John Button and his artful Australian industrial revolution: Carr

Senator Kim Carr reflects on the numerous achievements of former industry minister John Button.

In 1993, I had the honour of succeeding John Button as Labor senator for Victoria. In 2007, I had the honour of inheriting his old job as industry minister.

The job description has changed quite radically since the 1980s, but we still have a huge amount to learn from the way John handled it.

He was, quite simply, one of the most creative policy-makers of his generation. He turned program design into an art-form.

He has been an inspiration to me throughout my thirty-plus years in the labour movement, but especially since he demonstrated just what could be achieved in this portfolio during the Hawke years.

Two things were clear to Button from the day he was sworn in as industry minister in 1983.

One, it is a mistake to have “too narrow a focus on the issue of protection”; and two, it is naive to think “market forces will sort out all the problems.”

The challenge, as he saw it, was to find a middle way.While he deplored the tendency for industry policy to degenerate into crisis management, his first job as minister was to deal with the looming collapse of the steel industry.

BHP’s steel business — a virtual monopoly — was haemorrhaging badly, and the company was threatening to shut it down. Bob Hawke had gone into the 1983 election promising to fix the problem within 100 days.

It took a little longer than that, but on 2 August Cabinet approved the first of Button’s great industry plans.

Under the steel plan, the company got bounties on the production of certain products (for five years only), anti-dumping measures and the promise of productivity improvements and wage restraint from the unions; in return it gave an undertaking to keep its three steel plants running, invest in modernisation and protect jobs.

Owing to the unique structure of the steel industry, this first plan was in some ways atypical.

The car plan of 1984 was much more representative — so much so that it is generally remembered as the Button Plan, even though it was one of many.

It aimed to reinvigorate the car industry by making it more efficient and competitive.

It required manufacturers to reduce the number of models, standardise components, and accept tariff reductions over time.

The carrots were export facilitation, $150 million for R&D and re-training for workers who lost their jobs.

The textiles, clothing and footwear plan of 1986 combined similar ingredients, and added support for business planning and improving management skills in an industry dominated by small and medium-sized enterprises.

Despite their success, Button insisted that these three plans, designed for industries in trouble, “were not intended as models with universal application.”

The model Button did want to apply more generally was the one he saw at work when he visited Sweden in early 1984: “Government funds were spent on research and development, venture capital for small firms, export incentives, and training and re-training of workers.”

The work of applying that model began in the same year, when the government tried to correct the market’s failure to supply sufficient venture capital by establishing the Management and Investment Companies Program — with mixed success.

It continued with the R&D tax concession introduced in 1985, which revolutionised industry attitudes to innovation. Business R&D spending as a share of GDP grew 8.8 per cent a year in the ten years after the concession was introduced.

In the following decade — after the conservatives reduced the concession from 150 to 125 per cent in 1996 — business spending on R&D as a proportion of GDP grew just 2.5 per cent a year.

For a time it actually fell. By 2005-06 we had tumbled from eighth to fifteenth in the OECD rankings for this measure.Investment in R&D, new industries and technologies, exports and skills was central to the development (as distinct from salvage) plans Button devised for shipbuilding (1984), pharmaceuticals (1987) and information technology (1988).

The pharmaceuticals plan, for example, offered higher PBS payments to firms that developed and manufactured products locally, and that exported.

The shipbuilding plan offered export bounties to shipwrights who met certain conditions, including an apprentice-to-tradesperson ratio of at least 1:8. There was also assistance for R&D (yet again), innovation and marketing.Companies seeking support had to meet explicit targets.

For example, pharmaceutical companies were expected to spend 3 per cent and IT companies 5 per cent of their turnover on R&D. They were also expected to increase their exports — to 50 per cent of their imports for pharmaceuticals and IT hardware, and 20 per cent of turnover for IT software.

The “main thrust of the government’s industry policy”, according to Button, was cultural change. Sometimes he called what he was aiming for an “export culture”, sometimes a “productive culture” and sometimes a “culture of innovation”.

Button had a coherent vision of what Australian industry should look like, but he often played it down, insisting that industry policy was “a very pragmatic matter”, just “a series of problems that had to be addressed”. This was a smart tactic.

By taking it one battle at a time, he avoided uniting his opponents — whether in industry, the unions, the commentariat or among his Cabinet colleagues.

Yet day-by-day, plan-by-plan, he was transforming Australian manufacturing, and with it the Australian economy. Button was a genius at practical policy-making.

The six great plans — and measures for other industries such as telecommunications and aerospace — were often dazzling in their ingenuity. He may have made support for industry conditional on firms becoming internationally competitive, but he was also clever enough to design support that enabled them to meet that condition.His watchwords were innovate and export.

He had no time for zealots or Utopians of any stripe. His focus was firmly on what could be achieved in the real world.

That’s why he refused to pin all his hopes on the so-called sunrise industries of the 1980s. “Protection offered hope from the past,” he said.

“Sunrise industries offered distant hope for the future.” Button’s concern was with the here and now.

No one understood better than he did the transformative power of new technologies. He organised a series of Fabian Society lectures on science and society as long ago as 1967, and he was way ahead of his time when he added technology to the industry portfolio in 1984.

But he was surely right not to let the glamour of the next big thing blind him to the importance of existing industries — industries that account for the bulk of our output and employment now, and that still have enormous scope for growth and innovation in the future.

Always look for new opportunities, Button seemed to be saying, but in the meantime, make the most of what you’ve got.

If John Button had never become industry minister, he would still be remembered for his courageous and successful efforts to reform and rejuvenate the Labor party itself, starting from the day he joined the Carlton branch in 1952.

He was one of the “four just men” — the others being Barney Williams, Richard McGarvie and Xavier Connor — who resolved in 1965 to challenge the closed and stultifying oligarchy controlling the Victorian ALP, whose main achievement had been to render Labor unelectable in the country’s second most populous state.

They formed a loose group, known as the participants, dedicated to promoting party reform and progressive policies.

Their efforts were rewarded in 1970 when the Federal Executive intervened to restructure the Victorian branch.

The Whitlam government was elected two years later.Between 1977 and 1979 Button co-chaired an inquiry into the ALP which led to significant reforms, including the democratisation of the national conference and a commitment to affirmative action.

He was an astute factional operator, first in the participants, and later in the centre left. He was instrumental in achieving a smooth handover from Bill Hayden to Bob Hawke in 1983.

In fact, he was just as effective in a smoke-filled room as he was in the Senate chamber. The public sees little of this, but it is an essential part of any politician’s work.

Button was often accused of being too disengaged, and some thought his detachment bordered on disloyalty. In the end, he would claim no more for himself than a kind of “optimistic relativism”, or “a mixture of healthy scepticism and guarded hope”.

In bleaker moments he would dismiss Parliament as an arena in which “One set of half truths is opposed to another set.”

Yet this detachment was precisely the quality that underpinned his success. It granted him the independence to see and think for himself, and to act as an honest broker.

It liberated him from the prevailing orthodoxies and enabled him to develop highly original solutions to seemingly intractable problems.

It allowed him to find ways around entrenched positions without attacking them head-on. It was the source of his candour and directness — qualities that sometimes infuriated his colleagues, but which endeared him to just about everyone else.

It is true that he became increasingly disenchanted as the 80s turned into the 90s. We were supposed to trade places when his Senate term expired on 30 June 1993, but during the election campaign he took me aside and said, “I’m not going back to Canberra.” And he didn’t.

He resigned as soon as the campaign was over and I was appointed to the casual vacancy in April. He’d had enough.

For all that, I think the jaded, occasionally cynical, John Button of the years after 1990 was protesting too much. He never lost sight of what social democracy meant, and why it mattered.

Equality of opportunity is fine as far as it goes, he argued in 2002, but it is a liberal ideal. Social democrats demand more — not strict equality of outcomes, but a fairer distribution of wealth and “all those services fundamental to human security and development.”

For social democrats, “The emphasis is on rights rather than opportunity.” It is the duty of a social democratic government to honour those rights, and to address the many problems and fulfil the many needs and aspirations “for which markets provide no answers.”

John Button was an unorthodox politician, a fresh thinker and a brave reformer. Everyone who has followed him on this road is in his debt, including me.

Thank-you, John.

Senator Kim Carr is Minister for Innovation, Industry, Science and Research.

This is an edited version of an article that appeared in the Melbourne Age on 9 April 2008