Dog Washing, Hair Dressing and the Future of the Australian Economy (In response to a question. Isn't it nice how interactive and multi directional communications media are these days?!

The following comment was posted in response to this post. My response is altogether too verbose to be posted as another comment, so here is is.  

Ann said...

Do you think Australia is becoming a third world country and that the balance of power and wealth will shift worldwide? We export our resources (human and physical) to India and China and dispense with our manufacturing industries. It seems to me that an economy and society based on tourism, dog washing and haircutting is not sustainable. The mining boom is a good example of short-term greed at the cost of sustainability.

4 November 2011 12:10 

Pinky's Reply: 

I'm not sure that the definitions by which economists judge which countries are third world and which aren't are all that satisfactory and it often becomes a derogatory term used by nationalistic types to brand everyone else. 

However, in general, the countries considered 3rd world have very different problems to those facing Australia, or areas thereof. In Australia, hardship is caused by the increase in prices brought about by the extremely high performance of some sectors. The overall GDP per capita figures are still good.  

As for whether 'we' should outsource manufacturing, the answer is that 'we' don't. Governments and representatives of the people do not encourage companies to move their operations off shore. The difference is that we no longer actively create barriers to them doing so in the form of tariffs. Because imports are not taxed or restricted as much as they used to be, it becomes cheaper to import goods from low cost parts of the world than to manufacture locally. Because groups of commercial entities that operate internationally have pressured governments around the world to reduce trade barriers, arguing that it will increase efficiency and reduce costs through competition, there is very little possibility of the process being reversed. 

As for whether Australia needs manufacturing to function economically, the argument usually put forward is for a 'knowledge economy' in which skilled and educated people here manage operations that generate huge profits by outsourcing menial tasks to the cheapest bidder so they can concentrate on the really important stuff like thinking and designing and being innovative. This is very appealing, since nobody would want to work in a factory anyway, would they? People like to be told they are too clever for that. It's probably true for some. 

Of course the fundamental weakness of this model is that there are of course people in China and India who can think and be innovative too. We might hope that there are getting pretty good at it by now, since one of our biggest exports is education and they are its consumers. If people like me are doing our jobs right, we are helping those who do not settle here to go back to China and India and other countries with as much cleverness and initiative and business knowledge as as anyone in the Australian work force. Indeed, because they appreciate and value our teaching, they learn more from us than many of us learn from each other.

Should we be worried then? Should we greedily keep our knowledge and ideas to ourselves? Of course not! That would firstly destroy our second biggest export industry and secondly be bad for the world as a whole, including the first world, or should I should write hole because that's a more apt description of any world without scholarship. Whenever we teach and educate people we are contributing to humanity and as a part of it we benefit. Sorry to upset those who believe in individualism, but ultimately we're all in the same boat, by which I mean planet. You'd have to be off the planet to not get that. (sorry, I know that't terrible, but it really is true.)

So there you have it: what is going on will encounter issues. Things will have to change. The changes that have led to this can't be undone. The answers? I'm still looking too. 

For further reading in relation to outsourcing, please consider the following. Buy via my links and you will support my blog too^^. Only $2.99 for the first one, in electronic form. Others are hard copies.