Robert MacCulloch asks: has Aoteanmoics become Labour’s plan for New Zealand?:
It started as a few comments that weren’t seen as mainstream. Now it’s become a veritable tsunami.
The Head of the Productivity Commission has just announced his disdain for GDP. He says it “is not a great measure of anything useful” and blames the profit-oriented shareholder model for our society’s ills. Even though it forms the basis of wealth creation in this nation.
GDP isn’t a measure of anything useful and a focus on profit is wrong? What would they replace them with?
The Reserve Bank is backing him. As for the Climate Change Commission, had it cared about both the environment and economic growth, it would’ve advocated for carbon taxes with the revenues being used to cut other tax rates. But it didn’t. Furthermore, the keynote address at the NZ Association of Economists 2021 Conference by the Ministry of Primary Industries’ Chief Economist called for a “systemic transition” to a new “holistic”, “post-growth”, “doughnut” approach to management of the country’s affairs.
The keynote gave this new approach a name. Aoteanomics. What is it? A full blown rejection of the idea that GDP growth is desirable. And it is way more radical and experimental than Rogernomics ever was. So why won’t the PM and Finance Minister come clean to the nation about the new post-growth agenda that’s the talk of the Wellington elite?
Are they terrified of their party being wiped by Kiwi business if they make the big reveal? Is this the reason why the government is pretending to be inventing gravity-defying forms of economic management? Ones that can close borders and still yield long-term prosperity? Ones that can impose a swathe of command-and-control rules relating to climate change with little effect on output? Ones where more equity can be achieved by dumping the shareholder model, or by introducing fair-pay agreements, without giving up efficiency?
These policies are sadly typical of people who see a desirable goal without understanding any of the downside in the way they plan to get there.
The twin aims of good economic and good health outcomes that the PM describes were achieved the past year due to robust consumer demand made possible by our domestic elimination of the virus. People were able to go on holidays and enjoy a freedom of movement denied in most other places. But the policy actions that achieved this outcome were short-term patch-up jobs. The factors that determine long-run growth rates are very different to the consumption spending that has recently been underpinning output. Those factors include skills, innovations and investments, which are being severely constrained by our border controls. . .
Closing the borders last year was justified by the risk of letting Covid-19 in. They are still closed because our vaccine roll-out is so slow and until most of us are vaccinated the risk of the disease spreading as it has, and still is, in most other countries dictates that they will stay closed.
But that has come at a huge personal and economic cost. Families and friends are being kept apart, business people can’t meet customers and the public and private sector are both facing desperate staff shortages.
Countries are now moving beyond addressing the fall-out from what first appeared would be a temporary shock to designing ways of accommodating what’s fast looking like becoming a more permanent state of affairs. In this new equilibrium, biting trade-offs will occur. Better virus-related health outcomes supported by closed borders are likely to lower long term growth paths, especially for small, isolated countries. The best-of-both-worlds scenario that we previously savored is about to evaporate.
As NZ enters this new phase, some truths about government priorities are beginning to be revealed. Long-run economic growth isn’t one of them. . .
Is there any alternative to long-run economic growth other than decline?
If our economy doesn’t grow, how will we afford the health care, infrastructure and other goods and services that allow us to call ourselves a first world nation?
If the government is going to take us down this uncharted territory, shouldn’t they tell us what they’re doing and why?