The answer is less government. What’s the question again?
The report is quite spectacular in how far it goes beyond the frontiers of right-wingedness.
Whereas normal right-wingers say that the government shouldn’t pick winners by backing specific industries or technologies or companies, Brash & Co have taken this several step further: The government shouldn’t even aim for goals like “more savings” or “more research” or “diversify exports”, because that’s basically trying to pick winners.
Whereas normal right-wingers believe that when the government step out of the way, the market will step in to provide something better, Brash & Co just don’t care. If it doesn’t make economical sense for parents to go to work and send their kids to an early childhood centre, then it’s not worthwhile. Whatever the market delivers up is, by definition, the optimal outcome.
For primary healthcare subsidies, not only do they ignore the point of the entire field – to ensure people don’t get sicker and require more serious medical intervention – and claim that there’s no public benefit, but they seem to take ideological offence, warning of “increased regulatory control and administrative hassle that tends to accompany greater government funding, stifling innovation and enterprise”.
What does that even mean? That individuals fail to innovate with medication at home? That we don’t have enough entrepreneurial alley-surgeons with a scalpel and a bottle of scotch?
But the bit that takes the cake is what we usually consider to be actual productivity: People. Out of a 150 page report, this is the section on human productivity. In its entirety:
The size of the workforce, and the level and quality of “human capital” – the skills and aptitudes each of us acquire through work, training, education and experience – are important parts of any story of wealth accumulation and improving living standards
It seems unlikely that deficiencies in this area can explain much about why our incomes lag so far behind those in Australia and elsewhere in the OECD. There are no direct measures of human capital, but data indicate that the share of the New Zealand population with a tertiary qualification is now among the highest in the OECD (having increased markedly in recent decades). Skill shortages were a common theme in business surveys this decade – but that is to be expected when demand is running well ahead of the economy’s underlying productive capacity. It is well known that New Zealanders in employment work long hours by international standards: across the population as a whole, hours worked per head of population in New Zealand averaged 887 in 2008, higher than in either the United States (852) or Australia (864), and well above the figure for the OECD countries as a whole (805).
Our workforce is maxed out, with high workforce participation, high employment rate and long working hours; our businesses report a skills shortage, but that’s nothing to be concerned about, because it’s just demand outrunning our “underlying productive capacity”… as in skilled workforce. Ah, so businesses are reporting a skills shortage because there’s a shortage of skills. Nothing to worry about then. Less government, that’s what we need.
It’s hard to avoid the conclusion that this is a big fat patsy, generating outrage so that whatever the Tax Working Group report suggests will look moderate and sensible by comparison.
Stay tuned: Will live blog from the TWG.