Last week (NZ Herald, January 10), I was one of many commentators who had something to say about the speech given by Canadian Prime Minister Mark Carney to the Davos Economic Forum. A quick reminder – Carney warned that the world’s rules-based order as we have known it is being “ruptured” by great power competition, protectionism and populist nationalism. He did not name names, but he meant the United States, closely followed by China and Russia.
Carney noted that efforts to appease or flatter great powers have diminishing returns. Nor did he think that opposing great powers had much to offer. He advocated an alternative; middle-sized countries should work together to organise a new rules-based order while at the same time building more resilient domestic economies.
I suggested New Zealand listen carefully to what Carney had to say and adapt his strategy to our circumstances. It is time to really be different.
Of course, as some said in response to my column, it is one thing to advocate change and another to spell out what that might mean. We are not a middle-sized country like Canada. New Zealand is a small liberal democratic trading nation at the edge of the world. Sometimes, it is even left off maps of the world! In this age of “monsters” (see Gramsci), we need to tread carefully.
We can, however, tread carefully while seeking to find a place for ourselves in whatever world will emerge from the rupture underway.
For me, this is a “nation-building” exercise. New Zealanders must work together at a time of seismic change to become something different to what we are today.
This does not mean abandoning the rules-based order that has been in place since World War II. Rather, it means working with middle-sized and small nations to define new rules and modernise institutions like the World Trade Organisation and the United Nations.
This is neither a globalisation nor a nationalist agenda. Nations should be able to make decisions about what is good for them. The problem with globalisation as we have experienced it in recent decades is that it was treated as inevitable – a fact of nature. We all became subservient to the demands of a free and open global economy.
This was never true, and today nations are pushing back, arguing that they must put their interests first. While economics once dominated political decision-making, today politics is dominating economic decision-making.
But a retreat into a world where nations always put themselves first can only lead to isolation and conflict. The way forward is to acknowledge that nations have their own interests, but that much can and must be achieved through collaboration and co-operation. This is not the path to globalisation or nationalism; it is the path to internationalism.
For this world to be realised, as Carney argues, middle-sized and small nations must work together.
Domestically, we have a lot of work to do if we are to be a sovereign, not subservient nation. An option some countries are exploring is to onshore products and services that are considered vital.
This is not an option with much to offer New Zealand. Perhaps we could look at some areas of key concern, maybe in co-operation with Australia, but our economy is too small for us to pursue import substitution or import duties as core strategies.
This leaves us with the option of strengthening our place in the world economy. Historically, New Zealand’s economic strategy relied on producing more volume. In recent decades, a focus on adding value has taken over. Today, we need to go further (as Eric Pawson from Canterbury University suggests), aiming to meet and exceed the desires and expectations of consumers in a range of markets rather than trying to find end users for “product” after the fact.
We could refer to this as a “niche economy” strategy. As a small economy, our ability to produce anything (including dairy products) at scale is limited. But we can aim to lead in a range of high-value products and services.
A good number of New Zealand businesses are already doing exactly this. These businesses signal the way the whole economy should operate.
For this to happen, we would need to do the following as a minimum.
– Ensure the rapid spread of new technologies through the private and public sectors.
– Develop an industry policy that would ensure we make strategic choices to promote areas of the economy where evidence shows New Zealand could occupy a leading position.
– Ensure access to lifelong learning for innovative, problem-solving, self-motivated learners.
– Shift social policy from a focus on redistribution, social transfers and macroeconomic policy to creating economic opportunity by working on the supply side to create good, productive jobs for everyone.
– Revitalise local government so they can play a role in co-ordinating economic and social policies in their area and support local communities to do more for themselves.
It is election year and, as politicians like to say, all politics is local. The rupture Carney talks about may seem of no immediate concern. But it is. We have relied on the disappearing rules-based order for much of our prosperity and our way of life as a liberal democracy for decades.
As a small, vulnerable nation, it is time to be clear that everything has changed and, if we are to thrive in this new world, we must change too.
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