Australia’s new pivot to manufacturing?

The Labor government’s “Future Made in Australia Act”

A good shift with wrong assumptions

The union movement has found a Labor government willing to put manufacturing industry and skilled jobs back in play with its Future Made in Australia Act (FMAA). The manufacturing shift” has been announced in several parts, presented in the 24-25 Budget. PM Albanese’s first announcement came one day after the Australian Manufacturing Workers Union (AMWU) released its new report on renewable energy.

The FMAA, up to a point and if realized, dovetails with the long-standing common sense of the people and specific organizations like the AMWU.

The government’s new focus is correct in principle and in some detail. However, union and environmental activists must critically analyze what the government proposes, and, with that, the investment failure of the private corporations, domestic and transnational, that own and control the industry.

What is proposed is not enough and is a modest, important step in the right direction.

The FMAA is based on two wrong assumptions.

First, profits have not been big enough to fund new private investment, especially from an environmental and productive point of view.

Second, manufacturing private companies can be trusted to respond positively to more government support as tax breaks and direct public subsidies, also known as corporate welfare.

Ironically, in being wrong they justify what the government proposes provided it goes somewhat further, especially regarding democracy and ownership. It is correct in principle that public funds justify public ownership.

Labor’s neolaboralism will not, of its own accord, take this step against the near absolute control and failure of private investment decision-making by private business. Thus, a clear-headed left must intervene.

Mainstream economics commentary from the Productivity Commission and the pages of The Australian, and the Financial Review, for example, says the FMAA is wrong. The opposition says that the present situation is the same as the 80s and is acceptable.

Below we see the status quo is a disaster for the Australian majority and nature. The principal continuity that makes it so is the “profits-first-always” dynamic of the society.

Above all, the heating of the planet is getting worse faster, and more destructive. That must change everything, just as the carbon-based combustion engine did in the formation of capitalism 200-odd years ago. Greg Jericho puts it this way.

The FMAA’s content: brief sketch

The government intends to develop Australia as a “renewable energy superpower” for domestic and trading purposes, “powered by clean energy” delivered by “secure, well-paid jobs” with “benefits to communities across the country”.

They have committed $22.7 b over a decade to unlock private sector investment. About $54b of private sector capital appears to be available, just sitting there waiting for its moment. PM Albanese admits the government intends to absorb some of the risk for the private corporations, attracting and enabling investment, including foreign, using natural endowments of sun and wind (tidal?). The focus is on green hydrogen, critical minerals processing, green metals, and clean energy manufacturing, including battery and solar panel supply chains.

There are several specific programmes, including “Hydrogen Headstart”, Solar Sunshot “to build Australia’s solar photovoltaic (PV) manufacturing capabilities”, the Capacity Investment Scheme, aspects of the $15 billion National Reconstruction Fund (NRF), streamlined foreign investment, community engagement ($20.7m.) and a long overdue review of private industry’s weak research and development effort. The government support is through direct subsidies, grants and tax breaks.

Workforce skills and technical knowledge formation are critical; the government intends “$91.0 million over the next five years to accelerate the development of the clean energy workforce”. That will include a New Energy Apprenticeship Program and, $55.6 million “support for women training in male-dominated industries….”

There are serious contradictions. One of them is the continued focus on manufacturing for war-making shown, for example, in the “$68.4 million to attract and retain the skilled industrial workforce needed to support defence industrial priorities”.

Another is the government’s public commitment to protect the priorities of the gas transnational corporations. However, the Climate Council says the FMIA shows “gas and coal are not part of the budget’s vision for a Future Made in Australia”. It’s worth understanding this in more detail.

In the $178.6m for “worker transition support, including the Energy Industry Jobs Plan and place-based Regional Workforce Transition” there is potential for unions, environmentalists and communities to get funding support for democratic intervention to ensure public direct subsidies and tax breaks work effectively and creates opportunities for the benefits of public ownership.

The wrong assumptions and their implications

The government recognizes, correctly, that the manufacturing status quo is inadequate, unable to help the people in the face of climate change, global competition, pandemics and the prospect of war.

Some of the facts are well known. “Gross value added” (GVA) is the standard measure of new value created by workers' effort in any given industry, no matter the level or quality of management, equipment, machinery and industrial structures. Manufacturing GVA has fallen steadily from 14% of GDP in 1975 to 5% now.

Manufacturing employment over the same time has fallen from about 16% of the workforce to 7%. We are talking about workers who transform raw materials of many kinds into semi-finished and complete products, much of it essential for the well-being of the majority.  The AMWU has pointed this out since its first report, Australia Uprooted, in 1978 and regularly since.

This is disgraceful for a country so well-endowed with all the natural resources to make just about everything needed for its population and others. We keep in mind this is the product of the most violent, vicious expropriation by the British occupation of the natural world that provides the raw materials.

Despite this, the volume of profits is holding together quite well, based on a moderately high rate of exploitation of that workforce.

The obvious first question is, “How much have manufacturing employers invested from those profits back into the industry from which they have been taken?” Here is the answer.

The Australian Bureau of Statistics (ABS) calls that “Gross Fixed Capital Formation” (GFCF). It includes new industrial structures, machinery and equipment, research and innovation, and computer software.

Annual new investment in manufacturing has been stagnant since the mid-noughtie, especially relative to mining. (See also the Centre for Future Work on the reality of new technology).

Consequently, Australia’s manufacturing capital stock – mainly the value of factories and other industrial structures, machinery and equipment - has barely grown in the past 15 years, just when the reverse needed to happen.

This is the outcome of private ownership and control of the investment dynamic and the deliberate intent of the private sector to NOT take advantage, in the interest of the people, of manufacturing capacity close to the resources extracted by the mining industry.

It is the opposite of the common sense of most Australians who are correct to wonder why what is dug from the ground cannot lead to products made here by Australian citizens, and other migrant workers. 

The hypocrisy of private capitalists’ professed patriotism is matched only by their obsession with putting profit-taking and corporate control first.

Another outcome is shown in the next graph. Here we see how much new wealth they have appropriated from the efforts of their workforce year-by-year.

Even with inadequate productive investment and low capital stock, the capital stock has still increased. And so, we see in the next graph a strange anomaly. Profit relative to total investment has trended down, although recovering.

This contradiction will be a big issue in the coming years.

Returning to higher profitability with new hardware investment requires more profits and downward pressure on wages. That is, increasing the rate of exploitation. In green manufacturing, it is a serious threat to a democratic and just transition.

The above describes the status quo those who oppose the FMAA wish to hang on to (except the profitability bit). The neoliberal commentariat, living in their 80s-90s heyday, say this status quo is so perfectly okay that they will defend it by helping Dutton’s LNP win the next election. 

But it also shows that the pivot is both necessary and requires democratic intervention, mindfully militant when necessary, to provide momentum that is green and just. This is a historic responsibility for leftists in unions, environmental, and feminist organizations.   

Leaving the future to private corporations and parliaments will be a dead end.

Some Big Issues

We will need to learn more about and take account of several big issues.

The first and most obvious is the heating of the planet faster, and more destructively every year. The science is clear. However, the political strategy to slow and reverse it is not.

The National Secretary of the AMWU, Steve Murphy, has called for workers to lead environmentalism. We must study this idea, apply it in practical interventions and learn how to make it happen as we go.

The idea invites us to work out a transformative, democratic productive environmentalism that synthesizes the red and the green.

In this framework much will depend on a skilled and technically knowledgeable workforce. That requires an urgent renewed Technical and Further Education (TAFE) to replace the damaging presence of private providers. Maybe the government understands this with its fee-free TAFE courses and New Energy Apprenticeships Program.

The second big issue is economic stagnation. Like many other nations Australia still sits on the edge of recession. Neolaboralism means the government may back off its modest step forward if a recession happens. Certainly, its enemies will call for that.

The third big issue is the Labor government’s continued commitment to the expropriation of country to protect the gas corporations. We must wonder whether this neutralizes the potential gains in the manufacturing pivot.

Another big issue is the new forms of global competition between corporations for ownership and control of both digital communications and physical production and between nations.

The USA’s Inflation Reduction Act is already attracting investment from profits made in Australia and the European equivalent threatens the same.

And we have a new “China syndrome” because the competition-cooperation dynamic with China has a different character. China is already “the” manufacturing powerhouse with much more still to come. Australia has strong trading relationships with China that are rich in profit-making and potentially something much better. But out of loyalty to the USA, China is now defined as a threat. Stupidly, that has locked Australia into a military alliance that also saps productive in favour of destructive investment. The FMAA includes skills formation spending for military purposes. Thus, the very real potential to learn from China is constrained.

The next big issue is “the role of government”. Should it stand by and let “the market” decide how the problems should be resolved, trust the owners of capital who dictate those markets to make the right investment decisions? Or should it actively intervene in the name of the people to use public money and other powers as corporate welfare to push manufacturing in a new direction?

Or should it, as I argue, also enable demands from people’s organizations for greater control and ownership of new projects funded for a green transition that is democratic and fair?

Asserting the role of the people: understanding intervention

 Worker-community organizing on green industry development for good jobs can occur at the workplace, employer, community, regional and industry level.

We have good examples of worker-community organizing on industry development that can be spread more widely and, in doing so, improved upon. There is the Hunter Valley Jobs Alliance, the Collie Industry Transition group, and in Gippsland. Likely there are others.

Intervention starts with established workers and residents. As the organization develops it makes its own decisions, including consultation arrangements with relevant employers, and moments when smart direct action to support their proposals is the way to go. The union presence can ensure that the new jobs in green industrial activity are above minimum standards. A just transition rejects more intense workforce exploitation as the new industries develop.

Such intervention does not need permission from any employer or government authority to get started but can demand enabling support from the government.

There are dozens of local and national unions, community resident groups, and environmental and feminist activists who can work out whether and how to apply for the new Commonwealth funding available for such activity.

If they emerge we will be taking a big step forward.