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Doing what we’re best at

Written By: - Date published: 2:37 pm, September 24th, 2013 - 53 comments
Categories: david cunliffe, Economy, exports, Steven Joyce - Tags: ,

One of the oddities of looking at our export statistics in NZ is that one of the largest export sectors simply doesn’t show up. It is one that virtually didn’t exist 20 years ago when I started working in it. The amount of  hi-tech exports in 1993 was more of a mirage than any kind of reality. That isn’t the case these days.

What our people are really best at is producing goods and services for vertical micro markets sold worldwide, and in a hell of a lot of those markets. What our land is good at is producing grass, but we have now exploited that to the point that all our rivers and aquifers are drying up.

It is pleasant that the Labour caucus, or at least David Cunliffe appears to have recognized that. He appointed himself to the position of the ICT, which is at the crucial core of many of the hi-tech export companies as part of their products. For instance Fisher and Paykel’s core selling point to other countries isn’t their hardware. It is in their their intelligent software embedded in the processors that control the hardware.

For a comparison consider the dairy industry’s inexorable rise mostly in selling milk powders. These stats are a bit old, but should give the idea about where dairy is growing and how fast it is growing.

Export value ($NZm)
Product YE June 2003 YE June 2009
Milk Powders 2,602 4,950
Butter 944 1,693
 Cheese 1,052 1,612
Casein 999 1,055
Total all dairy 5,807 10,402
(Source: Statistics New Zealand)

And the picture of where dairy is growing hasn’t changed much since then. The number of different products that they produce is very limited.

That causes vulnerabilities for the whole country as a recent milk contamination food scare over milk powder demonstrated.

The 2012 total for all dairy was just over $13 billion largely from increases in milk powder. If you look at the stats departments overview of exports. It looks like this.

Exports – top 20 commodities

Commodity NZ$ millions Year end
Milk powder, butter, and cheese 12,428 31-Dec-2012
Meat and edible offal 5,167 31-Dec-2012
Logs, wood and wood articles  3,160 31-Dec-2012
Crude oil 1,790 31-Dec-2012
Mechanical machinery and equipment 1,716 31-Dec-2012
Fruit 1,563 31-Dec-2012
Fish, crustaceans and molluscs 1,382 31-Dec-2012
Wine 1,218 31-Dec-2012
Electrical machinery and equipment 1,119 31-Dec-2012
Aluminium and aluminium articles 1,042 31-Dec-2012
Casein and caseinates 890 31-Dec-2012
Iron and steel and articles 874 31-Dec-2012
Preparations of cereals, flour and starch 917 31-Dec-2012
Precious metals, jewellery and coins 807 31-Dec-2012
Miscellaneous edible preparations 747 31-Dec-2012
Optical, medical, and measuring equipment 721 31-Dec-2012
Wool 717 31-Dec-2012
Wood pulp and waste paper 589 31-Dec-2012
Raw hides, skins, and leather 567 31-Dec-2012
Textiles and textile articles 560 31-Dec-2012

Source: Statistics New Zealand

Which is pretty much what this current government tries to sell us as being to the rest of the world.

What we do the best is being an exporter of lightly processed raw materials to the rest of the world, with a light leavening of mechanical and electrical machinery. But that really isn’t the case. That is an artifact of the stats department’s rather antiquated classification system that appears to be designed for the 19th century.

Consider the revenues for our top tech companies from the TIN100 report in 2012. This restricts itself to companies that

▶ Originate in New Zealand

▶ Retain a meaningful presence here in New Zealand

▶ Operate in the high-tech manufacturing, ICT or biotechnology sectors (excluding food technology and health supplements)

▶ Have developed their own technology-based intellectual property

▶ Generate at least 10% of their revenues offshore

While these are revenues and is not just exports, this country will only make up a fraction of the revenues of these companies. With just a population of 4.4 million that is inevitable. Almost every hi-tech company gets the majority of their revenue from exports to larger markets.

The total for 2012 was revenues of about $7.28 billion of which $5.18 billion was from exports, and this was just the top 100 or even 200 companies.

The company that I’m currently working for isn’t in there. Indeed none of the firms that I’ve worked for in the last decade have been in there. But even if you only look at the top 100, you’ll find that they have a growth rather that is usually considerably faster than dairy or any other primary production. They also employ more people at higher wages than any other sector than any extractive industry like farming or mining.

So why since National got into government have they cut virtually any incentives for startups to grow? Putting minimal effort into helping tech firms offshore has paid off massively since Helen Clark’s government started it soon after coming to power in 1999. But National cut everything, leaving behind some high sounding phrases, no real incentives for smaller startup companies, and not much significiant support offshore as McCully trashed our existing systems.

Sure Steven Joyce ambles along to tech conferences and big notes with meaningless phrases, but he hasn’t provided any of the tools that government can provide for small companies trying to make that expensive and scary step to find markets offshore. As head of MOBIE, about the only economic development he seems to want to foster is extracting money from land and sea – unsustainably. So why is that?

Well in my view National are *the* party of lazy parasitical rentiers rather than producers. They lease and sell land for farming and mining because that way you have to do less work.

Rather than making an effort to foster lots of smaller firms and getting them to become bigger firms, they like to wave the big notes around that are easier to do. So we get the Fonterra welfare trade agreement that sells out local tech exporters  of intellectual property –  merely so Fonterra gets easier access to a few markets.

With the clear direction of David Cunliffe’s self-appointment in the heart of the tech sector, it looks like Labour have again chosen  to foster high wage employment over National rentiers. Another clear political difference for the election in the area of doing what we’re good at….

53 comments on “Doing what we’re best at”

  1. Chooky 1

    +100%……Very thought provoking analysis and post ….thanks!….

    • lprent 1.1

      Not particularly well researched. Mostly got done late at night a few weeks ago and I haven’t had time to dig into a better set of statistics. The best source of stats on the state of the tech industry is from TIN, and it is a bit expensive for me to pay for for a single post.

  2. Chooky 2

    …add to this we are also an exporter of images….place ,space, ecology and landscapes….which although don’t directly earn us a dollar ….they do entice in the tourist dollar

    ….if we trash our land environment and rivers and lakes by overdoing dairying and mining … in the long term we trash our image and our tourist economy ( which is usually overlooked and not costed into our economy…particularly as it comes into conflict with and is weighted up against dairying….which is a very insecure monoply on the world stage in itself)

    ….the tech sector and intellectual property, does not trash the environment…..and is the way to go imo

    • lprent 2.1

      ..tech sector and intellectual property, does not trash the environment..

      Oh it can. Anyone who has seen a tech hardware dump of old computer monitors and cases is quite aware of it. However there is enough value in the commodities that cleanup of both the production materials and the end of life hardware is a relatively small part of the purchase price. Increasingly cleanup is factored into cost of production/import.

      And it is a lot easier to fix than degradation and downstream costs of an aquifer which are almost impossible to repair once they have been destroyed as it happening in the canterbury plains and the Waikato at present. I remember taking aquifer samples for geochemistry labs out towards Cambridge back in the early 80’s and being astonished at the level of contaminants showing up in the X Ray Fluorescence analysis then. Apparently it has been getting steadily worse ever since then to the point that there is quite a discernible polluted outwash effect.

  3. Rob 3

    I think you have under estimated F&P’s core capability of production engineering alongside control systems. Also exports in our wine production from natural advantages in location and wine making ability. Another growth earner is rugby with companies building off shore and local academies for players and coaching systems.

    • just saying 3.1

      As far as I know, none of our large wineries are NZ owned.

    • lprent 3.2

      Rugby is a bit too much of a short term thing as expertise eventually evens out because there are only so many things that can make kiwis distinctive. Furthermore the people with expertise earning the revenue (and their taxes) are usually exported offshore. It also has a relatively small market size worldwide which will probably forever limit its size – probably the total “export” revenue annually would be mere 10’s of millions. We’ve been “exporting” from that sector as long as I’ve been alive and it’s growth is pitiful.

      Wine has been steadily growing for the last 30 years and we do have some distinct advantages in particular types of wines. But its export growth is simply not that fast and the wages paid just aren’t that high. Up to $1.2 billion for the whole industry.

      That was why I was showing the figures of dairy against hi-tech to give a sense of scale.

  4. bad12 4

    i don’t know a hell of a lot about the intricacies of the ‘Tech World’, making the PC work is where it starts and stops for me,

    What interests me tho is why, when there is obviously the Tech intelligence present in this country are the IT needs of our Government and all it’s departments being provided by off-shore companies,

    My view is that the next Government need either build a government owned IT company able to undertake such work or encourage the formation of a ‘silicone valley’ type campus where the whole does not necessarily all have to be working on the same contracts at the same time but the capability would be present so that an Education type payroll system might call upon all parts of such a campus to contribute,

    Obviously there would then be the capability in the one place to enable work from off-shore to be imported/exported either by such a campus in it’s parts or the campus as a whole should foreign contracts require such…

    • lprent 4.1

      It is the same issue as our exports in reverse. We have vast experience in a range of certain areas and export to micro-markets world wide. When they are world wide even a niche market is big enough to get really good at something and to see off most competitors by simply being better.

      To have the required levels of skill and accumulated experience for structuring a government system, you need to have done a lot of different government systems. Otherwise you tend to be a bit of an amatuer learning at someone elses expense. You’ll find that the structural stuff is done by specialists who do this everywhere in the world. You’ll tend to find that most kiwi companies don’t have the experience to do much more than work safely around the edges of the big-iron systems.

      That being said. Datacomm and a few other kiwi companies are starting to get pretty good at their areas of expertise. But they’re gaining a awful lot of the that expertise offshore. In a large part I suspect that is where they want to continue gaining it as well. Basically you get competitive when you work on a world stage. You don’t when you’re too cloistered inside your own small country.

      The nice thing about communications tech in these days is that we can do a hell of a lot outside the country without having to have a large local base. Which is a damn good thing considering that we have a really really small local market. In the last 15 years no company I have worked for has ever had more than 10% of their revenue from the local market.

    • NaN 4.2

      Why do we have to physically clump together?
      Why can’t we teleclump?

      Why do we have traffic jams as thousands of office workers physically commute to sit in cubicles.

      Why can’t office workers live in some of the best environments in the world with those majestic vista’s, enjoy the amazing landscapes… and work closely with others as required in teams online?

      Work nationally/globally, live locally at the beaches, lakes and mountains of NZ!

      We should be developing and applying such approaches throughout our business starting with government departments.

      We should be vigorously applying the MOOC model/ideas to the office.

  5. davejac 5

    If this is all part of a big push by DC into high tech sectors of the economy he’s shot himself in the foot by giving Innovation, Research, and Development to an unranked caucus member (Note, I think Megan Woods is a good choice for the position though)

    • lprent 5.1

      It is called mentoring. The only way to get experience in parliament is to work on it, so you usually find newbie MP’s like Woods paired up as a associate or in a coupled portfolio with a more senior and experienced politician. Happens in my industry all of the time as well for the same reason. I know very little about Woods, but her CV shows her to be bright enough to work that portfolio. The question is if she can push it to the public.

      But if you want to look at it superficially, then do so…

      • davejac 5.1.1

        She had a good stint at Crop and Food/Plant and Food- a lot of the people I know from science circles in Christchurch speak very highly about her.

        I’m not sure how I’m being superficial here- at the top of the article you talk about how David Cunliffe taking the ICT shows how important he thinks the portfolio is, I’d have liked to see them do the same thing with R&D, which I’d argue is more important to more of the companies in the top 10 than the software is.

        • lprent 5.1.1.1

          The bottleneck hasn’t been in the institutional R&D, there are more ideas around than there is marketing capital to develop them.

          The problem for several years is how to realise a profit out of the existing ideas by selling the products from them offshore. The biggest hassle is the marketing development in overseas markets. The R&D development costs are relatively small by comparison. At present the commercial time from investment to reinvestment (ie to self-funding a hi-tech startup cycle) is mostly limited by the lack of capital requiring a very slow creation of overseas beachheads or even setting up production supply chains..

          If you’re talking about pure R&D, then the Marsden fund and the like are on a shortish but not inconsiderable budget. Needs to be done, but really a lot easier than trying to kickstart a startup.

          • Harriet 5.1.1.1.1

            “…..The bottleneck hasn’t been in the institutional R&D, there are more ideas around than there is marketing capital to develop them….”

            LOL.

            ‘Rich pricks’ all left NZ have they? All foreign investment stopped coming has it?

            Or have the ‘rich pricks’ decided to abandon wealth altogether – together?

          • davejac 5.1.1.1.2

            Really? Because those ideas aren’t coming through in patents. Maybe that’s got something to do with the lack of venture capital telling them to patent it or maybe patent numbers are a bad measure of it, but still.

            Anyway, this is all based on a day’s speculation on the line up, with no policy or indication on what anyone is planning to do. David Shearer had Research, Innovation, and Development when he was leader and did exactly one fifth of fuck all, so wait and see.

            • lprent 5.1.1.1.2.1

              Why patent software? To do so you have to release your software into the public domain and techniques. It is more effective to simply not release the code. Then people have to build it from scratch, while we do more code. Software really only has a few years before the hardware changes for updates anyway.

              If you want to see nz hardware patents, then look in US or european registries…

  6. Anton 6

    I’ve always admired programmers and network engineers for their amazing imaginative capacity: the vast majority of what the do is entirely invisible, but it doesn’t stop their work from being elegant. What we see here is the extension of that.

    There have been very, very, few politicians I’ve met that have a grasp on the power and implications of ICT. One of the reasons I voted for Cunliffe is that he is reputed to be one. A few Greens I’ve interviewed over the years get it too. No Tory has ever said anything that make me think they have a clue, apart from DPF. In that case I assume its that odd space where the progressive Liberal meets the nut-job libertarian going the other way, but I’ve only heard him speak at Nethui, so I can’t assume to know his real agenda. I worked for the Conservative Party (it wasn’t my idea, I assure you) and they really didn’t naturally grok ICT, where the left (including the UK Labour Party, if the Blairites could be called ‘left’) were swimming in it right from the start of commercial internet provision.

    I suppose the point is that if you want people to communicate, if you want a more democratic model, the advantages of ICT are obvious. The uses of it as a panopticon only come later, for the use of capital and repression, and then ICT makes sense to the right.

  7. Ad 7

    Lyn great post. Sounds like you’ve been reading Get Off The Grass.
    I hope you are right; yours is the grand game of changing the entire economy of the country.

    So let me trot out what appears to be the default export development programme currently in place if I squinted my eyes and sang You Are My Sunshine over and over:

    Gradually increase the productivity per hectare in New Zealand devoted to exporting

    This requires:
    – Increrase in debt per hectare (rather than acquiring more acres for mere land area production)
    – Increase in mineral inputs per hectare (requiring higher water corridor management)
    – Increase in water useage per hectare (hence far higher storage requirements)
    – Increase in machinery and technology per hectare (hence growth of Gallaghers listed above)

    – Decrease in family-owned farms towards multiple and sometimes listed agribusiness
    – Decrease in low-capital sectors such as coarse wool and other extensive pastoral production
    – Decrease in low value-added industries eg logs, whole fruit, live cattle exports

    I think this is where National is heading us, and I think it’s working at least for the dairy and new-dairy regions. Nowhere near fast enough, and with plenty of stumbling and damage. But working.

    I sincerely want our Fonterras to turn into our Nokias. But those Fishers and Paykels emerged from an age in which industry development was not something to be afraid of. One can only imagine for example what kind of company Telecom would be now if it was still under NZPost, with Kiwibank. There are so many alternative trajectories that have been lost that I think there is little will to reinvent it.

    I’m conservative enough to believe the continued evolution of protein production and broadly the food and beverage sector will be the primary basis of our export sector for many decades. We will gradually grow the capitalisation of our land, as we are now. SHould we not simply seek to accelerate that rather than strike out afresh?

    • Ad 7.1

      There’s also a problem with timing.

      Following this impending loss to Oracle at the America’s Cup, there’s going to be a backlash against governments of any stripe backing high techology ventures with high global risk and stuff all high salary jobs in return.

      Granted Team New Zealand are a sports team – hence a marketing platform rather than an exporting manufacturer. But there will be real blowback on this degree degree of central government intervention in high tech sectors rather than “sticking to our knitting” .

      Clearly that’s a mere momentary sentiment, but it will have us all dusting off our copies of “Theory K” and other managerial paroxysms of (ewk) kiwi ingenuity for slapping down those who reach high into the value-added world.

      • lprent 7.1.1

        That has only happened about (ummm) 6 or seven times in NZ since I started working tech back in 1991. Please adjust your timescale.

        It has never stopped anything apart from a few PR people. I can’t tell you how many times this “fashion” idea has come up. Most tech firms run for 20+ years slowly winding up their markets and revenue – read the potted company histories at the TIN site. They really don’t care about such transient distractions.

        What does slow things down is lack of capital, R&D tax costs, and the varying support given by MFAT to startups making their first penetrations offshore. That is where most of them fail. Right now we’re seeing the startups from the mid-00’s growing and continuing to grow. The problem is that there are few startups since 2009.

        • Ad 7.1.1.1

          “Theory K” came out pretty close after the Michael Fay successful challenge.
          Do you remember them and their staff waving from their Fay Richwhite Tower on Queen Street as the parade came down the street?

    • Huginn 7.2

      ‘SHould we not simply seek to accelerate that rather than strike out afresh?’

      No, we should not.
      There’s no connection in NZ between being able to produce a lot of milk and being able to make profitable use of that milk.

      Dairying will become more and more capital intensive, farms will go out of family ownership and into corporate control. Many of these corporations will be based offshore where profits will be expatriated.
      Higher capitalisation will lead to efficiency gains, eg through mechanisation. These farms will employ proportionately fewer people (although those that are employed are likely to generate higher labour productivity figures).
      The corporations that will end up owning and controlling dairy production will lobby effectively to reduce taxes and environmental protection.

      We will be to milk, what Guatemala is to bananas.

      It would be nice to think that we can capture innovation to protein and food & beverage but the fact that enterprises like Fonterra have not been able to do this by now suggests that they are systematically unable to do this. Worse still, the recent contamination scare has revealed how weak our scientific/technological infrastructure is in this.

    • lprent 7.3

      I’m conservative enough to believe the continued evolution of protein production and broadly the food and beverage sector will be the primary basis of our export sector for many decades. We will gradually grow the capitalisation of our land, as we are now. SHould we not simply seek to accelerate that rather than strike out afresh?

      But we’re already seeing diminishing returns all the way through the farming sector because of the tragedy of the commons issues – especially in water. Most of the area where it is feasible to put in dairy farms they now are and the environment is being degraded in many of the more marginal areas.

      The other problem is that NZ isn’t unique in having the right environment for producing protein. Like sheep meat, wool, beef, leather, flax, lumber, gold and all of the previous extractive industries that NZ has had before – our competitive advantages will pass within decades to other places where economies of scale will operate more effectively. You don’t have to look far around the world to see where vast acres are currently being turned into dairy to satisfy the demand.

      And it is notable that Fonterra ain’t exactly the most innovative company in the world. Look at the sales figures up above and consider how much of that has come from simply increasing production rather than adding value. We still export almost all of our milk powder as bulk to industrial food plants offshore.

      Furthermore you forgot that the number of people being employed in agriculture is actually diminishing as the automation and larger farms are being created. It does bugger all for the vast majority of people as a direct or indirect income earner. You only have to look at the recent population drops in Southland rural as the mixed farms have given way to dairying.

      And in the medium term over the next few decades as the worlds population growth slows and starts to fall world demand for protein will follow the same process.

      Basically depending on these kinds of bulk extractive industries is a dangerous and risky thing to make a population to depend on, especially in the coming decades..

      • Ad 7.3.1

        You will note how hard I had to defend the current pastoral exporting direction. Fonterra is an astonishing missed opportunity that is not living up to its legislated purpose to add value to New Zealand’s milk.

        I would like to see you do more posts on economic development, please.

        How do you argue against the tyranny of the cash burn that tech companies need, that the slower-growth and lower tech agricultural companies don’t appear to have?

        This broad area needs a clear weekend for us all to sharpen our pencils and go at it. Please.
        And ideally before Labour Conference so we can get our policy thoughts in order:

        Looks like we will have a government to influence.

  8. xtasy 8

    My personal observation is that New Zealand must have one of the highest rates per population of $2 and similar discount shops and markets, of tiny “restaurants”, cafes, lunch-bars, cheap gift shops and the likes, which sadly is about the only thing that many “entrepreneurial” migrants, and naturally also locals, see as a prospective kind of “business” to start off here.

    High tech, specialised service and product retailers and wholesalers are there in niche areas, but most business and export volume is in low value added primary products, in raw commodities and the likes, as the above tables seem to imply.

    So yes, it is farming (especially dairying), horticulture, viticulture products, some forestry, fishing and oil, coal and the likes that largely go into exports, which means New Zealand is a somewhat underdeveloped country. Tourism and education of foreign students must be added, of course. Even with milk so much more higher quality products could be made, besides of blocks of butter, basic cheeses and baby formula. Do also not forget the huge “investment” ON CREDIT that is put into real estate (and speculation), and it is so clear where major structural flaws exist.

    Other countries that used to have similar economic structures, like Korea and Taiwan, even Finland, may not be the ideal examples to look at what could be done and changed, but they show that much much more can be done with not so large populations.

    Surely the National led government will not bring the needed change, as they do not even comment on criticism from the Prime Minister’s Science Advisor Peter Gluckman, on lack of application of science here and there.

    I am sure a Labour and Cunliffe led government can do better than what is happening, but that should not really be all that hard, with some bright minds setting the agenda and pace for implementing it. Investment will also be needed, and unless taking perhaps high risks, there will continue to be a high dependence on foreign investment, which should be more carefully chosen.

    People need to see the potential, but must first vote for the right alternative in late 2014.

  9. srylands 9

    How is this new?

    This thread started with a false premise. There is a limit to what a government can (or should do) to chnage an economy. The last Government launched its Economic Transformation programme (led by Jim Anderton). It had mixed results. Some successes and some abject failures. Or have you all forgotten about ET?

    But back to the real world – R&D spending is higher than ever under this government. It is mostly being driven out of services and manufacturing.

    http://www.stats.govt.nz/browse_for_stats/businesses/research_and_development/research-development-in-nz-2012.aspx

    You don’t need to get rid of the cows. Most New Zealanders are not employed in agriculture.

    There is no magic government wand to wave to deliver higher wages. You need skills and higher productivity. You also need investment, lots of it. That is the problem with the Greens. Their dream of the “green economy” is just that. They would lead us to a socialist nirvana of people living in villages growing organic crops.

    • Murray Olsen 9.1

      We do need to get rid of a lot of the cows. What we’re exporting is our clean water, our aquifers, and our wetlands. The eagerness with which the Tories embrace fracking means that very soon there’ll be nothing left. That’s your agrocapitalist nirvana.

      As for the Greens, you know about as much about their socialist nirvana as you do about your own home address.

    • McFlock 9.2

      Personally I think that once again it is you who is missing the point: what government policy exists is based around obsolete categorisations of the NZ export economy. However:

      There is no magic government wand to wave to deliver higher wages. You need skills and higher productivity. You also need investment, lots of it.

      Assuming that “higher wages” were the main objective for a change in the economy (rather than redistribution of wealth or lowering of prices or an increase in employment):

      skills are provided by education (from apprenticeships to phds – all of which progressed tepidly under lab5 and are less accessible or even discontinued under the tories),

      productivity is a function of “ability to perform task” (aka “technical equipment and training”) “management” (aka recruitment, training and monitoring/mentoring of staff”) and “incentive” (aka “management style and remuneration”),

      and investment can be diverted from gambling on derivatives into industry development via the handy mechanism of taxation.

      Problem sorted, without having to “cow-tow” to some of our largest and most persistent polluters.

      • Harriet 9.2.1

        “…..Assuming that “higher wages” were the main objective for a change in the economy …..education…..technical equipment and training………………….and investment can be diverted from gambling on derivatives into industry development via the handy mechanism of taxation….”

        So some technical skills are far superior then to others – where the aim is to increase incomes for individuals? – Which ones then – do you have a list?

        I trade for a living and all mechanisms and strategies used to create personal income are certainly not ‘gambles’. Yes – some people do enter the market under educated, and yes, some also do gamble in the markets, but that in itself is no reason to discredit ‘technical skills’ in the markets – or the market itself.

        I trained as a chef in NZ, hated the fact that ‘well trained staff’ were worth about 30% more than those who were untrained [minimum wage] and so, I left NZ. I was a chef in Aus for a further decade, learnt tehnical analysis, saved some capital, and entered the markets as a private trader. Someone else is now a chef in BOTH countries, learning skills, and earning an income.

        I now pay INCREASING income tax where some goes to a chef [aus wff].

        So much for the ‘relevance’ that my technical skills in wider society play a lessor role than the ‘relevance’ that trade skills are better!

        How do you suppose the skills of a chef will be ‘upgraded’ so as to provide ‘higher wages’ – more training; again?

        • McFlock 9.2.1.1

          Yep. they’re gambles.

          It’s the “risk” bit of the “risk:reward” equation. Ref:GFC.

          And what do you actually produce? Can you point to anything that would not have been created without your input? You could as a chef. You’re making good coin – nice for you.

          But depending on what you trade and how deeply you are immersed in the bullshit market, you might well contribute absolutely nothing to society. The cliche of the “deal maker” adding value by enabling basic transactions to take place efficiently loses relevance when talking about financial traders: all they do is place bets on what they think other people will bet on tomorrow. the returns to society of such gambling have diminished well and truly.

    • lprent 9.3

      ET worked (you myopic moron) – where do you think all of these hi-tech firms managed to jump into the world markets from?

      Your problem appears to be is that you have a problem with needing short-term immediate pleasures rather than having the patience required for real world economics. It takes at least a decade and often two to create new sectors in any economy. But I suspect that you’re one of those guys with no stamina and a tendency to shoot off too early…

      R&D spending isn’t particularly the issue and most of what this particular government is providing is being squandered on stuff that doesn’t provide much export returns because it is in local businesses and old industries doing “R&D” to import technology. What is of more use is assistance in the initial marketing runs into beachhead markets. That has always been the difficult bit.

      There is no “magic wand” – only the fools like yourself expect that or even talk about it. It takes a great deal of persistence to start up a new export company and make it profitable. The advantage is that they really don’t cause the country the kinds of fiscal misfortune that we have whenever a drought comes along or a financial crisis or commodity price falls. They’re usually providing a core need rather than a commodity.

      I think I pointed out that cows are only growing via production of simple milk-powder. To do that they have just about used most of the land in the country than can be made into dairy.

  10. tricledrown 10

    Rob the wine industry is primary
    Productin.
    Rugby primal production.
    Technological advanced countries got their by pumping huge amounts into R&D .
    National are a laissez faire govt?
    No they put money into pet projects that bring very little in most cases negative return.
    National have decimated research and development since they have been in power.
    Cutting funding only to find out that it was a bad mistake returning funding in adhoc fashion.
    So our best scientists are snapped up by overseas govts even third world govts that have more foresight than Nationals bimbo bean counters!
    Example one of many the worlds foremost wool researchers were
    made redundent after making huge breakthroughs it wool fireproof clothing ,loomless weaving,shrink proofing wool wash and wear etc!
    The miserly budget was cut when more needed to be spent especially on marketing!
    Nactionals excuse was that their wasn’t any money so we will cancel the whole idea.
    South Africa picked up our world class scientists and their knowledge for next to nothing.
    Natenomics= vote buying over economic sense.
    SCF Riotinto etc get more funding !

    • Colonial Viper 10.1

      Rob the wine industry is primary
      Productin.

      Well, you could say that exporting grapes or grape juice is primary production.

      However, crafting wines which sell for $50/L and beat the product of specialist artisans in France and from around the world – that’s a knowledge industry.

      • lprent 10.1.1

        Yep, and it’d be great if the dairy industry could get off their acre and figure out how to do the value add thing as well. So far their efforts for the last 30 years have been pretty pathetic. I’m pretty sure that the real value they get returned per KG of product is diminishing over that period compared to the costs of producing it..The only reason that dairy farmers aren’t broke is because they’ve increased the size of the production per person.

        • Saarbo 10.1.1.1

          Interesting, it wouldn’t be surprising if a whole category of exports were not being recognised. Your list of large organisation definitely suggests that a big group of exports are being missed.

          It is critical that we diversify away from Dairy, not only because of the huge impact it is having on our beautiful environment but also because as we discovered in 2008 and again in 2012, the Dairy export market is bloody volatile. The current dairy price increase (Fonterra paying a record $8.62 2013/14 season) is in part being caused by the north island drought earlier this year, if this is the case, then a very small drop in volume in the NZ market has caused quite a big movement in the international Dairy price. As you point out, many countries around the world are ramping up dairy produce including USA, refer this article http://www.stuff.co.nz/business/farming/dairy/9090751/NZ-dairying-warned-of-US-threat

          It wont take a very big imbalance in supply over demand in the export dairy market for the dairy price to collapse, and it seems that with both North and South America working hard to get into the dairy export market, we could see the dairy price cycle head south within the next 2 to 3 years. Today Fonterra announced a 2013/14 payout of $8.62, which means that the international dairy price is incredibly attractive for other nations to chase. This is scary for NZ I reckon.

  11. tricledrown 11

    Ad you are right we have built nearly all the AC72 boats because our country has the leading edge technology in this type of boat building to ditch funding because we have lost
    would be an absolute travesty.
    Nactional have said they will not help fund another Campaign if; we loose more shortsightedness from myopic bean brained brained counters!

  12. ghostwhowalksnz 12

    Its stunning that ‘optical and medical’ category is greater than Wool !

    • Murray Olsen 12.1

      It’s also something that gives me a small flicker of hope, ghost. There is a hard limit to the amount of wool we can grow, which has been pushed downwards by the turn to diary, and is imposed by the amount of suitable land available. While there will be limits to the amount of optical and medical technology that can be sold, they’ll be more to do with markets than production.

  13. davejac 13

    If you can find a good niche you can make a fortune- have a look at how Buckley Systems have cornered the market on electromagnets for semiconductor manufacture.

  14. Sable 14

    Interesting article but I think it misses the point. National “don’t care” about this country, they care about themselves and their supporters. Most of their decisions to date have been to the detriment to the country and the majority of the population.

    Its time to acknowledge that they are really a bunch of scroungers who like most free loaders take advantage of an opportunity when its presented.

    Labour have failed to remove National because they are perceived as a similar animal by the public. If Labour wants to have a role its time to “differentiate” themselves from these creeps and start doing something that emphatically demonstrates that they actually give a damn about this country and its people.

    They also need to stop being complacent about their media presence and start to develop channels to get their message out to the majority of the population circumventing the lies told by the sleazy mainstream media.

  15. MrSmith 15

    Lets face it National is the farmers party and although growing protein may seem like a nice safe bet it has it risks, the elephant in the room is a foot&mouth outbreak, it could decimate farming here for years.

    Something that pisses me off about this lot (Farmers) is the way they unite and work together to make more profit, yet mention the word union and they will start screaming from the roof tops.

    Also farmers will continually have there hands out over the coming years due to Climate change.

    Farmers continue stealing from the environment to enrich themselves, paying little or no tax but crying as they hand over a few dollars for a hard days work, oh and how I enjoyed hearing them crying when they had to pay their way during the last labour governments term.

  16. Lefty 16

    You have to look at the banking and finance industries and the power they weild to understand why the Government makes the economic decisions it does.

    New Zealand is definitely run for a rentier class but only because they serve the purpose of the banking industry.

    For example there is huge profits in the sale and transfer of dairying land (and other farms) from one highly indebted farmer to another. Each time it happens banks get to make high interest loans that are totally guraranteed by the ever rising price of dairying land.

    On top of this further loans, often backed by the Government, are made for irrigation and new technology on farms.

    It is a perfect closed system with the same land been sold and resold over and over again and conservative farmers pumped out of our agricultural institutions convinced they are very clever with their groundbreaking farming methods when they are really just bagmen for the bankers.

    At the first sign of a drop in land value the banks kick them off their land and load someone else up with debt to take it over.

    Housing is becoming very similar.

    Before any real change can happen we need a government prepared to stand up to the finance industry.

    Banning private banking would be a good start.

  17. Not Another Sheep 17

    The input and discussions of different industries and markets for growth potential for the NZ economy have great merit. I would pose though that in any of these area’s ‘growth’ would not necessarily change lives for most New Zealanders (e.gs higher wages, better working conditions, less poverty), because it would be in the hands of the “controllers” whether benefits/profits were disseminated fairly down to the masses.
    On a global scale this growth of wealth over decades has been deliberately engineered and allowed to be captured only by a FEW as successive nations adopted, then ‘hoodwinked’ and forceably coerced its people (e.g. via engineering the ERA) into believing doctrines that shored up these glorious “free-markets”. Generations now have swallowed the sales pitch of “free- markets”, that ‘austerity’ measures are good for us as a sacrifice for the greater good (yeah right), citizens also thought that they were democratically participating, voting gullibly for a “Brighter Future” and yet the promised gold for all was just the gold foil wrapping around a piece of Shonkeyshite.
    Before ‘growth’ with benefits for all happens how does a government break down a globally entrenched (30 years??), insidious system which is overwhelmingly controlled by the few ‘rich’ with their powerful ability to manipulate, dominate, dictate, threaten or hold to ransom (Tiwai?) any government ( be it left or right now) into acting in the ‘FEW’s’ interest.
    Lefty (above) has part of the solution, banking being one industry, “Before any real change can happen we need a government prepared to stand up to the finance industry” but having evolved into a global world that is now captive and so dependent on “financiers” and rich global cooperates, how would a government do this (or want to as they are actively part of the free-market and reliant on it) without massive economic disaster for all?

    Xstasy has mooted how the core of the problem is that people don’t stand up, they’re “lazy”. I’d go with that but also with a paucity of knowledge that the majority of casualties and sufferers of the “system” seem to have about the SYSTEM and who it really does serve . Gould puts it like this “..but also from the quiescence and apathy of that much greater number who fail to understand that democracy is necessarily sidelined if the market cannot be challenged. The substance of democracy has been hollowed out, so that only the shell, the forms, remain, because we have not cherished and made a reality of what was our most valuable protection and greatest achievement.” [community].
    I am sceptical that any ‘government’ can truly change current ills, say by investing in this or that industry, to benefit the everyday majority… “Virtually the whole of the increased wealth of the last three decades has gone to the richest people in our society; poverty, even in the “rich” countries, has risen while inequality, with its attendant social ills, has widened; the rights of working people at work have been weakened; joblessness is endemic;” successive governments have all colluded in varying ways to this demise. “Myths, Politicians and Money” Gould.B. (2013).Palgrave. Launched in UK but in New Zealand soon.

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