Think Big

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For the horse, see Think Big (horse)

Think Big was an interventionist state economic strategy sponsored by the New Zealand Prime Minister Rob Muldoon and his New Zealand National Party in the early 1980s. The Think Big scheme saw the government borrow heavily, running up a massive external deficit, pumping the funds into large-scale industrial projects. Some were petrochemical projects designed to utilize New Zealand's abundant natural gas to produce ammonia, urea fertilizer, methanol and petrol.

1 History
2 Think Big Projects
3 Did the strategy work?
4 References
5 External links

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History

Image:Oil-Price.jpg In the late 1970s the New Zealand economy was suffering: 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. OPEC continued to raise the price of oil. Then a political revolution occurred in Iran, its oil industry was paralysed and 5.7 million barrels (900,000 m³) per day of production were withdrawn from world supply.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 $12 a barrel to $19 a barrel. The New Zealand government banned weekend sales of petrol. On 30 July 1979, carless days were introduced, where private motorists were required to choose one day of the week to be their carless day. Anyone caught driving on their carless day faced heavy fines.

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

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Think Big Projects

Image:Clyde Dam.jpg The core Think Big projects were 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. Natural gas from the off-shore Maui field was converted to methanol, which was then converted to petrol on-site. Declining oil prices rendered this process uneconomic and the manufacture of petrol has been abandoned, but the Motunui and Waitara plants continue to produce export methanol.

The construction of the Clyde Dam on the Clutha River was part of a scheme to generate electricity for smelting aluminium. A smelter at Aramoana was proposed, but never built - largely because of resistance on environmental grounds.

List of Think Big projects:

Methanol plant at Waitara
Ammonia/urea plant at Kapuni
Synthetic petrol plant at Motunui
Expansion of the oil refinery at Marsden Point
Expansion of the New Zealand Steel plant at Glenbrook
Electrification of the North Island Main Trunk Railway between Te Rapa and Palmerston North
A third potline at the Tiwai Point aluminium smelter, near Bluff
The Clyde Dam on the Clutha River.

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Did the strategy work?

There has been no definitive study as to whether there was a positive economic benefit to New Zealand from Think Big or whether it simply raised the country's debt levels. Opinions are divided.

The cost to taxpayers is unknown, and there has been no comparison of cost to results obtained. Some commentators believe the schemes delivered net benefits to the private sector only. Some see the Synfuels and other projects as a way for foreign multinationals to establish themselves in the then highly-regulated New Zealand market.

There is little doubt the economy had substantial benefits from economic activity during the construction period, but the basic justification for the projects, a permanently higher oil price, did not then eventuate. 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 sizeable profits (for their largely overseas owners) that arguably cumulatively have outweighed the actual cost of the creation of the Think Big projects. Power generated from the Clyde Dam, the expansion of the Marsden Point oil refinery (which has been claimed to have one of the most powerful catalytic crackers in the world), and the methanol produced at Waitara are all examples of continuing positive benefits to the economy decades after the projects were completed. The balance of payments problem in the late 1980s would have been much more significant 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 it was implemented, tended to rely on party affiliations (i.e. National Party supporters backing the projects, whereas Labour Party supporters opposing them). However, Think Big, whilst no longer an issue in New Zealand politics, is now commonly perceived even by much of the National Party to have sunk New Zealand into huge debt without any significant return, accompanied by a generational repudiation of Muldoon's entire legacy.

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References

Gustafson, Barry (2002), His Way: A Biography of Robert Muldoon, Auckland University Press, ISBN 1869402367
Easton, Brian (2001), The Nationbuilders, Auckland University Press, ISBN 186940260X

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