Saturday, January 26, 2008

The Case for Economic Debate

No Right Turn has a link to an excellent Listener column by Brain Easton talking of the pros and cons of privatisation. Which reminded me of another recent Easton column on the quality of economic debate here in New Zealand.

Easton argues that:

The economic debate has moved from the general pages into the business section, limiting the public to the sterility of such questions as whether we should have tax cuts. There is no discussion about whether we have the production to pay for them. Celebrities and crime are given greater prominence. Occasionally, when there is a crisis, an economics story appears on the front page. The world financial system has been under severe stress since last August. But where do you see that mentioned in your paper, except when it gets close to home in the form of a local finance company collapse? Even then, little international context is given to the parochial story.

Instead of a vigorous public debate there is ignorance and self-promotion. Participants are out of touch with the general public. (Who would have guessed that a November AC Nielsen poll found those supporting increased public spending were more than double those prioritising tax cuts? The answer may be Helen Clark.) There are hardly any serious attempts to inform the public. We are back to the 1970s and 1980s: “Trust me – I am acting in your best interests.” Yeah, right.

When some hard decisions have to be made – and the international financial crisis is likely to require them – the public will be unprepared and uncomprehending, and will want to return to ineffective anti-market interventions.

My own personal fear is not so much of anti-market populism but rather of knee-jerk conservatism and blame the victimism when things go really wrong. But I do agree that New Zealand is incredibly poorly served by the quality of its public debate on economics. We have business groups with disproportionate voice, media conglomerates who (in the last election at least) appeared to be playing the role of the tax cut lobby, an unwillingness to discuss trad eoffs and an alarming degree of economic illiteracy in parts of the punditocracy. And we also have some major challenges ahead of us. Challenges which we will only overcome with sensible and inclusive economic debate in which the public can understand and own policy.

Here are two such challenges:

1. Climate Change: despite what proponents of extreme discounting think, people really do care about the fate of the planet and about the world they will bequeath to their descendants. The trouble with climate change policy though is that it requires short term costs for long term benefits. And this is something that is politically very hard to sell. Unless people have a real understanding of why policy is being made and why it is necessary. Right now, for the most part, all we get is anatomically inaccurate names for taxes and tractors on parliament.

2. Government spending: from health care to prisoner rehabilitation New Zealand struggles to deal with its social problems in part because we simply do not spend enough to tackle them. We don't spend enough because we don't have the tax revenue to do so. Now perhaps New Zealanders really prefer an individualist let them eat cake economy and low tax rates. Good for them if they do but, when discussing tax cuts (and why is it always tax cuts rather than tax raises?) let's at least openly examine the need for spending.

There are many more - the challenges of globalisation, local resource management, poverty - and the problem is that we just don't seem to be able to discuss these issues in a meaningful manner. (Not to mention race relations). And we really need to. At least if we want to continue inhabiting a country worth living in.

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