In a statement made on 17 February 2020, General Motors said that it is:

taking decisive action to transform its international operations, building on the comprehensive strategy it laid out in 2015 to strengthen its core business, drive significant cost efficiencies and take action in markets that cannot earn an adequate return for its shareholders.

This means that GM will wind down sales, design and engineering operations in Australia and New Zealand and retire the Holden brand by 2021.

This announcement—no more Holden cars—was interpreted in different ways.

A lot of grief of course. But after the grief came blame, and here views were divided. Neil Clugston and Oliver Yates, for example, used Twitter to blame the previous treasurer, Joe Hockey; for Caroline Di Russo, the unions should take all the blame.

If we are fair, however, this car crash was entirely predictable and entirely desirable. As it happens, Neil, Caroline and Oliver are all wrong, and our country is better for the closure of Holden, Ford and Toyota.

It helps if we go to economics for an explanation that, on the surface of things, is not immediately obvious.

We start by repeating the most important idea in economics: that there is no such thing as a free lunch.

If you remember nothing about economics other than this single idea then you will be a better economist than, say, some ministers who these days act as if money grows on trees and can be harvested indefinitely, infinitely and without cost.

The car industry existed in Australia only because of the assistance the industry received from government. And this assistance has not come cheap.

The first point to make is that Australia is small beer as a market for and as a manufacturer of motor vehicles. According to the Productivity Commission:

Australia is a very small player in the global context of automotive manufacturing. Australia’s new vehicle sales of just over 1 million units were about 1.3 per cent of the 85 million passenger and commercial vehicles sold globally in 2013. Australia’s share of global production, at just over 200,000 units, was about 0.25 per cent in 2013.

In 2006, Australia produced around 300,000 motor vehicles.

To manufacture cars competitively requires an annual factory output of 200,000–300,000. In 2012, Holden produced around 80,000 motor vehicles. Ford produced less than 40,000. By way of contrast in 2011, the United States produced around 9 million motor vehicles; China over 17 million; and India around 4 million.

So for Holden, Ford, Toyota and Mitsubishi, achieving a volume that keeps unit costs competitively low was a problem—and it always has been.

On top of this, export markets are tough. Our labour costs are relatively high, higher than those paid in China or Thailand.

So Australia starts well behind in the race to competitively manufacture motor vehicles. The exact same reasoning applies to our efforts to mass produce textiles, clothing, shoes, television sets, radios, fridges and computers. We are situated high on the cost curve.

Since the late 1940s, this statement of reality provoked action by governments, which with big hearts, nationalist fervour, open wallets and a keen eye on regional and marginal electorates, played the role of facilitator, enabler and financial supporter.

According to the Productivity Commission—and thank goodness for an organisation focused on research and evidence—the automotive manufacturing industry received about $30 billion (in 2011–12 dollars) in assistance between 1997 and 2012.

As a general statement, industry protection wastes precious resources. An industry can’t stand on its own two feet, so the government taxes everyone else and hands over free money. It is a beggar thy neighbour approach, whereby many are made poorer so that a few can become richer. In the case of GM, a large multinational company, the monies they received were shipped off shore.

Now, the loud and passionate supporters of Holden don’t care all that much about this. The argument is that so long as V8s go around the Mount Panorama circuit, then no sacrifice—so long as it is shouldered by another—is too high.

To this we can say that government sometimes gets it right.

And the history of Australia over the last 30 years has been that governments, no matter their political stripes, have got industry protection and payments to industry mendicants right.

Holden is gone and, for the vast majority of us, will soon be forgotten.