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    Jim Anderton
    — towards an era of partnership

    from The Jobs Letter No.120 / 17 March 2000

    anderton.gif - 29367 Bytes

    In this special feature, we present an essential summary of Jim Anderton's recent speeches on his programme for economic development and jobs.

    The objective of the Government's economic development programme is to provide increased opportunities for employment and rising incomes for all New Zealanders, no matter where they live.

    I cannot emphasise enough the urgency of the need to do better. Unemployment has remained far too high for far too long. There are more than two hundred thousand jobless in New Zealand. During the 1997 Superannuation referendum, the Treasury prepared economic forecasts which predicted that unemployment in New Zealand would remain at 6% of the workforce or more for the next fifty years.

    That is a social, economic and human catastrophe which we cannot allow to happen.

    If we can reduce the level of unemployment, then we will not only make a vast difference to the lives of tens of thousands of people. It will also mean that the government doesn't have to pay out two billion dollars a year in unemployment benefits...and we can spend that money on priorities such as health care and education.

  • New Zealanders' incomes have been dropping compared to the incomes of other developed countries. When the "hands-off" era began in 1984, New Zealand's per capita income stood at 95% of the OECD average. By 1992 it was down to 81%. The figure rose to 87% in 1995 - still 8% behind the position at the beginning of the `hands-off' era. It has slumped back ever since. In other words, after fifteen years of hands off, we are much further behind other countries than we were when we started.

  • We haven't paid our way in the world for twenty-seven consecutive years. Our current account deficit is now running at 8% of GDP. That is a very serious deficit on any measure. At the same time, our economy has built up a huge overseas debt. It now tops a hundred billion dollars.

    In other words, we owe more overseas than the entire economy produces in a year. We owe overseas the equivalent of about three and a half years worth of exports. Back when the free market policies began, in 1984, our overseas debt amounted to about a year and a half's worth of exports - and that was when the debt was so bad that it was one of the major reasons the Muldoon Government lost office.

  • Today there are about two hundred thousand jobless New Zealanders, just as there were two years ago. Yet it will come as a surprise to most people to learn that there are just about enough jobs today for everyone who was jobless then. And two years ago there were just about enough jobs then for everyone who was unemployed two years before that.

    In other words, our economy is clearly capable of generating the jobs that are needed. But the creation of those jobs has been maintained at a level that has produced on-going joblessness. The result has been wide-spread, avoidable misery and social dislocation.

    "the era of "hands-off" for central government is over. I make no apology for saying that a new era is beginning. It's an era of genuine partnership..."

    Over recent years a void was created as central government withdrew from the provision of many essential services. One of those was its role in assisting and providing for the economic development of New Zealand.

    In many parts of the country that role has been picked up by local authorities as well as through private sector and community initiatives. Economic development agencies have emerged and facilitated a wide range of programmes aimed at attracting new productive investment and fostering local initiatives. The resulting expertise at the local level in many cases far out-strips the abilities of central government, because it is an area that central government has not been actively involved in.

  • There are exciting programmes underway around the country. For example, in Dunedin, an economic development arm of the City Council is involved in attracting new investment, in the development of an industrial park, and in a partnership with the local university designed to promote industry clusters around innovative new businesses.

    In Southland, local authorities have undertaken a topoclimate study that has produced highly detailed maps revealing the best use for soil and land in the region. The resulting information makes a difference not only to local enterprise, the expertise developed could be applied in other areas of the country.

  • Economic development agencies play an active role in partnership with central and local government as well as business and community organisations. Many EDAs are capable of playing a much wider role, and are making a positive contribution in fields as diverse as migration, commercialisation of technology and R&D, skills training and venture capital.

    The missing ingredient in initiatives that have unfolded around New Zealand has been central government. There are some unique contributions that only central government can make. When I announced the establishment of the Ministry of Economic Development and Industry New Zealand, I said the era of "hands-off" for central government is over. I make no apology for saying that a new era is beginning. It's an era of genuine partnership.

    What New Zealand has lacked is a supportive Government and an economic development dimension to New Zealand's economic policy planning. We intend to provide that dimension in partnership with local authorities and the private sector. We intend to utilise existing structures, as well as opening new mechanisms to harness the creative potential and innovation of New Zealanders

  • There have been many requests to spell out exactly which industries will be supported, and what level of support there will be. That is to mistake the partnership approach we are taking.

    The answers to those questions will not be determined by me in my office in Wellington. The answers will come from partnership between communities, businesses, the scientific innovative sector and Industry New Zealand. The range of partnership contributions the government can make is limited only by the imagination of those involved and the needs of the economy.

  • There is no silver bullet. There is no blunt `one-size-fits-all' theory which relies on a straightjacket of purity. The form of co-operation will be tailored to the type of project and its circumstances. Local initiatives aimed at boosting the performance of industries on the local, regional, national and international scene are not only welcome, they are vital.

    No one has a monopoly on the good ideas required to enhance New Zealand's economic development. In principle, anyone should have access to the economic development process. Individuals, trade unions, community groups, private companies, Maori economic entities and local authorities can all play their part.

    The free market policies of the last century failed. They didn't produce growth fast enough or increase the incomes of New Zealanders as fast as incomes in other countries increased. The countries that have been powering ahead have been the majority of EU countries and East Asia members of the OECD.

    Successful economies like Ireland, Finland, Scotland and Taiwan have adopted pro-active economic development policies. They have discovered that advantages are created, not endowed. The governments of those countries worked in partnership with the private sector. They identified opportunities that relied on the innovation and skills of their populations and invested in those. They broadened and deepened the industrial base of their economies. And they invested in weak regions.

  • These countries have recognised that a country needs strong regional economies if we are to have a strong national economy.

    If we think of the New Zealand experience, local infrastructure in many parts of the country is under-utilised: schools, hospitals, banks, petrol stations and other services are closing. A cycle of decline sets in where people drift away from regional centres, which undermines the viability of remaining services - and the loss of those services drives even more people away. Meanwhile, in places such as Auckland, infrastructure is under stress. It's a continuing struggle to keep pace with the rapid demands of the population migrating to the urban centre.

    Knowledge and innovation have always been critical at least since the Industrial Revolution. Probably since the first cave dwellers harnessed fire and employed rudimentary tools. Now, though, innovation, intellectual capacity and technological advance are becoming relatively more valuable. Minerals, crops and commodities are relatively less valuable.

    Brains are in. Brawn is out.

    That represents a challenge for an economy like ours, which has been based very heavily on exploitation of our vast natural resources. We need to meet that challenge by transforming the economic base of New Zealand. We're going to invest in job-rich, high-tech, high-skill, high-value new industries.

    There is no shortage of good ideas in New Zealand. Mail is stacked up in my office from people who have suggestions for ideas that could contribute to this country's economic development.

    Now, of course some of these ideas will not be runners. But what if some of them are? Some of them are sure to include ideas that could contribute very significantly to New Zealand's industrial and economic development. We only need a few successes. Companies like Tait Electronics, CWF Hamilton, and Snowy Peak.

  • Higher incomes are crucially dependent on innovation. Innovation is not just entrepreneurs thinking of new ways to make widgets. It is a systematic approach to technical progress, involving professionally conducted research and development in all sectors - services and infrastructure as well as manufacturing and agriculture.

  • The Government is working on its contribution to this area. The tax treatment of R&D will be studied as part of the Government's review of the entire tax system. More immediately, Industry New Zealand will be able to enter R&D joint ventures, with an emphasis on new technology industries providing sustainable, skilled, well-paid jobs and high added-value exports.

    I am supportive of much greater public sector funding for science and R&D through Crown Research Institutes and Universities. The Foundation for Research, Science and Technology has cautioned the Government that a large number of worthwhile projects are being refused funding each year.

  • Universities receive only 18% of public sector funding for R&D, compared with an OECD average of 27%, even though they are internationally recognised as hotbeds of innovation and new business formation. By under-valuing university-based research, New Zealand is likely to be missing out on a valuable source of commercial applications and new business formation on the knowledge frontier.

    "We're going to invest in job-rich, high-tech, high-skill, high-value new industries.

    There is no shortage of good ideas in New Zealand...."

  • We need to combine well-judged public investment in education, infrastructure and science and technology with creative private sector investment focused not just on adopting technologies already available but on continuously creating new products, processes and designs.

    There needs to be a high and relatively steady rate of new investment. Investment raises incomes by directly increasing production and employment. It also embodies new technology. This introduces new products, raises outputs per person and improves the competitive position of firms and the country.

  • Better jobs and higher incomes are crucially linked to the development of skills. Innovation and investment cannot occur without a well-educated population, equipped with a high level of industry-specific training.

    The overall number of science graduates New Zealand produces each year compares well with other OECD countries. But we have a very low number of scientists working in research and development compared to other developed countries: Two thirds as many as Australia, the US or Canada and only one third of the number in Japan.

    We produce only half the number of engineers as the UK or Canada and a quarter of the number in Germany, France, Finland and Japan. And although the number of engineering graduates has been increasing, much of the increase is made up of overseas students who leave New Zealand after qualifying. More alarmingly, the number of New Zealand students who leave New Zealand after graduating is increasing steadily.

    If we are serious about a vision for our collective well-being, then the well-being and quality of life of our children and young people is a good place to begin. There is no higher responsibility than to ensure that every young person has the opportunity to realise their potential. That they are secure, well-fed, free from avoidable illness, and that they have hope.

  • Look at the way young people are paid. They pay market rents for their homes, but they are paid youth rates at work. There are no lower bank charges or hire purchase charges for young people. Cars and petrol to run them are not discounted for young people. But the value of their work is.

    While their work is devalued, so is their opportunity to fulfil their potential through education. Young people entering higher education are punished with a lifetime burden of debt. Unless we can reduce the cost of education, the student debt will in about fifteen years - exceed the entire national debt. What message does that send to young people about the place they have in the community we have created?

    The environment we have created permits a sustained, high level of youth unemployment to continue for year after year. Yet we know how destructive of confidence and self-worth unemployment is.

  • For example, when we are warned that young people are leaving New Zealand by the thousands in search of the bright lights and cultural stimulation of other countries: we have to be prepared to foster and support the growth of our own cultural identity. Uniquely New Zealand culture, physical environment and values are only to be found here. It's no wonder New Zealanders cut their ties to home when our culture is swamped by overseas voices and styles.

  • In 1969, Norman Kirk wrote a book called Towards Nationhood, where he said: "Let us have a sense of pride in being New Zealanders. Let us recognise the value of the unique way of life we have built here - a humane, non-violent society, free from the social and economic injustices that plague so many societies."

    It's in co-operating in partnership to achieve that vision, that central and local government can make the greatest contribution to the quality of life of our young people.

    Sources Hon Jim Anderton, Deputy Prime Minister, speech to Economic Development Agency of New Zealand "New partners, new directions" 10 March 20000 Centra Hotel Auckland Airport, Manukau City; keynote address, International Cities of Tomorrow Forum "The new partnership between central and local government" 9 March 2000, Heritage Hotel, Christchurch

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