Will NZ Seize The Moment?

Dr Oliver Hartwich's Speech to the Epidemic Response Committee


Oliver Hartwich
23rd April, 2020

The New Zealand Initiative’s Executive Director Oliver Hartwich presented to the Epidemic Response Committee today. He outlined his vision for New Zealand’s social, political and economic future. You can read his full speech below:

Mr Chair,

Thank you for the invitation to speak to you. And thank you for the work of this Committee over the past weeks. While Parliament was suspended, you have ensured that Parliamentary scrutiny continued.  In this time of extraordinary executive powers, we must uphold and defend our liberal democratic values. You and your parliamentary colleagues of all parties have done that, and New Zealanders thank you for it.

You invited me to present a vision for New Zealand’s social, political and economic future. So it is appropriate to begin with a word about our present.

New Zealand and the world are facing a crisis like none before.  This crisis is like a war in which we mourn our dead and care for the sick. It is like a recession in which many of us lose their jobs and livelihoods. It is like a natural disaster in which the world we knew is crumbling before our eyes.

I have not come here to deny the severity of our situation. It is grave.  But I have come here to offer a ray of hope.  No matter how dark our predicament, a brighter future is always possible. Because our future is always up to us.  As an economist, for me a bright future will deliver “Prosperity for all”.

You may think I am dreaming. Forecasters warn us of rising debt, bankruptcies and mass unemployment. So how can I have the audacity to imagine a future bringing “Prosperity for all”?

Chinese Prognosis

No Virtuous Circle of Creative Destruction

The Communist Chinese regime has had to walk a tightrope over Mao Zedong and his disastrous Cultural Revolution.  On the one hand, Mao is portrayed as the revered Father of the Nation; on the other, his Cultural Revolution is acknowledge as a cruel, barbaric fiasco.  

Associated Press has reported:

China’s official media reaffirmed on Tuesday the Communist Party’s longstanding judgment that the Cultural Revolution was a catastrophic mistake after staying silent on Monday’s 50th anniversary of the start of the decade-long upheaval.

The official party mouthpiece People’s Daily published an opinion piece on its website precisely at midnight on Tuesday unequivocally praising the 1981 party resolution that condemned the bloody political movement launched by Mao Zedong to enforce a radical egalitarianism. “Our party has long taken a solemn attitude toward bravely admitting, correctly analyzing and firmly correcting the mistakes of our leadership figures,” the piece read.

What, then, is the lesson of the Cultural Revolution?  The (official) People's Daily confirmed what the government thinks should be the "takeout" from Mao's great leap forward.

When Less is a Whole Lot More

Why the Spanish May be Better Off Without a Government

The state’s most important economic role is to get out of the way

James Bartholomew
The Spectator

On 26 October last year, the Spanish government shut up shop in preparation for a general election. This duly took place in December but then a strange thing happened: after all the build-up, the arguments, the posters and the television coverage, the result was… nothing. The various parties were so balanced, so mutually distrustful and ill-assorted that no government could be formed. Since last October, therefore, there has been no government in Spain.

One can imagine that the average political correspondent would think this a terrible problem, maybe even a crisis. The Financial Times has referred to Spain ‘enduring’ months of ‘political uncertainty’. This is assumed to be a matter requiring furrowed brows and grave tones. But the economy seems to be taking a different view of the matter. It is bowling along more breezily than in a long time. The growth rate during the final quarter of last year was an annualised 2.9 per cent, which, in these days of dismal Euro-growth, is a star performance — easily beating the pants off Italy, France and even Germany.

The improvement has continued this year. Unemployment has fallen month after month and is now down to 20.4 per cent which, though awful, is an improvement on a year ago when it was 23.2 per cent. That is a much better showing than in most EU countries.

Unlocking The Potential in the Creation

Change We Can Believe In

Sheik Yamani once cryptically said, "The age of oil will inevitably come to an end but not for lack of oil."  The Sheik was a smart man who had more than a basic understanding of economics and history.  On this point he was much wiser than most modern politicians, bureaucrats, and academics who show repeatedly that they have very little understanding of markets, economics, and the history of technological development.  Malthusianism remains alive and well.

The Sheik knew what should have been obvious to all adults.  The age of the horse came to an inglorious end, but not because of lack of fecundity in the species.  The age of sail ended, but not for lack of wind.  The age of steam came to an abrupt end, but not for lack of wood.  The age of coal began petering out decades ago, but not for lack of the hard black stuff.  Oil and gas took over.  But the age of both will come to an end as new, cheaper technologies emerge.

One apparently significant (and recent) technological development gives a clue to at least one technological advance that will help make oil redundant: batteries are changing.  Consider the following:

Slinking Out the Back Door

Rising Envy

These days the Commentariat and the chattering classes don't talk so much about poverty.  They focus upon economic inequality.  Rising inequality.  (It's always rising.)  This is a classic case of misdirection.  It is also another indication of the intellectual dishonesty of many and legerdemain that passes for truth.

We see this kind of vacuous nonsense every day:

More than 300,000 Kiwi kids now in relative poverty

 The number of Kiwi children in relative poverty has jumped over 300,000 for the first time since 2010 - but it's because of record inequality, despite falling absolute hardship.  The Ministry of Social Development's annual household incomes report shows that the numbers below a European standard measure of absolute hardship, based on measures such as not having a warm home or two pairs of shoes, fell from 165,000 in 2013 to 145,000 (8 per cent of all children) last year, the lowest number since 2007.

Children in benefit-dependent families also dwindled from a recent peak of 235,000 (22 per cent) in 2011, and 202,000 (19 per cent) in 2013, to just 180,000 (17 per cent) last year - the lowest proportion of children living on benefits since the late 1980s.  But inequality worsened because average incomes for working families increased much faster at high and middle-income levels than for lower-paid workers.

The net result was that the number of children living in households earning below 60 per cent of the median income after housing costs jumped from a five-year low of 260,000 in 2013 to 305,000 last year, the highest since a peak of 315,000 at the worst point of the global financial crisis in 2010.  [NZ Herald]

Consider a model society that consists of ten households.  One household lives in squalor: it is dirty, and unkempt.  Its occupants are usually sick.  No-body works, except one who spends his days begging the other nine households for food.  Another household lives in comparative luxury.   The earnings and net worth of this household increased by two hundred percent in the last twelve months.  The remaining eight households experienced no change over the same period.  According to the egalitarians, this society has just got worse (more evil and unjust), because inequality has increased.

Most morally clear-sighted people would think it a good development if at least one household greatly increased their net worth.  But the egalitarians regard it as an evil outcome, unless every other household increased commensurately.

There are two philosophical and religious axioms underlying the cult of economic equality.

Making Matters Much Worse

When Solutions are the Problem

One of the reasons Western capitalist societies are struggling is due to a bizarre approach to supply and demand.  We say, "one" of the reasons, for there are legion.  Nonetheless the deliberate skewing of supply and demand is a significant impediment.

Let's consider some of the ways the productive economy is inhibited and made inefficient by inappropriate interference with the buying and selling, investing and producing populace.

The first is a relentless compulsion to restrict the supply of resources useful for constructing and delivering goods and services.  This is largely driven by the notion that natural resources are finite and are running out.  Oil, gas, energy, land, timber, coal, steel, water, etc. are all limited.  Consumption will reduce their supply.  Therefore, it is prudent to restrict their use and application to make them last longer.  But rumours of the disappearance of natural resources are greatly exaggerated.  Remember the shrill, siren calls of the looming, dooming devastation of "peak-oil" about to wreak havoc upon us all.  The Sirens began shrieking in around 2008; "peak-oil" was supposed to hit in 2012.  Now, world oil supply is such that we presently have a glut.  Go figure.    

A second inhibition comes from the various ideologies of Greenism.

Two Very Different Houses

Economic Literacy in Oz, Ignorance in NZ

New Zealand appears to have a strong streak of xenophobia.  It also can be characterised as excelling in economic and commercial ignorance.  These things tend to come out especially during election campaigns, but they are always there, simmering away just beneath the surface, waiting to break out like a bad case of acne.

One traditional cause célébré is residential housing and whether New Zealanders can afford it.  Prices are rocketing up in some locations (Auckland, Christchurch) bringing forth pronouncements of doom.

But attitudes across the ditch appear to be very different.  House prices have ratcheted up in that country as well, particularly in Sydney and Melbourne.  And, more to the point, the  presence of strong Chinese demand is having a significant impact.  In New Zealand, a similar phenomenon has produced xenophobic reactions against Chinese immigration and house-buying.  Not so in Oz--at least not in the Sydney Morning Herald, which is hardly a denizen of right wing, pro-business, free market economics.

Letter From Argentina (About The Fate of Another Socialist Economy)

Analysis: Argentina policies adrift as inflation spiral looms

Brad Haynes
Yahoo News 

BUENOS AIRES (Reuters) - In the midst of Argentina's biggest currency devaluation in a decade, with the peso's plunge rattling financial markets worldwide, President Cristina Fernandez's first public address in weeks was silent on the matter.  She didn't say a word about the currency, but instead took to national television last week to announce the latest government measure - a new form of high school scholarship.

While the president has avoided mention of currency policy, the increasingly unpredictable messages from her ministers have amplified the risks weighing on the peso.  An announcement last week suggesting long-awaited relief from currency controls for ordinary Argentines in practice meant a trickle of U.S. dollars for an affluent minority.  Officials also promised to cut the tax rate on spending dollars overseas, but revoked the measure just two days later.

It's Not Fair

Economic Ignorance and Moral Turpitude

In his book, Fairness and Freedom, David Fischer makes some observations which represent a touchstone for truth and error in economics.  Fischer has written a historical comparison of New Zealand and the United States.  The latter nation has focused over time upon political and social freedom (from government rules, regulations, and controls) whilst New Zealand has been shaped by notions of fairness (which implies egalitarian distribution at least of opportunity, if not actual goods). 

We will endeavour to critique Fischer's book in a future post, but for the moment consider this partly insightful, yet misguided quotation:

Sunset Industries

Commercial Reality

Back in the day, New Zealand used to make cars.  We kid you not.  In fact, when Milton Friedman visited New Zealand around 40 years ago he was aghast that we had an automobile manufacturing industry.  It existed and was nurtured by government subsidies and grants--all in the name of creating employment.  Of course NZ Autos Incorporated has long since gone the way of the dodo.  Now punters import swanky second-hand (near new) cars from Japan at a fraction of the price.

The thing about government subsidies to start and maintain industries is that they are proof positive from the outset that the industry in question is not economic from the get-go.  In order to continue, it will need perpetual injections of government money.  Before you can say "Mitsubishi", pouring more money down the crankcase becomes a political necessity because, well, all those jobs are at stake.

We have seen a modern version of the same parable recently with the NZ film industry--stimulated by government interventions over the last twenty years.

Simplistic Nostrums Don't Cut It

More Full Than a Craft Beer Bar

Consider the following testimonies.

Citation One:

Feeding the masses will be a problem if the population continues to soar.  The news on the population front sounds bad: birth rates are not dropping as fast as expected, and we are likely to end up with an even bigger world population by the end of the century. The last revision of the United Nations' World Population Prospects, two years ago, predicted just over 10 billion people by 2100. The latest revision, just out, predicts almost 11 billion.

 

That's a truly alarming number, because it's hard to see how the world can sustain another 4 billion people. The current global population is 7 billion. But the headline number is deceptive, and conceals another, grimmer reality. Three-quarters of that growth will come in just one continent: Africa.  The African continent has 1.1 billion people. By the year 2100, it will have 4.1 billion - more than a third of the world's total population. Or rather, that is what it will have if there has not already been a huge population dieback in the region. At some point, however, systems will break down under the strain of trying to feed such rapidly growing populations, and people will start to die in large numbers. 

Citation Two:

Letter From America (About Capitalism, Part III)

State-Wrecked: The Corruption of Capitalism in America--Part III

 By DAVID A. STOCKMAN
New York Times

Published: March 30, 2013

. . . While the Fed fiddles, Congress burns. Self-titled fiscal hawks like Paul D. Ryan, the chairman of the House Budget Committee, are terrified of telling the truth: that the 10-year deficit is actually $15 trillion to $20 trillion, far larger than the Congressional Budget Office’s estimate of $7 trillion. Its latest forecast, which imagines 16.4 million new jobs in the next decade, compared with only 2.5 million in the last 10 years, is only one of the more extreme examples of Washington’s delusions.

Even a supposedly “bold” measure — linking the cost-of-living adjustment for Social Security payments to a different kind of inflation index — would save just $200 billion over a decade, amounting to hardly 1 percent of the problem. Mr. Ryan’s latest budget shamelessly gives Social Security and Medicare a 10-year pass, notwithstanding that a fair portion of their nearly $19 trillion cost over that decade would go to the affluent elderly. At the same time, his proposal for draconian 30 percent cuts over a decade on the $7 trillion safety net — Medicaid, food stamps and the earned-income tax credit — is another front in the G.O.P.’s war against the 99 percent. 

Without any changes, over the next decade or so, the gross federal debt, now nearly $17 trillion, will hurtle toward $30 trillion and soar to 150 percent of gross domestic product from around 105 percent today.

The Last Dodo

RIP, "Think Big"

In the early 1980's the government in New Zealand decided that it was smarter than the average joe when it came to business.  The government was going to pick some economic winners.  The policy was dubbed "Think Big" which had more than a communist, central-economic-planning ring to it. 

It had been the oil shocks jolted the government into action.  Borrowing vast sums of money on world money markets, the government persuaded lenders that huge government sponsored and endorsed energy projects were pretty much risk free.  Whilst they could never stack up on a risk/return basis in the open market, they sure could if the gummint were the borrower.  In time, Think Big delivered, according to Wikipedia:

Letter From the UK

Chilling News

The things that happen gradually are the things least noticed.  The "frog in the pot" syndrome is all too real.  We remain unaware of the dangers and calamities facing Western civilization.  Some people, at least, are starting to feel the chill winds of fear.

This from The Telegraph:

Malthusian Cassandras

Purblind Arrogance and Invincible Ignorance

Malthusian despair grips the Western world in a vicious vice.  It is a puzzling phenomenon if one considers that the economic theories of Thomas Malthus were discredited centuries ago.  But the puzzlement exists only if one also believes in a false, objective rationalism, ignoring the blind foolishness attenuating the human heart.  Did not the prophet say, "the heart is deceitful above all things and is desperately sick; who can know it?" (Jeremiah 17:9)

We are sonorously told by modern sages that over-population threatens the continued existence of the planet.  Assuming that the world is one vast fixed, zero-sum game, our oh-so-wise cassandras insist that more mouths to feed means less food for everyone.  If one eats more, everyone else is condemned to eat less.  If a country expends more energy, there is less energy for every other nation. 

The latest voice is the respected and revered Royal Society.  Its purblind stupidity belies its reputation.

Letter From the UK

O Canada our only hope

By James Delingpole
The Telegraph

I love Canada. I love Canadians. I like very much what their government is doing. I have great faith in their future. And if it weren't for their winters, I'd go and live there like a shot. Weird, huh?

Well it's certainly weird enough for those of us old enough to remember Canada in the Seventies, Eighties and Nineties when it was little more than an embarrassing liberal-lefty joke. Sure we still remembered the suffering and courage of those plucky Canucks from Vimy Ridge to Dieppe to the Low Countries, but that spirit appeared long since to have vanished under the noisome regime of Pierre Trudeau and his grisly communitarian successors. Canada was like a pale imitation of the US with all the worst aspects of European Socialism and political correctness tacked on to it.

But suddenly – sorry South Park – but Canada-is-crap jokes just aren't funny any more because they lack the key ingredient of truth.