New Zealand’s been in economic decline for decades…

… but never mind, we’re good at rugby and it’s a great place to bring up kids.

frog in the proverbial heating potThose are good points, except that hundreds of thousands of those kids are brought up in Australia. New Zealand’s economic goose has been gradually cooked by half a century of poor political decisions and short-sighted economic policies. Sadly, like the proverbial frog in the slowly heating pot, most New Zealanders aren’t yet aware of the seriousness of the problem. We’re teetering on the brink of third world status.

The reason this is happening is that we’ve lost the capacity to innovate. Our two biggest income earners are agriculture and tourism, two industries that produce lots of low paying, dead-end jobs. Our prosperity was built on innovation, then we stopped doing it. Sir Paul Callaghan describes this problem in detail in the video link I’ve provided below.

Consider:

Continue reading “New Zealand’s been in economic decline for decades…”

Chickens coming home to roost again

chickens
The following is an extensive extract from the Business Insider. I recommend ignoring my extract and reading the full post right here, but if you’re determined not to, go ahead and read my truncated version.

It’s a little technical and although my knowledge of economic theory is improving, I don’t understand all of it. But the implications for all of us are very serious. This is the stuff that John Key and Bill English seem able to gloss over but which continues to make a mockery of their ever-optimistic and perennially wrong economic forecasts. The 95% that I do understand isn’t really debatable. As you’ll find when you read it, there’s an inevitability to what is happening that lends it verisimilitude.

This is just part of the reasons why John Key gave up on catching up with Australia and Bill English made a virtue of our being poorer than our mates across the ever-widening ditch. The ill-informed, self-serving and uninspiring people you put in power don’t get it.

The last paragraph is spine-chilling, provocative, and hopefully will not come to pass.

Not yet.

Over to Raul Ilargi Mendoz…

…and quotes within quotes:
Continue reading “Chickens coming home to roost again”

Catching up with Australia

In your dreams John: not at this rate

Yeah, I know they’ve given up on the promise. The disgusting thing is they shouldn’t have. We can catch Australia. But the longer we leave it the more difficult it becomes – the people we need to do it will all be in Australia.

Since I last investigated our dreadful economic performance the plot’s thickened. The table below is the most current comparison of GDP per capita for the richest 51 countries in the world, click on it to see it full-size. The figures in the table are taken from the CIA’s World Factbook. You may not be enamoured of the CIA, but they do their homework.

You can find us quite easily. The reason I’ve made it so long is that we’re at the very bottom.

per capita gdg table

With a bit of Googling you’ll find figures from other organisations showing us at a higher position than 51st. It depends upon several things including how GDP is defined, how recent the figures are, and whom they include in the stats. Nevertheless, the trend is the same. Steadily downward and with no sign of relief.

Most often our position is quoted as in the 20s. That’s because they usually only include OECD countries. We’ve been overtaken by a whole gaggle of countries which aren’t even in the OECD.

Mr Bollard and Mr Key please note

    • Since the 2007 update Australia has moved up 5 places, New Zealand have moved down 5 places.
    • Before leaping to the conclusion that the Aussies are just digging dollars out of the ground bear in mind that minerals (including oil & gas) comprised only 8% of their GDP in 2007. 7% according to some.

But GDP isn’t everything

Yes, I hear your cry. There are more important things than GDP. I’d rather live in New Zealand than in wealthy Qatar or Hong Kong. I’ve been to both those places and they’re not my cup of tea. Nevertheless, although the best things in life aren’t things, there comes a point where relative wealth becomes important. When a country can no longer afford the level of health care, policing, educational resources, defence and welfare its people expect, then per capita GDP becomes a very big issue.

When the outflow of our most valuable people becomes a steady torrent our collective future well-being is at risk. We need these people creating wealth for New Zealand so that we can repay our rapidly rising debt. I need my grandchildren to live in my country.

We need these people to continue the precious New Zealand can-do, string-and-barbed-wire, punch-above-our-weight culture built up over a dozen decades and more.

We’re paying for our education system to churn out people to build Australia; the medical and dental professions are becoming dominated by people for whom English is a second language; soon we’ll fall behind Botswana and Khazakstan economically.

It matters alright.

  • To re-iterate, if you wish to find New Zealand in a hurry on this chart, we’re at the bottom of the table at #51.
  • When I was very young we were #2.

Pray tell me:

  • What resources do Liechtenstein, Luxembourg, Jersey, Singapore, Hong Kong, Switzerland and Iceland have that New Zealand can’t match or exceed?
  • Why can’t we compete, for instance, with the Danes? The Swede’s say about Denmark “Stand on a box and you can see their whole damn country.” Like many other economies on this list they have very few natural resources: just good people.
  • Greenland! Before the crash were they selling ice as well as fish? They’re down now but watch them rebound.
    If you want answers to these questions, check my links below.

We need action

A few hints:

  • More research and development.
  • Proactive mentoring in entrepreneurial skills for small and medium sized businesses.
  • Sort out our education services. Less technology, more 3 Rs. Get people with real work experience onto the education coalface.
  • Jobs, jobs, jobs.
  • What happened to the war on bureaucracy? Bring the public sector into the real world.
  • In case it’s escaped notice, the much-maligned employers are the people who create jobs and wealth.
  • Less arts and law degrees, more science and engineering.
  • Less time wasters in the student body.
  • Less welfare, more work.
  • Less borrowing for hire purchase, more for investment.
  • Less consumption, more work and education.
  • Did I mention jobs?

For more insight into where our country is going wrong read my series: New Zealand’s Economic Decline and watch Sir Paul Callaghan’s inspirational presentation Beyond the Farm and the Theme Park.

//
//

Recovery? Don’t hold your breath

John Key, in yet another triumph of hope over experience, maintains that we’re on an economic roll. There are some minor problems with Mr Key’s super-optimism. Not unlike the now abandoned “catching up with Australia” pledge, or the “Working for Families is communism by stealth” backtrack.

Over 50 years of voting I’ve been a swinging centre-right voter and a supporter of capitalism. I’m a slow learner. I didn’t notice that the system that once worked very well is now absolutely broken.

When Henry Ford invented the production line and started churning out Model T cars in vast numbers, he concluded that if he wanted to create an economic and transport revolution he needed to ensure that his car was affordable. More specifically, he had sufficient insight to realise that success depended upon the people who built the car being able to afford to buy it.

For several decades this was understood by economists, money managers, reserve bankers, and capitalists. For the market to work successfully ordinary workers had to be sufficiently well paid that they were empowered to be consumers. It’s no use producing vast quantities of junk if nobody can afford to buy it. Trouble is, sometime in the last 20 or 30 years they’ve forgotten the basic message. The ratio between the incomes of the top earners and the average worker has increased enormously, but for 10 or 20 years the inflation adjusted wage of the average worker hasn’t increased. The top earners are nevertheless creaming the system more and more with every passing day and they’re apparently oblivious to the fact that they’re strangling the golden goose.

From SmartBlog

In 2010, the average annual wage for U.S. workers in production operations was $33,770 while the average CEO pay in S&P 500 companies was $11,358,445. CEO pay was 336 times more than the average employee.

The Wall Street crowd and their cronies around the Western World are sucking more blood out of the system than they were before it all turned pear-shaped in 2007-8. Before your money bailed them out. It’s unsustainable.

From MarketWatch

The left-wing Institute for Policy Studies found that the CEOs of the job-cut companies on average took home nearly $12 million in 2009, above the $8.5 million brought in by the average CEO of an S&P 500 company. The study found that 72% of the announced layoffs came at a time when the company was reporting positive earnings.

“This reflects a broader trend in Great Recession Corporate America: squeezing workers to boost profits and maintain high CEO pay,” said the study.

The growth occurring in the US and elsewhere is a jobless recovery. How does China remain an engine for growth when the people who buy their products have empty wallets? Sure, they can generate some internal consumption from their massive surplus, but that won’t last long when their own individuals and local authorities have been indulging in a borrowing spree which has created a massive real estate bubble. Negative equity is knocking on China’s door too.

For 2 or 3 decades the underpaid workers in the Western World have been borrowing to buy stuff that they previously could afford to buy for cash, or that didn’t exist, or that they chose not to buy. Now those people are pulling up the drawbridge. Countries like China and Germany who have relied on manufactured exports for growth are heading for a train wreck.

Millions of people around the world have lost their jobs and their homes. The rich are getting richer after the system that feeds their greed was bailed out using the taxes of those who’ve been destroyed. A revolution is overdue and I suspect that it’s coming.

From the horses’ mouths

The Wall Street Journal and Forbes Magazine are hardly bastions of Liberalism, nevertheless they can spot a trend when it hits them in the eye.

As you can see from this graph from the WSJ, the rich are doing OK. In 1965 they earned, on average, a mere 24.2 times the average employee’s income. In 2009, long after the recession hit, it was 185.3 times, and if you check this link at Forbes magazine, you’ll see that the thin red line is now on the rise again.

These people just don’t get it.

this is a dummy line break

CEO salary disproportionate growth

Protectionism redux

It’s a bit late to whine now

It's a cow!There was much outrage expressed here in New Zealand over the cynical, amoral European and American decisions to resurrect dairy subsidies in 2009. I feel sympathy for our dairy farmers and the industry they support, but they shouldn’t be surprised. President Obama never made any secret of the fact that he wasn’t a subsidy hard-liner. His much vaunted intelligence and integrity doesn’t seem to extend to acknowledging that subsidies paid by rich nations to inefficient agricultural producers are kicking efficient producers – particularly those in poor nations – in the teeth and contributing to third world poverty. Not to mention breaching their sworn international obligations. However, dairy producers are fairer game to these cynics than are most agri-producers.

Who is hurt most by dairy subsidies?

New Zealand.

Who else?

Ummm… errr.. Well hardly anybody if you ignore the fact that rich consumers in the first world are being forced to pay $100 billion or so more than they should to support incompetent agricultural producers. Poor countries aren’t big dairy exporters.

But it’s unfair!

Too right it’s unfair.

Why are they doing it then? Continue reading “Protectionism redux”

Someone else who understands the problem

Rod Oram
Rod Oram. He gets it.

Rod Oram is a controversial figure to many. Mostly he irritates the revisionist old school ignoramuses who got us into the mess we’re in. Those folk in farming organisations who believe that producing more lamb and milk powder will get us back into First World status aren’t too keen on Rod either. He sums up some of what I’ve been trying to raise awareness of in this article in the Sunday Star Times:

Time for a cultural revolution

My only gripe with Rod is that he doesn’t make enough noise about the issues. He—along with folk like Colin James, Fran O’Sullivan, Gareth Morgan and Leighton Smith—could make a big difference if they screamed louder.

Throwing good money after bad

It’s about time the New Zealand taxpayer saw some action on the dreadful state of the tottering health edifice. We can’t afford to pay medical staff enough to keep them in this country, but we can shell out tens of millions (hundreds?) on exponentially increasing health bureaucracy.

It’s crazy.

We need answers, results and accountability. Information Technology is supposed to make life easier for bureaucrats, instead it just produces more and more paper which nobody reads and an increasing spiral of administrative complexity. More and more managers of managers. Less and less doctors and nurses. It’s a sorry state of affairs when we’re spending more money on health than ever before, but our health services seem to be in an ever-decreasing spiral of effectiveness.

The problem isn’t what we’re spending, it’s how we’re spending it. What has changed in the system that requires vastly increased expenditure on non-medical staff and services? If those changes haven’t resulted in improved services and cost effectiveness why were they made and, more importantly, why are we stuck with them?

Michael, I suspect you got it right for once

Can’t be wrong all the time.

Wanganui mayor, Michael Laws, had this to say a while back regarding the Whanganui DHB:

“My initial inclination is that one administrative entity that looked after the west coast of the North Island – from Levin to New Plymouth and included both Wanganui and Palmerston North – would be preferable to the current hodgepodge.”

Sounds good to me. Now all he has to do is stop abusing his fellow DHB members, get them to co-operate and start getting stuff done as he did with the City Council; at least during his first term. Maybe he can’t cope with not being numero uno on the Board.

There is no need for Whanganui Hospital to provide full services if a combined alternative could, as it should, result in more bang for the buck. If you’re living in Greater Auckland you may well have to travel far greater distances (and through worse traffic) to receive treatment than you would if you were to travel from Wanganui to Palmerston North.

Case in point

John de Waal A few years ago I cut off the end my thumb by guillotining it in a folding trailer towbar. Yes, it hurt. At the time I was living in Whangaparaoa on the Hibiscus Coast. The nearest hospital was North Shore, but the nearest place where I’d have received full treatment was Middlemore in Otahuhu. By the time I got there and waited a day or two for treatment my thumb would have been dog tucker. Maybe literally.

By amazing good fortune, I hit the jackpot at my Red Beach local medical centre. A plastic surgeon, Dr John de Waal, was visiting to provide staff training. That’s John on the right. Give him a ring if you need a half-life refit. A lateral thinker and a nice bloke. Thanks John :o)

He sewed my thumb back together as a practical demo for the staff. Clever work – drilled holes in the reinserted thumbnail to serve as a splint to sew the mangled flesh back together. Ten years on it’s almost as good as new. If it hadn’t been for that happy coincidence I’d have been unable to carry on working as a marine engineer. I’d have been another ACC statistic on a permanent disability benefit.

So what’s your point I hear you cry?

With our present setup, unless you live very close to a major hospital you can’t expect close-to-home Rolls-Royce treatment in any area of medicine anywhere in this country. If something bad happens to you you can’t expect treatment around the corner or a helicopter in 5 minutes. The cookie jar is not bottomless. Unless we rebuild the whole tottering edifice from the ground up, you can’t expect satisfactory treatment anywhere. Waiting lists for emergency treatment are, on many occasions, as unsatisfactory as waiting lists for surgery. Yet again we need to start with a clean slate. This time with more input from the medical folk, less from the bean-counters and the pedlars of high tech baubles. It’s a bloody mess.