Posts Tagged ‘Philip McCann’
A question: Can we catch Australia if their population is growing a hell of a lot faster than ours?
Brian Gaynor touches on this issue in his latest column, saying that in 1970 Australia had 4.3 times more inhabitants than us; now it’s 5.5 times greater and by 2050 it’s forecast to jump to 6.8 times.
Many Kiwis would be happy with our relatively low population growth, but as Gaynor says “at the same time we want all the trappings of the modern world, including the latest electronic gadgets, late-model automobiles, generous retirement schemes and a world-class health scheme.
“We cannot expect to have these unless we generate sufficient domestic economic growth and exports to pay for our imports. We also need a higher tax base to pay for a world-class state pension scheme and health system.”
Philip McCann from Waikato University has also pointed a finger at our tiny population. He says being small and far from markets is the worst position to be in. In Australia’s case, size can help overcome the limitations of isolation. And small European countries have large markets nearby to help develop economies of scale.
The role of population growth in economic growth is highlighted in a pwc report “The world in 2050”.
The report notes:
• A rapid convergence between the E7 emerging economies (Brazil, Russia, India, China, Indonesia, Mexico, Turkey) and the G7 (US, Japan, Germany, UK, France, Italy and Canada). In 2007, total G7 GDP at purchasing power parity (PPP) was still around 60% larger than total E7 GDP. By 2010, pwc estimates the gap had shrunk to only around 35%.
The E7 (Russia excepted) has fast growing populations; the G7 (the US excepted) has slow, static or negative population growth.
• pwc says the catch-up process is set to continue over the next decade - by 2020 total E7 GDP at PPPs could already be higher than total G7 GDP, although any difference would still be within the margin of error of such projections.
• In the following decade from 2020 to 2030, however, the process of overtaking is likely to be reinforced, with total E7 GDP projected to be around 44% higher by 2030 than total G7 GDP in PPP terms. The gap would widen further beyond that, with the E7 almost twice as large as the G7 by 2050 in PPP terms.
Population growth is identified – along with labour force quality and size, and technology– as a key driver of this economic power switcheroo.
pwc says the emerging economies have stronger potential growth than established OECD economies on most of these measures, assuming they “continue to follow broadly growth-friendly policies”.
On this basis India is expected to overtake China’s trend growth at some point during the coming decade due to India’s significantly younger and faster growing working age population. (Or put another way, India eventually overtakes China in the growth stakes because of China’s ageing population, accentuated by its one child policy).
There’s also the fact India is starting from a lower level of economic development than China and so has more catch-up potential.
pwc says most of the variation in growth rates reflects differences in population growth.
Australia, Canada and the US, which are picked to have relatively strong population increases, are projected to continue to grow at around 2.2-2.4% a year up to 2050, while countries with shrinking populations such as Germany, Italy and Japan will see total GDP growth of only around 1.0-1.9% in domestic currency or PPP terms.
Meanwhile the younger and faster growing Indian and Brazilian populations race along till around 2030, then their ageing populations start to apply the brakes.
NZ is not well placed in this regard. According Statistics NZ projections, by 2051 half of all New Zealanders will be over 45 (in 2001 the median age was 35). The number of New Zealanders aged 65 years is expected to reach 1,220,000 by 2051.
pwc admits such long-term projections are subject to great uncertainties but believes the trend is clear.
[NZ is not mentioned in the report]
A enduring Kiwi myth is that we are a particularly innovative bunch – we love the whole ‘number 8 wire and we don’t have much money so we have to think’ thing.
Part of the myth is that we are this way because we are small, isolated country. Well maybe not.
But myths have lives of their own and we just lap up stories about Kiwis with smart ideas because it fits our image of ourselves – you know, clever do-it-yourself thinkers who lead the world. This often gets called innovation, but it ain’t.
Innovation turns ideas and invention into a goods and service people will pay for.
Kiwis are good at the first bit; not so good at the second.
Anyway getting back to size and isolation, it may be that these qualities, far from being good for innovation, are in fact bad.
Hong Shangqin, Philip McCann and Les Oxley in a University of Canterbury paper say a survey of Kiwi businesses suggests that “in a small and isolated local market such as NZ, smallness in terms of firm size may not be an advantage for innovation.
“The reason appears to be that the notion of ‘small’ itself may have an absolute minimum threshold, below which translating entrepreneurship into innovation becomes problematic.”
Which the trio says is at odds not only with our Kiwi myth, but also economic text books.
“NZ is a small and isolated economy which, at least in a textbook sense, is institutionally almost ideal for promoting local entrepreneurship and innovation.”
However NZ’s innovation performance of is poor (or maybe mixed). Back in 2007 the World Economic Forum ranked us only 27th in the world in terms of our overall capacity for innovation, the fourth lowest ranking for any advanced economy.
The authors say our underperformance is particularly noticeable compared to other small isolated countries such as Israel and Finland. “The reasons for this poor performance are as yet unclear.
“It may be that the awareness of best-practice and state-of-the-art thinking on innovation issues is less in NZ than might be hoped. This scenario would call for better training and human capital development.”
Marketing and management skills would be classic examples.
“Alternatively, there may be grounds for believing that some of the structural determinants of innovation in NZ are different to those in other countries. In this case, some of the recipes for promoting innovation which are adopted in other countries may not necessarily be appropriate in NZ.”
How come we are so bad?
The authors believe part of the answer may be related to the role size plays in the innovation process, that is the size of businesses, local markets and cities.
Much international evidence suggests that small businesses (along with large ones) are inclined to innovate more. “Yet, translating these arguments to NZ may not be so straightforward because what is meant by large and small may be very different in different contexts.”
As well as clustering around small firms, international evidence is that innovation likes large and diverse cities.
“Combining this observation with the above observations from the international literature regarding small firms suggest that that large concentrations of small firms in large cities should promote innovation,” the authors say.
“While urban areas are regarded as being beneficial for innovation promotion, absolute scale may also be critical. As such, once again there may be an urban population threshold above which being located in a city is advantageous for fostering innovation.”
Patenting is a classic example. As MacDiarmid Institute deputy director Shaun Hendy has pointed out, the difference between Australia and NZ’s patenting rates (we’re 40% below Australia’s) is down to the relative size of the two countries’ cities.
Specifically we can’t match the grunt of Sydney (population 4.5 million) and Melbourne (4m plus). Bigger cities generate higher rates of patenting. Where our cities are of a comparable size – Auckland and Adelaide – patent rates are much the same
The three authors believe market size may be important. “NZ is the third smallest national market in the OECD, with a total national market which is only equivalent in scale to a medium sized urban market in the USA.
“Yet, in terms of its accessibility to other national markets, NZ is also one of the two most geographically isolated countries in the world. Many other small countries, and particularly those in the EU, are part of a much larger market, such that exporting increases the returns to innovation.
“The fact that the net benefits of exporting diminish as distance costs increase implies that the positive effect of exporting on innovation may therefore also be smaller in NZ than for many other small countries.
“Finally, the small scale and isolation of the New Zealand economy means that there is always a higher risk premium attached to the NZ dollar than for almost all other currencies. The result is that interest rates are consistently amongst the highest in the world. As such, the optimal investment portfolio for businesses may be rather different in NZ than in other countries with a greater relative preference for labour over capital investment.”
Is the world “spikey” or “flat”?
BigCake’s in the “spikey” camp – technology is not diminishing distances, in fact is likely to be increasing them.
The gran’ daddy of the the spikists is Richard Florida. He says location still matters heaps innovation and economic activity remain concentrated in “spikes,” in certain urban areas reflecting a disproportionate amount of activity and talent.
In a Harvard Business Review guest blog, John Hagel III and John Seely Brown give more evidence that distances are increasing.
They say information technology is not reducing the incentive to gather in dense cities, rather it is likely to be accelerating the movement of people into cities.
NZ does not have dense cities (at least on a global scale). We are basically a small good guy in a fight against good big guys.
Hagel and Brown are co-chairmen of the Deloitte LLP Center for the Edge which conducts original research and develops “substantive points of view” for new corporate growth.
They say: “Of course, people still have compelling non-economic reasons for where they live — in the future, as now, family ties, lifestyle preferences, even aesthetics may cause a person not to relocate. Just don’t look for technology to eliminate the imbalance of economic opportunity and talent and innovation between geographies — those imbalances still exist and will tend to become more significant.”
They identify two key reasons for people shifting to cities:
• Rich exchanges of know-how (tacit knowledge) generally require face-to-face contact. Emerging technologies said to improve the creation and sharing of knowledge (for example telepresence) largely focus on explicit knowledge that can be expressed in data and written text rather than supporting the kind of informal gatherings that promote the sharing of tacit knowledge.
• Serendipity the ability to attract people and resources we need but don’t yet know exist. In a dense city, the probability of serendipitous encounters increases; if the city draws a specific talent pool (such as entertainment in LA or finance in New York), the number and quality of encounters improves.
“Far from making location obsolete, the digital infrastructure is actually fuelling spikiness. On the one hand, the Internet (and global transportation and mobile phones) have provided unprecedented access to the world for residents of small towns and distant countries.
“At the same time, this has made relocating to an urban area more attractive and reduced the opportunity cost. In the past, choosing to move to a specific city was a more significant commitment because it implied sacrificing contact with other parts of the world. Today, global digital infrastructures help us to stay in touch across urban areas, allowing us to benefit from richer interactions within a city while maintaining connections with other parts of the world.”
As I’ve posted before, geography has delivered NZ a bum hand.
Our small population and location at the bottom of the world (which is how most of the world sees us) is a major obstacle in our fight to keep up with everyone else in health care, education resources and wages. The OECD reckons distance alone lowers our ability to generate more wealth by around 10 percent.
NZ basically needs to recognise this truth when it starts looking at ways to get out of our economic rut.
And that say people like Philip McCann requires radical policy changes which would be at odds with how we see ourselves and our ‘kiwi’ lifestyle.
MacDiarmid Institute deputy director Shaun Hendy says we need to act like we are in a city of 4 million.
Size, as BigCake has said on numerous occasions, matters.
Our lack of size, along with our distance from markets, is a big factor holding us down in our economic rut. The OECD reckons distance alone lowers our ability to generate more wealth by around 10 percent.
People like economist Philip McCann argue that governments can’t do much about our our isolation and lack of size.
But they’re not impotent.
The Ministry for the Environment has released a discussion document that focuses on improving the planning system for the country’s urban areas and infrastructure.
A key acknowledgement is that our international competitiveness relies more and more on the competitiveness of our major cities.
BigCake figures a large part of the competitiveness picture is to do with size. Until our cities (well Auckland) can foot it with at least Adelaide and Brisbane across the Tasman, we’re basically a good small guy in a fight.
The discussion document identifies issues getting in the way of the competitiveness of Kiwi cities as:
• Planning and urban design – there’s inadequate recognition of the urban environment in the RMA
• Complex planning system
• Lack of consistency in decision-making
• Ineffective implementation tools
• Lack of national clarity and consistency of objectives, direction and standards
• Mixed access to RMA designations
• Complex and inflexible approval processes
• Lack of robust and integrated decision-making
• Inefficient and inadequate land acquisition processes.
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?
It’s scary how shakey support for economic growth in NZ is.
Most of us support growth, but that backing is delicately poised. It doesn’t take much to tip support over into opposition.
I’ve had a shot at grouping levels of Kiwi growth support:
| GROWTH SUPPORTERS |
- The majority of NZers. However, a 2004 Growth and Innovation Advisory Board survey described this support as “polite”, “fragile” and lacking “passion”.
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- Few register as opposed to growth, but a significant number are at the ‘lukewarm’ end of positive.”
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- And as Bridget Liddell has pointed out: “[We] don’t want too much growth that might mean too many people and that might mean a deterioration in access to this wonderful country”.
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- Passionate growth support is largely the domain of the business community, particularly so-called ‘big business’.
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| GROWTH SCEPTICS |
- Mainstream NZ. The term ‘growth scepticism’ refers to the idea that previous promises of economic growth have either not been fulfilled, or if they have, the benefits have gone to the already rich and powerful. As a result Kiwis are very sceptical of the motives of growth proponents.
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- BigCake figures this phenomenon spans the political spectrum with both main political parties open to attack in this regard.
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- Many in the business community, particularly small enterprise owners, subscribe.
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| GROWTH APATHETICS |
- A minority. As the GIAB survey showed, those who believe economic growth doesn’t matter are few.
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- If it does matter for growth apathetics, it’s a close run thing between the benefits of growth (more jobs etc) and its costs (increased congestion etc) so ‘who cares’.
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| GROWTH FATALISTS |
- Another minority who believe our ability to improve our economic lot is beyond our control.
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- Much of this attitude maybe instinctive, but it has academic support from people like Philip McCann who believe factors we can’t control, like our geography (small and peripheral) and globalisation, mostly determine our destiny.
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| GROWTH OPPONENTS |
- A significant minority, not for its size but organisation. Opposition is based on the premise that growth, and particularly capitalism’s drive for ever greater levels of private consumption, have put us well down the road to environmental disaster.
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From a growth backers’ view point, that’s that adds up to an ugly picture.
The main aim of the BigCake blog is to help increase Kiwi support for economic growth that improves our quality of life (which wraps in our personal wealth, how healthy we are, education levels, the quality of our natural environment, our lifestyle etc).
But without greater wealth, our quality of life will eventually suffer.
Anyway when BigCake’s is faced with a communications-type problem, he falls back on his PR training and lists the stakeholders (as above), and then tries to figure out what’s going on in their heads, then how do you get them from point A to desirable point B.
Support for growth is, in the words of the Growth and Innovation Advisory Board “fragile”. The GIAB’s work is getting a bit old now, but there’s no reason to believe our attitudes have changed that much.
The Global Financial Crisis and Recession represented what the GIAB would call “burning platforms” for change, but they’re now just smouldering, so not much hope there.
BigCake figures we still don’t see our lifestyle as being that bad compared to other countries and for the moment international surveys support this.
But it looks like we’re betting that this will remain the case, even if our level of personal wealth continues to fall relative to that of other countries.
And that’s a pretty dodgy bet.
More evidence that being big makes a difference.
According to MacDiarmid Institute deputy director Shaun Hendy, the difference between Australia and New Zealand patenting rates (we’re 40% below Australia’s) is down to the relative size of the two countries’ cities.
Specifically we can’t match the grunt of Sydney (population 4.5 million) and Melbourne (4m plus). Bigger cities generate higher rates of patenting.
Where our cities are of a comparable size – Auckland and Adelaide – patent rates are much the same.
Compared with the OECD average, we’re very poor at generating triadic (filed in US, Europe and Japan) patents. The latest World Intellectual Property Office stats I can find (till 2007) show the number of NZ patent applications increasing over the 10-year period, though with a substantial drop in 2006-07.
The number of NZ patent granted has pretty much flatlined, apart from a spike in 2003.
I’ve blogged before on how our littleness holds our economy back. Economist Paul McCann says being small and far from markets is the worst position to be in.
In Australia’s case, size can help overcome the limitations of isolation.
McCann talks about “global regionalism”, fed by the rise of huge trade blocs, investment and taxation treaties, and world-changing stuff like computers, the internet, modern transport, communications technologies and off-shoring.
Global regionalism, he says has favours big urban centres.
One of McCann’s ideas to combat this is to increase the size of the Auckland-Hamilton-Tauranga triangle. The easiest way of doing this, he says is to increase immigration to the region.
MacDiarmid Institute’s Hendy, as reported in today’s Herald, has a bigger plan.
He says New Zealanders need to act like they live in a city of four million.
The city size-patenting rate relationship is about the size of businesses in cities of certain mass, he says. Larger cities were more collaborative and the larger the city the more collaboration went on.
“When you have … high degrees of specialisation, people really need to collaborate to have an impact,” he says. “It’s larger cities enabling these larger collaborations or teams of researchers that can make progress.”
So, New Zealand needed to think and act like a city of four million people.
“We need to look at putting together multi-disciplinary, multi-institutional collaborative research networks, whether they’re in business or academia.”
A hell of a lot of our economy is in the hands of cooperatives.
For example:
• They comprise 22% of gdp
• Fonterra is twice the size (by revenue) of our next largest company and accounts for more than a quarter of our export earnings
• Overall co-ops have 95% of the dairy market
• Nearly a quarter of the revenue by our top 200 companies is earned by cooperatives
• Five of our top 15 companies are co-ops.
Internationally this is unusual; in the export sector the preponderance of co-ops is possibly unique.
The scary thing about this is the question: What if cooperatives are commercial under performers compared with say, the good ol’ limited liability company?
If the answer is yes, the cooperatives (and by association New Zealand Inc) would be running up hill compared with competitors, right?
BigCake’s Econ 101 background (even doing it twice) can’t help him with this one, so over the last year or so he’s accumulated the thoughts of better qualified people.
• Exhibit 1 – “The inability of cooperatives such as Fonterra to retain earnings [only $14 million against revenues of $20 billion] has proved to be a significant constraint on investment and expenditure on research and development.” (Treasury paper)
• Exhibit 2 – “The Fonterra model has under-delivered on the aspirations [expressed at the time of its creation] for innovation and globalisation.” (Another Treasury paper which was looking at Fonterra as a template for the meat industry ) [Nooooo!]
• Exhibit 3 – “…a cooperative organisational structure will almost certainly limit the ability for innovation in these sectors.” Paul McCann’s economic geography paper. McCann points out that labour productivity in NZ’s agriculture sector is only 16th in the world and below that of other rich nations.
• Exhibit 4 “You can’t point to any one of those [co-operative structures such as Fonterra's, and assets owned by central and local government] and say they’re not doing their job properly, but they are examples of a whole lot of structures that are not set up to profit-maximise.” Former All Black captain and former CEO of Fairfax Media David Kirk in the NZ Herald.
• Exhibit 5 – “…co-operatives, with redeemable shares, are producer orientated whereas companies with permanent capital are much more likely to be customer orientated.” Brian Gaynor in the NZ Herald.
A bit of a dump I know, but you get the picture.
Of course another question is: Are these co-op failings any worse than those of any other Kiwi companies?
Anyway, last year the Government got so hacked off with the mismatch between the initial promises made by Fonterra’s backers and its actual performance it called on the co-op to get its act together for the good of the country.
You can see that Fonterra is trying and this time may make some significant progress towards a more balanced ownership structure.
Other co-ops have figured out a way to get to where Fonterra I think ultimately needs to go. The meat co-op Silver Fern Farms is on the Unlisted share market and kiwifruit and avocado co-op Satara is on the NZAX.
David Brooks, The New York Time’s columnist has brilliantly skewered the science/expert school of economic thought as having a “stick-figure view of humanity” and performing an “amputation of human nature”.
BigCake agrees, but he’s no economist, though he passed Econ 101 – twice.
One text book (Begg for those who did Econ 101 in the early 90s) did mention two schools of economics – positive (hah!) dealing with objective and scientific explanations and normative (personal value judgements).
Begg then went on to almost completely ignore the latter on the basis that economists are experts and the normative stuff is something that anyone can get involved in.
I think that’s it.
Old-school economists, says Brooks (who elsewhere is described as the Times’ ‘house conservative’) have a crude vision of human nature based on a belief that everyone is perfectly rational, seeks the most satisfaction possible and is completely self-sufficient.
Then they built “elaborate models based on that creature”.
BigCake thinks this old-school thinking about this mythical creature has swamped our debate over economic growth.
The real and rich world of economic thought of the like’s of Philip McCann is drowned out by the sterile statements of Don Brash, Treasury, the International Monetary Fund (IMF) and the Business Round Table.
Brooks notes that economist Russ Roberts has pointed out that ”…in economics, old thinkers cycle in and out of fashion. In real sciences, evidence solves problems.”
The world is much more complicated (and interesting) than these old thinkers would have you believe.
The house of cards constructed by the science economists came tumbling with the economic crisis of 2008 and 2009.
This crisis, Brooks says “is a climax of sorts because it exposed the shortcomings of the whole field.
“Economists and financiers spent decades building ever more sophisticated models to anticipate market behaviour, yet these models did not predict the financial crisis as it approached.
“In fact, cutting-edge financial models contributed to it by getting behaviour so wrong — helping to wipe out $50 trillion in global wealth and causing untold human suffering.”
Brooks says economics now appears to be heading in a humanist direction. Economists are rediscovering “the humility of an earlier time.
“[They] are taking baby steps into the world of emotion, social relationships, imagination, love and virtue.
“The moral and social yearnings of fully realized human beings are not reducible to universal laws and cannot be studied like physics.
“…economics will be realistic, but it will be an art, not a science.”
One of BigCake’s fears is that our economic growth cook book has a lot of important ingredients missing.
Improving the tax system, reducing bureaucracy and cutting red tape, while important, won’t get us to where we want to be.
I’ve blogged before on Philip McCann’s view that fiddling around with these issues, as we’ve done in the past without much success, won’t make much difference to our economic growth prospects.
I’d also filed away a Business Herald interview (Prescription for NZ: Action not talk) with former All Black captain and former CEO of Fairfax Media David Kirk who’s similarly sceptical.
Kirk only nods in the direction of tax cuts, smaller government, privatisation and the other usual economic reform suspects and heads off on an angled run into much more interesting territory, though ultimately I’m not sure it brings us much closer to the goal line.
Kirk is smart and a winner, and he cares about his home country (yeah, I know he’s now an Australian), so when he says we’ve got a problem we should take notice.
He says we’re dreaming if we think we are going to catch Australia without getting radical.
“And those radical things can’t be structural policy things because there’s just not enough leverage in that.”
The “structural policy things” are what Brash banged on about in his 2025 report – cutting government spending, reducing taxes, privatisation and less regulation.
The Herald interview was before the Brash report was made public, so it’s probable that he wasn’t having a bash at Brash.
Anyway he supports these moves, he just feels they are inadequate.
His missing bits include:
• Leadership – “…to cut through this kind of morass of ‘it’s all too hard’ and apathy and disbelief that wealth creation is a good thing to do, it just takes leadership. It takes people out there talking about it, banging away.” Kirk is talking about more than just the politicians here. Those doing the leading need to be “people who are demonstrably balanced human beings that are not flashy people who just want to make money and rip off other people”.
It’s easy to get cynical about the latter comment. BigCake’s initial reaction was ‘that halves the field’, but really it’s crap. With one or two exceptions our leaders are (and have been) good people with good intentions.
• Ambition “We need to be more ambitious for ourselves and for future generations.”
• Love businesses – “…people have to understand the value of private enterprise. No one else makes money – only companies create money – and as a nation we only make money by selling things to other countries.”
• Celebration of entrepreneurs – “…it does take building of a lot of small businesses; and putting in place good opportunities for capital formation, and a lot of them will fail, and it takes an environment where people say, ‘Oh well, it doesn’t matter, they had a go’.”
• Skilful business-building capability “Being an entrepreneur gets your business to a certain stage and friends chip in this and that, but you’ve got to build businesses to take on the world.”
• Immigration – Kirk says Australia has benefited enormously from European and Asian migrants. “New Zealand has had less of that. I’m not trying to make any judgment on this, but I think New Zealand has had Asian immigration, and from the Pacific Islands, and I think the ethnic make-up of New Zealand is an issue. Whether there needs to be new ways found to create pathways, to educate, and to create an environment where particularly Polynesian people in New Zealand have got a stake in the entrepreneurial future of the country is an interesting question, and is a question that should be open and people should debate it openly.”
Nothing wrong with this list, but BigCake reckons it still falls short. It’s not really all that radical nor anything we haven’t tried before (Knowledge Wave, Trade and Enterprise, Buy New Zealand, Export Year etc anybody?).
All the same some on the list are hard – changing ones like our lack of ambition and distrust of overt wealth creation really cut against the Kiwi cultural grain.
As I wrote in the post What the hell’s good growth? growth needs to be Kiwi – We must find our own solutions that fit who we are and what we do best.
But that’s not to say we can’t grow up a little on some of our attitudes.
