Thawing after the BRR

Written By: weka - Date published: 7:10 am, December 12th, 2019 - 27 comments
Categories: economy, greens, james shaw - Tags: BRR, budget responsibility rules

Stuff reported a few days ago that the Greens have dumped their policy on the Budget Responsibility Rules (PDF).

The most stringent rules include a commitment to reduce net core Crown debt to less than 20 per cent of GDP within five years, and to keep government spending at or below 30 per cent of GDP.

These rules have caused serious upset within the Green Party base and caucus, with both female co-leadership candidates committing to get rid of them during the 2018 leadership race.

The rules went out for review earlier this year and the party’s policy group has now decided to scrap them, replacing them with a new economic policy that promotes greater public spending.

Economics is not my area so I’m hoping for some thoughtful discussion in the comments. A few points on process. One is that many Green Party members will be pleased. This allows the Greens to shift policy back closer to core values. The review and its outcome strike me as what would be expected, and they are consistent with the kaupapa of the party (economic and internal process).

There’s been criticism of the Greens and Shaw in particular over the BRR, that it was an intentional push of the party to the right. I don’t see the Greens as going right so much as making the pragmatic choices necessary to advance their policies via mainstream politics and the limited power that New Zealanders give them.

So it’s possible that both these things have been needed. That the BRR helped change the government in 2017 by undercutting the right and the MSM’s drive to present the Greens as economically dangerous (thus preventing leaching of votes). Now that Labour and the Greens have proved they can work together and provide stable government, it’s time for the Greens to shift back to their more cutting edge approach. If it is true both were needed, I’m grateful for a party that can accommodate this degree of diverse opinion.

I’m also very happy to see the party front footing that unlimited material growth is impossible. An obvious key component of meaningful action on climate change, the Greens are opening the door for serious mainstream discussion about this. Very exciting.

The policy change is more than just dropping the BRR. An email from the Green Party to its membership explained,

Policy Committee has recently confirmed a new section of the Party economic policy. Because this policy has received a lot of attention from members, and also from the media, we’ve decided to let you all know about the changes and what they mean.

A new section of the economic policy has been adopted which sets out our approach to government spending, debt and other matters which were covered by the Budget Responsibility Rules we agreed with the Labour Party in 2017. One consequence of the changes we’ve adopted is that they overturn the Budget Responsibility Rules. We have reaffirmed our commitment to moving beyond GDP, focussing on wellbeing and building a strong public sector.

Our updated economic policy is part of the Green change we are bringing into government, and means we can advocate more strongly in government for better public services and significant spending on public housing, and infrastructure to help tackle climate change, inequality, and the protection of nature. It also means we can start work on our 2020 election platform with a strong mandate from the membership

You can read the new policy here.

We believe there is a strong argument for more public spending by this Government because of the infrastructure and social spending deficits we are grappling with, and the need to tackle the challenges we face.

We’re looking forward to a strong election campaign next year and this new economic approach is a key part of that.

Mā te aroha tātou hei ārahi,

Green Party Leadership Group

Caroline Glass and Leighton Thompson (Policy Co-Convenors), Penny Leach and Wiremu Winitana (Party Co-Convenors), and Marama Davidson and James Shaw (Party Co-Leaders)

The new fiscal policy section (PDF),

10. Fiscal Policy

Government investment, expenditure and revenue raising are all means that need to serve broader environmental, social and economic goals. The current approach to fiscal management embeds neoliberalism in both legislation and in the way the national accounts are prepared and so, for example,leans towards austerity measures in response to economic crisis. The Green Party will promote a broader and more balanced approach to fiscal policy in line with both the overall principles of this Policy, and the recognition that unlimited material growth is impossible.

The purpose of fiscal policy should be to ensure ongoing wellbeing for all and the health of our environment.

A. Reform of the Public Finance Act 1989

The Green Party will seek significant reform or replacement of the Public Finance Act 1989. The Fiscal Responsibility section (Part 2) of this Act should be reformed by:

1. Replacing the emphasis on controlling specific measurements with a broader view based on the purpose of fiscal policy set out above.

2. Adding a new aspect of revenue strategy, which ensures adequate revenue in the long-term to pay for necessary investments to support the purpose above (see also C5 below).

3. Framing ‘fairness’ with an emphasis on broader equality of wealth and economic power, rather than merely the predictability and stability of taxes.

4. Reframing the approach to debt to focus on both private and public debt, and ensuring any debt strategy addresses both of these and supports the purpose in 1.

B. Adequate and timely information for fiscal policy

The national accounting system provides information on which economic management decisions are based. The Green Party will update the national accounting system to provide information in a form necessary to support effective and timely management of the economy as a whole. This includes:

Broadening the definition of investment to include investment in social, cultural, human, natural and physical (including infrastructural) capitals

Classifying expenditure and revenue on the basis of their impact on the economy as a whole rather than on the basis of analogies with private sector accounting

Providing sufficient timely and accurate information at a level of details needed to support good economic management in line with the purpose of fiscal policy

C. Government’s fiscal strategy

Government expenditure is a critical part of its central role in guiding and developing the economy and must be sufficient to ensure ongoing well being for all and the health of our environment. It is currently insufficient. The Green Party will implement a fiscal strategy which:

Incorporates the need to transition to a circular economy which does not rely on unlimited growth

Ensures government expenditure is sufficient to maintain and enhance the well being of our people, our planet and our economy

Considers the capacity of the economy, such as the availability of raw materials and skills, when making decisions on expenditure, revenue and investment

Maintains macroeconomic stability, including full employment and controlled inflation

Uses the full range of tools available to finance government expenditure, and chooses the mix between them on the basis of their effects on broader goals. (See also Monetary Policysection of this policy)

Recognises the multiple roles of the tax system as set out in the Taxation section of this Policy

Recognises fiscal, social and environmental costs of both government action and inaction

Strengthens the resilience of our nation to sudden shocks and systemic ecological and social crises, including natural disasters. The Green Party opposes fiscal strategy which includes arbitrary point targets for government debt and government expenditure. Any debt and expenditure targets must be based on evidence and clearly derived from the purpose of fiscal policy set out above.You can read our full Economic Policy here

27 comments on “Thawing after the BRR ”

Comments are now closed

gsays 1

12 December 2019 at 7:35 am

I am curious as to how the proposed shift north of the Auckland port is viewed by the Greens.

On one hand it provides employment opportunity, on the other, the development is based on biggering.

We get more roads (boo!) and we get more rail (yeeha!).

FWIW, I think ditching the BRR, is great.

I felt by imposing those restrictions, Labour were endorsing the Tory myth of being irresponsible with money. Even a half hearted look back shows this to be untrue.
pat 2

12 December 2019 at 9:18 am

Roads of National significance?
Nic the NZer 3

12 December 2019 at 9:32 am

Good ridence to bad policy.

This change makes good economic policy sense. Its important to realise that there are two sides to economic transactions. There is the financial side (the payment) and the real side (the good or service paid for). It is therefore important to focus on the more relevant side of the transactions. For the government the financial side is owned and operated by themselves so the real environmental and social impact comprises most of what they should deliberate over.

Targeting specific debt to gdp and govt spending to gdp ratios is bone headed as the target ratio is pretty well an arbitrary percentage anyway.
Bill 4

12 December 2019 at 9:43 am

Looks good at first blush. Credit where credit's due – acknowledging they supported a "fiscal management (that) embeds neoliberalism" and " leans towards austerity".

I don't buy the argument that pragmatism is a justification for buying into liberalism, but that aside, with Corbyn and Sanders in Downing Street and the White House respectively, switching lanes and getting a move on with social democratic priorities (ie, shedding the chains of austerity and making practical and desperately needed investments in society) will be the new flavour of the day in NZ.
- pat 4.1
  
  12 December 2019 at 10:49 am
  
  but a wasted opportunity if it simply funds BAU
  - Bill 4.1.1
    
    12 December 2019 at 11:27 am
    
    Well, yes. So fuck the roads of whatev's they're labeled, and get on with retrofitting all of NZ housing and getting real on the energy front (ie, put the biomass ideas in the same bin as the roading ideas) and, if need be, repurpose the army to get a leg on in securing vital infrastructure in the face of the coming decade's climate hits.
    
    Etc.
  - Bill 4.1.2
    
    12 December 2019 at 11:53 am
    
    Mind if I put a caveat around those previous comments there Pat? I just read Trotter's piece and tumbled to the fact this is $200 million from a pot of $12 billion. If The Greens think this is a win…what do they think losing looks like?
    
    We have BAU delivered with happy jingle, courtesy of the Green backing crew, and all wrapped around with some pointless Xmas paper (recycled and from 'sustainable' sources of course). -sigh- 🙁
    - pat 4.1.2.1
      
      12 December 2019 at 12:02 pm
      
      thats my fear…we will squander the borrowing but more importantly resources and time to add yet more high carbon and high maintenance infrastructure….either the grasp of the problem isnt there or theres no intention to address it
RedLogix 5

12 December 2019 at 10:35 am

unlimited material growth is impossible

Only if you presuppose that the nature of that growth will never change. In the year 1800 it was for example 'impossible' for the global population to grow to 7.5b people using the agricultural and manufacturing technologies of the day. Yet now it's 2020 and the 'impossible' has happened.

And the rate at which the 'impossible' is becoming true is only accelerating. By 2050 everything will be different again. Another example, in just 2010 shale oil extraction was 'impossibly' inefficient … now less than a decade later the USA is a net exporter of energy and essentially has unlimited supplies of almost free natural gas. I certainly did not expect that, nor did most people.

In the next decade battery technologies will change everything, the decade after that AI and the next wave of automation, CRISPR will alter the way we do evolution, MSR reactors will come online delivering safe, cheap energy everywhere, 5G will make highly connected and efficient cities possible. And that's not counting all the as yet unknowable discoveries we will make. My point is simple … yes unlimited growth is impossible, only if you assume that we are locked into it's current form. That has never been true, and is even less true now than ever before in human history.

Yet for some weird reason this rubric remains at the core of Green Party thinking. Why?
- Nic the NZer 5.1
  
  12 December 2019 at 10:53 am
  
  Unlimited growth in the real world is simply not possible. What your examples identify are some instances where efficiency improvements have extended the constraint somewhat or even quite significantly here but there is an upper limit to any kind of efficiency gains.
  
  The path forward which maintains GDP growth is to take advantage of technology developments while changing the nature of the goods and services consumed away from ecologically harmful resources and towards renewable resources.
  - Rocco Siffredi 5.1.1
    
    12 December 2019 at 11:21 am
    
    "Unlimited growth in the real world is simply not possible."
    
    The Limits to Growth was wrong when it was written and is still wrong today. As you say, we keep finding ways to extend those constraints and as long as we still have technological progress, that will always be the case.
    - greywarshark 5.1.1.1
      
      12 December 2019 at 11:34 am
      
      Haha – there will be growth in technology and its complexity! But alonside that, a decline in humanity and an attempt to manage it with simple algorithms, with disastrous mistakes treated as exceptions to the rule.
    - Nic the NZer 5.1.1.2
      
      12 December 2019 at 11:46 am
      
      You do know what a limit curve is right?
  - greywarshark 5.1.2
    
    12 December 2019 at 11:30 am
    
    I'm looking at getting buried naturally with a tree planted on top, So growth in population could be balanced by bodies becoming one again with the earth – also saving lots of materials being used for coffins and chemicals poisoning the earth etc. It just has to be done carefully as you start 'going off' pretty quickly. We are really so fragile and so beautifully made and forget how marvellous it all is, being in nature.
    
    So if we can gentle down on the growth and start planning for the future instead of BAU with some extras added, we might get through and leave something for some young people who haven't been spoiled by excessive ambition for class and money targetting, lack of generosity and friendly attitude in community, and lack of physicality.
- UncookedSelachimorpha 5.2
  
  12 December 2019 at 11:26 am
  
  The growth of our current global civilisation has been accompanied by a dramatic and consistent increase in the use of natural resources – despite huge efficiency gains in almost every technology you care to look at (e.g. transport, food production etc). So increasing human economic activity is highly likely to be accompanied by further increases in natural resource use I suspect.
  
  I applaud the Greens for being cautious on economic growth, especially the constant political pressure to grow the economy in its current form. If you are on the inside of most primary industries, the mantra continues to be "growth growth growth" and the growth desired definitely will increase natural resource use (certainly in my own industry – a food production industry – it will – despite CRISPR and everything else).
adam 6

12 December 2019 at 12:12 pm

“To speak of ‘limits to growth’ under a capitalistic market economy is as meaningless as to speak of limits of warfare under a warrior society. The moral pieties, that are voiced today by many well-meaning environmentalists, are as naive as the moral pieties of multinationals are manipulative. Capitalism can no more be ‘persuaded’ to limit growth than a human being can be ‘persuaded’ to stop breathing. Attempts to ‘green’ capitalism, to make it ‘ecological’, are doomed by the very nature of the system as a system of endless growth.”

Murray Bookchin

[Unbolded and reformatted]
- weka 6.1
  
  12 December 2019 at 12:36 pm
  
  any human system of economics (or organising society) is a subset of nature.
  
  The point of discussing the impossibility of perpetual growth is to shift society to a place where we can design systems that are part of nature. In the absence of that debate, we have rapidly escalating death cult capitalism/fascism with some anti-capitalist voices at the edge shouting into the void.
  
  Unfortunately I don't see the anti-capitalists generally getting what sustainable and regenerative design is. The anti-capitalist voices are important in their own right, but they too seem to be missing some critical aspects of what is needed and 'how to get there'.
  - adam 6.1.1
    
    12 December 2019 at 12:53 pm
    
    Then die. It's that simple really.
    
    Learn some economics weka, because your call to say nature is economics – is the basis of new fascism – ecofascism. Which is the fascism which will probably win, and in the process kill us all at the same time.
    - weka 6.1.1.1
      
      12 December 2019 at 1:09 pm
      
      I didn't say nature is economics adam. Not sure what the connection is with fascism, but you're welcome to explain. I'm here to further discussion and understanding.
      - adam 6.1.1.1.1
        
        13 December 2019 at 3:39 pm
        
        The reality is when this the environment goes pear shaped, and that is a given.
        
        What follows from that will be a human response driven/dominated by fear. Fear is easy to ramp up by the way – even in so call enlightened societies.
        
        That will force the political solution to be based on irrationality and state worship. Of course it will have a green veneer, hence the eco in front of this new fascism.
        
        Not saying it somthing I look forward to – Indeed I like my politics to have a good dose of irrationality in it. But those who worship the state will either let rationality govern and we get some form of green-communism. Or they will let irrationality govern (which I see as far more likely in the current political climate) and we will get eco-fascism.
  - Robert Guyton 6.1.2
    
    12 December 2019 at 2:07 pm
    
    "any human system of economics (or organising society) is a subset of nature."
    
    but seeks to make nature the subset. Risky business.
    - Nic the NZer 6.1.2.1
      
      12 December 2019 at 7:08 pm
      
      Tricky business this epistemology.
      
      Not for a lack of trying but (no branch of) economic theory seems yet to have achieved the escape velocity needed to fully escape the gravity well of reality.
      
      The heathens (like myself) are not as of yet, satisfied with economic theory as its own end and think it should only tell us what economic states can occur in the real world.
- Nic the NZer 6.2
  
  12 December 2019 at 1:02 pm
  
  Its rather difficult to interpret the meaning of this whole paragraph.
  
  There are two parts to Capitalisms limits to growth. First there is the legal framework making it Capitalism and second there are the real resource implications for the economic system to serve humans in a society. If the second part is the issue then were kind of stuffed as the planet can't support society any more so he must be talking about the first part as the Capitalist part. But this leaves the open question, which laws do we need to change to implement reform and having done so why would we not call the resulting economic system Capitalism just the same?
  
  Having resolved those terminology maybe its possible to have this discussion with people not steaped in marxist ideology.
  - weka 6.2.1
    
    12 December 2019 at 1:15 pm
    
    I'm guessing the quote makes more sense in context.
    
    I'm not convinced that the planet can't support society any more, it really depends on what we want and whether we will design regenerative systems. Certainly nature cannot sustain the lifestyles that you and I have for every person on the planet. I'm willing to live in a society with a lower foot print, there are others too, not a huge number but growing.
    - Nic the NZer 6.2.1.1
      
      12 December 2019 at 1:28 pm
      
      I think the qoute makes sense to somebody steeped in marxist ideology. They should have a concept of what parts of the legal economic framework make it capitalist and would be improved in an alternative, I think.
      
      But i also suspect they don't even agree with each other on those particulars.
      - adam 6.2.1.1.1
        
        13 December 2019 at 3:21 pm
        
        What marxist ideology Nic the NZer? Truly an odd comment by you – one showing your ignorance.
        
        As for legalistic dog crap you keep raising – you really have missed the point.
        
        Here a hint, look at the name of the author of the quote.
        
        Nic the NZer 6.2.1.1.1.1
        
        14 December 2019 at 12:13 am
        
        Oh come on Adam. The Marxist philosophical influences are dripping from that whole paragraph. On the otherhand a philosophy which tries to hide its roots is corrupt, but i am going to assume that the roots of those statements are equally well understood by yourself.
        
        If you need confirmation of that which is obvious feel free to research the author and his influences.