Australian Car Industry – When in a hole stop digging

At Jo Nova’s unthreaded there is a debate going on about Australian car industry. Started up in the post war era, it is currently going through a crisis. In fact, despite large subsidies, it is collapsing. The major messages I want to get across are:-

  • Learn from other countries. Britain in the 1970s for instance.
  • When in a hole, stop digging. If the car industry is failing, throwing money at it might win a few votes, but damage the economy.
  • Australians have the energy, and entrepreneurial skills, in abundance to create new wealth-generating opportunities.
  • Australians (like other countries) are being crippled by the short-sighted hand of Government, who should recognize that do not have the skills, nor the incentives required to create an industrial policy that is of net benefit to the country as a whole.

On making a new start and learning the lessons of Brazil

To successfully start a new car company is virtually impossible in the modern world. In recent decades the successful ones have been in China, but with the help of, and by copying, established marques. Outside of China, there was Proton of Malaysia. There original car was a 1984 Mitsubishi Lancer. That end of the market you do not want to get into – high subsidies and reliant on cheap labour. The last major car company start-up was (I believe) Honda.
Then there are niche markets. McLaren is doing well in the UK, but a midget and building on its F1 base. As the majority of F1 cars are made around Silverstone, it had an advantage of a skilled labour pool and (most importantly) the engineering and design skills.
The alternative is to do what Brazil did. For years it did not allow any imports. There were four foreign car companies building in Brazil (Fiat, Ford, GM and VW). The quality was shocking, models were decades older than Europe and the the companies colluded. VW built a variant of the Ford Escort and the Beetle came off Ford production lines. In 1994, they opened up to imports, but with a 25% import tax. Very quickly 70-80% of the market was imports. So the Brazilians stuck a 70% tax. The response over a decade was for more foreign companies to open assembly plants. Then came Mercosur – the “free-trade” zone covering most of South America. Now there are plants from Renault, Mercedes (mostly the A-class), Audi and Volvo amongst others.
The major problem of taking this route is the restriction of choice. The Mercosur market (including Brazil, Argentina and Mexico) is a number of times bigger than Australia, and last time I looked, had a more limited choice and higher prices than in Europe.
Learn for Australia what the biggest businesses did in the 1980s. Stick to what you are good at. Let the market develop in Australia based on its comparative advantages. That is farming (which you have developed from low margin sheep farming to high margin wine production) and mining. Then there is tourism as well, so long as you don’t let your government tax air travel.
In the longer term there are spin-off industries. In Britain we don’t have much manufacturing, but we have some of the world’s best designers. Oil production is declining, but a disproportionate amount of global off-shore technological expertise is around Aberdeen.
The mistake of most people to associate wealth with making actual things. It is not. Wealth is about creating greater value than the inputs. Assembling everyday, easily reproducible, objects adds very little value, so is confined to the poorest countries. For instance textiles in Bangladesh, or assembly of commodity items in China. The real wealth comes from new ideas, or taking existing processes and doing them more efficiently and/or effectively than anyone else. That is staying ahead of the game.

A readable primer on the economics is Israel Kirzner’s “Competition and Entrepreneurship.”

When in a hole, stop digging. Lessons of the British Experience

Andrew McRae is torn between ending the subsidies and letting the car industry fold.

Hi Andrew,

I can see why you are torn between Government Industrial policy and letting free markets work. I finished high school and went to university during the early Thatcher years and saw both sides. In the 1970s one of the most famous British cars was the MG Midget – a tiny two seater sports car. There were huge protests when production was stopped, with each car costing twice the selling price. Like most of the cars produced in Britain it was unreliable, particularly when compared with the Japanese competition. The country subsidised many industries, spending 5-8% GDP on subsidies. We tried to get into the computers – and failed. The one bright spot was Concord, developed with the French. A phenomenal technological achievement, it cost £4bn (A$40bn+ in todays money) and the few made were virtually given away. It was a case study in how an original government project at low cost with high rewards switches to the opposite. When mooted in the mid-50s, it was to cost £80m with a market for hundreds of planes.

One thing that you must not lose sight of is the existing workers in your car industry. In Britain in the 1970s there were millions employed in manufacturing, whether the car industry, steel, shipbuilding, engineering, or technology assembly lines. Another 250,000 jobs were in coal mining. Many who were made redundant in their 50s never got jobs again. Many others only obtained lower paid unskilled work. There is still incredible bitterness towards the whole Thatcher legacy. But the fault lay not with ending “industrial policy”, with its ever-growing subsidies, but in starting it in the first place. It is the same principle as for the carbon tax. Even assuming the theoretical case was true, the people least qualified to implement the policy are the politicians. Not because they cannot hire the best experts to devise a policy. It is for business and a carbon tax to work you need to make changes, which will hurt people. In manufacturing you need to continually cut jobs and change. With an “optimal” policy to reduce CO2 emissions some jobs need to be destroyed (to get huge benefits) and people suffer hardship. Politicians who are so openly ruthless get voted out pretty quickly, even though they are doing the best for the country. The best long-term interests of the country are the biggest vote losers, if those politicians are advised think short-term and are advised by spin doctors. Yet the interests of a modern developed country are in providing the structures to enable the future wealth-creating opportunities to develop. Australia is probably the pre-eminent example of a country for this to happen, as there are many people with vision, ability and the passion to make things happen, along with the ability to take risks. The crippling disability that they need to overcome is the risk-averse dead-hand of government who cannot see beyond the next set of opinion polls.

The Summer Riots – causes and prevention

Whilst I was away on holiday in Pembrokeshire, riots broke out in the cities of London, Birmingham and Manchester. The following comment was just posted to John Redwood’s blog:-

We should look at this in context. All the riots except the first in Tottenham were copycat riots. People saw that with sufficient numbers of people, looting could be carried out without fear of arrest. There was also the adrenalin rush of rioting, just like football hooliganism. The rioting stopped when people started being arrested in large numbers. They also stopped in Manchester when it started raining.

We should not overreact in issuing draconian laws. Rather it is to understand that people react to the opportunities presented to them. We had in the inner cities for a few nights to opportunity to riot and loot in the belief there would be no punishment. Many took that opportunity. This can be gleaned from the work of Prof. Gary S. Becker, who pioneered the study of the economics of crime.

Prevention of the riots in the near future might simply be to show that many of those who rioted had been caught. Therefore the belief that criminal acts in a riot would go unpunished is a false one. Beyond this, there might some minor changes. First, by more rapidly escalating the intensity of Police action in an area and nationally. Second, by instituting temporary powers of arrest in, or near, riot areas for those covering their faces. Third, if riots are in the summer, for helicopters to spray water to simulate a heavy downpour. The water might also contain a harmless dye visible under ultraviolet light (that can be removed with soap and water) to identify those who duck into side streets.

The ideas are minor. They will not quell a serious political riot – but the more serious riots of the 1980s in Brixton & Toxteth were also stopped by the rain. These are superficial “shopping riots“*. They are only a reflection of a breakdown in society insofar as there are large sections of society who lack the moral sense to respect property and other people even when there appears to be no possibility of being caught for breaking the law. The rule of law needs to be respected by vast majority of people for the vast majority of the time for civil society to exist. Otherwise, the peace can be maintained only by draconian laws and thuggish law enforcement. In such authoritarian societies the civil peace is maintained only by fear of arbitrary arrest and restraint of peaceful activities.

*This is not an endorsement of David Starkey’s other comments on the subject.

John Redwood and the BNP

Blogger Ralph Musgrave in comments to John Redwood’s posting “Finding our National Identity” claims that John Redwood and the rest of the Conservatives have been moving towards the BNP. This is my response.

A sure sign of extremism is to point to superficial similarities, over the substantive ones. In this case the use of a word – Identity – over these points of difference with the BNP.

 

1. Praising the left for making racism unacceptable.

2. “(W)e should also dislike those who think there is a single or pure British way which they wish to enforce.” Sounds like a dig at the BNP.

3. The ideas of Britain having emerged into a tolerant democracy.

4. Anyone who was moving towards the BNP position would not have written this posting:-

http://www.johnredwoodsdiary.com/2011/02/05/the-tyranny-of-ideas/

 

I categorize extremism as falling two types. The first is the numerical type – those who hold ideas distinct from the numerical majority, or mainstream. The second is those who hold ideas that cannot be substantiated by rational argument, or who are highly intolerant of others.

I believe that John Redwood has sometimes taken extreme positions of the first type – usually for well-argued reasons. The BNP falls into the second category.

UKIP did not lose the Tories the Election

The notion that UKIP lost the election for the Conservatives is erroneous.

This claim originated by Richard North on EU Referendum, and repeated by Conservative Home (with figures), John Redwood and Cranmer.

UKIP cater for a niche of voters who would otherwise (mostly) vote Conservative. However, a mainstream party cannot cater for all tastes. If the Tories became more euro-sceptic to squeeze the UKIP vote, they would most probably have lost more votes to the Lib-Dems and Labour. Any main-stream political party must be a broad church. The problem with our current political opinion is that we had two left-of-centre parties that got over 50% of the vote, a mainstream right-of-centre party that got 36% of the vote and UKIP that got 3%.

The conclusion for the Conservatives is not to try to appeal to a very broad church by merging many different opinions. Rather, they must capture a vision that people can empathise with, as did New Labour and Thatcherism. The time to introduce this was not with the launch of the manifesto, but two or three years before an election. Further that vision should also be an implicit attack on the alternatives.

A positive vision to vote for; and the opposing failures to vote against.

Alex Salmond’s anti-democratic spoiling tactics

Alex Salmond’s claim that he should take part in the British Political Leaders Debates is not just invalid, it is anti-democratic.

1. He represents a party that is only standing in less than 10% of the total constituencies.  (59 out of 650). If you are concerned about getting people interested in the political issues, then his utterances will be largely irrelevent.

2. This is a fraction of the candidates of UKIP (500+), the BNP (339) or the Green Party (300+).

2. If those three parties look at the European Elections in 2009, they can also claim to appeal to more people.  The fringe parties 31.3% of the vote verses 2.1% for the SNP. The English Democrats got 1.8%.

3. More importantly, many of the issues, such as Education and Health Services, are English issues. On the majority of the questions the SNP would have to be silent.

The only valid reason that the SNP taking part in the three main debates is to generate such a loathing for Scotland that the English public will want to throw them out. But British democracy is already weak and should not be weakened further.

Iain Dale on the Perils of Saying Something Nice

Iain Dale wrote last week about the adverse comments he received when twittering some appreciative comments about a political opponent.

The worrying bit about this is not in making politics divisive and generally unpleasant. It is that we are not open to learning from experience and one another. Instead we have to be right and can never admit to having got things wrong.

Two important areas where this applies.

1. The Economy. Labour cannot admit that the financial regulations were ineffective during the boom years, nor that the recessions were abolished, merely postponed by the central banks. Gordon Brown is responsible for setting up a tripartite structure that was fundamentally flawed. He was also responsible for creating structural deficits through “only borrowing to invest”. To admit that he was wrong, would mean be blamed for recking the public finances for the next generation.  The consequence is that the bankers carry the full blame. Anyone who does agree is siding with this greedy and unscrupulous minority.

2. Climate Change. Anyone who did not agree with the scientific consensus was considered delusional, a political extremist, or in the pay of the oil companies. Now that the science has been shown to be suspect and biased, there is no possibility of a climb down without loss of face.

This country will be poorer for a generation because those in power have built a false image of infallibility. Further, if the climate change exaggerations are not forgotten, the impact will be much longer than that. The Conservatives should learn from this.

Finally, I hope that Iain Dale should keep on appreciating the good things in the Conservative party opponents, criticizing the conservatives who he thinks as wrong, as well as recognizing (and apologizing) his own errors. The general political debate is richer for it.

Balance Sheet Accounting for the UK economy

The true health of the economy is not to be judged by the growth rates, nor the state of the government’s finances on the size of the annual deficit, nor upon the balance of payments. It is upon the state of the balance sheet.

 

In simple terms, a balance sheet consists of liabilities and assets.

 

Liabilities – examples

 

  1. The National Debt £800bn
  2. The Final Salary Pension of public sector employees £1,000bn
  3. State Pension and disability benefits       say £1,000bn
  4. NPV of PFI schemes
  5. Maintenance of exiting assets, e.g. NPV of maintaining buildings and roads in their current state.
  6. Commitments, such as increasing the school leaving age to 18, emissions reductions, or the cost of reducing poverty. 

 

Assets

 

            This is not the actual assets that a government holds – the land and buildings at market rates, the cost of computer equipment. For a business these are assets, as they will provide future returns, but for a government they are the means of carrying services. The major asset is the future tax revenues. The government’s asset is the future capacity of the general public to pay tax.

 

It may not be possible to get a full balance sheet, and any conclusions will be contentious. But from year to year, it will be slightly easier to look at the change in the balance sheet from year to year. Such an approach will be a focus for debate, and move politicians away from short-term expediency and towards long-term stewardship of the Nation’s finances.

When Strong Politics incites the Thugs

The Huffington Post reports on another killing of a critic of the Russian Regime

Award-winning Russian rights activist Natalya Estemirova has been found dead hours after being kidnapped in Chechnya, reports Human Rights Watch.

Estemirova’s body was found on a roadside near the Chechan border with two bullet wounds to her head, according to the local Interior Ministry spokeswoman.

I do not believe that the Russian Government authourised this, any more than they ordered the deaths of numerous others journalists and human rights activists that have been  murdered over the years. (Please see list below from the Huffington Post Article). Nor do I believe that some leader mutters some comment like Henry II referring to the Thomas a Beckett in 1170 saying “What sluggards, what cowards have I brought up in my court, who care nothing for their allegiance to their lord. Who will rid me of this meddlesome priest.”  (Although there is nothing like the penitence of that monarch expressed after the deed was carried out after the event either)

Rather, it is a more lowly scale. An assertive government, who believes that they are acting for the good of the nation, and confident that they are right, will pass on that belief to their supporters. Some of these supporters, acting anonymously, will have a slightly less scruples & no political acumen.

In the UK, there is a slightly more moderate party that craves for power. The leadership will never call for violence against those who thay oppose, but may inspire others of a more extremist vain to support violent acts.  In the UK (the home of Liberal Democracy), they will remain a minority so long as people remember their heritage and believe in it. The problem with Russia is their history. The current leadership are the children of the survivors. Those who survived by keeping their heads down and agreeing. The children of those who accepted that the state was all-powerful and the individual was a cog in that machine.
Russia will continue to be a miserable place until the leadership can learn from Henry II. They need to learn pennance and the need for openess and for dissent. It will take more courage than unarmed combat with a tigers, but not more than the courage of true men who believe in making their country great.

Alternative details on the BBC.

Vyacheslav Yaroshenko,

Magomed Yevloyev,

Anna Politkovskaya,

Telman Alishayev

Stanislav Markelov

Anastasia Barburova

Does the Prime Minister Tell Porkie Pies?

Douglas Carswell today accused the Prime Minister of telling lies. Here is the comment just posted.

 

 Interviewed by Nick Robinson today, the Prime Minister categorically said that “I have always told the truth”. On that point I think we should believe him.

Why? you might ask. What he says is clearly at odds with the facts.

The problem is that Gordon Brown (along with Peter Mandleson) have moulded New Labour around projecting a message and image. That message is not objective reality, but the image necessarty to win power and retain it. Couple this with Brown’s decade-long building of his own power base to become Prime Minister through scheming against every opponent. What results is someone like a communist who saw the imminent revolution in every newspaper paragraph, or an alcoholic in denial. They can only see what fits their reality. To see objective reality would cause his own self-destruction with a comment like

“We are in the worst economic mess since the second world war, and many of my actions as Chancellor have made this worse for Britain. As Prime Minister, despite trying to do my best, I have made mistakes that our children will be still paying for in their retirement. I have run out of ideas and energy on how to improve the situation, shall therefore be tendering my resignation with immediate effect.”

Giving the BNP voters a message of hope

Summary

BNP supporters include many hardworking, but unappreciated people. Their lives can be turned around by a confident Christianity that values them.

 

 The Political Establishment reviles the BNP, either describing them as beyond the pale, or denigrating them for views they do not necessarily hold. In so doing they guarantee that the BNP will build a core following that will endure. Instead we should understand the people who voted for the BNP. The recent Channel4-commisssioned Yougov survey of electors highlighted the issues.

 

  1. BNP voter families are poorer than national median, but less than 10% below. Indeed, if you allow for the concentration is the lower income areas (Burnley for instance), they are about average.
  2. They are disproportionately manual workers (36% v 20% in the population), male (61% v 48%), and read the most down-market papers (33% v 20%). There are few professionals (11% v 36%) and few readers of the quality papers (6% v >12%)
  3. They feel left out by society. “Just 19 per cent of BNP voters are “confident that my family will have the opportunities to prosper in the years ahead”. This compares with 59 per cent of Labour voters, 47 per cent of Lib Dem and Green voters, and 42 per cent of Conservative voters.”
  4. They feel discriminated against as compared with immigrants, such as the feeling that immigrant families can jump the queue in getting a council house (87% v 56%), and feel that white people suffer unfair discrimination (70% v 40%)

 

There is something else that can be inferred from this data. Despite being of near median family income, they display signs of being below the average educational levels (more Sun & Star readers and lots of manual workers). That means there must be something else that characterises these people. I would suggest that they are hardworking people. The sort of people who two or three generations ago who do any job rather than claim dole; who would be horrified if their children had sex before marriage; who would be proud if they could go through their working lives without a day off sick; who would work long hours to afford the luxuries; who would be proud of their council houses and keep their gardens in a better state than a National Trust property. They are the sort of people who a generation ago would have bought their council house, and immediately change the front door to a mahogany-look one with a brass knocker to show their status. The same generation who would have seen the next door house being allocated to a single mum, who having had three children by different fathers, gets more cash and benefits through a few minutes of drunken sex, than they ever could by working 60 hours per week. They are the people who should be proud of what they have achieved, but looking round now say “should I have bothered?” (or something stronger). They resent those who get things easy, and the hectoring state who taxes their pleasures (smoking and drinking). They have been deserted by their natural political party, who, in being multicultural and inclusive has lost its dogmas and its passion. The final straw is when they support a party who seems to answer their concerns, they are treated as outcasts by the political establishment. That same political establishment, who having for years actively encouraged the politicians to gorge themselves at the public trough, now dither in sacking them.

 

Like the worst gangs, the BNP encourages these people to blame this on other groups – on the muslims, the immigrants, the corrupt politicians or the foreign imports – then provide a strong solution. But the solution is to turn inwards, rejecting outsiders, rejecting foreign imports, rejecting customs. It is also to say that by a strong government that they can believe in, they can get the esteem that they lack. But this will not be the answer. Crushing ones opponents never brings peace; harsher punishment does not reduce crime, nor does protecting jobs make us richer, or even reduce unemployment. Like the communists of yesteryear, they believe with the right plan, ruthlessly implemented they can solve all problems.

 

The answer is not to revile such people, but to see them as achievers, who have been lead astray. One hundred years ago, they would have been the people who packed the churches during the revival, cheered loudly on the terraces on Saturday afternoon, sung lustlily on a Sunday morning and repaired to the club afterwards. The churches again need to accommodate them. To provide them with strong dogmatic statements, not tortuous arguements about gender-inclusiveness and sexual orientation. To provide them with a strong sense of faith, that believes its past achievements and what it can achieve, not a faith that is no better than any other. The BNP followers, I would suggest, are made up of people who have been lead astray, but are not fundamentally evil. They are sinners whose lives can be fundamentally changed by a confident faith.

 

 

Channel 4 commissioned a massive poll of 32,000 electors, of whom nearly 1,000 voted BNP in the Euro election on 4th June. This is the website analysis.

 First, who voted BNP? They were mainly men: they voted divided 61 per cent male, 39 per cent female. (Men comprise just 48 per cent in the electorate as a whole.)

 They were also more working-class. In the country at large, professional workers outnumber manual workers by 20 per cent to 18 per cent. Among BNP voters the pattern is very different: 36 per cent manual workers, 11 per cent professionals.

 One third of them read the Sun or Daily Star as against one in five adults generally; just 6 per cent of BNP voters read the upmarket papers (Times, Telegraph, Guardian etc), which is less than half the national average.

 Yet the household income of the typical BNP voter (£27,000 a year) is only slightly below the national median (£29,000) – and not that far below that of a typical Conservative voter (£33,000).

 It is not money that marks BNP voters apart as much as their insecurity. Just 19 per cent of BNP voters are “confident that my family will have the opportunities to prosper in the years ahead”. This compares with 59 per cent of Labour voters, 47 per cent of Lib Dem and Green voters, and 42 per cent of Conservative voters.

 Among UKIP voters the figure is also fairly low, at 28 per cent, which suggests that UKIP also picked up the votes of many who feel the traditional parties let them down – and not just on Europe.

 Not surprisingly, BNP voters regard immigration as the top issue facing Britain. Fully 87 per cent of them told us it was one of their top three or four concerns. (This compares with a still-high 49 per cent among the public as a whole.)

 But when people are shown the same list and asked which three or four issues “are the most important facing you and your family”, the figure falls to 58 per cent. True, this is three times the national average of 20 per cent, yet it means that for almost half of BNP voters, immigration is NOT among the worries of day-to-day life.

 We also find that most BNP voters do NOT subscribe to what might be described as “normal racist views”. Just 44 per cent agreed with the party in rejecting the view that non-white citizens are just as British as white citizens.

 Yet the feeling is widespread that white Britons get a raw deal. Seventy seven per cent of BNP voters think white people suffer unfair discrimination these days. But that is also the views of 40 per cent of the public as a whole.

 The average British voter is more likely to think that discrimination afflicts white people than Muslim or non-white people. And only seven per cent of the public think white people benefit from unfair advantages, while more than one in three think Muslim and non-white people receive unfair help.

 Thus the BNP is tapping into some very widely held views, such as the desire to stop all immigration, and the belief that local councils “normally allow immigrant families to jump the queue in allocating council homes” (87 per cent of BNP voters think this, but so does 56 per cent of the public as a whole).

 Yet, depending on how the term “racist” is precisely defined, our survey suggests that the label applies to only around a half of BNP voters. On their own, these votes would not have been enough to give the BNP either of the seats they won last night.

 There are two telling pieces of evidence that suggest wider causes of disenchantment. Seven out of 10 BNP voters (and almost as many Green and Ukip voters) think that “there is no real difference these between Britain’s three main parties”.

 But perhaps the most startling finding came when we tested anecdotal reports that many BNP voters were old Labour sympathisers who felt that the party no longer speaks up for them. It turns out to be true. As many as 59 per cent of BNP voters think that Labour “used to care about the concerns of people like me but doesn’t nowadays”.

 What is more worrying for Labour is that this sentiment is shared by millions of voters, way beyond the ranks of BNP voters. Overall, 63 per cent of the British public think Labour used to care about their concerns – and only 19 per cent think it does today.

 In contrast, just 29 per cent think the Conservatives used to care about their concerns; this figure has climbed to 37 per cent who think they care in the Cameron era.

 Yes, Labour has a problem with voters deserting the party for the BNP. But its far bigger problem as it heads towards the next general election is to extinguish the overwhelming public view, reinforced by the scandal over MPs’ allowances, that today’s Labour Party is no longer on the side of ordinary voters. And that, more than anything else, is why its vote collapsed to just 16 per cent in the Euro election.

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