One of the things that has pissed me off about MSM political analysis lately is the constant repetition of the idea that cutting taxes in a recession is all you need to do to be considered Keynesian. This is generally remarked upon in the context of National shifting their economic policy left (that “Keynesianism” and “left” are considered synonymous by the MSM is another bugbear of mine but I’ll address that at another time).
Today we got a real taste of proper Keynesianism. Clark has announced a far-reaching training policy which would ensure workers who lose their jobs in the upcoming economic downturn will get funded to increase their skills. She also talked about bringing infrastructure projects forward.
Labour’s economic plan is becoming obvious: use unemployment as an opportunity to upskill the country’s workforce and build infrastructure while the demand for the resources to do it is low in the private sector (and thus it’s cheap to do). The end result is twofold in that you moderate the impact of the recession by putting public money into long-term spending projects and into the pockets of people who are increasing their skills but you also create a more skilled and productive workforce and provide the infrastructure to support productive capital.
That means when the next boom comes the country is in a position to take full advantage of it through workers who are skilled and productive and infrastructure that has the capacity to facilitate increased growth.
The contrast of this approach is the way National dealt with the recession of the 1990’s. During that downturn they cut government spending, abolished the apprenticeship system and introduced the EFTs system and student loans. They also cut tax for the wealthiest New Zealanders.
By doing so they expected the market to provide and business to sustain itself through consumer spending (a similar view to G.W. Bush’s when, in the wake of 911, he claimed true patriots should get out and shop).
What the market provided was another story altogether. Workers didn’t have access to training. Tertiary education ended up heading down the path of twilight golf and the rich didn’t manage to shop us out of recession no matter how much they tried (in fact we grew a huge low-wage low-skill service sector, massive income disparity and whopping levels of private debt instead).
That meant that when the good times swung back around we didn’t have the skills to take advantage of them or the transport system to shift labour and goods efficently or the telecommunications system to engage in full e-commerce or even a reliable electrical network.
Looking at National this time around I don’t have much trust in them to do anything differently. On agenda this morning Bill English was espousing the same failed trickle-down theories they were so fond of last time and they have shown they are willing to cut investment in R&D and the capital fund that is Kiwisaver just to cut taxes for the rich. They’ve also banged the drum about reducing government spending so much that it would be extremely surprising if they didn’t use a deepened recession as an excuse to cut as deep as they could.
I don’t give Labour praise lightly but I think today Clark showed that they have the best answer for the hard times to come. National has only the failed policies of the past.