It is not often that John Howard and the government receive a compliment from a union official. Yet that's what happened this week after Holden's decision to cut 600 workers from its plant in Elizabeth, Adelaide.
The announcement provoked the national secretary of the Australian Manufacturing Workers Union, Doug Cameron, to bemoan that "the government's got a hands-off approach to manufacturing" and there "is no plan for the future of manufacturing in this country". They weren't intended to be, but these comments are high praise.
It's a welcome relief that for once the Prime Minister doesn't have a plan. In recent weeks there have been a surfeit of plans: plans for Canberra to manage the water of the Murray-Darling basin; plans for Canberra to write the curriculum for schools; plans for Canberra to install broadband internet around the nation. Any issue, large or small, now requires a plan. Strangely enough, government plans seldom allow for free operation of markets. More often they are about distorting or stopping competition.
Industry Minister Ian Macfarlane is sensible enough to realise that if manufacturing is to be viable it won't be because of government planning. Wisely, he's refused to back down from the decision to cut car tariffs from 10 per cent to 5 per cent in 2010.
According to Cameron, more than 200 jobs have been lost in manufacturing for every week the coalition has been in office. What Cameron hasn't revealed is the price consumers would have had to pay to keep those jobs. Decades of intervention have left Australian manufacturing dependent on protection and unable to compete internationally. In the case of the car industry, 50 years of industry policies haven't yet secured its future and there is no indication that another 50 years of planning would make any difference.
Another industry plan is the last thing car manufacturers should get. Or, put more precisely, the last thing the country needs is a plan that has taxpayers and car buyers subsidising inefficient and uncompetitive automobile companies.
Government industry plans don't work. From Kodak to Blundstone Boots, the evidence is clear. A competitive advantage provided courtesy of tariff protection is not sustainable in the long run.
The Australian Council of Trade Unions is dogged in its refusal to consider the facts of economic history. Its commitment to the policies of the past is almost admirable.
After Holden's decision was made public, ACTU president Sharan Burrow pondered: "Why on earth aren't we asking them to manufacture a small-to-medium car that might be popular in the domestic market?" If only picking winners was so easy.
This question could be answered by posing another question: "Why would consumers buy a domestically produced small car when a better and cheaper imported model is available?" Another might be: "What on earth would government know about the sort of cars that would be popular with consumers?" Maybe the ACTU believes there is a government department with access to information about the preferences of vehicle purchasers that isn't available to the car makers.
Planning ACTU-style is reminiscent of East German economic policy circa 1957. In that year the Trabant was put into production. A product of government diktat, the Trabant was a car with a two-stroke engine that had a top speed of 100 kilometres per hour and which suffocated driver and passenger alike in exhaust fumes. The Trabant sold well because it was the only car available.
Productivity is the new economic mantra of the Labor Party, and the ALP is absolutely correct to identify the slow rate of productivity improvement as a major policy challenge. But Labor can't have it both ways. It can't demand policies to boost productivity and at the same time blame the coalition for job losses that are the result of more efficient work practices. The $500 million that Holden has invested in new plant means it can produce the same number of cars as previously, but with 600 fewer workers.
This equation neatly sums up the conundrum of manufacturing. As manufacturing becomes more efficient it is inevitable that jobs will be shed. The challenge for governments is to manage this process instead of trying to stop it.
We have become accustomed to measuring the success or otherwise of our manufacturing sector purely in terms of the number of people it employs. This attitude is as old-fashioned as the Trabant.
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