Let us recall where it all started. The Harvard Kennedy School’s Center for International Development has developed an Atlas of Economic Complexity, with Australia being ranked as having one of the least complex economies. The Atlas measures the diversity and sophistication of national exports, with almost all of Australia’s exports not requiring a degree to make. The Center for International Development contends that for countries to get richer that they need to develop more sophisticated products, but Australia has been very tardy when it comes to innovation. From The AFR:
The enormous wealth generated by iron ore, coal, oil and gas masks, and probably contributes to, an economy that has failed to develop the industries needed to sustain its position among the top ranks of the developed world.
Put simply, Australia is rich and dumb, and getting dumber.
On the primary metric used in the database, an index of economic complexity, Australia fell from 57th to 93rd from 1995 to 2017, a decline that is accelerating. Australia’s top trading partner, China, rose from 51st to 19th over the same timeframe…
As Leith noted:
The Harvard data exposes the paradox of the Australian economy: the eighth-richest nation in the study has the export profile of Angola.
You will note from the above table that the most sophisticated nations have big manufacturing industries. By contrast, Australia has let its manufacturing industry collapse and now has the lowest manufacturing share across the OECD.
Adding to Australia’s malaise is its ‘dumb growth’ economic model, which relies on importing hundreds of thousands of bodies every year, alongside increasing household debt, which drives consumption and malinvestment into property and catch-up infrastructure, rather than productivity.
Perversely, adding a million extra people every 2.5 years also dilutes Australia’s mineral base – the primary source of its wealth – which then makes us poorer per capita.
“Rich and dumb, and getting dumber” perfectly describes the contemporary Australian economy.
It’s amusing stuff today as the dumb AFR dumbly aims to refute Harvard’s assessment of the great Australian dumbening (though Harvard has contacted us to insist it has not used any such a label):
If a piece of academic research comes up with conclusions as counter-intuitive as this, it should be vigorously examined for methodology flaws. But not, it seems, in Australia, for all its challenges a very wealthy nation so used to debasing itself we’d more easily countenance our future among the world’s poorest.
Aside from this newspaper, which both broke news of and reported some scepticism about the survey, gullible reporting of Harvard’s research was repeated far and wide in outlets as unfamiliar with matters of economic complexity as SBS’ The Feed and the Daily Mail.
…The data in Harvard’s survey comes from that reported by customs agencies. Service exports don’t go through customs offices, and aren’t uniformly reported to the United Nations. For the purposes of statistical coherence, trade in services is thus utterly excised.
There is a good reason for not counting services exports and it is this: they are dumb. Generally speaking services exports are just people serving people, not elaborate, value-generating transformations.
This is especially the case in Australia’s services exports mix which is dominated by tourism and education exports.
The former is clearly based largely upon natural stuff that was here all along like the Great Barrier Reef, which we are destroying, which is pretty dumb.
The latter is laughably dumb given they’re not really exports at all. The majority of revenue counted as such is actually from earnings made while students work here, displacing a local. Thus a lot of that revenue just floats straight back out in remittances to foreign homes. Moreover, education “exports” have literally made us dumberer via the gutting of pedagogical standards and corruption of intellectual integrity. Not to mention our universities cozying up to the CCP, jeopardising the very liberal system that gives rise to the free-thinking and entrepreneurialism of a dynamic economy in the first place.
Perhaps resulting in this jingoistic and, dare I say, dumbefied journalism.