How MILK made NEW ZEALAND very very rich? | World cup of Economies by Abhi and Niyu

Phurden Lepcha
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When we hear the word New Zealand, the beautiful scenes come before our eyes. But did you know, in this country with a population of 50 lakhs, every person is 25 times richer than one person in India. New Zealand is miles away from every major country in the world but still, they have something from which they can earn a lot of profit, and that is milk.
Yes, milk. Developed cities, good standard of living, and luxuries around the world have become possible only because of milk. Because New Zealand is not run by humans, How? Let us know.
1: The economy of cows: There is a saying about New Zealand that New Zealand has more cows than humans. It is hard to believe but the population of New Zealand itself is about 52 lakhs. To put things in perspective, double the number of people travel by Mumbai local every day.
But the interesting thing is that there are 10 crore cattle in this country. Cattle include dairy cows, beef cows, and deer. And they have made this strange thing their biggest advantage. How? India is number 1 in terms of population, and our dairy industry is also very big. But New Zealand is 12 times smaller than us in size and 260 times smaller in population, that is, there are 260 Indians for every New Zealander.
But if we compare with India, in 2022 India exported 5,97,000 tonnes of dairy products but New Zealand exported 1,87,72,000 tonnes of dairy products. It is important to talk about exports here because exports earn money for the country and bring valuable money from outside into the country, and New Zealand has cracked this code.
Fonterra Cooperative Group is the largest company in New Zealand, which is like Amul there, i.e., it is a farmers-owned cooperative. This one company exports 30% of the world's dairy. Their products are sold in 140 countries of the world, and they give direct employment to 10,000 people. In a country with a population of only 50 lakhs, it is a big deal for only one company to employ 10,000 people. Let's understand a little basic Economics.
What is the economy of a country? 
Economy means an area where things are produced and consumed, where trade happens, and where items are produced and distributed. An economy is often divided into 3 categories, primary, secondary, and tertiary. Primary sector i.e. agriculture and agriculture-related activities which earn money directly from the environment or earth's resources. Secondary sector i.e. manufacturing, where the output of the primary sector is transformed and processed so that something new is made from it. And tertiary sector i.e. services sector which focuses on distribution where there are all the industries supporting the primary and secondary sectors.
You must have read in economics textbooks in your childhood that often the countries that depend on the primary sector i.e. agriculture are underdeveloped. As a country develops, it focuses on manufacturing, and then as development increases, it focuses on the tertiary sector i.e. service sector. But New Zealand's economy is unique.
If we look at New Zealand's GDP, 7% comes from the primary sector i.e. agriculture. But if you look at New Zealand's top exports, six out of the top 10 items are related to agriculture, farming, and food processing. Almost 60% of their total exports come from this sector alone, which is quite significant.
New Zealand is among the top 2 exporters of butter, cheese, and whole milk powder, and among the top 5 in skim milk powder. That is, we can say that animals are as responsible for New Zealand's prosperity and development as humans.
2: Milking the milk: An economy does not become rich just by having more cows, resources should also be used properly.
And this will happen only when the government supports the farmers and makes good policies that benefit everyone in the long term. New Zealand has not won any Cricket World Cup to date, but if there was a World Cup for the dairy or wool sector, New Zealand would have won every year. By understanding the history of New Zealand, everything will become crystal clear.
Let's rewind a bit. At the beginning of the article mentioned that there are 10 crore cattle in New Zealand, but the most interesting thing is that just 200 years ago there was not even a single cow here, so where did these cows come from? The same place from where half the world's problems come, Great Britain. There was a time when it was said that the sun never sets on British umpires because they had colonies in every area of the earth. New Zealand was also a British colony, and part of the Commonwealth. The native people here are called Māori. These are their native inhabitants whose culture is quite different from the culture of today's New Zealand.
Most of the people living in New Zealand today are Europeans who came there in the last 400 years. They did to the Māori people what they did to India. Māori people traded with French and Dutch traders. British missionaries came here for the first time in 1814 and brought cows. Just as there was a lot of treasure in India for the British to loot, similarly there was a lot of pasture i.e. fodder in New Zealand for the cows to eat. In 1840, the Māori people signed a treaty with the New Zealand Company, i.e. the British, called the Treaty of Waitangi, and because of this treaty, the Māori people became British subjects who were to receive the protection of the Crown. That is, we can say that the Māori people lost their independence because of cows.
Basically, because of this treaty, the entire land which we call New Zealand became a colony of England. New Zealand was quite pastoral, meaning there were a lot of grassy areas, so farming naturally flourished there. Māori have always been engaged in farming, and trading their goods with European traders. But after 1850s, the focus went to sheep farming.
In the 1870s, Britain paid a lot of attention to roads, railways, and infrastructure. And after the advent of refrigeration, New Zealand also started focusing on dairy farming in 1900. New Zealand became a Dominion in 1907. When Britain was busy waging war in Europe, they were in great need of dairy products like cheese and butter, so they promoted the dairy industry in New Zealand, and since then New Zealand became their supplier of dairy products, wool, and meat.
So much so that in 1928, dairy farmers from New Zealand set up Amalgamated Dairy in the UK to market butter and cheese. Even during the Second World War, New Zealand became Britain's sole dairy supplier. Because of their support, sheep and dairy products accounted for 90% of New Zealand's total exports.
Britain was a secured market for them, and there they got guaranteed prices. Now what is this guaranteed price thing? You see, it would have taken weeks to reach England from New Zealand, and the New Zealand traders had to bear the risk here. What if the ship sinks? What if pirates attack? What if the prices fall? This is a risk, but Britain wanted New Zealand not to stop its supply, so they came out with a scheme specifically for New Zealand, Guaranteed Price.
This means that even if the price fell, New Zealand traders would still receive the same price. What does it mean? The more milk you produce and the more milk you sell, the more profit you will earn guaranteed. The scheme worked well until 1955, but could the British be trusted? No way! In 1955, Britain stopped giving guaranteed prices to New Zealand, and this was a huge blow to New Zealand.
But by then they had realized that cows were cash cows. They just had to find a new market for dairy. They focused on this for the next 20 years. Then in 1973, there was another shock. In 1973, Britain became part of the European Economic Community. The earlier agreements they had made with New Zealand had to be canceled.
New Zealand's condition was already bad due to the loss of the British market, and the oil crisis of 1973 and 1979.
3: Cash Cows from Cows: By the end of the 1970s, big problems had started in New Zealand. Their economy was in danger because they had taken loans to build the infrastructure, and suddenly their income took a hit.
There was no money to complete the projects, but the interest on the loan taken had to be paid. While all this was going on, 1984 came.
1984 was as important for New Zealand as 1991 was for us. Tax rates were reduced by half, from 66% to 33%. But at the same time, subsidies for agriculture were removed. At that time agriculture received support of up to 4% of GDP. If a country that has grown on the basis of its agricultural products stops all subsidies and removes all benefits, then how will it work? How will that country and most importantly the businesses of that country survive? Logic says that New Zealand's dairy industry should have been finished after the removal of subsidies, but the interesting thing is that the opposite happened. New Zealand businesses survived, their dairy and wool industries survived. On the contrary, they became more competitive after the restrictions were lifted. Earlier there was a subsidy on fertilizers, hence the farmers used to use as much fertilizer as they wanted, but now they adjusted and started using it whenever required.
In 1983, more meat was being produced than required. One study says that New Zealand used to produce so much surplus meat that it was turning into fertilizer, which was a waste of resources. Land prices were also increasing. There was no correlation between supply and demand. Basically what was happening earlier was that production was increasing but its selling price was going less than its cost.
After the reforms, the focus shifted from quantity to quality. How to increase the productivity of a land, how to increase its output? Discussion started on all these issues. At the same time, how can farms become technologically advanced, farmers get low-interest loans, and they get market support training, all this was enforced by the government.
The government focused on how to make farmers technologically advanced, how to provide them low-interest loans, and how to provide them market support and training, and the farms which earlier sold only unprocessed products now started selling processed products, they started coordinating with different supermarkets chains and matching their production with them.
They also started focusing on horticulture i.e. fruit production. Exports of kiwi fruit increased from 42 million dollars in 1984 to 2.7 billion dollars in 2021. Farmers suffered losses due to the removal of subsidies but only till 1989. But after that, other solutions emerged which made New Zealand's economy stronger and New Zealand's farmers richer.
Even today New Zealand is known for its dairy products. In 2021, 30% of their total exports were animal products.
4: Lessons for India: What difference does New Zealand's story make to us, what can we learn? This is most important. New Zealand is not a perfect country. In fact, if you look at India-New Zealand trade, India's imports are Rs.
3,838 crores and India's exports are Rs. 4,383 crores. So we run into a small trade surplus. Just like New Zealand used to give subsidies, India also gives it. India also gives many subsidies to its farmers, buys rice and wheat at MSP, gives them interest-free loans, and also has subsidies on fertilizers. However many experts like Dr.
Ashok Gulati believe that India is not benefiting from this, instead it is causing loss. Due to subsidies, fertilizers are overused, due to which the health of the soil gets ruined in the long run and farmers have to commit suicide. Due to MSP on only a few crops, they are produced in excess, whether there is demand for them or not. That is, instead of market forces, subsidies decide what should be produced in the fields.
In which world can this logic be sustainable, you tell me? Even though electricity and water are free in many states, we have not been able to work on wastage also. As a result, food prices keep fluctuating across the country. Food grains purchased at MSP are distributed to the people as ration at low prices or free of cost.
There are leaks in this system also. There are issues in quality. Food grains given for public distribution do not reach those who should get them. And what's our solution to these problems? Throw more money and increase subsidies, this is clearly not solving anything. There were protests all over New Zealand but still, the decision to remove subsidies was not taken back.
On the contrary, farmers were given training to become competitive, they were given support in trade and commerce. The Indian government will have to take strong decisions as well as learn to follow them up. Sometimes in India, it seems that one ministry does not know what the other ministry is doing. The focus of a ministry is on one scheme, not on overall development.
Neither the problems of farmers are decreasing nor the prices for consumers are decreasing. The second lesson from New Zealand is the power of collective bargaining. In 1928, when demand was low, big farmers from New Zealand set up a marketing organization in the UK, and that is what India needs. Just as there was a white revolution in India because of Amul, similarly we are in dire need of cooperatives in different sectors which can make the farmers self-reliant.
A few years ago we went to Germany, we saw two types of honey on the shelf, one was normal honey and the other was Manuka honey which comes from New Zealand. They marketed their honey as having some medicinal properties, it was a healing honey, and hence they could sell it at a premium price. The branding of this product should specifically be such that it has some medicinal properties.
On this basis, we will be able to sell it at a premium. We are not able to brand our products properly or position them properly, and this is what is missing in India. And that is how Lakdong turmeric of Meghalaya, or kiwis of Arunachal, or tribal coffee of Araku Valley should be promoted across the world. The third lesson is that we have to learn to change with time.
The dairy sector is changing and the demand is now going towards whey protein. So the farmers of New Zealand are focusing on manufacturing milk protein products from milk products. We will also have to adopt this dynamic attitude. We produce so much milk but still, most of the whey protein coming to India is imported.
Why? Why do we lag behind in making value-added products? Ultimately businesses do not operate in a vacuum. One has to adjust gradually according to market feedback, that's a reality. And the last lesson is the ease of doing business. New Zealand tops in ease of doing business. Corruption is least here. Generally, when we think about the New Zealand cricket team, a smile comes on our faces.
They are good people, talented cricketers, and people like Ross Taylor have integrated well into the Indian culture. If we zoom out, their country is also similar. Despite being in a corner, it is leaving its mark across the world. We have to learn from the countries around us, we have to avoid their mistakes and learn from their solutions.

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