Wednesday, May 26, 2010

Let's mine bright ideas and stop being shrinking violets

When it comes to matters economic, the cultural cringe is alive and well. Australians lack confidence in ourselves and our own inventiveness. We see our country's rightful place as a follower of international trends, never a leader of them. We seek the approval of foreigners and fear their disapprobation.

One of the favourite Australian laments is the story about some wonderful new invention that local bankers or businessmen lacked the either the wit or the courage to take up, thus forcing the inventor to take his idea abroad for development and losing for Australia all the profits that could have flowed.

We've heard such stories so many times most of us hold this view of Australia as an article of faith. A related belief - so deeply held it's impervious to contrary evidence - is that we suffer a terrible Brain Drain as our brightest young scientists and professionals move abroad in search of the opportunities we deny them.

These narratives may seem to contradict my case: we know full well how valuable our inventions and young people are, how happy the rest of the world is to take them off our hands. At another level, however, they reveal our cringe: trust us Aussies to keep stuffing up.

They also reveal our protectionist predilections: good things should be kept at home, which is the only way they can benefit us. To let them leave is to lose.

There was a time when Australia was happy to do things its own way for its own reasons. What the rest of the world thought we neither knew nor cared. But some of the things we pioneered were copied by others and when we learnt of it we were proud.

Australia (and our Tasman cousins) led the world in electoral reform. In 1856 we began introducing the secret ballot. When the rest of the world began copying us, it became known as the "Australian ballot".

The Kiwis pioneered votes for women in 1893, South Australia followed in 1894. Again, the rest of the world followed.

Our use of compulsory voting hasn't caught on elsewhere, but why should we care? We don't. But as the Brits consider abandoning their first-past-the-post voting system, some are saying they should switch to "the Australian system" of preferential voting.

But all those intellectual inventions were a long time ago. It's more recently that we seem to have acquired our self-doubt, our suspicion that if we're leading the world on something we're sticking our neck out and have probably got it wrong. Our desire to be a trend follower, never a trend setter.

You see that in a common attitude to the plan for an emissions trading scheme. Why should we be the first? (We wouldn't have been, but let it pass.) What about the big boys? What are they doing? Wouldn't it be safer to wait until everyone else has moved?

Admittedly, this is not a case where what the rest of the world does doesn't matter. Only concerted international action will succeed in lowering global emissions. Even so, a self-confident nation would have seen the advantages of being among the first to take the plunge. The sooner we make a start, the lower the ultimate cost of making the transition to a low-carbon world.

And since Australia has a lot to lose from climate change, why don't we try to break the stand-off, set the others a good example and press them to join us? Aren't the stakes high enough to justify taking a bit of a risk?

All these were Kevin Rudd's arguments until his failure of leadership. Now he has succumbed to the national timidity and joined the Poor Little Australia party, waiting for the world to determine our fate.

In their fight to avoid paying more tax, the big mining companies are seeking to play on our self-doubts. No other country has such a resource tax, they claim, and nowhere else are they required to pay so much. If Australia persists with this weird tax they'll cancel their projects and take their money elsewhere.

Oh dear, don't desert us. Please!

Know what their problem is? Australia, being one of the world's leading mining nations, is a world leader in designing taxes that increase the public's take without discouraging mining activity or otherwise damaging the economy.

The resource super-profits tax is a state-of-the-art tax, designed by our leading economists not to do all the bad things it's being accused of. It's a close relative of an earlier Australian invention, the resource rent tax, developed by Professor Ross Garnaut and others at the Australian National University.

The big international mining companies are fighting it partly because they fear that, once its success has been demonstrated, it will be copied by other countries. And they're fighting it by trying to press our cringe button: if no one else is doing it, it must be a dumb thing to do.

The miners are right to fear the tax will be adopted by other countries because that's just what's happened to that other great invention of Australian economists, the "income-contingent loan" (known to you as HECS, the higher education contribution scheme). This one was invented by Professor Bruce Chapman, also of the ANU.

We cringers think of Australia as a small country that carries no weight in the world. But the world's big companies see us as a potential setter of dangerous precedents. Whenever we decide to do something novel that could impinge on their profits, they quietly assist their local colleagues in trying to dissuade us.

The world's tobacco companies are still trying to prevent us preceding with our path-breaking move to plain cigarette packaging. When the Reserve Bank moved to end the banks' ban on shopkeepers charging a fee to people paying by credit card, the two international card companies were most agitated.

Turns out the world has more faith in Australian innovations than we do.