It’s renewables or barbarism: how to cure Australia from its case of Dutch disease

When COVID-19 struck, the Australian economy was already suffering from a chronic case of Dutch disease. The present COVID-19 crisis has exposed and exacerbated the pre-existing vulnerabilities, injustices and inequalities within the Australian economy. 

The term Dutch disease was first coined in The Economist in 1977 to describe the contraction of manufacturing in the Netherlands after the discovery and exploitation of a large natural gas field. In The Eighteenth Brumaire, Marx had described The Economist as ‘the European organ of the aristocracy of finance’, and within the magazine’s pages one can often find a fairly open account of the contradictions and constraints capital faces in any one historical moment. It should come as no surprise, therefore, that this apparent paradox where the significant expansion of one industry happens in conjunction with the relative decline of other sectors was first depicted in this organ of capital. 

In the Australian context, specifically, it has been the mining industry which has risen at the expense of manufacturing. 

The resources boom and the dominance of big mining companies and magnates actively harmed the country’s manufacturing sector.

It was the resource-fuelled bubble in the Australian dollar combined with incoherent and ambiguous industrial policies that cut back iconic manufacturing employers like Holden, Ford, Toyota and many of their local suppliers. 

It was the mining lobby that killed the mining super profits tax. This tax was primarily supposed to redistribute profits from mining to other sectors of the economy through a cut in the general corporate tax rate. 

It was the mining lobby that pushed for deregulation of Australian gas prices forcing industry to pay the global premium. Without strong energy transition policies, this just meant manufacturers lost the competitive advantage of relatively cheap gas prices without the prospect of a pathway to cheap renewable energy.

It was the mining lobby that killed effective climate action. With it went a program of investment into industrial processes in order to make for more carbon-efficient manufacturing. 

Australia’s case of Dutch disease has real political dimensions. The Australian state has represents what we might call in vulgar Marxist terms an executive committee for the mining industry. 

All of this is more than a bourgeois factional dispute. This intra-capitalist balance of power within Australia matters for socialists and leftists locally and globally. It can be read in the morbid symptoms of Australian political life including the defunding of climate science research, the undermining of quality journalism, the demonising of public protest and the federal government flipping the switch to a ‘gas-led’ COVID-19 recovery. 

The federal government’s Industrial Relations Roundtables are another example of the state catering specifically to the needs of the mining lobby. 

Since the early 1990s, the introduction of enterprise bargaining and the concomitant restrictions on collective action have largely controlled the cost of labour from capital’s perspective and facilitated its control over productive processes. 

The roundtables only make sense when viewed from the perspective of mining being the dominant faction of capital. The five areas of ‘reform’ that the government has picked out are award simplification, enterprise agreement making, casuals and fixed-term employees, compliance and enforcement, and greenfields agreements for new enterprises. In addition, the Coalition government has very theatrically involved unions in this discussion. 

This tells me the Coalition is attempting to achieve three things. 

First, obtaining a social license for both the deterioration of the labour market over the last generation, and its ongoing degeneration. 

Second, tighten the control of labour and cut wages in mining and infrastructure. For, even within the confines of enterprise-based bargaining, labour acting collectively over geographic sites of high capital intensity such as mines and infrastructure projects can still extract significant value from bosses. 

Third, introduce measures to help subordinate sections of capital cope with the impact of reduced consumer spending that comes with backing in the mining lobby over its own workforce. The enterprise agreement making roundtable will likely focus on the ‘better off overall test’ which would allow retail employers such as Coles and Woolworths to reduce the wages of its staff relative to the award. While award simplification allows smaller businesses such as cafes and restaurants to legally pay their staff less, after thirty years of award simplification there is not a lot of fat to cut in those statutory documents. 

The compliance and enforcement, and casuals and fixed-term employees groups are really about baking in the existing chronic precarity with a veneer of social legitimacy. A greater focus on enforcement will not solve the systemic wage theft which is a product of the intersection of the restrictive controls on worker action, and a migration system that makes people illegal, while the terms of reference for the casuals group is so narrow as to be laughable. It can only be interpreted as trying to give the appearance of fixing a problem without doing so. 

All in all, the government’s direction of industrial relations reform is really about the radical redirection of wealth from mining workers (and their communities) to mining bosses, and then accommodating subaltern sections of capital to a more miserable status quo. 

This intra-capital balance of power within Australia not only has a material impact for workers and communities but it has strategic implications for the broader left both in the country and globally, for the historic and relative weakness of the Australian left is detrimental to people everywhere. 

Australia has become the world’s largest exporter of coal and gas. The country’s geography and natural resources mean that it will either be a climate change exporting menace to the world, or an important generator and exporter of renewable energy. This is where the right’s line that what Australia does as far as climate action is meaningless on a global scale is so dangerous; Australia is a globally significant exporter of energy: it is a matter of what type of energy and on what terms. 

It’s renewables, or barbarism. 

Any truly just socialist economic system, Australia would be a location (amongst others) for the generation of renewable energy and production of associated downstream products such as green steel or renewable fuels such as ammonia. 

Changing the balance of power between mining and manufacturing capital in Australia does not automatically solve this problem but it is a necessary step along the way. The Australian left needs to build its power by weighing into this intra-capital dispute in favour of manufacturing. 

Building up manufacturing matters on two levels. First, manufacturing has the capacity to employ many more people than mining, even accounting for automation. Secondly, manufacturing requires a renewable energy transformation in order to control the cost of energy as an input into the productive process. 

In order to bring the Australian manufacturing sector to the same relative footprint as comparable OECD countries like New Zealand, South Korea and Canada, other sections of business need to confront the undue and bipartisan influence of the mining lobby in Australian politics. 

It is the mining lobby that effectively strangles any possibility for a manufacturing renaissance in Australia. It is telling that, while the draft report of the NCCC’s Manufacturing Taskforce focuses on the relatively high price of gas and energy more generally for the Australian manufacturing sector, its solution is not to find ways to lower demand for gas through investment in energy efficiency and electrification, but calls for public money to go towards expanding the supply of gas. 

The federal government’s economic response  to COVID-19 is shaping up to be a matter of carving up the pie for mining, giving some scraps to manufacturing and then absolutely kicking the stuffing out of workers, particularly in women-dominated industries, while they’re down under the table. 

It would be far better for both the Australian manufacturing sector specifically, and people more generally, if public monies were going towards the build-up of new renewable energy infrastructures and energy efficiency measures. 

The policies we need to kickstart a manufacturing renaissance in Australia are simple and doable. It requires focusing on the three Rs – Renovate, Repower and Refine. 

Renovate refers to the opportunities flowing from stimulus focused on providing investment for building energy efficiency upgrades into existing residential, commercial and industrial buildings. It will cost approximately $15 billion per year to retrofit 2.5 million homes over the next five years. Government can procure this capital at effectively zero cost, and the savings from reduced energy costs can be used to repay this initial investment.

Repower means retooling existing manufacturing so that it runs on renewable energy for both electricity and heating. This is technologically feasible, and the additional investment into the sector would go a long way towards securing the existing 900,000 jobs in Australian manufacturing. It just requires the right policy settings. One way of achieving this is through updating state and federal government procurement policies to include embedded carbon in manufacturing as a cost. An additional step the government could make is to further the benefits from the historically cheap price of money and provide loans, grants and tax credits for manufacturing companies to invest in renewable energy and new heat processes from electricity. 

Finally, the refine step is about building up a strong domestic renewable hydrogen refining industry. Hydrocarbon refining plays a vital part in Australia’s historic and present industrial supply-chain, and an expansion of hydrogen refining will be as equally important for a strong manufacturing future. The export of ammonia fuel from hydrogen refining would not only put Australia in the box seat to earn export income from cheap renewable energy but also help us repower much of the world’s industry. Putting in place a guarantee that all domestic demand for hydrogen and hydrogen-related fuels will allow us to build the infrastructure required to take advantage of this opportunity. 

This can be coupled with bridging measures to ensure domestic security for existing gas and oil supply-chains so that workers’ incomes are not disrupted as this energy future is brought into the present. 

The manufacturing sector would benefit from the additional capital investment, new consumer markets in residential energy upgrades and the spending power created from these new, secure jobs. 

That these simple stimulatory pro-business measures are not even on the table should not be read as a sign of federal government incompetence or even ill-intent: it’s a feature of a society getting strangled and sucked dry by the limitless greed of a few mining bosses.  

If COVID-19 has taught us anything, it’s that industry requires a strong state in order to create an environment in which it can thrive. Australian business has a choice; leave the government in the hands of the mining lobby or have a public environment in which it can prosper. It won’t get both. 

The key question here is whether the Australian left can organise enough power to force manufacturing and non-mining industry to supplant the dominant position of mining capital in the state. If we are not up to the task, then manufacturing will have to remain content to be a junior partner in the ongoing drive to planetary destruction. 


Image: Flickr

Godfrey Moase

Godfrey Moase is an Executive Director, United Workers Union. He’s previously written for the Guardian, Overland, Jacobin and New Matilda.

Overland is a not-for-profit magazine with a proud history of supporting writers, and publishing ideas and voices often excluded from other places.

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  1. Great article. It’s great to see the malignant influence of the mining industry being properly called out.

  2. How long must we argue for change of the model, abusive and dated and move to the Norwegian National Sovereign wealth type model.

  3. Thanks Geoffrey. It’s do or die for manufacturing but also do or die for our children’s futures. Scientists have warned that we could pass the point of no return for a Hothouse Earth even before two degrees of warming. It’s insanity to risk leaving our kids an uninhabitable planet! The decisions about spending and industrial relations that are made in the course of this pandemic will shape our world for generations. It’s good to have a strong clear voice of sanity from the union movement. It’s a hard battle but we have to win it!

  4. Here we go again with the “renewables” catchcry. Hydrogen, Ammonia, Electricity take vast amounts of “something (a fuel)” to make them. There is not the renewable technology anywhere in the world available at this point in time that can take the place of hydrocarbons for our power needs. Even if there was who would want there country covered in solar panels and windmills.
    To say that retooling existing manufacturing so that it runs on renewable energy for both electricity and heating is technologically feasible is just plain wrong and NOT feasible.
    A leftist gobblygook article with little common sense or constructive suggestions. Even Jane M was so confused she couldn’t get the authors name right.

    1. In 1901 even after the Wright brothers first flight at Kittyhawk most folk would have ridiculed the thought of modern day air transport.
      Advances in technology have reduced the cost and improved the quality of equipment used in solar generation and storage.
      The country doesn’t need to be covered in solar panels and windmills, in fact a very small area of the nation receives enough solar insolation to power the nation.
      Some industry leaders are currently investing large amounts in the development of solar installations in the Northern Territory with the intention of exporting power to SE Asia through high voltage DC transmission lines.
      Noone is suggesting that fossil fuels should be turned off tomorrow, however for thirty years the so called debate has continued in the vain you exhibit, in the interests of the dominant mining corporations.
      A transition away from fossil fuels is both necessary and possible and this continent is better placed than any other location on the planet to benefit from the development of a renewables industry.
      A national government which ignores the opportunities available to our nation right now is deliquent.

  5. This article provided a watershed in my own understanding of how Australia’s pattern of capital investment needs to be transformed if this country is to make a meaningful contribution to avoiding global climate meltdown. Canberra is doing its best to have us join all the other lemmings now running for the cliff-top.

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