Hugh Fletcher Slates Laissez Faire Economics
Hugh Fletcher is stepping down from the board of Fletcher Building and this will severe the ongoing connection of the Fletcher family to the firm started by his grandfather in 1909. In his interview with Kathryn Ryan he expressed frustration with the laissez faire management of the economy over the last 30 years. Given Hugh's long and successful business career and his involvement on the Board of the Reserve Bank, his comments carry some weight. Alison Paterson describes Hugh Fletcher in glowing terms and claims "I have never worked with someone with a bigger intellect then that guy." I feel therefore that the points he makes in the interview (my interpretations admittedly, and I'm open to corrections) are worth noting:
- No iconic New Zealand Companies that were around when he began in business exist today.
- There has been no commitment from recent governments to ensure that domestically headquartered businesses can compete with international companies.
- There is not a level playing field for New Zealand owned companies and investors to compete against overseas investors. There needs to be generically determined macro and micro settings that can manage the imbalance that exists between overseas investors and local interests. Such controls should have some local bias to protect strong local businesses.
- International traders and exporters are more likely to produce high value jobs and these are being lost in New Zealand. There has been a growth in low value jobs in New Zealand because of the lack of support for New Zealand exporters. Per capita incomes in the bottom two quartiles haven't grown for some time.
- 6% of our GDP is accrued by overseas interests and this is growing. This is allowing much of our wealth to be sucked offshore.
- Laisse faire economic management doesn't work, it is based on the premise that open markets allow perfect competition - this is highly flawed thinking.
- Incentives and taxation for outside investors give them an advantage (there are too many loop holes that they can exploit). New Zealand is the third easiest in the world for doing business.
- Fletcher Energy (originally the state owned Petrocorp) should never have been allowed to be sold to Shell New Zealand (which actually has very little New Zealand ownership). Shell has continued with the ventures built by Petrocorp and Fletcher Energy but has invested in little new exploration or activity since.
- Few countries divest themselves of state owned or locally owned oil and gas companies. Australia wouldn't allow Woodside to be sold to Shell and the US is actively restricting Chinese takeovers of their energy companies. Fletcher Energy was recording profits of around 20% and this income has been largely lost to the country.
- Overseas capital should only be allowed into New Zealand if it is going to add to our productive capacity and introduce something useful that doesn't already exist.
- New Zealand's current account deficit is a actually a huge concern and we are actually worse than Ireland in this respect and not much different from Greece. We are a hugely indebted country.
- Government politicians have subscribed to Laisse faire economics for too long and need to be sincere in having a debate about introducing further controls to manage our economy and dealing with our inflated exchange rate that is crippling our manufacturers and exporters.
Hugh didn't mention Russel Norman or quantitative easing, but the Greens seem to be the only party that is on the same wave length and taking our economic situation and local business interests seriously.