Locked in an industry policy past

In discussion on yesterday's post, Footloose industries etc, I commented:

One of the difficulties, Evan, is that discussion is effectively mired in a paralysis created by the combination of Australia's past with certain neo-classical economic views.

I have written on this one before, but didn't have time this morning to check past posts.

In summary, for much of the twentieth century, Australian discussion on industry policy was dominated by the question of tariff protection. The need to unwind that protection, to create a more open economy, created a mindset that denied the validity of all forms of proactive industry development policies. This meshed with the growing dominance of certain neo-classical economic views that provided the theoretical underpinnings for that mindset.

One result has been a certain sterility in policy discussion and indeed in the policies themselves. We deny the validity of proactive approaches, yet events force them on governments regardless. We have no real alternative framework for considering such actions.

To illustrate, there has been considerable discussion recently about the failure of Australian industry to properly access the market opportunities offered by heavy resource investment. Governments have put in place mechanisms to try to facilitate access.

The problem is that approach adopted is yet another re-run of approaches that previously failed. Minister Carr trumpets their success, but they have only a small impact because they fail to address the real reasons for failure to sell.

You can see something similar with the Australian car industry.

I know from experience that it is extremely difficult to do new things, to generate new ideas, when the very validity of what you are trying to do is denied.