Grant on Manufacturing

February 10th, 2013 at 10:00 am by David Farrar

writes in the HoS:

David Shearer and his cohort of prospective coalition partners, the Greens, Mana and NZ First, are holding a show-trial into who killed the industry.

Forty thousand manufacturing jobs have disappeared, Shearer declares.

What he does not say is those 40,000 jobs have gone since a peak right before the 2008 recession and almost half of that loss occurred in the final year of the last Labour government.

But if Shearer and his band of the grumpy and frumpy were to take the time to read the Department of Statistics September 2012 Economic Survey on Manufacturing, they would learn that total sales in the sector have been static.

Falling from a high of $24 billion in 2008, it is now sitting at $23 billion, measured in 2010 dollars.

The industry has become more productive; jobs have gone, but sales have not.

A good point.

Shearer is known to enjoy the surf, so he will understand it is best to ride the waves – not try to turn them back.

Manufacturing jobs that have gone are not coming back and there is nothing he, Graeme Wheeler or King Canute can do about it.

As well as his plan to build slums for the urban poor in areas where there will never be any employment – manufacturing or otherwise – he is granting a platform for the vested interests of the likes of the Manufacturers Association to cry about the exchange rate.

It is worth noting that the MEA represents relatively few manufacturers. Business NZ has a far higher proportion of manufacturers in their membership.

Manufacturing jobs have been killed because the economic tide has moved.

Shearer knows it, or should know it.

He may be king one day and if he is telling us he can control the tides of economic change, then he is going to look pretty silly on the beach after the next election.

Grant points out we also have fewer typists and lighthouse keepers than we used to!

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13 Responses to “Grant on Manufacturing”

  1. wat dabney (3,850 comments) says:

    Shearer knows. But he also knows that bad economics makes for good politics. All that crap he spouts about the need for a government that practises “hands-on” economic management: “Hands-on” being code for ‘giving subsidies to my mates.’

    The result will be that everyone is a lot poorer, but Shearer and his corrupt cronies will be in power. From his point of view that’s a complete win.

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  2. toms (209 comments) says:

    Whenever I see Damien Grant has written another rant (I dodn’t think anyone with a brain actually read them, a view that still remains to be contradicted) I can’t help but wonder at the extraordinary generosity and downright sweetness of the Herald to continue to offer a wider forum than the looney bin of solopassion.com for convicted frausters to peddle their ridiculously out of date thinking.

    Still, Mr. Grant is a relic of the 80s and 90s and appears to be more than a little doddery with his advbancing vintage; a few more years and the only people who have to suffer being favoured with his views will be the minimum wage, untrained, and deregulated third world rest home workers who will presumably administer the required number of freemarket beatings to shut him up.

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  3. hj (7,184 comments) says:

    Read Herman Daly on globalisation and the pitfalls of a globally integrated economy. It doesn’t necessarily follow ruled which say it is win:win for any particular nation (although the real estate industry does all right).

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  4. JC (951 comments) says:

    “The industry has become more productive; jobs have gone, but sales have not.”

    That got me thinking about the average price of NZ logs the last time we had a low exchange rate so I hauled out some figures for Nov 2002 when the the exchange rate was $0.50.. the average log price at mill or wharf was $77.50/tonne.
    In Nov 2012 the average price was $83/tonne and the exchange rate was $0.82.

    So even though the 2002 exchange rate was hugely more favourable than the 2012 rate we were making more money at the higher rate!

    The difference is the FTA with China and a much better trading relationship with countries like India.

    A couple of years ago I spotted a magnificent table and chairs made out of Blackwood and incradibly cheap. I knew the wood was Australian blackwood so I asked the owner about the provinance. She grinned and told me the wood was grown and milled in NZ, then the sawn timber was sent to Vietnam, made into the table and chairs and reimported into NZ.

    Right now you can buy some very classy outdoor tables and chairs made out of Quila at bargain prices.. in this case the wood is imported to NZ and made up here.

    The stand out points to make are we are using the high exchange rate to our advantage to make money and good to great products for the customers, and that we are trading smarter with more countries.

    JC

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  5. beautox (409 comments) says:

    So the price of logs is higher in NZ$ now than in 2002. Great if you happen to be in logs. But you’re right out of luck if you’re not. Most exporters are making a lot less money now than when the exchange rate was saner. Trying to pretend otherwise won’t wash with me. (I am an exporter and what I export is priced in us$)

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  6. hj (7,184 comments) says:

    The Westpac Economist (?). Him say 60%¿ jobs were due to the property boom?
    Bring back the 2sq. M of books on real estate riches that will fix it!?

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  7. YesWeDid (1,056 comments) says:

    Seems that when Damien Grant isn’t writing for the Herald he’s a company liquidator, so him giving advise on the manufacturing sector is a bit like an undertaker giving you advise on your bad back.

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  8. JC (951 comments) says:

    “Great if you happen to be in logs. But you’re right out of luck if you’re not.”

    The same success is showing in agriculture as well, so the primary industries are 55% of our exports and have been growing their exports 2% each year for the last decade or so. Manufacturing exports grew only 1% in the same period so it looks like factors other than the exchange rate are at work in holding it back.

    JC

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  9. hj (7,184 comments) says:

    Even if logs and primary industries are doing well you still need something for the rest of the population as how a person earns their living is just as important what they earn?

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  10. Johnboy (17,051 comments) says:

    I may be wrong but that fellow that does the Father Time ad on Sky looks a lot like Shearer! :)

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  11. JC (951 comments) says:

    hj,

    Here’s the comparison of exports in 2006 ($32 bill) and 2011 ($46 bill). Notice that manufacturing is but a tiddler anyway and being so insular is vulnerable to downturns:

    http://www.stats.govt.nz/browse_for_stats/snapshots-of-nz/nz-in-profile-2012/exports.aspx

    .. remember that stat I posted showing NZ has the least foreign direct investment in manufacturing?

    JC

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  12. hj (7,184 comments) says:

    Theoretically we could live on an island where one group owns all the productive capital, trade offshore and the remainder of the population have little to trade. In the past you could identify what drove the economy “farming is the backbone” and the towns and cities were service centers. We now have policies based on population growth and the promise of big things happening in the future. For now what we see is that those policies put a floor under house prices and guarantee an income for infrastructure providers, the loan books of banks etc.

    “With capital mobility now the major defining feature of globalization we have left the world of comparative advantage and entered a regime of absolute advantage which guarantees gains from trade to the world as a whole, but does not guarantee that each nation will share in those gains, as was the case under comparative advantage. Global gains under absolute advantage are theoretically greater than under comparative advantage, but there is no reason to expect these gains to be shared by all trading partners.

    Free trade and free capital mobility increase pressures for specialization according to competitive (absolute) advantage. Therefore the range of choice of ways to earn a livelihood become greatly narrowed. In Uruguay, for example, everyone would have to be either a shepherd or a cowboy in conformity with the dictates of competitive advantage in the global market. Everything else should be imported in exchange for beef, mutton, wool, and leather. Any Uruguayan who wants to play in a symphony orchestra or be an airline pilot should emigrate.

    Most people derive as much satisfaction from how they earn their income as from how they spend it. Narrowing that range of choice is a welfare loss uncounted by trade theorists. Globalization assumes either that emigration and immigration are costless, or that narrowing the range of occupational choice within a nation is costless.
    http://www.mnforsustain.org/daly_herman_globalism_and_its_discontents.htm

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  13. Paulus (2,712 comments) says:

    Looks though Grant Robertson’s, knifework behind Shearer’s back, is working where Grant and his “cohorts” can now see the real change of leadership before the election.
    What was the Vote ????

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