I had fun last evening.

The Public Service Association and the Institute of Public Administration ran a debate on the topic ‘Are cuts to public services and asset sales in recessionary times the way forward for New Zealand?’ 

The main speaker was David Hall, Director of the Public Services International Research Unit, University of Greenwich, London.  On the panel were Bernard Hickey, MP Grant Robertson and me.  Not a very balanced line-up you might think.  Apparently the PSA had asked several ministers to front but they declined.  And most of the large audience seemed to be rusted-on PSA supporters.  They loved Grant Robertson for slapping down John Key for his remarks about our bloated and inefficient bureaucracy and Bill English for talking about ‘waffly’ social policy advice.  Anyway, none of that was a problem for me.

David Hall seems a decent fellow but his views are littered with economic fallacies and they fly in the face of economic research.  For a summary of them, see here.  Essentially, he argues that big government is good but bigger government is even better.  I felt dissecting his positions was like shooting fish in a barrel.  I even managed to feel sorry for the PSA – bringing him to New Zealand would have done their credibility with ministers and the heavyweight policy community no good at all.

Two bits of the evening were particularly enjoyable

I had been itching to ask a front-bench Labour spokesperson why is it that, of all the parties of the Left around the world, New Zealand Labour was in the shrunken universe of the resistant  – which might now be down to just North Korea – in opposing privatisation?  Communist China has long been into it, and now even Cuba.  Helen Clark’s Social Democrat friends have been into it everywhere – Germany with its Post Office, Sweden even with a hospital and a university.  You only have to look across the Tasman to see all Labor federal and state governments getting out of running commercial enterprises in the past 20 years – most recently the Queensland Labor government with the sale of Queensland Rail and the New South Wales Labor government with the sale of electricity assets.  Why was New Zealand Labour in such a weirdly different place?, I asked.  Can you believe what I got in reply?  “That’s not a question.”

The second bit of fun was to offer a bet to the PSA.  Earlier this week they had reacted to the government’s announcement about state sector cuts by saying they would drive the economy back to recession.  That’s a very testable proposition, I thought.  Any organisation that wants to be taken seriously should be willing to put its money where its mouth is.  So the personal bet I made is that there will be no recession (defined as two negative quarters of GDP) in the next two years if the government proceeds with its spending cuts ($200-300 million off new spending etc).  I said I wanted a serious bet – four figures, but they could name the first one.  (I could do with the money to help with my mortgage.)  Brenda Pillott and Richard Wagner Wagstaff looked sheepish but said they would come back to me later.  And indeed they did, but for only $100.  You can decide what to make of that, but I’m happy.

Anyway congratulations to the PSA for organising the debate – I loved it.

6 thoughts on “PSA/IPANZ Debate

  1. Excellent insightful post.

    Why is Grant Robertson so highly regarded (primarily by Tories for some bizarre reason)?
    He’s an absolute lightweight. Apparently his dissertation was a history of the OUSA, while he was president of the OUSA!

  2. Grant Robertson is an economic illiterate. And it is obvious. David Cunliffe is also one. Mr Robertson & Mr Cunliffe should have chosen a career in journalism and joined up with other bozos such as Brian Fallow in the NZ Herald.

    I’m amazed at how illiterate politicians are being put into positions/portfolios that they have no clue about.

  3. I’m glad you enjoyed the debate, Roger, and thanks for taking part. We’re not afraid of debate and clearly you aren’t either.

    As for the bet – I don’t think Richard (Wagstaff, not Wagner, by the way) and I are capable of looking sheepish. We were a bit taken aback by the prospect of a four-figure bet though – but perhaps that reflects the very different worlds that the PSA and the Business Roundtable exist in. We were happy to take the bet at a more affordable rate. We’ll shout you a beer when we win!
    Brenda Pilott

  4. Hello Roger,

    I too attended the PSA sponsored debate and found it enjoyable and informative. However, unlike you and several of the commentators here I considered that the other three panelists made worthwhile contributions and in particular Davd Hall, whose paper on “Why we need public spending” (have you bothered to read it?) made many valid points worthy of debate in the wider public arena.

    I wish to take you to task here regarding a comment you made during the discussion, that Keynesian economics has been thoroughly discredited during the past 25 to 30 years. The way I see it, it is the unregulated free market and monetary policies you so strongly support that have been discredited, but like the emperor with no clothes you seem not to notice. If one cares to view the situation from an historical perspective, political and economic events tend to be cyclic. If we go back to the end of World War 1 it is clear that supporters of the monetarist view of economic management were clearly in control and it was the implementation of such policies that led to the crash of 1929 and the great depression that followed. It was counter cyclic government spending as espoused by Keynes that lead to a global revival and the subsequent boom years of the 1950s and 1960s. Once again in 2008, when the global financial system went belly up it was massive government spending that bailed the financial sector out around the globe, or didn’t you notice.

    In regard to asset sales, you suggest that the New Zealand Labour Party along with North Korea seems to be the last line of resistance in opposing state asset sales. Whether your assertion is factual I have know idea, but the mere the fact that others are privatizing assets does not necessarily make it a good idea. The New Zealand experience with NZ Rail is a case in point. While sale of this asset may have been a good thing for private sector interests, as events panned out you would be hard pressed to convince me that our New Zealand society as a whole benefited from that sale.

    Finally, with regard to your bet, the way I see it the odds weigh heavily in favour of Richard and Brenda winning. In fact you may have already lost???

    Karaka Bay, Wellington

    • Michael

      My brief response is as follows:

      1. Keynesian economics: I cited Robert Barro for the US and Tony Makin for Australia in finding that stimulus packages had only small effects (multipliers were low), and left many governments with massive fiscal problems.

      2. ‘Unregulated free markets’! Markets can’t function without regulation, including the common law.

      3. ‘Monetarist’ policies? Bad monetary policy by the Federal Reserve was the major cause of the 1930s depression. No New Zealand government has followed a monetarist rule (targeting a monetary aggregate). On the other hand, many governments, including New Zealands’, have adopted inflation targeting.

      4. On asset sales, the World Bank has written, “Privatisation is now so widespread that it is hard to find countries not using the approach: North Korea, Cuba and perhaps Myanmar make up the shrunken universe of the resistant.” Clearly the World Bank had not noticed New Zealand on the map these last 10 years.

      5. The sale of NZ Rail was a bad thing for private sector interests – they never met their cost of capital, although they came closer (less capital was wasted) than under government ownership. The government bought back rail at a absurd price, and taxpayers are now saddled with losses as far as the eye can see.

      6. My bet? The government hasn’t even started to implement reduced spending plans!


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