Think Big

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For other uses, see Think Big (disambiguation).

The New Zealand Prime Minister Robert Muldoon (Prime Minister: 1975 - 1984[1]) and his New Zealand National Party government in the early 1980s sponsored Think Big as an interventionist state economic strategy. The Think Big schemes saw the government borrow heavily overseas, running up a large external deficit, and using the funds for large-scale industrial projects. Petrochemical and energy related projects figured prominently, designed to utilize New Zealand's abundant natural gas to produce ammonia, urea fertilizer, methanol and petrol.

The National Cabinet Minister Allan Highet coined the "Think Big" label in a speech to a National Party conference in 1977.

The Clyde Dam, a "Think Big" project.
The Clyde Dam, a "Think Big" project.

Contents

[edit] History

In the late 1970s the New Zealand economy suffered from the aftermath of the 1973 energy crisis, from the loss of New Zealand's biggest export market upon Britain's entry to the European Economic Community, and from rampant inflation.

In 1978 New Zealand faced a further crisis in oil-supply. OPEC continued to raise the price of oil. Then in 1979 the Iranian Revolution paralysed Iran's oil-industry and withdrew 5.7 million barrels (900,000 m³) per day of production from world supply.

In 1978 Bill Birch became Minister of Energy. He saw the substantial reserves of natural gas under Taranaki and off its coast as an opportunity to bring life to the ailing economy.

In 1979 the oil crisis worsened. During the first half of 1979 OPEC raised oil prices from US$12 a barrel to US$19 a barrel. The New Zealand government banned weekend sales of petrol. 30 July 1979 saw the introduction of carless days, where private motorists had to choose one day of the week as their carless day. Anyone caught driving on their carless day faced heavy fines.

The increases in oil prices contributed substantially to the continuing worsening of the country's terms of trade. The cost of oil loomed as the major component of the New Zealand balance of payments deficit. Muldoon's administration intended the Think Big projects to reduce New Zealand's reliance on imports, especially oil imports, and thus improve the balance of payments.

[edit] Projects

The core Think Big projects included the construction of the Mobil synthetic-petrol plant at Motunui, the complementary expansion of the oil-refinery at Marsden Point near Whangarei, and the building of a stand-alone plant at Waitara to produce methanol for export. Motonui converted natural gas from the off-shore Maui field to methanol, which it then converted to petrol on-site. Declining oil prices rendered this process uneconomic and New Zealand abandoned the manufacture of petrol.

The construction of the Clyde Dam on the Clutha River formed part of a scheme to generate electricity for smelting aluminium. Construction of a proposed smelter at Aramoana on Otago Harbour never eventuated — largely because of resistance on environmental grounds.

[edit] List of projects

An electric EF class locomotive on the electrified section of the NIMT.
An electric EF class locomotive on the electrified section of the NIMT.

[edit] Defining outcomes

No definitive study has addressed the issue as to whether Think Big brought positive economic benefit to New Zealand or whether it simply raised the country's debt levels. Opinions differ — the cost to taxpayers remains unknown, and no comparison of cost to results obtained has appeared. Some commentators believe the schemes delivered net benefits to the private sector only. Some[who?] see the Synfuels and other projects as a way in which foreign multinationals had the opportunity to establish themselves in the then highly-regulated New Zealand market.

Little doubt remains[who?] that the New Zealand economy reaped substantial benefits from economic activity during the construction period, but the basic justification for the projects, a permanently higher oil-price, did not happen. Oil prices subsequently dropped in real terms.

Think Big did have a large positive impact on New Zealand's exports, and saved large quantities of commodity-imports through its process of import substitution. The industrial projects such as Tiwai Point continue to generate very sizable profits (for their largely overseas owners) that arguably cumulatively have outweighed the actual cost of implementing the Think Big projects. Power generated from the Clyde Dam, the expansion of the Marsden Point Oil Refinery (claimed[who?] as having one of the most powerful catalytic crackers in the world), and the methanol produced at Waitara all provide examples of continuing positive benefits to the economy decades after the completion of the projects. New Zealand's balance-of-payments problem in the late 1980s would have loomed much more significantly if New Zealand had not had the benefits to its external accounts arising from Think Big.

Approval of Think Big, at least during and soon after the time of its implementation, tended to rely on party affiliations (with National Party supporters backing the projects, while Labour Party supporters opposed them). But Think Big no longer serves as an issue in New Zealand politics. Even much of the National Party subsequently came to perceive that Think Big sank New Zealand into huge debt without any significant return, accompanied by a generational repudiation of Muldoon's entire legacy.

[edit] See also

[edit] Bibliography

  • Easton, Brian (2001), The Nationbuilders, Auckland University Press, ISBN 1-86940-260-X
  • Gustafson, Barry (2002), His Way: A Biography of Robert Muldoon, Auckland University Press, ISBN 1-86940-236-7

[edit] External links

[edit] References

  1. ^ Robert Muldoon became Sir Robert from 1983.
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