By Rose Patterson*
In two weeks the New Zealand Initiative releases its centerpiece report on economic growth.
It may seem counterintuitive, but the researchers here at the Initiative don’t actually think it’s the government’s job to grow the economy.
Yet when many people think about economic growth, they conjure up an image of economists pulling policy levers to force it on people.
Au contraire. Most economists, and pro-market liberals in particular, do not think along these lines at all. The government’s job is not to teach the grass to grow, but to get the damn rocks off the lawn.
In other words, the only job of a government in the economy should be to remove barriers (usually put in place by governments of the past) to allow people to thrive, live their lives, and pursue their own objectives. Some of those objectives will be economic in nature. But most people would agree there is more to life than economic pursuit.
Political parties in power want people to think that it is the government that builds the economy. Take the opening line of Prime Minister John Key’s State of the Nation speech this year. “We are making great strides towards building a stronger, more prosperous country.”
Politicians (all of them, not just John Key of course) love to tell you they are building the economy for you. They want you to attribute greater prosperity to their being in power, so they get your vote next time around.
But actually, the economy is just the sum total of the activities of people and businesses exchanging goods and services with one another.
The verb ‘to grow’ was once an intransitive verb, meaning that it doesn’t take an object. Over time, people have started using it as a transitive verb, which implies someone makes something grow.
To illustrate, consider these two sentences, the former uses ‘grow’ as an intransitive verb (its correct use), and the latter as an transitive verb (the way politicians use it with the object ‘economy’).
The grass grows. Let’s grow the grass.
How about, again, let’s just get the damn rocks off the lawn so we can allow the grass to grow. The change in the use of the world ‘grow’ illustrates an attitude change in the populace that economy is done by design by an omniscient, omnipotent, omnibenevolent government.
If we take the more classical liberal view that it is not the government’s job to ‘grow’ or design the economy from on high, and that plays out in reality, then growth will resume its status as a verb that needs no object. Economic growth will happen naturally.
This is because people have different objectives. For many people, bringing in more money is one of their life objectives, because it helps them pursue other goals, whatever they might be. The only real way to earn more money is by providing more value. This is not necessarily about pushing your nose harder to the grindstone, but thinking about smarter ways to do your work and provide benefits to other people in the world using fewer resources. Or, you might wisely consider what skills are in demand in the world and work on developing those skills.
Other people will be content with a certain level of income and after this point will divert their energy elsewhere, perhaps into community causes, hobbies, or more time with the family. Everyone has a different point at which more money doesn’t equate to more value in their lives.
And some would love to have more money, but weigh that up against the time taken away from raising their families or other activities. They make that trade off and only people can decide for themselves what is right for them.Yes, people don’t always make good life choices and decisions. But on balance, people are far better at knowing what is best for them than government is.The government cannot possibly know the individual situations, dreams, and values of each and every one of us.
Human nature means that many people will choose to add more value to the world to earn more money. The upshot of this is economic growth.
That’s the outcome. It’s not by design. Economy and society is built by people, not by government.
Ivan Snook, a very left-wing education thinker, recently wrote that education shouldn’t be there to serve a national economy. I actually couldn’t agree more. Education should be there to serve each child, to give them the skills they will need in life to enable them to pursue their own objectives and flourish in their own ways. Snook says that literacy and numeracy are “important but they are merely requirements for education not education itself”. Totally agree.
Getting these building blocks for further education right in the primary school is of critical importance if today’s children are going to grow up to have the choices that will allow them to pursue their own objectives in life. Economic growth is the consequence, not the goal.
*Rose Patterson is a Research Fellow at The New Zealand Initiative, a public policy think tank.