The Pike River mine disaster - good for the economy?
The Pike River mine disaster - good for the economy?
A recent article by NZ Herald business editor Liam Dann highlighted the self-conflicted nature of economic discourse.
The tenor of the article was that things weren't too bad: "Two fresh sets of data suggest the economy is holding up well despite low levels of business confidence," he said. The reliability of business confidence surveys aside, the types of data sets used to inform this opinion are informative in themselves.
One was retail spending on electronic cards, and the other is the ANZ Truckometer, which uses traffic flows as an indicator of economic activity. Both had registered recent increases, and therefore this was all a thumbs-up for "growth" in the economy. Dann quoted several private sector economists who shared this view.
It turns out, though, that the major catalysts for the increased retail spending were the implementation of the Government's Family Package, and increased fuel prices. And with the data in for the majority of the third quarter, "the Heavy Traffic Index was looking supportive for the economy", according to ANZ chief economist Sharon Zollner.
So the "growth" in question, then, turns out to be predicated on the introduction of a glorified government soup kitchen and having to cough up more to drive to work, and yet more heavy traffic on the roads, with all its attendant major road damage and added congestion. Whoopee for growth.
Yet again, economic commentators are conflating what is better termed economic "churn" with growth, where churn merely signifies economic activity of any nature, be it good, bad or disastrous for citizens' general well-being.
Of course, this is all akin to the use of other crude metrics such as Gross Domestic Product (GDP) to gauge economic performance.
Most economists have long recognised the flaws of such measures as GDP. A few lifetimes ago, economics guru John Maynard Keynes famously said words to the effect that if a man marries his housekeeper, it's bad for the country, as her housekeeper wages no longer count towards GDP.
Even a mainstream politician such as Robert Kennedy said of GDP in a 1968 speech that it "counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonders in chaotic sprawl. It counts napalm and counts nuclear warheads ... It measures everything, in short, except that which makes life worthwhile".
But while readily admitting its limitations, the same economists will plead that it's the best tool available. This is as pathetic as saying, "I know my clock isn't working, but at least it's right twice a day."
Frank Greenall
Economists have really got to get their A into G and work out a better economic vocabulary — one that reflects the true indicators of what any economy ultimately exists for — the overall quality of life of its constituent members.
To not do so is to leave the door open for the likes of John Key to brag of a "rock-star economy" when we're simultaneously tanking in a whole raft of OECD negative social and environmental statistics.
To be fair, work has been going on in this regard over the years (including seminal work from Marilyn Waring), with the development of alternative, more accurate measures of quality of life such as Genuine Progress Indicators. Assorted jurisdictions have even incorporated them into official policy. But advances have still been glacial.
However, with both our present Minister of Finance and Governor of the Reserve Bank calling for more sensible economic well-being indicators, perhaps we may finally see an actual sea change.
How much overdue can it be when we still obscenely employ a metric that counts the Pike River mining disaster as an economic plus?
