Selling assets to finance current account deficit = good?

Written By: - Date published: 2:00 pm, October 20th, 2010 - 58 comments
Categories: overseas investment - Tags: ,

I’m generally a fan of Gareth Morgan, but boy his facts are wrong in yesterday’s Herald column, and those false premises lead him to really bad conclusions. Basically, Morgan is trying to argue that we have to let foreigners buy our assets because if we don’t then they won’t buy our currency and lend us the money to buy more in imports than we make from exports. Morgan doesn’t explain why it’s a bad thing to not be able to fund overspending:

“Foreigners who sell us the imports we covet don’t really want to be paid in our quaint currency. So a pass-the- parcel process occurs until some foreigner is found who will either extend us credit (by holding our Reserve Bank’s IOUs) or buys one of our assets, thus giving us the foreign currency to buy those imports we crave…
… The only way this reality might come to an end is for the NZ dollar to fall so far that the price of imports we hanker for becomes sufficiently expensive that we pull our heads in and live within our (income) means.
That prospect is so surreal it’s not worth wasting time contemplating it.”

Well, let’s clear up one thing: New Zealand does not import more than it exports. Since the global economic crisis began, we have exported more than we imported nearly every quarter – exports have exceeded imports by $6 billion in the past 18 months.

True, in recent times we have tended to import more than we export but trade deficits only became the norm in New Zealand after 1995 (see Stats Infoshare). The cause? Neoliberalism, which hollowed out our domestic manufacturing so everything remotely high tech needs to be imported and brought in inflation-targeting which has resulted in New Zealand having a relatively high interest rate, creating the carry trade, which has kept our exchange rate up making imports cheap compared to domestic products.

Morgan seems to think there’s some inherent cultural stupidity about Kiwis that made us import more than we export in the years from 1995 to 2009. In fact, we were just responding to the market signals created by neoliberalism.

“If a foreign investor thinks the price of the asset reflects an attractive entry to the prospective profits that could flow, they will want to buy it – just like anyone else. The land’s not going anywhere, of course, it remains located right where it’s always been and over time its ownership will change – sometimes foreign, sometimes not. No big deal”

Um. It is a big deal because the reason we have a current account deficit is foreign owners of New Zealand assets (like farms) exporting the profits they make, and our banking system, now 90% owned by Australia, exporting its profits. In the past year, we sent $9 billion of profits overseas while exporting $3 billion more than we imported. To make up the difference, we had to sell assets and take on more debt. Insufficient exports and too many imports isn’t nearly as much of a problem as the huge flow of profits to foreign owners of New Zealand assets, including our debt.

The truth of the matter is that we’re selling off our assets to finance the outflow of profits from the other assets we’ve already sold off.

(btw, who else is pissed off with the vacuous ‘they can’t take the land away’ line? The productive capacity of the land is what is valuable, and that’s what we lose)

Morgan then goes on about a dairy farm he owns in Brazil:

“If instead I’d invested in dairying in New Zealand I would simply have pushed land prices up and, I’m reasonably sure, have made less money. So it’s being argued by the xenophobes that a win-win for New Zealand and Brazil is worse than if I’d spent my money developing a farm up the slopes of the Southern Alps.Get real. Foreign investment is how countries develop.”

No. Foreign investment is how developing countries like Brazil develop. A country with a relatively poor domestic economy can’t generate internally the capital it needs to grow. But it only works while a country is in the development phase with high growth rates to finance the foreign investment and increase domestic incomes. New Zealand is not a developing country – it has the growth profile and, potentially, capital depth of a developed economy.

Let’s follow though Morgan’s horror scenario. He goes part of the way, then stops:

“Ban foreigners from buying our assets, though, and there certainly will be a sharp shock to the system.

If foreigners can’t use New Zealand dollars to buy New Zealand assets why would they be willing to hold New Zealand dollars?”

So what happens next? Foreigners are prevented from buying Kiwi farmland and strategic assets. Foreigners become less willing to hold Kiwi dollars, so the currency falls. That pushes up price of imports and make exports more competitive, so the current account balance improves. With less money flowing out as imports and more coming in from exports, New Zealand has more money domestically. That money can be used to fund capital development in place of foreign capital – New Zealand’s indebtedness to the rest of the world falls. Meanwhile, asset prices fall because a group of buyers has been excluded from the market, making it more affordable for Kiwis to buy them, leading to lower mortgages to the Aussie banks, and freeing up capital that was used to buy land for investment elsewhere.

We end up less indebted, with a deeper pool of domestic capital, with more competitive exports, with domestic manufacturing not being undercut buy cheaper imports, and we own our own assets. In return, you might have to buy a small LCD TV than you otherwise would have, or car rather than an SUV.

Yeah, that’s a real horror scenario, Gareth.

58 comments on “Selling assets to finance current account deficit = good? ”

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  1. M 1
    20 October 2010 at 2:37 pm

    ‘That pushes up price of imports’

    This could breathe new life into domestic manufacturing if the price of imported stuff soars.

    How on earth will NZers be clothed and shod once the containers slow down or stop coming from China? There can’t be too many shoe manufacturers left in NZ – Minx springs to mind only because it’s been in the media a lot and there’s a custom shoe maker on the Kapiti Coast. Few people can afford designer duds and many people are unable to sew so they’ll be in a tight spot unless they have skilled family members or friends, assuming of course there are any fabrics to buy.

    • Rex Widerstrom 1.1
      20 October 2010 at 5:09 pm

      You mention shoes… When I grew up in Wainuiomata a lot of the locals were employed at the Bata factory – founded and owned, ironically, by the kind of foreign investor we do want, a fine man by the name of Frank Brugger. And those who didn’t work at Bata were employed down the road at Brugger Industries, who made fuel-efficient (better than 75%) woodburning stoves and car radiators amongst other things.

      There was hardly a pair of Kiwi feet which hadn’t at some point worn a pair of Bata Bullets, and the stoves were a feature of many homes in NZ as well as being exported all over the world.

      Frank Brugger, despite being undoubtedly the richest man in Wainuiomata and one of the wealthiest in NZ at the time (this was the 70s and early 80s, before asset-stripping and money trading made rich men out of people with no talent) but maintained a humble office in Wellington and gave, quietly and unostentatiously, to charity.

      AFAIK he never had industrial trouble at his plants – there were certainly no strikes – paid fairly and treated everyone well.

      It was the influx of cheap footwear (not that Bata Bullets were out of the reach of anyone I knew) and the collapse of the car manufacturing industry that led to the end of both these companies (there’s a Brugger Industries in Samoa, I believe, though I have no idea if they’re connected).

      No doubt Gareth Morgan would cheer the “efficiency” this represents. But Wainuiomata didn’t, in those days, need its own WINZ office which it has today. There wasn’t the domestic violence, or the other sorts of violence, which plague the place today.

      I wonder if, with a little bit of creative thinking by government – tax breaks to cover setup costs, for one thing – we couldn’t reinvigorate a community like Wainuiomata with manufacturing again. After all, as reports like this show, the “savings” from offshore manufacturing are often illusory.

      The idea that decent wages are driving manufacturing offshore is also a nonsense – wages account, on average, for 4% of the cost of manufacture in that study (which looks at US companies shifting manufacturing to South America, admittedly, so there could be differences in actual percentages if such a study were done in NZ).

      But let’s not accept the prevailing orthodoxy that there’s nothing we can do. Let’s at least look at the options, undertake some studies like that one, be a bit flexible in our tax policies instead of looking to milk the most out of everyone to hand back as illusory “tax cuts” to buy votes from a relatively tiny group of swinging voters.

      Let’s stop accepting crap like that mouthed by Morgan in that piece as being as unalterable as the laws of physics, and being too scared to challenge that orthodoxy lest we be called heretic.

      At least that’s what I’d like to do, given the chance…

      [Frank, a Czech immigrant (nowadays he’d probably be called a refugee) I believe passed away in 2000. It’s a source of regret that I didn’t tell him how much I admired him despite the assistance he gave to many community initiatives of which I was a part. I hope his family knew how many people thought him a truly great man].

      • Draco T Bastard 1.1.1
        20 October 2010 at 7:38 pm

        I wonder if, with a little bit of creative thinking by government – tax breaks to cover setup costs, for one thing – we couldn’t reinvigorate a community like Wainuiomata with manufacturing again.

        Forget the tax breaks – just have the government finance it and then once its up and running hand the management over to the workers as a cooperative.

        After all, as reports like this show, the “savings” from offshore manufacturing are often illusory.

        A factory in NZ is just as efficient as the same factory in China. Sourced from local resources and selling to the local market only and it’s far more efficient. It also would be far smaller and unlikely to be making a profit but costs will be covered and the people working there will have a good living standard.

        • Rex Widerstrom 1.1.1.1
          20 October 2010 at 8:11 pm

          But I like the idea of NZers (other than, but of course including, the workers in a particular business) having a financial interest in it. I think it builds a connectedness that otherwise wouldn’t exist… If I own a shoe factory and you own a market garden, if the weather means you have a bad season and I’m making a good profit out of my shoes, you can come to me for investment. I’ll do that (providing you have a sound business model) because if you go out of business, you and your employees won’t be able to buy my shoes (to use a ridiculously over-simplified example).

          A factory in NZ can be more efficient than one in China, in fact, because the Chinese one probably hasn’t been built with the same amount of ingenuity (something in which NZers excel) and most likely relies for its “efficiency” primarily on cheap labour costs.

          But while we might disagree on the exact shape of the solution we’re clearly both tired of the prevailing paradigm, as are a lot of others here. So why isn’t that seeping through to our Parliamentarians? I expect because candidate selection is tightly controlled so as to weed out any heretics who might frighten the ubiquitous “swinging voter” by proposing something different to the received “wisdom” being mouthed by the hundreds of other wannabes come election time.

          And so long as the elites keep choosing those who think and look and talk the way they do, we can’t expect change.

          • Draco T Bastard 1.1.1.1.1
            20 October 2010 at 8:26 pm

            I think having control of the business is rather than just being another wage slave is enough. The idea is the people who work there can see just how well the business is going and make decisions that will affect that.

            Yeah, getting the people at the top to realise that capitalism has failed is a little difficult even though the people at the bottom already know this.

      • M 1.1.2
        21 October 2010 at 9:22 am

        Rex

        Wonderful post and a good history of Bata – I recall that no matter how dirty your shoes got the stars always shone through. NZ needs to get its manufacturing base back, employ its own people at liveable rates of pay and stop supporting the slave regime in China.

        If that were to happen then maybe we would start rising to the top of the OECD ladder again.

  2. Herodotus 2
    20 October 2010 at 2:41 pm

    “…We end up less indebted, with a deeper pool of domestic capital, with more competitive exports, with domestic manufacturing not being undercut buy cheaper imports, and we own our own assets”
    So Marty what time period will this readjustment take and what unforseen consequence will be endured by us? Remember the Great Lab follow up comment regarding the economic pain that we were to endure from the ’84 changes. Agreed Lab kept promise .. There was pain !!!
    I am donot hold a degree in economics (But I do have a dart board) Whislt we have current account deficits we require overseas source of funding this will progressively get more expensive. There already are the likes of additional charges from banks as Global Liquidity Costs to cover additional borrowing costs from banks readjustments to longer term source of funds and increased local % of borrowed funds + some other targets.
    As Labour is tradable (if your reactions to this change hold true) then we loss our most unique and valuable resource human capital as they are tempted to follow the money ofshore.
    At the same time that Lab has commented on increasing wages and investing more, but no how?
    It is no good thinking that we have found a cure when the patient has already died.

  3. Bobby 3
    20 October 2010 at 3:09 pm

    I agree up to a point but like Gareth you mising the next few steps

    NZ dollar devalues hence import prices increases

    Because we dont have the manufacturing capacity or expertise to produce what NZ’ers want we cant subsitute imports for NZ production

    Therefore large increases in inflation leading to a real decline in incomes, leading to all our talent going offshore leading to a cycle of declining productive, inflation and loss of talent

    But we still own the land hence can all live in thatched huts growing our own vegatables and good times will be had by all

    lesson – you cant deintegrate from the global economy unless you have something unqiue the world wants (like China has cheap labour). Unless that is the master plan – become the new China of the South Pacific?

    • Blighty 3.1
      20 October 2010 at 3:30 pm

      National’s plan is to make us a low wage economy.

      And you’ve forgotten that with domestic production more competitive we can make use of a hell of a lot of idled manufacturing capital. Every city and town in this country has shuttered factories that can easily to reactiviated and equiped with new equipment.

      • Bobby 3.1.1
        20 October 2010 at 3:34 pm

        Agreed you could reactivate it – but where would you buy the equipment, tools etc from?

        You would have to buy it offshore and high prices given the now weak NZD – making it uneconomic for a private enterprise to reactivate said factory

        Actually i see your master plan – the Goverment steps in and nationalises all these factories…..

        • Gosman 3.1.1.1
          20 October 2010 at 4:01 pm

          Funnily enough this was the stated policy of Zanu-PF in Zimbabwe when their left wing policies destroyed their productive sector. They thought they could just command businesses to produce and threatened to nationalise any businesses which weren’t opperating at capacity.

        • bbfloyd 3.1.1.2
          20 October 2010 at 4:10 pm

          Bob… so continuing to import for consumption is fine, while importing machinery/equipment for domestic production is bad? if i buy a pair of trousers made in china, then i pay for those trousers with money that i earned at my job(assuming i have one).. conversely, if i buy sewing machines made in china, then i would be paying for them from the proceeds of the clothing etc i would be selling.. when my trousers wear out(rapidly if they are chinese made, then i have to use more money out of my wages. i recoup nothing on the cost of those trousers, yet if my sewing machines wear out, then the cost will have been factored into the price i ask for my goods. and, of course, it allows me to continue earning… can you spot the difference yet?

          • Blighty 3.1.1.2.1
            20 October 2010 at 4:16 pm

            Basically, Bobby is pro selling assets to pay for consumption. That’s a pretty f*cked up position.

            It’s better that we don’t learn to fish for ourselves, especially if we have to buy the fishing pole from offshore. It’s far better that we continue to pay someone else’s profits for doing the fishing, even though we have the spare capacity to fish ourselves and we can’t afford to keep buying fish from others.

            • Bobby 3.1.1.2.1.1
              20 October 2010 at 4:24 pm

              I dont propose it there just no realistic alternative….the alternative outlined above would not work – thats what im pointing out as is Gareth.

              I actually agree that land should be NZ owned….

              • Colonial Viper …
                20 October 2010 at 5:21 pm

                Ah well when the NATs lose in 2011 we’ll show you a few realistic alternatives Bobby. Then you can watch and learn.

                Goodbye TINA hello gorgeous TARA

                There Are Real Alternatives 😀

                • Bobby …
                  20 October 2010 at 5:23 pm

                  I look fwd to being educated!

                  Labour does do some good things – Kiwisaver is a brilliant idea – Nats stupid to prune it back. Should be expanded

                  • Herodotus …
                    20 October 2010 at 5:40 pm

                    There are some here who comment that the current financial model (neo lib) has past its used by date, if they are correct then wait for this as if/when the world wide economy bursts and our funds go bust then where are we, at least internal investment there is something tangable to build on.
                    Kiwisaver is great for those being subsidised by those unable to benfit, more of the rich profiting from the worker.
                    Also investing the money offshore does what for promoting NZ economy? And Lab wants to greatly limit foreign investment then OK for us to invest overseas. Looks like Phil the Metronome will then have to swap sides again to keep the faith of his comments, now is Phil swinging to the right or left to keep the beat?

          • Bobby 3.1.1.2.2
            20 October 2010 at 4:21 pm

            Can YOU spot the difference

            In your silly example its a consumer buying both the consumer good and the productive asset

            In the real word the productive asset is purchased by a private enterprise who need a return on that asset and who need capital to invest

            If you make it expensive to purchase input costs then prices need to rise to generate the required return, but in this high inflation, low wage utopia you created nobody can afford it.

            Hence private enterprise wont invest..there is no magic bullet here

            I have no real problem with moving away from a free trade / capitalist enivironment (despite my education and career being tied directly to it). I honestly believe humanity would be happier and our lives more meaningful if the focus of life moved from consumption, wealth to more basic needs and aims. But for it to work the WHOLE world would have to move at once. NZ cant be a leader in this…we would only be hurting ourselves.. mmm think i actually just proposed a global revolution oops

            • KJT 3.1.1.2.2.1
              20 October 2010 at 4:35 pm

              Someone has to start.

            • bbfloyd 3.1.1.2.2.2
              20 October 2010 at 4:43 pm

              Bob… you make far too many assumptions to have a valid point… 1) you assume any clothing i produce would be expensive. (have you a costings sheet handy?). 2)have you never heard of cottage industry? assumption 2 is that this wouldn’t be a viable option unless it could be done on a large enough scale immediately to attract investment capital… you really need to go to your local library and read up on how most businesses get off the ground..

              i appreciate your effort in putting forward an opinion, but i would prefer you spent a bit of time considering the examples i gave from a slightly wider perspective.

              a small (three/five person) clothing company would be relatively easy to set up and run, which could produce very efficiently, basic, good quality clothing at prices that would be competitive with imports on two levels.. 1)prices would beat worst, only marginally more expensive than chinese imports..2) the quality of those goods would be, without much effort at all, much higher than the imported product… meaning that it would probably fit better, as we aren’t all shaped like orientals, (which is the templates generally used for imported clothing), and also the items would tend to last much longer, which, of course, over a period of time. lets say one to two years, would result in actual savings to the consumer..

              • Bobby …
                20 October 2010 at 4:49 pm

                Lol – have you heard of specialisation – it is (was) the major driving force in the large increase in world GDP and standard of living over the last 200 years

                To suggest a cottage industry could get anywhere near the costs of Chinese production is laughable and shows a basic lack of knowledge of economic theory and general common sense.

                The destruction of NZ industry over the last 20 years proves my point (and these were large scale operations)

                Its not my number of assumptions that is the issue – it is your lack of understanding of basic economic conceptions that hinders your ability to interpret them

                Cottage industry as the solution….really that is hilarous!

                • bbfloyd …
                  20 October 2010 at 4:57 pm

                  Bob… please try to read the whole post…. your cherry picking of points within is irritating.. and pointing to the status quo as justification for avoiding the issue i raised is facile semantics… if you want to discuss this intelligently, then i suggest you do more than react.

                  • Bobby …
                    20 October 2010 at 5:01 pm

                    I did read it – and can dispute it with one word ‘specialisaiton’

                    I suggest you look the term up and learn why it such an economic driving force.

                    You are proposing a return to the 18th / 19th century…its really is laughable

                    If you proposal is so achievable why dont we see 100’s of small (3 – 5 person) clothing companies dotted around NZ? I will give you a hint the answer starts with ‘S’

              • bbfloyd …
                20 October 2010 at 4:52 pm

                the time to talk investment capital is once the company has achieved enough market share, and possibly by then, export potential to need significant expansion.

                • Rex Widerstrom …
                  20 October 2010 at 8:24 pm

                  I’m in agreement with everything else you’ve written on this topic in this thread bbfloyd, but surely you’re not ruling out venture capital?

                  I know talking about the DFC is akin to goosing the vicar these days, and I don’t support bureaucrats “picking winners” and handing out taxpayer funds.

                  But when the DFC was withdrawn, the chances of a NZ startup getting venture capital went with it.

                  When I was actively in politics the lack of venture capital was the first equal complaint I heard (the other was the imbalance in the Family Court, but that’s another post). I was, frankly, amazed at how many ideas are out there that just need what is (in our terms) micro finance to produce a prototype and explore markets.

                  ABC Australia has a series called The New Inventors. Every week for an entire season they feature three product ideas that have at least some degree of potential. Converting just a third of those into businesses holds the potential to boost the country’s balance of payments (since many have export potential) and put thousands into work.

                  Australia, of course, is short of workers in the mining states so their strategy is to shift people from the non-mining states to fill the vacancies. NZ doesn’t have that luxury.

                  Just scroll through the inventions on that site and I’m certain you’ll see dozens of potential businesses. Sadly, the show often does a “where are they now” segment, and the inventors of a few series ago say they can’t find venture capital.

                  I reckon that if we incentivise genuine capitalism – taking risk in the hope of reward – and disincentivise property speculation, we’d be amazed at the explosion of inventiveness, business startups, employments and eventually exports that would result.

                  • lprent …
                    20 October 2010 at 9:33 pm

                    Getting capital is still the biggest pain in the arse in doing startups. There are venture capitalists out there these days which is a let better than it was 15 years ago. They get an arm and a leg but are sometimes worth it. Most ventures still start with mortgaging a house…

                  • bbfloyd …
                    21 October 2010 at 6:45 pm

                    sorry for the tardy reply rex.. no, i’m not ruling out venture capital. what i am saying though, is that historically, some of our most successful industries have started life as a “cottage industry”.. i would agree that once a business has become successful enough to look to move towards national, or international growth potential, then venture capital would be a necessary step.

                    i can easily envisage many small local businesses providing the goods we use every day at competitive prices. and making profits doing it. not large profits necessarily, but enough..

                    one of the major problems with the business models i have heard touted seem to be geared towards maximizing profit, ultimately at the expense of quality,and/or service.. i would regard this as regression rather than progression.

              • Uroskin …
                21 October 2010 at 1:13 pm

                Sounds exactly like Mike Baldwin’s ladies’ underwear factory on Coronation Street. Highly mythical even in soap opera terms. Delusional in real life – even at the high end (Italian underpants designers now offshore manufacturing too)

        • Rex Widerstrom 3.1.1.3
          20 October 2010 at 5:22 pm

          Weak NZ dollar?! If you’re looking to buy your tools from the US there’s probably never been a better time for you (or indeed just about anyone else) to do so.

          The Australian dollar is nudging parity… of course Australians are eyeing cars and Disneyland holidays and US clothing labels bought on ebay. As usual the government has no plan to capitalise on the situation by encourging reinvigoration of the manufacturing sector. Indeed it’s lamenting the effect of parity on exports coz, you know, all Australians can do is grow food and dig holes in the ground…

          Too many people have been brought up over the past 20 years hearing this so that even those ostensibly on the left (like Australia’s present PM) treat it as though it’s writ in stone. It’s not, and if we think a little laterally then the falling US dollar could, for precisely the reasons you mention, make retooling a possibility.

          Then it’s a matter of rethinking our tax system to make property speculation unattractive and thus encourage productive investment…

          Of course I could have it completely wrong. But what annoys me is that no one (aside from a handful of people such as the report I’ve linked to above) are doing the research, and certainly not in NZ, because no one will challenge the prevailing orthodoxy.

          • Colonial Viper 3.1.1.3.1
            20 October 2010 at 11:00 pm

            Just buy second hand tooling from Australia and the US. Not too expensive. Australia because they are upgrading and the US because their (non-military) industrial economy is on its last legs.

            That’s how China started.

    • KJT 3.2
      20 October 2010 at 4:24 pm

      I am sure that denied imports, a whole lot of Kiwi number 8 wire entrepreneurs would soon find substitutes.

      That could well be the best thing that could happen for ordinary NZ’rs.

      We may even avoid becoming a casualty in the USA and China’s currency wars.

      Do you really think we are going to get out of debt by out exporting all the other Western nations that are trying to do the same thing.
      Not to mention getting more and more into debt from China to buy junk from China.

      • Blighty 3.2.1
        20 October 2010 at 4:28 pm

        bobby and his ilk don’t believe in Kiwis’ abilities. they’re always talking down our ability to do anything ourselves.

        • Bobby 3.2.1.1
          20 October 2010 at 4:37 pm

          Im sure the #8 kiwi spirit would come out in spades…im sure we would survive -we would just be a lot poorer. If thats a trade off you willing to make so be it!

          A lot of NZ’er would not make the trade off and would leave – and thats not a good thing no matter how you look at it

          • bbfloyd 3.2.1.1.1
            20 October 2010 at 4:59 pm

            you mean they aren’t leaning in droves now? they have their own suburb in perth now.. get with reality bob…

            • Bobby 3.2.1.1.1.1
              20 October 2010 at 5:05 pm

              Yeah they are – but could be a lot worse. At the moment the trade off is a 50% higher salary in Australia but move away from family / friends etc. Personally thats what is stopping me

              Are you honestly suggested that if (for example) the wage difference was 100% you would not see MORE people leaving?

              • KJT …
                20 October 2010 at 5:28 pm

                It is the wage difference plus high costs that see people leaving.

                Everyone is going to be poorer soon as lack of resources worldwide start to bite. Oil is not the only one.

                A country that is first in the race to a sustainable economy is likely to be better, not worse off.

                It is a problem that most of the people who can actually do things (Rather than juggle money and flip burgers) have left, but if we are a leader in the new world they may be motivated to come back.

                • Bobby …
                  20 October 2010 at 5:32 pm

                  Agree with your basic premise but as i said before being the first to go down that path will cause a lot of hurt – better to be a follower

    • Draco T Bastard 3.3
      20 October 2010 at 7:42 pm

      Because we dont have the manufacturing capacity or expertise to produce what NZ’ers want we cant subsitute imports for NZ production.

      I’m getting really pissed off with the idiots spouting this line. We probably do have the expertise and the manufacturing is just a question of development from applying that expertise. It’s how every single country has developed and the ones that developed fastest are the ones that did so with government intervention – not foreign investment.

    • infused 3.4
      21 October 2010 at 7:20 am

      “Because we dont have the manufacturing capacity or expertise to produce what NZ’ers want we cant subsitute imports for NZ production”

      Wrong. It’s that we shop for the cheapest price. Manufacturing cannot compete with imports.

  4. bbfloyd 4
    20 October 2010 at 5:05 pm

    talking of kiwi’s abilities… was it not kiwi can do and ingenuity that gave us the opportunities to become a successful, wealthy country? a quote that may be relevant..” to know your past is to know our future”.

    i for one am sick of our looking to a future that is no more than an echo of what has gone on in the last twenty years. time to break the cycle of stupidity.

    • Bobby 4.1
      20 October 2010 at 5:10 pm

      Got us to ‘where’ today – a continious decline in the OECD rankings since we lost our direct and preferred access to UK market a few decades ago?

    • KJT 4.2
      20 October 2010 at 5:45 pm

      40 years of idiots in parliament. From Muldoon who taxed sunrise industries out of existence to pay welfare to farmers, Douglas who let his mates steal everything that was not nailed down to Key who thinks we will get rich by selling the remainder of our productive assets.

      look to successful countries, not failed States like the USA and UK.

  5. ZeeBop 5
    20 October 2010 at 5:46 pm

    If only! The reasons kiwis left NZ to find work, careers, returned! If only the economy was not aplace
    for foreign speculators to make profits and no capital gain taxes to crimp them. The argument that
    we would not find the capital is disingenious since all those Kiwis who left will start returning in force.
    The developers won’t mind, it will mean a booming property market. Exporters won’t mind, larger
    more consistent consumption by Kiwis is actually a bugger buffer to build off to then export.
    One thing’s for sure, we’re catch Australia.

  6. Draco T Bastard 6
    20 October 2010 at 7:17 pm

    Foreign investment is how countries develop.

    That has got to be the most stupid thing I’ve ever seen any economist say. Britain didn’t develop and become a major empire through foreign investment. In fact, such investment was out and out banned and they also tended to be having wars with the people who could have done the investment.

    Foreign investment is how developing countries like Brazil develop.

    And even then it’s still not needed as they already have the capital to develop their economy. They have the people, the education and the material resources. It’d be a little slower maybe but development would still happen.

    New Zealand is not a developing country – it has the growth profile and, potentially, capital depth of a developed economy.

    Actually, I think we at the point of having to develop a stable state-economy. One that produces enough to cover what we need (with the proviso that it be within ecological limits) and no more. And we have the capital depth – it’s not money that causes development to happen.

  7. Colonial Viper 7
    20 October 2010 at 11:01 pm

    Gareth Morgan needed to switch off his economics brain to write that piece. Was someone holding a piece to his head? That’s what it read like.

  8. Robert Atack 8
    21 October 2010 at 9:36 am

    Gareth Oxymorgan ?
    This guy has been on record about climate change etc … didn’t he write a book about it or something?
    His ideas belong with the dynasores. Economic growth is killing your children’s futures
    But what the hell no one gives a toss.
    Keep paying into Kiwi Saver you 18 year olds, Oxymorgan thinks we will have an environment worth living in when you retire.
    Humans are no smarter than yeast.

  9. john 9
    21 October 2010 at 5:31 pm

    I think Gareth Morgan is a really nice guy but his social and economic opinions are the failed ones of selfish greedy neoliberalism. Just as Jesus said it’s easier for a camel to pass thru the eye of a needle
    than a rich man to get to heaven. I think Gareth’s privilege from wealth completely blinds him to the social well being of all NZers, which is don’t sell off your free hold house to buy goodies from overseas! Otherwise you’re renting someone elses house (Who lives overseas and may not even be a kiwi!)while you enjoy your imported goodies.I know which I prefer!

    • bbfloyd 9.1
      21 October 2010 at 6:57 pm

      John.. i agree that morgaging our future in order to have flash new toys to play with is short sighted stupidity.. gareth does seem like a nice bloke, when he’s not expounding his economic theories that is.

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