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Tuesday, 11 February 2014 18:48

Australia drifts toward third world as manufacturing dies Featured

First Holden Prototype First Holden Prototype National Museum of Australia

The news that Toyota has joined GM and Ford, announcing that it will stop making cars in Australia means much more than the tragic loss of thousands of local jobs. It is yet another sign of the inexorable decline of Australia’s economic self-sufficiency and slide out of the ranks of a proud, capable first world nation that produces its own finished goods.

Those who think – as many economists and market commentators do – that Australia doesn’t need manufacturing and can prosper from mining, primary produce, tourism and services alone are living in a fool’s paradise. To paraphrase the words of a one-time senior manufacturing executive, if we want to thrive as a country, we can’t simply be a nation of bankers and real estate developers.

Africa is a continent much larger than Australia with an abundance of natural resources, arable land and is host to a bunch of impoverished third world countries. Greece and Spain are tourism paradises with 30% unemployment. Go to Asia or even Eastern Europe, where the desperate for work populace will provide all the services you want for a fraction of the cost of what you’ll pay in Australia. You can find many of them on

The fact is a country that makes nothing of its own and has to import all of its finished goods is not a first world country. Yes, it may have pockets of fabulous wealth as many second and third world countries do, but it also has an almost non-existent middle class and an overwhelming abundance of masses living in poverty.

Take a look at the once mighty USA, a one-time manufacturing juggernaut that is now forced to live on a $1 trillion a year drip feed of zero interest rate central bank money printing. Those who seriously believe that the US economy and jobs are coming back should ask themselves where are these jobs coming from. They’re certainly not coming from Detroit, once the richest city in the US, which used to churn out cars by the millions but where factories are now rusted out shells and real estate can’t be given away these days. Perhaps Silicon Valley is the new jobs growth engine of America?

Silicon Valley certainly is a knowledge workers’ paradise, with companies such as Apple, HP, Google, Intel and countless others employing tens, even hundreds of thousands. It’s probably a great place to work if you’re a Stanford graduate or maybe lucky enough to score a job as a Google bus driver. However, most of the companies in the Valley, with the notable exception of Intel perhaps, no longer make hard products to any significant extent in the US.

Go outside the Valley, however, to San Francisco, and the growing rift between the relatively few workers employed within the elite IT industries and the rest of the populace is becoming increasingly apparent. Air conditioned luxury Google buses with on-board Wi-Fi pull up at public bus stops In San Francisco to pick up the privileged few and ferry them to Mountain View while the irate masses watch on and complain that wherever the Google buses go their rents and house prices rise.

This isn’t meant to be a Google bashing story and the search giant can quite justifiably argue that it is in the best interests of itself and its workers to provide perks such as Google buses. However, the point is made to illustrate that the knowledge industries emanating from Silicon Valley are now just a tiny and, thanks to offshore outsourcing, a shrinking fraction of the overall jobs market. So once again, where is the so-called U.S economic recovery coming from? Low paid service jobs?

Before returning to Australia, let’s take a look at Western Europe.  We’ve already mentioned Greece and Spain, but France and Italy are also economic basket cases with double-digit unemployment, the Netherlands and Belgium are approaching double-digit unemployment, while the UK is not in as bad shape yet but suffers from horrific youth unemployment. Is there at least one country doing well? In fact there is.

Germany, the largest country in Western Europe and a manufacturing powerhouse, is the one country of any size that is doing well. When it comes to land transport, Germany makes everything from cars to trains on its own soil. And Germany is able to do this while paying its workers top dollar, with an average 37 hours working week and six weeks annual leave. Germany doesn’t just have one major car manufacturer – it has three! And they’re all doing well! What’s more, there are great manufacturing companies like Siemens that make anything from healthcare products to wind generators to very fast trains and trams – the ones we use in Melbourne.

Now back to Australia, where we have just learned that the last of the automobile makers Toyota will shut the doors on our 65-year-old car manufacturing industry in 2017. Perhaps the most disturbing thing is that very few Australians other than the displaced workers seem to care. We appear to be determined to follow the failed U.S economic model rather than the successful German model. Encouraged by the media and governments, we are led to believe that the only thing that matters is what’s cheapest for consumers.

Thus, for many it is more important for consumers to be able to buy cheap new cars on easy credit that can be disposed of every three years than for Australia to have the capability of making its own cars. We are led to believe that it is sound economic practice for us to have a cheap imported car for every member of the family rather than to have one solid Australian-made “family car”.  After all, the way to avoid a recession is to keep buying cheap imported goods on our credit cards right?

So now that the remaining three car manufacturers have committed to shutting their plants is there anything that can be done?  Well yes but it would take the sort of cojones that Australian governments of whatever persuasion have not had since WW2.

Back then, our government was discussing with GM and Ford a grand plan to produce an Australian-made car, a plan that eventually came to fruition in 1948 with the first Holden. Perhaps in some parallel alternative universe our government could take the billion or so it was going to offer GM and Ford to keep their factories open here and instead of using it for redundancy payments and useless retraining programs it could throw in some more money, buy up the existing plants, keep the design and manufacturing expertise painstakingly built up over 65 years in our wonderful country, which produced the inventor of rack and pinion steering, and create a truly Australian car maker that can later be floated on the ASX.

If all that sounds too radical for those of you who don’t have a problem with our government spending $40 billion on a fibre optic broadband network, then please go back to eBay and put in a bid to buy a phone with Flappy Birds still installed.



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Stan Beer


Stan Beer co-founded iTWire in 2005. With 30 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications.


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