Current economic debate rarely extends beyond hearsay and uninformed opinion.
Listener: 15 December, 2007.
Keywords: History of Ideas, Methodology & Philosophy; Political Economy & History;
Thirty years ago, a large majority of New Zealand economists argued for greater use of the market to regulate the economy. Prime Minister Rob Muldoon was sympathetic, but after almost losing the 1978 election he concluded that the public had not liked his cautious market liberalisations.
Because he also held the finance portfolio, there was none of that creative tension between the short-term political and the long-term economic that makes for good government. Ultimately, he imposed an anti-market wage and price freeze in 1982.
The Labour government adopted a “more-market” approach from 1984, at which point the near unanimity of the economics profession collapsed. There had been cautious liberalisers, moderate liberalisers and extreme ones. The extremists captured power, introducing many policies that were of poor quality, economically damaging and have been – or are being – reversed, to be replaced by the policies of the moderates.
The extremists were just as repressive as Muldoon, punishing anyone who disagreed with them, even if subsequent events proved the critics correct. Many withdrew from the public debate. Today, fewer university economists are involved in the public arena than were in the 1970s. The university contributions to the current hearings of the select committee on monetary policy were disappointing. Their marginal role is especially odd, for the universities have a statutory obligation to be “critics and conscience of society”. As a couple of non-economist academics point out in interviews in Speaking Truth to Power: Public Intellectuals Rethink New Zealand, published in April this year, the universities provide no encouragement for staff to involve themselves in public debate.
The consequence is a watering-down of competence in the economic discussion. The extremists are not held to account. How are they to explain that their policies generated a six-year recession, which dropped New Zealand from the top half of the OECD (just) to well below the median? What defence have they for their failed privatisations and other policies?
The lower-level economic debate makes it easier for the uninformed to think they have something useful to contribute. You see this in our newspapers. They have four-and-more times the number of business pages compared to 30 years ago – their size is determined by the amount of advertising. I bet there are not four-and-more times the number of reporters. One is struck by how often commentary is but unreflective opinion based on fashion, rather than careful, informed analysis based on facts. Today, few people bother to read government or technical papers, relying instead on being told by others what they contain. As a result of these Chinese whispers, interpretations are only tenuously linked to reality.
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.
A Muldoon-like politician may triumph in the political short term, to our long-term detriment. This columnist will continue to resist both trends.
<>This is the 30th anniversary of Brian’s first Listener Economy column.