April 18th 2020


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Articles from this issue:

COVER STORY Justice at last: Cardinal Pell set free

EDITORIAL Australia needs an economic reset after covid19 crisis

CANBERRA OBSERVED The very young can still be 'taken care of' during the covid19 outbreak

RURAL AFFAIRS A national disgrace: Our great land sale

NATIONAL AFFAIRS Use detention centres to help deal with covid19

GENDER POLITICS Do we really need to ask, what is a woman?

REFLECTION A chance for a change of heart: Covid19 as Memento mori

FAMILY Who let the kids out? The stay-at-home parent and covid19

ECONOMICS The oil cartel: The lesson for other industries from OEC

HEALTH Lessons from the 1918 Spanish flu epidemic

CULTURE AND SOCIETY There is a war: The battle in and for hearts

ASIAN AFFAIRS What makes China different is not the Chinese but the CCP

HUMOUR Locked down in Covi Town

MUSIC Great, er, swan songs

CINEMA+TV Staying in; staying sane

BOOK REVIEW Not our Robin Hood

BOOK REVIEW At home among others

POETRY

LETTERS

AS THE WORLD TURNS

CARDINAL GEORGE PELL FREE: The commentary file

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EDITORIAL
Australia needs an economic reset after covid19 crisis


by Patrick J. Byrne

News Weekly, April 18, 2020

As the first responsibility of government is to protect citizens from harm, the Prime Minister’s $130 billion wages package – to help feed families and keep people in their homes and jobs – is an important move in the right direction.

However, the covid19 crisis has highlighted Australia’s vulnerability to fragile global supply chains, after four decades of privatisation and deregulation of trade, finance and industries. These policies have left the country heavily dependent on imported manufactures.

This vulnerability stems from what economist Dani Rodrik calls “deep globalisation” (or deep global integration), which followed the breakdown of the post-World War II international arrangements that were based on shallow global integration (or “shallow globalisation”).

Shallow globalisation had allowed each government to exercise controls on capital flows in and out of its country, manage its exchange rate and have targeted industry policies to achieve desirable goals such as preserving strategic industries and achieving near full employment.

It left nations free to choose what industries they wanted to develop and what areas of the economy would be left open to imports and competition.

The new system of deep globalisation began in the late 1970s. Its advocates assumed that the “invisible hand” of the market would even out imbalances and boost economic growth when (mainly Western) countries opened their borders to trade in goods and capital flows, which allowed industries to shift to low-wage countries, and free-floated their exchange rates.

In reality, many global markets were “corrupted” by subsidies, tariff and non-tariff barriers, the global financial system suffered a series of major crises, and deep globalisation gave “predominance to the needs of multinational enterprises, big banks and investment houses over other social and economic objectives”, says Rodrik.

Moreover, he says, “unlike national markets, which tend to be supported by domestic regulatory and political institutions … there is no global anti-trust authority, no global lender of last resort, no global regulator, no global safety nets and, of course, no global democracy. In other words, global markets suffer from weak governance, and therefore from weak popular legitimacy.”

Rodrik argues that, as the current system is “unsustainable”, a new shallow globalisation system “that permits policymakers to focus on domestic social and employment needs” is needed.

This should focus on building, or rebuilding, strategic industries: that is, industries vital to the nation’s economic development and security.

Two examples point to a new direction for Australia.

Whereas Western nations let the market’s “invisible hand” decide which industries survived and which didn’t under deep globalisation, Asia’s economic tigers operated differently. They would pick, say, five industries to develop; two may fail but three would succeed and become world competitive.

For example, from scratch, Taiwan developed and became a world leader in flat-screen televisions.

Separately, the recent trade tensions between the United States and China have been more about President Donald Trump protecting U.S. strategic industries – such as steel, the tech sector, next-generation technologies and important commodities – than about employment.

WHAT WE NEED HERE IN AUSTRALIA

With Australia’s well-educated population and vast array of natural resources, a new consensus is needed on the strategic industries Australia now needs. Here is a partial list:

  • A pharmaceutical industry for essential medical supplies.
  • A major domestic liquid fuels industry utilising domestic gas supplies, new refineries and expanded exploration for new oil supplies.
  • Reliable, low-cost electricity, utilising our coal for supercritical coal-fired power plants.
  • Rebuild an Australian-owned car industry, while we still have the skilled management and workers for such an industry.
  • A steel and essential metals industry.

And, as it is in almost every other country, agriculture should be declared a strategic industry. It should be exempt from National Competition Policy and be allowed to re-establish vital marketing arrangements, including single selling desks, as existed in the past.

This will only be possible if Australia resets to a new form of shallow globalisation that allows strategic industries to be in Australian hands, or be at least 51 per cent Australian owned, and that supports strategic industries from being undermined by foreign (often subsidised) competitors and protects them from foreign takeovers.

It will require major investment in badly needed new national infrastructure.

And all of this will require financing by a federally sponsored development bank that is mandated to build infrastructure and strategic industries.

Australians are up to the task, but are our politicians up to resetting their policies?

Patrick J. Byrne is national president of the National Civic Council.




























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