Sunday, January 27, 2008

What the Huck?!? Bill Ralston Edition

Doing his bit for the long decline in public discourse on economics Bill Ralston tries to convince Herald readers of Labour's economic ineptitude.

Historians will look back in a couple of decades at the decline and fall of the Labour Government and lay much of the blame on Michael Cullen and his dead hand as Minister of Finance.

In his eight-year reign, the Government has amassed huge surpluses through over-taxation, putting pressure on the disposable incomes of already struggling households. His tolerance of high interest rates has strangled economic growth, his approval of record levels of Government spending has led to a huge growth in bureaucracy, waste and heavy compliance costs for business. His obstinate refusal to cut taxes will be seen as another long nail he inserted into the coffin of Helen Clark's three-term administration.


At the same time, voters will see 3.5-4 per cent inflation gnawing away at their income and savings while the value of their biggest asset, property, shrinks.
Far be it for me to critique the the arcane science of Ralstonomics but isn't there just a slender chance that interest rates are high because our economy is suffering inflationary pressures and that were it not for 'over taxation' both interest rates and inflation would be higher still. And I suppose it's just churlish to suggest that public spending isn't all about bureaucrats but also other things such as doctors and nurses. (Or that, in the case of the RMA, for example, more having bureaucrats actually helps reduce compliance costs).

What I would like to know though is what Bill Ralston, were he in Michael Cullen and Alan Bollard's shoes, would propose doing. Would he (the list is in decreasing order of plausibility):
  • Liberate Iraq to lower oil prices and reduce inflation?
  • Invade China to lower oil prices and reduce inflation?
  • Lower interest rates and reduce inflation? (While at the same time developing a perpetual motion machine to compliment his defiance of the laws of economics with equal defiance of the laws of physics)
  • Lower interest rates and taxes and reduce inflation? (While using the spinning corpse of JM Keynes to drill a hole to China to facilitate the invasion).
Ralston continues: (Click here to read the rest of this post...)
They [Labour] also triumphantly point to low unemployment, ignoring the fact that business is starved of labour and the high rate of employment is because more than a million Kiwis have fled to greener pastures overseas.
So what's he saying? That we should have high unemployment just so business can have surplus labour again. Boy that sounds like a vote winner.

I do have to concede that Ralston is right when he says that low unemployment only exists because 'more than a million' Kiwis have 'fled' overseas though. After all, as we all remember, when unemployment was through the roof in the late 80s and early 90s immigration was just so high and our population well over million more than it is today. Oh - hang on.

The economic genius of Ralstonnomics is not that it bares any relation to the real world but rather that he actually gets paid to write this stuff.

[Update: I added the bullet points this Monday morning; they weren't in the original post. Meanwhile Keith Ng engages in Ralson-watching par excellence at Public Address. As I said in comments under his post, public debate on economics in New Zealand would be much better served if Keith was a columnist for the Herald and Bill Ralston reduced to commenting on Deborah Coddington's blog]

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