Sir Frank Holmes has been a prominent figure in New Zealand economics for the working life of everyone in this room. When I started work in Wellington in late 1957 Frank was a lecturer at Victoria University, having served, from there, as an adviser to the Royal Commission on Money, Banking and Credit. He was appointed to the Macarthy Chair at Victoria in 1959.
In retrospect the New Zealand economy of the 1950s has some of the charm of a golden age. New Zealand’s fully employed economy ranked amongst a select few nations in terms of per capita income, attaining a relative international standard that is now held before us a distant and probably unattainable ideal. I say some of the charm because, despite undoubted successes, the economic and social structure was loaded with stresses, including its narrow dependence on pastoral exports to the United Kingdom, the role of women and the economic position of Maori, that would play themselves out through succeeding decades.
The world in which Frank grew up was one devastated by economic depression, political extremism and ultimately war, a war that killed tens of millions, destroyed cities and basic infrastructures over vast swathes of territory and consummated itself in genocide and the development and use of nuclear weapons. Frank was drawn into that cauldron and sixty years ago, from the time of this gathering, that is in July 1944, he was a Pilot Officer, back in Auckland following a three-month spell dive-bombing Japanese positions in Rabaul.
Reading Frank’s account of his war experience I was struck by the lottery of our lives. Frank’s father served in Gallipoli and the Somme, Frank in the Pacific. My father, half a generation younger than Frank’s, missed the First World War and served in New Zealand during the second. And I, half a generation younger than Frank, have been spared war entirely. I share Frank’s gratitude that his “children and grandchildren have not been called upon to participate in wars”.
Along with many others Frank came away from war convinced that there must be better ways of settling disputes between peoples and a developing belief in the importance of improving economic and commercial relations between nations. Frank’s commitment to the promotion of open economic relations is reflected in numerous papers on aspects of New Zealand’s external and trade relations. An early and influential paper was Discussion Paper No 1 of the NZIER Should we have free trade with Australia? Over the years Frank has authored numerous papers on trade and economic matters including our relations with Britain and the United States. More recently he has paid particular attention to relations within the Asia Pacific region and has continued to reflect on the Australian-New Zealand relationship including his joint exploration, with Arthur Grimes, of the case for a common currency. He has been active in organisations promoting Asia-Pacific cooperation and was first chair of the Asia 2000 Foundation of New Zealand.
The economy of the 1950s was widely characterised as an externally constrained high demand economy, operating with one foot on the brake and the other on the accelerator.. It contained two central flaws. The commitment to sustained high demand threatened and, in time, delivered high inflation. Secondly, the external constraints of tariffs and import licensing distorted resource allocation thereby threatening lower real incomes.
The problems associated with inflation were another continuing concern of Frank’s working life that fits naturally with his central professional interests in the economics of money and finance and also with his role as a public economic adviser. His interest has continued to the present. In 1994 he reviewed the frameworks of Australian and New Zealand central banking and in 2000 made a submission to the independent review of monetary policy.
Looking further back, Frank was the founding chairman of the Monetary and Economic Council, serving in that role from 1961 to 1964 and from 1970 to 1972. Both fairly short time spans but during those years Frank played a particularly important role as a reliable and perceptive public analyst and discussant on a sequence of key macroeconomic issues.
On the issue of inflation Frank placed primary emphasis on the importance of getting fiscal and monetary policies right but he also paid attention to the institutions of the labour market as in the December 1971 report on Inflation and the labour market.
In his letter of transmission to the Ministers of Finance and Labour, Frank argued
“The nation cannot tolerate a continuation of increases in costs and prices on the scale we have been experiencing. … employers and unions who persist in making bargains which will lead to the national average of increases in pay rates rising above about 4 percent per annum, are inexorably driving the nation into a cruel choice between unacceptable price inflation, unacceptable stagnation and unemployment or both.”
In the event the players in this drama, like a bemused student faced by a multi-choice question, chose all three, unacceptable inflation, unacceptable stagnation and unacceptable unemployment. But the point that I want to make here is that independent bodies that can help argue the difficult issues that continually confront us assist political process. Frank performed those tasks with distinction, not only with the Monetary and Economic Council but also in a variety of roles, not least as founding chair of the New Zealand Planning Council.
An important attribute of such commentary is that whilst formally addressed to those in authority it also speaks to a public audience including the economic and social actors whose decisions jointly determine outcomes in the area under analysis. I believe it is difficult to overstate the importance of that role and suggest that current policy making suffers from the absence of bodies such as those that Frank chaired. In the ideal the commentator’s text is backed by independent research and reading and informed by discussions with officials and ministers, with key actors in the field, through access to academic research and last but not least by argument and discussion around the council table.
I have witnessed Frank in that role and been impressed by his quiet mastery of it. Frank holds firm opinions but he is not a dogmatic man and is always open to argument. In my experience he is an unusually strong team player. He keeps his eye on the ball and knows instinctively where the play is heading and that success will come most surely when individual strengths are combined and focused on common goals.
Frank’s focus is not solely economic as is evidenced by his continuing interest in education, his chairmanship of the Advisory Council on Educational Planning and of the NZ Council for Educational Research, and his 1975 knighthood for services to economics and education.
The wider field of social policy and cultural matters was most publicly evident during his association with the Planning Council. The 1976 report of the task force on economic and social planning, New Zealand at the Turning Point, which led to the creation of the Council, includes an interesting discussion on the changing balance between racial and cultural pluralities and the importance of focusing on the multicultural nature of New Zealand society, concluding that failures within “the halls of power” had “largely been fostered by an illusion that “minorities” should somehow be content to discard their identity and merge with the dominant group.”
I don’t know whether Frank, who chaired the Taskforce, or one of his associates, drafted these words but I do know that he will have weighed and approved them. Frank’s interest in multi and bi-cultural matters is also evident, in a somewhat surprising place, in a short discussion on the opening page of his 1972 text Money Finance and the Economy. Discussing the distinction between barter and gift-exchange in the pre-European Maori economy he wrote, in words which resonate in the context of current discussions on the seabed and foreshore
“What was acceptable was determined by a mixture of conventions, hints and tacit understandings. Each transaction had the appearance of being free and spontaneous, but in fact it was based on a strict system of obligation, both to give when occasion arose and to accept a gift when offered, with a moral commitment to repay by another gift of at least equal worth.”
I am not far from done but I want to pick out one other thread from Frank’s work, his long-term interest in defining the proper role of government in relation to the evolving balance of economic activity. Given his life-long commitment to promoting more open economic structures one might presume that Frank would adopt a strictly laissez-faire response, but this is not so. In the recently published version of a 1950s paper, The Quest for Security and Welfare in New Zealand 1938-1956, Frank reviewed the pattern of sectoral development and concluded that whilst the efficiency of manufacturing activity could have been assisted by a “somewhat less protective policy” efficiency could also have been promoted by more positive actions, such as institutional innovations in finance, increased spending on research and a decision to invest much more heavily in higher education.
In his Sir Sidney Holland Memorial Lecture of 1962, Planning for Growth in a Freer Economy Frank Holmes argued “the current urgency of longer-term planning”, on the need “to work consciously for the development of new exports and new markets, on the one hand, and the encouragement of maximum economy in the use of overseas exchange and the development of industries, using more domestic resources and components, to produce more of our requirements, on the other.”
He went on to discuss the case for longer-term consultative planning, a theme which was developed extensively, fifteen years later, in the Report of the task force on economic and social planning. Consultative planning has had a bad press in recent years and as one who has, like Frank, frequently advocated it, I have to admit that it has its problems and that the case for it changes through time. But, as I look back over New Zealand’s undoubted successes in transforming the structure of its economy, I suggest we can give thanks to people such as Frank for their undogmatic pragmatism, for their preparedness to review the strengths and weaknesses of the actually existing economy and its institutions. To try and define how their performance might be improved and then to argue and advocate the policies that might help us get there. And, at all times, to keep in mind that economic performance is instrumental and needs to be tested within a wider framework encompassing our individual and collective aspirations, both social and cultural.
Frank has had and continues to have a busy life, in academia, in government circles and in the business community, including directorships, at various times, with Norwich Union, State Insurance, the National Bank and Lloyds Bank in Australia. In the short time that we have here I have been able to no more than sketch the reach and depth of his interests. I want to end on a personal note. In our work we are continually reminded that we each have our own perspective, and reviewing Frank’s work I have been reminded of issues on which our judgements have differed. It is fundamentally important to our profession that we continue to explore and define our different viewpoints, because that is the way we test our ideas and develop frameworks of common understanding. Frank is an energetic and tolerant man who has significantly advanced my, and our, understanding of the workings of the New Zealand economy and its relations with the rest of the world. It gives me great pleasure to nominate Frank Holmes as a recipient of the inaugural award as a Distinguished Fellow of the New Zealand Association of Economists.