Toby Manhire: Crisis a red flag to NZ's cow dependency

Fonterra chief executive Theo Spierings (left) and chairman John Wilson. Photo / Richard Robinson

There will be a reckoning. Fonterra says so, the Government says so, the farmers say so. And as soon as the crisis of tainted whey, tainted Fonterra and tainted 100% Pure NZ has settled - fortune willing, without anyone falling ill - what a lot of reckoning there is to be done. Why such a delay between the contamination and its discovery? Why the delay from its discovery to the public announcement?

What about the befuddling messages about the products that might be carrying the bacteria? On Saturday morning, everything was accounted for. Then two specific batches of Karicare formula were named. By Sunday, forget the batches, it was two varieties. Then, said the man from Fonterra in a fluster on Campbell Live, all Karicare products. No, wait, the next day - just those two varieties. My own interest was hardly dispassionate - I've fed one of those products to my daughter.

But what a shame it would be if all that reckoning weren't to probe something more fundamental: New Zealand's extraordinary dependence on its farms. The primary sector has been the backbone of our economy and is not about to disappear. But it is also a burden. Roughly 70 per cent of New Zealand exports come from primary industries. Fonterra alone is about 10 per cent of the economy. When the sector sneezes, the country catches cold.

Trade Minister Tim Groser said this week that the best-case scenario was New Zealand escaping this episode with "a bloodied nose". But just imagine the consequences if a child had developed botulism. That would be less a nosebleed, and more like getting hit by a freight train.

There are other threats. Even a relatively modest spread of bovine foot and mouth disease could wipe 8 per cent off the economy over two years, according to a 2002 government study. Britain's 2001 outbreak cost its economy about $16 billion and thousands of jobs, many in tourism. The Auditor-General this year warned that New Zealand's preparation for a similar epidemic was "weak ... more a collection of policy statements than a comprehensive plan".

And that's not to mention the environmental factor - the susceptibility to extreme weather and climate change, along with the inconvenient reality that the export industry that benefits the most from the clean, green, 100% Pure brand is the same industry that most often disproves it.

Given the headlines, next week's publication of Get Off The Grass: Kickstarting NZ's Innovation Economy is timely. Co-authored by Professor Shaun Hendy, winner of the Prime Minister's science media communication prize, and Sir Paul Callaghan, the acclaimed physicist and former New Zealander of the Year who died last year, this important book makes a lucid and persuasive argument for change.

"New Zealanders work harder and earn less than most other people in the developed world," they write. "We need to start capitalising on our smarts, not just our sheep; we need to start seeing ourselves as people of learning, not just of the land; we need to start harnessing science and innovation, the sources of prosperity in the modern world; and we need to figure out how to export knowledge, not nature."

The authors nominate Finland, which has developed beyond reliance on its primary sector, as an inspiration.

In these pages this week, Paul Brislen of the Telecommunications Users Association NZ pointed to Estonia. There are a number of examples of small nations reshaping their economies. But it takes a concerted, vigorous effort to change. As Hendy and Callaghan note, New Zealand hasn't done nothing - there was the Knowledge Wave, the Growth and Innovation Framework, and now the Business Growth Agenda.

"Although each of these strategies can point to a few successes," they write, "none has captured the imagination of the country in the way that similar initiatives have been embraced in Israel, Finland or Singapore. These countries have taken ownership of their economic challenges and turned their disadvantages into strengths. New Zealanders have been content to live off their rich endowment of natural resources, to live off the good luck of yesterday."

Dispiriting though it is to read Groser this week telling the Associated Press that calls for economic diversification are a "caricature", the Government has inched towards encouraging innovation industries. But their best bet to tackle the wider problem could be to seize on some of the (shortlived, admittedly) parliamentary consensus in the days after the contamination scare emerged, and launch a cross-party working group to ask what kind of economy we need to nurture over the next five, 10, 20 years.

Labour could hardly refuse to back them. David Shearer regularly points to Callaghan as a major influence on his thinking, and advocates a "step change" in the economy.

A step change is right. The alternative is to grit our teeth and plough on, in the knowledge that the Achilles heel of New Zealand's national wealth could take the form of a dirty pipe just down the road from Cambridge in the Waikato.