The Market Stall Hypothesis
What happens when a country loses its industry but keeps its talented people?
I have a hypothesis about Australian industry. It’s possibly similar to those who precede me over time. I call it the Market Stall Hypothesis.
The Market Stall Hypothesis is not an argument against major investment, technology, automation or the energy transition. It is a question about what productive capability Australia retains after that investment has occurred.
My hypothesis is that when a country loses substantial manufacturing and industrial capability, the skills, creativity and enterprise of its people do not disappear. The people remain.
Instead, their capability becomes fragmented across smaller and often lower-value activities because the larger industrial systems that once gave those capabilities scale, purpose and continuity no longer exist. This matters to Australia.
It also matters to businesses making decisions today about projects, engineering, procurement, assets, operations and the people who will need to support them in another 10, 20 or 30 years.
The person at the market stall
Most of us know someone who has been made redundant. They may have spent years developing considerable skill in a particular industry. Suddenly the job disappears. They remain intelligent, capable and industrious, so they find another way to make an income. Perhaps, for a period, they make furniture in the garage. Perhaps they sell handmade products or beaded jewellery at the local markets. There is nothing wrong with doing that. The problem is not the person. The problem is that a system which once gave that person's capability considerable productive leverage has disappeared.
Australia has done something similar on an industrial scale. Over several decades we have lost substantial parts of manufacturing, processing, refining and the industries surrounding them. The engineers did not suddenly become less intelligent. The trades did not forget how to work. Our inventiveness did not disappear.
But when factories, production lines, design offices, workshops, suppliers and specialist businesses disappear, the ecosystem which converts that talent into complex products and industrial capability disappears with them. People make do.
How can we get Australia back on its feet?
A factory is more than a factory
We sometimes judge an industrial operation by the number of people employed inside its front gate. I think that substantially understates its value. A substantial manufacturing or processing operation creates a reason for other capabilities to exist. Someone has to design the machinery. Someone fabricates it. Someone installs it. Someone commissions it. Someone develops the process. Someone maintains the equipment. Someone investigates failures. Someone modifies the plant when production requirements change. Someone supplies components. Someone develops control systems. Someone trains apprentices, graduates and younger engineers. Someone learns something unusual because a difficult problem needs solving at 2.00 am on a Tuesday morning.
Around that activity grow fabricators, consultants, electrical businesses, instrumentation specialists, maintenance contractors, logistics companies, equipment suppliers and specialist engineering firms. This is not simply employment. It is an engineering and industrial ecosystem. And once that ecosystem disappears, recreating it requires much more than constructing another building and advertising a few jobs.
Investment and development are not the same thing
This distinction becomes particularly important when we talk about major projects. Australia is attracting and undertaking enormous investments in energy, infrastructure, technology, resources and data. The construction expenditure can be impressive. Thousands of people may become involved during delivery. That is an opportunity, and I do not dismiss it.
But we should ask a second question: What is left when construction finishes?
A project can consume considerable capital, energy, water, land and skilled labour without creating equivalent long-term productive capability. The engineering may come from elsewhere. The principal technology may come from elsewhere. Major equipment may arrive as complete packages. Intellectual property may remain overseas. Specialist maintenance may remain with the original international supplier. Profits may leave the region. Operations may require relatively few people.
Automation may reduce the requirement for a substantial local technical workforce. We can therefore have enormous investment without building an equally substantial local industrial ecosystem. That is not necessarily an argument against the project. It is an argument for thinking much harder about what we want the project to leave behind.
What do our engineers actually get to engineer?
There is another issue which concerns me. Australia can employ a great many engineers without necessarily developing engineering capability. An engineer can spend a career coordinating contractors, administering packages, managing schedules, reviewing documents and attending project meetings. Those functions have value.
But they are not the same as developing machinery, designing plant, solving difficult production problems, developing processes, commissioning equipment or taking technical responsibility for something genuinely new. We should ask whether our younger engineers have enough opportunities to actually engineer things.
The same applies to tradespeople, technicians and other technical professionals. Capability develops through application. You cannot completely replace decades of industrial experience with a course, a procedure or a database. People learn complex industrial work by doing complex industrial work alongside people who have already done it.
We have a succession problem
This is where I think Australia faces a problem. We still have engineers and technical people who spent meaningful parts of their careers working within the industrial Australia that designed, manufactured, commissioned, operated and maintained complex plant and machinery. Many are now in their 40s, 50s and older. Over the next 20 years, a large part of that generation will retire. If the industries in which their knowledge developed no longer exist, who will they transfer that knowledge to? More importantly, where will younger people practise it?
We cannot transfer industrial capability simply by writing down what the previous generation knew. We need workplaces in which the next generation can use that knowledge, challenge it, improve it and ultimately replace it with knowledge of their own. Otherwise experience disappears one retirement at a time.
At some point we stop talking about succession and start talking about rebuilding. That is much harder.
Adaptation is not necessarily advancement
Australian communities have adapted remarkably to industrial change. New businesses have appeared. Service industries have expanded. People have retrained. Regions have found new sources of employment. That adaptability deserves recognition.
But adaptation should not be confused with economic advancement.
Replacing an industry that designs, manufactures and exports complex products with an economy primarily providing services to itself does not necessarily leave us with equivalent capability. The activity may still employ people. Money still changes hands. GDP may still record economic activity. But something different may have happened underneath those numbers. We may have lost the ability to make something.
The energy transition provides a test
Australia's changing energy system provides an enormous opportunity to test whether we have learnt from the past. Replacing one form of generation with another is only part of the question.
We should also ask:
Who designs the new equipment?
Who manufactures it?
Who owns the intellectual property?
Who develops the control systems?
Who fabricates the structures?
Who maintains the equipment?
Who modifies it in 15 years?
Which Australian companies develop new capability because of the investment?
What will an engineering graduate working in the region learn from it?
What industries will grow around it?
And what will still be there in 30 years?
If an old industrial ecosystem disappears and its replacement largely consists of imported equipment, imported technology and remotely supported systems, we may successfully replace the electricity while losing another layer of engineering capability. That would represent a considerable missed opportunity.
What this means for businesses
The Market Stall Hypothesis is not only a question for governments. Businesses make these decisions every day. The lowest-cost equipment package may solve today's problem while creating dependence on a supplier for the next 25 years. Outsourcing an engineering function may reduce today's overhead while removing the people who understand why the plant behaves as it does. Buying a complete proprietary system may shorten a project while leaving nobody internally capable of modifying it. Allowing engineering knowledge to reside entirely with a contractor may make project delivery easier while making operation harder. None of those decisions is necessarily wrong. But their long-term consequences deserve consideration.
When we assess a project, asset or engineering decision, perhaps we should ask another question alongside cost, programme and technical performance:
What capability will we possess when this work is finished that we do not possess today?
That could mean:
Better drawings.
Better asset information.
A trained maintenance team.
Greater understanding of failure modes.
Internal engineering knowledge.
A local supplier developed through the project.
Young engineers who have worked beside experienced ones.
A design that the owner understands and can modify.
A manufacturing process that can evolve rather than simply operate.
Those things have value even though they do not always appear neatly in a project cost estimate.
Engineering should leave something behind
At Sulphurcrest Engineering, we feel engineering should do more than produce drawings, calculations and reports.
Good engineering should leave the client knowing more about its plant, its assets, its risks and its options than it did before the work began.
Where practical, it should build capability rather than dependence.
It should help people understand what they own and why it works.
It should challenge the assumption that buying the answer always represents better value than developing the capability to understand the answer.
Australia still has talented engineers, tradespeople, manufacturers, operators and entrepreneurs. The people are not the problem.
The question is whether we continue creating environments in which their capability can operate at scale.
Because once those environments disappear, talented people will continue doing what talented people have always done. They will adapt. They will make do. They may even set up a market stall.
But Australia should aspire to give them something bigger to build.
The argument this hypothesis is not that Australia should preserve obsolete industries, but is arguing that when we replace industries, we should deliberately replace the productive capability that disappeared with them.
Michael West
FIEAust CPEng NER RPEQ
Managing Director and Principal Engineer
Sulphurcrest Engineering
