From Menders to Makers: How we Built a Manufacturing Nation
Chapter 3 of ‘The Revolution that Nearly Was: How Aotearoa New Zealand’s progress was frustrated, and utopia mislaid’
A LOCALLY FAMOUS cliché holds that New Zealanders can mend anything with ‘number 8 wire’, galvanised steel wire used for making agricultural fences. Running repairs were often necessary on back-country farms, and they required a certain degree of mechanical ingenuity.
The number 8 wire theme has been picked up in the title of a couple of books about the mechanical inventiveness of the New Zealander.
According to one of these books, Jon Bridges and David Downs’s № 8 Re-Wired (2014), there are no less than 202 New Zealand inventions that changed the world. There may be a few more now.
We produced Glaxo, a giant pharmaceutical firm which was the nearest local equivalent to Finland’s Nokia, a firm that eventually became one of the three limbs of become part of GlaxoSmithKline or GSK, before losing the last of Glaxo’s domestic production offshore in the 1990s: in part because the New Zealand Government of the time refused to guarantee any procurement from Glaxo to service New Zealand’s health needs (Millen et al, Glaxo, 2nd edn, 1997).
We have also retained and developed other high-tech firms and research collaborations, including Nuenz (the only commercial manufacturer of silicon nitride fibres, founded in 2011), Buckley Systems (makers of machinery that makes silicon chips, founded in 1978), the high-end audio firms Perreaux (founded in 1974) and Plinius (founded in 1980), Rakon (quartz crystal oscillators, founded in 1967), HTS-110, founded in 2004, which manufactures high-temperature superconducting magnets using technology developed over the previous two decades by New Zealand government scientists, and the Inductive Power Transfer technology still under development at Auckland University.
Not to mention Tait Communications, founded in 1969, and Fisher and Paykel Healthcare, plus several more recent gaming and software firms and, of course, Peter Jackson’s Wētā Workshop and Park Road Post.
As is the case in other countries, a significant number of these firms had been spun off from the universities and government research institutes, such as our former DSIR (Department of Scientific and Industrial Research), or had otherwise been assisted by government procurement and research grants, in ways that are still ongoing to some degree via the universities and such present-day innovation agencies as the Paihau — Robinson Research Institute and Callaghan Innovation: Te Pokapū Auaha.
A 2013 Radio New Zealand interview with Sir William Gallagher, principal of the Gallagher Group, inventors of the modern electric fence among other things, makes for interesting listening in that respect:
Gallagher: “When it comes to growth, in the seventies we had several years … three years of more than doubling our size every year, which was very exciting.”
Interviewer: “That was with actually a lot of government subsidy, wasn’t it? I read at one point your tax actually got down to zero thanks to R&D incentives.
Gallagher: “Oh no, it was worse than that — I mean better than that. Your after tax result was bigger than your pre tax result….
Interviewer: “So how big was that as a factor in your R&D investment and growth?”
Gallagher: “Oh quite considerable…. that’s why we’ve still got the privilege of being a private company…
And yet, for all that, what is really striking about today’s New Zealand is to what little extent the media and the political class frame our country as a manufacturing nation.
Economic policy debates in New Zealand are mostly about the price of milk and houses, while almost never touching on the issue of manufacturing development. Moreover, our national self-image continues to be framed in the rather anachronistic terms of what Dionysus, in 1921, called ‘pre-eminence in Rugby football and dairy products’.
To which one might add that has also been an increasing emphasis on Aotearoa’s unique Māori culture in its more rural and traditional forms (though most Māori now live in cities), and on the scenic qualities of a mountain landscape with lengthy coasts.
Both of which, a cynic would say, have grown increasingly important in the jet age, as tourism numbers have increased.
As Erin Mercer writes in a scholarly 2017 article about the country’s traditional reliance on extractive rural industries, with the interesting title of ‘Shot at and slashed and whacked’, the paradox in all this is that the overwhelming majority of New Zealanders live in modern cities, and yet this fact is almost never talked about:
If the settlement of New Zealand in the nineteenth century relied on rendering it as a pastoral paradise, then the present moment sees it represented in similarly idyllic terms through the 100% Pure New Zealand campaign established by Tourism New Zealand. In spite of the overwhelmingly urban nature of the New Zealand population, 100% Pure New Zealand uses a range of images representing the country in terms of pristine natural environments, including the sort of sublime mountain peaks and glassy lakes that characterise nineteenth- century propaganda and literature. Interestingly, this vision of New Zealand entirely omits any form of industry . . .
Yet as Sir William suggested in 2013, it was not always thus.
As we have seen, from the dawn of the twentieth century, there was a push to use the country’s renewable energy resources — initially hydroelectricity, supplemented from the 1950s by geothermal power and, more recently, wind and solar — to power manufacturing industries and thus help New Zealand to get beyond an essentially colonial position in the world.
These renewable resources were supplemented by local supplies of fossil fuels in the forms of coal, oil, and gas. But local fossil fuel reserves were found almost from the outset to be quite limited even in relation to a colonial population, let alone the larger populations expected in the future.
Across the twentieth century to follow, the only discovery to challenge the idea of a New Zealand in which renewables were the only game in town was the Māui gas field, developed at around the same time as the fields of the North Sea on the other side of the world and now, like North Sea oil and gas, somewhat used up: a shared biophysical reality that lies behind a curiously parallel perception of decline in Brexit-era Britain and contemporary New Zealand alike.
In both countries, a fossil-fuel bonanza was used to finance tax cuts, which then went into a boom in real estate prices, but with little actual investment to show for it.
In contrast to Norway, where the proceeds of North Sea oil and gas were invested wisely, or even for that matter Britain’s past great age of coal, in which the sinews of the Industrial Revolution were forged, little productive hay was made while the oil-and-gas sun briefly shone on late-twentieth-century and early-twenty-first century Britain and New Zealand alike, and both countries now languish in the aftermath.
(We have long been Britain’s mini-me to some extent, and this is a further curious parallel of that nature.)
On the other hand, as the New Zealand Government’s chief public works engineer Peter Hay put the matter in 1904, hydroelectricity — and by implication all later renewables — would serve us for “as long as the climatic conditions and the mountains endure.”
The motives for what was known for much of the twentieth century as hydroindustrialisation always extended beyond considerations of what was most immediately profitable in the short run —mining, fishing, cutting down trees, and farming — to a longer-term developmental vision, which was also held to warrant state intervention if the cities were not to languish as the driven wheels of an economy in which most of the wealth was generated in the countryside.
In part because our countryside was not all that productive in the first place, such an outcome portended stagnation, the frustration of the ambitions of the ‘nation builders’. Either that, or the emergence of cities full of slums, poor, and the unemployed and under-employed.
On the other hand, it was not clear why any urban manufacturer would wish to become established in remote and underpopulated New Zealand, as opposed to, say, Manchester or Birmingham. We faced a bit of a chicken-and-egg problem in that sense.
There was, as such, a near consensus in the New Zealand of a hundred years ago that in as distant a spot as that in which we found ourselves, the state would have to blow on the coals of urban industries to get them to take light.
For indeed, once geography is added to economics, we find that there is a powerful agglomerative tendency at work. Though the earlier forms of modern industry might have found their origins in the fortuitous proximity of coalfields, iron-mines, and waterways to transport the products, once modern industrial development has become established, it then continues to build upon itself in the same regions even as it becomes more diversified and ‘high tech’: for these old industrial regions are close to markets and the booming centres of population which the older forms of industry first encouraged to grow.
And where, also, there is a skilled workforce and all kinds of related and supporting services ready to hand: districts where, as the great British economist Alfred Marshall once wrote, “the secrets of industry are in the air.”
Districts and regions that are not favoured by having got in on the ground floor of the nineteenth-century Industrial Revolution thus have an uphill development struggle, tending only to come into industrial prosperity through some kind of concerted and common effort to bust the chicken and egg problem.
Concerted and common efforts, of a kind that did indeed come to be favoured in the parts of Continental Europe that had missed out on the early stages of the Industrial Revolution. And in East Asia, all of which had similarly missed out.
These concerted and common efforts — not Communism, but rather what are now called ‘national systems of innovation’, or the ‘innovation triangles’ of the private sector, government, and universities — have proven particularly effective at fostering the more complex sorts of industries, primarily dependent on brainpower, that arose after the initial and more muscular stage of the Industrial Revolution had run their course.
In this way, to take just one example, Finland, one of the poorest countries in Europe as late as World War II, became a comparatively high-tech industrial nation.
Another good example of industrialisation through concerted effort is provided by the US West Coast, which as late as 1939 was a primarily agricultural region.
Phrases like ‘Silicon Valley’ were yet to be coined. As a colourful advertisement from the day suggests, the valley in question — more formally known as the Santa Clara Valley — was also primarily known, back then, as a place where fruit was grown and canned.
Elsewhere, fish were the things that were being put into cans: the subject of one of the best-known novels about the California of that era, a gritty waterfront novel called Cannery Row. Nobody thought of the place as particularly high-tech.
These facts, plus its isolation from America’s industrial heartland by more than two thousand kilometres of mountains, deserts, and prairies, made the US West Coast a potential target for being taken over by such rising powers as Japan, China, or Russia: of which the last had at one time owned Alaska, of course, but had also established a string of outposts to the south, all the way down to the sailors’ graveyard that gave its name to Russian Hill in San Francisco.
A subsequent, massive, military-industrial intervention during the World War II era, and the Cold War that followed, helped to make the US West Coast more secure from Washington’s point of view, and also fostered its development into one of the world’s largest regional economies.
In a curious parallel to New Zealand’s situation, much of this development was powered by a string of massive hydroelectric projects. The same was also true of the industrialisation of Norway and Sweden.
Among other things, abundant hydroelectricity also dovetailed very nicely with the latest sorts of industries, such as the manufacture of electronics and aircraft. All of these required clean conditions and highly precise, ultimately computer-controlled manufacturing processes, as opposed to the sooty workshops of earlier forms of industry, and their fiery furnaces and steam engines that could only be controlled to a certain degree.
In this country, the interventionist or, as he put it, ‘national’ point of view was forcefully defended in an 1897 book called Notes on Political Economy from the Colonial Point of View, by New Zealand Liberal Party politician and colonial diplomat Frederick J. Moss, who was perhaps one of the first to distinction between the idea of New Zealand as an agricultural colony of Britain and New Zealand as an independent nation.
The latter, he argued, would only be possible, in any genuine sense, if New Zealand also became an industrial nation as well. This was not just a purely economic argument, but also of becoming more well-rounded. In his Notes, Moss wrote that:
. . . the colonist desires that the children growing up around him may have opportunities of acquiring mechanical skill, and so be saved from becoming mere hewers of wood and drawers of water for richer nations. He regards mechanical skill and the great products of that skill as the buttress of a people’s strength and safety. He is firmly convinced that without a variety in industries no single industry can thrive, and that without a local ready market for a variety of agricultural products the proper rural settlement of his new country is impossible. These are the considerations which make nearly every British colonist, who is not a trader in imported commodities, strongly protectionist in policy. He does not regard immediate results. His eye is on the future and on the children growing up around him. (pp. 43–44)
I first came across this passage in a book called How Rich Countries Got Rich … And Why Poor Countries Stay Poor, by the Norwegian economist Erik S. Reinert, first published in 2008 and revised in 2019. On the other hand, Moss’s Notes are not nearly so well known in New Zealand these days — a case of a prophet without honour in their own country, perhaps.
Along with the fact that their continued domination would have left New Zealand one-sided, rural pursuits alone could never have provided a growing population with adequate employment in any case.
A harsh topography, described in the introduction, has always limited our rural population to about half a million or so, even when the smaller towns are included. And yet, our population was already twice that before World War One; with nearly every additional New Zealander since those days an inhabitant of an urban census area.
Along with Australia, where most of the landscape is similarly inhospitable albeit for different reasons, New Zealand is, despite its dependence on rural exports, also one of the most urbanised countries in the world.
Having said that, it is equally true that until Auckland expanded past a million just in the last few decades, our urbanisation was of the ‘small-u’ variety, a state of affairs in which “Main Street runs pretty well the whole length of New Zealand,” as a historian named P. J. Gibbons was put to put in a comment below a 1979 article by David Hamer, on the subject of New Zealand’s historically rather scattered form of urbanisation.
An urbanisation that took the form of a profusion of towns and small cities arranged along railway lines like beads on a string, with no really big cities until the 1970s or thereabouts.
This scattered form of urbanisation would create difficulties in getting to grips with the country’s urban issues and, indeed, its rural-to-urban transition, insofar as each town often tended to identify with its immediate agricultural hinterland (as limited as that may have been) rather than the rest of urban New Zealand.
And it also detracted from the efficiency with which production could be organised, as compared to how things might have been if most of the urban population was at one end of the country or the other.
Such a concentration of population at one end, or in one corner, is something we observe in three similarly sized nations with similar populations in northern Europe, namely, Norway, Sweden, and Finland. It is also true of all the more populous Australian states and Canadian provinces.
The degree to which New Zealand’s urban population — still quite small in relation to the geographical size of the country — is scattered into far-flung fragments, is in that sense, quite unusual for a country of only 5.2 million, and even more unusual in the days when our population was smaller.
In the last few decades, the population has started to become more concentrated toward the Auckland end of the country, the subtropical ‘Gateway to New Zealand’ as the city was branded in the 1930s, and the ‘Queen City of New Zealand’ as it became after World War II.
A 1930 booster publication with the former ‘Gateway’ branding presents an image of a subtropical paradise of red-blooming pōhutukawa trees: a city more comfortable than its colonial-era rival at the southern end of the country, Dunedin: a city that lies some nine degrees of latitude closer to Antarctica and in a more exposed location to boot.
The country’s first university and medical school were established in Dunedin, as I recall, on the grounds that it had a ‘climate conducive to study’. For better or worse, that is not so true of Auckland and its environs.
The disproportionate rise of Auckland, which was both normal and expected as overall national population continued to grow and drift toward the more internationally accessible, sunnier, and more obviously Polynesian end of the country, was nevertheless met with an extraordinary degree of moral panic and resentment from points south, nicely captured in the observation of the then head of Public Administration at Victoria University of Wellington, John L Roberts, who wrote in 1977’s Auckland at Full Stretch (a collection of essays introduced in Chapter 2), that:
Any government is always on the horns of a dilemma. On the one hand, Auckland is of enormous political importance to parliamentary survival. On the other, there is a widespread uneasiness about this concentration of political power away from Wellington. It is now a political orthodoxy that something must be done to curb the growth of Auckland. (at p. 261)
And in the Dunedin Labour Party MP and future Finance Minister Michael Cullen’s 1998 declaration, to a Taranaki audience, that:
Auckland now sits atop the nation like a great crushing weight, with one-third of the population and growing all the time.
(Quoted in Audrey Young, ‘Auckland a crushing burden says Cullen’ , New Zealand Herald, 9 March 1998, p. 1.)
Like most, perhaps all, of our recent Ministers of Finance, Cullen would procrastinate for as long as possible before signing off on transformational investments for Auckland’s growth. As late as 2006, he would still be insisting that those who called for the electrification of Auckland’s suburban railways should be content to make do with the bus.
Cullen would eventually be arm-twisted into a reversal of this position, just in time for Labour to be voted out of office in 2008, after nine years of doing very little for Auckland: with the ironic result that it would be National Party ministers who cut the ribbons on the new, electrified stations — the coming of which had been resisted by politicians of both main parties for as long as humanly possible
This resistance was born, in part, out of the belief that a city-region with one-third of the nation’s population is somehow deeply unnatural and not to be encouraged by further civic investments.
As we have seen, Robbie’s Rapid Rail was successfully, if paradoxically, seen off by no-growth environmentalists in the 1970s. Indeed, the electrification of Auckland’s railways was resisted even twenty years before that by National Party ministers, most of whom seem to have been farmers in those days.
In reality — to reiterate — there is nothing unusual about Auckland’s growing prominence at all. Other polities with comparable populations to New Zealand have an even greater degree of urban concentration.
If we take a look at the two cities which are held to be most comparable to Auckland, Perth in Western Australia and Vancouver in British Columbia, we find that Auckland is significantly less dominant within New Zealand than Vancouver within its province, and much less dominant within New Zealand than is Perth in its otherwise physically colossal state.
At the other end of the geographical spectrum from Western Australia, Auckland is also less dominant, nationally, than Copenhagen, the capital of Denmark.
In spite of the physical difficulties caused by the initial dispersal of our population, and subsequent, self-imposed political difficulties resulting from a stubborn refusal to frame the rise of Auckland in positive or even realistic terms, the hydroelectrically powered industrialisation of twentieth-century New Zealand was quite successful.
Indeed, more so than it has since been given credit for. It is to this issue that I now turn.
From Menders to Makers
In a book published in 1986 called The Quiet Revolution — a title its publishers may well have borrowed from a prior Canadian usage — the Auckland journalist Colin James noted, with regard to the creation of new industries over the preceding quarter-century, that:
… after the National Development Conference in 1969 … the government accorded manufacturers greater importance in the export drive. Tax incentives for manufactured goods and services were brought in during the 1970s, most notably the export performance tax incentive, introduced in 1980, under which export earnings were exempt from income tax. . . . Manufactured exports grew from 5 per cent of exports in 1965–66 to 19 per cent in 1980–81, including a narrowing of the trade gap with Australia from 3.4:1 in 1965–66 to 1.3:1 in 1980–81. The range of countries to which manufactured exports went also widened, as did the range of products.
There were other successes. New pastoral products from deer and goats found ready, if small, markets. . . . A range of new horticultural products, led by the New Zealand-developed Kiwifruit, scored smallish but important successes. . . . In the 1980s engineering companies began in a small way to export their services as consultants and there were successes in biotechnology, computer software and instrumentation. (p. 62)
In his 2001 history of twentieth-century New Zealand, Paradise Reforged, James Belich records that New Zealand’s manufactured exports actually quadrupled as a percentage of the total during the 1970s, admittedly from what was still a low base in 1970. (p. 455)
As Gallagher suggested above, some of our most successful export-manufacturing industries of the present day got their start in those years, when tax breaks and export incentives were plentiful and easy to come by.
Even one of the leading Rogernomes of the 1980s, Michael Bassett, has conceded, in his 2017 biography of New Zealand Prime Ministers from Seddon to Key, that “gradual progress” was made in building manufactured exports in the 1960s, in the form of a 4,725% increase between 1960 and 1972:
But gradual progress was made with manufactured exports, stimulated again in 1969 by the widely attended National Development Conference that [future Prime Minister John] Marshall chaired. The conference aimed at introducing an elaborate economic plan of the kind that was then in vogue in Europe. While the targets that were adopted were laudable, New Zealand’s economic performance fell short, although as [New Zealand’s EU ambassador 1967–1973) Merwyn Norrish notes, manufactured exports that had amounted to less than $4 million in 1960 had reached $189 million by 1972. (p. 294)
New Zealand’s annual GDP at the start of the 1970s was about 9 billion US dollars and the New Zealand dollar was worth about the same as a US dollar in those days.
So, manufactured exports of NZ $189 million were quite a creditable achievement, especially when one considers that hardly any of these industries had been exporting in 1960, or had even existed at that date, little more than a decade before, and that most of the quadrupling claimed by Belich was still to come after 1972.
The August 1984 issue of New Zealand’s Reserve Bank Bulletin begins an article ‘Manufactured Exports to Australia’ (p. 347), downloadable from the Reserve Bank of New Zealand website as a PDF, with the following paragraph:
One of the factors that has contributed to the recent upturn of the New Zealand economy has been the rapid expansion of manufactured exports. In value terms these grew by 28.8 per cent in the year to March 1984. While part of this growth can be attributed to a substantial increase in aluminium exports (chiefly to Japan), it would also appear that there was a significant contribution from a wide range of products which were exported to Australia which is New Zealand’s major market for manufacturing goods.
Some of the most controversial interventions were those associated with a plan to use Māui gas, and other latter-day energy resources such as the last of the big hydro dams to be built in this country, as a springboard for further industrialisation.
This was, of course, the strategy colloquially known as ‘Think Big’, a phrase which perhaps found its ultimate origin in an inspirational quote attributed to the American architect and town planner Daniel Burnham, who flourished around the year 1900:
Make no little plans; they have no magic to stir men`s blood and probably themselves will not be realized. Make big plans; aim high in hope and work, remembering that a noble, logical diagram once recorded will never die, but long after we are gone will be a living thing, asserting itself with ever- growing insistency. Remember that our sons and grandsons are going to do things that would stagger us. Let your watchword be order and your beacon beauty. Think big.
Though having said that, it is difficult to imagine Rob Muldoon, leader of the National Party and Prime Minister from 1975 to 1984 and one of the two key sponsors of Think Big along with his Minister of Energy from 1978 to 1984, Bill Birch, ever waxing quite so poetic.
For Muldoon, and Birch, the strategy was known more prosaically, and officially, as the Growth Strategy.
In its background lay the crippling effects of a growing, pre-Māui energy poverty. The development of dams, and other energy sources, had just barely kept pace with population during the fast-growth years of the 1950s and 1960s. And then, in 1973, the year we hit three million, we were also hit with the first of the two great oil shocks of the 1970s.
The oil price hike of 1973 led, in combination with other external difficulties such as a fall in the price of wool driven by substitutes like nylon and polyester, and Britain’s entry into the European Union (then known as the European Economic Community) and consequent restrictions on exports to Britain, to a record New Zealand current account deficit of 13.4 per cent of GDP in March 1975.
Roughly a year after the second 1970s oil shock, that of 1979, the Massey University economist Eric M. Ojala would observe that:
The cost of petroleum imports is currently about equal to the foreign exchange earned by the entire meat industry.
So, it was pretty obvious that something had to be done. But what? This was where the Growth Strategy, a.k.a. Think Big, came in. In a recent book called Power Surge by John Boshier, a deputy energy secretary in the 1980s, we read that:
National’s 1981 election campaign was based on the proposition that the path to prosperity was through economic growth. Its Growth Strategy wanted to achieve a diversified and prosperous future after several decades of total reliance on traditional products and markets. New export industries in agriculture, forestry, fishing, horticulture, manufacturing and tourism were described in detail. . . . (pp 88–89)
The basic idea of the Growth Strategy was to use Māui gas, and the continued construction of large dams and geothermal power stations, to sustain an industrial transition that was already under way and, if anything, to accelerate it.
Of course, it was well understood that Māui would run out in the early decades of the 21st century. But, hopefully, something else would have been developed by that stage, such as solar power, wind power, or nuclear power stations, to sustain the fully industrialised New Zealand of the 2020s.
Our mid-to-late twentieth century industrial takeoff might have gone further, with its tigerish quadrupling in the 1970s and 30 per cent year on year gains in the early 1980s, had the plug not been pulled by the Rogernomes, whose free-market policy was partly inspired by the idea that state support for manufacturing was unwarranted.
It is to that development that I now turn in the next chapter.
I have lately returned to Medium publication, after mostly limiting myself to comments and building up a store of new content, to be published over the weeks to come (readers may also wish to refer to ‘Powered by Aotearoa’, which came out last September.)
