New Zealand is a remarkable country.
With little more than 4 and a half million inhabitants and a surface of 268 thousand
square Kilometres, it is a little bit smaller than Japan or Italy.
It is located in the South Pacific and we could say New Zealand is far from, well, literally,
everything.
Because, even though it feels like it is right near Australia by looking at the map, these
two countries are separated by more than 1,600 km at their closest.
That is why we can find there endemic species such as the kiwi a non-flying nocturnal bird…
Despite being such an isolated country, New Zealand has managed to become, following a
rather unique model, one of the countries in the world that enjoys one of the highest
standards of living.
In this first video we are going to tell you about some of the most striking keys to New
Zealand’s success.
There is an oft repeated comment, or feeling if you wish, which takes place over and over
again every time someone is asked about New Zealand after a visit.
They all say it is a country of congeniality and quality of life.
A country that everyone seems to want to go back to…
“I am happy to say categorically that I have found no other country that aligns more
with my view of the future than New Zealand”.
Peter Thiel.
So if something is for sure, it is that New Zealand is, above all, a welcoming, integrating,
country.
Well, how about a piece of evidence to support that?
Well, consider this:
“1 out of 4 of New Zealand's inhabitants has been born abroad, and here, sign language
is considered an official language”.
Their citizens certainly have plenty of reasons to be happy and more than satisfied!
Further, New Zealand is one of the top 5 safest countries in the world, its economy is the
third freest on the entire planet and, according to the “Doing Business ranking”, it is
the number one country in the world when it comes to the ease of doing business.
Yep, you heard that right.
“New Zealand Dethrones Singapore as Easiest Place to Do Business”.
Bloomberg
But this isn’t the end of our story today...
Not even close.
New Zealand is also considered the least corrupt country in the world along with Denmark.
Employment rates are higher than the average in the OECD and it has excellent educational,
sanitary and cultural systems.
In other words, New Zealand is both an economic and social success story.
But leaving all this aside, in this video we are going to focus on one of the most distinctive
keys to its success.
And that’s the countryside...
NEW ZEALAND, A LAND OF FARMERS
New Zealand is the only developed country where the primary sector has become more relevant
in the last three decades.
This sector represents, today, almost 7% of the country's economy.
To highlight quite how much this is, consider that the primary sector is just a 1.6% of
the economy in the European Union.
Four times less than in New Zealand.
Even Spain, whose primary sector represents a little more than a 2% of its economy and
is considered the orchard of Europe, looks ridiculous when compared to the country we
are discussing today.
There is simply no equivalent in the entire world.
For example, milk and dairy are the largest exports from New Zealand.
If we add both the primary sector to the agro-food industry, these two represent 60% of the nation's
trade exports.
Could you really have thought this would be possible?
That the countryside could be one of the main economic engines in a country with one of
the best welfares and standards of living on the planet?
It is, quite simply, rather amazing.
The agricultural competition is so high that they even managed to achieve this without
having to rely on government subsidies.
Consider the difference here:
Every year, the European Union grants agriculture and livestock subsidies worth around 21% of
production.
In Spain alone, the European Union has foreseen they will have to give 55 billion USD in farming
support between the years 2014 and 2020
And don’t be thinking that the American system is any different…
Alright, so in North American, subsidies are a bit lower than in the EU, but they still
are around 8% of all agricultural production and…well, that´s quite a lot.
Now, New Zealand does have some government subsidies, but they are just 0.9% of production.
23 times less than the European Union and almost 10 times less than in the United States.
Not bad, right?
Besides, if this wasn't enough, New Zealand’s spending is mostly bound for investments and
innovations...
As you can see, they save a great deal.
But this hasn’t always been the case...
ROGERNOMICS AND THE NEW ZEALANDER FARMING REVOLUTION
In the early 1980s, almost 40% of farming income came from the government subsidies.
At the time, the national economy was the archetype of protectionism… and the system
didn’t exactly work…
The economy of the country was going through a tough crisis:
The public deficit was enormous, almost 10% of the national GDP, there was double-digit
inflation.
External debt and unemployment kept rising and the economy was in a state of stagnation.
Now, in 1984, the Economics Minister of the recently elected labour government, Roger
Douglas, started an ambitious reform program known as Rogernomics.
In this program, many areas of the economy were liberalized, and this included the primary
sector.
And these changes took place almost overnight!
Price controls were eliminated and most farming subsidies were removed.
Furthermore, in order to fight inflation, the government decided to raise interest rates.
It was unpopular and farmers were angry since they had gone into debt in the previous years.
It was the perfect storm: income falls, debt interest spending increases, and there was
a fall in the price of land…
As you can probably imagine this change wasn’t easy, and it all seemed to indicate a future
disaster...
However, the country soon felt the benefits of putting an end to subsidization:
The income fall encouraged farmers to look for innovations capable of raising the levels
of production.
They introduced new crops, improved the quality of their crops, and used more ecological farming
methods.
They simply had to stand out from the crowd.
On the other hand, they began to be very careful about cost.
And this wasn’t just about maximizing the production of subsidized products: they had
to improve the value chain, adapt to consumers, and reduce costs.
As an example: subsidizing fertilizers had resulted in the careless use of them...
When there were no more subsidies for these fertilizers, the use of fertilizers fell without
affecting production.
Farmers learnt to use them only whenever necessary, which helped with the cost of production,
but also helped the environment.
The same happened with other things and this created a more efficient and sustainable agricultural
system.
When we consider the new crops and products that New Zealand started producing there is
probably no better example than that of the wine industry.
The space dedicated to vineyards has almost tripled in the last decade and New Zealand
wine has become known around the world.
Moreover, with the goal of finding new revenue sources, the rural population started to develop
additional businesses like rural tourism or elaborate agro-food products, both closely
relying on environmental preservation and a highly valued brands.
This meant that farmers started to commit to the protection of the environment.
Now farmers realized that preservation of the ecosystem was also profitable in economic
terms.
The result was an incredible revolution.
In the end, only 800 exploitations, 1% of all of them, had to close down.
And in the next twenty years after 1986, the production in the sector grew by a 40%.
And pay close attention to that figure!
Since the removal of subsidies, the primary sector has grown more than the rest of the
economy.
Between 1986 and 2006, the primary sector saw a sustained growth of 5.9% a year.
So New Zealand really has thrived after the removal of subsidies!
Alongside with this process, internationalization was also key.
It let the New Zealand countryside competitively export more than 90% of its production.
And further to that it’s all very environmentally friendly, what else can we possible ask for?!
New Zealand, dear viewer, is the perfect example of how bad policies and subsidization can
damage innovation, diversification and productivity, while at the same time creating a burden for
public economy.
This is exactly what is happening with the CAP, the European protectionist agricultural
policy, which costs around 50 billion Euros every year.
On the contrary, New Zealand shows that, by doing things right, it is not only possible
to save a lot of money, but at the same time for rural areas to improve substantially..
New Zealand has absolutely proven that farming can be prosper without public aid.
And while New Zealand is trying to double their farming exports by 2025, the rest of
the countries are still involved in the debate around subsidisation…
But, what do you think?
Do you think the countryside will die without public aid?
Could New Zealand’s success be replicated somewhere else?
We’d love to know what you think…
Let us know in the comments below!
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Also, check out our friends at the Reconsider Media Podcast - they provided the vocals in
this episode that were not mine!
And as always, thanks for watching!