In the Fairfax paper this week, Colin James asks, Will unequal tax cuts be good for the economy? After covering the usual contestation between government and opposition about who gains what from the October 1 changes, he concludes by saying:
Much has been made of the rise in income and wealth inequality since the 1980s in our sorts of “Anglo” economies.
That may be an element in recent political volatility and might partially explain conservative parties’ failure in Britain and Australia to win majorities in otherwise propitious circumstances: the 1950s-60s upward socioeconomic mobility stalled in the 1980s. In turn it may be a factor in faltering economic growth, now the house-bubble-borrow-and-spend taps have been turned off.
Intriguingly, the Economist magazine, not noted for soggy leftism, several times directly linked inequality to growth rates in a recent survey of Latin America: the more unequal a country, the slower its economic growth.
Of course, Latin America is different. Isn’t it?
Colin’s Otago Daily Times column is The long haul back out of the 2000s economic haze, another look at our economic situation and economic prospects:
New Zealanders were the most indebted in the developed world after now-bust Iceland. That debt was lent by foreigners: New Zealand’s country debt to the rest of the world, at 86 per cent of GDP, poses a risk that in another global shock credit lines might be pulled in.
Despite our 2000s profligacy, we have a real possibility of a reasonable decade ahead. We may even, with luck, avoid a house price plunge: prices might just go sideways and let inflation engineer the fall of 30 per cent or so in real terms needed to align with fundamentals.
That however depends on exports to Australia and China, and they both have their own problems. Australia is heavily reliant on mining (as Rod Oram has noted previously) while China needs to contend with “water; widening social and economic divisions; corruption”.
Rod Oram’s Star-Times column, Water forum offers sign of hope, covers the Land and water Forum, as Colin James did last week. Rod is a bit more cautious than Colin about whether Nick Smith has achieved a break-through in collaborative processes:
. . . it remains to be seen how far the government will buy into the forum’s recommendations. If it treats them as a framework for an enduring consensus on water, then it could run a robust, publicly supported national water strategy.
Then it, business, environmental and other lobby groups and the wider public would want to use the collaborative process to find common ground on other very difficult issues such as energy strategy, adaptation to climate change, urban land use and design, or even the likes of savings and superannuation.
But if the government treated the forum’s recommendations as a menu from which it selected politically acceptable items, or worse rejected others under pressure from lobby groups, it would make a mockery of the collaborative process. It would leave us mired in the same old adversarial politics.
Rod also talks to Nine to Noon about Transpower versus the business lobby and the government’s changes to the rules for foreign investment. He sets out some interesting ideas of his own for the latter:
Oram: It would be far more interesting if approval was contingent, for example, on a large-scale investment that would improve the industrial capability of New Zealand and increases exports beyond a business-as-usual case. Or there would be safeguards, so for example if a foreign investor bought a New Zealand company any money that that company had received in the way of government R & D grants over, say, the previous five years were refunded. You could be an awful lot more strategic about that — as other countries have been.
Ryan: Unless you lose your investment to other countries.
Oram: No but other countries are strategic. They know what they want, and they know what to ask for and expect from foreign investors. And we don’t.
Brian Easton publishes an index of his articles on gambling economics.
If you have thoughts about the issues raised by our commentators this week, or other interesting pieces of commentary you’d like to highlight, then leave a comment below!