The grass is green, again

By COLIN JAMES

Suddenly the wisdom of decades has gone out the window. If we get through the international economic turbulence relatively unscathed, it will be thanks to grass - and especially cows. But what then?

What happened to the "new economy" and the "knowledge wave"? Weren't "commodities" a drag on our prosperity?

Actually "commodities" are damaging economies right now - but in Asia, not here. The plunge in information and communications technology (ICT) investment in the United States has whiplashed back on its upwardly mobile Asian hitchhikers who got heavily into chipmaking and computer assembly - the commodity end of ICT. In Australia there is a thanking of lucky stars that calls for government stimulus for chip-making went unanswered.

In Australia, as in New Zealand, the swingbridge across the ravine of world recession is constructed of traditional commodities: minerals, agricultural and other resource-based products.

Here two good growing years and an exceedingly rare conjunction of firm international commodity prices and a low exchange rate - high prices usually winch the kiwi dollar up - have delivered succour to the countryside and cheer to the cities, including, last in this particular food chain, Auckland.

Over the past 18 months this has forced the political parties to re-evaluate their economic strategy. There is now across-the-board acceptance that, as Finance Minister Michael Cullen puts it, "resource-based industries will continue to provide the core of foreign exchange earnings, and any economic transformation must protect and enhance that core".

Rod Donald, co-leader of the Greens: "The foundation of New Zealand's economy in the future depends on our natural assets and innovative people."

Rodney Hide, Act's finance spokesman: "Agriculture remains the backbone and will be for a long time to come."

National leader Bill English: "The country's deeper strengths are in the biological industries."

But agriculture could easily slip back to its former despised status.

Mr Hide reckons the current strength is only because of a "low-peso" strategy . The others acknowledge this but diverge on the consequences of an exchange rate rise and the policy prescription.

Mr English comfortingly reckons there has been a structural shift in meat and wool prices, which will not fall as far on the downside of this price cycle as in the past. He also has argued that there is a major change taking place in the politics and structure of agricultural industries and the mentality of farmers.

Dairying has "at least asked the right questions", he says, though it has yet to be seen whether it got the right answer. The meat and wool industries have only recently grasped the need for change.

The challenge, in his eyes, is for farmers to develop "commercial and managerial skills to do better at risky investment", with "bigger lumps of capital" and a "drive to commercialise" research and technology.

"Farmers know they have to learn fast," says Mr English, who sees evidence of a quicker uptake of new ideas.

Mr Donald predictably focuses on organics, keeping the country free of genetic modification and exploiting the "clean and green" image, which we have "on a plate", to market our agriculture and tourism to an increasingly safety-conscious world.

Mr Hide takes a typically idiosyncratic line that an "isolationist" defence stance will be a disadvantage - compared with pro-US Australia - in maintaining access through bilateral deals if countries to which we export turn defensive in the face of terrorism, especially if extremist anti-globalisation protesters adopt terrorist tactics.

Mr Hide also stays true to his party's hardline market approach: maintain competitiveness by lowering taxes and lowering farmers' risk by securing property rights - and apply genetic modification. "Marketing is important but we can't afford to turn our backs on technical advances, of which GM is one of the key ones."

Mr Donald, as a born marketer, turns this last statement exactly on its head.

"We are not luddites in terms of technology," he says. "But it is commonsense to recognise what we are good at." In that light, the "knowledge economy" for Mr Donald is not just technical improvement but also innovative marketing.

Dr Cullen, though trying to promote the knowledge economy as core economic policy and tying that tightly to resource industries such as agriculture, treads warily around GM.

"Most of New Zealand's knowledge-based advances have been concentrated in the life sciences and applied to resource-based industries. They are highly knowledge-intensive," he says, voicing a view now common across parties. "Economic transformation builds the new, more secure, higher-earning base out of, not instead of, the old."

In that "a large part of the process of economic transformation will have to involve the development and application of new biotechnologies" - and he adds, in the context of GM, that "we have to get the pitch right, because there are as many risks from being too cautious as there are from being too cavalier".

Mr English's party would implement the royal commission's cautious go-ahead for GM. But, he says, it is not a "cure-all" for farmers.

He is bothered that most research for agriculture is still done by the government, which is risk-averse - the very antithesis of the fast-learning, high-return farmers he wants for his economic backbone.

In the midst of this Indian summer of high profits, farmers who want to keep their recently recovered place in the political and economic sun might ponder that carefully.

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Colin James

is a political commentator and Herald columnist.