Red Alert

Economic development ideas

Posted by on April 29th, 2012

During the recess I have been working to fill out some ideas around economic development.

These personal views build on caucus discussions and our 2011 manifesto, and take on board feedback from party and business circles as I have been listening and engaging over the last few months.

This oped, published in the Herald on Friday, argues for lifting sustainable economic growth through a more ‘can do’, positive partnership with between government and business. It argues for a clear and credible strategy that integrates economy-wide, sector-driven and regional initiaitives. It warns of the dangers of the kind of one-off ‘deals’ with indvidual corporates now so typical of National.

This speech, delivered today to a meeting hosted by the New Lynn Women’s Branch of the NZLP, goes back to first principles. It argues that, post GFC, the “invisible hand” of neoliberal economics has failed, that New Zealand cannot cut or sell our way out of a hole, and that Labour must therefore present a clear alternative economic approach to the current government based on our own enduring values.

Hope you enjoy them.


29 Responses to “Economic development ideas”

  1. GN says:

    David, your speech really resonated with me. I appreciated your honesty about why Labour failed in 2011. I hope to hear more speeches like this and hopefully more social justice and moral senitment rhetoric from Labour and especially David Shearer (who needs to show his teeth not for simply smiling but also biting back!).

  2. former Labour supporter says:

    A facebook-free link to the speech please, David.

  3. Sofie Bribiesca says:

    Don’t do facebook David but would like to read your speech . Herald article is good too. More please.

  4. Carol says:

    It’s available here:

    http://newlynnlabour.nationbuilder.com/speech_get_your_invisible_hands_off_our_assets

    Excellent speech – inspirational. Though I prefer talk of sustainability, and a liveable quality of life for all over “growth” – in this world of diminishing resources, endless “growth” is becoming unachievable.

    But I really liked the rest of the speech.

  5. Simon Arnold says:

    David, haven’t read the New Lynn speech because of Facebook issue and my desire to keep some semblance of control on personal info, but the thing to grapple with is “where to invest?”

    The problem with state activism is the risk (seen in a lot of past investments) that we risk in what we tell ourselves we are or should be good at, or are popular in the public’s mind, rather than where we actually are.

    The Herald piece rather exemplifies this. You say: “There are also huge opportunities in clean technologies and renewable energy options that, with appropriate facilitation, could become major export earners as well as securing our future energy needs.”

    A more realistic assessment would be that this is an area of technology development that is receiving extremely large injections of public and private investment. We should stop and think about where we have real competitive advantage, and recognise that even in the best of all possible worlds we will only have that in very narrow niches.

    My rough rule of thumb would be we are unlikely to build a platform in a global niche value chain unless we are investing ~$10m p.a. in R&D to give critical mass on a global scale. In areas with impact on clean and renewable I can really only think of two in NZ that meets that criteria: geothermal and superconductivity (I’m not really up on the bio end – perhaps Scion and wood processing for bio-fuels would make this grade).

    I’m not sure that these are the things that NZers have in mind when we talk about clean and renewable tech (and I have to confess that while superconductivity is likely to be a feature of most large power systems equipment by next decade, and we are currently maintaining our position, it’s hard work keeping our seat on this train).

    Just to note the above isn’t an argument against fostering innovation in clean and renewable tech – it is just to remind that this won’t be the main game (and also it might be that we have nothing to offer the world here – no matter how sexy everyone thinks it is – and are better off being global leaders in another niche and importing best of breed clean and renewable tech).

  6. Simon Arnold says:

    Sorry typo in 2nd para – second “risk” should be “invest”

    Sorry now see Carol has posted a link to the New Lynn speech, but being polemic it doesn’t impact on the substantive issue discussed in my comment – although I do rather wondering about railing against the Australian banks and Micheal Fay while at the same time the Labour party are now supporting the latter in trying to buy the Crafer farms cheap from the former on the basis that he is more of a New Zealander.

  7. ghostwhowalksnz says:

    Simon, Fay is only one of a consortium who have banded together because they were prevented from from bidding for the farms individually.

    The effect of their bid is that iwi and local buyers will own individual farms. It is not a matter of being more of a NZer.- there is no such thing- is that overseas buyers have to follow the law.

    Labour is saying the current bid does not. Fay’s consortium is saying the same thing and the court have agreed.

    You are making falsehoods AFTER they have been shown to be incorrect.

    Then again you fail to mention that the National government has used Landcorp to make a foreign bid even partly acceptable to OIO. No one else has ever been so favoured by using Landcorp ( an SOE) outside their normal business model.

  8. Simon Arnold says:

    ghostwhowalksnz I was just dealing with the politics of the situation (which is the domain in which the new Lynn speech sits). It is difficult politically for the Labour Party to be critical of Micheal Fay in the context of asset sales while at the same time he is the public face of Crafer farm challenge.

    I’m sure that in your mind this is a principled position by the Labour Party, it’s just that the public perception of the issue (and the political nerve political parties are groping for) is that it is about selling off assets (and in particular land) to foreigners.

    However do I understand you to say that Micheal Fay won’t benefit if the deal goes ahead? If this is true Labour should get this out into the public domain, because it would greatly help its political position.

  9. Olwyn says:

    David, your speech in New Lynn was the most heartening I have seen for a long time, I only wish I had been there. You have very articulately put into the public forum what a lot of us have been saying, less articulately, in our living rooms.

    And good on you for challenging the superstition of the invisible hand; a perniciously used phrase that attempts to lend absolute moral authority to a non-moral concept.

  10. ghostwhowalksnz says:

    There you go again Simon, making falsehoods. Obviously Fay is one of the farm buyers, as everyone else knows apart from you, there being 12 scattered across the central north island.
    As for buying the farms cheap, they are valued individually at market rates, some are better than others.
    To an overseas buyer, they may wish to to pay a premium if they can get a special deal to get the government to run the farms and milk the cows for them. Thus they get around some but not all of the provisions of the law.
    Even the OIO rejects the claims that we need this company to sell milk products in China and along with PM Keys claim that ‘assorted laws’ such as the Trade deal mean they must approve the deal.
    It seems clear which group is on the wrong side of the current law and public opinion

  11. Simon Arnold says:

    ghostwhowalksnz I don’t know if you are worth the traffic, but you really shouldn’t go around accusing people of being liars without backing it up.

    I made two statements that could possibly be regarded as lies in my last comment. Did I lie when I said that Fay was “the public face of Crafer farm challenge” or was it when I said “the public perception of the issue .. is that it is about selling off assets …. to foreigners”?

    Come to think about it, you do understand what lying (aka “making falsehoods”) is?

  12. whodunnit says:

    Nice speech mr cunliffe! What do you mean though that governments over the last three decades have failed? Have you forgotten that you were a senior minister in the fifth lab gov?

  13. sica says:

    I totally agree with what Olwyn writes(hope you don’t mind Olwyn):

    “You have very articulately put into the public forum what a lot of us have been saying, less articulately, in our living rooms.

    And good on you for challenging the superstition of the invisible hand; a perniciously used phrase that attempts to lend absolute moral authority to a non-moral concept”

    Thank you David. I thought your Herald article was great but your speech (read thanks to Carol) was phenomenal. I almost wept tears of relief that someone had not only articulated a comprehensive,truthful analysis of the horrible situation we find ourselves in but had also, at long last, pointed the way towards an intelligent and informed alternative/narrative

    “Instead of National’s failed economic model, we need a simple, credible economic development plan that serves the interests of all New Zealanders.

    One that keeps more of what we earn here in the country we love.”

    Labour is back!

  14. Quoth the Raven says:

    David – In your speech you argue that “The global financial crisis was caused by unregulated banking”.

    Do you then ignore all the those interventions that are widely cited as contributing to the financial crisis. For instance, in the U.S. there was the change to the Community Reinvestment Act (CRA) (the first private securitization of loans were of CRA loans), to make banks prove they were making efforts at lending to the ‘underprivileged”, which led to the creation of the subprime mortgage market in the US, HUD directives to Fannie and Freddie, beginning in 1994, which produced a gigantic spate of government-insured subprime and nonprime lending and securitization, the innumerable regulations that had, since 1936, “canonized by decree” the judgments of rating firms and the 1975 S.E.C. decision to confer legally protected status on the three extant rating agencies, the Federal Reserve keeping interest rates low for five years after the dot com crash and the credit expansion it fostered and the role of the Basel accords. Read Jeffery Friedman’s paper A Crisis of Politics Not Economics: Complexity Ignorance and Policy Failure for more detail or his book with economist Wladimir Kraus Engineering the Financial Crisis: Systemic Risk and the Failure of Regulation.

    Or how about this work on Why Financial Regulation is Doomed to Fail

    In your speech you claim “Europe’s current economic crisis was caused by bankers who loaned money on riskier and riskier ventures until the whole structure collapsed”. So European politicians who used the credit conditions of the Euro to increase and increase government spending (till it was over 50% of GDP in Greece for example), or the establishment of the Euro in the first place played no role? It was just the bankers?

    In your speech you say “Austerity economics does not work. It did not work in the Great Depression of the 1930s and it will not work in the Great Recession of the current decade”. What austerity were you referring to during the great depression? Surely this is not a reference to the Hoover Myth.

    The historical record is clear that nothing has succeeded in lifting the masses out of poverty and fostering a flourishing and prosperous society as free market capitalism. Indices of economic freedom are consistent in demonstrating the link between economic freedom and greater human well-being. Economic freedom correlates positively with lower levels of violent crime, with higher levels of human development, and so on. Small government size and economic freedom are robustly associated with poverty reduction and government size negatively correlates with economic growth.

    Look at the historical record of countries that have followed free market reforms in recent times China, India, South Korea, Brazil, Hong Kong. It has resulted in the fastest elimination of poverty in human history. Now look at the numerous examples of societies that became significantly more statist and implemented state socialist economic policies and the human misery that resulted – Cambodia, North Korea, Somalia under the Barre regime, other past Marxist-Leninist African regimes e.g., Benin, Ethiopia, Maoist China and of course the Soviet states. Mass poverty, famine, torture, slavery, and mass executions were all commonplace among them.

    But this is an argument you are not having. No where in your speech do I see you really engage intellectually with those who hold a different view to your own. Instead of intellectual engagement you have chosen bellicose rhetoric and that is incredibly disappointing. You claim to want a positive environment for business, but the radical anti-market rhetoric of this speech will be a cause for concern for many.

  15. David Cunliffe says:

    @Olwyn,@Sica. Thanks. I am one of a team that care hugely about our shared future

    @ whodunnit. Sure Some mea culpa there.

  16. James says:

    I hope some decent economic development happens soon. Many businesses have found it hard to survive over the past few years – if they haven’t closed already. I think the economy will still be flat for a few more years at least, and having some good strategic direction would help.

    If there is no money for larger government initiatives, then the new growth has to come from somewhere else.

    I have seen some good initiatives and support by regional startup business networks, but the money just isn’t available for those with ideas to progress to the next level unless ideas are proven. It is difficult if you just need a small startup amount to test a new business idea, and you don’t have a sizable team to attract the funds needed.

    People don’t want to risk their home (if they have one) against a business startup in the current economy. Small business are having to bootstrap some type of lean biz startup to find pockets of profit, while testing new ideas and innovation. That all takes time, but the right initiatives, incentives and support for smaller businesses to develop and grow again would help.

  17. Tim G says:

    More than a little mea culpa. Unfortunate to find myself referencing Chris Trotter’s recent rant, but it’s nice to lay bare the ideological red meat on our bones.

    Working with mana it will be eviscerated for all to see

  18. Quoth the Raven says:

    Economist Paul Walker has a great riposte to this speech on his website: Just what does David Cunliffe know about economics?

    I would hope David would read it because it is very disappointing that someone in such a position as he would make such errors in his speech.

  19. David Cunliffe says:

    @ quoth. You are welcome to your opinions but remember that for every two economists there at least three different views.

  20. Jack Ramaka says:

    The KISS principle in business and economics work quite well, Keep It Simple Stupid, the wide boys have got it horribly wrong in recent years.

    At the end of the day the books have to balance somehow, the taxcuts benefitted the top 10% and the rest of us picked up the tab with the increases in GST.

    We have been running higher and higher current account deficits and now we are selling the family silver again to recorrect this mismanagement of the economy.

    Just blame the GFC.

  21. Paul Walker says:

    @ David. Your comment counters what I said how exactly?

  22. Red_maxim says:

    Bravo Mr Cunliffe. Brilliant speech, the sentiment was well received by my family and friends, many of whom now have their faith restored.

  23. Jeremy says:

    I was going to post but QoR has done the job expertly. The lesson of history is absolutely clear that the freer the economic system the better the poorest in society do. I notice in response to overwhelming evidence the best Mr Cunliffe can offer is:

    @ quoth. You are welcome to your opinions but remember that for every two economists there at least three different views.

    PPP’s are nothing but a recipe for inefficiency, corruption and corporate welfarism, and renewable energy – no such viable thing.

  24. Sofie Bribiesca says:

    Good one David , enjoyed your speech very much. It feels like Labour have some refreshing ideas going forward. Nice to see the strengths coming through on you and the teams new line up. Keep up the great work.

  25. SPC says:

    Mildly amusing that some right wing economists and friends are getting precious about the content of a speech to a party gathering. They note that it did not go into detail, nor seek to prove the points made in an academic format/method. Then the counterpoint contribution from Farrar on Kiwblog – who at least recognised it was a political call to arms, he tried to portray it as part of a leadership challenge and thus overlooked the parts of the speech that did not indicate this.

  26. Paul Walker says:

    @ SPC. The issue with the speech isn’t whether it is given at a party gathering or whether it is academic or its method or the amount of detail involved. The issue is that the content of the speech is, on a number of issues, simply wrong.