Small Business Resources
Financial Turmoil - We live in interesting times.
Opinion Piece - Tim Levchenko-Scott - June 2008
We're in a time of financial turmoil. The credit crunch, sky rocketing commodities prices. Maybe the start of peak oil ? Food becoming more scarce and highly valued. Water and its management likewise now being recognised as vital.
This is not just the end of the latest property boom. Not just a period of re-adjustment for a nation that has been living on credit. Not just the peak of the latest interest cycle. (Although it is all those things). No, this is a period of long term economic adjustment. Some things will never be the same again.
I wouldn't be surprised if future historians will give this period a distinct name. It will roll off everyone's tongues in the way that the phrase 'industrial revolution' or 'the rennaisance' does. It will be framed at its start by the events of September 11th 2001, and at its end by who knows what.
What this is going to mean for most people, I believe, is a period of significant re-adustment. A lot of things that we have taken for granted for a long time, will never be the same again. Food, for example is going to take up an increasing part of the family budget, after 50 plus years of becoming cheaper in real terms. This is not cyclical, this is structural. That is, there are forces at play which are making food a more scarce resource. Increasing world population. Potential food producing land being used for growing bio-fuel crops. Drought and other extreme weather patterns. Dietary changes in China and India towards western diets which use more land to feed a given population than traditional diets. Add to that lot increased transportation costs and you have a recipe for expensive food. None of these factors are likely to head in the opposite direction any time soon. So, we're going to have to get used to this and be less wasteful and more efficient with our food consumption (maybe not a bad thing in some ways).
I'm told by those in the know that there's a fair bit of oil left before it really starts to run out, but its getting more and more expensive to extract it and consumption in the developing world is sky-rocketing. I'm not going to argue the point about peak oil, but it seems to me that whilst there may be cycyles in the short term, medium to long term, oil is only going to get more expensive. We could see some radical changes in transport.
Water is another factor. We absolutely can't live without it, but we do tend to take it for granted in developed countries. The climate does seem to be changing though, and ensuring adequate, well managed water supplies for all in the future will be an important issue.
In a country like New Zealand, all of the above probably means some not insignificant lifestyle adjustments, but we'll no doubt survive reasonably in tact. In some parts of the world however, we're already seeing food riots, and we can expect some serious social and political turmoil over the next generation as people compete for basic resources.
In relative economic terms, I believe New Zealand could actually do very well over the next generation due to these issues. We are a major food producing nation and we produce it very efficiently. This will continue to earn us a lot of money in the future. Also, I believe we will see significant population growth in the not to distant future, notwithstanding the current negative migration statistics. We have over a million people overseas who are either citizens or residents of New Zealand. We still have a positive birth rate of plus 30,000 or so per annum over deaths. The big factor though, will be world events, be it terrrorism, climate change, war or general upheaval due to the factors mentioned above. This will make New Zealand an even more attractive place for immigrants. As our relative wealth improves, our population will increase. I believe the population will increase at a faster rate than the government statistics predict. This could well start to happen within the next 5 years to 2013.
So, its going to be a very dynamic few years, maybe even longer. Opportunites will abound, but no doubt there will be plenty of business caualties as well. Blaming the government won't make a lot of difference. Being prepared for anything, flexible, innovative and quick-witted will be more important, if you want to benefit from the