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free trade & protectionism « Previous | |Next »
April 12, 2006

Niall Ferguson has an op ed in the Los Angeles Times about free trade and protectionism in the US. But his comments could equally apply to Australia.

He asks 'Are we witnessing the beginning of the end of globalization? And should we be cheering or chafing at the prospect of its demise?' And he answers thus:

So global flows of labor, capital and goods are all under attack — and this in a country that has been enjoying robust growth for the better part of five years. I shudder to think what would be coming out of Congress if the country was in recession. Presumably a bill for total autarky, mandating the construction of a vast, impermeable dome from sea to shining sea

The stark duality is reminiscent of the Australian debates about Hansonism in the 1990s isn't it. Ferguson adds:
Proponents of a new generation of anti-global measures claim to want to protect vulnerable native groups from the ravages of competition. They point to studies that show the biggest losers from immigration to be high school dropouts. Other evidence shows that it's unskilled blue-collar workers who are most likely to lose out from free trade with China.

Well, the unskilled blue collar workers are surely going to carry the costs of the forthcoming free trade agreement betwen China and Australia.

Ferguson's call on this?

It makes no sense to jeopardize the benefits of globalization to protect the employment prospects of high school dropouts. So here's a modest counter-proposal for the House of Representatives. Instead of building an expensive, hideous and probably ineffective new Iron Curtain, why not use the money to get this simple message across to the kids in American high schools: If you flunk, you're sunk. Yes, boys and girls, academic achievement is the only route to decent employment in an economy at the top of the technological food chain. Drop out of education without qualifications, and you'll be lucky to get a job alongside the Mexicans picking fruit or stacking shelves.
'Tis neo-liberal harshness is it not? There is nothing about programs to lift the skills of high schools kids so they can get jobs in a high tech economy. As things stand Australia is pining its hopes on quarrying minerals for China and India and importing the sskilled workforce.
| Posted by Gary Sauer-Thompson at 12:23 PM | | Comments (9)


The theory says the opener the better and experience says there will be winners and losers. Provided adequate programs are put in place for the losers, OK. The curly one is of course liberalisation of human capital - so far, OK for the global elite, not for the others (except for highly regulated programs like Philippina maids in the Middle East, and so on). Without the economic skills to work it through, my chief fears are based on the law of diminishing returns: in other words, we've had x amount of liberalisation, so it follows that if we have x+1, we'll be that much better off. Relying on nothing more than common sense plus a dangerously little bit of knowledge, I think it actually may not.

And I always get apprehensive about the dodgy modelling that is called on to justify any particular liberalisation.

Our education system is from an industrial era when competition was provincial only. Globalisation is not going to go away, not without a world war happening first. Too much money and wealth is being made with uninhibited flows of capital and goods. The problem is that nation-states are still restricting labor markets unfairly and inhibiting labor flows.

Our education system needs to be updated for the global realities of the labor market. That means faster education, less time to credential, and cheaper retraining of skills.

you are right re:

...we've had x amount of liberalisation, so it follows that if we have x+1, we'll be that much better off.

You can see that pressure with the recent IR reforms that shifted power to the employers; and the push for a reduction in corporate taxes and tax relief in the May Budget for high income earners.

Australia has to compete with Asia. We have to get real. But that will not lead to removing the obstacles in the way of welfare recipients wanting to move into the workforce eg., by removing soem of the most punitive effective marginal tax rates in the OECD.

Those on welfare get the stick in the welfare to work reforms without any carrot.

you write at Polemica in favour of a policy shift in education in a globalised world so that:

The High Schools can offer courses that will enable a student to major in Humanities, Science or Mechanical Arts. Once graduating from High School the student can specialise further in a tertiary institution with post-graduate studies.

At the moment the teaching only universities are doing this. They are part of the feeder to the post graduate universities. What happens to these kind of universities in the future is anybody's guess.

It is probably better to address vocational training feeder through TAFE---this is a sector in need of much reform. It is here that you have the link between job and training.

On education/skills, I'm doing a fair bit of work in this area at the moment. Trying to get universities to be more able to meet industry needs is a real challenge - a lot of academics just don't get it. But that's my job and it needs doing. Personally, I am - along the lines of my x+1 comment last night - more than a bit concerned about the increasing focus, from school through TAFE to uni - at training people for a particular job. That is rightly the role of TAFEs, but the other two need to contribute more to a broad education - how to think for oneself, how to research, how to analyse. The less we devote to the humanities - as we seem to be doing - the less human we will be. A bit overstated but you get my drift.

Gary, Yeh we make kids learn for too long, remove them from the economy for too long, and burden them with too much debt before they get working and earning.

It is going to have to speed up. What was once the domain of the world brightest in the 1600s (calculus and algebra) we teach to six year olds. So it is expected that was constituted a tertiary education fifty years ago now be taught to sixteen year olds, and also that graduation from high school ends up in a Bachelor of Arts.

I am sure that some private and select schools will push their kids to double major in a two year period too.

To make our kids compete in a global labor market we are going to have to credential them earlier and with less cost to them, especially in debt.

I agree with you that 'the increasing focus, from school through TAFE to uni - at training people for a particular job is rightly the role of TAFEs.'

Alas these have been run down by the Labor states and turned into businesses so that it is very expensive for the working class to acquire a vocational education; or for the working class in the regions skill themselves with basic computer skills and knowledge to participate in the new economy.

I take all the ALP about the shortage of skills, apprenticeships and up skilling with a grain of salt given the way they have trashed TAFE.

Tehr is a alot of talk about the value of a general humanities education --I have one, a good one---but the reality is that it does not pay the univesity as a business to provide them.

Full fee paying students bring in the cash flow desperately needed by the univerities; and these students are interested in good professional jobs --lawyer, doctor, engineer etc The only way that the humanities will be sustained is through double degrees payed for by the parents.

That means the affluent middle class in the leafy suburbs.

you are probably right--I don't dispute your account of what needs to happen. What I'm doing is pointing to the educational reality in Australia--it is not good.

#some regional high schools are corporating vocational TAFE type courses into their high school education. This is for the semi skilled workers to find low paying jobs in the local regional economies.

#the universities are preparing for the global working force by aligning themselves with the US model of education-- generic undergraduate degree plus Masters professional/specialist degree. That is designed to give the wealthier students better access to the good American universities.

#Canberra is not really concerned about equipping Australians to be global workers--it is largely concerned with bringing high skilled trades people into Australia to keep the minerals boom running hot. It is currently faltering because of a lack of skilled workers.

Gary. I am not sure the US universities are any better placed. UVa charges 26K a year now. So a student coming out with a degree and two years masters is 150K in the hole. Worse they have been removed from the economy as a productive member for six years.

Our university/college, even TAFE systems and public schools were designed for the industrial era. Unfortunately I dont think students or employers know what they want done either. So we are kind of in a swamp of not knowing what to do, plus the inertia of government, education and employers not wanting to change other than inflate needed credentials.