Think Big
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- Alternative meanings at Think Big (disambiguation)
Think Big was a 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 borrowing heavily, running up a massive external deficit, and pumping the funds into large-scale industrial projects. Many were petrochemical projects designed to utilize New Zealand's abundant natural gas to produce ammonia, urea fertilizer, methanol and synthetic gasoline.
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History
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, 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occurred in Iran, its oil industry was paralysed and 5.7 million barrels (900,000 m³) per day of production were withdrawn from world supply.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 off the coast and under Taranaki 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 gasoline. On 30 July 1979, carless days were introduced, where private motorists were required to elect one day of the week to be a "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.
Think Big Projects
The core of Think Big was the construction of the Mobil gasoline plant at Motunui, the complementary expansion of the oil refinery at Whangarei and the building of a stand-alone plant to produce methanol for export. Today the manufacture of gasoline has been abandoned but the Motunui plant together with the nearby stand-alone plant at Waitara continues 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
- Synfuel plant at Motunui
- Expansion of the oil refinery at Marsden Point near Whangarei
- Expansion of the New Zealand Steel plant at Glenbrook
- Electrification of the North Island Main Trunk Railway
- A third potline at the Tiwai Point aluminium smelter
- Construction of the Clyde Dam on the Clutha River.
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 tax payers is unknown, and there has been no comparison of cost to results obtained. Some commentators believe the schemes delivered only net benefits to the private sector. Some see the Synfuels and other projects as a way for foreign multinationals to experiment first in New Zealand.
There is little doubt the economy benefitted from economic activity during the construction period but the basic justification for the projects, a permanently higher oil price, did not eventutate. Oil prices subsequently dropped in real terms.
Think Big had a big positive impact on New Zealand's exports, and saved large quantities of commodity imports. 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.
External links
- Techhistory: Think Big (http://www.techhistory.co.nz/ThinkBig/ThinkBig.htm)
- Chronology of World Oil Market Events 1970-2003 (http://www.eia.doe.gov/emeu/cabs/chron.html) including a detailed annotated graph of oil prices