So what plans do National & Labour have to reduce the cost-of-living? Take a look at their websites. Labour want to address such issues by increasing benefits; National want to by cutting taxes (though not by much). Both parties want to take cash out of one person's pocket and put it in anothers so they can better "afford" to pay a bill. Yet those bills will still be the same size. Neither party has a plan to reduce the cost, nor price, of anything.
The remarkable feature of both parties "policies" is no mention of how they will increase competition & choice. Yet it is competition & choice that drive prices lower & increase quality. We face lack of competition in domestic air travel where Air NZ dominates, construction where Fletchers dominates, food where the two supermarket chains dominate and banking where the Big Banks dominate (aided by Big Media, which gives their Chief Economists a daily platform to advertise by letting them gabble on about nothing).
In the public sector, the same problem exists. The Education Department, under Hipkins "leadership", didn't want Charter Schools competing with State schools to enhance competition & choice. In health-care, private providers are not able to compete alongside public ones, without you having to pay out of your own pocket for the former. However, other nations have designed systems to allow choice & competition between public & private providers, so you can choose where to go, with the bill covered by social insurance.
However neither Labour nor National have anything useful to say on these issues of competition & choice that lie at the foundation of our cost-of-living problems & falling quality of public-sector services. In this sense, listening to the election debates between our two big party leaders will be a waste of time. By the way, what does the White House have to say about competition? Something not to be found anywhere on the Kiwi Labour & National Party websites, namely:
"Healthy market competition is fundamental to a well-functioning U.S. economy. Basic economic theory demonstrates that when firms have to compete for customers, it leads to lower prices, higher quality goods & services, greater variety & more innovation .. When there is insufficient competition, dominant firms can use their market power to charge higher prices, offer decreased quality & block potential competitors from entering the market - meaning entrepreneurs & small businesses cannot participate on a level playing field & new ideas cannot become new goods & services.
Research has also connected market power to inequality. In an economy without adequate competition, prices & corporate profits rise, while workers’ wages decrease. This means large corporations & their shareholders gain wealth, while consumers & workers pay the cost. The pandemic has further underscored the dangers of an economy that depends on a few companies for essentials, exemplified by the supply chain problems we face when a small handful of corporations creates bottlenecks for a critical product".
What is the moral of the story? A vote for either National or Labour will not lower the cost of living in NZ. Our two party duopoly has become the counterpart of the oligopolies that exist across a swathe of our economy and which are even being protected by those two parties.
Sources:
https://www.downtoearth.kiwi/blog/search/cost%20of%20living%20election
https://www.whitehouse.gov/cea/written-materials/2021/07/09/the-importance-of-competition-for-the-american-economy/#:~:text=Healthy%20market%20competition,improve%20working%20conditions.
In the public sector, the same problem exists. The Education Department, under Hipkins "leadership", didn't want Charter Schools competing with State schools to enhance competition & choice. In health-care, private providers are not able to compete alongside public ones, without you having to pay out of your own pocket for the former. However, other nations have designed systems to allow choice & competition between public & private providers, so you can choose where to go, with the bill covered by social insurance.
However neither Labour nor National have anything useful to say on these issues of competition & choice that lie at the foundation of our cost-of-living problems & falling quality of public-sector services. In this sense, listening to the election debates between our two big party leaders will be a waste of time. By the way, what does the White House have to say about competition? Something not to be found anywhere on the Kiwi Labour & National Party websites, namely:
"Healthy market competition is fundamental to a well-functioning U.S. economy. Basic economic theory demonstrates that when firms have to compete for customers, it leads to lower prices, higher quality goods & services, greater variety & more innovation .. When there is insufficient competition, dominant firms can use their market power to charge higher prices, offer decreased quality & block potential competitors from entering the market - meaning entrepreneurs & small businesses cannot participate on a level playing field & new ideas cannot become new goods & services.
Research has also connected market power to inequality. In an economy without adequate competition, prices & corporate profits rise, while workers’ wages decrease. This means large corporations & their shareholders gain wealth, while consumers & workers pay the cost. The pandemic has further underscored the dangers of an economy that depends on a few companies for essentials, exemplified by the supply chain problems we face when a small handful of corporations creates bottlenecks for a critical product".
What is the moral of the story? A vote for either National or Labour will not lower the cost of living in NZ. Our two party duopoly has become the counterpart of the oligopolies that exist across a swathe of our economy and which are even being protected by those two parties.
Sources:
https://www.downtoearth.kiwi/blog/search/cost%20of%20living%20election
https://www.whitehouse.gov/cea/written-materials/2021/07/09/the-importance-of-competition-for-the-american-economy/#:~:text=Healthy%20market%20competition,improve%20working%20conditions.
Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.
4 comments:
Could not agree more but...... my first question is how do you increase competition within such a small market as NZ while maintaining economies of scale? The second question is how would a Government encourage competition? No Government has a particularly healthy track record at picking winners. Maybe reducing regulations to make market entry easier however Governments don't like doing this because that means a loss of power and control. When did we last see a Government willingly handing increased power and control back to its citizens?
'The Commerce Commission is New Zealand’s competition and consumer watchdog. We enforce competition law so that markets are competitive, and consumers are well informed and protected.'
I wonder if the Commerce Commission would be happy with a few more entities entities ensuring that markets are competitive - you know, just to have some more competition in that space.
good point by JamesA! perhaps the question for public is this: when was the last time they voted for a government that promised to reduce the size of government?
I think James A makes a good point, the conundrum of gaining an improved deal for consumers...more competition, or gaining economies of scale, the latter in NZ's tiny market means someone is dominating the competition environment. A good example is in the area of pharmacies, traditionally the role of hundreds of owner operated businesses. Enter the Chemist Warehouse with (by NZ scale) deep pockets and a determination to dominate the market. The result is obvious with early retirement for many local small pharmacies, and once CW being the major player? I imagine the much touted bargains will disappear, or just become part of a Briscoes style operation where the discounts will be much trumpeted but the overall shop will be more expensive.And suppliers will find, like Ebos, that the Aussies play very hard ball!
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