The economic philosophy behind Labour’s Forestry policy

By   /   March 20, 2014  /   19 Comments

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National has forgotten about the forest industry. It barely rates a mention in any literature, is the poor cousin to farming at the Ministry of Primary Industries, and a lack of any direction has seem the commodity focus take over from a real value-add strategy.

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Last term I was Labour’s Revenue and Forestry spokesman.  I loved both portfolios because I truly believed that by manipulating the tax system for good, the government can significantly improve lives, change investment patterns, and promote economic growth, innovation and market engagement; and a visionary forestry policy could take a totally underutilized industry predominantly focused on commodity exports and create jobs, wealth and regional development.

I wrote a number of discussion documents and draft policy papers on a revision of the tax system and a rejuvenation of the forest industry.  The papers contained ideas that were evidence-based with quantified benefits that would, I believed, take NZ from a mediocre economy to a world-leading society that valued workers’ labour, increased equity, created jobs, changed investment settings and reestablished us at the forefront of innovation and excellence.

Today, David Cunliffe released Labour’s forestry and wood-products policy.  It marks a very clear departure from the National government’s ‘hands off – let the market decide’ approach.

The NZ economy is too small to allow markets, often controlled by overseas interests, to operate in isolation and self-regulation.  I have argued a number of times that in a country the size of NZ’s the government has a very important role to play in driving sustainable economic growth and creating wealth.

In fact, I go further and believe that the government actually has a responsibility to constantly look at economic – and industry – settings and intervene when, for example, those in the workforce are treated unfairly, when investors and markets are being deliberately or negligently misled or manipulated, or when scarce resources are being exploited or suboptimised.

It is, therefore, the philosophical mandate and governance role of any social democratic government to ensure the negative social effects of economic growth are mitigated through sound policy, justifiable regulation and wise legislation.

As the global demand for goods and services increases, so does the competition to provide these goods and services.  Not only companies, but now countries are striving to determine their competitive advantages and leverage these, in partnership with the private, and when applicable public, sector, to create sustainable wealth for their citizens and their citizens’ organisations.

Optimising international competitive advantage can manifest itself in a number of ways, but fundamentally through increased public and private partnerships in the area of economic and trade development and access to competitively priced capital.  This is especially necessary and relevant in a country like New Zealand where 97% of companies employ less than 19 people, which is geographically (and culturally) isolated from key markets, and whose cost of capital is amongst the highest in the developed world.

This is what the Labour party’s forestry policy is about: using the tax system to provide incentives for those who share the vision of a country where innovation is encouraged – and rewarded; leveraging government procurement to ensure innovative solutions are commercialized and rewarded; offering the opportunity to our R&D sector to be the best they possibly can be, and using the government’s ability to fund development in a way that improves economic certainty. It’s also about understanding where our country’s competitive advantages lie and leveraging these to create domestic and international wealth.

National has forgotten about the forest industry.  It barely rates a mention in any literature, is the poor cousin to farming at the Ministry of Primary Industries, and a lack of any direction has seem the commodity focus take over from a real value-add strategy.

This is a shame to those who understand just how great we could be if only we were given a little support.  National really can’t see the wood for the trees; whereas Labour has seen the processing plant full of workers at the end of road in the middle of the forest in the heart of provincial and regional NZ.  Thank goodness someone has their eyes open.

 

 

 

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19 Comments

  1. Draco T Bastard says:

    I loved both portfolios because I truly believed that by manipulating the tax system for good, the government can significantly improve lives, change investment patterns, and promote economic growth, innovation and market engagement;

    That’s probably because you’re delusional. The private free-market has always brought about the collapse of society and is not its saviour. All we’ll get from Labour’s policy is more of this.

    • Stuart Nash says:

      I am unsure how you drew the conclusion that I was advocating for the private free market… In fact, the post is about how the government has a responsibility to ensure that the free market IS NOT allowed to rule supreme. If you bother to read Labour’s forestry policy you will see that it is about government working in partnership where necessary, and taking charge when appropriate. The free market has failed the forest and wood products industry.

      • Draco T Bastard says:

        In fact, the post is about how the government has a responsibility to ensure that the free market IS NOT allowed to rule supreme.

        The government does have that role but it shouldn’t be doing it in consultation with business and industry but through consultation with the people of NZ.

        If you bother to read Labour’s forestry policy you will see that it is about government working in partnership where necessary, and taking charge when appropriate.

        Labour’s policy is about giving more taxpayers money to the private sector in the hopes that it will do something.

        The free market has failed the forest and wood products industry.

        Free-market capitalism has failed all of NZ and the world. I’ve read Cunliffe’s and Parker’s speeches and both are about maintaining that failed system.

  2. Intrinsicvalue says:

    Sorry Stuart but you’re just way off beam with this. The Government has no need to intervene in the forestry industry any more than it already does, and certainly not using our money to incentivise it to produce products the market isn’t already directing it towards. History shows that Governments generally do an appalling job of picking winners, whereas the market dies a damn good job. That’s the way it should be left.

    • Marc says:

      Yep, let the market rule free of charge, more forest worker deaths, more low value added exports, logs galore, competing with Chile, Canada, Indonesia, Congo and who else is in the game. Grow them fast, screw up soil and environment, enrich a few, and leave the rest serving lattes and hair cuts to each other, that is if they are not busy running around delivering pizzas to their neighbours, to be repaid in services of similar value.

      Welcome to a dumb economy, New Zealand leads the way, that is under NatACT.

      • Intrinsicvalue says:

        The market doesn’t kill workers, Marc. Forestry is a high risk industry, and I would point out that this Govt. has done far more than previous Labour Govt’s ever did to reduce accidents. As to ‘value add’ your just spouting mantra. The market is the best determiner of how to get the best value for products, because the profit motive is a better assessor of risk than Govt. ever will be.

        • A bit of sophistry there, IV – as usual from you.

          The de-regulation of the mining industry and safety regulations, in the early 1990s, is well-documented. Under the guise of “eliminating red tape”, this dangerous piece of legislation allowed mining companies to self-monitor their own activities,

          “39. Prior to the enactment of the HSE Act, New Zealand had a ‘mishmash of legislation’[5], in which the duties of employers and others tended to be set out prescriptively and in considerable detail. Under this regime, specification standards directed duty holders as to precisely what preventive measures they must take in particular circumstances. Such standards identified inputs, telling duty holders how to meet a goal, rather than health and safety outcomes to be achieved…

          42. In undertaking reform, New Zealand, like the UK and Australia before it, was strongly influenced by the British Robens Report of 1972. This report resulted in widespread legislative change, from the traditional, ‘command and control’ model, imposing detailed obligations on firms enforced by a state inspectorate, to a more ‘self-regulatory’ regime, using less direct means to achieve broad social goals…

          46. New Zealand embraced the Robens philosophy of self-regulation somewhat belatedly, but with particular enthusiasm and in the context of a political environment that was strongly supportive of deregulation. Indeed, in various forms, deregulation (and reducing the regulatory burden on industry more broadly) was strongly endorsed by the Labour Government that came into power in 1984 and by the National Government that succeeded it in 1990. The HSE Act was a product of this deregulatory environment and in its initial version was stripped of some of the key measures recommended by Robens, not least tripartism, worker participation and an independent executive. It was regarded, so we were told, as a ‘necessary evil’ at a time when the predominant public policy goal was to enhance business competitiveness…”

          Source: http://www.dol.govt.nz/news/media/pikeriver/Pike-River-Mine-review/regulatory-role.asp

          Responsibility for Pike River can be sheeted home to de-regulation; the Rogernomics Labour government; National; and market forces which demanded profits at the expense of safety.

          None of your National/ACT apologism will change those facts one iota.

          • Marc says:

            And the deregulation of building standards, allowing the use of untreated or insufficiently treated timber, allowing too much “flexibility” in building standards was also done under a National government in the mid 1990s.

            The result was the leaky building crisis, going to cost the country many more billions for years to come. That does not include the legal costs, which keep many lawyers busy, and forces many people to pay high fees to them.

            The overly “free market” does cause more damage than a well regulated society with a disciplined and managed market economy.

            And with this governments deal with Sky City here in Auckland, to get an international convention centre built by Sky City, there will be endless damage through more gambling and gambling addiction, and add also the increased crime going along with it, inviting the various mafias from Hong Kong, Taiwan, Japan and the Chinese Mainland to also “visit” Auckland and New Zealand, to launder their illegally earned money.

            Oh, it is all so “great”, is it not, IV?

    • ntrinsicvalue says:
      March 20, 2014 at 6:11 pm

      Sorry Stuart but you’re just way off beam with this. The Government has no need to intervene in the forestry industry any more than it already does, and certainly not using our money to incentivise it to produce products the market isn’t already directing it towards.

      Your slavish devotion to ideology is as repugnant as ever. You see no problem with the growing number of deaths in the forestry sector because, for you, The Market is everything.

      You are more delusional than I ever thought possible and prove how people can be blinded by faith (whether religious or political).

      Only a Right Wing Nut Job would voice something as cold and vile as what you are doing.

      No wonder you are anonymous. No one would have the balls to put their name to a repugnant ideology such as yours.

  3. Marc says:

    Well, if IKEA can use Swedish timber to make export quality, affordable furniture there, to cover much of Europe, and now even parts of Asia, to make it a success, why can there not be a New Zealand success story, making more from the good quality timber grown and processed here, to do something similar, or even better?

    But we could even do better than that, and grow trees and timber, like Kauri, to make them ready for sustainable harvesting, and use the wood to make top quality furniture and more, that will be paid for with the best of prices, on a global scale. Ideas, quality and smart export strategies can work, and Scandinavia shows us. Question is, are Kiwis up to the game?

    Let your fantasies fly, please!

    • Intrinsicvalue says:

      IKEA is a business, who make their sourcing decisions based on their own values and market assessments. No Govt. intervention that I’m aware of.

      • IKEA is a Swedish company and Sweden does very nicely with a mixed economy; extensive welfare state; massive industrial sector; fourth most competitive economy in the world; etc. http://en.wikipedia.org/wiki/Sweden#Economy

        Sweden also has some industry subsidies (http://www.bloomberg.com/news/2013-09-05/germany-urged-to-copy-sweden-s-clean-energy-subsidies.html) and the State offers various supports for local industries (http://www.swedishwire.com/opinion/7869-green-taxes-and-subsidies-boom-in-sweden).

        So the situation is far more complex than you suggest.

        • The Other Mike says:

          They also have a fair tax system where the rich pay their fair share. Their health and welfare systems are world leaders, working poor are virtually non-existent and I bet the rich are still doing quite nicely, thank you.

          They are quite used to an egalitarian society and income equality has been, until recently, almost unknown. However – “since the mid-1980s, Sweden has had the fastest growth in inequality of any developed nation, according to the OECD. This has largely been attributed to the reduction in state benefits and a shift toward the privatization of public services” – http://en.wikipedia.org/wiki/Sweden#Economy

          Sound familiar?

          They still had ABBA of course!

        • Gosman says:

          Sweden generally has higher un and under employment than NZ as well.

          • Marc says:

            Maybe that is, because rather than forcing people into jobs to live as “working poor”, they offer people more support to retrain and study, and look after newborns, as part of better social services?

            In New Zealand you will face insurmountable hurdles to get past a front counter at WINZ in too many cases, to even get any support these days, and people are forced to take on any kind of casual, part time or other low paying job, to struggle and make ends meet. Some live in cramped conditions, not able to afford decent enough accommodation.

            It will be interesting to see what health effects all that endless stress and ill-treatment of people will have down the line in years to come.

      • Marc says:

        INTRINSIC (LACK OF) VALUE:
        The idea of tax breaks, more favourable depreciation rules and perhaps subsidies should be, to help get businesses off the ground, and once well developed, they become self runners, not needing any more support. That has worked for many leading economies in the world, including Japan, Germany, Sweden, even in the US. But “purist” New Zealand should not be allowed this? Go and vote your ACT Party then, you are lucky to share your sentiment with a maximum of 1 percent of the population!

        • Gosman says:

          What industries have been developed in Germany and Sweden as a result of subsidies?

          • Marc says:

            Regenerative energy plants, like wind and solar energy plants to produce electricity. More effective and effcient agricultural production, at the same time doing a bit more to try and achieve more sustainability.

            It is not necessarily always through straight “subsidies”, but also tax breaks and such are used rather frequently across the EU, to help develop regions near borders and in economically weaker regions. Industries get such tax breaks in designated regions.

            Much of the infrastructure is developed and built though public investment in projects, given to private companies to complete, so transfers are normal, and some of it even happens here.

            Faster depreciation rates can assist businesses, same as other measures. There is even with the rather “free” global trade still a lot of stuff happening all over the world, that is not that “free market” as it often seems. “Free trade” and similar slogans are often abused by the stronger corporate and other players in some large economies, to simply exert pressures on smaller countries like New Zealand, to achieve easier access to markets, by doing deals, which are never quite “even”.

            As for getting small businesses off the ground, I believe that even MSD and WINZ still offer some (albeit humble) support to people who want to try and set up their own business to become kind of self employed. That is also a kind of “subsidy”, is it not?

            I am surprised you asked the question you asked, it does not give me much confidence in your economic literacy.

            • Andy K says:

              Interesting you mentioned the WINZ assistance available, I believe it’s a $1,000 grant. In 2011 I was told it was discontinued due to the Christchurch rebuild, whether this is true or some denial tactic I’m not sure.


 
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