San Francisco

Q: What do you understand about the term "knowledge economy" and how does it apply at a national policy level?

A: We talk about it a bit more broadly. Kim (Beazley) uses this concept of the "knowledge nation". It is the knowledge economy and a bit more.

I don't know that I could give you a pat definition, but I can certainly give you the elements. What we mean by knowledge nation is that if you ask what is a successful country going to look like in 2010 - maybe ideally you ought to be saying 2050, but let's say 2010 - what are the signposts of economic and social success? To what extent will you be able to drive your economy by the products of your education, the products of your research institutions and your R&D? Will you have a framework in place to capture the value that those ideas create and turn them into wealth, jobs and businesses? That's why we talk about knowledge nation, not just knowledge economy.

The social aspect of it is the extent to which you can equitably distribute the access to and the opportunity to participate in that economic success. A knowledge economy has within it the potential to make the social divide worse. I don't think it needs to do that. I think the Industrial Revolution had that within it, and did for a while, but didn't need to. It wasn't necessary for the success of the Industrial Revolution. You can have social policies that have some, if not all, of the economic benefits without the social price.

That's why we talk about the knowledge nation and I think crudely put those are the elements. If you try to define it too precisely, you'll be wrong in six months.

Q: There's an obvious imperative to understand this when constructing policy. What do you see as the political environment for the Australian Labor Party to be doing this now?

It's a potential point of political product differentiation for us because I don't think there is either in the reality or the appearance, faith that John Howard as a person, has a vision of what Australia will look like in 2010. John's not seen as a forward-looking evangelist of the new. He is essentially someone who yearns for the past and protects what he sees as best of the present and is not driving forward in the new direction.

That doesn't mean nothing has happened. Of course, you can see individual things being done that have merit for the future. But as a sustained view of Australia in a decade or 50 years, it's very hard to imagine John as the advocate or apostle. First of all, in education and R&D, there are opportunities because you can see gaps there. Second, you can't just seize every gap. There is a gap that fits what we are comfortable with for two reasons.

One is, this is interesting, although a bit obtuse, but let me make the point and then I'll make a more hard-nosed point. There is an interesting debate about the nature of a 21st century social democracy. What does it mean to be a 21st century social democratic party in this so-called new economy?

It's a great debate, but what it certainly means is that education is the core driver. It's about education as an economic driver and education as a social bridge. There is no question about that. Education broadly defined means life-long education and workplace training as well as formal education.

Secondly, it's what Kim's very comfortable with and you always do better with things that you are comfortable with.

If you are in the professional political business you can make a fist of anything, any policy area. But you do better at the things you're passionate about. The public is pretty discerning. They'll say "he just learnt that by rote".

When Kim talks about education and R&D his eyes sparkle. And as everyone knows it's also true of defence and national security questions. We all have things that drive us. John Howard has them. They are essentially about indirect tax and labor market reform. He's had that passion for 20 years. I don't agree with it, but I respect it. He's been consistent.

Most people who come into public life with any sort of aspirations for executive government as against legitimate aspirations just to be in representative politics, usually have a couple of issues that are the core ones that drive them. Well, education and R&D are central to Kim's motivation.

So, we think it's a political opportunity and one we are well placed to take advantage of both philosophically and by the good fortune of the individuals we have in the leadership. Kim and Simon (Crean) have both been Education Minister, they see it as central to their raison d'etre, so we'll do it better.

Q: By communicating the notion of a society that is based on the value of knowledge, is there a danger that you can get caught in a trap of being seen as completely reactionary on issues like education or industry policy? How do you imbed a broader message?

A: Correct question, and I probably left a stage out in my explanation that you picked up.

The other aspect of the political opportunity is articulating alternative paths to economic growth. That is what underpinned what I said about the social democratic as opposed to the conservative.

Crudely put, there are essentially two, internally consistent strategies for creating jobs and economic growth. Particularly for Australia, but not exclusively, what gives it a slightly different resonance here is our strong resource base, the very unusual shape of our economic resources compared to most Western countries.

There is essentially a low-skill, low-wage route, and a high-skill, high-wage route. I mean, that sounds simplistic, but it fairly easy to define. There are common elements to both. They are not totally divergent. They are both going to have mines in them and they are both going to have successful farms in them and all those things, so I don't want to be absurd about it.

Peter Costello summed it up to some extent. His view is that the key solution to unemployment in the bush is the low-skill, low-wage solution. Well, we don't think that is right. There is going to be, and there always has been, wage differentials. It's a factor that must emerge. The laws of supply and demand will work but the social consequences of having it as your primary policy driver are terrible. Economically it's also the wrong strategy. You are getting a little element of differentiation that will occur most times, out of sync with the big issues.

When you go around Australia and look at the cities that are succeeding, they've usually got some kind of higher education campus, for example Armidale or Bendigo. A university or college brings people in, it brings high-skill, high-wage options. Different things spin off something like a university being in a town. High skill work in trades provides support to the scientific labs of the university. The trades people in mechanical contracting in the town are likely to get better jobs, get better wages, higher value.

So, it's not just that you get a few hundred academics and a few thousand students, it means the businesses in town have a different market to sell to. It also means the smartest kids can stay in town. The saddest thing is the perception that the success stories are the people who leave a town. It is not what you want but it's true both nationally and regionally.

The common element that can enable us to present this strategy in comprehensible terms to Australians across all metropolitan and regional areas from Campbelltown to Bendigo, is that it's about a high-skill, high-wage strategy for economic growth. It's not just about succeeding in macro terms, it's about the nature of that success. If we have more people in work, what are they doing? What are they getting in return for it? What's their life like?

If there is a defining concept out there at the moment, that's come to many people as a revelation - though I would have thought it was pretty obvious - it's this disillusionment with the major institutions of our country including the political parties and government. It's not just them. It's equally true of banks and the media and others. There is a disillusionment and disaffection. We keep hearing about a record period of economic growth for Australia but people are asking "well, why isn't my life getting any better?".

If they've got a job, they feel insecure in it, they're working longer in it, they see their kids less. Let's take a little example. You go from an 8 hour shift to a 12 hour shift, it probably makes the business more efficient. It probably also means two things. One, it could mean there's fewer people working there. But it also means you see your kids less. If you are the coach of the local football team, you can maybe do it. It sounds silly, but that's what gives meaning to people's lives, what they do outside their job as well as inside. And if you work seven to seven, you can't coach the local footy team. It's not possible. Suddenly that part of their association with their kids and their community goes up in smoke. The community loses and the individuals lose.

So, people are saying if this is the best it's ever been, if it's better than Bob Menzies' time, why aren't their lives getting better?

I think that is the reality for people. It's not some artificially created perception. That's their reality. I think we can actually communicate with that reality by saying it's not just about economic success. Economic success is important but you've got to focus on the nature of it, and it's about a high-skill, high-wage future for our kids.

Q: That sense of disillusionment is really the point at which the community generally is coming into contact with this great economic dislocation. As you say, it's the equivalent of the Industrial Revolution, this is a profound period of change.

The infrastructure of this new economic success is different from those of the past. Education is an obvious example, but we talk about bandwidth as an equity issue except it's an industry policy issue, because if you don't have bandwidth you don't participate.

A: It's both. It's also a regional development issue.

Q: Is there a difference between industry policy and regional development?

A: Simon would love you to say that! I agree with that, but that's Simon's passion, that the two things are essentially the same. I say that to some extent you can't look at them separately, but I also emphasise the differences a little more. Nevertheless, there's commonality. If you're going to have a successful region, it depends upon economic success in those regions, no doubt about that.

Q: That goes to my next question, whether the structure of government, the separation of responsibilities between portfolios and departments, is reflective of the social and economic infrastructure of the past. And whether it's able, in a mechanistic sense, to create the type of economy and society or support those policy discussions, policy issues and policy initiatives that we need to be looking at?

A: That's a really important question. I think that over the last 20 years or so, even though there's been a lot of change in the structure of Government, I think the changes have been for the better. It's become more contemporary, the bigger departments incorporating broader issues. I think that's a trend in the right direction, but I don't think we've got it right and I think we've got to re-examine the structures and processes of Government, just like in a small way we need to re-examine the structure and processes of the Parliament.

I mean, you can't lodge a petition electronically. Well, why not? No, I don't say there are not any issues involved because there are authentication issues etc, but why can't the Parliament adapt to that? It must.

If a petition is the way citizens convey their views to the Parliament, it after all has its origins in petitions of grievance.

Young people - not only young people, but young people in particular - communicate with each other and with authority and elsewhere electronically. Well, how can the Parliament not accommodate that?

That's just a micro-example. But it is interesting. We have to change that.

I think we have to look at the nature of governments.

Now there are two aspects to that. One is the so called whole-of-government approach. It's obviously very desirable as a goal that you want to focus all of the government's activities on key objectives. But I think it's a necessary part of the administration of anything to get your processes into manageable chunks.

One of my organisational precepts is you don't have to be able to do everything before you decide to do anything. So, I think you do have to accept that there's a compromise between the need to get broader structures with the fact that they have to be manageable structures.

There has to be some, albeit inevitably artificial, division and structures. Not because structure is so important, but because it has got to be manageable and capable of conceptualisation. People need to able to say "this is what I'm doing, this is my function, this is where I fit".

Several of the structures I'm about to express reservations about I was involved in creating, so I'm not just being smart at other people's expense. But I wonder whether we have got the relationship between industry development, communications and IT right?

When you have a department principally responsible for the development of our next century industry framework also having responsibility for mining but not for IT, I think you've got a problem.

No one can argue that mining is not crucial to the future of Australia. Of course it is. What we mine, how we mine it, what we do with it after we mine it is very fundamental.

But where public policy has the biggest impact is where the new industries are emerging. The new industries aren't always the most important but they are the ones where the function of public policy tends to be most important.

We've essentially got a pretty good set of public policies about mining because we've been doing it for 100 years. As it changes, we need to keep updating it, but this is not a new task for the public sector. We know Australians are pretty good at it and we advise the rest of the world. I've led trade missions where we were saying to other countries, we've got expertise. We can come over and help you set up a legal framework for the development of your mining industry. We're pretty darn good at that.

But, what is the public sector role in biotechnology, IT and the new industries? That is where the challenges are and where the public policy issues are most important. It seems strange to me that we have a departmental structure that says communications and IT is over there and industry is here and within it, it has departmental responsibility for the mining industry.

That is an issue we have to address and when, much closer to the election, when we will talk about what will happen if we win, it's an issue I expect to address. I have views about it but I haven't discussed it with my colleagues who have responsibility for resources, communications or IT. I have discussed it with Kate Lundy in IT, so she knows the direction of my thinking, but there are other colleagues I haven't discussed it with so I don't think I'll announce it to you first!

But it's an important question. I think the existing structure is anomalous and reflects a view about a different period in our economic history than the next decade. If you're saying, what is the structure that makes sense in terms of setting the pattern to take Australia to 2010, I don't think what we've got is it.

Q: What is the level of urgency here? Is it possible in a period of profound global economic change for whole nations to miss out somewhere along the way, or do you just participate at greater or lesser degrees?

A: I think it's the latter. If you take IT and biotechnology as examples of the new industries with the capacity to create new wealth, there's nothing in the existing pattern of development to suggest Australia is going to "miss out". But it is certainly arguable that there are questions of whether we're maximising our achievements and capabilities of the great things Australians are doing.

But you can say now, today, others are doing better and we could be doing more. The alarming thing is that when you look at the issues that drive success at least from the field of the public sector, we are going backwards.

These driving issues of success are investment in education, investment in research as well as incentives for business investment in research and development. It's very hard to find another Western country with our sort of aspirations that is going backwards in those three areas. So that's alarming. The 10-year view says that is the wrong strategy.

It comes back to this low-cost, low-wage, low-skill strategy. Otherwise you wouldn't contemplate addressing the 21st century by reducing your commitment to business expenditure in research and development, public expenditure and support for research and public investment in education. It just doesn't make sense.

It's hard to reverse. It's a pretty big ship we're driving here. You don't turn it quickly. To go back to your question about urgency, it's one of the dilemmas of Opposition. You see things that have to be done urgently, but you know you can't do anything about it for years except talk about it. Talking about it is a useful thing in a democracy, but it's very frustrating.

In the next two years, significant damage could be done and the longer this trend continues, the harder it is to reverse. You lose the election, you accept the consequences, but it means it doesn't come around again for another three years.

I don't want to be melodramatic about it. I think in 2010, Australia will be a very successful country who ever has been in government in the intervening decade and it will be a terrific place to live; one of the best in the world.

But you can see what it could do better both economically and socially.

Q: One of the things that's apparent in the United States is that they don't have the answers, despite the things that you see happening there driven by the liberation of information that are just phenomenal. You also see a digital divide that is deep and seems to be getting worse and there seems to be few coherent answers to that.

In the next two year period, if you are going to make this one of the foundation principles upon which you ask for a mandate to govern again, you would, I would imagine, have to develop a pretty innovative set of policies to address this. Does that demand an innovative policy development process as well?

A: I don't know that we need to transform the process in terms of what the first principles of the process are but some of the practical things might be different.

One thing to realise now more than ever is that Australia is not an island. The policy challenges we are facing, everybody else is also facing. They're facing it from a different starting point, so we can't just take their solutions and bring them here. But there are people, intelligent people, in comparable countries, grappling with these issues and we ought to go and see what they're doing.

I was in the UK in July, I got good access and I was grateful. I'm hoping to go to both Israel and the US in the next 12 months to look at what they've done. Other colleagues have done the same, Kim and Kate Lundy and Simon, they are all doing these things. They are not the only examples, they are just the most obvious ones. There are people around the world writing interesting things. You can't reach them all, but you can pick the best of them.

And of course it's going to be a fascinating time because in the US it's a presidential-election year. Not everything about a US presidential election is very elevating, but it does mean that you see three or four people, at the end of the day two people, grappling to say what the policy responses are to the challenges of the next five years. Like everything else, some of it's platitudinous and some of it's disappointing but some of it's bloody good too. So you will see some interesting ideas being articulated by the Bradleys and the Gores, McCain and Bush.

The British have done new things, experimenting and I think there's some lessons to learn. So, that's always been a part of developing new policy but it's more so now because of globalisation, which has somehow become a pejorative term. I don't understand why.

Globalisation is just a fact and public policy has to cope with its consequences. It's no good saying I wish it wasn't there. It's like the weather. What are you going to do? Say we don't want to have it thank you, please take the weather away! It just exists that you have good public policy to grab its strengths and cope with its problems.

But globalisation does mean that the challenges people face are more common so the debate about the solutions are more common, not the same, but similar. Then in our show, that's the thing about the ponderous beast that is the Labor Party, its internal policy processes are pretty challenging.

In the Labor Party people are not shy about telling you their views when you've got it wrong. And, as long as you are not a person who cannot take criticism, well, nine times out of 10 as a shadow minister, you'll prevail. The Party will support you. But you won't learn anything. You won't do anything new.

If you believe in democracy, you accept that most times, the more people who contribute ideas to an outcome, the better the outcome will be. That's the strength of our model. There is a fairly large group of people who have direct responsibility for recommending what the policy should be. There's an even larger group - that is the whole Party and particularly all the activists in it - who have the right to make an input and you've got to go and listen to them, hear what they've got to say.

So those principles about trying to get the best from the rest of the world and feeding it into an internal party process, I don't think they need to change. But what goes into that process is going to be different and therefore what comes out is going to be different. The challenges are different, for example people turning up at committees talking about issues of access to bandwidth are, as exactly as you say, industry development issues and not some discrete thing called communications policy or IT policy. (see related article: Bandwidth: An Industry Policy Issue)

There is actually an old concept in Australia that used to be part of the way the Government was structured called national development. It meant then building dams. But it's actually quite a good all-encompassing concept. If you take it that way and say that what we're talking about is not industry policy, IT policy or communications policy, but a national development strategy, then you can get a fairly all-encompassing approach and you can take an issue like bandwidth and put it into a bigger context.

You can't miss the issue when you turn up in Rockhampton and ask what the biggest issue is and they say bandwidth! They used to say cattle prices. Cattle prices are still important to Rockhampton, but what people talk to you about now is something like bandwidth.

It's a good thing. It shows they are very sensible about it.

Q: What's the driver there, is it the fact that there are changes in the cattle market that require them to have bandwidth?

A: No, sure the beef industry is interested, but I guess we've always underestimated the diversity of an economy like the one in Rockhampton. It's got a strong university and it is generating economic and research opportunities out of its industry base, its resource base and its higher education research base.

They can see that if you want to have the best jobs in all those sectors, rather than just being a long distance supplier to people who've got the best jobs somewhere else, you've got to have access to bandwidth. And they're right.

I don't know enough about the beef industry, but I'm sure it's true that some of the best jobs in the beef industry are going to depend upon the capacity to have that international access from Rocky. And we want to be able to do it there. We want to be able to have the best new jobs and apply them to the development and marketing of beef products. You should be able to do that from Rockhampton in the wired world of the 21st century.

It's a great thing. If you're the mayor or the local member for Rockhampton, that's what you should be saying to us. And to their credit, it's what they are saying to us.

When you talk about new industries, you have to be careful because a lot of people who work in what therefore are by definition "old industries" don't like it. I understand that, it's a perfectly human reaction. But the two sides of the coin are one, the application of that technology to the so-called old industries.

I always use automobiles as an interesting example. In 10 years time there's going to be a terrific and interesting automobile industry in Australia. Don't ask me to tell you what it's going to be like because I don't know. But if we are at the cutting edge of that technology - magnesium's the most interesting example but there are others too - the imperatives are driving lighter vehicles. There's no country better placed to be doing that and we're investing in being successful at that. (see related series: Ford Drives Motor Industry Innovation)

But it's also a matter of looking at ways to apply new technology to our traditional strengths and making those our niche in the IT market and in biotechnology.

As long as we don't talk about the "new" and the "old" in pejorative ways. For example, when you talk about "industries of the future", which I do a lot and I don't resile from using the term, you have to be careful it doesn't carry with it the implication that there is another thing called "industries of the past". Maybe eventually there will be, but you don't have to say that if you're not part of this future, be gone.

Socially, the national interest means you can't do that, but also, "industries of the future" are what I call the industries that are going to be creating new products and new jobs in 2010. Well, that's certainly the case for automobiles. That's certainly textiles and quite possibly, some of the niches in clothing and textiles. You don't have to say "well all those people, they're all written off, bad luck about them, we'll put them all on the dole for the rest of their lives". The future doesn't have to be like that as long as we're clever. They don't have to be left behind like that. (see related article: A Future for Our Factories?)

That's where the difference between knowledge nation and knowledge economy comes in. You don't have to leave other people behind to succeed. Maybe we have to pay a bit of a price to have an integrated, healthy society but you pay a pretty big price for the other.

I'm not just talking financially, but the simplest way is to pay financially. If you said to a lot of people around the world that if you paid a bit more money, your society could live in greater harmony, they would pay. In Australia, because we have an harmonious society we tend to take it for granted and perhaps don't invest as much in keeping the harmony as we might in other circumstances. We are in danger of starting to pay a price for that.

Politics is only the sharp edge of what's happening in society. Politics doesn't happen in isolation. It's just the sharp edge of what's happening in society as a whole. It makes social disharmony and division more vivid. It doesn't create social disharmony and division.