Fearmongering

 I migrated to NZ from the US in 1994 because I was given a job offer at the RBNZ. Besides, the only reason to stay in NZ and raise a family was the fact that NZ is a non-nuclear country, no fearmongering and no warmongering. 

Less than a month ago, the NZ government announced its objective to increase productivity growth ​(economic growth​). 

Now, the NZ Minister of Defense seems to suggest that NZ should increase military spending to deter China! 

​Politics aside for now, these two goals are contradictory. If the Minister wants an increase in military spending (to a 2% of GDP) as required by Nato, it will crowd out an equal amount in private investments. If the money were to be printed, we get inflation, the RBNZ has to deal with it by raising the interest rate. ​If the government wants to increase taxes it would violate its objective to reduce taxes. Generally speaking, such a whim would be very costly.​ 

I showed before those countries with lower government expenditures / GDP ratio grew much faster than others. Here is a scatter plot of the average real GDP per capita growth and the average government consumption expenditures (military spending is a consumption expenditure) / GDP ratio from 1990 to 2023. You could see how the three Asian economies grew richer than the G7 and New Zealand. It is likely that such proposed increase in military spending would result in lower growth over time.

​The story the Minister of Defense is quoted telling is that NZ is mineral-rich, and China has its eye on it! If this is the case, then why not export more of it to China? We have a trade surplus with China. In addition to dairy products and other agricultural commodities we export minerals. China would be even happier to help us with capital investments. I am unaware of China's previous military interventions to steal resources. China usually traded with other countries, not invade them. This idea that some superpower will come to steal NZ resources sounds like a colonial mentality flashback. 

And note that if the NZ government increases military spending it would be in the form of capital expenditures such as weapons, planes, ships...etc. not manpower. Where do we get these weapons from? Most likely the US and the UK will sell us their old machines to us. It looks like New Zealanders will be the losers. Trade with China is the best security for NZ, and this is a long geopolitical argument, but I find Don Brash and Helen Clarke's argument of independent foreign policy very convincing.