GaneshNana

Dr Ganesh Nana, Chief Economist, Business and Economic Research Limited (BERL).

A long time ago, in a galaxy far, far away, there was a young boy who stumbled into the study of economics. He found his venture into the field far more interesting than he expected. He was particularly attracted to the focus on people and their skills and how they were developed, adapted and enhanced. And then how they were combined with land, water and other resources to provide opportunities for communities to develop. The way communities chose to use these resources and how such choices may severely limit future opportunities also attracted his interest.

However, as his career developed he found the world moving away from his, apparently naive, view of economics. The centres of authority had moved the profession towards a discipline more focussed on the money, finance and the institutional dimensions of economics. Increasingly, inflation, exchange rates, interest rates, leveraging, swap rates, hedge funds and securitisation became favourite words in the economist’s lexicon.

Lost in this new world were words like people and education, along with the concept of investment to improve future opportunities. Of course, the word˜investment’ remained common” but increasingly in the sense of devising schemes designed to separate people from their life savings. The frustration in our, now not-so-young, economist reached despair as he repeatedly yearned for economic analysis based on the use of resources. And for policy aimed at improving the opportunities of communities, rather than the paper inventions of financial market players.

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The ‘investment’ defined in the economics textbooks of yesteryear referred to the use of resources today in order to accrue benefits in the future. Investment in this sense was not about slips of paper exchanging hands. But today, the word on many lips is ‘productivity’. I detect an almost audible sigh, but don’t switch off yet. What is necessary is to re-establish the understanding that there is an inseparable link between investment today and productivity tomorrow. Unfortunately, this link is blurred in the economics of today. But the link remains crystal clear to me, and to many real economists.

How one can expect to achieve a lift in future productivity without putting in the hard yards now? While many in NZ seem to be forever searching for the quick (and hopefully cheap) solution, it is clear that productivity improvements will not come quickly, and nor will they come cheap. They will only come as a result of investment in the true sense. Whether that investment is in the concrete and fibre of the nation’s transport and communications highways; or, in the science of protecting the nutrients in the land, soil and water of the nation’s endowments; or, in the machinery and equipment to help construct and create things; or in the skills, knowledge, creativity and experiences of people, investment is central. Why? Simply, because it lays the foundation for the future opportunities for NZ Inc.

This is the context that I see spending on education – across the whole spectrum of the sector. Unfortunately, NZ Inc hasn’t shown any great desire to devote a higher portion of our annual earnings to investment in people. Probably because we’ve been spellbound into believing wealth and prosperity comes from exchanging paper amongst ourselves. And as that distant galaxy recedes further into history, and our new world becomes increasingly hostile, a few truths endure. From the purely textbook view of our new world, education is about investing in one of the prime resources of an economy. Sounds fairly much like my old textbook.

Unfortunately, just like eating your vegetables, getting enough exercise and doing your homework, the returns on investment in education will not accrue until well into the future. But, if we remain reluctant to devote energies and resources to this task then we shouldn’t be surprised if our search for higher productivity remains fruitless. And our new world becomes even more bleak.

By Doctor Ganesh Nana.