The Post: Beware the politician talking up a crisis

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Crises are a double-sided coin: terrible for a public, but an opportunity for sharp-eyed politicians. As the Obama staffer Rahm Emanuel once said: “Never allow a good crisis go to waste.” Such events can be used to justify extreme measures that the public would not normally tolerate.

So powerful, in fact, are crises that some people will manufacture them. As the fortieth anniversary of the 1980s Rogernomics revolution rolls around, its architect, Roger Douglas, has popped up to claim that we’re now in “as much trouble” today as we were in 1984, and that we once more need a hard-right shift.

Where to start with such stupidity? First, Douglas exaggerates the economic situation we faced in 1984 following Robert Muldoon’s near-decade in charge. While one specific policy – the refusal to devalue the New Zealand dollar – was exhausting our stocks of foreign currency, and the economy was massively over-protected, the nation was hardly about to go bankrupt.  

A slow and steady reorganisation could have got things back on an even keel without widespread social destruction. Instead Douglas and co used the “crisis” narrative to justify slashing taxes and launching a fire-sale of state assets. 

His successor, Ruth Richardson, attacked the living standards of the most vulnerable, cutting benefits and helping crush trade unions. Wages for many workers plummeted, while the deepest forms of poverty doubled overnight. Now, every day, the New Zealand state has to pick up the pieces of this economic and social vandalism, as it deals with the damp and dangerous housing, the third-world respiratory diseases, and the devastating consequences of the long-term unemployment and loss of hope bequeathed to us by the likes of Roger and Ruth.  

The reforms also did little to solve our long-term economic shortcomings. Our productivity is now further behind that of our rivals than it was when Douglas took control. Hardly surprising when you consider what a drag poverty and poor health are on economic performance. Douglas’s solution would be to double-down on privatisation and deregulation. “Beatings will continue until morale improves,” as the trade unionist Craig Renney likes to say. 

The crisis-mongers were wrong then, and they’re wrong now. New Zealand is not broke, nor about to be. Public debt, at around 20% of GDP, is low by global and historical standards, and although tax revenues remain insufficient, the government’s books are still heading back to surplus in a few years’ time. 

This week, infrastructure minister Chris Bishop has been trying out a subtler version of the narrative that the government is broke. User-pays and part-privatisation – toll roads, water meters, private financing of infrastructure – are inevitable because, he argues, decades of underinvestment have left a deficit “we cannot buy our way out of”. 

User-pays, though, doesn’t magically create more money to “buy our way out”: it just shifts the cost, from taxpayers as a whole to individual users. Which isn’t the right direction. Our government may not be heavily indebted, but we as individuals are: private household debt, most of it mortgages, is a staggering 166% of disposable income.  

The poorest households in particular are not well-placed to take on more costs. Yet broad-brush user-pays – tolling roads, for instance – will take a bigger chunk from their budgets than it will from richer ones. 

While user-pays may have a limited role – water charges for the largest properties, or tightly targeted congestion charging – it should not be the default. If we need to raise petrol costs to reduce climate-change emissions, that must be offset by increased cash transfers to poor households. Generally speaking, infrastructure that advances basic rights – freedom of movement, or access to water – is a collective good, something people are entitled to as citizens, and should where possible be funded from the collective purse. 

Private funding for infrastructure doesn’t stack up, either. Because firms face higher borrowing costs than the government does, it is more expensive upfront. And since that private borrowing has to be later repaid by the state, it cuts into our ability to fund more infrastructure in the future. Nor is there compelling evidence that private-sector efficiencies will offset those costs. 

We must, of course, do better as a country. We need bipartisan agreement on a shared infrastructure pipeline, and far tougher procurement by central government. The proposed National Infrastructure Agency could – if well-directed – help there.  

And, while there is no crisis, we do have grave and long-standing economic problems to solve. But they are mostly about under-investment: in basic infrastructure, of course, but also in retraining and upskilling, in productivity-boosting capital, in the machinery that drives our factories and in the people who work alongside it. Some of that investment – in skills, especially – must come from individuals and firms, but much of it from the state. The solutions to our economic problems involve the state stepping up, in a more active and smarter manner, not stepping away.