Beware of fads. Two of the biggest fads going around at the moment are "green jobs" and the national broadband network.
We're warned that unless we embrace clean technology and fund it with taxpayer subsidies all our environmentally friendly jobs will go offshore and we'll miss "the wave of the future". Likewise with the national broadband network. We're assured that if the government spends $43 billion we'll be able to download new-release movies faster and our international competitiveness will be assured.
Before we start believing this sort of stuff we should remember we've heard it all before. Today it's green jobs and the internet. A few years ago it was Knowledge Nation and Australia as the centre of a regional computer industry. In a few years it will be something else again. All these things have one thing in common -- the requirement that government give industry billions of dollars in subsidies and tax breaks.
A decade ago we were told we should be more like the "Celtic Tiger" -- Ireland. In the heady days of the late 1990s the Irish economy was growing at 10 per cent a year. Kim Beazley's Knowledge Nation recommended Australia follow Ireland and subsidise a domestic computer manufacturing industry. Fortunately, this didn't happen. As recently as 2005 Austrade was sending trade missions to Ireland in the hope of learning how government could foster a technology industry. The following year Austrade was telling us that "after many years of suffering, including being the butt of 'Irish jokes', the Irish with their strong and consistent economic performance are having the last laugh".
Well, it seems that the Irish might have started laughing a little early. The Celtic Tiger is now pretty much extinct Ireland's economy is predicted to shrink this year by at least 9 per cent. Unemployment is estimated to reach 15 per cent. Meanwhile Ireland's budget deficit is double the average size of those of developed countries.
It's so bad in Ireland that even the politicians have taken a pay cut. All ministers and public service department heads have had their salaries reduced by 10 per cent. And for good measure the Finance Minister suggested that every member of parliament should voluntarily cut their pay. Not surprisingly the suggestion wasn't greeted with enthusiasm. Only around a dozen of the more than 200 Irish parliamentarians took up the offer. Two MPs who initially did give up some of their salary later asked for their money back. When the Education Minister suggested university staff take a pay cut, too, the academic union replied with an outright "no".
Having a computer manufacturing industry didn't save Ireland. In 2003 the computer company Dell was Ireland's largest exporter. Together Dell and Microsoft made up 10 per cent of the country's total economy.
However, the reality of the Irish technology industry was that little of its manufacturing was high value-added activity. Companies were taking advantage of government subsidies, Ireland's relatively low wages and corporate tax rate, and its skilled workforce. But when the subsidies ran out and wages caught up with the rest of Europe the inevitable happened. Earlier this year Dell announced it was shutting some of its production facilities in Ireland and relocating them to Poland.
Ireland's woes have been exacerbated by a housing bubble and the practice of successive governments spending the revenue from the boom years on massive growth in public sector salaries. Australia is not in anywhere as bad a condition as Ireland, but there are more than a few similarities between the countries.
According to Dan Breznitz, the American academic who's made the best study of Ireland's computer industry, in the mid 1990s the Irish government had no qualms about making "veiled threats" to persuade pension funds to invest in technology start-up companies. Those sorts of veiled threats haven't been made in Australia -- as yet.
However, Infrastructure Minister Anthony Albanese has already announced he's started negotiations with the superannuation industry on how to "unlock" billions of dollars to fund projects like the broadband network. Retirees might consider the Irish experience before they hand over their savings to their fund manager.
If Australia could have a computer manufacturing industry, "green jobs" and a national internet network without government hand-outs, then well and good. But until they can survive without taxpayers footing the bill they should be treated as nothing more than the political fads that they are.
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