Voting every six or nine years for a fresh crop of politicians, each with his or her own ideas about how it should be done, has got New Zealand nowhere. Photo / Mark Mitchell, File
Voting every six or nine years for a fresh crop of politicians, each with his or her own ideas about how it should be done, has got New Zealand nowhere. Photo / Mark Mitchell, File
OPINION
Democracy, Churchill famously remarked, is the worst form of government except for all the rest. His disparagement of democracy however is not without relevance to economic development which, to succeed, requires policy consistency well beyond short-term, three-year election cycles.
An environment free of all threats of political or ideologicaldisruption is not the only requisite for successful economic development.
While the modern developmental state tends to be associated with strong, authoritarian government, notably the East Asian tiger economies or super-exporters, Western social democracies are by no means precluded from the prospect of development.
With an informed public, the appropriate development institutions and - most critically, the political will - development can succeed.
The problem is that New Zealand presently lacks all three of these requisites.
It should be blindingly obvious that simply voting governments out every six or nine years in exchange for a fresh crop of politicians, each with his or her own ideas about how it should be done, has got New Zealand nowhere. And it never will.
There is only one way New Zealand will ever achieve rich-nation status (very high per capita income) and that is by becoming an export powerhouse. Period. More of the same simply will not cut it.
All the tiny, high-income nations that enjoy the world's highest living standards and unmatched quality of life are export powerhouses. Hence their very high national incomes relative to population.
John Gascoigne. Photo / Supplied
The national income or GDP of small nations such as Iceland, Luxembourg, the Scandinavian countries, Singapore, New Zealand, Uruguay, and so on is determined by their level of export income. Basically, the higher the export income of a tiny nation the higher its national income.
Exporting enables small nations with tiny domestic markets to tap into the wealth of much larger nations abroad.
A very high level of export income requires a massive, nationally owned productive sector relative to population size. A low- or middle-income nation that aspires to rich nation status will require substantial investment capital to underwrite new infrastructure and expansion of productive capacity. In turn, nations with a scarcity of investment capital engage in a process called savings mobilisation and ensure those savings are channelled directly into their productive sectors to grow their economies.
The development process calls for considerable state intervention and oversight not just to initiate the process but, more importantly, to keep it on track until the goal of rich-nation status is ultimately achieved.
Once the economic goal of a nation is set the development strategy must lock on to its target or ideal. For example, if New Zealand were to decide on achieving rich-nation status we would have to plan on a $500 billion national income evenly distributed across a highly disciplined, cohesive population of 5 million by 2050. That would, of course, be the ideal. However, the closer New Zealand could get to that ideal the better off all New Zealanders would become.
There is a snag. An export-led, economic development strategy would require solid, bi-partisan support which, like US gun control, appears unlikely. Our political masters will always oppose such an initiative as unnecessary. Politicians have always come up with meaningless, unquantifiable assurances their particular policies will "bring benefits" or create the conditions for future prosperity. An old favourite is "our underlying economic fundamentals are very sound". We have heard these shop-worn claims for years. They have got us nowhere.
The writing is on the wall for New Zealand. We have two choices. We can think big and plug into the world as an export powerhouse like Denmark or just continue indefinitely as a quaint, low-wage, cash-strapped economic backwater like Uruguay, awash with social problems.
