Posted by: graemebird | August 29, 2011

The Quest For Productivity And De-Industrialisation.

We are on a clear trajectory towards impoverishment, and have been for quite some time.

“There  is a very strange debate going on at the moment about productivity.  Everyone knows that, however it is measured, the performance on productivity has been poor over the past decade and particularly woeful recently. ”

so says Judith Sloan over at catallaxy. I was unaware of the debate, but I’d probably find myself mostly in the Quiggin camp, though likely for totally different reasons to the Professor.

But here is something interesting that tends to confirm my prejudices.

“Krugman didn’t really mean ‘productivity is everything’; he meant technical progress is everything.”

This is Judith summarising the thoughts of what I assume to be the other side of the argument. But what I’m noting here is the rather daft idea that we ought to be interested in what Krugman REALLY meant.

You see Australian economists don’t study deeply about economics. To do that you really ought to be reading economic TREATISES.   But your average working economist wouldn’t be seen dead with a treatise on the trains.  So by default they’ve gotten their thinking from three sources.

1. Economic textbooks. Not treatises. Just textbooks.

2. A book called “Free To Choose” by Milton Friedman.

3. Another book called “The Age Of Diminished Expectations” (First Edition) by Paul Krugman.

I’ve been sorely let down by Paul Krugman. Perhaps I was being weakminded but on the strength of the first edition he became the economist I acknowledged as “my favorite” for a short time. I was briefly in a welfare joint upon first coming to Sydney (jobs were harder to get back then) and I can remember the needlemen and juicers thinking how weird it was that someone would have a “favorite economist.” They were right that I was being weird.

What swayed me in what now looks to be such a odd-ball direction? Well firstly there were the research paper bona-fides.

You see Paul was a workaholic through his 20’s. He’s actually a crap economist, but he was a machine at turning out statistical research in trade economics.  The second thing is that he did not let show through his big government tendencies in those days, but instead came over as a bit of a breath of fresh air since he seemed to be a small-government egalitarian.

You know normal people LIKE small government egalitarians. They really do. I’m not kidding. They do.  Thats probably one reason a lot of folks have repeatedly been lenient with me.

But no-one will pay a small-government egalitarian for their thoughts, generally speaking, because the people who like them aren’t the government or bigshots. They are just good, smart, normal individuals.

Pauls rise to being a canoninical economist, when he didn’t really have a firm grasp of economics, came about through unintentional triangulation.  The modern insiders are super-impressed with statistical applications. Completely unimportant in economics except for the fact that to impress people you need to be able to confirm your reasoning using these statistical applications.

So anyhow when he came out with that impressive little book the left loved him because he was a lefty. And the right gave him good wraps because back in those days they were so put-upon, they needed to defend themselves, by over-praising lefties doing good. Also everyone was impressed by Krugman’s ability to look at a situation, and reduce it to various exercises in applied maths and statistics.

The degree to which Australian economists are influenced by these three sources is simply astounding. Its hard not to imagine them (when students) as being “empty vessels, waiting to be filled” or blank sheets upon which to write.  When someone comes along who actually has an interest in economic thought, the Australian economists seem to find it hard to make head nor tail of him.

So thin is the exposure of Australian economists to deep thinking in economics, that 3 or 4 years ago it seemed that everyone was getting their talking points from over at Greg Mankiw’s blog.  Truly the things you wind up witnessing can be unbelievable.

Another eye-catching feature of Paul Krugmans first edition was that it was small and economists weren’t afraid to read or buy it. Plus it was very well written, particularly for being his first book and coming from such a young fellow. So in those days Krugman walked on water and could do no wrong.

It may have been a small book. But I’ve noticed that Australian economists are heavily influenced by some things he said RIGHT AT THE START OF THE BOOK.  Implying that they read small books,  or at least they read the first few pages of very small books.

Right at the start of the first edition, as I remember, Krugman brings up productivity. He makes a very clever analogy that seemed to convey wisdom upon the small-government Keynesian. He said something about the way we don’t prioritize, and I remember him making the analogy in quite an endearing way. He said that he ought to be concerned with only maybe two-three or four things, like love, health, and work. Whereas he finds himself worrying about the poor state of all the gear in his attic.

Something like that anyhow. I’ll read it again sometime and see how close I got.  But then he likened it to economists who get worried about this and that. Perhaps inflation and the trade balance, or whatever. But Krugman said that really the thing to worry about is PRODUCTIVITY.

Well as I recall the analogy was so well-written and it sounded so damn nice and thats probably the explanation for why the comments have caused no end of mischief ever since.

For starters high productivity is an outcome. One of the many outcomes of good policy that is made in accordance to economic science. The study of economics is the study of WEALTH CREATION. Not resource allocation. WEALTH CREATION.  Economics tells us how to go about creating wealth, or its just no good for anything.

So of course should you follow good policy. Policy that creates wealth. You’ll wind up with high productivity.

Now there is another thing. The over-focusing on fluency with numbers and statistical packages leads to people mistaking their metrics for the thing itself.  So they have a metric for productivity and they begin to call that metric “productivity” and they begin to believe that the metric is the thing itself.

Currently the main national aggregate used in productivity is GROSS DOMESTIC PRODUCT. Gross Domestic Product has many items in it that are not elements of production. Rather they are elements of consumption.

Gross Domestic Product equals Government spending plus net Investment, plus net exports plus consumer spending.

or to shorten these items we say:

GDP= C+(net)I+G+ (X-M)

Well look what we have here. You see all of consumer spending and most (if not all) of government spending has to be seen as consumption. So why are we including these in a measure of productivity? Which ought to be all about production? The only reason that this metric “works” even a little bit is that REAL GDP will be boosted by productivity improvement insofar as this will lead to a lower price level for any given level of money-and-spending in the economy.

Now I would like to make a statement that ought to be emblazoned prominently somewhere in every economics faculty within the realm (if you cannot think of anywhere else the noticeboard will do just fine).  You cannot have a single mathematical metric to define a CONCEPT.


To understand one valuable concept requires thinking beyond the reaches of a single ratio. Any attempt to follow the “fallacy of the one-best-metric” will have the faculty-entire mistaking the metric chosen for the concept, and neglecting the “REAL” concept as such.

Usually productivity is thought of as production per hour. So someone jives up a figure for average HOURS worked.  Probably this would be done by surveys.  Then you get the number of people multiplied by the average hours worked. And then you put that figure in the denominator and “real” GDP in the numerator.  So you get “output” per hours worked. Well for starters GDP isn’t output, nor is it a good proxy thereof.  GDP is far more close to a description of consumption.



Supposing I was to ask you “How would a government focused on increasing “the productivity metric” during their 3 year tenure act?

Pretty clear isn’t it? Since GDP is to a great degree a measure of consumption, and only a measure of production due to the price deflation effect …..  then the short-term government, focused on “productivity” (ie the productivity metric)  ….   will:



And here we have the connection to “productivity” (the focus on the productivity metric) as the goal ……….. AND DE-INDUSTRIALISATION.  

The productivity metric  or metrics are NOT the thing to aim at. The thing to aim at is the very object of economic science and that is WEALTH CREATION.  If we aim at wealth creation, justice and fairness there is no possibility that success will not bring with it vast output per labor hour.

Thinking about it so many years after the fact its pretty amazing how seductively Krugman put forward this productivity case. Writing is a funny thing. The writing sometimes takes over the reality of the argument. And it was a fine piece of writing by the youthful statistical researcher. But its a very foolish policy goal to follow.

What Australians ought to do is own more and be in less debt every year. What the short-term pursuit of the productivity metric has lead to has been for us to own less and be in more debt every month. And the weak performance of the productivity metric simply reflects the long-term effects of owning less and less and owing more and more.

We have to hand it to Bob Brown. He was the first person in a long while to hire someone to show very clearly what we all really knew; That we were impoverishing ourselves by selling off the farm.

THE REALITY IS THAT WE ARE IN A CYCLE OF IMPOVERISHMENT. Thats the reality of it and we aren’t getting away from that without serious and wrenching changes to policy.



  1. Well I hope so?LOL

  2. Hi Bunny-Honey. Yeah I’ve become the laziest blogger in Australia. I’m actually a bit too busy doing other things.

  3. Do you support unions and workers’ right to collective bargaining or not?

    And you do realise don’t you that a 21 century manufacturing system will mechanise and automate as fast as it can so as to not hire so many costly and headache-inducing union workers or humans full stop.

    By the standards of capitalist economic/industrial relations the faster the the number of workers shrinks the greater does it measure productivity which according to its logic will only increase in the long term with the replacement of people with machines.

  4. For the moment I do. But thats not the best option. The best option is consistent growth-deflation, and undermining the agency within corporations that allows top management to effectively stick their hands in the till.

    • So, does that mean you are currently a financial member of a trade union?

      • Yes I am actually. Though I don’t see any connection.

        Unless we have consistent growth-deflation, and pretty damn good laws that don’t advantage the bigshots, then its a case of every man for himself.

      • Mind you I don’t understand why any worker isn’t a member of a trade union, unless they’re gutless crony capitalists in the making, which of course is an aspiration doomed to fail for the vast majority of wage slaves.

        The fees are 100% tax deductible, which means the state is effectively subsidising the union’s work and full-timers and so you’re not out of pocket at all. And in return you get a workplace community, free legal advice and representation and an entity that negotiates on your behalf with the employer for the best possible wages and conditions outcome (under the current inferior system of individual enterprise bargaining).

      • Right. Under current circumstances its a good move to be a union member.

  5. Graeme, another problem with your manufacturing industry growth mantra (not that I wholly disagree with it in principle) is that workers in a rich country like Australia will only want to work in manufacturing if it the work conditions are reasonable, not horrible, and the pay is good, not dire and if there is no better alternative.

    Small business aside, neither good conditions nor fair wages are likely to be offered today in manufacturing industries, and that’s just a fact. People may agree to work in such industries if they believe there is no other alternative but they’re just as likely to choose something less onerous or even unemployment

    What most people want – and don’t have – is meaningful or satisfying decently paid work. And the failure of capitalism to provide well paid meaningful work to the majority of its adult citizens is what concerns me more than abstract loaded measures of productivity.

  6. Right. I like the way this discussion is going. Because it ought to give me the opportunity to talk about things that don’t get talked about and solve some mysteries that usually remain unsolved. Take for example this:

    “And you do realise don’t you that a 21 century manufacturing system will mechanise and automate as fast as it can so as to not hire so many costly and headache-inducing union workers or humans full stop….”

    This sort of thing will have economics boffins cringing and the stupid at catallaxy coming over all smug. But what you are saying is based on valid and considered observation. So why are we having this divide between theory and empirical reality? I think I can bridge that gap in about 400 well-chosen words. But I cannot do it now because I have to hustle. So I’ll have to see about it later.

  7. Alfred Nock said: Your comment is awaiting moderation.

    I’m having a hard time figuring out where it is you guys think that Homer is wrong. Putting kids in childcare before the age of about three is child abuse. And even then you would be depriving aunts or other close relatives of the gift of being able to look after the kids at a young age. Hopefully with remuneration. That there are tax advantages and subsidies to handing kids over to total strangers is an attack on the culture. Its also abuse of the Mother to let go of her baby to strangers. Its well-known that Mothers like the little baby stage the best and mum will never get it back if she’s arm-twisted into letting the kid go before toddler stage. The terrible two’s really need a Mothers discipline. Thereafter she could safely pass the kid onto others in order to make room for work.

    We have set up an actively harmful set of sticks and carrots.

    Posted on 29-Aug-11 at 3:57 pm | Permalink

    Alfred Nock said: Your comment is awaiting moderation.

    The problem is that we have set up a society where to make a massive salary you need to convince the bigshots in some gigantic corporation to give you that salary. From their point of view they would want talent to sit right under them and drive their own careers forward. The natural harmonious society would have us aspiring to make a fortune in our own small businesses that success would see grow to medium size. Under those circumstances mum can be doing her business pre-production intermittently while getting all her due gratification being close to her child while she still has the chance to appreciate it as a baby.

    You know that it always breaks a Mothers heart when her little boy first skins his knees? You know why? Because this tells her that the boy is a baby no longer.

    Posted on 29-Aug-11 at 4:05 pm | Permalink

    Alfred Nock said: Your comment is awaiting moderation.

    I mean to say here that it is probable that our most talented women, and many of our most talented men, are effectively recruited to help drive another blokes career forward in these unnatural monstrosities of modern corporate life. This is all totally wrong and against the basic nature of the human. Evolved as he was in disparate and tight little clans. That is to say that while much of the life of the species may have taken place in larger groupings, its likely that the majority of the evolving and adaptation came about when he was a breed apart in small clans.

    Posted on 29-Aug-11 at 4:10 pm | Permalink

  8. Mr dear Mr Bird

    Like it or not the names on everyone’s lips are not only Bob Brown but that old genius scallywag, Herr Karl Marx.

    Even Bloomberg sezs so. lol lol lol.

    “Policy makers struggling to understand the barrage of financial panics, protests and other ills afflicting the world would do well to study the works of a long-dead economist: Karl Marx. The sooner they recognize we’re facing a once-in-a-lifetime crisis of capitalism, the better equipped they will be to manage a way out of it.

    The spirit of Marx, who is buried in a cemetery close to where I live in north London, has risen from the grave amid the financial crisis and subsequent economic slump. The wily philosopher’s analysis of capitalism had a lot of flaws, but today’s global economy bears some uncanny resemblances to the conditions he foresaw.

    Consider, for example, Marx’s prediction of how the inherent conflict between capital and labor would manifest itself. As he wrote in “Das Kapital,” companies’ pursuit of profits and productivity would naturally lead them to need fewer and fewer workers, creating an “industrial reserve army” of the poor and unemployed: “Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery.”

    The process he describes is visible throughout the developed world, particularly in the U.S. Companies’ efforts to cut costs and avoid hiring have boosted U.S. corporate profits as a share of total economic output to the highest level in more than six decades, while the unemployment rate stands at 9.1 percent and real wages are stagnant.

    U.S. income inequality, meanwhile, is by some measures close to its highest level since the 1920s. Before 2008, the income disparity was obscured by factors such as easy credit, which allowed poor households to enjoy a more affluent lifestyle. Now the problem is coming home to roost. ”

  9. Graeme, Judith Slack-Sloan-Ranger is a low-brow glibertarian and shallow thinker as well of course as a heartless neo-liberal corporate crony shill.

    She also has a marked catty and gossipy streak which contributes to her fundamental lack of seriousness and failure to be in any way a public intellectual in the spheres of politics and economics in the way say even the generalist autodidact Phillip Adams is.

  10. Right. Marx. Bad economics. But if he were talking about the results of our current crazy oligarchy he would have a point. Deficits and monetary expansion do increase profits. So if money creation is in the hands of the banks and oligarchs there are certain things that flow from that.

  11. Jesus, Mary and Joseph, economists can’t get enough of Karl babe.

  12. Yeah its depressing. But this is what cronytown has done for us. Cronyism and a crony-socialist monetary system, mimmicing the Marxist slurs against capitalism.

  13. Note how cleverly the Wall-Streeters and the bankers deflect criticism from themselves and hive it off onto the voluntary society. They’ve just stolen trillions off everyone else. Everyday the central bank feeds them subsidised credit, and they would blame your local startup if they could.

  14. Another astute piece from Guy Rundle.

    Manufacturing … there’s nothing left to cut
    by Guy Rundle
    Yesterday, my suggestion that Labor could be regarded, for the purposes of thinking ahead, as done like a dinner, brought an angry response — largely from old Labor loyalists, who appear to prefer fantasy to reality in assessing what needs to be done. Many appeared to loathe the Greens more than they hated the Right, thus replaying the old ALP Right-Left wars, now stretched across two parties — and to be reminded that the Greens would sail on in the Senate while Labor fell apart, was particularly unwelcome.

    The whole point of the exercise was to presume an Abbott Coalition victory, with all that that entailed, and think strategically about what the Left and progressive forces should do, in a situation when the two houses become divided along Right-Left lines, and politically antagonistic. That may not happen, but — given the decrepit state of Labor, created in part by its unthinking loyalists — it’s likely that it will, and it’s worth thinking it through.

    Yet the political dilemmas of the Left are merely a part of the whole, and the other dimension of that is the grievous political problems faced by the Right, as they try and perpetuate Howardism, under conditions where it is ceasing to be viable. Tony Abbott’s each-way bet on the steel industry was a wake-up call to many on the Right, that it had to get its house in order. The coal-seam gas issue was able to be dismissed as an anomaly, which it wasn’t — it was simply the first major eruption of a contradiction on the Right, between conservatism and neoliberalism, one that can no longer be ignored.

    Howardism? Yes, the term seems fair, it is not ideology inflation. Howard created a stabilised form of economic liberalism and social conservatism, with Australian characteristics. A modest social welfare/social market state was retained, as the Hawke/Keating neoliberalisation was extended. A moderate culture war was undertaken, with careful attention to the limits imposed by the social liberal nature of Australian life — Howard thus quashed Abbott’s eagerness to have a full-bore culture war on abortion, stymied efforts to ban flag-burning, etc. That combined with a reduced-tax, low-reinvestment strategy is sufficient to call it a specific philosophy.

    The problem with Howardism was that the conditions of its success created a dilemma for those who followed. We are having a debate about manufacturing now, because it was in the Howard era that most of that sector was fully and finally given away, and replaced by … well, by nothing at all. We simply broke bits off of Australia and sold it on. As an economic strategy it was less Hayek than Beverly Hillbillies — find stuff in your backyard and move into a McMansion.

    What history will damn Howard and Costello for — as it will damn Thatcher and Reagan — is that in giving away the old world, it spent no money or energy building anything to replace it. They simply juiced a century of embedded industrial development, a vast network of social, intellectual and physical capital, for a good look on the balance sheet. Howard, better than Thatcher, understood the sense of social dislocation this created, and argued that a socially conservative state policy was necessary to compensate for that effect, politically and culturally.

    Thus all that crap about Bradman, Anzac, values, etc, was designed to reassure people that the place they lived in hadn’t really changed, despite the great sucking sound everyone heard everywhere. (Keating had had what is an essentially Left version of that, based on an anti-British cultural nationalism — their fight was essentially one of content not of form).

    So far, so good for the Right. Across the Keating-Howard era, manufacturing essentially disappears as a major economic sector. In that, they are identical. But look closer, and there’s an important difference. When Hawke and Keating mounted a war on protection in the early ’90s, they had a vast penumbra of uneconomic manufacturing to cut into. In the late ’80s, the inner-city suburbs of major cities were still place of work — of factories and workshops cheek-by-jowl with houses and flats. They went in a decade, and the utter transformation of a place such as Brunswick in Melbourne serves as a microcosm of the country — a place of textile factories that became ghost buildings in a snap, and then overpriced spec apartments.

    But, as much as people didn’t want to lose jobs, most could see that the jig was up — that there was something absurd about making shoes in Collingwood, dresses in Redfern, fabric in Footscray — when they could be done so much cheaper elsewhere. On that, there was a broad deal of implicit agreement between the neoliberal elites and the masses.

    The difficulty now, for both major parties supporting this move, is that it’s a one-time deal. Like a diet that goes too far — cutting first fat, and then muscle and organ tissue — the obsessive free trade/comparative advantage mantra makes no distinction about what is being lost. In that, it wilfully blinds itself with the abstract generalities of economic theory, to its particular effects on the ground, and how they are viewed. The public lacks that bias, and retains its willingness to take things on a case-by-case basis.

    Thus, the evisceration of manufacturing could proceed in the Keating era, because everyone could see the sense of it — there was no compelling collective reason we needed to produce our own shoes (though there may be all sorts of social and cultural reasons for it) and most people can see that. But steel is a different matter, and most people can see that too.

    Under Howard, the country began to enter a second stage of de-Fordism — all the obviously uneconomical industries had been wound up, and the process was starting to affect industries that might be viable. The continuation into the Gillard era has taken it to the point where the threat is poised over industries that any intelligent person might say are essential to the independence of a modern state, steel being the pre-eminent example.

    What characterises the current period is the absence of anything left to cut. You can’t show your fearless commitment to the global market without hacking into something people think might be necessary to a viable independent country. A type of political anorexia takes hold, in which a permanently distorted image of the body politic guides action. Cutting a little more, would make things perfect.

    The Howardist ethos was always an efficient form of fantasy (thus it came to grief over WorkChoices) but it was viable. Its success made Abbott’s continuation of it impossible — it was a cover by which the remainder of Australia could be disassembled and shipped away.

    Now the contradictions are coming to the surface and neither major party is equipped to cope with it. From 1983 onwards, the Labor centre argument has been that free-market economics could be harnessed to supplying the revenues needed to funnel back into tackling poverty and inequality. This is still the position taken robotically by Craig Emerson and the free-market power elite within Labor. Long since most people have wondered if there is not something fundamentally wrong with a country giving away its most basic means of life, and trusting to the possibility that it will always be able to buy what it needs in a global market.

    This is the gap that Tony Abbott has exploited — in typically cack-handed fashion, but nevertheless … But it’s a high-risk strategy because it has the capacity to crack the Right open irrevocably. Labor can, in the last instance, always reconcile these contradictory notions on the grounds of pragmatic social interest — for the Coalition it represents the fundamental contradiction between its twin political poles, the prudence and traditionalism of conservatism and the anarchic possessive individualism of classical liberalism.

    The more that the latter undermines the former, the more that the Right falls apart as a political formation. The slow death of the National Party has been the most obvious example of that, but it will pop up everywhere — the Coalition has peddled a fantasy to its followers, and now they demand its maintenance — an Australia unchanged in key respects, but nevertheless relentlessly free market, with the exception of rural subsidies … and capital subsidies to industry … and … and …

    In diving in to the eye of the storm, Abbott has been admirably creative and audacious, but he needs to be. He is coming from the political tradition of B.A. Santamaria, who was not so much protectionist as autarchic, arguing for a de-urbanised Australia with millions of families resettled on small farms, ruled over by bishops and protected from the depredations of running water and radio, etc. The Cold War pushed Santa to abandon such a radical social vision — all the more so when it was taken up by the New Left — and subsume his movement to the secular Right. He never liked them much, and he loathed Howard and free-market consumerism, and Abbott, his disciple has never managed to shake off those influences.

    Hence, his bizarre acquiescence to Barnaby Joyce’s demand to be shadow minister of finance — a man who does not believe in finance in the modern sense, considering it “usury”. With major corporate capital demanding a neoliberal framework, and the “heartland” demanding the lost world of the postwar settlement, the Coalition is squeezed worse than Labor. It is easy prey, not only for Labor, but for forces to the Right of it, chiefly Bob Katter. Luckily for the Libs, both of those are so inept that they constitute minimal challenge.

    Meanwhile, for Katter and the Greens, such circumstances represent unparalleled political opportunity — if they have the courage to be audacious. Katter should radically and finally renounce any fealty to the beliefs of his former allies, and position his nascent party as radically pro-Australian, unequivocally positive towards protection and the common good of the nation. The Greens should also make an unequivocal pitch to such localism — but from the Left tradition of communitarianism, a community that happens to be a (multi-ethnic) nation.

    Both parties should push the major parties to declare where they stand, which side they come down on. In Labor it would serve to isolate the free-market elite, the power intellectuals, who believe that Australia should be ceaselessly reconstructed against its public wishes. In the Coalition, it would serve to sow total internal conflict. Those who yearn for the verities of either side will be disappointed. The sides are changing their most basic composition, as the world does.

    *This is part of a Crikey series Make or Break: the state of Australia’s manufacturing sector.

  15. Yeah very interesting. The anti-manufacturing orthodoxy is facing real challenges to its dogma at last.

  16. Sinclair seems to be giving me a decent run on Catallaxy even though I’m being guardedly critical of his anti-manufacturing attitude. We need to unemploy people in a lot of other areas so they can be employed in energy, infrastructure, construction, and most particularly manufacturing.

  17. Fuckit I swear upon Gods eyes that I will beat this cunt to a pulp if I ever lay hands on him:

    “From Birdie’s site:

    Because an animal would hardly evolve a long kneck which it would not be able to use.

    The misspelling of simple words is a frequent feature in pseudoscience.

    Questioning the existence of dinosaurs is a sure sign of a creationist. His creationism goes hand in hand with his AGW denialism and his birtherism. I once saw him foolishly declare his birtherism at Pharyngula. He was crucified there.

    I think creationism underlies a lot of AGW denialism.”

    Just an incredible rolling-thunder of misinformation and lies.

    I’ll find you you cunt. Just about the time you are thinking you alright.

  18. “…… I believe it takes only a few seconds.”

    “Hours I sez. How would you be as an economics consultant GAB? Instead of taking months to write a report and being able to charge squillions, you’d just tell them “Read Mises.” That may be the right answer but there is no payoff for that.”

    lol I charge squillions for a an hour. That way I don’t need to work long hours and it ensures repeat business. Fast, accurate and expensive. That’s me. 🙂

  19. Cool. I’m appropriately jealous.

    • Graeme, Sockpuppet/Astroturf Inc (aka in this instance ‘Gabrielle’, plus its squillion blog aliases) is a fantasist. Pay him no mind.

    • Speaking of jealously, I notice that Philomena gets tetchy when I converse with you, Graeme. Why is that?

  20. Philomena I cannot know that. So I cannot run the risk of insulting a woman when she seems like a woman to me. If she retaliates against you I’ll wipe her post. So its a bit unfair for you to take a shot at her, given that she is defenseless over here.

    • Graeme, I’m not asking you to do anything. I’m just letting you know that Gab who is most probably male is an astroturfing op.

      It has nothing of interest to say other than self promotion and casual abuse of others, so as I said, pay it no mind.

    • See what I mean, Graeme? I’ve never made a play for you (despite your requests for my email address) so I don’t understand Philomena’s distress at my comments to you.

      • GAB I can ask her to be fair and not take advantage of her untouchable status here. But thats still the policy, on the basis of the terrible group male dynamic that she was subjected to at Catallaxy.

      • Okay, I understand now. Philomenia can post lies about me and she gets a free pass. However I’m verboten from replying as you would censor my comment. LOL. You’ve been to the same school of ethics as Gillard.

      • Well hopefully she won’t do it again. Naturally I hope you hang out.

      • I’ll pop in as I enjoy some of your posts here. But not tonight as I’m on my way out with friends for dining, wining and a good old fashioned gossip. Ciao for now.

      • See you later. Have a good night.

  21. Poor lonely Gab. LOL.

  22. Have a good night Gab. All work and no play is bad for the face, not to mention the bod and the soul.

  23. “Unless we have consistent growth-deflation, and pretty damn good laws that don’t advantage the bigshots, then its a case of every man for himself.”

    Well your vague premise aside, that is the connection. In the absence of a sound and just economic and monetary system it is a case of every man (and woman) for themselves which brings us full circle back to the need for trade unions as flawed as they may be in a fatally flawed system to provide a defence against never ending exploitation of labour.

    Individual contracts and outsourcing are a recipe for worker impoverishment by definition. All IT services in Australia in the public and private sector will very soon be completely indivudually contractual and will offer workers the lowest wage possible. Eventually the bulk of IT work will go offshore to India and similar places where the wages/conditions are even lower.

    • Well thats about right I think. But its pretty clear that the best of all systems involves falling or at least fairly stagnant wages, and prices falling much faster than the stagnant wages.

      All other systems are problematic in one way or another.

  24. It was quite funny being at the trade union rally last Thursday in Sydney’s Domain against the Lib’s attack on our wages and conditions. It was a very big demo, very well organised and all sectors of government employees were visibly represented including by their uniforms. I’ve never been at a demo before that had so many police and firefighters part of the demo. And among the rank-and-file speakers from a range of the major trades and professions was a spunky young policewoman who turned out to the most militant speaker on the platform.

    She asked Barry O’Farrell (who was listening up on the Parliament House balcony) if he had not taken note of the London riots, linked them with the public sector and other austerity cuts of the Cameron government and warned him that similar action could occur here if he presses on with his anti-people course of action. She said don’t think there aren’t gangs here who will retaliate. Why I have a gang, she said. I’m a member of a gang and there are tens of thousands of us (referring to the members of the Police Union, which I believe is a very highly unionised sector).

    Amazing stuff. If you’ve got the police off side, you’re really in trouble.

  25. Yeah you bet.

  26. The other odd thing about that demo (apart from the back to the past vibe provided by the Bob Dylan songs blasting out across the Domain) is that from my workplace a substantial proportion of the participants were senior accountants and financial advisors. Industrially, I’ve always known these people to be on a continuum from ineffectually apathetic to management-fellating.

    So there must be something about these current government attacks on wages and services that they know is going to be detrimental to the point of untenable about the current provision of services, i.e. that this time they will be qualitatively degraded and diminished via the multifaceted process of constant budgetry reduction and penalty, less incentives for good and conscientious workers, outsourcing, privatisation, corporatisation and straight out abolition of services and programs – all of which constitutes the Liberals’ wholly negative and destructive program in mind.

  27. There has to be some largesse when it comes to government functions. Which is why entire departments need to be struck out. Government has to narrow its focus and go for a huge pruning. But once it is decided that a function really truly has to be done by government then there has to be some level of largesse to it. Or else very crucial things won’t get done on time.

  28. What do you mean by largesse here. I don’t understand.

  29. I wish they’d played this one. But then it’s just as well they didn’t. It will always break me up.

    • For sure. That has always been one of my all-time favorites.

  30. Well every so often you have this idea of 3% efficiency-cuts or some such nonsense. But cost-effectiveness comes through either starving of funds or through ongoing investment. Efficiency-drives of 3% don’t come under either of these two alternatives and are a distraction.

    If you really really need having government to do things then the cost-effectiveness ought to come from pretty lavish ongoing investments. To me a tough budget that doesn’t wipe out a few government departments is a lame budget and no good will come of it. Because if you are simply going to put departments on a diet that implies the ongoing investment funds are not available.

  31. Dear Graeme, I would like to unsubscribe from your blog, I don’t mind stuff
    on climate change and AGW.

    But this type of blog is losing interest with me.

    Kind regards

    Bush bunny.

    Your emails will be put now down to spam if they continue.

    • Sorry to hear that bush honey.

      It does sometimes feel like a blog is personally interested in you, but trust me, that is an illusion.

    • Yeah you better spam them. I don’t quite know why they are clogging up your email. Its not my doing so I don’t know how to stop them.

  32. Yet the unifocus of budgets is of course its very Achilles Heel. If anyone bothered to actually ask public servants themselves (the doers and the majority) you’d get a wealth of ideas about what are the problems, which are much broader and deeper than simply $ allocations by the state.

    We will have some sort of public oversight of programs, laws and services for the forseeable future. But the really difficult question which no government is even attempting to address is how to challenge managerial preorgative and thus allow the possibility of genuinely creative, effective and cost-efficient public service to flower.

  33. prerogative

  34. Anyways, the party after the rally was one for the grandchildren.

    Who’d thought there were Opium Dens in Chinatown. lol lol lol

  35. Graeme, a major reason why the news/current affairs print media is dying among young people is that their social pages and accompanying photos may as well come from Mars so little do they correlate with how people socialise and get their highs. e.g. some of the very best parties are not at the clubs, pubs, music venues, socialite weddings, museums, concert halls, etc featured in the MSM. Rather they occur in countless small venues organised and hosted by Lebanese taxi driver-poets, Spanish flamenco guitarists, Macedonian fire-eaters, builders’ labourers’ Adonises and so much more.


  37. For your reading delight, Graeme.
    Honey Pot

    NY Times September 10, 2011
    Is Manufacturing Falling Off the Radar?

    PELLA, Iowa

    JUST outside this prairie town, seven vast buildings, each painted brick red, are lined up along a highway bordered by grain fields. These single-story structures have no smokestacks or any other indication that they are, in fact, very busy factories.

    Three shifts of workers produce machines that bale hay, dig trenches, reduce tree branches to wood chips, grind stumps into sawdust, and drill tunnels to run electric wires and pipes underground. Most were the creations of Gary Vermeer, a farmer, tinkerer and inventor who died two years ago, at the age of 91.

    The company he founded bears his name, but for all its American roots, the Vermeer Corporation put its newest factory — and the wealth that goes with it — not here but in the capital of China. And Mr. Vermeer’s daughter, Mary Vermeer Andringa, the chief executive, presides over a manufacturing operation that relies increasingly on government support.

    As President Obama urges Congress to enact a package of tax cuts and new government spending intended to revive growth and create jobs, one crucial corner of the American economy — manufacturing — has largely fallen off Washington’s radar screen.

    Vermeer earns nearly one-third of its annual revenue from exports — counting on the United States government for trade agreements, favorable currency arrangements and even white-knuckle diplomacy to make exports happen. In China, that wasn’t enough. For several years, it had been running into competition from Chinese manufacturers of horizontal drills, supported by their government in the form of free land, tax breaks, cheap credit and other subsidies. With its share of the market falling precipitously, Vermeer in 2008 opened a plant in Beijing, taking a Chinese partner and drawing help for the venture from the Chinese. “I am a very big proponent of making the United States a great place from which to export,” said Ms. Andringa, 61, who is also chairwoman of the National Association of Manufacturers. But she added: “If we wanted to stay in the Chinese market, we needed to be there. That was the reality.”

    Manufacturing is not simply a market activity, especially not in the 21st century: manufacturers rely increasingly on governments, here and abroad, to prosper and expand. Vermeer, family owned, thrives with such help, as do big multinationals like Dow Chemical. In each region of the world, multinationals produce much of what they sell locally. European and Asian governments support this strategy, and the American government is cautiously getting into this game. The president, in his speech on Thursday, nodded in this direction.

    “We’re going to make sure the next generation of manufacturing takes root not in China or Europe, but right here, in the United States of America,” he told a joint session of Congress.

    Vermeer tries to march to that edict, employing 140 engineers, 7 percent of its staff, in a constant effort to upgrade the various machines it exports. But it runs into an obstacle. For all the desire to make things in America, manufacturers increasingly rely on imported components, diluting the label “Made in America,” and Vermeer is no exception.

    “We would prefer to buy everything in the United States, but some of our transmissions come from Europe,” Ms. Andringa says. “They are not made here in the sizes and capacities that we need.”

    In Dow Chemical’s case, thanks to a $141 million federal grant, roof shingles that generate solar power are rolling out of a pilot plant near Dow’s headquarters in Midland, Mich., and a full-scale factory is under construction nearby. The government is also paying nearly half the cost of building a $362 million Dow plant in the Midland area, whose “clean” rooms will soon produce batteries for electric cars.

    “An advanced manufacturing policy is what this country must have,” says Andrew N. Liveris, the chairman and chief executive of Dow Chemical, arguing, in effect, that manufacturing needs government support to expand its dwindling share of the nation’s economy. That is particularly so when demand for new products like solar shingles and batteries is not yet enough to justify the investment. (Three solar companies recently filed for bankruptcy.)

    Mr. Liveris, 57, himself a chemical engineer and co-chairman of President Obama’s newly formed Advanced Manufacturing Partnership, a group of outside advisers, would even “pick winners” — that is, select some manufacturers for continuing support. “I would not let free markets rule without also addressing what I want manufacturing to be 20 or 30 years from now,” he says.

    The Obama administration hasn’t tried to formulate policy that far into the future. But, last year, the president called for a doubling of exports by 2015 — which would require total factory output in America to rise several times faster than it has in recent years. One way to accomplish that would be to have multinationals repatriate some of their overseas production — which Mr. Liveris, for one, is not planning to do.

    Despite its goals for manufacturing, the administration lacks an explicit plan for achieving them. “The United States today is alone among industrial powers in not having a strategy or even a procedure for thinking through what must be done when it comes to manufacturing,” says Thomas A. Kochan, an industrial economist at the Massachusetts Institute of Technology.

    MANUFACTURING’S muscle helped make the United States a world power, but its contribution to national income is dwindling. And while corporate leaders like Mr. Liveris and Jeffrey R. Immelt of General Electric — who is chairman of the President’s Council on Jobs and Competitiveness — are beginning to express concern over manufacturing’s relative decline, the multinationals they command have contributed to the problem by gradually shifting production abroad. About half of Dow Chemical’s $58 billion in revenue last year came from overseas operations.

    A tipping point may already have been reached. Manufacturing’s contribution to gross domestic product — roughly equivalent to national income — has declined to just 11.7 percent last year from as much as 28 percent in the 1950s, according to the Bureau of Economic Analysis. In this century, the 20-percent-or-more club draws its members mainly from Asia and Europe.

    It isn’t that fewer autos or plastics or steel products or electronics are coming out of American factories. Quite the contrary: output continues to rise, reaching $1.95 trillion last year. But other sectors of the economy have grown faster in recent decades, and that dynamic has reduced manufacturing’s share.

    In particular, the finance, insurance and real estate sectors — driven especially by investment banking and home sales — rose from less than 12 percent of G.D.P. in the mid-1950s to more than 20 percent before the onset of the financial crisis, and even now remain nearly that high. In China, in sharp contrast, manufacturing’s share of national output is more than 25 percent. While the United States has a far larger economy — $14 trillion in G.D.P. versus China’s $6 trillion — it has less factory production.

    Exactly when China took the lead, ousting the United States from a position held for more than a century, isn’t easy to pin down. The bureau says it may have come in 2009, when Chinese manufacturers generated $1.7 trillion of “value added,” versus America’s $1.6 trillion. (When a $100 sheet of steel, for example, is shaped into a $125 auto fender, the value added is $25.)

    Relying on World Bank figures, some economists suggest that China moved into first place in manufacturing last year. Others say that based on measurements of actual purchasing power, the moment has not yet arrived but will come soon.

    It may seem remarkable that America’s fall — or impending fall — from first place in manufacturing isn’t generating all that many headlines, certainly not when compared with the controversies over the national debt or persistent unemployment. One reason may be that the nation’s political leaders don’t see manufacturing as a problem. Put another way, they don’t necessarily regard making an engine, a computer or even a pair of scissors as having as much value as investment banking or retailing or a useful Web site.

    “You have a culture within the elites of both political parties that says manufacturing does not matter, and industrial policy will do more harm than good,” says Ronil Hira, an assistant professor of public policy at the Rochester Institute of Technology.

    But the stark reality of manufacturing’s shrinking share of national output is beginning to force these questions: Does manufacturing matter? And is the financial sector, which rose as manufacturing declined, an adequate substitute? The financial crisis may have answered that last question with an emphatic no. Certainly, many experts maintain that manufacturing’s contribution to the national health is significantly underappreciated.

    Recovery from the recession, they say, would not be so sluggish if there were still enough manufacturers to jump-start an upturn by revving up production and rehiring en masse at the first signs of better times. What’s more, each new manufacturing job generates five others in the economy. Shrinking the relative size of manufacturing has undermined that multiplier effect.

    The damage doesn’t end there. The intractable trade deficit is attributable in part to manufacturing’s shaken status. And in many areas, craftsmanship in America has been eroding. Forty percent of the nation’s engineers work in manufacturing, for example, and that profession’s numbers have been declining. That is a particular problem because innovation often originates in manufacturing, frequently in research centers near factories, which aid in the creation of products and the tweaking of them on assembly lines.

    As multinationals place factories abroad, they are putting research centers near them, with as-yet-undetermined consequences. At the very least, this trend challenges the view that the United States has the best scientists and research centers and is thus the research-and-development pacesetter.

    “If you let manufacturing go, over time that will have a negative gravitational pull on innovation,” says Ron Bloom, who served as the administration’s senior counselor for manufacturing. He resigned in August and has not yet been replaced.

    In fact, as American multinationals become ever more global, they are placing sophisticated research centers near their overseas factories, partly to keep R.& D. close to assembly lines and partly because of enticing government incentives.

    From China, Dow Chemical now exports products invented at its research center near Shanghai. “Overseas,” Mr. Liveris said, “I get tax incentives, and I get incentives to go to certain locations where they offer us utilities, infrastructure and land. I get access to human capital. I get all sorts of support to help train that human capital.”

    Against that backdrop, he and a few other top executives of multinationals exhort the Obama administration and Congress to grant incentives and subsidies intended to halt the 60-year decline in manufacturing’s contribution to national income. Mr. Liveris recently published a book on the subject.

    He says vigorous government support, like the subsidies that Dow receives for its solar roof shingle operation and the electric battery factory, might eventually halt manufacturing’s slide. But he adds that his company and others will not embark on a reverse migration, a significant “in-shoring” of what has already moved abroad. Too many consumers are concentrated today in Asia and Europe.

    “We put things overseas,” Mr. Liveris says, “because markets were growing there and we wanted to be close to them, and that will never change.”

    THE skyline at the Dow Chemical complex in Midland is made up of smokestacks, giant pipes and multistory factory buildings. The site where Herbert Dow first extracted brine from underground wells to make bleach is organized now as 32 production units employing 3,600 people and spread over three square miles. Out of this complex come products like brake fluid, plastic tubing, paint, battery components and solar roof shingles.

    Much of what is made at these factories is sold in the United States, and more could come off the assembly lines if domestic demand rose or exports grew, says Earl Shipp, a Dow Chemical vice president, during a tour of the sprawling complex. Dow is now a significant exporter from the United States, but it is also a significant exporter from its factories overseas.

    Consider China. “We have launched several products sold around the world that were designed and invented in China and are now made in China,” Mr. Liveris says. He cites as examples a protective coating with properties that neutralize the corrosive effects of formaldehyde and an epoxy-based laminate used in printed circuit boards.

    The solar roof shingles being produced in Midland, by contrast, are intended only for America. That is partly because roofs on single-family homes in this country slope differently from those elsewhere, according to Jane M. Palmieri, general manager of Dow Solar Solutions.

    Still, Dow’s research in Midland led to the invention of a layered roof shingle that converts sunlight into enough electricity to heat water for a home. If there were enough demand in, say, Europe, Dow might initially export a European version from the United States.

    “At some point, as demand rose, we would go overseas,” Ms. Palmieri says. “We would want to keep the production facility in good proximity to our end-use market.”

    The battery factory nearing completion a few streets away is a different tale. It is to produce enough batteries each year to operate 30,000 fully electric cars. But the batteries aren’t likely to be exported immediately. The reason is that Dow is manufacturing them in Midland in a joint venture with other companies, licensing the technology from the Kokam Company in South Korea. Elsewhere in the world, Korean, European, Chinese and Japanese companies are already making and selling similar batteries, using different technologies.

    “Battery production went overseas when electronics did, and we are only now bringing it back,” says David Pankratz, the Dow vice president of operations for the joint venture, adding that the government pushed for this to happen.

    That sally into industrial policy, some economists say, is like closing the barn door after the horse has escaped — the horse in this case being America’s possession of the world’s biggest mass market. That ended in the late 20th century with the rise of millions of consumers in Asia and Europe with ample disposable income or access to credit.

    The upshot is that governments in these markets pile on subsidies to gain or keep as much production as possible. Whirlpool, for example, makes most of its microwave ovens in southeastern China, with help from local subsidies.

    When companies engaged in this kind of strategy in the 1980s, there was often much more criticism than today.

    “The reason you no longer get much of an outcry over this exodus has to do mainly with jobs,” says Heather Boushey, a senior economist at the Center for American Progress. “Less than 12 percent of the American work force is in manufacturing today, down from 30 percent in the 1970s. So there isn’t the same level of public concern.”

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