A History of Australasian Economic Thought

 

Most economies today are generally a reflection of their modern economic history. The economic histories of New Zealand and Australia are no different. Following European settlement, the New Zealand and Australian economies were captive to Britain’s imperial hegemony, providing primary commodities to the UK and other parts of the empire (later, Commonwealth). This situation ensued until Britain’s formal entry into the European Economic Community (EEC) in 1973. In the 1980s, following the loss of Britain’s “imperial benevolence”, Australia and New Zealand embarked upon comprehensive market reforms, with the result that both economies are today far more dynamic, resilient and outward-looking.

Alex Millmow’s account focuses on the history of Australasian economic thought from the early interwar period till the late twentieth century, covering the trajectory of economic thinking in New Zealand and Australia during the twentieth century and the emergence of an academic economics profession in the two countries. The focus is right as economics and economic policy has played a crucial role in building two vibrant, ethnically-diverse nations over the last century. The role of economists in both countries was crucial in forging imaginative economic solutions to the most complex economic policy challenges in two commodity-dependent economies. As such, Millmow largely succeeds in capturing “the rich, engaging tapestry of Australian and New Zealand economists in the twentieth century”.

The prominence accorded in political circles and in the media to leaders of the economics profession is understandable given the high importance attached to economic discourse in both countries. Innovations and novelties that sprang from Australian and New Zealand economists, who punched above their weight in world economics, were very often the by-product of the interplay between economic events and economic thought, producing striking departures from economic orthodoxy when circumstances warranted it. Millmow’s story of the emergence of an academic economics profession in both countries overlaps with seminal economic events including the Great Depression, the Second World War, the pursuit of full employment, the post-war recovery, the oil crisis and the impact of inflation and the far-reaching liberal reform programmes of the late twentieth century. The admixture of economic history and intellectual history is most welcome for it demonstrates how economic policy “innovations sprang from Australasian-based problems or circumstances” (6).

Until the broad-based economic reforms of the 1980s, the economic mentality of both nations had largely been grounded in and shaped by the 1890s and the 1930s Depressions and the response by government authorities with defensive and protective strategies. This meant that economic policy prescriptions often remained hostage to the powerful vested interests in the primary producing industries of both countries. However, even though the existence of heavy protectionism in both countries was often frowned upon by Australasian societies, the general populace exhibited an even deeper “distrust of markets and competition”. Such disdain inevitably led to a “proclivity for regulation and control” (4). As a result, by the late twentieth century, the New Zealand and Australian economies were among the most highly protected, regulated and inefficient in the developed world. Liberalization couldn’t come soon enough.

Another key facet of the work of Antipodean economists was the emphasis on applied areas of economic research. Indeed, New Zealanders and Australians have long prided themselves on being practical people. Such pragmatism meant that economic policy formulations were sometimes haphazard and lacked formal intellectual foundations. As the conservative New Zealand Prime Minister, Robert Muldoon, once remarked: “you cannot take a blueprint from some other country, slap it on this country, and expect it to work”. Of course, Muldoon’s successor, the Labour government led by David Lange, did exactly that when they swept away, in 1984, the extensive system of controls and regulations that completely girdled the economy. Bob Hawke’s Labor government, which came to power across the Tasman in 1983, soon followed suit.

The economics profession in New Zealand and Australia has never really enjoyed wide public support. Its reputation was further tarnished after the comprehensive market reforms of the 1980s where the general public in both countries remained ambivalent about economic liberalization. Antipodean economists in universities and government were anxious to experiment in market-oriented economics from abroad. This suggests that economics as practiced in New Zealand and Australia was largely derivative, having imported economic ideas from Europe and North America and adapted those ideas to local circumstances and conditions. True, economic practitioners in both countries had a brilliant knack for improvization. However, Millmow also provides ample evidence of “the idiosyncratic nature of economic life in Australia and New Zealand, including the unique institutions and conventions that characterised those economies” (8). The so-called “curse of distance and geography” sometimes has its advantages.

New Zealand and Australian economists have made valuable and innovative contributions in many branches of economics since the early twentieth century. The iconoclastic image of Australasian economics persists to this day. Alex Millmow’s stimulating new book celebrates that rewarding journey. I commend this inspiring story to anyone interested in the economic development of two of the best countries in the world to live in.

 

Alex Millmow. A History of Australasian Economic Thought. London: Routledge, 2017

Mark Donoghue has held faculty appointments at the Australian National University, National University of Singapore and the University of Notre Dame (Australia). He is currently on the faculty of the Singapore University of Social Sciences. He has published extensively in the field of the history of economic thought and is the author of Faithful Victorian: William Thomas Thornton, 1813-1880 (Palgrave, 2016).

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