For over a century, NZ had privileged access to the markets, resources and technologies of the British Empire.
The Four Firsts with China gave NZ initially unique access to the world’s greatest rising economic power.
While GDP per capita has often fallen during this century a wave of new immigrants has arrived.
“Matthew,” sighed Speaker Gerry Brownlee in a pre-Christmas podcast, “you really do have to give up this dreadfully negative approach to everything in life.”
For anyone connected with politics, it pays to listen to the Speaker. After all, the Speaker can theoretically still haveyou locked up for contempt.
In the spirit of peace and goodwill toward all people, let’s give a break to Jacinda Ardern or Christopher Luxon, or whoever else you blame for the nation’s ills, depending on your political colours.
Probably, New Zealand’s disastrous economic and social trajectory is just a function of geography.
America's Cup triumphs are examples of New Zealand exceptionalism, says Matthew Hooton. Photo / Photosport
If so, it would be to the credit of our politicians, diplomats, farmers, businesspeople, scientists, teachers, social agencies and even union bosses that we have hung on to First-World status for so long.
Despite claims New Zealand lies at the centre of the Indo-Pacific, we really don’t. For evidence, recall that our worst-ever civil disaster was a day-trip sight-seeing flight to Antarctica, just 4700km, a stretch further than Tahiti.
The centre of the Indo-Pacific is probably Singapore, 8400km away. Santiago is 9700km away, Los Angeles 10,500km and Mumbai 12,300km.
Nearly 30 years ago, the left-wing commentator Chris Trotter pointed out that were oil, uranium, and gold found in Antarctica, New Zealand would quickly declare ourselves sub-Antarctic islands, and we are.
Even the most intrepid people who ever lived — those who took to sea from East Asia and reached the likes of Samoa 3500 years ago — only discovered New Zealand around 800 years ago, about the same time as the Mongolian empire stretched from Southeast Asia to Western Europe.
Europeans showed up around 500 years later, bringing Māori valuable Foreign Direct Investment (FDI) and trade access, along with a lesson in the perils of unrestricted immigration.
New Zealand’s isolation means that, to be anything more than a second or third-tier last-stop to nowhere, it has always had to be more exceptional than anywhere else.
Compared with small countries close to major economic and cultural centres, we have needed better economic and more sophisticated foreign policy and trade access; the most efficient allocation of capital possible; ever-improving literacy, numeracy, creativity, science and technology; and the superior capital and labour productivity that brings.
For a long time, we managed it. For over a century, we had privileged access to the markets, resources and technologies of the British Empire, followed by being on the winning side of World War II with no damage to our homeland and physical infrastructure, and the benefits of new Anzus and Five Eyes connections.
As the United Kingdom turned to Europe, the unwritten Trans-Tasman Travel Arrangement (TTTA) negotiated by the Kirk Government’s Fraser Coleman and Closer Economic Relations (CER) negotiated by the Muldoon Government’s Hugh Templeton meant our wages, economic and cultural outlook and living standards kept in touch with Australia’s for a further half century.
This century, the Four Firsts with China, negotiated by the Bolger Government’s Lockwood Smith and the Clark Government’s Jim Sutton and Phil Goff gave us initially unique access to the world’s greatest rising economic power.
Combined with the inflow of foreign insurance payments following the Christchurch earthquakes, the relationship with China meant things continued to feel good through the 2010s.
While GDP per capita often fell, that was hidden by successive governments keeping the door wide open to the greatest wave of new immigrants since Europeans overwhelmed Māori in the 19th century.
The new immigrants were meant to be accompanied by massive new FDI, and access to new markets and business connections, but it’s not clear that really happened.
Like European arrivals a century earlier, New Zealand wasn’t necessarily their first choice, with North America, the UK, European Union and Australia usually preferred. The new immigrants were often those who couldn’t get entry to those, sometimes seeing New Zealand as a stepping stone to Australia.
We nevertheless have kept telling ourselves myths of Kiwi exceptionalism, based on the older legacies of Kate Sheppard, Lord Ernest Rutherford, North Africa, Peter Fraser, Sir Edmund Hillary, and various All Black sides.
More recently, those legends have been joined by things like the anti-nuclear policy, the initial success of the economic re-opening and other reforms, the America’s Cup, The Lord of the Rings and now RocketLab.
Like his predecessors, the Prime Minister tells us we live in “the best country on Planet Earth”, one with “endless potential”. But the leaders of all countries, except Germany, always say things like that.
More accurate was one of Luxon’s worst political faux pas, when he was caught saying New Zealand had lost its mojo.
If so, that’s something that goes back to the reaction to the pace of economic reform in the 1980s and 1990s.
As a people, we largely gave up. We cannot blame the politicians alone, who only responded to voters’ demands to maintain all the services of a wealthy country’s welfare state, the additional indulgences we have come to expect, but without paying through either higher taxes or productivity.
Further economic reform was off the table. Our best allocators of capital, including Graeme Hart and the Superannuation Fund, preferred investing offshore, seeing few domestic opportunities.
Everyone thought they should earn as much as Australians — and could demand to — because of the TTTA and CER but we are now in a world where New Zealand in its best years does worse than Australia in its worst.
The best advice to talented young people is to leave.
To maintain the illusion of a First-World country, governments increased debt almost every year since 2008 and all the medium- and long-term forecasts and projections suggest that remains politicians’ only plan.
The Luxon Government may be even more spendthrift than the Ardern-Chris Hipkins one, but Labour now promises to borrow and spend even more again.
Governments have pretended handing out taxpayer cash and other indulgences and privileges to cronies and other chosen businesses is an economic plan.
Disgracefully, some on the political right have found it easier just to blame so-called Māori privilege for the malaise rather than their own failure to lead the reform they are meant to stand for.
Like the Ardern-Hipkins Government, the current lot seems to think there is a secret plan in the Treasury that could raise productivity without any politically difficult transition costs, but that the bureaucrats just won’t hand it over.
There’s not. It is probably now too late to opt for the Scandinavian model, which aims to boost productivity by building social cohesion, at the cost of very high taxes that citizens willingly pay.
That would just see the rest of the middle class cross the Tasman.
There is now really only one option and that is to radically cut the size of the state, abolish or at least halve company tax, and not to stuff around with David Seymour’s bureaucratic Ministry for Regulation but just get on and deregulate our investment and business rules.
We know this works wherever it is tried.
How positive we could all be in 2025 if the Government got back to work early in the new year and announced that continuing to preside over failure was no longer on its agenda.
Disclosure: Matthew Hooton has over 30 years’ experience in political and corporate communications and strategy for clients in Australasia, Asia, Europe and North America, including the National and Act parties and the Mayor of Auckland.
