Public ideas
On industry policy
Australia and the US are on the same path in re-vitalizing industry policy (known as “industrial policy” in the US). Australia’s $15 billion National Reconstruction Fund and America’s $370 billion Inflation Reduction Act(so-named as to avoid terms such as “industry policy” or “public investment” that send Republicans crazy) are broadly similar in purpose, which is mainly about capitalizing on innovation, strengthening supply chains, and reshaping each country’s economy around clean energy.(In relation to GDP America’s fund is more than twice the size of Australia’s but it also has more emphasis on physical infrastructure.)
Any mention of “industry policy” evokes images of protectionism. That was certainly so in Australia up to the 1980s, when tariffs and quotas were the established instruments of our industry policy, but those days are long behind us.
Nevertheless industry policies as practiced today do have elements that some would dismissively call “isolationism”, while others would call a degree of local reliance a sensible approach to economic security in a world subject to the uncertainties of climate change, pandemics, the bellicose behaviour of right-wing dictators, and the fragility of just-in-time supply chains. In his Project Syndicate article Washington’s new narrative for the global economy, Harvard’s Dani Rodrik tends to the latter view: America can address its national security concerns without undermining the global economy.
One of our readers has drawn attention to a contribution in Social Europe, by Anne-Marie Slaughter and Elizabeth Garlow, Beyond industrial policy. (Slaughter is a former director of policy planning in the US State Department.) Unlike Rodrik, Slaughter and Garlow are not confident that Biden’s industry policy can achieve its claimed distributive benefits. They call for an approach that would “embrace production but insist that workers be connected to one another, to what they produce and to the broader ecosystem on which we all depend”. This approach would re-invigorate the service economy and would keep public policy focussed on wellbeing rather than on indicators of economic activity as ends in their own right.
Even though they claim that such an approach does away with “our old economic paradigms”, it is not particularly radical and fits easily into conventional economics. Neoliberalism, which it rightly condemns, in spite of its destructiveness, is but a passing fad, that never colonized economics entirely or securely. In fact what Slaughter and Garlow advocate is not far from the broad approach of Australia’s rather conservative social-democratic government.
Maybe Slaughter and Garlow, influenced by historical examples, see industry policy only in terms of manufacturing industry, but the old classification of industries into “manufacturing”, “agriculture”, “services” are relics of the economic structure 100 years ago: today they are worse than useless.
The Pope’s economist
Readers of this site will have come across many references and links to the work of Mariana Mazzucato, a strong critic of neoliberalism and an equally strong advocate for an economic system that eradicates gross poverty and inequality and that deals with the challenge of climate change. She came to Sydney in 2017 to deliver the John Menadue Oration.
Writing in Eureka Street, Bruce Duncan, a Redemptorist priest and emeritus lecturer at the Yarra Theological Union, reports that Pope Francis, who is deeply concerned to see economics re-framed so as to embrace human values, has appointed Mazzucato to the Pontifical Academy of Life – in short she is the Pope’s economist .
Mazzucato is well-known for her 2013 work The entrepreneurial state: debunking public vs. private sector myths. (Miriam Lyons and I borrowed heavily from her ideas, with acknowledgement, in our 2015 work Governomics: can we afford small government?)
Bruce Duncan recounts that when he was writing about social inequality in terms of the cost of Covid-19 vaccines, Pope Francis urged people to read her 2019 work The value of everything: making and taking in the global economy. It’s pretty hard for an economist to get a stronger promotion than that.
Some devout Catholics attribute the Pope and his advisers with a degree of prescience. Their faith would surely have been reinforced by the work The big con: how the consulting industry weakens our businesses, infantilises our governments and warps our economies, jointly authored by Rosie Collington and Mariana Mazzucato, published when only a handful of people in the ATO, the Tax Practitioners’ Board and the Commonwealth Police knew about PwC’s behaviour in Australia.