My first career “backward step”

Sometimes, one of the problems of being successful in an organization is that you end up getting more work, usually the sort of work you do not need. In my previous post, I mentioned that, early in my career at the national chemistry lab, I managed to get a report on bioethanol in a very short period of time. Accordingly, certain administrators seemed to decide that I must have been good at this so I got the job of correlating and reviewing the overall Department’s efforts in response to energy. This involved sending out requests for information and correlating the responses. Everybody sending a response was senior to me, but of course the request for the response, although it came from me, had somewhat more senior backing. The request was for outlines of what projects were to be worked on in the coming year, how many people were working on them, budgets, and hoped-for outcomes. I duly submitted the report to Head Office and tried to return to doing something useful.

If I thought that would be the end of that, I was in for a disappointment. Next year I got the same job, presumably because they thought I was good at this sort of thing. So, out went the requests, and in came the responses, and I did the same thing again, except I made one addition: I correlated what had happened with what was supposed to happen based on the previous year’s responses. The results were quite hilarious: the first ever responses had claimed huge effort, a clear response to an urgent crisis, but when the time came to own up to progress, there were dramatic reductions in effort. I dug deeper, and came up with further surprises. One particular example was that several years previously, to show that it was taking forestry seriously, the Department had set out to tackle wood waste, and various Divisions set up a Wood Waste Working Party, which had been touted by Head Office as an example of what was being done to address this problem. What I found was that over the several years of its existence, it had never met, and most certainly had never worked. So there was a lot of smoke, but not much fire.

The report, when it went in, probably created more heat than the energy program. I was called in to meet an Assistant Director-General, and told that this report was unsatisfactory. My response was that anyone could edit it, I would accept any changes to grammar or style, but if anyone wanted to change the content, my name had to come off it. There was something of a stand-off. I have no idea what happened to that report but I was never asked to do anther, nor was anyone else.

This failed situation is, I suspect, only far too common. It is a problem anywhere where leaders make announcements regarding what is going to happen, or what is happening, when they do not know for sure that it is happening. Particularly susceptible are voted politicians, because ultimately, their priority is getting re-elected, senior public servants, because they always want to look good, and business leaders who care mainly about their short-term share prices. As long as it is not too critical, it is easier to ignore failure than try to ensure it does not happen. This problem of how to get things done is a theme of much of my fiction writing, and part of the reason I am writing this series of “future history” novels. Also, of course, examples like the one above help give ideas for fiction. Fictional scenes are just that: fiction. However, they can be inspired by reality. In an ebook I intend to self-publish soon, called “A Face on Cydonia”, there is a scene inspired by the above.

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New Zealand economic development, 1970s

The previous post outlines the background to my first job. The New Zealand government decided it had to do something about developing the economy, and I was hired by the national chemistry laboratory to find a use for lignin, since New Zealand had a lot of timber approaching harvest. Needless to say, I failed. There is now a saying, you can make anything you like from lignin, except money! I am not alone in that failure. In fact I did not stay with it very long because all the country’s troubles were exacerbated in the early 1970s with the first oil crisis. This hit new Zealand very hard because there was even some doubt as to whether we could get any oil, even if we paid enough for it. The government requested their science department to give options of what to do, and I was given the task of finding as much as I could about bioethanol ASAP. (Others were given similar tasks on different energy sources.) I presented my summary in about a week, plus typing and editing time. (No computers then!)  How had I done that so fast? My reasoning was, someone must have had this problem during the war, so I went back into the departmental files, and found all the details of farming practices, costs, processing costs, etc. All I had to do was to update the costs.

The net result of that was that the government knew enough to make ethanol if it wanted to, and it knew what the costs would be, subject to a small uncertainty due to different inflationary effects in different sectors. To the best of my knowledge, very little, if any, bioethanol was made.

This government knee-jerk reaction got nowhere in one sense. The problem was, the government had set up similar quests elsewhere, and the experienced bureaucrats beat the scientists all the time. They set up panels, committees, got large amounts of funding, and then commissioned all sorts of reports. What is interesting about this is that when the energy crisis died down, there must have been hundreds of cubic meters of reports somewhere, and when the next energy crisis came along about 30 years later, these reports were forgotten. Sound familiar?

However, in the 1970s, quite a bit was done on alternative fuels. There were cars running on compressed natural gas (the cylinders taking up most of the boot space on small cars), liquefied natural gas, and methanol/petrol blends. Service stations became interesting puzzles: where did you go in an unfamiliar service station to get what you wanted? The lasting lesson, however, was that once the oil crisis died down, the supply of these alternatives began to die. When that happened, you had to reverse the significant changes to your car. The better strategy, and one I followed, was to stick to petrol and pay the increased price. Also, in some cases, such as with methanol blends, the necessary information remained dispersed across so many reports. Nobody correlated everything, so the chances are, much of what was learned has been forgotten.

Post-war New Zealand economic protection (2)

Whatever your thoughts on the policy in the preceding post, it worked, at least for a while. New Zealand was selling agricultural products to a world still recovering from the war, and the Korean War created a wool boom. Unemployment was measured in the hundreds, and most of those were desperately trying to avoid work. Nevertheless, there was an underlying problem. As a senior schoolboy in the late 1950s, I recall being asked to write an essay on helping undeveloped countries. Mine was about helping ourselves, because I pointed out that our economy was dependent on a very few products and one, wool, was already in decline. Needless to say, this was not popular with the teacher, but the point is, we still get economists saying we have to diversify our economy out of basic commodities. So, a problem still being discussed by economists now was seen by a schoolboy 50 years ago.

What it says, of course, is that in economics, at least, it is relatively easy to see a problem. The difficult part is working out what to do about it. Part of that problem lies in an inherent lack of flexibility, or, if you prefer, an intense economic inertia. A sheep farmer cannot simply give up sheep and start manufacturing microprocessors. Even the youth cannot get jobs with microprocessor manufacturers if there are not any there. The unemployed have to take up existing jobs, which means somebody else has had to make the necessary investment in capital and educational/skills, and find the markets for whatever they have invested in. Thus politicians can talk all they wish, but it is extremely difficult to turn a small economy around, and even harder to turn a big one around. Right now we see everybody saying countries like Greece, Spain, etc, have to put their houses in order. Notably missing from such exhortations is a clue as to how to go about doing it.

It was not long that New Zealand found a new problem. Like Australia, the New Zealand economy was closely tied to Britain’s, but then Britain decided to join the Common Market. Now what? New Zealand did win special concessions, and far more than Australia, but Australia had an answer. An immense deposit of iron ore was found in the Pilbara region, so Australia could prosper by digging bits of itself up and selling them. New Zealand did not have that opportunity.

What it did was to try to protect what it had, through more controls and subsidies, which required more taxes. Marginal tax rates hit 66% at the lower middle class, sales/excise tax on cars was about 120%. That did not work. The economy was choked, the dollar got progressively devalued, huge government debts built up and perhaps the main growth industry was from tax accountants, working on loopholes and tax structures. As if this were not enough, in the early 1970s, the first oil crisis struck. This was more a political crisis than a supply crisis, and consequently the major economies of the world simply inflated their way out of it. New Zealand followed suit, with perhaps more enthusiasm, and this had the effect of making people who could get large amounts of borrowed money very rich, usually by investing in property. The politicians could see that something had to be done, but what? The government decided (correctly) that the country needed new industries, but the question then was, how to get them? Its answer was eventually, “Big Fixes”, but it also made money available to fund new businesses. If you do not know whether that was good or bad, try guessing before next post. I would also be interested in your comments on what you think the government of a small country could do.

Post-war New Zealand economic protection

In my last post, I mentioned how a small company came into a joint venture with a multinational, and for many of you, this will make no sense, after all, why would a multinational reject a project, then become interested again? The answer may lie in context, and since I lived through the background, but very few readers of this did, I shall give my impression of the relevant history, and in particular, the economic history.

New Zealand is a small country far away from anywhere else, and together with Australia faced serious problems during the great depression of the 1930s. In New Zealand, the Labour Government of 1936 started a program to relieve the worst of the suffering for “the working man”, but the program was running into financial problems until World War II occurred. Now, instead of serious unemployment, there were problems in finding manpower as large numbers of young men went to Greece, then Africa. At the end of the war, however, a new problem arose: large numbers of returning soldiers, many with no useful skills. The government of the day responded in a number of ways, but the relevant response to this story was that it decided to encourage local industry as a way of promoting economic growth. It slapped on huge tariffs on imported goods, to encourage local manufacturing. It also encouraged multinationals to at least part manufacture in New Zealand through the tariff structure and favored treatment for “good citizen companies”.

This program had mixed results, and was overturned in the late 1980s, but let us look at what happened then. Some businesses took advantage of this, and developed into significant industries that grew as the politicians had hoped. Some, such as car assembly, put moderate local economic activity into basically imported goods, and these were later argued by the liberal right to be “bad” because they distorted the market. Perhaps they did, but they also led to a number of further local businesses that supplied parts to these assemblers. Now, these parts were obviously going to cost more to the consumer than parts made at scale in Japan, say, but they had three advantages that are seldom acknowledged. The first was they provided employment, the second was that they provided a supply of certain sorts of parts, and the third was they reduced the amount of variation in models. This latter point is never acknowledged, because in a small market far from anywhere the cost of carrying obvious replacement parts for a huge variety of models has led to parts actually being more expensive now in real terms, as can be seen if you have an accident.

The real problem with this policy was that many were simply enterprises that were designed to make the owners rich through the enforced subsidies (i.e. payments made through imposed tariffs). So, what went wrong? Put this question to various groups, and most of the answers are trite. Examples include, governments should stay out of business, protection does not work, businesses have to stand on their own two feet, etc. My response to these trite responses include, state reasons why or why not, as platitudes have no analytical value. As for no intervention, consider gardening. If you just sow seeds and leave it alone thereafter, all you will get are weeds. Darwinian evolution involves survival of the adequate to survive in that niche. There is no reason not to modify the niche!

While this is the start of a series of related posts, at this point I would like to know your views on how you think a country should go about getting things done. After all, I am writing a series of futuristic novels (see http://www.ianmiller.co.nz  for more details) and the answer to this question (which I do not have) would be of value to me. So, what do you think?