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Nats’ economic plan: more oil, more cows

Written By: - Date published: 12:14 pm, November 8th, 2010 - 70 comments
Categories: Economy - Tags: ,

We’ve been critical of this do nothing government’s economic record, but now I/S at No Right Turn has received documents that lay out the Nats’ economic plan. They rejected the notion of government, business, and workers pulling together to create a better economy and went with: 1) find lots of oil 2) lots of GM cows.

Inspiring, eh? This government rejected the suggestion from Treasury that it should follow the model of Singapore, Korea, and, lets face it, every other economic success story whereby the government ‘picks winners’ and leads investment in promising areas. Instead, they hope to (somehow) export a whole lot more oil and a lot more milk – hey China, fancy some white gold in your texas tea?

I/S explains what the papers he received under the OIA reveal:

“NZ’s GDP per-capita growth rate must be 1.5% higher than Australia’s on average over the next 15 years if we are to close the gap. The Government has already admitted that it does not expect to meet that target for the next five years. Real exports/capita needs to grow 2.2% faster than their historic average of 3.1%. There’s no sign of that happening. Exports need to grow to $150 billion. But even the government’s “stretch” targets show them coming to only $116 billion or $137 billion if we discover oil (which seems to be their plan, BTW: “discover oil”).”….

….”The presentation to the Cabinet Strategy Committee, Achieving New Zealand’s Economic Potential: Exploiting International Opportunities by Harnessing our Strengths (15 September 2009), recommended a strong focus on the high-tech manufacturing and services sectors. The key policies were supposed to be government coinvestment to help firms overcome capital constraints, and a strong focus on assistance with R&D (described as “replacing the R&D tax credit”). Neither of these has happened, or looks likely to. Which means that National’s ambitious growth targets there won’t be met. So what does that leave?

That’s right: farming. And in particular, dairy farming.

Somewhat oddly, Brownlee attempted to withhold all information on the dairy industry’s current and expected growth on the basis that it would “prejudice the security or defence of New Zealand or the international relations of the Government of New Zealand”. More likely that it would prejudice the popularity of the government. Because he stupidly missed a bit. And that shows that National plans a massive expansion of dairy farming. Currently, the dairy industry is worth $10.15 billion a year. At its expected growth rate of 3% a year, they expect it to be worth $16.9 billion in 2025. They want it to be worth $25.9 billion. In other words, they want to double the growth rate, and more than double the size of, the dairy industry.

Some of this growth will apparently come from increased offshore production, driven by a restructuring of Fonterra to allow them to raise capital more easily (the information on that is largely withheld, unfortunately). Some of it – but not much – will come through more efficient cows. But most of it will come through simply increasing the size of the dairy herd. In other words, their plan for growth is “more cows”. Which means more shit and nitrates fouling our waterways, and more greenhouse gases fouling our atmosphere. We can barely cope with the environmental footprint of dairy farming as it is, and National is planning to double it. At the same time, they plan to

promote NZ as synonymous with products and services that are safe, secure and sustainable that are good for the consumer and for the planet.

How they intend to do this when we are drowning in cowshit is anyone’s guess. maybe a glossy PR campaign, and hoping that no-one ever actually looks at a river?

Meanwhile, there are a few other scary ideas in their dairy plans. “Review[ing] incentives for rational irrigation, storage, and water use decisions” for a start. In other words, giving all the water to farmers for free. When government Ministers like David Carter spout ignorant bullshit like “Here in Canterbury 96 percent of all water flows out to sea” (that is, we have rivers), then you have to worry.

Then there’s this little bit in the “Barriers and issues” section:

Market acceptability of GM would have to be tested and may require modifications to the HSNO Act.

So, the government wants genetically modified cows. But at the same time, it wants to promote us as safe and sustainable. Good luck with that. European customers have spoken: they hate GM, and don’t want it in their food chain. So quite apart from any domestic issues, its just a dumb commercial decision. But as we’ve already seen with water and climate change, farmers aren’t the sharpest tools in the shed when it comes to environmental branding.

So, National’s plan for growth is to do the same thing we’ve always done, only more of it and dirtier. Its exactly the sort of plan I’d expect from narrow-minded, jealous farmers. But it won’t see us catch Australia anytime soon. On their core promise, National has no real plan to deliver.”

An extraction economy, which is what both National is proposing, is not the model of a successful, prosperous, sustainable country in the 21st century. But it appears they are too ideologically set against government leadership and too fundamentally lazy and bereft of ideas to steer the economy towards a better future.

70 comments on “Nats’ economic plan: more oil, more cows ”

  1. vto 1

    Head them farmers off at the pass …… apply for your own consent for your local water before the local farmer does. And then leave it in the river or ground.

    And does this great review and bullish view of dairy allow for the inevitable collapse in prices? After all there has never been a boom that has lasted has there …. or do we just ignore that part?

  2. billy fish 2

    GM Cows that produce HydroCarbon based fluids, not Milk
    Getting very Dr Strangelove

  3. Lanthanide 3

    “European customers have spoken: they hate GM, and don’t want it in their food chain.”
    Given the rate of population growth around the world, coupled with climate change and peak oil making fertiliser more expensive, I’d just love to know what these Europeans think they’re going to be eating in the future, because it is surely going to have to be GM.

    • Draco T Bastard 3.1

      GM foods aren’t any more efficient at producing food than the non-GM food. What they and we will be eating is likely to be vegetables and very little meat. Growing meat is massively expensive as it requires more land, more fertiliser and energy to produce.

      • Richard 3.1.1

        Even if GM crops were heaps better the fact that our main markets don’t like them means we shouldn’t be making them. Our economy is based on selling food to rich people. We need to produce the food that those rich people want in the way that those rich people will pay for.

        GM crops would make sense if our agricultural products were low value, low margin, products sold on a massive scale to mostly poor people. This is not the kind of agricultural economy that we have.

        • Lanthanide

          Hmm, that’s true. That puts an interesting spin on it – tight supply will push all prices up, especially non-GM, and we can continue to export the same food but be paid more for it.

          • Richard

            Kind of, yeah.

            If you look at NZ’s land area etc we’ve got enough arable land to feed 30 million people (more or less depending on how you count it).

            As a country, the game we are playing is all about finding the 30 million richest consumers worldwide and then growing stuff, that those 30 million people will pay for.

            Plus, balancing with this, is keeping our own living conditions high, by a) not being too damaging to our local environment and b) ensuring the repatriated profit on what we sell is high (and widely distributed).

            • ianmac

              Trouble is that the more that rich folk are prepared to spend overseas, the more expensive it is for the domestic market. So roll on butter and cheese at $20 per kilo or beef at $40 pkg. Oops!

              • felix

                I suppose we could just decide not to let markets in Europe and China dictate how much a block of cheese produced in the Waikato sells for in Taranaki.

                But that would be economic heresy. Burn the witch.

                • insider

                  How would you do it?

                  • Clarke

                    Create a two-speed market, then cross-subsidise local consumption with an export levy.

                    Let’s for argument’s sake say that we regard New Zealanders starving in their own country to be a market failure. (Cue the RWNJ’s who will claim otherwise here.) The solution is to rectify the market failure by fixing food prices to some arbitrary percentage of the average wage, or similar measure. This will obviously be less than what producers could achieve on an international market – right up until the point when our wages catch up with Australia – so the effect will be to create a disincentive to sell in NZ and an incentive to export.

                    Assuming the figure of being able to feed ~30 million people on our arable land is correct, it means feeding 4.5 million locals at lower prices than the export price adds a maximum 15% cost to the exporters. The government levies the exporters and returns the levy to the local producers, resulting in affordable food for Kiwis. Which is a good thing, given we all live here.

                    Of course it’s less “efficient” than no subsidies, but it’s also got a long and illustrious pedigree given that the EU, Japan and the US – amongst many others – indulge in the same practice.

                    • Richard

                      I agree that’s a possible mechanism…the point, however you do it, is to ensure that NZers generally share the benefit of selling produce overseas at high cost.

              • Richard

                Sure, but that is true no matter what we make and export. It is unavoidable if we export stuff to economies that are wealthier than ours.

                For example, few of the factory workers who manufacture iphones (in China?) are probably able to afford to buy them. The same thing applies to people who make sneakers for Nike.

                The answer to that is “merely” ensuring that the repatriated profit on what we make is high and widely distributed. That is something which we can do much better. That is what the government should be planning to ensure.

    • Colonial Viper 3.2

      I’d just love to know what these Europeans think they’re going to be eating in the future, because it is surely going to have to be GM.

      You’ve been reading Monsanto literature again.

  4. freedom 4

    Perhaps we could combine the vast increases in excrement from the Government’s economic plans with one of the new WarnerBuddies Theme Parks and you got shitslides for everyone, with plenty of hormone-heavy hamburgers. It’s not like the water will be safe to use !

  5. spam 5

    Gm to reduce methane emissions, perhaps?

  6. Colonial Viper 6

    Dairy farming creates only two or three jobs per $1M capital investment. And most of those jobs are for labouring type work which is not well paid.

    Its an awful, poor use use of capital for very little financial and societal payback.

    I suspect our best and brightest are not going to come back from Sydney CBD, city of London or Shanghai to work on a dairy farm.

    As for turning NZ into a petrostate, thats just daft.

  7. randal 7

    in the meantime they can beat up on beneficiaries becuase they cant stump up with the 60 billion needed to start a car factory.

  8. Bored 8

    Fek oh dear, is this the very best our “leaders”can come up with…here we are running headlong at a precipice that is all too visible (should anybody care to open their eyes). Peak bloody climate is going to make food one hell of a valuable commodity. Peak oil is going to make current agricultural practices bloody difficult BUT we can still grow food, and lots of it. Peak oil is also going to kill off the synthetic fibre trade as well, I seem to recall we are bloody good at growing fibres aka wool.

    In business one of the most important things to do is to keep going, protect your investment and your profitable modus operandi. So here we are with a “business” government whose view of the medium term future is as out of date and impossible as any I possibly imagine. Instead of investing in a transition to our new / adjusted future, they like First World War generals will keep sending us over the top into oblivion. What a pack of clowns, mind you dont get uppity Lefties, Labour are just as myopic.

  9. As for turning NZ into a petrostate, thats just daft.

    its worse than daft, its a pipe-dream. They don’t actually have a plan to do this, just a bunch of specualtion about how much oil could be there, which (for the purposes of catching Australia) is taken as a certainty and turned into a $20 billion a year export industry in 15 years.

    I’ve seen this sort of “logic” – take a tenuous chain of suppositions, “could”, “might”, “may”, and transform it at the end into a certainty – before. Its used by conspiracy theorists. This part of Brownlee’s economic plan is based on Wishart-logic.

    • Colonial Viper 9.1

      I really really hope that National use their “Lets turn into a Petrostate” plan as a central plank for 2011.

    • Doug 9.2

      Dear I/S

      I have some magic beans do you think that the NATs will be interested. Given that their oil state delusion is at about the same level of thinking I am optimistic 😉

  10. Draco T Bastard 10

    Meanwhile, in reality

    “All Kiwis should be concerned that the latest numbers show a stalled economy and a government with no answers and no plan,” David Cunliffe said.

    We need something other than the but it worked 2 centuries ago… brigade that we have now.

    • Zaphod Beeblebrox 10.1

      And English’s response to lower govt receipts- to cut spending even more. At his rate we will have no government debt because there won’t be any economy to spend it on. (There will be 4 million extra Australians too).

      • Bored 10.1.1

        English is a fool, as are all of those prats who in the past 25 years have used the terms “Polish shipyard” and “Fortress NZ”. What they were actually refering to was an “integrated economy”. What that means for the layman is an economy where you support your key economic buiding blocks with the necessary infrastructure and supporting industries and services. What we did in 1984 was to offload whatever we could in the name of cheapness, in effect moving provosion of our economy to the places with the lowest cost of labour somewhere else in the world. In effect we not only exported the profits made through supporting the economy to offshore capital, but also stripped ourselves of the means to be economically self sufficent to a large degree. English is not alone in lacking vision to reverse this trend, in in being a fool. We have 25 years worth of politicians, business leaders and economists queing up for his “Dunces” hat.

        • Colonial Viper

          Maybe if we paid all these very able business and political leaders more* they would do a better job and we could retain their services to NZ for longer?

          *Yes I am kidding

          • Kevin Welsh

            Nah, its the tax rates CV, you don’t need to pay them more.

            • Colonial Viper

              Yeah we should raise the tax rates on them. Go back to the 1950’s/1960’s US system. 91% tax rate on every dollar earned over $3M.

          • Zaphod Beeblebrox

            But JK is doing something really useful- he bought back knighthoods for them.

  11. insider 11

    Are you seriously supportin g that we follow Singapore and South Korea’s lead? How were civil rights in those two countries in their growth periods? How free and fair were their elections and legal systems? A whole lot more went on there than just “picking winners” – which is wonderful in retropect I have to say (and isn’t that exactly what the govt is doing targeting oil and dairy?)

    We might actually be better off in the long run with a ‘do nothing’ government than a ‘do something but get it wrong and bankroll it with the taxpayers’ deep pockets’ government. Been there, done that and it hurt a lot.

    • Jeremy Harris 11.1

      As this latest article in TIME argues:


      Globalization has always been the engine behind Korea’s economic miracle. Beginning in the 1960s, a destitute Korea capitalized on its cheap labor to competitively export toys, shoes and other low-tech goods to consumers in the West. That jump-started income growth; as costs rose, Korea shifted into ships, microchips and other advanced products. Yet to Koreans, globalization was a one-way street. They were happy to sell things to the world, but wanted no more than the profits in return. Koreans didn’t care much for foreign cars, foreign investment — or foreigners. Empty taxis would ignore my frantic hails, while locals sometimes swore at me while I walked in Seoul with my Korean-American girlfriend (now wife). Behind its crenellated walls, the Korean economy developed on its own dynamic, and boosted by their unexpected economic success, Koreans came to believe their system was special, even superior. But dangerous problems were festering. Companies were shielded from competition and heavily supported by tight links to the government and banks, allowing them to borrow and invest willy-nilly while building up frightening debt burdens. When I would mention these flaws to businessmen or officials, I got brushed off. The normal rules of economics didn’t apply to Korea.

      That self-delusion evaporated during the Asian financial crisis of the late 1990s. As Korea’s most prominent companies collapsed into bankruptcy and the government endured a humiliating $58 billion International Monetary Fund bailout, Koreans had to rethink the ways they did business, managed their careers — even their entire economic system. The crisis “was the catalyst” for change, says financier Tom Kang. “The old ways didn’t work.”

      State directed capitalism can be a method to industrialise, as we are seeing in China, but eventually two things happen; protectionism leads to imbalance (as do Central Banks) and economic freedom leads to individual freedom, in some cultures this takes longer than in others…

      You are very right Insider, when people like you and I look at what places like Singapore and South Korea had to give up to achieve their their current levels of wealth, the “miracles”, we recoil, socialist rub their hands… And I completely reject the notion they wouldn’t have got to where they are now by following almost completely free trade, as the example of HK shows…

      The reason the people of Singapore and South Korea are successful is their work ethic, their commitment to education and their ability to save, 5 generations of nanny state has robbed many hundreds of thousands of NZ citizens of that drive…

      • Colonial Viper 11.1.1

        The reason the people of Singapore and South Korea are successful is their work ethic, their commitment to education and their ability to save

        Not true. In fact I’d go so far as to say that your Chicago School narrative is completely unsustainable. Early 20the century Western analysts considered both Singapore and South Korea deadbeat countries with bad education systems, populated by simple illiterate people with bad work ethics who needed mounds of foreign aid if they were ever to go anywhere. (And what is foreign aid if not direct state intervention?) Without Lee Kuan Yew Singapore would be a shadow of itself today, one of the freest economies in the world by international measures.

        And I completely reject the notion they wouldn’t have got to where they are now by following almost completely free trade, as the example of HK shows…

        Who cares what you reject when the basis you choose to make your decision on is completely inaccurate?

        The example of Hong Kong?! You made me laugh out loud. Hong Kong which was seized by British imperial force, built using British riches from its opium trade and the levies the British placed upon the Chinese Government, exploiting cheap Chinese labourers to build its cityscape and work in its factories, a British constabulary which treated locals like second class citizens, Chinese locals who were never given any true citizenship or freedom to leave even after working for the British for years and just handed back to communist China. So what exactly out of all of this was the free market utopia you referred to?

        In terms of its existence, Hong Kong is about as contrived a ‘country’ as you could imagine.

        State directed capitalism can be a method to industrialise, as we are seeing in China, but eventually two things happen; protectionism leads to imbalance (as do Central Banks) and economic freedom leads to individual freedom, in some cultures this takes longer than in others…

        You may or may not have noticed while ensconced in your theoretical free market dreamy fantasies that China remains relatively unscathed from the GFC while multiple western powers are crippled, and its absolutely rigid centralised currency controls and central planning has been a mainstay of that.

        The other small detail, noting your dig at central banks (which I agree have been far too lax in their regulatory oversight – mainly because they all believed in the self correcting rationality of the markets – boy were they all completely wrong!) is that the US Federal Reserve is owned by very profitable private banking interests. That is exactly the way that the banking industry has wanted it for two centuries now. And I think that THEY are not going to be listening to your free market ideology one little bit.

        State directed capitalism can be a method to industrialise, as we are seeing in China

        With the acquiescence of US corporates, China has single handedly decimated US industrial output. China is beyond the stage considered ‘industrialisation’ now. That was done in the 1980’s through the 1990’s.

        Since then China has been pursuing an ever higher value added knowledge based economy churning out the highest tech highest quality products in the worlds.

        And next they intend to create and own their own high value proprietary brands and technology. Lenovo and Haier are just the start.

        Not bad for a centrally planned economy with US$2.5T in reserves huh?

        • Jeremy Harris

          Ha ha, I so love it when you’re ranting responses have almost nothing to do with the points in my post…

          You are a tiresome bore CV, did you even read the linked article or did the words, free trade, innovation, competition lead to a blind typing rage..?

          • Colonial Viper

            You are a tiresome bore CV

            Hey if you aren’t able to address my points, like I did the ones you made on Singapore/South Korea/Hong Kong/China just say so.

            I won’t look down on you.

            Although I’m still laughing at your use of Hong Kong as the natural free market example when its entire existence was totally contrived through military force.

            • Jeremy Harris

              Your points have little to do with the position I hold or the points I made…

              In the example of HK, the point was regarding the economic model as compared to the Singaporean and South Korea, it’s a shame the British had the deal they did with the Chinese and the residents of HK didn’t have a revolution and formed a Republic, in economic terms the British largely stayed out of the way, enforced contracts and the rule of law and people poured from the Mainland to HK…

              • Colonial Viper

                In the example of HK, the point was regarding the economic model as compared to the Singaporean and South Korea

                Its a shame then that economic models can’t exist by themselves in a vacuum separate from societal and historical context eh?

                Because once you place Hong Kong’s economic model inside the societal and historical context which created it, and you see that the creation of the entire country was contrived by imperial military force, its early development funded by levies the Brits placed on the Chinese, and that its cheap indigenous labour market was exploited for many years in construction and in factories to help build up the wealth we see today, it hardly looks a free market example to crow about.

                • Jeremy Harris

                  Well what you call exploitation was a part of development, as we have seen in every industiralised country in the world, it has gone through a period when life was cheap and it is when members of society worked 70+ hours a week to be productive enough to develop, when development occurs, the hours required for labour become less, the standard of living rises, the population demands cleaner air and better workplace safety, etc, etc…

                  That this happens isn’t based on how a country was formed, NZ has been largely democratic over the last 150 years but read the history of how the Civic in Auckland was built and you’ll see it happened here too, and the US, UK, etc…

                  When a society is economically free, and even in the periods were labour conditions were poor and pay was low, people still clamoured to get into these countries, because their children would largely have the chance to be whatever they wanted and would have better lives than they had…

                  You only need to look at how many people died trying to get into HK from China to understand that…

                  • Colonial Viper

                    Well now I am hearing realism about the situation around Hong Kong. And as you know, although Hong Kong may have been economically free during British rule it was never politically free. And it remains that way under Chinese rule.

                    Economic freedom != Political freedom (even after 100+ years).

                    people still clamoured to get into these countries

                    I think escaping from a vicious lengthy Chinese civil war and escaping from the cultural revolution to secure British held territory of HK was more to do with people saving their lives and their families rather than acting as economic migrants looking for a ‘free market economy’.

                    By the way, plenty of brand new NZ graduates are now economic migrants, leaving NZ and going to China.

                    • Jeremy Harris

                      I did say Economic Freedom and Political Freedom takes time, they quite clearly do encourage each other… If you’d read the TIME article you’d see that this is what has happened in South Korea, it was the other way around in India, Japan is still very repressed after 150 years… Snide comments do not a point make…

                      You haven’t been to Auckland recently have you..? Or else you’d realise that trying to pretend there are more Kiwi’s in China then Chinese people in NZ is pretty hilarious after a walk down Queen St…

                    • Colonial Viper

                      If you’d read the TIME article you’d see that this is what has happened in South Korea

                      The article said that it only happened in South Korea because of a free market financial crisis.

                      they quite clearly do encourage each other…

                      You’ve got frak all data points to work with so actually its far from clear

                      Snide comments do not a point make…

                      Hey, good snide point, Jeremy.

                      trying to pretend there are more Kiwi’s in China then Chinese people in NZ is pretty hilarious after a walk down Queen St…

                      Any particular reason that you are making shit up which I did not say? What I DID say (and you can check by scrolling up) is that there are plenty of economic immigrants – NZ graduates (and I meant NZ’ers) – heading over to China.

                      If I had said that there were plenty of NZ economic migrants heading over to Australia you wouldn’t have questioned it.

                    • Jeremy Harris

                      Seem to have hit a nerve there… You obviously had no point because otherwise what the hell does a few Kiwi’s moving to China have to do with anything..? There are a few Kiwi’s moving everywhere…

                      I have to say it is quite revealing of your authoritarian mindset that you are so enthusiastic about the method of development of the Chinese economy…

                    • Colonial Viper

                      Seem to have hit a nerve there…


                      so enthusiastic about the method of development of the Chinese economy.

                      Dude its US$2.5T in foreign currency reserves and what is now a high tech economy which has grown in double digits (or near to it) for about 20 years.

                    • Jeremy Harris

                      No it’s not, it’s an economy where the average worker is only earning $8,000 odd a year, there are only 2 universities in the world top 200 and it has built up it’s cash reserves by denying it’s citizens services and/or failing to cut government revenue and the citizens there are very good savers…

                      As we saw the stream run out of South Korea’s and Japan’s economies based on your desired model and the Singaporeans largely moving to free markets of it’s own accord, HK already there, it is likely the Chinese model has a limited shelf life, quite possibly reaching parity size-wise with the US but much lower per capita wealth, then things will heat up in China (economic freedom and political freedom and all that)…


                      The facts are no less impressive for their familiarity. China now buys more cars than gas-guzzling America, and exports more goods than Germany, the manufacturing powerhouse of Europe. As Western governments fret over their cavernous deficits, Beijing continues to pile up its mountainous surpluses of foreign exchange. And it is not just economically that China is on the march: as we report today, despite the fact that Beijing spends just a tenth of the American total on its armed forces, the Pentagon’s annual report has warned this week of its growing hard power, describing ship-building programmes and “carrier-killing” missiles that threaten to erase the strategic superiority that America has maintained on the high seas for 50 years.

                      This seductive and persuasive narrative of Western weakness and Chinese strength has been fuelled in part by our own insecurities – after all, the financial crisis has given us good reason to question our own economic model. But before we throw up our hands in defeat, it is worth remembering that we have been somewhere like this before.

                      Twenty years ago, it was Japan, another export-reliant economy, that was going to “rule the world”, just as China is today. Such was the paranoia in the early 1990s that people were taking sledgehammers to Sony stereos in the street and American columnists were penning serious analyses of a book entitled The Coming War with Japan.

                      We all know what happened next. Japan’s property market imploded and its economy suffered a lost decade – now two decades – as its policy of using state-led investment to perpetuate economic growth simply ran out of steam.

                      There are no crystal balls when it comes to predicting whether China will follow a similar trajectory – but while the potential for sustaining its growth is certainly greater than Japan’s, given its vast population and resources, there are good reasons to question whether the predictions of global dominance might be somewhat premature.

                      It should go without saying, at this point, that China’s achievements in the 30 years since Deng Xiaoping began unravelling the economic and political madness of the Mao years are real and significant. Country lanes have become motorways, villages have become towns, and towns have metamorphosed into shimmering megacities whose factories have changed the dynamics of global commerce. In the process, hundreds of millions have been lifted out of poverty.

                      So far, so good – but if this remarkable growth is to be sustained, the country’s leaders will have to overcome a set of challenges that makes the last 30 years seem like one of the late Chairman Mao’s picnics on the banks of the Yangtze.

                      To the outside world, China’s stony-faced leaders might appear supremely self-confident, even arrogant of late. But viewed from the inside – and China’s leaders still instinctively look inwards – their place in the world starts to seem increasingly insecure.

                      Economically, China is already starting to hit the limits of a growth model that has relied on massive public investment in infrastructure, a vast pool of cheap labour and an insatiable appetite for cheap goods among Western consumers.

                      Thanks to the one-child policy, China’s working-age population will start to shrink from 2015. Also, now that the financial crisis has slashed the West’s credit-fuelled spending power, exports aren’t a long-term option any more.

                      Furthermore, China knows that it can no longer afford to ignore the environmental costs – social and economic – of its rampaging growth, which has poisoned half its rivers and shrouded its cities in clouds of industrial smog which will cost billions in healthcare bills down the line.

                      Beijing’s rulers know they must take steps to rebalance the economy by fuelling demand at home. But for all the hype about Chinese millionaires buying Mercedes cars and Louis Vuitton handbags, a country with a GDP of £2,500 per head is still a very long way from having a consumer base that can take the strains currently being put upon it by the global economy.

                      To make that transformation, China must force its way up the global value chain, moving away from cheap exports and educating a new army of technically proficient workers. Again, there is much hype about China’s vast legions of chemists and engineers, but for now, their quantity is not matched by their quality. The country’s comparatively unreformed education sector may have realised Mao’s dream of almost universal literacy, but it remains poorly equipped for the modern world, as shown last week by the international university rankings published by China itself.

                      According to Shanghai Jiao Tong University, of the best 100 colleges in the world, 54 are in the United States. China’s own elite institutions – Tsinghua and Peking universities – do not appear until the lower reaches of the top 200.

                      And China’s model of growth, admired as a “miracle” in the West, has also created deep political problems for its leaders, which it is far from clear that the innately conservative Communist Party has the vision or the daring to overcome.

                      Where the West sees only a market opportunity, China’s leaders are daily confronted by the social consequences of an economical model that, ironically for a nominally Communist state, has made the rich very rich, but the poor relatively poorer.

                      Deng Xiaoping might have said “Let some people get rich first”, but that maxim has been taken to a dangerous extreme: between 1983 and 2005, the proportion of China’s wealth comprised of wages and salaries fell from 56.5 per cent of GDP to 36.7 per cent. This growing disparity has gained little attention in the West, but is the reason why Beijing has become so fearful of unrest among its own people that it now spends as much on its internal security as its army.

                      A spate of knife attacks at kindergartens this year, the increasingly bold and youthful strikers seen at many factory gates and the growing numbers of jobless graduates (a third of the six million leaving universities this year) are all symptoms of a political system under massive strain.

                      At the very point that the world is fixated on the country’s rise, long-term China hands say they haven’t seen such fear in the upper echelons of the Communist Party since the dark days of 1989.

                      China’s authoritarian system is often cited as one of the key factors behind its success – and not just by its own rulers and commentators. But of late the leadership has been exhibiting increasing signs of paranoia, harassing lawyers, deepening internet censorship and locking up dissidents such as Liu Xiaobo, a human-rights activist who received an 11-year sentence in December for circulating a pro-democracy petition.

                      For now, China rejects democracy as a luxury it cannot afford. But the record of the other successful Confucian states in East Asia that have made the leap up the global value chain – Japan, South Korea, Taiwan and Singapore – would suggest that it cannot do so for ever.

                      China may have surpassed Japan’s economy, but its leaders, with their strange mix of arrogance and insecurity, know the mountain they have to climb better than anyone. As Japan’s own painful experience shows, there are no guarantees that they will reach the summit.

                      So maybe not time to throw away freedom to follow them just yet…

      • Vicky32 11.1.2

        “are successful is their work ethic, their commitment to education and their ability to save, 5 generations of nanny state has robbed many hundreds of thousands of NZ citizens of that drive…”
        Proof of that assertion would be nice, Jeremy…

        • Colonial Viper

          Starving homeless NZ’ers in Australia.

          Perhaps Jeremy thinks this is a good way to give people “drive”.


        • Jeremy Harris

          Now your resorting to desperate topical mud slinging CV… Weak…

        • Vicky32

          @Jeremy who said: “You haven’t been to Auckland recently have you..? Or else you’d realise that trying to pretend there are more Kiwis in China then Chinese people in NZ is pretty hilarious after a walk down Queen St…”
          Fixed your grammar problem… plurals don’t take apostrophes, even if it does mean putting an ‘s’ after a vowel.
          Who says he was pretending any such thing? That jibe about walking down Queen Street and thinking you’re in Asia is getting pretty old and tiresome. The work I do (when I can get it) is teaching English to 90% of those Chinese (a huge chunk of whom are actually Korean and Japanese – can you tell the difference? Well, I can..)
          My point is that overwhelmingly, those Chinese are here temporarily as English or business students, and will be returning to their own countries. Schools actively recruit them to come here.

          • Colonial Viper

            Thanks Vicky. Its a shame that Jeremy is abandoning the lessons of his private school education but good of you to remind him.

          • Jeremy Harris

            Vicky you’ve now responded to my posts four times and every time it has been to point out spelling and/or grammar mistakes, as I said to you the third time if you are expecting a throughly edited post of beautiful prose in iambic pentameter you are going to be sorely let down…

            I don’t have the inclination to constantly proof read and edit posts, this is not a University essay… You’ve admitted on here that you post in Word to pick up your errors, so please get off your blameless, teacher’s high horse… My spelling may not be perfect but I’ve never claimed it to be, I’ve never actually even claimed my education was better than that provided by a state school (I went to a religious school, so we spent a lot of time reading the bible and praying when we could have been learning and doing something useful like maths, science or *gasp* even spelling), I would hazard a guess my spelling is better than a good proportion of the population and certainly many of the kids whose exams will be completed in txt spk youv got 2 mrk latr ths yr… Blogging is supposed to be fun, as such I’m not really interested in your petty spelling exams… I understand you don’t like the fact my family has a good standard of living, I understand you don’t like my beliefs and that therefore you must hate me and what I believe but this really is pathetic… If editing is really all you have to contribute to conversations and your only counter to my different view point of life, economics and politics, then you might as well butt out…

            @CV, I would point out when I notice your spelling and grammar mistakes in future but it is really a sad level to reduce a debate too…

            • Colonial Viper

              Yeah I was one who went to a public school Jeremy so waddya expect?

            • Vicky32

              Jeremy, I sometimes compose my posts in Open Office (not Word, they charge like wounded bulls) and when I do so, it’s to get around connection problems, not my spelling/grammar, because that comes naturally..
              (I was educated at an all-girls State school, by pendantic women who were dedicated and caring teachers.)
              I teach ESOL students (the above-mentioned Chinese, Korean, Vietnamese, Japanese and the odd Saudi, none of whom would be caught dead using txt spk… 😀
              I couldn’t care less about your family’s standard of living. If they are now filthy rich, good on them. It’s nowt to do with me!
              I don’t hate you, don’t be absurd! I notice that your extended whine about my attempt to correct something that really makes me teeth ache (apostrophe abuse) amounts to completely ignoring the rest of what I said about immigration and Asian economies!

  12. tc 12

    How predictable when the examples exist in our own sector that show sustainable non GM farming produces better returns, is dare I say it ‘sustainable’ and produces a product in demand rather than a commodity that asia/sth america can swamp us on.

    Organic milk gets 20% more on average as Fonterra, being sometimes customer focused, handle it.

    To have a plan that deviates from the traditional NACT M.O. (privatise, reduce services, reward your rich mates, punish the proles) requires intelligence, vision, drive and ambition to make a sigificant difference, oh and some talented folk to execute the plan…..move along people nothing here to see.

    Notice how the msm have forgotten about the bold economic vision that was put forward by a certain party after being consumed by all matters Hobbit……ah the NACT just must be lovin that goldfish attention span…..keep adding those fish flakes, it’s working a treat.

  13. M 13

    Hmmm, oil and cows.

    The globe has scoured for the type of source rock that is a sign of oil deposits – not/going/to/happen.

    Dairy – have these nuts never heard the expression ‘don’t put all your eggs in one basket’? Land and waterways cannot handle any more effluent unless we want to be like the US where on pig farms the farmers drive around dumping excrement all over their fields layer upon layer or use machines that flick great gobs of pig shit into the air so it can drift off in the wind. It may take someone like Key getting a face full before it dawns on him that this is madness – he could be shitfaced in all senses of the word.

  14. MrSmith 14

    Anyone heard Blinglish today, he sounds like a beaten man.

    • Colonial Viper 14.1

      Over what issue?

      • Draco T Bastard 14.1.1

        The fact that the economy is still crashing despite (or, more likely, because of) all of our wealth that the NACTs gave to the rich.

        • Colonial Viper

          But…but…but…isn’t it good the rich are now richer? Aren’t they going to invest their tax cuts in big NZ businesses and establish big employers here to create the innovation and leadership which is going to bring NZ out of its 30 year hole?

          That’s what Bill and John said last time*, right?

          They wouldn’t lie to us…would they?

          *It did cross my mind that Bill and John actually and sincerely believe in a mental model of the NZ free market economy where this would actually happen.

  15. Jum 15

    This government is captcha: failing.

    Submissions to stop the McKenzie country shit storing, putting cows where they were never meant to be and telling us that it was to keep them warm and then the water takeover and ECan going under were just used by this government to steal our democracy and place Jenny Shipley, Ruth Richardson and Don Brash in charge of divvying up the spoils to give out to the rich mates. The Canterbuy Finance sell off is just the same. Create a crisis and then take away our assets to resolve this non-existent crisis.

    Oil and cows – it’s like poverty-stricken people without hope taking a lottery ticket. This government should be so much better, but it’s not. Change it for another.

  16. FiresFloodsFlys-Aus 16

    Of course doubling the number of cows assumes no droughts, no floods, no large snow dumps, no bio-security breaches…

    But hey, not to worry the tax payer can cough for those, plus the tax breaks needed to buy those farms that don’t make sense now that “capital farming” has crashed.

  17. alloverrover 17

    Oil is not going to be NZ’s economic saviour anytime soon — maybe never.
    New Zealand’s domestic oil production from existing oil fields will have halved in just five years by 2015, and be down to zero by 2023. Dr Peter Crabtree let this cat out of the bag at the recent Petroleum Conference . see more at….

    Even if major discoveries offshore in New Zealand are made as early as 2011 (no new discoveries were made in 2010, and Exxon abandoned exploration in the Great South Basin), it takes at least five years and more likely 10 years to bring any such oil into production. (same for Southland lignite to fuel …. still in the pre-feasibility phase and turning sour ..


    Meanwhile as the recent Parliamentary “Next Oil” Shock Report pointed out – a lack of spare global capacity is very likely to lead to oil shortages, and recessions in the 2012 — 2015 timeframe.

    We face a perfect storm of plummeting domestic oil production, little if any new oil production likely, and global oil price shocks and shortages as world oil production fails to keep up with escalating demand. More Brownlee pipe dream than credible economic plan

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