Both luck and good management: a review of Ian McLean’s Why Australia Prospered

The passing of Ian McLean in May 2021 reminded me that his 2013 book on Australia’s economic history had been on my ‘to read’ list for a long time.

An epigraph to the last chapter of Why Australia Prospered quotes the Greek poet Archilochus that ‘the fox knows many things, but the hedgehog knows one big thing’ (popularised by Isaiah Berlin).

McLean was a fox, with this nicely undogmatic book looking at the many factors that can influence economic growth both in general and in Australia, rather than seeking one big theory to explain it all. It takes sceptical looks at theories that might claim too much policy wisdom (post-WW2 Keynesian economics, 1980s & 1990s ‘economic rationalism’), and too little, that Australia was just a ‘lucky country’, as Donald Horne famously put it.

Australia was and is lucky in its natural endowments. These were the earliest source of its economic comparative advantage, as the wool industry developed in the first half of the 19th century. Sheep grazing land was taken without paying for it – whether the wronged ‘owners’ are taken as the Indigenous people who had traditionally lived on it or the Crown as represented by the governor of the colony – and the mild climate made winter housing for sheep unnecessary. Combine these capital savings with cheap convict labour and Australian wool was very competitively priced on international markets.

Continue reading “Both luck and good management: a review of Ian McLean’s Why Australia Prospered”