Simon Wilson's Covid 19 coronavirus pandemic diary: 7 lessons on economics from a non-economist

When we get the economy back to work, will we be resetting for the public good? Photo / Michael Craig

I know, it's the time of the experts. But I'm not sure we're hearing everything we should from the economists. So, here in splendid isolation, I'd like to help.

1. There is always money for the priorities

I suggested yesterday that we will need big new programmes in public health and social housing. Also, that payouts to households would be useful to stimulate spending coming out of lockdown. Several people have told me there won't be any money for these things.

That's not true. There will be money for whatever the Government prioritises. That's always true. It will come from taxation and borrowing, and that's always true too. All I'm suggesting is that our priorities include public health, the needs of the poor, and allowing all of us to help refloat the economy by making sure everyone has some money to spend.

If it seems absurd to prioritise the needs of the poor, well, why is that?

2. Our tax system fails us

All tax possibilities are now on the table. It wasn't me who said that, it was Sir Bill English. He noted that the sharemarket went up, which meant investors weren't shouldering what might be called their share of the burden.

He's right, we do need to rethink tax. It's plain as day we need – urgently – investment in sectors that are productive and will help build economic, social and environmental resilience. That's not property. I'm not sure anyone really disagrees with this. But we keep being told it's too hard to stop the favoured status of property in our economy.

Let's not ever let that be an excuse. We're the people who are going to eliminate Covid-19. Tax reform should be a doddle.

3. Also, is it time for a universal basic income?

Tax reform and also welfare reform. A universal basic income (UBI) is a base payment to everyone, like superannuation only you don't have to wait 'til you're old enough. One of its biggest advantages is that it provides personal and social resilience in tough times.

These last weeks, we've discovered how important that is. So, should it be a UBI or something better?

4. We have to stop spending more than we earn

In ordinary times, we spend more than we earn. Although it's easy to understand why that's a bad thing, we keep doing it because our economy is predicated on it. We're encouraged to do it. If we stop, the economy crashes.

Right now, though, we've been forced to stop, so this is it: our golden opportunity to reset the economy so we don't go back to such a crazy set-up.

Finance Minister Grant Robertson: big calls to make. Photo / Mark Mitchell

Spending more than you earn used to be discouraged, because it led to crashes. But that's no longer true. Modern economies have evolved to be so flexible in their commitment to consumer spending, the old fears of inflation and high unemployment, caused by normal economic cycles, seems to have largely disappeared.

Banks keep rolling out more credit, which makes them more money. We keep spending, which makes us think everything's fine. And governments keep smiling.

Only, it turns out there is a glitch after all. The economy isn't too flexible to fail, because external shocks can bring it down. Covid-19 has been a big sharp stick poked in the eye of the "always buoyant" joy-germs.

Household debt in New Zealand is at 93 per cent, according to one agency. One of the highest levels in the world. High debt levels mean low savings. And that means we've been harder hit and will find it harder to climb back up.

Prime Minister Jacinda Ardern: she also has big calls to make. Photo / Getty Images

Businesses will continue to suffer because of it. Quite rightly, they fear that a return to "normal" won't be normal. We won't spend as much. We'll want to guard what income and savings we have, and we won't have as much anyway.

A more resilient economy means a rethink to consumer spending. This is our chance.

5. It's the environment, stupid

Environmental degradation probably caused this crisis, as wild animals lost their habitat and were pushed ever closer to human settlements. Pangolins aren't supposed to be anywhere near people.

That same degradation will cause the next crisis and the next.

In some parts of the world, Covid-19 has advanced the cause of battling climate change. But elsewhere it has not: in the name of jobs, high-emissions industries are being propped up.

• Covid19.govt.nz: The Government's official Covid-19 advisory website

Lowering carbon emissions isn't nice-to-have stuff. If they're allowed to keep rising at the current rate internationally, the destruction wrought by Covid-19 will be dwarfed by what's to come. We know this.

Minister of Climate Change James Shaw: now is not the time to forget the climate. Photo / Mark Mitchell

In New Zealand, we're offered an opportunity. We could use the forthcoming infrastructure spend to make steep cuts to our emissions and establish an almost entirely renewable energy sector. Reforming transport is the key, but not the only thing we need to do.

Climate Change Minister James Shaw is pushing for reform. Infrastructure Minister Shane Jones still needs some persuading.

It is not, as some like to say, "utopian" to suggest these things. But it is a failure of imagination to think we're too helpless to change.

6. The most valuable people are not the best paid

Well we certainly always knew this. But as the crisis passes, wouldn't it be nice to see a permanent bump in status – with better pay and more respect – for checkout operators, cleaners and all the other people we actually need to keep society afloat?

I'd like a real economist to explain how to make that work.

7. We need jobs

Reserve Bank governor Adrian Orr said this week employment is the single most important element of the economy. Shane Jones is right about this, too: we need a lot more jobs, and quickly.

But how come the road-building sector has monopolised the discussion on job creation? It's not even a jobs-heavy sector.

More jobs in the environment, please: there's been a call for an army of pest eradicators and what a good idea that is. Another army in public health, another in social housing construction. There's so much we could do. If we get our priorities right.