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Introduction
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.
