Wellington has solved New Zealand’s 50-year productivity puzzle. According to a new 60-page joint briefing from the Ministry of Business, Innovation and Employment and the Ministry for Foreign Affairs and Trade, the answer is simple. We need a better “mix of levers” and more “deliberate and strategic” coordination.
One can easily guess who is to do the coordinating.
The document, called a “Long-term Insights Briefing,” is admirable. It identifies the problem (productivity is low), studies successful countries (their productivity is high), and proposes a solution (a framework for identifying high-productivity sectors).
The framework features horizontal levers and vertical levers, strategic interventions and foundational settings. Horizontal levers are “widely agreed to be effective,” while vertical levers require “careful design.”
A diagram shows how these interact with each other. It’s enough to make a McKinsey consultant weep with joy.
Denmark, Finland and Ireland feature as exemplars. Our ministries have studied them carefully. Their conclusion? We need better frameworks for identifying high-value sectors.
Never mind that Ireland’s approach was the opposite of strategic coordination. It was simple. Lower taxes, get out of the way, let companies come.
Our ministries prefer the sophisticated approach. With consultation. It’s like being given the solution and choosing to redesign the method for finding it.
Officials will use the framework to identify which sectors show promise, then coordinate resources accordingly. What could possibly go wrong?
But the true genius reveals itself on page 51. After 50 pages of methodology, matrices and assessment tools designed to identify high-productivity sectors, the authors pose two questions.
“Do you have any other suggestions for how government could identify high productivity sectors?” And: “Where are the opportunities?”
They’ve built the machine. They’re now asking the public to tell them what it should tell them.
This is accidentally honest. The knowledge required to identify productive sectors doesn’t exist in any ministry. No framework would have predicted Rocket Lab launching from Mahia Peninsula. Peter Beck had to identify the opportunity himself, then persuade the government to enable it.
That’s why we have markets. Entrepreneurs try things. Many fail. A few succeed spectacularly. Prices signal where value lies. Resources flow accordingly.
Of course, there is a legitimate government role in productivity: removing barriers and letting commerce work. Regrettably, better regulation is not a lever in the diagram.
But don’t tell MBIE and MFAT that. You might spoil their fun.
What a good post, thanks Roger
And I loved your reference to McKinsey’s (or Bain & Co, etc.) “solutions”!
Why is it that the private sector usually become more productive when applying the benefits of “technology” (e.g. fewer bank tellers) while the public sector always becomes less productive each time new technology is adopted (more “tech experts”, etc.)?
Your solution to replace stupid public sector “levers”: “…Never mind that Ireland’s approach was the opposite of strategic coordination. It was simple. Lower taxes, get out of the way, let companies come…” is spot on.
(P.S. I know the reason: private sector increases productivity or gets replaced by competitors. Public sector simply claim more taxes and rates from hapless tax and ratepayers.)
You did Ireland, now do Finland and Denmark