The most striking thing about PM Malcolm Turnbull’s new innovation statement — which appears to have all but disappeared from public discussion less than two days after its launching — is that it isn’t. Very innovative, I mean. As m’colleagues Razer and Murphy touched on yesterday, its model of how innovation works appears to be at variance with the way that “innovators” work, and how they think about what they do, and the returns on a lot of these companies don’t really justify public investment. Much of the most welcome part of it is the restoration of funding to the CSIRO, which is simply a reversion to rational modern government after a brief period of some weird mediaeval/Stalinist mix in which science was held to be both immoral and a political enemy.

But much of the rest of it is based not on an idea of innovation and change, but on an absence of it. There is, in the policy, a profound belief that the content of what you’re doing doesn’t change the form of what you’re doing. There’s no indication that anyone understands that the whole frame of society, economy and the state, is undergoing a fundamental transformation. This was perfectly expressed by Turnbull’s focus on us being opened to the “global marketplace”, to which we will come to sell our wares, etc, etc, and a lot of money being loaded into the front end, start-ups and ideas. Sorry, ideas! “Ideas” always needs that exclamation mark. Ideas!

From economic liberals who believe in the danger of unintended consequences, this is pretty wacky stuff. The front end is being heavily loaded with instant cash, the back end — pure research, education, mass high-tech infrastructure — is being underdone, and out of that mismatch much developmental hilarity will ensue. The first thing to happen will be a gold rush, with start-ups that would have once been two people on laptops in a hipster cafe getting the spigot turned on. Hopefully, we have solid domestic production in foosball tables, massage chairs, restored pinball machines and retro office furniture, because that’s where a lot of the growth will be.

The second thing to happen will be that the carpetbaggers will come in. People who’ve been timeshare shonks, film producers and expert consultants will reinvent themselves as start-up brokers, money-finders, active partners, etc, etc. People who know how to get money will partner with people who know how to do tech, with no real guarantee that the free government money isn’t generating the product, rather than the pre-existing product finding the money.

So a lot of the money will simply be wasted, and the presence of shonks will make it harder to sort good ideas from bad, or create “noise”, ironically so in information theory field. The third thing that will happen is that anyone who does get a good idea is as likely to relocate overseas as they are to stay here, no matter how many tax breaks they get. Why? It’s not just a question of population numbers and markets, though it’s partly that. It’s also the costs associated with getting to the next stage — for material production — via prototyping and low runs.

In researching A Revolution In The Making, on the rise of additive manufacturing, robotics, etc (Mandarin edition forthcoming), I was struck by this single brute fact. The costs of prototyping and short-run production in Australia are so staggeringly high compared to elsewhere that many find it not worth doing. If they do, they outsource it to China or elsewhere. And then it simply becomes easier to wholly relocate there. This gap is the direct policy of our decision to more or less abolish a manufacturing sector, rather than technologically develop select sections of it, and no amount of money we can feasibly marshal will restore that plant. The models of innovation we are having our attention turned towards — or should have our intention turned towards — are in northern Europe, and their innovative economies work because they still make a lot of things and sell them to people who need them to make other things.

In the absence of high-tech plant, money flows towards “information” innovation. This is folderol and a lottery, and the value it adds to an economy is highly questionable, if you do some real accounting on it, rather than going by stock valuations, or even GDP. The marginality of much of this stuff is disguised by the pseudo-material language we use — i.e. that you “build” an app, as if it were anything other than a series of light flashes, represented by 1s and 0s in notation, which produces images on a screen.

This is all the sort of thing that liberals should be saying — and would be saying, if Rudd were doing this. But there will be nothing like the examination of the innovation “boom” from News Corp (unless they really come to hate Turnbull) in the manner in which the Building Education Revolution was eviscerated. Ironic, really, since a plain old statist program like the BER, employing skilled labourers and tradies, builders and architects, putting spending money in everyone’s pockets and giving us better schools, was a much better bet, not only for keeping the economy going, but for laying the groundwork for innovation — the 22-year-old with the new whatever-we-call-killer-apps now may well have done science in a BER classroom — by simply developing mass talent, and the general intellect. You need to graduate a lot of engineers to get a Steve. Steve Wozniak that is. Steve Jobsed are a little thicker on the ground.

The final problem for those imagining they can revive old-fashioned capitalist growth from an innovation economy is the trickiest — technical innovation now points in a post-capitalist direction. As m’colleague Keane noted, Big Media/Big Copyright are the least innovative groups around, still interested in things they can “channel”, rather than spread via networks (you can’t put a tollgate on a network. Canals — i.e. channels — are what tollgates were invented for). But it’s not just Big Media. The more innovation shifts us towards zero-cost production and innovation, the more that the entire edifice of capitalism becomes a mere rent-seeking process — in the same way as the once productive edifice of feudalism became a rent drag (via land) on capitalism in the 19th century.

Thus, the day the innovation statement was announced, Tesla announced the release of its new battery, which will allow for the storage of renewable home-generated energy. So an end to jokes about whatcher gonna do with yer panels when the sun don’t shine, ha, ha. The clue to the intent of this development is in the name — Nikola Tesla has become the patron saint of post-capitalist development occurring within the capitalist frame, because he proposed a system of unmeasurable electricity distribution, and was stymied and ruined by nascent Big Electricity. Turnbull and others believe that this trick — the Edison trick — can be repeated in our era. It’s the Edison process — develop idea; build it; take to market; $$$$ — that they’re relying on here.

But it’s not going to happen that way again, and the degree to which that’s not happening, or unhappening — the degree to which the value substructure of capitalism is being undermined by genuine innovation — is now so fast that current governments must regard it as present opportunity and challenge not a future one. Otherwise “innovation” policy will simply be misplaced, as this one is — a money spray across a rent-field. Everyone — from one-note classical liberals, to communists who want a massive re-up investment in technology for human liberation — can see this is a farce waiting to go on. The only people who believe in it are the political caste, who need to be seen to look busy, and who will be looking for corporate boards to be on in a decade or so’s time. Very innovative indeed.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey