Is it time for an economic revolution?
Is it time to completely overhaul New Zealand’s economy? Deputy Prime Minister Winston Peters thinks so.
Peters came off the long run last week with an attack on globalisation and free market economics that will prompt some to speculate that it is election year.
While his attacks on Fonterra and New Zealand’s export reliance on China grabbed headlines, it was hardly unusual territory for the veteran politician.
More unusual was that Peters said some things that business leaders and economists have also been saying.
“Anyone who thinks that postCovid-19 will be business as usual can forget it. If they think we can go back to what we used to do, they’re wrong,” he told Newstalk ZB’s Mike Hosking.
But his excellent point — that the economy isn’t going back to the way it was before — was muddied a bit by his other point . . . that we should be moving it forward to 1983.
Peters says we should look back to a time when the country had a much bigger manufacturing industry — could assemble its own cars and had a pharmaceutical industry.
He’s no doubt being buoyed by the fact that, all around the world, the pandemic has made state support more central to economics than it has been for almost 40 years.
It’s fair enough that he is grabbing that political opportunity and presenting it through a New Zealand First lens.
He and about 5 per cent of the population have a much fonder view of the controlled economy of the 1970s than many of my generation.
Peters’ dim view of free trade and globalisation, however energised, won’t shift the central view of the New Zealand establishment that we should push for more of it.
For all the perceived injustice trade liberalisation is accused of around the world, New Zealand has clearly been a net beneficiary.
The bigger risk is that the world follows a protectionist path as global political upheaval spreads.
If that is the case, then Peters’ argument that the New Zealand Government could do more to support key industries may have merit right now.
We should do more manufacturing here. We do need to create new jobs. But it needs to be at the smarter end of the economy.
Bringing back car assembly plants and shoe factories is not a realistic solution.
We simply can’t compete with lower-wage economies and would end up subsidising jobs until the country was broke — again. There are smarter sectors to foster. More pharmaceutical production in this country doesn’t sound like a bad thing and more tech — software, video games, engineering and design.
And there are smarter ways to foster things.
Tax breaks have worked for the film industry. A state-funded marketing department worked for the tourism sector.
At no point has the government attempted to set up a film company or run guided tours.
The state’s role in supporting the film industry has been to attract foreign investment that has an economic multiplier effect — creating jobs not just for film crews but for the people who make their lunch and coffees and so on.
Peters is right that this is a good time to be looking at new ways of doing things — including the government’s relationship with business.
At a micro — economic level, small businesses all over the country are leading the charge to embrace change.
Necessity is the mother of invention.
Talking to business leaders in the past few weeks, and the many smallbusiness owners I count as friends and family, I have great confidence they will rise to the challenge.
The pandemic has forced a rapid acceleration of digital adoption.
There’s opportunity for New Zealand to address some productivity issues it has struggled with for decades. Government will have a vital role to play helping to enable business to transition to new areas of growth.
What I liked most about Peters’ comments last week was his enthusiasm for the opportunity presented by change; change which has been forced upon us. What I liked least is the sense that he is clinging to the ideological battles of the past.
There is no going backwards. The idea that we can is a political device.
Politicians like Donald Trump milk nostalgia for a past that many people feel was a simpler and less difficult.
But if there’s one thing the US President has showed the world in the past few months it’s that we can all do better.
The past is a useful guide but reality lives in the present. It is gritty, complex and difficult — it always has been.
Perhaps one of the barriers to productivity improvement in the past few decades has been political stalemate.
New Zealand has never quite utilised the strength of the crown balance sheet to drive innovation but also never been quite brave enough to attract the kind of high-value investment that drives growth.
Imagine there’s no neo-liberalism versus socialism. Imagine there’s no globalisation versus nationalism. It’s easy if you try. Apologies to John Lennon fans, but as the song points out many of the things holding us back are ideological constructs.
If we could let them go, that really would be revolutionary.