Left wing people, and lots of middle class voters, are scared of economics because it seems unpredictable, it’s full of numbers and if money is ‘lost’ we’re poorer and that’s serious. We all know you need money to run the economy, but left wing people feel that’s not something they know about; but business people claim they know all about money and how to ‘make it’.
Being capable about money wins elections, because voters worry about economic unpredictability and think we need a safe pair of hands so they aren’t plunged into poverty, so they accordingly vote ‘safe’. So left wing politicians want people to see them as a safe pair of hands, so they feel they have to listen to economists because they are supposedly the ring masters of the economy circus. In essence they are listening to very similar advice that is given to the right.
But it is this cautious safe pair of hands perception when voting that has created the monster of climate change and environmental damage that threatens our existence on earth. The safe pair of hands was voting for policies that have brought us to this ecological cliff.
In this 7 part series ‘Understanding economics’ I want to show you why economics doesn’t really know how to run the economy and gain wealth for everyone; though there are plenty of nut job neo-liberal economists who will tell you otherwise. I also want to show problems that arise from an excessive reliance on market economic theories. And in my second series ‘The people’s economy’ I’ll tell you what the left needs to do to run the economy efficiently and effectively.
We know economists (and by default politicians) don’t really know how to run the economy because almost all their predictions don’t come true. For example: The sanctions on Russian for invading Ukraine were predicted to quickly bring Russia to its knees. It hasn’t. Apocalyptic outcomes were predicted for people in the UK in 2016 if they voted for Brexit. There was no apocalypse, but Britain is now predictably declining. Economic leaders in power, like Alan Greenspan, did not foresee the massive 2008 economic crash, in fact he unknowingly helped bring it about. The recent surge and persistence of inflation was not predicted.
But who cares if economists don’t really know how to run the economy. These repeated failures of economics are a boon to fear mongering politicians and business groups about the sensitivity of the economy for making money/wealth. (Interestingly the root word for business comes from old english meaning ‘anxiety’). Business and politicians just want short term gains. Consider conservative commentators playing down climate action as too costly for business. And pushing for a do little emissions trading scheme (NZ ETS) when a carbon (fart) tax would have been so much more effective and the benefits would go to the government who could direct spending to shift the economy to carbon neutral.
Instead the NZ ETS gave the profit of capturing carbon credits to private investors who took the low effort option to plant pine trees, taking land out of active farm production; damaging our trading economy. And many investors probably spent their carbon credit profits on flying away for overseas holidays. Even the Maori tribes who planted trees on marginal land are backing a scheme that won’t help the planet. Private investors aren’t set up for moving the economy to carbon neutral. The private market fails as it is too small and uncoordinated on such a large scale problem; I accept there are some tiny positive stories.
The fear of inflation dominated the 2023 budget not climate change. The initiatives that supported people, like 50% subsidy on public transport for younger people, are about giving the money to a business who provides the services because giving money to people will stimulate aggregate demand and that pushes up prices/inflation. Giving money to a business supposedly won’t cause inflation because in the 2008 crash they simply typed zeroes behind the banks numbers and that didn’t cause inflation! (There is an explanation). And we can see fear of the economy in the recent decision not to take up a capital gains or wealth tax as an issue to campaign for in an election.
My point here in the series is to simply say there is uncertainty of prediction in economics, because economics is not a science, and that uncertainty creates fear of change and this fear is used to twist voters to vote against their own economic self interest by tricking them to think it is for their economic self-interest.
The result of fear of the economy and ultimately fear of losing elections means only minimalist economic steps are made and they are not dealing with the significant problems society is facing. Voters can see the need for change (poverty, cost of living, climate crisis) but nothing happens, and no policy direction is apparent. The economic policy differences between parties is tiny so there is little sense of choice on economics.
The consequence of this policy ineffectiveness and indistinction is that silly issues like law and order, immigration, not enough roads, become more important to voters as the explanation why society is the way it is. The left allows these issues to become the point of difference, the defining topics that suck all the energy out of the room when the real fear is the climate disaster. Labour is now trying to fight the election on the law and order ground National/Act have laid, when it is economic policies that have created all the significant societal problems we currently have like the climate crises.
But running the economy poorly is a winning strategy for the right because it causes economic fear. It doesn’t matter whether this is by design or stupidity because they are aligning with what most expect in how an economy is supposed to work so voters will forgive them as it could just be the unpredictability of the economy. National is the party of Growth.
But just go back to the 2010 Bill English and John Key, bragging about the NZ$15B of tax cuts how transformational it would be for the economy. The path to growth and Nirvana. Where? It was a hugely damaging budget to New Zealand society and government. Nobody feels better off and who looks back and thinks of any transformation except higher GST. How come? Nobody talks about that failure as a symptom of National policies. (They will claim a boom – but voters will laugh)
The party of progress/change is Labour. But where is the vision for economic change that is credible? They are trying to follow the same economic strategy of predictability. The fact is if Labour had a strong vision and it failed; the voters would forgive them because they are the party of change and they gave it a shot. To be a sitting duck is more damaging.
Next, let’s look at what history tells us about creating or accumulating wealth as that might help with a vision.