Into the future — by committee
Nobody — Govt included — knows which industries will thrive or fail
There are early signs of megalomania in the Government’s economic response to Covid-19. It needs to be nipped in the bud. In recent days, Prime Minister Jacinda Ardern and Finance Minister Grant Robertson have signalled that they don’t see their role as limited to providing a general economic framework and guaranteed familyincome system from which the postCovid economy will evolve. Instead, it seems they want to personally pick which industries are doomed and which are set to thrive.
Thus, the Wellington bureaucracy is working on a “sector by sector” approach for the post-lockdown recovery. Ardern wants there to be “specific” and “specially designed” initiatives for different industries. She says she is sure tourism and largescale events like concerts and conventions are in big trouble but that the world will still want dairy powder and other food.
On the assumption she is right, Robertson is looking favourably at a Dairy NZ proposal to select 1000 tourism workers and retrain them for farm work. It’s a reversal from when agriculture and manufacturing leaders would grumble their workers were being asked to retrain as baristas.
The Dairy NZ proposal is just the first such programme being considered to switch workers from industries the Government judges have no future and invest in those it believes do. It is an invitation for capture by lobbyists from the established end of town.
Deputy Prime Minister Winston Peters is even bolder. He foresees “all sorts of unforeseen second-order disruption”. He believes the “fragility and the vulnerability inherent in the highly interconnected and networked global economy have been revealed”.
Henceforth, he says, “if we can grow it or make it at near competitive prices, then we will grow it or make it, use it or export it, rather than use valuable offshore funds importing it”.
As an autarkic taster, Peters mentions a domestic pharmaceutical industry as a priority, to compete with the vast resources of Roche, Pfizer and Bayer, and generic manufacturers in India, Israel and elsewhere.
We need to speak very plainly about this: these three career politicians have absolutely no idea what sectors of the economy are doomed, which have a future, and whether any particular commercial proposal makes sense. Add Economic Development Phil Twyford to the mix, and it risks the appearance of a circus run by clowns.
We need not mention Ardern,
Robertson, Peters or Twyford’s CVs to prove this point, nor slag off politicians and bureaucrats generally. The truth, proven over and over again, is that no individual or committee ever has clarity on how technologies, societies and economies will evolve. Just about all of us are wrong about more or less everything, pretty much all the time.
The exceptions become household names, like Bill Gates, Warren Buffett and Graeme Hart.
But their insights are usually much more prosaic than the highfalutin’ visions of Wellington policy analysts or the Davos and TED-talk crowds. Hart’s great insight included that people would want more cardboard boxes. Had he outlined this to Helen Clark and John Hood’s Knowledge Wave conference in 2001, he would have been laughed from the room for his limited ambition. Just where is the value-add?
But let us not be arrogant even in hindsight. Unless we have gone on to make several billions of dollars from our own investments, we would probably have been among those who were laughing too.
Under present circumstances, Ardern and Robertson’s initial cafeto-cowshed assessment seems safe. But, then, the much more commercially savvy John Key and Steven Joyce spent much of the past decade utterly convinced taxpayers and others should invest hundreds of millions of dollars in convention centres. So passionate were they that they got the more sceptical Bill English and Gerry Brownlee to go along with it too.
Among thousands of its other Brezhnevian insights, the previous Government’s endless Business Growth Agendas and Regional Growth Programmes decreed there should be more honey in Northland and more chickens in the Manawatu¯. If either has eventuated, the one certainty is that such booklets had nothing to do with it.
Free-market capitalism works not because it is individualistic — although it is — but because it collectivises everyone’s best guesses and analysis. In contrast, collectivist economic systems reply on the brilliance of individuals or, worse, committees. Again, we should speak plainly: central planners are not just often wrong, but invariably wrong, just like most of us.
If Robertson truly believes he has special insight about which industries and companies should be mourned and which should be backed, the best thing he could do is take personal control of the New Zealand Superannuation Fund. The money he could make allocating an initial $44 billion in seed capital means all 5 million of us could look forward to prosperous futures, with or without Covid-19.
That is not some rhetorical flourish. It is the logical extension of any minister truly believing they can beat the market.
The explosion of the Wellington bureaucracy under Clark, Key and Ardern means many thousands of policy analysts are returning to their whiteboards to advise ministers on what should now be done in the particular area of the economy they believe they oversee.
Their advice should be welcomed if it is about protecting the border, maintaining law and order, regulating markets to be fair and efficient, providing cash support to help people through the severe economic adjustment ahead, upgrading basic infrastructure, improving the schools and hospitals, and even building the odd playground, art gallery or sports stadium.
But we must be extremely wary if anyone in Wellington plans to use Covid-19 as a pretext to start micromanaging the economy — or, even worse, to do so in “partnership” with the city’s industry lobbyists like Business NZ.
In truth, none of us really knows even if tourism is doomed or if foreigners will keep wanting to buy our milk powder. A Covid-19 vaccine might be found in a few months. The rest of the world may join Peters in demanding self-sufficiency in food.
That the Prime Minister was right to tell us to be kind and wash our hands doesn’t mean she or anyone knows where our economy or any industry will be five years or even 12 months hence. If she and her advisers base their economic recovery work on that assumption, they’ll stay on the right track.
Central planners are not just often wrong, but invariably wrong, just like most of us.