Farming is a dead-end track for NZ economy

There’s been plenty of petty politics around the government’s announcement of a $500 million fund for research in primary production but precious little analysis of what it means.

We are told that with interest and matching contributions from the private sector the fund could produce up to $2 billion invested over 15 years.

The Prime Minister has called it a “quantum leap forward” for scientific research and innovation. She describes the New Zealand Fast Forward Fund as part of a drive to transform the economy into an innovative supplier of high-value goods and services.

National leader John Key has condemned it as a “gimmick” and threatened to scrap the fund if National leads the next government.

More considered criticism has come from those who point to the narrow focus of the fund. It is devoted almost exclusively to primary production which brings in around 57% of our national income. The government’s logic is that we are investing in our existing strengths but this only serves to emphasise the underlying structural weakness of our economy.

In earlier times we sought to develop a self-reliant economy. The idea then was we were too dependent on primary product exports to Britain and needed to expand into markets elsewhere and promote manufacturing so we made more here and reduced our dependency on imports. We were told we needed to diversify our economy away from reliance on primary produce. We had tariffs to protect fledgling industries from cheap imports, financial incentives to develop new manufacturing plants and planned national infrastructure to support this developing economy. This same model was used to build every highly developed economy in the world.

New Zealand abandoned all this common-sense with the advent of neo-liberal economics and globalisation. The new fashionable theory says the world is becoming one large free market and countries should develop their economies based on what they do better than anyone else. China for example has become the world’s largest manufacturer, closing down factories in other parts of the world. Here the Warehouse has led the charge to bring in cheap Chinese imports and force kiwis out of relatively well-paid manufacturing jobs.

In New Zealand, so the theory goes, we are good at farming so let’s stick to our knitting so to speak and put the emphasis there. As a result our economy is bipolar based on primary production at one end and servicing at the other.

Last week’s government announcement continues down this dangerous, one-way track. We are seriously at risk like trampers on an exposed ridge. There is nothing better on a fine day but as soon as the wind whips up and the weather closes in you have to find shelter quickly. We have no shelter. We’ve destroyed most of it these past 20 years.

Our farming and political leaders are in a heady space at the moment seduced by high dairy prices. All manner of farmland is being converted to intensive dairying at an alarming rate with just next year’s profit margin in mind. Politicians are little better being addicted to thinking ahead only as far as the next election. We have no risk assessment for any of this short-termism.

What will happen here when countries such as China shift their production to domestic consumers ahead of international trade? What will happen when high dairy prices slump in the face of cheap imports from countries where labour and land are much cheaper? What will happen when the price of fuel rises such that our efforts to export from these islands (which are further from international markets than any other country) are uneconomic? What will happen when global warming makes the cost of sending protein around the world unsustainable? Or makes much of the country unsuitable for current farming practices?

In all these scenarios we are stuffed. All our eggs are in the one basket. How can our economy not collapse?

It’s interesting to think that the very people who talk about sensible investors having a balanced portfolio of investments are pushing our economy onto a single investment strategy with at best an uncertain future. It’s all bound to end in tears.

It’s not as though we’re even helping feed a hungry world as various farming spokespeople like to suggest. The hungry can’t afford our food. We are feeding the obesity epidemic instead.

It’s true the government’s research funding is looking ahead 15 years but its 15 years into a long narrow tunnel. It is a perilous path. Farming is more likely to be our Achilles Heel than our saviour.

There is already a chilly breeze out here on the ridge.