Lloyd Morrison backs greater public ownership (of economic growth that is)

How much do Kiwis want more economic growth?

At the moment, not enough to do anything that’ll make it happen.

And it won’t happen till we take ownership of the issue, says Infratil director  Lloyd Morrison on the NZAhead website, the NZ Institute’s report card on our social, economic, and environmental wellbeing.

He says achieving greater economic growth is not about what the politicians or influential people do or say, it “will only occur when we engage with the wider population”.

To do this, Morrison says we need simple measures so that the average person can understand the connection between performance and health, crime and wealth.

The NZ Institute has had a shot at this with NZAhead which has sixteen measures that are relevant to the quality of life of all NZers including social, environmental and economic dimensions.

Morrison says Kiwis understand rankings in rugby – “They understand whether we are 7th or 1st.

“If they understood that instead of being 23rd in gdp we were 15th , we would have better health, better education, lower unemployment…

“Probably because of our history we are looking for other people to sort it out. If you talk to people about making NZ better off, most people start with criticising other people – Why doesn’t the government do this? Why doesn’t such and such do that? Why don’t we tax these people or take less tax off these people?

“The fundamental issue should be just agreeing that we have to be better off, then iteratively finding the solutions.

“They won’t appear immediately but the commitment is as important as the way we get there.

“If we want to be better, we are going to have determine that for ourselves. Not if a small group of politicians or a small group of influential people.

If [Kiwis] are asked to do things they believe in, they will do so.”

The importance of being ambitious. A (brief) comparison of Kiwi business and sporting success

It’s a question that a few great minds have pondered: why are we so good at international sport but not so good at international business?

Our sports people regularly punch above their weight in international events (for example rugby, rowing, sailing, triathlon); our exporting businesses not so much.

Individual export companies manage the trick, but it’s not something you can say of the export sector in general.

As mentioned in yesterday’s post on the Southland rugby team’s success, our international sports people face the same basic difficulties as our exporters:
• Lack of size and
• Distance.

A couple of years back I did a piece for the Business Herald looking at this puzzle, which as I wrote, has produced a rich vein of discussion, like Saatchi and Saatchi boss and rugby fan Kevin Roberts mining of the All Black’s success in search of lessons for businesses.

In my interviews, ambition was identified an a big factor to explain the different levels of performance. It was felt a lot of business underperformance came down to differences in aspiration. In sport we are very focused on success. We plan and invest to be the best in the world. Business? Again not so much.

As was pointed out by former NZ Institute head David Skilling, there’s nothing about our dna that makes us fantastic rugby players or netballers.

But sports and businesses and surrounded by very different ecosystems. Our passion for sport has created a hot house for sporting achievement. Business? Again not so much.

But I also spoke to New Zealand Rowing chairman and businessman Bill Falconer who warned against making too much of comparisons between the international performances of our businesses and sporting people and organisations.

Falconer doesn’t believe the sports-business comparisons are totally fair. “To be successful in business requires a much broader agenda. You need greater resources in business to export, for example the huge capital investment involved.

“And it is hard to benchmark in business. In sport it is a little easier than in business – it is easier to measure, to see if you are up to it.”

Another thing that is different between business and sport is age. Sportspeople are young so it’s easier to make the high level of commitment needed for success on the international stage - they don’t have to worry about a mortgage or time away from a family.

The majority of managers of exporting companies don’t have that freedom, but like sportspeople have to spend large chunks of their time offshore.

If ambition was sales – the unfulfilled dreams of the IT sector and how the export growth debate has moved on

This post started out focusing on the lack of ambition of our businesses and politicians, but noting one honourable exception – the Kiwi IT sector.

That led to BigCake wondering what has become of all this IT ambition. Unfortunately not much, from a national big-picture perspective anyway. For sure, there’s heaps of IT businesses whose results match their ambitions, but I’d guess there’s an equally big heap where reality has fallen short.

That sort of lead to the question: why’s that? Is our IT sector a bunch of dreamers or is something else going on?

And that got me thinking about how the debate regarding what’s holding our exporters back has changed in the last decade or so.

Anyway, as mentioned BigCake has been a bit obsessed by a lack of ambition around the Kiwi shop which just seems at odds with our pioneering past, though the more he thinks about it, not so much.

One group of Kiwis not so inhibited is the IT sector. What’s happened in this sector (with its abundance of dreams, energy and ideas) brings home the magnitude of the problems facing globally ambitious Kiwi companies.

If ambition was sales…

Latest export sales stats show the sector has been going backwards from $1.6 billion in 2006/07 to $1.4 billion in 07/08. Domestic sale increased a bit over that latest period.

As a result, you have to wonder whether our leaders have now given up on IT, and other high-value sectors, because they’re too hard and instead have gone and put most of our eggs back in the agriculture/commodity basket.

It’s the path of least resistance, but it’s also a risky one as the last 50 or so years have shown.

Back in 2003 the ICT taskforce came out with a set of targets for the industry to achieve by 2012, including:
• More than trebling the number of employees to 125,000
• More than doubling the sector’s contribution to gdp to 10%
• A 625% increase in the number of $100m plus IT companies to 116.

To get an idea of how big a leap the last one was, there were only 15 companies in the $50 – $100m bracket at the time. Just 16 had already made it. I think this target was later (sensibly) modified to be less focused on a number of companies and more on the 10% of gdp target.

Anyway, they’re not going to happen.

For the taskforce these targets were not aspirational – the collective wisdom of some of the brightest minds in the ICT sector (Peter Maire, John Blackham, Ian McCrae…) was that it could be done…provided there was a “serious commitment to change”. Which of course never happened.

The NZ Institute’s latest report “A goal is not a strategy” also goes into this issue of our inability to ‘walk the talk’.

It’s interesting to compare what the ICT Taskforce saw as the constraints back in ’03 with what the institute now sees as the problems holding back high-value sectors like IT (acknowledging they’re got different approaches).

BigCake sees the changed diagnoses as a sign of how the export support debate has moved on.

The issues, as the taskforce saw them, were:
1. The shortage of commercialisation skills and experience to go global
2. The supply of appropriately educated graduates. The taskforce was particularly worried about the need to “inspire and engage with tomorrow’s ICT talent”.
3. Celebrating our ICT heroes
4. The regulatory environment.

For sure, they were big problems back in ’03 and in the main, are still so today. However, in today’s debates on how to grow exports, the taskforce’s constraints seem a bit self regarding, internalised and maybe naïve.

Are they really the heaviest anchors on the ICT sector’s ambitions now, or even back then? Would a 2010 taskforce consisting of Rod Drury, Sam Morgan etc produce a completely different the set of constraints?

Dunno. Let me know.

In a “Goal is not a strategy” the NZ Institute has come up with alternative diagnoses for sectors like IT that reflect where BigCake thinks the export growth debate has gone in the last couple of years (or at least gone in his head).

I’ve posted on this shift, or the need for it, before while looking at the work of people like economic geographer Philip McCann.

The guts of what the institute is saying is this: “Much more effort is required by New Zealand to establish the basis for success of wealthy small countries; that is having large exports of differentiated products and services.” (eg. IT ones)

Its list of constraints on achieving this is:
• Size and distance – “Other countries have implemented policies to help domestic businesses overcome the size and distance barrier challenge. New Zealand has not pursued the range of policy initiatives that other countries have, and all of these countries have been more successful in growing differentiated exports.”

The institute has looked at the support countries like Singapore, Korea, Denmark, Australia and Israel give their exporters to overcome their size and distance problems. We give financial support, but not R&D tax credits or exemptions, skill development help and we don’t do industrial park development.

• Infrastructure – “New Zealand scores relatively poorly on measures of infrastructure development, placing 35th in the world with the quality of roads, railways, and electricity ranking worse than the OECD average.”
• Exchange rate policy – while a floating exchange rate provides commodity exporters with a natural hedge, it is not so good for sector like IT. “Exports are usually priced in the currency of the destination market so the consequence of the exchange rate rising and falling for non-commodity exporters is that earnings fluctuate.”
• Picking winners – encouraging the development of the kinds of economic activity that are regarded as more valuable including sub-sectors and individual businesses.
• Supporting cluster development.

Yeah, so things have moved. The perceived problems now are more external or structural and as such much more difficult to resolve, in part because we haven’t really acknowledged how big the issue is.

Most of the above get a mention in the taskforce report, but don’t make it to the list of top-line issues.

So if you were on a 2010 ICT taskforce, what would be your top three problems and the related fix?

NZ Institute describes our economic hole – a guide to why NZ needs to walk the talk to escape

BigCake’s four big themes have been:
1. Economically we are in a hole
2. We need to recognise we are in a hole
3. We can extricate ourselves if we get our act together
4. NZ is still a pretty sh!t hot place, so while climbing out of the hole, we need to protect what’s great about living here.

Regarding numbers 1 and 3, the NZ Institute thinktank has been a major influence.

Following up on yesterday’s post.  Below I’ve cherry picked facts from the institute’s latest paper, A goal is not a strategy, to show that NZ is in a hole. Many challenge the way we like to think of ourselves:

Innovation and education
• New Zealand has the highest proportion in the OECD (equal with Ireland) of highly skilled people living in other OECD countries.
• None of the 10 MBA programmes offered around the country focuses on developing the skills needed for international business success.
• In New Zealand innovation is often confused with inventiveness. As a result there is a tendency to think that if R&D output is increased then innovation will increase. Unfortunately for New Zealand, which is quite good at inventiveness, innovation also depends on successful commercialisation of the new way of doing things, and New Zealanders are not so good at this.
• New Zealand’s innovation and business sophistication score is low relative to the scores for many other advanced economies indicating there is great potential to improve innovation, and that doing so would lift economic performance substantially.

Agriculture
• In 1990 New Zealand had around five hectares of agriculture and forestry land per person; today it has less than three hectares per person. Population growth will reduce that further.
• Productivity per hour worked in agriculture is not very different between New Zealand (NZ$40) and Denmark (NZ$50). But in New Zealand the productivity of agriculture is around 83% of the average for the whole economy (NZ$48) whereas Denmark’s agricultural productivity is only around 47% of Denmark’s overall average productivity (NZ$106). Despite outperforming New Zealand in agriculture, agriculture is not the powerhouse of the Danish economy.
• Denmark and New Zealand have almost identical food and agriculture, beverages and tobacco exports per capita. However, New Zealand uses a greater share of its total workforce (6.8%) than Denmark (2.6%) to achieve the same result.

Entrepreneurship
• Two-thirds of New Zealand entrepreneurs are home based and tend to be ‘solo’ operators with few employees. Many of these people are satisfying their desire for independence, to be their own boss. These small independent businesses are likely to have quite low productivity. The relative abundance of these small businesses is therefore likely to be contributing to low overall relative productivity.
• New Zealand has too few highly skilled entrepreneurs targeting international business success. The shortage means the product of New Zealand’s inventiveness – large research output, inventions, and new business opportunities – is not being converted into international business success.

Exporting
• New Zealand’s exports have grown much more slowly than the OECD average partly because global trade in commodities (where New Zealand exports are concentrated) has grown more slowly than trade in differentiated goods and services.
• New Zealand’s most important sectors for exports are tourism, agriculture, and manufacturing. All three have average or lower than average productivity so simply growing these activities without also substantially lifting productivity would not lift GDP per capita materially.
• Commodities are well known for their cycles, and reliance on them would mean New Zealand would continue to be exposed to volatility and price shocks.

General
• New Zealand and Denmark have similar small populations yet the institute calculates that Denmark’s GDP per worker (NZ$170,386) is more than twice New Zealand’s GDP per worker (NZ$83,842).
• New Zealand’s manufacturing labour productivity is the same as that of agriculture, at NZ$40 per hour worked. In comparison, Denmark’s manufacturing labour productivity is almost 90% higher than New Zealand’s, at NZ$75 per hour worked.
• Despite strong doses of economic liberalisation, New Zealand’s GDP per capita remains lower than the OECD average and much lower than Australia’s. New Zealand’s private economy labour productivity is 57% of Australia’s.
• New Zealand scores relatively poorly on measures of infrastructure development, placing 35th in the world with the quality of roads, railways, and electricity ranking worse than the OECD average.

It’s a pretty big hole, but it’s one that we can get out of if enough of us accept we are in a hole. We also need to accept that something more needs to be done to get us out our hole than we are seeing at the moment.

In A goal is not a strategy, which everyone interested in the above issues should read, the Institute again sets out the case for change and the bare bones of an economic growth strategy. It says New Zealand needs to:
• Focus on the internationalisation of high value,differentiated export sectors
• Prioritise labour productivity improvement efforts on these sectors, and
• Reallocate resources from low to high productivity sectors.

[Photo credit - horslips5 via Flickr]

Latest NZ Institute paper out – “A goal is not a strategy”. NZ’s tiddlywinks approach to economic growth

The NZ Institute’s latest discussion paper – “A goal is not a strategy – focusing efforts to improve NZ’s prosperity” – touches on one of BigCake’s observations about how this country attacks its economic growth issues.

We’re playing “bloody tiddlywinks” while countries, even of a similar size, play big boys’ games.

Tens of millions of dollar there, millions here ain’t going to make much difference.

As the NZ Institute says if a goal is important, then resources should be poured in to match.  “Competing small countries are committing hundreds of millions of  dollars to efforts they regard as strategically important.”

The Herald’s Brian Fallow has commented on the sizeable discrepancy between what NZ will fork out for its national broadband network (calculated to be $5-8 billion) and Australia’s A$43 billion.

“Canberra’s estimate is the equivalent of $2400 per Australian, eight times the per capita outlay of public money our Government is talking about.”

Fallow was making the point that “this does not, as they used to say, compute.” Someone is going to lose – the taxpayer and/or the consumer.

BigCake’s point is the difference in ambition – geographical and population differences aside.

A couple of years ago I wrote about how the then Labour Government was, under the heading of economic transformation, going to spend $3.6 billion over four years on infrastructure skills and R&D.

At the same time Ireland’s National Development Plan projected expenditure of NZ$105 billion on infrastructure alone over six years.

Whether either happened is not really the point – it’s just the gap in ambition (and the money backing it) that hits you between the eyes.

You see the small thinking in the current Government’s tens of millions approach to agriculture R&D.

As usual the NZ Institute’s work is packed with good grunty stuff on what’s wrong with our economy and what we can do to fix it.

“A goal is not a strategy” is focused on boosting the non-commodity side of the economy – “exports of differentiated goods and services, and helping firms overcome the barriers to internationalisation.

“New Zealand’s exports have grown much more slowly than the OECD average partly because global trade in commodities (where New Zealand exports are concentrated) has grown more slowly than trade in differentiated goods and services.

“New Zealand’s most important sectors for exports are tourism, agriculture, and manufacturing. All three sectors have average or lower than average productivity so simply growing these activities without also substantially lifting productivity would not lift GDP per capita materially.

“Other small countries are becoming prosperous by exporting differentiated goods and services and New Zealand must find a way to join them or find another strategy for success.”

A post on the performance of our ICT sector has been banging around my head for a while. The above looks like good context for a post.

Gallup world poll ranks NZ sixth happiest country in the world, along with Costa Rica. Why is relatively poor Costa Rica so happy?

Polling company Gallup bills its global happiness research as going beyond measuring “simple happiness for people and wealth within societies to uncover what really makes certain people and communities thrive while others struggle and suffer”.

The findings (which I haven’t seen published in NZ) are based on in-depth analysis of wellbeing, which is described by Gallup as the “interconnected elements that contribute to health, happiness, and productivity, including work, social networks, personal economics, personal health, and citizen engagement”.

NZ came sixth to compared our country ranking of 51 in terms of personal wealth.

(Based on a table compiled by Forbes.com. GDP rankings courtesy of CIA Factbook)

Poll questions include:
• Are you satisfied or dissatisfied with your job or the work you do?
• Are you satisfied or dissatisfied with your standard of living, all the things you can buy and do?
• Right now, do you feel your standard of living is getting better or getting worse?
• Are you satisfied or dissatisfied with your personal health?
• If you were in trouble, do you have relatives or friends you can count on to help you whenever you need them or not?
• Approximately how many hours did you spend socially with friends or family yesterday?                                                                   

• Have you volunteered your time to an organisation in the past month?
• Please imagine a ladder, with steps numbered from 0 at the bottom to 10 at the top. The top of the ladder represents the best possible life for you and the bottom of the ladder represents the worst possible life for you. On which step of the ladder would you say you personally feel you stand at this time?
• Did you feel well-rested yesterday?
• Did you smile or laugh a lot yesterday?
• Did you experience a lot of stress yesterday.

Obviously another better measure of how we’re faring overall than the simple gross domestic product per capita measure still favoured by many.

But wellbeing doesn’t tell the whole story either.

Gallup has developed a hierarchy – “a path for building the best society possible” – of needs that are required if we’re to have thriving communities.

The first order ones are:
• Law and order
• Food and shelter

Then comes:
• Institutions and infrastructure
• Good jobs
• Well being
• Brain gain – a “country’s ability to attract and retain talented people whose exceptional gifts and knowledge create new business and new jobs to help improve that city’s or country’s economy”.
• Quality GDP growth

GDP growth is guess is built on the foundation of the others.

Gallup says it believes “leaders can’t maximize the potential of their societies until they measure and truly understand their individual country’s areas of strength and weakness and then track progress toward improvement”.

The NZ Institute with its nzahead campaign is pushing for a “big picture” growth goal that has 16 measures including traditional gross domestic product per capita, along with ones for inequality, education, unemployment, productivity, innovation and the environment.

It’ll be the ‘big picture’ measure of how we’re doing overall as a nation that’ll motivate Kiwis to change, not harping on about falling incomes, gdp per capita etc.

But BigCake doesn’t believe that lets us off the hook in the wealth stakes.

As the Gallup happiness poll shows, you’ve got a better chance of being happy if you’re from a “rich” nation. The three unhappiest countries in the world are Coromos, Burundi and Togo.

Though as Costa Rica shows money ain’t everything. The Central American country has about one fifth the per capita gdp of Norway.

Costa Rica’s happiness is not a flash in the pan in terms of strong performances in international surveys. It’s also:
• Number 1 in the Happy Planet Index compiled by the New Economics Foundation
• 3rd in the 2010 Environmental Performance Index published by Yale and Columbia Universities.

Earlier this year the BBC had a look at why Costa Ricans were so happy. The Beeb identified:
• Emphasis on the environment – more than half its territory is now covered in trees, compared to 20% in the 1980s
• A carbon tax is used in part to pay landowners and indigenous communities not to chop down trees
• More than 90% of its energy supply comes from renewable sources

• High life expectancy of 78.5 years
• And ummmm the army was abolished in 1949.

But as the BEEB asks: does this “greenness” make Costa Ricans happier?

“Yes,” says a cattle farmer and government adviser on climate change. “Now I have a simpler, less materialistic life, more in tune with nature.”

Costa Ricans often answer the question ‘How are you?’ with the phrase “pura vida”. It literally translates as “pure life” but roughly means “cool” or “everything’s fine”.

Analysts the Beeb spoke to say that Costa Ricans’ apparent happiness could be down to a whole series of factors in addition to greenness: strong social networks of friends, families and neighbours; ubiquitous social and education programmes; and tolerance of social divisions and different opinions.

Also “a popular piece of philosophy in Costa Rica says no argument or quarrel should last more than three days”.

Tunnel vision over wealth measures exposed by international prosperity survey – we come 10th.

Another international survey looking at how we’re doing as a nation compared with the rest of the world again highlights the gulf between our rankings for quality of life and wealth.

In the 2009 Legatum Prosperity Index, which measures the quality of our institutions, education, health, personal safety, governance, freedom and social capital as well as wealth, we rank 10th, just behind the US.

Take out the wealth stuff – that is our economic fundamentals (our poor exporting performance drags us down) and entrepreneurship (not as good at innovation as we think we are) – and we do better than Australia ranked four places above us in the full rankings.

The index has a nifty little tool that allows you to make these types of comparisons.

Anyway, in the most commonly used measure of relative wealth, the OECD’s gdp per capita stats, we currently rank 22nd out of the 30 OECD countries though it’s a hell of a lot worse than that as the OECD is a bit of an odd-ball exclusive club.

If you want to include wealth measures for all countries, such as in the CIA factbook, then we’re 51st out of 227 countries.

The Legatum Institute, a Dubai-based international investment group interested in sustainability, defines prosperity as both wealth and wellbeing.

It says “the most prosperous nations in the world are not necessarily those that have only a high gdp, but are those that also have happy, healthy, and free citizens”.

And it’s these latter qualities that make NZ such a great place to live. I’ve posted before on how governments focusing on NZ’s poor economic performance, though the narrow lens of wealth, ain’t going to spur most of us on to greater economic activity because Kiwis are more motivated by national wellbeing than by pure wealth.

The New Zealand Institute’s nzahead campaign for a “big picture” growth goal that has 16 measures including traditional gross domestic product per capita, along with ones for inequality, education, unemployment, productivity, innovation and the environment.

In case anyone’s felling complacent some of the nzahead social measures, such as inequality and assault deaths ain’t that sh!t hot either.

Overall the country gets a ‘C’.

The Institute wants New Zealanders to start talking about what really matters and how we measure those things we identify as important.

It’ll be the ‘big picture’ measure of how we’re doing overall as a nation that’ll motivate Kiwis to change, not harping on about falling incomes, gdp per capita etc.