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  • rmacculloch

The Cost of Living Crisis: does it reflect moral bankruptcy at the heart of Labour and National?

PM Ardern has just announced the government is cutting the excise tax on fuel as a result of - wait for it - not the "cost-of-living crisis", but instead the cost of "energy crisis". For a government that was meant to stand for the environment, encouraging more petrol consumption and greenhouse gases is something quite extraordinary!?


She was reported in Stuff as saying, "Undoubtedly, for many families, there is [crisis]. But I think the most important thing is regardless of what anyone's calling it, it's whether or not we accept that there's something that needs to be done.” Ardern talked about her government's Winter Energy Payments and Working For Families boosts to help lower income families, saying that the “energy crisis” was “acute”.


The PM's political strategy, in other words, is to blame our high cost of living on overseas factors, so domestic policies don't come under the spotlight. Labour's reaction has, until now, been to increase benefits. By comparison, National's reaction has been to tout tax cuts. Now Labour has stolen a part of that policy. Yes, it's all about partisan politics.


As a result, both our major parties have revealed scant interest in addressing any root causes of the problem. Yet in the same week that the news headlines featured how expensive it is to live now in NZ, the media was also filled with stories about our supermarket "duopoly". The editor of the National Business Review had this to say, "The people who have failed NZ consumers are the lawyers, the regulators, and legislators". Why? Since, for example, our supermarket chains have been buying up properties & placing "restrictive land covenants" on them, which "prevent any future owner from putting a supermarket on the site. They can be placed on land sold by the supermarkets themselves, or a seller of land to a supermarket may agree to place restrictive covenants on their other land as part of the sale price". Our two dominant "supermarket groups had created more than 90 restrictive land covenants".


Can you believe it? Neither National nor Labour want to do a US President Teddy Roosevelt-style bust-up-of-monopolies to make our markets more competitive & lower costs for everyone. Neither party wants to address the domestic root-causes of high prices. The benefit increases & tax cuts they offer are not aimed at improving the general welfare, but instead are simply bribes targeted at their own supporters.


Why does the lame reaction to anti-competitive behavior by the Nats & Labour reflect a moral bankruptcy threatening the legitimacy of capitalism in NZ? Because the likes of Republican President Roosevelt did see his monopoly-busting reforms in the early 1900s in precisely those (moral) terms. He invoked publicity to combat business “evils". He also saw his reforms as averting a radical reaction. At a banquet at the Gridiron Club he lectured J.P. Morgan & other members of Millionaire’s Row that they should learn to live with his reforms if they did not want a takeover of Wall Street by “the mob, the mob, the mob.”


Roosevelt’s moderate economic reforms legitimized the capitalist system, rescuing it from its own destructive tendencies at a critical moment. That moment has come again, in NZ.


Given the quiet response of our political parties to competition issues, expect to see more Kiwis believe that markets & capitalism are not working for them - and so expect demands for redistributive taxation to increase. Not to mention a rise of "the mob, the mob, the mob". As for my economics students, they've discovered how to make a $ in NZ. Become a real estate agent or get a supermarket franchise. Not much point studying. That's become the word on the street. It's undermining not just our economy, but our society.


Sources:

https://www.stuff.co.nz/national/politics/300540207/jacinda-ardern-says-government-will-consider-cutting-fuel-tax