David Clendon

Small (business) is beautiful

by David Clendon

Not too many  years ago the thing NZers were most likely to know about Finland is that some people from there were really good at driving fast.  Then came Nokia, the remarkable company that went from making paper and gumboots to being the world leader in mobile phone technology. 

A recent article in the NBR  reveals that between 1998 and 2007 Nokia contributed about a quarter of Finland’s economic growth, close to 30% of the country’s R&D spend, and generated nearly 20% of all exports. The same article quotes a member of a recent Finnish trade delegation to New Zealand, who said that Finland had become too reliant on Nokia, and that “…you need a few flagships, that’s for sure, but you don’t need one company that carries 4% of your GDP. I’d much rather diversify and have it in smaller pieces”.  As Nokia has been overtaken by smartphones, especially the iPhone, the Finns have had to rethink and seek to reinvent their economic model.

The obvious analogy with the  New Zealand economy  is our heavy reliance on the dairy industry, particularly Fonterra, and a few other high volume, low value commodities. (Taking a moment to look over my shoulder as I’m writing this, I see yet another massive stack of raw pine logs sitting on Wellington’s wharf…).

Let’s take an economic lesson from one of the basic principles of ecology – monocultures are highly susceptible to external changes or interventions, while complex and diverse ecosystems are much more resilient and able to withstand shocks.  While we want and need some economic  ’flagships’, the tall specimen trees, we neglect the undergrowth and the emerging saplings at our peril. 

The present government has done very little to encourage or support emerging companies.  The much vaunted voucher schemes that are nominally available to support research and development and capability building are not well regarded by many in the business community.  According to most of the feedback I hear from business people, the schemes demand a lot of time and effort on the part of applicants, with a very low probability of eventual success, and are heavily weighted towards exporting companies, at the expense of  companies producing goods or services for local consumption or export substitution.

Let’s take a lesson from the Finnish experience.  A smart, Green economy will be diverse, well integrated, resilient, and those are the characteristics our policy settings and investment need  to deliver.

 

 

Published in Economy, Work, & Welfare by David Clendon on Thu, December 12th, 2013   

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