Only One Idea

The National Party’s economic policies have a disturbing amount of deja vu to them – as I/S notes, they seem to largely revolve around tax cuts, gutting the RMA and attacking the public sector.

What’s interesting is that these policies are almost identical to the ones Don Brash was pushing back in 2005 … which are almost the same as the ones from 2002 … yet the world has changed beyond recognition in that time. You’d think that moving from the halcyon days of 2005 – main problem: too much growth – to the recession-filled 2008 – main problem: not enough growth – would result in some kind of change of direction or re-weighting of economic instruments. Not if you’re the National Party, apparently. It reflects an almost touching faith in an outmoded economic dogma.

But as the Nobel-winning Joseph Stiglitz notes in a very thoughtful article in Vanity Fair this week, the thinking that got us into this problem – specifically tax cuts and deregulation – is unlikely to get us out of it. And the traditional austerity approaches to economic management are likely to make things worse, not better:

This is not the time to turn to the old- time fiscal religion. Confidence in the economy won’t be restored as long as growth is low, and growth will be low if investment is anemic, consumption weak, and public spending on the wane. Under these circumstances, to mindlessly cut taxes or reduce government expenditures would be folly.

Which is exactly what National seems to be planning, unfortunately – and if history is any guide, it seems beyond doubt that these policies will make the recession longer and deeper than would otherwise be the case.

National needs to get rid of its ideological baggage, and start thinking about the economy in a way that deals with reality rather than in terms of dogma. As it stands, John Key and Bill English are starting to look out of touch with our economic reality – based on the evidence, space aliens could invade Earth and enslave us all, and the National Party would still be suggesting tax cuts and RMA reform as the solution.