Industrialization in Australia in 1950-1973 - Essay Example

How successful was industrialization in Australia over the period 1950 to 1973? Introduction Industrialization in Australia started over a hundredyears ago. Australia is now regards as one of the highly industrialized countries in the world. According to Geoffrey1, the proportion of workers employed in the Australian manufacturing industry is appreciably higher than that in the US. In 1850, population in Australia increased rapidly because of the gold rush. It increased from about 400,000 to 1,150,0002. There are two main reasons for the growth of manufacturing in Australia. First, it was stimulated by the expanding population during 1850-1860. Second, it was due to the exploitation of indigenous resources of metals within the country. (R8:3). The development of manufacturing is complicated. It involves a great variety of products, fragmentation of the industry, different markets between six states as well as a wide range of operations (R8:3). Industrialization of Australia first began with its heavy, complex and diversified manufacturing during the First World War. Since the Second World War it has become one of the most highly industrialized economies in the world (R6:182). Australia played a major role in promoting post-war industrialization; however, its welfare state interventions created a great barrier in its later manufacture development. The major growth phase of post war manufacturing development was between mid 1940s and late 1960s. In 1944, it announced that it “is ready for an adventurous expansion of secondary industries in the post-war period” (R5:15). This essay will examine Australian manufacturing development over the period 1950 to 1973 and the impact of industrialization during this period. Section one will examine the importance of industrialization to the Australian economy. Then, we examine success and impact of industrialization to the economy. This included the impact on employment, capital investment, public infrastructure, country import and export as well as the protection policies implemented by the state during this period. After examining the advantages brought by industrialization, the essay criticizes on the effectiveness of welfare state interventions to the Australian economy. Importance of Industrialization During World War Two, Australian foreign debt was due to the sales of goods and services to the United States. This can be accounted for the high demand in food stuffs by other industrialized countries. A high price was paid for Australian primary products (R4). Its dependence on foreign capital rose. At that time, foreign investment, foreign technologies, foreign management, foreign corporate structure as well as foreign workers were some of the major dependents of post-war Australian industrialization (R1:7). Meredith (1999) has pointed out that industrialization was fundamental to the growth of the international economy. It stimulated the economic nationalism of the 1960s (R1:196). Before World War Two Australia relied heavily on its primary industry, (mainly on wool) and imports mainly depended on industrial goods. There are only a few manufacturing industries (e.g. steel, iron and non-ferrous metals). The state governments had noticed the risk of high reliance on one specialized kind of primary product (R8:22); therefore, it started to develop home-produced manufacturing in order to replace the imported products. Under industrialization, the technical problems of developing international trade have been solved. For example, transportation problems of commodities were solved using mechanized power in shipping; and primary products like foodstuffs can be kept fresh by using refrigeration (R6). This marked the success in primary products exports of Australia during WWII. The Australian manufacturing sector responded positively to the wartime needs (R5:15). The development of manufacture and industrialization continued after WWII. Exports of manufactured goods eventually increased after the dominant exports of primary goods over the past six decades (R1). Manufacturing industry is important to Australian economy. It plays the central role between the primary and services industries, (i.e. raw materials is comprised with the inputs of manufacturing industries with imports, and its outputs are composed of goods which are transported, stored , advertised, distributed, insured and financed by the services industries (R6). Industrialization was also successful under the assistance of the state. A number of policies, like Supportive policy regime of high protectionism, open door foreign investment and immigration policies helped manufacturing sector growth and reconstructed the Australian economy (R5:16). It has been found that GDP share of manufacturing sector increased 10 per cent from 1933 to 19493. Up to the 1970s, the sector’s relative rapid growth was directly due to the steady and high protection from import competition (R7:165). The export of manufactured goods was even more significant than raw materials, foodstuffs or minerals (R4). There was a recorded increased from 12 per cent in 1951/52 to 25 per cent in 1969/70 – 1973/744. In a word, industrialization was successful during the post war period. As discussed in section two, industrialization gained success before the 1970s; it had many marked achievements in different aspects of Australian economy. Meredith (1999) stated that the post war strategies for economic growth and development seemed to work at the end of 1950s. Full employment had reached due to increase in population and development in manufacturing sectors (R1). Second, the successful of industrializing economy in Australia attracted foreign capital to invest. A number of foreign manufacturing companies set up their subsidiaries in Australia after WWII. Third, there were booming Australian imports and exports for manufacturing outputs due to industrialization. Inflation rate has been kept constant at the rate of three per cent and the current account deficit was manageable. Finally, public sectors were extended in order to support the private companies; for example, expansion of public infrastructure in 1950s (R1:198). Success and Impact of Industrialization As discussed above, industrialization stimulated the growth of population. Migration was driven by growing industrial sectors. According to Meredith (1999), the first sustained population explosion produced after WWII. Australia became the biggest recipient of this expanded population. Industrialization provided jobs opportunities to migrants and thus a large amount of migrants entered the Australian labor market. Labor productivity increased in manufacturing (R1:200). Cheap, unskilled laborers were found in the European migrants. They were employed in unskilled activities in the construction and industrial sectors. Immigrants were more mobile from 1940s to early 1970s. A bulk of additional migrants settled in Australia due to the regulated subsidies and protected industrialization (R2:57). For example, southern European migrants were attracted and flourished in Melbourne’s protected industries. As Labor governments of the 1940s aimed to achieve full employment, they implemented a number of protection policies to ensure growth in manufacturing industries. The combination of tariff protection and cheap migrants produced a level of industrial production that employed a quarter of the labor force in 1960. Employment of industrial sectors grew from 890,000 in 1949 to 1,315,000 in 19675. Also, the annual rate of growth in manufacturing production increased from 4.2 per cent in 1946 to average 6.5 per cent in 19606. The increase in population also brought an increase in government tax revenues. It has also been found that labor productivity increased from 3.5 per cent to 4.5 per cent per year in foreign-owned firms7. Manufacturing employment grew approximately at the same rate as total employment. Full employment was said to be reached (R6). On the other hand, the rapid growth of manufacturing sectors under industrialization attracted foreign capital investment. This is one of the reasons of why productivity raised in the manufacturing industry. The state government used tariffs to encourage foreign investment in Australian manufacturing industries. During the Menzies period, British and American companies stepped up their investment in secondary industries within Australia. After WWII, the government industrialized the economy and protected the market against imports by imposing a protection tariff. Many multinational industrial companies companies were attracted by this policy and entered the market. They shipped machinery from their parents companies to Australia. Although the machinery was often not front-line technology, they still gave great assistant to the growth in the secondary industry as they did not need to compete with other markets (R2:55). Foreign direct investment brought the necessary capital, management skills and new technology into Australia. Manufacturing expanded through widening capital. Differentiation in production started to be introduced in Australian manufacturing sectors. Introduction of new technology and sufficient capital brought along with the capital intensive production process in manufacturing, which resulted in a rapid increase in labor productivity. On the other hand, the opportunities given to the new entrants and expansion of existing firms increased the fear of competition; thus innovation was stimulated. Progressive as well as competitive elements also contributed to the rapid growth in productivity (R6). Capital-intensive development occurred mainly in five sectors during 1950s to 1960s. This included iron and steel, motor vehicles, electrical and electronic equipments, machinery and engineering, and processing and refining or other metals (R6). The iron and steel industry is a good example for one of the most important “outside” investments of capital. The British subsidiary company, the Broken Hill Proprietary Company was the only iron and steel manufacturing company in Australia at that time. It dominated the iron and steel industry and had made a good profit from exporting steel to other countries. It has been recorded that the output of steel was about 3.5 million tons in 1959. The Demand was much greater than the supply B.H.P. could produce (R8:9). This domination of foreign companies in the secondary industry has raised the concern of Australian people which led to some criticisms in state welfare intervention policies in the latter decade (R1:201). On top of the population growth and inflow of foreign capital, industrialization also brought significant changes in manufacturing imports and exports (R6:182). The composition of imports and exports changed after WWII. There was a trend away from consumer goods to capital goods and equipment. It has been found that there was a sharp increase in the relative importance of capital equipments since the late 1940s. A decline in share of consumer goods in total imports has shown that Australia’s capacity of raw materials is greater under industrialization. According to Boehm (1993), the US was the chief source of imports to Australia in the mid-1960s but this changed to Japan in 1970s. Structural changes in the composition of Australia’s imports were resulted from the process of industrialization (R6:184). Also, the data shows the significance of import replacement. Import replacement helped Australia achieve equilibrium in the Balance of Payment under the unfavorable phenomenon in world markets for Australia’s primary products (R6:188). Under state protectionism for manufacturing industry, since 1907import tariffs were imposed. There was a greater level protection to local producer in order to stimulate industrialization in 1950s and the rate of tariff kept rising until 1970s (R1). For the exports side, Australia’s export industries expanded after WWII. There was a rapid increase in the exports of manufacturing products from the late 1950s to 1960s (R6:181). The industry groups, for instance iron and steel, transport and other mechanical equipment and chemicals occupied a large part of exports in Australia since WWII. There was a rapid growth of mineral exports from late 1960s, particularly of aluminum, coal and iron ore (R6:181). The rapid growth in these industries was supported by the modern and efficient production techniques introduced during industrialization (R6). The greater size of the domestic market under high protectionism can account for the expansion of exports as well. Statistically manufactures comprised about 6 per cent of the total value of exports of Australian produce in 1953/54. This rose to over 20 per cent in the 1970s. A decent return on commodity exports contributed strongly to the rapid, sustained growth of the Australian economy (i.e. stronger in its industrialization) (R6:183); however, some people argued that the manufacturing industry had depended too much on foreign investment. Exports of manufacturers actually grew less than total exports. This reduced the proportion of manufactures in Australia’s foreign exchange earnings. Welfare State Interventions Last but not least, the commonwealth government has provided “manufacturing capital” as well as extended its public sectors in order to support the private companies. As discussed above, “manufacturing capital” mainly came from tariff. The post-war policies that aimed to protect the expanding industry put manufacturing at the centre of national strategies for economic development. There were a number of public investments in infrastructure carried out by the state (R1:201). This is because manufacturing industries has to secure economies of scale. The source of markets and labor supply should be maintained in a sufficient level (R6:185). Transport system had been built to connect ports to hinterlands by the states. However, they did not connect the major cities together as the state wanted to isolate the main centre of population. Duplicate factories in different states are thus encouraged. Moreover, with technical the process and the discovery and exploitation techniques developed during industrialization, new resources were found. In order to support private investment to a further extent, the Australian government imposed the Trade Practices Act from the mid-1960. This has increased the entry of enterprises and has opened up the Australian market on a national scale (R6:188). In general, the official policy in domestic manufacturing can be described as “a policy of the open door.” (R5:20). Despite the rapid growth in manufacturing industry after WWII under industrialization, there are a number of critics of the import tariff and the open door policy for foreign investment. First, some people argue that the high import tariff hindered the incentive for local manufactures to improve because they are highly protected under protectionism and competitions are not keen during this period. The quality and competitiveness of home-produced manufactures might decrease (R4). Moreover, foreign subsidiaries have dominated the domestic manufacturing market. Domestic industrialization did not carry out all of the basic functions. Despite original design to marketing, there was no room to develop and produce goods; therefore, domestic manufacturing industries could only remain in small scales. Politicians did not take the above criticisms into consideration until 1972 when the labor government took power and carried out a tariff reform. There was a tariff cut by 25% in order to fight inflation (R1:203). Conclusion In conclusion, there is economic success in the early post-war era, particularly in post-war industrialization. Industrialization led to growth in employment and the country’s population. During the period of 1950 to 1973, there was a resultant growth expansion in productive capacity (i.e. large labor force), the introduction of new technologies and skills, the huge foreign capital investment, rapid growth in manufacture imports and exports as well as expansion of public sectors. All these marked the success of industrialization after WWII. Although there are some critics that question the state welfare protectionism on manufactures during these periods, Australia demonstrated an apparent economic growth. Therefore, industrialization can said to be successful in the post-war era. Read More