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The Forum > Article Comments > Return of protectionism > Comments

Return of protectionism : Comments

By Saul Eslake, published 1/9/2011

The only thing the government can do for manufacturing while maintaining collective wealth is to help it maintain productivity.

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I am a protectionist and proud of it.
The globalization of the world industry, which in effect means moving factories offshore to countries that give big tax breaks and allow the payment of miniscule amounts to labour, is a festering wound.
“A narrower range of often poorly-made goods” means that Eslake does not consider Australians capable of emulating peasants in Asian countries and doing skilled work.
So we are only capable of quarry work to supply those doyens of industry working for a few dollars a day with the raw materials to produce the high quality goods we desperately need.
Might I suggest that it is purely profit that drives the export of our and the other “developed countries” manufacturing offshore.
We have seen many of our icon industries close and move away because “they can no longer compete with imports”.
Of course that can’t. How can any business compete with the so called level playing field, where wages for a start are so mediocre?

No we must protect our core industries and the sooner the better.

Australia is supposed to be the “clever country” so is it smart to turn us into a nation of shopkeepers and quarrymen?
Posted by sarnian, Thursday, 1 September 2011 9:01:47 AM
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Our industries must be able to compete on the world stage, not just the domestic one. Gov't subsidies, derived in part from a mining resources tax, should be applied. Taxing imports is not the way to go as that only benefits industry serving the domestic market, not the world market.

Even the proceeds of a carbon tax could be applied to this. The CT is really just an addition to the tax base that reduces reliance on income tax, company tax, and the GST. This broadening of the tax base gives the Gov't more flexibility in responding to the situation than ever.

Bluescope Steel is an operation that should be able to wring efficiencies in all areas, especially in the distribution its product which follows archaic practice in trying to keep it all in-house.
Posted by Luciferase, Thursday, 1 September 2011 9:23:08 AM
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Interesting use of the word “force”, there, Saul.
“But there’s not much difference between that traditional form of protectionism and the idea that businesses should be 'forced' to buy Australian-made products in preference to imported goods that are cheaper...”
But it's okay to 'force' businesses and all taxpayers to pay more to cover unemployment benefits, etc.?
And again: “...forcing Australian consumers or businesses to pay higher prices for a narrower range of often poorly-made goods...”
Yes indeed, the cheap shops are just full of high quality imported goods for crazy prices... Spend a lot of time in the Warehouse, or even Big W, Saul?
And again: “Forcing ‘struggling’ Australian households to pay higher prices for kids’ clothes...”
I think every shopper (unfortunate enough to not be an economist) understands 'you get what you pay for'; and 'buy cheap, buy twice'. As an economist, I would have thought you would be able to argue your point more effectively by offering proof, instead of just using one word emotively.
Before we can claim to be progressive, we need to first have a goal; then demonstrate we are heading towards that goal. Using an increase in GDP proves nothing. A good flood or bushfire can do that.
How about forgetting established doctrine for half a mo, and checking some facts? Like comparisons to other economies -many if not most of which still offer some form of protection to their domestic businesses? How about checking how much tax is spent in more equitable societies on unemployment benefits, and the constabulary and corrective institutions?
What about a general happiness index, instead of GDP?
I'm old enough to remember when 'made in Tokyo' was synonymous with 'lasts until Boxing Day-if you're lucky'. There's no getting around the fact that if you keep giving someone else money...
They're going to end up with all the money.
And you're going to end up paying just as much for imported goods, as you would have if you had made them yourself.
Posted by Grim, Thursday, 1 September 2011 9:24:34 AM
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“The best thing that the Government can do to assist businesses and workers in the manufacturing sector … is …. to assist them in improving productivity.”

Oh that’s a good one (wipes tear of mirth from eye). So now Julia Gillard is going to assist entrepreneurs to improve their productivity? Saul does not explain how they are to do this, but it should be obvious that governments have no general residual capacity to increase the productivity of businesses.

But we can think of dozens of ways the government is actively reducing the productivity of businesses – lemme see, how shall I count the ways? Income tax, GST, capital gains tax, fringe benefits tax, superannuation laws, fuel tax, occupational licensing, so-called OHS laws, and every kind of interference in other people’s business of which government does not and cannot have superior knowledge.

The only way government can assist businesses in improving productivity is to reduce its own depredations against them.

“The Government should also be seeking to extract the highest share it can of the proceeds of the exploitation of Australia’s natural resources, without deterring the investment required for those resources to be exploited”

So the government should tax mining, but the tax should not deter the people paying it from the activity being taxed? This is economic and ethical nonsense.

BTW, they’re not taxing undiscovered rocks in the ground. They’re taxing them after private concerns have raised the capital, explored, surveyed, put in roads, built towns, extracted them, marketed them, sold them, and shipped them. And now all of a sudden, they are owned in common! Economically, this theory is no better than communism.

Saul ignores the possibility that the funds from mining will better serve the wants of the Australian community by being left untaxed.

“using the revenue flow over time to enhance Australia’s productive capabilities, through well-targeted investments in infrastructure and skills formation.”

Please don’t make us laugh. How is the government going to know how to “well-target” an investment? If they had that general ability, private property would not be necessary.
Posted by Peter Hume, Thursday, 1 September 2011 9:34:23 AM
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sarnian/Luciferase/Grim/Peter Hume

Look, where have you guys been for the past few decades? Australia went down the protectionist path for decades before abandoning it, for the very good reason that it didn't work. All that ever happened was that the manufacturers would sit behind the high tariff barriers and complain that they had to be higher. They didn't try to innovate or invest in better systems, instead they spent their energy "gaming" the protection system.

Local industry ossified. It was just an expensive dead weight kept there for political reasons, and only those with no knowledge of how the system use to work (or didn't work) would advocate a return to it.

Admittedly manufacturers are doing it tough at the moment, but even they don't want a return to the old system (I've spoken with a few). Helping them lift productivity is all that can be done, and it shows the naivity of one poster that he laughed at the suggestion.

The old system was dumped for very good reasons. Time to update yourselves.
Posted by Curmudgeon, Thursday, 1 September 2011 11:16:36 AM
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Saul states 'However, it’s much more likely that the ‘mining boom’ will last at least until the end of this decade, and possible into the early 2030s. If the history of other countries is any guide, China won’t begin to move out of the commodity-intensive stage of economic development associated with urbanization and industrialization until 2019 at the earliest, and possibly not until 2024. India, which only entered this stage of development in 2007, won’t begin to exit it until 2032 at the earliest.'

Think about this, the IEA clearly stated Peak Oil occurred in 2005, we have an ever declining energy resource key to all components of modern society. With declining and more expensive oil, it won't matter whether or not we need protectionism, globalisation is dying, current economic policy is failing and government, industry and spruikers don't want to, and won't accept this reality.

Our economy is now in a perpetual no growth situation that may see some slight upticks, but the general trend will be down, governments and economic policy experts cannot work this out and have no models to work from. We are in the very early stages of systematic global decline, per capita energy has been in decline since 1979 and is heading off a cliff. Saul, like all economic 'experts' fails to see or acknowledge this, to all our detriment!
Posted by Geoff of Perth, Thursday, 1 September 2011 1:51:12 PM
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