Should NZ's secular stagnation be due to working-from-home, lack-of-meritocracy & endless Treaty debates, then we can forget economic growth.

The country does not appear to be in a cyclical down-turn. Of course, the PM and his Finance Minister are desperately praying that all we have been experiencing is just a typical "business cycle", and once interest rates come down things will turn. However, the evidence points more to a long-lasting slow-down, which attracts the name "secular stagnation" in economics. Truth is, a large part of the stagnation of New Zealand's economy, which has turned it into one of worst performing in the world, remains unaccounted for. The "experts" quoted in the mainstream media, who work for the Big Banks and NZX 50 firms, don't have a clue, though not the modesty to admit it. They shy away from explanations that have any hint of being "anti-woke"; which may create a stir. As such, their commentary has little to do with truth, but everything about marketing their Big Bank, or other business. So let's look at three explanations for NZ's secular stagnation that the big media outlets refuse to blame.

First, the vast number of New Zealanders who now "work" from home. Yes, NZ may be stagnating simply because the nation is only pretending to work. An article published in the National Bureau of Economic Research is being quoted world-wide which estimates falls in productivity of around 18% once a person works from home. It has attracted interest since it is written by economists at MIT and has a great deal of credibility, due to its randomized control trial methodology. Given NZ had amongst the longest, most severe lock-downs of any nation, whereby a huge chunk of our work-force now considers it a right to work-from-home, its entirely plausible that this change accounts for a significant chunk of our economic stagnation. Few folks in NZ, especially in Wellington, physically go into work on Monday and Friday. This outbreak of collective laziness is more than able to explain why the country has stagnated. Amazingly, Wellington was the only city in NZ that was in favor of extending the lock-downs. Why? The City didn't want to work.

Second, many of the Board members and CEOs of our largest corporations are nothing short of useless. Many are accountants & lawyers who know little about the core business. A vast proportion have got their jobs through their networks. The higher echelons of NZ corporates have descended into an inbred club of status-seeking social climbers who aren't the real deal. Furthermore, unlike in other nations where there has been a backlash against Diversity-Equity-Inclusion & Affirmative-Action policies to the extent they've led to hiring people who can't do the job & have displaced merit, NZ has ramped up efforts to embrace them even more, doubling down on the who-you-know & equity agendas. Efficiency is barely an aim now. Again, it is entirely plausible that this factor accounts for a chunk of our stagnation. I was asked last week to give a Keynote to a Human Resources conference, and told them my theme would be meritocracy. They told me it wouldn't be appreciated, so I resigned and told them to find someone else to do it.

Third, our national energy has been increasingly sucked up by Treaty debates. Why would anyone want to invest in NZ? Why would rising-star young Kiwis want to stay in a country that spends its entire time looking backwards? That is not to diminish the Treaty - and it is not to take sides. We have no interest in doing so on this Blog. It is to make the point that the debate has become endless, spawning industries of academics, lawyers, politicians and media types who do nothing productive, other than argue with one another. The "debate" certainly has exposed that NZ has no agreed constitution, no consensus about the meaning of a founding document, and is unsure of the status of its parliament. It has emerged that property rights, the fundamental driver of economic growth, are thereby insecure in NZ, making it a terrible place to keep your money and invest.

To summarize, no-one knows for sure what's behind the secular stagnation that NZ has been experiencing these past years. We do know the cause is not partisan. It has been happening under both National & Labour. That being so, it is entirely plausible that the vast numbers of Kiwis who are now pretending to work from home, hiring and promotion policies not based on merit, but on who one knows & pursuit of genetic based social engineering, along with endless going-nowhere Treaty debates which have consumed the energy of the country, together may account for all of our economic stagnation.

Nicola Willis, as the New Minister of Economic Growth, may as well be Monty Python's Minister of Silly Walks

The article below of mine was published in the NZ Herald yesterday. Finance Minister Nicola Willis immediately complained, saying that although she is the "Minister of Economic Growth", there is no "Ministry of Economic Growth", to which the Herald article referred. Her complaint makes the article's argument stronger. Namely that her new title is a marketing-PR-comms gimmick designed to mislead the NZ public, with nothing behind it:

The Prime Minister should put his marketing past behind him. After all, we voted out former PMs Ardern and Hipkins because of their Marketing, Public Relations, and Communications Spin Machines. During the last election, Hipkins said that New Zealand had the fastest growing Gross Domestic Product in the world. That was a hoax. The International Monetary Fund ranks us 181st out of 190 nations. We have spent the last two years in and out of recession, under both National and Labour.

Now PM Luxon is trying to convince voters that he is all about making the economy bigger. On that note, he has launched a new brand name. It is called “The Minister of Economic Growth.” He has delegated managing it to Finance Minister Willis. Why is it a misleading name, not used by any other country? Because in a market economy like ours, the government has only a limited and indirect influence over the pace at which it grows. The main job of the government in that regard is to design quality laws, in particular relating to property rights. Those rights incentivize private individuals to innovate and produce.

It is the people and our firms, by virtue of our purchases and production, who add up to being the two biggest players creating the demand and supply equilibrium which determines GDP and prices. Since aggregate growth is measured in terms of Gross Domestic Product, NZ's new Minister of Economic Growth could equally be called The Minister of Production. As such, it conjures up communism, command-and-control, and central planning.

There was once a Ministry of Production in England during World War 2, in charge of setting weapons manufacturing. During the War the Americans had an Office of Price Administration doing price controls. These days no nation bothers pretending that it can directly set output and prices.

Furthermore, there are times when GDP should freely fall due to supply shocks, like to oil, or due to a pandemic. In those times, it is important for shoddy firms to exit, making way for more efficient ones with new people geared up for a new order, a process called creative destruction. Times of upheaval do require unemployment insurance, but not a Ministry of Economic Recession.

Reduced prosperity and entrenchment of monopoly power in NZ occurred after both National and Labour supported offering blank cheques, drawn on your account, to our country’s biggest firms during the pandemic. In 2020, after that announcement was made, the NZX 50, which comprises the top fifty in terms of size, rose nearly 50% in value, representing a transfer from taxpayers to them of tens of billions of dollars.

Our biggest firms today are busily privatizing their gains, whilst just a few years ago they were busily nationalizing their losses. Our present huge public debt and high cost-of-living is the collateral damage.

The political desire to maintain big business economic growth during the pandemic avoided a hugely overdue shake-out in NZ. Instead it has been small firms - the likes of green grocers - that have bankrupted. Big useless building companies, the big supermarkets, who were the only ones legally allowed to open in lockdowns, and all of the NZX 50 publicly listed oligopolies, have sailed happily on.

We are now paying the price for our politicians’, and the Reserve Bank's, myopic obsession with faking economic prosperity during the pandemic. Together they prevented the cleaning out of the Big End of Town. Together they prevented the rise of a new type of kid on the block, armed only with the strength of their character, big dreams, and the potential for big achievements.

No wonder those youngsters are leaving the country. National and Labour were complicit in granting New Zealand’s old guard a too-big-to-fail public guarantee. Both parties hunkered down with Business NZ to buy the support of its members before Election 2021. They now cry crocodile tears for our youth, whilst at the same time handing a swathe of big jobs to mates, rather than searching for the best person.

Why has former PM Key’s Chief Science Adviser, Sir Peter Gluckman, been recycled as PM Luxon’s Science System Advisory Group Chair, along with so many other recycled throw backs, when a whole new generation of outstanding scientists and business folks emerged in the intervening years, including the Kiwi founder of Artificial General Intelligence?

National and Labour together bemoan a lack of competition, but they engineered it themselves by insisting public funds be used to underwrite our largest companies and business partnerships. Even now neither party is championing meritocracy in NZ. To explain our country’s poor performance, they conveniently blame each other.

All told, a Minister of Economic Growth is as silly as Monty Python's Ministry of Silly Walks. It denies personal responsibility. It sends a confusing message that somehow our country’s production depends on Ministry officials and Aunty Nicola. It promotes the idea that a weakly growing economy run by government cronies and poorly managed firms is more preferable than change, upheaval and a temporary deep recession, even though it would herald a brighter long-term future driven by a new group sweeping away the broken old system, turning it into something better.