History is a fascinating subject.  But it takes work and extended recall. It contains lessons. Particularly about humans and States.  

George Santayana wrote: “those who cannot remember the past are condemned to repeat it” (1905) and from Winston Churchill in the House of Commons: “those who fail to learn from history are doomed to repeat it” (1948).  These two were not the only people to muse on history, supposedly repeating itself.

Economic history is just that bit more complicated.  An account of figures and statistics can be a complete book shutter.  None of the scintillating material of human life.  But a moment of thought might bring forth the realisation that these book-shutting accounts are the substance of human activity.  The economic times were good and bad that fashioned how people lived their lives.  So keep open the book and follow this, if you want to be concerned.

On 14 July 2021, radio (the wireless) commentators were gaily showing their credentials that the quarter GDP for Australia will be hit by 1.45% by the Sydney 7 week lockdown.  No one speculated what a ten-week lockdown will mean. 

Think of Peter Gilmore’s dessert, the ‘Golden Crackle’ on Master Chief 2021 final, with the layers of chocolate mousse, prune jam and other delights. Looking like a piece of Sydney Sandstone with its beautiful layers of different sediment. This allegory is used, it all takes the layers to make the dessert or sandstone piece.  So it is with these figures for our world in Australia, our lifestyles, our homes, our well-being.

The bread and butter of life, as it has always been, is productive work; work to engage the human spirit, nourish the body and mind, and have freedom without being a slave or under another’s yoke, and enjoy human fellowship without fear of physical intimidation or coercion.

Agriculture, because it is seasonal, provides productive work.  In an industrialised society, factory work or manufacturing provides lifetime work, as is the case in the extractive industry or service that services a manufacturing sector.  When you send the factory jobs offshore, the balance inherent in the economic shape of a society outlined in the last sentence obviously changes.  To revert back to the layer analogy, the first sentence has a layer, the second sentence has a bit missing.

Put this on top of these statistics.

Australia’s manufacturing share of Australia’s GDP is less than 6%   

This ranks about equally with Lebanon, Ethiopia, Botswana and Azerbaijan. 

To further put this in perspective, Argentina’s manufacturing share of GDP is 13%, while Mexico’s is at 14.8%.  

The global average – excluding the USA, is 12.3%.  Advanced countries – Germany, Switzerland, Singapore are all in the 19% range.  

Australia in the 1990s ranked above the world average at 14%.

When Howard came to power, manufacturing as a percentage of GDP was about 14%.

If you want to check the other numbers – World Bank : https://www.theglobaleconomy.com/rankings/Share_of_manufacturing/#Australia

Shaun Carney is a vice-chancellor’s professorial fellow at Monash University and a visiting fellow at UNSW Canberra.  He notes:

Now the pandemic is highlighting how exposed we are to offshore manufacturing.

Last March, we learned Australia has only one factory making medical masks – and it’s tiny, employing 17 people – 95% of Australia’s mask supply comes from overseas.

It is not only the current pandemic, which highlights Australia’s exposure to our manufacturing being sent off-shore.  If it is off-shore, that means we need access to shipping lanes, it is the lifeblood for so much for Australia.  You can pause and ponder about this and realise how easy it is to disrupt this supply line, just like a medieval siege of a castle or an island!

Australia’s problems also include :

• Excessive reliance on one source of export earnings being sold to one customer only – with that customer becoming increasingly hostile;
• Understatement of external debt – external debt is substantial. It needs to be rolled or repaid. This is going to become increasingly difficult against the (inevitably) deteriorating foreign exchange position as the Australian dollar drops in value in comparison to the value of the currencies in which the external debt is denominated;
• Accelerating interest rates. There are some commentators projecting  double-digit inflation in the USA by year-end. This seems a little extreme but 5% US CPI by December is not unrealistic.  The most recent set of figures for the twelve months ending June 30^th show a rate of 5.4% for inflation in the USA. This is not reflecting as yet in in bond yields – which means the sophisticated “money” is looking for a safe haven;
• Meaningless Australian Government statistics. The measurement of Australian GDP is little more than a consumption index underpinned by the reliance on immigration.  Figures suggest that the majority of new immigrants end up on social security. CPI is understated as a result of the Federal Government’s obsession with (almost) continuously “recalibrating” the underlying basket to ensure that the CPI remains suppressed.  This has been a practice of previous Governments in order to try to avoid budgetary outlays as many pensions, superannuation payments and other outlays paid by the Commonwealth have a CPI indexation component;
• Taxation receipts – these are approaching a threshold of acceptability. It is becoming difficult to increase taxation collections much beyond current levels. Increases beyond current collection rates will result only in capital leaving the economy coupled with accelerated growth in the “black economy”;
• The real tragedy which awaits is the imposition of mountainous debt on future generations;
• There is a responsibility to hand over a country and an economy on significantly more solid foundations than the one inherited.  This is being ignored.  Future generations are being handed excessive debt. A collapse in manufacturing and a lack of diversification of export earning similar to that of the third world.  Australia is becoming entirely dependent on the export of iron ore to China which is working slowly to remove any dependence upon Australia by establishing alternative sources of supply in Africa and South America;
• An economy that is reliant on imported goods where supply lines can be blockaded very easily.

Back to history.  What happens when there is food insecurity in a country?  What happens when people do not have employment?  What happens when the standard of living starts to decline.  If anyone is in doubt on this issue, look at the real scenarios behind the graphs and Treasury forecasts in the Intergenerational Report 2021.

Well, like the worship of the Sun Gods in antiquity, Australians have plenty of sun.  The role of the king or queen, which we now call Parliament, is to look to the welfare of its citizens through wisdom.

Will Athena, the Greek Goddess of Reason and Wisdom (and War), or will Sophia of the Judeo-Christian tradition, known as the emblem of wisdom, share their virtues with our rulers to restore our fortunes?