How about some economic stimulation that trickles up, not down?

How about some economic stimulation that trickles up, not down?

There have been many reckons of late for what New Zealand (and, for that matter other countries) should do to kick-start the economy to bring us out of the COVID-19 doldrums. Now I have to state my view upfront that some of the problems we're facing now directly result from our current economic system that requires constant growth and consumption to fuel itself. While I don't have the alternative model all worked out, it seems less consumption would stand us in good stead.

But saying things like that quickly descend into calls of socialism (and, as we know, many view socialism as worse than leprosy) so let's put such revolutionary ideas to the side for a time.

Outside of that sort of fundamental economic remodelling, however, I've been wondering about what sort of stimulus initiatives the New Zealand government could come up with that would not only fuel the economy but would do so in a bottom-up way.

You see, there have been many opinion pieces from business leaders, steeped in the multi-decade neo-liberal model - that have suggested that the way to success is to attract big money foreigners either as investors or landowners. Their theory goes that the riches they (theoretically) introduce into the country will flow down so that it benefits society as a whole.

Notwithstanding the fact that we've been sold this idea in the past to very little benefit (here's looking at you, Mr Thiel), even when it does go like this, we run the risk of creating a less equitable society. One in which New Zealanders have access to work, but work which sees them in servitude to a modern take on the landed gentry. I'm not sure that New Zealanders really want to mow the lawns and clean the pools for Silicon Valey tech gurus, Swiss financiers or South American industrialists.

But here's the thing, there is mounting evidence that the neo-liberalist theory of trickle-down economics doesn't work. Introduce wealth at the top and you certainly benefit the top strata of society, but generally, that results in increased property speculation which, rather than benefitting those lower down on the economic ladder, actually makes life worse for them through reduced affordability of housing and the like.

So how do we make the economy move, while benefitting those at the lower levels of society? How do we encourage economic flows at all levels, rather than just at the top?

Our government spends billions of dollars a year on its internal procurement - buying stationery, furniture, clothing, cleaning, catering and a myriad of other services that it needs. My business, Albion Clothing, has been directly involved with that given the contracts we have to supply uniforms for agencies such as the New Zealand Defence Force, Fire and Emergency New Zealand and the New Zealand Police.

But this is only a tiny proportion of the needs of these organizations and, not surprisingly, the vast majority of government procurement sees cash spent overseas. So how can we use that fact to change our own economic model?

How about our government enacts a policy whereby procurement must take place domestically if at all possible (no, I'm not suggesting we buy dismantled cars from Japanese car manufacturers and assemble them here in NZ the way we used to - I'm talking about stuff that CAN be made efficiently in New Zealand).

Imagine then, that in return for procuring locally, the government also enacted a policy whereby locally procured items would have to involve companies that pay the living wage. All of a sudden those skilled technicians who make Police uniforms, who supply government stationery, and who supply the raw materials that Kainga Ora use to build state houses, would be paid a wage that was independently and neutrally assessed to be a living one. What happens then?

Well, all of a sudden, those people who are paid the minimum age and currently have to skimp and save in order to buy their kids school uniforms, pay their rent and put food on the table, will be paid a wage that allows them to do so. And in doing so, a significant proportion of that extra cash spent by the government directly facilitates economic stimulus at the grassroots. It's a circular economic move that keeps money flowing and does so largely within our own economy.

It's not a perfect scenario, and people will rightly point out the issues around relativity. Those on lower incomes tend to apply a relative lens between their and others' wages. If you're currently paid, say, $2 per hour more than minimum wage, then you're going to potentially be pretty dissatisfied if, under this new scheme, your relative position is seemingly worse.

But details aside, it seems to make sense to me. This is money that the government already spends. Simply spending it in New Zealand means our economy enjoys the financial benefits of that expenditure, not another economy.

In fact, I'd go so far as to suggest that the financial delta (ie the price difference between buying locally and buying from offshore) is more than made up for by the reduces government expenditure that would come from increased employment, better health outcomes (since people can eat better and afford better housing) and more optimal mental health outcomes (a gainfully employed citizenry is, generally speaking, a happier one).

So there's an idea, Jacinda. And while it's something that ACT might argue with, what logically-thinking party could deny a plan that both benefits businesses and workers?

Andrew Pengelly

Account Manager at One New Zealand

4 年

While we are constantly told that the current economic system that requires constant growth and consumption to fuel itself, is that really true. For example consider hair dressers, painters and other sole traders. I doubt any of them expect 20% growth year after year. Let's face it there are only so many heads you can trim or walls that you can paint in a day. So there are existing economic models that do not rely on constant growth, they simply rely on good, consistent business. The reason most people push for constant growth is because it is the opposite of going backwards, which is bad, however for some just being consistent is enough.

James Lunday

Director at Common Ground Southern + Walker Lunday Architecture. Working for a Just and Sustainable society

4 年

Is time to bury neo liberalism . Low movement , low consumption and stable state economies circulating goods and wealth

Michael Smith

Continuously Improving Lifelong Learner Focused on Results

4 年

I want to comment that on the other side of the USA from Silicon Valley, "Data Center Alley," in Virginia, taxes, housing, and the cost of living is much lower. Loudoun County is perhaps the wealthiest county in America with a median annual income of over $130,000 US. It is possible to have significant wealth in an area and accessible homes for working and retired in the same area. The cost of living is higher than average, although nothing near what it is like in that area of California. Affordable housing codes and regulations are not perfect, although successful.

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Ross Milne

Retired at Being

4 年

Interesting proposition Ben Edward Bernay's was the founder of the PR industry and his books where principal in the teachings of Dr Goebbels. They are also prevalent in some of the comments that follow below. Economics 101 consists of two papers Microeconomics and Macroeconomics. At times these two subjects contradict each other. The idea that competition drives prices down and quality up is a fallacy! Look at the artificial electricity market here in New Zealand. It is NZ generated power, yet we have enabled overseas owners to benefit from the so-called "return on investment" with pricing justified by asset revaluation and infrastructure duplication, multiple billing systems and head office buildings. The price went up and the quality of service went down. And not to mention the so-called competitive banking sector! This is what is meant by selling our means of production to enable the servitude of the local population. Wages and salaries are controlled! I often remind people about the rules of the game of Monopoly! There are the original rules from the UK game where the bank is the means by which money is redistributed. Then there are the American rules where fines and rates etc, accumulate in the middle, and thus the bank pays out and only receives interest and original house and property sales. The American rules means the games is over quicker and luck plays a bigger role, but the outcome is the same! Maybe it is time to reestablish the original rules where the community is considered more important than the individual? Just a thought!

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