It has long since been something of a strange hobby of mine.
I like to look at where products I buy have been made and mentally ‘collect’ new countries I haven’t bought things from before.
This particular penchant might have had its origins one Christmas in either the late 1980s or very early 1990s when the family was unwrapping far too many presents we had given to each other.
I’m not quite sure what led us to doing it, but we ended up examining all the product boxes to find out where the goods were made. EVERY present in the room had been made in China. Nowadays you may well say ‘so what?’. Then, I can assure you, it was a big deal. It was a very new thing. We were shocked. Hello 'globalisation'.
And so, subsequently I have taken fascination in discovering ‘new’ countries of origin; my first product made in Peru (a cycling shirt). Products made in Myanmar (jerseys). I’m not quite sure (I missed this one) when every second item of clothing started being made in either Bangladesh or Pakistan. A particular surprise, and I’m not sure why, was to discover my toothpaste du jour was now being made in Poland.
Lurking beneath the curiosity of where all these goods are manufactured is the knowledge that I’ve been paying less money to buy them then I would if they were produced in New Zealand. We’ve all been able to afford things we wouldn’t be able to afford through globalisation.
But now what?
Cold winds had already been blowing on globalisation for some time, particularly after Donald Trump became US President.
Then Covid broke supply chains and has led to a regrouping and reorganisation.
And now we have Putin’s War.
The biggest significance of the latter development is that the massive wave of sanctions against Russia set quite a precedent in terms of the sheer scope. It would be hypocritical (though, let’s face it, not surprising) if any subsequent bad behaviour by a global power is NOT now greeted with the same thing. But I suspect we are now in a new environment where it will be less fashionable to turn a blind eye to what goes on in other countries.
One obvious question mark is whether China gets dragged into all this either now or later. This would matter to us. Boy, would it. According to Stats NZ, in the December 2021 quarter New Zealand exported $20.7 billion of goods - of which $6.2 billion went to China. We imported $24.6 billion of goods, with $4.9 billion coming from China.
That level of trade would need quite some replacing, if for some reason we needed to.
But this is not an NZ v China discussion as such. The point of this is more about the fact that the world having all ‘joined up’ is now for various reasons seemingly heading for a more fragmented future.
Look, it’s difficult to see us ever going completely back. Gosh I remember when I first moved to Wellington from my home town of Nelson in 1980 that the Wellington region then had a handful of motor vehicle assembly plants, as well as things like a meatworks. All gone.
It’s long since been a thing that we don’t ‘make things’ in this country, well not many in terms of our overall need for goods. And the key reason has been of course the cost. And you can’t ever imagine us turning back the clock completely. But then again, we may be forced to step back at least a little.
Moving production of goods to ‘low cost’ countries has been a big factor in the driving down of global inflation.
I had long been of the view that we would see a return of global inflation as the world naturally ran out of ‘low cost’ production. And this of course would happen as ‘low cost’ countries played catch up with the standards of living elsewhere and developed their own burgeoning middle classes.
We in New Zealand were one of the many countries benefiting from the gap between the cost of production and cost of living in one country compared with another. But such a differential was never going to last forever. In the meantime, however, the ever-reducing cost of products such as electrical goods has helped to disguise rises in the price of things like food in overall inflation figures.
Now, thanks first to Covid and now to Putin, we seem to have reached a period of reckoning that we were always going to face - but ahead of time.
I wonder if the days when we just buy products off anybody regardless of their relationship with the world at large have gone. Rather than the world as a global village perhaps we are indeed heading more towards a system of trading blocks, perhaps of varying sizes.
However, if there is to be a sort of redrawing of world trade boundaries and definitions it can only mean that that products will cost more on an ongoing basis.
Yep, inflation.
We thought we had slayed the beast but maybe we just put it to sleep for a while.
The idea that globally we could keep squeezing costs of goods ever lower has maybe had it’s day.
If that’s the case then obviously it’s huge in terms of worldwide standards of living in the future.
Perhaps the pandemic has signalled, not so much a ‘transitory’ wave of supply chain disruption and inflation, but the start of a new more uncertain, perhaps lengthy, period where living standards might get pressured in a way not seen in years. This might not be temporary folks.
Maybe the last 30 or so years might come to be viewed, at least by the wealthier nations, as kind of halcyon days.
A big point of discussion of course is the extent to which the ‘dividend’ of the effects of globalisation has been evenly shared around.
Well, it hasn’t has it?
And there may be interesting ramifications for those who haven’t had their share of the growth dividend if we do now face a more protracted period of inflation. We already worry about poverty. There may be more to worry about in future.
The process by which more and more wealth was concentrated into fewer and fewer hands is therefore likely to be much more scrutinised than it has been to date.
What does all this mean? Good question.
I think that as a country little old NZ needs to be having a much closer look at who it trades with and how - just in terms of ensuring we don’t get caught out if there’s a change in the wind. We need back up options. Difficult thing to do perhaps till you are faced with it, but I think we are now in a new environment where we can’t take trade for granted.
Could there be scope, does there need to be scope, for actually starting to produce some goods in New Zealand again? It would have to be cost-driven and clearly we are not at a point where such considerations would be given yet. But in future?
In terms of ‘the person on the street’ I think the obvious thing is we are going to have to learn to deal with inflation all over again. Maybe there really is a way of slaying the beast. Properly. But we probably need to find it. The search goes on.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.