Dialogue: Generations pass, problem remains

Most of us, I suppose, are creatures of our most impressionable years. Most of us begin to awaken to the condition of the country somewhere about the fifth form of secondary school.

For me that was 1967, the year Muldoon became Minister of Finance, the year, as Barry Gustafson's new biography of him reminds us, that wool prices plunged and the country sensed its vulnerability to declining terms of trade.

New Zealanders of my age have been hearing all our conscious lives that we cannot forever maintain a first-class living standard on exports of unprocessed food and fibre. The country's plight was never more graphically explained than by Muldoon in his 1975 election landslide when he campaigned with charts showing it took ever more lamb carcasses to buy a barrel of oil.

Every microeconomic move made by governments since then - interventionist or liberal - has been motivated by the old problem of paying our way. That must be obvious by now to all intelligent life on these islands. Yet a remarkable number of people who enter economic discussion manage to ignore it - particularly those with a few years on the likes of me.

The generation schooled in the 1950s seems to have a different attitude to the economy from those who woke up to it a decade later. A fifth former in 1957, I suspect, was imbued not with the idea of chronic decline in the terms of trade, but with boundless faith in the welfare state.

The notion of New Zealand as a "social laboratory," showing the world how wealth can be shared, has been a recurring point of pride in good times. Much was made of it at the beginning of the 20th century and again in mid-century as commodity exports rode the postwar recovery in Europe.

New Zealanders coming of age in that era had no concern about the creation of national wealth. All economic discussion was about distribution. And, for many, it still is. They know, presumably, about the chronic trading problem but somehow it does not haunt their views on social justice. They are able to regard the economy as simply a contest of self-serving claims, much like the welfare state.

It is not a simple divide, of course. There are many among the class of 1957 who faced economic facts, just as there are many younger minds happy to leave the current account out of their calculations. The outlook prevailing before 1967 is still influential in classrooms, lecture halls, the law, social services and journalism. But it will pass.

The class of 1977 would have awakened to a country bruised by the loss of the British market and rising oil prices but confused by Muldoon. He had become Prime Minister by projecting himself as tough and capable of dealing with the country's chronic problems. But he was proving capable only of winning nasty political sideshows. Inflation and unemployment were rising and he was governing to no clear purpose. By the time he began to Think Big with oil substitution projects, the country was too polarised to believe in it.

The classes of 1987 and 1997 are in a different country. They have not known social security. Throughout their schooling they have been warned that jobs were hard to come by and nobody could count on one career for life. They have gone to tertiary education in much greater numbers than their forbears and they are the first generation forced to pay a significant proportion, 25 per cent, of the cost. They can invest heavily in themselves and they have.

The subsidised loans offered to students since 1992 have been taken up at a rate that exceeds the growth in student numbers or rises in fees and costs in that time.

The average amount that each student borrowed nearly doubled from 1992 to 1998. It became obvious that students were borrowing not just for course costs but for a better living standard than we had at university, and why not?

What is even a $90,000 loan to a junior doctor who is likely to be earning twice that much every year before he is much older?

If you are confident of working your way to a good income, why not borrow against the prospect? People start a business that way all the time.

The student loan scheme should be producing a generation of confident, calculating investors - exactly the sort of citizens needed in New Zealand's predicament.

Among the class of '97 there is not a lot of enthusiasm for that role. They mean to head overseas as soon as they graduate and their student debt is often blamed for that.

By 1998, the average student owed about $11,000 and only 11 per cent owed more than $25,000. I suspect they are going overseas for the same reasons we did, and they will come back for the same reasons, too.

They will realise, overseas, that this is a country of big blue skies. It is an intimate place in which anybody can enjoy a sense of contribution. It is stable, educated and struggling in post-colonial uncertainty.

It is a place to relish a challenge as large and undeniable as the problem of paying our way.