Australian Politics and Policy - Senior, 2019a

Government–business relations
industry policy that are compatible with the free market: passive and anticipatory
industry policy. Passive industry policy does not mean that government does not
make policy for industries; rather, government focuses on establishing conditions
that support competition within all industries. This may include monetary policy,
establishing trade agreements that are beneficial to businesses, enacting competition
regulation to prevent monopolies and other non-competitive practices,
reducing taxation and compliance costs, or incentivising research and development.
Anticipatory industry policy involves governments making policies that
target particular industries. In anticipatory industry policy, governments attempt
to stimulate or assist certain industries to achieve desired economic outcomes. This
canbepoliticallyriskyasitrequiresgovernmentsto‘pickwinners’–ineffect,to
predict what will happen in the future, and attempt to stimulate and incentivise
firms in a particular industry to change their market behaviours.
For example, during the 2008–10 Global Financial Crisis, the Rudd government
introduced a series of industry policies designed to stimulate the economy (or
‘fiscal stimuli’). A green car initiative was introduced to subsidise the automotive
manufacturing industry to develop fuel-efficient vehicles, enabling the industry to
compete internationally by using Australia’s highly skilled workforce to develop
sophisticated technologies. In addition, funding was provided to schools for
building halls and fences (to stimulate the construction industry), subsidies were
provided to householders to install roof insulation and individuals receiving
education assistance or family welfare payments were given a one-off cash payment
of approximately $900 to stimulate the retail sector. While not considered
protectionism per se, this level of government intervention in the economy
challenged the orthodoxy of the previous decades’ market reforms.
These types of intervention reflect anticipatory industry policy, wheregovernments
attempt to achieve economic objectives through direct intervention. Where
anticipatory industry policy differs from protectionism, however, is that it tends to
be for a specific purpose and for a short period of time. Protectionism, as practised
in the postwar era, on the other hand, was a long-term, institutionalised policy
designed to reduce the impacts of international competition. The Rudd government’s
policies were designed to stimulate, not protect, the industry. Nevertheless,
then Prime Minister Kevin Rudd wrote:
Thetimehascome,offthebackofthecurrentcrisis,toproclaimthatthegreatneoliberal
experiment of the past 30 years has failed, that the emperor has no clothes.
Neo-liberalism, and the free-market fundamentalism it has produced, has been
revealed as little more than personal greed dressed up as an economic philosophy.
And, ironically, it now falls to social democracy to prevent liberal capitalism from
cannibalising itself.
Industry policy can be further classified into two different types (which may
be either anticipatory or passive). Horizontal industry policies apply to all industries
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