Regional development in times of uncertainty
We’ve been away on holidays for some weeks and while that will provide some stuff to write about in future, of immediate interest is the outcome of the Federal election along with events overseas, particularly the Brexit issue. Currently there are high levels of uncertainty right around the world about what comes next, both politically and economically.
It is undeniable, I feel, that nearly 30 years of “neoclassical economics” or “economic rationalism”, has contributed to the election or plebiscite results we have seen recently.
Economists will tell you that the negative effects of globalisation have been felt clearly at local levels. These include job losses, the offshoring of work and the decline or end to particular industries, eg textiles clothing and footwear (TCF) and automotive. The benefits are more widely distributed and often not recognised. Moving TCF to cheaper countries has resulted in more affordable clothing which is a direct assistance to household budgets (as well as lifting many millions of citizens in developing countries out of poverty).
The rise in inequality of income and standards of living, with CEO wages simply the most obvious manifestation, has led citizens to perceive that their governments are no longer working for the common good. Vested interests have the ear of government as well as easy access to a compliant press, while voters have only one outlet. And this has been demonstrated very noticeably. The sum of these and other trends has contributed materially to the uncertainty voters feel.
Immigration – both controlled and uncontrolled – is seen as a simple contributing issue that needs to be fixed. But free movement of people was inevitable – from a dominant policy perpsetive – after the earlier, easier liberalisations: trade, services, and finance. There is also now a kickback against liberalisation of investment, with overseas ownership of agricultural assets a prime example.
So what does all this mean for regional economies? Can the effects of this uncertainty, which seems destined to last for some time, be mitigated?
First, Australia has always depended on foreign investment for development. A country the size of the USA but with only about 8% of the population was always going to need overseas finance. What is concerning now is the source – national governments, perhaps with very long term objectives, rather than private companies. More clear, accountable mechanisms to assess investment proposals are needed, along with some thought about mobilising more onshore capital.
Regions with less dependence on major industries that need foreign investment may, perversely, be better off, at least in the short term. In this case, maximising local spend remains an ongoing objective.
The country’s transition to less fossil fuel dependence remains critical. Regardless of any ideological attraction to sectors that have proved profitable to regions, coal is a finite asset. Better handling of the transition to more renewable forms of energy is essential.
There is so much more to write on this, watch out for further articles.
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