BEYOND THE HOLDEN SHUTDOWN

Good afternoon, and thank you for asking me to contribute to this discussion of what the future holds for SA, and indeed, the nation.

At a time like this it takes courage to look ahead with confidence.

We all know what the automotive industry, and Holden in particular, has meant for this state.

And we are all aware of the impact that the end of motor vehicle production will have.

An impact not limited to those at immediate risk of losing their jobs.

It will ripple across the entire economy, tearing an estimated $29 billion annually – about 2 per cent – from GDP.

That staggering figure is only one measure of the importance of the automotive industry.

But, it is because the impact will be so great that we must look ahead.

We must ask what made automotive manufacturing play a crucial role in the national innovation system.

We must try to preserve the capabilities the industry has generated.

We must ask in what other forms of manufacturing those capabilities might be found, and how they might be extended.

And, above all, we must remember that these are not just questions about sets of economic statistics or measures of technological change.

I have always held that at the deepest level industry policy is an answer to the question: “What sort of country do we want to be?”.

A strong manufacturing sector is one of the underpinnings of our democracy.

Without a strong manufacturing sector, we won’t be a technologically advanced society.

But there is much more to it than that.

We won’t be a prosperous or egalitarian society, either.

And we will find it more and more difficult to be the successful culturally diverse society we have become since World War II.

Manufacturing jobs sustained the many waves of migration that built that society.

For these reasons, the first task in looking ahead is to communicate the importance of manufacturing to the wider public.

There are too many commentators intent on sending the opposite message.

The media image of manufacturing is often a negative one.

It is portrayed, sometimes gleefully, as a sector in decline.

That is partly a matter of ideology.

Free-market enthusiasts don’t like manufacturing because they reject the role government plays in the sector through innovation programs and co-investment.

But lately the doomsayers have also been spruiking another narrative, about technological change.

Specifically, that narrative is about the changes in employment and work practices caused by automation and digitalisation.

Throughout the industrialised world, those changes have led to the loss of many manufacturing jobs.

It has led to the rise of the so-called “precariat” – increasing numbers of people who are dependent on precarious casual employment.

This has been a fundamental failure of policy.

It is not an inevitable consequence of automation.

Human choices that determine how we implement and adapt to new technologies, and those choices always reflect a political vision.

A vision of the sort of society we want to be.

I am fond of this observation in Karl Marx’s The Eighteenth Brumaire of Louis Bonaparte:

“Men make their history, but they do not make it as they please.

“They do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past”.

As much as futurists like to insist that we have nothing to learn from the past, I disagree. To return to The 18th Brumaire:

“The tradition of all dead generations weighs like a nightmare on the brains of the living. And just as they seem to be preoccupied with revolutionising themselves and things, creating something that did not exist before, precisely in such epochs of revolutionary crisis they anxiously conjure up the spirits of the past to their service …”

In a similar way the neoliberal critics of manufacturing talk about a brave new world of social relations and new ways of working, when in fact they are reviving ways of living and working not seen since the 19th century.

The rise of the precariat, with so many skilled and professional people trapped in casual employment, has resulted in the reappearance of that 19th century social milieu in the 21st century societies.

This has happened because so much of the political agenda in Western democracies in the late 20th century was devoted to winding back the achievements of the labour movement and social democracy.

Governments in the grip of neoliberal ideology ceased to regard guaranteeing full-time, well-paid secure work as a primary obligation.

The consequence has been widespread alienation from politics, and a delegitimising of the role of the state.

It is no accident that this is the age of Brexit, of Trump, of resurgent far-right populist parties in Europe, and of Hansonism here in Australia.

Those things are symptoms of our profound political malaise.

I say to you today that industry policy, understood in the broad sense in which I have described it, is the key to overcoming that malaise and to re-legitimising social democracy.

I believe that the new era of automation – the fourth industrial revolution, or industry 4.0, to use the popular labels – can be an age of opportunity.

This is already being demonstrated in the European Union, and especially in Germany, where a six per cent increase in manufacturing jobs is predicted over the next decade. A six per cent increase.

The Germans are demonstrating that industry 4.0 can be compatible with lower unemployment.

The unemployment rate in Germany is 3.9 per cent and the number of robots per 10,000 workers is 300.

Compare that with Germany’s neighbour, France, where the number of robots per 10,000 workers is much lower, 126, but the unemployment rate, 9.5 per cent, is more than double Germany’s.

Robots are much more prevalent in manufacturing in Germany than in the US or anywhere outside Asia.

Yet Germany is not only a major advanced manufacturing nation. It is a nation whose manufacturing sector continues to be a major employer.

In 2014, about 25 per cent of the German workforce was employed in manufacturing, compared with 9 per cent in the US.

The lesson in these figures is that the simple correlation between automation and job losses that doomsayers like to make does not hold up.

Predictions of massive jobs losses caused by robots replacing people have their origin in several reports by the IMF and OECD.

Those reports drew attention to the fact that, for the first time since the industrial revolution of the 18th century, the rate of technological change is increasing more sharply than new job opportunities are arising.

Compounding that structural change is the fact that skilled job opportunities that are arising are increasingly to be found in the CBDs and inner suburbs of major cities, not in the outer suburbs and regional cities.

Even in Germany, with its decidedly social-democratic approach to industry policy, recent elections revealed that the level of disenchantment with mainstream parties is running very high.

The far right did best in the east, where unemployment is highest and de-industrialisation has been most profound.

It may well be that sensitivities about immigration will resonate most highly where economic prosperity.

This hollowing out of the work force is changing the social structure of western cities, and the political geography of democracies too.

By themselves, these comments by the IMF and OECD were sober enough observations.

But they started to generate media panic after two Oxford University academics, Carl Frey and Michael Osborne, predicted in 2013 that “about 47 per cent of jobs” were at risk from computerisation.

This figure was seized on by the doomsayers, who either cite Frey and Osborne’s 47 per cent figure or round it up or down, to 40 or 50 per cent.

The doomsayers typically just repeat the figure, without examining the assumptions on which it is based.

They do not acknowledge that predictions of massive job losses ignore the actual effect of automation.

It reduces average employment (the number of jobs per unit of output) but not necessarily aggregate employment (the actual number of jobs).

Robots typically substitute for human effort in repetitive tasks.

But they also increase the value of tasks involving adaptability and creativity, which human workers uniquely supply.

It is important to note that I am not only talking about adaptability in high-skill, high-tech jobs here.

I am talking about low-skilled jobs too. To cite a familiar example: if someone’s make a mess in your office, a human cleaner will likely deal with it faster and more effectively than a robot.

So I say that we can, and must, face the future without fear.

But we cannot do so if we just let the market rip.

The era of industry 4.0 requires industry policy that embraces the flexibility of the smart factory, with its interactive machines and digitalisation.

That industry policy must start by identifying the capabilities in advanced manufacturing we already have.

The automotive industry, of course, has always been the great repository of those capabilities in Australia.

That includes robotics, as anyone who has seen an automotive production line knows very well.

A modern production line is also a good example of the way that interactive machines and uniquely human skills complement each other.

Preserving these capabilities is one reason why the Senate inquiry into the future of the automotive industry recommended extending the ATS beyond 2020, and redesigning it as an automotive-related engineering and design program.

It is crucial that we do so, but the kind of industry policy I am talking about should not only be focused on the automotive industry.

Yes, we need to retain the industry’s capabilities. But we also need to encourage those who have those capabilities to diversify and enter other markets. We need to make it easier for them to do so.

Here in SA, there are new opportunities appearing even as the car maker that has been so large a part of the state’s industrial history shuts down.

The steel industry, the producer of a strategically vital industrial material, has been given a new lease of life with the acquisition of OneSteel by Liberty Group.

This state will be a key centre of naval shipbuilding, which, like the car industry, has always been a great repository of advanced manufacturing capabilities.

The task of revitalising and extending those capabilities has been made more difficult by inept and sometimes devious political decision-making.

But the industry and its skilled workforce are there to play a crucial role in the future of this state, and of the broader Australian economy.

Most recently, we have also seen, the huge range of advanced manufacturing capabilities on display at the International Astronautical Congress in Adelaide.

The SA Government’s Space Capability Directory lists scores of firms, industrial associations, educational institutions and research agencies that are engaged in projects that can shape the future of manufacturing.

Let me cite just one example, because its activities relate to industry 4.0 and the internet of things, of which I have spoken at some length.

Fleet Space, based in Adelaide and Sydney, is proposing to launch 100 small satellites to provide a network that will enable the internet of things to work more effectively.

For that proposal to work, there would have to be a supply chain not only of satellite builders, but also communications technologies and app developers.

All of which needs to be properly facilitated, which is what the programs of a well-designed national innovation system would do.

I do not mean only the programs that assist firms directly, through providing expert advice or co-investment.

I am talking also of the role of scientific research by universities and publicly funded research agencies, and their collaboration with industry.

The research in materials science and related areas that CSIRO’s Manufacturing division undertakes is absolutely crucial to the future of advanced manufacturing in this country.

A national innovation system such as that which Labor set in place when we were in government did all these things.

A Shorten Labor government would rebuild the national innovation system, to ensure that it can what it is meant to do.

I look forward to helping to make that vision of the future a reality.

Thank you.


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