With most of the economic policy options for the coming NZ election now in front of us, it would appear we are continuing down the route of GDP growth, low inflation, government surpluses and Triple A credit ratings as measures of economic policy success. But, these are only means towards some desired ends or ultimate goals?
It's still the economy, stupid. So what economic offerings are in the tea leaves heading towards this year's election? We can robustly judge that the National Party is offering pretty much more of the same, while fiscal policy plans announced jointly by Labour and the Greens – and monetary policy adjustments floated by Labour – it would appear that by early autumn we already have the guts of our electoral choices.
In discussions with an acquaintance recently, we struggled to isolate the core points of difference between these competing platforms. Our discussions led us, inadvertently, to times gone by (apologies, but they are relevant).
Think back to student protests where we chanted in unison “What do we want?” The response varied depending on the cause at the time – no nukes, gay rights, or a living student allowance (this was long before student loans). However, the critical line followed, and was always the same – “When do we want it? Now.”
Now, of course, few of my cohort of friends and acquaintances participate in such vocal activity. But, if we were to do so, I can imagine it might now go something like:
“What do we want? Affordable housing and no children living in material deprivation. When do we want it? Oh, in the fullness of time, depending on the state of the economic cycle and in line with appropriate prudential criteria, after accounting for revenue growth forecasts and meeting all due considerations contained in the Public Finance Act.”
Yes, fiscal prudence seemingly takes priority over other worthy objectives. Numerous arguably artificial constraints (e.g. debt-to-GDP ratios, tax-to-GDP ratios, balanced books) are implicitly more critical ahead of other objectives. Indeed, the commonality in the range of electoral pitches reflect that we as a nation remain wedded to goals that are assumed (but, arguably, not proven) to be inherently of some value.
So, running government surpluses is common to all party pitches. Indeed, it is highlighted as perhaps ‘the’ priority. And the consequential fiscal prudence, will no doubt be proclaimed as a desirable virtue and, implicitly, also as a goal in and of itself. Alongside that you can add other so-called goals of low inflation, high GDP growth, and a Triple A credit rating.
So what about other objectives? Well, they implicitly get put in the “when we can afford it” basket as our economic policy frameworks and choices confuse ‘means’ with ‘ends’. As the above benchmarks get mistaken for goals, the ultimate desirable objectives are side-lined.
These benchmarks are useful vehicles through which desired goals may be realised; but they are hardly goals worthy of celebration on their own.
Indeed, I find no solace whatsoever in a low inflation economy rated Triple A, with a government surplus, and strong GDP growth, if there are people sleeping in cars and children living in material deprivation. But economic policy options (aka our electoral choices) continue to be measured against these dubious inflation, government surplus, growth and credit rating benchmarks.
Managing an economy to meet a set of artificial benchmarks are, at best, a means to an end. If such means don’t seem to progressing towards the desired end(s) then we should question closely the virtue (or value) of those means. The desired end(s), or goals, need to be identified and settled (ideally as a result of the democratic electoral process).
That process should not be dominated by assumed goals of dubious or unproven value.
For me, governing an economy (on behalf of society) so that people are suitably fed, clothed, and housed is the goal for economic policy to strive for. It would be one truly worthy of celebration. Conversely, if our economic policy framework does not achieve that, then society, governments, the economy (and, dare I say, markets) have failed.
Others will have different desired goals and objectives for economic policy and frameworks. Let’s, at the least, argue those choices. But, let’s not mistake increased outputs for improved outcomes.
However, I fear that the economic policy choices put in front of us over the next few months will continue to focus on management. And economic policy choices will continue to be benchmarked against output measures of high GDP growth, low inflation, government surpluses and Triple A credit ratings.
If the outcome of these targets, though, is one where numbers of children live in material deprivation and families sleep in cars, then any claims to achievements and economic success will, to me, be very hollow indeed.