Creativity and Competition in N.Z

New Zealand’s brain drain of scientist, engineers and technicians is strongly related to the Government’s lack of investment in research and development and its excessive reliance on free trade policies. According to the National Party the main reason for New Zealand ‘brain drain’ to Australia and Britain is higher wages. However, for many scientists and engineers the primary problem is not high wages but lack of job opportunities. Since 1984 New Zealand has slashed its spending on research and development while Australia has steadily increased its spending in this area. For example, Australia allows tax writes offs for R and D and has a protected motor industry that employs a significant number of engineers. It is not so much high wages that is attracting New Zealand graduates but a wider range of interesting jobs that don’t exist back home.

New Zealand has one of the most open economies in the world. Subsequently, N.Z companies cannot afford to devote as much spending to research and development as its overseas competitors who receive more government assistance. This has been reflected in the limited growth of productive new companies and products in N.Z over the last two decades. In contrast the number of managerial professionals employed in areas like accounting is very large compared with many other developed countries. The New Zealand economy is over focused on efficiency at the expense of long-term growth.

In the 1930s the Austrian economist Joseph Shumpeter pointed out that if there is too much domestic and international competition in an economy, there will be little growth because companies cannot afford the luxury of investing in R and D. Subsequently, the government needs to step in to provide protection for emerging industries and assist with research and development. This provides a partially sheltered breeding ground for developing new products and services. In Europe and America the heavily protected arms industry has been the nucleus for many new products such as radar, G.P.S. the Internet and the silicon chip – none of these products could have been developed without government assistance.

In Arts and Culture the Labour government has already acknowledged that domestic producers need some protection from overseas competitors. For example, it has introduced quotas for New Zealand music on radio and this has proved to be relatively successful. It has also set up a new agency, Creative New Zealand, for promoting the Arts. However, it has been much slower at helping emerging industries in farming and manufacturing, with Jim Anderton practically a one- man show in the unfashionable field of economic development.

Admittedly in some areas wage rates are the primary factor for the exodus of New Zealand graduates. Doctors, dentist and nurses have incurred large student debts and can pay off their debts much more quickly overseas. However, Labour has started to address this problem by introducing an interest right-off for students that stay in the country- this kind of national interest thinking is well overdue. Another reason why workers are emigrating is the increasing gap between wages and house prices. If the Government did more to address this problem by slowing immigration and introducing a capital gains tax, then there would less incentive for young people to leave the country. High land prices benefit aging landowners at the expense of young productive workers and the national economy.

If New Zealand continues to put free market ideology over pragmatic development it will continue to lose highly skilled workers overseas.