Progressive Turmoil

Rational and experienced employers care about their workers because they have learned that it is profitable to do so. At the margin, it is often more profitable to train, support and retain someone than to burn them off and start again. And even if you do start again, lessons will have been learned.

The same considerations should apply from the perspective of NZ Inc (if you’ll please pardon that collective noun). The welfare system links wealth/income generators to net beneficiaries, making it rational for the former to care about the latter. Why then is no-one seriously investigating the links between social and economic policy?

In particular:

1. it would be nice to see the welfare working group (WWG) looking deeply into the reasons for underemployment, from both sides of the relevant markets. I’d expect a complete analysis to end up recommending a combination of sticks and carrots.
2. and what’s with these Auckland mayoral candidates? Notwithstanding the recent troubles in JohannesChurch,  Auckland surely has the most to lose from inequality-based social unrest, and the most to gain from including and upgrading the skills of poor Aucklanders. So why do none of the candidates even mention social issues, let alone the social/economic links?

Do politicians pander more to older voters than younger ones? Some say yes, and their arguments make a bit of sense. They argue that young people are less engaged in the political process than older folks. One reason might be that older voters can see very clearly what is in store for them (superannuation) whereas the trade-offs are less apparent for the young.

In this light, its interesting that John Key is ignoring Treasury advice over changes to superannuation. Contrast this with the fact that “full funding” is now clearly the policy for ACC, the levies for which are not paid by the retired.

A few days in Papua New Guinea has reinforced the idea that “social problems” go hand-in-hand with income inequality. PNG has the 19th most unequal income distribution of 137 countries (NZ is in position 83 on the same scale). The richest 10% of people enjoy 40% of the income; the poorest 10% get 1.7%.

Crime is endemic. Looking around Port Moresby, the high walls, razor wire, and guarded gateways are everywhere. I get driven from compound to compound in cars with locked doors. Restuarants look like prisons – armed guards are posted at steel door entrances. I hate to think what the actual prisons are like, but there are scary clues. There is also a pretty serious HIV/AIDS problem; the highest rates in East Asia and the Pacific.

Yet, at the same time, the people I’ve met are lovely, friendly, shy, curious. It is a bit hard to fathom, particularly on a short visit, but here is a (true, recent) story that might help. An ex-pat was woken at 3am in his “secure” hotel to find a gun under his nose and three guys in his room. They cleaned the place out, taking everything except his pyjamas and passport. At the end of this, while two were outside loading up the loot, the third returned to the room. The victim assumed he was about to be murdered, but instead received a sincere apology. I guess the message was “we don’t hate you or wish you harm; we just want your stuff”.

One way to think of the left-right economic policy debate is between fans of two different economic outcome criteria: equity and efficiency.  For the right, the goals are to increase total surplus through trade, market liberalisation, better productivity and low taxes. They focus on efficiency, innovation and growth. By contrast, the left are more interested in equity, fairness and the distribution of value.

Well call me greedy, but I want both.

(more…)