Where's the plan?
It’s time for breakout groups, brainstorming and butchers’ paper ... except at a national level
Thursday, July 08 2010 || Economics || BY Donal Curtin
plan-like, hopefully something that’s of positive value to your business but at a minimum something to keep the bank sweet.
But there’s one massive exception to all this planning. Nobody’s doing it at a national level. Every sizeable business in the country knows what it needs to do to meet its growth or profit aspirations, and has written it down. Nobody’s written down what New Zealand as a whole needs to do. We have no national plan.
When I say a national plan, I’m not talking about the clappy-happy Soviet or Chinese plans of the 1950s, with sun-kissed peasants swooning over the Great Leader’s tractor targets and muscular women stoking the furnaces of the steel factories. What we need is what used to be called an indicative plan.
“This” (says my aging copy of John O’Hagan’s book, The Economy of Ireland: Policy and Performance) “is a form of national economic planning in which a target is set for the growth of national output over a series of years, usually about five. Quantitative estimates are made of what might happen to particular industries and sectors of the economy (private consumption, public consumption, investment are some examples) if the global expansion is achieved. The figures are accompanied by a list of policy measures intended to help fulfil the plan. The figures are thus an ‘indication’ of how the economy is expected to develop.”
Why do we need it? First, because it makes sense at any time. Let’s say we were to sign up to a national target, maybe the Brash taskforce one of level pegging with Australian incomes by 2025. How would we know, in any detail, what this actually means in practice? How much infrastructure, and what sort, would we need to put in place to support the push? What labour force would we need? What carbon emissions would we be creating? What industries or export markets are going to have to grow the most to earn those higher incomes? As it happens, economists have a tool in the kitbag (‘input output analysis’) that can answer those questions. Suppose the dairy sector doubled in a decade, what would be its impact on all its supplier and customer industries? How will they need to evolve, by way of providing inputs or providing demand, if the dairy sector is going to get where it wants to go?
And second, because it makes sense right now. The current government has commissioned an impressive number of reviews — how the Crown Research Institutes should work, what national infrastructure we need, what the tax system should look like, how the capital markets could be improved, that Brash taskforce and probably others I’ve forgotten — on top of an already chunky ‘business as usual’ agenda. How anyone can keep all of this in their heads at the same time, or prioritise one bit over another, is something I don’t understand. We need a statement of the big picture: a high level document that says ‘this is where we’re aiming to go, here’s what we’re doing, and why, to get there, and here’s what the public and the private sectors might need to look like if we’re all going to arrive at the same destination in good shape’.
I’m not saying we’re flying completely blind. The Budget speech and its accompanying material is a plan of sorts for the public sector. But it’s not linked in any explicit way to our macroeconomic ambitions. There are, to be sure, seat of the pants judgements in it: if we’re going to grow faster, then we’ll likely need more infrastructure and fewer bureaucrats, and that gets built in. But no one has explicitly figured out whether these government goods and services are the right mix and right amount to achieve our growth goals. And while the fiscal bumph is fine as an accountability document for government spending, it’s little or no planning help at all to third parties.
I admit that indicative planning is out of favour. It’s the macroeconomic equivalent of tie-dye T-shirts over bell bottoms. But when our Productivity Commission gets down to work, there are worse ideas it could start with.
Good article Donal.
My only comment would be there needs to be more emphasis on the vision of New Zealand in the future. We, (us citizens), need a more compelling, emotionally connecting vision of what New Zealand can and will look like, if we practice xyz.
Anyone who's studied success of any kind knows there needs to be a vision and that's it's the leader's responsibility to share that vision in such in an inspiring way, that the followers are more than happy to create and stick to a plan.
I'm a big fan of plannng and preparation myself and would always encourage others to do the same when planning any kind of development journey... As soon as they know exactly where and why they want to get there!
Posted by Colin Clapp at 11:39 on July 12, 2010
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