February 26th 2005

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Articles from this issue:

COVER STORY: NATIONAL AFFAIRS: The WMC takeover - losing our last mining giant

EDITORIAL: A challenge to the biotech corporations?

SCHOOLS: The battle for our children's minds

SPECIAL FEATURE: 1.5 million dead Armenians (but don't tell the EU)

ECONOMICS: Australia's plight in dire need of a remedy

SUGAR INDUSTRY: Anger at stalled sugar package

ENERGY: Ethanol needed for new fuel, engine standards

STRAWS IN THE WIND: Conspiracy against public health / Half a loaf is better than one / Palm oil - a New Class aphrodisiac

IRAQ: Shi'ite win in Iraq elections vindicates US role

CHINA-TAIWAN RELATIONS: China's anti-secession law raises tension

CHINA: Beijing's ban on sex-selective abortion

POPULATION: Why Australia must decentralise to new states now

OPINION: The tsunami of bias

The Holocaust Industry (letter)

Communist killings (letter)

Putin a second Stolypin? (letter)

The Left and the Iraq War (letter)

Misinformation about WW2 bombing (letter)

No reaction to Dutch infanticide (letter)

Link queried (letter)

Sure-fire recipe for disaster (letter)

BOOKS: DAWKINS' GOD: Genes, Memes, and the Meaning of Life, by Alister McGrath

BOOKS: GOD UNDER HOWARD: The Rise of the Religious Right in Australian Politics

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Australia's plight in dire need of a remedy

by Colin Teese

News Weekly, February 26, 2005
Sometimes it pays to look backwards. This writer was unable to attend the recently concluded NCC national conference. Nevertheless, communication with others who were able to follow proceedings, made it possible to keep abreast of what was happening.

On matters economic, Dr Peter Brain provided the conference with a most notable address. Some of his views are not unknown to many readers of News Weekly. He has been a consistent critic of economic rationalism and its adverse impact on Australian economic life. And, in a discerning circle of economic thinkers, his views are widely respected.

He maintains, and argues cogently for his position, that by following the dictates of economic rationalism, successive governments have compromised the economic future of our country. Dr Brain points out that there is no example in the developed world where a country has been able to equip itself to participate in 21st-century industrial development without its government identifying and assisting in the development of strategic industries.

Under the influence of economic rationalism Australia has turned its face against this reality.

The important question to ask is this: if the points made by Dr Brain - and other similarly enlightened commentators - are so self-evident, why are they not widely accepted?

To take only one issue by way of example, how is it that orthodox opinion can continue to assert - as is the case right now - that unemployment is at a 30-year low when the facts contradict that proposition?

The truth is that there is no valid basis for comparison of employment levels between now and 30 years ago, if only because the methods of calculation are no longer the same.

Why is it then that these assertions are allowed to go unchallenged?

To get some idea of the answers to these questions is it necessary to look backwards. Dr Brain himself, in an Alfred Deakin lecture back in 2001, gave us some insights which are vitally important and which will be examined in greater detail later. But no less important were the views of B. A. Santamaria in a 1996 paper entitled "Australia's Economic Problem: The Issue of Sovereignty".

Now both papers offer us equally important insights, but it must be remembered that the problems Mr Santamaria identified a decade ago had been recognised by very few others at that time; and, certainly, none had brought together the economics and politics of the problem in quite the way he did.

It's worth re-examining a little of what he said at close quarters. He reminded us of an important truth which was contentious at the time, and would still be denied by economic rationalists.

"Economies," Santamaria insisted, "... are not about abstract definitions. They are about the distribution of wealth and power, which inevitably involves major conflicts. One of these is now developing [and he was talking about economic rationalism and globalisation] between a highly concentrated number of very rich who control society, and the mass of very poor which do not have a stake in it any longer."

He went on to talk about - of all things - how Karl Marx saw this conflict and how it was played out in real life. Societies were based on a dual structure: a sub-structure, where all aspects of economic power played themselves out, and where economic power - as it always did - translated itself into political power. Above all of this was a super-structure - a world of ideas and of ideology. From this was distilled a received orthodoxy containing some variety of opinion, but nevertheless constructing a fundamental consensus held by a majority of people.

On the Marxian definition, globalisation, deregulation and free trade, would today be the prevailing and accepted orthodoxy, embraced in greater or lesser degree throughout the Western world.

Big business

And, as Santamaria points out, Marx would insist that the beneficiaries of this economic internationalism would be "... the transnationals [companies], the major investment banks which finance them, the members of the interlocking directorates which hold them together, the top echelons of university faculties, the bureaucracy, the union leadership which, in different ways, is increasingly integrated with big business, and the political leadership which is all that counts in the life of the political parties."

This kind of quasi-Marxian analysis, which Bob Santamaria spelled out for us 10 years ago is pretty much what we see today - except, possibly, for the trade unions, which appear to have been squeezed out. And there are reasons for that which fit neatly into Santamaria's analysis.

Dr Peter Brain, five years later, comes to the same conclusions as Mr Santamaria, except that he approaches the issues from a different perspective. Coming later to the problem allows him the privilege of refining both the definition of the problems and how they might be dealt with.

There can be no doubt that both believe that globalisation and its trappings have been developed to advance the cause of international corporations. Free trade is the key. It allows these companies to set up wherever it is most convenient, and to sell its output, without impediment, wherever they like.

This truly immense economic power of the international companies has not so much been wrested from governments, but willingly offered up, presumably in the mistaken belief that it will enhance economic growth.

Nothing of the sort is true. World economic growth is not necessarily enhanced by moving productive capacity from one country to another, though it might possibly happen that some goods will be offered at lower prices. But this is by no means certain.

What we do know for certain is that world output, by virtue of this policy, will not necessarily increase, but the share of that output falling to international companies will most assuredly grow.

World trade

And so, of course, will world trade. But this is not a virtue in itself. If trade increases at the expense of output in individual companies, then the benefits accrue, not to the individual countries, but to the international companies controlling the output and distribution of what is produced.

Economic rationalists are constantly telling us that world trade is expanding and that this is good for the world. Not necessarily. We know that most of world trade is in the hands of major companies and that they are benefiting enormously from it. But what are the gains for those countries who have surrendered domestic production by removing barriers to imports? What are the gains for them?

This is the real point. Does it mean no more than the export of jobs and domestic production for the benefit of others?

In the end, this is what Santamaria and Brain recognised when many others were still trying to figure out what had happened.

What they saw was that embracing free trade was another way of winding back industry development and condemning Australia to entering the 21st-century having surrendered our capacity to make 21st-century products - or even to make 20th-century products with the benefit of 21st-century technology. As Brain points out, our economic policies now amount to nothing more than maintaining a low exchange rate for the purpose of sustaining mining and agricultural exports.

We have found better ways of handling that in the past and we should look at them again.

The fact we can't ignore is that the present policy of keeping downward pressure on the exchange rate inhibits the attraction of investment into more advanced manufacturing which can benefit both traditional and new industries.

Both Bob Santamaria and Peter Brain are perfectly clear. The key requirements for any change will be government intervention in the name of promoting industrial development in strategic industries. In other words, we must have an industry policy.

And for governments to understand, as Dr Brain puts it, that there is, indeed, a difference for the economy and the national interest between investment in the production of potato chips and micro-chips. And for this to happen, the commentators agree, will require some control over financial institutions, which at the moment are able to insist on remaining indiscriminate and profligate lenders.

The question which ultimately troubled both commentators, and obviously still troubles Dr Brain is how to turn all of this around. Each - for slightly different reasons and by travelling along slightly different pathways - has recognised that the key to any change is political.

Brain, is much more explicit. He believes that, in so far as it applies to economic rationalism in Australia, representative democracy has failed. He identifies, as does Santamaria the converging of the parties and party discipline as culprits.

But he goes further. He identifies the fact that the Deakinites - that is the true liberals - were rooted out of the Liberal Party in the 1980s and that the National Party deserted its traditional supporters, and joined itself at the hip to the emerging economic rationalist Liberals.

From Peter Brain's perspective, the only hope is for party discipline to weaken and to allow the emergence of new parties to help members of parliament to regain control of parliament for the benefit of their constituents.

Public opinion

Bob Santamaria was a little more circumspect. Most likely, having identified how public opinion was shaped in societies, he called for the building of a movement capable of driving economic and political change.

Perhaps, in the end, they were not so far apart even as to how to effect change.

In any event-at least for this writer, the journey back in time was well worth the effort.

  • Colin Teese was deputy secretary of the Department of Trade.

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