New Zealand’s been in economic decline for decades…

… but never mind, we’re good at rugby and it’s a great place to bring up kids.

frog in the proverbial heating potThose are good points, except that hundreds of thousands of those kids are brought up in Australia. New Zealand’s economic goose has been gradually cooked by half a century of poor political decisions and short-sighted economic policies. Sadly, like the proverbial frog in the slowly heating pot, most New Zealanders aren’t yet aware of the seriousness of the problem. We’re teetering on the brink of third world status.

The reason this is happening is that we’ve lost the capacity to innovate. Our two biggest income earners are agriculture and tourism, two industries that produce lots of low paying, dead-end jobs. Our prosperity was built on innovation, then we stopped doing it. Sir Paul Callaghan describes this problem in detail in the video link I’ve provided below.

Consider:

  • In 1900 we had the highest per capita income in the world. By the 1950s we were still in the top 4 or 5. We’re now about 30th. It was worse until the global economic crisis; previously, depending upon whose figures you believed, we were between 40th and 50th.
    John Key’s government claims we’ve weathered that storm because of superb financial management by his coalition. I disagree: we’ve been kept afloat because China kept growing. China also kept Australia afloat. Because the Aussies are our other big customer, China helped us out there too.
  • On current trends we’ll be overtaken economically by Botswana and Kazakhstan by 2025. Paul Newfield, Morrison & Co.,
  • 20% of New Zealanders—over 1,000,000 Kiwis—live in other countries. So tens of thousands of Kiwi grandparents never see their grand-children. Most families have sons and daughters, brothers and sisters, living in Australia and elsewhere. They’re there because that’s where they’re richer.
    The flow of Kiwis across the Tasman has dwindled, but despite the claims for our “rock star economy” and Australia’s dismal performance there is still a small nett outflow, including my son and his family. My son, as a self-employed carpet laying contractor in Sydney, earns about double what he earned here.
  • Each person in Luxembourg produces 2.5 times more wealth than each New Zealander, despite the fact that we work longer hours. They’re far less well endowed with natural and human resources than we are. Liechtenstein produce 3 times what we do.
  • Many communities in New Zealand can no longer attract medical staff. Those that can, have to accept doctors for whom English is a second language. We accept the payment of multi-million dollar pay packages to the heads of Telecom and Westpac but we simply don’t have enough in the kitty to pay doctors, nurses, teachers, engineers, and tradesmen the salaries they expect from a First World economy.
  • Since the 2008 election, when John Key used “catching up with Australia” as an election plank, we have fallen further behind our neighbours. By a lot. Now the mealy-mouthed government turn that around and say that it’s a good thing because it makes it easier to sell our stuff to our mates across the Tasman.
  • So far, nothing substantial has been done to halt the decline.
  • Our parliamentary democracy has turned into a 3-yearly bidding war. The winner is the party or coalition that offers the biggest bribe to an ill-informed and short-sighted electorate. Unfortunately, we don’t have the money to pay for those bribes, so student loans must be paid out from funds that should go to health, education, defence and R&D.
  • Our education budget is funding our best and brightest to build Australia, leaving an ever-dwindling proportion of productive people to generate the wealth to pay the piper.

The good news?

There isn’t much of it.

  • We could fix this problem—perhaps within 5 or 6 years—if we got stuck in.
  • We have the natural resources and the talent required.
  • We know what needs to be done to halt and to eventually reverse the decline.

We’re not doing any of that. The leaders of the current government and the previous government are fully aware of the mess we’re in. They choose to turn a blind eye. They’re doing alright. Even without their subsidized jet-setting, as long as they con us into giving them three terms in Parliament they retire on a very nice package. (I remember an occasion many years ago when they increased their own retirement benefits within weeks of reducing mine.) Prominent people in the media and business are aware of the problem but most of them are doing little to spread the message. In many cases it’s easier to move your business overseas than it is to stay here and deal with a broken system.

One exception was the late Professor Sir Paul Callaghan, a world-renowned scientist, a top academic, and a high tech entrepreneur. He worked to spread the message but, although successive governments honoured him, they didn’t follow his advice. Please set aside an hour to watch Sir Paul’s presentation here. It will disturb you and if it motivates you to demand change we could turn things around. The presentation is a few years old, but everything in it is still relevant.

“So what?” I hear you cry,

“New Zealand is still a great place to live, and what’s more we’re near the top of the rankings in the Great Happiness Index.”

Depends upon whom you ask. Nigeria, Nepal and Vanuatu have come top of various such indices I’ve seen. The average New Zealander wouldn’t find life in any of those countries totally appealing. New Zealand is still a good place to live, but relative to other countries that compete for our people we’ve fallen behind and that relative decline continues apace. If it continues for much longer, we won’t remain at the top of any list for long—except perhaps the list of countries in steepest decline. More to come on this subject. We’ll consider the direct tangible effects of our poor performance on your health and happiness.

Next:
The relativity of wealth