Why Australia should fund science research and technology development, and why Australia doesn't!

During the 2016 election the incumbent Liberal-National Party Coalition bombarded Australians with slogans such as “Ideas Boom”, “Culture of Innovation” and “Jobs and Growth”. And yet funding for Australian science is at its equal lowest level ever recorded. The argument for funding science and technology is that it drives innovation, which in turn is good for jobs and growth. But is this really true? Since most technology is invented and manufactured overseas and can be imported as needed, is it really necessary for Australia to “waste” money on science and technology?

The concept of continually growing the economy seems unsustainable on a planet with finite resources, finite access to energy, water, living space and arable lands. In such a closed system it is impossible to continually grow and consume resources. John Stuart Mill, one of 19th century’s most influential thinkers on liberalism argued that the logical conclusion of unlimited growth was destruction of the environment and concluded that a stationary state was preferable to unending economic growth.

So why do we need to grow the economy and is science and innovation relevant to this?

It is useful to think of the global economy in simple terms. In the distant past humankind lived in relatively small groups. Items, like food and utensils, tools or ornaments, were either traded directly or for tokens (money). Such a simple economy could be static with the quantity or total value of money fixed. For people to survive they would need to produce food and shelter for themselves or some other item or service that could be exchanged for food and shelter.

The downside of such a system is that few, if any, could afford to build a new or better way of grinding flour or to make more carts to carry produce. The creation of the finance system provides one solution to this dilemma. People lend the money to those who want to create new things, with the expectation that more money is returned than was lent. That is, the loan is repaid with interest, which is the incentive to lend money in the first place. This system enables new, better or a greater number of objects or services to be created. This is the economic (capitalist) system in which we find ourselves - the money is used to develop capital (stuff) that enables us to increase wealth.

Although we often hear about the banks and other institutions in the financial sector “making money”, they don’t actually make money or create wealth. The financial market does not produce anything. But with each dollar lent, the total amount of money must increase since interest must be paid and the financial institutions take some of it each time it passes through their hands.

The amount of money in a society can increase in a number of ways. Money can be taken from someone else, where some people become poorer and others become richer. This was done in the past by “robber Barons” and is associated with social inequity, social upheaval and quite often ends in revolution. It is interesting to view the current trends in society where more and more of the worlds wealth is being controlled by fewer and fewer people. The “robber Barons” have been replaced by a new ”management class” whose role is increase benefits to themselves (huge salaries and pay bonuses) while reducing benefits to others (reducing wages growth, limiting tax payments that benefit society, and so on).

A better way to increase wealth is to create more products, and since products have value this effectively creates money. But creating more products requires an increasing demand for them, often underpinned by population growth. With an increasing population there is an increasing demand for food and shelter, so that more farms, mills and carts are required and the wealth of the economy can increase. An increasing demand for products and services can also be achieved by selling to the nearby town. The wealth of one town increases at the expense of the other, unless both towns sell to one another.

This system has been around for many thousands of years, and yet the rapid rise in prosperity of nations and the globalisation of markets has not been driven by population growth and transference of money, but by science and technology.

The industrial revolution was built on an understanding of the thermodynamics of heat and work as embodied in the steam engine, leading to new machines for mass production, opening up new markets and creating wealth. The rise of the global economy was driven by an expansion in transportation, such as rail and steam ships, and by enormous improvements in communications through radio and cable. In the twentieth century, advances in solid-state physics underpinned the new semiconductor industries resulting in the vast number of electronic technologies that we see today. Science and technology has had a profound impact on the economy, because now monetary growth can occur through the creation of new products and by creating desires for things that never before existed. One hundred years ago we did not have mobile phones but now some of the most profitable companies exist because of the demand for such technology. If it wasn’t for science and technology, the rise of world economies could never have happened. We would not have had enough energy (such as electricity) to drive new developments, and the ever increasing need to generate more money would not have been fulfilled.

So where does Australia fit in on the world scene?

Australia’s wealth is built on natural resources that others pay for. Australia exports food to the rest of world to feed the growing populations and its mineral resources are in demand by manufacturing nations. Additionally the Australian government promotes foreign investment to bring in money to spend on products and services, creating employment. And of course, Australia’s population has continued to increase, creating more demand for products and furthering economic growth. Whenever the population growth starts to falter, our government panics and looks at increasing immigration or looking for incentives to enhance “local production”!

Despite Australia having large areas of available land, house and land prices in Australia’s major cities are higher than most major cities in the rest of the world, like New York or London. One can also take a cynical view and say that the rise in the cost of housing is good for the economy because it returns more to the finance industry and forces people to work longer and harder to repay loans. The fact that fewer and fewer Australians can afford housing should be a forewarning of social unrest.

Let us ask the question. Should Australia invest in science and technology? If Australia is content with mining, selling agricultural products, increasing its population to drive a growing economy, paying more and more for housing then there is no need to invest in science and technology. With a growing economy Australians can always purchase technology from other countries.

But this is a very short sighted view, unfortunately one that is adopted by the current Australian government. Future global trends are not in Australia’s favour. On our planet we cannot indefinitely increase the population so we cannot rely on population growth to maintain the economy into the future.

Globally, people are realising the true cost of energy, the impact of our actions on the environment and the economic advantage of technologies that require less resources in their manufacture. These factors impact on the wealth of mining and agricultural resources. If there is a drop in demand for natural resources, Australia’s economy will falter, as indeed it is now doing. Inequality in the system, such as rising household debt and homelessness creates an unstable social situation. So while Australians don’t need to invest in science and technology they are gambling on the continued demand for Australian resources into the future.

Technology is potentially a high-value add commodity so that greater wealth can be generated using less. And very importantly, industries based on science and technology provide rewarding job opportunities for a highly educated work force, such as found in Australia. The problem with investing in science is the long lead time before there are profitable outcomes.

Australia also suffers another problem - its industries are not used to developing and adopting new technologies but are stuck in a 19th century colonial view of importing such goods from overseas. Most leaders of industry in Australia are lawyers or accountants. There are very few people on industry boards who have backgrounds in science.

Also, there are no natural conduits to translate science and technology into industry outcomes. There is an expectation that this will be done by the scientists themselves, which is flawed. Certainly this is what the current Australian prime minister thinks, who is a laywer and investment banker. In my experience with Australian industry it is necessary to present them with a finished product that they can manufacture and sell - there is very little desire to take a prototype and invest money to develop it to a commercial product. Moreover, as a scientist you are expected to present industry with a business and marketing plan and an estimate of the number of units that can be sold per year. Such a market understanding is usually beyond any knowledge of most scientists. To gain such an understanding requires many years working in the market. Although industry themselves often have this information, in Australia they see this as intellectual property that gives them a market edge and they do not divulge it. So its “catch 22”!

Science and technology has underpinned the global economy for over 150 years and we don’t know what it will do the future. As a nation Australians have a choice, but it would be foolish and short sighted not to invest now.

Back item1