The rocky road to today’s New Zealand
There’s been progress — and plenty of setbacks too
Few of us would want to trade places with our ancestors. Will future generations say the same of us?
These are historic times we are living through, so there is illumination, and some comfort, to be derived from contemplating our history.
A richly informative contribution to that is Brian Easton’s latest book Not in Narrow Seas: The Economic History of Aotearoa New Zealand.
It is history from an economist’s perspective and the better for it, because the economy is not some abstraction. It is where we all live and the forces at work in it can really mess up people’s lives.
Overall, our national story so far is one of progress and advance. Few of us would want to trade places with our ancestors. Will future generations say the same of us? Look around. This can’t be the best it ever gets.
Easton makes clear that this progress has been far from steady. There have been recessions and other setbacks and surprisingly long periods of stagnation, as measured by such metrics as per capita income. It would be foolish to assume we are immune from more of that.
All but one of the recessions — that engineered by Rogernomes — has been the result of events overseas.
It is an important point. We are prone to insularity. If you live in New Zealand and it stretches to the horizon it is a bit easy — admittedly not so much these days — to forget about the other 99.8 per cent of the world economy and its endless ability to sideswipe us.
Sometimes it has been a financial crisis like the Wall Street crash of 1929 or the global financial crisis 12 years ago. And sometimes a sharp deterioration in the terms of trade — the mix of export and import prices.
Our heavy dependence on commodity exports makes us especially vulnerable to that.
The global Great Depression hit a New Zealand economy already weak and saw per capita output fall 13 per cent by its nadir in 1933. But that was compounded by a fall in the terms of trade which saw per capita national income decline by 25 per cent.
Conversely, the boom from 1950 to the mid-1960s, when GDP grew by an average of 4.3 per cent a year, was underpinned by strong terms of trade, which came to an abrupt end in 1966 with a 40 per cent fall in wool prices.
Will fake meat wreak similar havoc to nylon carpets then, or will it be more like margarine and butter?
The most recent boom, now emphatically over, was underpinned not only by unusually favourable terms of trade but also by exceptionally strong net immigration, which has come to an abrupt halt.
“The case that immigration is beneficial to natives’ incomes needs care,” Easton writes. “It is possible that during the 2010s GDP per capita went up but that income growth accrued to new immigrants rather than to those already here. This probably contributed to the lack of enthusiasm for economic conditions which voters showed in the 2017 election.” Hardly anyone expected National to lose that election, he says, including those who won.
A key Labour election promise was to progressively reduce child poverty — the social scar tissue from the
Richardson/Shipley welfare cuts of 1990.
But the current Government has given no indication that it knew how big a task it had set, Easton says, nor did it set up an institutional framework to tackle the challenge. “The parallels with KiwiBuild are evident enough.”
Another clear theme running through the history is adaptability and changes of land use. Land abuse, often, to be honest.
A persistent pattern since Europeans arrived has been what these days is politely called depletion of natural capital, or what Easton calls quarrying.
It started with the slaughter of seals and whales, moved on to excessive deforestation and continues with intensive farming practices that turn our rivers into sewers.
If there is now a rural/urban divide on the issue of whether environmental degradation should be addressed by voluntary initiative or regulatory fiat, it reflects an extraordinary change in the country’s political economy over about a century, Easton says.
“In the 19th century when towns were but outposts of the countryside — when livestock roamed on Lambton Quay or in Cathedral Square — such tensions were inconceivable.”
The years since then have seen not only demographic change but shifting attitudes towards the state, and the adoption of a more representative electoral system, MMP, as a reaction to the excesses of Rogernomics.
“The popular lesson from the Depression was to reinforce trust in the state, especially that it could insulate the New Zealand economy from the rest of the world. It was a vision which lasted half a century, perhaps more, for even today it remains deeply wired into the psyche of New Zealanders.”
But by the mid-1980s, following nine years of Robert Muldoon, confidence in government was at a low ebb and the tsunami of radical change associated with Roger Douglas and then Ruth Richardson followed: cut taxes, deregulate, privatise, open the borders, stand back and let markets work their magic. It took 10 years for per capita GDP to return to its 1985 level.
Aside from that brief deviation into ideology between 1984 and 1993, New Zealand has been primarily governed by pragmatism, Easton says.
“Sometimes this has taken the form of following special interest groups. Only occasionally has there been leadership which has looked past the short term.”