Look to small countries to lead the way, says expert

Small countries are going to be the drivers of the new global economy, says Kiwi expat and economist David Skilling.

The director of Landfall Strategy Group, who now lives in Singapore and advises the New Zealand government, says the world is essentially shrinking and it's time to stop looking to London, Washington DC and Beijing for leadership.

"If you’re looking for action, insight and innovation, my sense is to look to small countries," he told the annual The Competitiveness Institute conference in Auckland last week.  "What is going to drive idea generation and policy and the global economy forward is small countries, small regions, small cities.  That is where the energy is going to come from."

David SkillingAccording to Skilling, small countries are not simply scaled-down versions of large countries – they're qualitatively different in their approaches to policy. While government spending tends to be higher, he says they are less likely to run deficits. They're active in alliances and free-trade agreements and in many cases have managed to overcome the "tyranny of small size" by expanding aggressively into global markets.

“They figure out 'what's our value proposition' and they invest heavily in it,” he says.

"They are much more advanced than large countries in understanding the dynamics of the global economy and how they should position themselves.”

And data show that small countries have outperformed large ones over the past 60 years – per capita income growth rates are significantly higher, as are cross-border investment rates.

Skilling says small countries also invest more heavily in R&D, innovation, and education.

"Look at the top 10 and indeed top 20 – small countries are overrepresented. The Finlands, Singapores, Israels."

New Zealand still has a "thing or two" to do, however.

"I  don’t think we have stepped up in quite the way we need to," says Skilling.

What's needed is investment in strategic capacity, identifying what we do that's distinctive, and capitalising on that.

"There is a need for real thinking and real action."

Also speaking at the conference was Professor Michael Enright, who co-authored Upgrading New Zealand's Competitive Advantage 20 years ago with Michael Porter and Graham Crocombe.

He says New Zealand faces a crossroads and could either harness our hi-tech talent and proximity to Asia to build a strong international position, or fall behind and become increasingly irrelevant.

Smith & Caughey's chair Tony Caughey was part of the team that worked on the book.

He says Kiwis generally either don't understand "competitiveness" or don't want to – and he would like to see the subject taught at universities.

Caughey says clusters have been shown to work well overseas but the government has failed to incorporate them into any of its strategies.

Improving New Zealand's ability to compete on the world stage is a subject too hard and too-long term for our leaders, he says.

"If you are a bureaucrat in Wellington, it is much easier to change the rate of GST or introduce a capital gains tax with the stroke of a pen than it is to work with industries to improve their competitiveness."