Government intervention and the Right

The following article by Roger Kerr discusses New Zealand economic growth relative to the OECD. He complains that our economy is growing too slowly, and as a result we are actually falling further behind other developed countries.

As he is from the Business Round Table, he has to criticise government for this lack of economic growth. There are two ways he could do this that would imply government failure. He could:

  1. attack government spending and say that it is crowding out productive investment
  2. attack where government spending is going

In a sense, he chooses to attack where government spending is going in his article, but not directly. What I find interesting is that he complains that productivity growth is too low, and then blames the government for abandoning its goal of economic growth. So he is blaming government for a lack of action, rather than saying that some active government policy was a failure. This implies that he thinks government policy can increase productivity growth.

We also happen to believe that appropriate government policy can improve productivity and economic growth, it is nice to see that people on the right-hand side of the spectrum agree with us.

  • rauparaha

    Ha, that’s a great misrepresentation of Roger Kerr that you pulled off there. As consensus building as your approach is, I’m not sure that Mr Kerr would agree with the way you portray him. It’s a shame that irony doesn’t come across better on the internet, because I presume that’s how you meant your blog piece.

    The way I read his article, he seems to be saying that the best government policy is no (or minimal) government policy. He sounds more like a libertarian than an anarchist, so it’s not surprising that he thinks that the role of government is very important to the welfare of a country. To him though, the best government is one that is rarely seen, or heard from. Minimal welfare, removal of labour market protections, removal of trade barriers, privatised health and education; these aren’t the sort of things that we’re used to seeing on this blog.

  • Matt Nolan

    He is definitely not saying that no government is best, although he is saying a smaller government would be better. Although he believes in privatisation etc, I’m sure that we would have points of agreement about where government spending could be used to promote productivity growth.

    As long as he believes that some government action could lead to an increase in productivity and economic growth then there is some scope for agreement. After all, we’re not trying to define a normative case for government action, we just want to find situations where there is a positive case for government action. These are cases where theory points out the government would be useful. We have never defined whether a larger or smaller government then the current one would be better, as we are not trying to be ‘prescriptive’ in a sense. We are mearly stating occasions where government intervention has scope to work.

    I feel that Roger Kerr didn’t say he wanted the government to burn and die, and since he didn’t say that government could not positively influence economic growth, then he believes there is some role for government.

    Consensus building is what it’s all about my friend 😉

    P.S. If we were to write something normative, then we could write about the privitisation of health and education if that is what we believed. All that we would be required to do to stay within the context of this blog is to state areas where the government should get/stay involved e.g. private/public partnerships for roads is one example that I think most economists would agree on.