Category Archives: Growth & Innovation

Rethinking Economic Policy: The Washington Consensus Turns to Custard

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Listener 3 July, 1999.

Keywords: Growth & Innovation;

Half a decade ago, capitalism appeared to have triumphed over communism (if one is allowed the crudity of these descriptors). When the Berlin Wall fell in 1989, the Eastern European nations of the COMECON pact left the Soviet fold, looking to the West as they transformed their economies and ways of political life. The rest of the Russian Empire broke up in 1993, and they went west too. No longer is a “spectre … haunting Europe – the spectre of communism” (as Karl Marx wrote in 1848).

View from Abroad: What Do We Know About Economic Growth?

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Listener 22 May, 1999

Keywords: Growth & Innovation;

Even a good scientific theory experiences anomalies which it cannot explain. Resolving those aberrations eventually leads to a better theory. However ideologists prefer certainty to complexity and ignore inconsistencies. An article in the April 10 London Economist – the world’s top economics weekly and prominent upholder of “more market” – nicely illustrates the phenomenon.

Hands Together

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How to Get Manufacturing and the Rest of the Tradeable Sector to Grow
Listener 27 February, 1999

Keywords: Growth & Innovation;

“Deindustrialization” describes the process whereby the manufacturing sector grows more slowly than the rest of the economy. Almost all rich OECD countries have experienced deindustrialization in the last three decades. Including New Zealand, whose manufacturing sector’s contribution to production decreased from 24 percent of GDP in 1974 to 18 percent in 1993. (The employment share fell from 27 percent of the labour force in the 1960s to 17 percent in 1993. The sharper employment fall, here and in rest of the OECD, reflects the faster rise in manufacturing productivity.)

Some Macroeconomics Of the Employment Contracts Act

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Paper to the Labour, Employment, and Work Conference 7, at Victoria University of Wellington, November 28-29 1996, published in Labour, Employment and Work in New Zealand 1996, pp.148-156.

Keywords: Growth & Innovation; Labour Studies;

Abstract

Earlier this year Wolfgang Kasper produced a book “Free to Work: The Liberalisation of New Zealand’s Labour Markets” (Centre for Independent Studies). By reviewing this book, this paper is able to shed some understanding of the effectiveness or otherwise of the Employment Contracts Act. On the basis of the emperical evidence it is very difficult to reach, in a systematic way, Kasper’s conclusions about the beneficial effects of the ECA. In particular, the poor productivity growth rules out the likelihood that the ECA was a major contributor to the macroeconomic expansion of the mid 1990s. The Act would, however, seem to have contributed to the poor real wage growth, and the failure of many workers to obrtain a share in the increase in propserity of the 1990s.

The Deindustrialization Of New Zealand

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Labour Employment and Work in New Zealand: 1998 Proceedings of a conference, 26-27 November, 1998, pp.38-46.

Keywords: Growth & Innovation; Labour Studies;

Abstract

Deindustrialisation is the phenomenon of the secondary sector growing more slowly than the rest of the economy, whether measured by share of GDP or of employment. Almost all rich OECD countries have been expereincing it. However New Zealand has been deindustrialising faster than the OECD average (even if the energy based industrie developed in the 1980s are included). The paper describes rthe phenomenon and discusses why it happened.1

Productivity Puzzles

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Why is Output Per Worker Growing So Slowly?

Listener:12 September, 1998.

Keywords: Growth & Innovation; Labour Studies;

A scientist puzzles most when a prediction fails. The generally poor performance of the New Zealand economy since 1985 (inflation excepted), was expected given the overvalued exchange rate as a part of the disinflation strategy. However the poor productivity performance was a surprise. By a careful selection of period or industry, or relying on anecdotes, it is possible to claim the growth of output per worker has been high. But a comprehensive review shows that productivity growth appears to have slowed down since the reforms, despite the pro-reformers promises that it would accelerate. Even those who might have expected the reforms to fail must be perplexed.

In Stormy Seas: Can We Cope when a Wave Broadsides Our Economy?

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Listener 4 July, 1998.

Keywords: Growth & Innovation; Macroeconomics & Money;

“Small open economies are like rowing boats on an open sea. One cannot predict when they might capsize; bad steering increases the chances of disaster and a leaky boat makes it inevitable. But their chances of being broadsided by a wave are significant, no matter how well they are steered and no matter how seaworthy they are.” Joe Stiglitz, World Bank chief economist.

Notes for a Presentation on Maori Exporting

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Presentation to a TPK seminar. June 1998.

Keywords: Business & Finance; Globalisation & Trade; Growth & Innovation; Maori;

The Maori economy has made exceptional progress in recent years. Preliminary figures from the 1996 Population Census show that the numbers of Maori employed have grown considerably faster than the Maori adult population, and that additional employment has tended to be in the better quality jobs: more at the managerial level, more involving greater skills. Job growth has also been strong in those industries to which the Maori has given priority: agriculture, forestry, fishing, and tourism. (See the attached table.) In summary the Maori Development Strategy of upgrading Maori skills, increasing Maori work experience, and emphasising Maori business in key growth industries has been extremely successful.

Open and Closed: Is the US Economy a Good Model for New Zealand?

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Listener 25 April, 1998.

Keywords: Globalisation & Trade; Growth & Innovation; History of Ideas, Methodology & Philosophy;

Numerous readers have asked me to reply to Debasis Bandyopadnyay’s review of my In Stormy Seas: the Post-War New Zealand Economy (7 March 1998). I do not think that quite appropriate, especially since dealing with the review’s errors and misunderstandings would be tedious to the reader. But he raised one issue so central to the economic debate, that it is useful to address it here. The review argued I was unaware of some of the current fashionable theories of the supply-side of economic growth. It did not say that I gave a quite different account of the growth process, based on the external demand side.

Microeconomic Reform: the New Zealand Experience

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Microeconomic Reform and Productivity Growth: Workshop Proceedings, proceedings of a conference “Microeconomic Reform and Productivity Growth”: 26-27 February 1998. (Productivity Commission and ANU, 1998) p.155-181.

Keywords: Growth & Innovation; Macroeconomics & Money; Political Economy & History;

Prologue

This being the first occasion which I have visited the Australian National University since the death of Professor Fred Gruen, may I briefly pay him a tribute. When we first met, Fred was suspicious of my approach, thinking I was anti-market. Over some long discussions he came to recognize I have a deep Marshallian respect for the market, even though we might not always agree on the details of policy. I would have appreciated a continuation of our intermittent dialogue with his response to this paper. It would have been thoughtful and shrewd. I would have responded in my revision, each of us shifting our position in the light of analysis and facts. I am sorry he is not here, except in spirit.

Introduction

Economic reform in New Zealand has been unusually comprehensive and thorough. For the scientist it provides a test of the theory which underpinned the reforms. The overt theory was essentially that which is known in Australia as “economic rationalism”, the consistent application of modern neo-classical market theory. At the practical microeconomic policy level this has been the withdrawal of government interventions which preferred one firm, industry, or sector (relative to others), in favour of market regulation of economic activity. Thus import licences have been abandoned, tariff levels steadily reduced, subsidies and tax incentives withdrawn, the tax regime made more uniform with exemptions barriers to entry eradicated, corporatization and privatisation of government trading activities, and greater reliance on competition law.1 There remain some (now much lower) tariffs, a few special taxes, occasional interventions, and so on. Nevertheless the extent of the microeconomic reforms is such to that they become a test of the theory which underpins them.

The Year Of the Paper Tiger: Asia Is in Economic As Well As Financial Crisis

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Listener 14 February, 1998.

Keywords: Growth & Innovation; Macroeconomics & Money;

This column gets written about a month before it is first read. So there is a discipline to avoid instant comment which will prove facile a few weeks later. But the lead time also limits commenting on a rapidly unfolding scenario, as is occurring in East Asia. I have not been one to assume that the current bailout of this or that country by this or that institution will be the last, nor that the bailout will resolve quickly some underlying problem.

Chapter 1: the Economic Miracle: 1946-1966

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A chapter of Globalisation and Welfare State

Keywords: Growth & Innovation; Labour Studies;

For the first two decades after the Second World War the performance of the New Zealand economy seemed miraculous. Growth of real GDP exceeded 4 percent a year, consumer inflation was less that the average for other rich countries, there were strains in the balance of payments but no major crisis, (1) and unemployment was hardly reported at all (2)

Capital and Technological Change: Some International Comparisons

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From In Stormy Seas, p. 200-208.

Keywords: Growth & Innovation;

Capital(1)

Here we use the term (fixed) capital to mean physical items such as land improvements, buildings, plant and equipment. It excludes land, and it excludes inventories (physical stocks). Sometimes physical capital is thought of as `stored labour’ to distinguish it from the ongoing labour which accompanies its use. The term `capital’ is also used for financial assets. In principle these are matched by physical capital after the netting out of liabilities. Financial capital is not a concern of this chapter.

In Stormy Seas: The Post-war New Zealand Economy

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Otago University Press, 1997. 343pp.

A detailed look at the New Zealand economy in the twentieth century, and in particular its course since World War II. This is not just a history but a narrative about a problem’, defining, and ‘hopefully contributing to an understanding that will aid to its solutions’.

In Stormy Seas asks pertinent questions about some of our favourite national myths. The intial chapters examine the ongoing debate about the New Zealand economy, looking at such factors as external impact and internal response, the business cycle and growth, and problems of financing investment. Structural transformation, the farm sector, industry and energy, efficiency and flexibility, and ‘the market’ are all explored before the book closes with a discussion of the aftermath of Rogernomics and the decade of greed. (Publisher’s blurb)

SCIENCE POLICY

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Chapter 14 of The Commercialisation of New Zealand   Keywords: Growth & Innovation;   Science interfaces with broad economic policy because it uses public resources and impacts on industrial policy. But even though the science community did not always help itself, Treasury’s approach was fundamentally anti-science. (Chapter 6) There is an instructive article by a…
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The End Of the Golden Wether

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The economic earthquake, thirty years ago this week, continues to shape New Zealand.

Listener: 14 December, 1996.

Keywords: Growth & Innovation; Macroeconomics & Money;

On 14 December 1966 the Wool Commission found itself buying in bales of wool offered for auction. This arrangement had been devised in the early 1950s to provide a floor price for wool, evening out the troughs in the fluctuations for the commodity whose price was set mainly on the auction floor. Each year a floor price was set. When offers were below this level the Commission would bid – on occasions even make small purchases – to push up the price to above the set floor level. But typically their involvement was minuscule.

Productivity Puzzle

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Everyone Assumed That Productivity Growth Would Increase with the Employments Contracts Act. But Check the Data: No Significant Change.

Listener: 27 July, 1996.

Keywords: Growth & Innovation; Labour Studies;

The non-ideological economist would have made three confident predictions about the effects of the Employment Contracts Act (ECA) introduced in May 1991. First, it would weaken the unions. True. Second, it would depress wages of low pay workers (because of the mass of unemployed with similar skills). True. Third, it would generate productivity increases (at least in the short term). False.

Poorer, but Wiser

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Listener: 17 December, 1994.

Keywords: Growth & Innovation;


This is an update on the original graph.

Many people think that our post war record has been one of continuous economic decline relative to other rich countries of the OECD. The accompanying graph tells a different story. The black lines show the volume GDP (production in constant prices) growth paths for the OECD as a whole. The top line is indexed at 1000 in 1955, the middle at 790 in 1955, and the bottom at 700. Over these three lines is superimposed the red volume GDP growth path for New Zealand.

Crises in the Cris: the Science Reforms Have Been Failed

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Listener 22 October 1994.

Keywords Governance, Growth & Innovation

We were told that the separation of scientific research funding and providing would result in better research. (The funder is the Foundation of Research, Science and Technology – FRST, pronounced “forst”; the main providers are with corporatized profit oriented Crown Research Institutes – CRIs, pronounced “crises”).