‘After COVID. Beyond GDP Growth’

Published in The New Zealand Herald, 24th of February 2021

With the start of the largest immunisation campaign in our history, and the continuation of strong public health measures, New Zealand’s largely COVID-19 free status can be consolidated, although we have to wait a while longer before the wider world becomes more health secure.

Here, we can now look ahead to our post-COVID future. Will we grasp this opportunity to map out a bold future, or will it be largely a return to “business as usual”? If our response after the Global Financial Crisis (GFC) is any guide, the prospects for fresh thinking leading to transformational are not good.

After the GFC, and cheered on by the bank economists and the commentariat generally, New Zealand suffered a collective failure of imagination. In the pursuit of untrammelled GDP growth we went for volume rather than added value and innovation. Essentially the strategy was about more of everything: international tourists and students, migrant workers to fill the gaps we couldn’t or wouldn’t fill ourselves, more unprocessed primary commodities, and more roads and vehicles. This all contributed to economic activity, but added little value, diversification, or new directions, and put considerable pressure on our infrastructure and our ecosystem.

It also required the government to look the other way as greenhouse gas emissions soared and questionable emissions units were traded, fresh-water systems suffered, logging debris was left unsecured, fishing vessels could ignore catch requirements, safety standards in trucking were not properly enforced, low-value providers in international education and elsewhere flourished, and short-term visa migrant employees were exploited at work.

Is there another way, and is New Zealand well poised to take advantage of it? A recent report in the Global Competitiveness series from the World Economic Forum (WEF) suggests we are well placed. The report – https://www.weforum.org/reports/the-global-competitiveness-report-2020 – reviews the prospects for post-COVID transformative economic and institutional change in 37 countries (including New Zealand), assessing a range of indicator across the three Ps of productivity, people and planet.

The top performing countries are almost all small-to-medium social market countries with competitive economies and developed welfare states: namely, Demark, Finland, and Sweden in the first rank, with the Netherlands, Canada and New Zealand not far behind. The one exception is China, which also features in the second rank. Our usual comparators, such as Australia, the United Kingdom and the United States, are towards the middle of the pack, with Greece, Hungary, Mexico, and Turkey in the bottom decile.

Where does New Zealand do well above average in the 100-point scoring system? We are in the top rank when it comes to quality and trust in our public institutions, a thriving, long-term oriented and stable and financial sector (although data availability is very limited here), and indications of diversity, equity, and inclusion (again, with limited data availability). New Zealand is also above average in keeping education and skills training up-to-date, in the quality of its labour laws and social protection, and in expanding access to care services and improving health system resilience.

But where is New Zealand below average and needing to lift its game? Despite all the public rhetoric, WEF sees a need to upgrade infrastructure for the energy transition and ICT access. It also thinks New Zealand could do a lot better in shifting taxation in a progressive direction, creating a more competitive and vibrant economic environment, facilitating the higher-technology “markets of tomorrow”, and incentivising and encouraging the long-term investment in research, innovation, and invention needed to underpin those markets.

These insights into areas of strength and weakness in New Zealand’s economic and institutional structure are not necessarily new. What is new is the comparative framework that allows us to view ourselves in relation to 36 other economies on key parameters of performance, and to find that we are close to the top rank – and that those comparator countries are not dissimilar to ourselves in many societal and economic features. We are in that cluster of small-to-medium-sized countries that operate largely on a social market basis with a competitive, open economy underpinned by environmental protections and with a well-developed set of welfare state arrangements that provide the essentials of an enduring social compact fora cohesive and fair society. We have the potential to transform. The question is whether we have the will to do so.

Peter Davis is Chair of The Helen Clark Foundation, an independent public policy think tank. 

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