By NIGEL HAWORTH*
Since the last election, the debate about the future of the economy has verged on the apocalyptic. Fears exist that New Zealand will fall off the edge of the global economy if economic performance does not improve. The debate is polarised.
The Labour-Alliance Government has turned its back on the hands-off approach of the previous 15 years. Instead, it proposes a pragmatic partnership of Government, employers and employees in pursuit of high-tech, high-income growth.
In doing so, the Government seeks to learn from similar experiences in economies such as Singapore, Ireland, Israel and Finland. It recognises that it is not simply a question of transferring policies here from overseas. The art will be in the integration of relevant overseas experience into New Zealand's unique circumstances.
Critics reject this pragmatism, none more than Roger Kerr, executive director of the Business Roundtable.
In a recent Business Herald article, he praises the successful entrepreneurial environment of Silicon Valley and argues that New Zealand needs to create the same conditions if it is to prosper. In his view, Government policy is taking us in the wrong direction.
Mr Kerr's argument is a curate's egg. He is correct in saying that the notion of a knowledge economy is not new. He is also correct in identifying innovation, entrepreneurship and strengths in education as important components of economic success. But his argument thereafter loses the plot.
According to Mr Kerr and his selected sources, the success of Silicon Valley is due to free-market ideals and institutions, free labour markets, the absence of Government meddling, and low compliance costs. The message from Silicon Valley for New Zealand is that we need more of the 1984-1999 model and a better education system.
Silicon Valley can tell a quite different story. Entrepreneurship is important in the valley. But what were the circumstances in which it prospered?
Layers of technically skilled people were an important component of success. They came not just from private Stanford but from high-quality, state-funded institutions.
Those institutions, and many of the pioneer Silicon Valley firms, gained their first footholds in high-tech research as a result of Government funding.
Valley firms were supported by Government trade and intellectual property policies designed to favour US exports at the expense of competitors.
The point is that the US is not the unregulated, free market that Mr Kerr portrays. Any number of New Zealand exporters will bear this out.
The US may well value entrepreneurship more than we do in New Zealand. The stigma of business failure is rarely felt there as it is here. But the success of Silicon Valley is to be found precisely in the integration of entrepreneurship, Government policy and technical skill.
Stanford illustrates this point well. It is a nexus of superlative intellectual effort, private sector involvement and Government funding. In seeking to learn from this partnership, New Zealand is going the right way with its present pragmatic approach to growth.
The experience of Silicon Valley can be put to better use for New Zealand. Research at the University of California in Berkeley highlights the relationship between Government policy and market activity as the key to the Valley's success.
Other research emphasises the social make-up in the Valley, suggesting that innovation and commercialisation result from a powerful social capital.
These insights into Silicon Valley's success offer far more to Government policymaking in NZ than the call to return to the 1984-1999 policy framework.
*Nigel Haworth is professor of international business at Auckland University.
Partnership between public and private key to high-tech advance
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