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Opinion: Jobs summit lacked game-changers to boost productivity
March 10th, 2009
By NZ Business Roundtable executive director Roger Kerr
Now that the dust has settled on the Jobs Summit, how might we put it in perspective?
In the lead-up to the Summit there were some predictable outbursts.
Veteran anti-globalisation campaigner Jane Kelsey hyperventilated. She saw the Summit as “a Trojan horse for the business sector” and likened it to the 1984 economic summit which was apparently “a carefully orchestrated piece of pageantry chaired by Ron Trotter” (actually David Lange – academics should get their facts right).
Professor Kelsey should calm down and watch Slumdog Millionaire. It is a rags to riches story of entrepreneurship in the new India, the product of sweeping moves to cut taxes, liberalise trade and deregulate business.
India needs to go further to lift up more of its poor, and it is unlikely to abandon globalisation any time soon.
Former Waikato University vice-chancellor Bryan Gould intoned that the Treasury and Reserve Bank should “forsake ideological purity” and opt for an Obama-style fiscal stimulus package.
Mercifully, there were no echoes of these themes at the Summit.
And interestingly, even though the election only four months ago was largely about economic directions, no one argued that the government was heading in the wrong direction with its economic policies.
Opinion polls also suggest a majority of the public supports its return to more conventional and less interventionist economic policies.
There were no calls for more fiscal stimulus. Participants seemingly understood that the existing stimulus is large and that any further boost could put our credit rating at risk. This would raise the cost of borrowing for all New Zealand firms and households.
Moreover, under New Zealand’s floating exchange rate regime, monetary policy is critical for sustaining domestic spending and incomes, whereas increased government spending would largely spill over into imports and increase the deficit in the current account of the balance of payments.
Business representatives did not call for handouts or tax concessions. Reductions in top effective marginal income tax rates would do more to stimulate investment, output and employment.
There was a big focus on regulation, ranging from pleas to remove red tape to calls for not introducing climate change measures until an economic recovery is well in train.
Strikingly, for what purported to be a jobs summit, discussion of job destroying labour market regulation was off-limits, presumably in deference to union participants.
If they saw nothing wrong with present arrangements, why were they afraid about defending them?
Australians present were heard to wonder at the Kiwi aversion to open debate.
Fortunately, the government has signalled further moves on employment law.
None of the 20 main ideas that came out of the Summit were potential game-changers in terms of the government’s goals of raising productivity and economic growth rates to reach Australian income levels.
Cutting the government spending share of the economy, strengthening our regulatory and fiscal constitutions, refocusing local government on core public good functions, putting central and local government commercial activities into the private sector, addressing Auckland governance, port rationalisation, education and welfare reform are among the many more important policies for major economic improvement.
Two ideas that featured in media coverage were a union proposal for a 9-day working fortnight and a joint government-banking sector fund to assist distressed companies.
If the recession deepens, it may well make sense for some firms to reduce working hours to preserve jobs. But other options are productivity improvements, reduced wages, and other changes to working conditions. Individual firms and their employees are best placed to work out what adjustments suit them best, and the case for government intervention beyond training programmes seems dubious.
Moreover, the overriding imperative at present is to reduce our vulnerability to external funding constraints. The falling exchange rate is telling us that the economy needs to expand export and import-substituting activities overall through increased competitiveness. It makes no sense to assume
that every industry contracts.
It may also be wise to make some contingency plans for further government action if economic conditions worsen dramatically. A joint government-private sector fund may have merit in placing decisions at arm’s length from politics.
But outside the banking sector, where risks to the financial system as a whole may be involved, only very exceptional circumstances could justify taxpayer support for distressed firms, and great care would need to be taken to avoid prejudicing the interests of other suppliers of capital.
Some of the other ideas were a product of do-it-yourself economics rather than informed analysis.
A wag might suggest that the prime minister’s idea of a national cycleway could be based on sections of the nationalised rail network – along the lines of the Central Otago Rail Trail – to save the country millions of dollars of financial losses on the business.
Politically, the Summit can be seen as an extension of the government’s moves to have a relationship with the Maori Party and a dialogue with the Greens, and many other inclusive initiatives.
This is a far cry from the tribal ‘We won, you lost. Eat that!’ style of government of recent years and augurs well for a better consensus on national directions.
_________
* This piece by Roger Kerr first appeared in the Dominion Post, March 9, 2009. Roger Kerr (rkerr@nzbr.org.nz) is the executive director of the New Zealand Business Roundtable.
Tags: Bryan Gould, David Lange, Jane Kelsey, Jobs Summit, NZ Business Roundtable, Roger Kerr, Ron Trotter
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March 10th, 2009 at 11:09 am
Roger,
I highly recommend this white paper:
White Paper on All the Options for Managing a Systemic Bank Crisis by Bernard Lietaer
Center for Sustainable Resources,
University of California at Berkeley
http://www.lietaer.com/images/White_Paper_on_Systemic_Banking_Crises_final.pdf
I have highlighted points here:
http://neuralnetwriter.cylo42.com/node/66
Steve
March 10th, 2009 at 2:40 pm
I’m with you Roger – it is indeed a seriously scary thing when all the supposed captains of industry get together and don’t come up with a single innovative idea.
It is indeed an even scarier thing when the majority of the ideas they do come up with are a list of various programmes/projects for taxpayer subsidised labour market intervention.
But, the scariest thing is the fact that to ’save face’ this Government is actually planning to press ahead with these ideas – AND it’s come up with another of its own – taxpayers subsidised airfares for overseas visitors;
http://www.stuff.co.nz/business/2247764/Allowance-scheme-for-9-day-fortnight
They should have had a summit on ways to reduce government expenditure in order to cope with the increased cost of unemployment – because there really is nothing, no programme and no project that is going to cost as little as simply paying people the benefit over the course of the downturn. It just seems madness to attempt to rationalise increased capital expenditure for non-essentials (such as a bike path) whilst also carrying the burden of the increased expenditure on unemployment.
And as Steve points out – just think – they could have actually spent the day doing something constructive – like discussing a complementary currency: a way to keep business people in business, rather than a way to keep unemployed people “pretend employed” through silly work schemes.
March 10th, 2009 at 2:50 pm
@ Kate
Please read:
http://www.interest.co.nz/ratesblog/index.php/2009/02/27/jobs-summit-eyes-bike-track-super-charged-retail-bond-market-and-co-investment-equity-fund/#comment-17817
..and make your comments
How can you keep business (production) with a stagnation in consumption ?
March 10th, 2009 at 3:40 pm
“I’m with you Roger – it is indeed a seriously scary thing when all the supposed captains of industry get together and don’t come up with a single innovative idea.
It is indeed an even scarier thing when the majority of the ideas they do come up with are a list of various programmes/projects for taxpayer subsidised labour market intervention.”
Kate, could we really expect anything else ?
I’m of the opinion that we need to think out of the box. For that I suspect you need people who are free to think outside the norm.
Business people are too limited in their focus to understand the bigger picture, unless they take an interest in the greater economic issues with an open mind.
Steve
March 10th, 2009 at 4:48 pm
Steve you wrote:
I’m of the opinion that we need to think out of the box. For that I suspect you need people who are free to think outside the norm.
Business people are too limited in their focus to understand the bigger picture, unless they take an interest in the greater economic issues with an open mind.
Sorry Steve you are wrong. As a successful person running a business in a competitive world one have to think outside the norm and one have to understand the bigger picture.
You only have to look into our website to see how outside the norm I think.
The bigger picture is a possible worldwide depression with unfortunately not many options of “thinking outside the norm”. This is a situation where for a start one option is highly successful = all of us have to work together on the ground floor- where life is happening. Businesses, government and communities to tackle the problem.
What is your idea?
Of course this is certainly an option to consider: http://www.sunshinecable.com/~eisehan/woergl.htm
March 10th, 2009 at 4:53 pm
The country has a choice thru its leadership
see some tough times or go bankrupt.
Everyone splitting off doing their own thing will send any country or company bankrupt.
RK you of all people would know this.
As a CEO or even PM one hast to get everyone on the same page.
One needs to listen to everyone
One WILL have their ideas on how to get thru the crisis.
So what better idea than call a Summit or brain storm whatever the term maybe involve them in some answers/solutions. Some ideas will be the same as you, even some parts will improve on what you have in mind…Others will just be grandstanding in their own personal interest without concern to the country..At the end of the day, Key IS involving, listening and not just heading in a given agenda
Avoiding bankruptcy is not just an economic soln..it will not work but has to be combined with a social team work with everyone on board.
JK you make the comment, appears rather -ve thu
“Politically, the Summit can be seen as an extension of the government’s moves to have a relationship with the Maori Party and a dialogue with the Greens, and many other inclusive initiatives.
This is a far cry from the tribal ‘We won, you lost. Eat that!’ style of government of recent years and augurs well for a better consensus on national directions.”
Yes ..social/national motivation…basic tools of good leadership, as against dictatorship.
Even the knighthoods is a tool to get this country on the one page.
Key is doing OK so far, how well history will tell, he is on a ‘mission’ and I would not like to be on the wrong side of the ‘Smiling Assassin’
March 10th, 2009 at 6:43 pm
As Steve mentioned earlier on annother topic (Job summit eyes bike track..):
http://projects.exeter.ac.uk/RDavies/arian/wir.html
Yes I’m aware of this method, which is quite commun in my home country among certain business- people and certainly an option in thougher times for NZ, but one cannot exclude other good ideas.
March 10th, 2009 at 9:10 pm
Steps – surely you’re not suggesting that re-establishing crony colonialism is going to ’save’ us all?
Australia got rid of British honours back in 1975 – a sign of building its own identity and nationhood;
http://www.itsanhonour.gov.au/honours/our_honours/index.cfm
I am aghast that John Key within his first week as PM visited the Queen and requested this action – without one ounce of public disclosure or public deliberation on the matter. I assume he made the decision unilaterally in agreement between himself and an inner circle of friends (many of whom are now eligible to take the British titles).
And he can ensure himself one in the future as well, of course!!!
March 10th, 2009 at 9:41 pm
Kate
without one ounce of public disclosure or public deliberation and how much public disclosure or public deliberation did we get from Helen as she rammed thru her ’secret’ republican agenda, jeez Kate take off your rose tinted glasses for a minute will you.
These are not ‘British’ titles, they are NZ ones, this is not colonialism it happens to be part of our culture, good and bad.
I have a Scots surname it doesn’t make me a Scot but I can enjoy the bagpipes.
Neven
March 10th, 2009 at 9:52 pm
neven911, I wasn’t commenting on Helen Clark’s move to disestablish them – I have no idea whether there was or wasn’t public disclosure and deliberation before the change, but frankly I’d be surprised if there was not. Might go and research it and find out.
Get real – Sirs and Dames are a part of the British empire/noble class carry-over system. JK wants his name preceeded by Sir someday, simple as that! Heck, he waited less than a week to secure it!
March 10th, 2009 at 9:52 pm
Walter,
You’ll notice this part of my quote
“unless they take an interest in the greater economic issues with an open mind.”
I’d be happy if most of the business people in NZ fit into that category, and that I was wrong
Because then there is hope.
Thanks for the WIR links.
Steve
March 10th, 2009 at 10:33 pm
neven911 – yes, there was a review done by the Honours Advisory Committee back in 1995 before the changes. The report of that Committee is publicly available;
http://www.dpmc.govt.nz/honours/overview/history.html
And note – Helen first took office in 1999 – meaning the 1995 report of the Committee could hardly have been working off of her ’secret’ republican agenda, as you suggest!
March 11th, 2009 at 7:05 am
I agree with the headline.
I have listed some suggestions that might help here:
http://www.interest.co.nz/ratesblog/index.php/2009/03/06/new-zealand-could-go-bankrupt-within-next-5-years-markets-believe/#comment-17877
Les Rudd
Invited Member, New Zealand Manufacturers and Exporters Association
March 11th, 2009 at 8:54 am
Kate
Knighthoods are non-heritable honors and yes they date back to the middle ages, when achievement meant gentry. And so what if they evolved from the “British empire/noble class” system, the point is that they evolved.
We have a national honours system, what I object to is the cultural cringe/ideological social engineering that you appear to require.
Onward Sir Galahad, or should that be Onward Comrade Galahad, most meritorious bearer of not to sharp implement that should not be used to slay indigenous wildlife.
Neven
March 11th, 2009 at 9:44 am
Kate Says:
“Steps – surely you’re not suggesting that re-establishing crony colonialism is going to ’save’ us all? ”
No ..It doesn’t matter if these are NZ knighthoods, or “crony colonialism” thats a separate issue….What does matter is in these times to achieve, our leader, who ever he/she is NEEDS the public on his side and Sir Colin Meads sounds real good rather some obscure letters after his name….Motivation is all about image.
Tuff times means some real bad thing has to happen to a lot of people, and to maintain a motivated leadership following means a lot of “positive” popular things must happen also….
Putting aside judgemental issues, The rise of Hitler and the marketing concepts of Goebbels is a classic example….I dont think Key intends to disinherit minority groups and put them in concentration camps….on the other hand I think he does believe (ass-u&me) in 1 flag 1 country 1 people, regardless of race.
March 11th, 2009 at 10:01 am
Steps
I’m sensing some grudging admiration for our new leader.
Interestingly if you remember back to the election a lot was made of how polished Helen was versus the awkwardness of Key, little is made of it now, in fact I think he trades on it (stop moving your hands John!)
Neven