The New Zealand economy has evolved in two distinct phases:
- the first 500 years after the arrival of the first Māori settlers around the late 13th century, when New Zealand was isolated from the rest of the world and there was little or no economic intercourse
- the 250 years after Europeans arrived, when the world impacted on the New Zealand economy.
Once the new population had settled in, around the 15th century, Māori ceased to deplete natural resources such as forests, and technological innovation was slow. Capital accumulation such as clearing land and building houses was probably just enough to cover population growth. It seems likely that there was little overall per-capita economic growth. Shocks from the weather, such as droughts, hurricanes and floods, and from natural disasters, such as volcanoes, earthquakes and tsunamis, set back some regions for a time. Inter-tribal warfare in the 18th century may have had some effect; the construction of fortifications would have absorbed energy, and there was some destruction of capital and stores as a consequence of fighting.
New Zealand entered the European imagination at almost the same time that the father of economics, Adam Smith, published his famous work The wealth of nations in 1776. James Cook had reached New Zealand in 1769. Smith pointed out that people’s pursuit of economic self-interest frequently led by an ‘invisible hand’ to social good. The book became the founding text of modern economics.
The arrival of Europeans brought new peoples (and diseases), materials, plants and animals, technologies and ideas, together with new sources of capital and opportunities to trade. The Māori response to the challenges these brought was not simply a matter of imitation. To succeed the response had to be creative and appropriate to local conditions.
New Zealand became a more specialised economy, both within the country, where the distinction between household and business became common, and in the world economy, as a specialist provider of food and fibre. Greater division of labour required a market economy, in which private initiative and capital were critical. Central government – an institution inconceivable in New Zealand before the end of the 18th century – was always closely involved in development and sometimes the leader.
New Zealand and the world economy
From the end of the 18th century New Zealand faced the tension of benefiting from trading with the rest of the world, but losing its autonomy as a consequence – the main determinant of the course of the New Zealand economy has been the world economy. New Zealand’s responses to this external environment have determined the degree to which the economy has prospered.