Thursday, 14 June 2007

An Australian Experience-colonial trade and coming changes

The economy of Australia is not static; people hear little about it in international business news because either the economy is a medium one or it is running well. It has long been a member of developed countries, so there is little chance for Australia to achieve a miracle "tiger" or "dragon" performance of some newly industrialised countries of past decades.
The general impression of Australia is a sleepy country built on the back of sheep or digging. That is perhaps true of the economy before WWII, when Australia simply supplied Britain and other European countries with what they could produce on this massive continent. With plentiful export earnings from supplies those European customers, Australia even saw no need to engage in the infamous opium trade in Asia, as the British unabashedly did in the 19th century. The economy of Australia then was not dissimilar to a banana republic, being an infant economy in a comfortable cuddle of a world power and recognising its sole customer. The situation was also like a bond formed between a provincial vegetable supplier and a wholesale handler of the imperial court.
This harmonious trade pattern faced formidable challenges after the world wars. Britain unavoidably lost its commanding position in the world, not merely in military terms. The country in decline moved quickly to rely on the US and further looked to continental Europe for economic survival and opportunities. Trade with Commonwealth countries, including Australia, became less significant, even over obligatory. To a large extent, the British economy was becoming more international, rather than imperial or colonial. It took Britain (the US) 12 years to become a formal member of the EEC in 1973, which plainly shows where the British saw their future interests lie.
This was obviously a dramatic change of attitude bordering on slight towards Australia. The special relations with the "mother country" were forever downgraded. Australia, and its government, finally realised that they now must be on their own and search their own way out. The immense shock of being marginalised went beyond a sense of failed business deals; the century-old beliefs and routine trade practices were shattered to pieces in a single year. The naked truth was revealed under the sun that Australia needed to concentrate on safeguarding its national interests and cease to fantasise the immense favours from one or another giver. Australia then became relieved from colonial duties and began to obtain an equal status in world trade. Finding new major trade partners would no longer be seen as a betrayal of that once glorious imperial order. In reference to the "British to the bootstraps" Menzies years, this episode of British departure and Australian Independence was both painful and reassuring.
Searching for trading markets is not an option, but a necessity. Australia moved to the direction of the US fairly quickly. Eventually and inevitably, Australia also became more conscious of the surrounding regional development and caught the wind of emerging markets up to its north. This open trade strategy has led Australia to doing brisk business in the Asia Pacific, including that with Japan and China. Six of Australia's top ten trading partners were East Asian economies in 2002. In 2004, 47% of trade was with East Asian economies, with exports to those economies taking up 50% of export total. In comparison, trade with the EU was 19% of the total, and export to the EU took 14% of the total, in which the UK took 43%, still the largest in that colossal economic bloc, on the basis of enduring links extended on from colonial times. The UK jumped to the third-largest merchandise trading partner of Australia in 1998, chiefly a result of the disease of Asian financial crisis. Once that economic downturn was by and large reversed, and especially when the economy of China moved forward unabated, Australia managed to have its continued trading business with East Asia secured.
Despite a sense of loss at the moment of British departure, the historic turn essentially set Australia free, and Australia moved quickly to fill the void with new orders from other customers, mainly Asian. Geographically, Australia is closer to Asia than to other major overseas markets. This has been ignored previously for two reasons: an over reliance on old, familiar markets and a disregard of unexpected rise of Asian economies after the war. Luckily, Australia soon realised the value of those Asian economies as stable customers of Australian made products and services.
This turn from dependence on traditional powers to newly industrialised economies proved a smart choice. It also enhanced the spirit of competition among Australian businesses and there emerged more adventurous tendencies for much needed improvement in business practices and for lifting efficiency in operations. I once accompanied a Chinese salesman to a small sized factory in Melbourne, where the manager candidly confessed that he needed to import Chinese made lathes, cheap while reliable, in order to improve the productivity and overall financial performance. That was a year in the mid 1980s, about the time the Hawke Labour government announced their significant industrial restructuring and other related reforms.
All these chain reactions depict an evolving process for Australia to get in touch with the new world economy beyond past imperial circles. While British influence had trickled down to every corners of the society and remains, it is no hard done to the economy that Australians found additional sources of revenues to enrich the country. Loyal sentiments is one thing; economic well being is another. This is a fundamental turn of event for Australia, from a colonial to a fair world trader, decisively making the country less rigid and the economy more resilient.
It is perhaps not a coincidence that the Whitlam Labour government took decisive actions soon after the UK's entry into the Common Market. What were the imperatives? Exactly the previous government's inaction and lack of understanding of changed environment, inside and outside the country. There began a soul searching and an urgent need to switch tracks for an economy better conditioned for the new era.
On the domestic front, not long before the 1980s, cross country transportation in Australia was in such a disintegrated state that goods carried by railways to another state had to be unloaded and reloaded at borders, so that they could be on the move again, on tracks of different widths. With its colonial history of expanding from one state to another, the Australian economy was much rationalised, with strong parochial concerns and thinking embedded in life from distant past. Touring around some regions of Australia, you still get a feeling of being in some quiet and isolated areas of Italy, where people mind their own affairs, have their set life patterns and deal with local or even district issues, not being overly bothered by economic fluctuations at national or international scenes.
These separate policies and strategies of the states are a legacy of early colonies and their power of persuasion at the time of the Federation. A prime example is Queensland under Sir Joh Bjelke-Petersen, when the state was claimed not even a part of Australia. In his own words, "The trouble is that Queensland get branded as being a part of Australia". States may just well run policies and other affairs pretty much against other states. Again in Sir Joh's words, "What is good for Queensland is good for Australia".
The Australian economy of a mixed nature also plays a key role in inducing major reforms in following decades. It is commonly rationalised that when severe challenges emerged something in the society must be given up, in order to cut waste or slack and then to rise up to compete. The Australian type of welfare state was established with huge expenses, chiefly in government expenditures on benefit handouts and in resultant international problems in business doing. Complaints of drawbacks included large numbers of recipients of various welfare benefits, lowered level of market competition, tedious and unpredictable employee dismissal process, and above all high tax rates to pay for all those heavy welfare costs. Budget deficits caused the government to reconsider options; raising tax rates appeared not plausible, as the existing rates proved unbearable and scary to business and residents alike. The official policy of full employment, with the backing of unions, hampered business operations, in terms of red tape and slower response to market changes.
An external factor not to be ignored is that newly industrialised economies demonstrated their surprising strength in growth and upped the ante in competition on the basis of their lower production costs. To counter this rising wave of competition, lumbering developed economies, mostly welfare states like Australia, felt the urgency to make necessary changes.
All these concerns led to restructuring drives in Australia specifically targeting the public sector and institutions in later years, those viewed most inefficient and slack. Governments, in agony, turned to fully embrace a guiding ideology totally different from that of a welfare state. Big governments with extensive welfare covers of the old days went out of fashion and conveniently dismissed, at least among the social elites. As now commonly believed, Australia indeed craved for a jolt and big benefit cuts, in order to survive and revive.

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