The more informed an economist is, the more they keep their head down during elections.
Elections are not a time to talk about economics in a serious way. Sure, politicians talk about the economy and what they will do to it, with promises soon forgotten when they take power. Elections are timely reminders of how shallow and poor quality our public discussion on the economy is. (You won’t be able to infer how I voted from this column. Economic issues were not a major determinant.)
The front page advertisement of my paper on the morning before election day proclaimed:
‘Vote Labour for help with the cost of living:
- Free dental care for under 30-year-olds;
- Free prescriptions;
- $25 extra a week for 180,000 families;
- 20 hours free ECE for 2-year-olds.’
My instant reaction was ‘Is that what the Labour Government is about? Where is the narrative?’
Providing such narratives is not an area of my expertise. Typically they are less pointy-headed than what I write and are developed by trying them out on audiences and modifying them in response to reactions. (Trump is a very transparent example of this behaviour.)
Had I been foolish enough to have been a Labour politician elected to office in 2017, I’d have started off with a narrative that the Key-English Government had suffered from inertia and failed to address a multitude of issues and ‘we are going to deal with the backlog’. One example would be the mess that housing had got into – it would take years to sort it out. (National is hinting that it will use the narrative but apply the backlog thesis to Labour. Oh well!)
Of course other events – the Mosque Massacres and the War on Covid – took over. In any case, a new narrative was needed following reelection in 2020. One which fitted in with actual events was something like ‘We’ve won the War on Covid; we are dealing with the recovery.’ (OK, it’s too pointy-headed.)
After the guns stop firing, there is an enormous readjustment necessary to get back to a peace-time economy. What happened after the Great War is not well documented and data deficient but it was turbulent. (Recall the sentiment in Man Alone: ‘I couldn't tell you about the war,’ Johnson said. ‘It wasn't a lot different from anything else. I could tell you worse things about the peace.’) In the case of the Second World War, Jack Baker points out that while it lasted five years, the recovery took another ten.
The War on Covid is in an uneasy armistice with guerilla warfare as the virus mutates and we respond with improved vaccines. Even so, we should celebrate our successes. Vigorous public health measures, including lockdowns until vaccines became available, restrained deaths to below 3000. There would have been another 20,000-odd deaths if our response had been as ineffective as the US’s. (One wonders how those who didn’t die, and their friends and relations, voted.)
To win that war we used a lot of economic resources, as is the way of warfare. That is the major reason for net public debt rising from around $5b in June 2019 to around $71b today. And as occurred during the Second World War, not only did government debt rise dramatically, but other economic activity got diverted. We had power cuts in the 1950s because we did not build enough power stations during WWII.
Today the pall of the War on Covid hangs over the world and New Zealand economies, in addition to the Russian invasion of Ukraine which is impacting on the world and hence on the local economy too. That pall hung over the 2023 election.
Is there a narrative to be constructed from this? As I said, this is outside my competence. But I do know that when faced with the 2008 Global Financial Crisis the government threw everything at it, public debt rose sharply, and National’s Key-English Government was re-elected in 2011 and 2014. People believed their narrative (although Labour did little to offer an alternative one).
The critical point is that the state of the New Zealand economy is shaped by what happened in its past and what is happening overseas. But, well illustrated in the election campaign, the public rhetoric assumes that the economy is isolated in time and space – a bit like a 101 economics textbook, I suppose. I infer that the commentariat find it very hard to follow what is happening overseas, while their knowledge of New Zealand economic history is thin, at best.
I am not saying that the more sophisticated in the local economics profession think this way and sometimes Minister of Finance Robertson showed he was aware of the international and historical impacts. But the public commentary was, shall we say, out of this world.
To go back to that front page advert. It could have been rejigged into this narrative. Something like ‘the economy is struggling under pressures over which the government has little control; but it is doing its best to shield the most vulnerable’. That is not to say that the promises were the most efficient way to protect them (some were more about targeting particular voters).
National’s story was similar. They were promising tax relief, funding it by cutting public services. Perhaps the tax relief was poorly targeted and indulgent. One fears the new government will repeat the Key-English mistake of cuts which cripple the public sector.
Even so, the choice for electors was not too bad (assuming you expected the promises to be delivered) although not very transparent.
Observe that neither party was targeting the group which was hardest hit – those facing substantial interest rate hikes. (I have a column to write about current international thinking on interest rates; prospects look grim for mortgage holders.) I take it that neither party could think of how to provide relief. It is a reminder that on many matters the government is impotent despite the political rhetoric. It makes promises to improve the situation but if it is realistic it knows it cant; if it is stupid it believes itself and is dismally disappointed. At best, politics hides behind promising policies which are largely ineffective.