Organisational Innovation at the Highest Level

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Organisational Innovation at the Highest Level: Economic Policy in Australia 1980 – 2000 : 

Organisational Innovation at the Highest Level: Economic Policy in Australia 1980 – 2000 Professor Richard Blandy Centre for Innovation and Development University of South Australia

The Australian Settlement 1901*: 

The Australian Settlement 1901* White Australia Industry Protection Wage Arbitration State Paternalism Imperial Benevolence * Paul Kelly, The End of Certainty, Allen and Unwin, 1992

White Australia: 

White Australia First law passed by the federal Parliament A creed endorsed by all political parties, employers and unions, and the people Essence of nationalism and basis of national unity Formally abolished (both Parties) in 1965/66 Transition to multicultural (especially Asianised) Australia now in progress Source: Paul Kelly, The End of Certainty, Allen and Unwin, 1992

Industry Protection: 

Industry Protection Both a creed and a dogma following political defeat of the free traders by the protectionists in the first Parliament First tariff 1902, increased 1908, doubled by 1920, doubled again by 1932, quotas also introduced Government intervention entrenched as basis for economic development rather than free enterprise Exporters bought off with subsidies, price fixing, etc. Consensual belief in “Protection all round” Source: Paul Kelly, The End of Certainty, Allen and Unwin, 1992

Wage Arbitration: 

Wage Arbitration Judicial determination of all wages and conditions of work on a “fair and reasonable” basis Major achievement of the second Parliament Tied to industry protection – gains to be distributed to labour as well as capital Aimed to eliminate class conflict, enshrined trade union power, drew on mediaeval “just wage” ideas “Needs based” minimum wage with skill and other margins added Consensual political support (or at least acquiescence) Source: Paul Kelly, The End of Certainty, Allen and Unwin, 1992

State Paternalism: 

State Paternalism Wide belief (predating Federation) in individual happiness through government intervention Derived from Australia’s penal colony origins together with 19th Century radical political thought Australia became the world’s first democratic socialist state endeavouring to advance the individual through state power Deakin “I have no desire other than to extend the sphere of State interference and control” Eggleston (1932): “… the largest and most comprehensive use of state power outside Russia” Source: Paul Kelly, The End of Certainty, Allen and Unwin, 1992

Imperial Benevolence: 

Imperial Benevolence Consensual belief that Australian prosperity and security were underwritten by the Empire Federation was of six British colonies united under the British crown No conflict between being both British and Australian Royal Navy was Australia’s guarantor; British finance and trade preference underwrote Australian economic growth “Fortress Australia” was complete – and very comfortable Source: Paul Kelly, The End of Certainty, Allen and Unwin, 1992

Outcomes of Fortress Australia: 

Outcomes of Fortress Australia Ninety years of relative national decline obscured by ninety years of absolute gains starting from a position of phenomenal wealth 1870 – Australia’s income per head was 40 per cent higher than any other nation, 75 per cent higher than in America (Economist) 1929 – Australia in fourth place 1980 – Australia eleventh (Economist), fourteenth (World Bank) Labor Federal Treasurer Keating (1986): “A banana republic” Source: Paul Kelly, The End of Certainty, Allen and Unwin, 1992

1950 - 1980: 

1950 - 1980 1950s and 1960s - miracle economy: high growth, high immigration, low unemployment, low inflation, high protection and government intervention, stronger US alliance, white Australia 1970s - crisis years: high inflation, rising unemployment, large government deficits, start of opening to Asia, start of multiculturalism, first weakening of high protection wall

Structural Weaknesses: 

Structural Weaknesses Small scale production Diversion of resources from activities with the best long-term potential to add value Inward rather than export orientation Poor investment decisions and excess manning in economic infrastructure Poor work practices, labour relations and management Outdated or inappropriate technologies, combined with low innovation and skill development A production culture that resisted change and showed weak commitment to performance improvement Source: Dean Parham, Productivity Growth in Australia: Are We Enjoying a Miracle?, Productivity Commission, Canberra

Policy Reform Strategy (1): 

Policy Reform Strategy (1) Encouraging greater flexibility in the economy by Allowing resources to be directed by changing market circumstances to where they are used most effectively Fostering a more dynamic, entrepreneurial and innovative business culture Source: Dean Parham, Productivity Growth in Australia: Are We Enjoying a Miracle?, Productivity Commission, Canberra

Policy Reform Strategy (2): 

Policy Reform Strategy (2) Sharpening incentives to be more productive by Increasing competitive pressures Corporatising and privatising government business enterprises Source: Dean Parham, Productivity Growth in Australia: Are We Enjoying a Miracle?, Productivity Commission, Canberra

Policy Reform Strategy (3): 

Policy Reform Strategy (3) Providing greater flexibility to adapt to change and competition by Removing unnecessary regulatory restrictions Allowing greater scope for work arrangements to meet the needs and circumstances of individual enterprises Source: Dean Parham, Productivity Growth in Australia: Are We Enjoying a Miracle?, Productivity Commission, Canberra

1980 - present: 

1980 - present 1980s - reform years: Australian Settlement seen as flawed: high unemployment, falling inflation, falling protection and government intervention, growing multicultural Australia, growing Asian integration 1990s/2000s - miracle economy emerges: high growth, low inflation, falling unemployment, low protection and government intervention, freer labour markets, government surpluses, less Asian but more US emphasis, multicultural Australia

The Emerging Transformation: 

The Emerging Transformation Sharp experiences of failure in the 1970s lead to widespread recognition in the 1980s that the Australian Settlement is fundamentally flawed and that basic institutional change was required Multiracial Australia, freer trade and capital markets, privatisation, deregulation, curtailing of Arbitration and union power, reappraisal of state intervention and welfare, more emphasis on individualism, more outward-looking and efficient economy, more confident and self-reliant country start to emerge Source: Paul Kelly, The End of Certainty, Allen and Unwin, 1992

Decade Average GDP Growth, 1900 - 2000 : 

Decade Average GDP Growth, 1900 - 2000 Source: Australian Treasury Department

Slide17: 

Source: Saul Eslake, The Australian economy: a decade of relative progress after four decades of relative decline, Economics@ANZ, 31 May 2002

Decade Average Growth in GDP per capita, 1900 - 2000 : 

Decade Average Growth in GDP per capita, 1900 - 2000 Source: Australian Treasury Department

Slide19: 

Source: Dean Parham, Productivity Growth in Australia: Are We Enjoying a Miracle?, Productivity Commission, Canberra

Slide20: 

Source: Saul Eslake, The Australian economy: a decade of relative progress after four decades of relative decline, Economics@ANZ, 31 May 2002

Slide21: 

Source: Estimates derived from University of Groningen and The Conference Board, GGDC Total Economy Database, 2002; http://www.eco.rug.nl/ggdc, accessed 7 March 2002. Cited in: Dean Parham, Productivity Growth in Australia: Are We Enjoying a Miracle?, Productivity Commission, Canberra

Multifactor Productivity, Australia, 1976 - 2001: 

Multifactor Productivity, Australia, 1976 - 2001

Slide23: 

Source: Dean Parham, Productivity Growth in Australia: Are We Enjoying a Miracle?, Productivity Commission, Canberra

Imports and Exports as per cent of GDP, Australia, 1900 - 2000: 

Imports and Exports as per cent of GDP, Australia, 1900 - 2000 Source: Australian Treasury Department

Slide25: 

Source: Saul Eslake, The Australian economy: a decade of relative progress after four decades of relative decline, Economics@ANZ, 31 May 2002

Decade Average Inflation, Australia, 1900 - 2000: 

Decade Average Inflation, Australia, 1900 - 2000 Source: Australian Treasury Department

Inflation, Consumer Prices, Australia, Germany and Switzerland, 1961 - 2001, annual % change: 

Inflation, Consumer Prices, Australia, Germany and Switzerland, 1961 - 2001, annual % change Source: World Bank, World Development Indicators, 2003

Unemployment Rate, Australia, 1900 - 2000: 

Unemployment Rate, Australia, 1900 - 2000 Source: Australian Treasury Department

Slide29: 

Source: Saul Eslake, The Australian economy: a decade of relative progress after four decades of relative decline, Economics@ANZ, 31 May 2002

The Crucial Role of Political Consensus: 

The Crucial Role of Political Consensus Broad consensus across both major political parties is as crucial to the new order as it was to the old order Opposition to the reforms cut across the political spectrum but was unable to stop it Success in the 1990s has vindicated the reformers and demonstrated the success of the free market model in a globalising world

Further Lessons: 

Further Lessons Importance of the Labor party (“the Left”) in leading market-promoting reforms Political importance of “the Accord” with the Trade Union movement in the 1980s Strategic consistency has its own force: for example, labour market reform has not gone far enough Some “reforms”, eg in higher education, have not been fully supportive of the productivity strategy

The Remaining Agenda: 

The Remaining Agenda Australia’s egalitarian sentiments are not being met: new instruments are needed, for example, State-financed investments in the endowments of the poor and their children Australia’s relationships with Asia need renewed emphasis and attention Australia’s business sector needs to invest more in R&D, innovation and the commercialisation of R&D

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