Introduction

End of another era

WHEN THOUSANDS OF unemployed miners, steel, clothing and textile workers, their friends, families and organisers pushed through the glass doors of Old Parliament House and into Kings Hall on 
26 October 1982 shouting ‘We want jobs,' it was the end of an era. The protestors were at the sharp end – their anxiety, pain and anger were palpable. Placards demanded the ‘right to work'.

At the same time thirty-one of their colleagues were five kilometres underground, occupying a BHP coalmine near Wollongong where 206 men, two-thirds of the workforce, had been made redundant ten days earlier. The well-organised miners broke the routines of traditional industrial action: rather than staying out, the Kemira miners stayed in.

For thirteen days they had made do in the crib room deep underground, journeying to the surface to collect meals and supplies, hug their wives and kids, and then returning to the cramped underground space – a makeshift home, hammocks slung between poles, electricity and ventilation maintained at the order of the Premier. Meanwhile, an inquiry into their future and that of the underground coal industry proceeded above ground.

The miners were the latest to be told that their services were no longer required; a swathe of redundancies had left thousands of people without work, unemployment climbed to postwar highs, gross domestic product fell 4 per cent, trade ground to a standstill. Steel and coal were at the heart of the domestic industrial economy, so they were hit first and hardest – 15,000 people lost their jobs with BHP in the Illawarra alone – but it did not take long for the freeze to chill the whole economy.

This provoked raw, desperate politics, fuelled by class-driven anger. Individuals and their worried families were pitched against company executives who were mystified and governments that seemed helpless. 
The market deteriorated with unprecedented speed: ‘It just came from nowhere, one day we had full 
order books, the next the orders just stopped, no one was buying here, and no one was buying abroad,' 
one executive after another told me as I researched the recession and its impact for Steel City Blues(Penguin, 1985).

There was great concern about the future, and for all the tentative talk of a service economy, jobs in McDonald's didn't seem to compare with the hard yakka these men and their families had known for generations. The new industries based on education, finance, tourism and hospitality felt intangible and insubstantial. Electronic technology was beginning to transform work processes, but automating mining and steel seemed more like a job destroyer than the creator of interesting new work; uncertainty was widespread.

Few were surprised when a Labor government was elected five months after the storming of Parliament; Bob Hawke's last rally was at the Bulli Showground near Wollongong. Three days after the Canberra protest the miners returned home: they had spent a record sixteen days underground. The action had not got their jobs back, but had tripled their redundancy pay from one week for each year of service to three. It was a victory of sorts. It also marked the end of the dominance of underground mining, and the end of a national economy defined by manufacturing staffed by a unionised workforce.

Just as it took a long time before the legacy of the Great Depression revealed the end of an agricultural economy, the import of the early 1980s transformation, dramatically played out in the Illawarra coalmines and steelworks, took time to crystallise as the end of the industrial era. Yet a year after the Kemira stay-in strike, the reality of the new economic order was there in microcosm: eight of the men were still unemployed, sixteen had travelled to the new open-cut mines in Central Queensland and the Hunter Valley, five were working in the service industry and one was studying.

 

WITH THIS IN MIND, it should scarely be surprising that until this year, 1982 held the record as the year when Australian shares lost the most value. The link between the share market and the ‘real economy' is inextricable. There have been days with more spectacular losses and gains, but 1982 was a watershed in the way that 2009 is likely to become.

The globally connected, technologically enabled economy was born in the ashes of the recession of 1982-83. The pattern was repeated throughout the developed world – technology transformed old industries, squeezing undreamt-of productivity from them, replacing antiquated mills and workplaces with new factories and offices; unionisation plummeted; deregulation reduced costs and increased organisational flexibility; women joined the workforce in unprecedented numbers; and multinational companies explored economies of scale and comparative advantages (resources, labour costs, market size, infrastructure, educational levels) wherever they operated. For Australia it meant services and resources.

That era was captured in Oliver Stone's Oscar-winning Wall Street, most often remembered for Gordon Gekko's defining credo: ‘Greed is good.' Yet at the heart of the movie was a battle that now seems impossibly old-fashioned – between local enterprises that rewarded workers with secure reasonably paid jobs and clever schemers who could make a quick buck from mergers and acquisitions.

The schemers won. It did not take long before Sydney became one of the global beneficiaries of the new era. The New South Wales government was profoundly shaken by the collapse of manufacturing in 1982, and escalated the exploration of economic alternatives for the state which had already begun in a less urgent, almost ad hoc way.

With the election of the Hawke government and the deregulation of the economy that followed, Sydney, the capital of the Premier State, was well placed to take advantage of the new global order. Within a decade it had been transformed from a raffish, provincial industrial city – where small factories lined the roads to the airport – to a regional financial capital with dark-windowed hire cars zipping along sleek tunnels from the airport. Sydneysiders became accustomed to the income disparities that characterise these cities everywhere.

The process of remaking Sydney, of wresting the crown of business leadership from Melbourne, was incremental. It was not without social cost, but it was a product of a deliberate political strategy informed by shrewd information – especially from advocates of the new global order. Those wanting to create an investment-banking sector in Australia recall with wry amusement how gambling legislation had to be changed before Sydney could become a financial capital – the new financial products looked like wagers.

It was a bet that paid off. The city was transformed. For many years its growth and activity fuelled the nation. Trickle-down economics took on real meaning, as the divide between the wealthy harbourside suburbs and the west widened, and then narrowed as the good times rolled on year after year.

Sydney has now lost that crown – it has stalled, and even as the growth in the resource-rich states slows New South Wales is falling behind. There is little evidence of the urgency that characterised the debates of the 1980s.

It is likely that in another twenty-seven years we will look back at the global financial crisis as another watershed. The precise shape of the new economy that will emerge is of course impossible to predict, but there are some early pointers. It is likely to be knowledge intensive, to value sustainability, to be less tolerant of global inequality and, in a sea of instant communication, to demand greater regulation.

This era has been marked by complexity. It is one of the rules of ‘complexity science' that as systems become more labyrinthine and interconnected, they also become more fragile. The unravelling of the global economy in the past year is proof of this principle.

Within days of the collapse of Lehman Brothers on 15 September 2008, companies all around the globe evaporated, national economies dissolved, the first of millions lost their jobs, governments were spooked into implementing unprecedented policies – taking over banks, guaranteeing deposits, regulating the share market and dispensing vast amounts of money to keep the system working. It is estimated that something like sixty trillion dollars disappeared from the global economy – an unimaginable number until it is broken down into the countless jobs and activities that will cease to exist.

The Ponzi scheme that sent Bernie Madoff to jail for 150 years depended on perpetual growth, repaying investors with the capital of future investors. It depended on ever more money coming in and rising prices. But when the market crashed, like the child who misses out on a chair when the music stops, there was simply not enough to go around.

If Madoff did not exist it would have been necessary to invent him – his extraordinarily complex scheme was a metaphor for the times. Like Madoff's ‘investors' the global system is simply not sustainable if it depends on robbing the future.

Each of the major recessions of the past century has resulted in a profound economic restructure: from agriculture to industry, from industry to services, from local to global. Other lessons from past recessions have been applied to the costly, short-term rescue packages, keeping money flowing, creating jobs, expanding education – but there is less evidence that the thinking that drove these big transformations has similar traction. To prevent a global dystopia, sustainable energy, knowledge and productivity-enhancing communications will be central if we are to look back and see how the future was created from the ashes of this crisis.

 

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3 July 2009

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