In June 2012, the Australian and Victorian governments announced a $40+ million assistance package to Alcoa's Point Henry aluminium smelting operations 'to help ensure its economic sustainability.'
At the time, Alcoa stated that they expected 'to operate the Point Henry aluminium smelter until at least mid-2014.' This week the company announced that the smelter will close in August this year.
Predicting in 2012 that the $40 million bailout for Alcoa would achieve little apart from pushing job losses to after the 2013 election required no great foresight, although that is cold comfort to the workers who have lost their jobs.
We would be doing those workers and the car industry workers before them (not to mention the taxpayers) a disservice if we did not examine whether the government policy of supporting Alcoa was the right option. At some point we simply must start examining the costs of corporate welfare.
Government support for the 500 Alcoa workers at Point Henry amounted to a total of $80,000 per worker, equivalent to nearly five years of unemployment benefits, while the $30 billion provided to automotive manufacturing industry workers between 1997 and 2012 amounted to approximately $30,000 per worker per year.
No doubt some workers are wondering why their jobs are not worth thousands in subsidies. However the bigger point is that despite significant wage subsidies, these industries and companies were simply unable to be competitive.
Proponents of protectionism prefer to frame their argument as a choice between providing assistance (which protects jobs and communities) and not providing assistance (which causes industries to fail).
Yet Toyota, Holden, Alcoa and many others show that this is a false dichotomy; at best governments can delay the impact of market forces. The choice is between some pain now as workers transition to efficient industries or more pain later as workers who have been told their jobs are safe discover this security is an illusion.
Industry assistance is far from the only factor in business decisions, as General Motors Head of International Relations Stefan Jacoby made clear; there was nothing that the government could have done to keep Holden in the country.
Let's stop pretending that government can ensure business survival. Protectionism is a relic of Australia's past and there it should stay.
Simon Cowan is a Research Fellow at The Centre for Independent Studies.
Home > Commentary > Opinion > Alcoa exposes false promises of protectionism
Alcoa exposes false promises of protectionism
At the time, Alcoa stated that they expected 'to operate the Point Henry aluminium smelter until at least mid-2014.' This week the company announced that the smelter will close in August this year.
Predicting in 2012 that the $40 million bailout for Alcoa would achieve little apart from pushing job losses to after the 2013 election required no great foresight, although that is cold comfort to the workers who have lost their jobs.
We would be doing those workers and the car industry workers before them (not to mention the taxpayers) a disservice if we did not examine whether the government policy of supporting Alcoa was the right option. At some point we simply must start examining the costs of corporate welfare.
Government support for the 500 Alcoa workers at Point Henry amounted to a total of $80,000 per worker, equivalent to nearly five years of unemployment benefits, while the $30 billion provided to automotive manufacturing industry workers between 1997 and 2012 amounted to approximately $30,000 per worker per year.
No doubt some workers are wondering why their jobs are not worth thousands in subsidies. However the bigger point is that despite significant wage subsidies, these industries and companies were simply unable to be competitive.
Proponents of protectionism prefer to frame their argument as a choice between providing assistance (which protects jobs and communities) and not providing assistance (which causes industries to fail).
Yet Toyota, Holden, Alcoa and many others show that this is a false dichotomy; at best governments can delay the impact of market forces. The choice is between some pain now as workers transition to efficient industries or more pain later as workers who have been told their jobs are safe discover this security is an illusion.
Industry assistance is far from the only factor in business decisions, as General Motors Head of International Relations Stefan Jacoby made clear; there was nothing that the government could have done to keep Holden in the country.
Let's stop pretending that government can ensure business survival. Protectionism is a relic of Australia's past and there it should stay.
Simon Cowan is a Research Fellow at The Centre for Independent Studies.
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