Keynote Address to the 1997 “Engineering Our Nation’s Future” Conference of the Institution of Professional Engineers of New Zealand, Wellington, February 5th.
Keywords: Political Economy & History
Today’s lecture is work in progress, which will one day become a book called something like “The Nation Building State”. It is concerned with one of the dominant themes of New Zealand’s economic and social development, the use of the state to build the nation, and the curiosity that in the mid 1980s that theme suddenly disappeared. Engineers had a central role in this nation building, so it is good to have an opportunity to talk to you about it. After all if we do not have an understanding of our past – from whence we came from, why we are where we are – then engineers will have little influence over the nation’s future, and where we are going.
I want to start off with an Australasian contrast in roadworks signs. In New Zealand it states in large letters “TRANSIT”, and then underneath in smaller letters “New Zealand”. The sign goes onto describe the particular project, and ends with a statement as to how much it costs. A comparable sign in Australia says “FEDERAL GOVERNMENT OF AUSTRALIA”, gives the project title, and at the bottom has a slogan “Uniting the Nation”.
Part of the difference between the two signs reflects different political situations. In Australia there is a federal government in Canberra and a set of state governments which are very much more powerful than any local authority in New Zealand. Often the Australian federal government cannot do things of importance without consulting the State government, while there are even occasional threats for some of the states to become independent countries in their own right. This imposes a continual pressure on the federal government to prove itself to the public, a pressure which hardly exists in New Zealand. That is the underlying message in their road construction signs – the federal government doing something for you, the public.
But there is another difference between the two signs. In the Transit New Zealand signs, you can hardly see the “New Zealand”, almost as if the project has got nothing to do with the country. In contrast the Australians make certain you know their project is about Australia, and about the government of Australia that is building its roads. Moreover while the New Zealand project emphasizes how much it costs, in Australia they tell you about its overall purpose: uniting the country, building a part of the nation’s grid, the network which brings Australians together. Thus the two signs represent two very different visions. On the east side of the Tasman there is organisation which seems to be not very proud of being a New Zealand one or of contributing to the development of the nation, but is mainly concerned about spending money. To the west there is a country which is committed in some sense to building the nation.
The expression, “the nation building state” was in a the subtitle of a very influential book by Australian sociologist Michael Pusey. Its title is Economic Rationalism in Canberra, which describes how the theory, which is called “Rogernomics” in New Zealand, took over the federal government of Australia in the 1980s. Its subtitle is A Nation Building State Changes Its Mind.[1] Pusey argues that as the theory of economic rationalism came to dominate thinking in Canberra, Australia changed its economic strategy from being a nation building state to one which is more passive. Yet if we look at the road signs in the two countries we see that Australians still have this notion of the state as a nation builder, even if it is not as strong as it once was. For New Zealanders a nation building state has been all but disappeared.
The tradition of the nation building state in New Zealand is a long one, beginning with the ambitions of the first settlers committed to New Zealand. It includes the politician Julius Vogel who was involved in the founding the Public Works Department (PWD) in 1870, which for over 100 years was the major engineering instrument of the state’s nation building strategy.
In the government centre in Wellington there is the Vogel Building named after him. Ten years ago it housed the Ministry of Works and Development (MWD), the successor to the PWD. For over hundred years it, and its precursors, had been the country’s biggest employer of engineers, and some of the most technically accomplished ones. The MWD was involved in building the nation so, for instance, the old National Roads Board, the precursor of Transit New Zealand, was a part of it. Many other engineering activities involved in the building of New Zealand were originally in the Ministry of Works, its predecessor, or in related government departments such as the Forest Service, the Post Office, the Mines Department, New Zealand Railways, or the state electricity system. Yet today the Ministry of Works has been abolished, most of its activities have been privatized, and there are hardly any engineers directly employed by the government.
How did the vision of the role of the government of New Zealand change? How did we shift from this vision of building a nation and uniting the country, to one in which New Zealand is demoted and the costs of each project highlighted? To answer that we go back sixty odd years.
In the 1930s New Zealand, like the rest of the world, experienced a devastating depression. What was the response of the leaders of New Zealand? Almost all of them were men, so I shall be using the masculine pronouns to describe them.
Virtually all those significant in the developments after 1930s were public servants (or politicians) at some time. I happened to be working on a biographical essay of one of them, Bernard Ashwin, who was an economist and was Secretary of the Treasury from 1939 to 1955.[2] He was, according to Keith Sinclair, one of the most powerful men in New Zealand in the 1940s, so one can tell much of the story of the nation building state through his life.
Ashwin, born in 1896, entered the public service in 1912, fought in France in the First World War where he twice diced with death, and came back to graduate in economics. Transferring to the Treasury, he became one of New Zealand’s most important public servants and, indeed, economists. Reflecting in his early memoir, before his distinguished career was to be evident, the 30 year old economist wrote that in early adolescence “I acquired a desire which I did not entirely abandon for many years to be an engineer and build bridges and tall buildings.” Instead Bernard Ashwin became a social engineer, and built the mid-century New Zealand economy.
In those days there was a synergy between economists and engineers. Ashwin is not the only example. During the war New Zealand was faced with a grave shortage of physical infrastructure, so James Fletcher, founder of the Fletcher Construction company, a precursor of today’s Fletcher Challenge, was for a while Commissioner of Works in the public sector. Meanwhile his son, Jim Fletcher, ran the family firm and was an active economic nationalist, including on the Tasman project. Both worked closely with Ashwin.
Other major nation builders included politicians like Gordon Coates and Peter Fraser; other economists like Bill Sutch; Pat Entrican an engineer who ran the New Zealand Forest Service; Alister MacIntosh, the secretary for external affairs; Clarence Beeby (“Beeb”) the Director General of Education; Joe Heenan, the Secretary of Internal Affairs; and James Shelly who led the development of national radio. Each of them was involved in using the state to shape the nation.
The late 1930s was a time of many social reforms – perhaps social security is the most memorable. Ashwin was closely involved in the creation of the Reserve Bank of New Zealand. But it was also a period of the physical building of the nation’s infrastructure – roads, railways, ports, telegraph, and new facilities such as hospitals, government office buildings, airports and electric power. It was not just a matter of housing people and providing them with education and health and social security. The productive capacity of the economy had to be enhanced to provide the goods and services that raised standards of living. Infrastructure and industrialization were key concerns, so was irrigation.
The war redirected the nation builders, changing their priorities. A major concern now was building airfields, while the hydro-electricity construction program was delayed, resulting in the power blackouts of the 1950s.
After the war there was the problem of demobilisation, of finding jobs for servicemen. That led to the longer term issue of industrial strategy. The war had favoured New Zealand production, because many goods could not be imported, so they were produced here. The decision had to be made whether to wind down these factories – in which case where would their existing and new workers be employed. And how would the imports be paid for? In those days exporting was almost solely meat, wool and dairy products – pastoral exports. Would there be sufficient of them – at a sufficient price – to pay for all the imports, and provide jobs? This issue was and is central to economic policy throughout the postwar era.
A key influence on the nation builders’ thinking was the unimportance of New Zealand in the international arena. It is small, whether measured by population of economic size, and on the international margins. One might joke we are behind the filing cabinets of the world. If in an office there is a map of the world on the wall, then as like as not there will be a filing cabinet pushed against it, and behind that cabinet is where on the map is New Zealand. In truth we are basically a very unimportant country.
Nation building had a vision of making us important. Admittedly we were important suppliers of pastoral products to the international market, but they are hardly products of key international significance. Moreover they were (and are) very vulnerable if there was another international downturn, like that in the 1930s, while the farseeing predicted there would be competitive pressures from highly subsidized pastoral producers in the actual and potential export market. So the nation builders looked for new industries, which offered the opportunity for diversification, for reduced dependence upon pastoral exporting.
In the late 1940s Ashwin becomes interested in very specific developments, especially the Tasman Pulp and Paper industrial complex at Kawerau which processes the vast Kaingaroa forest, the result of providing work for unemployed New Zealanders in the interwar years. In this context there are a couple of features of Ashwin which need highlighting. First of all he was the Secretary of the Treasury – he was the first great Secretary of the Treasury – and yet as the Secretary he was intimately involved in actually building of an industrial plant. He was so committed, his son Barry Ashwin tells me, that he decided to retire early from the Treasury so he could be involved in the Tasman project as a director.
The second interesting feature was that Ashwin was a conservative. We are not talking here of about a person who was a Marxist or a socialist or even mildly on the left. Not only was Ashwin a fiscal conservative concerned with limiting government spending – the inevitable fate of a Treasury official – but he was a political conservative. Despite being the key economic adviser to the Labour Government in the 1940s, Ashwin probably voted National.
What interests me is that it has been usual to present economic nationalism as a policy of the political left. Certainly our most articulate economic nationalist, Sutch, was of that political suasion, but economic nationalism – even the nation building state – was not a preserve of the left, as Ashwin well illustrates. For here is a man who is in power in the Treasury and who is a conservative, at least by the measures of New Zealand at the time, and nevertheless he supported direct intervention to build industry.
He was not alone in doing this. Entrican had a key role as head of the Forest Service, and James Fletcher had returned to private practice and became chairman of the Tasman Board. The industrial plant – New Zealand’s largest factory – was built not by private enterprise, but by the Ministry of Works, whose new Commissioner of Works, Ed McKillop was also Tasman’s board.
Ashwin retired in 1955 and leaves this story. But the story does not stop there. There continued a constant seeking to create by the New Zealand government industries which were alternative, or complementary to, pastoral industry and which would make the country of greater significance in the world, while supporting the rest of the economy.
The greatest advocate of these developments was Bill Sutch, whose collection of his essays, Colony or Nation?, argued New Zealand had to choose between these options.[3] The choice was not peculiar to New Zealand. The notion of using the State to build the nation was an international phenomenon, popular in the recently decolonisation of many parts of Africa and Asia in the 1940s and 1950s. These newly politically independent states wanted to be economically independent, wanted to build their nation and not just be a “neo-colony” – as they described it. They saw the building of great industries as a part of this independence, of their acquiring genuine nationhood.
This strategy of industrialisation, of course required engineers, as when the nation built an oil refinery at Marsden Point, as when it continued the electricity generation construction program (which shifted from just building hydro and geothermal stations to include building thermal stations like the ones at Huntly and New Plymouth), or as when the nation built an aluminium smelter at Te Wai Point, or as when it built a steel mill at Glenbrook. In each case the government was intimately involved.
The last great stage of the story of the nation building state starts in 1968 when what was then the world’s fourth biggest gas field – the Maui field – was found off the Taranaki coast. The find had a number of fundamental implications. First in most countries such natural gas is used for industrial processing, but New Zealand did not have the industrial base that could use all the gas. How then was it to be used? Second, the government signed with the consortium which found the gas, a “take-or-pay” contract. This meant the New Zealand government would guarantee to pay for it even if the nation did not use the natural gas. The consortium needed such an agreement to secure the finance to construct the Maui platforms, which were huge engineering projects in their own right.
Thus the last great nation building state activity, what became called “Think Big”. Today, the projects are looked upon unfavourably, despite them being engineering successes. The synthetic gasoline plant at Motunui was a superb piece of chemical engineering, using state of the art catalysts to convert methane into petroleum products, and was constructed at below the forecast cost. On all measures it was a success except one, the commercial one. It was designed on the assumption that the price of oil would be at least $US25 a barrel. That was a perfectly reasonable forecast at the time. Modest predictions were for a price of $US35 a barrel, while Texans were talking about the price of oil being $US75 a barrel in 1975. When the syngas plant started the price of oil was $US12 a barrel so the plant operated at a loss, which was carried by the New Zealand government and taxpayer.
This experience, or worse where there were construction cost overruns, was typical of almost every one of the Think Big projects. The financing of each project had been arranged so that if there was a loss, the taxpayer or consumer carried the burden. When oil prices fell in the mid 1980s, virtually all the projects went commercially wrong.
Meanwhile the public servants were already losing their faith at being able to identify and promote successful industrial projects, and national independence.[4] The failure of the Think Big projects was the clincher. And so in the 1980s, the nation building state changed its mind, becoming passive towards promoting industry. This loss of faith percolated through the whole political and government system. The MWD and agencies with a similar mission were closed down, corporatized, or privatized. And, as we saw with Transit New Zealand, those which were left redefined their role from nation building to spending money.
The original concept of my study was the abandoning of the nation building state. But the nation building state is not going to disappear so easily from the political agenda. While one can explain why many economists enthusiastically abandoned the nation building state strategy, and why many engineers did so reluctantly, I am puzzled by the abandonment by the politicians. The political parties seemed to have largely given up the strategy. Labour, the nation builders of the 1930s and 1940s, who renamed the Ministry of Works and Development in 1973, became the vehicle for disbanding the instruments of state nation building in the 1980s. National’s stance is neatly captured by Bill Birch who drove the Think Big projects while Minister of Energy from 1978 to 1984, and pursued the opposite strategy as Minister of Finance from 1993 to 1996. There was the odd politician who touched the rhetoric of the nation building state, but it was pallid in comparison to their predecessors, and typically their role was marginal and ineffective.
Yet the New Zealand public has never abandoned the vision of the nation building state. Indeed their widespread resistance to privatization, despite the enthusiasm for it of the politicians, is evidence that the vision of nation building is still a powerful political notion.
It is not accidental then, that there are elements of nation building in the rhetoric of Winston Peters with his aim to reflect his public. As Treasurer and deputy prime-minister in the coalition cabinet after the 1996 election, he has the opportunity to pursue his vision. How he will do that, whether he will do it, we have yet to see. But whatever the governing elite may think the public vision will not go away. Perhaps the book I plan to write may not be a requiem for the nation building state after all.
The nation building strategy we return to will be different in execution from that we did in the immediate past. Suppose Ashwin were alive and active today. We may take it he would still be a nation builder, but the likelihood is that he would pursue the strategy in a different way from that we did in the seventies, relying more on private enterprise. The PWD hired private firms to carry out the tasks given to it in the 1870s. In the foreseeable future some return to great use of the private sector to build the nation seems likely.
Perhaps Ashwin would see the government as facilitative, rather than interventionist.[5] It is a horses for courses issue. The sort of interventionism Ashwin practised when he was Secretary of the Treasury does not work to the same extent today. The globalized world economy limits the effectiveness of the interventions of the past. We need to think of new strategies which are facilitative, and give the nation some control over its destiny. Otherwise we will end up a neo-colony of the globalized economy.
It was not only the economists who lost confidence in the nation building state, less confident of its traditional role – to help build a nation through industrial and infrastructural projects. The engineering profession has to revise its vision too.
There are three main reasons. First there are fewer of the traditional constructed: the roads have been built, the rivers straightened, and railways – that key network the PWD created – is shrinking. Second there are new technologies, most notably in information technology, but it is not clear how they fit into the heroics of nation building. And third, increasingly there is a concern for “sustainable development”, which in some ways is conflict with economic development.[6] After all economics, like engineering, is fundamentally based on the second law of thermodynamics. Without it there would be no production functions, no decreasing returns from additional inputs. Without it most of the central economic problem of scarcity would disappear.
In a fundamental way economic development has been about extracting energy and resources from the environment in an unsustainable way. Although the classic Maori managed the economy and environment in a reasonably sustainable way, the first European settlers “quarried” the environment – for seals, whales, fish, timber, gold and other minerals, and kauri gum.[7] Subsequent economic activity may have been less exploitive, but even pastoral farming cleared bush, degraded soil and water, used oil and phosphate mined overseas, and chemicals which will take generations to clean up. Other post-quarry industrial activities have as equally uncomfortable records, while carbon emissions are proving to be a global sustainability issue.
Nevertheless there is an increasing recognition that some ways are less sustainable than others. Even if engineers were uninterested in their impact on the environment – and they are not – there is a strong environmentalist sentiment throughout the nation, which will shape and limit what engineers (and economists) can do. We are going to have to organize the economy so the impact of economic development on the environment is minimized. Perhaps economic growth – as we have known it over the last two centuries – must come to an end. What role then for engineers? What will replace it is less clear. As long as there is technological innovation, there will not be pure stagnation.
Facing this challenge will involve a reinterpretation of sustainability and economic development, and what the nation building state means. Ideally the new strategy will involve economists and engineers working closely together, as they did once in the past, but in different ways. Recall Ashwin’s desire to be an engineer and build structures, and how instead he became a social engineer and built an economy – an economy in which those engineering structures are not only central to its practical development, but provide some of the most central images of its success. Those aspirations still exist among the people of New Zealand. They must be harnessed, or we fail as a nation.
Endnotes
1. M. Pusey, Economic Rationalism in Canberra: A Nation Building State Changes Its Mind (Cambridge University Press, 1991)
2. B.H. Easton, “Bernard Ashwin: Secretary to the Nation Building State.”, New Zealand Studies, November 1997, p.13-21
3. W.B. Sutch, Colony or Nation (Sydney University Press, 1966).
4. B.H. Easton, The Commercialisation of New Zealand (AUP, 1997).
5. B.H. Easton,Getting the Supply-side to Work, (New Zealand Engineering Union, 1994).
6. See R.M.Sharp (ed) Sustainability Through Engineering( IPENZ) for an example of a thoughtful discussion on the issue
7. The “quarry” and later stages of economic development are described in B.H. Easton Towards a Political Economy of New Zealand (1994 Hocken Lecture, Hocken Library, 1996).