ECONOMIC development in South Australia has always needed a creative mix of public and private. As Geoffrey Dutton put it, South Australia was destined never to be blessed with an overabundance. Victoria could rely on gold and squatters and NSW on coal and big rivers but we have had to be more clever, blending private sector verve with public sector planning.

The Rann Government’s Economic Development Board arrangement does not build on that history. It places too much power and responsibility in the hands of a few successful businesspeople and reflects the fact that the Rann-Foley-Conlon triumvirate is more interested in foreign movies, AAA ratings and law and order than it is in economic development policies.

The Rann Government’s faith in the EDB is reminiscent of the faith the Bannon and Arnold Governments placed in the board of the State Bank. Mr Rann apparently believes that public servants are too slow and staid to deal with the fast changing, globalising world, just as Mr Bannon believed a private board was needed to shepherd the bank into the era of financial deregulation. Indeed our history has many examples of just this mistake: when government fails to keep faith with its public servants and thinks economic development is just a matter of releasing the pent-up energies of the private sector, we get it wrong. Growth and confidence inevitably suffer.

The EDB has questioned this generation’s commitment to progress, saying that we have placed too much government in the way of entrepreneurs. That is an unsubstantiated and simplistic view. It is reminiscent of our earliest days when private interests, backed by the governor – just as the EDB is now backed by the Premier – agitated for Colonel Light to get out of their way. The EDB’s position also fails to understand the story of Goyder’s line – that profit-driven, private sector expansion without public sector planning and restraint can be wasteful and self-defeating.

There are other relevant, historical parallels. Mr Rann’s EDB contrasts strongly with Mr Playford’s Industries Assistance Committee which oversaw much of the mixing of public and private during the post-war years. Like the EDB, the IAC members were mostly successful businessmen. Unlike the EDB, which has a private-sector chairperson, the IAC was headed by Playford’s senior public servant, William Wainwright, a man to match any on the committee. The IAC was never a policy-making substitute for cabinet and its committed public officers, but then Playford’s ministers were prepared to get their hands dirty promoting our industrialisation. It seems that Mr Rann’s are not.

These historical allusions would have little critical force if the policies coming from the EDB were clear improvements, based on compelling argument or evidence – but they are not. The board has set 71 targets, intending that these will guide the public sector’s economic development efforts. That is a poor substitute for an economic strategy and no improvement on past policies. For example, the board’s approach to population compares poorly with effective past policies, including especially those by which the Housing Trust provided $4 billion of good quality residences as well as land and amenities for industrial expansion and did so without costing government one cent – the return on assets repaid the money borrowed plus interest. Under the stewardship of Alec Ramsay, the Trust combined public and private in clever ways. One was that Ramsay used private builders, having them compete with each other and awarding most of the work to the firms offering the best combination of price and quality – but awarding enough to others to keep them afloat so that they would be able to exert pressure on incumbents during the next round. This is the way to use competition, not as a panacea and substitute for government involvement but as one among an armoury of weapons to promote efficiency. Where in the EDB’s work is there an improvement on that?

The EDB has also set an export target, arguing that directing development towards foreign demand is the way to get the State growing. However, an export strategy is no substitute for an economic development strategy. Firstly, it is unwise to focus on targets when the export outcome will be far more influenced by Federal policies and foreign exchange markets – we could have the right policies and still fail to meet the targets. Targets are just spin dressed up as a strategy. Secondly, an export strategy runs the risk of distorting the economy. Strong economies have robust internal linkages which develop organically as the presence of one activity creates the conditions to attract and develop others linked to it. Economic development policies are meant to improve and extend these links.

The danger with a strategy dominated by exports is that it restructures the economy into a series of production chains running from our natural resources to foreign markets. This reduces the tendency for the economy to also develop links among these chains or the capacities to meet local demands. The result is an unbalanced economic structure with too few self-reinforcing tendencies and a heightened vulnerability to external shocks.
In short, the EDB arrangement and its policies compare poorly with our past mixing of private and public. We must move beyond its thinking. We need better policies and a renewed public sector. History suggests that we can excel at both but it will require more of the Rann Government and less from the EDB.