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March 10, 2008 | by  | in Opinion | [ssba]

An Open Letter to Oliver Driver

Dear Oliver Driver,
I write to you regarding your role in advocating on behalf of the Government’s Campaign “Buy Kiwi Made.” I believe that your exhortations to buy products produced in New Zealand are misguided both morally and economically. I write this letter in order to convince you of this.

The ‘Buy Kiwi Made’ campaign will be effective in promoting the purchase of domestic goods insofar as it convinces people that there is some advantage produced in buying domestic goods rather than foreign goods. So let us consider whether such an advantage exists.

Many people believe that when we import goods we send our money overseas never to be seen again. It is true that we send our money overseas, but we send New Zealand dollars overseas. New Zealand dollars are only good in New Zealand. Now they could go and exchange them, but all that means is that someone else is going to have New Zealand dollars.

So what are all these people from whom we import goods going to do with New Zealand dollars? Well, as the Nobel Laureate Milton Friedman used to jokingly ask, “are they going to eat them?” There are two things they can do: they can buy goods or services from New Zealand, or they can lend them to New Zealanders and spark investment.

In other words, we pay for our imports through our exports. The best way to think of international trade is as a new technology, that allows us to put sheep on boats, send them out into the sea, and then return with iPods and TVs in their place. No one would say that that such a technology would be bad, but they are all too willing to complain about trade.

Or let me put it another way. You are an actor and director. That is your comparative advantage. Every day you use the wealth you have gained from your job to trade with other people – to buy a flat white at a café, to get groceries from a supermarket, etc. If trade is bad, surely you should begin to do all of those things yourself? You should have a large garden to grow your own vegetables; grow your own coffee beans and become an expert barista. No one seriously contemplates such a proposition, but if trade is really so bad, then that is the logical conclusion we should draw.

You may also know that it is currently ‘export year.’ As explained above, we use the money we make from exports to import goods. The Government’s plan to encourage both exports, and discourage imports, is literally paradoxical. There is no possible way that we can maintain this in the long term, because every export buys us an import of comparable worth. To claim we should export more and import less is to suggest that we become wealthy by showering the world in free gifts.

I ask you to kindly withdraw your services from the Buy Kiwi Made scheme. We cannot grow wealthy by restricting trade, nor by endlessly subsiding advertising undertaken by the state to tell us how to live our lives.


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