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As agreed in 1975, the entire world economic order at that point was thrown on the scrapheap and replaced with a race to the bottom on price alone. A race that could only ever be won by those willing to cut more corners than anyone else whilst a few reaped the rewards.
That we don't manufacture cars in Adelaide, that we don't manufacture tools in Hobart or steel in Perth, that we haven't addressed climate change and that we've got unaffordable housing are all ultimately tied to that as is our "reliance" on exploiting cheap labour overseas and running up debt which can never be repaid.
Politically, the big barrier to progress is that all sides struggle to admit they stuffed up. Both major parties in any Western democracy were on board with it all and most of the minor parties weren't much better. It's all tied together but the problem is that neither the Left nor the Right is willing to admit it.
Looking at the investment implications of all this, well if there's one thing that everyone has hopefully learned over the past few months it's that the unthinkable can not only happen but it can happen rather quickly.
Anyone who thinks concepts such as free trade and the current taxation regime are a given, is taking a rather large gamble. We could well see 90% tax rates and tariffs on pretty much everything - indeed the US had a 91% top rate until 1963 and the top marginal tax rate didn't drop below 70% until 1981. Here in Australia businesses were constrained by the Prices Justification Tribunal, imports were mostly subject to tariffs and so on.
We could of course see a move in the opposite direction or some sort of hybrid. Anything's possible and we're living in a world where the "debate" may well be non-existent in practice. You wake up and it's in. Done.
All this stuff is temporary in nature, change occurs, and anyone who thinks the current state of affairs is permanent could well find themselves in for a very rude shock. Invest with this in mind noting that race riots do, if they escalate, have the potential to be a trigger for change which could be in any direction and at very short notice.
The rise of globalisation, in tandem with government policy to just sit back and rely on selling our iron ore and coal abroad, has in effect decimated Australia's industrial capacity. We took the easy path in just letting our manufacturing industries collapse while we discovered the honey pots of resources across our vast geographical home.
Resource rich nations tend to become lazy, which often leads to great economic disaster somewhere done the track. This is known as the 'Dutch disease': "Dutch disease is a concept that describes an economic phenomenon where the rapid development of one sector of the economy (particularly natural resources) precipitates a decline in other sectors." (https://corporatefinanceinstitute.com/resources/knowledge/economics/dutch-disease/)
Australia now needs to correct this economic phenomenon through the establishment and support of new industries in multiple sectors like:
- energy development in nuclear, hydrogen, solar, biogas, biofuel
- agriculture technology business
- large scale freshwater transfer/network infrastructure
Once we have mastered these sectors we can then export our expertise abroad, just like we do with mining today.