Australia: From eternally emerging to falling behind

I remember being told in 1994 – when it was not totally politically incorrect – that Australia was a third world country that thought it was first world. There is a thin veneer of sophistication and development but underneath the country is pretty basic.

Coal in 2018 was the number one export, iron ore number two and Australia is set to become the biggest producer of LNG in 2019. A further 15% of Australia’ exports are agriculture related. Construction represents another 8% of GDP. And it is these primary sectors that underpin much of the rest.

So perhaps Australia to date could best be classed as a developed emerging economy – and to be fair it has done very well out of this. The world is changing though and the country risks falling behind if it gets stuck in the hubris of admiring the developed bit of the classification and ignores the necessity of addressing the problem of the emerging bit.

Some suggest that we are entering a new age – of artificial intelligence – that will change the very fabric of our world creating a few very big winners and a lot of very big losers. For a scare – or wake up call – read Kai-Fu Lee’s AI super powers. He suggests AI will add $15.7 trillion to the global economy with 70% of the value being split between China and the USA.

If it is to continue to thrive in this age, Australia needs to rethink its economic drivers, overhaul its government system and learn to move fast.

Coal is becoming a pariah. Immigration may falter as a key driver of growth. Access to space is a primary factor attracting people yet a rising population requires increasingly vertical cities.  Perhaps worse, the key funnel for immigration is a University system that favours subjects such as accounting which are largely irrelevant to AI innovation.

Government is dysfunctional. Six changes of PM since 2007. A proportional representation system that sees Tasmania (population 0.5m ) have as many representatives in the upper house of parliament as New South Wales (population 7.5m) and the possibility of being elected with only 430 voters choosing you as their first preference.

Finally Australia is so slow to act. As an example, locally it took 12 months to bury the electricity supply for fewer than 600 homes and close to 9 months to replace a single bridge. By contrast China in 10 years went from having no high speed rail lines to having more than the rest of the world combined!

 

Balance

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Over time we tend to go from one extreme to another – from owning technology to accessing it via a cloud, from buying games to spending on in-game purchases, from paying for applications to them being funded by advertising or, even, from a Valley of startups to one of giants. As we oscillate we do not go back to where we started. Things getter better – faster, cheaper, more capable. But they can also get more complicated – or even complex. We might not notice because at the surface level everything gets easier. But underneath we might get more and more dependent upon the technology. Not only do we need it  but we have less and less understanding of how it works and, worse, of the fundamental skill it started off supporting and ultimately is increasingly replacing. And this can occur at both ends of the pendulum’s arc. This raises three questions. First, are we ready to swing back? Two, what happens if we ever go too far and topple over? Three, do we need to ensure fundamental skill sets are preserved?  Finally what happens if this phenomenon applies not just to technology but to other aspects of our lives ..

Unstoppable BAT FANGs

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Collaboration is good. You do what you are best at and leave the rest to others. In one sense they provide the infrastructure you rely on. Yet it has not worked out this way with the BAT FANGs (Baidu, Alibaba, Tencent, Facebook, Amazon, Netflix, Google). With their infrastructure they have captured the value. Network effects and resultant size may mean they, or their ilk, have become unstoppable. Governments are increasingly trying to tax and regulate but they may be too late. Many of the companies are bigger, and stronger financially, than the countries they reach into. Overstep and they, or more worryingly the country’s citizens, may react. A company can abandon most individual countries easily and with limited consequences. Worse though is that motivated, networked, citizens, operating outside traditional formal structures, can bring a country to its knees if they object – as President Macron is discovering with the Gilets Jaunes. Which companies persist may change – incumbents may move from operating in largely different realms to competing in winner takes all struggles and Uber is a potential entrant as it spread and dominates logistics – but will the dominance of such savvy “infrastructure” providers?

City transport: Not just bikes or cars

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Transport should be seen as multimodal not one mode or another. Some places are getting it. Use an electric scooter to get to a taxi rank in Singapore then fold it and put it in the boot. Cycle to a bus stop in San Diego then attach your bike to the front of the bus. Check in your bags at Central in Hong Kong for an easier trip to the airport. Sydney is not. Billions and years are being spent building specialized trams and tunnels. Regular arguments arise between car owners and bike riders about the wrongs of the other. The city is schizophrenic wanting to be part Copenhagen, small, compact and bike focused, part Los Angeles, sprawling and car dependent and part Singapore, dense, high and with an excellent meshed public transport system. Yet it is none and its aspirations are backward looking to other places and times. The world is moving forward and there are many more transport needs, uses and choices emerging. Battery powered scooters, human powered bikes and drone powered deliveries.  Sydney could defend existing players and fall behind. It could let large corporations sneak in, define the field in their interests and build out, as Uber is from ridesharing to food delivery to scooter hire. Oh they get the future! Or it could plan for a complex, multimodal future. What rules are needed to facilitate freedom safely. How do we avoid knee jerk reactions, like the banning of electric scooter rentals in Madrid when an accident happens. Restricting scooters to bike lanes and single lane roads, as they were, seemed eminently sensible and still does. Tweak if necessary but do not turn away.   The future is only going to get more complex.