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.  



Comments

Shane Pleasance said…
Fascinating. Which country is he referring to?
Dave Kennedy said…
As if you didn't know Shane :-)
I know you would be totally supportive of the laissez faire approach and opening New Zealand even further so we that can be ravaged by the corporate wolves and have our assets and sovereignty stripped.
Draco TB said…
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.

Shouldn't be allowed then either. If there is something in the world that we can use then the government should buy the rights for NZ to use it.

Shane Pleasance said…
New Zealand has never had a free market. Period.
Dave Kennedy said…
Maybe, Shane, but can you name a country that is more free? When Roger Douglas introduced Rogernomics New Zealand became an experiment that was watched with great interest by other nations to see if such a liberated economy would work.
Jeremy said…
In 1984 Labour devalued the NZ dollar by 20%. This was followed almost immediately by floating the NZ dollar. The value returned to where it was before the devaluation within a year.

Chris Trotter has an excellent article "Parker's Stance on QE Bodes Ill for Labour-Green Coalition" on his blog. Read comments 18 to 22 for dialogue between Chris, Pat, Kat and Jigsaw for some enlightenment from that period.
Dave Kennedy said…
Thanks, Jeremy, it does make interesting reading.
Shane Pleasance said…
How can one criticise a free market when it it not a free market?

The issue is one of the use of force, plain and simple. Free market capitalism aough to be applauded by communists, as it is the only type without coercion or force.
Shane Pleasance said…
ought* Bit of a hurry today.
Dave Kennedy said…
Shane, your idealism is to be admired but in the real world free markets will always be corrupted by the powerful and the greedy. If a truly functional free market could exist in the way you envisage we would have to start afresh and ensure that all will operate according to the highest ethical codes. Even then the likes of Monsanto will probably find a way to corrupt the system: http://topdocumentaryfilms.com/the-world-according-to-monsanto/

Shane Pleasance said…
The 'idealism' of which you speak is only the absurd idea the someone else is not your property, and you not theirs.

How bizarre that the removal of force and coercion be considered avant-garde?
Tracy Roberts said…
How can one criticise a free market when it it not a free market? The issue is one of the use of force, plain and simple. Free market capitalism aough to be applauded by communists, as it is the only type without coercion or force.

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