From: Foundation for Economic Growth

Our Economy
Our Philosophy, Goals and Vision for Growth
By Charles Gilmore
Aug 16, 2004, 13:49

Parties For Growth Inc.
‘Foundation’
Philosophy, Policies and Strategies

Introduction

The Foundation For Economic Growth Incorporated Society arose out of the concerns of a group of individuals about the downward slide of New Zealand in the table of wealth of OECD countries. These individuals felt that in a free country it is the duty of citizens to make their concerns known and to actively participate, using the democratic process, in highlighting the issue and promoting a solution. This ‘Foundation Document’ adds to the information contained in the society’s rules and incorporation papers by describing in greater detail the rational for Parties For Growth Inc. and its philosophy, policies and strategies.

Fundamental Issue

New Zealand was number three in the OECD countries in wealth in 1950 but by 2000 was in the bottom third measured by GDP per capita. As a consequence, the living standard in New Zealand declined relative to the rest of the world and, we believe, also compared with the country’s potential.

If we are to have a higher standard of living and compete effectively with the other nations of the world we must have policies and legislation that promises much higher growth. The choice belongs to the citizens of New Zealand. We can sit back and go along or we can take action.

We have asked ourselves some basic questions:

Question 1. Is economic growth necessary to improve our standard of living?

Foundation For Growth Inc.- In theory, it is perfectly reasonable to have low or indeed negative growth. And we recognised that some people may regard economic growth as relatively unimportant and that many other things in life are more important, such as, care of the environment. We believe economic growth and the other things in life are not mutually exclusive and that with a healthy economy the other things in life are more easily achieved. It is our view that a high income is a pre-requisite for increasing an individual’s choices to live life at a better standard and for other things to assume greater importance. We believe economic growth enables the citizens to spend more on the environment – and they will!

Question 2. Can we in New Zealand reasonably expect to increase our economic performance relative to the rest of the world?

Foundation For Growth Inc.- We believe there is ample evidence in the performance of other countries similar in size, location, natural resources and political structure to confirm that New Zealand can do better. The facts that changes do occur in economic growth rates and other countries have increased their wealth ranking supports the reasonable expectation that New Zealand can change and improve its relative economic performance, if it has the will and leadership to do so.

Rationale/Justification for Action

Unless there is a recognition that the relative position of New Zealand has declined and programmes initiated to change this direction, then the outlook for our children is likely to be poorer than for their international contemporaries.

Foundation For Growth Inc. believes firmly that change is required and was formed for the purpose of providing a structure for action by citizens concerned about growth to act collectively rather than as individuals.

Philosophy

We believe in a higher standard of living, solid economic growth and that New Zealand can and should perform relatively better internationally. These tenets form the ‘foundation’ philosophies of Foundation For Growth Inc.:
• Consistent above average economic growth is important for future generations,
• The outlook for improved growth is poor without direct action to reverse the trend,
• An active group of citizens can positively influence the achievement of a common goal,
• Key drivers of growth are an enlightened citizenry, efficient government and administration and the quality of a country’s central policies and institutions.

Defining a ‘philosophy’ is only the starting point. As a consequence, there will be pressure on Foundation For Growth Inc. to identify and promote specific policies and strategies that will deliver higher growth rates and wealthier citizens in New Zealand. In this regard Foundation For Growth Inc. will:
• Promote only policies and strategies that are well researched by others, generally accepted by informed individuals and where possible proven in practice in similar circumstances,
• Focus on outcomes and be flexible in the detailed programmes to achieve them,
• Identify and support individuals that espouse economic growth and efficient administration, including politicians and influential citizens,
• Remain a ‘Non-profit Citizens’ Movement’.

Every proposed economic growth initiative has its detractors and only a few have achieved the status of general acceptance. An example of this is a ‘minimum tax’ policy. In one country a low common personal and company tax rate is reported as the catalyst of growth, and in another country a flat tax rate of 15% is seen as the reason for their turn around. Yet a country with a graduated scale ending at 66% for the wealthiest performs as well as either of the lower taxed countries. These are conflicting messages and indicate that economic growth does not have a simple one-policy solution and the issue needs to be examined in light of New Zealand’s unique position in the world.

The Inland Revenue Department asked the question ‘Is there a tax rate that gives maximum growth and if so, what is it? An international expert answered that several independent OECD studies showed the tax rate is somewhere between 15% and 26%. In New Zealand his own study suggested that our optimum tax take was around 19%. These studies all arrived at the same conclusion - lower taxes equate to higher growth rates.

Foundation For Growth Inc. does support a minimalist and efficient tax policy as one of many initiatives to foster growth - the actual rates and level of taxation are issues for elected politicians to address.

Commenting on Growth

The consensus is New Zealand has to trade with other countries or export to survive and earn the money needed to invest in expansion, procure raw materials for ‘value added’ products and to meet consumer demands. While we believe there is some scope to add to New Zealand’s prosperity from within, it is only if the locally produced products and services are priced less than their equivalent imports. We understand there is a trade-off between the costs of these individuals being unemployed versus being employed in local companies supplying import substituting goods and services. However, if the Government is serious about achieving higher growth then understanding the trade-offs in efficiencies and the opportunity costs of decisions like this is needed. These trade-offs are matters for the Government, but the basic policy test of comparing new spending initiatives with their alternatives (i.e. status quo, paying down debt, reducing taxes) needs to be passed first.

An Economic Survey of New Zealand by the OECD provided some ‘rules of thumb’ for use on all existing Government spending and proposed future initiatives to assess their merit. The OECD asked:
61485; Does the programme serve a clearly defined purpose that matters?
61485; Is this an appropriate role for government? (Does it address a specific market failure?)
61485; Would we establish a programme today if it did not exist?
61485; Is it desirable to maintain spending at its current level?
61485; Can it be delivered more effectively or efficiently?

Both Labour and National led Governments regularly commit to lifting New Zealand’s OECD wealth ranking and supporting the policy ingredients for growth and other basics concepts, such as, an open and competitive economy, macroeconomic stability, global connectedness and the role of skill, talent and innovation. Parties For Growth Inc. agrees with the questions raised by the OECD and the commitments of the major political parties to set an agenda for growth, but it is outcomes and consistent results that we seek. We do appreciate that there are many facets in governing a country and pro-growth is only one of the inputs to be considered in selecting a key policy.

Our view is that every aspect of the economy needs to be examined and efficiently utilised to maximise the opportunities for growth, including:
• Capital utilisation - Capital is scarce and cannot be wasted,
• Infrastructure - Roads and ports need to be open at all times,
• Education and health - Is there room for a private sector role?
• Regulatory environment - The statute book contains around 2,000 public, local and private acts, comprises 90 volumes and about 65,000 pages. Do we really need all these?
• Labour market - Is labour flexibility crucial to productivity?
• Welfare and tax policies - Most New Zealanders agree a safety net should be funded by taxes.

Some of the questions that we, as an independent country, need to answer:
61485; Are we prepared to implement measures required to accelerate growth?
61485; Do we appreciate that prosperity provides benefits for even the lowest paid section of the community?

Foundation for Growth Inc. believe an educated and well-informed populace would answer ‘yes’ to both questions.
Importance of Exports and Productivity Gains

Independent research by the New Zealand Institute of Economic Research found that weak economic growth in the past was mainly attributed to New Zealand’s:
1. Comparatively low level of exports,
2. Exports being in sectors where growth in world imports has been relatively slow.

We understand that exports are only a ‘proximate’ source of growth and that the efficiency of the economy or the nation’s productivity is another important determinant of sustained economic growth. Exporting however is so important that it demands dedicated attention. The NZIER went on to conclude that for New Zealand to be more prosperous we should:
• Expand and grow export-oriented activities that inject foreign exchange into the economy,
• Identify and grow new export oriented activities that provide products and services that are in demand and can be delivered to markets at competitive prices,
• Identify what goods and services internal industry can supply more economically than by importing them from overseas. Support those already engaged in such activities and encourage commerce to invest in those not already in operation,
• Learn from other countries that are similar to New Zealand and emulate their successes,
• Examine a ‘free worldwide trading’ environment as a growth initiative.

Foundation For Growth Inc. support the importance of boosting exports, increasing productivity, a wider involvement of New Zealand in commerce and active participation and immersion in international markets.

Vision

Our Vision for New Zealand is:
“A vibrant, progressive home of choice for talented and successful people, actively participating in a free economy with a high living standard and a clean environment.”

To fulfil this vision many factors need to come together, for example, a strategic outlook, efficient utilisation of resources, excellent planning and close co-operation between Government, commerce and education, where:
• Government moves towards the creation and maintenance of a social and economical environment that is attractive to investors and supports and encourages growth in commerce,
• Commerce identifies, implements and expands viable import substitutions and export earning opportunities,
• Education provides most of the skilled resources.

Our Goal

Our Goal is to create and foster support for achieving a sustained:
• 5%+ growth rate in GDP per capita,
• High Standard of Living.

‘GDP per capita’ is widely used as an indicator of how well off a country is in comparison with other countries. For this reason, Parties for Growth Inc. have adopted it as the best single indicator of New Zealand’s relative economic performance. We recognise it is not a complete measure of the population’s well-being, for example, it does not take account of the negative effects of economic activity on the environment and is not inflation adjusted, but it is reliably measured by the OECD and regularly reported.

‘Standard of living’ is adopted as a subjective measure of the value of the wider choice people have in spending their money. We recognised that the relativity of standard of living or quality of life is individually determined and varies between countries. However, we believe that by consistently out performing other countries in GDP per capita the living standard of the average New Zealand citizen will correspondingly rise.

Estimates made by a major bank suggested that to achieve the objective of returning New Zealand to the top of the OECD per capita income ranking would require a growth rate of around 6% per annum for 10 years – or 4% per annum for 20 years. To put this in perspective GDP growth prior to 2000 averaged only 3% per annum, or only 1.5% on a per capita basis. Because no Government has lasted longer than 10 years in New Zealand in the last 50 years, Parties For Growth Inc. is aiming to provide a stable and long term voice of reason outside of Government on the single issue of improving economic performance.

Policies
Objectives

Foundation For Growth Inc. is an independent apolitical educational organisation with the Objectives to:
• Promote an understanding that prosperity can only be achieved by sustained above average OECD economic performance,
• Educate politicians that high growth advances the wealth of the country,
• Educate all citizens that high growth improves their standard of living,
• Encourage Government to pass pro-growth legislation and change laws that hinder growth,
• Be apolitical and support individuals that actively advocate growth principles,
• Carry out actions to achieve the above.

In every country examined that has experienced a change of fortune, excluding through a natural event, it can be traced back to the direct actions of either individuals or a political party.

Foundation for Growth Inc. will support selected individuals we believe have similar views and the motivation and ability to influence a positive change.

If our aims are achieved, New Zealanders will be:
• Better educated, and thus better able to profit from our uniqueness,
• Surrounded by good physical infrastructure (eg, efficient ports, airports, telecommunications, road and rail transport, and health systems),
• Working in a relatively low-cost regulatory environment,
• Part of a labour market where businesses can organise their operations at peak efficiency,
• Encouraged to work because the welfare system is just a safety net,
• Properly rewarded because the tax system will not increasingly erode take-home pay

Important Outcomes

The Outcomes we seek to achieve are:
• A 5%+ GDP per capita growth rate,
• A return path to number 3 in the world wealth ranking,
• Out-perform Australia in economic and social parameters.

Demographic trends in NZ suggest that the retired to employed ratio is set to decline through to 2015. This creates a unique moment in time to take decisions that have a long term gestation period and reap the benefits of any new growth initiatives before the dependency ratio begins to rise around 2015 and costs escalate. Parties for Growth Inc. see this as a ‘window in time’ for a political consensus on economic growth and the development of strategies and action plans to achieve the above outcomes.

We equally believe that low growth rates will increasingly force families apart and each member of Parties for Growth Inc. desires that our children remain by our sides and not look elsewhere for a better life. If Australia is seen as delivering a higher standard of living, the draw will be to move there. Our wish is for our children to remain in New Zealand out of choice, because life here is equal to or better than overseas. We want our politicians today to preserve our families and keep future generations at home.

Strategies
Educate, Encourage and Evaluate

In the past New Zealanders believed that government was the principal source of growth and development in the economy. Foundation for Growth Inc. was created to change this view by helping every citizen to understand that we all have an influence and impact on the economy and consequently our economic performance as a nation. Parties for Growth Inc. will provide reasonable and useful information to individuals and politicians to persuade them to provide the leadership needed to facilitate growth. By speaking with “one voice” on this single issue, we feel will help create an ongoing dialogue between the public and politicians on the importance of adopting growth policies now for a better life for our children.

Foundation for Growth Inc. will:
• Utilise the expertise and knowledge of members to identify and promote economic growth strategies and actions,
• Compare and rank political candidates by their historical stance on pro-growth legislation and the strength and validity of their public comments on pro-growth initiatives and policies during the election,
• As resources allow, openly endorse and publicise the highest ranked candidate,
• Suggest economic and policy alternatives that foster growth,
• Be an independent, non-partisan and non-profit organisation supported primarily by grants and contributions from foundations, corporations and individuals.

We, as citizens of New Zealand and members of Parties For Growth, will fulfil our Vision by:
• Educating the public and enlisting their support for the adoption of public policies that encourage growth,
• Encouraging politicians and political parties on the imperative of achieving above average economic growth relative to other OECD countries.
• Evaluating public and private policies and actions for relevancy in achieving pro-growth outcomes and being a voice of reason where trade-offs are required.




© Copyright 2003 - 2007 Foundation for Economic Growth