Economic Leadership

Notes prepared for an informal presentation (June 2004)

Keywords: Growth & Innovation; Political Economy & History;

The ‘Growth Culture’ report of the Growth and Innovation Advisory Board (on which I am on) raises major questions about the direction of economic policy. The survey had been commissioned to understand how the public could be involved more effectively in the economic growth strategy. However their responses firmly indicated that the large majority of the public had objectives which were different from those espoused by the nation’s economic leadership.

Because their responses were so unexpected, the survey was not designed to distinguish between the various versions of economic growth strategies: Rogernomics, Ruthanasia, Bolgernomics, the Knowledge Economy, the Growth and Innovation Strategy, post-Rogernomics, or those who argue for policies which they will say will return New Zealand to the top half of the OECD. The public, probably not distinguishing between them, is probably saying ‘a plague on all your houses.’

They certainly dont trust those who advocate economic policies, probably reflecting that for (literally) decades they have been promised benefits from economic policies, which have never been realised: when the rogernomic policies began in 1984, New Zealand was in the top half of today’s OECD. (Recall the woman who sued for divorce from her economist husband on the grounds on non-consummation. ‘He would stand naked at the end of the bed promising that things would get better, but nothing else happened.’) The public especially eschewed ‘burning platform’ approaches, the demand for dramatic policy changes to avoid promised economic crises. ‘Wolf’ has been cried far too often. One suspects they also think the policy advocates are self-serving.

There may be a deeper concern about ends and means. The public did not seem to see GDP as the end of economic policy: they had broader objectives. Being told that it was necessary to privatise the health system, say, to increase GDP growth, they would prefer no increase. GDP probably does not properly reflect their vision of the good society, although what they do value usually requires more economic output. The underlying challenge is to utilitarian economics which has assumed for two centuries that more output means better. We may be entering a post-utilitarian age.

The New Zealand public are turned off by economics, evident by today’s media economic debate being largely confined to separate business pages. (One survey found 42 percent said they were ‘bored’ by economics.) Compared to a decade or so ago, economic issues hardly hit the headlines, today. Even the Minister of Finance spends much of 2004 focussed on the foreshore issue, while political prominence came to the Leader of the Opposition, an economist and ex-Governor of the Reserve Bank, when he turned to race relations issues.

Yet national economic issues will continue to influence the course of politics. The leadership challenge is to identify the public in terms of its objectives, and manage the economy to meet them, rather than – as some of the earliest responders to the survey implicitly did – saying the public was economic illiterate and the leadership knew better. In an MMP environment that may be politically suicidal.