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  • rmacculloch

Depression Election 2023: a State of the Nation Essay

I just wrote this Opinion Piece for the National Business Review - it's about putting an historical perspective on NZ's present situation:

The only-marginally-different economic band aids which Labour and National are proposing to try winning the 2023 election are taking shape. Put bluntly, the Kiwi economy is being buffeted by large supply shocks to labour, oil and a host of other inputs which require extensive deep-level reforms to mitigate. Yet neither political party has shown a serious will to address these challenges. How come?


Significant supply-side reforms were last enacted between 1984 and 1989 by the Fourth Labour government following the OPEC oil production cuts. National was booted out of office that year due to its failed attempt to soften the blow with subsidies & loose monetary policy - the same policies that Labour is doing right now. The reforms which began in 1984, known as Rogernomics, are often referred to with complete and utter contempt by our PM & Finance Minister.


As a result of this history, both Labour and National seem incapable of addressing the supply-side problems that have led to our cost-of-living crisis. What was the aim of the 1980s reforms? To cut costs by removing privilege. Yet neither party now wishes to remove the privileges enjoyed by select groups in both the public and private sectors that have again built up in recent decades, stifling productivity.


The PM and her Finance Minister equate such kinds of reforms with their despised label, “neoliberalism”. Former National PM Jim Bolger shares their distaste for promarket, pro-competition supply-side policies which he blames for inequality. He has aided a return to union power by chairing Labour’s Fair Pay Working Group.


In a desperate attempt to avoid confronting the root causes of our current malaise, Labour has declared its intention to fight a 1930s-style election campaign in 2023. The opening shot was the Finance Minister’s evocation of the Great Depression as a comparable shock to the pandemic in a recent Budget Speech.


“We can draw on the lessons of the past as to how to deal with them. The answers lie in the great traditions of the First Labour Government who rebuilt NZ after the Great Depression”, Robertson stated.


Arguing that the post-1929 Great Depression rebuild period offers a road-map to solving supply problems in 2022 is misleading, confused and wrong. The nation is experiencing record low unemployment, severe labour shortages and high inflation. In the 1930s it was the diametric, reverse opposite. Those were years of record high unemployment and deflation due to plummeting demand.


Yet Labour remains determined to implement Depression-style policies regardless of the circumstances. The Party steadfastly refuses to address the supply-side gorilla in the room. It makes disparaging comments about markets at every opportunity. Rather than reducing cost pressures, a raft of new initiatives from higher minimum wages to fair pay laws to unemployment insurance payroll taxes will add to them.


The Finance Minister’s Great Depression analogy serves his own interests and those of the Labour Party, not the interests of New Zealand. It has been made to highlight the record falls in GDP during the 1930s and contrast them with the more moderate drops the past couple of years. He is wanting voters to draw the implication that his superior management has made the difference.


The Finance Minister also wishes to set up a scenario like the one in the 1930s when people were wracked by fear and insecurity. It was that state of affairs which helped Roosevelt’s Democrats in the US and Savage’s Labour Party in NZ gain power on platforms based around providing more social security to workers. The parties of the right failed dismally by raising the objection that higher taxes would follow.


Behind the story of the Great Depression lurks great danger for Labour. The wins of Roosevelt and Savage were attributed not so much to their welfare proposals, but to voters blaming incumbent politicians for the meltdown. "Even a vaguely talented dogcatcher could have been elected president against the Republicans”, folks said about Roosevelt in the 1930s, so angry were people with those who presided over the crash.


As a result, our Finance Minister is in overdrive to divert blame. He’s busy telling voters that their financial woes are not of Labour’s making. The narrative goes as follows. The shock was caused by the virus. It’s also President Putin’s fault.


The greatest irony of Election 2023 will be that the very issue which motivated the PM & Finance Minister to get into politics, namely their disdain of the Fourth Labour government’s reforms in the 1980s, has come back to bite them.


Our country’s two most senior politicians have spent their entire careers attacking those reforms. They’ve had 30 years to come up with their own solutions to avert a cost-of-living crisis caused by supply problems.


We’ve found out they have none.


As for the National Party, it just lacks the guts to take on the privileged interests which are protecting their patches and adding to our sky high cost-of-living.


So the battle-lines between Labour & National for Election 2023 have been drawn. The themes will be the Depression politics of the 1930s & the Pepsi-Cola Wars of the 1980s, when the marketing gurus at those firms fought for market share, selling two products that were basically identical. Supply-side reforms won’t get a mention.


The next election will be fought by two politicians who've spent their careers in PR & marketing, both without a plan to deliver a lower cost-of-living for Kiwis, least their brands be polluted with the word, shock-horror, “neoliberal”.