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Thursday, 15 September 2011

India Emerging, Australia Submerging.


The Australian Governments main defence in the sacking of 1000 BlueScope workers was that this was a painful symptom of an ongoing economic transition. But this transition is been treated as a magically vague happening and not explained for very strong political reasons. Australians don’t want to hear that India and China are fast becoming their economic superiors.

For the Government to fully explain the implications of this ‘transition’ would be political suicide. To enlighten the electorate that Australia has been reduced to a quarry for booming Jamshedpur steel furnaces would make Gillard’s chances of reelection impossibly even more remote.

The Australian public is simply not ready to take on the reality that the United States is no longer our obvious choice for snuggling up to in a new Asia Pacific. With our Uncle Sam looking increasingly senile how long can Australia unquestioningly endorse American policy and as Professor White of ANU says, ‘turn around, point up to the US and say ‘I’m with him.’

Australia is an obedient ally of the States. I don’t belittle that in the unhinged lefty sense. If it wasn’t for the US, Australia would have predated it’s Asian destiny by many decades. We forget how many 19 year old GI’s died in malaria infested Papua jungles ensuring a resource starved Japan didn’t set up shop in Newcastle.

Australia will be forever grateful and of course culturally identify more with her North American cousins. But the US’s faltering economy and her ditzy expeditions in the Middle East have exposed a shrunken dog with a deafening bark.

The US economy has proved shockingly fragile. The myriad of reasons given to why it can’t shake it’s unrelenting string of crisis are unconvincing. Few are brave enough to talk of the elephant in the room. The US doesn’t produce it consumes.

This model has been enthusiastically taken up by Australia. 25 years ago, 20% of Australian GDP was from the manufacturing sector today that is halved. Only one in 20 Australians are involved or connected to the manufacturing sector.

Our economy is overwhelmingly service based. We have become latte servers and pizza deliverers. We serve one another in a closed loop with the assistance of coffee machines and pizza ovens all made almost exclusively in China or India.

This is of course globalization. Where you are rewarded for your competitiveness not your country club. Where as a lefty I take an eccentric view.

I believe that globalization is more beneficial to countries that have been excluded form the world’s economic engine. Strongly tempered with the West taking advantage of the sickening reality of child labour exploitation and the virtual non existence of labour law implementation.

For the West could not have seen the writing on the wall. They could not have foreseen how the well India and other Asian giants have risen to the challenge. They have embraced globalization with a rabid enthusiasm.

This has left countries like Australia, who dreamt that their products were infinitely superior and would find new massive markets, looking non plussed. They never dreamt that they would become the market.

Australia’s economic position can now be equated with pre independence India. Gandhiji would lead huge rallies burning Manchester woven clothes made from Indian raw cotton. Gandhiji saw that the paralysis of the Indian economy stemmed from India exporting her raw materials to be almost exclusively processed in England then insultingly imported back into India to be purchased by her then British ruled masses. Not unlike Australia exporting raw materials like coal that is then used to make steel in India that is then imported into Australia at a massive added value.

Australia’s economy rests treacherously heavily on this model. 90% of the diamonds from Australia’s Kimberley mine find their way to Indian traders who polish the stone s in centres like Baroda. Again adding a massive value to a resource that was sold in Australia at a fraction of it’s final Mumbai showroom price or indeed it’s Sydney showroom price.

Australia has all but resigned to the reality she cannot compete in manufacturing. She is still a force in innovation but I feel this century will be characterised by India and China shedding their well deserved nicknames of copycats and show the world they have a also have a strong creative spirit with future ground breaking research and development.

This new Indian innovative spirit may break Australia’s back. For if an Asian laboratory with increasingly huge budgets, searching to solve over reliance on Australian resources, finds a steel substitute, Australia will be banished to an economic wilderness. The demand for coal and her own steel manufacturing would plummet. In an age of windmills and macbooks the whole process of steel manufacturing seems medieval crude and is begging to be replaced by a new competitive material.

With these future prospects Australia will have to decide whether to keep snuggling up to Uncle Sam and be a detached quarry or partner with India and become once more competitive.

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