The other curve

06/04/2020

In ordering a lockdown and putting New Zealand into a state of emergency, the government is firmly fixed on reducing the spread of Covid-19 to save lives and, ultimately, eliminate the disease.

That’s the health side of the equation. Roger Partridge argues a coherent Covid-19 strategy would also taken into account the economic one:

Professor Sir David Skegg raised the 64-thousand-dollar (or perhaps 64 billion-dollar) question in his testimony before Parliament’s Epidemic Response Committee this week. He asked whether the government had a clear the strategic objective for its unprecedented level-four lockdown.

Since the subtitle of Alert Level 4 is “Eliminate”, Sir David’s question might seem unfair. And Director General of Health, Dr Ashly Bloomfield, quickly clarified to media that elimination is indeed the goal.

But if elimination is the objective, it is troubling that Minister of Health David Clark referred to a goal of reducing the epidemic’s effect to successive “waves” of infection in his testimony before the Committee. There will be no waves of infection if elimination is successful.

Lack of consistency in messaging about the Government’s strategic objective is worrying. But there is a more fundamental concern with the elimination objective: the absence of a clear timeframe. Of course, we can eliminate the disease. If the four-week lockdown does not work, the government simply forces us into lockdown for longer. But at what cost?

A cost-benefit assessment sounds heartless when the goal of the lockdown policy is to save lives. But the country-wide pause has already triggered a domino-effect of business failures and job losses. Just as the coronavirus spreads exponentially, so does harm from the lockdown. For firms and workers, each day of lockdown causes more business failures and job losses.

It is easy to count the deaths of, or at least with, Covid-19. It will be harder to count the social costs, including lives lost, from both later treatment of other health conditions and the economic devastation, but they will be real.

These economic effects have health and wellbeing implications too. And at some point, the harm to the wellbeing of Kiwis from the lockdown may become greater than the benefit to the wellbeing of New Zealanders from continuing with it.

This will include more suicides, more domestic violence, more alcohol and drug abuse and delayed treatment for health conditions including cancer which could make a life or death difference.

Most estimates show unemployment soon running into double figures. Overseas estimates suggest if Governments are not careful unemployment could exceed 20% or even 30% – levels not seen since the Great Depression.

The hardship caused to hundreds of thousands of Kiwi families from widespread unemployment, the evaporation of job opportunities for the new generation of school leavers and the losses to the productive side of the economy which funds our social services and most of the population’s livelihoods, must all be factored into the Government’s strategic choices.

The business failures and job losses have both and economic and social cost that will feed off each other.

They will also result in less tax paid while demands on the public purse will increase.

Until it addresses this complicated equation, the Government’s Covid-19 strategy is at best only half complete. A well-informed strategy must consider both curves – the epidemiological curve and the economic curve.

In the meantime, Professor Skegg had some clear advice for the Government on the areas it must lift its game to give us the best chance of achieving the goal of elimination. The Government must fix the shortcomings with Covid-19 testing. It must enforce strict quarantining at the border. And it must improve contact tracing.

If the Government gets these tactics right, perhaps it can sidestep the bigger strategic decision. But it is fast bearing down on us.

In the meantime, the Government must be more transparent with New Zealanders on the difficult strategic choices the country is facing. If it isn’t, we risk drifting in a direction that may do more harm than good.

This response form the Prime Minister suggests she doesn’t understand that:

“A strategy that sacrifices people in favour of, supposedly, a better economic outcome is a false dichotomy and has been shown to produce the worst of both worlds: loss of life and prolonged economic pain,” Ardern said. . .

She is saying there would be fewer lives lost and less economic pain if the lockdown continues as it is which is not necessarily so. A better economic one would be a better social and health one too with fewer deaths from other causes.

The economic and social costs wouldn’t be so high if the government was to opt for safety rather than essential as the guide for which businesses can operate.

National on Sunday called for more businesses to be allowed to open up if they could prove they could operate safely.

“Our economy has already faced unprecedented devastation since the Government closed it down, we should be doing all we can help revive it and protect businesses and jobs,” economic development spokesman Todd McClay said.

“To date the decision making has been too arbitrary and there are too many inconsistencies. For instance, allowing dairies to open but not local butchers or greengrocers, agriculture to continue but not forestry, cigarettes to be manufactured but community newspapers cannot be printed.”

“If a business proves it can operate safely, provide contactless selling and ensure physical distancing then they should be able to operate.”

What’s the difference between butcheries, greengrocers and fishmongers following practices that keep their staff and customers safe, and supermarkets operating as they are now?

What’s the risk in greens keepers working by themselves on a golf course?

Why can’t  more businesses that sell online be able to do so? If it’s safe to sell a heater or a winter jumper why not a scanner or a shirt?

Why couldn’t some road works be done safely while there’s so little traffic? Why can’t some building continue as long as the tradies work alone or at safe distances from each other and without sharing tools? If an urgent repair to a vehicle can be done safely, why not a warrant of fitness?

All the arbitrary emphasis on essential rather than safe is doing is allow overseas online businesses to compete with domestic ones which might not survive the shutdown.

While Baur might have pulled out of New Zealand anyway, the government’s declaration that only daily media was essential has killed some of our best magazines.

The latest update on Covid-19 cases does show that the lockdown appears to have stopped the steep spike in cases seen elsewhere.

That doesn’t mean we can relax, but it ought to allow the government to take a broader look at its strategy and its social and economic costs.

The lockdown does appear to be achieving its aim of flattening the epidemiological curve, but the government is not doing nearly enough to consider the economic curve and the social costs that will result from that.

Flattening the Covid-19 curve is good but not at the cost of flattening the economy more than is necessary.


Is inequality really the problem?

10/06/2014

Forget inequality, it’s not the real problem. This is the view of Roger Partridge, chair of the New Zealand Initiative:

Since the publication of The Spirit Level in 2009, and its ‘devastating critique’, The Spirit Level Delusion, in 2010, debates in the media and among politicians have been gripped by wealth inequality fever. The latest instalment is French economist Thomas Piketty’s Capital in the Twenty-First Century – a book which is at the centre of its own maelstrom over the accuracy of its analysis.

But is inequality a worthy cause célèbre? All other things being equal, few people on either the left or right would disagree that less inequality is better than more. And any parent will know that equality will lead to a more civil, stable, state of affairs within the family – and this is no doubt also true for society as a whole. But the factors that drive inequality in economic outcomes in a free market economy also produce great benefits. China may now have greater extremes of wealth than it did before Deng Xiaoping’s reforms, but the Chinese live 25 years longer and are 50 times richer than they were 25 years ago. . .

This reinforces the view that we can be equally poor or unequally rich.

Focussing on inequality – and looking to redistributive policies to solve it – risks throwing the baby out with the bath water. We would not restrain our more talented child just to make her less successful, younger brother feel better, so why should we levy our most talented, productive citizens?

The easiest way to reduce inequality is to bring the top down but that won’t improve matters for anyone.

What is needed is a focus on the real problem: that not everyone in our society has the skills needed to take advantage of the opportunities that should be available to all. Among them are the 20 per cent of New Zealand’s school-leavers who, year after year, do not achieve NCEA level 2. It requires a suspension of belief to conclude they are failing because the rich are getter richer. The problem is more complex, but we will not solve it if we look in the wrong place.

If Piketty’s thesis is correct, and inequality in the West has increased in the last 50 years, then it has coincided with a great social experiment, the welfare state, which has seen an unprecedented rise in just the sort of redistributive policies Picketty believes are needed to solve the inequality problem. But as the Welfare Working Group reported in 2011, the welfare state in New Zealand has led to long-term welfare dependency, deprivation, financial stress, low living standards, and poor health and housing. It just might be that Piketty’s solution is the real problem.

In spite of what the opposition and their supporters think, inequality isn’t getting worse:

. . . Hon BILL ENGLISH (Minister of Finance) : The evidence shows that inequality in New Zealand has been flat or slightly declining since the mid-2000s. We also believe that a number of the measures the Government took through the recession certainly prevented inequality from worsening at a time when the Government was very short of revenue. But I welcome the member’s interest in the IMF’s view, because among its recent comments on New Zealand, the IMF emphasised the importance of ongoing fiscal discipline to a sustainable economic recovery. Nowhere in the statement does the IMF refer to inequality, and that is for a very good reason in respect of New Zealand—that inequality in New Zealand has not increased over the last 10 years. . . .

That inequality isn’t getting worse doesn’t mean it couldn’t – and shouldn’t – improve.

Education is one of the keys to improvement:

The interesting thing about the OECD work is that it shows that economic inequality in New Zealand has among the lowest levels of impact because of our education system. Part of the reason for having public education—in fact, the main reason—is to overcome the inequalities of birth and inequalities of opportunity. That is why this Government is so strongly focused on helping our system be more effective in overcoming economic inequality. Another reason there is high transience in those schools is that the State housing system does not meet the needs of those with serious housing need. That is why the Government is changing that policy next week.

Hon David Parker: Why can the Minister not see that rising inequality under National goes against the egalitarian values that New Zealanders hold dear, is making educational outcomes worse, and is holding back economic growth?

Hon BILL ENGLISH: There is a very simple reason we do not believe those things, despite the fact that the member does, and that is that the measures of inequality in New Zealand and the facts demonstrate that it has not got worse. That is not a political assertion or an ideological conviction; it is the facts as laid out in the annual report from the Ministry of Social Development, which was set in place by the previous Government. On “Planet Labour” I know facts have very little impact, but on Planet Earth and in New Zealand the facts matter. . .

The opposition has leapt on the inequality band wagon but have fought every initiative National has introduced to move people from welfare to work.

Welfare dependency is the cause of a great deal of inequality and helping those who can work to do so is one of the most effective way to improve not only financial outcomes but social ones like health and education too.


Australian honour for Roger Kerr

02/08/2011

Sir Roger Kerr, executive director of the Business Roundtable has received an Alan McGregor Fellowship from Michael Darling, chair of the Centre for Independent Studies:

Business Roundtable chairman Roger Partridge said the awards are given to honour individuals who have made a significant contribution to the advancement of the principles of free markets, a liberal society, and personal responsibility.

“This is a great honour for Roger Kerr and the Business Roundtable and it’s great to see the work he and the organisation have done over the years recognised in this way. . .

Mr Darling noted in his citation that Roger Kerr “has personally commissioned, overseen and made extensive editorial contributions to all of the work produced by the Business Roundtable, totalling more than 200 books and reports and well over a thousand articles, op-eds, submissions, media releases, speeches and policy backgrounders.”

Mr Darling also quoted New Zealand Institute of Economic Research chairman Michael Walls who, in awarding Mr Kerr the 2001 NZEIR Qantas Economics Award, said: “No single individual has done more over the past 15 years to persuade important parts of the business sector to support economic policies which, though often contrary to the interests of individual firms, were in the interest of the country as a whole.”

That last sentence bears repeating: “No single individual has done more over the past 15 years to persuade important parts of the business sector to support economic policies which, though often contrary to the interests of individual firms, were in the interest of the country as a whole.”

People who promote economic liberalisation and personal responsibility are often criticised for being selfish. But it’s protection which helps individual businesses at the expense of other businesses, consuemrs and the country.

 Former Australian Prime Minister, John Howard, was the only other award recipient.


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