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Matt McCarten: Cheap talk not the way to get NZ out of this crisis
Herald on Sunday
Do you get a sense that the Government doesn't really know what it's doing about the impending economic crisis? For 25 years, right-wing politicians and their fellow travellers have been telling us that state intervention is bad and that an unfettered free market will fix everything. But now that the world economy is in meltdown it's clear the Government needs to intervene to save capitalism from itself.
But because our politicians have been raised to believe right-wing nonsense, their reaction to date has been incoherent and inconsistent when it comes to what to do. It must be evident to even the economic illiterate that the neo-liberal ideologues have led us down a path of doom and have no answer to how to fix it. Here are three examples just this week.
First, the Reserve Bank Governor belatedly dropped interest rates and begged us to spend our savings to help the economy.
Yet, just a few months ago, this same guru was artificially inflating our interest rates and telling us to save our money rather than spend it.
Anyone who took his advice will now be out of pocket and must wonder what is going on.
Second, the Minister of Finance, Bill English, on Thursday told us he was going to have a stern talk to Kiwibank about why it had huge penalty payments for those homeowners who now will want to get out of their fixed interest rates and take advantage of this week's drop. He knows this posturing is disingenuous.
After all, the National Party opposed the formation of Kiwibank and has consistently opposed regulation of the banking system. Now it would have us believe that it will force our state-owned bank to lower its fees in an attempt to force the other banks to lower theirs.
Talk about market intervention. If Labour had tried this when it was in power, National would have called it heavy-handed socialism. The hypocrisy is rather amusing.
Third, John Key, the great free marketer, is now prepared to go a step further, hinting that he would be prepared to use public money to prop up some of our private monopolies if they get into trouble.
Isn't it interesting? When the economy is doing well, profiteering becomes a sacred cow, and any interference or involvement by the state is seen as anti-business.
Yet now things are about to go sour, these free-market disciples insist that the state intervene and cover any losses. But even if we wanted the intervention we have a problem; successive governments have dismantled the state apparatus and the tools that could be used to fix our nation's economy.
For example, English knows full well that he has no power to tell Kiwibank what to do. It would be anti-competitive for Kiwibank not to try to make a buck along the lines of its Australian banking competitors.
And don't get me started on Key's murmurings to use taxpayers' money to cover the losses of some businesses.
The clearest example of how hopeless our Government's response to the current crisis was when our Prime Minister boldly declared he was freezing MPs' salaries in a show of populism. He can't do any such thing.
The power to set parliamentary salaries was given to the boffins at the Remuneration Authority long ago. All Key can do is write a letter and hope they don't throw it in the bin. After all, they are required to ignore political interference. So much for setting a strong example.
This entire hapless situation that the Government is in is self-inflicted.
During the Rogernomics and Ruthanasia periods, successive governments went through a fetish of abdicating their economic power to unelected ideologically driven bureaucrats. Now that the proverbial mud has hit the fan, they can do very little except hope for the best. Why else do you think they're holding a series of talk-fests and a so-called Job Summit?
It's because they need to give the impression there is something meaningful going on. Don't believe me? Name one good idea about creating any new jobs since this Government was elected?
If the Government is waiting for the likes of Business New Zealand to come up with creative solutions, it will be disappointed. That employers' organisation's only solution is to freeze workers' wages and slash their employment rights.
Does anyone believe any of this has anything to do with creating employment? Common sense suggests that if workers had more money they'll spend it on goods and services that help the economy.
If they get less then it hurts the economy. Basic economics, really.
Therefore it will be revealing to see if Key sides with Business New Zealand's other idea to freeze the minimum wage when his Cabinet considers it on Monday. To date, Key has positioned himself as a moderate.
But next week he will have to make a decision about whether he is on the side of mainstream Kiwi workers on Struggle Street or on the side of big business. Even beneficiaries and superannuitants receive a guaranteed income increase each year.
So for Key not to increase the minimum wage for low-paid workers will show New Zealanders where he really stands. It's a litmus test and we should all watch closely.