Generating wealth rather than trading money
Did you know that if you invest $6M in a dairy farm on average you will generate $1M of revenue, you will give employment to 2.6 people and your business will have another job or so associated with it, whereas if you invest only $3M in manufacturing you will on average generate $10M of revenue, employ 80 people and will have another 232 jobs associated with that activity? Let’s consider the difference between money in the economy and a wealthy economy. In my opinion the difference between these things is something we should be debating. You can make money speculating on foreign exchange or you can do it shuffling assets around like Brierley did in the nineties, but from society’s point of view real wealth is an abundance of things like available health care for its most vulnerable members, high levels of education among even the poorest members, average income levels that match the best of the developed world and interesting and varied work opportunities for our young people. We know that New Zealand is largely blessed with steady rainfall and a temperate climate that can grow stuff the world wants. We should celebrate that and do all we can to keep farming efficient but the industry is pretty grown up now and doesn’t need much help from the rest of society. If the whole economy is tilted towards supporting conditions that favour that one activity, then it quickly becomes welfare for that industry – that distorts asset values and creates a fear of upsetting vested interests that benefit from the way our economy and exchange rate are managed. It’s somewhat worrying that the Prime Minister seems to be following his predecessors from the past four or five decades but it’s understandable, after all he’s involved in a popularity contest […]