Sinclair has described the Government’s release of the “Industry and Innovation” statement as red tape and protectionism.
Chris Berg concluded it was “a couple of tokenistic, bureaucratic measures”, candy for the union protectionists without this ever being able to take hold. He might be right but the new policy contains a troubling attempt by the government to insert commissars, who, in Minerals Council chief, Mitch Hooke’s words, “will embed public servants inside companies”. This is a replay of the corporatist aspirations of the “Australia Reconstructed” industry policy that was the original Hawke-Button approach.
In this respect, one of the architects of the plan, Roy Green sees it as a means of cultivating a series of silicon valleys in Australia. Though disappointed that the government is funding this from reducing R&D support, he thinks that having governments, government research institutions and private enterprise all being brought together will generate the dynamism of the so-far unreplicated high tech area based on Palo Alto.
Professor Green talks of creating new cluster industries with, “smart specialisation in enabling technologies, strong connections to global networks and supply chains and an application of non-technological forms of innovation such as new business models, design thinking and systems integration.” His views are supported by other bureaucratic drones, like CSIRO’s Megan Clark, seeking to grab a table-setting for institutions unable to win commercial support by their own efforts.
Those in taxpayer funded sheltered workshops dream of establishing strategic control positions from which they can pull levers and the treasure trove of new “clean” high tech unionized jobs entices other freeloaders. The “indicative planning” and “nudging” of commercial activities into areas selected by the great and good is the modern version of nationalized industries, harnessing private enterprise and directing firms into business prospects that it is said they are inherently incapable of finding for themselves.
It is an indictment of hubris of those whose salaries are earned by political entrepreneurship rather than that of the market that they should continuously develop fresh means of creating relevance for themselves. With characteristic understatement Sinc says, “Innovation and smart thinking will play a huge role. It isn’t clear that government can add value beyond making it easier to do business”.
My own contribution in The Australian and more comprehensively in Quadrant, is to call for a dismantling of the industry policy government expenditures. At best these are a waste of taxpayer money. And, as the new Gillard plan illustrates, they may bring negative value-added in distracting firms from meeting the needs of customers into avenues that may provide some government cash but entail endless rounds of meetings and consultations.
Typesetting?
This yakka about – “…cultivating a series of silicon valleys in Australia.” has been going on for at least a quarter century. I recall the Cain/Kirner years and the “Multi Function Polis” idiocy.
The only model for enticing R&D that I’ve seen work to any extent is the Irish model (ok – so the rest of the economy is a basket case).
Slash corporate taxes to entice companies to base themselvese in IRL, and provide large R&D tax deductions regardless of company income.
AFAIK, R&D deductions in Oz are somewhat useless for multinationals, as they don’t necessarily have local income to deduct against.
You certainly don’t go robbing Peter to pay Paul via a large government-interfering churn operation.
Oh.. and the R&D tax concession in Ireland is available as cash if the company doesn’t make a profit.
That’s what’ll help startups.
Whoa! Does Snic know you’ve dipped into the reserve serifs? Those things are expensive as hell, mate.
Green – blah, blah, blah. Words, words, words. And to think he is a dean of a business school!
It’s funny how the UTS business school has both such a good reputation and demanding courses, and can have some really flaky research and public statements.
Just as long as they don’t besmirch the law school, that’s probably alright.
“Dean Roy Green” sounds like a professional pugilist.
That would be the case if the purpose of industry policy was to provide better a economic platform.
Unfortunately, “Industry Policy” is merely the PC label for providing truck loads of taxpayer funds to crony capitalists whose business models have become uneconomical due to tireless work of the trade union movement.
It’s funny how nobody stops and thinks that maybe the world only needs/wants one Palo Alto? Why would any company set up in an area that was not Silicon Valley, if Silicon Valley is still the best and retains all the original advantages of large amounts of local talent (continually being supplied by Stanford and drawing from others), a deep funding pool, a risk-seeking culture and the cumulative experience of some of the most successful companies in the world. You can think that you might lure people with tax breaks – the taxes in California are obscene – but tax becomes a tiny problem when a company truly takes off.
As I said before, the only way forwards is to remove regulations and let the market grow an industry with comparative and competitive advantage. Of course, we already have the ability to do this in mining and agriculture, but it just doesn’t sound sexy enough to the central planners. But it still brings in the jobs and tax revenues.
Probably copied and pasted from Word. Fixed.
Technology is even less encumbered by logistical concerns than manufacturing. You can often ship your product over the internet, and support it too. With high labour costs here our value adding will have to be darn high to justify a local base. Another case of “tell em they’re dreamin”.
They really need to give up on the Silicon Valley analogy if they want any traction on this.
Silicon Valley is called what it is because of the large (but falling) number of wafer foundries there. There was a good combination of investment, education and cheap labour (which is important).
There is a snowball’s chance in hell that such facilities will be built in Sydney with the usual environmental suspects holding everything to ransom.
There is one fab in Sydney, and its been here since about the mid 80′s, IIRC. It has struggled through multiple owners (about 5-6) and is a niche facility with old technology.
Only 2-3 other facilities ever existed in this country.
FFS – its easy. Ask business what would help R&D, then provide suitable tax breaks to help get that done.
The only thing needed is for government to get the hell out of the market place and leave the companies to work it out for themselves.
For Gods sake, it isn’t that hard.
Whenever government even glances at something, they stuff it up. So what to do with a stuffed economy that’s in a hole?
Maybe stop bloody digging?
Fabrication plants have long since left silicon valley; the name is vestigal.
What’s stayed is the culture and a continuous reinvestment of capital from profitable ventures.
Alan, industry policy reasserts itself once a generation because enough people have moved on that those left behind forgot the arguments from the last time that mercantilism was refuted.
The up-and-coming generations lacks knowledge of these old ghosts. young people always think they are facing the first salvo.
There were the strategy trade policy wars of the 1980s. Krugman managed to lead the charge for that and then led the charge against it when Clinton did not give him a job.
One of the best refutations of industry policy is in the 1984 economic report of the president. Krugman worked at the council of economic advisors around that time.
MITI was supposed to have picked winners. everyone says so. If so, MITI must have to have excellent investment appraisal skills? How would you test that?
Look at their investment portfolios after they retired. Much less inside information but those picking winners skills can be used to trade on their private accounts.
My professors at graduate school in Tokyo were retired from MITI, ministry of finance, the lot. they worked at those ministries in the high growth years picking those winners.
The retired MITI and other professors kept their wealth well hidden. Clothes were the same as others. Their children went to normal high schools and Japanese public universities. They all looked forward to their annual bonus (5.15 months salary). No BMWs.
I thought all would be revealed when invited to their houses for lunch. Alas no: an ordinary Japanese suburban house. Many still lived in their ministry apartments.
Bureaucrats who could pick winners – beat the market – should be excellent investors in their private portfolios after they retire. They have the core skills.
If special investing skills somehow appeared from the air inside MITI and the other ministries, people would pay to work there. There would be books written on the investment skills passed on by MITI word of mouth. Someone would spill the beans.
Jim
Too true about the MITI myth. It was grabbed by Chalmers Johnson and others who observed the polite apparent acquiescence of Japanese corporate leaders vis-a-vis their government counterparts and concluded they were being lined up for selective support.
An enticing story for all the political and beureaucratic types lodged in work that has little purpose unless they are pulling levers. Such a disaster for economies who followed their advice