Australia: a mini America?
I was reading an excellent interview between Alex Malley, Chief Executive of CPA Australia and Andrew Liveris, and wanted to pass on some of the most pertinent points to our readers. Andrew is the President, Chairman and Chief Executive Officer of American firm, The Dow Chemical Company – and he’s also an Australian.
Dow has US$57 billion of revenue and employs 53,000 staff globally. Andrew has been with Dow for 37 years and the company has transformed from a commodity producer to a high value-add company with innovation at its core.
The full version of the below interview appeared in the June 2014 issue of CPA Australia’s In The Black.
Malley: So let’s turn to manufacturing. You’ve written a book about the issue, Make It In America. We have enormous dilemmas in Australia in relation to manufacturing. Where do you see the innovation in manufacturing in the US and where perhaps in Australia could we look to improve that?
Liveris: I wrote a book on this subject because I’d made maybe six years of visits to Washington under the Bush Administration and the Obama Administration, but was going nowhere fast. The American psychology was that manufacturing was old school, was smoke stack, was pollution, was the industrial era and that in the new era, the services economy was the way forward, that we could become the financial services capital of the world.
In that book I made a couple of observations that were in front of people’s noses, like most things, so I simplified them: Where production goes, innovation follows. Why does China run a production economy? Because it wants a research and development economy. To get a knowledge economy, to build an iPhone, you had to start with a flip phone. To have a flip phone you had to start with a brick we called a car phone. To have a brick called a car phone, you had to have telecommunications capability and chips. America started all that and then it grew it and so therefore we have the iPhone. China gets that.
The other observation I made is countries around the world want what America has, and countries unlike America compete like companies. So you’ve got Japan Inc., China Inc., Germany Inc. Nation states are the new competition.
President Obama reacted quickly. He said we need a manufacturing economy of the value-add kind. “To compete in this world of ours, it’s not just brawn and muscle, it’s not just low-cost and commodities. I need to be smart and then how to combine brawn and brains? Well I need an innovation-centric economy, so I need to create lots of Silicon Valleys” (Obama said) – and that’s what we are now doing. I’ve been coming back to Australia since I wrote that book and offering Australia help because I think Australia can be a mini America.
Speaking of innovation, Australia’s Commonwealth Scientific Industrial Research Organisation (CSIRO) will likely cut at least 400 – or 7 per cent – of their staff on the back of the $100 million government funding cut in the recent budget. Go figure!
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
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Chris B
:
Thanks Roger. I saw something recently about machinery getting more technical in the clothing industry and so because the machinery is getting better, it will bring production back to the UK instead of China.
The Abbott govt have hit the panic button and falsely made our debt a big issue, in a growing country with quite low debt, it isn’t such a big deal. The 2 issues Abbott told everyone were yardsticks for a govt were the boats coming to Aus and the debt. The debt isn’t such a big problem and the boats were never an issue 20 years ago.
Bill Gates says carbon tax is a good thing because it encourages innovation.
Charlie Munger said UK indirectly has a carbon tax because of the tariffs on petrol in the UK. So with Abbott increasing the tariffs on petrol, does that mean he has put on a carbon tax?
The Abbott govt are stripping off R&D and forgetting about the future for now because they don’t want to break any more promises.
xiao fang xu
:
I would suggest to all to read Mises’s 1944 book Bureaucracy to understand how government employees work or not and how much they charge for that work or not work.
thanks.
barry.fitzhenry.1
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For goodness sake, can someone give the CSIRO the money and task to find a solution for mining CSG safely??…the greenies and farmers and all governments will happy, mining will have another life, we can sell the technology to the US…isn’t innovation one of strengths?
xiao fang xu
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“For goodness sake, can someone give the CSIRO the money” –That some one is going to be us who work and pay taxes.
And why would “we” trust bunch of government bureaucrats instead of free market ?
Michael Shapiro
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This is a zero sum game. What one country gains another loses. What the other country loses, it cannot pay for what the first country produces. The large trend is towards common currencies, free movement of capital and goods. In this upcoming environment who does what will become irrelevant.
andrew whyatt
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Could not agree with you more andrew. First shares we bought and still hold in a company structure were ANZ cost price $3.73. When I look at 30% capital gains tax rate there is no reason to ever sell them. However that makes it harder for newer companies to get extra capital because of the risk/reward of selling a long term holding for me that spins off cash-flow. The bit about the loss of jobs in the CSIRO is just plain dumb. For instance have a look at their work in the prawn farming industry
Andrew Legget
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Thanks for sharing David. What Andrew is saing in this interview is completley correct and your last point is a very good one. We have so many potential advantages to do this, especially in specific areas such as renewable energy, but there does not seem to be a resolve to help it happen. I fear that every good idea that comes out of Australia will have to move to a country like the USA to see it materialise.
I sometimes wonder as well if the existence of imputation credits and superannuation mean that existing companies in Australia put more weight on dividends then R&D.