If your team won yesterday you may be feeling a twinge of joy. If not, perhaps you are feeling a sense of disappointment. Either way, let me bring you back to an equilibrium.
Elections, with a very few consequential exceptions, do not matter.
Let’s go back to a recent moment of collective hysteria. Covid. Our feelings towards Ms Ardern are, well, complex but let me propose a counterfactual. National would have followed a very similar policy. With less spending and perhaps a less onerous second Auckland lockdown but democratic governments globally acted in near unison because they faced the same political and economic constraints.
The progressive Ardern and the classical liberal Boris Johnson responded in the same manner because that was what the politics of the moment demanded of them.
Had National won in 1984, Muldoon, or whoever his party replaced him with, would have been forced to embrace much of the same reforms Douglas undertook. The economic forces pushing deregulation were more powerful than the crumbling regulatory infrastructure Sir Robert had erected to keep the sea behind the shoreline.
Nicola Willis did not run a surplus because she was not required to. Her replacement will also fail to confront the deficit because our debt to GDP is manageable in the short-term. We will continue on the current path of permanent deficits and then we will default. By printing money. Because that is the political and economic equilibrium.
Let’s consider the fiscal parameters democratic governments can work within. If taxes are low and the economy is going well, an obvious electoral strategy is to raise taxes on the few to distribute to the many. Such a party will win power and raise taxes, and keep raising them until the point that economic activity begins to fall, employment stutters and they are voted out of office.
There is a theory, the Rahn Curve, which stipulates that as government spending increases from zero, economic activity increases as law and order improves and property rights are respected. At a certain point, academics disagree, more government spending actually reduces economic activity. I am pretty sure we are well over that point but eventually the damage is so great that things begin to fall apart.
In the Western world, all governments tax income around 35% of their country’s GDP. They provide free or heavily subsidised health and education and a welfare safety net. They all run the roads, pay for police, have an independent judiciary. All good stuff.
And currently they almost all have budget deficits that are growing because politicians have a low time horizon. It does not matter if the political class is versed in Hayek or Keynes. They all operate on the same fiscal and democratic incentives and the outcomes are always the same.
It does not matter who you elect. The outcome will be determined by the macro forces acting on those in power, or those advising them.
Let’s go back to 1975. Sir Robert Muldoon campaigned to cut migration to nearly nothing, with an unsubtle hint that those lucky few would more likely be from Scotland than Samoa. He won, and Muldoon followed up with dawn raids. New Zealand did not want to move from a bicultural to a multicultural country.
Muldoon was standing on the sea, yelling at the tide. A decade later, with little debate, Wellington began to relax immigration rules. The public were not asked but the economic and demographic imperatives made this change inevitable.
We did not vote Muldoon into office to become a hyper-regulated, quasi-socialist state either, yet that is what we got under his regime. When we voted him out, we did not vote choose to become the hot-house for unconstrained deregulation. Yet that is what we got.
Those we elect are constrained by both the limitations of the institutions of government and the wider economic and political realities which confront them.
No matter who won yesterday’s election, the fundamental infrastructure of the New Zealand state will remain unchanged. We will not run a deficit unless there is an unprecedented surge in economic activity and, if that occurs, that surplus will quickly be spent.
We will continue to run a comprehensive welfare state with free education, health, universal pensions, minimal defence spending and a growing need by Wellington for more tax revenue to pay the interest bill until the money runs out and then we will be forced into a drastic U-turn, which will be messy.
In this respect, we mirror almost every other democratic OECD nation. Because once you set the rules of the game, you can forecast the outcome.
This does not mean that governments do not matter - they do. There are many examples of poor governance leading a country into despair, ruin and war. But if you want to understand what an individual will do once in office, it is more important to understand how they obtain, and retain, power than it is to attempt to lift the veil on their character...The full article is published HERE
Damien Grant is an Auckland business owner, a member of the Taxpayers’ Union and a regular opinion contributor for Stuff, writing from a libertarian perspective.
The progressive Ardern and the classical liberal Boris Johnson responded in the same manner because that was what the politics of the moment demanded of them.
Had National won in 1984, Muldoon, or whoever his party replaced him with, would have been forced to embrace much of the same reforms Douglas undertook. The economic forces pushing deregulation were more powerful than the crumbling regulatory infrastructure Sir Robert had erected to keep the sea behind the shoreline.
Nicola Willis did not run a surplus because she was not required to. Her replacement will also fail to confront the deficit because our debt to GDP is manageable in the short-term. We will continue on the current path of permanent deficits and then we will default. By printing money. Because that is the political and economic equilibrium.
Let’s consider the fiscal parameters democratic governments can work within. If taxes are low and the economy is going well, an obvious electoral strategy is to raise taxes on the few to distribute to the many. Such a party will win power and raise taxes, and keep raising them until the point that economic activity begins to fall, employment stutters and they are voted out of office.
There is a theory, the Rahn Curve, which stipulates that as government spending increases from zero, economic activity increases as law and order improves and property rights are respected. At a certain point, academics disagree, more government spending actually reduces economic activity. I am pretty sure we are well over that point but eventually the damage is so great that things begin to fall apart.
In the Western world, all governments tax income around 35% of their country’s GDP. They provide free or heavily subsidised health and education and a welfare safety net. They all run the roads, pay for police, have an independent judiciary. All good stuff.
And currently they almost all have budget deficits that are growing because politicians have a low time horizon. It does not matter if the political class is versed in Hayek or Keynes. They all operate on the same fiscal and democratic incentives and the outcomes are always the same.
It does not matter who you elect. The outcome will be determined by the macro forces acting on those in power, or those advising them.
Let’s go back to 1975. Sir Robert Muldoon campaigned to cut migration to nearly nothing, with an unsubtle hint that those lucky few would more likely be from Scotland than Samoa. He won, and Muldoon followed up with dawn raids. New Zealand did not want to move from a bicultural to a multicultural country.
Muldoon was standing on the sea, yelling at the tide. A decade later, with little debate, Wellington began to relax immigration rules. The public were not asked but the economic and demographic imperatives made this change inevitable.
We did not vote Muldoon into office to become a hyper-regulated, quasi-socialist state either, yet that is what we got under his regime. When we voted him out, we did not vote choose to become the hot-house for unconstrained deregulation. Yet that is what we got.
Those we elect are constrained by both the limitations of the institutions of government and the wider economic and political realities which confront them.
No matter who won yesterday’s election, the fundamental infrastructure of the New Zealand state will remain unchanged. We will not run a deficit unless there is an unprecedented surge in economic activity and, if that occurs, that surplus will quickly be spent.
We will continue to run a comprehensive welfare state with free education, health, universal pensions, minimal defence spending and a growing need by Wellington for more tax revenue to pay the interest bill until the money runs out and then we will be forced into a drastic U-turn, which will be messy.
In this respect, we mirror almost every other democratic OECD nation. Because once you set the rules of the game, you can forecast the outcome.
This does not mean that governments do not matter - they do. There are many examples of poor governance leading a country into despair, ruin and war. But if you want to understand what an individual will do once in office, it is more important to understand how they obtain, and retain, power than it is to attempt to lift the veil on their character...The full article is published HERE
Damien Grant is an Auckland business owner, a member of the Taxpayers’ Union and a regular opinion contributor for Stuff, writing from a libertarian perspective.
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