Mood swings polarise economic debate

By Rod Oram

Between the lines


In recent weeks, the debate over the state of our economy has reached a crucial stage. It is the "tipping point", the moment in any argument when support for change begins to outweigh support for the status quo.

Just like a see-saw, such debates swing slowly through the point of equilibrium, then gather speed before they crash down heavily on the new "side".

The best evidence that we've reached the tipping point is the sound of ministers formerly known as "dries" enthusing about the Government playing a more active role in economic development strategy.

From this first swing in 15 years of economic debate will flow many good and bad things. The very best is a new freedom to discuss an easing of the rigid orthodoxy which has wrought many vital reforms to New Zealand's economy. The very worst is the danger that, disenchanted by the downside of reforms, we will dilute, or worse, damage those achievements.

All or nothing seems to be a kiwi character flaw. As our mood swings, our see-saw crashes up and down. That national characteristic has further polarised the economic debate in recent weeks, triggered by the 15th anniversary of Labour's election and the start of reforms.

So much of the commentary has made it sound as though July 14, 1984 was the day New Zealand entered economic heaven or hell - or worse, we went to heaven but have since been relegated to hell because we "took a tea-break from reforms."

We're in neither place. We're in limbo, the region between heaven and hell. The changes we've made to our economy, our society and methods of Government have enhanced the lives of many people. But the changes are incomplete, as witnessed by our failure to maximise the benefits of reforms or to bring them to all people.

The way ahead -to heaven, not hell - is tricky. We have to find new policies which will stimulate New Zealand's economic development without jeopardising the achievements of reforms.

Most crucial is the need for the next Government to find a way to set strategic objectives for the economy; in other words to focus our scarce human and financial capital on development goals.

Labour - and latterly National - believe they are devising such policies. But both parties remain naive and timid about the ways of economic development.

They talk of the lessons we could adapt or adopt from the Irish, the Finns, the Israelis or which ever wealthy small country they have most recently visited. But they are shying away from the strong political leadership which is the true key to those countries' success.

To examine the gulf between our politicians and those abroad who are driving development, the Business Herald will run next week a series on Finland by columnist Colin James and an article on Government development strategies by David Cunliffe, one of the authors of our Doughnut Economy series last year.