The dead hand of government policy

No doubt the government believes its new jobs policy can't hurt polling, and may even help it. But there's precious little other benefit the plan could possibly bring.

There’s an interesting graph on page 23 of the Plan for Australian Jobs: The Australian Government’s Industry and Innovation Statement, released yesterday by Prime Minister Julia Gillard and the Minister for Industry and Innovation, Greg Combet.

It charts the results of an OECD study into "national and international collaboration in innovation”, 2006-08 (so it’s at least five years old, but let’s not quibble) and it shows Australia triumphantly (for the policy) near the bottom with just 20 per cent of innovative firms engaged in collaboration, supporting the dire need for government investment in 10 new innovation precincts.

Unfortunately the point of the graph is rather undermined by the fact that also on 20 per cent, and ranked equally with Australia, are Germany and China, the world’s greatest exporters, with Korea not far away on 22 per cent. Switzerland is next on 26 per cent. The leader by far, with nearly 70 per cent, is the UK, whose economy is a basket case.

What does all this mean? Who knows, but I suspect it demonstrates the opposite of what it’s supposed to.

But in any case most of this sort of government policy is based on the principle of: "Can’t hurt, might help.” So, notwithstanding graph 5.1 on page 23, Australian industry is bloody-well going to cluster whether it likes it or not. The first collaboration precinct will bloody-well be in Clayton in Melbourne’s southeast suburbs.

Of course, what the principle of "can’t hurt, might help” actually applies to is the government’s standing in the polls. If this sort of policy were designed to achieve real results, it would come with a way to measure the results and benchmark them.

But of course, it’s all about the act, not the outcome, or rather the outcome is political poll points. And they’re never measured either.

Anyway, a total of $504.5 million will be removed from large companies’ R&D concessions and "invested” in precincts between this year and 2016-17, although this includes $29.8 million already announced in May last year for a "Manufacturing Technology Innovation Centre” which they presumably haven’t got around to yet. The money includes $238.4 million "to establish, administer and operate Precincts, including the competitive Industry Collaboration Fund”, plus $236.3 million of Industrial Transformation Research Program funding.

This cash will "drive best practice technology and process adoption and adaptation through lean manufacturing, technology deployment and the provision of assistance to develop and implement innovation strategies.”

Really, one’s heart sinks: it is the dead hand of government policy laid bare in the language. There are 56 pages of it in the statement, plus press releases and speeches, with more to come today.

Well-meaning folks in the Department of Innovation in Canberra have presumably toiled for months on this policy, having been given the green light by the PM to relieve large companies of their R&D tax deductions to pay for it.

According to the statement the spending over the forward estimates (four years) is $745.3 million, although I can only get the figures to add up to $679.2 million, so $66.1 million is missing somewhere.

They then get it above the $1 billion round number for the announcement effect by adding $350 million over 14 years in a new "Venture Australia” fund, which appears to be a dollar for dollar scheme to put money into start-ups, where the government only requires the bond rate as its return.

The key purpose is the Sunday Announcement, conducted yesterday by the Prime Minister at the Boeing Aerostructures factory in Port Melbourne (not a precinct, by the way) surrounded by blue-collar workers.

The policy officers in the Department of Innovation no doubt genuinely believe it will help, and won’t hurt.

The business people whom they consulted as part of the policy development process would be potential recipients of this Robin Hood largesse, and very happy to get it. "Can’t hurt,” they’d be thinking, "and might help”.

And they won’t be held to account anyway. The only measurable thing you can say about the $1,057.8 million is that it’s definitely coming out of someone else’s pocket, before heading into the black hole called policy.

Follow @AlanKohler on Twitter

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