If the financial crisis is to have a silver lining, it will come not from decrying the misplaced utopianism of free marketeers (as the Prime Minister has done), but as an opportunity for first world nations to fundamentally restructure our economy. With the amount of money moving about, now is the time to make a truely first world, twenty-first economy in this country.

Though the debate about trade vs protection was been comprehensively decided two decades ago, first world countries such as Australia and the USA still have large sectors of their economy either protected or dependent upon government support, such as in manufacturing and agriculture. These industries are iconic for both countries, think of the image of Australia riding in on the sheeps back, or the great machines that have come roaring out of Detroit. Yet whilst both got ahead because of natural advantages in the great quality of our farming land and local population demands for goods, both are being artificially propped up at levels well beyond their sustainable limit.

For as long as I can remember, there has been a predictable pattern with these sectors (There’s others fields too, but these two are useful examples). We have a drought, an international economic down turn (or equally upswing introducing new competition) or a currency change and suddenly these sectors cry poor and threaten thousands of job losses. Likewise whenever Australia tries to undertake a trade deal, either pushing the Doha round or the 2004 FTA with America. Again both sectors rise up to demand their own pound of flesh (In the later example Howard paid off the sugar farmers to get out of the game, almost everyone else got told to suck it up)

This pattern, however justifiable it is from day to day to stop the harm that would inevitably come (including to the governments political support!) is simply unsustainable for the long run. Yet despite the great influx of cash that the Mineral Boom offered, the Australian economy under Howard and Costello remained almost the same. New industries had to fight to emerge, whilst old ones, crumbling away were propped up time and time again under governments watching care. We might not have fixed the foundations during the sunshine, but as we use up our rainy day savings, now surely is the time to make the changes.

Take a look at the image on your right involving job changes in the US in recent times. The tangible sectors of the economy, manafacturing and the like have suffered greatly. People cant justify buying new products and are going out less. But they still have to keep healthy, and they recognise that a good education is the best way they have of ensuring their continued employment in this bad time, and a better future once the sky clears. Hence its continued growth regardless of the health of the economy. As Michael Mandel of Business Week declared of the US economy “The war between the intangible and tangible sectors of the U.S. economy is over—and intangibles have won”.

None of this will be politically easy. Indeed it has been politics far more than economics that has dictated both countries resistance to change, but now is a golden opportunity, Especially for a Labor government who’s voters are much more urban, educated and unlikely to punish the government short term for decisions taken -honestly-in the long term interests of the country. Whilst Rudd’s new stimulus package is being sold with education at its heart, much of the money will still end up going to the tangibles in construction and maintenance. Much more however needs to be done.

Now is the time we should
1) Look to end most agricultural subsidies + support systems (natural disasters excluded). Australia has too much good farming land to ever stop growing food, and is still allowing a lot of inefficient (and environmentally damaging) practices to be carried out by the current generation of farmers, delaying the introduction of new farming techniques and individuals who will be able to provide more and depend on the government less. This will mean the closure of some towns, and whilst these people will need support, the one off cost of assisting people to move is incomparably cheaper than the money spent year after year to keep hospitals and schools running for just 200 people, plus all the usual subsidies that go along (such as unemployment benefits as jobs are so rare in such communities).

2) Realize that unless we go the Work-choices path (one comprehensively rejected by the people) Australia cant out compete in manufacturing against Asia. Indeed even if Howard had won and kept his plan, australian costs of living and workers pay are still far far higher than in faced by our competitive neighbors, meaning a distinct disadvantage on pure dollar terms.

3) Invest in High-Tech industries. We can not outproduce on quantity or cost, but we can do quality. We can make products that no one else in our region can. We can be the one’s to create the next generation of products, to attract (or keep!) the highest quality of graduates in fields like IT, Bioengineering, and medicine. Equally we should look to support those emerging industries who are producing tangibles that require high quality input. Video Games for instances are now worth $2 Billion a year, 40% higher than movies. And yet just recently, two video games companies here in canberra alone have had to close their doors. If anyone thinks games are going away, think again. The average age of gamers is over 30, and they’re just starting to have children and introduce them to games. Yet the sector is virtually ignored by the government, whilst much (perhaps $80 million) is spent on flops such as Baz Luhrmann ‘Australia’.

4) Really invest in Higher Education. Un-noticed (even scorned) by the Howard government, Higher Education rose to become our third biggest export sector (behind iron and coal) worth over $13 billion. Australia has steadily become the place for the elites of Asia to send their kids to be educated, and all without any real focus from our government on making this a point of national pride and economic activity. Not only could this become a great cash cow for the country, it has flow on effects in the local market benefits of increased rich kids living near universities, of the wisdom and knowledge they may bring here, of the high quality graduates who will be attracted, and hopefully stay to work in and advance our high tech industries or improve the educational sector.

Australia rode in on the sheep’s back in for most of the twentieth century. But political calculations and a mining boom let us ignore/smooth over much of the economic changes that were being forced on us. Now, without that buffer, we can no longer continue to waste money on sectors that cant compete, at the cost of those who offer great long term, unique opportunities for economic growth and development.

Now is the time to act Mr.Rudd. Use the financial crisis to restructure the Australian Economy to an intangible knowledge based economy. Our country is too naturally blessed for sectors like manafacturing or agriculture to ever fade away, but by keeping them on the drip we are keeping them inefficient and are starving other potential areas of growth. Such meddling in the economy may not be supported in good times, but with so much money being spent, with so much being challenged, now is the time to get involved and make good on your promises and vision. (And Mr Turnbull – Opposing is one thing, but if you want to win votes then you’ll have to offer something positive as a counter offer. Else your “bold stand” will go the way of Beazley’s 2006 opposition to the tax cuts).