New Zealand needs to promote new industries if it’s to compete on the world stage, according to an Oxford University expert on the global economy.
With global economic giants, including the United States and China, strongly backing various sectors, the free trade market is becoming a dated concept.
The idea of industrial policy is still viewed as a communist concept in many parts of the New Zealand political and business sector, which remember the days of Robert Muldoon’s Think Big projects in the early 1980s.
But that view is now about as useful as a floppy disk, says Ngaire Woods, professor of global economic governance at Oxford University, and founding dean of Oxford’s Blavatnik School of Government.
“You can’t prepare yourself to be the best rugby team in the world and then discover the competition is actually ballet,” says Woods, a New Zealander and graduate of the University of Auckland who has lived abroad for decades.
Our current way of stepping back and letting the market do its work doesn’t make sense in a world where China and the US are pursuing industrial policies to support national champions.
“We’ve come through 35 years of believing that the government should really just be this sort of cocktail party hostess, ushering different businesses and market players,” she tells The Detail.
But China and the United States are not supporting open markets.
A decade ago, Beijing laid out a ‘Made in China 2025’ strategy that led it to become a global leader in solar panels and electric cars. Meanwhile, the US – under both the Biden and latest Trump administrations – has put export controls on advanced computer chips to stop other countries (mainly China) catching up with the United States.
“They’re weaponising interdependence,” Woods says. “They’re weaponising trade policies, subsidised credit, investment controls, to create a world in which countries need economic alliances, and to create a world in which other countries need to think really carefully about what kinds of industrial policy work.”
Woods says what governments need to do is create a sector in which Kiwi companies compete vigorously with one another, and which strengthens them for when they go out into the world.
“New Zealand government officials and politicians are going to have to learn very fast what are the industrial policy muscles we need and how are we going to do that in a world where that’s what winning economies do.”
Backing industries – rather than companies – would enable them to compete at home and strengthen themselves for the global marketplace, Woods says.
“Is New Zealand doing enough to make its economy resilient, and to make its businesses competitive enough to survive when they go into the rest of the world?” she asks.
Woods sits on the board of Rio Tinto, a multi-national mining company, and says when they think about global supply chains now, they’re not just thinking about where they’re going to get the most efficient price or supply.
“They’re thinking about within which economic alliance is that nested, and how is that going to affect our resilience in a much more geopolitical world?”
That’s a big change in mindset for us, she says, but also brings huge opportunity for New Zealand if we can navigate that very different world.
“We were all brought up with a mindset which was to think that we were playing in a rules-based order. And suddenly we have to change our mindset into one which is far more geopolitically attuned and far more proactive in what governments need to do.”
This Saturday episode is made with funding from the Peter M Acland Foundation.
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