This morning the Australian Bureau of Statistics has released its monthly employment and unemployment figures. These will get deserved front page treatment in South Australia. The figures will continue to remind us that our state economy is performing badly. And worse is likely to come with the closure of Holden.

On ABC 891 radio last week, Premier Jay Weatherill said that the economy was in a time of very dramatic change. He noted that a lot of jobs were being lost but that more jobs had been created over the past six months than the jobs that had been lost. The extra jobs that had been created were simply not enough to meet the increase in the labour force.

The problem with this defence of South Australian economic policy is that it tells you nothing about the strength of the South Australian economy. A strong economy is one that is growing strongly. A weak economy is one that is growing weakly.

The rate of economic growth in Australia required to stop the unemployment rate from rising is more than 3% p.a. For the world economy, it is more than 4% p.a. The reason for this is not only that the population and labour force are increasing (in Australia and the world) but that productivity growth (which provides the basis for rising living standards) also serves to reduce the number of jobs being created out of increases in production.

In the seven years since August 2008 (the height of the GFC), Australia has put on 998,000 jobs, of which 411,000 have been full-time. By comparison, over the same period of time, South Australia put on 20,000 jobs in total and lost 20,000 full-time jobs.

If South Australia had done as well as Australia as a whole since the GFC, the increase in South Australian jobs would have been 70,000 (3.5 times our actual increase) and the increase in full-time jobs would have been 30,000 (50,000 full-time jobs more than actually materialised).

The political panic that will likely set in as the unemployment rate increases remorselessly over the next few years will provide fertile ground for all sorts of quack, gimmicky, “painless” solutions to be proposed.

South Australia’s job growth has been pitiful by comparison with Australia’s as a whole. This has not been because Australia’s has been exceptional in recent times. On the contrary, Australia’s rate of jobs growth has itself declined, thanks to poor economic strategy by successive Australian governments, as well as the effects of the Global Financial Crisis.

South Australia has been the weakest economic performer of all the states since the GFC – and this is before we have lost a single submarine contract or closed Holden. Our underlying lack of growth capability in the modern world has been brutally exposed.

We have been gulled into supposing that “strong government”, at the heart of Premier Weatherill’s economic as well as political strategy, produces strong economic results. The failure of the communist and fascist political experiments of the last century showed that this is not true. Strong economic results come (with some cyclical wobbles) from highly competitive, innovative, free market economies. They come from freely competing businesses.

Over the last century, South Australians have become sucked-in by what I have termed “sook” economics, where private businesses, rather than standing on their own independent feet, have come to rely on government support, in one way or another. The businesses that I have written about over the past month or so, are an exception to this mind set – and they have thrived!

There is only one way forward that will resurrect our economic fortunes. That is to wean South Australian business off the teat of national and State Government dependency – or the promise of government help. This is also one reason why small businesses and start-ups are the hope of the side. They are too small to provide political mileage from stories about the help they are receiving from government. As a result they don’t get much – which makes the survivors strong.

It is the bigger businesses that we are told will save our economic bacon if they get a bit of government help,  at least through “a bit” of public spending to prop up demand for whatever they produce. This has been a refrain from both sides of Parliament during most of the 20th Century.

Both sides of politics must avoid populist, “quack” remedies for South Australia’s economic ills.

My great fear for the future is that South Australia will redouble its efforts at “sook” economics as the wheels fall off the economic structure that has resulted from adopting a “sook” economics approach in the first place. The political panic that will likely set in as the unemployment rate increases remorselessly over the next few years will provide fertile ground for all sorts of quack, gimmicky, “painless” solutions to be proposed.

Panic is not a good motivator for clear thinking and good policy. Short run, “quick fixes” are not going to help solve our economic problem, because it is a long-term, structural, problem, not a short run, demand-deficiency, problem. Keynesian demand management only works in closed economies. State economies are very open. Most of the gains in increased state demand from State Government spending increases will flow, one way or another, to outsiders. When the quick fix comes to an end and no lasting solution has come about, the problem will be worse (because more pointless State Government debt will have been accumulated).

Will the main political parties take up the cudgels for real economic solutions or will they be tempted down the path of populist, “painless”, quack remedies? The jury must be out on this, because it is not easy politically to sell painful real solutions in the face of “painless” fake alternatives. Voters are not able easily to identify which is which, particularly when there are “experts” supporting the fake remedies.

What state and local governments need to do in South Australia particularly is to lower the costs of doing business (particularly of creating new businesses) by deregulating. For example, a lot of small businesses operate from home. This should be made easier and cheaper, for example by allowing home businesses to have parking permits for extended periods for customers and suppliers, and allowing rebuilding of homes more easily for business purposes. A mix of zoning should allow mutually-supporting, business “clusters” to develop more easily without costly disputes with neighbours. They should allow for innovation and new forms of businesses to emerge inexpensively in at least some areas in the Adelaide, including the CBD.

Red tape reduction through sunset clauses in regulations is a good idea. All barriers for new business creation and small business expansion should be reduced. Business development “lounges”, where start-ups and small business owners can meet and form mutual support groups, could be useful. Governments must try to persuade residents (voters!) from being quite so risk averse. Innovation is the key to the future, represented by start-ups, the digital economy, pop-ups, and so on. Innovation is always risky.

Become efficient; lower costs; deregulate; reduce rates and taxes – this is the way to go. Over a number of years it will make a big difference to the state’s economic performance.

The rest is spin-doctoring.

Richard Blandy is an Adjunct Professor of Economics in the Business School at the University of South Australia. He is a regular economics commentator for InDaily.