Manufacturing

Manufacturing needs appropriate infrastructure but big companies have to pay their way if they want to have the infrastructure. Henry Ford made a fortune but he didn't have to build the roads for his cars. The public taxes did that.

The poor may not drive cars but the still have to fund the roads or maybe even build them.

The big companies want all the facilities laid on by the taxpayer but they don't want to help fund them. As Warren Buffett admits he could not have made his enormous wealth if he had being born in India or the jungle in South America. He needed everything to be in place already.

Australians love cruising but they don't build the cruise ships. Could they build the ships? Of course they could if the will was there. The South Koreans did it and it wasn't done on cheap labour either. Labourers were being paid double what a labourer would receive in Australia. The brought in the experts, one from Ireland and one from Canada and asked them what their dream shipyard would be like. Then they said ‘build it’. They had no history of shipbuilding but they figured if the Japanese could do it they could. And they could.

South Korea is the biggest shipbuilding country in the world with 37.45% of the world total.

(China is second. The opposite of Capitalism is not Communism. The opposite to either is good and honest government. That’s what we are asking for.)

So could Australia. We did it once. We have forgotten that there was a substantial shipbuilding yard in Whyalla and in Brisbane. These two companies together produced 74 merchant ships from 1942-72. The ship building industry in Australia has witnessed a decline from 1970 onwards.

We can do it again. And it has nothing to do with wages. It has to do with government will. None of our super wealthy has shown the slightest interest in manufacturing and there is no indication that they ever will.

Casinos and newspapers/television and mining and shopping malls, supermarkets and more gambling are lucrative but they are not manufacturing and those in charge show not the slightest interest in ever manufacturing anything.

There needs to be big tax incentives for manufacturing. At the moment all the profits are either leaving the country or going to shareholders and not into growing the businesses.

Without a manufacturing industry we will indeed be the Poor White Trash of Asia. Being agile and nimble is just another slogan and it will fizzle out by the time the next slogan comes around.

Economies like Japan and Germany were built with long term low interest and sometimes no interest loans. That is what is needed in Australia. The manufacturing industry must be resurrected.

A Deloitte report stated the nation could become less competitive over the next five years while the United States was expected to become the most competitive country in the world, overtaking China.

Deloitte’s 2016 Global Manufacturing Competitiveness Index showed Australia had fallen five places from 16 to 21 in over the past two years.

Top 10 competitive manufacturing nations:

  1. China
  2. United States
  3. Germany
  4. Japan
  5. South Korea
  6. United Kingdom
  7. Taiwan
  8. Mexico
  9. Canada
  10. Singapore

Manufacturing industry’s share of GDP

The usual complaint and excuse is that Australia is a high wage country, but Germany is still one of the biggest manufacturers in the world and it’s not a low wage country. How have they adopted to the competition from low wages in Asia? One example would be Germany’s Putzmeister, the world’s biggest manufacturer of the giant concrete pumps used to pump concrete up to the top stories on construction sites. It splits its production between high-wage Germany and low-cost China. The Chinese plant mostly serves the booming Chinese construction industry. German operations meet the demands of developed-world construction companies. There is also a plant in the US for their construction industry. Both the high-wage and low-wage operations are close to the customers they serve. Many new jobs are created in the high-cost German economy.

Belgium, Canada, France, Germany, Ireland, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland, United Kingdom and others are not low wage countries but they are manufacturing countries. Ireland with a much smaller population and few natural resources has many similarities to Australia but it imports 60 billion dollars less than it exports thus giving it a huge surplus in its balance of trade. It borrowed the money to achieve that and it came off a very low base. The industrial revolution passed over Ireland like a white cloud on a fine day.

Ireland and Australia went in different directions around thirty years ago and it would be difficult to suggest that Australia went in the correct direction. If Australia didn’t have minerals it would be as Paul Keating said a real ‘Banana Republic’. If you substitute minerals for bananas that’s what Australis is.

Unlike Ireland, and indeed South Korea thirty years ago Australia was up with the rest of the world in manufacturing; now Australia is down to the level of Greece.

(Ireland’s fall from grace had nothing to do with the balance of trade or manufacturing but with the speculative bubble in property that was supported by a surge in bank lending, and the balance sheets of Irish banks grew disproportionately large relative to the size of the economy. The Irish were buying property all over the world with money borrowed in Ireland but not Irish money. When the international financial crisis erupted in August 2007, Irish banks were left vulnerable and exposed. When America’s housing market turned, a chain reaction exposed fragilities in the financial system. With falling property prices, banks began to suffer huge losses on their loans. Much of the money had come from conservative Germany (they save but they don’t speculate) and the Irish government guaranteed the banks. Surprisingly the Germans wanted the money back.)

The opening of the Newcastle Steelworks in 1915 established the Australian steel industry.  

Years later…Although the reformers spoke of a re-energised Australian manufacturing sector, responding to tariff cuts with an outward re-orientation that would stimulate innovation and boost productivity, this proved to be fanciful. Australian manufacturing went into precipitous decline instead.

Manufacturing has been reduced to a remnant. …Given the continuation of current policy, further decline in manufacturing is assured.

To reduce the foreign debt, what we need is to manufacture the things we import or at least some of them; house-hold products, whitegoods, tools, computers and all the things we regard as necessities.

Without a manufacturing base, Australia would need to import more consumer and capital goods, reinforcing our chronic inability to run a positive trade balance.

The drop in the Australian dollar might help the tourist industry but overall the country will go backwards because everything we import will be dearer. It’s now use telling us that internet items will be dearer so therefore that will help retailers in Australia. It would if the things they were selling were manufactured in Australia but they also have to purchase overseas so their price will have to rise exponentially. How can they be relatively cheaper?

It is increasingly recognised that accelerating deindustrialisation results in countries going backwards technologically, and diminishing their capacity for innovation. Not the other way around as Turnbull keeps trying to convince us. Other industries cannot substitute for this loss in capacity.

Until someone admits that’s where the problem is the country will continue to stagnate and struggle.

For example, in a paper published in the journal Applied Economics in 2009, Miao Wang from Marquette University, examined the relationship between inbound foreign direct investment (FDI) and economic growth within 12 Asian economies over the period 1987 to 1997. This analysis found that FDI inflows into non-manufacturing sectors did not play a significant role in enhancing economic growth. However, FDI flows into manufacturing industries had a significant positive impact.

The Economy

Despite the Conservatives saying that it is in their DNA to be better managers, in fact no party is a better manager of the economy. They mostly all just rise and fall with the tide of the global economy. Rodney Tiffen and Ross Gittins compare the Howard government’s economic record with the performance of other Western countries. They match almost exactly. However it is to Labor that we have to look for all the innovative policies. The Hawke–Keating Government introduced Economic reform. A fringe benefits tax and a capital gains tax were implemented. A compulsory superannuation was introduced.

The economical comparison between the US and Australia is unmistakable. However, Australia never was a superpower so it’s not as noticeable. The US still thinks of itself as a superpower but it hasn’t won a war in a lifetime.

How did the US rise from being little more than a colonial power to being a superpower? After the great depression of the 1930’s, Franklin Roosevelt planned and instigated an economic policy which rebuilt the US economy from the ground up.

In one simple example he created two million jobs that didn’t previously exist in parks and recreation. He began an infrastructure program on a scale previously undreamed of, putting dams and power stations near farms and bringing better living conditions to rural America.

From 1933 to his death in 1945 he presided over an epic stimulus program which transformed the flagging economy into a high tariff, high taxing, and prosperous system of production and distribution and consumption.

The rapid industrialisation of the United States gave it at least the appearance of a superpower.

However, the post war period under Harry Truman saw Roosevelt’s industrial economy systematically dismantled. Real capital was siphoned off through privatisation and replaced with mountains of debt. Financial markets were deregulated, leading to a series of booms and busts of ever increasing magnitude. The most recent brought the entire western world to its knees.

Roosevelt had repudiated Churchill’s planned cold war. Harry Truman proved a much more pliable president. That was where the rot set in again. Truman became a prisoner of the money people the Rothschilds, Warburgs, Lehmans, Goldman-Sachs’, Rockefellers and other banking elites, a relationship set in stone by the Federal Reserve Act of 1913,

In 1963 JFK planned to issue government bonds as currency, effectively shutting down the Federal Reserve. This did not end well for Kennedy, and to this day Washington and Wall Street remain loyal servants of the money people.

Projects built with taxpayer dollars was handed over to private interests only to be rented back at a profit.

So where did the money go from the US? It followed the manufacturing. Where manufacturing goes the money flows. Today we are witnessing the birth of a new superpower. This is unstoppable. The Anglo system was based on looting and that’s not as legal as it was. American capitalism was based on productivity. When the US outsourced its manufacturing to China (and Brazil), their superpower days were over. With almost total control of global manufacturing and new multibillion dollar funds for development the power lies with China.

China is now the banker of the US. (China is now a huge borrower itself, after squandering huge sums on cities where nobody lives etc.) Luckily China loans money to the US so that it can buy what China manufactures. But there is a price to pay. Credit Hillary Clinton with a wonderful quote which is, indeed, a great question: 'How do you deal toughly with your banker?'

China, whether we like it or not, is the new great power; it is also Australia’s banker and Australia’s factory.

Reserve Bank of Australia governor Glenn Stevens said in July that markets need to prepare for a world where China invests $400 billion a year offshore. The figure is equivalent to more than 25 per cent of the Australian economy

The comparison between the US and Australia is obvious. Once Australia closed its manufacturing and sold its government assets it was on the slippery slope to the mud at the bottom of the incline or in this case decline. The only way out of the mud would be to start climbing back up the slippery slope. Because the Coalition doesn’t even acknowledge that we are in the mud, or that there is a slope, all we are doing is sinking deeper. We are still selling off the assets. Now it’s the States and Territories selling them: Ten billion here half a billion there.

(Their latest rumoured plan is to sell the NBN network off, at a huge loss, to their corporate mates even before it’s finished. And no doubt take enormous commissions or transaction feeslike they did from the sale of the NSW power grid – a 'massive’ $134 million.

According to the Financial Review, these were huge "fees" for Liberal donors.

‘Banking sources place the fees for their advisers JP Morgan and Royal Bank of Canada at about $20 million. Each. Plus a cut of the debt and equity fees. Sweet Mary! As for the government's advisers UBS and Deutsche Bank, disclosure on the NSW tender website "estimated" they would each earn $17.5 million for their work ...’

Three of these recipients – JP Morgan, Deutsche Bank and UBS – have been generous donors to the NSW Liberal Party. An inquiry must determine why so many beneficiaries reaped such huge ‘rewards’ from the public purse.

Senior Liberal party figures and donors, including the party's federal treasurer, have reaped multi-million windfalls from the former Baillieu government's signature urban renewal project in inner Melbourne.

An investigation into the controversial Fishermans Bend project has found Liberals' honorary treasurer Andrew Burnes is among a slew of party activists and donors who either bought into the renewal precinct before it was rezoned or were long-term property owners that pressed for redevelopment of the area.

Others include auto dealer John Ayre and BRW rich-listers John Higgins and Harry Stamoulis​.)

How important is manufacturing for any country? Well it’s a lot more important than being agile and nimble and Ubering, all of which are just a new form of Work Choices’.

In a recent interview with Charlie Rose, when asked if Russia would survive sanctions, Putin replied: “Naturally, beyond any doubts, it is even out of discussion. Sanctions even have a certain advantage. Do you know what is it? The advantage is that previously we used to buy many goods, especially in the area of high technology, with petrodollars.” “Now, with the sanctions imposed and our partners having left our market voluntarily, we have an opportunity to develop.”

However, we have all our faith in Free Trade Agreements. Despite the fact that the critics were right. Ten years after the Australia–United States Free Trade Agreement, or AUSFTA, came into force, new analysis of the data shows that the agreement diverted Australia’s trade away from the lowest-cost sources. Australia and the United States reduced their trade with the rest of the world by US$53 billion and are worse off than they would have been without the agreement.

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