80 years of underachievement

Yesterday afternoon, glancing at my email inbox, I was briefly take aback.  Like many no doubt, I’m signed up for the Prime Minister’s weekly mass emails.   But, not really concentrating at the time, the sender/subject line of the latest one grabbed my attention.

Rt Hon John Key        Celebrate 80 years with me Michael

It was an unnerving thought –  80 years with the Prime Minister.

It turned out that yesterday and today mark 80 years since the conference in Wellington in which the depleted forces of the then Opposition formed the new National Party (and the PM was trying to encourage people to join the party today).  I got curious and turned to that invaluable resource Papers Past to see how the papers in 1936 had covered the formation of the new party, which was to play such a large part in subsequent New Zealand political history.  Surprisingly, there was very little coverage at all.  I guess the media is often not very interested in the goings-on of the Opposition the year after a new governing party has won a crushing victory.

In its eighty year history, National has been in government (and the dominant party in all those governments) from 1949 to 1957, 1960 to 1972, 1975 to 1984, 1990 to 1999, and from 2008 to now.  That is 46 years – or 58 per cent of the 80 years.  Take out the period of World War Two –  when everyone’s attention was mostly elsewhere – and National has dominated the peacetime scene and, hence, the ability to set policy, pass legislation etc.  (In fact, as the Prime Minister’s email pointed out, the National Party was formed by merging existing political parties, which themselves had governed New Zealand for decades prior to 1936.)

Against that backdrop, their achievement –  as stewards, leaders, those entrusted with power – is pretty disappointing.

In 1936, Angus Maddison’s collection of national per capita GDP estimates suggests that New Zealand per capita incomes were among the very highest in the world –  behind, but not much behind, the United States, the United Kingdom, and Switzerland.  Denmark and Australia were a little way behind us.  The Great Depression had been pretty awful for New Zealand –  albeit not as bad as in the US – but we had emerged as still one of the most prosperous countries in the world.

By contrast, on the IMF’s PPP estimates, New Zealand was 29th in the world last year.

The 1936 dataset only has estimates for around 50 countries, but glancing down the 2015 list it is a pretty safe bet that none of the other countries (not in the 1936 collection) now above us would have had higher per capita incomes than New Zealand in 1936 had the data been available.

New Zealand has done badly (although it is fair to note that of the other leaders in 1936, even the US now only has the 10th highest GDP per capita).

Here is a scatterplot showing GDP per capita in 1936 and 2014 for the 45 countries for which Maddison (and his successor, the Conference Board database) had per capita GDP estimates for both 1936 and 2014 (the latest actual data).

1936 and 2014

Broadly, countries that were rich then are still pretty rich now, and countries that were p0oor then are still towards the lower end of the distribution.  There are some striking exceptions – South Korea and Taiwan are two of the more striking examples here. (China, interestingly, for all the hype about the last couple of decades, is the dot furthest to the left on the entire chart).

New Zealand is marked in red, with incomes per capita well below where one might have expected knowing our economic performance in 1936.  Some places have done much much worse –  those green dots are Guatemala, Venezuela, and Argentina  – but New Zealand’s performance has little to commend it.  Relative to the starting point, it is the worst of any of the now-advanced countries.

Of course, some people will want to mount arguments that our severe underperformance is not a matter for which governments (or the political parties behind them) can be held accountable for.  And there are certainly some things government can’t change –  geography, natural resources, the EEC, and so on.  But almost every country has advantages and disadvantages –  permanent or specific to that 80 year window. In each country, governments are responsible for how they react.  Ours, typically, seem to have chosen quite badly.  Since our relative fortunes still aren’t improving, it is reasonable to suggest that our governments are still choosing badly.

The National Party, and those of its members who form governments need to take some considerable responsibility for that.  Of course, the Labour Party and its governments do too –  it is just that they have had rather less time with their hands on the levers of power.

Good luck to the National Party in celebrating their 80 years.  The party has done well for itself, but less well for the people of New Zealand.  I’m not suggesting any ill-will, or bad intentions, and I don’t subscribe stories in which parties skew things over time much towards their own voting base.  National Party-supporting groups have probably done about as badly as everyone else –  in those international comparisons –  over the 80 years. And that is a problem for all of us.

Somewhat to my surprise, I discovered recently that the Fabian Society still exists.  The Fabians developed in Britain as non-revolutionary socialists, and my images are of people like Sidney and Beatrice Webb, Clement Attlee, and Herbert Morrison.  But anyway, the movement still exists in New Zealand.  Also somewhat to my surprise, they’ve invited me to speak to one of their public meetings on what went wrong with New Zealand to generate this disappointing long-term  economic performance and what might be done about it.  Glancing through the list of past speakers, I think I will be the most conservative or market-oriented person ever to address them.   But I like the idea of any organization whose website leads with the aim of “inciting debate”.

Anyway, meetings appear to be open to anyone who wants to come along, and for any Wellington readers who might be interested I will be speaking –  sharing a platform with Herald columnist Brian Fallow (who is probably more naturally at home with the Fabians) –  this coming Friday evening (20 May)    Details are here, but the venue is Connolly Hall (Guildford Terrace, just off Hill St) and the meeting kicks off at 5:30pm




8 thoughts on “80 years of underachievement

  1. Nice blog post. Its just so frustrating that we perform so badly. today we have a discussion about shop hours. This has been going on since the Nats were formed. Why?
    It epitomizes the inability of Govt. to get out of everybody’s lives.


  2. You are far too harsh on National Michael. Between them and the last Labour government they have done what many thought impossible: economic alchemy through no significant natural resource discovery, big improvements in productivity or significant capital deepening.

    All they had to do was artificially rig a housing market to constrain supply, combine this with a banking system that doesn’t have the skill or capability to lend on little else besides housing and boost immigration and *woosh* a city of instant paper millionaires. Its such a successful strategy I don’t know why every city in the world doesn’t try it.

    I suspect in years to come city mayors far and wide will court these economic experts for advice on how they too can turn their citizens into “millionaires”.

    (In case this is lost on anyone I am being entirely facetious)


    • Shamubeel finally is making sense. We are in a period of nation house building. The lack of infrastructure spending he referred to the last 10 years is a little light and I suspect that his migration history in NZ has really only been 10 years. I would put the lack of infrastructure spending to be the last 30 years.


  3. Michael what is your opinion of the way the prime minister has interacted with younger women in our society, pulling their pony tails and making jokes and so forth. is that something you could comment on thanks Harry D.


  4. I guess there’s always the counterfactual argument: “Maybe, but it would have been worse under Labour!” I suppose it is too hard to glean from the 80 years of data (and noise) some measure of relative economic performance that might be attributable to one party over the other.


  5. Yes, it would be very hard to disentangle the relative contribution of the two parties. One reason of course is that the parties’ policies have been very similar to each other over the 80 years, altho the shared ground has changed over time. There are differences of course, but the govts between 1936 and say 1984 weren’t that different from each other, one could mount a reasonable argument for the similarity of the 84-90 Lab govt and the 90 to 99 National govt, and I’d argue there is little material difference between the Lab govt on 99 to 08 and the current govt.


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