I heard comments on the news recently that New Zealand has “ Zombie” towns in many regional areas that should be left to die away naturally and let Auckland grow without restraint. These views apparently come from Shamubeel Eaqub, an economic commentator from The NZ Institute Of Economic Research and seem to me to perpetuate a dangerously shallow perception of what is really happening in the World Economy and how it is being allowed to stifle the economic performance of many regions in New Zealand.
He is, in my opinion, ignoring the fact that many Asian economies are using mercantile policies (state intervention and manipulation) that are sucking away the wealth of many Western monetarist (open market) economies and dethroning them as dominant powers in the World at large. New Zealand has followed Western economic trends too and we are being exploited as well, with so many of our regional towns showing us the tragic consequences. Auckland has escaped the effects somewhat because it has become a relatively prosperous market town - a place where the much of the wealth produced by the regions is spent on real estate, lifestyles and consumer goods etc and playing with borrowed money from abroad. Productive industries have shrunk away and are being replaced by service sector activity that caters for the needs of local customers and foreign interests. As I see it, New Zealand is being sold away right under our noses and there will not be an end to it until those in power wake up to economic and social realities and act before it is too late to have any control of our future.
The following article might offer some hope for a better future with one solution to help avoid this danger. Hopefully it will help you see the big picture and perhaps appreciate that a household full of affordable clothing, electronic gadgets and cars etc from Asia and misuse of borrowed funds from abroad might be costing us much more than we realize. To implement these suggestions will require the same kind of courage and foresight that NZ governments have shown in the past and I believe it can be done if enough people in power act soon.
The Wheel Of Misfortune
If you want to make things or farm commercially in NZ, one of the biggest difficulties you have to deal with is the way our government chooses to use a floating exchange rate internationally to help regulate our economy and discourage inflation. I wonder whose bright idea it was to use our unstable dollar in this way and deliver Kiwi business profitability into the hands of fund managers who handle the savings of people living in other countries.
To get a take on what is happening in the overseas currency markets, just imagine how you would have to cope if the NZ internal economy operated like the global economy - where some districts within NZ had their own exchange rate that could be changed daily by professional gamblers in the Sky City Casino. To further complicate matters, other districts would also set their exchange rates to ensure a continual economic advantage over other districts.
If this was the case, when you travelled around NZ, imagine how frustrating it would be trying to work out the going rates every day so you could control your spending and income expectations in localities only a few hours from your front door. I think it would be incredibly complicated, inefficient and unfair.
Obviously, in our domestic economy, we need a single exchange rate for commerce and the rest of or society to run efficiently along with one set of commercial laws etc. Perhaps there is a solution here to help the World's economic woes and ours too by eventually having one world currency and the same commercial standards.
If a shared currency and accepted trading rules became established worldwide, as it does within our domestic economy, we would know at last the real costs of goods and services being traded by each nation. This would stop each government seeking unfair advantages for their trading sector by manipulating their exchange rates and help reduce their huge trade surpluses that are lent back as debt to other countries and disrupting their economies - which can eventually lead to a very messy World debt crisis.
The present set up is surely more than a bit crazy and would collapse if the debt accumulated by the USA was called in for repayment. It would also collapse if every country tried to devalue its currency and restrict imports in order to accumulate capital. There would be no winners, only billions of people losing faith in money doing its job – which is to be used as a means of exchanging goods and services.
Establishing a standard worldwide currency would of course be extremely difficult in today’s highly competitive political and economic environment. That will come in time when the World requires it, so initially, for cultural and practical reasons, currency parity between groups of nations would be an achievable first step. Obviously, the best parity partners for us to begin with would be countries that we have the most in common with culturally and/or have a similar standard of living – e.g. USA, Australia, Canada and the UK, followed by Europe, Japan, South Korea, Taiwan and Singapore etc.
Other arrangements would require more complex evaluation and adjustment systems to establish fairness and still remain true to keeping internationally traded money as a means of exchange instead of speculation and manipulation. To help poorer countries catch up and achieve faster rates of economic growth than richer countries, openly transparent trade assistance could be used until it became unnecessary. This would not include China. Because of its economic power it would need would need a separate deal to join groups of nations sharing a common currency value. China has been accustomed to doing rather well out of the present set up and would need extra time to adjust.
Another advantage of nations adopting currency parity values would be that it would help stem the wealth transfer taking place from the West to Asia by unfair trading practices and instead allow wealth to be generated within each country - influenced by its own skills and natural advantages. It might also help environmentally by exposing the real cost of transport and energy.
Initially, in New Zealand, export returns might fall in real terms from some countries and rise in others as our market adjusts to a fairer trading system. The pressure to keep quotas and tariffs would no doubt re-emerge with our trading partners, but they would be far more obvious and I would expect they would be less justifiable in a fairer trading environment that has a real level playing field.
Some time ago, I heard President Obama saying that his government would strive to lift his country out of the recession by reforming the finance sector and promoting ‘Fair and Free Trade”. He has not been able to do this, but could we succeed with our less complex economy and political set up? I would say “Yes We Can”, while we are still able to establish and maintain trading relationships on our own terms.
Until the principle of currency parity values was accepted and implemented by our trading partners it would be prudent in the meantime to mirror the various kinds of restrictions, tariffs and currency manipulations imposed on our exports and apply them to imports as we receive from them – a kind of Fair Trade Duty that over-rides current trade agreements. This would level the playing field for our productive sector (i.e. manufactures and farmers etc). These measures would be removed of course when currency parity was established and other state imposed protections were removed on both sides. If fluctuating currency values were removed, handling trading transactions would also be far less complex and enable businesses to focus on more important matters such as planning ahead with more confidence.
It is plain to see that currency speculation and exchange rate manipulation are unfair and distort world trade. They are not tolerated inside most economies and it is time to remove them internationally. World peace and continuing rises in world wide prosperity are at risk if we just sit back and hope that the invisible hand of the marketplace sorts it out somehow. Surely the wars, recessions and depressions of the last century are enough to warn us that changes are needed and leaving it to traders in many Western economies and Nationalist Governments in the East to sort it out does not work well. It is time instead to establish a fairer international trading system and build a more balanced World Economy.
If this came to pass, I believe that even poorly performing areas outside the main cities in New Zealand would very likely to become prosperous again. Their economic growth would be then be based on natural advantages, sound business management, technology and creativity instead of being hammered by policies dictated from abroad that reward mercantilist nations who punish the gullible nations ruled by leaders who cannot see or do not want to see what is really going on. These leaders seem to believe in monetarist myths and allow other nations to unfairly establish an unfair trading advantage. We have plenty of these running the show in NZ.
There are of course many other factors working together that encourage economic growth or decline in nations. However, I see our trading policies as the elephant in the room that few people want to discuss because I suspect that the current set up suits most of us. Many Maoris probably felt much the same when Europeans first arrived here offering a treasure trove of manufactured products. This short sighted attitude delivers short term individual needs very nicely and yet ignores the long term consequences of eventually becoming dispossessed. It appears to me that this is happening again and yet I am sure it is not too late to reverse it. If we do not, then the number of “Zombie Towns” will grow and eventually turn us into a “Zombie Nation” as we watch hopelessly while our land and future independence and prosperity are spirited away.