Economic lessons lost on us all as end nears for Holden

This month marks the end of the slow, tragic and extremely painful death of the Australian car industry. In fact, this has been an industry doomed since Ben Chifley posed next to the first FJ Holden in the 1940s.

For as long as I have been alive, Australia made cars, and many will mourn this industry’s passing. As a young senator I was a strong protectionist. For anyone who truly believes in the dignity of employment, to subsidise or not to subsidise was a crucial but difficult decision. In the 1960s and 70s the future looked rosy, but only because Australia was blind to anything that happened outside our borders.

The end may not have been nigh, but it became inevitable once the Japanese started building cars for export more than a half a century ago. Sure, for the first few years the gearboxes from Japan were the butt of many a joke. But bad planning and false bravado became substitutes for economy in an industry too well fed for far too long by governments of both political persuasions.

John Button was the architect — with Bob Hawke and Paul Keating — in finally bringing down the “Berlin walls” of tariffs that protected our carmakers and others from competition. If you worked at a textile mill in Albury you were the first to go. Then went the shirtmakers and the cobblers. Factories that produced bed linen shed thousands of workers and the Amco and Nile factories that I drove Hawke to in the 1972 and 1974 campaigns, so he could be cheered on by the troops, were soon casualties of the brave new free-trade world.

The billions of dollars doled out to GMH, Ford and Toyota during the 80s and 90s and beyond was good money thrown after bad. These companies were masters at sucking more and more out of governments with false promises about how much and how long they would produce and operate.

We all fell for it. The trade unions cannot escape their share of blame. The Metal Workers Union actually forced Toyota to move from its chosen site to a less suitable one because the union thought the former too far for some workers to travel. The industrial agreements they forged over half a century gouged profits off the carmakers.

I sat in cabinet meetings where all of us, and I must sadly dob myself in on this, were too frightened to tell the workers of Adelaide that this would not end well. While the governments in which I served wound back protectionism and were the first to have the guts to so do, billions of dollars were shovelled at the industry in the certain knowledge it would only delay what fate had destined to occur. A big part of the reasoning then and since was to protect jobs, and the dignity that goes with them. I can only imagine how hard it will be for many families trying to sell houses on a crowded market as workers strive to find other jobs in other places. At least there has been a couple of years’ warning and assistance for retraining.

If there is a lesson, it is never forget one of the most basic rules of economics. Without economies of scale you can’t win a trade war. It was bad enough when our car companies’ major competition was Japan, the US and Germany. Now that China, Korea, Malaysia and Thailand have entered the field, that basic lesson in economics has been learned way too late.