Australia is a resilient and resourceful nation.

One out of the box

Its sometimes said that we need to look back to move forward. If there is any truth to that, then it will be worth rewinding the tape a little bit. To a moment when, if only in mere sporting terms, Australia ruled the globe. It’s a risky move. Revisiting halcyon days can entrench stasis and delusion. The future can seem brighter if we simply ignore who and where we’ve been, and focus on the way ahead. But just sometimes a glance at the rear view mirror reveals more than merely the past receding into distance. A vision of the past, even imperfectly seen, might inform and inspire. Just occasionally it reflects the feats of a past generation impressive enough to influence the future-shaping efforts of the present one. 

On Monday, 26 September 1983, the 12-metre yacht ‘Australia II’ sailed into Newport Harbour, Rhode Island. It had just won a seventh, deciding race against a United States team of Dennis Connor and his yacht ‘Liberty’. Many consider it the ‘race of the century’ for its hard fought intensity. An Australian team skippered by John Bertrand had secured the famed America’s Cup. It was quite an achievement in a competition steeped in history. After an 1851 race in which the schooner ‘America’ had beaten a British boat, the Royal Yacht Squadron commissioned a superb silverware cup. It was offered as a perpetual trophy, which a winning nation could hold as long as it was able to fend off challenges from other countries. The idea at the heart of the America’s Cup competition was brilliant. Conduct friendly warfare on the ocean, under sail, so that bragging rights could be won without the shedding of blood. For 132 years the Americans practically owned it, defeating all challengers. That is, until Bertrand’s team finally broke the longest winning streak in sporting history. As a victorious ‘Australia II’ entered the harbour, it flew a flag bearing a famed symbol of Australia’s competitive spirit - the ‘Boxing Kangaroo’.

The America’s Cup triumph, as much as the flag under which it was won, has become symbolic of Australia’s national competitiveness. It was a victory for financial capital, since the costs of fielding a team were so prohibitive. It was a victory for innovation. The audacious ‘winged keel’ designed by Ben Lexcen helped ‘Australia II’ achieve its performance edge in the water. And it was a victory for persistence. From 1962, Australia fielded numerous unsuccessful challenges before finally achieving ultimate success. The complexity of competing for the America’s Cup makes it a true test not only of sailing ability, but also of team management and logistics. Winning it seemed to announce the arrival of a newly self-confident ‘Team Australia’. One that could not only compete in sport, but in any endeavour that called for both individual nous and collective ambition.

Resilience at risk

Over thirty-two years have passed since that race was held. More than the quarter century that for many defines a generation. Australia in 2016 is strong, proud and wealthy. Resilient. A resilient nation resists foreseen and unforeseen threats. It protects itself against a wide range of possible shocks, as well as chronic impacts to its economic, political and social health. Fiscal strength is not the only determinant of national resilience. But it is important. A drifting economy means that Australia’s competitiveness, and its resilience, is at risk. In 1983 its economy was stifled, underperforming, demanding of reform. Now in 2016, Australia is once again at the crossroads of change. A generation ago, Australia proved itself up to the challenge. Can it do so again?

An economically competitive country maintains both a vibrant domestic economy, and the ability to trade to its advantage in highly integrated global markets. A trade-exposed nation like Australia must produce goods and services for export that are prized by global trading partners. In short, it must produce export items with true scarcity value.   Australia has built generational wealth by exporting natural commodities. In 1963 this primarily meant wool and wheat. These days it means iron ore, coal, and other mineral products that collectively account for 50% of exports. The abundance of natural commodities that could be grown, harvested, extracted, and shipped offshore has given Australia a long-standing trading advantage. But the rules that govern value in global markets have changed. More than ever these rules reward nations that export high value-added products, not natural commodities. They put a scarcity value on technology, built into computing, instrumentation, and telecommunication equipment. And they increasingly penalise countries that continue to depend on the export of raw materials - including those that others convert into sophisticated final products. Australia is on the receiving end of this profound change in the rules. One that has no foreseeable end date. It is eroding the nation’s export competitiveness, and its longer-term financial position.

Australia is a resilient nation. It has withstood threats before, and will likely do so again. However, its diminishing economic competitiveness is undermining this resilience. The rising threat to Australia, and the superior quality of life it provides its citizens, is very real. Confronted with economic and other threats, Australia has always risen to the challenge. A pioneering spirit endures. A sense that wealth and wellbeing must be worked for, not merely received. Australia has often shown a clear-eyed pragmatism. Far from the ‘she’ll be right’ stereotype, its leaders have demonstrated a readiness to change national systems. To fix what is broken. Financially, socially, militarily. Such circumstances have arisen again. Australia must reignite its economic competitiveness. But this raises a profound question. Can the Australia of 2016 still muster the kind of collective vigour that seemed reborn in the heady days of 1983, and in the moment ‘Australia II’ crossed its fateful finish line? In short, can the nation still put up a fight? Does the ‘Boxing Kangaroo’ still stand for the feisty and irrepressible spirit Australia is famous for?

Australia must transform its export-led economy. After all, trade now constitutes over 40% of its Gross Domestic Product (GDP), significantly more than in previous decades. However, this transformation will be drawn out and difficult. It will require a rebalancing of the productive capabilities of the nation - moving away from extractive and towards technology-enabled industries. It will require the ability to make difficult political decisions to boost national saving while changing the direction of spending. It will take time, during which sacrifices will be needed. It will require both the nation’s leadership, as well as the wider community, to ‘stay the course’. It will be a true test of long-term commitment to national transformation.

Precisely because of this difficulty a new politics of consensus is needed. There must be consensus not only in the perceived need for change, but also in the policy initiatives designed to achieve it. Consensus is hard to manufacture. It arises from intangible sources that are invisible in the national accounts. These reflect the values, aspirations, and confidence of the population. Just as personal endeavour is often motivated by intangible personal beliefs and emotional drivers, so too the collective ‘mood’ of the populace influences its national performance. There is a non-rational thread to consensus. Logical argument alone rarely motivates individuals to strive for distinction in their chosen fields of endeavour. Nations in this sense are individuals writ large. As populations gain a sense of optimism about the future, and the potency of collective action, they seek to find ways to ‘act as one’. Sometimes this is in advance of, or in defiance to, the material reality. To do this they rally around commonly held beliefs, underpinned by a sense of mutual association and identification. True national purpose is based as much on subjective and affective foundations as it is on logic and reason. This is why cultural symbols, visible expressions of collective striving and success, are important. No matter to what extent such symbols are justified by historical facts. 

Consensus can be found in the same spirit that infused Australia’s successful America’s Cup challenge, and which is symbolised by the ‘Boxing Kangaroo’. One which recognises and celebrates national endeavour. The social capital that flows from consensus can be used to strengthen the ability of government to increase national saving and targeted investments. Australia’s future prosperity will depend on the ability of government, business and the wider community to broker consensus in a compelling national vision and strategy.

What vision?

Australia currently lacks a cohesive national vision supporting a broad based commitment to collective endeavour. For many, the Australia that contested the America’s Cup in 1983 is an almost mythical place. To some it represents a time when the country was naively self confident and embarrassingly jingoistic. They do not want a return to an Australia that they perceive was less diverse and more insular. It is true that nationalism can have profoundly negative outcomes when it is based on chauvinistic premises. This type of nationalism is toxic, encouraging social divisions and the scapegoating of minorities. ‘Flag waving’ should be entirely rejected when used to marginalise and exclude, rather than unite and inspire, a nation’s many communities. There are examples of nationalist chauvinism which should be deplored, of which the 2005 Cronulla riots are among the more dramatic examples. But these are at the margins and not representative of Australia’s sense of nationhood at its best. It could be argued that the lack of investment in positive nationalism has enabled fringe groups to hijack and pervert Australian nationalism in ways corrosive of social unity. While such abuses can and do occur, it remains to be asked, can Australia really do without nationalism altogether? Can abuses done in its name really disfigure it to such an extent that it must be discarded? Is it an anachronism in the 21st Century?

Arguably, the answer is ‘no’. An inclusive nationalism that makes a virtue of the best aspects of shared identity is potentially of decisive value for social unity. It enables a nation to act collectively to achieve difficult feats through common effort. Achievements that may even go far beyond winning prestigious sporting contests like the America’s Cup. 

In reviving a commitment to national endeavour, Australia faces a problem that it shares in common with other Anglophone nations featuring advanced economies. That is, a rising tide of inequality accompanied by a gradual increase in wealth and income disparities. It includes the apparent erosion of the so-called ‘middle class’, with the majority being forced downwards on the wealth spectrum (in terms of income and wealth distribution). A 2014 study found that the richest seven individuals in Australia held more wealth than the 1.73 million households in the bottom 20% of the Australian community (by wealth distribution). The top 20 per cent of people had five times more income than the bottom 20 percent, and 71 times more wealth. Rising inequality undermines the commitment of the community towards national endeavour, since it erodes the dream and the reality of an egalitarian society. This has been exacerbated by a decade-long movement towards politics that tend to favour the economic rights of the individual over those of the wider community.  

Disenfranchisement has reached almost unprecedented levels in Australia. There is little political consensus on the issues that matter (including the development of infrastructure, support for industries, and protection of the environment). A divisive national politics has only contributed to a sense of diminishing confidence that positive nationalism can exist. Put simply, there are too many people in positions of influence in Australia who perceive it to be in their interests to play up the divisions that exist between Australians, rather than seek to overcome them.  Australians are energised by the opportunities they have to improve their material wellbeing. This vibrant competitive urge is increasingly directed towards personal fulfillment and wealth creation. Comparatively little regard is paid to a better future in which all can share. Australia, like other Anglophone nations, is fragmenting into a social reality of ‘haves’ and ‘have-nots’. The ability to summon collective action for the common good is diminishing.  

John Hewson, a respected former leader of Australia’s conservative Liberal Party, has portrayed Australia’s dilemma as a failure to develop an ‘orchestrated’ strategy to meet its challenges. In endeavoring to make the transition from a resource-based export economy to one based on other strengths (including higher education, research and technology), Australia has failed to develop a compelling ‘economic overarching narrative’. Such a narrative would help Australians make sense of their current economic predicament, and build a common view of how to overcome it.

The nation and the citizen

There is a very 'human' basis to national resilience. A nation only exists as the sum of its individual citizens. In the same way the national will depends upon the competitive spirit of each individual person. The competitive urge, put simply, is the wellspring not only of an individual citizen’s success (economically or otherwise), but also of broader national competitiveness. The urge to compete is a good thing. It powers the selection of hardy and adaptable species in the natural world, and the refining of technologies in the human one. Railways that cross continents and join oceans. Medical breakthroughs that improve the lives of millions. It leads to the marvels of Fred Astaire, punk rock, and bendable screens we can fit in our pockets. And of course, better mousetraps.

Competitiveness is at the heart of human identity. Much of what makes Australia great is its liberal foundations and respect for the individual. The spirit may be dented, but rarely is the competitive urge completely extinguished. Ben Lexcen, the extraordinary designer of ‘Australia II’ epitomised the competitive spirit. As his biographer Bruce Stannard relates, Ben had an incipient competitive streak that belied his “laconic, almost lazy, appearance of a bushman”. Lexcen speaking of his own experience in yacht racing related to Stannard: “I get a fantastic competitive urge. I become ultra alert and I can see with absolute clarity every little facet of wind and water and sail shape and trim that is going to be important to my winning. I like the feeling of sailing, of having it all come together and working nicely. It’s not so much an overwhelming desire to thrash the other blokes but a feeling of desperation or scrabbling and I have to struggle to keep this desperation under control”. There is clearly nothing premeditated about Lexcen’s expression of personal competitiveness. Nor is it, while unquestionably strong, in any way particularly unique to him. Rather, it shows that this urge is semiconscious at best, unpremeditated, part of the basic makeup of the man.

Australia is a resilient nation that has proven itself able to weather significant social, economic, and geopolitical challenges. It occupies an entire continent, and is well endowed with numerous advantages including extensive natural resources, a highly educated population and strong institutions. Australia has long been able to compete in terms of economic strength. It has also made historic contributions in many spheres of global endeavour including the sciences, technology, arts, and social change. Despite the prevalent charge of ‘tall poppyism’ Australians of talent and determination have always been able to rise up and make names for themselves both at home and abroad.   

Australia has been at its best when it has leveraged a positive sense of nationalism, based on prosperity, opportunity for all, and plurality through multiculturalism. It has been at its most competitive when there has been a sense of common purpose. This consensus made possible the difficult decisions necessary for successful economic reform over the last 30 years. It has helped the nation achieve its longest streak of unbroken economic growth. Since the late 1990s, this consensus has declined. It has been gradually replaced with values prioritising the right of individuals to advance their own economic and social interests; as well as those of their immediate families and communities. While family building is an undeniably worthy goal, it has tended to obscure the need for collective action on critical political, economic and social issues. It has likewise diminished the nation’s ability to execute the reforms that would ensure its resilience in the 21st century and beyond.

The challenges of a transforming global economic world order are substantial. Australia needs to develop its competitiveness to successfully adapt to these challenges. It needs to carefully consider how it will develop its national resilience through strategies that better develop and deploy its economic resources. This will require greater collective saving, and a focused effort towards nation building through industries that will be critical to global development over the next century and beyond. 

AN inconsequential australia?

In recent years it has become a commonplace among Australian commentators to suggest that Australia is a relatively weak and insignificant country. This has been offered as justification for the belief that Australia should not seek to take leadership positions on the world stage. It includes criticising the efforts taken by Australia’s leadership to help broker agreement at the 2009 United Nations Copenhagen Conference (on climate change), as well as its temporary membership of the United Nations Security Council in 2013-14.

Possibly the underlying reason for this ‘talking down’ of Australia’s significance and role in the world is the view that an inward-looking Australia, which stands apart from global concerns, will best conserve its ‘way of life’ unmolested. This view generally accompanies both a small role for the national government in domestic matters and an equally small role for Australia on the global stage. Contrasting this standpoint, some commentators of note including Michael Fullilove (in his ABC 2015 Boyer Lectures) and ex Foreign Minister Gareth Evans have shown clearly that as a ‘middle power’ Australia’s long term interests are best served by principled engagement in global issues, rather than retreat from them.    

The idea that Australia is relatively insignificant is pernicious because of the effect it has on the collective, competitive ambition of Australians. It turns Australia into a nation of ‘takers’, not ‘makers’. It abnegates the idea that the nation has the ability to either innovate or outcompete (in global terms). For the sake of the status quo, it sacrifices the raw dynamism of an energetic, young country. It asks Australians to pursue the micro and leave bigger decisions to global leaders elsewhere. It infantilises Australia’s role in setting economic, social and political blueprints for itself and the world.

As Gareth Evans stated: “I refuse to believe that Australia is just another also-ran country, focusing wholly on our own interests defined in the narrowest possible way, not really caring much about the wider world we live in, and deserving to be treated accordingly. I believe that on the contrary we are – and that our track record over many decades overwhelmingly shows it – decent and committed international citizens, independent minded and with a real egalitarian streak, neither sucking up to the powerful nor kicking down at the powerless.”

Michael Fullilove has argued that Australia uses its membership of the Group of Twenty (G20) to “contribute to the rules of the economic game and advocate the kind of open, transparent, rules-based international economic order which favours Australia and the world”. Why would Australia want to abandon that position of leadership?

The idea of a small and uncompetitive Australia is also unsupported by the facts. After all, in 2014 Australia had at least the 20th largest Gross Domestic Product (GDP), and the 25th largest GDP per capita.  Contrary to recent revisionism, the modern Australian nation is resourceful. Australia’s indigenous population has demonstrated enormous adaptability and resilience for millennia, as enduring custodians of the Australian continent. Post-European arrival Australia, benefitting from the contribution of generations of immigrants, is likewise strong. Australia has known weakness. But this was temporary, and a long time ago. If we take the early colony as the forerunner to the modern nation, then the last time Australia was genuinely weak was a brief period in 1788-9 after Arthur Phillip sailed into Port Jackson at the head of the First Fleet.   

The early colonialists in Port Jackson (now Sydney harbour) ran out of food and could not figure out a way to replace it. Most were convicts, transported from Britain as punishment for crimes committed out of the desperation of poverty. They were not suited for survival in an unfamiliar and seemingly hostile land. Nearly all had been urban working poor. They had little to no understanding of agriculture. Worse, what relevant farming skills they possessed were defeated by the ground under their feet. The soils at Sydney Cove were unyielding. Their seeds didn’t take. The arrival of a second, and then a third fleet put more pressure on resources. Relief transports from the distant homeland were few and far between. Within two years famine threatened, and the nascent colony was on the brink.

The grand British experiment in ‘Terra Australis’ looked doomed. But necessity proved, as it often does, to be a formidable mother. Explorers set out into an inhospitable landscape, as strange as the moon, beyond the pickets of a dying settlement. Momentously, new pastures were found up river from Sydney Cove at Rose Hill, a place we now call Parramatta. Seeds were sown. The crops took and farms were built. A threat of starvation receded, and with it, an existential peril overcome. Australia has known weakness. But through the retrospective sweep of time, it is hardly a blip. Taking the entire period of post-European settlement as a single day, that weakness lasted about twelve minutes.  

Long before it was considered ‘policy’, the urge to compete helped Australia thrive. The colony was a frontier land, tackled by those determined to achieve social distinction and accumulate wealth. The hardy survived. The cluey thrived. ‘Weaklings’ were expected to settle at the bottom. There was no featherbed for the so-called shiftless in colonial Australia. Reality was a mangle that straightened out the good from the bad, the weak from the strong. Australians took deep breaths of fresh air and put their shoulders to the wheel (or the shears to the sheep, as the case may be). It was a hard place. A country, and a people, immortalised by the canvasses of Roberts and Streeton.

It wasn’t easy to get ahead. But Australia offered opportunity to those who were willing to strive. Fortunes for those who wanted them badly enough. A new society, modeled on, but distant from, ‘old Europe’, in which one could rise. Opportunity could be found, but was not scattered about on the surface waiting to be picked up. It had to be extracted, cut down, boiled out. Fought for. The toil needed to exploit this opportunity forged bonds harder than the convicts’ chains. It produced the unique phenomenon of ‘mateship’, a cultural tattoo that to a lesser or greater extent still burns at the heart of Australian identity. ‘Mateship’ continues to imprint itself into the imaginations of immigrants, though perhaps not uniformly or to the extent felt by the ‘native sons and daughters’ of the early colony.    

‘Mateship’ became the short hand for a set of values that held up the value of cooperation. But it was never conceived as an absolute thing, blind-eyed to reality. It walked hand-in-hand with competition. The kind of competition that saw shearers race each other to record daily tallies of fleece. Competition that saw John Macarthur, and those like him, set up agricultural export enterprises on a vast scale. It witnessed the squattocracy, early industrialists, and cities (like boom era Melbourne) that at one point were among the wealthiest places on earth.  Australian ‘mateship’ is not Pollyanna-ism, or socialism in strange garb. It is the hard-nosed expression of an unwritten social compact based on the (mostly unspoken) understanding that mutual support equals greater wealth for all. It takes full advantage of narrow personal ambition, and knocks it into the shape of collective virtue.

THE Natural limits to competing

The need to compete is as natural as breathing. Of itself it is neither an ‘evil’ or a ‘good’. Like other human needs, it is bounded by finitude. There is a point beyond which indulgence in the urge to compete is more or less satisfied. Once a certain level of dominance has been achieved over rivals, the act of competing becomes progressively less pleasurable. Stress arises from having to defend a superior position, once won. The marginal benefit curve for competing harder starts to flatten out.

Most successful businesspeople welcome competition, and feel uneasy when those competitors disappear. They understand that, in an essential sense, they can only be as strong, and as innovative, as the level of competition allows. The cut and thrust of competition drives innovation, efficiency, and quality in the development of products and services for consumption in the market. It is accepted as key to that fraught but otherwise unavoidable national goal of economic progress.

We are also mistaken if we believe that money is the only motivator for competitive people. It is not the only reason the entrepreneur gets up in the morning. While most competitive people are keen to demonstrate their superiority in terms of affluence, it is normally a relative thing. Most are satisfied if they can prove to themselves and others that they are relatively rich. Most are not aiming to enter the Guinness Book of Records as the richest man or woman who has ever lived. Policy makers are therefore mistaken if they believe that they must provide individual citizens with the potential opportunity to garner unlimited, disproportionate wealth – simply in order to encourage them to build businesses and generate economic activity. Policy makers should certainly provide the ‘carrot’ that encourages financial risk taking by individuals for the potential benefit of a bigger slice of the economic pie. But it is a grave mistake to put ‘all eggs in the basket’ of motivating individuals by the promise of unlimited financial reward.

Other goals can motivate men and women to achieve great things that advance the nation. Ben Lexcen himself made this very plain to his biographer when he compared chasing the America’s Cup to a “huge ego trip”. After winning in 1983 he said: “Why else would you do it? We all want to be world famous. That’s something that has always driven me. I achieved a degree of notoriety over the America’s Cup win but now my ego is saying I’ve got to go on and defend the damned thing”. Ego, pride, ambition, fame. These are all qualities that motivate individual citizens to strive for personal success. But they can be leveraged not only for personal financial gain. Tied to notions of national advancement, they can be swung in behind the country’s policy objectives. A true wind in the sails.

Personal ambition, like democracy, is a wonderful but often not a pretty thing, in the final equation. It can be leveraged for national development. But it should never be held up as an unqualified good. Rather, it should be bent to the needs of the wider society – not the other way around. Pandering to individual ambition leads to a selfish society that values narrow personal interests over those of a common humanity.  The urge to compete finds its limitation in itself. It is possible to have too much of a good thing. Rampant competition is a source of economic and social evil. Unchecked, it tramples on everything, good or bad, in its path. It can destroy entire industries, entire communities. When let off the leash an irrational exuberance causes cycles of booms and busts that devastate the economy and creates many losers.  This triggers a profoundly deleterious effect at the national, rather than at merely a personal level. The unchecked greed of a few destroys the wellbeing of the many.

Economically, rampant competition leads to systems in which the ‘winner takes all’, rather than the ‘winner takes more’. When the winner clears the board, the access to capital others rely upon to start up new enterprises and contribute to a productive and growing economy diminishes. The wealth of the nation is locked up in the vaults of the wealthy. The vitality of the economy diminishes. The diversity of economic production starves. Socially, excessive condescension to the competitive animal spirits of individual economic actors encourages the development of underclasses. The problem is not with the mere existence of social distinctions. They are unavoidable. The real problem is with the extent of disadvantage that can be experienced by those of modest financial means, when extremes between the ‘haves’ and ‘have-nots’ are allowed to expand unchecked. 

Underclasses develop and become dangerous when sections of the population are marginalised. People who experience the suffering of want in the present often cannot see how things will improve in the future. They get desperate. And desperate people do not build social wealth. They agitate, militate, and if ignored, destroy. Even moderate social inequality can trigger the types of social stress that leads to violence and the destruction of wealth. In economic terms, the burden of inequality born of underclass is an unacceptable ‘transaction cost’. It’s a problem Australia doesn’t need to create for itself, given its plentiful resources and relatively small population.

Capitalism is necessary, but like an poorly tamed animal has a tendency to run wild. The boom/bust cycle brings windfalls to the canny and asset-rich minority, but smashes the welfare of the majority. The most unfortunate sink to the bottom of the economic pile and comprise an underclass. As a nation Australia has created (thankfully temporary) underclasses before. They were seen on the colonial-era goldfields of Victoria, in the shearing sheds of Queensland, on Australian wharves and in its factories. Each time the nation flirted with ‘old world’ economic tyranny it paid a heavy price in social disharmony. However, it learned from these experiences. It has largely chosen social equity over unchecked capitalism, when faced with such crises. This is not to argue that Australia has no problem with entrenched poverty and disadvantage – it does. But arguably it has done a lot (through its history) to avoid the extremes of inequality that lead to the widespread creation of underclasses.   

Australia remains a nation of practical, hardheaded ‘doers’. This in not meant to give further air to the prevalent myth that Australians can be divided into a simplistic binary of ‘leaners and lifters’. Australians have long realised that everyone deserves a chance to get ahead. That aristocrats (of any stripe) are not needed for their ability to dispense crumbs to the poor so they don’t starve. Australia operates on the premise that all should be able to bake, and eat, as much bread as they need. That is the nation’s idea of commonwealth. What use is the ‘trickle down effect’ when there is genuine thirst? No trickle can slake the ‘hard-earned thirst’ that the baking antipodean sun inspires.

In for a dip

Now, as a proud, strong nation in the 21st Century, Australia faces new challenges. Increasingly, the need to compete locally is giving way to the need to compete abroad. Technology enables economic networks that expose countries to the competitive forces powering the global economy. More than ever, Australia cannot rely upon its traditional agrarian and resource-extraction industries to support the quality of life its communities need and expect. The so-called mining boom of the 2000s (at least as expressed by exuberant commodity prices and capital investment) is over. Australia is gradually starting to move away from its recent, almost exclusive dependence on the resources sector. Persistently wealthy countries are all moving up the ‘value-added production’ chain as quickly as they can. This does not entail remaining bound to the exportation of raw commodities in bulk.  

To provide acceptable health care to its aging population, and to enjoy all the benefits of advances in technology, medicine, lifestyle and entertainment, Australia needs to build national productivity for national wealth. Encouraging the competitive urge will help it get there. It has powered the wheels of industry before and will do so again. It is undeniable that Australians thrive on the battlefield and the football field. They also strongly compete in the fields of scientific and medical research, design, engineering, education, fashion, and the arts. They are a resilient people, taught by circumstance to be self-reliant, practical and bold. They know they cannot walk alone, and in a spirit of unity have found strength.

Australia enjoyed an extended period of twenty-seven years of economic development from 1981 to 2008 driven by tough but necessary economic reforms, and a once-in-a-generation boom in export prices for its mineral wealth commodities in the 2000s. This expansion was only briefly interrupted by recession in 1991. The Global Financial Crisis (GFC) of 2008 put the brakes on the type of growth that saw the Australian economy expand by an average of 3.3% per annum between 1992 and 2014. Australia has not experienced a ‘technical recession’ (two successive quarters of negative economic growth) since 1991. In 2016 Australia achieved its 25th year of unbroken economic growth. It is the only developed economy to have achieved this feat.

There are now signs that Australia’s long-term economic resilience is declining. Australia successfully avoided entering a recession during the GFC in part due to its capital reserves and stimulatory financial policies. It also relied upon record commodity export levels to its major East Asian trading partners – especially China, which now accounts for approximately 30% of the nation’s total export trade. Given that the boom in commodities that supported this trade is ending (or has ended), Australia is faced with the significant challenge to transition its economy to other sources of sustainable export-led growth.

In the meantime, national productivity has slipped, as the cost of inputs (labour and equipment) relative to the value of production has gradually increased. Multifactor productivity is the key reason why the Australian Bureau of Statistics (ABS) adjudged in 2013 that the overall ‘resilience of the Australian economy has regressed over the last decade’. Productivity declined by 2.1% between 2001-2 and 2011-12. This is despite relatively high levels of capital base ratios held by Australian banks, a measure of prudent financial management - and despite historically low levels of inflation. Australia’s recent inability to leverage its highly developed scientific, educational, and professional resources to drive increased productivity and economic growth has been striking. With the collapse in commodity export prices (including iron ore and coal) after 2008, an inability to sufficiently grow the value of alternate export sources has damaged the economy. The trade deficit of AUD $3.9 billion in April 2015 was the worst monthly result on record (since 1971).    

While Australia continues to achieve economic growth (predicted to be 3% between 2015 and 2019), it is has arguably lost control over its fiscal position. The federal government has run budget deficits since the 2009 financial year. The shortfall between revenue and expenditure of the national budget reached almost 20% of GDP by June 2015, and was predicted by the Treasury to reach 24% by 2019. The Australian government’s net debt is expected to be AUD $278 billion in 2015-16 (or almost 17% of GDP). Given the type of long-term pressures on the economy with an aging population, the slide into persistent budget deficits is alarming.

There is no doubt that Australia has to rein in unsustainable spending. A nation can only thrive when it is not excessively burdened by the need to pay down debt. Australia is not alone in needing to face up to unsustainable deficits. It is a problem experienced by developed economies across the world. Australia must reverse chronic debt accumulation. Fortunately, Australians respond positively to notions of thrift. They have shown a preparedness to endure self-sacrifice for the national cause. Australians will ‘tighten their belts’ when the economic situation demands it. And when the case is made. But there is a difference between belt tightening and actually building sustainable wealth. A malnourished man who constricts his waistline may make his trousers look like they fit him better. But if he doesn’t eat he will collapse anyway. Similarly, merely cutting back on national expenditure is not enough to restore health to the economy. Cutbacks (alone) do not make for a sustainable economic future. The idea that Australia has merely a spending, and not a revenue problem, is false.  

Belt tightening is important, but by itself is not enough. At this juncture, encouraging personal competition would encourage an ‘everyone for themselves’ mentality. Combined with heavy expenditure cuts in public services (like health and education), this is very risky policy. More than ever nations must heed the timeless message of Adam Smith’s ‘The Wealth of Nations’. Specialisation remains the sine qua non of economic progress in the global economic system. While refraining from ‘picking winners’ each nation must still seek to identify its sustainable competitive advantages. In a term coined by C. K. Prahalad and Gary Hamel in 1990, like a well-run corporation each nation must build its ‘core competence’. The global future for humankind will in large part be defined by the capability of societies to solve complex economic and environmental challenges. Nations that most successfully develop their knowledge-based capabilities (i.e. in science and technology) will achieve a sustainable competitive edge. Innovation and investment in this competitive advantage must flow.

Those that rely on their status as low cost exporters of raw materials will fall behind. As Emeritus Professor Ian Lowe has noted, the “relative value of raw materials has steadily declined as technological innovation has made it possible to do more with less”. Australia’s outsized advantages as an exporter of commodities does not make it in any way immune from the long-term trend towards value production through innovation. The individual competitive urge cannot provide for nation building. It’s not in the instinct of the magnate to do it. The state must take the lead. And in countries where the present wealth is heavily provided for by common assets and resources (e.g. through extractive industries) it is even more critical that the nation harvest and preserve its wealth for future use. Not just to support present consumption. Why? Because those resources, once consumed, do not grow back. They are finite. A one-time windfall. 

It will be expensive for Australia to keep developing its sources of competitive advantage. Whether in renewable technologies (like wind turbine or battery storage), in medical innovation, education or information technology, the sunk cost demands are enormous. Since Australia competes in all these fields against other nations, they become increasingly costly.  Unpredictability in identifying specific areas of competitive advantage continues to grow. Who knows what will bring nations to the top of the economic pile in fifty years? In a hundred? It is difficult enough to pick winners that might hold true for a single decade. With technological and social change accelerating, it may be impossible to pick the winners of tomorrow. Despite this, we know that the future belongs to science, technology, and innovation – this much is clear. It is equally evident that only sustained investment in the institutions, industries, and enterprises that drive innovation will generate long term national prosperity.

This is not (or should not be) news. National awareness of the need to innovate goes back at least as far as the 1980s – when successive Labor Prime Ministers Bob Hawke and Paul Keating exhorted Australians to embrace the idea of Australia as a ‘clever country’. The National Innovation and Science Agenda announced by Prime Minister Malcolm Turnbull in December 2015 was praised for revitalising a focus on innovation which many perceived to have fallen into neglect. In early 2014, Australia’s former chief scientist Professor Ian Chubb remarked that if Australian science was a cricket team, “you might say we’ve got a few great players but the team is average”. Later that year he released recommendations for a national science strategy titled ‘Science, Technology, Engineering and Mathematics: Australia’s Future’. Chubb noted that Australia was falling behind OECD peers in inventiveness, collaboration between business and research organisations, national direction in science, innovation and technology, and the teaching of mathematics. 

taking saving seriously

Countries that rely on resources for windfall wealth understand the centrality of innovation to their continued prosperity. They invest in national sovereign wealth funds based on a knowledge that a resilient country is one that tightens its belt, but tightens to a purpose. Not just so that the rich can get richer, while the disadvantage grows for those lower in the social order. In the hyper competitive 21st Century, more than ever Australians will rise or fall together. The value and purpose of the nation state is still meaningful. National purpose has not yet been superseded by concepts of a single global economy, or even by the power of multinational corporations. Australia should aim to be a valued, trusted global citizen – one that is recognised for building international consensus for peaceful cooperative development. However, it should not fail to act to preserve its own legitimate interests, and the long-term welfare of every one of its inhabitants. The long-term is not counted in months, years or decades. It is counted in the innumerable future generations that will call the Australian continent home. Australian leaders should rightly focus on the present but not lose sight of the needs of future generations of Australians as yet unborn. This requires foresight.

Like Norwegians, Australians are hard working and thrifty. They know the value of squirreling away the fruits of their labour for a better tomorrow. They know it makes them proud, healthy and strong. Like them, they also understand the merits of ‘delayed gratification’. However, it is an open question if Australia fully grasps Norway’s power of foresight. While Australia has largely spent (and to some extent squandered) the one-time windfall of the recent mining boom, the Norwegians have saved it. It is difficult to argue that they are suffering an impoverished existence to pay on lay-by a luxurious lifestyle generations from now. Far from it. Norwegians enjoy a good lifestyle now and can be confident of a good lifestyle in the future. Neither have they had to resort to anything as dramatic as abandoning capitalism - which so efficiently translates the ‘urge to compete’ into wealth creation.

Norway is smart. It understands that the North Sea (and other) national oil reserves discovered in the late 1960s provide for a vast surplus income which will not flow forever. The petroleum sector is already at peak production. Norway knows that if it allowed multinational corporations to control oil industry profits, wide scale repatriation through offshore remittances would likely occur. It also knows that if those profits are controlled by a few individuals or private interests, the wealth generated is likely to be hoarded or used for frivolous purposes. History shows that individuals rarely know how to spend windfall earnings more wisely than the nation. Whether or not the main share of profits from resource extraction flow to individuals or to corporations, the deleterious effect is the same. A vast source of capital for essential nation building is irretrievably lost.   

For Norway, the results have been astounding. In January 2014 its ‘Government Pension Fund Global’ (previously called ‘The Oil Fund’) reached 5.11 trillion crowns ($931.87 billion). This is the equivalent of a million crowns for each man, woman and child in the country of just over 5 million people. Norway’s sovereign wealth fund has provided it with massive financial security. Not only for its present circumstances, but also for subsequent generations. The fund, established in 1990, has helped Norway keep a cap on potentially dangerous domestic inflation, which would have otherwise have been stimulated by the windfall terms of trade accompanying the decades-long oil boom. It also facilitates smart investment of national wealth. Administrators of sovereign wealth funds are not constrained in the way that corporate investors are to achieve short-term returns on capital. They invest for the long haul. This gives them an advantage when investing in productive, long-term investment vehicles.

According to the Sovereign Wealth Fund Institute’s ‘League Table’, the largest global sovereign wealth fund is the United States’ ‘Social Security Trust Funds’, a national pension with over 2.7 trillion dollars invested. Unfortunately, the trust is only allowed to invest in ‘non-marketable securities’ (essentially long term government bonds) issued and guaranteed by the ‘full faith and credit’ of the US federal government. When the total public debt (including intergovernmental holdings) exceeds 17 trillion dollars, it is a moot point that the fund exists. It is a sovereign wealth fund in name only, not in substance. Its massive ‘on paper’ assets are in reality no better than an outsized IOU.   

Australia does have its own sovereign wealth fund established in 2008 from budgetary surpluses, and from the privatisation of its telecommunications carrier, Telstra. Australia’s Future Fund exceeded $100 billion in 2014, aided significantly by exceptional performance over the 2013-14 financial year. Since inception, the fund has achieved a nominal 7.1 per cent per year growth, almost achieving its target of 7.2 per cent. This is a good thing. However, with a population four times the size, the fact that Australia’s fund is eight times smaller than Norway’s is very sobering. Like Norway, Australia is dependent on mineral wealth extraction for its present economic wellbeing. So why is Australia being so soundly beaten in terms of saving for the future? What is it that Norwegians are capable of, as a nation, that Australians are not? Is foresight such a rare commodity?

It is not only the Norwegians that Australians trail in terms of national saving. By 2014, Australia’s fund lagged those of Abu Dhabi (US $773 billion), Saudi Arabia (US $738 billion), combined Chinese funds (US $1.14 trillion), Hong Kong (US $327 billion), and Singapore ($US 500 billion)[iii]. This is all real money, providing each of these prudent nations with the financial strength to weather the shocks and stresses that an unpredictable future may bring. Beyond that, national saving provides nations with the power to make bold choices about the type of economic activities, and sustainable competitive advantages, they want to pursue. Countries without these means are disadvantaged and vulnerable to disruptions. Australia risks, through lack of an appetite for national saving, being out competed by those nations that have. Should Australians care about this? Arguably they should, if they believe that the present generation has a moral obligation to leave the country in at least as good a shape for future generations as they found it.

Sovereign wealth funds are not the only way Australia can save for its future. There are other mechanisms, such as adjustments to corporate and personal taxation, that can have a role to play. Likewise, harnessing the native urge to compete though incentives favouring entrepreneurs and small business can play a part in generating revenue. But for a nation so dependent on resource extractive industries for its trade-based wealth, the sovereign wealth fund is a form of saving that deserves more serious attention.

Financial rectitude is not the only source of future resilience for Australia. But it is a key element in an increasingly interconnected, global economy. It is not wise policy to ignore the role of sovereign wealth funds in influencing the relative economic health of nations. Australia may baulk at the concept of wealth funds, since at face value it appears anomalous to a liberalised market economy. It may also be tempted to shun such them since its traditional economic peers and allies (notably the UK and US) have eschewed them. But the reality is that Australia, as a resource-rich country, needs to learn its lessons from elsewhere. Critically, perhaps, it should learn from some rapidly growing non-Anglophone nations for which such funds are understood as a key part of nation building. In the Asia-Pacific Century, Australia has arguably no other choice.  

WAKING UP TO INDIVIDUALISM

The competitive urge can be a powerful and useful thing. But it is not an altar at which Australians must kneel. Those who have ‘made it’ financially are usually satisfied by achieving comparative, not absolute dominance. Most are not inspired to achieve unprecedented levels of personal wealth. It is neither necessary nor useful to place all the heavy lifting for the nation’s economic revitalisation in the hands of the entrepreneur. That would represent an ‘all-in’ bet on free enterprise that has never been proven to work. In inadvertently pandering to purist notions of the ‘free economy’, Australia risks underinvesting in the institutions, skills and industries it will need for its future wealth and security. Australia needs a new commitment to building national wealth – and in so doing to insulate itself against volatile and blind market forces.

Australia seeks economic growth. It can erect as many inner city apartment complexes as it wants. It can attract capital from overseas to fund its infrastructure. It can borrow to buy or build fleets of submarines and fighter jets. All to stimulate its domestic growth and protect its borders. It can keep going in this way for a long time, due to a comparatively manageable debt level and stellar credit ratings. However, Australia’s resilience ultimately depends upon a competitive, sustainable economy. Not one which relies on advantageous interest rates or fleeting sources of cheap global credit. It must build upon a foundation of core capabilities. These capabilities will drive economic growth through successive waves of unforeseen future challenge and opportunity. A lack of national ambition threatens Australia’s long-term prosperity. It must re-invigorate a sense of positive nationalism, based on shared values. This will provide the political consensus necessary for critical economic reforms.

Australia has achieved historic levels of growth because it embraced difficult reforms. One such reform was the Prices and Incomes Accord signed between the Australian Council of Trade Unions (ACTU) and the Australian government in 1983. The Accord represents the type of virtuous compromise Australians need to be willing to adopt. Key economic players recognised that sacrificing their own short-term interests would bring greater benefits for all in the long run. The 1983 Accord (and subsequent iterations) reduced wage claims by the union movement in return for improvements in social services, health, welfare, superannuation, and taxation. It saw the near cessation in economy-crippling industrial disputation. It helped reverse the pernicious stagflation that afflicted the Australian economy in the early 1980s.

The Accord, like Australia’s other economic reforms of substance, succeeded because the political will existed and public acceptance was sufficient. There was a sense of a national endeavour. A sense of a national endeavour empowers the collective capabilities of the nation. It allows the sum to be much greater than each of its parts individually. Through a communal exercise, each person feels able in his or her individual walk of life to contribute.

The eclipse of national endeavour in favour of individualism has had a corrosive effect on Australian society. It has made it more difficult for government to prosecute reforms that will allow it to get the fiscal position under control. While nationalism continues to be a force in Australia, it is redefined version in which citizens are encouraged to ‘barrack’ for Team Australia in ever-narrowing contexts (e.g. in international sport). However, a sense of collective vigour has been lost – along with the goal of nation building as an enterprise to which all can contribute meaningfully. This betrays the optimistic and idealistic refrains of Australia’s national anthem, ‘Advance Australia Fair’.

Following a long period of economic and social change in the 1980s, during the late 1990s there was a growing sense in the populace that reform had either done its job or gone too far. A reforming culture was gradually replaced by a less demanding agenda that extolled the goals of personal fulfillment, advancing family wealth, and the enjoyment of a comfortable lifestyle. Complacency gradually replaced the sense that 'anything was possible' for Australia.

Historically, Australia has not seen itself merely as a follower, with nothing to contribute to a better and more prosperous world. On the contrary, it has proven itself to be an energetic, reforming state with a valuable contribution to make to the world. It has understood this sometimes means taking leadership positions on specific issues. This spirit of adventure and energy needs to be rediscovered. Reform of the type the nation needs cannot be achieved without brokering consensus. In turn, consensus cannot be achieved without a sense of national enterprise - common values to which Australians can aspire collectively. This will require both a starting point, and an end goal, that is both credible and compelling.

leavING no one behind

The importance of the nation state to human wellbeing continues to exist. Humankind has not advanced to the point at which the role of nations, in protecting and advancing the social and economic wellbeing of large populations, has been replaced by some other entity (e.g. multinational corporations, or a unified global government). On this basis, there is still both a justification, and a benefit, for nationalism that motivates collective action. Warlike or aggressive nationalism should never be encouraged. It is destructive and dangerous.

However, a positive form of nationalism that encourages healthy competition between nation states is a different matter entirely. Positive nationalism encourages societies to take pride in the laudable aspects of their own history, culture, capabilities, and potential. Fostered in the right way, it can also help Australia achieve its great potential as a forward-looking, socially progressive, pluralistic and culturally diverse nation. One which has a valuable role to play in enabling a safer, more economically secure future for the world’s population. Australians should be able to find many sound reasons to be proud of the role that their country plays globally. The effect of such pride on the national mood, social cohesion, and the motivation of individuals should not be dismissed out of hand.

Australia has not outgrown its need for constructive, positive nationalism, free of jingoism or racist overtones. It cannot be expected that multinational corporations, that contribute so much to the development of the Australian economy, can ultimately provide the governance, investment, and direction that Australia requires to become globally competitive in the 21st century. This is simply not the role of multinationals. Neither is it the role of wealthy individual Australians. While individuals can drive the growth of businesses that help advance specific industries, ultimately they are not in a position to lead and enact the type of economic reforms that are the natural province of government.

a nation awakes

Just before dawn on Tuesday 27 September 1983 those Australians who were not already watching the telecast awoke to a live television interview between a Sydney-based news crew and a jubilant Bob Hawke. Australia II had just crossed the finish line in that momentous seventh race that decided the America’s Cup. The Prime Minister was at a post-race celebration in Claremont, Western Australia. He was completely in his element – and for this one short moment, seemed to speak for an entire nation in expressing his joy. He completely grasped the symbolic value of the Australian win. He knew this far exceeded its currency merely as a spectacular sporting triumph.

An exuberant Hawke explained to his urbane, somewhat nonplussed interviewers, what he believed the victory meant for Australia. Seemingly unsure which tone to adopt, the questioning veered between good-natured jocularity and patronizing jibes.  His interlocutors were as awkward and ambivalent as Hawke was comfortable and joyous. It is, in retrospect, still a quite delicious moment of counterpoint between a national leader in his pomp and representatives of the fourth estate.

The moment revealed Hawke’s grasp of what is sometimes called ‘the vision thing’. After all, those who fail to see the true significance of events tend to minimise or even mock them. By contrast, Hawke could see that the victory carried a symbolism that lifted it beyond the realm of sporting trivia and into the stratosphere of national legend. This takes a keen political eye and a genuine rapport with the popular sentiment. At that moment Hawke was impervious to embarrassment - despite being forced to put on, mid-interview, a tasteless blazer liberally festooned with the word ‘Australia’ and repeating motif of the Australian continent in the colours of the national flag. He was quite the sight, but Hawke’s enthusiasm trumped all irony.  

Talking about the achievement of the Australia II team, he memorably said: “There is no group who deserves to be honoured more than this group. It's not just what they've done for sport. It shows that our technology when applied is equal to or better than any in the world”.

This was a brilliant political gesture, as well as an accurate summation of the moment. It epitomised the values of positive nationalism, neatly connecting as it did patriotism, teamwork, and persistence in adversity. It also celebrated the value of what James Collins and Jerry Porras memorably termed a ‘Big Hairy Audacious Goal’ in 1994. Hawke was ecstatic, and if his interviewers thought that this had overwhelmed his sense of proportion and reason, they were completely wrong. Clear eyed in his joy, he jokingly agreed with his interviewer that national productivity would indeed slump for the day, since no one would be in any condition to work after staying up all night to watch the race live on television.  

Craftily turning the joke on its head, the Prime Minister seemingly pandered to the stereotypical image of a ‘lazy’ Australia, while cleverly subverting it. After joking about productivity, he very quickly pivoted to extolling the sporting victory as an unprecedented win for Australian innovation, design and technology. After all, there was no better advertisement than Australia II for ‘working smarter, not harder’, even before that mantra was termed. He uttered the now famous words that bear out this philosophy: “any boss who sacks their worker for not turning up today is a bum!” - to rapturous applause. Less quoteworthy perhaps, but equally significant, was his observation that the victory was “not just for people interested in sport, but for all Australians, to see just what Australians are capable of”. Heady stuff.

With the power of hindsight, we now see that Hawke had his eyes on a larger prize. One in which every event that demonstrated the success of the nation (no matter how insignificant in real terms) could be used to symbolise the value of collective national endeavour. He needed all the national consensus he could muster. Hawke’s party had only recently won government after 8 years in the wilderness of political opposition. He had inherited an economy that had just endured a deep recession, with high unemployment, inflation and fractious relations between business and their workforces. His government saw the clear value in the politics of national striving for success as a key to building national morale. For a nation striving to climb out of its funk, an extended period of economic and social decline, the win in Newport was just the smelling salts it needed.

Australia should not suppress its competitive urges. In fact, it should celebrate them. It needs its robust animal spirits. But this is not enough. It also needs a new paradigm for competition. One in which competition between individual economic actors is held subservient to the national good. The right for individuals to play a ‘winner takes all’ game of economic snakes and ladders cannot be allowed to trump the right of all Australians to enjoy a secure future.  

Competition is a good thing. Liberalised markets are a good thing. And so is the type of economic foresight that will allow Australia to compete globally and build its national wealth. Competing as ‘Team Australia’ need not be limited to the sporting field. Australia must stop unnecessarily limiting the fields in which it is prepared to ‘have a go’. After all, as a previous Australian Prime Minister so memorably implied after a yacht race, the ‘Boxing Kangaroo’ can fly just as proudly in Martin Place as it does at Homebush.

Disclaimer

This article, and the views it expresses, are entirely my own as the responsibility of the author, and do not reflect the opinions of my employer.

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