In the wake of the double downgrade, the debt blowout, and further afield the Occupy Wall Street movement, one thing keeps coming through for me. If we want to improve our lot economically, if we want to address the growing inequality in our society, we have to do things differently.
An interesting contribution to that debate in New Zealand is coming from Gareth Morgan and Susan Guthrie. Their latest piece appeared in the NZ Herald on-line today.
Morgan and Guthrie highlight the obsession with property speculation, the reliance on commodity prices to keep us afloat, a narrowly based economy and monetary policy and a tax system that fuels the worst of speculative behaviour. These are not new messages from Gareth, but there is more reasonance as we look at a global and national economy defiantly not recovering and staggering (or is that muddling) through the year. He puts it this way
There is a naive single dimension to our economic policy – we either raise or reduce the budget deficit or we raise or reduce interest rates. That’s the sum total of the intellectual capital being applied to managing our economy. That it could be so bereft for so long has led to the persistence of our “structural imbalance”. There is a chronic need for policy enlightenment and a sweeping aside of a simplistic policy orthodoxy that has been rigidly paid homage to for 30 years now.
Now, of course I don’t agree with all of their prescription, but the idea that we have to change the way we think about our economy is the core message, and it is one that Labour has heard and taken on board. We are offering a different way of doing things both from where the current government is, and where we have been.
Monetary Policy. Labour has already announced that we need to change monetary policy to address the structural issues in the economy, including the volatility of the dollar that makes life difficult for exporters and high interest rates that discourage investment in productive parts of the economy. While curbing inflation remains important, having that as the single focus is not working for us. Our policy is to broaden the objectives of the Reserve Bank beyond just controlling inflation to look other issues, such as employment and to support more aggressive interventions to deal with currency speculation.
Fairer Tax System. As noted we are going to introduce a Capital Gains Tax to ensure we tax income in all its forms and start to move toward investment in our productive economy. We also are going to return the top tax rate to 39c over $150,000, the first $5000 tax free and taking the GST of fresh fruit and vegetables
Procurement/Overseas Investment. Labour is going to make important changes to focus to support our own economy. This means new rules on government procurement, that will be compliant with our international ageements, but will require a process that gives Kiwi firms a fair go and will look at a wider set of criteria for awarding contracts including the impact on the domestic economy. We want overseas investment but as announced in 2010 we will put stricter controls on purchases of farm land, monopoly infrastructure, so that we keep control of our assets (and of course there will be no asset sales!).
And there is more to come in terms of innovation and economic development, to build on the R and D Tax Credits, Youth Employment. And more to come in Savings, where we really can build a basis for creating the pool of resources to invest in our own companies, just as Kiwisaver funds have done with Scott Technology.
This post is too long already, so I will come back to some of the social policy issues Morgan and Guthrie raise, but for now I am confident that Labour has a different vision on offer this year. Some of it is policy we have done before, but a lot of it is thinking differently, because as they say a definition of madness is doing the same thing over and over and expecting a different result.