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”

The symbiosis of capitalism and democracy

(This review is cross-posted at Goodreads.)

Theorists of the left and the right argue that there are tensions if not contradictions between democracy and capitalism. Left-wing theorists argue that business has undemocratic power, buying influence through political donations and altering policy by threatening to invest elsewhere. Right-wing theorists argue that democratic majorities vote for taxes and regulations that weaken incentives and undermine the efficiency of capitalist enterprises.

Judged by the normative standards of these theorists, these critiques have something to them. But judged by some other standard, such as elected governments maintaining capitalist economic systems with widespread high living standards over long periods of time, the ‘advanced capitalist democracies’ discussed in Democracy and prosperity: reinventing capitalism through a turbulent century, look very successful compared to other political and economic combinations.

democracy and prosperity


One contention of the book’s authors, Torben Iversen and David Soskice, is that a symbiotic relationship between democracy and capitalism contributes to the success of these countries. Although business and rich people may, at least initially, resist the increased taxes that democracies impose for social policy programs, often in the long run these programs contribute to economic success.

For example, education is electorally popular and provides business with the highly-skilled workforces they need. Government unemployment, health, and retirement programs reduce workers’ uncertainty about their future welfare, reducing short-termist behaviour and industrial conflict. Workers are less dependent on their employers.

In turn, key constituencies in advanced capitalist democracies depend on a successful economy for their own jobs and the tax revenues that support social programs. They support political parties that competently deliver economic growth, limiting the political potential of parties that would damage the capitalist economy. The rejection of Jeremy Corbyn’s Labour in Britain is an example. Continue reading “The symbiosis of capitalism and democracy”

Dubious ideas submitted to the higher education funding review, part 1

With submissions to the higher education base funding review due on Thursday, some organisations are starting to put their ideas out into the media. I thought I would start an occasional series on dubious proposals made to the review (though I suppose this is just a more specific version of what this blog has been about since it started).

Behind the AFR‘s paywall is a story about the Australian Technology Network’s submission. They are suggesting that graduates who work in areas of skills shortage get a discount on their HELP debt repayments.

But generally where there are skills shortages the market deals with financial incentives: the pay goes up. And why should taxpayers rather than employers fork out when staff get more expensive?

The only example given is a rather sexist one, that female engineers should be given an added incentive to stay in the profession. The Beyond Graduation survey, of graduates three years out, found that engineering graduates were already earning good money (median salary $75,000) and had the second highest rate of income growth since their first job (63%). If there is a problem with women in engineering, I doubt it is money. A female engineering graduate isn’t likely to earn more doing something else. Continue reading “Dubious ideas submitted to the higher education funding review, part 1”

No progress to graduate target

The latest issue of ABS Education and Work suggests that maybe we have headed slightly backwards on our way to the government’s target of 40% of 25-34 year olds having degrees. From 34.6% last year the ABS finds 34.2% this year. But the differences aren’t statistically significant.

On the other hand, there is one factor that might slow growth a little. In 2003, the government announced that it was going to penalise universities that ‘over-enrolled’ too much. This flowed through to slightly lower commencements in subsequent years, and a small drop in completions 2006-2008. Combine that with a slight increase in the size of the relevant age cohorts and it’s likely that we have some slightly less educated birth years now reaching the 25-34 age group (assuming they did not take advantage of renewed growth in places later).

Against this migration would be pushing the numbers up – due to migration criteria permanent migrants aged 25-34 are more educated than Australian-born people of the same age.

Education and Work also shows essentially no change in graduate over-qualification from 2009 – 27.4% last year, 27% this year. Graduate unemployment fell from 3.4% to 2.5%.

Over-qualification and migrants

An AMP-NATSEM report on migration released today included this figure on a long-term theme of mine, the employment outcomes of graduates:

In response to my claims that over-qualification is significant among graduates, Bob Birrell has said that the figures are distorted by the large number of over-qualified migrants. The numbers in this figure shows that this is a factor for migrants from non-English speaking countries. Continue reading “Over-qualification and migrants”

Skills matching for recent graduates

Andrew Carr asks if I can compare the skills mismatch of international and local students. To re-cap, a study of former overseas student migrants in 2006 found that:

18 months after their arrival found the skills match for former overseas students at the following levels: accounting 35%, business/commerce 5%, education 31%, engineering 23%, IT 35%, law 50%, nursing 90%.

I can’t get a direct matching comparison but there are surveys relating to this issue.

The Graduate Destinations Survey (summary results are free), which surveys graduates about four months after completion, now has a question which asks about the link between the graduate’s qualification and their main paid job (it’s only asked of those in full-time work, so I will put in brackets the percentage still looking for full-time work). The answers combine those who answered either a ‘formal requirement’ or ‘important’: Continue reading “Skills matching for recent graduates”

Should the government change migration laws to suit universities?

Australia’s universities are in a bit of a panic. With international student applications down, and much bigger drops in the ‘feeder’ colleges, the next few years are looking particularly grim.

While issues such as the high dollar, student safety and more intense competition for even-more broke universities in the UK and US are affecting the international student market, changes to skilled migration rules are also causing grief.

Most university courses that were being used as backdoor routes to permanent migration are still on the skilled occupations list used by the immigration department (the vocational education sector has not been so lucky), but the number of visas available in this category has dropped significantly. The emphasis has shifted to employer-sponsored migrants. So international students now need to find an employer to support them, creating much more uncertainty.

Yesterday the Group of Eight lobby group joined other university groups in calling on the government to ‘fix’ the problems. Continue reading “Should the government change migration laws to suit universities?”

Australia’s still surprisingly secure workers

The ABS released their labour mobility survey yesterday, and as I predicted two years ago Labor’s legislated job security provisions, which took effect about five months into the survey, did not stop retrenchments going up.

3.7% of workers who were employed in the year to February 2010 were retrenched, compared to 1.8% under WorkChoices in the year to February 2008. Retrenchment levels have more to do with business conditions than legislation.

While the 2010 result confirms that as a general point, the longer term trends on this in the figure below are quite intriguing. As measured by people being retrenched, the common belief that job security is declining over time is not correct. 2010 was the first negative trend in nearly 20 years. Maybe the long boom has saved more employers from the difficult decision to let people go. Or maybe there are other things going on that make dismissal a less common form of labour market adjustment.

Graduates three years on

Graduate Careers Australia has released Beyond Graduation 2009, a follow-up survey three years on of graduates they first surveyed in 2006.

A few points of interest on topics of particular interest to me:

* The proportion of their sample who were overseas had doubled from 3.2% to 6.8%, which means that they will not be repaying their HELP debt. People with qualifications in ‘architecture and building’ are most likely to be overseas (12%).

* The graduates in non-graduate jobs generally don’t want to be there, though this is is more true of ‘sales workers’ than ‘clerical and administrative workers’. The second most frequent reason (‘to earn a living’ had a majority response for all occupations) for taking a clerical job was ‘to develop general skills’, but only 7% of sales worker respondents gave that reason. By contrast, 47% of sales workers say they took their job because it was the only one they were offered, compared to 23% of clerical workers. Continue reading “Graduates three years on”