Thursday 24 September 2009

Go West Young Man

Dr Andrew West

"NO ONE over 25 should be allowed to run this place." Says Dr Andrew West, the Chair of Innovation Waikato Ltd. Why? Because the Baby Boomers and their parents have made such a complete hash of the job.

In a provocative PowerPoint presentation to the Australasian Research Management Society conference held in Christchurch last week, West fleshed out his thesis with slide after slide of graphs and statistics illustrating New Zealand’s steady descent across nearly all of the crucial international indices.

"My generation of New Zealanders and the one before it have presided over a gradual, interminable decline in relative prosperity at least since 1950; that represents 60 years of retreat", says West.

"If our generation had been the management team our Board of Directors would have sacked us by 1965 at the latest. Somehow we have disgracefully hung on for a further 45 years."

"The remedy is simple", says West.

"Firstly we must ensure that our investment environment is neutral and that it does not favour relatively unproductive assets – land and buildings. A capital gains tax or land tax would assist that. Secondly, we need to introduce compulsory superannuation and focus a reasonable percentage of those savings into productive enterprise onshore. Opening up some of our best companies to mum and dads’ equity investment would help secure this. Then we need to abolish use of the price of money to regulate the economy, or, at the very, very least find other tools to supplement it. Singapore varies the savings rate to superannuation in this regard and it’s a very successful economy. So should we; it’s your money to be spent later rather than today, it will be invested in creating better jobs and it doesn’t disappear into an offshore bank reducing the balance of payments and destabilising the exchange rate in the process."

West insists that "there is nothing radical here". Most of what he proposes is "routine overseas". Our fundamental problem, he argues, is a business culture that is "speculative, impatient, intra-generational and focused on the balance sheet." What’s needed is a culture that’s "sophisticated, patient, inter-generational and focused on the profit and loss statement, that is, on consumers offshore who will pay us a decent whack for a new generation of knowledge-intensive goods and services."

THE LATE BRUCE JESSON used to say that while the National Party might be very good at governing for capitalists, only Labour knew how to govern for Capitalism. New Zealand’s economic history amply confirms Jesson’s thesis. Before attempting to change the New Zealand economy, it has always been necessary for Labour Party politicians to gain a thorough understanding of the way it worked. It’s why deep-structural economic innovation is, at least historically, more usually associated with the Centre-Left than the Centre-Right.

And precisely because social-democratic political parties are parties of reform, rather than revolution, their leaders have always sought out business leaders willing to think new thoughts and use new methods. Just think of the Fletcher family’s long history of co-operation with the Labour Party. Or, more recently, of Helen Clark’s attempts to forge a similar relationship with business leaders who were persuaded, like West, that New Zealand’s future lies in catching the "knowledge wave" and innovating "a new generation of knowledge-intensive goods and services".

Clark’s great failure, of course, was her inability to persuade her Finance Minister to either accumulate or deploy the public venture-capital required to expedite the "economic transformation" she was constantly promising to deliver. Cullen proved a master at sucking vast amounts of money out of the New Zealand economy. Sadly, he never quite mastered the art of squeezing it back in.

Well might West and his fellow innovators say: "It only takes vision and courage." Unfortunately, saying it has always been a great deal easier than doing it.

WHAT STOPS NATIONAL from doing it? That’s easy: relationships. As Rhys Derby never tires of telling us on TV, New Zealanders are a closely connected lot. And the degrees of separation within the nation’s ruling elite are even closer. It is, therefore, quite impossible for National Governments to enter office unencumbered by all kinds of favours, deals and quid-pro-quos.

Enmeshed in this vast and sticky web of obligations, National Cabinet Ministers cannot help pursuing erratic, and at times wildly contradictory, policy paths. The gains of the major carbon-dioxide emitters are only exceeded by the losses of the major forest owners. Looking after the dairy industry means placing the tourist industry at risk. Lowering the onshore costs of exporters (i.e. cutting wages, lowering taxes and slashing public spending) does nothing to lift New Zealand’s multi-factor productivity.

As Jesson observed: This is governing for capitalists – not Capitalism. Labour’s lack of intimate connections with the business community, usually construed as one of Labour’s most glaring weaknesses, is actually one of its greatest strengths.

AT THE PARTY’S annual conference there were clear signs that the caution and conservatism of the Clark-Cullen Era is slowly being replaced by a more open and creative approach to economic policy formation. It is time, one veteran trade unionist observed, for the Party to dispense with the neo-liberal shibboleths of the past decade and adopt a broader view of the State’s role in wealth creation. In the key economic policy workshops, Labour’s finance spokesperson, David Cunliffe, was relaxed and receptive to such suggestions. Phil Goff even included some of them in his keynote address. A future Labour Government will likely take a much more active role in economic affairs.

My suspicion is that the more active role contemplated by Cunliffe and his party activists will bear a very close resemblance to the role mapped out in West’s presentation. Not, I hasten to add, because Andy West is some sort of social-democratic Manchurian Candidate, but because his ideas are shared by scores of other progressive New Zealand business leaders: men and women who are desperate for something resembling a coherent economic programme from their political counterparts.

As West expresses it: "I have three young kids and I want them to stay in New Zealand in the long term. That is what motivates me … If my generation doesn’t decide to do it, then it’s time to pass the baton onto those who are 25 years and younger – who definitely will. After all, who else is going to pay for our retirement?"

This essay was originally published in The Independent of Thursday, 24 September 2009.

1 comment:

Sir Arthur Streeb-Greebling said...

"Cullen proved a master at sucking vast amounts of money out of the New Zealand economy. Sadly, he never quite mastered the art of squeezing it back in."

Of course he could have just left the money alone.