Like lambs to the slaughter

Dunedin Smith, from Shortland Station, and a team of dogs drive a mob of sheep along the Kyeburn Diggings road towards Dansey's Pass. Photo by Stephen Jaquiery.

If you put your ear to the wind, the death rattle of the sheep industry is audible. Sheep numbers have halved over the last three decades as the best ''sheep country'' is being put to alternative uses. Who, or what, is killing the sheep industry?

One obvious answer is ''competitive destruction'' by all the industry players. This is a process where processing companies compete for throughput. The real answer, however, lies with the wider failure to understand the fundamentals that separate successful industries from those that fail.

The dairy industry was no different from the sheep industry a few decades ago, beset with silo mentalities. The NZ Dairy Group and Kiwi Dairy Company, at best, resented each other. This wholly negative attitude focused the industry on the internal politics between the companies rather than on the policies that grow the industry.

A form of ''creative destruction'' once dominated the dairy industry.

''Creative destruction'' is a phrase coined by economists James A. Robinson and Daron Acemoglu. They describe it as a negative force which attempts to maintain an existing position within an industry, rather than seeking the creativity so necessary to keep the whole industry competitive.

The changes to the dairy industry driven by John Roadley and others meant that industry transformed to adopt inclusive policies demanded by the suppliers who clearly felt a deep sense of ownership of their industry.

Policies trumped politics for the first time, resulting in a now inclusive and successful dairy industry. Fonterra's success is based on this inclusive attitude by the governance of the industry and from its owner-suppliers, as they focus on future investment needed to secure their place in the international marketplace. The dairy industry appeared to understand that significant change was the vital component in achieving and sustaining growth of investment in all its forms. It was not just about farmers' income or new ways of doing the business but, importantly, it was about the changing of the political power and influence of the old guard controlling the industry.

Those negative forces that once dominated the dairy industry are still hard at work within the once great sheep industry which is now desperately clinging to a foothold on New Zealand's second-class hill country.

By comparison with the dairy industry, it is unable or unwilling to change to meet the international challenges and competition. Anything new that undermines positions of power and political influence within the sheep industry is crushed as firmly today as it was during the wool acquisition debate of the 1970s. Then, the politics of the industry completely trumped the policy proposal of ensuring woolgrowers at all levels had ''more skin in the game''. Instead, we have competitive destruction combining with creative destruction to effectively condemn the wool industry to a bit player in the fibre market instead of the premium position the product should hold.

The repression of innovation through self-imposed ''creative destruction'' allows vested interests to consolidate their position, power and influence, along with their investment in old assets and technologies. The recent proposal ( threat) of grower-dominated Wool Partners to rationalise and amalgamate the marketing of wool saw an immediate lift in wool prices during the time of that debate, followed by an equally immediate fall in prices as the threat of an inclusive industry fell away.

Coincidence?

Yet again, politics rather than wider policy objectives won the day and is a fine example of creative destruction in action. The only, but important, role for politics and politicians is to create the necessary space for the right policies to take hold, which is the real failure of successive political leaderships in Wellington.

The sheep industry is, therefore, characterised by a failure of the entire leadership to identify the forces that lead to creative destruction. Regretfully, competitive destruction has almost halved the value of a lamb this year, as the processing industry claws back its substantial losses, exacerbating a decline of confidence, just when the sheep industry desperately needs it.

So many people have tried to re-focus the sheep industry. In relatively recent years people such as Steve Edge, Lindsay Smith, Ian Creswell and Keith Milne deserved the support of all within the wider industry. They didn't get it.

Regretfully, vested interests blocked the attempts to implement constructive change. The demand for change was not just about sheep farmers' incomes but about the implementation of policies needed to grow the wealth of this nation.

That lesson, which the dairy industry seized with both hands (albeit after considerable debate), seems completely lost on the sheep industry. Sheep farmers need to take ownership of policy development and insist on implementation of their policies. That change can only come by the suppliers taking decisive and cohesive action.

A counterweight to the processing industry's determination to hold its position is essential. The entire industry failure to fully adopt the necessary inclusive strategies is made all the more unbelievable, given the two major players in the meat industry are a form of co-operative.

The focus of the ''leadership'' from the old guard is set to continue their defensive strategies, securing their position within the meat and wool industries. The authoritarian and extractive attitude of the sheep industry is a deliberate and fateful decision of the wider industry leadership.

Who or what is really killing the sheep industry?Actually, it's the sheep farmers themselves. Their continued support for ''a dollar on the day'' and believing that dagging a shed full of lambs is more important than policy development, has allowed the politics of the sheep industry to bring creative destruction almost to an art form. The suppliers of meat and wool to the exporters and processors hold the key to policy direction. They must take the ultimate responsibility. The sheep industry is a perfect example of creative destruction and indeed ... why industries fail.

• Gerrard Eckhoff, a former Act MP, lives near Alexandra.