Re: Buying Overseas Vs. Developing our own talents.
I've said this before and I'll say it again. We suffer from the ANU over educated idiots who populate the Canberra bureaucracy. They kill 99.999% of every Australian initiative or innovation all the time. The reason is that what they were taught in Economics 101 about competitive advantage and economics of scale is utter bull**** and has been for at least the last 60 years.
"Competitive advantage" is a term for having some geographic, social or economic advantage over other producers that results in your industry being more efficient and profitable than other peoples. This is often to do with "input costs'.
"Economies of scale" is to do with absorbing the initial investment (referred to as setup costs) in producing something over more units than the next guy. This means a lower unit cost.
The examples quoted in the texts are the American Auto industry - huge economies of scale. The Chicago meat packers grow cattle > rail to chicago > kill and fit into tins > rail to New York.
However these and other examples are sixty years out of date and in a modern context, just plain wrong. For example the entire technology thrust in the auro industry for the last sixty years is to reduce setup costs so that economic order quantity = 1 not 10,000! This is what, among other things, Kanban and CNC machine tools is all about.
Same with competitive advantage - transport costs these days are minimal, the internet has shrunk the planet and the idea for example that our primary products (e.g wool) had to be processed in England is way past its use by date.
So how is this relevant? Simple ANU graduates were taught:
- Australia only has competitive advantage in mining and agriculture, we are a quarry and a farm, period. The downside of this is that we are price takers as our commodities are traded internationally.
- Australia is too small to have economies of scale in manufacturing anything at all. The corollary to this is that any manufactured goods from overseas are always cheaper and better value.
- The deduction from these two outdated principles is that forcing miners and farmers to buy anything local reduces their profitability.
* For these "logical reasons" the Mandarins in Canberra have implacably opposed ANY manufacturing or other initiative in the Australian economy because it might "hurt our farmers or miners".
That is why:
-the Victa airtourer business was allowed to be destroyed.
- The Nomad was scrapped.
- Gippsland Airvan had to be sold.
- Ansett wasnt rescued (we don't have a big enough market for two airlines - economies of scale again).
- Our car industry was closed.
- Etc. You lose count.
But wait! There's more! Not only do the bureaucrats believe all these things and act accordingly, it gets worse!
Should some Australian secondary industry succeed in developing something competitive and thriving, the bureaucrats are enraged and try to kill it because it isn't supposed to be possible! The thinking goes that if Australian xyz company is designing making and selling digital thronomisters around the world, then we must be subsidising them in some way, because this can't happen! Therefore they do what they can to shut them down, starting by the Federal Government ignoring the local product and buying overseas. This is what happened to the RAAF Wamira trainer project (sort of).
So despite Australia being bushfire central there is not a hope in hell that the Australian Government, or any state government is going to support a local capability. The Mandarins in Canberra will tell them its uneconomic and to buy from overseas for the reasons I've elucidated.
Same thing is happening now to the alternative solar energy industry. We should be world leaders, but not if Can'tberra has its way.