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Many among us worry about the fading away of once-big industries because we think our economy, its workers and families will be worse off – or we worry for nostalgic reasons, given that we or close friends or relatives work (or once worked) in them. Nostalgia makes us human of course, but the other reason for this concern is just plain groundless, indeed regressive and dangerous. We cannot advance economically or socially by standing still, as our caveman ancestors are testimony.
One of the most serious misunderstandings is that a nation should produce a lot of goods to create the money for supporting service industries that are not really wealth producing. One response to that would be: if your young child were seriously ill, would you go to a doctor, or would you go out and buy a new toaster for the same amount of money as it is better for the economy and jobs?
No, the only wealth-producing industries are those that are providing things that customers actually want to buy, be they goods or services. If we are oversupplied with goods or can get them from overseas more cheaply or better made, so be it in the freer trading world of today.
And it is worth noting that trade in services across the world is growing faster than trading in goods. Indeed, the export of services from Australia will be our biggest single category within a few decades, overtaking minerals, which have overtaken manufactures, which overtook agriculture over the past 50 years. It is ironic that the profits from service industries are being taxed and subsidising non-competitive manufacturing industries these days (so, which are the most wealth producing?).
Then there is the argument about loss of skills if we give up old industries – another argument that is spurious. Advancing economies, industries and households have been outsourcing for centuries, to better focus on being very good at fewer things rather than being jack-of-all-trades, master of none. Pretending that Defence manufacturing is vital is just plain silly. The equipment turns out more expensive, and usually doesn’t work well, if at all, anyway – witness the submarines debacle and others.
And do we need a car manufacturing industry anymore, good for us as it once might have been? It is almost sad to see an annual V8 competition these days with cars that people have more or less stopped buying, but that does not include cars we are actually buying – made overseas as they are.
So, a look at the industries that have created the nation’s wealth through our ages of progress is a useful reminder that the world moves on, as we must too. The first chart shows what the mix of industries looked like towards the end of our Agrarian Age, which finished in the mid-1860s.
It was, of course, an age dominated by resources (Agriculture and Mining) and commerce (mostly Retailing).
Then came the Industrial Age, which finished in the mid-1960s. Our mix of industries at that time is shown in the chart below.
Clearly, Manufacturing was dominant, and the entire secondary sector including Utilities and Construction then accounted for 40% of our wealth creation (GDP). But it is interesting to see that, even then, the service industries in total – the tertiary, quaternary and quinary sectors – accounted for 47.5% of our GDP. So the idea that Manufacturing created the wealth for the rest of the economy, especially services, is a mathematical and economic nonsense.
This brings us to the present day. We are more than halfway along the post-Industrial Age, variously referred to as the Infotronics or, more recently, the Digital Age, which itself will be supplanted by yet another new age in the middle of this century.
At the end of 2011, the industry mix was unrecognisable from that of 1960, let alone 1860, except for the temporary resurgence in the importance of Mining (largely due to the serendipity of quadrupling prices, rather than a volume growth boom).
Service industries dominate, especially the quaternary sector ones (with information and/or finance as their common feature). However, the quinary sector of outsourced household activities (Hospitality, Health, Recreation and Personal & Other Services) is also rising as a vanguard for the next new age in the second half of this century.
And are we getting better for all these changes and developments? You bet we are. The final chart shows our climbing standard of living. And let’s not fool ourselves that such progress does not include social progress. It does – with longer lives, better health, more safety nets for the disadvantaged, exposure of once-hidden crimes (such as paedophilia and spouse abuse), less racism and intolerance, accountability of politicians and business and social leaders, and more, much more, social progress.
The good old days are today and tomorrow, not in yesteryear. Nostalgia is not really a substitute for progress, as self-indulgent and human as it is. Driving via the windscreen is safer and better than by the rear-vision mirror and, unlike in traffic, we are rarely hit from behind.
Sourced from IBISWorld dated 9/5/2012, retrieved from www.ibisworld.com.au
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