Dialogue: Southland shows the way to a real global economy

By KEITH RANKIN

The promotion of Southland, published as a supplement in the Herald, is a timely reminder to the rest of New Zealand that we all participate in provincial economies and that a provincial economy can be vibrant and entrepreneurial rather than subservient.

Historian James Belich has given us another reminder about what it means to be a province.

In his just-released Paradise Reforged, he shows that for nearly 100 years (the 1890s to early 1970s) New Zealand was an economic province, not of Britain but of the British Empire.

As such, we were no mere chattels of Britain. Much as Mainlanders assume they are better Kiwis (especially better than Jafas), we were, or assumed we were, "better British".

The evidence of the rugby field was irrefutable, we thought.

The economic empire of which London was the undisputed capital was somewhat broader in scope, however, than the political empire we once took for granted. It included, for example, Scandinavia and much of South America.

In the middle decades of last century it was called the "sterling group". Denmark and Uruguay were rival provinces against which New Zealand could measure its success as a provincial economy.

We can learn much about our future by understanding both Southland's present contribution to New Zealand and New Zealand's past contribution to the British Empire.

For now I will beg the question of what New Zealand is (or is becoming) an economic province of. Rather we should consider what are the criteria for evaluating the success of a provincial economy.

Southlanders do not much concern themselves with their rate of inflation, their balance of payments or their exchange rate.

They want full employment, sustainable economic growth, immigration, investment, freedom from poverty and a rugby team to match their netball team.

A true provincial economy has no borders, no barriers between it and its neighbouring economies.

Trade is free between provinces, as are flows of labour and capital. So it follows that prices (including wages) are much the same in one province as in others.

Further, not even the most ardent protectionists argue that there should be trade or investment barriers between, say, Southland and Auckland.

How does Southland pay for its schools? After all, so many of its old boys and old girls no longer live in Southland. It's not a problem, because taxes are levied at a national level.

Thus former Southlanders working in Auckland contribute, through their taxes, to the ongoing education of today's Southlanders. And that is the way it has to work in the future for New Zealand as a whole.

New Zealand needs to receive a share of the tax revenue generated by a large proportion of New Zealanders working abroad, just as Southland - through schools and hospitals, benefits and superannuation - receives, in effect, much of the inland revenue generated by departed Southlanders.

The former British Empire didn't go so far as to have a unified tax regime. But New Zealanders were among those who most strongly pushed for an imperial federation that would necessarily have required a centralised exchequer.

Globalisation, if it means anything worthwhile, means the removal of all barriers, not just trade and investment barriers.

It means the globalisation of taxes and of the global funding of collective goods such as education, welfare and defence.

In reality globalisation is too big (and probably too foolish) a step. A "one world" economy looks much like either anarchy or tyranny (or both).

Instead, the practical challenge is to create a world economic order based on a small number of regionally inclusive super-economies.

Britain, indeed, took such a step in joining the European Union.

Our challenge is to facilitate the creation of some kind of economic superstructure - perhaps through an enlarged Nafta - in which New Zealand becomes like Southland, in which Australia becomes like Otago, in which the United States becomes like Auckland and in which Brazil becomes like Canterbury.

(I note from the Asean meeting in Brunei that East Asia is also groping towards an extra-national economic structure.)

Today's realities of trade, labour and capital flows suggest that we are well down the path towards the creation of an American-Pacific commonwealth.

Eventually such a commonwealth should become a unified tax zone, a single currency bloc, a common labour market and a supplier of public goods.

New Zealand is well placed to become one of the most dynamic provinces within the American-Pacific region, much as Southland is clearly a centre of dynamism within New Zealand.

Politically, New Zealand is and will continue to be an independent nation, much as Ireland is and continues to be a nation despite its status as an economic province of the European Union.

A nation's identity does not require an adherence to economic nationalism.

New Zealand is not an autonomous national economy. Nor is it an economic province of Australia, Britain or the United States.

Rather it is - or is becoming - an economic province of some entity which includes both Australia and the US as fellow provinces.

Southland is encouraging us to think more about interprovincial economic relationships.

* Keith Rankin teaches economics at Unitec.