How to get serious economic growth? None of the parties have anything new to say.
Right. Now, this is officially creepy. No sooner does our Finance Minister hail a return to Budget surplus “barring accidents” than we have … another bloody great accident. Writ day, the official start of the election campaign, was marked by a 
massive indefinite go-slow by some of our most vital businesses because of a sudden gas pipeline leak. That, and the near-loss of the Rugby World Cup after a national fever of hubristic proportions (and earthquakes and oil spills and credit downgrades and Dan Carter’s groin), must suggest, at least to those of a nervous disposition, that Someone Up There is still trying to tell us something. But what? Build an ark? Can we even do that without a gas supply?
So far we can look in vain for election manifesto promises to make us more resilient to these modern-day bolts of lightning. This is a very scratchy, sparse campaign – or should we say, “campaign”, for it’s still mostly a matter of shadow-boxing by the Opposition, with the Government not due to launch its re-election policies for another week. This remarkably indolent, procrastinatory approach to winning an election is probably because, as is becoming increasingly clear, the Government has nothing new to say.
The key policy slate we desperately need – how to get serious economic growth, and quickly – is pretty much blank on all prospective sides of the next Parliament. The Labour and Green policies are so far mostly aimed at redistributive measures – tax-system re-steepening, mandatory wage increases and new taxes on capital and unrealised gains. But there is nothing about how the money, which needs to be earned by businesses before it can be redistributed or taxed, is going to be generated.
Mind you, this is the political Riddle for the Ages. Various governments have tried various approaches to fostering business growth. We once had subsidies and export incentives. World trade rules have put the kibosh on that sort of thing, unless you’re very sneaky (which the whole of Europe is, but we’re no good at cheating).
A couple of administrations tried leaving business to fend for itself, and that brought decidedly mixed results. Existing monopolies and dominant players prospered, but a lot of productive companies were broken into bits and then fell over in the mad sharemarket paperchase. And by the time that mania abated, we had become a nation heavily dependent on imports.
The last Labour Government tried to “partner” business. It was never entirely clear what this meant for most companies, save for incessant tax-tightening, less labour market flexibility and a fatter public sector. Where the Government did get up close and personal with a particular company, as in actually giving it money, the results weren’t a great advertisement for a state buddy system. The failed Sovereign Yachts became the poster project for how even a modern Government can get a cargo-cult mentality.
This Government started with a hiss and a roar on the Jobs Summit. This is best recollected with a broad Yorkshire accent, as in, “Summit a’ nowt.” Once again, all of a sudden … nothing much happened.
Perhaps the only lesson we can distil from all the above experience is that no government has found a successful formula for stimulating business. The most reliable theories are that governments should (a) ensure free and fair competition is possible through vigilant but judicious regulation, and (b) otherwise get the heck out of the way.
But our governments have found these simple rules impossible to follow, because there seem to be so many exceptions. Our dairy and fruit monopolies do seem to work rather well, and very much in our favour, so why mess with success?
And despite our having a Commerce Commission, our domestic market is still beset with duopolies, aggressive near-monopolies, pernicious vertical pricing and a host of nasty little practices that stack things against smaller businesses and the consumer.
And then there’s the awkward point that, even if we had a free and fair market, there’s no obvious way to force shareholders to stop senior executives from ingesting the profits by paying themselves obscenely large salaries and bonuses, even during precarious economic times.
And why should there be, when in both central and local government, executives get bonuses simply for doing their jobs? And when MPs, judges and the like get pay rises irrespective of their performance and whatever’s happening in the wider economy?
The major parties have at least found a handy focus for the economic growth question in the issue of national savings. Labour and National propose varying degrees of extra pressure on householders to commit to long-term savings, and there’s little doubt that this would (a) get our behind out of a sling with the international credit ratings agencies, (b) take the pressure off our paltry national super coffers and, perhaps most importantly, (c) provide increasing depth of investment in (we hope) productive industries.
There is compelling debate around whether KiwiSaver is regressive and might make us over-save for retirement, although it’s hard to see how the latter is such a terrible problem. “Oh, dear. If only I’d saved less, I wouldn’t be able to afford this tiresome trip to Italy in my old age.”
But there’s no argument whatsoever that more savings are good for the economy. If you want to give yourself a really miserable time, sit down and try to calculate how many billions we might have salted away to invest had Rob Muldoon not scrapped the Kirk Labour Government’s compulsory super savings scheme in 1975, in favour of the laughably named “universal” super. (But try not to dwell on it, or you’ll find it very hard to get out of bed in the morning.)
However, savings growth is not a Pantene solution. We need something that will happen overnight, otherwise we face the really bad news: that any answer any government is likely to consider will involve a drop in the overall standard of living.
As Bill English once famously said during a Budget debate, “Ya get skinnier.”
The other bad news is that the only politician who is prepared to say so out loud is Act leader Don Brash. As a former central banker, he regards the deliberate lowering of living standards as a vital and virtuous tool of monetary management, and cannot for the life of him understand why voters aren’t begging the Government to sock it to them. That’s one of the reasons why he’s a lonely figure, even in his own party.
Despite – or perhaps because of – this being a life-or-death election for Act, Brash is overseas and incommunicado. His party says he is attending top-level talks in Europe about the global financial crisis, though whether he is an active, contributing player in the continent’s crisis summits, or is having a harmless little Walter Mitty adventure to get him out from underfoot in the election campaign, where he has proven a menace, is hard to tell.
Suffice it to say, even if Brash is the only honest politician in his acknowledgement that our getting poorer is inevitable, he’s unlikely to be given the Moses treatment on his return. The only thing voters seem interested in anyone bringing down from the mountain just now is the Webb Ellis Cup, and Stephen Donald sorted that one for us, thanks.
Still, the handcart to Hell hasn’t embarked yet. Despite its portents being “skewed to the downside”, the Treasury has pointed out that exports are firm, unemployment is falling and dairy payouts (though falling) are way better than a kick in the pants. Most astonishingly, household spending is lower than household saving for the first time in a decade, and the overall proportion of debt to household income is going down. The grasshopper-to-ant conversion may be too little, too late – but at least it appears to be under way. We are also, allowing a massive salt-pinch factor for Treasury’s number-crunching, on track to return to budget surplus next year. (All barring global financial meltdown and recession, of course.)
It only remains to be seen what further trials will be sent to us in the meantime. We haven’t had famine or pestilence yet, though in modern terms, the puzzling incidence of elective gluten-intolerance might count towards the former, and the last Justin Bieber tour, with its voracious swarms of squealing pre-teens, would surely equate to the latter.
Only one thing seems clear – apparently, we haven’t yet suffered enough.