The IMF, in all its infinite glory and knowledge, has decided to give New Zealand some advice on fiscal and monetary policy. Here is my take on their sermon from the heavens.
We generally allow capital and goods to flow freely between nations nowadays – which is a good thing. However, that leaves us in the situation where the whole purpose of a nation appears to be working for the benefit of labour in that country.
Now it may well seem like the best thing to do – if we didn’t do it we would undoubtedly have lower incomes. However, this would be because the people in abject poverty overseas now have more options and will be able to manage a higher living standard.
Often people blame globalisation for the abject poverty we see overseas. But it isn’t globalisation that is the problem – it is the lack of globalisation. Closed labour markets, which are effectively massive labour unions, are a large part of the reason why poor countries can’t pull themselves out of poverty.
Now we may value the welfare of local citizens more than we do foreign people – some people have said so here. But even in the case where loosening migration would lead to worse outcomes for locals (which is not always the case), we would have to discount “non-local” people quite substantially not to let them in. Remember that the human cost isn’t all on one side – when we close off migration we are implicitly falling the lives of people overseas as well.
How is this like a labour union? Well labour unions do all they can to increase workers wages, often at the cost of the unemployed (who are the competition of the employed). Unions thrive by hurting the unemployed through artificial barriers – and they inherently value employed people more than unemployed people. Change unemployed to “non-local” and employed to “local” and we have the same thing for nation states.
Given the relatively unimportant issues that get wide coverage in the blogsphere I am very surprised not to see many people ranting about the possible “revoking of visas” for temporary workers in New Zealand.
However, when I went across the top 50 blogs according to the Tumeke rankings yesterday there were no posts on the issue. Looking at my regular reading today, I noticed a post by Not PC, and I know Anti-Dismal has covered the issue in the past (Paul, if you have a link to the post where you called this National’s buy NZ made campaign could you tell me so I can link to it ).
Does no one else have an opinion on the issue – either for or against? Revoking someones visa on nationality grounds because of a recession is quite a big, loaded, move – it seems like the thing you are either against or for, not neutral about.
If anyone has written on the issue, put a link in the comments and I’ll link here …
Update: Eric Crampton has written about the issue, looking at data to work out the attitude of NZer’s – it is an excellent post, I suggest you read it right now. Brad Taylor comes out as well. Paul Walker discusses here. Nigel Kearney represented his frustration before all of us here. Bill Bennett discusses here.
Update 2: Casey Mulligan on the issue in the US (ht Eric Crampton)
I have noticed that there is a belief out in New Zealand that there is a set “lump” of jobs – and if foriegn people come in they take them, and “New Zealander’s miss out”.
Now if this matters to us this may be concerning – however, we have been talking about migrants “creating work” and saying that they do “different jobs” than the New Zealand trained workers.
The idea that there is a fixed lump of jobs does not fit this description. However, the idea has a name: The lump of labour fallacy.
The confusion stems from a fundamental misunderstanding surround what labour is. Labour is an input to production. However, as people (who we value in society) get their income by acting as an input we sometimes view work as income. From this step – we end up saying that other people are “stealing our income” by doing this work.
However, what this argument ignores is that labour is an input to production – if you bring in more people, more stuff can be produced. If the addition person is really productive (skilled labour, or domestic poorly provided unskilled labour) then when they come in to society they quickly help everyone else.
As a result, policies to kick current skilled labour out of the country will be counter-productive. Even if we didn’t care about the welfare of foreign people (which of course we do – and really should equally, but oww well) we are effectively cutting off our nose to spite our face. Keep that in mind.
The Sanlu poisoned milk saga was extremely sad, no-one likes to hear of deaths caused by products.
Beyond the tragic deaths, the saga was expected to hurt Fonterra heavily – they had a large stake in Sanlu, and it was expected to sully their reputation in China. However, this wasn’t the case.
After the crisis became public in September, Chinese dairy companies started buying milk from overseas rather than sourcing it locally, he said.
That was the largest of three drivers of the increase in Asian revenues.
It appears that the Chinese public still trusted Fonterra – but did not trust domestically made milk at all. As a result, Fonterra ended up with a huge boost to sales. A surprising result.
Two of my favourite applied economists have come out in support of inheritance taxes (to some degree):
In NZ we have David Grimmond of Infometrics:
A means of correcting for dynastic privilege is to introduce a uniform tax on capital. The absence of bequest taxes, in combination with a lack of uniform tax on capital, is a stark aberration in the New Zealand tax system
Then in the UK we have Patrick Nolan of Reform:
In this environment it is unclear why reducing inheritance tax should be a priority. It could be argued that falling property prices mean it would now be relatively cheap, with some estimates indicating that the cost has fallen by almost half to £1.3bn for 2011-12. Yet this is money that could be put to better uses – including reducing other more harmful taxes.
I am a fan of inheritance taxes – as they don’t distort economic behaviour to the same degree as other taxes. If we want to change the tax system this is the sort of tax we should be introducing – with a corresponding cut to the top tax rate.