Manufactured crisis

Australian manufacturing isn't in trouble, it's just obsolete in a richer, more modern country.

Ford has announced a week-long production halt in Australia.  Toyota is mired in a labour dispute.  But is Australian manufacturing in trouble?  No.  In fact, it's thriving.  Not that you'd know that from most commentary or political debate, which suggests that manufacturing is falling off a steep cliff.  No matter how much taxpayer money we hand to the car industry, it is always flirting with collapse.  For decades, the nightly news has told ominous tales of factory closures.

These stories mislead.  Australia is by far a more successful, efficient, profitable manufacturing nation now than it was in the 20th century.  When Kevin Rudd famously said in the 2007 election that he wanted to be prime minister of a country that ''made things'', Australian manufacturing was already making more things than it ever had.

Over the past 60 years, the output (that is, the making of things) of manufacturing has increased fourfold, according to the Productivity Commission.  Sure, that output has dipped about half a per cent since 2008.  But blame the (temporary) global recession.

So why the big fuss?  Well, the debate over manufacturing has never really been about manufacturing.  It's never been about economics or prosperity or even employment.  The manufacturing fetish is nothing more than a marriage of nostalgia and special interests.

Manufacturing may be doing well but it holds a declining share of the total economy.  Service industries are growing quicker and assuming the pre-eminent place.

People find this change hard to grapple with.  Perhaps understandably.  Factories are as much cultural icons as they are venues for production.  For two centuries, the factory was an emblem of Western prosperity.  Factory jobs were stable, well-paid, and open to all.

Our culture and politics reflected this.  It was the factory wage for a married family man that underpinned our protectionist industrial relations system.  Pre-war consumer advertisements tended to feature factories more prominently than the products.

By contrast, modern service industries are more diverse and less tangible.  But productive work is productive work.  What should it matter if we make a dollar's worth of tractors or code a dollar's worth of websites?

Preconceived ideas of what constitutes a healthy economy don't disappear overnight.  Especially when they're promoted by union-tied politicians and lobbyists.

Announcing the federal government's manufacturing taskforce last year, the then innovation minister Kim Carr said the government needed to ''ensure manufacturing remains a key part of our economy for generations to come''.

That might be Labor's priority, but it shouldn't be ours.

The number of people working in manufacturing is a declining share of the total labour force.  That's a big political problem for the ALP.  Many Labor politicians draw their support from the old industrial unions.

These unions are now less the vanguard of the proletariat, and more ageing, derelict fiefdoms.  They are still able to depose prime ministers, sure, but that's about it.  The dysfunctional union-Labor relationship creates the perfect environment for dirty deals to flourish;  hence the steady stream of cash the government sends the car industry's way.

Immediately after Prime Minister Julia Gillard fended off Kevin Rudd this year, the unions were calling on her to keep manufacturing jobs from going overseas.  They want some reward for their support.

But the unions are wrong.  Jobs aren't going overseas.  Larry Summers, former economic adviser to US President Barack Obama and no free-trade ideologue, has pointed out that even in China manufacturing jobs are in long-term decline.  It isn't foreign competition, offshoring or the high dollar shrinking the relative importance of manufacturing.  It's technology.

This is great.  Not all factory jobs are good jobs.  Why have 10 people do a mind-numbing repetitive task that could be done by one machine?

In the future Australia may no longer assemble cars.  Robots will.  But we will design the cars.  We will design, program and build the robots.  We will construct the most intricate, high-value components that require the best technicians to produce.  We'll then ship everything off for final assembly in a lower-skilled country.

The industrial revolution was propelled by technological change.  ''De-industrialisation'' is propelled by the same.

Even in some shrinking sectors of manufacturing there are niche Australian successes — particularly those areas that require high skills and high precision.  But nimble niche industries won't furnish the unions with a secure power base.

What to make of the claims that we need domestic manufacturing for national security?

Put aside that we have a vibrant manufacturing sector already.  If a war came that forced us to make all our tanks — that is, if the global arms market was suddenly closed to America's closest friend — the state of our car industry would be neither here nor there.  We're going to lose that war.

That this apocalyptic scenario is a foundation of the case for manufacturing subsidies just shows how desperate the industrial unions and the ALP are.

Manufacturing will never be the linchpin of the Australian economy.  Nor should it.  The sooner we get over our manufacturing obsession, the sooner we'll be able to embrace a richer, more modern Australia.

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