On the road to Damascus
As the years went by I began to doubt the doomsday predictions that accompany the death of each old business, some of which predictions I helped to draft, and to value our economy’s ability to take up new ideas quickly and to quickly abandon those that have had their day. But at some point, like Paul on the road to Damascus, I had an epiphany, realising that our intervention was, in many cases, doing more economic harm than good.
I have spent many long hours debating these issues. My argument became that we should redirect government support for manufacturing to the area where it demonstrably improves productivity: to programs that develop skills in, or provide external expertise to, medium sized enterprises that are demonstrating high growth; to foster growth that is reflective of an innovative product or service and/or improved production technology and/or a new market opportunity. Assistance should not be squandered keeping 'typewriter manufactures' in business or in relocating businesses to a struggling country town where they can only continue to exist on subsidies.
But as we are presently witnessing, politicians like to offer their electorate taxpayer funded presents. And they feel a need to do or, more often, just to say something in mitigation, if a significant business is to be lost. They often expect to be backed-up with some kind of executive action, usually amounting to a taxpayer handout, to delay a closure.
I could easily list another twenty major manufacturing closures in regional NSW, including iron and steel making in Newcastle, and probably, if I had access to the database, thousands of smaller businesses, where there is a high ‘churn rate’ of start-ups and closures.
I have come to accept that these many closures have not devastated the Australian economy. Quite the opposite - resources have been redistributed more efficiently. The economy grew rapidly at the end of the last century as we began to concentrate on the things we do well and to abandon those old industries that once weighed us down.
History shows that the impact of such a closure is often ultimately beneficial. The decision to abandon a moribund, unprofitable industry in a growing city can be positive, as productive resources, including land; factory space; and skilled people, are rearranged.
On my birthday in 1999, Newcastle, that was once the home of Australia's largest steel maker with a peak workforce of almost 12,000, saw the closure of the coke ovens, blast furnaces, and steelmaking that once defined the city. In a decade and a half since the closure, Newcastle has blossomed and now has a larger workforce; a larger population; and substantially lower unemployment; than it had in 1999.
But for me, the last step on the road to Damascus was the Victorian Government’s attempts to save a Kodak processing plant at Burnley, in the face of obvious technological change. It became a symbol of wrong headedness. How could anyone not see that film was a dying, if not already dead, technology? That they enlisted Federal support for this farrago was unconscionable. Australian taxpayers money, that could have been spent on scientific research; education; infrastructure; or dozens of better projects that could be real investments in the future, was squandered.