Brexit Metaphor 32
Adelaide (South Australia) used to be the hub of Australia's vibrant automotive industry for decades. However, various macroeconomic factors in the 21st century gradually made the industry uncompetitive and in 2017 the last car assembly plant in Australia shut down.
This is no big revelation: industries come and go, in line with Schumpeter's "creative destruction" theory. The big story here is what happens to the automotive workers. One Australian business school dean calls the 5-year period after the demise of an industry "the Valley of Death." It turns out it takes about five years for the regional economy and the workers laid off in one sector to find a new sector of employment.
In 2016 after the Brexit referendum I sat on a plane next to a BCG automotive industry consultant. Back then Nissan in the northeast of England was the big news story. The consultant did not think Nissan's plant was facing a major threat as the risk of a 10% tariff being imposed on British car exports to the EU was outweighed by the depreciation of the British pound. However, he thought the less efficient car plants in the Midlands would shut down if EU tariffs kicked in and their workers would not find a job again for the rest of their life.
A Valley of Death in the Midlands might sound like a "Middle Earth" scare story from The Lord of the Rings but is sadly a realistic prospect. Just look at other Rust Belt regions, from the US Midwest to northeast China. And it is not the heat that kills in the Valley of Death; it is idleness.
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| Car assembly line (Source: Wikipedia) |
Notes:
1. Timeline: This article is part of a daily #BrexitMetaphors series, with 129 more Brexit Metaphors to follow until Brexit day, March 29, 2019.
2. Disclosure: The author has a master's degree in European Integration.
3. Invitation: If you'd like to contribute to the debate, you are welcome to leave a comment below.
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