Tough Nuts to Crack

The Government has spelt out two big aims. One is to get back into the top half of the OECD income league. The other is to be “first-world” nation in other respects. The second aim threatens to trip up the first – which in turn would stymie the second.
It’s all to do with triple-bottom-line accounting. This fashionable notion – not just among leftish liberals and greens but also among some conservatives and even some in business – assesses success not just by the financial balance sheet but by social harmony and the health of the physical environment.
Helen Clark in sense marries the social democratic and conservative dimensions: brought up in conservative, small-farming family; trained in 1970s social democracy just beginning to incorporate environmentalist concerns. But can she transplant this notion from the seminar room into the real world?
New Zealand is close to the bottom of the OECD income league table – behind even growing number of economies not in the OECD. If anything, the direction is still down that table, not up.
New Zealanders feel the reality of this slide in two ways: when our dollar doesn’t buy as much of foreign goods and holidays as it used to or as others’ dollars or marks or yen do; and when our kids and colleagues leave for fatter salaries and bigger challenges in other countries.
Over the next half-decade or so New Zealanders will find that hopping to Sydney to live and work doesn’t fix this. Australians, even if still unmistakably richer, are now also beginning to slide.
Australian CEOs tell me they have increasing difficulty attracting top-flight New Zealand executives: they do not see Australia as offering enough cash and enough challenge and, if they head out of here, they go right on to the action in the northern hemisphere.
So now we’ve got company next door. But, also in company with Australia, we’ve got great lifestyle, haven’t we, the envy of ladder-climbing Asians and ladder-clinging New Yorkers, Londoners and Berliners?
Well, actually, the better-off segment among us have. For the less well off the tradeoff value of the lifestyle margin over countries we used to call third-world is eroding. The slide down the league table has taken toll on social harmony and the equitable distribution not only of materialist spoils but also of intangibles.
This Clark wants to fix. We are to be first-world in all respects – even if we now have only tenuous hold on first-world income status.
Her policy approach doesn’t just aim for more equitable distribution of private incomes, individual opportunities and social goods – classic social democracy. She assumes it as given in first-world country.
Hence certain policies are bottom line. Among them are easier access to higher education, more generous treatment of beneficiaries and labour laws giving employees more leverage to win higher share of profits.
Clark likewise doesn’t just aim for more protection of the physical environment and biodiversity. She assumes it as given in first-world country. Hence logging stopped in state-owned indigenous forests. We will take the costly measures needed to ratify the Kyoto climate-change protocol.
Clark also assumes that first-world country values and supports the arts. Hence big dollop of cash last year. And she assumes first-world societies are genuinely multicultural and respectful of their indigenous peoples.
There are some potential revenue gains out of this. One is eco-tourism by rich foreigners. Another is that more of our brightest might stay and contribute. Another is an image gain for our exports as nice country from which nice rich foreigners want to buy things.
But there are costs, not just to the Budget in Wellington but to the operating profits of rich foreign companies choosing where to invest or expand. Lifestyle in the antipodes cuts no ice in single-bottom-line boardrooms in Cincinatti or Cologne. Nor does first-world social, environmental, artistic and ethnic policy status.
If other countries rapidly climbing the income league table impose on balance lower financial social and environmental costs on companies, they will get the investment and our slide down the income league table will continue.
Can Clark solve this conundrum? If she can, policy wonks from round the world will sit at her feet. If she can’t it will begin to tell in her second term if she gets one. And it could be her undoing.

Colin James, Synapsis Ltd, P O Box 9494, Wellington, New Zealand Ph (64-4)-384 7030, Fax (64-4)-384 9175, Mobile (64-25)-438 434 Webpage:www.ColinJames.co.nz, Email:[email protected]

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