Clydesdale on growing the economy

August 23rd, 2011 at 12:00 pm by David Farrar

Dr says:

We cannot rely on Auckland to drive the New Zealand according to Dr Clydesdale who today releases a discussion paper ‘A middle path for the New Zealand ’. 

 A key feature of recent economic debate has been the idea that Auckland will be the country’s economic driver.  The argument states that there are economic advantages to having many firms located close together.  However, Auckland’s industries have low rates of innovation and exports: key drivers of .  The city lacks the capabilities to deliver desired growth rates.

 Auckland’s location does present many economic advantages, but to expect it to drive growth is going too far.  Recent policy was inspired by recent literature from economic geography, diversity and immigration.  Dr Clydesdale states it is time to end the myths and alchemy that has influenced the New Zealand economy for so long.  It is time to get back to basics. …

Definite food for thought. The full paper is embedded below.

Conference Fashionable Policy With Super Font

Tags: , ,

30 Responses to “Clydesdale on growing the economy”

  1. berend (1,700 comments) says:

    Well, we can rely on the government though! After all, if government spends money, GDP goes up (yes, that’s why it’s a stupid figure). And John Key believes in the multiplier effect of government spending, spends more than Labour, and borrows more as well, so we don’t need Auckland.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  2. Viking2 (11,372 comments) says:

    Haven’t had time to read this but anyone who beleived that auckland drives NZ economy is stark raving bonkers.
    Head Offices may be there but companies like banks are really only service organisations to the rest of us. Even Fonterra’s Head Office is only a service outfit. The real money is made on the paddock.
    24%of NZ’s income comes from those paddocks and a whole lot morefrom the forests around them and the orchards and vineyards that are intertwined amoung them. Tourisnm of course is hardly an Auckland thing. A scruffy tower and bridge is rtheir claim to fame.
    Auckland is a drain on the rest of us. always has been, always will be.
    Is this really rocket science???

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  3. ben (2,375 comments) says:

    Spelling mistake in the abstract.

    Politically soothing word in the title: “middle”.

    If you have so little to say that you have room to define “path dependency” in your abstract then you probably have nothing.

    And the paper’s by a guy from Lincoln.

    I doubt very much he has anything of substance to say on the question of why NZ grows so slowly. Pass.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  4. Scott Chris (6,043 comments) says:

    DPF might want to edit the extract above. The first three paragraphs are identical to the next three.

    With regard to the content: One would assume that the market will dictate where growth takes place.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  5. BlairM (2,314 comments) says:

    A Middling Path for New Zzzzzzzealand huh.

    I thought we’d been on the middling path since the mid-nineties? How’s that working out for us?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  6. virtualmark (1,510 comments) says:

    Auckland’s commercial sector is strongly composed of (i) head offices, (ii) service companies and … whats not often recognized … (iii) the New Zealand office of multinationals who’re selling their products in New Zealand. Whether that’s Apple New Zealand, BMW New Zealand, Sony New Zealand or whatever … the New Zealand subsidiary tends to be based in Auckland.

    But those New Zealand subsidiaries don’t create a lot of value for New Zealand. Lots of sales and marketing jobs. A bit of warehousing. But little or no design, engineering, manufacturing or production of any sort.

    So yes, Auckland has a lot of workers. But few of them are actually making the national cake any bigger.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  7. Lance (2,629 comments) says:

    Viking 2
    The voice of ignorance

    Next it will be everyone in Auckland spends all day sitting around Parnell drinking Latte’s.

    Did you even read the text?
    The bit where it argues “The argument states that there are economic advantages to having many firms located close together. However, Auckland’s industries have low rates of innovation and exports: key drivers of economic growth. The city lacks the capabilities to deliver desired growth rates.”

    This is different to ‘Auckland is a drain on us all’. But then not everyone can tell shit from clay

    The fact that the company I own is in one of many industrial clusters in Auckland quietly exporting away is lost on many does not justify such drivel as usually comes from those clinging to their smug self justification based on deriding an integral part of New Zealand’s economy.
    Next time you want to talk out your arse try a few less done to death cliche’s

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  8. Lance (2,629 comments) says:

    The 20 odd manufacturing sites in our cluster/area has very very few ‘service’ industries in it.
    It’s a 1/3 of the population here guys! Yes there are head offices, banks, but also a hell of a lot else.

    Shit some of our suburbs have damn near the population of the South Island in them. Expand your mind

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  9. hj (6,879 comments) says:

    10/28
    Diversity and Immigration
    [ ]
    “While government departments invite proponents of immigration and cultural diversity to NZ, no opponent has ever received the same invitation. At the same time, many government departments openly advertise that they value ethnic diversity. It has become a moral position, and the holder of such morality can never be accused of being racist or xenophobic, but this moral position is inhibiting balanced debate and recognition of the implications of government statistics.There is a common perception that migrants are more likely to start a business than locals. In the old days, migrants could enter a new country with their skills from home, and introduce new products and services, such as Italian restaurants or Dalmatian vineyards. However, with large scale migration, the supply of such businesses soars. When a migrant starts a Thai restaurant in NZ, the biggest losers are the existing Thai restaurants who must face increased competition. Anecdotal evidence suggests we are now at a stage where crowding-out is occurring.”
    etc

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  10. mikenmild (11,247 comments) says:

    Is this the same guy that wrote about the (allegedly) bad effects of Pasifeka immigration a couple of years ago?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  11. seanmaitland (498 comments) says:

    @Viking2 – according to wikipedia, only 4.5% of our GDP is from agriculture – 70% is from the services industry.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  12. ben (2,375 comments) says:

    Dr Clydesdale writes:

    Dr Clydesdale states it is time to end the myths and alchemy that has influenced the New Zealand economy for so long. It is time to get back to basics.

    This is strikingly unacademic prose. It is political. Back to basics in fact was a political slogan for a British election campaign, I think. It is a term that has no meaning in economics, so I wonder what Dr Clydesdale is doing using the term. Preparing a run for office, perhaps?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  13. Evadne (88 comments) says:

    Viking – Your comment “Auckland is a drain on the rest of us. always has been, always will be” is one I’ve heard often and never fails to astound me. How can intelligent, rational people actually profess such nonsense? It is patently untrue, and could be refuted at great length. I’ll just mention two statistics to give you a little pause next time you are so scathing. 2005 statistics (because these are the ones I found first on google) show that the Auckland region provided 35% of all government revenue (GST, individual tax, company tax) and accounted for just 31% of all government expenditure. Doesn’t seem like a drain to me. Auckland also educates 40% of all university students. Is that also a drain on society?

    Some Aucklanders are arrogant, I’ll admit, but most see themselves as New Zealanders first & foremost, and are quite bemused by the amount of derision, hate and prejudice directed at them. Few would claim that Auckland drives the economy. All would argue it forms an (ie. one of many) important part of that economy.

    (And I’m not a rabid JAFA. I’ve just seen enough of the world to appreciate how many people, doing different things, contribute to a bigger picture. If you despise or discount someone’s contribution before you understand it, you really are digging yourself a hole. Like an untrained builder chopping down a wall they think is irrelevant and obstructive, only to find it was one of the pillars holding the place up.)

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  14. berend (1,700 comments) says:

    Let me make one substantive comment:

    Contrary to popular mythologies that “the earth is flat” or that ‘geography is dead,” some public and private sector leaders have grasped the modern implications of the ancient truth: location matters. Being close to one’s peers makes a huge difference. Forward-looking cities are nurturing entrepreneurs with funding, mentors and facilities so that they can flourish even in the teeth of a bleak economy.

    And may I conclude with that I hope no planners will take account? The government can’t pick winners, because nobody can predict the future. So please, can we stop trying to make anything in NZ the driver of the economy?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  15. Bob R (1,362 comments) says:

    ***mikenmild (2,063) Says:

    August 23rd, 2011 at 12:53 pm
    Is this the same guy that wrote about the (allegedly) bad effects of Pasifeka immigration a couple of years ago?***

    I believe so. Also, nothing alleged about it if you are considering educational attainment, welfare dependency rates etc.

    There is ample evidence that high skill immigration is a benefit, but low skill from populations with year round tropical agriculture and female farming systems, can disproportionately add to your underclass (see Caribbean immigration to the UK, North African to France etc). UC Davis Economist Greg Clark has some interesting work on this and how in those societies the men can do less work and there is selection for ‘big man traits’.

    “Similarly Sillitoe reports of Papua New Guinea tribes that though they vary enormously
    culturally, they are all “big men” societies where “Big men achieve their positions because they excel
    in the things that matter in life, they are good talkers, they are courageous, they are skillful in
    exchanges of wealth.” (Sillitoe, 1978, 253). Success in these societies – status, pigs and wives –
    comes not from skill in production or innovation, but from success in war, social intercourse, and
    social negotiations.”

    http://www.econ.ucdavis.edu/faculty/gclark/Farewell%20to%20Alms/EREH%20response%20-%20revised.pdf

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  16. Lance (2,629 comments) says:

    @berend

    I agree

    Indeed govt assistance can be an unmitigated disaster because it attracts bureaucrats who have no fucking idea what they are doing yet insist on certain best practice.
    Solar hot water is all but dead in NZ as a result. A case study on how not to do it and the industry would have been far better off without the endless meddling for such a pathetic subsidy.
    The bit I like is having to remove the advanced efficiency algorithms because the govt computer model is too stupid to cope with it. Punished for innovation, a fine model.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  17. swan (659 comments) says:

    Viking2 – is it the cows themselves that are our galtian masters then? Or the farmers? You are really quite naive.

    Fonterra is an industrial company made possible by first and foremost chemical and process engineers, and food scientists, but also civil engineers, lawyers, bankers etc. More indirectly electricity generators and distributors, road builders, port operators. Who are where are these people?

    And anyway forget about fonterra the NZ economy is far bigger than food processing, or agriculture for that matter.

    I am not going to argue Auckland is the best hope for NZ’s economy, but the benefits of agglomeration are pretty obvious to those who work in highly skilled industries where the transfer of complex knowledge and information is important.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  18. jamest (2 comments) says:

    I thought a lot of fonterra’s product went out through tauranga, not auckland. In that case the government should be supporting Tauranga. Isnt Tauranga our biggest exporting port and Auckland our biggest importing port? Tauranga doesnt have much in the way of agglomerations but it’s doing a good job.

    I think the problem is there are not enough Fonterra’s in Auckland. I dont think retail, accomodation and finance are going to drive our economy.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  19. hj (6,879 comments) says:

    mikenmild (2,072) Says:
    August 23rd, 2011 at 12:53 pm

    Is this the same guy that wrote about the (allegedly) bad effects of Pasifeka immigration a couple of years ago?
    ….
    That’s right. Economists like him are unpopular with the left (yourself) and the right because of the benefits migration brings to the real estate industry.

    “Immigration and tax breaks for investment in residential property are being cited as the underlying causes of steep increases in the cost of housing over the past decade.

    New Zealand now boasts one of the highest rates of home unaffordability in the world as a result of prices rising far faster than incomes, and the government’s Savings Working Group blames that squarely on the policies of successive governments.

    Although “the favourable tax treatment of property investment” accounted for about 50% of house price increases between 2001 and 2007, the working group said, there was also strong evidence that rapid swings in immigration brought about price-rise “shocks”.

    There was a sharp spike in immigration in 2001, 2002 and 2003 and, said working group committee member Dr Andrew Coleman, it appeared that property prices did not fall anywhere near as greatly when immigration fell again.

    The report added that there was little evidence that immigration boosted local incomes. In fact, the need to build roads and schools meant that net migration contributed to the national deficit.

    “Migration is another issue that the government should investigate further,” the working group said. “There are indications that high immigration rates have pushed up government spending, house prices and business borrowing, and prevented necessary adjustments to the economy.”

    http://www.stuff.co.nz/business/4622459/Government-policies-blamed-for-house-prices

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  20. Viking2 (11,372 comments) says:

    swan (62) Says:
    August 23rd, 2011 at 2:23 pm

    Viking2 – is it the cows themselves that are our galtian masters then? Or the farmers? You are really quite naive.

    Fonterra is an industrial company made possible by first and foremost chemical and process engineers, and food scientists, but also civil engineers, lawyers, bankers etc. More indirectly electricity generators and distributors, road builders, port operators. Who are where are these people?

    And anyway forget about fonterra the NZ economy is far bigger than food processing, or agriculture for that matter.

    I am not going to argue Auckland is the best hope for NZ’s economy, but the benefits of agglomeration are pretty obvious to those who work in highly skilled industries where the transfer of complex knowledge and information is important.

    Almost all of which is transferred to the provinces to actually produce our export income.
    24% of our export income is from diary product. Nealy 1 billion from kiwifruit almost none of which is grown in Auckland.
    How much wine is made from grapes growing in Auckland or paper and pulp from trees grown there or wool or meat or timber, This list goes on.
    The biggest export port in NZ is still Tauranga, the biggest import port is Tauranga and if you removed cars from Auckland’s efforts it would be almost behind Christchurch.
    Which town makes the money from films? Would that be Wellington??
    How much coal is exported via Auckland.
    Auckland may have a lot of little industries making up a few dollars of exports but it hardly scratches the surface of our export receipts despite the fact that most of the money laundering happens up there.
    Even software exports are greater from Chch than Auckland.
    Auckland can claim the crown when it comes to boat building but we have spent how much to get it there?
    All the while Auckland consumes greater resources.

    The problem with your myopia is that you fail to tell the difference between earning a living and spending money. spending money is the measure of GDP which is so badly used as a measure of anything.
    Earning a living is what we do to become wealthy.
    For lots of years and currently so many Kiwi’s have dismally failed to understand the difference.
    That’s why we are still borrowing 300+ million a week.

    Go figure it out.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  21. Viking2 (11,372 comments) says:

    Evadne (5) Says:
    August 23rd, 2011 at 1:01 pm

    Viking – Your comment “Auckland is a drain on the rest of us. always has been, always will be” is one I’ve heard often and never fails to astound me. How can intelligent, rational people actually profess such nonsense? It is patently untrue, and could be refuted at great length. I’ll just mention two statistics to give you a little pause next time you are so scathing. 2005 statistics (because these are the ones I found first on google) show that the Auckland region provided 35% of all government revenue (GST, individual tax, company tax) and accounted for just 31% of all government expenditure. Doesn’t seem like a drain to me. Auckland also educates 40% of all university students. Is that also a drain on society?

    That may be a representation of where the cash ends up but it does not represent where it was earned to create wealth.
    Fletcher for example earn their money right throughout NZ as do Fonterra,Telecom, Vodafone, BNZ, ANZ, and so on. Get the drift, so that statistic is meaningless except to justify your argument.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  22. swan (659 comments) says:

    Viking why the focus on exports? Fonterra (for example) is an exporter. Farmers are suppliers just like many other businesses. And these businesses have suppliers, and so on. That’s why I asked if you draw the line at cows, or if farmers also get some glory? Perhaps you draw the line at the sun itself.

    I work in consulting engineering. We service and provide specialist expertise to many large industrial, mining and energy companies. In my line of work the NZ experts are generally in Auckland. The vast majority of professional engineers are in Auckland. I am sure it is similar in other professions. When it comes to economic development it is human capital that really matters.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  23. Viking2 (11,372 comments) says:

    Lance (838) Says:
    August 23rd, 2011 at 12:38 pm

    Viking 2
    The voice of ignorance

    Next it will be everyone in Auckland spends all day sitting around Parnell drinking Latte’s.

    Did you even read the text?
    The bit where it argues “The argument states that there are economic advantages to having many firms located close together. However, Auckland’s industries have low rates of innovation and exports: key drivers of economic growth. The city lacks the capabilities to deliver desired growth rates.”

    This is different to ‘Auckland is a drain on us all’. But then not everyone can tell shit from clay

    The fact that the company I own is in one of many industrial clusters in Auckland quietly exporting away is lost on many does not justify such drivel as usually comes from those clinging to their smug self justification based on deriding an integral part of New Zealand’s economy.
    Next time you want to talk out your arse try a few less done to death cliche’s

    Did you read my post????
    Viking2 (4,864) Says:
    August 23rd, 2011 at 12:08 pm

    Haven’t had time to read this——

    So before you start ranting like a lefty read the plain English first paragraph. If the rest of your reading is as good as the first no wonder you are ignorant of facts.

    If you are exporting good on you. You deserve our support. But to then equate that with Auckland being a success and earning its keep is beyond comprehension. The two are not in anyway related.
    Auckland, like Lower Hutt before it was gutted by the transfer of industry to Auckland, has been gutted of productive capacity and survives as a service town with a much smaller manufacturing and development capacity than it used to have.
    If you actually could track the money earned to its source Auckland would not rate well at all, especially when that is compared to spend. That’s why it costs more to do anything there, live there, etc than any other part of NZ.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  24. Viking2 (11,372 comments) says:

    New Zealand’s Top 10 Exports (millions of NZ dollars) YE Dec 2008 YE Dec 2009
    Milk powder 4,864.7 4,302.4
    Sheep meat 2,732.2 2,896.5
    Crude oil 2,769.1 1,726.2
    Frozen beef 1,641.7 1,555.9
    Butter 1,701.4 1,511.0
    Cheese 1,592.0 1,362.6
    Fruit 993.3 1,058.0
    Wine 903.3 1,013.9
    Confidential exports* 1,176.6 1,004.8
    Wood 711.4 952.4
    Total exports 42,900.2 39,667.7

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  25. swan (659 comments) says:

    “If you actually could track the money earned to its source Auckland would not rate well at all, especially when that is compared to spend. That’s why it costs more to do anything there, live there, etc than any other part of NZ.”

    What is this crazy linear model of the economy you have viking2? Money earned doesn’t have a true source, it is earned where it is earned! Each firm that makes money in an open market is earning it. Look up interdependence.

    If we only had primary industries, NZ would be a sad place. You would struggle to get around without roads. Wouldn’t like your chances if you got sick and had to boat it to Sydney for help (no airports). Sending your kids offshore to get educated wouldn’t be much fun either. A bit boring without tv or the Internet. Expensive weekly shop without a local supermarket.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  26. jamest (2 comments) says:

    Swan your skills and the type of work you do are definitely good for NZ, but you are not typical of the businesses in auckland where the main sectors are retail, insurance, fianance, accomodation and cafes – Have you read the report. If most Auckland companies were like you, Clydesdale would be wrong, but sadly you are not the norm.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  27. seanmaitland (498 comments) says:

    @Viking2 – you fail to realise that there are a shitload of servicing companies providing outsourced services such as IT to the world, the majority of them in Auckland.

    Just listing the top exported goods is a waste of time – just a cherry picked set of figures to try and back up your ludicrous argument.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  28. wreck1080 (3,865 comments) says:

    I wonder if ‘brain drain’ might have something to do with New Zealands poor performance.

    We export the best brains , and import taxi drivers to replace them.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  29. Francis_X (147 comments) says:

    “It is time to get back to basics. …”

    Really?

    Cool! Free education, free healthcare, a progressive taxation system! Excellent!

    Funny how he states that economists are puzzled by NZ’s poor economic performance given our economic flexibility. You mean that after 25 years of neo-liberal, free market policies; several tax cuts; and the rise of the Cult of the Individual – it’s still not delivering results?!

    Hmmmm, at about this time the masters of the Soviet Union realised that their grand experiment in marxist-leninism had failed. It only took them 70 years.

    Do we really need to wait 70 years to accept that neo-liberalism has also failed??

    Clydesdale’s table on Silcon Valley “performers” is pretty bizarre though. What the feck does being married, w/children, have to do with the price of fish?

    The rest of his stuff was blah, blah, pointy-head rhetoric. *yawn*

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  30. janemarsh (2 comments) says:

    Did any of you mean read the paper before making comments? – obviously not. I read the report and felt I was reading something totally different. All you men do is moan.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote

Leave a Reply

You must be logged in to post a comment.