarich was famously parochial. In 1989, the federal government offered him $16.5 million to keep Orbital in Australia. Too little, too late.

Real jobs or McJobs?

Manufacturing provides stable wages and working conditions across a range of industry sectors (some 2009 and 2011 statistics are here and here). It also employs around 1 million workers directly, contributes almost 10% of GDP, and accounts for around one third of exports. Male workers occupy approximately 75% of manufacturing jobs. Manufacturing careers are often long-lived; workers may be employed by, say, Holden or Ford for 20 or 30 years.

But when deindustrialisation hollows out manufacturing and downsizing occurs, the following problems emerge.

First, how do you retrain and redeploy workers aged 40–55 to compete effectively in alternative labour markets? Ageism is rife throughout the Australian jobs market. And retraining – even if it works – takes real time. And time is not on some workers’ sides.

Moreover, any retraining costs invariably fall upon government, meaning taxpayers are forced to shell out in any case. Not to mention the inevitable social security costs associated with the fallout from deindustrialisation.

Second, what industries will replace labour-intensive heavy industry in Geelong, Elizabeth and other manufacturing hubs throughout Australia?

Third, Australian manufacturing employment still dwarfs mining employment, although the gap has narrowed. Mining will not take up the slack, nor is it geared to absorb the existing automotive industry skills base.

Fourth, the auto components industry manufactures parts for imported (as well as local) products. However, they achieve scale economies largely through supplying the downstream car-makers, without which it is unlikely most small and medium auto components firms would be able to derive sufficient revenue streams in the absence of volume production for particular models (Falcon, Commodore, Camry). In other words, they need local volume in order to be serious about export-geared production.

Fifth, it is inefficient to waste the considerable investments, accumulated over decades, in the skills and training regimes embedded in the automotive, materials and production engineering sectors. Dumping this skills base makes no sense; adopting adaptation strategies for an existing industry is the logical path.

The industry’s problems are not entirely of their own making. The high Australian dollar exchange rate; the free-trade agreement with Thailand in 2007; weak world demand, combined with the economics of surplus capacity in the global automotive industry, where there are over 30 million units of surplus production, have all contributed to the downsizing of the industry. Essentially, the industry has become a victim of the law of diminishing returns: despite increased subsidies, jobs in the sector have decreased in rough correlation with outputs. In other words, neither jobs nor the industry will be saved via incremental productivity gains.

Roads to somewhere?

Perhaps we should look to Beijing for guidance. After all, that’s where virtually the entire federal cabinet is currently.

China is looking at subsidizing electric and hybrid cars (while filing a case against the EU in the WTO, designed, cleverly, to stop Europe from subsidizing high-value green technologies, while China plays protectionist catch-up).

The Germans are also looking at electric car subsidies. The Germans also subsidize their car industry to the tune of about $US95 per capita. A far cry from Australia’s $AUD18. Not quite the $US260 the Americans pay per head.

Neither the Chinese nor the Germans are stupid. They know their auto industries are strategically important to their economic present and future. I won’t regurgitate the arguments concerning the security of the industrial base, the skills base and the jobs base, as I canvassed them here in 2012.

Just five years ago, the Holden engine plant at Fishermans Bend, Victora, was scheduled for closure following the cessation of Family II engine production. However, new investment and government assistance ensured the plant’s survival as it was re-geared to produce the HF V6 Alloytec engine. But a lack of local and global demand has also compelled reductions in output at the Fishermans Bend plant, leading to this week’s job cuts.

Australia has first-rate engineers and builds world-quality suspension and braking systems, develops advanced composites and innovative alloy technologies.

Australia also builds second-rate cars. It has a third-rate managerial class and fourth-rate governments.

It has the knowledge and capabilities to develop world-class next-generation electric and hybrid technologies. Even if Australia specialises solely in the export of high value-added components to the global automotive industry, rather than building complete vehicles, this is the preferable road to travel, rather than the gradual unravelling of an entire industry that is one of the central components of the country’s manufacturing base.

Better a small multitude of Ralph Sarichs than a plethora of unwanted cars.

Article by Remy Davison, Jean Monnet Chair in Politics and Economics at Monash University

Unconventional Economist


  1. We designed our economies, decades back, without even fully understanding the implications,to subsidise the weak – corporate and private – and sacrifice work; innovation and education, for imports and speculation. The choice of rectifying that will be too hard to make – until we are left with no other choice. The car makers are a symbolic token of sacrificial change, and no matter how regrettably, at least it’s a start.

  2. I was wondering what to make of the guy until the last few sentences, and I applaud heartily:

    “…..Australia has first-rate engineers and builds world-quality suspension and braking systems, develops advanced composites and innovative alloy technologies.

    Australia also builds second-rate cars. It has a third-rate managerial class and fourth-rate governments.

    It has the knowledge and capabilities to develop world-class next-generation electric and hybrid technologies. Even if Australia specialises solely in the export of high value-added components to the global automotive industry, rather than building complete vehicles, this is the preferable road to travel, rather than the gradual unravelling of an entire industry that is one of the central components of the country’s manufacturing base.

    Better a small multitude of Ralph Sarichs than a plethora of unwanted cars.”

    This is exactly what I have been trying to say myself on this subject. But I am not sure whether Remy Davison is trying to suggest that politicians should merely try to “pick new winners” instead of propping up old losers, or whether he understands the broader fiscal and regulatory framework that lets 1000 flowers bloom.

    I presume everyone is tired of me posting the same link to “America’s Growth Corridors” by Joel Kotkin. That is the lesson for Australia.

  3. Excerpts from what I said yesterday:

    While everyone in the USA is obsessing about their “Big Three”, they can’t even see the fact that they have been taking the rest of the world to the cleaners in innovation and manufacturing where it COUNTS: in the “waves of the future”.

    “…..The world now wakes up to iPhone communication, Amazon online buying, social networking on Facebook, Google Internet searches and writing and computing with Microsoft software. Why weren’t these innovations first developed in Japan, China or Germany — all wealthy industrial countries with large, well-educated and hard-working populations?…”

    Australia has almost all the POTENTIAL attributes that attract companies like Airbus to Southern USA. Australia is English speaking, with stable politics and strong institutions, close to Asia. It has desirable housing norms. It has (or should have) cheap resources. It most certainly SHOULD have the world’s cheapest urban land, and it should also have a quick and easy regulatory environment for anyone wanting to invest in a “tradables sector” activity. It should be exporting Hondas like the Southern USA is and could even be exporting jet airliners like the Southern USA is soon to be; if it adopted similar policies.

    • It should be exporting Hondas like the Southern USA

      Phil mate, can I have what you’re on?

      There is no frickin’ way we will be exporting Hondas (or anything else) with the dollar at $1.05. No amount of cheap urban land, deregulation, cheap resources, or driving down wages will change that fact.

      If you believe otherwise, you are more deluded than I thought.

      • “…..No amount of cheap urban land, deregulation, cheap resources, or driving down wages will change that fact….”

        So let’s not bother to try, then, huh? Let’s leave all 4 competitive disadvantages in place and not bother to change any of them.

        Way to go to “do the best you might”.

        • So let’s not bother to try, then, huh? Let’s leave all 4 competitive disadvantages in place…

          No, lets focus on the mother-of-all competitive disadvantages instead — the exchange rate — instead of deluding ourselves that urban planning restrictions are the source of all our troubles.

          • Why not “do everything”? Why deny the evidence that urban planning restrictions are a major source of economic decline?

      • Phil, maybe its time to put down the pipe.

        Sure Australia could be all the things you mention BUT it is not.

        Australia lacks both quantity and quality tech’s, both are absolutely necessary for advanced manufacturing.

        Look no further than our university systems and witness the declining numbers of home made science / engineers graduates. For a real shock try interviewing some of Oz’s best and brightest technical stars….the quantity is not there and the quality is sadly deteriorating.

        Even in sectors where Australia was a clear leader such as Solar cells (miles ahead of everyone else thanks to Martin Green’s work) that advantage was completely ****ed away. Australia’s best and brightest got the message and moved on to greener pastures.

        • Get positive….! We are talking long term agenda here. Southern USA was supposed to be ignorant hick territory too.

          BTW I agree about the disastrous collapse of science in the educational institutions. I read Quadrant Magazine every month so I know about this. This is something else that needs reversing, perhaps with private sector involvement.

          • Phil,
            I had no idea how bad the science / math education problems were in Australia till I came back to Australia to live.

            Do you have any idea how few high kids do the highest level Math or science for their HSC? How about the second highest level math?

            Now for a better question, what percentage of those kids that do have Asian lineage?

            Look up the statistics for students GRADUATING from high school with no math at all on their subject lists. the problem with this is that it effects the quantity section of the technically skilled employee base. How do you explain a PID (Proportional Integral Derivative) control system to someone that does not even know the simple math of getting a first derivative?

            BTW I’m not pessimistic by nature, actually I’m exactly e opposite. However I just spent over 2 years of my life and several hundred thousand dollars, believing I could be a vector to help bring about a technical change in Australia. Now I know I cant help, and I can’t help because very few Aussies believe they need help, so they probably dont.

            She’ll be right..No worries mate….

      • I should have said “has”. I mean from the point of view of international sectors looking for a good location for workforces. But the bulk of Aussie’s housing stock predates growth containment urban planning and is pretty good.

        I am of course arguing for it to be made affordable

      • “Look no further than our university systems and witness the declining numbers of home made science / engineers graduates.”

        Yep ChinaBob but you can go back further to Primary and secondary education and their teachers. We are decades away from any reasonable capacity. Really it’s impossible.
        The answers lie back in time.

        That’s not to say, with due respect for Phil’s sentiments, that we shouldn’t start damned well trying to do something!

  4. Good question about Geelong.

    This week we have Shell selling its Corio refinery. We know Ford departs circa 2016, we know Alcoa departs sometime within the next five years.

    The local council bangs on about the place not being a manufacturing centre any more with its largest employers being Barwon Health (the hospital) Deakin University and other government instrumentalities. Is it just me or is this just silly?

    • “Is it just me or is this just silly?”

      Well I ask myself that question every day but there aren’t many of us and we’re all mostly in MB or farmers…and farmers don’t count!

      • Believe it or not Flawse I come from ancestry which is largely composed of farmers and lawyers.

        The farmers are all socialists and environmentalists who vote Torynuff or Brown (for the quite plausible and ostensible reason that the ALParatchiks are comprised largely of socialists and environmentalists who are Union friendly, or that an ALParatchik government may open up the floodgates to riff raff from overseas who do a pretty good job of keeping menial labour rates low) and wonder why their political interests get represented the way they would like.

        The lawyers are all well dressed neo nazis who break both sides of the Torynuff Brown – ALParatchik divide but tend to see politics as a brand or investment vehicle decision, only being concerned about legislative change or policy to the extent that contribute to litigation demand. The idea that any policy would or wouldnt have intrinsic merit on administrative technical grounds generally strikes them as being exotic.

  5. Thankyou Remy Davison!

    Australia is teetering on the brink of disaster. If we let our manufacturing base collapse now, it will never come back. It’s not just the car makers, but all of the smaller upstream suppliers who need the additional volume that the cars provide to stay viable. Lose them and we make nothing at all.

    There is no doubt that some of our locally produced vehicles are not exactly setting the world on fire with forward looking, innovative design. But if this is to change, the industry needs to know that the government is behind them with policies that encourage investment and innovation.

    Subsidies are a small price to pay to buy that time to change

    • Look at the UK and look at the reasons it has steadily lost its manufacturing in spite of being a much more mature economy. Alan W Evans of the University of Reading pointed out recently that the UK enjoyed world-leading establishment of manufacturing in numerous sectors – until the 1947 Town and Country Planning Act. It has been all downhill from there.

      If we rationed the amount of land farming could take place on, drove up the cost of land for farming by several hundred percent, and insisted its workforces live at high density at double the cost, would that not render farming uncompetitive?

      The UK’s economy has survived as long as it has because it also has a long evolutionary history in the area of finance and media and services, that require less land and can sustain higher costs of it. Australia does not have this advantage.

      I have just seen a very interesting comparison of the UK’s export income versus Germany’s.

      Germany’s is
      76% “goods”
      12% “services”
      11% “receipts of income”.

      The UK’s is
      43% “goods”
      22% “services”
      32% “receipts of income”.

      Nice work if you can get it. Won’t you tell me how? It is far from certain that the Aussie economy has this kind of luxury.

      • And the UK tried for decades to throw public subsidy money at dying major industries. Did it keep them alive? Remember British Leyland?

        • Seriously?! The 1947 Town and Country Planning Act is the source of all woes in the UK manufacturing sector?

          Now I’ve heard everything.

          • Not necessarily “all woes” but certainly the big unidentified (by the mainstream) source of them. What do YOU say the problem is?

            Militant unionism (pre Thatcher) or breaking the militant unionism (Thatchernomics)?

            Managed exchange rates or floated exchange rates?

            A protected economy or an open economy?

            All factors BUT the urban planning system have been through phases of reform and change. Manufacturing in the UK has declined throughout.

            Other nations have lost some traditional manufacturing but gained new sectors, particularly as technology has advanced. But the McKinsey Institute in “Driving Productivity and Growth in the UK Economy” (1998) suggested that nothing like Silicon Valley could occur in the UK as long as its urban planning system remained as it is.

            There is no lack of academic research that supports what I am saying, particularly from Alan W. Evans and colleagues, and from the London School of Economics “Spatial Economics Research Centre”.

            Here is Alan W. Evans on the subject:

            “…Over the past thirty or forty years a number of studies have been published in which the authors have set out to try to explain the low rate of growth of the British economy. In seeking explanations the authors of these studies have paraded the usual
            suspects – obstructive trade unions, inferior management, lack of investment, inadequate training and education, failure to follow up innovations, perverse macroeconomic policies, and so on. In the past land use planning has not usually figured in this identity parade. This does not necessarily signify a lack of guilt, however, as we shall seek to demonstrate in this paper. The main reason would seem to be that the studies have been written by ‘mainstream’ economists, and, particularly in Britain, such economists are trained to regard national economies as aspatial points and to ignore space, distance, location, and land as unimportant.

            Nevertheless the neglect of land use planning is surprising. All the other possible suspects would deny any intention of slowing economic growth. The land use planning system in Britain, on the other hand, has been deliberately set up with the intention of constraining and restricting physical development.
            Moreover it is sometimes stated that this is LIKELY to constrain and restrict economic development……

            “…..The most usual position is, however, that economic growth and development is not the concern of town planners. Their concern is with achieving the best possible land use plan, even if this results in people’s real incomes being lower than they otherwise would be, for example with a land use plan which was not the best possible. Sometimes this too is made explicit…..

            “…..Given these statements and comments it still seems strange that the influence of town planning on economic growth has been generally ignored. After all
            land use planning would appear to be a figure lurking in the shadows with a smoking gun saying it wasn’t anything to do with them and anyway it was an
            accident and they didn’t mean to do it, and what’s all the fuss, it was only a scratch. The only explanation for planning’s omission from the line-up of usual suspects would seem to be that economists have concentrated their attention at the scene of the crime on the areas where the light is better, and have ignored the figure lurking in the shadows where they haven’t been trained to look.

            Recently, however, the position has changed a little. In the first place spatial economists such as myself (Evans, 1988) and Paul Cheshire and Stephen
            Sheppard (1989) have attempted to draw out the implicit relationships between land use planning and economic wellbeing. And, secondly, in 1998
            the McKinsey Global Institute published a report….”

  6. Made me reflect too..

    Now supporting Holden does not sound so bad.. out of that long list.. i am guilty as charged for “salary”, “healthcare”, “super”, “actors/arts”!

  7. Ok, if everyone is subsidized, where the money comes from for all those subsidies? Who works the most to pay for all subsidies? Is this a kind of a miracle, where everyone is subsidized, but no one pays more taxes than everyone else, so that everyone can get subsidies?

    • “Is this a kind of a miracle, where everyone is subsidized, but no one pays more taxes than everyone else, so that everyone can get subsidies?”

      Yep! In the final analysis the miracle providing all this is the CAD and accompanying rising external debt and the more or less total sale of all national resource assets and manufacturing chains to foreign interests.

    • rob barrattMEMBER

      Though there are arguments for the knock-on effect of benefits for associated industries and services, in the end it’s Newtons law of conservation of energy as applied to economics – A subsidy for one industry has an equal and opposite effect on others. Admitting that neither the product nor the management are up to it opens a whole lot of other questions such as whether anyone can manage or plan effectively in a highly unionised environment.

      Pure cloud cuckoo land. The slow destruction of our industry isn’t just due to the high dollar.

  8. Let the other countries subsidise their car manufacturers so we can buy their cheap subsidised cars.

    Let’s make things we don’t need to subsidise and protect.

    It’s a no-brainer.

    • “Let’s make things we don’t need to subsidise and protect”

      If you can honestly see an industrial/manufacturing business existing in such a curious vacuum then I gather you’ve never ever worked in manufacturing.

      The truth is that even the best engineers need 5 years training before they are ready to work alone, this hands-on industrial experience has to occur somewhere. In yesterday’s model it was part of the charter of places like Defense companies and Industrial giants (Holden ford etc) to provide industrial experience.

      The niche manufacturer always steals this already developed talent, it is silly to suggest that any niche startup can simultaneously develop its own talent. If it took that route it’d go broke long before it had a successful product.

      The startup needs the infrastructure and the existing companies usually benefit by deploying the ideas and products of innovative companies. It’s a symbiotic relationship…

        • Frankly, I’d draw the line somewhere back in the mid 90’s, that’s probably when the systems point of no return was crossed.
          High AUD and un-affordable housing are just the final straw’s.

          Think of the macroeconomic absurdity of closing down all manufacturing plants so that the land can be sold for more single family houses. Yet exactly this is happening all over Australia. The greatest asset on the books of Australia’s manufacturers is the land the buildings are sitting on. That about says it all!

          Last year I looked at buying a number of businesses in Australia. I must of looked at at least a dozen existing businesses that wanted to sell the product side of the business BUT maintain ownership of the land. As a result they wanted short lease contracts so that they could sell the land for urban development as soon as they were done with the paper work / approvals. What manufacturer, in their right mind, would invest in plant / machinery / automation when their land was leased on a 6 month contract?

          There are no doubt answers to your questions but I suspect they exist way back in time.

          • Surely there are better ways of supporting our manufacturing base than paying foreign-owned companies billions of dollars to make cars no-one wants to buy.

          • China-bob, your story is SOOOO telling.

            There’s the connection again – the dirt under the business’s buildings is the focus of all the business and investment planning these days, actually hiring and firing and making stuff is a mug’s game.

            Here’s another fun story. People in some parts of UK cities are grizzling that there is nowhere they can buy petrol any more, because petrol stations are getting bought up by developers of apartment buildings….. petrol station sites are more economically viable to turn into apartments than other “brownfields” sites…..

    • “Let’s make things we don’t need to subsidise and protect.”

      Certainly. That is where we need to be heading. However with the AUD at its current level, perfectly good manufacturers, engineers and designers are uncompetitive and are closing up shop at a scary rate. Once gone, they are gone for good.

      Then when (if) the dollar corrects, those who want to make “things we don’t need to subsidise and protect” will have none of the expertise or plant and equipment available locally to realise their goal.

      This is not a question of protecting car manufacturers, it’s a question of protecting our manufacturing base so that it can be improved and made competitive in the future.

  9. “Let’s make things we don’t need to subsidise and protect.”

    Yep!!! But let’s get this bloody dollar down to some sensible level where the economy is sustainable then let industries sort themselves out!
    We’s still need a lot of education in the Maths/Engineering/Sciences to plug the awful gap that’s been left by 30 years of neglect.

  10. Free_Market_Delusion

    So really in a nutshell the free market is subsidised by the government.

    Now I’m not actually proponent of a fully free market, I just don’t know to what level regulation and government intervention should start/stop.

    How have we got to a situation globally where very little can be done “viably” without subsidies?

    It would seem if for example if globally all car companies had subsidies removed it would be no longer economically viable to build cars? And yet so many own/need cars?

    In fact if subsidies were removed on everything very little would be viable on its own merits. Does this not suggest that there is some serious miss allocation of capital throughout the entire system?

    Now I’m not saying all of these industries couldn’t readjust but the transition would be extremely painful.

    Maybe its better to accept that having everything subsidised is just a the way the world is?

    Anyway I don’t have the answer just thinking out loud.

    • You are confusing “the free market” and “capitalism” with “capitalists”.

      Your first sentence should read, “capitalists are being subsidised by the government”.

      “Capitalists” as people, are not synonymous with the advocacy of free markets. Most of them will try on any sort of competition-limiting scheme with their politician friends. A “free market” grassroots political culture is a preventative of this, but this is now rare and little understood.

  11. Orright!! At least to me, This should be front page on every newspaper. I might be a bit biassed, but I’m more frustrated than anything else.

    I had the priviledge of making Sarich componentry in ~’96 & drove a test car with it installed. It was something to behold, a 1.2lt 2 stroke as powerful as a 1.8 & far lighter, set up in a ford laser, it went like the clappers for what it was, & drank bugger all. & considering it was a (thirsty) 2 stroke that was an even greater feat.

    We couldn’t understand why it was dead in the water. I’ll never forget one of our cluey (older boomer) engineers saying it was because it didn’t have corinthian columns on it, & they didn’t think it was a safe bet in a dying industry. Right there – He had an inkling into something that, at that time I couldn’t see (housing). He was into Micromedical (cum Ventracor – cum dust) because he could see that it worked! Where is it now? He had imagination, He did his dough. Shame he didn’t take his own subconscious advice & grab an extra house or two.

    Metalstorm? It worked devastatingly well. I read that their hearquarters were broken into by (suspected Chinese) spies to try & steal the plans! I do know it had to go the well trodden path & go OS to get any interest & $$. The contracts signed in America had clauses excluding other countries from getting it. Where is it now? I know of more than a few local scientists & engineers that did their dough – these guys aren’t mugs when it comes to the physics – or in making them. In this case, maybe the strategising from the US done it in? I don’t know. But where was the local marketing & funding – there’s a hole there!

    I’m currently contributing to a machine that is in recycling, & a green theme. Being in these sectors you’d have to think you’re onto a winner wouldn’t you? I’ve seen it work! We have some installed at various OS locations that have been working well for a few years & making their companies money.

    We’re having trouble raising enough capital to scale it into full production here (there are patents, but we’re still further developing IP, & understandably reluctant to have it made in a copy country). Our OS contacts can see the value in it & are thinking of passing the hat around to invest themselves as they can see it works. But locally? – no corinthian columns??? Crickets chirping!

    • Free_Market_Delusion

      Well you know its much easier to invest in property from the banks perspective 🙁

      That is a factor as well I think no motivation to “speculate” on innovation.

    • And if I wanna get on this recycling machine,as a small investor, how much do you have to go through for that to happen?

      Prospectus, PDS whatever, you go under trying to be legally compliant.

      Nuts to it all.

      • Yeah, That side I don’t know, I’ve always been on the tech side of these developments, that’s my corner! I do have an interest in seeing how the corporate side ticks. But when it comes to prospectus’s or PDS… I don’t know what they’ve got written up. Maybe I should sus it out for my own edification.

        At this stage I think it’s private (venture?) capital they need. There is an investment banker hovering around, but I don’t know what’s going on with him or just what his role is? A cattle prod might sort him out one way or the other – I’m wondering if he’s looking for a roof on it. It does all seem quite fluid just now!

        I know they are entertaining the view to floating in the future, but I don’t know their full vision or plans. I can’t see it being hugh infra $$ compared to other factories I’ve been involved in – it’s not that high tech to make & it’s not high volume like cars. It’s Niche, but it’s a niche that is there & can be expanded & branched out into other niches using variant models as they’re being developed!

        • Your comments definitely should be on there as a sidebar to Remy’s piece.

          I am sure your story could be repeated by many other frustrated Aussie innovators. Don’t you envy the many American counterparts who have made it into business success with their ideas?

          • I guess I’ve known of a few over the years. A lot of tradesmen have moved onto anywhere out of the field – shrinking pie & just no choice. From highly skilled & motivated to dejected taxi drivers – they don’t all find their feet again.

            Some innovators initially wen’t OS & came back because they couldn’t get the quality needed & other local workshops remained in business by fixing up the stuffups as they came back. I think some still get the rougher stuff done OS then finish it of back here where they know they can get the quality.

            Other innovators who believed in themselves & their product have gone OS & have basically come back as importers.

            Some here are still doing well enough if they’ve been lucky enough to find their low volume niche & have the cashflow to survive startup.

            I don’t know the American situation so well. But as far as I understand most western world manufacturing has suffered greatly to the god of globalisation & concentration of oligopolies – I’ve only got to think of mass producers like Nike or Apple, they might be doing well, but it’s not been done on local labour. & they do have a huge advantage when it comes to populations.

            CSL & Cochlear have done alright, selling to/in an overseas market…. so it can be done.

            Envy is a strong, pointless & negative emotion that drags your focus away fom where it should be. – But frustration & bewilderment…..

          • It is interesting though, with some of the US businesses where manufacturing has been offshore, a substantial share of the “value” captured as local income, has still been back in the USA. I wish I could remember where there is a good article on this.

  12. Comparing public healthcare with giving private corporations accountable to foreign shareholders money?

    I expect better from you MB.