Angus Dowell cautions that comparisons between New Zealand and economies such as Singapore or Ireland are “simplistic and misleading.” I would suggest they are, in fact, highly instructive. The point is not that we can replicate their precise geography or political structures, but that small, open economies can prosper when they adopt sound institutions and policy frameworks.
It is undeniable that New Zealand is remote from major markets. But geography does not explain why our productivity lags so badly behind Australia, or why our per-capita incomes remain well below the OECD frontier. Those outcomes reflect policy choices. For most of the past half-century, government spending in New Zealand has hovered around 40 percent of GDP. No country has sustained high growth rates with a state of that scale. By contrast, Hong Kong, Singapore, and Ireland all pursued leaner, more competitive environments.
Mr Dowell points to Singapore’s state-owned firms and sovereign wealth funds. But to attribute Singapore’s success primarily to state ownership is to miss the wood for the trees. What sets Singapore apart is its extraordinary openness to trade and investment, low and simple taxes, predictable regulation, and strong rule of law. It consistently ranks alongside Hong Kong at the top of international indexes of economic freedom. These are not accidents of geography.
Likewise, Ireland’s turnaround was not merely the product of clever tax structuring. Low corporate tax rates certainly mattered, but so too did EU integration, investment in skills, and above all a political consensus around welcoming enterprise. Multinationals did not simply book profits in Dublin; they built operations, created clusters, and helped lift Irish living standards dramatically.
Foreign capital, whether from Amazon Web Services or elsewhere, should not be feared. It will not transform New Zealand overnight, but it can bring productivity gains, knowledge transfer, and infrastructure investment. The task for policymakers is to ensure that our environment is sufficiently attractive and competitive to capture those benefits.
Of course, New Zealand cannot become a European hub or an Asian entrepôt. But to use that fact as an excuse for mediocrity is to accept a diminished future. The lesson from Ireland and Singapore is that small nations need not be condemned to the backwaters of the global economy. With the right institutions—smaller government, open markets, and policy settings that reward enterprise—New Zealand too can close the gap.
Geography is unchangeable. Policy is not.
[…] It is undeniable that New Zealand is remote from major markets. But geography does not explain why our productivity lags so badly behind Australia, or why our per-capita incomes remain well below the OECD frontier. Those outcomes reflect policy choices. For most of the past half-century, government spending in New Zealand has hovered around 40 percent of GDP. No country has sustained high growth rates with a state of that scale. By contrast, Hong Kong, Singapore, and Ireland all pursued leaner, more competitive environments. – Nicholas Kerr […]