On the ‘high’ Kiwi $
When Adam first came to live in NZ he noted the number of ‘successful’ businesspeople who kept on complaining about the negative impact of a high Kiwi dollar. On a regular basis we hear this chorus.
Yet Adam remembers watching Robin Day on the BBC chair the excellent programme Question Time, at some stage in the 1980s. At that time the UK was going through a phase when the Pound was relatively high compared to past levels.
A questioner asked the panel what the government should do to lower the exchange rate so as to make business more competitive and to grow exports.
One of the panel members that night was Lord Weinstock at that time running British GEC a large group of which he was the architect. Weinstock said that as CEO of GEC it was his job to run GEC so that so far as possible exchange rate variation made little or no difference. To this end GEC strove to make quality products, which customers both needed and wanted to buy, as efficiently and cost effectively as possible. He saw reliance on exchange rates being lowered as indicating that a company was not cutting it and needed a crutch.
So when Adam hears the cry ‘we need a lower $’ from business ‘leaders’ he wonders whether this is code for I do not add any value to my products so I have to sell at the lowest common denominator as my product cannot be differentiated from anybody elses.
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Successful businesses concentrate on the things they can control. If you export or import the exchange rate isn’t one of them.
Check our exchange rate around 1970 when the sheep was king.. IIRC the rate was about $1.12 to the US dollar and we were in the top third of the OECD.
Then Britain joined the Common Market, we went mad on social welfare and couldn’t diversify fast enough from sheep and agriculture generally to protect our position in the world.. so we and the dollar went down and inflation (and stagflation) hit us.
But the rot set in after the war.. we had a winner in agriculture and we protected it and other preferred industries to the hilt.. to the point where we (successfully) avoided any form of creative destruction (CT).
When we finally got round to CT in the 1980s it was really too late, we had already created the Shire mentality.
JC