1

White trash of Asia?

First published in 1987 as Quiggin, John. ‘White Trash of Asia’. Current Affairs Bulletin 64: 18–25.¹

Introduction

In recent years it has often been claimed that in the absence of radical changes in economic policies and social attitudes, Australians will soon be the ‘poor white trash’ of South-East Asia. The phrase itself appears to be due to Sir Roderick Carnegie, chairman of the mining company Conzinc RioTinto Australia, but other commentators ranging from Max Walsh, editor of the Australian Financial Review, to Lee Kuan Yew, prime minister of Singapore from 1959 to 1990, have made the same general claim.² In 1984, the claim was the subject of a conference of the Australian Institute of Political Science (AIPS), whose proceedings have recently been published as Poor Nation of the Pacific?: Australia’s Future? (Scutt 1985).

The basis of the claim is the fact that, since about 1870, when Australia’s income per capita was the highest in the world, Australia’s rate of growth in per capita gross national product (GNP) has been slower than that of most other nations, with the result that we have fallen to about twelfth on the international ladder (depending on how the measurements are made).

This relatively poor performance is illustrated by statistics such as those in Tables 1.1–1.3. Table 1.1 (taken from Hughes 1985) illustrates the relative per capita GDP of Australia and other developed nations over the period 1870–1976. At least at first sight, it gives evidence of a dramatic decline in Australia’s relative standard of living. Table 1.2 (taken from Dowrick and Nguyen 1986) gives more estimates of per capita GDP for the countries of the Organisation for Economic Co-operation and Development (OECD) over the postwar period.

Table 1.1 Relative GDP per capita (USA=100)

	Year						Growth rate
Country	1870	1890	1913	1929	1960	1976	GDP	GDP p. cap.
Australia	173	145	107	74	75	80	3.2	1.1
Austria	53	58	48	54	69	2.6	2.1	NA
Belgium	123	104	82	75	66	84	2.1	1.5
Canada	80	77	81	70	78	91	3.8	2.0
Denmark	69	66	73	64	66	76	2.9	1.9
Finland	52	42	41	39	54	71	3.1	2.2
France	87	71	67	66	67	87	2.2	1.9
Germany	68	60	58	51	70	81	2.5	2.0
Italy	69	46	42	37	43	53	2.3	1.6
Japan	35	33	29	32	35	77	3.8	2.6
Netherlands	123	87	69	70	69	80	2.7	1.4
Norway	63	52	47	50	65	85	2.9	2.1
Sweden	54	48	55	61	79	88	3.0	2.3
Switzerland	104	88	74	85	85	78	2.4	1.6
UK	103	81	67	70	67	124	1.8	1.3
USA	100	100	100	100	100	100	3.5	1.9

Source: OECD

The main interest of these type of data for advocates of the white trash thesis is the relative ranking of different nations, and, here again, Australia seems to have performed poorly. By contrast, over about the last 30 years, the nations of South-East Asia have enjoyed very rapid growth in per capita incomes. Obviously, if these trends are extrapolated, these nations will, at some point, overtake us. Hughes (1985) has undertaken such an extrapolation, and the results are presented in Table 1.3.

Table 1.2 OECD per capita GDP levels (in 1975 $US) and rankings

	1950/52		1960		1973		1985
1	USA	4748	USA	5195	USA	7480	USA	8709
2	Canada	3736	Switzerland	4424	Canada	6702	Canada	8037
3	Luxembourg	3474	Luxembourg	4239	Switzerland	6454	Sweden	7741
4	Switzerland	3295	Sweden	4160	Sweden	6407	Norway	7668
5	Australia	3216	Canada	4079	Luxembourg	6383	Denmark	7524
6	Sweden	3206	Australia	3894	Denmark	6205	Germany	7437
7	NZ	2897	Denmark	3761	Germany	5914	Luxembourg	7270
8	Denmark	2825	Germany	3711	France	5777	Japan	7019
9	UK	2773	NZ	3424	Australia	5745	Switzerland	6911
10	Belgium	2512	UK	3388	Belgium	5471	Australia	6891
11	Norway	2456	Netherlands	3198	Netherlands	5314	France	6890
12	Iceland	2320	Norway	3163	Iceland	5164	Finland	6621
13	Netherlands	2315	France	3163	Finland	5129	Austria	6545
14	France	2314	Iceland	3096	Norway	5052	Belgium	6441
15	Finland	2097	Belgium	3085	Japan	5025	Netherlands	5864
16	Germany	2059	Finland	2912	Austria	4837	Iceland	5594
17	Austria	1763	Austria	2764	UK	4709	UK	5390
18	Ireland	1560	Italy	2313	NZ	4681	NZ	5058
19	Italy	1470	Ireland	1868	Italy	3971	Italy	4818
20	Spain	1304	Spain	1737	Spain	3841	Spain	4457
21	Greece	934	Japan	1674	Greece	3334	Greece	3981
22	Japan	900	Greece	1385	Ireland	3038	Ireland	3546
23	Turkey	804	Portugal	1137	Portugal	2615	Portugal	3102
24	Portugal	796	Turkey	1044	Turkey	1586	Turkey	2361

Source: Dowrick and Nguyen (1986)

Table 1.3 Projections of GDP (1981)

	GDP 1981 (US$ billion)	GDP growth 1971–81 (% p.a.)	GDPa 2011 (projected, US$ billion)	GDPb 2031 (projected, US$ billion)
Indonesia	85	7.8	809	3632
Malaysia	25	7.8	236	1059
Philippines	39	6.2	236	787
Singapore	13	8.5	149	763
Thailand	37	7.2	296	1190
Total	199	NA	1726	7431
Australia	171	3.3	453	867

Notes: a—Assuming continuation of 1971–81 growth rates; b—Assuming continuation of 1971–81 growth rates

Source: Hughes (1985)

The ‘poor white trash’ image is merely the most extreme manifestation of a large literature focussing on differences in the growth of GDP between nations. The central message of this literature (or, at least, that section published in Australia) is that Australia has performed very badly while other countries have performed very well, and that the crucial objective of economic policy is to improve Australia’s relative performance compared to our competitors. The way to do this, it is suggested, is to copy appropriately selected countries that have performed well. Popular examples have included Japan, Sweden, the United States of America (USA) and the countries of the Association of Southeast Asian Nations (ASEAN). Arguments of an analogous kind have been popular in many other countries, including most of those listed as exemplars for Australia.

Thus, much of the interest in the predictions of future (relative) poverty relates not to their accuracy as forecasts but to their rhetorical use in present-day policy debates. Australia’s perceived decline is attributed to various aspects of our current socio-economic system, such as protection, regulation, taxation and industrial conflict, and we are urged to follow the example of our more successful neighbours, such as Japan and the ASEAN countries. Since these are a very diverse group, a wide range of policy positions can be supported in this way.

For example, in the 1983 election, the Australian Labor Party (ALP) used relative growth style arguments to support Bob Hawke’s brand of corporatist consensus (which may be justified by a reference to Japanese examples). By contrast, most of the contributors to the AIPS study support free-market policies, Singapore and Hong Kong being the prime examples. With appropriate selections, a similar type of argument could be mounted for mercantilist or indicative-planning types of policy or, for that matter, for some form of ‘guided democracy’.

This wide range of possibilities may suggest that the thesis is merely a debating point that can be used to stress the urgency of whatever policies the speaker favours. In fact, however, the adoption of relative GDP growth rates as a touchstone of policy success has significant and dangerous implications.

The objects of this article are twofold. The first is to show that the data used to back up the ‘poor white trash’ case can be highly misleading. In particular, Australia’s apparent relative decline since 1870 has more to do with demographic factors than with mistaken economic policies. The second object is to argue that concern with relative economic growth rates as the major focus of economic policy is both mistaken and dangerous.

How much do relative living standards matter?

The first question to be asked is whether it would matter if the current trends in relative growth continued to the point where Australia’s per capita income was below that of our South-East Asian neighbours. After all, the standard of living for most Australians is already fairly high, and the scenarios set out in typical projections of relative growth imply that they will continue to improve, although not as fast as those of other countries. Even in relative terms, our per capita income is only 5 to 10 per cent lower than that of most of the nations currently ahead of us and 20 per cent below that of the richest country in the world, the USA (this gap has narrowed significantly over the past 25 years). Thus, unless the South-East Asian nations ran far ahead of the entire world, our poor-nation status would be difficult to discern from a casual examination of living standards.

Most advocates of the ‘poor white trash’ thesis do not bother to address this issue, relying on the impact of its racist imagery and the general presumption that more is better. One writer who does address the issue is Helen Hughes (1985), who argues that there are two main reasons for concern.

The first is that ‘young Australians will have to seek graduate studies or career opportunities in Tokyo or Singapore to be at the frontier of technological trends’, while ‘unskilled Australian workers will have to look for jobs as maids and waiters in Kuala Lumpur’ (Hughes 1985). If this prospect is dismaying, it is worth noting that ambitious young Australians already go abroad (most of them to the USA) to be at the forefront of technological change and intellectual endeavour generally.

The apparent fear associated with the prospect of our South-East Asian neighbours taking over some of these roles would appear to carry with it a hint of racism. This tendency is obviously inherent in the ‘poor white trash’ terminology, and it is noteworthy that the AIPS deliberately avoided this phrase while carrying over many of the associated preconceptions.

A more serious threat, according to Hughes, is that our standing in the region, which depends on the fact that our economic weight is disproportionate to our small population, will be gradually eroded as our total GNP becomes smaller in relation to that of the region as a whole. But this is inevitable. There is no way that we can prevent the ASEAN nations from catching up to the developed world in general, and Australia in particular. The best that can be hoped for, in terms of relative economic performance, is that Australia’s per capita GNP will remain somewhat higher than that of our neighbours. Even if this is achieved, our small population means that our absolute GNP cannot continue to be as large in relation to that of the region as a whole as it has been in the past.

It does not seem that the relative growth debate is very useful in adapting to these realities. Moreover, this argument concerns absolute GNP, while the relative growth debate is almost always couched in terms of per capita growth rates. As Table 1.1 shows, Australia’s performance in terms of absolute GNP growth has been quite good. Over the period 1870–1976, only three developed nations managed higher rates of growth in absolute GDP than Australia. Performance over the postwar period was similarly reasonable according to this criterion.

An alternative ground for concern over low relative per capita GDP growth rates is that they are an indicator of poor economic management, or, more generally, of social institutions being antagonistic to growth. It is important to consider how useful an indication is provided by low relative GDP growth rates.

Some observations on relative growth rates

Before considering any international comparisons of economic performance, it is important to note that slightly different methods can yield massively different results. Castles (1986) shows that in terms of purchasing power for standard consumer commodity baskets, Australia is still in the top 10 countries of the OECD and has shown no perceptible slide. The same difficulties arise for coun­tries other than Australia. Dowrick and Nguyen (1986), using the criterion of per capita GDP in 1975 in US dollars, show Switzerland as experiencing a relative decline, parallel to Australia. By contrast, Kasper (1986), using 1980 prices and exchange rates, shows Switzerland as leading the world throughout the postwar period.

Even sharper changes arise when an alternative criterion of assessment is applied. For example, differing comparisons have been made on the basis of levels, growth rates, and changes in growth rates of per capita GDP. In general, countries that do well on the first criterion (such as the USA) are likely to do badly on the second (the convergence effect examined by Dowrick and Nguyen), while those that do well on the second (such as Japan) are likely to do badly on the third.

There is no reason to confine attention to per capita GDP. Given the fairly small differences between the developed countries, it would seem reasonable to consider factors such as the labour–leisure trade-off and the equality of income distribution before making any comparison of prosperity or economic performance. Even a 10 per cent difference in working hours could offset a shift of about six places on Dowrick and Nguyen’s league table.

For example, many workers in the USA work a 40-hour week, with two weeks of annual leave, no long service leave and about six public holidays per year, implying approximately 245 working days in the year. A comparable Australian with four weeks annual leave, a monthly rostered day off (associated with the 38-hour week), 11 or 12 public holidays and long service leave would work about 210 days per year, or about 15 per cent less. This is almost exactly enough to offset the difference in per capita GDP between the two countries. Similarly, as regards equality of income distribution, few would doubt that Sweden is a better country in which to be (comparatively) poor than the USA.

Indeed, an appropriate selection of time periods and criteria can make any nation look good or bad. For example, it is currently fashionable to compare the ‘dynamic’ US economy with the hidebound and over-regulated economies of western Europe. Yet, only a few years ago, the USA was being compared unfavourably to these very countries. All that has happened in the interim is that the USA has moved from a trough to a peak on the business cycle. Over the post-1973 period as a whole, the USA has done slightly worse than most European economies.

It is quite straightforward even to make a country like Japan look bad. For example, Norton and Mcdonald (1981) compare a number of countries on the basis of changes in rates of unemployment, inflation and growth since 1973. Their purpose is to compare Australia’s performance with that of other countries, but when their criterion is applied to changes in growth rates, Japan is the worst performer in the OECD.

A crucial feature of the data listed in Tables 1.1–1.3 is the tendency for the less developed nations to catch up. This reflects, among other things, the fact that it is easier to copy or adapt existing technologies to make productivity improvements than it is to develop new technologies from scratch. This tendency is not universal; with sufficient mismanagement, a lagging country can fall even further behind. However, as Gruen (1982), and Dowrick and Nguyen (1986), have shown, there is a general tendency for growth rates to be higher for those nations that are initially worse off. Thus, during the period when she specialised in ‘copycat’ manufacturing, Japan recorded annual growth rates of the order of 10 per cent. When Japan became a technological leader in the 1970s, her growth rates fell to 3 or 4 per cent, and it was poorer South-East Asian nations that recorded strikingly rapid growth.

It is worth considering the extrapolations presented by Hughes in the light of this convergence effect. They are based on the assumption that the ASEAN nations can continue their current (or, rather, 1970–81) growth rates long after they have caught up to and surpassed Australia, and, for that matter, the other developed nations. Such an extrapolation implies that, by the year 2131, Singapore would have a per capita GDP nine times as large as that of the OECD nations but would still be growing more than twice as fast.

Dowrick and Nguyen (1986) cite a number of estimates showing that, all things being equal, a poor nation should catch up two-thirds of the difference with a rich one over a period of 25 years. As levels of GDP converge, so, in general, do rates of GDP growth. An important consequence of this ‘catch-up’ effect is the sharp decline in the variance of per capita GDP among the developed nations. Since 1973, differences in rates of growth have also fallen sharply.

The other major factor that has been shown to affect the rate of growth of per capita GDP is population growth. In general, studies of comparative growth indicate that a 1 per cent increase in the rate of population growth is associated with an increase in total GDP of between 0.3 and 0.9 per cent. Since this is less than the increase in population growth, per capita GDP growth is reduced as population growth increases.

One noteworthy issue that can only be mentioned briefly is the relationship between economic growth and spending on armaments. In the classical theory of economic growth, armaments expenditure is a straightforward subtraction from savings devoted to productive investment. On the other hand, there has been an influential school of thought suggesting that ‘military Keynesianism’ has played a vital role in preventing stagnation and promoting growth.

Looking at the best and worst performers in Table 1.2, the United Kingdom and Japan, it is noteworthy that one has struggled to maintain Imperial pretensions, while the other has been forcibly prevented from making major arms expenditures. Of all possible paths to greater worldwide prosperity, a reduction in arms spending seems both the most appealing and one of the most practical.

In general, however, the most important point to be derived from the study of international growth rates is the fact that differences in both total levels of GDP and the rate of growth of GDP have become generally smaller over the postwar period. Differences in growth rates among the developed nations since 1973 have been very small indeed, with 15 of the 24 nations, including Australia, falling in a range of only 1.5 per cent. As regards the developed nations, relative growth is an issue whose time has passed.

Assessing Australia’s performance

1870–1930

In light of these general comments on international comparisons, what can be said about Australia’s economic performance? Perhaps the most important feature of Table 1.1 is that the period of sharpest decline is the 60 years from 1870 to 1930. Since 1930, Australia’s per capita GDP has moved broadly in line with that of other developed countries, although it has been slightly below average. Several observations may be made at this point.

First, there is not much value in scrutinising our present institutions for the sources of poor economic performance in a period before many of these institutions were formed. For example, many commentators place a great deal of stress on highly protected industries such as motor vehicles and textiles. Yet the motor vehicle industry only dates from the Second World War, while the first tariffs on textiles were imposed in 1926. If comparisons of relative growth are to be the touchstone of economic performance, it would seem that the high protection of these activities has greatly improved our performance. Even such a venerable body as tthe Arbitration Commission (previously the Arbitration Court) only dates from 1904, towards the end of the period of sharpest decline.

Second, while Australia’s comparatively poor performance since 1870 is blamed on various defects in our sociopolitical system and, particularly, on government policies, no corresponding analysis is given to the previous century. During this period, European Australia was transformed from a starving convict settlement imposed on a continent occupied by hunter–gatherers³ to the richest society (in terms of measured per capita GDP) the world had ever seen. It is rarely suggested that this spectacularly good performance was the result of brilliant management by the rulers of the time. Rather, it is attributed to luck in the form of our endowments of natural resources. For many writers it is this endowment of natural resources that makes our decline in relative growth rates since 1870 so difficult to believe. This betrays muddled thinking. The price of primary commodities relative to other goods has fallen significantly over the last century so our endowment of natural resources is much less of an advantage now than it was in 1870. Therefore, contrary to the popular view, it would have been surprising if Australia (or any other primary commodity exporter) had maintained higher than average rates of growth over this period.

The discussion so far has implicitly incorporated the assumption that measured GDP per capita is a useful basis for comparison. However, some features of the Australian data make it particularly unreliable for this purpose. First, the data presented by Hughes are based on population counts that exclude Aboriginal people,⁴ although their (low-paid or unpaid) labour made a significant contribution to measured GDP. Since Aboriginal people formed 9 per cent of the population in 1870 and only about 1 per cent in 1930, both the initial level of per capita GDP and the subsequent decline are exaggerated to this extent.

Second, the European population in 1870 was very atypical, reflecting a frontier society with high rates of immigration (predominantly by young adult males) and a small initial population. In particular, the masculinity ratio (the ratio of males to females) was much higher than for other developed countries. Furthermore, this ratio was highest in the most productive age group (those between 15 and 65). Since measured GDP is dominated by the work of men and excludes much of the work done by women, it is not surprising that Australia’s measured GDP per capita should be very high. Over the period 1870–1930, Australia’s masculinity ratio approached that of the USA (Table 1.4). The Australian population was also significantly younger on average than that of other nations. For example, in 1870 the proportion of Australians aged over 65 was only 1.7 per cent compared with 3.6 per cent for the USA and 7 per cent for the UK. While this was offset by a correspondingly higher number of children, the workforce overall was substantially younger than that of other countries. In an era when capacity for hard physical work was essential, this was conducive to high per capita GDP. Once again, Australia approached the international norm in this respect over the period 1870–1930, and this was reflected in a decline in relative per capita GDP.

Table 1.4 Masculinity ratios 1870–1930

	AUSTRALIA	UK	USA
1870	121	95	102
1880	117	95	104
1890	116	94	105
1900	110	94	104
1910	108	91	106
1920	103	92	104
1930	103	92	102

Sources: US Bureau of the Census—Vital statistics: Rates (various years); UK General Register Office Census Reports (various); ‘Population of Australia’; ESCAP Country Monograph 9

Australia now appears not as an extreme outlier but as a member of a group of leading nations, including the UK and the Low Countries. While it is apparent that the USA overtook this group between 1870 and 1930, and that several other countries have caught up, the picture of dramatic relative decline derived from GDP per capita may be seen to be greatly exaggerated.

1930 to the present

Although the data presented in Table 1.1 have been shown to be misleading, there is no doubt that Australia’s economic performance before about 1930 was somewhat unusual. For most policy purposes, however, it is more useful to consider the subsequent period, and in particular the period since the end of the Second World War. During this period, Australia’s per capita GDP growth perfor­mance was anything but unusual. As Table 1.2 shows, it was within 0.5 per cent of the average for the 12 richest nations in each of the three sub-periods.

Dowrick and Nguyen (1986) provide a more formal test of performance. They estimate several equations that relate per capita GDP growth in a range of countries to initial income levels and population growth rates. Australia’s growth rate is almost exactly that predicted by the equations, with the deviation ranging from +0.5 per cent to −0.3 per cent. Similar results are obtained by Gruen (1986), using a slightly different dataset.

How can this be squared with the dire statistics of our slip down the international ladder presented by advocates of the white trash thesis? As we have seen, convergence means that differences between income levels should shrink. Thus, it is not surprising that Australia’s per capita GDP has grown more slowly than that of nations that were initially poorer.

However, this alone cannot account for the fact that some nations have overtaken us. The explanation offered by the international growth models is that Australia’s population has been growing about 1 per cent faster than the OECD average. This implies a reduction in relative per capita GDP growth of about 0.4 per cent. Because differences in income levels among developed countries are now very small, even such a small difference implies a large slip down a ladder of comparative levels. In essence, this says more about the pointlessness of such league tables than anything else.

A point of particular relevance in the assessment of Australia’s economic performance is that, until recently, Australian policy has focussed on absolute as much as per capita GDP. This has reflected defence concerns and the existence of a generally shared ideology of development. Thus, while it may be suggested that immigration and tariff policies have led to a lower per capita GDP than might otherwise have been possible, it should be recognised that these policies were implemented with a general acceptance that some constraints in average income were a reasonable price to pay for more rapid absolute growth.

This acceptance is quite explicit, for example, in the Brigden Report, and is implicit in the rejection of standard economic criteria for the assessment of projects seen as promoting ‘development’, notably through irrigation and Northern development. Current views, including my own, tend to place a low or even negative value on development and population growth per se. In assessing past performance, however, we should be clear that our predecessors did not miss the target. Rather, they aimed at, and hit, a different target.

One aspect of the relative growth debate and the current economic crisis has been a series of conflicting claims on the role of migration. Geoffrey Blainey and others have called for restrictions on migration as a response to recession, while Helen Hughes and others have proposed a return to the mass immigration policies of the 1950s and 1960s as a response to poor relative performance. The debate has been confusing and, frequently, confused.

One major source of confusion has been a failure to distinguish between short-term macro-economic effects of migration and longer-term effects on growth in per capita incomes. Oddly enough, the evidence here suggests that both sides have got their arguments back to front. The critics of immigration have generally focussed on short-term employment effects, but the evidence here suggests that these are neutral or slightly favourable.

On the other hand, advocates of mass immigration have frequently focussed on long-term effects, but the evidence, including that provided by Gruen, and Dowrick and Nguyen, supports the view that high population growth tends to reduce per capita GDP growth. It is likely that the effects of migration will be somewhat more favourable than those of high rates of natural increase, since migrants are likely to be people of working age. Nevertheless, the evidence does not support the proposition that mass immigration is likely to promote high rates of growth in per capita (as opposed to total) GDP.

Both sides of the debate share the view that migration policy should be determined primarily by fairly narrow economic considerations. This is a natural consequence of the ‘relative growth’ approach. In my view, policy should primarily reflect social decisions on the costs and benefits of greater cultural diversity, higher population densities and other such effects of expanded migration. We should view with suspicion any claim that our economic circumstances necessitate either sharp reductions or massive increases in immigration.

Playing the relative growth game

In the preceding sections, the specific contentions made by the ‘poor white trash’ school have been criticised. The object of this section is to examine the general implications of this mode of argument. The misleading claims made by users of these arguments reflect the biases inherent in their manner of assessing economic performance.

One noteworthy feature is a strong tendency to select and present statistics in such a way as to make relative economic performance for any particular country look bad. Conversely, it is possible to select statistics that make any particular country look good, and this exercise is occasionally undertaken by governments facing re-election. However, in most countries, the purpose of international comparisons is typically to demonstrate the poor relative performance of the country concerned, and hence to emphasise the urgency of adopting whatever policies the person making the comparison wishes to advocate. Viewed simply as a way of emphasising the urgency of one’s case, the relative growth game may seem harmless enough. In fact, however, it yields a seriously distorted attitude to economic policy issues.

For example, it would be generally agreed that Australia’s economic performance since 1973 has been considerably worse than during the postwar period from 1945 to 1973. However, a concern with relative growth rates yields precisely the opposite conclusion. During the relevant period, Australia’s per capita growth rate has been much closer to the OECD average than in earlier periods.

A second feature of this approach is that it focusses attention on narrow measures of GNP without any concern for quality of life. In a general context, even the most rigidly orthodox economist would recognise that increases in GNP are not necessarily beneficial if they are obtained at the expense of increased working hours. In mainstream economic theory, what matters is that the allocation of resources should reflect individual preferences regarding the relative value of increased leisure and higher income.

Distortions arise when outcomes diverge from these preferences. Yet, in the context of the relative efficiency debate, Hughes feels free to write that in Australia, ‘a high preference for leisure distorts the allocation of resources’. Calls for increased working hours, shorter holidays and other improved conditions have been common. Less tangible aspects of the quality of life, such as the protection of the environment, are typically ignored completely in this debate, except as sources of needless regulation.

The distribution of income is another issue that goes by the board in this approach. Indeed, players of the relative growth game such as Michael Porter are concerned to decry disputes over the distribution of income as a major obstacle to the good of ‘the community as a whole’, which is typically measured by average per capita income. In the context of very poor developing countries, one could perhaps argue that an increase in the size of the cake matters more than more equitable sharing, since the achievement of an average income comparable to that of the developed world would make almost everyone better off.

It is, however, very difficult to apply this argument to the developed world. The wellbeing of the poor in a range of developed countries is largely independent of the minor variations between them in average income. For example, the USA has a per capita income 20 per cent larger than that of the other developed countries, but its performance on measures such as infant mortality and homelessness, which are closely related to levels of deprivation, are among the worst in the developed world.

A more subtle feature of the relative growth game is the way in which key policy issues are prejudged. For example, there is considerable scope for debate over the importance of external competitiveness as compared to measures of domestic wellbeing such as unemployment levels. The relative growth approach implies a single-minded concern with competitiveness on the assumption that everything else will come right in the end. This is seen at its worst in the prolonged deflation imposed by Margaret Thatcher, which, after her serving two terms in office, has yet to produce tangible domestic benefits.

A second important feature of the relative growth game is that issues relating to the overall world economy are largely ignored. This is despite the fact that, among the developed countries, the worst performers prior to 1973 did almost as well as the best performers since 1973. Insofar as the sharp downturn since 1973 is discussed at all in the relative growth literature, it is typically regarded either as the result of an exogenous shock in the form of the increase in Organization of the Petroleum Exporting Countries (OPEC) oil prices or as the result of mistaken domestic policies adopted independently (but simultaneously) by a large number of different countries.

The most important topic of economic analysis should attempt to analyse the problems of the world economy and seek to propose remedies at a global level. The relative growth approach totally excludes this task from the agenda. Severe difficulties, particularly in the form of intractable trade deficits, have been encountered by countries that have attempted to maintain growth rates substantially in excess of those of their trading partners. Examples include countries as diverse in their institutional structure and policy background as France, Australia and the USA.

Against this backdrop, supporters of the relative growth approach point to the success of the East Asian countries in maintaining high growth rates. In the last two years, however, the Philippines has entered a seemingly intractable economic crisis, South Korea has encountered significant balance-of-payments problems, and Singapore has issued forecasts of negative real growth. All of these problems may be traced to low export demand associated with the poor performance of the world economy as a whole. Players of the relative growth game have essentially nothing to say about this issue.

Concluding comments

Prophets of all kinds have long found predictions of impending doom an indispensable aid in gaining and holding the attention of their audiences, especially when they can promise that careful obedience to the prophet’s commands is the only method of averting this doom. The prediction that Australians will soon be the poor white trash of Asia has been used in precisely this fashion.

While shock tactics may sometimes be salutary, it is extremely unfortunate that the advocates of this approach have chosen to focus on minor, and rapidly decreasing, differences in growth rates at a time when growth throughout the developed world has been painfully slow. The prospect of significant worldwide falls in rates of growth, and even in the actual level of per capita income, is uncomfortably close. In this light, arguments about which nation is doing the least badly are not merely irrelevant but positively damaging to prospects for international cooperation.

There is, no doubt, substantial scope for improvement in Australian economic performance within the constraints imposed by the world economy. Efforts towards such an improvement are likely to be more rewarding if they are motivated by the desire to improve the lives of Australians rather than a need to keep up with the international Joneses.

Bibliography

Castles, Ian. 1986. ‘Is Australia’s Slide Down the “League Table” a Myth?’. Paper presented at the Centre for Economic Policy Research, The Australian National University, Conference on Recent Australian Economic Growth, November 1986.

Dowrick, Steve and Duc-Tho Nguyen. 1986. ‘Australia’s Post-war Economic Growth: Measurement and International Comparison’. Paper presented at the Centre for Economic Policy Research, The Australian National University, Conference on Recent Australian Economic Growth. November 1986.

Gammage, B. 2012. The Biggest Estate on Earth: How Aborigines Made Australia. Sydney: Allen & Unwin.

Gruen, Fred. 1982. ‘How Bad Is Australia’s Economic Performance and Why?’. Economic Record 62: 180–93. doi.org/10.1111/j.1475-4932.1986.tb00893.x.

Hughes, Helen. 1985. ‘Australia and the World Environment: The Dynamics of International Competition and Wealth Creation’. In Poor Nation of the Pacific?: Australia’s Future?, edited by Jocelynne E. Scutt, 1–17. Sydney: Allen & Unwin.

Kasper, Wolfgang. 1986. ‘Structural Change for Economic Growth’. Economic Affairs 6, no. 5 (June–July): 8–13. doi.org/10.1111/j.1468-0270.1986.tb01773.x.

Norton, WE and Robin McDonald. 1981. ‘Implications for Australia of Cross-Country Comparisons of Economic Performance’. Economic Record 57, no. 159: 301–18. doi.org/10.1111/j.1475-4932.1981.tb01067.x. 

Porter, M. 1985. ‘The Labour of Liberalisation’. In Poor Nation of the Pacific?: Australia’s Future?, edited by Jocelynne E. Scutt, 37–61. Sydney: Allen & Unwin.

Quiggin, John. 1987. ‘White Trash of Asia’. Current Affairs Bulletin 64: 18–25.

Reeder-Myers, Leslie, Todd J. Braje, Courney A. Hofman, Emma A. Elliott Smith, Carey J. Garland, Michael Grone, Carla S. Hadden, et al. 2022. Indigenous oyster fisheries persisted for millennia and should inform future management. Nature Communications 13, Article no. 2383. doi.org/10.1038/s41467-022-29818-z.

Scutt, Jocelynne E., ed. 1985. Poor Nation of the Pacific?: Australia’s Future? Sydney: Allen & Unwin.

---

1. 1 I wish to thank Pat Quiggin for extensive help with the provision and interpretation of demographic data, and Bruce Chapman, Steve Dowrick, Fred Gruen and Tom Nguyen for useful discussions on the issues examined here. None of these should be assumed to share the views expressed here.

2. 2 As noted in the Introduction, subsequent analysis has suggested that Lee Kuan Yew was probably the first to use the term.

3. 3 Since this article was published, scholarly and public discussion of Aboriginal land management has emphasised the role of active practices, including forms of agriculture and aquaculture and the use of fire to manage landscapes (Gammage 2012; Reeder-Myers, L, Braje, TJ, Hofman, CA, et al. 2022). Nevertheless, monetary measures such as GDP, the central topic of this chapter, are not applicable to Aboriginal society before European contact. GDP measures are only meaningful in the context of a market economy.

4. 4 The term ‘Aboriginal’ also encompassed Torres Strait Islanders.