The Productivity Commission is well past its sell-by date


Mark Dodgson
Contributor

In 1653 Oliver Cromwell gave a speech dissolving the House of Parliament. He didn’t hold back. “Ye have grown intolerably odious to the whole nation” he thundered to the cowed parliamentarians. “Go, get you out! Make haste! Ye venal slaves be gone!.. In the name of God, go!”

This is precisely the sentiment I feel towards the Productivity Commission and the reaction of its past and present leaders to the Future Made in Australia initiative. The clutching of pearls by the Commission and the resource industry client journalists in the right-wing press was entirely predictable. So wedded are they to the ludicrous assumptions of their theories and in such denial about the empirical evidence of the failures of their policies that their views can only be likened to a cult.

A cult that is totally divorced from reality and whose analyses and prescriptions were dubious for an economy in the 1960s and 70s, let alone the 2020s. A cult whose views are simply unfit for purpose in the globalised, digital age. While some of Cromwell’s language – ‘mercenary’, sordid’, ‘wicked’ – may be a little bit strong, his reference to “enemies to all good government” applies to all those opposed to creating a vibrant, modern economy due to their distorted ideological views.

I’ve always thought there are three kinds of people in the world. Those who make things happen, those who watch what happens, and those who wonder what happened. The dinosaurs opposed on ideological grounds to an approach to policy such as that signaled in Future Made in Australia are a fourth group: those who stop things happening. And this group has been active and influential for decades, and with the world the way it is now, its thinking is positively dangerous.

In the face of all the uncertainties we face in climate, energy, health and in technologies such as AI, there is no alternative to having a resilient, knowledgeable, and responsive industrial base, well connected domestically and internationally with supply chains and researchers, and shaped by a patriotic concern for our nation, and deep personal apprehension for our children’s and grandchildren’s future. That surely is the essence of a Future Made in Australia. But we’ve been here before.

Way back in 1988 I had a letter published in the Financial Times in the UK extolling the virtues of Australian industrial and technology policy. I had opportunity to discuss these matters at the time with leaders of the calibre of Senator John Button and Professor Ralph Slatyer, Australia’s first chief scientist, who clearly saw what the problems were in being a low-skill, low-productivity, resource-dependent economy, and fought for policies to address them.

Since then we’ve had government review after government review saying exactly what was known then, occasionally coming up with some imaginative policies, but invariably the periodic waves of information and enthusiasm for change have ended up crashing on the rock of neo-classical economic orthodoxy.

This craven capitulation to the ‘market primacy’ view of dated undergraduate textbook economics has been bipartisan. Labor’s Kim Carr certainly talked the talk well, but will ever be tarred with his infliction of the metrics fetish on the university sector, aided unforgivably by supine vice-chancellors. The wellsprings of knowledge that are universities deserve better than the type of management foisted upon them that is more appropriate in sausage factories.

And any leadership from Australian industry has been minimal. For every Catherine Livingstone and David Thodey – informed and articulate voices for change – there have been regiments of sclerotic Boards of Directors, fearful of innovation and risk, preoccupied with industrial relations and ‘micro economic reform’, whose attention is directed more towards government coffers than opportunities provided by research and innovation.

I have lost count of the number of senior public servants who upon leaving the bureaucracy have become enlightened advocates for innovation, research, technology, manufacturing and skills, yet whose performance in post had been completely muted in the face of unquestionable adherence to the mantra of the unassailable primacy of non-interventionism and market forces. I suspect there are many public servants, including perhaps some in the Productivity Commission, who would dearly love to be relieved of the yoke of rigid orthodoxy imposed upon them by the acolytes of the cult.

And the debate is still very much below par in Australia. Witness the recent evangelical reception to the ideas of ‘missions’ from Mazzucato. A more critical balanced approach may ask what a view that looks backwards – ‘government did this’ – tells us in the highly specific case of Australia, and the challenges of looking forward: ‘what can our government do now?’

Such a view may consider the incredibly important role of curiosity driven basic research, and the lessons from countries, such as China, that have successfully combined mission-free entrepreneurial energy and reflexive and responsive government guidance and support. It is high time to trash the tired old trope that ‘governments can’t pick winners’, and look to examples where well informed and engaged governments have ‘placed some bets’ – which may or may not look like ‘missions’ – and bought valuable options in an uncertain world.

And let’s have some fresh thinking informing government. Out with Friedman and in with Schumpeter. Less concern with market failure and more with systems failure. Let’s see risk and uncertainty as inevitable to progress, rather than a blot on the balance sheet and source of criticism at Senate Estimates.

Let’s hear from entrepreneurs creating future jobs and industries rather than bloated protectors of the status quo. What a difference it will make to have advisers trained in the thinking of contemporary economists such as Ha-Joon Chang and Kate Raworth, rather than that of the male, stale, pale and usually long dead Americans of a bygone era.

There has been progress over the 40 years I’ve been studying Australian industrial and innovation policy, but it has been glacial. It has been hampered by the outdated, atrophied, and now hazardous views exemplified by leading voices in the Productivity Commission.

The dangerous consequences of this blinkered thinking over past decades have been masked by the demand for Australian resources, particularly from China, but in today’s circumstances such views are perilous. Australia’s have a go attitudes and deep pragmatism have been sacrificed in the past on the altar of a discredited cult. It is time to recognise this cult for what it is and consign it to the dustbin of history. In the name of God, go!

Mark Dodgson AO is Emeritus Professor, University of Queensland, Executive-in-Residence, University of Oxford, and Visiting Professor, Imperial College London. www.markdodgson.org This article was first published by the Acton Institute for Policy Research and Innovation. You can view the original here.

The Acton Institute for Policy Research and Innovation is a platform for pioneers in innovation studies to share and apply their knowledge to improve the quality of discourse and achieve greater effectiveness and impact in science, research, and innovation (SRI) policy.

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2 Comments
  1. Tim 1 month ago

    This “opinion” piece highlights all the deficiencies of the current debate around the Future Made in Australia policy announcement: short on evidence and analysis; long on rhetoric and criticism of messengers such as the Productivity Commission.
    First, where are the ACTUAL and persistent success stories of previous interventionist industrial policies? Those of the Button era, of State Premiers Cain, Bannon, Burke et al, of Rudd/Gillard? The “multi-function polis”, the NBN? How embarrassing! Picking winners — indeed, all gambling — is a mug’s game. And we can thank the Productivity Commission and its predecessors for repeatedly showing this to be the case.
    That’s NOT to say there isn’t a problem with the underlying structure of the Australian economy: we’re not producing the skills we need to be internationally competitive in the 21st century — another topic that’s been central to multiple reviews but little action; our capital markets are thin, have low risk thresholds and little understanding how to value investments outside primary and resource industries. Ironically for its critics, the Productivity Commission has actually drawn attention to these problems in many of its reports. But, as here, it seems easier to kill that messenger, which is of course the lazy response!

  2. david@havyatt.com.au 1 month ago

    Wouldn’t it be simpler to simply address the deificiencies of orthodox economic analysis directly? That includes the ‘ceteris paribus’ assumption used in most analysis , that is the assumption that everything else stays the same. In the economy as opposed to economic models everything is changing all the time.

    The role of government isn’t to “get out of the way” of the dynamics of various markets, but to prepare society to respond to and benefit from change, and ultimately to foster change that benefits the citizens individually and collectively. We call the latter “innovation”.

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