Big Bad World: Is There Any Future for an Independent New Zealand?

Listener October 4, 2003.

Keywords: Globalisation & Trade;

Our economic debate is bedevilled by defeatism, the belief that New Zealand cannot survive as an independent nation. Rogernomes seem to conclude that since their policies failed, there is no alternative but for us to become a colony. But even many post-Rogernomes, typically trained in the ideal of the US economy, think we are too small and too distant to survive.

Their usual solution is for New Zealand to merge with Australia, something the Australians would welcome because they know they are going to thrive and the added market (as well as from Pacific Islands) would further help. The current defeatist strategy is to tie New Zealand into the Australian economy by a myriad of institutional arrangements. Closer Economic Relations (CER) was a major strategy and their current push is for monetary union in which the New Zealand dollar would be replaced by the Australian one.

There was quite a different view when CER was negotiated. It reflected a confidence that New Zealand could survive, but in a radically changing world, it had to adapt. No longer relying on the British market absorbing our pastoral products, New Zealand would continue to be a specialist producer, but not just of meat, wool and dairy products. And it would export everywhere. CER was a part of that global opening, learning international engagement, but Australasia was never the end point. Every trans-tasman engagement was tested by whether it helped the economy relate with the rest of the world: eg, when the two countries adopt common standards, the test is whether they were consistent with those likely to be adopted by the Atlantic economies.

Thus, monetary union only makes sense in the most unlikely prospect that there would soon be a single international currency. In the long interim, we would find ourselves shackled to the Australian economy to which only a fifth of our exports go, and many of whose own exports, such as grains and minerals, have little to do with us. In any case, monetary union does not work very well without fiscal union. (Argentina locked its currency with the US. The unwinding of the disastrous consequences means incomes are now a fifth lower than they were.) Not that the defeatists eschew fiscal union, since that would merge us further with Canberra (though the Australians might be reluctant, since we would be a fiscal drag on them).

Defeatism is about swapping Mother England for Sister Australia, the fear that one cannot make it in the big bad world, so New Zealand needs someone else’s skirts to hide behind. It’s irritatingly bad economics, compounded by a lack of any historical sense. Defeatists like to point to a circular map of the world centred on a New Zealand surrounded by acres of water, with the rest of the world on the fringe. But it is relative. If that map applied to the 19th century, when it took months to sail to the other side and there was no network of cables, a map on the same effective scale of effective distance is a dot when shipping is now weeks, flying to England is a couple of days –– a microscopic dot in the case of telecommunicating information.

Ironically, the defeatist sees the closer world as frightening –– “where are those skirts to hide behind?” –– whereas the New Zealander sees it as an opportunity to exploit new markets for goods and services. Despite the image of New Zealanders as linguistically challenged, some of us supply overnight translation services for European businesses. They email the texts at the end of their day, New Zealanders translate them in their night and our day, ready for the next European business day. If distance is a problem, it is increasingly less so. The next step may be an airfreighting network, instead of relying on the cargoholds of planes carrying tourists to determine where our exports can go.

And sure, we are small. We always have been small and that did not hold us back in the past. That means we are still going to be a specialist economy. But smallness has its advantages both in governance and in adaptability. We should not try to ape big economies, and certainly avoid the theories that are based on being big.

Defeatism is closely related to isolationism, that the world is so frightening that we can’t succeed in it, and should hide in fortress New Zealand. The genuine internationalist knows the globalising world is a challenge, but New Zealanders have succeeded internationally, and will continue to succeed if we remain energetic about our opportunities and intelligent about our prospects. The biggest threat to New Zealand’s future is the defeatists and isolationists who influenced so much of our policy thinking over the past three decades.