Treasury widens its world view
''There are different ways to deliver wellbeing, and the Government owning stuff is just one of them.'' Tim Ng
The Government’s bean counter, Treasury, is becoming a little warmer in the way it sees the economy, although it strenuously denies it’s going fuzzy.
The state economic forecaster publishes the Government’s Investment Statement in March, and for the first time its scope will officially be broader than just sheer financials, taking in natural, social, human, and physical impacts as well.
‘‘The wellbeing aspect of public policy must be much sharper,’’ Treasury’s chief economic adviser Tim Ng says.
Since the Global Financial Crisis shook confidence in neo-liberal economics, ‘‘wellbeing’’ economics has gained global credibility.
The annual investment statement, Treasury’s stocktake of the Government’s massive balance sheet, is the wellbeing focus’ first real deployment.
‘‘Government assets such as schools and hospitals, roads, defence equipment and financial investments contribute to the (four) stocks of capital - natural, social, human, financial and physical - which generate tangible and intangible benefits relevant to wellbeing,’’ Treasury says on its website.
But Ng says the new approach will be no less rigorous in its economic analysis.
Focusing on wellbeing allows Treasury to advise about the tradeoffs between different choices of government spending.
Some of the advice could be controversial.
It’s possible, for example, that Treasury may identify instances where the wellbeing of New Zealanders could be increased by selling assets owned by government departments so the money can be used for other wellbeing-enhancing things.
‘‘There are different ways to deliver wellbeing, and the Government owning stuff is just one of them,’’ Ng says.
Treasury is also looking at wealth differently, seeing our collective national wealth in terms of those ‘‘four stocks of capital’’, which include a lot of intangibles, and a lot of things that can’t be priced easily, like biodiversity, or the conservation estate, or trust between people.
But, Treasury believes, good public policy increases the capacity of the four capitals to generate well-being for people in one of ‘‘five dimensions’’ (and here things do start sounding a little more leftist).
The first asks whether the result is sustained or enhanced, not eroded by current generations at the expense of future generations (sustainability).
Then whether the result is shared equitably in a way that sustains or enhances (equity); promotes respect for all people and groups to live the kinds of lives they value (social cohesion); is resilient to major systemic risks (risk management); and generates material well-being (economic growth)
In March these dimensions will be used to report on the performance of Crown entities like Housing NZ and the Department of Conservation, Air New Zealand and KiwiRail
Not every economist is happy with the Treasury embracing wellbeing in its policy advice. Economist Bryce Wilkinson from the New Zealand Initiative, an economic think-tank funded by big business, believes Treasury should remain ‘‘at the hardheaded end’’ of the spectrum when it comes to analysing government policy.
Tangible analysis Wilkinson approves of. Intangible makes him nervous.
‘‘Resources are scarce. Taxpayers’ money is precious. It’s important it’s well spent and not wasted, and we need to be hardheaded about that.’’
His fear is that ‘‘wellbeing’’ can mean a lot of different things.
‘‘There’s scope for greater fuzziness and recourse to greater arm-waving in policy debate,’’ he worries.
He fears ‘‘wellbeing’’ could be the justification for policies that shift wealth from one group in society to another.
‘‘We don’t necessarily want a Treasury that’s popular, but we do want a Treasury that is respected.’’
But economist Paul Dalziel from Lincoln University, co-author of Wellbeing Economics, said Treasury’s move shouldn’t be seen as a radical departure from the past.
‘‘Treasury has always had as part of its mission statement to improve the living standards of New Zealanders. What it has done is broaden its understanding of living standards.’’
Greater focus has been given around the world to the people whom economies have left behind, led by wellbeing economists Amartya Sen, Joseph Stiglitz, and Jean-Paul Fitoussi.
A concept that has gained resonance among OECD countries is that economic growth does not necessarily lift wellbeing for all, or for future generations.
In New Zealand that’s been seen in the increased concern about child poverty, the working poor, sustainability of pensions, climate change, and young people shut out of the highly-priced housing markets in Auckland and Wellington.
Something else may be happening, Dalziel says.
Treasury veered from being tightly controlled by Robert Muldoon to the 1990 swing to the neo-liberal agenda of the right.
‘‘Now, I think, the pendulum is swinging back towards the centre,’’ Dalziel said.
Former Treasury chief economist Girol Karacaoglu, now a professor at Victoria University, said: ‘‘I would say since the 1980s (economic reforms), this offers the biggest revolution in public policy in New Zealand. It’s really alligned with what is happening in the rest of the world.’’
It could also provide measures against which public policy success and failure could be clearly judged.
Karacaoglu said New Zealand could see the OECD report on its progress against the Better Life Index, on which New Zealand scores pretty well.
Wilkinson, meanwhile, says the New Zealand Initiative will scrutinise the operationalisation of Treasury’s wellbeing focus.
‘‘We will be pushing for better quality, and more rigorous analysis,’’ he says.