Paul Keating’s grand vision: Australia gasping for ventilators

With Australia unable to supply itself with vital medical equipment, and its heavy manufacturing industry decimated, it is time to take a walk down memory lane.

It’s July 2000, and former Prime Minister Paul Keating is boasting about how he “liberated” Australian factory workers from their jobs:

Interviewer: On trade unions, when you addressed the ACTU Executive, your message was basically that unions should be embracing the new economy in the interests of their members. I think you also said something along the lines that ‘the union movement may have fulfilled its historical destiny’. What do you mean by that?

Paul Keating: I did not say that. But I did say that we are going to reach a point where individuals will be able to command a premium on their own abilities. In the days that I grew up, capital was king. In future, capital is going to be in reasonably plentiful supply and the prizes are going to go to intellectual product – to the knowledge workers, and what this is going to mean is that people with abilities are going to be able to eke out a place for themselves in the economy. And if you have got skills you will be paid more. And if you don’t like where you are currently employed you will be able to move on. And the likelihood is we are going to find skill shortages of this kind. Which is going to mean that a lot of people who formerly were simply employed are going to find themselves, certainly in a world without the old certainties, but also in a world where they actually earn more and have more freedom for themselves…

Interviewer: Let’s just stay with that idea of fair trade – Doug Cameron’s call – for a moment. Can you understand why his membership of traditional blue collar manufacturing workers are feeling locked out of all the gains of the changes going on?

Paul Keating: There is a great moral dilemma here for people of Labor persuasion, and that is that they don’t want their jobs taken by the workers of developing countries. The case is dressed up as a real concern, with concern for the welfare of the workers in developing countries. The genesis of the concern is however, the welfare of workers here, and the workers in the United States…

Interviewer: What would you say to the blue collar workers who have seen their jobs lost in Australia? What do you say to them?

Paul Keating: What do I say: What is your new job like? One of the 2.5 million created since the early 1980s. People have found better jobs. I mean, did we ever hurt anybody liberating them from the car assembly line? When they left the car assembly line and got a more interesting job in the economy, did we do them a disservice? Of course we didn’t. And the way people talk about this free and fair trade as if the economy is static and not dynamic and a job lost is not a job replaced, is just bunkum…

Interviewer: [Union] numbers went down a long way during the Labor years though didn’t they? Almost halved union membership.

Paul Keating: That was because of the inevitable decline of the old structure to which Australia was completely vulnerable… That was the creaking industrial structure – the structure doing that, not disaffection with unions per se. As everyone in the business knows.

Twenty years on and Australia’s manufacturing industry has been gutted. The car industry has left. Household incomes have stagnated for a decade. And Australia has been left exposed to reliance on a Communist dictatorship to supply it with vital medical equipment and other essential goods to fight external threats, such as the coronavirus.

As noted today by former Dow Chemical chief, Andrew Liveris:

“Australia drank the free-trade juice and decided that off-shoring was OK. Well, that era is gone,” said Mr Liveris, who’s been tapped to work with Nev Power’s advisory commission into restoring local manufacturing.

“We’ve got to now realise we’ve got to really look at on-shoring key capabilities,” he said…

Mr Liveris indicated Australia should never have accepted the hollowing-out of its manufacturing base – part of what is known as “Dutch disease” – to the extent it has…

“I don’t think you tilt as far as we’ve tilted, in which 20 per cent is domestic and 80 per cent imported,” he said of Australia’s reliance on foreign manufacturers.

“You need some balance in there that lessens the reliance [on foreign suppliers], and safeguards your basics and essentials”…

“We’ve spent many decades being a resource commodity exporter and more lately a service industry based on tourism, education and some digital,” Mr Liveris said.

In the meantime, manufacturing has contracted to 6 per cent of the economy from around 40 per cent in the 1970s.

That model of Australia being “willing to export commodities and import finished goods is old and broken,” says Mr Liveris…

Here’s the chart:

So, how do we fix it?

As DLS has written, the path ahead is well understood if we are prepared to take it.

The Morrison Government will need to work on two fronts, micro and macro. On the micro it must:

  • identify which areas of global supply chains it is no longer tenable to outsource. These segments must be actively incentivised with investment and research tax forgiveness;
  • create industrial relations regimes that do the same with both unions and bosses on board;
  • slash international student intakes and invest in, rather than debauch, education, and
  • rejig bank capital rules to boost business lending over mortgages.

On the macro it must:

  • slash immigration in half and collapse temporary visa categories;
  • deliver cheap energy via tough gas reservation, pipeline regulation and a big green ‘new deal’;
  • adopt an all of government policy for a lower AUD and higher productivity which includes cutting things like franking credits and negative gearing plus having higher mining taxes, and
  • use tariffs or behind the border protections on specific supply chains.

These measures will begin to transition the economy from being overly reliant on Chinese demand and supply plus mortgage credit, to one that has more internal production drivers that are competitive and self-sustaining. The same measures will balance out the benefits to both capital and labour to make it politically viable.

There is no need to disengage further from what is left of retreating globalisation.

You will notice that such a project requires sacrifice by all. Therefore the greatest single challenge to making it work is the communication of the national interest project to the people. A leader is needed that can win them to the cause.

It sure won’t be Paul Keating.

Unconventional Economist
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Comments

    • Yes Max, I remember how he conveniently forgot about why we had a publicly owned bank and airline, and airports. Just kept chanting the modern day mantra at the time — the governments business is not business. The budget got a short boost, and those organisations took off to the moon with what a virtually unregulated monopolies or part of a cartel, to the detriment of all Australians.

      Yes a true jerk who sold us all out for his own prestige and retirement plan. Betcha he’s not hunkered down for easter like the rest of us plebs. And, I’m still waiting for my oil cheque…

  1. It sure won’t be Scott Morrison either. As Treasurer, he always swallowed the Treasury line. No different now.

  2. An industrial economy is the backbone of a contemporary civilization. Who could have known!?

    Oh, that’s right, financial engineering will solve every problem that money can buy. I forgot.

  3. adelaide_economistMEMBER

    This flashback to the past reminds me of a young Swedish lecturer I had for an international trade course back at uni (talking mid 1990s). I remember him making really derogatory comments about our local cars at the time, which most of the fellow students lapped up (no doubt because most of them were from suburbs where you wouldn’t have been seen dead in one). He didn’t even seem to recognise the argument that we should just export agricultural products (this was pre-mining boom) instead was something you just told the students as a device. No awareness of history, or the reality of ‘political economy’. You weren’t supposed to believe in absolute free trade with an unhinged certainty – most of the older lecturers didn’t – but he did. The irony of him being from Sweden of all places, home of the stodgy ‘tractor masquerading as a car’ Volvo seemed lost on most. I guess seeing the implosion of Sweden today seems more understandable when I reflect on his attitudes.

    • I think it’s too late for Sweden…they’re doomed as a first world country. I don’t think it’ll go full-Mogadishu, but their comfortable and civilised world is vanishing around them as we look on. Their future is one of decay, poverty, social upheaval, violence and stupidity, all of it largely imported.

      Heavy duty social welfare systems require cooperation, and more people contributing than using the resources. If you import a bunch of people who reject the society, live in parallel societies and only take while never contributing then it will eventually collapse.

      If we don’t pull our fingers out, we’ll be looking on, just from a little further back in the same queue.

      • “If you import a bunch of people who reject the society, live in parallel societies and only take while never contributing then it will eventually collapse.”

        Absolutely nailed it. People are are more and more becoming aware of this. What a disaster social experiment Sweden is. The same with south western Sydney.

        • okradovicMEMBER

          Pardon my ignorance, but can you tell us more what exactly is happening with Sweden? I must admit it’s been a while since I last paid attention to it and stopped travelling there after having worked for a Swedish company a decade ago. I suspect their problems you are alluding to are caused by a certain unmentionable group with incompatible belief structure and cultural practices, shall we say? In some ways similar to the problem facing the UK?

      • The gob-smacking moment for me came when a European bureaucrat was explaining the reasoning behind these heavy immigration flows from 3rd world countries: politicians were convinced, he said, that these backward peoples would be so imbued with gratitude at being invited in, lavished with free accommodation and being sent a regular cheque, that they would bend over backwards to give back to their new, adopted country i.e. the country would benefit from all this imported vitality (and no doubt some votes for the party/parties involved)

        Quite chilling, if true – naivete on another level.

  4. It is fun to see Paul Keating’s self-aggrandising, phantom legacy disappearing under a sea of piss.

    But the cost to transform this economy is going to be immense. The pain of staying home for 6 months and watching your paper wealth go down by 30% will be of nothing compared to the cost of that particular transition.

    Does any government have the stomach for it ? I doubt it.

    • I wouldn’t hold my breath. The situation is far worse than what can be solved by a gusty government. Since this has been going on for more than a generation, the necessary expertise, infrastructure and capabilities have gone. So it is not a matter of a decade or two to rebuild the sorry Straya from scratch.

  5. TailorTrashMEMBER

    As the Centrelink queues stretch around the corner PJK will be comfortable in Elizabeth Bay with the gramophone on and admiring a first empire clock on the mantelpiece…….

    “When you walk through a storm
    Hold your head up high
    And don’t be afraid of the dark
    At the end of a storm
    There’s a golden sky
    And the sweet silver song of a lark
    Walk on through the wind
    Walk on through the rain
    Though your dreams be tossed and blown
    Walk on, walk on
    With hope in your heart
    And you’ll never walk alone

  6. “cutting things like franking credits and negative gearing”

    Given Labor lost the “unlosable” election with those policies, I cannot see the current government considering them in any form.

  7. Goldstandard1MEMBER

    What about re-establishing a nationally owned bank? I think that underpins a lot of your tactics.

  8. SweeperMEMBER

    Great article.
    Everything Keating said there turned out to be wrong.
    Capital is still king. More so as the profit share is larger. Yes IP commands a return but it almost all goes to capital as rent.
    Skilled workers are less rewarded now than they were
    Trade has ended up hurting workers in advanced countries exactly as trade theory in Kalder-Hicks sense predicted (at the time)
    Car workers didn’t become financial planners in Keatings superannuation casino. They became unemployed.
    Buttons car plan of reduced tariffs in return for “scale” was crazy. You can never scale up manufacturing in Australia so you need tariffs.

    • Button wasn’t completely crazy. At the time there were lots of tiny outfits. But in retrospect there was certainly an aspect of “quick, let’s shoot them before they die!”.

  9. The Unions were Weak as P1ss by the late 80’s – Sold out & run over by the Neothingy! How is Manufacturing going to rebuild if the people’s “representatives” are still in bed with the management? Workers insights add value & shouldn’t be dismissed in a cooperative workplace…… as they often are currently.

    • NoodlesRomanovMEMBER

      Workers insights are incorporated plenty in my experience – the idea is usually stolen by some rising superstar or consultant who gets all the recognition. Even that recognition is sfa compared to the value of the idea, but they at least get a congratulatory email.

  10. Ashley Bennett

    We should be re-localising our manufacturing because the worldwide energy supply is depleting. Eventually it’ll be too expensive to sell things on the other side of the planet because of transportation costs.

  11. give it a rest its 24 years since Keating was in the seat!
    FFS there has been 24 years for things to have been changed.
    Firstly by Howard/Costello then 6 years of Rudd/Gillard/rudd
    but they did have a GFC to contend with and
    now we have had the LNP overlords doing stuff all.

  12. give it a rest its 24 years since Keating was in the seat!
    FFS there has been 24 years for things to have been changed.
    Firstly by Howard/Costello then 6 years of Rudd/Gillard/rudd
    At least he had a vision!!!!
    but they did have a GFC to contend with and
    now we have had the LNP overlords doing stuff all.

    • Exactly – so I wonder why the ALP wheels him up on the stage and waxes lyrical about all his neoliberal “reforms’ that set Australia up for all of the wonderful things we enjoy today that every other party took credit for? i.e.neoliberal financialisation, criminal banking, asset bubbles, mass immigration, Corvid-19, destruction of manufacturing and all the other consequences of being a “service economy”….

      Keating took the credit for these “reforms” and went off and joined a Chinese Bank and even today lectures us all about the benign a glorious record of the CCP. I’d say that is a massive target deserving of a massive kick. As for Howard/Costello they were laughing all the way to the deregulated bank after the ALP threw out its core values, abandoned the working class and slid to the Right. How else do you think it all got going?

      And Big Australia Rudd? Give me a break – Keating policies lite with a narcissistic personality disorder twice the size.

    • SweeperMEMBER

      In my experience this is the standard defence of Keating disasterism.
      ie. maybe it’s bad in hindsight but at the time it made sense. Plus Howard and Costello made it worse. Plus globalisation.

      I totally totally disagree.
      1. It ignores how politics works: eg. Certain governments set in motion a regime or set the boundaries for policy and the the ones that come follow it. eg. Deakin to WW1, Curtin & Chifley post WW2.
      Then Keating set in motion the disaster epoch. Everything else has been a continuation of the regime he set in motion. Howard did nothing except remove the GST which Keating wanted to do anyway. Everything else was minor tinkering.
      2. In foresight it made no sense. Do you really think nobody at the time said his crazy ideas we’re crazy; to deregulate banking in line with Campbell’s ideological vision, privatise pensions, destroy manufacturing, attempt to “scale” car making, privatise the CBA, then want to sell Telstra, remove all capital control, “inoculate all future Treasurers” to start the balanced budget fetish, free trade withought any offset from winners to losers,lead the RBA to inflation targeting, give the wealthy their largest tax cut ever…
      everyone with a brain and a conscience said it would be a disaster *at the time*.
      Read any account of the period.

      • Good comment. I wonder if the election cycle rhetoric fools people into believing that each government has no legacy? You are totally correct about epochs in this regard. Menzies was another that led to Whitlam. Whitlam allowed Frazer to stay relatively moderate and truly ‘liberal’ until Hawke/Keating moved the ALP show to the Right. History will show that the ‘prosperity’ and lack of recessions was the nation eating itself out at the core after Keating let the rabid corporate dogs off the leash to feast and drop crumbs – and they loved him for it. This was the turning point as it was for the USA under Reagan and the UK under Thatcher. The ‘wealth’ generated ended up with an Australian elite choking on its own vomit and a trickle down of urine from the top upon the scum and undeserving. This attitude has split Australia. It has been a 30 year experiment that led us to a political, social, economic and moral crisis. Perhaps the biggest miscalculation was that the CCP would reform and globalisation would create one big happy family. Instead we are wedded to a China government that is an unreconstructed Cold War elite of hard men with a Micky Mouse economic face. The bet did not pay off.

        History is not going to treat Paul Keating well. It will be his carcass in the neoliberal/globalist coffin when it is carried to the political graveyard, not the opportunists that were Howard and Costello.

  13. GuillotineArtist

    Blaming a prime minister that hasn’t been in power for over 20 years, when Holden left Australia in this last decade, yeah right.

  14. Its a waste of time and energy banging on about someone who has not had a hand on the tiller for nigh on a quarter of a century.
    Like WTF were the LNP doing for the last 7 years might be more relevant.
    Seriously there needs to be a re calibration of the artillery to current day

  15. SupernovaMEMBER

    A good start would be to transfer idiot Turnbull’s submarine contract from the expensive French to the Germans who proposed to build the subs within Australia and for almost half the cost as the French contract.