A Wolf in Lion’s Clothing

Listener 15 January 1994.

Keywords: Globalisation & Trade; Macroeconomics & Money;

I knew Wolfgang Rosenberg before I wanted to enter economics. I sort of blame him for my becoming an economist. At a student camp, he talked on .’The Dangers of Being an Economist’. Such camps are notorious for long nights and late mornings. My concentration slipped during the lecture. It sounded fun, .For Wolf, it has been dangerous. He came here as a 22-year-old German refugee, arriving on a day he now celebrates as if it was a birthday. Perhaps because of the dreadful events of Nazi Germany, Wolf cares passionately about economic issues, which is dangerous, and has been outspoken on them, which is even more dangerous. He has been publicly abused in Parliament and, no doubt, on many less formal occasions.

After gaining a degree in economics part-time (he says because fees were so cheap), Wolf took up a position at the University of Canterbury , In a more tolerant society, less concerned with being politically correct and more with commitment, innovation, enthusiasm and output, his record would have given him a professorship. He rose to the rank of university reader, retiring in 1980 to practise law, but still writing on economics.

His first book, in 1960, was Full Employment: Can the New Zealand Economic Miracle Last? They were halcyon days, in which it was said that the minister of labour knew all the unemployed by name – both of them. The book emphasised the marvel of the local situation, warning that we had to strive to preserve it. Alas, we have not. Wolf has tirelessly written pamphlet after pamphlet arguing for an alternative economic policy that will return us to, and preserve, full employment.

I have valued the many discussions with him over the years: first as a student, then as a colleague, now as a friend. Wolf’s distinctive view, coupled with a courteous patience, reflecting his old-world, gentlemanly manner, probes into one’s own explanations. We may not end up agreeing, but I understand his, and my, economics better

The insights can be old, or new, or both, Recently, he took a copy of Adam Smith’s Wealth of Nalions from the bookshelf in his living room, insisting I read a section on the international mobility of capital. It argues, he points out, the need for trade and exchange controls. (How many economists have a copy of Adam Smith kept in their living room, or even read it?)

Wolf has, of course, despaired over recent economic policy. In 1986, he wrote The Magic Square: What Every New Zealander Should Know About Rogernomics and the Alternatives, with an introduction by Jim Anderton. (An earlier study had one by Bill Sutch.) The sides of the ‘magic square’ are labelled ‘full employment’, ‘economic growth’, ‘price stability’ and ‘external balance’. The dilemma is to obtain success on all four sides, Uncontrolled market economies do not have a good record. The book argues that is inevitable, There is a need for intervention. as occurred in the 1950s. Wolf is especially strong on the need for import controls,

His latest book is New Zealand Can Be Different and Better. (This time Anderton’s introduction is commented by a tribute on the back cover from Bill Rowling,) It is a wonderfully eclectic collection of facts and quotations. (Not only is there Adam Smith, but John Donne’s sonorous ‘No man is an island entirely of himself …’) Throughout runs Wolf’s basic thesis:

* Economic policies must be formulated within the nation. Internationalism is desirable, It is co-operation between healthy nations, Transnationalism ignores national sovereignty and renders economic policies, which look towards the welfare of a nation. impossible.

* Without being able to pay its way internationally, a nation’s independent existence becomes threatened.

* There is no automatic mechanism that keeps a nation’s imports within the limits of its exchange earning capacity,

* For that reason. without foreign trade and exchange controls, a nation cannot maintain external balance and full employment simultaneously.

* Protection and import controls are a necessary but not sufficient condition for the success of full employment policies.

* Planned policies of using internal resources for investment and qualitative improvement of the people and resources of New Zealand can only be successful if they do not cause foreign exchange crises. Import substitution, export promotion, social improvement of health and education, greater Maori self-determination and nature’s conservation and enhancement are essential conditions for full employment.

* What is needed for full employment in an environment of pervasive high-tech developments is a two-tier economy. On one tier, there must be support of advanced techniques for export production through government-supported and intensified research and development, plus an expanding basis of universally accessible education. On the other tier, there must be the availability of low-tech employment. Examples are developments such as scenic walkways, road maintenance and improvement, expansion of residential and public building programmes, educational and health developments.

There is not room to detail where I disagree, The most significant point is that I consider macroeconomic policy far more important than protection and foreign exchange control for guarding the external balance. Wolf’s notion of a dual (two-tier) economy is a characteristic catalyst: worth pondering on, but perhaps leading to a different policy conclusion.

No doubt shortly after this column appears there will be another friendly letter: polite and patient, reaffirming the Rosenberg vision, making a new, stimulating point.

This month is his real birthday, As Wolfgang enters his 80th year, let me salute him for fleeing to the dangers of being an economist in New Zealand, and so making it a better country.