Island Life: Q+A. Fill in the blanks.
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NZ's low productivity
I'm not sure this isn't a bit misunderstood, even by those in the know. People mostly look at productivity as like-for-like, whether an F&P plant here makes more washing machines than one in China. But in fact it's as much about what people are doing as how they are doing it. People chopping down trees or herding cows around don't produce as much, per capita, as somebody developing software or pharmaceuticals.
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Read the article I linked with "enormous, wallowing, dangerous beasts" and you'll get it. I consider it a completely valid point, but YMMV.
I read the article. It doesn't argue that Americans like SUVs because they eat and drink all the time, though; it argues that there is a 'reptilian' brain-association between being high and comfortable (including access to drinks, etc) with 'safety'. That's not really what you were saying.
Just for the record, I'm pretty stoked if there are cup-holders in my car, too, but perhaps that's just because I'm dopey, credulous and insecure. :)
As for "othering" Americans, assuming I'm understanding the term correctly, I'm hardly alone. Possibly more vocal, but definitely not alone.
Of course you're not alone. I find it a bit annoying when anyone else does it as well.
the evidence points to Kiwis being somewhat more cerebral, as opposed to instinctual, when it comes to buying automobiles.
I think that's a strange leap in logic to make. Is it 'cerebral' that we buy sedans and station wagons, or is it just that most people in NZ buy sedans, so the, erm, hivemind is attuned to them? Is boyracer culture 'cerebral'?
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I'm unaware of any other country where it's de riguer for there to be at least a 1:1 ratio of cup holders to seats in even the largest vehicles.
Heh. If only there were less cupholders, the obesity epidemic would be solved!
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To support Danielle: if petrol were as cheap here as it is in the US, and we had the effective subsidy on small truck chassis vehicles that the original SUVs had, and our roads were as wide as US suburban roads and freeways, I think we'd love SUVs just as much. Part of the SUV story in the US is the economic factors that made them an affordable choice.
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Matt P:
But there's a serious aversion within NZ business to the concept of "You've got to spend money to make money." This even extends to getting professional advice, where businesses will avoid it as long as possible and then only grudgingly hire the cheapest consultant they can find. In the long run, that can cost far more than it saves.
That I agree on. It seems to date back particularly to Black Monday and the subsequent DFC collapse. There was a similar effect in Adelaide when the SASB went bankrupt, depriving it of much-needed investment capital.
NZ turns out a large measure of know-how, but most of it goes overseas or stays under the radar because most of NZ's investment money has gone into McMansions. A good start to addressing that problem would be to take a leaf of the US Democrats' book, and remove tax benefits on suburban properties above a certain plot size. Going by the Democrats' example, that would translate to about 278 sq m. And it would still circumvent the politically suicidal capital gains tax.
According to the NZ Business Roundtable, of course, Germany has it all wrong...
They like to point to Germany's near or actual double-digit unemployment rate. In reality, the figures are skewed by the much higher unemployment rates in the former East Germany, which had the indignity of Joe Stalin foisting a puppet government on it.
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if petrol were as cheap here as it is in the US, and we had the effective subsidy on small truck chassis vehicles that the original SUVs had, and our roads were as wide as US suburban roads and freeways, I think we'd love SUVs just as much
Yes! I was going to say something about the massive interstate highway system and the US' 'road trip'-oriented culture since the 1920s, but I got interrupted...
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I'm not sure this isn't a bit misunderstood, even by those in the know. People mostly look at productivity as like-for-like, whether an F&P plant here makes more washing machines than one in China. But in fact it's as much about what people are doing as how they are doing it.
Rich, isn't that something that's adjusted for by economists, using measures such as GDP/GNP per-capita and the like? Certainly I don't think productivity is just about how many washing machines we can make, the appearance of my question above notwithstanding. Manufacturing is a higher-level output than primary produce, though, so one way to improve productivity is to keep manufacturing in-country rather than outsourcing everything as quickly as possible. The best outcome, as you say, is to get into the high-tech, low-footprint industries around software and other "soft" exports. We have some pharmaceutical R&D here, but after seeing this I'm not so sure that we really want to get ourselves too closely aligned with Big Pharma.
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David Hayward wrote:
And I suspect our biggest economic advantage is:
1. Extremely low levels of corruption.
2. A highly literate and numerate workforce.Well, Id agree with you on the first: On the second, no. This is from the Tetiary Education Commission a couple of years back:
The more recent 2006 Adult Literacy and Life Skills Survey compared results internationally for numeracy (the ability to understand and process mathematical and numerical information) and document literacy (the ability to read and understand discontinuous texts such as
graphs, charts and tables). This survey shows that approximately 50 percent of the adult New Zealand population still have low numeracy and (document) literacy scores.
Apart from that, I'll admit I've heard a lot of anecdotes about people not being able to read safety instructions, for example. A good friend who teaches whatever they call woodwork these days is constantly frustrated by the number of his pupils who can't read the written part of the course, let along have the maths skills to cope with basic measurement activities (he teaches, or did until recently, in a decile 5 school).Someone over the page referred to a recent study showing our school leavers are doign comparatively well. Yes, I'm aware of that, but there are two things to remember - firstly, those are people joining the workforce today. There are still a lot of people within the workforce with extremely low skills.
The second caveat is with the use of averages in a lot of these statistics. There's plenty of people posting here with better knowledge of statistics than I have, so I'll just point out that an average doesn't tell you much. The spread of figures does. I think those school leaver figures are an average, and from memory when you look at the spread we have a lot in the low end.
I'll partially retract one thing - saying it was 'the biggest' drag. That was a careless use of words, if only because I don't think this sort of thing is quantifiable, at least not in any useful way. It is a major drag, though.
A comment about the wider context of my original comment - I was concerned about what looked like developing into a bout of reflexive business-bashing exercise (and subsequent posts haven't exactly disabused me of that notion).
I can point you to numerous monetary policy statements from the Reserve Bank over the middle of the decade which noted the comparativley high level of business investment - around 20% above trend in '04-05. Now, thats an aggregate figure, which, like averages, can conceal a large 'tail'. I'm not sure it does so in this case though.
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And it would still circumvent the politically suicidal capital gains tax.
It's a shame that Labour couldn't have sucked it up, accepted its impending doom, and passed a capital gains tax in its dying days. That would've been the greatest legacy Cullen could've left us. Instead we're stuck with an freshly-elected government that's going to do its utmost to cling to power for as long as possible, ensuring that capital gains won't happen for several more years. If ever. It's dangerous to even admit considering such a thing, never mind actually implementing it, and that's going to keep us fucked for a long time to come.
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I can point you to numerous monetary policy statements from the Reserve Bank over the middle of the decade which noted the comparativley high level of business investment - around 20% above trend in '04-05.
Which was right around the time that businesses started going through the upgrade process to get their offices running XP. That frequently involved buying new computers, and often meant a full upgrade of the entire IT infrastructure to go to Windows 2K3 and an AD structure. IT consultants are cunning buggers, and it's not hard to baffle the average medium-size business operator with a whole lot of BS about why they should be using Active Directory and all the rest. And even small businesses were pretty much forced to upgrade by the emergence of Office 2K3, requiring improved hardware just to get it to open in less time than it took to boil the jug and make your morning cuppa. We'll see a similar capital spending up-tick in the next couple of years as companies that've let Vista pass them by upgrade to go to Windows 7.
Hate to break it to you, but upgrading your computers so that you can maintain electronic communication with the rest of society isn't an investment in the capital means of production. -
Rob, I think the improvement in business investment was from a very low base (but I have no links to back that, but recall Rod Oram raising it somewhere).
From when we were discussing educational stats here last year, I think you are right about the skew in our recent school-leaver achievement levels - though as you point out that does not say much about the rest of our existing workforce.
However, I agree with Mr Hayward's analysis that the biggest improvement in our business productivity is likely to come from investing in the quality of our management and governance. Surely it's one reason our companies get monstered so regularly when they try to do business in Australia?
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pproximately 50 percent of the adult New Zealand population still have low numeracy and (document) literacy scores.
50% below average shock horror!
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Hate to break it to you, but upgrading your computers so that you can maintain electronic communication with the rest of society isn't an investment in the capital means of production.
So much of the cost of modern business life probably isn't productive. Way back in the day, a typical sales tender was a typed and photocopied document. Now it involves a publication-quality effort backed up with powerpoints, just because the competition will do the same. Does that actually make anyone more efficient?
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Stephen, that's very interesting. So the feeling that we under-invest in capital means of production is just that, a feeling, and not something borne out by the evidence, but we're still a very under-performing economy. Which doesn't make a heck of a lot of sense.
I wonder what the figures would look like if they were adjusted to factor out the very capital-intensive nature of dairy farming. As in the farms themselves, not Fonterra's massive and highly-advanced processing facilities. Building and upgrading milking sheds costs a heck of a lot of money, but the productivity is only minimally variable without going to an entirely new format - such as going from herringbone to rotary. I see the "next big thing" as the fully-automated dairy shed that's been worked through in Otago (I think the farmers that came up with it are in Otago), and that'll be another step up in productivity but is still tying the investment into primary production. -
From when we were discussing educational stats here last year, I think you are right about the skew in our recent school-leaver achievement levels
Actually, I was wrong. Here's my post from our original discussion about Tolley rushing through "standards" testing - including links to the international PISA results.
Only 3 of the other participating countries had a mean reading literacy score that was significantly higher than New Zealand’s.
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3410,
David Hayward... Mr Hayward...
That's Hay*wood* .
David Hay*ward* is, in fact, the infamous Auckland conceptual artist currently reconfiguring the conciousnesses of the inhabitants of London and surrounding areas.
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Oops. Sorry, David.
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Rich, point taken about computers in general being a productivity enhancer, at least to a point. After all, it's a bit hard to surf for porn on your manual typewriter. But once that benefit's reaped it's only very, very slight increments to invest in new computer equipment. The initial investment in IT was staggered across industries over time, so there was no bubble. However, by the time XP came out everyone was using IT and there was now a large market that was ready (and easily convinced) to upgrade. Hence, bubble. The productivity and efficiency gains will be mostly unnoticed, though companies that are still existing in the dark ages will get a big boost.
Anecdotal example here: my flatmate's a consulting engineer, specialising in HVAC. His employer is a small (I think it's about four engineers, including him, plus two or three ancillary staff such as a draughtsman) partnership, and until late last year they were running on computers that had as their most up-to-date model a Pentium 2. The network was 10Mb/s ethernet. It took 10 minutes to open up AutoCAD, and as long again to open up some of the larger project files. It was at the point where he used his own laptop just so that he could get something resembling responsiveness from AutoCAD. That's a ridiculous drain on productivity, with all the lost time to slow computers. They finally upgraded their entire IT infrastructure last year, with new workstations, servers, and network infrastructure. He's estimating about an extra hour of productive time per day, just for him, as a result. That's a big deal, but it took years before his boss could be persuaded to spend what was, relatively speaking, a fairly small sum. I don't know what the consultants charged (they hired a specialist consultancy that does IT systems for engineering firms), but the hardware cost left change from $20k. They should make that back in a year, but it will be a long time before the firm recoups the huge sums that were lost before the upgrade.
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if petrol were as cheap here as it is in the US, and we had the effective subsidy on small truck chassis vehicles that the original SUVs had, and our roads were as wide as US suburban roads and freeways, I think we'd love SUVs just as much. Part of the SUV story in the US is the economic factors that made them an affordable choice.
...and if New Zealand made SUV's so Kiwi's could buy them locally, and if they were made locally and a whole bunch of trade tariffs were put around imports so the local product was a cost-attractive option to a consumer, and if there was a ready-made 'buy kiwi' mythology around these SUV's that advertisers could exploit, and if there weren't a whole bunch of slightly used but still nicely servicable ex-Japan station wagons arriving on the docks every week....
And about a bazillion other 'if's' that would have to be taken into account for me to actually agree with Matthew Pooles conclusion.
Seriously, your chain of logic is missing a few links between hypothesis and conclusion.
Having said that, Bill Bryson has a great anecdote in one of his books about cup holders. Apparently, Volvo attempted to enter the US market with a model that didn't have at least one cupholder per seat, thinking that features such as fuel efficiency and safety would be clear winners. It bombed. The designers had to frantically remodel the interior to include the requisite minimum number of cupholders before they could relaunch it.
Dunno if it's true, though.
They like to point to Germany's near or actual double-digit unemployment rate. In reality, the figures are skewed by the much higher unemployment rates in the former East Germany, which had the indignity of Joe Stalin foisting a puppet government on it.
Yes. Having to effectively deal with your existing population, plus the absorb the same again, especially when that population is generally made up of unskilled, unmotivated, traumatised people, living in a part of the country with effecively zero in the way of advanced technological infrastructure. Well, that tends to put something of a dent in even the best-running economy.
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However, by the time XP came out everyone was using IT and there was now a large market that was ready (and easily convinced) to upgrade. Hence, bubble.
Not many work places will have gone out and bought new machines for all their staff in one year. Most will have just continued to buy the latest computer with the latest operating system as the old machines got too old.
I run a four year cycle in my department, the latest operating system or software has no affect at all on our hardware purchasing. Computers also wouldn't account for a 20% increase in capital purchasing, and I work in a very computer intensive workplace. Computers pale in comparison to capital spent on new and existing buildings.
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Yes, commercial property boom on the back of banks seeking avenues for lending. And milking sheds for all the conversions to dairy farming. And tractors. And factory equipment, once the incentives to just hire more low wage labour were changed slightly by the incoming Lab govt in 1999.
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Which was right around the time that businesses started going through the upgrade process to get their offices running XP. That frequently involved buying new computers...
Yeah, but the MPS figures I was referring to usually strip out the computer investment from their business investment stats.
Never asked them why, and perhaps I should have. But it always struck me as an implicit vote of no confidence in the productivity benefits of IT.
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Yeah, but the MPS figures I was referring to usually strip out the computer investment from their business investment stats.
Never asked them why, and perhaps I should have. But it always struck me as an implicit vote of no confidence in the productivity benefits of IT.
Interesting. I wonder why the sudden up-tick in investment, then, because ordinarily a 20% increase doesn't just disappear with no visible trace.
As for the productivity of IT, I'm not in the least surprised. With very few exceptions, IT doesn't of itself make a business more productive. Obviously if you go from, say, a manual lathe to a computer-controlled one you'll probably see increased productivity, but if you upgrade the A/R clerk from paper to MYOB your business's output isn't changing at all. That lathe isn't strictly-speaking an IT upgrade, either, since you've almost certainly had to replace the entire machine in order to bring in the IT component, so it's a plant upgrade not just an IT upgrade.
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Rob, I think the improvement in business investment was from a very low base
Oh, very true. But don't forget I was responding to Matthew's comment that businesses regard capital expenditure as a dirty word. I was simply saying may have been true 15-20 years ago but not so more recently.
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