30 Year Progress Report

30 Year Progress ReportMy wife, Vicki, and I took our children on an outing over the weekend. We bundled the kids into our people-mover and after a 20 min. trip we arrived outside the front door of Otago Settlers Museum. I just love our magical southern city called Dunedin. It was Sunday and we could park our car right next door to the museum for free. We could have spent a whole day looking over the many exhibits detailing our links to Dunedin's rich heritage. We were very impressed and even better it was entry by donation! If you're travelling to Dunedin... you must check out the Otago Settlers Museum.

One aspect which was clearly portrayed was the way we lived then as opposed to now. I could just imagine the first settlers arriving in Dunedin to an almost barren landscape. They had travelled for months on sailing ships in the knowledge that most were never to return or speak to their relatives again. The sense of making the most of the opportunity could not have been greater. There was certainly no soft landing, being forever cosseted in the ample bosom of the states welfare system as we have today. For these settlers it was find work, alternately plead for food and lodgings.

The thought that everything that they needed had to be imported at great expense from half way around the world on sailing ships must have spurned them on to create industries that would reduce the expense, time and inconvenience to a minimum. The Otago Settlers Museum provides a comprehensive catalogue covering many of Dunedin's local industries. How they rose from humble beginnings to prominence and more recently into decline.

Creation of the New Zealand Railway Network

The Settlers Museum also provides details of the history of New Zealand Railways. It began around 1873 when Prime Minister Julius Vogels' government loaned 10 million pounds. From that loan, industries such as Dunedin based Hillside Railway Workshops arose which in it's heyday was a very substantial employer and produced hundreds of locomotives and items of rolling stock only now to face open competition from China and face closure.

The Big Picture

My interest is in the logic and policies behind our system of Government that in the beginning openly encouraged the creation of local industry only to recently adopt an open and free market approach. This has resulted in a steady decline in manufacturing and reduction in OECD 'GDP per capita' rankings.

Our government is still basing its thinking around twin concepts of "Competitive Advantage" (Prof. Michael Porter) and "Globalisation". These twin power house ideologies reinforce the notion that New Zealand is part of an ever growing and inescapable global community and as such we need to embrace it by the removal of barriers to trade. This will supposedly provide advantages to our citizens as they will be able to choose locally manufactured goods, alternatively opt for imported goods thereby encouraging open competition and reduced prices.

These sound like lofty ideals and our Governments have applied them with vigour and great dedication for the past 30 years. The New Zealand Labour Party of 1984 first adopted these doctrines coined 'Rogernomics'. Central to this being that the Government itself must altruistically lead the charge to free market reform by selling off state owned assets into the private sector and effectively remove it's hands from the steering wheel of strategic assets such as telecoms, electricity, insurance, banking and set ambitious targets of steadily reduction of importation tariffs.

The Experiment Was Started 30 Years Ago... How Are We Getting Along?

New Zealand Overseas Debt and OECD Ranking

New Zealand Overseas Debt (1993-2012) and OECD Ranking (1970-2012).

Over the past 30 years, the government sold many of our hard earned assets such as Railways, Power, Banking, telecommunications at peppercorn prices and we have been paying extorted prices for these services from that day on.

Import licensing was removed and duties steadily fell... resulting in a flood of imported goods and very competitive pricing... and in a large part the demise of local industry.

The dollar was floated and has been the plaything of currency traders since the inception. The value of the New Zealand dollar against the US dollar has been all over the place and it is currently almost at historic highs, making it very difficult to export.

I don't agree with New Zealand's direction and I feel that we need to rethink our stance.

We need to stop being so quick to act... why does a small country at the bottom of the world want to lead the market in ideological reforms. Surely a better stance would have been to be a market follower. Example being... why was it so important to be the first country to sign a free trade agreement with China... surely it would have been better to adopt a wait and see approach?

As for the FTA with China... 30 prime NZ farms were recently purchased by the Chinese. This is shortly to be followed by a Chinese owned milk processing company... total vertical integration... and yet NZ can't buy land in China... words fail me.

Core Issues Are

Wholesale adoption of purist free market doctrines with thoughts that the rest of world would engage on a level playing field. Clearly there will always be massive differences between democratically and quasi-military command style of governments. Get real NZ... isn't it time to start looking after your own people for a change.

Floating of the NZ dollar... leaving it at the complete whim and mercy of large managed currencies such as the USD, Yuan etc.

Liberalisation of international credit facilitating a huge increase in debt and reduction in savings.

Too small to facilitate true open international competition... what chance has NZ got against China.

Failure for the government to intervene and to sponsor winners.

Our government must be prepared to take a stance and intervene by incentivising local industry. I believe manufacturing is vital to our country's future.

Clearly I'm not alone in my thoughts... Harvard Business Review asks 'Just How Important Is Manufacturing?'.

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