Cars. You probably own one. If you live in the suburbs, you actually need one. And apparently if you are the Prime Minister of any self-respecting industrialised nation you need the ability to make one.
That’s why industry policy is back under the Rudd Government. And when it comes to industry policy in this country, one industry gets very special treatment.
The idea that governments can and should support specific industries — often ones that are shedding jobs, and thus hurting voters — is not one that many economists support. It’s long been out of fashion at places like the Productivity Commission and the Treasury. Let the free market operate, say the neoclassical types like Sinclair Davidson.
But with Kevin Rudd and Kim Carr at the wheel, preferential industry policy is on track. The Rudd Government seems determined to pick winners, if necessary by throwing taxpayers’ money at multinational corporations in the hope that they’ll create wonder products like green cars or clean coal power plants. "I don’t want to be a prime minister of a country that doesn’t make things any more," Rudd told the 2007 ALP National Conference.
Politicians, especially Labor politicians, are perennially fascinated by manufacturing. It has traditionally created the kind of well paid, unionised jobs that are disappearing so fast in rich countries like Australia and the US. Indeed, the ALP has a history of industry policy that dates back to the foundation of the party itself: the notorious White Australia policy, for instance, was championed by the Queensland ALP as a way of keeping cheap "coloured" labour out of the country to prop up working class wages.
In the 1980s we had John Button. The Hawke government’s charismatic industry minister spent several years and billions of dollars coming up with the "Button Plan" for the Australian auto industry. The idea was to reduce automotive tariffs and get manufacturers to share costs. Australian consumers got the dubious benefits of "badge engineering", where the same car was sold by two different manufacturers under different brands. Remember the Holden Apollo? No, I didn’t think so.
Industry policy, 2008 style, is represented by the auto industry assistance package announced by the Rudd Government on Monday. It’s a 12 year, $6.2 billion handout that aims to prop up Australian car manufacturers at a time of global over-capacity in the industry.
Any way you look at it, this is a risky policy. Twelve years? Can Ford and GM even last 12 weeks? The giant US manufacturers have been smashed by the American recession and are burning through their cash reserves at the combined rate of $US1 billion a week. Detroit’s Big 3 have long relied on gaz-guzzling tracks and SUVs and ruinous credit incentives to get US consumers to buy. That’s not working anymore and their proposed saviours — fuel-efficient small cars and the much hyped Chevy Volt — may not arrive in time to save either company. One of Barack Obama’s first decisions is likely to be whether to bail out the big US auto companies.
What is it about cars, roads and freeways that so fascinates Australian politicians? Even under John Howard, the Australian car industry received plenty of preferential treatment, and Australia’s premiers and mayors are still addicted to a freeway-building fetish that flies in the face of any sensible analysis of our carbon-constrained future.
The problem, of course, is voters. Australians love their cars and they hate sitting in traffic. We have an unashamed love for car culture (who doesn’t love the parking scene in The Castle?) and motor sports remain big drawcards on our sporting calendar. We also have an aggressive automotive lobby led by state-based motoring clubs like the NRMA, RACV and RACQ which has only recently begun to be balanced by cycling, pedestrian and public transport users groups.
In many ways, cars have become fetish objects in Western societies, much more significant and electorally sensitive than their declining economic and social significance warrants. When was the last time you heard a politician stand up for the hairdressing industry? Service sector jobs employ many more Australians than the manufacturing sector, but somehow they don’t capture the glamour of "making things."
It’s time Australians debated the merits of automobiles more generally. Cars are wonderful devices for personal freedom and mobility. But they can also be a cage with leather seats, condemning workers and families who live in the sprawling outer suburbs of our cities to spending years of their lives in tedious, sometimes dangerous traffic — as the Australia Institute’s 2005 paper "Off to Work" detailed. Cars pollute the atmosphere, they kill and maim their drivers and occupants, and they’re helping to make us fat. The failures of our freeway-building transport planners have turned our suburbs into what epidemiologist Sarah Hinde calls "a cultural economy of car reliance."
While we’re having this debate, we might also consider the merits of funnelling billions of dollars to multinational corporations, even if Kim Carr insists that more than 200 Australian component manufacturers will also benefit.
As the Government’s own innovation report, released earlier this year, points out, there are better ways to stimulate innovation than handouts to big manufacturers. Tipping $500 million a year into the Australian Research Council would go a long way towards achieving Terry Cutler’s recommendation of doubling Australia’s public research spending in 10 years. Instead, it’s all going to be spent on a failing industry.
Let’s hope consumers really want to buy those hybrid Commodores and Camrys.
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