Australia's economic performance has been the standout among advanced economies for several decades. With economic growth at nearly twice the pace of US or Germany over the past decade, a remarkable 25 years without a recession and a large, highly competitive mining sector despite the end of the resources boom, Australia remains a strong economic participant in a region of the world where future global growth is likely to be generated.

But with drivers of growth over the past 25 years unlikely to be the engines of growth in coming decades, now is not a time for complacency. And if there's one lesson from Britain's decision to leave the EU, it's that that disruptive forces are sweeping through the global economy. Australia, with its cohesive politics and economic success, has been able to avoid the worst of these problems, but the dangers are present if the economic challenges are not met.

To start with, the impacts of the reforms of the 1980s and 1990s are fading. The investment boom in mining is over, and the prices for mining and agricultural exports will probably remain subdued with slower growth in China. While Australia's incomes were boosted by the improved terms of trade, this has partially reversed. The housing boom will inevitably eventually slow.

As evidenced by the results of the Brexit referendum, there is a distrust of the political and economic elites that have led the world's biggest economies. Disruptive, rapid changes in technology have not led to broad-based productivity growth. Workers in many countries have been left with stagnant incomes and governments with rising public debt.

Industry policy has a bad name among American economists who see it as a manifestation of "capture" where special interests are able to obtain subsidies from taxpayers or special protections that are not in the national interest. The modern theory of industry policy, however, recognises that a well-designed policy can actually help markets work better, therefore helping an economy like Australia's make the transition to a new growth path when faced with changing economic conditions. Productivity is the key to high growth and rising incomes – and well-designed industry policy can help.

Structure of trade competitiveness

Take, for example, Australia's manufacturing sector. Mostly because of comparative advantage, it is the smallest among all advanced economies relative to the size of its economy. In 2010, Germany had 21.2 per cent of its workforce in manufacturing while Australia's was 8.9 per cent. While it's not surprising that Australia's structure of trade competitiveness differs from Germany's because of its enormous export strength of mining and agriculture, it will benefit by taking advantage of its highly skilled workforce and the potential to develop industries based on this human capital – including advanced manufacturing industries.

One of the traditional strengths of the American economy is the close link that exists between leading universities and businesses – an area Australian policymakers are seeking to improve upon. At MIT and Stanford, professors of engineering, biology, finance or economics finish their lectures and head off to the companies they run or advise. They often enlist graduate or undergraduate students to help them with their commercial projects and these collaborations often result in jobs as well as experience. There is a danger in this model if pure research loses out to business interests, but the interaction between academia and the practical needs of companies can largely improve both research and business profitability. It's worth recalling that even the giants of science in the 18th century were motivated by the need to improve navigation or build new machines or design buildings. Funding for research should support greater industry-university cooperation as highlighted by the Watt Review.

Another important element in Australia's continued economic success is the growth of its service industries. With most jobs in these industries, the performance and productivity of services will be the largest determinant of Australia's living standards. Productivity comparisons between Australia and the United States show that Australian productivity lagged behind the US as recently as the mid-1990s, but there has since been substantial catch-up taking place. Smart regulation that promotes competition and rewards innovation are necessary to bring up the laggards. While there is a continuing debate about the possible end of productivity growth in advanced economies, Australia can still do much to catch up to global best practice.

The winners of this weekend's election will be charged with answering an important question: what is the role of government in a modern economy? How they answer that will determine future prosperity for all Australians.

Martin Baily is a senior fellow at the Brookings Institution in Washington and a former chair of the US President's Council of Economic Advisers. He has been invited by the Australian Ministry of Industry Innovation and Science to report on lessons from the US for policies to enhance economic growth, innovation and competitiveness.

Warwick McKibbin AO, is the director of the Centre for Applied Macroeconomic Analysis in the ANU Crawford School of Public Policy and is a non-resident senior fellow at the Brookings Institution.

Editor's note: this opinion first appeared in Australian Financial Review.

Alaska Republican Sen. Lisa Murkowski’s write-in candidacy for reelection makes her the latest to join a growing number of prominent politicians who have shed political affiliations in the hopes of winning public office.

Florida Gov. Charlie Crist is running as an independent for the Senate, former Sen. Lincoln Chafee is running as an independent for Rhode Island governor, Mayor Michael Bloomberg became an independent to run New York City, and, of course, Sen. Joe Lieberman lost the 2006 Democratic Senate primary — but won in the general as an independent.

The trend of moderate independent candidates who have forsworn party affiliations is not new to U.S. politics. Since the Civil War, when the modern Republican Party was established to compete against the Democratic Party, minor party or unaffiliated candidates have won election to the House or Senate a total of 697 times. Of these, 89 percent of elected minor party candidates had voting records ideologically between the two major parties.

Despite the recent polarization of U.S. politics, history tells us that moderates make winners. Consider the Wisconsin Progressive Party. Its development has a familiar ring to today’s politics. Extremist elements flourished in the Republican Party during the Great Depression, growing out of our nation’s economic anxieties. GOP moderates responded by creating this Wisconsin group, focused on issues of reform and pragmatic governance.

It started when Wisconsin Gov. Philip La Follette ran for reelection in 1932 as the GOP nominee. He was heckled throughout his speeches by Republican ‘Stalwarts’ on his political right. They “had their Phil” and were angered by his policies of perceived higher taxes to support government spending. La Follette lost the Republican primary to Stalwart-backed Walter Kohler amid then-record turnout. Kohler lost to the Democrat in the general election.

La Follette is a famous political name. Gov. Philip La Follette and Sen. Robert La Follette Jr. were sons of the leading GOP politician, Sen. Robert La Follette Sr. Republican progressives had supported him for the party’s presidential nomination in 1912 and 1916. He eventually ran for president in 1924 — on his own Independent Progressive Party ticket. But while the father’s exploits are well-known, his sons’ reactions to Wisconsin’s political climate are more relevant to today’s politics.

Frustrated by the GOP extremists, the La Follette brothers created the Wisconsin Progressive Party, and they ran as party candidates when successfully elected governor and senator in 1934. Today’s independent candidates share a similar frustration with the ideological purists on their right and left. The extremists in the Democratic and Republican primary electorates are rejecting centrist candidates who might be better positioned to win general elections.

Consider the words of Crist when he declared his Independent candidacy. “If you want somebody on the right or you want somebody on the left,” Crist said, “you have the former speaker, Rubio, or the congressman, Meek. If you want somebody who has common sense, who puts the will of the people first, who wants to fight for the people first, now you've got Charlie Crist. You have a choice.”

With all the attention paid to the successes of Tea Party activists during the GOP primaries, it is easy to forget that these are not like general elections. Primary voters tend to be more ideologically extreme. So these Republican primary voters may end up denying the party several general election victories.

For example, many political observers agree that Rep. Mike Castle (R-Del.), a moderate, would have been a stronger candidate for Senate than the GOP primary victor, Christine O’Donnell, his tea party-backed opponent. General elections have traditionally been won in the center -- where most voters still reside.

Minor party successes usually arise when the two major political parties become ideologically polarized. Moderates can usually find a seat under a big tent, but when party activists are unable to tolerate dissent, moderates are shut out and left to their own devices. So it isn’t surprising that strong candidates holding moderate positions realize they are electorally viable by abandoning their party and appealing to the center in general elections.

History tells us that conditions now are favorable for moderates like Chafee, Crist, Lieberman, and Murkowski. They step into a political vacuum at the center that the major parties created by moving to the political extremes. With room left for further polarization, this may be just the beginning of the rise of moderate independent candidates.

History also tells us the political party that first figures out how to recapture the middle -- and bring these candidates and their supporters into the fold -- is the one most likely to emerge as dominant.

Event Information

By most metrics, the 1991 Gulf War, also known as Operation Desert Storm, was a huge and rapid success for the United States and its allies. The mission of defeating Iraq's army, which invaded Kuwait the year prior, was done swiftly and decisively. However, the war's impact on soldiers who fought in it was lasting. Over 650,000 American men and women served in the conflict, and many came home with symptoms including insomnia, respiratory disorders, memory issues and others attributed to a variety of exposures – “Gulf War Illness."

On June 16, the Center for 21st Century Security and Intelligence at Brookings and Georgetown University Medical Center co-hosted a discussion on Desert Storm, its veterans, and how they are faring today. Representative Mike Coffman (R-Col.), the only member of Congress to serve in both Gulf wars, delivered an opening address before joining Michael O’Hanlon, senior fellow at Brookings, for a moderated discussion. Joel Kupersmith, former head of the Office of Research and Development of the Department of Veterans Affairs, convened a follow-on panel with Carolyn Clancy, deputy under secretary for health for organizational excellence at the Department of Veterans Affairs; Adrian Atizado, deputy national legislative director at Disabled American Veterans; and James Baraniuk, professor of medicine at Georgetown University Medical Center.

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This program was aired live on CSPAN.org » 

With the demand for its services constantly evolving, the Department of Veterans Affairs (VA) faces complex challenges in providing accessible care to America’s veterans. Amidst a history of long patient wait times, cost overruns, and management concerns, the VA recently conducted a sweeping internal review of its operations.  The result was the new MyVA program.

How will MyVA improve the VA’s care of veterans? What will it do restore public confidence in its efforts? What changes is the VA undergoing to address both internal concerns and modern challenges in veteran care? 

On June 20, Governance Studies at Brookings hosted VA Secretary Robert McDonald. Secretary McDonald described the VA’s transformation strategy and explained how the reforms within MyVA will impact veterans, taxpayers and other stakeholders. He addressed lessons learned not just for the VA but for all government agencies that strive to achieve transformation and improve service delivery.

This event was broadcast live on C-SPAN.

Join the conversation on Twitter at #VASec and @BrookingsGov

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The Horatio Alger ideal of upward mobility has a strong grip on the American imagination (Reeves 2014). But recent years have seen growing concern about the distance between the rhetoric of opportunity and the reality of intergenerational mobility trends and patterns.

The related issues of equal opportunity, intergenerational mobility, and inequality have all risen up the agenda, for both scholars and policymakers. A growing literature suggests that the United States has fairly low rates of relative income mobility, by comparison to other countries, but also wide variation within the country. President Barack Obama has described the lack of upward mobility, along with income inequality, as “the defining challenge of our time.” Speaker Paul Ryan believes that “the engines of upward mobility have stalled.”

But political debates about equality of opportunity and social and economic mobility often provide as much heat as light. Vitally important questions of definition and motivation are often left unanswered. To what extent can “equality of opportunity” be read across from patterns of intergenerational mobility, which measure only outcomes? Is the main concern with absolute mobility (how people fare compared to their parents)—or with relative mobility (how people fare with regard to their peers)? Should the metric for mobility be earnings, income, education, well-being, or some other yardstick? Is the primary concern with upward mobility from the bottom, or with mobility across the spectrum?

In this paper, we discuss the normative and definitional questions that guide the selection of measures intended to capture “equality of opportunity”; briefly summarize the state of knowledge on intergenerational mobility in the United States; describe a new microsimulation model designed to examine the process of mobility—the Social Genome Model (SGM); and how it can be used to frame and measure the process, as well as some preliminary estimates of the simulated impact of policy interventions across different life stages on rates of mobility.

The three steps being taken in mobility research can be described as the what, the why, and the how. First, it is important to establish what the existing patterns and trends in mobility are. Second, to understand why they exist—in other words, to uncover and describe the “transmission mechanisms” between the outcomes of one generation and the next. Third, to consider how to weaken those mechanisms—or, put differently, how to break the cycles of advantage and disadvantage.

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