Australia's resource curse

In an interesting review in Nature today Barry Jones, Vice-Chancellor of Melbourne University, and former Australian minister of Science (from 1983-1990) reviews The Australian Miracle: An Innovative Nation Revisited, by Thomas Barlow, who coincidentally was an advisor to Brendan Nelson, Australia's recently departed science minister.

The books title is tellingly optimistic: Australian's are damn proud of their inventions; from the stump-jumper plough (though I've never seen one), the Hill-hoist clothesline, two-stroke lawnmowers, vegemite, Coopers sparkling ale ... the list goes on. But not for long.

The truth is, in the last century Australia's contribution to technological advance (excluding medicine) in the last 100 or so years has been pretty abysmal. The Hills-Hoist didn't really change the world. Barlow's book is somewhat dismissive of the naysaying of academics who are - lets face it, the worst whingers imaginable - and for that it is somewhat refreshing. But turning a blind-eye to our lack of techno can-do is not going to improve our lot.

Australia's main problem is what's generally known as "The resource curse." At first glance you wouldn't expect plentiful resources to be much of a curse. But to borrow from a talk I heard of Prof. John Connell's (Sydney Uni), lets take the case of Nauru.

The Nauru people were lucking enough to be living on a big pile of shi... er... guano. In fact it was one of the world's biggest supplier of phosphate for quite some time. The export of this after their independence in 66 allowed Nauruan's to enjoy the higest living standards in the Pacific: no taxes, free electricity (why bother turning the light off, its free!?), free air transport for a while ... and the highest obesity rate in the world.

Unfortunately, the crap dried up. In the 1990's Nauru had to look somewhere else for its future. The problem: most Nauruans have never done a solid day's work in their life. 90% of the island is unemployed; of those that work, 95% work for the government. They have no industry, no tourism - not only because the island's a pile of shit, but the phosphate mining operation wasn't pretty, and besides that, there are barely any tourist facilities. A national trust fund, established when the going was good, shrunk from AUS $1300 million in 1991 to $138 million in 2002. From Wikipedia:

"However, a history of bad investments, financial mismanagement, overspending and corruption has reduced the Trust's fixed and current assets. For example, Nauru House in Melbourne was sold in 2004 to finance debts and Air Nauru's last Boeing 737 was repossessed in December 2005... Nauru currently lacks money to perform many of the basic functions of government, the national Bank of Nauru is insolvent, and GDP per capita has fallen to US$5,000 per annum."

Not a great outlook. Chronic corruption and a "provided-for" mentality means it going to be hard for this little nation to pick up its feet. Its attempt at offering a no-questions-asked tax haven for foreign nationals led to millions of dollars being laundered by the Russian mafia through Nauru. International pressure has since put a stop to this. Now it relies on Australia's unwanted refugee's for income.

Australia is different from Nauru in many ways, but it still suffers from the resource curse: a primary reliance on sales of non-renewable natural resources for revenue, with no firm manufacturing or industrial base. This is a huge weakness in the Australian economy, and makes it highly susceptible to fluctuations in the metals market. Natural resources tend to drive the Aussie dollar, and living standards, higher, which makes it too expensive to manufacture in Australia, so industries go offshore.

Jones mentions in his critique a book by Donald Horne called The lucky country, published in 1964 - which outlines Australia's resource curse in different terms. Whenever Australia has had a crisis, it had nearly always escaped by digging stuff up to sell, from gold, to iron, copper, coal, oil/gas... Its not an escape strategy that is always going to work (not that much new stuff out there...). As a result, we've never had to knuckle-down and tackle our industrial ineptitude head on.

This is not to say Australia is not a technologically advanced nation; we are. But how much of that is home-grown? Jones' mentions that when you look at technological exchange to and from Australia, it is essentially one-sided. What we need, he states, is an Australia Volvo:

"Barlow fails to address what I refer to as Australia's inventory problem, the conspicuous lack of internationally successful high-value-added brand-name goods and services. The Netherlands, Sweden, Switzerland and Finland, which all have smaller populations than Australia, make products that sell internationally on reputation, rather than price. Where are the Australian equivalents of Philips, Volvo, Scania, Hasselblad, Nestlé, Roche or Nokia?"

Australia had an educated population clearly adept enough to ride the internet bubble, or capitalise on the communications revolution, but in investment it never leads - it just follows by example. A company like Nokia, for instance, would have a hard time starting up in Australia, yet its the biggest export Finland has. A little bit of forward thinking is required, short-sightedness is not just something you can fix with glasses.