A Modest Member of Parliament [Bert Kelly], “Foster mothering BHP beef bull,” The Australian Financial Review, August 20, 1976, p. 6. Republished in Economics Made Easy (Adelaide: Brolga Books, 1982), pp. 102-04, as “Iron and Steel (2)”.

In December 1970 I poked fun at the Broken Hill Proprietary Company Limited, saying that we should no longer use it as the shining and successful example of the infant industry argument to justify tariff protection. I drew a parallel between the foster-mothered beef bull down on his knees sucking greedily from a weak and skinny cow half his size, and the giant B.H.P. company still getting tariff assistance from the Australian economy. But when I wrote that article some of the comments I made were not quite fair because at that time, B.H.P. were not using the small amount of tariff protection that was available to them on the main range of their products, though they were certainly using it all on stainless steel.

But now B.H.P. is before the Industries Assistance Commission asking for tariff protection on their main products and they claim that they really need it. It is true that the requested tariff rates are low, but it is a tragic commentary on our economy that they are needed at all. I can imagine how the shades of Essington Lewis and Harold Darling must quail at the thought. People will never be able to use B.H.P. ever again to illustrate the infant industry argument.

Now that the plight of B.H.P. has been exposed for all to see we may have more public understanding of the fundamental sickness that afflicts all of us. B.H.P. is not in its present predicament because they are a lot of messers, nor mainly because they lack the spur of competition. You can find things to criticise, but who are we to throw the first stone? Any steel mill has to be big if it is to be efficient and I have never known a big show that didn’t suffer from bureaucratic stiffness of the joints. I know that B.H.P. is little better than government departments in this regard, but any fair-minded person will admit that B.H.P. is a well-conceived and well-run organisation, big though it is.

Their trouble is the same as the rest of us: we are all being clobbered by an internal cost structure that is out of line with our competitors. That is why B.H.P. is asking to be treated like the foster-mothered beef bull, that’s why it is asking for, and needs, tariff protection.

However, B.H.P. is asking for treatment of the symptoms of the disease, not its cause. Its fundamental problem is a high internal cost structure, yet if they are successful in obtaining the tariff protection for which they ask, they will have an immediate effect on increasing the cost structure of the company still more. A tariff-induced rise in steel products will quickly get built into a rise in the price of cars, wire, fencing droppers and then into wages and so back along the line until it comes to the exporter who can pass the price rises no further. And in a few year’s time B.H.P. will come before us again and ask for another subsidy from the exporting sector of the economy because their cost rises will have been increased because of the tariffs that they themselves received. It is pathetic seeing a company as big and efficient as B.H.P. down on its knees before us, asking for more of the same treatment that made it and us sick. Surely a company with such fine traditions, with such a large stake in the country, can think of some other solution, one that won’t make it and us sicker!

B.H.P.’s problems centre on the high cost of labour, the high cost of industrial strife, the dreadful load of coastal shipping freight rates and port handling charges and so on. I do not pretend that these are inconsiderable burdens, indeed they are not, but they are the very burdens that are breaking the backs of the rest of us. If B.H.P. gets relief by an increase in tariff protection, this may suit them in the short-term, but it would be fatal for them and us in the long-term.

My city readers find my rural illustrations rather primitive, but they are real to me. I started this article by comparing B.H.P. to a big beef bull being foster-mothered on a little cow. But there is another somewhat similar comparison. City people may not believe this, but sometimes (not often) cows suck themselves. This is an unprofitable business for the dairy farmer, because he gets nothing out of the cow. And, strangely enough, it is also bad for the cow who milks herself weak and skinny in the end. Well, if B.H.P. gets the tariff protection for which she asks, it will do the same!