B3.2 New Zealand Economy: Bringing Home The Cup
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This article is from the New Zealand FAQ, by Phil Stuart-Jones and Lin Nah with numerous contributions by others.
B3.2 New Zealand Economy: Bringing Home The Cup
Kindly submitted by Paul Walker. Published in the Christchruch Press
on September 13th and 14th, 1995.
BRINGING HOME THE CUP
Michael Carter
Senior Lecturer in Economics
University of Canterbury
When Australia wrested the America's Cup from the New York yacht club in
1983, Tom Schnackenberg was a member of the shore team (a sail designer).
When New Zealand won the cup in San Diego, Tom was head of the design team
and navigator on NZL 32. His progression from shore to ship was far less
imposing than that in his native country. In 1983, a New Zealand
challenge for the America's Cup would have been inconceivable. The
domestic boat building industry was struggling. It had been decimated by
the imposition of an ill-conceived sales tax in 1979, which cut turnover
from $57 million to $8 million in two years.
Like Schnackenberg, many of New Zealand's best talents lived and worked
overseas, driven away by high tax rates and the lack of opportunity.
Innovation was discouraged by regulations, import controls and selective
taxes. The idea of a New Zealand team taking on the might of corporate
America was laughable.
At the end of 1984, I left Australia to return to New Zealand. Some of my
Australian colleagues laughed. They saw New Zealand as a basket case, a
joke, small isolated islands drowning in a sea of debt. My Australian
friends wondered when, not if, Australia would have to come reluctantly to
the rescue.
Ten years later, how things have changed. Our triumph in San Diego is due
in no small measure to the changes which have be wrought in the New
Zealand economy over the last 10 years. Moreover, bringing home the Cup
was only the most visible sign of the new vigour, confidence and strength
in New Zealand and its people.
New Zealanders are justifiably proud of the performance of Team NZ in San
Diego. They could be even more proud of the performance of home team, of
the radical transformation of their economy over the last ten years.
Domestic critics talk of the "New Zealand experiment" as though New
Zealand has pursued a lone path in recent years. Nothing could be further
from the truth. Massive economic change has occurred throughout the world
over the last fifteen years. Deregulation and privatization are universal
trends. No country remains untouched, from Britain and the US to the
former constituents of the Soviet block to Latin America, Africa and Asia.
Around the world, there is a feeling that New Zealand has done it better
than most. The Australians are now looking cautiously over their shoulder,
as their economy is consistently eclipsed by their Tasman rival. The
Economist regularly cites New Zealand as exemplifying the benefits of
economic reform. Monetary economists pay significant attention to the
Reserve Bank Act. Experts on telecommunications watch with interest New
Zealand's system of light regulation. New Zealanders are employed as
consultants advising on economic reform all round the world.
>From the laggard of the OECD, New Zealand has emerged to one of the
strongest economies in the world. It is an achievement to be proud of, an
accomplishment which surpasses even the yacht races in San Diego. That is
not to say that we have got everything perfect. Mistakes have been made,
implementation of some policies was less than perfect, and there is still
much to be done. But, from an international perspective, New Zealand's
transformation in a single decade has been remarkable. At a time when
some politicians are promoting a return to the past, it is sobering to
recall the changes which have been made and to reflect on the way we were
ten years ago. It is also interesting to remark how the opponents of
change have often become its most vocal advocates, as exemplified by
Federated Farmers and recently the Manufacturers Federation.
Much of the current political debate on economic policy is futile and
distracting, driven by poor memories and wishful thinking. If only New
Zealanders could achieve some consensus that we have been moving in the
right direction, debate could turn to the more constructive issues of how
to secure continued growth and equitable distribution. Prospective
voters could do their part by signalling more clearly to aspiring
politicians that they want to build on the present rather than return to
the past.
Tomorrow, we look back to the way we were in 1984 and review some of the
changes which have been made in our economic lives.
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