Dr Barlow, re your point that “the shifting nature of innovation suggests that we should stop worrying about our ability to compete in high-tech manufacturing.”

This “worrying” tends to arise from state “economic development” agencies which don’t understand what drives economic growth or concepts such as value added, comparative advantage and competitive advantage.

“Value added” is an accounting term, measuring the difference in the value of output from a firm and the cost of its inputs. All firms add value or go bust. But bureaucrats tend to define value adding as, for example, turning ore into refined metal or wool into clothing, and offer subsidies and other incentives to firms to engage in these “value adding” activities. Implicitly, they are saying that it is more valuable to add value in such ways than in other economic pursuits. This is worse than nonsense – if the favoured activities were commercially viable, they would proceed anyway – if they proceed only with subsidies, more viable firms are being taxed to support non-viable firms.

Better to consider “competitive advantage” - the ability of a firm to make higher returns than its competitors. (A classic example was BMW before it embarked on poorly-judged mergers and acquisitions.) It doesn’t matter what the sector or industry is, firms which can develop competitive advantage will grow faster and generate higher incomes than others – as you say, whether they are hi-tech or not is irrelevant. And innovation is not just about new gizmos, its about better processes, better ways of satisfying consumer demand, etc.

Australia is crap, but Asia is our Oyster.

Get over to the IT hub of the 21st century and do better business with no tax and government paid offices and incentives.

We are mugs for even contemplating competing, we are dominated by traditional industries with traditional business models and when hi tech companies appear in Australia, it is very hard to get funding, and very hard to get any benefits at all.

Lets stick to what we do best, and let the free for all happen somewhere else - we dont want it anyway as we are mving from the computer age to the energy age, thats where we need to keep pioneering as we will never be first to markety and our costs here are too high for high risk tech ventures.

I agree with Dr Barlow and suggest moves in the directions he highlights could be accelerated and facilitated by an innovative approach to governance of networks. A stimulating and informative discussion is taking place on this and related matters at
http://groups.google.com/group/Value-Networks. Included in the messages there is access to my paper about the Integrative Improvement Institutes Project which, among other things, offers an innovative approach called Integrative GovernanceTM.

Realist and Faustino, your argument is nothing new about low populated nations like Australia with too much desert and with ooddes of underground metallic surpluses. Furthermore, the Howard government has been following that premise to a T, by only training people engaged in mechnical assembling, not in total construction from the ground up, as was done with much of our farm machinery, and even much of the earlier mining gear as well as even steam locomotives and rolling stock.

But as well as losing our senses of innovation, as was produced with the stump jump McKay sundercut plough - as well as the header harvester and reaper-thresher, patents stolen and now sold back to us as gigantic harvester combines at one half million dollars a throw.

We might say that because we now mostly import even with cars and trucks only of imported bits and pieces to put together, causing us to have the hightest balance of payments costs by far for our size in the world. Indeed, it is so large amounting to just on one half trillion dollars that Costello hides the information - with Labor too dumb also to let the public know.

The point is what are our grandkids going to do when all the underground supplies, as well as our innovatory capabilities run out through innovatory laziness caused by too much interest in sport and the good old Aussie - she'll be right mate, which seems to have also become the Howard and Costello war cry.