Centre-left and right Governments could see the problem but did not do enough to deal with it. Political space opened for the Trumps of the world – and here we are.
Given that Trump’s trade policies are so destructive, resistance to them has tended towards defending the way things used to be. The “rules-based order”, it is argued by most Governments, including our own, must be upheld. But if “upheld” means a return to the status quo, we will go through the same cycle again.
It is not possible to follow policies that cause so much harm to so many people and not expect that they will find some way to hit back.
The way forward is, therefore, reliant on nations doing two things. The first is that the rules upon which international trade are based need to be rewritten. They must reflect the world as it is today rather than the way it was 80 years ago.
Getting agreement while Trump is blundering about demanding the world put America First will be difficult. But if the rest of the world is willing to work towards a new framework to guide free trade and substantially change institutions like the World Trade Organisation (WTO), progress could eventually be made. New Zealand should champion this cause.
The second is that there must be recognition that, particularly after the Covid pandemic, nations want to ensure three linked goals are met. First, there needs to be less dependence on imported goods and services. Second, there must be more secure, well-paid jobs. Third, that communities negatively impacted by free trade be revitalised.
To achieve these goals, New Zealand would need to decisively break with its low-productivity, commodity-based economy. There are many specific examples to be found of this happening already, but they do not constitute the norm. Our economic system is still based on the assumption that producing more volume is the way to prosperity.
The break can be made if we base whatever we do on our ability to produce goods and services tailored to the shifting needs of consumers. This is not a “more-volume” nor a “value-added” approach. Rather, it is about giving consumers what they want and having the capability to shift what we do as preferences change.
Building this kind of economy – one that is both flexible (it can change) and specialised (it can meet specific needs) – will demand a lot of us.
To give a taste of what would be needed, it would mean ensuring new technologies spread rapidly across the economy, micro-regulation that ensures firms pursue permanent innovation, a stable macro-economic environment, support for the clustering of like-minded businesses in specific areas of the country, regional development, access to life-long education and training, links between universities and business, public services that emphasise predistribution (keeping people economically active) more than redistribution, access to sophisticated market research, excellent transport networks, environmental protection and a much greater role for local government.
Above all, a change in the direction of the economy would demand clarity and stability to ensure the investment needed is forthcoming and put to good use.
This kind of economy would see New Zealand be more self-sufficient, while ensuring greater success in international markets. New and better-paid jobs would appear across the country with downstream economic and social benefits. The political spin-off would be greater stability.
The shift to the populist authoritarian right seen elsewhere in the world can and will arrive in New Zealand if economic and social divisions are allowed to continue. Recent years have seen many signs of Trumpism arriving on our shores.
As it stands, the risk of this happening is growing. The current Government sees a return to the way things were as the only way forward. It behaves as if nothing has changed when, as most commentators agree, everything has changed. We need a Government with the imagination to move in a different direction.
