Here are two ways to spend New Year: clamp your ears shut to the dire predictions, the better to keep summer alive a week or two; or look through the predictions to our abundant riches.
It is now fashionable to talk of the “great crash of 2008” as some replica of the “great crash of 1929”, after which came the “great depression”. A scary prospect.
There has been a crash in the rich Anglo and European countries and it is corroding the rest. The Americans did most to build the bubble that has now burst messily, as all bubbles do. But all the Anglo countries, this one included, fellow-travelled. We lived high on the hog.
The hog was debt. Households leveraged themselves on their houses which magically kept rising in “value”. Companies leveraged their balance sheets to make magical profits by expansion. Governments hoovered up revenue from the magical profits and sprayed much of it back in tax cuts and/or social spending.
As households go, ours leveraged the most except for Iceland, now bankrupt. Debt as a percentage of disposable income tripled in 15 years. Now, as houses re-price, households have to get the debt down to manageable levels.
As companies go, ours weren’t too bad but the most leveraged ones, notably in property development, are in trouble. More problematic are the foreign-owned companies which have to slash subsidiaries here to sort out head office debt, often regardless of profitability in this market.
As governments go, ours was less profligate but did join the party. The whiplash from towering Budget surpluses to monstrous deficits is the legacy. The new government seems frozen in the headlights, presiding, on its own admission, over nearly the biggest fiscal stimulus in the “rich” world but scared to rein it in.
It takes comfort from today’s low government debt. But as the debt rises the hard questions will crowd in. Its track record pre- and post-election does not yet suggest it will match the hard questions with hard answers. (But give it time.)
How did this crash come about? Read the rational, balanced, longsighted analysis by Henry Blodget in the December Atlantic Monthly, and a companion piece by Virginia Postrel. Bubbles are human; bubbles burst; the great majority of the “villains” are not evil or stupid; there will be a lot of bad and some good come of this crash. And a couple of generations on we will do it again.
So best to turn to the long end of the telescope. And what does it show? An astonishingly blessed country. Here’s a list of our comparative advantages.
We have water in a world that is increasingly water-constrained. (We manage it incompetently but that can be fixed, with a will.)
We produce high-quality food in a world that is increasingly food-constrained. It will take huge improvements in technology (including water use) and in national and international organisation to meet the food needs of the world’s fast-growing population.
Included in our food store are vast expanses of well-managed fisheries. (But can we stop others plundering them as they have plundered their own fisheries?)
We have abundant energy in a world which will be able to ward off shortages only with leaps of technology. This year’s oil price spike was a curtain-raiser. We have vast amounts of coal, oil, gas, wind, steam, water and, when the new technologies reach maturity, sunlight and biological energy sources.
We come relatively well out of climate change, compared with nearly every other country. There will be a cost but we will be able to adapt relatively easily.
We have distance. Once we talked of the tyranny of distance — from markets, from civilised discourse, from the metropolis. And we still live at the end of long, vulnerable supply lines in and out. But we can now talk of the distance of tyranny, the relative safety from overcrowding, the offer of a haven for high-end mind-work industries. Distance is now more a plus than a minus.
And we have a great brand: clean and green. Actually we are not clean and green and the government is putting it at serious risk, but there is at least the opportunity for us to claim and hold the brand and make premium money from it in a dirty, brown world.
Fred Dagg, decades ago when he was a New Zealander, sang ironically that “we don’t know how lucky we are”. We have taken the irony to heart. We truck off in droves to Australia where we think we will actually get lucky.
Sure, Australia has metals which the world needs and that looks flash (though less so recently). But our advantages are every bit as big. They are advantages most countries would kill for.
OK, this next year will be tough and maybe the one after and the one after. But if we want to look past that we have the potential to be very rich — and clean-green with it. Chuck another scallop on the barbie.
* This is my last column for the Herald. This slot has been reassigned. Thank you for having me over the past 10 years. My column will still be available from the email below.