Thursday, November 23, 2023

Oliver Hartwich: How Luxon can drag NZ out of mediocrity

Everyone has a story: where they come from, what they believe in, what they strive for.

Such self-mythologies can have powerful effects when they are based on positive values. We form our identities through them. We may use them to motivate ourselves. In difficult times, they can provide comfort.

Countries have mythologies about themselves too. These form the backbone of a country’s national story. And again, they are a powerful force.

But when self-mythology and reality are at odds, there is a problem. New Zealand is a good case study.

New Zealand has a distinctive self-mythology. As a small, remote, young island nation, it cannot claim an enormous influence on world affairs.

But New Zealanders like to think of their country as better than either its size or location might suggest.

There is the pioneering, ‘number 8 wire’ spirit of innovation and making do. There is a strong connection to the land, the sea and pristine natural environment. There are the self-perceptions of egalitarianism, giving everyone a ‘fair go’, and a lack of overt class distinctions.

In sum, New Zealand thinks of itself as a country “punching above its weight”, blessed with an idyllic environment and inhabited by friendly people.

In the past, this story had some truth to it. But it has never been the whole story, and it certainly is not anymore.

Rather than punching above its weight, New Zealand has fallen into widespread mediocrity. It faces significant environmental challenges. The ‘friendly’ people part remains largely true, although New Zealand has many social issues.

The new Government, comprising the New Zealand National Party, ACT and New Zealand First, comes at a time at which New Zealand’s economic mediocrity, infrastructure gaps, environmental issues, and persistent social problems all require urgent attention.

New Zealand’s economy has slipped down the rankings as decades of low productivity growth and poor innovation have stagnated incomes.

The International Institute for Management Development’s (IMD) World Competitiveness Center ranks New Zealand 31st out of 64 countries for overall competitiveness. This is ten places lower than in 2019.

New Zealand slipped in just four years in all the IMD’s subcategories. Economic performance fell from 36th to 50th, government efficiency from 8th to 21st, business efficiency from 22nd to 35th and infrastructure from 24th to 28th.

Apologists would say that the Covid pandemic played a role in these developments. But, as the term ‘pandemic’ suggests, it was a global phenomenon that affected every country. Yet New Zealand has plunged in these rankings and other countries have not.

The gulf between self-perception and reality makes New Zealand’s economic decline even more galling. New Zealanders like to think of themselves as free traders and innovators. However, they are only ranked 62nd in international trade, 53rd in international investment, and 53rd in productivity and efficiency.

Another obvious gap between New Zealand’s self-perception and reality is its water infrastructure and water quality. The stark contrast between a nation that claims to care for the environment and natural resources and the dire state of its water networks is astonishing.

New Zealand’s water crisis is rooted in decades of neglect and underfunding. The estimated cost of addressing this infrastructure deficit ranges between $150-210 billion over the next 30 years.

There is significant water loss through leaks. For instance, there are reports of the capital, Wellington, losing more than 40 percent of its water supply in this way. Nobody knows the true figure, but it is hard to walk around Wellington these days without seeing small streams of water running down the streets.

This loss is not just a waste of a precious resource, but a significant economic drain. With many of the country’s water pipes over a century old, fixing these leaks entails both technical and financial challenges.

Wellingtonians can now expect water restrictions over the summer - in a place that records 1,250 mm of rain per year (twice the amount of London – and with only a fraction of the population).

But perhaps the most significant chasm between Kiwi self-mythology and reality lies in the social sphere. Yes, New Zealanders are a friendly bunch, but they are no longer egalitarian.

As a nation, New Zealand is being pulled apart. One fault line runs between those who can still afford homes or have owned them for many years, and others for whom home ownership will always remain out of reach.

This is an entirely self-inflicted problem. Caused by restrictive planning laws that empower NIMBYism, made worse by lack of infrastructure funding, New Zealand has built too few homes for decades. This failure produced an entirely predictable housing shortage. Ours is one of the world’s most unaffordable housing market.

Even so, New Zealand’s failing education system is an even more pressing issue.

New Zealand once had a decent, even world-class, education system. It certainly does not today. In international rankings of student achievement, New Zealand has dropped dramatically.

Many parents – if they have enough money – move to suburbs in which they think the schools are betters. (They would not know because Government fails to produce good information about relative school performance.) Others take their kids out of public schools and send them to costly private schools.

But for families with low or average incomes, these choices are not possible. They have to stay in a school system that provides no more than a basic education – and often, not even that. This situation entrenches intergenerational inequality.

Housing and education are two areas in which failed policies have created and exacerbated social divisions. Another is health, in which the state now provides some basic cover, but anyone who can buys private insurance on top. In each of these cases, only people on higher incomes can purchase better service whereas those cannot afford that are stuck with poor baseline offerings.

All of this belies New Zealand’s self-image as a relatively class-less society.

The new Government must reform New Zealand to catch up with its self-mythology.

To close the gap between perception and reality, comprehensive reform is required. The economy needs deregulation to boost productivity, encourage investment, and stimulate innovation.

Environmental degradation must be tackled. Issues like water quality threaten the country’s pristine image. And glaring social problems, from unaffordable housing to inequality in education, require urgent attention.

None of this will be easy. Entrenched interests and outdated mindsets will resist change. But the potential rewards are immense.

With a bold reform agenda, the kiwi would grow wings. New Zealand can build an economy, society and environment that lives up to its lofty self-image.

Otherwise, New Zealand’s story about itself will be nothing more than an ancient myth.

Dr Oliver Hartwich is the Executive Director of The New Zealand Initiative think tank. This article was first published HERE.


Kevn said...

But isn't Welly getting a new/re-built monster event/civic center for 100's of millions of dollars?
Infrastructure isues? pfft... No vanity project there.

Anonymous said...

By the time they have removed all cars from Wellington they may as well switch the pipes of. No people will be there and those big project are a good bulldozer from earthquake safety.

Robert Arthur said...

And that is all without general adoption of te ao and tikanga. Much of our problem arises from excess population growth; by irresponsible fast multipying factions and immigration. The population of UK is not so very different from 100 years ago whereas ours has near tripled. The mania for home (actually section) ownership has been fuelled by loosely controlled inflation and the realisation that only property is certain. Yet still we persist in indexing everything to everything else, the sure path to more inflation. Woes began in the early 70s following an indexed general 20% wage order. Most of visble society was egalatarian. Incomes were very compressed. Maori lived mostly in the country where they could induge te ao and tikanga without dragging on the rest.There wre no Pacifica. No significant Islams or other very different cultures..

Ray S said...

You have made no mention of racial issues.
Why is that?