phil sage (sagenz) :
Zimbabwe is all the evidence you should need as evidence that government policy can influence long run growth.

Phil. I think there is an asymmetry in the effects governments can have. In most cases governments can do bad things more than they can do good things. This is what Zimbabwe shows. It was 20 years ago a healthy economy – at least for Africa – today it is not – even by the standards of Africa. Getting an OECD type country to growth is harder because all the things that a government can do to help growth – rule of law, protection of property rights, good institutions etc – have, by and large, been done but it can do bad things by backtracking on the good things.

ah so now you are saying something completely different. Not that government does not have the capacity to influence growth but that New Zealands current approach and the public understanding is basically incompetent and will not lead to catching up with Australia. I agree with that which is why I live in the UK at present. Not because their govt is competent but because I can mitigate that incompetence more easily.

Should the NZ public understand that voting for middle class welfare and punitive tax and treatment of entrepreneurs then New Zealand has a chance.

FWIW I agree the past and current government focus on “productivity” and “growth” is meaningless. It is changing depreciation rules, committing cullen fund to investment in nz infrastructure and other concrete actions that will make a government difference. teh nz public can help by voting out middle class welfare

Singapore for example has over time moved into and out of various types of activity, for example some decades ago it was in textiles, but got out of those, it went into electronics, but has consistently upgraded it’s participation. At the same time it went for financial services and latterly for Regional HQs.

It has been aided by a government focused on making it easy to do business and long term investment in the education system and core infrastructure to enable businesses to prosper. Further, the Central Provident Fund mechanism has provided a large pool of savings which the Government has been able to tap.

NZ has relied on primary produce and for a long time did not really attempt to provide any added value to that product.

In addition, far too many NZ businesses look to government for direction. Many successful business reach a certain size and then the owners sell out.Business is regarded with suspicion in NZ you only have to look at the way so many revile the private sector. Success is only lauded in this country if you are an All Black.

Too many people assume the world owes us a living and suffer under the delusion that because we make some good wine an d we have lovely scenery that we do not need to bother.Yet we have a poorly educated workforce, which is I suspect one of the reasons we have relatively low productivity. We need to graduate better qualified people from our schools and colleges.

We need to work smarter and seek to understand what we can supply into world markets. In addition I would suggest, we look at applying some of the approaches Singapore used in the 1970s and 1980s to encourage companies to set up shop there. In our case we should focus on service and technology industries. In addition growing our population by say another million would not hurt either.

“Excuse some of my more robust language, I do enjoy engaging in this forum on occasion.”

You have been perfectly reasonable this whole time, so don’t worry about it.

“Two examples of good government policy approaches producing similar positive outcomes over a long period. But they certainly do not prove the opposite as you and Chris Dillow assert”

They are examples of two very different “mixed economies” – which is a group NZ fits into. Now, they are not polar opposites in the widest sense, but in terms of good and labour market policy we do fit inbetween them.

“Zimbabwe is all the evidence you should need as evidence that government policy can influence long run growth.”

Zimbabwe is not an example of a mixed economy like NZ – it is a basket case.

Extremely bad government policy, when the government is effectively thugs, or are heavily mixing up the allocation of resources, is an example of where government policy influences long-run growth.

My point is that, given our current structure I do not think there is scope for any change in government policy to get us anywhere close to Aussie – even in this case I did not say the influence was zero, just small.

The policy discourse from both the left and the right of the spectrum suggests that the government can “organise” the economy and “increase output”. Even if this was desirable (which is not clear given the issues with statistical measures) it is effectively the same assumption that drove communist countries such as the USSR – hence why I compared these guys to communists.

Utterly utterly utterly confusing cause and effect. Sweden prospers by committing to a homogenous highly educated workforce with tight social constraints that ensure the working age population has worked productively over a long period. America has pursued a more laissez faire approach with respect to health care and education, although it is difficult to argue it is more laissez faire with regard to industrial policy. Two examples of good government policy approaches producing similar positive outcomes over a long period. But they certainly do not prove the opposite as you and Chris Dillow assert

Zimbabwe is all the evidence you should need as evidence that government policy can influence long run growth.

“Good and bad govt policy does have an impact.”

I agree that there is an impact, in fact I have never said there was zero impact that would be too extreme. My point is about the size.

The actual magnitude of governments impact on the economy is a lot smaller than is being sold here. Fixing up tax policy would help improve the allocation of resources, would improve growth, and would increase welfare for society. But it would not be nearly enough to help us catch Australia.

“curent gov is investing public money in broadband infrastructure. It can impact resource allocation through tax policy. All we need is to set those incentives in a way that the investment choice favours nz more often than australia. govt can invest in long term education to ensure a better skilled workforce rather than paying people to sit at home witgh their thumb up their arse. a private potential employer who can get $10 of value out of an hour of work when the minimum wage is $12 is not going to create jobs.”

Policies do make some difference. But this stuff about “creating jobs” it sounds like a planned economy. The goal of government should not be “maximising GDP”, it should be helping to help improve the allocation of resources that occurs though the market process by cleaning up market failures, improving the robustness of institutions, and providing public goods where there is a public mandate.

This is how I would expect the NZ right to talk – not to say “lets increase productivity and catch Aussie”. This sort of talk really, really, really, sounds too much like Stalin circa 1930s to me.

Truly, in a mixed economy the government is equivalent to a large firm – it is too big to fail, but it is not the driving force of the economy (contrary to politicians belief of their massive importance).

I am all for a commission that will clean up government policy, improve the tax structure, and make the trade-offs associated with govt policy transparent. But all this stuff about catching Australia and targeting productivity is just a straw man to sell policies that a given group wants.

As Chris Dillow says (vis Paul Walker):

“The opposing poles of mixed capitalism – social democratic Sweden and freer market US – are consistent with similar, maybe indistinguishable, growth rates.”

This implies that any belief that government can substantially influence the long-run growth in a country isn’t really consistent with evidence.

In no sense was Zim farming a “planned economy”. Farmers competed on international skewed markets and succeeded in making zim reasonably prosperous until govt policy completely screwed the country. you are hiding behind semantics. Good and bad govt policy does have an impact.

“Long-term growth is based on technology, resource allocation, and to some degree the structure of institutions in the economy. I severely doubt that the government can turn around and improve any of these things to the degree required to “catch Australia”. ”

curent gov is investing public money in broadband infrastructure. It can impact resource allocation through tax policy. All we need is to set those incentives in a way that the investment choice favours nz more often than australia. govt can invest in long term education to ensure a better skilled workforce rather than paying people to sit at home witgh their thumb up their arse. a private potential employer who can get $10 of value out of an hour of work when the minimum wage is $12 is not going to create jobs.

need i go on….

I would also note that I used the communist title for another reason. The focus on GDP (which isn’t even a direct measure of income, let alone wealth, and is pretty out of whack for small open economies) misses the point regarding social happiness.

The Soviet Union and China were also determined to push GDP during the Cold War (even if it involved making lots of things that no-one really wanted, or were unnecessary) when the USA was willing to allow society to make consumption goods – thereby illustrating how much happier people in a society that allowed freedom really were.

We could increase productivity statistics by just making things that can be made the most cheaply (as the change in prices isn’t included in the stats) – but this type of command and control isn’t in anyones interests. Trying to make it sound like government should push productivity is a command and control way of talking about things – and I don’t like it.