A Small History Lesson For Federated Farmers

It Ain't Wellington, Don: Far from being the innovative national icon described by Federated Farmers boss, Don Nicolson, the milk powder manufacturing business founded in New Zealand by 19th Century entrepreneur, James Nathan, was built on imported capital, imported patents and imported technology. The profits, as usual, went offshore - in Glaxo's case, to London.

DON NICOLSON needs a history lesson. In fact the current president of Federated Farmers could usefully invest in an entire history course. A surer grasp of where New Zealand has come from would allow the current leader of this country’s most powerful pressure-group to speak with considerably more authority about where New Zealand is now – and where it should be going.

Mr Nicolson began a recent newspaper article by lauding the achievements of Joseph Nathan, creator of the Glaxo brand of infant formula. "Joseph Nathan leveraged off agriculture and built a leviathan", wrote Mr Nicolson, before going on to sing the praises of the vast multinational corporation, GlaxoSmithKline, which long ago gobbled up Joseph Nathan’s highly successful Manawatu-based business.

Had Mr Nicolson taken the time to research the history of the Nathan family more thoroughly, he would have discovered a record of achievement which remains, to say the least, equivocal. Far from being a great innovator, Joseph Nathan was representative of a class of shrewd colonial businessmen who came to New Zealand in the 19th Century to make their fortune and then, hopefully, return with it to England.

The best business decision James Nathan ever made was to acquire the rights to the newly developed process for turning milk into powder. The process, along with the technology required to give it effect, were all imported. New Zealand’s only significant contribution then – as now – was grass, and the cows to turn it into milk.

The Nathans were fortunate in owning quite a lot of grass. To a degree which had raised eyebrows among their contemporaries, the land required to grow it had been acquired from soldiers returning to civilian life after the Land Wars. For services rendered these men were granted a small share of the lands confiscated from the defeated Maori tribes. By offering the penurious soldiery cash, the Nathans had built up a substantial base for agricultural operations.

Glaxo’s other great claim to fame was its masterful utilisation of advertising. The claim that Glaxo’s infant formula "Builds Bonnie Babies" secured it a significant share of the UK market, and contributed hugely to the decline of breast-feeding in that country – and ours. The consequences of Glaxo’s intervention, in terms of infant health, are difficult to calculate – but they were by no means entirely beneficial.

The history of Glaxo – as Mr Nicolson might have anticipated – is inextricably bound up with the history of New Zealand. The Nathan family’s obvious entrepreneurial talents cannot be separated from the fact that the industry they helped to establish, like so many of our industries, was based on imported capital, imported patents and imported technology transforming local raw materials into repatriated profits. Glaxo also provides an early example of how vulnerable local businesses are to foreign acquisition.

A more thoughtful president of Federated Farmers might have pondered the lessons to be learned from the history of businesses like Glaxo. It points to the huge financial benefits that flow from publicly-funded research and development. It directs our thoughts to the importance of limiting the vulnerability of local firms to foreign takeover. It speaks of the massive returns to the nation from encouraging and funding the expansion of science and technology in our universities. And it also reminds us of how important the teaching of New Zealand history is to forming an intelligent view of our country’s forward path.

Sadly, these are not the conclusions Mr Nicolson draws from his superficial references to successful (albeit foreign-owned) companies associated with New Zealand agriculture. Instead, Mr Nicolson defaults to a series of political demands which are now more than a century old.

It was in the early years of the 20th Century that New Zealand’s farming community first began to conceive of itself as something separate and distinct from the rest of the population. They construed the dominant role of agriculture in generating the nation’s export wealth as proof not merely of farmers’ economic centrality, but of their moral superiority. Indeed, town and city-dwellers in general, and working people in particular, were regarded as the source of all the nation’s vices – and in urgent need of rural reproof.

This lust to punish urban profligacy is still clearly discernible in Mr Nicolson’s prose: "If government spending was at year 2000 levels, adjusted for inflation, $30 billion would be left in the economy each year."

Which is probably true, Mr Nicolson. But, what’s equally true is that $30 billion would not be left in our hospitals, our schools, or our universities. It would not be available to assist and support struggling Kiwi families – your fellow citizens.

It would, however, be there for the modern equivalents of James Nathan – the businessman who died in London, aged 77, with his substantial, New Zealand-made fortune safely tucked away in the vaults of a British bank.

This essay was originally published in The Press of Tuesday, 18 January and in The Waikato Times of Wednesday, 19 January 2008.