Why do dummies lead our national debates?

Written By: - Date published: 3:38 pm, February 16th, 2009 - 31 comments
Categories: economy - Tags: , ,

gift-for-rogerWhy does the Business Roundtable employ an economic illiterate to represent them to the public and argue their corner on macroeconomics? Here’s some of what Roger Kerr has to say in his op-ed in Granny Herald today:

“What seems to be overlooked is that the huge rises in core Crown spending in recent years – some $25 billion since 2000 – saw New Zealand “lead the world” into recession.” – He’s implying causation when there is none. The causes of New Zealand entering recession were lack of spare capacity in labour and capital for growth, record oil prices, the end of the housing boom, and a major drought. Show me a causative link between the increase in nominal government spending between 1999 and 2008 (the figure Roger is quoting) and I’ll eat my hat.

He mocks the idea conept of economic “stimulus” (his punctuation). I love the quotation marks used to throw into doubt the entire notion that higher spending by the government (or anyone for that matter) is stimulatory, flying in the face of not only the near universal economic consensus by the very names of economic terms like ‘fiscal stimulus’.

“Hundreds of economists in the United States are saying the Obama Administration’s so-called “stimulus” package is reckless” Yeah but there are tens of thousands, probably hundreds of thousands of economists in the US. So a small minority who think the stimulus package is reckless, so what?

“High levels of Government spending, already projected to be 45 per cent of GDP on the OECD’s measure (which includes local government), contributed to the balance of payments problem by driving up domestic costs” – bullshit. The balance of payments problem was exacerbated by cheap foreign credit and the wealth effect from the housing boom and full employment but it is a structural problem arising from us not having enough domestic manufacturing and too much of the profits from domestic production flowing overseas, or to sum it up, too much of our economy being based around foreign-owned companies exercising rentier behaviour, milking us rather than building us.

“[Singapore and Hong Kong] are able to ensure the provision of high-quality public goods and maintain strong social spending programmes with Government spending at far lower levels than NZ.” Great, all we have to do is move New Zealand to one of the world’s largest shipping choke-points and live under one form of dictatorship or another. At least the taxes will be lower. And, for the record: Singapore’s health system is nearly entirely private and our health is better despite much lower GDP per capita. Singapore has the 6th highest level of public debt in the world, ours is 86th. Singapore has a larger gap between rich and poor, and higher inflation.

“Improvements of this kind in fiscal policy are a key element”, – ‘are key elements’, more than one improvement = more than one element.

Maybe it’s just me but if I were the Business Roundtable, I would prefer to employ someone who knows what they’re talking about than someone who is ‘politically correct’ and just says what I want to hear. Better to be told the unpalatable truth than a wonderful fairytale. Maybe it’s just me.

On a related note, the organisers of the Jobs Summit have relented and decided to invite Roger Kerr after all. Well, there goes any hope (not that I had any) of that event being more than a platform for voicing extreme anti-worker ideology.

On a further related note, Anti-dismal has a list of 14 things that most US economists agree on (which reminds me of the joke of my first economics teacher, ask 20 economists a question and you’ll get 30 answers). I agree with them all but point out that the minimum wage question deals in the absolute question of its existence, not marginal increases, and that no-one said ensuring a basic living wage for hundreds of thousands of families was completely cost-free. Negative income tax is attractive but not when, as usually, it is tied to flat tax.

31 comments on “Why do dummies lead our national debates? ”

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  1. Quoth the Raven 1
    16 February 2009 at 3:55 pm

    or to sum it up, too much of our economy being based around foreign-owned companies exercising rentier behaviour, milking us rather than building us.

    Excellent. Absolutely agree.

  2. burt 2
    16 February 2009 at 4:26 pm

    Steve P.

    You have argued why we managed to lead the world into recession but you have no argument that we did exactly that.

    Leading the world into recession is pretty shabby for a govt that claimed to be prudent financial managers irrespective of why it happened.

    [yeah, they should have prevented the collapse of the housing bubble, made it rain, brought down oil prices.. SP]

  3. bobo 3
    16 February 2009 at 4:35 pm

    I found Kerr contradicted himself in the article and made reference to Japans recession in the 90s with no mention of NZ decade long Gov induced recession, comparing NZ to Singapore or Hong Kong was pointless being major trade routes for China with up till now a guaranteed income. This is the same Kerr that moans during the good times that they can’t find skilled workers because they go overseas for more money and he still wants to a low wage economy model.

  4. IrishBill 4
    16 February 2009 at 4:47 pm

    burt, we had a small domestic recession that had nothing to do with the subprime crisis. If anything our position was a result of our failed monetarist model of inflation control.

    Our economy was geared for investment in property, there was heaps of cheap credit available and as a consequence we got a property bubble.

    Using our stupid monetarist system the inflation caused by that bubble was dealt with by raising the official cash rate.

    That had two main effects:

    1. Our dollar was kept artificially high which meant our exporters and especially our exporting manufacturers were hit.

    2. Our interest rates were artificially increased which meant we were an even more attractive population to lend to.

    The result of this was lost jobs and decreased productive capital as our exporters went under and even more money to finance property speculation. Which in turn increased inflation and the OCR. Until we got to a little recession.

    If Labour can be blamed for anything regarding the current recession it would be their failure to remove incentives for property speculation and the fact they didn’t change the reserve bank act. Both of these failures are classic non-interventionist, free market behaviours.

    What would really have done us in would have been tax cuts in 2005 which would have produced nothing but more inflation, intensified the OCR problem and left teh government with nothing to spend now. Not that the government is spending anything now as it seems the bulk of spending was already done in advance by the last government. What really concerns me is what happens when National/Act have to stand on their own two feet.

  5. burt 5
    16 February 2009 at 5:06 pm

    IrishBill

    What really concerns me is what happens when National/Act have to stand on their own two feet.

    Given Labour pulled the rug out from under the incoming govt by creating the domestic recession and spending all reserves on unproductive “assets” (read: liabilities requiring more investment) I’m also worried about how “the country” can stand on it’s own two feet. National or Labour govt is not really the issue after the damage Labour did in an effort to remain popular for a 4th term.

  6. Jum 6
    16 February 2009 at 5:46 pm

    It doesn’t matter what Kerr says or what The Standard says about him. He gets into print. He sounds important. People who are even stupider than him will believe him. There is no written word that people see to prove Kerr is lying. Until that happens, people won’t know that he is lying.

    Reporting Kerr is as bad as having bank economists, with conflicts of interest, on television to tell us how bad it is and NZers have to accept Mexican wages. Workers need to create a partnership with breaking businesses and make them work. Then NZ wins instead of the NZ Business Rotundtable/smash and grab merchants.

    On their website, these cretins used small print in the title of the Prime Minister Helen Clark. This shows the lack of respect they have for the office of the Prime Minister of any Labour Government, more especially if it is a woman, and offers more proof of the extent of their hatred towards working Kiwis.They have no credibility when it comes to New Zealand’s financial health and future.

    They are working against New Zealanders and need to be shown up. Their manifesto matches that of Act and National and international conservatives.

    The NZ Business Roundtable are dangerous, especially to women with independent thought.

  7. IrishBill 7
    16 February 2009 at 6:07 pm

    Burt, the domestic recession was minor and the result of the freemarket policies that Labour kept in place. They also spent the surpluses on paying down debt, encouraging kiwisaver and building up the super fund.

    We have one of the lowest debt to gdp ratios in the western world and as a consequence we are in a reasonably good position to deal with the recession. For a small country and assuming we are able to capitalise on the debt space we have available.

    Despite your greatest wishes the last government made a bloody good job of looking after the economy and would be making a better job of looking after it now than the current hacks.

    I get the feeling that fact that the economic facts don’t fit your “labour-bad” view of the world won’t stop your mindless mouthing of hollow spin. Which is funny because even the nats don’t try those patently fraudulent lines anymore.

  8. northpaw 8
    16 February 2009 at 7:34 pm

    To answer your blog title’s question.. it is likely because the ego involved has been encouraged.. by folks who many of us thought knew better. I’m referring to a public on-air platform at Te Papa quite recently. Yeah, we know as it were that operations cost money and sponsors likely provide it.. a pony has many tails..

    But after reading through your link to Granny’s op-ed I’d have to say how the rubber is not on road for this guy. He likely knows it — the call is for distraction. Excuses. When what is needed are solutions..

    An example of that is how the House-Senate conference recovery bill supplies $8.4 billion for transit projects, and an additional $8 billion for high-speed rail. These would put Americans back to work to the tune of nearly 20,000 jobs for every $1 billion invested in mass transit.

    Needs brains and application, not dummies with excuses and money that some folks would call status-seeking bribes..

    Else the stuff this wise owl
    ps: in case you start wandering the blavatar has a French name and one tiny segment of enzed lit for a signature.

  9. northpaw 9
    16 February 2009 at 8:20 pm

    Wiseowl (above link) just pulled an updater from Nick Stern, economist of sig note. Here’s a snip:—

    The report, co-authored by many of the same economists who contributed to the influential Stern Review, calls on governments to include $400 billion in green spending in their stimulus plans. That’s 20 percent of the estimated $2 trillion that nations are likely to spend on economic packages in total, or four percent of global GDP.

    Be nice to think that kiwis are aware of new satellite technology which measures atmospheric carbon dioxide and, importantly, says where it is and is coming from.. thinking positively, you understand, in relation to so-called trade protectionism and its underpinning arguments

  10. Pascal's bookie 10
    16 February 2009 at 8:27 pm

    So when did we go into recession? In the US it was dec 07.

    http://www.iht.com/articles/2008/12/01/business/02econ-web.php

    So if we led them, it wasn’t by much, and as alluded had more to do with our RB not spending drunken sailor wise to keep the bubble expanding.

    The argument seems to be that Labour sux because we didnae have helicopter Ben delaying the pimple bursting on some arses. Well, that’s what the argument would be if it were intended to make sense beyond sophistry.

  11. vto 11
    16 February 2009 at 8:35 pm

    P’s b, in my experience, for NZ it was August 2007. That is when reverse sentiment became apparent. And its since been reflected in stats – growth started to severely slow until eventually the slowing growth became negative.

  12. Pascal's bookie 12
    16 February 2009 at 8:49 pm

    When did that slowing growth become negative?

    I know you don’t like the official stats and things, preferring your gut and anecdotal subjective looking about, and that’s fine. But folks all over the shop are making the specific technical claim that we were in recession before the US. I’m not denying that, I’m just asking if it’s you know, true.

    edit, more snarky than intended. Frustrated that I can’t source this as quickly as the us stat, and that as a meme it may well be pants, yet unstoppable. Thanx stupid journalists!

    more edit, on the google it appears to be a US/NZ tie, not looked at other economies. Myth busted.

  13. vto 13
    16 February 2009 at 8:57 pm

    he he, yes I know, I do have an aversion to things authoritorial. But stats are good – lordy knows how to find them. Would take me ages. Thought that question of when things turned negative should have been answered.

    Wasn’t it early/mid 2008? I seem to recall Cullen finally admitting such in the early part of last year. Much to his pre-election disgust.

  14. Pascal's bookie 14
    16 February 2009 at 9:07 pm

    Treas’ reported thusly:

    Tuesday, 05 August 2008 16:30

    In its review of economic statistics for July, the Treasury says it believes that when official data is released, it will show the economy shrank in the three months to the end of June.

    A recession is defined as two consecutive quarters of negative growth. The previous quarter, to the end of March, showed negative growth.

    Quarter to the end of march o8 was the first neg quarter, which makes a photo finnish with the US, and a liar out of a few folks hereabouts. Or igonarantses. Or just bullshitters with a purpose. Depending on how one interprets their wrongness.

    edit. heh, I bet it did piss the Cullen off a bit. But on t’other hand it gave him a non psychological dissonance causing reason for tax cuts. I hope that bugger writes a nice long book to be honest. He’ll be more readable than most of similar efforts I think.

  15. vto 15
    16 February 2009 at 9:20 pm

    Good work Mr P’s b.

    I enjoy relying on my anecdoppled gut instinct and seeing how close I can get to the actual.

    Next one will be picking the bottom. My current pick is mid/end next year…

    I’ll put 2c on it… any takers?

    captcha: “symptoms 1974” ffs

  16. Ari 16
    16 February 2009 at 9:23 pm

    Given Labour pulled the rug out from under the incoming govt by creating the domestic recession and spending all reserves on unproductive “assets’ (read: liabilities requiring more investment) I’m also worried about how “the country’ can stand on it’s own two feet. National or Labour govt is not really the issue after the damage Labour did in an effort to remain popular for a 4th term.

    Establish for me that Labour was the primary cause of the recession, then we can talk about labour “damaging” the country’s finances.

  17. Pascal's bookie 17
    16 February 2009 at 9:31 pm

    Your gut does forecasts vto? That’s an impressive organ. I had thought it was just a real time digester that got its analysis out there quicker than the number crunchers.

    In any case I’m not betting against it.

    Macroeconomics is not much better than voodoo for predicting actual economic events, as far as I can tell. The mother of my child takes exception to the chicken blood, leaving me a blind man for my guess work.

    I think the forecasters get it so never right because of something similar to quantum. And the abused cat in the box that may not be alive if we care to look. What they say effects what we do, which effects the result. They can’t win, it’s a muggs game,and should stick to looking backwards, and telling us what happened. But everyone wants to know the future, so there’s better money it.

    edit, / Some of the above is very like the sub-header on that wiseowl’s blog Northpaw linked to. Weird. Must be quantum.

  18. the sprout 18
    16 February 2009 at 10:38 pm

    “gut instinct” = no evidence, no argument, no ideas

  19. vto 19
    17 February 2009 at 7:46 am

    Mrs Sprout, instinct is one of the most crucial tools in the armoury of any beast on the planet. Evidence, arguments and ideas will be found to naturally exist around instinct due to its reliability over the millenia. Hence its use to the animal world (including us).

    No wonder you don’t make sense sometimes.

  20. Lew 20
    17 February 2009 at 9:01 am

    vto,

    Mrs Sprout, instinct is one of the most crucial tools in the armoury of any beast on the planet.

    I think the folks here are arguing that it’s a tool of last, rather than first resort.

    L

  21. ghostwhowalks 21
    17 February 2009 at 10:09 am

    Kerr seems to use the OECDs figures for government expenditure to GDP ratio which arent a valid comparison.

    Australia’s government spending is higher than the 30% or so figure he uses because for some strange reason The OECD doesnt count GST revenue that is spent on local services.

    As we know the Australian states divide up the GST for their local services, such as schools hospitals police roads. Since we dont have a federal system this is government expenditure in NZ

  22. Travellerev 22
    17 February 2009 at 11:49 am

    vto,

    In response to your challenge the following:

    Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money .

    That was Josiah Charles Stamp the director of the bank of England speaking in Texas in 1920.

    It seems that we have continued to allow the banksters to use that pen and flicking they did.

    There is no way the economy will survive the mayhem they created in the last 20 years. Mid next year we will only begin to realise how bad it’s really going to get.

    Count on anywhere between 15 to 25 years, revolutions in the US, China, Russia and all over Europe and perhaps that will come closer to the reality we are facing.

    Sorry but there you have it. No quick fix, no Magic repair of our inherently fraudulent banking system. It’s broken. End of story.

  23. vto 23
    17 February 2009 at 4:41 pm

    Travellerev, you could be right. If there is complete and utter metldown, which is a possibility. I’ve got fingers crossed for something in between – living in hope!!

    Lew, instinct should be first as it is a time proven pointer to the correct direction. Subsequent analysis fine tunes. But then again, human advancement has not been possible without those ‘going against the grain’, if you like … (nothing like having a bob each way)

  24. Travellerev 24
    17 February 2009 at 4:44 pm

    vto,

    About the hope thing? You and me both, from the bottom of my heart. I don’t think I ever wanted to be more wrong in my life then I want to be now.

  25. r0b 25
    17 February 2009 at 5:45 pm

    “New Zealand lead the world into recession’ – great sound bite, simply not true:

    http://en.wikipedia.org/wiki/Economic_crisis_of_2008 (see the section “Countries in economic recession”)

    http://www.thetreeofliberty.com/vb/showthread.php?p=394863

  26. northpaw 26
    17 February 2009 at 6:42 pm

    A liitle more informed economics from Eric Pooley @ Slate’s BigMoney — It says it, and pointedly, for the mainstream media’s shortcomings which individuals with ego and others can still pay for (one way and another)..

    It just so happens that while here I happened note EV pump a friend of mine’s past family opponent. Yeah, no matter how well intentioned some Treasury officials have been in their nations’ pre and postwar interests life can deal them harshly.

    Related: Anyone spot another Stamp – British actor Terence Stamp – in the Wall Street movie..? Yeah, you find them here, you find them there, these stamp types are for finding every where 🙂

  27. blacksand 27
    17 February 2009 at 6:56 pm

    vto :
    > instinct should be first as it is a time proven pointer to the correct direction

    Not too sure about this. When a kiwi senses a predator, it follows it’s well honed instinct and keeps absolutely still & relies on camoflague. As they say, biology only makes sense in light of evolution. This approach works fine if your predators are entirely avian, and don’t have a sense of smell, but useless vs dogs, ferrets, and (depending on the kiwi) cats.

    Evolution is as much about failed traits, as about those that survive. Not only that, but that a trait has so far survived is no indicator of future success.

  28. blacksand 28
    17 February 2009 at 7:31 pm

    oh y god, tres embarrasing!

    its well honed instinct

    & an excuse to post a captcha ‘Boston couldn’t’

  29. northpaw 29
    18 February 2009 at 10:52 am

    rOb, ghost—

    Did we hear the Kerr gambit finally outed on Morning Report(RNZ) when Wodney attempted work over Mr Cunliffe on air. With a kiwi political B-and-S-see sense 2 around Kerr’s ‘lead (the world) into recession’ = bait.

    As with RB(elsewhere here), the bait expression is provocative, designed to elicit response/s and indeed as much as possible. [ in commercial terms, OTOH, the jetstar dollar deal illustrates incentive ]. In politics, however, argument, debate, discourse is all. Here, for instance, commenters have adopted a reasonable take them at their word/s response.

    In Kerr’s case: why? To sell a bill of goods. Namely ACT’s taxcuts = the answer to everything.. for all businesses.. small and large.. and everywhere. Regardless of whether the strategy works or not, of which there is so very little in the way of proof though a great deal in the bluster and bumptiousness of its proponents.

    The switch..? Would be the buying by more persons of this bluster and bumptiouness, howsoever it is served up.. smooth per le kerr – rough (aka cratered cranial) a la RB or combatively OUTED to the nation on broadcast media by wodney por favor. And undoubtedly delivering a very much more expensive product.

    Of course for those paid by percentage such an eventuality amounts to a BOB BOTH WAYS and NOT a bob each way (per the example hoped by a commenter above..

    No apols for shouted since patently clear is a bait and switch style of politics from the above parties. In unison or with others..

    IMO Beware—try not be used or victimised by what wikipedia refers to as bordering on fraudulent behavior

  30. Nickc 30
    21 February 2009 at 3:38 pm

    “Why do dummies lead our national debates?”

    Dont kid yourself Clinton, you dont lead our national debates!

  31. Pascal's bookie 31
    21 February 2009 at 10:47 pm

    Fuckinell Nick.

    5 bloody days after the post, 3 days after the thread died and that’s it?

    For.Fucking.Shame.