Following up on his recent article on Adelaide’s urban renewal, Mark Dean, Australian Industrial Transformation Institute, Flinders University, continues his examination of government policy responses to manufacturing deindustrialisation in this two-part series: Manufacturing engagement.
Manufacturing – making things – is the cornerstone of progress in society. Making things covers food, furniture, machinery, computer parts, cars and much more. No nation makes everything it needs and the industrial history of each largely determines its future. This is because economic development becomes path-dependent on specific industrial foundations. Losing capabilities in those specific activities – as Australia is facing with the automotive industry – sees a nation risk losing its ability to make far more than just cars.
Because a nation must continue to make things or risk becoming less productive, there is a vital public engagement role to be played by policymakers and industry stakeholders to communicate why manufacturing is so important. Public engagement can help to explain why successful countries mobilise their industries and communities into action as a way to ensure making things remains at the centre of development strategies.
Manufacturing industry closure: unravelling a nation’s future?
It is very easy to take manufacturing for granted. So it is crucial for stakeholders, including government and industry, to rally major support for manufacturing projects so that we don’t unravel our opportunities for advanced development.
The case of Australia and the pending closure of its automotive industry is an illustrative example. It is widely understood that Australia’s automotive manufacturing industry has been the backbone of its industrial economy since World War II – as well as that of many other advanced industrial nations. In fact, no nation in the world has ever become an advanced industrial economy without first developing a manufacturing sector, and most often this has centrally featured an auto industry. At present, Australia faces a troubling reality of automotive deindustrialisation and must seek forms of industrial transformation into advanced forms of manufacturing.
Public value of manufacturing: making things
Communicating the value of manufacturing to the general public relates to its role in knowledge development, its centrality to product supply chains, its impact on urban planning and its critical importance to government policy making for both economic and social reasons. This list is not exhaustive, but it is a good place for public engagement to begin.
Perhaps the most critical factor here is understanding manufacturing’s role in knowledge production. A landmark Harvard University study has demonstrated that ‘what a country makes is what it knows’. Making things epitomises a nation’s economic complexity and a higher complexity ranking translates to high-performing economies. These are ones that make effective use of a thick network of knowledge spread throughout different industries, institutions and organisations. Knowledge spread throughout dense webs of people and organisations is the key to producing more advanced, equal and sustainable societies.
The nations Australia often compares itself to feature in the top 10 nations for economic complexity. By comparison Australia’s ranking slipped from 60th place in 1998 to 82nd place in 2014, the same period in which economic growth increasingly relied on mineral exports at the expense of manufacturing exports. This is of great concern to Australia’s future. Although lucrative, mining does not commonly add much value to the economy; that is, unless raw materials are manufactured into something else. On the whole, Australia has failed to make this a priority.
Manufacturing v service industries: what next?
Australia has a rapidly growing service industry sector that will replace manufacturing.
The public needs to understand the interdependent relationship between manufacturing and services industries. Economic transformation is not as simple as services industries filling the void left by key manufacturing industries, as some commentators argue. We do not live in a post-industrial era in which service industries are becoming more important than manufacturing.
On the contrary, the fast-growing services industries in our global information-based economy are underpinned by the knowledge and innovation processes of manufacturing R&D, which is unmatched in expenditure outside of the sector. Manufacturing R&D has implications for virtually all areas of the economy, meaning that innovations in the automotive industry impact on innovations in upstream (other manufacturing) and downstream (services) industries.
Today, manufacturing and services sectors are practically indistinguishable: productivity in the services sector results from more advanced production in the manufacturing sector and knowledge-driven services sell mostly to manufacturing firms. This means success is interdependent and failing to recognise this fact leads to weakened economies.
It is important for this to be communicated so that the public understands that, practically, services exist because manufacturing does. Our demand for all types of manufactured things – from toasters to luxury yachts – creates demand for the kinds of services that range from product maintenance to customer experience.
But our lifestyles are changing and the era of mass-manufacturing is over
Manufacturing has a tremendous impact on our lifestyles because it also defines how we plan the future of cities. After all, it is the reason for their existence in the first place. This must be understood because the future will not be shaped in a vacuum. A good example is the way that into the 1950s cities like Adelaide and Los Angeles exhibited extensive light rail infrastructure; but shortly thereafter were dismantled with the arrival of the automotive manufacturing industry and along with it, increased private car ownership.
However, over the next decades we will see policy actively focus city planning on a shift away from the car and towards development based on cycling, walking, public transport and the use of information technologies to keep us connected, for reasons relating to environmental policy and changed consumption patterns among others. This means car manufacturing per se will be less important. But manufacturing will continue to shape our relationship with urban development.
The manufacturing sector is of central importance to the very justification for smart city development. The public must know that changing cities reflect manufacturing’s ongoing pivotal role in urban development. Without manufacturing processes, we will not be capable of making use of digitally connected cities that facilitate our interface with the global economy.
Thus, communication of city planning policy cannot exclude from public engagement campaigns the importance of making things to the technological innovations that will integrate us and our cities into the global future.
If manufacturing is so important, why isn’t it a policy priority?
In Australia, it has in recent years become government policy that protecting the car industry should not be favoured over other industries or the nation’s further integration into global free markets. This represents a very misguided understanding of how nations get ahead under conditions of global competition, as well as the approach to global trade other advanced nations have taken.
Once manufacturing is gone it is very hard to get back. Thus when governments take their hands off the steering wheel, manufacturing industries are at great risk particularly where high-cost countries like Australia must compete with low-cost countries like China. A nation must make its own future, not rely on others to get it there.
Policymakers and industry stakeholders must lead the charge in public engagement that highlights at the very least the critical reasons mentioned above so that it can build support for manufacturing. It is the key to a nation’s prosperity into the future. The public needs to be made aware of what is really at stake in terms of knowledge, prosperity, social development and even democracy when we move toward a future where there is no place for making things.
Mark Dean is a PhD candidate in political economy at The University of Adelaide where he is completing a project on government policy responses to manufacturing deindustrialisation in South Australia. He is a Visiting Researcher at the Australian Institute for Industrial Transformation, Flinders University and Vice-President of the Australian Institute of Urban Studies – South Australia Branch.
Header photo: Pete Wright/unspalsh/cc