Where to next for Australia?
By Professor Beth Webster
Research into innovation reveals it takes multi-decade efforts to reap results. Economists and scientists need to better align now for the country to see optimal outcomes by 2050.
To rely on serendipity or “the magic of the market” for our future material wellbeing would be a triumph of hope over evidence. The world has bumbled along, buffeted by chance and good fortune, for thousands of years. But since World War II, several developed nations have taken calculated steps towards securing advantage chosen industries. Often, governments created new industries and unleashed latent needs.
The United States has become a case study in this curated development. After the war, on the advice of the Office of Scientific Research and Development, the Truman administration increased strategic and mission-orientated research and development (R&D) by more than 10-fold. This decision spawned clusters of technological excellence – biomed, radar, communications, electronics, weapons – that by the 1970s had increased employment by over 60 per cent relative to the counterfactual.
Since the 1970s, other developed countries have similarly geared up. Rapid economic development in Japan, Israel, South Korea and Germany is testament to a focused and bipartisan approach to science and technology.
Australia, too, has sought a piece of the action. After the war, Country and National party leaders Earle Page and John McEwen garnered considerable community support for an agricultural research and development bureau. In the 1980s, these early rural R&D institutions were streamlined into R&D corporations by Labor’s Minister for Primary Industry, John Kerin. This model of mission-driven R&D has been crucial to the success of Australian agriculture.
Our mining industry – another export success story – has garnered decades of organised support from the logistics, R&D, education and training sectors. Australia led the world in autonomous vehicles and now leads the world in digital mining. The 1980s Hawke-Keating plan for industry restructuring – closing inefficient tariff-reliant industries and creating new value-added downstream industries – got us only so far. We hastened the death of the inefficient automotive and clothing industries, but failed to create high-value industries that we anticipated. In the 1990s, we were rescued by the rise of China and its burgeoning demand for higher education services, iron ore and coal. But in the face of rising geopolitical tensions, the single-buyer model of export success is looking decidedly fragile.
So, where to from here? Do we continue to rely on agriculture, mining and education for the bulk of our export income? Or do we refresh our national business model and catalyse emerging areas of economic promise? If the latter, then we need to get serious.
Success requires not only large-scale government funding into R&D and technological procurement, but supportive formal and informal institutions. Universities, industry groups, businesses and unions need to find a degree of consensus on a collective approach to the task, while governments, in turn, need to lend their weight via a package of complementary regulations and fiscal interventions.
As things stand, we are far from achieving a productive level of consensus in Australia. The national policy paralysis is attributable to the failure of economists and scientists to converse in a common language.
The science community continues to advocate for funding by presenting case studies that policymakers can easily dismiss as unrepresentative. Cost-benefit analysis is the workhorse of good policy, not stories. Although no one in their right mind would approve a new pharmaceutical drug based on ad hoc evidence, science advocates seem to think this is an acceptable approach when pushing for funding. The reflexive response of economists in government agencies is to assume that all calls for business support are rent-seeking. This suspicion is understandable given the history of rent-seeking by business for tax, tariff and investment attraction grants. But the real nub of the problem is economists’ rudimentary theoretical and empirical understanding of the role of science and institutions in economic development. The gulf between the two parties remains.
In recent years, the effect of public funding for research and innovation has been subject to objective, data-based evaluation. Swinburne and the evaluation units of multiple Australian governments have found that industry interventions to promote business efficiency and access to new markets do work.
Government and industry should see recent crises as an opportunity to pause, take stock and refresh our economic plans. What do we want 2050 to look like?
Professor Beth Webster is Director of the Centre for Transformative Innovation at Swinburne University of Technology, and Pro Vice-Chancellor for Research Impact and Policy. She has a PhD in economics from the University of Cambridge and an M.Ec and B.Ec (Hons) from Monash University. She is a fellow of the Academy of Social Sciences Australia.
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