« Bicycle Disequilibrium Theory | Main

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

Australia has prospered because of its resource (mineral and agricultural) endowment and the willingness for foreign capital (initially British, then American, then Japanese and lately Chinese) to develop these resources. It began to fall behind relatively once industrialization of the US and Europe then Japan kicked in. (Australia did once have a useful industrial base but that has since been euthanized by ongoing removal of trade barriers beginning in the 1970s and 1980s.) Unless Australia can increase high valued production then it will fall back again. I don't know a great deal about Canada but I believe it has a small industrial base but it has benefited by being a neighbour to the most powerful economy on the planet (just as Australia now is becoming increasingly dependent on China - but is conflicted by political/strategic matters). Japan's post war prosperity was driven by American capital/technology/management/markets. It seems if you haven't got a strong and contemporary industrial base you are destined to be an economic also-ran. The main hope for countries like Australia and Canada is to develop tertiary industries in high technology and IP. But even then countries like China and India are strong competitors as well as the main industrialized economies. Twenty or thirty years ago it was Japan that was fingered as exploiting (if not stealing) western technology, now its China. I guess it doesn't matter how they've done it or are doing it.

Australia used to suffer MORE economic instability, not less than other developed economies, so "luck" is a weak explanation for the very flat business cycle since 1991. (I credit the RBA's policy of targeting "inflation will be an average of 2-3% pa on average over the business cycle" as it anchors both inflation and nominal spending: I do that because I read Scott Sumner and Nick Rowe. Helped by the floating exchange rate, which acts as a shock absorber.)

Australia fell behind during the 1913-1983 period, because it adopted protectionist policies which taxed the resource endowment to support comparatively inefficient industries. The attempt to subsidise risk ended up into increasing the level of macro risk instability, hence the more intense business cycle. The move to a more open trade regime coincided with improved performance vis a vis US per capita income.

Using numbers provided by tradingeconomics.com, I get for 2017:

Canada, GDP per capita: US$51,316
Canada, GDP per capita PPP: US$44,018

Australia, GDP per capita: US$55,926
Australia, GDP per capita PPP: US$44,649

Looks like Australia is doing reasonably well for itself given the potential for the Resource Curse to reduce per capita income and wealth relative to potential.

Lorenzo of Oz,

"The move to a more open trade regime coincided with improved performance vis a vis US per capita income."


The chart above clearly shows that Australia's performance relative to the US began to stabilize 30 years before the removal of trade protection in the 1970s and 1980s and was due to the development of a protected manufacturing sector.

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Your Information

(Name and email address are required. Email address will not be displayed with the comment.)

Search this site

  • Google

    WWW
    worthwhile.typepad.com
Blog powered by Typepad