|Author(s):||McLean, Ian W.|
Published by EH.Net (May 2013)
Ian W. McLean, Why Australia Prospered: The Shifting Sources of Economic Growth. Princeton, NJ: Princeton University Press, 2012. xvi + 281 pp. $35 (cloth), ISBN: 978-0-691-15467-1.
Reviewed for EH.Net by Ian Harper, Deloitte Access Economics.
There was a time not so long ago when the study of Australian economic history was taken more seriously than it is today.? Australia?s major universities boasted separate departments of economic history, in which some of the authors familiar to any student of Australian economic history studied and taught.? Occasionally professional economic historians took their place alongside economists in departments of economics, as is true of the author of this fine book, who taught for many years at the University of Adelaide in South Australia.
Why Australia Prospered is the first major survey of Australia?s modern economic history to appear in many years, and it is an outstanding piece of scholarship.? Indeed, in his comment on the dust-cover, E.L. Jones, one of Australia?s internationally distinguished economic historians, confidently predicts that, ?it will become the standard work on Australian economic history.?
The book spans the full gamut of Australia?s story from the settlement of the penal colony of New South Wales by the British in 1788 to current debates about the future of Australian prosperity in the wake of the China-driven resources boom.? A great strength of the book is its value to readers interested in Australia?s contemporary economic challenges as much as to those keen to understand more of what distinguishes Australia?s historical experience from that of similar ?settler? economies like Canada, the United States and Argentina, with which Australia is often compared.
Australia remains one of the most prosperous countries in the world, easily within the top ten ranked by GDP per capita and second only to Norway according to the United Nations Human Development Index.? By any account, this is a story of remarkable success considering the comparatively short time period since European settlement and the fact, as McLean sensitively explains, that Australia?s modern economy was ?built from scratch,? there being no economic interaction of significance between the Australian Aborigines and the newly-arrived British colonists.
McLean tells the story sequentially, partly for convenience but partly to demonstrate one of his themes that the basis of Australia?s prosperity has shifted over time.? There is no single reason why Australians are rich, and McLean firmly repudiates the popular view that Australia is just a vast quarry or farm, and Australians are wealthy for no better reason than their fortunate initial endowment of resource-laden and/or arable land ? in other words, there?s little more to Australia?s economic development than dumb luck.
Australia?s bountiful resource endowment might have amounted to far less without the kick-start provided by favorable demographics and labor force participation rates characteristic of a convict settlement, generous financial ?aid? from Britain and strong trade links with the Mother Country, as well as the early adoption of representative and responsible self-government.? After all, Argentina stands as the classic counterexample of a settler economy with a resource endowment to rival Australia?s but whose economic prosperity began to lag Australia?s in the late nineteenth century and has fallen further behind ever since.
The run-up from near-starvation in the first decade of colonial existence to enjoying the world?s highest material living standard (as measured by GDP per capita) just one century later in the 1880s is familiar.? It is a story of land, exploited first for wool production, then mineral extraction beginning with gold, and subsequently for agriculture, especially following the development of refrigerated shipping.? But then the first of a series of major shocks, sourced from beyond her shores rather than within, hit Australia, beginning with the devastating depression of 1893-95 and followed by two world wars and another depression, all within the span of the next half-century.
The seemingly relentless rise of Australian living standards slowed to a crawl.? The annual average growth rate of per capita GDP fell by half during the two-and-a-half decades following 1890, and barely reached 0.1 percent per annum between 1913 and 1939.? Not until after the Second World War did prosperity levels once again begin to lift.? The latest long boom, which has seen Australian living standards ascend several places up global league tables, commenced as recently as 1990, during which time Australia, almost uniquely among developed economies, has avoided recession altogether.
As Australia?s economic fortunes waxed and waned, domestic economic institutions and policies evolved.? McLean makes much of this historical dialectic, more so than the orthodox telling.? This applies most especially to his interpretation of Australia?s long dalliance with industrial tariff protection, commencing in 1908 during the lengthy aftermath of the 1890s depression and concluding only in the 1980s.
Most economists regard this episode as the triumph of vested interests over rational economic policy.? Yet, in McLean?s rendition, such policy innovations say more about the resilience of Australian political institutions in re-casting the social trade-off between stability and growth as circumstances warrant or allow.? Australia?s later abandonment of tariff protection and floating of the Australian dollar are interpreted in a similar vein.? This is the only respect in which McLean?s narrative has divided professional opinion in Australia, with proponents and detractors of Australia?s proclivity towards economic interventionism voicing their approval or disapproval with equal brio.
Ian McLean has written a timely and masterful account of the long sweep of Australia?s economic history, which will be relished by anyone interested in the unique circumstances of this country?s remarkable economic development.? Written for the non-specialist, the narrative is accessible, brisk and appropriately, if sparsely, illustrated with charts and tables.? There is an extensive bibliography and index.
Ian Harper is Emeritus Professor of Economics at the University of Melbourne and a Partner at Deloitte Access Economics.? His latest book, Economics for Life (Acorn Press, 2011), includes a chapter on Australian economic history.? Email correspondence should be sent to firstname.lastname@example.org.
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|Subject(s):||Economic Development, Growth, and Aggregate Productivity|
Economywide Country Studies and Comparative History
|Geographic Area(s):||Australia/New Zealand, incl. Pacific Islands|
|Time Period(s):||18th Century|
20th Century: Pre WWII
20th Century: WWII and post-WWII