KEY POINTS:
The employment summit is a great focal point to think of how we want New Zealand to look in the future and how to get there. Many people will become unemployed over the next year or more as the global economic slowdown may well last longer than firms are prepared for.
Some predictions seem like scaremongering. But we should remember that it was an inability to imagine how bad things can get that was a cause of this crisis. It is up to us to find a solution.
The "coal face" of the economy has been invited to the Government's Jobs Summit tomorrow. Cold comfort I say. Did our listed companies have the foresight to see the collapse of the global economy? Even among those who did there is little agreement on what to do.
Elsewhere, the preponderance of debate surrounds the great schism of economics - whether or not government stimulus works. The Chicago school of thought says government spending is highly inefficient.
But without stimulus economies could get worse in a way that no monetary or fiscal policy could remedy. In these extreme times the symptoms such as unemployment can cause more long-term economic and social harm than the current economic disease.
But New Zealand is different in many ways from other developed countries. For a start, our employment problem is not even new.
For years New Zealanders have been migrating to better jobs in Australia. It wasn't that our economy and our companies were in decline, it was just that there were better jobs being created by our neighbour.
And that is the nub of the problem. While the summit addresses the employment issues associated with the global slowdown and local mismanagement of that, finding a long-term solution to the existing problem is the real task.
Yet it seems all the ideas in the mainstream media are about stopping the loss. "We must," they say, "keep companies from going overseas and prevent jobs loses."
This is the wrong solution to the wrong problem.
Job creation and destruction are natural. Our problem is the lack of job creation. In vibrant economies, a company emigrating or a job lost is replaced by newer, better companies and jobs.
New Zealand is rated as one of the easiest places to do business, yet there is little growth. Why wasn't Google started here? Maybe the next Google will be.
We have limited ammunition to throw at this recession, but it is not the size of the stimulus that matters, but intelligently targeting key sustainable drivers of growth. To this end we should:
Encourage businesses to move here. Technology, software and service sectors are industries with a small environmental footprint that can be exported anywhere despite growing protectionism and distance from customers. They are also high-margin businesses, making them more insulated from currency fluctuations.
Is this a tall order? Actually it could cost nothing. If we tried as hard to get companies to move here as we did to keep them here, we would have a waiting list.
In New York, where I grew up, it is common to give companies tax breaks for remaining in the city. In other places the local government will give away land or natural resources.
New Zealand is a great place to live. It should take a small economic nudge to get companies interested in moving headquarters here. Tax breaks work, and it costs nothing if the companies demand little in the way of unique infrastructure.
If they employ and spend we get growth for free. Remember we get to pick and choose what types of companies are "invited".
The only roadblock to that idea is our lousy infrastructure. Telecommunications, healthcare and schools need to be world-class. Being far away from our trading partners, we need the best technology. Our goals should not be modest.
Longer term, we should be growing businesses. We have the skill. Robert Gentleman and Ross Ihaka at the University of Auckland created a software package called "R" which is used worldwide by researchers and companies like Google. It is free, but there is a company in the US trying to make a commercial venture from supporting the programme.
Another example is Silverstripe. Many websites are developed with this software written by Silverstripe in Wellington. The talent is in New Zealand now.
The Government should provide space and technology to start up ventures. Maybe provide a building with a common cafeteria where people can exchange ideas. This is an attempt to recreate the cross-fertilisation of ideas and research that made Silicon Valley the centre of technology, and it works.
I suggest a few such complexes are needed, each near an academic and business centre. This is a step that could be taken immediately.
Lastly, there is a need for greater economic diversity - a diverse portfolio of industries to make the New Zealand economy more robust and resilient to economic bad weather elsewhere. Industries that can export competitively and not fall victim to protectionism are crucial. We can encourage these. While most stimuli will be directed to infrastructure and tax breaks, we should direct stimulus to industries we need to grow.
An economy like New Zealand, dominated by so few industries, is a risk similar to those taken by the banking sector abroad.
New Zealand is small and resourceful; we can use tactics and smarts to outmanoeuvre the world. In the future we won't need to measure our success by GDP or employment statistics but by the length of the line to get New Zealand residency.
* Lew Burton, a former Chicago hedge funds trader, now lives in New Zealand and is an investment adviser.
