TOP Leader Geoff Simmons wants us to focus on meaningful issues when we talk about "wellbeing" and "progress", and seek it in a system most likely to deliver what we really need

TOP Leader Geoff Simmons wants us to focus on meaningful issues when we talk about "wellbeing" and "progress", and seek it in a system most likely to deliver what we really need

In my previous article I set out how the eco-socialist movement is fixated on the claim that we can’t have exponential growth on a finite planet. I argued they are wrong.

Ultimately though it was a technical answer to a stupid question. In this article I will set out why I think the question is stupid, and what I think the important conversations are to have.

GDP is a crap measure of progress

The irony is that the same eco-socialists claiming we can’t have exponential growth also argue that GDP is a poor measure of wellbeing. Most economists would agree with this latter point.

Most people know the drill by now. GDP includes the Canterbury earthquake rebuild, which left Christchurch no better off than it was in 2010. There are other examples, including paying for security and cleaning up pollution. More GDP doesn’t mean we are better off.

There are examples that go the other way of course. We have seen huge improvements in computing power over recent decades, yet the price of computers has largely stayed the same. This makes us far better off, yet GDP is no larger because of it.

Anyway, can you see the contradiction here? We have a measure that is not quite pointless but certainly limited, then eco-socialists claim we are slaves to it?

Who says we have to grow GDP?

Who cares if we grow or not? Nobody is holding a gun to our head demanding that we grow our GDP. Politicians fret about GDP because it determines their tax revenues, which determines their budget spend up. But everyday people don’t care. They care about whether they have money in their bank account and can buy what they need.

Growth is also used by businesses as a sign of confidence to invest, but that is a fairly crude measure across the whole economy. Even if overall growth is stagnant, some sectors are growing and will need new investment, others will contract. 

Japan’s GDP was pretty much stagnant between 1998-2016, only having recently lifted above those levels. Even that recent surge seems to be a result of relative inflation as in $US terms GDP is still lower than it was in 1995. Importantly Japan have just changed the way they run monetary policy. Their GDP per person has grown a little since the 1990’s, but again not in $US terms.

Has the sky fallen in? No. Unemployment is 2.4%. One major reason their growth has stagnated is because of their ageing population. Their working age population has been falling since, you guessed it… the mid 1990s. Without immigration ours would have been doing the same about now.

As noted in my previous article, the Reserve Bank wants to see some inflation and they will jiggle things to make that happen. That means that they are likely to plump up nominal GDP over time. But real GDP? Nobody says it has to keep rising.

There is nothing to stop you from working fewer hours, getting paid less and consuming less. Go for it! Many people have already made this choice. Quit your job, move to Motueka and raise chooks if you want, nobody is stopping you. In fact, some businesses are moving to a 4 day week without reducing pay! They do this because people can achieve the same amount in less time if they are well rested. In other words, they are improving productivity. As I mentioned in my last article, productivity - doing more with less - is crucial to a future with a strong economy and flourishing environment.

There is no magical mystery force that is pushing our GDP figures higher every year. It happens naturally, because of lots of small decisions, individual people innovating, working hard and trying to get ahead. That is the miracle of modern capitalism.

In New Zealand’s case, GDP growth in recent years is mostly a result of our population rising. Before that it was because our cow populations were rising. That is the problem, New Zealand has never been very good at working smarter, in getting more from less. I agree with the eco-socialists here - New Zealand’s growth has been dumb and dirty and we have to sort it out.

In sum, the eco-socialists have set up a straw man of exponential GDP growth and are using it to beat us around the head. It is a stupid conversation to have in the first place. What questions should we be asking instead?

What do we really want?

What we all really want is progress, right? An improvement in our collective “wellbeing”. It doesn’t matter whether you are a lefty or a righty or an environmentalist, we all want the same thing. The argument is really over how we define progress, and how we share the gains.

As noted above, GDP is a crap measure of progress. Lots of work is going into alternatives, but we are unlikely to find one number that captures the different things we all value. Finding an agreed measure of progress is hard, and that conversation is ultimately what democracy is about. The “Wellbeing Budget” was nothing new in that respect. 

Let’s say we can find a better measure of progress, one that really reflected what we want as a society. One that included environmental impacts along with economic and social ones. If we replaced GDP with this better measure, wouldn’t we want that measure to rise over time? Don’t we all strive for a better life for ourselves and our children?

Finding a single measure will be hard, but in the meantime there should be one measure we can all agree on. New Zealand needs to improve productivity, to work smarter. This really is the core of what TOP is focussed on. If we improve productivity, if we work smarter, if we do more with less, we can be better off. Resources are limited, but human creativity is not.

What system is most likely to give progress?

Who cares about exponential growth? Continual progress is possible, and that is what we should aim for. In particular New Zealand needs to focus on improving productivity, on working smarter. The question is what way of arranging society will get us there? I argue that the answer is capitalism.

Capitalism provides us with the incentives to do better. To innovate, to create, to strive. No other system has as much promise to deliver. Where capitalism has bad effects it isn’t the fault of the people or businesses involved. It is the fault of government for not putting the right limits and incentives in place to make sure growth works for us all. The answer is to demand better government than we have now.

Capitalism certainly needs a massive reset to make sure it works for people and operates within environmental limits. Here in Noo Zillund, capitalism needs to be steered away from speculation on land toward investment that creates jobs and exports. Land speculation is a zero sum game that is making the rich richer and the poor poorer. It also makes it harder to look after the environment, as we have to push the land harder and harder in order to pay the mortgage.

Capitalism definitely needs a reset, but let’s not throw the baby out with the bathwater.


*Geoff Simmons is an economist and the leader of The Opportunities Party. 

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48 Comments

I was looking forward to this article.
But I guess I'll have to admit my stupidity cause I really didn't get it.
I'll try again later

... my take on Geoff's article is that GDP is a faulty yardstick to base our lives and policies on ... that we've flooded the country with cows , and with immigrants ... silly us ... and that we've allowed rampant speculation in land ... very silly us ...

Tried again. Yes capitalism does Ned a complete rework to get it working for us ALL both collectively and individually.
My solution? Tear down the banking sector, take it back to being a service industry as opposed to a bloated parasite requiring constant growth to survive. I can see that then possibly allowing progress without destroying every resource as we are want to do currently.

What we need is 2020 Vision from all Pollytitians and Bwankers who think they have the answer for the Futures.

A stable environment after the horse has bolted, is just where Oh Where?.. should we house the poor and down trodden in the rush to borrow more and more and never have to pay the price of endless Inflation ourselves by printing money in a declining State for bleedin Houses.

That we could produce a simple vision, for simple Houses, in a simple environment, at little cost to man-kind, would be so much better, than following the rest of the herd in crapping on our Future.

Only our Lords and Ladies have little vision, with both eyes shut, they think spending is the answer and borrowing into oblivion.

Happy 2020 Vision....All change, no change...do enjoy your mortgage free State...you lucky, lucky ...Suckers.

Oh and thanks for the financial advice.....in small Capital letters....please ..Note.

Great article Geoff, straight talking instead of theoretical fluff and fancy vocab and to the point. I'll look into TOP's policies closer, might even have to vote for you

The use of the term Eco Socialist really just illustrates a lack of ability to distinguish between the issues Geoff. So I guess it also highlights why you are doing political rhetoric, you are little good at much else. Slinging rhetoric is the stupid trying to convince other stupid people they know what they are doing when they don't. If they did they would be employed doing something practical.

You could probably all me an eco liberal with your daft characterisations. I want all the politicians and immigrants to bugger off so I can have more of the isolated and pristine New Zealand I grew up in to myself.

Scarfie - shooting the messenger is a populist's way of shooting the message, when said shooting doesn't stand scrutiny.

And you do shooting the messenger best, using a two-word earworm. Politics is littered with such.

Geoff is capable of much better. His Hook Line and Blinkers isn't as good as Mick Field's The Catch, but it's a good stab. He should do a similar effort looking at the Limits to Growth.

Progress and growth do not mean the same thing. You can have progress, it could come in the form of people being better educated, but that is not growth. You probably can have some sort of perpetual progress, it is mostly our curiosity that will ensure that, but growth, nope.

Is the ludicrous (to me, anyway) Higher House Prices Forever policy created by the 2% inflation target that Paul Volcker said is without any empirical support?

Capitalism works because it encourages experimentation. Rules and regulations discourage experimentation and create a cartel for existing large players.

Rules and regulations encourage the Trust that is essential for capitalism. On the other hand randomly unpredictable changes to rules and regulations discourage investment.

Sorry, Geoff.

You're a smart enough guy, and you've touched on the debate we need to have. Actually, the debate we needed to have had 40 years ago.

Productivity per person isn't the issue - nobody flaps their wings to get to London from here, they use a finite, thus-far-irreplaceable, energy stock. There's one of your problems. The other is that capitalism requires growth, or deflation, or ends in collapse. No other alternatives. Currently, the combined forward bets so far outweigh the post-peak planet to supply, that collapse is the most likely option.

Good luck with that. And ask yourself a question: Can profit still be charged in a no-growth world? What will the extra be spent on?

The hint that capitalism requires growth is in its very name, capital and the acquisition of it.

Agree with the general statement. But I doubt our energy stock is by any means finite (while the sun is still burning that is)

You need fossil energy - and feedstock - to build your solar-collecting technology. I live on solar, have for years, but it is limited by how much aluminium, copper, lithium etc, we can extract. Which makes it essentially limited.

Then there's the fact that every bit of sunlight is doing something right now. Essentially, we have already displaced forest and other biodiversity, claiming the sunlit acreages for our own use. We call them paddocks, and forget they used to do other things.....

Have a read-up on Energy Return on Energy Invested - note where solar sits. Then ask yourself whether the global financial system (nothing more than a collection of forward bets) will survive descent to that level? And if your aluminium, copper, lithium etc etc, will continue to be supplied. This is a systemic problem, and you need to see it in a systems manner:

https://www.youtube.com/watch?v=HMmChiLZZHg

Wouldn't solar powered civilisation work fine if the earth had an approriate and unchanging number of people? I feel as if I'm one of those flies in a bottle that double in number every minute until the bottle is full at noon and it is just a few seconds before noon. Posit an appropriate steady population then there would be sufficient energy and extractable metals for the foreseeable future.

. .. the cost per watt of solar power is decreasing so quickly , it's only gonna be a short few years before it's a no brainer to cover everything with panels ...

Farmers could offset their methane emission obligations by slapping a solar panel on each flank of their cows ... MFPP's .... mobile farting power plants ...

Totally agree Geoff. Now please come out and say clearly that TOP is not favor of the "big NZ" policy run by successive governments and instead values a small population in NZ and all the benefits of such.

Japan's labour shortage will be fixed mostly by drawing more women into the workforce. Female work participation rates have just crossed 50% (cf NZ at 65%) but most Japanese women work part-time or in low-paid jobs.
And the mandatory retirement age is rising.
NZ could do the same without importing tens of thousands of unskilled immigrants by raising wages and improving conditions, which would draw more women into the workforce and also young (and young-ish) people out of the lower end of tertiary education, which in many instances functions as a holding pool for the unemployed (and making them pay for the privilege).

You and I think we have imported tens of thousands of unskilled immigrants; our govt when asked says they are skilled and productive. Obviously there are both types of immigrant so the argument should be about the overall average. No need for an argument if stats were published matching immigrant IRD returns with work & resident visas. The govt does not collect & publish them so I am suspicious.

Geoff Simmonds blames Maori gangs on colonisation and "theft of land". Too much influence from the woke Workshop.
https://www.theworkshop.org.nz/

Other than yea doh.
Relevance?

Good Stuff. Makes far more sense than the other parties are saying and not doing if you get my drift.
There is another related major flaw in our economic management that I would be interested to hear your opinion on. That is the current CPI/OCR linked model. My views are -

This model totally prevents society from benefiting from increased productivity as follows
As productivity increases, relative prices of the effected products fall. This is not allowed by the inflation/interest rate model, so interest rates are dropped. This means money is channelled into fixed asset speculation so these assets rise in price. e.g. housing. There is also a rise in the price for goods that are not subject to strong competition and the forces that drive productivity (in NZ case building materials, food, petrol, power) The net effect is that the price falls due to rises in productivity are more than offset by the price rises from fixed asset speculation and price rises in low competition, low productivity sectors of our economy; so that inflation can remain positive. By this mechanism there has been a huge transfer of wealth from working people to some industrialists and the capital owning classes.
I think that there is another aspect too. That of the savers. If you are a saver and interest rates drop, then you are less inclined to spend. So as I have been saying for years now; while the model that ties high inflation to raising interest rates makes sense, the converse does not. It is totally counterproductive and the only sort of investment that it encourages is in non productive assets like property. We have been labouring under the effects of this flawed model since the 2008 crash and really have not made any meaningful progress in addressing the problems. So now that we are facing even more problems we are "turning up" the knob further.
"The beatings will increase until the morale improves" Or as Einstein said - the definition of insanity is to keep doing the same thing and expect a different result. Or as somebody else said (I forget who) Those that do not learn from the lessons of history are destined keep on repeating the same mistakes.

Who can actually prove that 'Finite' is actually a valid term or state...there is no way of knowing the absolute sum of anything....has anyone actually measured all the oil on the planet? No, its just an estimate at best...and so is the term finite. There, that will send sparks flying...
On our economy and gdp....the tipping point is fast approaching where our economy will finally be focused on tech and not low value farming and tourism and we will have a better economy because of it...the much maligned Clarke Labour Govt knowledge wave is building up to tsunami status...and not before time...

Xero , born and bred in NZ ... is the epitome of a knowledge wave company .. now listed in Australia ( ASX : XRO ) they command a market capitalisation of $A 12 billion ... had they stayed in NZ , they'd be the NZX's biggest star ....

.. no fossil fuels needed to create this behemoth ... none needed to keep it going ....

Yes there bloody is. Where do you think the money comes from that gets paid to Xero? People think these tech companies draw their money from fresh air, such as those who claim that Zuckerberg and co have gained their riches simply from innovation. They have NOT, they have gained it from people using their services who have used/worked with the finite resources to gain their money to pass onto to other, seemingly environmentally benign companies.
And cloud computing requires masses of energy.

Zuckerberg is a hero of our times .... a great innovator ... his services to mankind deserve a Nobel Prize ... and not a single CO2 particle produced ... although , probably a few CH4's trumpeted out after the gang have a brainstorming session and some hot spicey ribs ...

Are you and skidiv one in the same?

Mr skudiv and I are half brothers , same mother ... after a terrible cock up when the Eketahuna Bull Semen truck crashed into the Taihape Sperm Donors van ... and the samples were mixed up . ..

Ahem. I was born in Eketahuna and have the paperwork to back that up.

... yup ... their Bull Semen registry has always kept very accurate and detailed records ...

Somebody doesn't think before they splurge. Hungover, perchance?

https://www.theguardian.com/environment/2012/aug/01/facebook-google-carb...

Without energy, there would be nothing produced. What, exactly, would be the demand for Xero then?.

Zero.

the GBH statement is incorrect.

4th Estate – your comment re finiteness, is incorrect. The planet is indeed finite, as is the amount of every mineable resource within it. Whether you’ve discovered all of a finite resource, is indeed a different matter – but exponential growth makes this potential disparity of no useful consequence.

Exponential growth is not linear. It doubled, then doubles again, then doubles again, a hockey-stick, J-curve, call it what you will, the graph trends to the vertical. Thus, even if you had underestimated the remaining stock of say, oil, by 50%, you’d only buy yourself one doubling-time. At 3% growth, you only bought yourself 24 years (although, of course, as your oil-supply tailed off, your rate of growth might be less than guaranteed…..).
You don’t need to know how much of anything is in place, to know what happens after the penultimate doubling. And then you need two planets, four, eight…… Ain’t gonna happen.

As for the ‘knowledge economy’ and similar rhetoric, I don’t care a jot how much people wheel and deal virtually. The problem comes when the virtual wealth attempts to be cashed-in for processed parts of the physical planet. As in a currency-trader buying a condo in Hawaii, and flying to it. The moment that transfer happens, you’re into finite territory. Only so-many quarter-acres, only so much oil.
Sorry, Labour have a long way to go – and if you’ve got any connections in there, tell them that someone (in MBIE, I’m guessing) has got them clutching at short straws with hydrogen.

Take a look around you. Every day. Do you think we can get rich indefinitely without transporting and consuming physical stuff? Do you think we can continue agriculture as practiced?
My bookshelf includes Simple on Soapbox and Humanism in Politics, but it also includes Making a Difference and I’ve been Thinking. They all sprout from a time when the planet was seen as unlimited. Time we moved on. Did you get the Aussie smoke where you are? Small world, ain’t it?

If the planet was not finite, it would not be a planet, it would be the entire universe

I disagree and on hydrogen, I saw the early filling stations in California way back in the early 2000s, the technology is steadily increasing and so is the footprint of the fuelling infrastructure although fossil fuel companies are pulling every trick in the book to prevent their dominance being usurped. Once we reach tipping point I predict we will see some enormous leaps, to cleaner transport particularly.

You can disagree - but it's fact. So you can't be right.

Food for though, perhaps?

Research the EROEI of hydrogen. Check out the containment problems. The problem is the energy required to produce it. Even Arnie has diverged....

Rubbish, were you one of the sledgers who used to pillory prius and insight drivers when they first came out? As my mate who has a nissan ev says 'welcome to the leaf life' i guess you still drive a v8?

You guess that powerdownkiwi - who has been sounding the alarm on peak oil for years and lives off-grid on solar - drives a V8?

... it's a converted V8 , running off the methane from fermented goat faeces ...

Back to hydrogen : it seems it'll be useful for those applications where EVs fall short ... such as long distance travel , or carrying heavy loads , towing , etc

.. so , the future looks like a mix of different energy options , not just one " winner takes all " situation .

Sadly, powerdownkiwi, logic and reason will not persuade anyone who does not wish to see reality. It hasnt these past 50 odd years and it wont now but as we have wasted this knowledge for that time we are now living the proof....hold on tight for the rollercoaster ride.

... global hydrogen production is around 60 million tonnes ... its estimated to rise ten fold to 600 m. tonnes by 2050 ...

Grey hydrogen ( from fossil fuels ) still a counts for 96 % of production ...

... it's an infant industry ... with alot of research and development required ... just as solar was 20 or 30 years ago ... when the naysayers poo pooed it too ...

Hydrogen has a niche usage due heavy vehicles, where the time to recharge batteries and the weight required make them infeasible compared to hydrogen. Also the sort of work where you don't care too much about energy efficiency because what matters is simply getting the job done.

The energy efficiency of hydrogen is around 30-40%, batteries are already at around 65-70% and quickly getting better.

.. it is an exciting time in the energy sector , watching the rapid developments in solar and in hydrogen technologies ..

I dont see the need to be angry and deeply depressive as someone around here is : the future looks bright ; mega $ billions are pouring into research and development ...

... I'm predicting a tipping point with solar , too ... the point where the cost curve intersects with the incumbent mainstream alternatives ... then it's a no brainer . .sell the Contact Energy shares , stop paying those usurious sods , go off the grid ..

Battery technology improvements will be game changers too . .. the energy industry generally , is in an exciting state of flux . ..

Very enlightening article Geoff. Thanks. I have had a look at TOP's policies - very sensible. You have my vote.

One step at a time
Fix the (our) finance system, maybe try applying the existing laws (its ours so we can run it to our benefit):

https://youtu.be/UqWUvIBHR7I
Max is on fire!

... watching it on SKY 92 right now : " Debt Wish ! " ...

Fixing our economy would be a good thing.

The first move would be to factor in real sustainability - as in physical non-degradation.

That will remove the growth component, which is the major reason we are in trouble