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Why isn’t New Zealand richer and more productive?

marginalrevolution.com

11–20 of 169 posts

Re: Why isn’t New Zealand richer and more productive?

#11

Because, as the article says, it's isolated and has a small population. Tasmania, in Australia, is not as wealthy as the mainland -- it's small and isolated. There are dozens of similar examples. Meanwhile, Singapore is small, but sits athwart what has been, for hundreds of years, one of the busiest trading lanes on the planet.

> Meanwhile, Singapore is small, but sits athwart what has been, for hundreds of years, one of the busiest trading lanes on the planet.

You might want to revise that sentence. Singapore was nothing 100 years ago.

Wikipedia: Singapore ceased to be part of the British Empire when it merged with Malaysia in 1963. Singapore lost its hinterland and was no longer the administrative or economic capital of the Malay Peninsula. The processing in Singapore of raw materials extracted in the Peninsula was drastically reduced due to the absence of a common market between Singapore and the Peninsular states.[5]

Since Singapore's full independence in 1965, it has had to compete with other ports in the region to attract shipping and trade at its port. It has done so by developing an export-oriented economy based on value-added manufacturing. It obtains raw or partially manufactured products from regional and global markets and exports value-added products back to these markets through market access agreements such as World Trade Organization directives and free trade agreements.[5]

By the 1980s, maritime trading activity had ceased in the vicinity of the Singapore River except in the form of passenger transport, as other terminals and harbours took over this role. Keppel Harbour is now home to three container terminals. Other terminals were built in Jurong and Pasir Panjang as well as in Sembawang in the north. Today, the port operations in Singapore are handled by two players: PSA International (formerly the Port of Singapore Authority) and Jurong Port, which collectively operate six container terminals and three general-purpose terminals around Singapore.

In the 1990s the Port became more well-known and overtook Yokohama, and eventually became the busiest port in terms of shipping tonnage

Re: Why isn’t New Zealand richer and more productive?

#12
post #7

Adam Smith noted cities were founded on "navigable rivers", because that's how trade works. Still true today for cargo ships. But today the internet is a river everywhere, for information goods. New Zealand is the most beautiful place in the world, in my travels (circumvented the globe, but not been everywhere). Though I'm biased towards mountains. So, theoretically, beauty+internet makes it a great place for softwar…

The Internet river is mighty narrow in New Zealand though :-)

Re: Why isn’t New Zealand richer and more productive?

#13
It's refreshing to click on a headline in the form of a question and have the article explain why it's the right question to be asking, and not just following Betteridge's Law. I lived in New Zealand for about 5 or 6 years, and I saw huge numbers of people just living on welfare because they could - that's probably got a lot to do with low GDP. Normally, I would see that as a bad thing, but I think New Zealand's relative lack of corruption and the friendly disposition of almost everyone illustrates there is more to life than productivity, and the results of the atmosphere and culture speak for themselves. As fiscally conservative as I may be, I had to admire that. Additionally, I hate frivolous lawsuits, and having the government compensate you so readily for injuries really seemed to reduce the way people would resort to "just sue them". Perhaps there's moral hazard and I'm not smart enough to know how one would quantify that, but again - I had to admire that.

Re: Why isn’t New Zealand richer and more productive?

#14
Given its comparative geographical isolation, it makes sense for NZ to invest in it's digital economy.

NZ has its own competitive advantages:

(1) An educated population; (2) An English-speaking population (yes, this is an advantage. Regardless of the rise of the East, English is still the international language of business.)

But, clearly, it has certain disadvantages. Geographical isolation is one of those. It is difficult to close your trade deficit efficiently if your manufacturers are pummelled by shipping costs (and expensive labour costs). It's products are almost always going to be more expensive than it's competitors.

So, what should NZ do?

An obvious solution would be to invest in intangible exports (that's the technical terms for non-physical exports); exports that will bring money and jobs into NZ without having to saddle the costs of shipping.

This is what has happened in most of the west. But in most of Europe, we have invested in financial intangibles rather than digital intangibles. That's gone okay (hmm, okay might be a stretch). But it is unlikely to be the right move for NZ because it hasn't got an established financial center nor access to the Euro markets. (Actually with the rise of the China, which is geographically close to NZ, it might have a go at snapping up some of the renmimbi trade).

What does a country do with a highly educated workforce that needs to export intangibles? Software is the obvious solution.

Invest in Computer Science education at school, write an attractive set of tax laws for digital start-ups, and invest in high-tech infrastructure (i.e, be the first country to roll-out 5G).

In fact, the more I think about the it, the more this makes sense. As NZ is a comparatively small country with few concentrated geographical centres, it could roll-out super-fast broadband, 5G, etc, on the cheap.

Anyways, just a few thoughts.

Re: Why isn’t New Zealand richer and more productive?

#15
post #11

Because, as the article says, it's isolated and has a small population. Tasmania, in Australia, is not as wealthy as the mainland -- it's small and isolated. There are dozens of similar examples. Meanwhile, Singapore is small, but sits athwart what has been, for hundreds of years, one of the busiest trading lanes on the planet.

> Meanwhile, Singapore is small, but sits athwart what has been, for hundreds of years, one of the busiest trading lanes on the planet. You might want to revise that sentence. Singapore was nothing 100 years ago. Wikipedia: Singapore ceased to be part of the British Empire when it merged with Malaysia in 1963. Singapore lost its hinterland and was no longer the administrative or economic capital of the Malay Peninsul…

Singapore and its development is a unique case, so I think it's hard to compare it to other countries. It's still a very interesting story: http://www.amazon.com/gp/aw/d/0060197765

Re: Why isn’t New Zealand richer and more productive?

#17
post #11

Because, as the article says, it's isolated and has a small population. Tasmania, in Australia, is not as wealthy as the mainland -- it's small and isolated. There are dozens of similar examples. Meanwhile, Singapore is small, but sits athwart what has been, for hundreds of years, one of the busiest trading lanes on the planet.

> Meanwhile, Singapore is small, but sits athwart what has been, for hundreds of years, one of the busiest trading lanes on the planet. You might want to revise that sentence. Singapore was nothing 100 years ago. Wikipedia: Singapore ceased to be part of the British Empire when it merged with Malaysia in 1963. Singapore lost its hinterland and was no longer the administrative or economic capital of the Malay Peninsul…

Perhaps no revision is necessary.

Singapore may have been nothing 100 years ago, but trade through the region has been busy for much longer. Hence when Singapore decided to develop, it looked to the preexisting trade patterns, and developed accordingly.

Re: Why isn’t New Zealand richer and more productive?

#18
post #5

The original PDF is here: http://www.productivity.govt.nz/sites/default/files/internat... Figure 3 in Section 1 was really interesting, but maybe I haven't had enough coffee this morning: http://imgur.com/gvRugtl New Zealand is in the lower-right quadrant, which I'm interpreting to mean that it is predicted to be 20+% above the OECD average, but it is observed to be at 20% below , i.e. -40% below expectations So the…

The graph is claiming that countries should appear on the line - above the line are doing better than average; below the line are doing worse than average.

Vertical distance from the line is what you're looking for, so NZL is a crazy distance below. NOR, GRC and IRL are the furthest above the line.

However, another way to view this graph is to say that structural policies have no predictive power.

If you take out the outliers: the countries away from the central blob (e.g. Greece, Portugal and USA: all countries with exceptional circumstances), then the correlation is gone or perhaps even negative - meaning this is a poor model and a pointless exercise.

Re: Why isn’t New Zealand richer and more productive?

#19
Early-rising New Zealander here (it's 5am folks!).

Bullet points for starters:

1. We are genuinely relaxed people, life is good, weather not too hot or too cold, food easy to get or grow, housing not horribly expensive, healthcare obtainable for all, education as close to free as we can make it and an overall low crime and corruption rate. So the majority of us go to sleep at night, overall, not worried about losing our livelihood one day to the next or not having enough to eat. Similar in this respect to the Northern Europeans.

2. Tall poppy syndrome. We don't like people standing out from the crowd in terms of personality, flamboyance, income - to fit in, you maintain a level of 'bloke/girl next door'. Even if you have tons of money or you are flamboyantly dressy. If not, cue media outcry and attacks, so you move overseas where you can disappear among the masses.

3. Geography! You have no idea how expensive it can be to live here. We work hard to export all our fine goods to you and work harder to import the things we love.

4. The knowledge economy We are messing up here. Internet is too expensive, kids are not getting properly schooled in computing skills and we don't place a high enough value on STEM. If the government really really focused on STEM the next 10 years our next gen kids could have incredible lives, where distance is no barrier thanks to internet access and quality of life is incredible (those mountains, sheep and rivers/lakes are totally as amazing as you see in the photos).

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