The dumbening of Australia

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…

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.

Leith van Onselen
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  1. Just as expected. Basically, once the home-flipping gig is up and the education-as-export rort falls on its face we’ll just have toe-nail filing left. My children have a bright future indeed.

    ‘Sound economic management.’

    • Hey dont sell us short!

      We may have been edged out by Senegal and Uganda but at least we beat Bin Laden’s local stomping ground Pakistan.

  2. SnappedUpSavvyMEMBER

    not denying the dumbening, but the sheer magnitude of iron ore exports would make anything else look tiny and skew this

  3. Hill Billy 55MEMBER

    Joe Hockey and Alexander Downer to the caviar circuit would have to be the dumbest exports a country ever made!

  4. Nice reference in the heading to the Simpsons, Leith, even if it was to the smartest one of them.

  5. Tony Abbot and Joe Hockey should read this. This is after all their legacy. This and high house prices at any cost.

  6. adding a million extra people every 2.5 years also dilutes Australia’s mineral base

    I also suspect that the millions that we add are not the brightest, our average IQ is probably declining, too.

  7. Ronin8317MEMBER

    The report doesn’t consider how you can order 20 different types of coffee at the local Australian cafe : that’s complexity!!

    • billygoatMEMBER

      Don’t sweat it choice complexity simplified by 711 $1 special. Caltex Coles following suit ( no maccas tho – still servicing coffee flavoured burnt milk to travellers) with $1 specials. Tradies, mums, school kids, suit & vibrant all line up for cup on the run.

  8. If you believe in the economic principles of absolute and comparative advantage, it becomes obvious Australia is leaving the high tech manufacturing industries to countries with intelligent populations whilst we focus on the areas where we have a world leading advantage – ie digging dirt and asset speculation. This is precisely what modern economics taught us was the smart thing to do.

    • That is 100% correct. And it shows very neatly the limits of general principles of economics, which seem to be all that our political class can (or wants to) understand. Another example is clinging to the simple metric of GDP. Or looking at the UE rate, without considering the underemployment rate. We could go on forever. A rather depressing subject.

    • The point of the Atlas of Economic Complexity is that it shows us that comparative advantage is nonsense. They’ve found that the best indicator of future growth is increasing economic complexity – that is, doing more, not specialising on a few fields.

      If countries like China and South Korea had believed in comparative advantage then they’d probably be the most specialist rice exporters in the world and little else right now.

      • The90kwbeastMEMBER

        Very interesting point. This is the opposite of what neo liberal globalists would have you believe. Haven’t we been lead down the wrong path as a nation.

        • Just like religious zealots. They pick the bits of their “bible” that suits their interests and prejudices the best. Ignore the inconvenient parts. Most people are bluffed by the highfalutin’ language used and are ignorant of what’s not said. Generally the only bit that matters.

        • Any rudimentary look at the theory of comparative advantage doesn’t make sense or pass any pub tests. My first reaction when hearing it has proven after many years to be the right one. Why be comparatively better when I can have it all and be better at everything? The only way to the top is to be the best OR have a scarce asset everyone wants and cartel/supply restrict it to maximise bargaining power.

          On the first point we fail because we hollowed out everything for our so called advantage in mining, farming and houses. On the second point we don’t ration/cartel/price fix any of the assets we sell unlike say oil rich countries who are using that to transform their economies – instead we privatise them to foreign corporations. Gosh how dumb is that?

  9. Yeah but dem ones in da blue don’t have kid master chef on da tele, that’s da future right there….we produce worlds cup cakes and who else is ganna do that, nobodies! They all have to buy ours…

  10. Since 1996, under the Lib/Lab/Greens masterplan Australia has regressed from being a recognised developed nation into an underdeveloped nation (but we have not yet received underdeveloped nation trade status by the WTO) so that we now rank below Senegal and Uganda and just one step above Pakistan in the level of development status.

    The increased vibrancy and growth in our tertiary education system has worked to assist this drive. It just shows that you can go backwards while spending increasing sums on education – which is why the ALP wants 50% of year 12 students to go onto Uni (and be indoctrinated to support their ideology by doing a dodgy Arts course, I suppose).

  11. It shows also, how a so-called democratic country, can attract people who want a shot at a nice life, relative to the country in which they were born, by being supported by those that live here being prepared to forgo their own quality of life,…. without a vote on such.

  12. Why get qualified in anything when the way to get rich is to leverage yourself into housing? I mean, everyone knows that now, right?. To the point where the landed class are being regarded as the elites of Aussie society and what everyone else should aspire to. Yay, ‘straya. Aussie, aussie, aussie….

  13. People have the right to be rich and dumb, and getting dumber. If only they were not getting poorer…..