The article below of mine was published in the NZ Herald yesterday. Finance Minister Nicola Willis immediately complained, saying that although she is the "Minister of Economic Growth", there is no "Ministry of Economic Growth", to which the Herald article referred. Her complaint makes the article's argument stronger. Namely that her new title is a marketing-PR-comms gimmick designed to mislead the NZ public, with nothing behind it:
The Prime Minister should put his marketing past behind him. After all, we voted out former PMs Ardern and Hipkins because of their Marketing, Public Relations, and Communications Spin Machines. During the last election, Hipkins said that New Zealand had the fastest growing Gross Domestic Product in the world. That was a hoax. The International Monetary Fund ranks us 181st out of 190 nations. We have spent the last two years in and out of recession, under both National and Labour.
Now PM Luxon is trying to convince voters that he is all about making the economy bigger. On that note, he has launched a new brand name. It is called “The Minister of Economic Growth.” He has delegated managing it to Finance Minister Willis. Why is it a misleading name, not used by any other country? Because in a market economy like ours, the government has only a limited and indirect influence over the pace at which it grows. The main job of the government in that regard is to design quality laws, in particular relating to property rights. Those rights incentivize private individuals to innovate and produce.
It is the people and our firms, by virtue of our purchases and production, who add up to being the two biggest players creating the demand and supply equilibrium which determines GDP and prices. Since aggregate growth is measured in terms of Gross Domestic Product, NZ's new Minister of Economic Growth could equally be called The Minister of Production. As such, it conjures up communism, command-and-control, and central planning.
There was once a Ministry of Production in England during World War 2, in charge of setting weapons manufacturing. During the War the Americans had an Office of Price Administration doing price controls. These days no nation bothers pretending that it can directly set output and prices.
Furthermore, there are times when GDP should freely fall due to supply shocks, like to oil, or due to a pandemic. In those times, it is important for shoddy firms to exit, making way for more efficient ones with new people geared up for a new order, a process called creative destruction. Times of upheaval do require unemployment insurance, but not a Ministry of Economic Recession.
Reduced prosperity and entrenchment of monopoly power in NZ occurred after both National and Labour supported offering blank cheques, drawn on your account, to our country’s biggest firms during the pandemic. In 2020, after that announcement was made, the NZX 50, which comprises the top fifty in terms of size, rose nearly 50% in value, representing a transfer from taxpayers to them of tens of billions of dollars.
Our biggest firms today are busily privatizing their gains, whilst just a few years ago they were busily nationalizing their losses. Our present huge public debt and high cost-of-living is the collateral damage.
The political desire to maintain big business economic growth during the pandemic avoided a hugely overdue shake-out in NZ. Instead it has been small firms - the likes of green grocers - that have bankrupted. Big useless building companies, the big supermarkets, who were the only ones legally allowed to open in lockdowns, and all of the NZX 50 publicly listed oligopolies, have sailed happily on.
We are now paying the price for our politicians’, and the Reserve Bank's, myopic obsession with faking economic prosperity during the pandemic. Together they prevented the cleaning out of the Big End of Town. Together they prevented the rise of a new type of kid on the block, armed only with the strength of their character, big dreams, and the potential for big achievements.
No wonder those youngsters are leaving the country. National and Labour were complicit in granting New Zealand’s old guard a too-big-to-fail public guarantee. Both parties hunkered down with Business NZ to buy the support of its members before Election 2021. They now cry crocodile tears for our youth, whilst at the same time handing a swathe of big jobs to mates, rather than searching for the best person.
Why has former PM Key’s Chief Science Adviser, Sir Peter Gluckman, been recycled as PM Luxon’s Science System Advisory Group Chair, along with so many other recycled throw backs, when a whole new generation of outstanding scientists and business folks emerged in the intervening years, including the Kiwi founder of Artificial General Intelligence?
National and Labour together bemoan a lack of competition, but they engineered it themselves by insisting public funds be used to underwrite our largest companies and business partnerships. Even now neither party is championing meritocracy in NZ. To explain our country’s poor performance, they conveniently blame each other.
All told, a Minister of Economic Growth is as silly as Monty Python's Ministry of Silly Walks. It denies personal responsibility. It sends a confusing message that somehow our country’s production depends on Ministry officials and Aunty Nicola. It promotes the idea that a weakly growing economy run by government cronies and poorly managed firms is more preferable than change, upheaval and a temporary deep recession, even though it would herald a brighter long-term future driven by a new group sweeping away the broken old system, turning it into something better.
Now PM Luxon is trying to convince voters that he is all about making the economy bigger. On that note, he has launched a new brand name. It is called “The Minister of Economic Growth.” He has delegated managing it to Finance Minister Willis. Why is it a misleading name, not used by any other country? Because in a market economy like ours, the government has only a limited and indirect influence over the pace at which it grows. The main job of the government in that regard is to design quality laws, in particular relating to property rights. Those rights incentivize private individuals to innovate and produce.
It is the people and our firms, by virtue of our purchases and production, who add up to being the two biggest players creating the demand and supply equilibrium which determines GDP and prices. Since aggregate growth is measured in terms of Gross Domestic Product, NZ's new Minister of Economic Growth could equally be called The Minister of Production. As such, it conjures up communism, command-and-control, and central planning.
There was once a Ministry of Production in England during World War 2, in charge of setting weapons manufacturing. During the War the Americans had an Office of Price Administration doing price controls. These days no nation bothers pretending that it can directly set output and prices.
Furthermore, there are times when GDP should freely fall due to supply shocks, like to oil, or due to a pandemic. In those times, it is important for shoddy firms to exit, making way for more efficient ones with new people geared up for a new order, a process called creative destruction. Times of upheaval do require unemployment insurance, but not a Ministry of Economic Recession.
Reduced prosperity and entrenchment of monopoly power in NZ occurred after both National and Labour supported offering blank cheques, drawn on your account, to our country’s biggest firms during the pandemic. In 2020, after that announcement was made, the NZX 50, which comprises the top fifty in terms of size, rose nearly 50% in value, representing a transfer from taxpayers to them of tens of billions of dollars.
Our biggest firms today are busily privatizing their gains, whilst just a few years ago they were busily nationalizing their losses. Our present huge public debt and high cost-of-living is the collateral damage.
The political desire to maintain big business economic growth during the pandemic avoided a hugely overdue shake-out in NZ. Instead it has been small firms - the likes of green grocers - that have bankrupted. Big useless building companies, the big supermarkets, who were the only ones legally allowed to open in lockdowns, and all of the NZX 50 publicly listed oligopolies, have sailed happily on.
We are now paying the price for our politicians’, and the Reserve Bank's, myopic obsession with faking economic prosperity during the pandemic. Together they prevented the cleaning out of the Big End of Town. Together they prevented the rise of a new type of kid on the block, armed only with the strength of their character, big dreams, and the potential for big achievements.
No wonder those youngsters are leaving the country. National and Labour were complicit in granting New Zealand’s old guard a too-big-to-fail public guarantee. Both parties hunkered down with Business NZ to buy the support of its members before Election 2021. They now cry crocodile tears for our youth, whilst at the same time handing a swathe of big jobs to mates, rather than searching for the best person.
Why has former PM Key’s Chief Science Adviser, Sir Peter Gluckman, been recycled as PM Luxon’s Science System Advisory Group Chair, along with so many other recycled throw backs, when a whole new generation of outstanding scientists and business folks emerged in the intervening years, including the Kiwi founder of Artificial General Intelligence?
National and Labour together bemoan a lack of competition, but they engineered it themselves by insisting public funds be used to underwrite our largest companies and business partnerships. Even now neither party is championing meritocracy in NZ. To explain our country’s poor performance, they conveniently blame each other.
All told, a Minister of Economic Growth is as silly as Monty Python's Ministry of Silly Walks. It denies personal responsibility. It sends a confusing message that somehow our country’s production depends on Ministry officials and Aunty Nicola. It promotes the idea that a weakly growing economy run by government cronies and poorly managed firms is more preferable than change, upheaval and a temporary deep recession, even though it would herald a brighter long-term future driven by a new group sweeping away the broken old system, turning it into something better.
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.
3 comments:
More PR /spin.
I have synnergy with Robert's thoughts.
The missing component is the political cost of a deep and painful rescession. Would the government survive to implement their much needed agenda or would they be seen as the purveyor of pain, handing the reins back to the saviour Hipkins?
Re: local savings..... why can't we use foreign savings to build infrastructure? Businesses use other peoples savings to expand and grow, why can't countries? Surely the savings come after income has been lifted, after the investment in education and infrastructure lifts productivity?
Is it just me being daft for thinking that Luxon and Co, Incorporated while desperate for the elusive growth in the stagnant, moribund economy continue to fund (with our money) the Maori elite gravy train? Is that dumb or what?
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