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The Forum > Article Comments > Detroit lessons for South Australia > Comments

Detroit lessons for South Australia : Comments

By Malcolm King, published 14/8/2013

South Australia's politicians need to face the fact that globalisation has decimated its economic base.

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Hello Cheryl:
You say "This is globalisation at work as manufacturing markets in Asia undercut local producers on price."

If you look ahead at the time when the mining boom has spluttered to a halt , this is what could happen to the whole of Australia not just Adelaide.
Globalisation is what is going to kill our economy one day and the only way to protect against it is to bring back tariffs.
Yes Australia can "go it alone".
The only items that we have to import because it would not be worth making ourselves would be aircraft.
Let us close the borders completely.
The farming sector would scream blue bloody murder but it would not be ruining what little good agricultural land we have to export for digital dollars.
They could survive quite well by producing food for our own population.
Mind you I would not like to hazard a guess how long it would be , before we were invaded for our way of life.
Posted by Robert LePage, Wednesday, 14 August 2013 9:10:31 AM
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One of the lessons we have learned from recent decades, and one that Robert Le Page would do well to heed, is that we cannot shut out the rest of the world, economically or in any other sense. To out up tariff barriers is costly and self-defeating, at least in the Aus economy.

But chucking away protection has it penalties, including the slow collapse of most of our car manufacturing industry. This is a shame but basically it costs to keep it.. Those employed in the car industry would be more productive if employed in industries that don't have to be propped up by taxpayer dollars..
Posted by Curmudgeon, Wednesday, 14 August 2013 10:40:34 AM
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When you have farmers ripping out fruit trees and crops because they have no markets for them after being undercut by cheaper imports, how is putting up a tariff "costly and self defeating"?
When you consider that a lot of the "cheap" imported food causes huge unemployment here, I cannot see how we gain.
When you have manufacturing companies closing in droves because they cannot compete with cheap imports how do we gain?
When you consider that Australia did not descend into a depression in the GFC and is only now feeling the effects of a slowing world economy, why would we be tied to the chaos of the rest of the world?
The only lessons that we have learned in the recent decades are that the rest of the world is a mess and the lesson that we should learn is that we can never compete with most of the world in labour costs and it is foolish to try.
Posted by Robert LePage, Wednesday, 14 August 2013 11:04:21 AM
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Robert Le Page

These arguments are all old hat and barely worth refuting now. They may still have a certain appeal to those aren't aware of the debate, but that's their problem..

If farmers rip out fruit trees to free up productive land for produce that people might want to buy, so what? Would you put up tariffs just so they could continue to produce fruit the market doesn't want?

You say, "When you have manufacturing companies closing in droves because they cannot compete with cheap imports how do we gain?"

Yes we do gain. That's the lesson we have so painfully learnt over many decades. The resources consumed by those companies are then used more productively elsewhere in the economy, and the taxpayer does not have to prop them up. Everyone wins, even the retrenched workers (eventually), as they will get jobs in areas with prospects.

We got through the GFC because of our mining sector and because China kept on demanding resources. We were better prepared because we had mostly dumped protectionism (there is still some left, but nothing like what it was)
Posted by Curmudgeon, Wednesday, 14 August 2013 1:27:22 PM
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Malcolm there never ever was a really good reason for South Australia's existence. Without pinching a huge amount of water from the eastern states, the population & the wine would dry out, shrivel up & die.

Closing the place down would really be a good thing for the rest of Oz, & would do wonders for the deficit very quickly. Close Tasmania at the same time, & the rest would be on easy street. Hell we might even be able to pay off that deficit.

The fact that some folk back in history were silly enough to settle there is no reason why we should be so silly as to keep funding it's existence so their decedents can stay there.

To try to make some use of it, we could excise it from the migration zone, & give it to the illegal immigrants, it would serve them right.

This is not the fault of the car industry, but of course they were silly enough to be enticed to build that factory there, so must share some blame.

Continued.
Posted by Hasbeen, Wednesday, 14 August 2013 2:08:05 PM
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Continued

The reason for our car industry's problems is so similar to Detroit, & is now showing up in our mining industry.

The problem is down to unions & bosses. In the good times unions make ridiculous demands for pay & conditions. In those same time the bosses, laughing all the way to the bank, will give them anything, to keep the cars rolling out, & the money in.

Soon we have a grossly overpaid workforce, with conditions even a king could not have aspired to last centaury. Great, everyone is happy, until comes the crunch. The companies are going broke, & the workers won't take a pay cut. They can't actually, they have expanded their cost of living, & need every cent to pay the bills.

Now in America, the land of the free, along come overseas car makers. They open new factories, but they are too smart to give ridiculous wages & conditions. They pay a fair rate, build cars much cheaper, [& sometimes better], & make good profits.

The old companies have to go bankrupt to get rid of the ridiculous retirement conditions they gave away, & the poor old retired unionists is now in big trouble, because he has banked on what he was promised, lived to it, & the companies can't honor it, as they are priced out of the market

Everyone loses except the foreign car makers.

This can't happen here, any new manufacturer would have to pay those ridiculous wages & conditions, [unions rule here], so no new manufacturers to take over from the old. We end up even worse with no industry, old or new, & no jobs.

We go broke trying to compete with new manufacturers, in Asia, with low wages & sensible conditions. So watch out world, here comes Oz the soon to be poor white trash of Asia. If you can't see it, you're blind.
Posted by Hasbeen, Wednesday, 14 August 2013 2:10:59 PM
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Now lets look at our mining industry. I'm sure you've noticed some pattern here. Good times, pay whatever it takes to keep the stuff pouring into those ships. $100,000, $200,000 for a floor sweeper, it doesn't matter, we're making billions.

Then the slowdown. Suddenly the miners are competing for markets with each other, & South America, & even Africa. Where the bl00dy hell did they come from.

Then some fool bureaucrat suggests to an idiot government that the miners are ripe to fleece. A nice shiny new tax is the last straw.

Now the miners are struggling to find the payroll tax, let alone the payroll. They can't go bankrupt like those US car makers, they have too many profitable investments worldwide. All they can do is wind back their activities, mothball their less productive mines, & slowly ditch that expensive workforce.

The ore body will still be there in 30 years time, when Oz is a bankrupt country, the Greece of the South Pacific. It will be the new cheap labor country to go to, & rich pickings for them again.

Detroit got what it deserved, all we can hope is that some rather thick people can learn from the wreckage, & avoid doing it so badly here.
Posted by Hasbeen, Wednesday, 14 August 2013 2:42:39 PM
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Not sure I agree with you there Robert.

Mining sector rises and falls are episodic. No one thought 10 years ago that it would go to 8 percent of GDP.

SA enjoyed moderate growth through mining but nothing like the returns of WA and Qld. In fact, SA has been coasting for 30 years, relying on manufacturing, ag, cars, etc. It's a relatively undiversified economy so when the stuff hits the fan, as it is now, it is left exposed. Ditto Tassie.

There is a place for tariffs but I can't think of one at the moment. One of the reasons odd anti-population groups go feral here is the 'decline and fall' atmosphere turns them on. They can fine tune their end of the world, survivalist fantasy.
Posted by Malcolm 'Paddy' King, Wednesday, 14 August 2013 3:06:26 PM
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Robert, hang in there mate, you have some valid points.

I remember the same critics mocking my argument about our agricultural sector declining. If I remember right, the balance was worsening only because we purchased high end food products.

Yeah, yeah, it a pity some people cant actually look at evidence and call a spade a spade before shooting their mouths off.

Has been is right, we are going down the tube, but I reckon we could do something rather than accept our fate.

did China accept its fate that it was a loser economy thirty years ago? No, they looked at trends, and did something about it.

Australia will change, hopefully sooner the better
Posted by Chris Lewis, Wednesday, 14 August 2013 3:32:17 PM
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Chris Lewis
you actually think you won on the ag argument?? No, no.. I think from your post the point your objectors were making is that most imports into Aus are for processed foods and so are of higher value than exports.. a per calorie analysis clearly shows that Aus food exports are many times more than it imports. But if you want an update on the ag industry you only have to look at the Journal produced by the Australian Bureau of Agricultural and Resource Economics and Sciences(ABARES).. on its web site. some of the other reports give longer term trends. No decline, sorry..
Posted by Curmudgeon, Wednesday, 14 August 2013 4:50:51 PM
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I don't think I won on anything.

I just what you guys to tell us why we have it so good, and why we are not in decline.

And don't tell me the crap about how good we have it with our lovefest with authoritarian China.

Thankfully barnaby joyce and a few others are around to remind people of reality, or I suppose we would ignore the rural sector even more.
Posted by Chris Lewis, Wednesday, 14 August 2013 5:02:56 PM
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So the WTO figures are wrong, Aust's trade balance for food has gone from 400% to 200%, but we need not worry.

I suppose we can always sell indebted farms offshore cant we, I suppose we could all salivate over cheap bananas and food from Asia in time.

Of course, we can' compete on a whole lot of industries because of our way of life, and that will also include food in the long run. Why else are many of our food producers folding?

Ah but we have tourism, international students, and even life cattle. What a joke.

I will look at the data, to see what it says. Hopefully will be better than Treasury.

She'll be right mate, stick your head in the sand and hope for the best
Posted by Chris Lewis, Wednesday, 14 August 2013 5:10:39 PM
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People just need to face up to the facts they being that unless governments decide to prop up our manufacturing, not just cars, FOREVER, then we are doomed.

Apart from the fact that our costs are so high and that we have the largest carbon tax in the world, we are also isolated from global target markets.

Add to this our go slow ports, dreamimg about making our car industry viable is like pissing into a fan.
Posted by rehctub, Wednesday, 14 August 2013 8:21:20 PM
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