Not in narrow seas

That’s the title of a new book, published this month, by veteran economist and commentator Brian Easton.   The title is borrowed from a collection of poems, published in 1939, by New Zealand poet Allen Curnow,  but presumably also keys off the author’s previous book published in 1997, In Stormy Seas: The Post-War New Zealand Economy.

The full title of the new book, published by Victoria University Press, is Not in Narrow Seas: The Economic History of Aotearoa New Zealand.      It is a curious title in a number of respects.  First, there is that reference to the place –  so beloved of public servants and the Wellington liberals –  that is no place: New Zealand is the name of the modern country, and there was – so far as we know –  no collective name for what went before.   Then there is the definite article “the” – not “a” –  suggesting a definitive treatment that just isn’t on offer, even in this big (655 pages of text) book.   And then there is the suggestion that it is an “economic history”.

When I saw the title of the finished volume last month I was reminded of hearing Brian telling people –  the book has been many years in the making –  that it wasn’t going to be a conventional “economic history”, but something different, more of a “history of New Zealand from an economic perspective”.   And it is somewhat reassuring that, however the publisher has chosen to present the finished book, the author still seems true to  his earlier vision –  he begins his final chapter thus “This is a history of Aotearoa New Zealand, centred on the economy”.     Six years ago, seeking a new funding grant, he told interested parties

Not in Narrow Seas, as its title, suggests is an ambitious history of New Zealand . It is written from an economic perspective.

In fact, an extract from that document, written when the book was two-thirds done, probably gives you a good flavour of what is covered

As such it covers many issues which are often neglected by most general histories. These include:

– the interactions between the environment and the economy (and society generally); the book starts 600 million years ago at the geological foundation of New Zealand;

– the offshore origins of New Zealand’s peoples and the baggage they brought with them;

– there are seven chapters on the Maori plus further material in numerous other chapters;

– there is a whole chapter on the development of the  Pacific Islands (after the proto-Maori left)  in preparation for the account of the Pasifika coming to New Zealand;

– there are specific chapters on the non-market (household) economy in preparation for an account of mothers entering the earning labour force (one of the radical changes in the 1970s);

– there are five chapters on the evolution of the welfare state;

– the book pays attention to external events and globalisation;

– it could be argued this is the first ‘MMP history’ of New Zealand because it looks at how people voted as well as electoral seats won. (If this seems odd, it is rarely mentioned that when Coates lost power to Ward in 1928 his party won far more votes but fewer seats);

– this is not yet another history of the ‘long pink cloud’. It takes a critical view of the more extreme versions from this perspective, in part because it puts a lot more weight on the farm sector as a progressive force (albeit with its own kind of progressiveness);

– it synthesises the rise of Rogernomics with the events before, showing both the continuities and the disruptions;

– while not a cultural history, it integrates culture and intellectual activity into the narrative.

And, of course, there is a fair amount of more-conventional “economic” material as well.

Easton was economics columnist for the late lamented Listener for decades (I think I saw a reference to 37 years, a remarkable run) and you don’t hold down a slot like that without being able to write in a clear and accessible way, and make comprehensible what sometimes some economists almost seek to make imcomprehensible.    That carries over to this book.  If one were looking for straight economic history you might expect lots of tables and charts, but there is only a handful of either (by contrast, around 100 tables and charts in the much shorter In Stormy Seas).   And breaking the text into 60 chapters means bite-sized chunks.    For a serious work of non-fiction it is a relatively straightforward read (and, for better or worse, there are no footnotes).    For those who don’t know much about how the story of New Zealand fits together, especially with an economic tinge, it is a useful introduction –  especially when one recalls that the last comprehensive economic history of New Zealand, that by Gary Hawke, was published in 1985 (and had gone off to the publisher before any of the reforms of 1984 and beyond were even initiated).

But talking of “tinges” note that line in the extract above “this is not yet another history of the ‘long pink cloud’ “. He notes

Much of our history has indeed been written from a leftish perspective. However, the pink cloud obscures the total story of New Zealand’s development.

And he has some useful correctives to perspectives offered by other “leftish” authors, but make no mistake this is a book from the liberal-left as well.   If he occasionally has positive things to say about National governments, for example, it is largely when they initiated things – ACC as an example –  that were radical for their time.  His is a “progressive” vision in which, to a first approximation, things have only got better and better as they’ve approached today’s state of affairs –  even while there is still some way to go to get to the desired “progressive” end.

I always find it interesting to read the Acknowledgements sections, perhaps especially of New Zealand books.  Easton has well over 100 names listed, some of people long dead (such as Bill Sutch). I recognised only half or two-thirds of them but the great bulk were people of the liberal-left (plus Winston Peters).  That isn’t a criticism; just an observation about where the author’s central Wellington milieu is.   In some respects, the book may be best seen as a distillation of Easton’s decades of thinking and debating about New Zealand (not just its economy).

I’m not going to attempt a full review of the book –  I’d say that I’d leave that to the New Zealand Review of Books, except that that publication too has now passed into history –  but I wanted to highlight just a few scattered points that struck me as I read.

First, in his earlier history of the post-war economy (mostly up to 1990) there was much to like.  One of the key areas I disagreed with him on  – I’ve dug out a published review I wrote at the time  – was around macroeconomic policy since 1984.   He reckoned the conduct of monetary policy, and in particular the handling of the nominal exchange rate, played a big part in explaining New Zealand economic underperformance.  Here were my 1998 comments.

easton 1998

In the new book, although less space is devoted to it, this continues to be Easton’s view.   I continue to think his case isn’t compellingly made, but then this is one of those issues where I’m closer to the New Zealand conventional wisdom than on most (I reckon macro management –  fiscal and monetary policy – has been among the better bits of New Zealand economic policy in recent decades).

Having said that, one line in the new book that got a big tick next to it was his observation that the real exchange rate was probably the most important relative price in New Zealand (arguably the terms of trade).   In that regard, I was a little surprised that with the benefit of another 20-25 years, there was nothing in the new book about the extent to which New Zealand’s real exchange rate had –  over decades now – moved (risen, stayed high) in ways inconsistent with the productivity performance of the New Zealand economy, even adjusted for the improvement in the terms of trade, and the associated decline in the relative significance of the tradables/exportables sector of the economy.    It is the same curious de-emphasis we now see from our officials and ministers faced with a really major adverse economic shock and apparently unbothered that a key stabilising relative price –  the real exchange rate –  has barely moved at all.   Since one of the key elements in Easton’s economic history of New Zealand is the collapse in the wool price in 1966 –  at the time wool was a third of our exports –  it is all the more surprising.

Relatedly, I was quite surprised by how little mention there is in the book of the continuing relative decline in New Zealand’s productivity and material living standards over many decades, to today.  Brian is well-known for asking hard questions about just what official statistics are actually measuring, so perhaps he doesn’t think we’ve continued to drift far behind –  but I doubt that is the explanation (he explicitly highlights data for the late 30s that suggests that at that time our material living standards were still among the highest in the world).  On the one hand, he seems to work with a model in which government policy doesn’t really make much difference –  unless it is messing up “Rogernomics” and associated macro policy – but even if that is his model, he doesn’t make clear what he thinks is driving our relative decline (let alone –  and perhaps one can’t ask for this in a history – what might make a difference). I wonder too if there isn’t an element of the point I’ve suggested over the years, that the powers that be in Wellington (political, bureaucratic, and other) finding our structural economic performance too hard to explain prefer no longer to talk about it much?

In passing –  which is more or less how he treats it here –  it may be worth noting that Easton here (as in the previous book) seems less than persuaded by the notion that large scale immigration to New Zealand since World War Two has done anything beneficial for the productivity or material living standards of New Zealanders.  Here, as I’ve noted before, he stands in continuity with earlier authors on New Zealand economic history.

And two final points.

The first relates to the Productivity Commission.  Commenting on developments this century, he notes of the Clark government

Curiously the government often reappointed or promoted those closely associated with Rogernomics, and they did little to create institutions to provide alternatives to neo-liberalism. By contrast, the National-ACT Government established the Productivity Commission, one of whose members was not only a “Rogernome” but had stood as an ACT candidate [former Treasury secretary Graham Scott].

and moving a decade on, he notes

…the Key-English Government, nudged by the ACT Party, established a Productivity Commission to help pursue its economic objectives. This agency remained in existence under the Ardern-Peters government.  More generally, the Ardern-Peters Government had followed its predecessor’s habit of assuming a milder version of the neoliberal framework.  Like the previous Labour Government it gave important jobs to former neoliberal enthusiasts.

I imagine one of the people Easton has in mind here is the current chair of the Productivity Commission, Murray Sherwin, who was head of the International Department of the Reserve Bank back in the days of the float of the exchange rate –  an issue Easton has long written about and strenuously challenged how things were done –  and, of course, a key figure at the Bank in the years when price stability was becoming established.  I guess he must be almost the last of the people who held reasonably significant positions in those reforming days to still be in public office.  But his term expires early next year, and it will be interesting who the government (I’m assuming Labour leads the next government too) chooses to replace him, and telling about the interest (if any) the government has in addressing longstanding economic failures, and how.  [UPDATE: Brian tells me he didn’t have Sherwin in mind.]

But, to be blunt, if the Productivity Commission is the institution for the propagation of continued “neo-liberal excess” (my words, not Easton’s), those on the left wouldn’t seem to have that much to worry about.  In addition, of course, to the fact that the “Key-English Government” seemed to have no serious structural “economic objectives” –  do you recall them fixing the urban land market, addressing productivity underperformance etc? –  the Commission itself has increasingly tended to reflect the same sort of “smart active government”, technocratic wing of the European social democratic movement, that we see in –  notably –  the OECD.   Since governments appoint the Commissioners, the Commission will over time tend to reflect the preferences of governments of the day –  and we’ve seen that already in the rather different tinge of appointments under this government.  The Commission is certainly nearer in inclination –  if better-resourced –  to the old New Zealand Institute (former executive director, David Skilling) than to, say, the Business Roundtable or the New Zealand Initiative.  To survive –  as always a peripheral player, and rather small –  I guess they have to meet the market one way or another.

Economists are renowned –  sometimes fairly, sometimes not –  for acting as if they believe that economics is some sort of universal discipline without which almost everything and everyone is poorer.  But one rarely sees it quite so breathtakingly expressed as on page 75 of the book, discussing 19th century New Zealand, when Easton observes

Perhaps most of the settlers did not have well-formed opinions –  economics was then a new discipline, even among the well-educated.

In summary, almost everyone reading the book will learn something, and perhaps on a few points be challenged to think a bit differently.  It is fairly easy to read, but it isn’t “the economic history” of New Zealand.   Then again, it doesn’t really aim to be.  I noticed that back in 2014 Easton talked of wanting to have these appendices available on the publisher’s website (I presume the numbers refer to word count)

APPENDICES

I. The Course of Population                            3850

II. The Course of Prices                                  4200

III. Measuring Economic Activity                  2100

IV. The Course of Output: 1860-1939           3250

V. The Course of Output: 1932-1955 2700

VI. The Course of Output: 1955-                   3400

VII. The Structure of the Economy                4050

VIII. The Course of Productivity                   1450

IX. Patterns of Government Spending           4850

X. Transfers                                                    5650

XI. Debt and Deficits                                     3300

VUP doesn’t seem to have been receptive to that. I hope that in time Easton might be able to make this material available on his own website, and past such notes (including appendices in the 1997 book) were useful and interesting to the geekier of his readers.