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‘Happy go lucky’ Australia now adrift in Asia

by Gregory Clark

Australians used to call themselves “the lucky country,” after the title of a 1960s’ best-seller saying how farming wealth had allowed Australia to create a stable, prosperous and fairly egalitarian society.

But today’s minerals wealth seems to have worked in reverse, to create a nation prone to quick fixes, whimsical political changes, flip-flop foreign policies and crazy economic strategies. From the sober lucky country we move to the feckless happy-go-lucky country.

For example, Australia’s economy has long depended heavily on minerals exports to China. But Canberra is still so caught up in its long-festering anti-China fears that it is now offering Washington the bases and other cooperation needed for U.S. anti-China military strategies. And it is busy creating close military links with a Japan also now girding up for future confrontations with China. Despite these moves it tries to insist that they will not harm its heavy resource reliance on China.

In foreign policy we see the same lack of commonsense. Back in the ’50s, Canberra with its Colombo Plan did much to train young Asian graduates. It helped Indonesia gain independence from the Dutch. But today, while distant northern European nations, including the Netherlands, have been working to solve Asian’s bloody political confrontations, Canberra’s main contribution has been to support bloody U.S. interventions in Vietnam, Iraq and Afghanistan and the ugly 1975 Indonesian intervention in East Timor.

Both the Vietnam and East Timor involvements were said to be needed to stop Chinese aggression southward. Today Canberra still celebrates its one-sided victories in Vietnam while insisting it sees Hanoi as a friend helping to stop Chinese aggression southward. It claims to respect Singapore’s Lee Kwan Yew. But it once worked hard to prevent Lee from becoming prime minister, claiming he was a crypto-communist stooge of Beijing.

Australian politics are equally slap-happy. Up till 2010 it had as prime minister the reasonably popular, Kevin Rudd. But his abruptness toward colleagues and Washington dislike of his mid-road China policies encouraged the apparatchiks in his Labor Party — the “faceless men” they are often called — to have him dumped in favor of the unpopular Julia Gillard who three years later also had to be dumped, this in favor of Rudd.

It gets worse. Current economic problems began with the resources booms of the early 1970s when Australia’s hitherto efficient manufacturing sector was attacked by the so-called Dutch disease — high-value resource exports causing an over-valued currency that then kills import-competing manufacturing. But our free-market fundamentalists insisted that our rich resources endowment meant we could afford the across-the-board tariff cuts that hastened the loss of even more manufacturing.

Meanwhile, an immature resources nationalism was driving Japanese industry to seek resource imports elsewhere, Brazil especially. For much of 1975, conservative bureaucrats in Canberra were able to block the treaty of friendship and cooperation with Japan that some of us had long been pushing, claiming it was a Japanese plot to take control of Australia’s resources.

Only after a conservative government came to power the next year did they discover there was no problem. But by then the harm had been done.

Working in Canberra at the time I could see how the post-oil shock resources boom was distorting the economy. My proposal for resource export taxes, beginning with coal, to help fund economic restructuring, lower upward pressure on the currency and reduce inflation was accepted. But it was handled so badly it had eventually to be abandoned; the “rationalists” had opposed the tax to begin with, and had then insisted it should be universal, across-the-board, which meant new and smaller producers could not pay while the established and more prosperous could.

As we moved into the 1980s, the flood of cheap Asian manufacturing imports predictably began to wipe out much of Australia’s remaining mid-tech manufacturing. Some of us tried to push the idea of Australia using its attractive domestic market to impose the tariffs or import restrictions needed to lure Japanese car and other Asian mid-tech manufacturers to produce in Australia the goods needed to maintain employment and to preserve the industrial base.

But once again the “rationalists” said no; even the example of Reaganite USA using much the same policies to save its car and TV industries could not shake their ingrained anti-tariff dogmatism.

Australia should get rid of all these noncompetitive mid-tech industries, they said, and free up labor and other resources to move directly to competitive high-tech industries. Australia would become the Scandinavia of Asia — a high-tech powerhouse producing computers and other gadgets for the Asian market.

Today Australia now relies on that same Asian market to supply it with just those same high-tech gadgets, not to mention any amount of low and mid-tech goods. It is now losing even the car and steel industries it tried to protect in a last-ditch effort to retain some manufacturing employment.

True, some labor-intensive service industries flourish, helped greatly by Asian hunger for tourism and education. But they cannot hope to provide the jobs and technologies needed to fill the manufacturing gap.

With the Chinese economy slowing, Canberra is now trying to devalue its currency to boost exports and cut imports. But having lost its manufacturing leg, and with its resources leg in danger, the economy is now literally flat on its back — with only half a leg to stand on.

When Canberra has a problem it likes to set up a committee. Asia’s rise has triggered at least three such committees calling for more attention to Asian languages and expertise, the most recent being the much ballyhooed “Australia in the Asian Century” committee. One good result is that Australia is now producing some impressively fluent, young Asian-language speakers, even if in much smaller numbers than originally called for. But many of the top jobs, even in the embassies and academia, have remained in the hands of people who lack Asian expertise.

Meanwhile, the bureaucrats prefer to go along with talkfest operations like the originally anti-China Asia-Pacific Economic Cooperation where they can work away for years without having to produce concrete results. The Australia-Japan Foundation, which some of us worked hard to set up in the 1970s to fill the expertise gap, has been allowed to run down. Each year the Europeans send dozens of young businessmen to work and get to know Japan; Canberra has long ignored some of our proposals to do likewise, claiming Australia already knew more about Japan than anyone else anyway.

In 1991 a smart Labor Party politician, Paul Keating, once known for his anti-Japan resource nationalism and disregard for Asia (Asia was the place you flew over en route to Europe was one of his quips) became prime minister.

To show the importance he now placed on Japan, our Tokyo Embassy announced a special Paul Keating scholarship for a young up-and-coming Japanese academic who would act as a future bridge for economic research between Japan and Australia’s national university.

For some extraordinary reason they chose an unqualified secretary at a small Australian company it disliked, badly disrupting the company’s efforts to get established here. Said person soon dropped out of sight after she got to Australia.

Today no one at the Embassy or the Australian end admits even to recollection of, let along responsibility for, the squalid affair — yet it’s one more example of the casual, happy-go-lucky attitudes that have left Australia so adrift in Asia.

Gregory Clark is a former Australian diplomat who in the 1970s also served as policy adviser in Canberra’s Department of the Prime Minister and Cabinet. He has spent much of his career in Asia, mainly Japan. A Japanese translation of this article will appear on www.gregoryclark.net

  • Moonraker

    Ah! She’ll be right, mate!

  • pervertt

    Economic rationalists such as Paul Keating are not the source of Australia’s woes. You could well blame the economic irrationalists, including union leaders who seek pay increases irrespective of productivity, inefficient manufacturers dependent on tariff protection and politicians who readily cave in to unionist or protectionist blackmail. Add to this a lack of long-term economic vision by successive governments, a tall poppy syndrome that stymies entrepreneurs, an insular outlook shared with other island nations like Japan, then you have pretty much summarised where post-war Australia has gone wrong.

    But Australia also has much going for it. It has vast tracts of land (even after you have subtracted the continent’s arid heart). It has huge mining reserves and efficient agriculture. It has rule of law, relatively clean government and a high standard of living. Building on these strengths, and adding value to the industries that Australia excels in, is the way ahead. That is the law of comparative advantage that any first year economics student would be familiar with.