Propping up car jobs won’t save them in the long run

February 6, 2012

David Penberthy Punch Online 6th February 2012

A mate of mine went on a family holiday to China in January. He relayed an interesting item from a local English language newspaper about a new pay deal which had been struck for manufacturing workers in Macau. Under the deal, the workers will be paid AUD $239. Not $239 a day. Not $239 a week. But $239 a month.

Factoids such as this are illustrative, and depressingly so, as countries such as Australia grapple with the future of manufacturing jobs. The current discussion about the future of the car industry has been complicated by the high Australian dollar, which is driving up the cost of everything we export.

Regardless of whether our dollar was at 70 cents or at parity with the greenback we would still be wrestling with the exact same problems of competition amid the unstoppable forces of globalisation.

When I finished high school I was lucky enough to spend a year as an exchange student in a small town in southern Mexico, living with a terrific local family with whom I have stayed in touch. Their son, Miguel Graf Patjane, is the same age as me, and he’s a successful business man. I visited him about eight years ago and he offered to take me on a tour of one of his textile factories where he made jeans under licence for the high-end label Ralph Lauren. I was a bit reluctant to do so as I love the bloke and really hoped that I wasn’t going to end up witnessing Dickensian scenes of child labour and deprivation which made me think less of him. The opposite was the case. The factory was clean, safe, unionised, it even had a crèche. The workers were still only paid about 80 bucks a week. Miguel explained that he was thinking about closing the plant down and moving into agribusiness for the domestic market. I asked him why. “Pinche China,” he replied. “Bloody China.”

If a joint like Mexico can’t compete with China then God help Australia. The challenges confronting my Mexican mate tell the story of the past sixty years, where places such as my home town Adelaide or cities like Detroit in the United States have gone from being manufacturing powerhouses which could never imagine a day where they didn’t dominate the car industry or the manufacture of white goods and clothes and footwear. Their domination was first challenged by second-tier economies in places such as Latin America. Today, even Latin America is struggling to compete with China, India, Bangladesh and parts of Africa.

In the context of our domestic car industry, the debate now centres around whether the Federal Government should not only maintain but increase industry assistance to protect jobs from the ravages of international competition, higher tariffs overseas, and the strength of the Aussie dollar. The Coalition has indicated it wants to cut $500 million from the automotive industry assistance program. Labor is heading in the other direction and promising not only to maintain that spending but to find other funds to help manufacturers such as Holden in South Australia and Toyota in Victoria which have already starting laying off workers.

One of the more interesting interventions in this debate was from former Liberal Senator and committed economic dry Nick Minchin. As a parliamentarian Minchin was part of the Society of Modest Members, a free trade lobby group set up in honour of the former member for the SA seat of Wakefield, Bert Kelly, who was a free trade pioneer who long argued that tariffs were essentially a tax on consumption which distorted the market and provided artificial protection of jobs.

Despite Minchin’s conservative pedigree he went public this week attacking the Coalition for its planned cuts to automotive industry assistance, noting rightly that there are plenty of artificial government leg-ups for farmers which the Liberals and their rural partners in the National Party are leaving untouched.

Minchin is totally right on the grounds of consistency. But in terms of the continuing effect of these industry programs for the car industry, you have to wonder about their long term value. Indeed there is a massive great hole in Adelaide, less than 1km from where I grew up, which had millions and millions of taxpayer dollars thrown at it over the course of a decade, and still went under. It’s the old Mitsubishi factory and it stands as a bit of a beacon to the noble but fruitless use of public funds in the face of international competition. In terms of industry assistance the ten year’s worth of bailouts to Mitsubishi was the equivalent of piddling on a bushfire and it probably achieved nothing other than to delay the inevitable departure of local car-making jobs.

The temptation in cases such as Mitsubishi is to wonder whether the government could have done more. I’d ask a different question, of consumers, and it starts with suggesting that we all take a quick look at the marque on the cars we now drive or the clothes we wear or the whitegoods we use. There is a significant hypocrisy on the part of the public in these debates about local jobs, trade, foreign ownership, iconic national brands and so forth. We are all very quick to froth at the mouth about the demise of beloved national brands or the collapse of local industries which were central to our sense of self. That’s well and good but if we are all now getting around in a Hyundai or a Subaru and spending our weekends at the local direct factory outlet buying $4 t-shirts for the kids and $20 sneakers for ourselves, it’s pretty obvious that our actions as consumers are the driving force in the massive and unstoppable changes in our globalised economy.