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Contact:
Foundation for Economic Growth,
P.O. Box 10-282,
Wellington, N.Z.
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Our Challenge - Explaining why we need growth.
By John Whitehead
Jul 2, 2004, 10:38

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Why growth? To sum up so far, then: we have established that there is a substantial programme underway to improve New Zealand’s productivity levels and our overall economic performance. Some should be our short-term focus, others more long-term.

But I want to take a sideways step at this point. Underlying all this is the important question of attitudes to growth.

At the risk of preaching to the converted, I want to stress again today that economic health is inextricably linked to social benefits. Economic growth – the kind of growth which is essentially generated largely from private sector activity such as yours – is a prerequisite to the living standards – by which I mean the quality of life - we want as a nation.

It shapes the opportunities that are available to all of us – and to future generations. It means increased access to health, increased access to education, to the goods and services people value.

It’s not a tough concept. For businesspeople like Joe it may be something they have never consciously thought about. But it is disturbing to see attitudes such as those revealed in the 2003 Industry New Zealand survey which showed 46 percent of people viewed business as a “necessary evil”.

More heartening, however, were the March 2004 findings of the government-funded Growth and Innovation Advisory Board. For example, 91 percent of New Zealanders in this survey agreed that business success ought to be encouraged. 77 percent supported economic growth as a primary goal for the country.

But along with this good news, there was also the strong suggestion that many people had concerns about the impact of economic growth – in particular, on core New Zealand values such as egalitarianism and teamwork and a healthy environment.

Economic growth can put pressure on the environment and other core cultural values.

But overseas experience is conclusive: rich countries can better afford to make the trade-offs between environmental, cultural and economic goals. For example, a few years ago both the Thames and the Nile rivers were impossibly polluted. Today, only the Nile could be classified that way.

So – we do need economic growth. Does it really matter that some New Zealanders don’t think this way?

I’d argue that it makes a big difference. General attitudes to growth do affect actual growth.

Research carried out in recent years by Treasury backs up this thinking. Countries with a high level of consensus or agreement around growth – countries with a widely shared economic vision - seem to have performed better than countries without this consensus.

The recent economic success of Ireland, for example, is believed to be directly related to the fact that by the 1960s there was very widespread agreement on the need to promote economic growth and the broad means to get there.

In addition, where there is a high social consensus towards growth there is a corresponding impact on what a government can implement in terms of policy - and what it can do in response to events such as economic shocks.

Denmark, for example, like many of its Scandinavian neighbours, is long famous for its inclusive economy. In the early 1980s, in response to a very difficult fiscal position, it pulled off the remarkable feat of reducing government spending by 12 percent in four years - without a drop in GDP.

Where does this leave us here in New Zealand?

For Treasury, the findings of the Growth and Innovation Advisory Board survey show we have to think carefully about the way we communicate growth policies and messages to the wider New Zealand public.

We may need to express growth in a more meaningful and personally relevant way.

We may also need to better explain those links and trade-offs I talked about earlier – the links between growth and those elements of our society that are valued, such as environment, equality, health and education.


© Copyright; Foundation for Economic Growth and various authors. Individual authors retain their own copyright.

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