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Are we in 1978?
Don Nicolson
5 September 2010

Every 20-30 years the unfashionable, with a few tweaks, becomes fashionable. Surprisingly, this 'fashion cycle' seems to apply equally public policy and even to politics – think NZ First.   It all starts with an 'outsider' breaking the mold and if the movement has legs, it may reach a tipping point or 'precipice,' with other early adopters jumping in. If there's real momentum, a critical mass is reached turning what was once outlandish into 'mainstream.' 

Inevitably fads come and go and enter into 'decline' becoming unfashionable. Sometime later, people pick it up as an 'ironic' comment on a point in time. 'Nostalgia' follows next as people look glowingly back to some better time before the item or movement’s final evolution is 'conservatism' – reflecting that society has moved on. The entire cycle starts anew when someone dusts off the concept reinventing or reinterpreting it in a new direction.

It's hard to explain to younger people what New Zealand was like in the early 1980's but suffice to say, New Zealand and its then three million people literally shut down on a Friday and reopened Monday. By 1984, New Zealand was forced by absolute necessity into Roger Douglas' liberal capitalism as we swung from Rob Muldoon's command and control centralising tendency to Douglas' polar opposite. Kiwis don't do things by halves. Back in the mid-1980's, agriculture went cold-turkey on subsidies overnight. It was so traumatic that our economic obituary was written by a group of people – self-appointed cognoscenti. They believed and still do, that the future was in services and tourism and agriculture was to be managed in decline. Like all things in life, history has a way of making fools out of the self-important.  They didn't appreciate the adaptability of farmers to get on and do and agriculture represents 66 percent of all merchandise exports. We’re also adding value when the rule makers allow us to.

The self-important are still around, but the cognoscenti who scare me are in departments or working as parliamentary advisors. Their view of farming is locked in the mid-1980's lie of agriculture’s eclipse. While farmers today hear platitudes over how 'important we are,' you just know there's an inevitable 'but' coming. That 'but' explains why state sector policy is directed at a different economy. A 'nice' economy if you like, where agriculture is really for the tourists, where all rivers and streams have potable water and New Zealand is a clean-green marvel. In tight groups, they mix, talk and socialise reinforcing in one another, a sense of righteousness. Anyone who disagrees is belittled in background briefs to friendly confidants and commentators. They wholeheartedly back businesses that promise a low impact on 'our' but read as 'their' environmental and cultural values.

That 'our' is seeing a resurgence in subsidies but given this policy nexus is now conservative, the cognoscenti can't or won't use the 'S' word. The indisputable fact is this; in the early 1990's Government accounted for 35 percent of all economic activity but by 2009, that has grown to 45 percent. The 10 percent difference in 2009 dollars is an amazing $19 billion. The state sector is a direct competitor for capital and is seeing some perverse policies. The Ministry of Economic Development's (MED) Venture Investment Fund (NZVIF) is a $160 million effort from Government to cherrypick a Kiwi Nokia. Except this cherry-picking subsidy is moot if Government hadn't eaten up that $19 billion from the non-Government sector. One of the MED's latest idea is a $200 million plus international convention centre in Auckland that will attract ‘some’ local and central government funding.  Professor Heywood Sanders at the University of Texas wrote this last year about Vancouver’s convention centre, “the Vancouver Convention and Exhibition Centre's contemporary performance [is] about half of what KPMG depicted a few years ago, those targets appear unrealizable - indeed, almost absurd.”  Is it a future white elephant, given corporates are trending towards cheaper telepresence over large, ah-hum, carbon and shareholder unfriendly long haul conferences?  Add in the $8 million 'major events fund' and these are a mere three policies within Government's $84 billion annual cornucopia. Need I mention that $1.06 billion gift to foreign forestry owners - the Emissions Trading Scheme?

But none of this is that surprising when the Government’s policy advice bill, since 2003, has exploded 70 percent to $900 million. The New Zealand Government is obese. Command and control and picking winners didn't work with 'think big' and it won't work with any of these subsidised jobs schemes. P T Barnum once said, 'there's a sucker born every minute' and capitalists see Government straying into private enterprise as the biggest sucker of all. Sensation Yachts providing 'Exhibit A'  Yet the more we ignore the need for real reform the closer a Greek style tragedy looms. The devil makes work for idle hands and it’s time to put those hands to work in the real economy and the real New Zealand. We don’t need central planning but for ‘outsiders’ to take up the liberal capitalistic philosophy we’ve lost.  Economic realities must be a real test than assumed ‘reputation risk’ and fear.  We’re losing people abroad because the self-important stifle innovation. Their worldview is more about the word ‘can’t’ than ‘can’.  Our best and brightest are voting on this economic direction with their passports.  It's time to reinvent liberal capitalism and start that policy-fashion cycle anew.

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