Apr 21, 2016

Cashing in on rise of China’s big cities

There are 20 cities in China that are bigger than Melbourne and six that are bigger than Sydney and Melbourne combined.
There are 20 cities in China that are bigger than Melbourne and six that are bigger than Sydney and Melbourne combined.
One, Shanghai, has roughly the same number of people as live on the Australian continent. Welcome to China, the economic miracle nation of the 21st century.
Arguably, China is to the early decades of the 21st century what America was to the early decades of the 20th century.
Everyone speaks of China’s middle class, but I am not comfortable with this. Does a middle-class family in China really have the same spending power as a middle-class Australian family? Better to look at urbanisation as a proxy for consumer spending power.
During the first 15 years of the 21st century the population of Shanghai jumped from 14 million to 24 million. No city in history has added this number of people in such a short time.
But it isn’t just Shanghai that has been catapulted into a high rate of growth since 2000. Beijing has added nine million, Chongqing and Guangzhou each added five million. Tianjin and Shenzhen added four million. The largest 20 cities in China have added 73 million residents in 15 years. Not through an excess of births over deaths but through rural-to-urban migration. These are people seeking a better life, a middle-class life.
Since 2000 Shanghai has added 650,000 residents per year; Australia’s fastest-growing city Melbourne added 90,000 last year. Each new resident in both cities requires housing, employment, food, electricity and a proportionate share of urban infrastructure.
It is not so much China’s scale that drives opportunity for Australia as it is China’s transition from agrarian to consumer economy requiring imported resources and expertise. And that is the basis to the China-Australia relationship. We have much of what China needs to facilitate the economic transformation of the nation.
For example, despite its one-child policy China still produces 16 million babies a year. We produce about 300,000 babies a year. Which nation requires baby formula on a grand scale? It is unfortunate that Australia never developed a global agribusiness enterprise like we developed global mining enterprises. As such we perhaps haven’t been able to leverage even better agribusiness connectivity into China.
For further evidence of the rise of China’s middle class, consider the following. In 2005, China’s leading power supply business, State Grid, generated revenue of $US71 billion ($91.2bn) that was roughly the same revenue base as New York’s Verizon telco group. A decade later its revenue jumped almost 80 per cent to $US127bn. State Grid, the supplier of power to an urbanising Chinese middle class, lifted revenue 380 per cent to $US340bn.
There are times in history where one nation gears up such as America in the 20th century and Britain in the 19th century. This century, so far, is China’s century.
The rise of America didn’t initially shape Australian interests, which a century ago were tied to the British economy. The American ascendancy wasn’t apparent to the Australian people until after World War II and then only via the ANZUS military alliance and through trade with the Marshall Plan’s reimagined Japan.
China on the other hand is closer and is more in need of Australian resources and commodities than was America. Iron ore, coal, bauxite, agribusiness including red wine and baby formula as well as services like education and tourism are firm bases for China-Australia trade.
Over the past 12 months new air connections have been established between Australia and China via Sydney-Shenzhen and Coolangatta-Wuhan. Shenzhen is a city of 11 million; it did not exist in 1986; it now contains four Fortune Global 500 businesses. Wuhan is a city of eight million; it contains two Fortune Global 500 businesses, two more than Adelaide or Brisbane. And it probably contains a greater middle-class market than either of these Australian ­cities. These are good air connections for Australia to make and to build upon.
Indeed there is a mad scramble under way by Australian cities and airports to establish connectivity with second-tier Chinese cities. Or there should be a mad scramble. The largest Chinese cities without direct air connectivity into Australia are Tianjin (population 11 million), Dongguan (7 million), Foshan (7 million), Hangzhou (6 million) and Shenyang (6 million). Both Tianjin and Hangzhou have two FortuneGlobal 500 businesses that provide each city with a corporate and a middle-class economic base. Sydney connects into 11 Chinese cities; Melbourne connects into seven; Adelaide connects into just Hong Kong (but with another link planned).
As China shifts up the consumer-spending hierarchy, spending patterns will alter; there could well be a tipping point where demand for, say, tourism services suddenly escalates. That business will be captured by those cities that have well-established trade and flight connectivity and perhaps also familial connections.
Building connectivity with China is evident through the free trade agreement, through the fact that since the global financial crisis China has been Australia’s leading export market, and by the fact that China is now the largest grouping of non-Anglo immigrants. The rising ethnicity connection sets the scene for a later escalation in tourism traffic to visit friends and relatives.
And then there is the military rise of China. A decade ago China spent $US46bn on defence, which was 9 per cent of US defence spending. Today China’s rising defence spending is over one-third of the US’s falling defence spending. But the US still dominates in terms of technology and big-ticket military hardware including 10 active aircraft carriers as compared with China’s one. Superpower America has the unique ability to project its authority globally; China does not and will not until the 2030s at best.
This raises discussion about the disputed Spratly and other islands off the Chinese coast. I understand how Vietnam, The Philippines and Japan might lay claim to contested offshore islands but I cannot see how Australia can proffer commentary or take a position.
After all, we claim Christmas Island that is much closer to Indonesia than to Australia. And this is in addition to our suspended claim to one-third of Antarctica.
Perhaps the best way to illustrate the China ascendancy is via American business magazine ­Forbes’ annual listing of billionaires. The 2016 listing shows that China (including Hong Kong) is now home to 325 billionaires, which is less than the US (540). But the gap is closing. Australia has 25 billionaires. Viewed from another perspective, there is one billionaire per 600,000 Americans and one billionaire per 960,000 Australians. There is one billionaire per 4.3 million people in China. By this measure, the wealthification of China has some way to go.
This is not to say that China’s pathway to future prosperity will be easy. China does not control the land mass or the resources base to deliver a Western quality of life to its residents without the support of a substantial trade base. That is the basis to Australia’s ­special relationship with China. China cannot afford to upset too many suppliers. China must be adept at trade and negotiation; it must protect its supply lines with a strong navy capable of deployment and intimidation; and it must deliver on a social contract whereby individual freedoms are traded off against a rising standard of living.
China will face new threats in the coming decade. Not so much military threats as the possibility of internal dissent. So many visitors, so many migrants, so much connectivity with the West will amp up the terms of the social contract: deliver an even better standard of living or manage dissent.
I see mutual self-interest for China and Australia to build close trade, ethnicity and cultural connections over coming decades. The tricky bit will be to manage the American alliance while we build and prosper from our special relationship with China.
Bernard Salt is a KPMG partner and an adjunct professor at Curtin University Business School. Research by Simon Kuestenmacher.

Apr 15, 2016

US businesses: Start preparing for the EU's new privacy regulation - TechRepublic

US businesses need to start preparing for the European Commission's General Data Protection Regulation, which is up for a final regulatory vote Thursday, and if passed would result in massive fines for non-compliance.
The rules would be enforced starting two years from Thursday. Regulators, after performing privacy audits, can penalize a business up to Euro 20 million or 4% of annual revenue, whichever is more.
Businesses will be required to only store personal data if people opt-in, honor requests for personal data erasure, keep track of personal data in auditable ways, provide breach notifications within 72 hours, and make all personal data portable. It's a replacement forthe 1995 Data Protection Directive, and applies to all companies conducting business in Europe, regardless of where the companies are based.

"It is the biggest event that will take place in my lifetime as a data privacy lawyer," said Lisa Sotto, a privacy expert at international law firm Hunton & Williams. Sotto, based in New York, is a member of Hunton's European Data Protection and Privacy team.
"We are starting now with many of our clients to create a work plan to get into compliance with this," Sotto explained. "There is no leeway here," she noted. She said there won't be any escape, because European regulators routinely get complaints from citizens who are generally more conscious of privacy rights than people elsewhere, including those in the US, she said.
Sotto's team created a detailed overview document (PDF) of the new regulation.
Businesses are definitely taking note, said Omer Tene, vice president of research and education at the nonprofit International Association of Privacy Professionals (IAPP), which is based in New Hampshire.
During the next two years, "Businesses should use that to adapt their systems and their practices to some of the new rules," Tene said. There will be approved transfer mechanisms for personal data, he said.
"Being upset is not relevant here. Europe is a huge trading block, it has 500 million citizens, and it's a bigger economy than the United States. We have to live with their laws," Tene said. "It an investment, and businesses will have to work and comply with it. It is definitely a big compliance undertaking. There will be a lot of hours invested."
To help, the IAPP published a short video and partnered with TRUSTe, which sells an online service for businesses to perform data privacy assessments. TRUSTe, in San Francisco, produced a version of its software for IAPP members and is planning to update the software this summer.
"New TRUSTe Assessment Manager functionality is being developed to address a wide range of data privacy management use cases. We have just released a new ISO 27001 assessment template and later this month Assessment Manager will be integrated with TRUSTe Website Monitoring and EU Cookie Consent Management technology," spokeswoman Eleanor Treharne-Jones said.
"June will see the launch of Asset Manager, an online inventory management solutions for systems, applications, and products undergoing or requiring assessment."

Apr 13, 2016

A timely lesson in leadership from John Howard

There was plenty of nostalgia at a gala dinner last Friday to mark the 20th anniversary of the Howard government.
Former minister for industrial relations Peter Reith was back on the waterfront. But this time he was there only to enjoy a meal hosted by the Victorian division of the Liberal Party. Feral protesters were on the Melbourne waterfront too, shoving dinner guests and police, breaking a window in their so-called peaceful protest. A woman at my table, nursing a bruised hand from the fracas, would be forgiven for describing those who assaulted her as criminals, not protesters. While that must have brought back memories for John Howard, his address to the faithful was no remembrance of things past. Instead, it was a piercing reminder of what leadership looks like, be it 1996 or 2016.
On two fronts, the timing for a leadership chat was perfect. It came as we learned Liberal backbencher Kevin Andrews said he was prepared to challenge Malcolm Turnbull for the leadership and anointed himself an “intellectual leader” of the Liberal Party.
Not to make fun of Andrews, it’s silly to claim the leadership mantle when few people, beyond your base of loyal local followers, know your name. If you have to assert you’re an intellectual leader, it’s odds-on you’re probably not. You earn the mantle of intellectual leadership, you don’t proclaim it.
The conservative MP from Victoria has held portfolios in social services and defence in the Abbott government and ageing, workplace relations and immigration in the Howard government. But hand on heart, did Andrews shift the national debate on issues of importance in these portfolios?
Andrews is a decent man but he is part of the problem confronting conservative politics if he imagines he is an intellectual leader of that cause. An intellectual leader articulates his or her ideas, and more than that, draws people to those ideas. Not just the stalwarts. That’s the easy part. Intellectual leaders talk to people beyond the base, they draw new recruits to the cause, convince waverers about the rightness of their ideas. They take on the Left day in day out, understand the power of language and the difference between preaching and persuasion. They realise that the stereotypes of conservatives created by the Left need to be disproved and demolished.
Howard’s take on leadership resonated for another reason, coming soon after another dip in the Prime Minister’s personal ratings and the Coalition government’s poll numbers. Addressing the 1100-plus audience, Howard said he is often asked about the key to successful government. He recalled advice from his mentor, John Carrick, many years ago: “John, you’ve always got to remember one thing: government is a battle of values and ideas. It’s not a public relations contest.”
Howard lived that battle. He didn’t look for love from voters, instead recognising that respect counts for more. Howard used every opportunity to articulate his government’s stance on everything from fiscal repair, national security, border protection and the importance of the country’s history and cultural confidence.
The former PM told the audience that he never minded when someone said “I can’t stand John Howard”. And there were plenty of Howard haters. He said that as long as Australians knew what he stood for, that was the most important thing. Howard’s longevity as prime minister is a testament to that truth. No election was easy. His first year in office was marked with early chaos, but also a first budget that defined the commitment of Howard and treasurer Peter Costello to economic management. Howard’s convictions and persistence, his determination to take voters into his confidence by articulating Liberal Party values day in and day out determined each election in his favour.
Fast forward 20 years. The country’s need for successful, stable leadership has never been greater. After seven disastrous years under Kevin Rudd and Julia Gillard and the removal of Tony Abbott, the expectations on Turnbull could hardly be greater. And the Prime Minister added to the already heavy burden of expectations by premising his takeover on being better able to formulate and articulate a reform agenda.
Howard melded ambition with conviction and confidence with humility. Turnbull has ambition and confidence in spades. But convictions and humility? After more than six months in office, those leadership traits are not yet evident. In his address to the same audience on Friday night, Turnbull alluded to “Liberal values”, then proceeded to talk about innovation and science and a fully costed defence white paper. He described changes to the Trade Practices Act as a signature reform of the Turnbull government. He invoked the lawlessness of the CFMEU to defend the need for an Australian Building and Construction Commission. He said the Liberal Party is “sunny, optimistic …. and filled with hope for the future”. He finished by saying the next election would be a contest of ideas and values as espoused by Carrick.
Notice the gap? Like the curious incident of the dog that didn’t bark in a Sherlock Holmes story, Turnbull’s failure to mention the core issue of fiscal repair offers telling clues about his leadership. When you mention “Liberal values” without mentioning fixing the nation’s debt of $400 billion and the $37bn federal deficit, there’s a leadership vacuum in this area. After all, if a Liberal Prime Minister can’t or won’t use every opportunity to talk about core economic challenges to curb spending, who will?
Maybe Turnbull will unveil a brilliant budget plan on May 3. When he addressed the Victorian Liberal Party state council on Saturday he alluded to tax changes, warning the budget will not be a fistful of dollars, but one of “prudence, fairness and responsibility”. Now Turnbull needs to sell the fiscal reform message with conviction and humility in every speech, at every press conference, during every interview, before, during and long after the budget. Assuming you’re smarter than everyone else in the room is not leadership. It can lead to delusions of grandeur where you suppose that just because you see greatness in an idea, those less smart than you will follow. Voters won’t love you, let alone respect you, for that.
Not for nothing has Rudd’s former adviser Bruce Hawker warned of the similarities between Rudd and Turnbull. As if that’s not enough, Abbott’s episodic attempts at wrecking the Turnbull government have also drawn comparisons with Rudd the wrecker.
It’s hardly a healthy state of affairs for the Liberal Party, let alone leadership of the nation, when the current Prime Minister and the former prime minister are both being likened to the former, former prime minister.

Self-serving industrial relations club is destroying jobs

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Who can forget former Labor minister Craig Emerson’s impromptu gig in the Parliament House garden, gyrating as he sang: “No Whyalla wipe-out there on my TV shocking me right out of my brain.”
This cringe-worthy performance followed an April 2011 visit to Whyalla by then opposition leader Tony Abbott, who predicted the city would be “wiped off the map” by Julia Gillard’s carbon and mining taxes.
Well, five years on, despite attempts to prop up Whyalla by centring several government services there, the mainstay of the city’s employment, the Arrium steel mill is in administration as attempts are made to save it from bankruptcy. Thousands of jobs are at stake and a metaphorical “wipe-out” could be on our TV any time soon.
Of course we are told the collapse of the steel mill has nothing to do with the carbon and mining taxes (since removed thanks to Abbott). Nor does it have anything to do with high wage rates, antiquated work practices, uncompetitive coastal shipping charges or high energy costs, particularly in South Australia where, because of the heavy investment in renewable energy, electricity prices are among the world’s highest.
Labor, the trade union movement and their fellow travellers will argue the problem is poor management, bad investment decisions, cheap imports and the high dollar.
No doubt these points have limited validity and are similar to the arguments used to lament the passing of our car industry, two of our six primary aluminium smelters, the dramatic shrinking of our oil refining capacity, the disappearance of several food processors and the collapse of our wool processing industry.
In other words, if only we had smarter managers who, rather than seeking taxpayer support, would keep pouring endless private capital into loss-making ventures. And smarter governments that, instead of signing free-trade agreements that facilitated competitive imports, would erect tariff barriers to keep out cheaper foreign goods. Let’s go back to the good old days with a fixed exchange rate and high import barriers, when trade unions flourished and protected industries produced inferior expensive products and service was dismal.
Maybe, with taxpayers standing behind our banks, and with government back into telecommunications, it won’t be long before we are de facto owners of steel mills too.
Why not yield to the industrial relations club and embrace compulsory trade unionism? Let’s have the Fair Work Commission decide how many hours we work, our pay and conditions. How simpler life would be.
Fanciful? Perhaps. But the tentacles of government are so deeply embedded within every aspect of commerce that many small businesses are closing or breaking the law to survive.
Under the motherhood catch-all of safety, unions have shamelessly used their political muscle to place metaphorically a government official into every workplace, unionised or not, to enforce costly standards that are more self-serving than safety related.
Witness the minimum rates the Road Safety Remuneration Tribunal can set for owner-operators. It is an example of government doing the bidding of organised labour to push owner-drivers into bankruptcy and drivers into union membership. But if the ends justify the means, so be it.
In an election year don’t expect any light to shine on the root causes of our disappearing manufacturing sector, least of all industrial relations. Such is the awe the political class has for the industrial relations club that the parliament, faced with compelling evidence, still condones a union protection racket by rejecting the reinstatement of the Australian Building and Construction Commission. In a similar abrogation of responsibility, the Turnbull government will defer the abolition of the RSRT until after the next election.
How convenient, then, that Industry Minister Christopher Pyne can take a “bipartisan position” on Arrium, claiming with opposition infrastructure spokesman Anthony Albanese that management “clearly stuffed this up”. What a relief. Bad management was to blame. Why then the need for Pyne to back Labor’s plan to require federal, state and territory infrastructure projects to purchase Australian steel?
And how does this reconcile with the Prime Minister’s slogan urging us to be “more innovative, more competitive and more productive”? Of course it doesn’t. But better to sound all-knowing and act like a benevolent uncle, promising to care for vulnerable workers, than address the government imposed rigidities at the heart of Arrium’s woes.
Of course attacking bosses plays to the politics of envy. But it’s ingenuous. Not all manufacturers have poor management and, competent or not, they all have to deal with suffocating policies imposed at the behest of a collapsing labour movement representing only 15 per cent of the workforce. Indeed, unions have negotiated an unmatched place in the law. If not above it, the state extends completely disproportionate power and privileges to them. Despite having significant commercial interests, they enjoy legislated exemption from income and capital gains taxes. Their officers are largely free from provisions of the Competition and Consumer Act and, they are overseen by a judicial system where umpires are drawn from a sympathetic gene pool.
No government has yet demonstrated the courage to deal with this inequity. Malcolm Turnbull has ruled out changes to workers’ conditions. He told the Business Council of Australia last year his government was for “high wages and generous welfare”. So no hope there. A new wave of nation building projects will be promoted as an economic cure-all, further distracting from the task of industrial relations reform.
But the truth will out and as more Arriums present, the cumulative damage from Australia’s job-destroying industrial relations club finally may be exposed for what it is: a self-serving cartel. Perhaps this will encourage someone with the will, tenacity and support to finally break it up.

Welcome to hell, Mr or Mrs Australian citizen

Hello Mr or Mrs Australian citizen. Are you planning to move house? Be very careful, very careful indeed. According to official advice from the Fair Work Ombudsman, when you go to hire your removalist, through no fault of your own, you could be investigated, prosecuted and fined by the Australian government.
In compliance with the terms of an “enforceable order”, issued by the Road Safety Remuneration Tribunal, which came into effect on April 4, a “hirer” is defined as “the party to a road transport contract, other than the contractor driver”. The FWO has confirmed the order “could cover an individual hiring a contractor driver to transport personal household furniture”.
Journeys covered by the order are journeys longer than 500km or more than 200km and across state borders.
A driver covered by the order is a self-employed “contractor driver”, who, if they were not self-employed, would be an employee covered by the Road Transport and Distribution Award 2010. Job classifications listed in this award include furniture removers, assistant loader, courier and driver.
Therefore, if you want to move from, for example, Sydney to Melbourne, or Yamba to Brisbane, providing you hire a removalist who is a contractor driver, and depending on the size of the vehicle your furniture goes in, you must pay a price according to the bewildering schedule of “safe rates” listed in Schedule B of the RSRT order.
Failure to pay the correct rates is a breach of the law, and hirers are liable for their part in breaches.
So how are you supposed to know, when you arrange the move, whether your removalist is a contractor driver covered by the order, or an employee driver not covered by the order? How are you supposed to know the size of truck and get the price right? How are you supposed to avoid breaking the law?
There is no way you can know, of course. It is not humanly possible to know. You could very easily break the law without knowing. All you can do is ask the removalist, rely on their word, and hope they are both truthful and in full understanding of whether they are covered by the order.
If someone thinks breaches of the order are occurring, they can anonymously dob your removalist in for investigation by the Fair Work Ombudsman. Businesses dob their competitors in like this all the time, especially when they think their competitor is taking market share and must be undercutting their prices.
If this happens, you will be caught up in a nightmare. Fair Work Ombudsman inspectors can enter premises without warrant or permission. They could turn up at your work, ask to interview you, inspect documents (such as your removalist invoice) and take copies.
The inspectors have the legal power to require you to give your name and home address and provide evidence, for example by tendering of your driver’s licence.
Failure to comply with this can result in your prosecution and fines of up to $5400.
Inspectors could then send to your home a “notice to produce records or documents” and if you don’t comply with the notice, you could be prosecuted and fined up to $10,800.
If you are prosecuted and found to have breached the RSRT order, by not paying the required rates that hirers of contractor drivers are required to pay, the maximum penalty, again, for you, is $10,800.
Your ignorance of the rules will be no excuse, especially now that you have read about this staggering situation in this newspaper.
Welcome to hell, Australia. This is what happens when you elect Labor governments.
They give the unions too much, and everyone suffers the consequences.

Apr 11, 2016

Technology f*cked us all: The anxiety driving Donald Trump and Bernie Sanders is really about machines taking our jobs - Salon.com

Peel away the billionaire braggadocio, set aside the insults and bile, and Donald Trump is running for president on a promise to build a protective wall around America’s white working class. Most famously he is promising to build a physical wall on the Mexican border – which he will somehow persuade the Mexicans to pay for – to protect American workers from immigrants bent on stealing their jobs. But he is also promising to build trade walls by renegotiating free trade agreements so workers in China and elsewhere can’t undercut American workers. And he is promising to wall us off from the world diplomatically so American blood and treasure will no longer be spent defending our allies in Asia and Europe.
This is the core message Trump hopes to ride to the Oval Office: If we build a big, beautiful wall around Fortress America, we can sustain ourselves without the help of the rest of the world.
Let us ignore for a moment all the practical reasons why this make no sense. Forget that, whoever ends up paying for it, no wall can keep out desperate, hungry people who already tunnel miles underground and cross searing deserts for a better life in America. Forget, too, that with more than 11 million illegal aliens living in this country, some of them for decades, we are never going to be able to send them all home. And forget that free trade deals, while they do send many jobs overseas, also benefit Americans by reducing the cost of goods we all buy.
Forget all that. Trump is wrong because, while he, along with Democratic firebrand Bernie Sanders, have tapped into the deep pain being felt by America’s working class, they are misdiagnosing its root cause. Companies have always cut costs by shopping around for the cheapest workers. Bankers and corporate executives have always taken their profits first and absorbed their losses only after everyone else has suffered. Politicians have always sided, often corruptly, with whoever holds the most money and power.
What is different today, and what is ailing America’s working and lower-middle classes, is the way machines have fundamentally reshaped the work undereducated workers do. Advances in technology are gradually draining the skill and human judgement from every kind of working-class labor, from weaving a bolt of cloth to frying a hamburger, giving companies free rein to transfer once reasonably well-paid skilled and semi-skilled American jobs to unskilled foreign workers, both here and abroad. At the same time, advances in communications and transportation have enabled companies to build truly global supply chains, opening the way for them to shop the world for the cheapest and least powerful workers to do the job.
Together these forces, the de-skilling of human labor and the shrinking of the world of commerce, are helping corporations grow ever larger and more powerful and shifting ever more earning power from the assembly line to the executive suite. The more money and power the elite amasses, the more they can game the system to amass more money and power, until you’re left with a situation like ours, where a typical CEO makes 330 times more than the average worker and the top 1 percent of Americans hold 40 percent of the country’s wealth.
The growing gap between rich and poor in America is morally appalling and politically unsustainable, but many of the forces driving the disparities are systemic and irreversible. No wall we can build will stop the seepage of jobs overseas in a fully globalized and technologically mobile world, and a shift to a democratic socialist model that worked for highly homogenous northern European countries in the middle part of the last century is unlikely to work in our own fractious, racially diverse country facing 21st century problems. Whether we like it or not, we are stuck with the world we have made, along with the deep problems it is causing us, and we have no choice but to innovate our way out of it.
The thing is, we did it once before. In the 1930s, when mechanization finally pushed America’s small farmers and sharecroppers out of the fields and into factories, we saw a profound shift in the role of government in people’s lives. When poor people could no longer feed themselves from their own plot of land, however meager, governments had to step in to find new ways to feed the hungry and care for the sick and elderly. The Soviet Union responded to this crisis with Communism. Central Europe responded with Nazism. America responded with the New Deal. Then, 10 years later, we had a war to see which system worked best.
America won that battle, and in the process set off the longest and most prosperous economic boom in our history. But now that boom has run its course, and we must reinvent ourselves once again, this time for a very different world.
As was the case in the 1930s, when the developed world at last felt the consequences of a century-long shift from an agrarian society to an industrial one, our present challenges have a long history. As early the 1950s and ’60s, global markets were pushing good union jobs overseas and technological advances were turning skilled jobs into less lucrative semi-skilled ones. But today, when robots build cars and the digital revolution is tossing entire job categories – office assistant, taxi driver, newspaper reporter – into the trash heap, the sheer rate of change is starting to have political ramifications.
So far, though, America’s political class, including the current crop of presidential contenders, hasn’t begun to grapple in a serious way with how machines are changing the nature of work, especially at the economic margins. In part, this is because American political elites are themselves creatures of the knowledge economy and don’t feel the pain of the shift from an industrial economy in the personal and direct ways so many of their less educated constituents do.
Then, too, there is the problem of mounting a coherent campaign against technological progress. People love their gadgets, which bring them things they want cheaply and instantaneously. Digital communication may be picking clean the lower rungs of clerical workers, from receptionists to mailroom employees to inventory clerks, but try coming up with a political slogan denouncing email.
More troublingly, forces like technology and globalization are faceless abstractions, and in the heat of a campaign, efforts to combat their ill effects often devolve into scapegoating and demagoguery, as this year’s presidential contest has shown us all too well. A crowd that might sit on its hands for a lecture on the changing nature of work in a globalized, digitally connected world will cheer lustily at crude denunciations of Mexican immigrants or crafty Chinese businessmen stealing American jobs. This fury, while it turns out voters, can also send us tilting at windmills, chasing solutions that are wildly impractical, morally objectionable, or just plain counterproductive.
Still, as a society, we must learn to rage against the machines, not in the destructive sense of the industrial-age saboteurs who threw their wooden shoes into their machines to break them, but thoughtfully and creatively. In every past burst of technological progress, the jobs that were rendered obsolete by the new machines were eventually replaced by new kinds of work made possible by the new machines. But that doesn’t simply happen by natural law. We have to make it happen, the way Franklin Roosevelt did when he started experimenting wildly with the levers of government to stop capitalism from devouring itself.
And we have to start making it happen now. The longer we allow machines to shape our work lives unchecked, the more we will see wealth concentrate in the hands of those who design and finance those machines. Already, technology and the globalizing effects technology makes possible have hollowed out American factories and sucked the economic life from a few select knowledge industries like journalism, and now even workers in solidly upper-middle-class professions like law and medicine are starting to see their work de-skilled and outsourced to other countries.
Man vs. machine: It’s the defining issue of our age.

Apr 7, 2016

Melbourne victory on western front keeps Australian dream alive

There is a powerful demographic transformation under way in Australia that will continue to play out for another generation. One of Australia’s largest cities is re-­balancing its urban form to deliver a long-term shift in the demand for housing, infrastructure and commercial property.
This is a once-in-a-generation property transformation and it’s taking place right now in Melbourne. Yes, Melbourne, that rustbelt city that couldn’t hold on to its state bank in the early 1990s is now this nation’s property powerhouse. Why? Well that’d be ­because the city’s demographic weighting is shifting from the east to the west.
For 160 years Melbourne’s suburbia pushed east into the soft ­alluvial soils of the market gardens, the orchards and the dairy farms that led to Lilydale and ­beyond to the Dandenong Ranges. Then in the late 20th century the mighty Maroondah corridor bumped into the hills and the city’s growth deflected south into the Cranbourne-Berwick-Pakenham corridor.
But then in the late 1990s something odd happened: the city lurched in a different direction. The completion of the Western Ring Road in 1998 was part of the reason but it was more than this. The eastern push of car-based Melbourne had simply reached the limits of commutability at Pakenham, 55km from the CBD.
The city’s far-more-accessible western edge started to look mighty attractive and especially with new suburbs like Caroline Springs, west of Deer Park, and Point Cook and Truganina on the Geelong-facing front all located barely 35km from the CBD. Sure, the west’s treeless volcanic plain and sewage ponds created development challenges, but nothing that couldn’t be overcome with good land-use planning and a robust planting schedule.
All of a sudden Melbourne ­delivered something that Sydney could not deliver: affordability and accessibility. House and land packages on Melbourne’s western edge start at the mid-$300,000s and are less than 40km from the CBD. The best Sydney can offer in the affordable-housing space is mid-$500,000s at Kellyville, 45km from the city centre.
Melbourne has added more people than Sydney every year this century, challenging the demographic dominance of the harbour city that had ruled since Federation. And the trend continues. Figures released by the ABS last week show Melbourne adding 89,000 residents, versus 81,000 for Sydney, over the year to June 2015. But the significance of the Melbourne ascendancy is more than the volume of growth, it is the city’s shift from the east to the west.
The infrastructure underpinnings of Melbourne’s urban mass need to be rethought: new railway lines (regional rail link), new freeways (Western Ring Road upgrade), new river crossing solutions (Western Distributor), new and expanded shopping centres, industrial space and office parks. And whole new suburbs must now be conceived and ­delivered.
In the year to June 2015 the City of Melton and the adjacent City of Wyndham added 15,300 residents, making this “western front” the fastest growing region in Australia. The Gold Coast held this title every year during the late 20th century, but the Coast’s annual growth has contracted to 11,000.
Melbourne’s northern front (Hume and Whittlesea) added 13,900, while the southeast corridor (Casey and Cardinia) added 12,900 over the same year. Sydney offers annual growth of 11,000 in the west (Blacktown and Penrith) and of 12,500 in the southwest (Liverpool, Campbelltown and Camden).
The great commuter corridors of metropolitan Australia have for a generation reinforced the existing urban form: Brisbane to the north and south, Perth to the north and south, Sydney to the north, south and west. And all this, of course, makes perfect planning sense since new growth leverages off the community’s investment in existing foundation infrastructure.
But Melbourne is different. Here is a city that is reconfiguring its urban form and where the west is virgin territory. Everything has to be imagined from scratch. Melbourne used to push east but it is now shifting its demographic weight rather like an elephant getting more comfortable as it rouses from a bit of a lie down on the African savannah. Every shuffle of Melbourne’s heaving urban mass creates localised demand for new housing, new railway lines, new motorways and new workplaces.
Melbourne’s development front isn’t hard to see and nor is it unclear as to where things are headed. Thanks to the urban growth boundary the trajectory of development within Melton and Wyndham is neatly corralled for the balance of this decade and into the next.
By the middle of the 2030s, as Melbourne passes the six million mark, the western front now connecting Melton and Wyndham will have fused into a single urban coagulation not unlike the city’s eastern side. The western front’s Hopkins Road, for example, could evolve into something like the west’s equivalent of the east’s Springvale Road.
Why should business have faith in the future of Melbourne’s west? Because Melbourne’s west is this nation’s last untamed urban frontier. There is nothing quite like Melbourne’s great east-to-west switcheroo that is planned, or that is even likely to be planned, for at least a generation, if not two. Perth isn’t going to push east. Brisbane will not reach out to Toowoomba. Sydney cannot push east.
If Australia is to top 40 million by mid-century; if Melbourne is to approach eight million by 2050; then a fair proportion of this net additional demographic weight will land on the patch of dirt that lies within the urban growth boundary and bounded by Caroline Springs, Melton and the northern edge of Werribee.
Not only will Melbourne rebalance in the first-half of the 21st century, but in so doing it will offer what Sydney cannot offer or will not offer, and that is housing ­affordability. And the reason why Sydney cannot offer competitive housing affordability is because it can no longer deliver developable land within 40km of the CBD.
If Sydney wanted to compete in this space then strategic planners should have reimagined Sydney as a Dallas-Fort Worth binary city, probably inclusive of a bigger Parramatta, from the 1970s onwards. Such a strategy would have opened up Wollondilly to urban­isation within commutable distance of one of greater Sydney’s two CBDs.
Not that this “lost opportunity” will worry Sydney; that city will continue its trajectory as a global city attracting global knowledge workers and it will allow Melbourne to accommodate those who cannot afford to live in Australia’s Manhattan.
Melbourne, on the other hand, will continue to do as it has always done and that is deliver on the Australian dream of home ownership. But rather than deliver this dream exclusively through the quarter-acre blocks of the eastern suburbs, Melbourne will reimagine the dream in the west.
This raises an interesting question: which city — global exclusive Sydney or broad inclusive Melbourne — will ultimately deliver the better lifestyle and opportunities to its residents?
The taming of Melbourne’s west is a break-point in the ultra-long-term visioning of the two greatest cities on the Australian continent.
Bernard Salt is a KPMG partner and is an adjunct professor at Curtin University Business School.