Over the past few weeks, I have been writing about the importance of start-up businesses and the strategies followed by some particular small and medium businesses in Adelaide, including in the automotive sector.

I have done this so that readers can see that I am not making things up off the top of my head when I write about what a winning economic strategy for South Australia would look like.

A winning South Australian economic strategy will enable a lot more winning businesses like Redarc Electronics, Australian Clutch Services and BRS to develop in South Australia. That is all that a winning economic strategy is about. All the rest of the political hype is hocus pocus and rubbish.

These winning businesses are characterised by being very good at what they do, being highly innovative, working extremely hard and encouraging strong employee participation. The employees “own” what happens at these companies. They are proud of them. They see success by the company translated into success for themselves, individually and collectively.

Companies succeed that have customer-satisfying products and/or services, competitive prices based on low costs, high profits (enabling high investment in both physical and human capital) and fast growth. These all depend on high and rapidly-growing productivity.

Employee participation is important, not only because human capital is now at least as productively important as physical capital, but because the complexity of highly-productive businesses is now so great that individual workers can no longer be “directed” in their work by “bosses”. They must be self-actuating. The more they identify with the outcomes of the business, the better the results will be for the business – and for themselves.

Our present political alignments, and the structure of workplace relations, are a carry-over from the early days of capitalism – of workers versus bosses. These arrangements are based on an assumption of conflict between workers and business owners, and on the supposition that workers are part of an unskilled proletariat using highly productive physical capital (machines and buildings) owned by a class of capitalists.

In the 19th Century, South Australia was a pioneer in economic, social and political evolution. In the 20th Century we lost our pioneering ways, winding up in our present economic hole.

Successful businesses in economically advanced places like Scandinavia,  or South Australia, for that matter, manage to move away from such class-based assumptions. Rather, they base themselves on the modern realities of technology-driven productive advance in which the relevant technologies are embedded not only in structures and equipment, but also increasingly in the skills of  businesses’ employees.

What this means is that South Australians can make the businesses that employ them much more successful by their own efforts. For example, merely showing up five minutes early for work and leaving five minutes late could reduce labour costs by 2 per cent. Everyone who has been in a job for a while can see ways in which it could be done more effectively, easily saving 5 per cent in labour costs. Thinking about how your work could be more effectively integrated with the work of others can offer big efficiencies in complex work sharing arrangements, typical of modern business activity. Learning new skills useful to a business can double an employee’s productivity.

Business owners have a quid-pro-quo to give to their employees – they must enable every employee to (at least) not be disadvantaged by changes in what the business does and how it does it. The aim should be to provide a career structure for every employee that pays regard to each employee’s needs and capabilities as well as to the business’s plans.

Where does this leave the trade unions, their political creature, the Australian Labor Party, and the highly formalised and powerful Australian industrial relations system – based on an assumption of conflict between workers and their employers? In the private sector, the proportion of the workforce that is unionised has already fallen to about 10 per cent.

Ironically, it is in the public sector that employees feel most the need to become union members (to seek protection against actions by public sector “bosses”?). As a result, the ALP has a political commitment to a large public sector, irrespective of how advantageous that may be for the community as a whole.

The Australian industrial relations system looks somewhat like a dinosaur relic in the path of evolution to a more relevant system consistent with modern productive potentials. One is tempted to see this situation, in the terms of Karl Marx, as a fundamental conflict between the advanced capitalist world’s base (defined by its new productive potentials) and the advanced capitalist world’s superstructure (represented by the industrial relations institutions inherited from the past).

Is the ALP capable of unshackling itself from its union base and becoming a party protective of the interests of the bottom half of the income distribution, irrespective of how people may have become part of the bottom half? What are those interests? Not falling too far behind the top half is clearly part of such a focus, so institutions and arrangements that provide economic floors and that assist economic and social mobility will always be important to a reconstructed ALP.

By the same token, the Liberal Party could redefine itself as the party of “participative capitalism”, where the contributions of employees to the success of businesses are valued as much as the ownership of the capital in each business.

In the 19th Century, South Australia was a pioneer in economic, social and political evolution. In the 20th Century we lost our pioneering ways, winding up in our present economic hole. Could we resurrect our economic fortunes by again grasping pioneering ways of economic, social and political evolution in the 21st Century?

Ex urna resurgam.
(I shall rise again from the ashes.)

Richard Blandy is an Adjunct Professor of Economics in the Business School at the University of South Australia.