Sunday, September 22, 2013

Roger's reforms didn't work

I made a comment to a friend while discussing New Zealand's low wage economy. Roger Douglas' reforms, however well-intentioned, didn't work I said. But they did, she replied. Well yes some of the reforms were successful and have never been undone as a consequence. But what I was thinking about was low wages. A lack of trickle-down. A lack of increased wealth. Then I came across this graph which illustrates what I mean.

The reforms might have worked if they had been left to develop without state interference - bail-outs and excessive welfare for starters.

This conversation came out of one I'd had with a visiting local government candidate who kept telling me we live in a low wage economy. No doubt her solution was a living-wage based on the tenor of her conversation and the colour of her pamphlet. "But while we have a government that subsidises employers to keep wages down, and subsidises landlords to keep rents up, what's the answer?" I asked. She simply repeated back to me ,"We live in a  low wage economy."

Very few people want to stop the hand-outs, whatever form they take. So we are trapped in a complex money go-round with the people on the low wages and benefits no better off since Roger's reforms. The left thinks that the problem is not enough state assistance and too few jobs. In fact there is too much state assistance, creating less productivity, and investment capital tied up in real estate instead of enterprise.


Anonymous said...

Out of interest how do you explain "the slide stops" ie the fact that the long term decline from 1950 to 2000 seems to have stopped?

Lindsay Mitchell said...

Point taken.

JC said...

There are other graphs which are pertinent as well..

If you were to impose Govt debt burden on the above graph you'd find it peaked around 1989 at 65% and over the next 20 years slid back down to zero.. NZ had put its wealth into pating down debt and indicating we didn't have a saving problem.. we had a debt problem.

Another graph would show that as we freed up the economy we were busy re-cluttering it up with RMA issues, purse mouthed environmentalism and growing isolationism that saw our exporting become a smaller part of the economy.

In a way our economy is like a brilliant diver.. she's got all the moves and athleticism but she's not allowed to use the pool.