Don’t blame demographics, blame the government

Niels Jensen’s Absolute Return monthly newsletter raises one of the major structural impediments to growth in Europe:

As [economist Woody Brock] pointed out when in London, ageing has only had a modest impact on GDP growth and inflation so far. Governments have ruined economic growth in Europe; demographics haven’t. If employment laws are such that employment is virtually for life, companies stop hiring. If you can’t fire, you don’t hire, as Woody pointed out….

Similar impediments are evident in Australia. If developed economies want to compete in global markets, they need to get their house in order. Raising barriers to free trade is not a sustainable alternative but will instead destroy any remaining semblance of competitiveness. Trade barriers result in a limited choice of products, forcing customers to pay higher prices and accept inferior quality. Lack of competition leads to the death of innovation. Quality deteriorates and we soon face another zombie industry dependent on government support. A prime example would be the motor industry — in Europe, North America, even Australia — over the last half-century.

2 thoughts on “Don’t blame demographics, blame the government

  1. michael beard says:

    Hi Colin
    Free trade has destroyed manufacturing in Australia—footwear, clothing, cars, steel

    This is not a good outcome for employment in Australia

    What is your solution to this problem ?

    • ColinTwiggs says:

      Michael, I would put it differently.

      Free trade has exposed the level of decay in Australian manufacturing. The industry has been white-anted from the inside, not destroyed by competition from elsewhere.

      My solution is one that Australia has already implemented and has been a world-leader in for several decades….. our sports program.

      After the 1976 Olympics Australia came home with a pitiful medal tally for a once-proud sporting nation.

      Montreal 1976 Medal Tally
      (From Wikipedia)

      The country decided something had to be done. And it was.

      Money was poured into setting up Sports Institutes in each state. New facilities were built. The best coaches and sports scientists around the world were head-hunted. The best talent recruited. Broad grass-roots training programs were instituted to foster new talent. Nothing was allowed to stand in the way of the goal: to restore Australian sporting pride.

      A generation later, at the 2000 Sydney Olympics our tally was 16 gold, 25 silver and 17 bronze; a total of 58 medals.

      Amazing what you can achieve when you set national goals with buy-in from all sides of politics. The same is true of business. At present we are in the minor leagues regarding international trade. It is time we set a national objective to become a world leader. It may take a generation (or even two) but we have one invaluable asset: self-belief. We have done it before….

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s