A continuing debate? Protectionism and free trade in Australia

A certain game of shadow play takes place - some industries are protected, others are not. The Obama administration continues to shield trade and jobs against cheaper Asian competition and is hardly likely to budge on this. The criticism by such independents as Bob Katter, who has always taken a strong stance against a policy he sees as crippling to rural Australia, is not without cause.

Accused of going troppo where the sun beats down too heavily, Katter has seen the more destructive effects of policies that have emptied the interior of services and industries. Rural Australia only matters now because residents of those five teeming sores, as the Australian poet A.D. Hope put rather graphically, yearn for its product.

One sometimes wonders where the madness lies – in Katter's easily dismissed warnings and wishes. For example, the remarks of Guy Rundle in Crikey (Jun 6): "Crazy Bob Katter brought the crazy to politics" – or in the complicity of a consensus with the followers of Australia's mining conquistadores.

Any country blessed with natural resources is invariably cursed by it. This is the dilemma so wonderfully captured in the German term 'robber economy' (Raubwirtschaft). Australian manufacturing is barely a murmur on the world stage, obscured by the enthusiastic plunder of the mining boom. In 1984, manufacturing employed 17.5 percent of the workforce. It has now dropped to somewhere around 9 percent.

Any overly energetic and wealthy sector of the economy is unhealthy. To take the analysis of former federal Treasury secretary Ken Henry, Australia now operates on a three-speed model: The accelerator, dull as ever, lies in a happy-go-lucky cheap form of mining; then come industries such as manufacturing; then sectors which are not primarily dealing with trade.

According to James Glynn of the Wall Street Journal, the data reveals narrower trends – Australia is, effectively operating no a two-speed model. Pharmaceuticals, recreational and electrical-goods outlets are all, in an assessment of the chief economist of Commonwealth Securities Craig James, experiencing a slump. To sum up: If you are not in the mining industry, you can hop it.

Now, philosophers such as John Raulston Saul are making an argument that globalism – the philosophy whereby markets are deified and rendered sacred – is obsolete. An open market is never a recipe for doing nothing to control it, precisely because our freedoms have always been gained by action, intervention and an awareness of their dimensions.

The conscience of a Higgins eventually wins out over the free-market ideologues of the Chicago School. Countries have reacted to the financial crisis by wholeheartedly embracing measures of intervention in preventing the bad from getting worse. Few government officials, leaving aside Rudd's concerns, are willing to take their hands off the wheel of the economy. To do so would be perilous.

There is little reason to assume that Australia will not, at some point, adopt a policy that moderates the distortions that are now rife in the economy. The potential collapse of the Euro zone amidst the continuing sovereign-debt crisis, with the EU still being an important trade partner, may make the worries of Rudd academic.

The decisions on European trade policy are hardly going to be swayed by Canberra, and its humble officials may have to follow suit. Protectionism, in short, may well return to Australian shores.

Politics is a continuous practice of contradiction. According to the political theorist Hannah Arendt, it is even a flagrant one. But it is not merely the political idea that holds sway. To that we have the economist, the contemporary astrologer who gazes at stars in the hope of discerning the mystique of the money cosmos. John Maynard Keynes's statement in The General Theory of Employment, Interest and Money, authored in the depressed world of 1936, is still relevant – be they right or wrong, ideas 'of economists and political philosophers, are more powerful than is commonly understood. Indeed, the world is run by little else.'