Is Steven Joyce New Zealand's Mr Fix-it?

From having more portfolios than you could shake a stick at to now heading up the newly-created Ministry of Business, Innovation and Employment, Steven Joyce seems to have his fingers in a lot of political pies.

From having more portfolios than you could shake a stick at to now heading up the newly-created Ministry of Business, Innovation and Employment, Steven Joyce seems to have his fingers in a lot of political pies. Can he fix it? Yeah, he probably can.

Stephen Joyce ambles into the Victoria University lecture theatre in Rutherford House, just across the road from Parliament, takes in the assembled gathering of scientists and policy wonks, and – almost casually – leads off into a speech on what he calls “some of our thinking”.

The occasion, the Asia Pacific Science Policy Studies Research conference, could hardly be more pointy-headed, but Joyce keeps it accessible. The style is laid back, almost blokey, fairly non-specific, but certainly not directionless.

Before Christmas, he muses, he asked officials for some holiday reading. The Economic Development policy groups gave him a pile of papers about so high, he says – holding his hands about 15 centimetres apart. The Tertiary Education team a bit more, about 20 centimetres.

“The Ministry of Science and Innovation folk gave me a pile about this high,” he concludes, holding his hand at waist height, to general laughter. As a way of getting a bunch of science policy wonks – some of whom might be a bit threatened by Joyce’s political priorities – it’s not a bad way to get people on side.

The other tale he tells is of his own experience and training. His degree was in zoology, something he cheerfully confesses to never having used since completing his studies.

The appointment of Joyce to his current clutch of portfolios was hailed as the most significant change in Prime Minister John Key’s post-election Cabinet reshuffle. Partly it was the leaping up the Cabinet table – he moved 10 places to number five – but no-one, apart from a few political tragics, cares about which seat someone sits at in Wellington.

Rather, it’s the combination of portfolios on Joyce’s desk that is the most intriguing. For the first time, Economic Development, Tertiary Education, Science, Employment and Skills are all wrapped up in the hands of one minister. The move acknowledges the fact that all are quite tightly linked and that the usual, more diffuse approach, has not worked. The notion of linking them, he says, was Key’s.

“He rang me up and said ‘I’ve got a bit of an idea’,” Joyce says. “I think he’s been cooking along on it for a little while.”

So who is Steven Joyce, political band-aid and fixer of all?

“I would say there is now an ‘inner, inner’ Cabinet if you like, and it’s Key, English and Joyce,” says one veteran Wellington insider, who has dealt with numerous governments that have come and gone over the past 30-odd years. “And although I know there’s a number of people who says there’s growing tension between English and Joyce, I haven’t seen any evidence of that at all. It’s a bit of a Labour Party line. The three of them get on unusually well for anyone at the top of politics.”

Joyce is described as ‘Mr Fix-it’ by a number of political commentators, and also as the ‘Minister of Everything’.

“He wants to be Bill Birch, only with a bit more colour,” the veteran lobbyist says, recalling the rather dour workaholic National Party Finance Minister of the 1990s.

“But he doesn’t want the top job. He can do the glad-handing thing as part of his current role but he’s not interested in going around opening schools and things like that.”

Another long-time Wellington lobbyist describes the Joyce role as being one of the more decisive members of the government.

“He can absorb a truckload of information, cut to the nub of the issue and make a decision on it. Some ministers are not so good at that.

“The main fear I have is that once he’s made a decision, he’s very difficult to budge. In politics that can be a good thing, and it’s certainly often seen as a good thing. But as time goes on, and a government gets older, that can become a liability. What was strength can become obstinacy and a political weakness.”

Joyce held the Tertiary Education portfolio, along with Communications and Information Technology, and Transport, during National’s first term of government. That work gave him some insight into the sector he now has full-time responsibility for.

“I look at it and think, I don’t know quite how we’d seriously consider the Tertiary sector without the Science and Innovation sector or the other way around, because the two are so closely linked,” Joyce says in his office a few days after the Rutherford House speech.

“It’s interesting reading some of the papers you get from both sides. They act as if they’re on a planet on their own somewhere, and out there is another planet called the other side of the science – the government science investment. I think it’s a classic demonstration of the whole sort of ... not deliberate silo mentality, but just the way organisations end up thinking.”

A range of sins

Innovation policy, he says, covers a range of sins, and science is just one of them. From a governmental perspective it’s important, as that’s how it’s funded. But Joyce cautions there’s actually a wider set of things that make up innovation policy.

“If you say to yourself ‘what’s innovation?’, it’s the ideas that change the world, they change businesses, they change the way things are done. That comes about for a number of reasons, and science is one important, but nevertheless just one reason.”

This interview took place just before the recent announcement of the government’s merger of the ministries of Economic Development and Science and Innovation, along with the departments of Labour, and Building and Housing, into one big ‘super- Ministry’ to be called the Ministry of Business, Innovation and Employment, but it’s clear the work was already well advanced at the time.

In the general area of innovation policy, Joyce says it’s not only those above mentioned agencies but also New Zealand Trade and Enterprise (which is part of the Ministry of Foreign Affairs and Trade) along with the Ministry for Primary Industries, working in this area.

“So that’s the first opportunity, to have all the relevant government agency people in one room and introduce themselves. I mean, they know each other, but to get them to talk. I was very excited that the Tertiary officials came and talked to me yesterday.

“They just had a really good discussion with MSI on a range of the issues I’d raised with them and they were quite fizzing about this. That’s good, that’s encouraging.

“So there’s a sort of structural opportunity, which is just bringing that together through my office. But I think also the other opportunity is to look at it a bit more in the round.”

Joyce’s thoughts on innovation appear more developed in the tertiary education area – this is, after all, a portfolio he has held for longer than the others. What would surprise some within the business sector – and certainly some within the education sector, who are expecting a bit of an onslaught – is that he is not proposing a more directive approach to what people should or should not study.

“I actually think overall our tertiary sector does a pretty good job. There’s definitely a group of critics who wander around saying, well, we should just make people do other stuff. I think that’s a challenging thing to do. If you ever tried to tell a teenager to do anything, you actually have to sort of do it in a slightly different way than just telling them, you know, you shall do one of those, agriculture, or you shall do science, you shall do engineering. We don’t – it’s not the way people operate.”

Career focus

Super minister Steven JoyceBut he does say that over the years too much of the work helping school-leavers select careers has fallen on schools, which lack the skills and know-how, let alone the contacts, to do a particularly good job on what is a fairly crucial transition. And while he hints at a bit more direction from the government, he puts the onus back onto business.

“We have delegated a lot of the responsibility in the career space to schools ... and I wonder whether we have delegated too much.

“So who has a genuine interest in what school-age students think about their careers? Well, industry has, for a kick-off. And the tertiary sector. And surely they should be pretty active in advertising their wares, and telling people what the opportunities are.

“There’s no point in somebody rocking into the minister’s office and saying we haven’t got enough ICT graduates. And I go, okay, what do you want me exactly to do about that? What are you doing about talking up your industry as an opportunity, as an exciting thing for young people to be involved in?”

Much of that happens outside his direct portfolio, and is part of the work of Minister of Education Hekia Parata. Right now there’s a Careers New Zealand review going on, which doesn’t strictly involve Joyce, but he’s looking over Parata’s shoulder to see what might emerge from it. “Again, because it’s a genuine interest – if we’re going to build innovation then we actually have to still get our heads around what’s attracting people to certain occupations. And are they, at 16 and 17, making the right decisions?”

That doesn’t mean giving specific directions for career paths, but rather just letting people know that if they follow a particular course of study, what sort of direction their career – and perhaps other aspects of their lives – might take.

“Of course, some people are so altruistic at 17 that they’ll never listen anyway, because they just want to do the thing they love, and that’s fine. Because it’s also true that you don’t actually have to study the thing you end up doing – I’m a walking example of that, I’m a zoologist. I did my three-year undergraduate degree in zoology and I haven’t done a thing in zoology ever since, except to come here.”

Joyce wouldn’t be the first person to imply that Parliament has its zoo-like qualities. But he stresses he is not going to, as some have suggested, start capping numbers for arts degrees or take a more dictatorial approach.

“I’ve had conversations with the tertiary sector about it and they all go ‘Oh my God, he hates philosophers’. I don’t hate philosophers at all. I’ve gotten to know a couple of friends who are philosophers who are very good at whatever it is they’re doing now.

“You have to understand a good part of a tertiary education is learning how to learn. That was certainly true for me and it’s true for a lot of other people.” It is, though, a matter of balance, he says, and
suggests the questions is not so much a matter of having fewer philosophers (or zoologists), but training more people in vocations New Zealand definitely does need.

“I know we train way less engineers than we should per capita. Is that a problem? Does that mean we end up with fewer innovators? Because some engineers are innovators.”

The design edge

Joyce points to the lack of an industrial design school in New Zealand. There’s been talk over the years of having one. And Joyce, of all people, should know how industry design can affect a business’ trajectory. “I know certainly, and again, from my experience as a chair of an exporting manufacturer [hospital bed manufacturer Howard Wright], it turned out that industrial design was one of the things that actually clicked them to a whole new level from where they were previously. So I can certainly see the benefit of that. Those are the sort of things we’re going to want to turn over the stones on.”

That extends to areas outside his bailiwick and into the Commerce portfolio, held by Cabinet newcomer Craig Foss. This area, normally dryer than sawdust in the Sahara, contains two areas Joyce sees as crucial to innovation: intellectual property and competition law.

On the first, he shies away from detail. All he’ll say is: “If you want to develop innovation, your IP policy settings are fairly important, and, as we know, there’s some thorny issues there internationally at the moment on IP.”

The other area – also the responsibility of Foss – is competition policy. Joyce points to the development of New Zealand’s wine industry since the early 1980s as a classic example of how opening up a sector to competition can lead to growth and innovation.

“I had a really good meeting the other day with the wine growers and they were telling me the story of their industry in this country – which I vaguely know because I’ve had a passing interest in wine, and I remember when we were kids and we had Liebestraum, and we had ‘Château Cardboard’ and Marque Vue and stuff like that, and stuff at $4 a bottle.”

What the winegrowers told him, he says, was the role the Closer Economic Relations (CER) agreement with Australia, signed in 1983, played in the industry lifting its game. Until the CER came along we had a captive domestic market, and then suddenly the Aussies were about to compete with us, but wine growers here knew their product wasn’t all that hot. The industry was facing the axe and the only way it could escape it was to improve the quality. So they did – because they had to.

“That’s the power of competition in terms of getting innovation and building an industry,” Joyce points out. “I was intrigued that they – it wasn’t me trying to make a point – they came up with it as one of the key reasons why their industry grew. It’s more than $1 billion in exports. Competition policy is part of innovation. If you’re under pressure, if your company is struggling, you need to innovate, because you either innovate or you’re not going to be around much longer.”

He turns to his own business experience as an example. A self-made man in his own right, Joyce built up RadioWorks over 17 years organically and through careful acquisition, cashing up for $6 million to Canwest in 2001.

“We’re straying a little bit from the research side here, but anyway – we innovated with policies, approaches, in the radio industry. A couple of companies created the multiplex environment, which now is everywhere in the radio industry today, and our company was one of them. And we did it because we had to in response to what was going on competitively.

“But it worked, and it was an innovation. And I’ve been involved with other companies where
there are real pressures from multinational competitors, and as a result they’ve had to do things differently and smarter. So there’s that form of innovation, and then there are other things, which is literally the discovery of new ways of doing things.”

As for the actual research and development side of things, Joyce says some of the popular beliefs about New Zealand’s profile are not quite borne out by the facts.

Public sector research and development is growing a bit, he says, and there is a move towards the average OECD level. That, though, has been the target for a long time (see box, below). Private sector research and development unfortunately remains low.

“People blame the size of our firms but actually, if you look at the size of our firms compared to some other countries, the number of SMEs is not out of line with some other small countries. And naturally enough SMEs wouldn’t spend a massive amount on R&D, but there must be something else going on. So I want to test that, because I think there’s been some traditional policy measures that people see as the answer, but actually they haven’t done much. So I want to test that pretty thoroughly.”

Asked if he has an idea what that “something else” might be, Joyce just responds with something of a shrug. He doesn’t know, he says.

“But I’d ask the sort of questions like: Have we got the public and the private input in the right places? I think everybody agrees, you go through an innovation chain, you start at that sort of basic science which everybody agrees, if you didn’t fund it as a public good, then it wouldn’t happen, right?

“And it fortunately ties up quite nicely with tertiary training, so now there’s a benefit both in the education space and the science investment space.”

“So I think you can agree there. At the other end we can all agree that there are companies, once they get to a certain point, that should do it themselves. When they’re large enough, and ugly enough, they can do their own R&D and can capture most of the benefit they do from doing it. And they can also form partnerships with public science institutions.”

So who pays?

It’s the middle ground where there’s uncertainty. Who does the research, who pays, and where does the capital come from? “Actually, capital’s another thing on innovation. You can have all the best science investment in the world and if there’s nobody who’s got the capital to do anything about it, then you are sort of wasting your time.”

There are strong hints about more private sector involvement in the government science and research process, but Joyce says his thinking is still at an early stage on this.

“Some of the small country models – I mean, Israelis have been in to talk about their venture capital stuff, which is fascinating. I’ve been interested, and I’ve literally only read on a page, the stuff going on in Norway and Denmark. The Norwegians have a public/private partnership model in some of their institutes.

“Now, don’t start running off with that, I’m not suggesting that for the CRIs or anything. I’m just intrigued at the potential opportunities for involving, and getting the confidence of, private sector in some of these innovations earlier on.”

There are methods that have been tried before – technology grants, tweaking the tax system so research and development doesn’t (as it did for more than a decade) end up in a non-deductible black hole between capital and operating expenditure, and of course the last Labour government’s more controversial research and development tax credits, which were scrapped by National in 2009.

Joyce says he has an open mind on this. But, again, he has more questions than answers at this stage.

“Are we encouraging enough of private capital involvement early enough in the process? Do we inadvertently do things that scare them off? I don’t know the answer to that question. But, do we or not? I think there are some really good questions to be asked about who does what at which part of the chain.”

Other more recent changes he believes will drive a lot of innovation and research and development over coming years include the work he did in National’s first term on the ultra-fast broadband network.

“Infrastructure investment is an important part of any innovation policy and that’s going to change the way the New Zealand landscape works over the next five years and then nine years. There are a whole bunch of companies that are in industrial parks, or light industrial parks, around the country – they’re suddenly going to get access to a hell of a lot better broadband than they have, which is going to make it easier for them to do some things they haven’t had the opportunity to do before. And that will spark innovation as well and we shouldn’t underestimate the role of that.”

Of his overall approach to what might now be called ‘“innovation policy”, Joyce plays down any notions of radicalism.

“It’s not going to be a big bang. I mean my style is to sort of try to get a strategic view, ask yourself some of the key questions. And then as you go through and do some of the things you’ve got to do, try to answer them within an eye on the strategic things you’re trying to achieve.

“And so, it is incremental but a sort of thought about where you’re going to end up.”

R&D funding through the ages

The history in this area is one of rising rhetoric and diminishing results. Successive governments have talked about boosting innovation in the New Zealand economy, with extra funding, with grants, with tax incentives, and with other policy carrots.

The old Department of Scientific and Industrial Research (DSIR), formed in 1926, played a major role in development of New Zealand’s pastoral economy, especially between its formation in 1926 and the late 1950s – but for most of the time since then the science and innovation area has been a minor responsibility in successive governments of both political stripes. The last time the science and innovation portfolio had such a high-ranked minister as Joyce was the early 1950s, when deputy prime minister (and future prime minister) Keith Holyoake held the job, as a part of the responsibilities of Minister of Agriculture.

Funding in real terms on science and research – whether it was through government activity or through help for private businesses – was kept flat in nominal terms (and cut in real terms) over New Zealand’s long economic crisis between the mid 1960s and the mid 1990s. National restructured the various Crown Research Institutes in the early 1990s and by the middle of the decade, when New Zealand was emerging from its long economic and fiscal crisis, then Science Minister Simon Upton managed to persuade then Finance Minister Bill Birch to release some extra funds and lift the public good science funding.

The move was accompanied by a number of grants for “technology transfer” by private firms, and the Marsden Fund was created to encourage more pure research.

The goal, set in 1995 and seeming quite modest, was for total public and private sector research and development funding to reach 0.8 percent of GDP by the year 2010 (it was then about 0.4 percent).

That funding boost ran slap bang into the Asian Crisis of 1997-98 and a further round of fiscal tightening. A pick-up in the economy in 1999 saw some of this funding cut reversed, and two months before the 1999 election, National released its Bright Future package.

After a decade of explicit hands-off economic management, the Bright Future package was a reversal of thinking – and, given the looming defeat in the 1999 election, was sardonically dubbed “National’s deathbed conversion”. It signaled a much more explicit push aimed at encouraging businesses to innovate and invest in research and development, as well as more funding for the Crown Research Institutes.

“We have to have a policy on scientific research, because the Government owns most of the research companies,” was how then-Treasurer Bill English put it at the time.

Labour picked up some of the push and added its own twist, amid global talk of a ‘new economy’ and the big Knowledge Wave conference in Auckland in 2001.

Research and development actually fell. By the middle of the decade it was only 0.55 percent of GDP, barely above the level when Upton announced the target 10 years previously. Labour changed the target to reaching the average OECD spend and National has signed up to this target.

As a percentage of GDP, total research and development, both governmental and private sector, has risen since then, according to Statistics New Zealand data. Part of this is simply because GDP has not been growing as fast, of course. But there has been a pick-up.

Statistics New Zealand’s two-yearly survey shows research and development reached 1.3 percent of GDP in 2010, although the OECD average was 2.3 percent.

Israel – intriguingly, one of the countries Joyce mentions as being of interest to him – has the largest proportion of its economy invested in research and development, at just over 4 percent.

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