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Howard's End: Complacency Will See Dire Results

Australia, Japan, and the United States, some of our biggest customers, are facing recession so Reserve Bank Governor Don Brash, has lowered the Official Cash Rate by 0.25 percent mainly because of easing inflation pressures. John Howard writes.

Mr Brash says significant parts of our economy are operating at close to full capacity which has been fuelled by a good exchange rate and relatively buoyant commodity prices. But he also warns that nobody knows how severe the international downturn might be or how long it will last.

Japan is still the second-largest industrialised economy in the world and it is Australia's largest customer. In turn, Australia is our largest customer so the consequences of an international downturn for NZ, in the long-term, will be severe in the typical domino effect.

Until now, Japan was also Indonesia's biggest investor and provider of aid and the military seems likely to again seize power in Jakarta.

A few years ago Japan was the main investment powerhouse for global economic growth and it was often able to pick up the slack from other countries as the import-attracting and investment-generating leader.

But now that the long-invincible U.S. domestic economy is stumbling and Japan is also teetering on the brink of bankruptcy, the consequences are likely to be dire both for the Japanese people and the entire world.

Japan has been bought to financial ruin because of complacency, stagnation, mediocre government and even its past successes. Its Government has become process oriented rather than results oriented and the upshot of that was a bureaucratic mentality which did not face up to reality.

At the same time, the big old-fashioned heavy industry and consumer durable companies remain reluctant to shake the cosy 'social contract' they had with the Japanese government. The combination of giant industrial corporations working hand-in-glove with the Ministry of Trade and Industry in Tokyo fell prey to the inevitable cycle of complacency and intellectual decline so much so that Japan fell behind the high-tech revolution which swept the world in the 1990's.

Japan did not lack the economists, media analysts and financial experts to know what needed to be done and who consistently pointed it out. But no one in the banks or the political parties was really prepared to listen.

There is an element of what I call the Japanese disease in New Zealand whereby we seem to be moving towards what caused Japan's stagnation and complacency - the cosy business/government "partnership."

A gap has certainly been growing in New Zealand between the perceptions of people in Government and people in the private sector which, even today, leads to mutual misunderstandings and bad policy. Too many of our politicians and bureaucrats remain process oriented rather than results oriented.

For example, child abuse, WINZ and the IRD, to name just three, are all problems which are decades long and have still not been adequately solved because we have focused on process rather than results.

Our politicians, including the Government, seem to believe that if you follow a process long enough, the result will be obtained, even though no one action can be specifically linked to the final result. That is what happened to Japan.

The result of Japanese stagnation and failure to face reality are likely to be ruinous for all of us.


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