Thursday, January 30, 2014

Snippets - nostalgia, industry policy and the importance of shared returns

In the midst of the chaotic aftermath of the Arab spring, I almost missed the fact that Tunisia had ratified a new constitution. The process has been sometimes chaotic, but it seems to have been a considerable success in the end.

Ramana (Going To Seed.) has been to a reunion of his old business class. Paul Barratt, too, has been caught up in aspects of his past; A day trip to Dangar Falls takes us back to January 1962; Those were the days takes us to his early days in Canberra; while On final for Armidale introduces you to our joint home town. Somewhat unexpectedly, Armidale was named top third Australian visitor destination for 2014. Paul's nostalgia trips are dangerous, given our shared history.Aymever 10

Email during the week from Karl Reed during the week reminding me of some 1984 events. At the time, we were trying to introduce new approaches to encourage the development of Australia's electronics, aerospace and information industries.

This diagram from the 1980s provides an overview of the areas we were interested in. Karl's focus was especially on the computing sector, reflecting both his academic interests and his role in the Australian Computer Society.

I argued at the time that industry policy constantly failed and was bound to fail because it was either too general (economy wide horizontal measures) or to firm or industry specific to be be really effective.

Part of the solution lay in taking a broad but related group of industries, focusing on shared opportunities and problems, integrating the policies affecting the group, thus facilitating development. Note the way that the diagram integrates manufacturing and services and links together broadcasting and TV with communications and information services. The internet had yet to arrive, but by the mid eighties the key convergence trends were emerging, as was the digital revolution. How might Australia best take advantage of these new opportunities, recognising that in a let the flowers bloom approach, we couldn't assume that the flowers would bloom in Australia. In fact, they didn't beyond a few scraggly blooms! 

This work has a certain resonance today as the Australian Government wrestles with industry and firm specific issues in automotive and fruit canning. The Government has no intellectual or policy framework for dealing with these matters beyond the traditional tension of let the market prevail vs specific industry or firm assistance.

At his place, Winton Bates has taken a brief respite from his blogging holiday with  How do peaceful societies come about? I think that one message I take from Winton's post is the importance of shared returns. Winton puts it this way:

If you want to start a virtuous cycle where peacefulness supports the growth of economic opportunity, you first need to have sufficient numbers of people who are able to perceive of opportunities to engage productively in mutually beneficial activities, and hence, to want to live in peace.

It's not an especially profound message, but I think that it is an important one. Shared benefits are central. 


Anonymous said...

Regarding 'shared returns' - everyone pulling together only works for row boats.

It is the outriders and iconoclasts who drive progress; show me a herd of cattle threatened by wolves which wasn't forced thereby to invent new methods of protection, or to move to more secure pastures, or to at least be improved by elimination of the weak.


Evan said...

Hi kvd, I think there are roles for outriders and the majority.

If everyone was an innovator nothing would be sustained.

Innovations need to be spread. The outriders can build castles in the air (and not feel the need to put foundations under them).

And it means the implementation of means for everyone to pull together to the same end. If the means is as simple and elegant as a rowlock so much the better.

Anonymous said...

On 1 July 1794 the return for the colony of NSW showed a total of 20 horses - 11 mares, 9 stallions - of which 6 mares and 6 stallions were government owned. (One of the private owners was Captain Macarthur who had "a horse and two mares")

By June 1795 the count was 49 of which 37 were privately owned. Of the 12 government horses, 8 were male. (In September 1795 Mrs Elizabeth Macarthur wrote that their Rose Hill farm stock included "a dozen horses")

August 1797: government - 3 stallions, 15 mares. Private owners "23 horses, 43 mares".

August 1800 from the Banks papers: government - 3 horses, 27 mares. Private owners 57 horses, 116 mares.

Summary: a very minor bit of history, but unsupportive of the benefits of government (i.e. communal) enterprise, I would think.


ps August 1802: government owned 37; private 256 being "109 male, 147 mares". And so it goes, and yet we must believe that somehow 'government' aka 'communal' does it better.

Jim Belshaw said...

Actually, kvd, one wouldn't think! In the early days of the settlement, the Government farms and livestock supplies were very important, critical to development. The Rum Corp in particular did rather well out of them, using that money (among other things) to import horses.

In any event, I would gently suggest that you have introduced a kangaroo valley herring into the mix. I wasn't aware that anything I said detracted from the virtues of competition, merely that shared benefits were central.

As it happened, this link came from Ramana -

In discussions at Davos, one speaker identified the hollowing out of the middle class in Western countries as one of the three key items preventing the necessary further freeing of markets and more effective globalisation. Why? People weren't prepared to support change when the benefits went to a few, the costs were widely spread.

Anonymous said...

Jim, I stand by what I said @1 which was in response to your remarks about Winton's post. It just seems to me that what you now refer to as 'shared benefits' would not exist if it were not for those (I called them) outriders who departed from the herd mentality; made something of themselves etc.

And I also stand by my comment @3 which was basically in response to Evan's "innovations need to be spread. The outriders can build castles in the air..." which in shorter version was encapsulated by President Obama as "you didn't build that" and "we need to spread it around".

Anyway, I bow to your surerior knowledge of our early colonial history - but I can't help a sneaking suspicion that if 'the government' had imported the merinos and not Macarthur, we would've had an ensuing annual census reporting 8 rams and two ill-used ewes :)

Anyway, if you feel it a 'herring' to suggest that 'shared benefits' DO NOT come before innovation and enterprise then I must gently observe we disagree.


Evan said...

There is a new book (by an American of course) called The Entrepreneurial State or some such.

The analysis being that the tech entrepreneurs profited from research funded by the government (the 'fairchildren').

I think this is an ok system so long as the corporates don't avoid taxes by domiciling themselves in Ireland or the British Virgin Islands or whatever.

Jim Belshaw said...

Hi kvd. No benefits, nothing to share! If you remember my earlier stuff on Sydney's early military/civil establishment, they were successful in part because they were able to build from and milk the official system, but they were also successful commercial buccaneers, in so doing building wealth.

While I agree with you have to have benefits before you can share, my point was that systems work where the rewards are distributed sufficiently to attract support and encourage compliance. This not just or even primarily a distributional question.

Evan, US Government research funding and activities has indeed been central to US development in many industries during the post war period. That activity provided a base from which the entrepreneurs were able to profit. A bit like the Rum Corp I guess.

Evan said...

Quite a bit like the Rum Corp I suspect.

Anonymous said...

And as regards your 'herring' comment, you could not be morwong.

While it is not my halibut to point out when one is floundering, (and with no wish to pickeral an argument) I do feel it occasionally necessary to correct the impression that there is a sole explanation for matters under discussion. In this I am no piker nor carper - nor even a flathead.

This blog is bream full of worthy discussion and occasional cods wallop, but a little warning when one is perched upon the edge of pollock never hurts one.

That said, be assured that I do know my plaice :)


Winton Bates said...

Hi kvd,
I think what I meant by mutually beneficial activities might have got lost along the way. If someone gains a living by producing things that other people want to buy, they are engaging in a mutually beneficial activity. That is in contrast to gaining a living by stealing from other people.

Anonymous said...

Hello Winton - it is very good to see you writing again, and I hope you feel the need to continue so.

I read your piece and thought it well reasoned, but Jim turned your 'mutually beneficial' into 'shared benefits' which is a slightly different concept as far as I can see, and certainly as was taken up by Evan's comment. I accept that I don't always make my point clearly, but it was this difference I was attempting to address.

(And my last comment was way off-topic; an homage to LE)


Evan said...

Thanks kvd. Now you point it out that distinction is interesting.

Evan said...

I also liked your off-topic post.

Jim Belshaw said...

I have been up North, so unable to contribute to this discussion. That's no bad thing. It's been a whale of a discussion under kvd's moderation. I couldn't think of a suitable fish term!