A middle path for the New Zealand economy: getting back to basics

Abstract

Analysts have puzzled over New Zealand’s relatively poor economic performance given it scores so well on many economic fundamentals such as market flexibility. This paper offers a middle view and argues that the concepts of capabilities and path dependency are the keys to understanding the New Zealand economy. The path dependency concept states that what we can do tomorrow is limited by the investments we made yesterday. This paper examines New Zealand economic policy over recent years and examines the role of clusters, agglomeration, immigration and diversity in government policy. It then re-considers economic growth in terms of the tried and true concept of capabilities. The paper argues that the New Zealand government needs play less attention to the fashionable and get back to the basics.