Perhaps the politicians are content with this record

Michael Reddell Eastern and central Europe, New Zealand economic performance, Productivity

I’m on deadline trying to finish a chapter for a forthcoming book, but was checking some numbers and noticed that the OECD now has 2018 labour productivity estimates for most countries.

This is the company we keep these days (comparable levels of real GDP per capita, in PPP terms).

e europe.png

(For the two countries with asterisks the numbers are for 2017).

And here is total growth in labour productivity over the period 2012 to 2018 for each of those countries.

e europe 2

(On my reading of SNZ data, the OECD’s New Zealand numbers looks a little low: probably something between 0 and 1 per cent looks to be a better estimate).

It wasn’t that 2012 was particularly exceptional in New Zealand –  so that we were coming off an artificially high base –  just that since then productivity growth has vanished.

GDP phw may 19

I do hope our political leaders –  both main parties –  and their business and media cheerleaders are happy.

Citizens shouldn’t be.

22 thoughts on “Perhaps the politicians are content with this record”

  1. As most of our politicians own a primary residence and many own rental accommodation, all safely tucked away in family trusts, im sure they’re delighted to have crush-loaded our cities, especially Auckland.

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  3. And yet that is exactly what they will say, at least when they are not pretending everything is fine. Just that they don’t do anything serious, or even demand analysis/advice on what might usefully be done.

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  5. But you aren’t seeing the bigger picture Michael: we are but one house in a Village [“welcome to our Village – little one” Jacinda to Neve]?

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  6. Now I understand why my ex-neighbour came from Turkey; stayed three years; had two children and then returned to Istanbul. Maybe my children should be learning latvian, turkish or polish. Is English our disadvantage?

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  7. What would be quite interesting is to understand the total number of recommendations that the productivity commission has made since 2010/2011 (maybe 500 over that period…?) And the number that have been picked up by politicians as part of any sort of reform program (perhaps 50? 100?).

    Hard to say whether adopting every single recommendation would have made a material difference to productivity performance but surely the level of adoption of the recommendations would be indicative of the level of seriousness that politicians have placed on the issue of poor productivity performance?

    This analysis would surely just reinforce the point in this post but invites the question why bother having a commission and all the effort of analysing the problem if nothing is to be done about it?

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  8. Michael, in a technical sense, has not the strong growth of tourism (today it says 360k employees) at low wages, serving coffee etc, probably had a moderating influence on any gains in other sectors?

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    • Not clear: after all, if the overall performance of the economy were strong enough to support higher wages across the board, the tourism sector would simply have to match those wages (and of course, tourism has its own capital intensity – aircraft, accommodatiom etc). Also worth remembering that services exports as a share of GDP are lower now than they were in the early 00s – tourism has had a good last few years, but not a great century to date.

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      • Also worth remembering that services export as a share of GDP is a nonsense statistic.

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  9. As always I always enjoy your rant on Productivity Michael, you seem to have been doing it for as long as there have been statistics…but still you leave us with no real answers.. are they in the book.?

    I mean really comparing us to Poland.. have you actually been there… no I thought not, the worlds biggest producer of UPVC windows is based there, our company Aluplast (german) produces 10,000 windows (UPVC) a week there at our factory, but we are not the biggest!

    Now what about Agriculture….I bet they are shithouse at milking cows, or raising sheep, or producing wine or or just being efficient at agriculture.

    As for their political situation well.. no comment. As for their welfare support structure… work or starve I suspect. As for their Govt as a proportion of GDP, probably 30 %

    We are a jobbing economy… I bet we could run rings around the rest of the world, and we do.

    Are these ex communist countries you so conveniently compare us with the largest exporter of powdered milk top China (A2 Milk) nope, thought not.

    Adjust for EU 350m population, adjust for 20,000 km, adjust for a jobbing economy, adjust for welfare, adjust for Govt blight here, I reckon we are beating the pants off them

    Just a thought… as you know Michael there are statistics and damn lies ??

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    • Not quite sure of your point, or the reasons for the abuse.

      My (main) policy prescription has long been that we are crazy to be using policy to drive up the population in such an unpropitious location (where the econ track record conitinues to get relatively worse). Specifics are in an address I gave to a U3A group a couple of years ago, available in the papers and speeches section of the blog.

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  10. More sarcasm than abuse. I mean every year you trot out the same stats on productivity and apart from criticising the country you offer no truly in depth analysis of why.

    I mean I can’t see comparing us to Poland and its ilk offers any instructive lessons for NZ.. The company I am associated with have invested millions of dollars in plants in Poland because Poland is reasonably central to 350m consumers, etc etc. They are starting from a low base, us from a higher base.

    Yes I agree we are in a poor location but controlling the population is not the answer and using population as a tool is probably beyond us anyway. It would require sophisticated analysis of the population pyramid and the age cohorts within it which of course implies central planning..and we all know where that leads.

    Look at immigration to Australia, reported again as being on the way up after a relative lull, I suspect the ones with get up and go and getting up and going. After all it looks like Oz has turned the corner politically, and perhaps economically while we get saddled with a bunch of economic retards.

    For me a whole range of factors around economic management of the economy are at fault and why we choose to fail, relatively as a nation, goes back to the 1930’s. You could argue easily our education system is a failure, we copied the English elitist model rather than the skills based German one?

    Anyway good that you highlight it, and apart from the stats it leaves me known the wiser, say compared to your reserve Ratio articles.

    Cheers

    Ross

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    • Re population, of course we can make a great deal of difference. SImply change immigration policy, and cut back the non-citizen inflows to more normal advanced country leves (perhaps a third or less than what we take now).

      You are right, of course, that there is a degree of repetition here. I will probably go on doing so until there is some sign our politicians, their media and business cheerleaders, etc start taking the failure seriously.

      For some fuller discussion, see my Papers and Speeches page. This was my first substantial paper on the issue – causes, consequences etc (but subject to the constraint that i was then still a public servant)
      https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Seminars%20and%20workshops/Mar2013/5200823.pdf?la=en

      or these

      Why New Zealand languishes Notes that extend the analytical framework used in the March 2013 paper into a (brief) speculative treatment of a longer run of New Zealand economic history. May 2013
      “Thinking Big: And drifting slowly ever further behind” Address to the New Zealand Initiative Members’ Retreat, Auckland, March 2016 Drifting slowly ever further behind NZI retreat presentation 17 March 2016
      Think Big: Auckland, immigration, and the absence of income growth , AUT Policy Brief, May 2016
      People, land, and (lots of) sea: New Zealand’s persistent economic underperformance Address to the Fabian Society, Wellington, 20 May 2016
      Distance still matters hugely: an economist’s case for much-reduced non-citizen immigration to New Zealand, Address to LEANZ seminar, Wellington, 26 June 2017
      An economist’s scepticism about large-scale immigration to New Zealand, Address to Rotary Club of Port Nicholson, 5 July 2017
      Large-scale non-citizen immigration to New Zealand has been making us poorer , Address to Mana 3A, Plimmerton, 18 September 2017

      The central and eastern Europe comparisons are not primarily about policy prescriptions (altho all those countries have low or negative population growth) but about trying to get people to stop and think. In my youth “like a Polish shipyard” was Bob Jones’s damning – slightly unfair – description of NZ’s plight/economic management. Everyone knew it was overstated, but everyone also knew that no one wanted that sort of econ failure. Soon they will be passing us

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  11. With a huge public and service sector we are certainly somewhat victims to Baumols cost disease. But in the last decade we have also been saddled with a huge raft of new unproductive regulatory imposts, particularly health and safety and employment law required arse-covering activities that have hurt productivity greatly through so many sectors, but particularly anything to do with construction. Also the vast growth in regulatory bureaucracies in all areas of infrastructure and building activities has sapped yet more productive output.

    For evidence of this just look at the rapid escalation in building costs over the last 10 years. https://s3.assuredproperty.co.nz/2018/04/17214506/Building-Costs-Accelerate.jpg

    I’m from the government, I’m here to help. (Reagan’s scariest words a business owner can hear)

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  13. Thanks for the comment. Yes, there was a very extensive reform programme in the late 80s and early 90s. Sadly, it did not succeeed in reversing NZ’s relative decline. If you are interested in reading any more about it, another post last week https://croakingcassandra.com/2019/05/22/unsuccessful-public-policy/ has a few numbers and a chart, as well as a bit of discussion as to how best to look back on that reform programme (most of which I supported at the time, much of which I still do).

    My own hypothesis, outlined in various articles/speeches etc on this blog, is that extreme remoteness is working to NZ’s disadvantage (and, unlike Australia, we have no big new resource developments) and thus that a large scale immigration programme (largest per capita in the advanced world) is highly questionable

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  14. Hi Michael,

    Thanks for your article, it begs for more questions 😉

    – Do you feel like it is a cultural thing where we work 9-5 but are more involved in community groups, sports teams, family support?

    – Do you think there are many people running small businesses alongside full time work that is affecting this ranking?

    – Surely we must rank amongst the highest for home renovation productivity?

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    • Yes, this particular post was just a sobering snippet. There is more in depth discussion in the draft chapter I wrote about in my post yesterday.

      But on the working hours point, note that the data in this post are for GDP per hour worked (not per capita), and that oecd data show that NZers work long hours (average annual per capita).

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