Same old failed ideas

Written By: - Date published: 2:50 pm, July 22nd, 2009 - 27 comments
Categories: national/act government - Tags: , , , ,

The Government’s 2025 ‘productivity’ taskforce led by Don Brash will almost certainly come up with all the same old failed ideas that got us here in the first place. Expect a variation on the following themes:

  • Scrap the minimum wage
  • Privatise public assets
  • Cut taxes for the rich
  • Slash the public sector
  • Deregulate, deregulate, deregulate
  • Workers’ rights out the window
  • Lower wage increases
  • Cut benefits
  • User-pays education

The thing is, Brash’s predictable prescriptions, that we should make ourselves a lean, mean, soulless machine dedicated to growth without regard to who benefits, ignores the fact that Australia got ahead of us by not following that path.

We fell behind because we slashed labour costs. As Idiot/Savant notes:

The decision on whether to invest in productivity improvements is determined by the relative costs of capital and labour. Employers will only invest in productivity improvements if the resulting increase in output is cheaper than hiring more warm bodies. And in 1991 – when the gap opened up – the government drove the price of labour down significantly by passing the Employment Contracts Act. So, a centrepiece of the Revolution has caused our current problem.

If we want to catch Australia, shouldn’t we be doing what they did while we were busy shooting ourselves in the foot with the Right’s economic experiments? Shouldn’t we be investing in training like the Aussies? Shouldn’t we be giving better access to benefits for those who lose their jobs (99% of the unemployed get the dole there, 32% here) Shouldn’t we have stronger unions and an awards system like the Aussies? Why would we think privatisation is a solution when the last time we privatised the Aussies didn’t and they left us in the dust?

27 comments on “Same old failed ideas”

  1. Actually, if we want to catch Australia, we should send them Don Brash, and kill two birds with one stone.

    • Tigger 1.1

      Great idea, but why stop at Brash? I think we should send everyone who is obsessed with catching up to Australia on the basis that the idea is a mere sideshow, that we and Australia are completely different countries and economies and it’s not just about the money or else we’d all have moved there already.

  2. Pete 2


    Nice post, and yes, I imagine that the same old recommendations will be regurgitated again.

    However, I don’t think you can compare access to benefits between New Zealand and Aussie – we have a work-first approach in Work and Income that provides targetted assistance before benefits are granted. CentreLink in Australia has seperate employment and benefit components, so Australians will always be granted benefit before anything else is done.

    That said, I agree that it only works when there are jobs available to move into – so I agree with most of Goff’s proposal to extend benefits.

    • stormspiral 2.1

      We had that system before the slash and burn began. The Labour Dept interviewed newly unemployed people, and gave provisional benefit entitlement to be actioned by Social Welfare. Then the work on job hunting was started. A kind of first things first approach.

      Now we have a guilt and fault based system. The name WINZ is significant. No doubt an unconscious pun, but most people know that in Web jargon the Z usually means pirated.

      • Swampy 2.1.1

        It hasn’t been called Winz for more than 10 years, you should really keep up with the times.

  3. Marty. Did you ever think that governments in OECD countries can do bugger all to effect long-term economic growth? See Anti-Dismal and TVHE.

    • Pascal's bookie 3.1

      Oh well. They should just concentrate on social justice then.

      • Paul Walker 3.1.1

        May be not. What the evidence suggests is that they can’t do much at the margin to improve the long-term growth. But there may be an asymmetry, they can do things to hurt growth. Think of Zimbabwe. It will be interesting to how long it takes to over come the problems caused by the government there.

        • snoozer

          Paul. What’s the point of having Don Brash’s taskforce then?

          • Paul Walker

            Bugger all, as far as productivity goes.

            • snoozer

              What if your real objective was to weaken workers’ rights and lower wages – leading to more profits for business owners -, generate political momentum for tax cuts for the rich, and push privatisation so that the wealthy can buy valuable public assets on the cheap and make a mint on them?

              Could that be the real point of this Brash taskforce?

        • jarbury

          Oh gosh not more “government is the problem, not the solution” rubbish. So government had nothing to do with the decades of growth post WWII in most developed world countries then?

          • Paul Walker

            The study that the comments are based on states

            “We allow for trend breaks, by dividing the sample into six periods of approximately 15 years each, and estimating (4) for each period. As shown in Table A.1, using non-linear Wald tests, we find that for the last two post WWII periods, 1961-75 and 1976-1994, the hypothesis that there is a common value of mu across countries, cannot be rejected at any reasonable level of confidence. Likewise the null hypothesis cannot be rejected for the first two periods of the sample 1904-1915 and 1916-1930. We find that the null hypothesis can only be rejected for the two fifteen year periods directly before and after WWII.”

            So government action could have affected the growth rate for countries in 15 years after WW2. This isn’t surprising given the situation many countries were in due to WW2. The things that governments can do to help growth, e.g. rule of law, good institutions, protection of property rights etc, needed to be done then and this would have helped growth. Also many countries were starting from a very low based so high growth rates are to be expected.

    • Craig Glen Eden 3.2

      What a load of crap Paul. Heres one example when the actions of Government/Governments can increase Long Term economic growth its called war.

  4. vto 4

    oh that old cry “the failed policies of the past”, a failed cry of the past itself. Especially when the great majority of such previous changes were left as is by Helen Clark and her motley crew such were there worth.

    If the last labour lot left them mostly alone then why are you all so anti having another gander at them? Your position doesn’t seem to make sense..

  5. gnomic 5

    How long will it take the great man and whoever else is appointed to arrive at the foregone conclusions to work out that NZ productivity is lower than elsewhere at least in part for the following two reasons? Firstly many NZ businesses are undercapitalised and the main focus of the owners is the bach, the boat and the bimmer. Secondly, management in NZ is frequently mediocre. Or will such aspects be excluded from the scoping brief?

    In any case, why is money being wasted on this exercise in fatuity? There must be some objective which might actually be achievable for a field of study. I’ll eat my hat if we ever come within a bull’s roar of productivity in Australia, likewise wage levels.

  6. My hunch is that the wages gap with Australia will only be closed when Australians get pay cuts too.

  7. ben 7

    that we should make ourselves a lean, mean, soulless machine dedicated to growth without regard to who benefits

    Yes, because nothing has more soul than regulating and taxing the hell out of anything that moves.

    What makes this silly little country so great is the idea that government imposing itself on every conceivable transaction between peaceful, consenting adults is somehow decent, and that letting themselves makes up their own minds is somehow selfish.

  8. Greg 8

    How do you then explain the productivity growth post Douglas’s reforms, and post the Thatcher reforms…….. and post Reagan’s reforms? Coincidence?

    • stormspiral 8.1

      No. Consequences of wealth transfer from the bottom. Cutting costs and calling the result productivity. I think that makes sense–to me anyway.

    • Julio 8.2

      The productivity ‘increases’ in the 1990s were largely a result of high unemployment (it got up to 11%) knocking the least skilled workers out of the workfoce. That drop in less productive output ironically increased average productivity. When those workers came back into the workforce as unemployment declined in the 2000s average productivity fell even as GDP rose.

  9. Try lags and the perverse effects of unemployment growth on productivity. Post Reagan, see also the interesting effect of greater capital depth in ICT,

  10. gingercrush 10

    The taskforce will be a success. Why? Because the left has such low expectations. What the left does best. Become hysterical over any appointee this government makes and screams as loud as they can on how horrible it will be. As it won’t be nearly as horrible as the left make out, it’ll be a success.

    captcha: SHAME. Is that shame on me? Or shame on the left?

  11. Swampy 11

    The National government virtually did away with militant unionism in NZ, long overdue for it. It’s a historical fact that the Labour Party has spent the past many decades progressively distancing itself from its union roots so it wouldn’t do them any favours to see the clock turned back on “stronger unions” and that explains why they didn’t go very far in nine years. I grew up incidentally in that era when someone or other was on strike every week and many of the strikes were for political purpose. By the fact that they didn’t roll back the clock to the closed shop era of the 80s, Labour sent a fairly clear political message to the union movement. But unsurprisingly, even today, there are still a hard core in it who go on about red flags and how unfair the 1951 waterfront strike was etc etc etc.

  12. Clarke 12

    I don’t know why you lot are so harsh on Don Brash – he’s clearly suffering. He’s living in the past, keeps muddling up his decades, is forgetful, can’t differentiate between reality and his fading memories …

    This isn’t Brash being a neo-liberal idealogue – he’s afflicted by early-onset Alzheimer’s, and obviously thinks that (a) it’s still 1986 and (b) he’s Roger Douglas.

    Anyone know a good nursing home?

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