Did Govt. Squander Economic Transformation Opportunity?

Prime Minister Helen Clark has often called for New Zealanders to “back themselves” in business with the same enthusiasm that we support our sports teams. But after nine years in charge, Labour seem to have run out of ideas on the economic development front.

To be fair, I agree with the points made by Infometrics economist Chris Worthington in this weekend’s DomPost. Dr Cullen’s boring but fiscally responsible twin planks of repaying government debt and instigating a universal superannuation fund has put the economy in a strong position to weather the global economic storm and cope with future demands on resources from an ageing populace. On the downside, the oft quoted aspirational goals, regarding climbing the OECD ladder, will not be met anytime soon. Equilbrium is the best we can hope for.

I suppose a mediocre economic performance and low growth is better than a meltdown. But our greatest failure has been an inability to put capital to work more productively. There is no shortage of ideas in New Zealand on how to leverage innovation. However we are simply not good enough at attracting capital and executing on those ideas. Even addressing basic infrastructural issues such as broadband and roading seems about as easy as wading through treacle – yet almost everyone agrees that these are urgent issues. We can’t afford to wait until near the end of each election cycle before committing to such projects.

The Labour government had a burst of enthusiasm in 2001 when it backed the Knowledge Wave Conference. A lot of good ideas sprung out of this event and there was initially a great deal of goodwill generated amongst business movers and shakers. The Growth and Innovation Advisory Board (GIAB) was established shortly afterwards with an impressive looking group of influential business people involved. But nary a word has been heard since. The last press release from GIAB itself was in 2005 and a number of promising initiatives such as the ICT Taskforce have been quietly subsumed as attention drifted once again back to the primary sector as our economic saviour.

Lately independent thinktanks and commentators have been attempting to fill the void left by the lack of government leadership. But there is not a coordinated effort. Auckland seems to benefit increasingly from government largesse in terms of technology and innovation programmes at the expense of other regions. Hence the incoming government needs to think seriously about developing an equitable national innovation blueprint that will drive progress on these issues.

So why didn’t Labour propose a Fast Forward styled initiative for the ICT sector for example? Aspirational goals are fine, but if we are to overcome the disadvantages of geographic distance from capital and consumer markets and an over-reliance on tourism and primary exports, we need some radical solutions. We also need the commitment to back ourselves, as the PM often states. Half measures and programmes that only nibble at the edges of the problem simply don’t cut it.

Yes there are competing calls on government budget; but how are we to pay for improving health, education and superannuation in the future if we cannot earn a crust in the world and remain competitive? Now, I don’t think Labour entirely squandered the opportunity during their tenure, but they failed to generate and support a really powerful and vibrant leadership vision for how innovation might strongly underpin economic growth.

The scary part is that the blue squad seem to have even less of a clue on how to go about it. Certainly the prospect of having living fossils like Williamson, English and Brownlee sitting around the Cabinet table is not an appealing one in terms of ideation. Other small nations like Singapore, Malaysia, Ireland and Finland have backed themselves with investment and forward thinking public initiatives on innovation. Why can’t we?

7 thoughts on “Did Govt. Squander Economic Transformation Opportunity?

  1. One of that main factors needed os to create an industrial sector that can take the innovation to the next level. That would also hopefully create the employment opportuinities with good wages and conditions whereby we could attrract and retain top RS&D people to stay in New Zealand. This environment of differential reward for differential expertise is the thing that successive governments have totally failed in providing.

  2. “Why can’t we?” (grow like, for example, Singapore). Simple. It is the price of a “democratic (albeit munted) electoral system.” Vote Labour! This is an election the party deserves to win.

  3. Grant, we had a rather lax approach to innovation even prior to MMP. But I agree to a certain extent that political expediency is responsible for mediocrity.

    Visionary approaches to addressing the national culture around innovation are unlikely to be vote catchers in NZ, hence the lack of urgency by politicians. The Royal Society has been making a valiant effort, but they too are constrained by politicians who fund initiatives.

    I’m looking forward to the day when the Ernest Rutherfords and Angus Taits get equal recognition to the Colin Meads and the Tana Umagas. But I’m not holding my breath.

    That’s what I mean about “backing ourselves”. We have to look beyond the All Blacks and the Haka to define success in our society. The Singaporeans and Finns never had that burden, they just got on with it.

  4. Real science lecturers get paid more than pet homeopathy lecturers, for example. The collectivist system in setting wages in both education and research in this country will always limit our ability to inovate and to carry our innovations to the next level.

    In keeping with the “lets not wait for government, lets do it for ourselves” attitude, what we really lack in this country isn’t funding for R&D, its a vibrant secondary industrial sector that can compete with the government and especially bureacracy in provided attractive wages and and attractive carreer path. In other countries sceintists and innovators can easily flow between academia and industry and back again, but that doesn’t, and can’t happen here.

    Because we have this major unemployment problem, funders, especially the government are only prepared to fund (low) wage intensive R&D, and not fund capex. That is why we are now slipping badlly behind even in our flagship “education industry”.

  5. Kevin: right on the button. Academic socialists like Clark and Cullen simply don’t have the real-world experience to understand this (notwithstanding the likes of Owen Glenn fronting with $6 million for the UofA’s “business school” – which (ironically) ended up tens of millions of dollars over budget). The intellectual flow between US business and education is, in my humble opinion, one of the primary reasons for America’s success. Many New Zealanders would rather take comfort from “community contributions” via the likes of Lions Clubs and Presbyterian Raffles so as to avoid the gnarly issue: there are not enough bright, inspired, properly incentivised educated people in New Zealand’s private sector to make it work properly.

  6. “Collectivist systems for setting wages” appear to have failed NZ science and academia miserably, as far as I can tell.

    Bearing that point in mind, I’m not convinced that a lack of an industrial complex is entirely the root of our problems. Certainly knowledge spillover and network effects account for a great deal of economic activity in Northern Hemisphere economies. But they have huge capital and consumer markets on their doorstep. The chief problem is access to capital in NZ, not lack of good ideas.

    NZ universities have been slow to engage with business. There is some collaboration of course, but to my mind there is lots of untested opportunity out there, which is one of the reasons we are running the W2W event. Academics AND business need to pick up the mantle.


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