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14 September 2005 Market-Oriented Policies Are
Mainstream Recently Business New Zealand
polled its members on initiatives they would like the next government
to take. Respondents expressed support for
policies that were most aligned with those of National and ACT. A 'Mood of the Boardroom' survey
published in the New Zealand Herald this week reported that a majority
of corporate leaders (nearly 90%) also considered the policies of
the centre-right parties would be more effective than those of Labour
in growing the economy and raising living standards. Some politicians have responded
by painting support for market-oriented policies as 'radical', 'hardline'
and 'right wing'. Such labels were often applied
to the 1980s Labour government's liberalising reforms. They were
misplaced: the reforms were motivated far more by the realisation
that past policies had failed, and that orthodox economic analysis
pointed to the need for less interventionist government and a greater
role for private enterprise. Twenty years later it is even clearer
that New Zealand's policy reorientation was in line with the international
mainstream, and with moves by governments on both the political
'left' and 'right'. All OECD governments, without exception,
and many others, most notably China and India, have opened up their
economies, deregulated markets, moved state-owned business to the
private sector, and cut high tax rates. A recent study reports that for
23 OECD countries the average decline in the top personal tax rate
was 22.3 percent in the period 1980-2001. The most recent Fraser Institute
economic freedom index ranks Hong Kong, Singapore, New Zealand,
Switzerland, United Kingdom, United States, Australia, Canada, Ireland
and Luxembourg as the top 10 countries for economic freedom. In
many of these countries, both governments of the left and right
have been in office in the past 20 years. None is described internationally
as having 'radical', 'hardline' policies. There are no signs of a reversal
of this general trend. After the collapse of the socialist regimes
and following the Reagan and Thatcher reforms, some political movements
(such as Tony Blair's Labour Party in the United Kingdom and Labour
in New Zealand) espoused so-called 'third way' policies. This language is seldom heard today.
The freer 'anglosphere' economies (United Kingdom, Ireland, United
States, Canada, Australia and New Zealand - and possibly India should
be added to this list) are outperforming the 'third way' European
welfare states. It is a safe bet that within the
next decade Germany and some other European countries will be forced
to move in a similar direction - regardless of which parties are
in office. Some of the manifestations of these
trends have come from interesting quarters. Examples are the move
towards flat rates of tax in several ex-Soviet Union countries,
and the pressure for school choice (including education vouchers)
among 'left wing' US think tanks and African-Americans. These developments reflect an understanding
that policies aimed at choice, competition and wealth creation do
far more to help the poor than state welfare, control and redistribution. A current priority of the Blair
Labour government is to introduce more private sector involvement
and 'internal markets' in areas like health, education and prison
management. Governments of all political persuasions
are using the private sector to fund and operate infrastructure
such as roads and water and sewerage. Federal and state Labor governments
in Australia have gone down this path. The Howard government in Australia
is moving ahead with labour market deregulation, welfare reform
and privatisation. Leaders in both the Liberal and Labor parties,
and even the Australian trade union movement, are calling for cuts
in high tax rates. The advice of the OECD, which represents
the views of its advanced country members, is in line with that
of New Zealand business organisations. Today it would be fair to claim
that, internationally, policies of renationalisation and more 'hands
on' government are contrary to mainstream directions. Business organisations,
reflecting the views of their members, believe they harm New Zealand's
growth prospects. Amongst business organisations,
this does not translate into an attachment to any political party,
unlike the trade union movement and teacher organisations which
are openly partisan. Representative business organisations
today are much more focused on what's best for New Zealand at large,
not self-servingly on narrow business interests. The approach is not 'What's good
for General Motors (ie business) is good for America'. Clearly corporate
welfare could help some businesses but at the expense of the general
community. The business sector is now generally opposed to subsidies
and protection, and understands that what's best for the economy
is also best for business in the longer run. What ultimately counts is the state
of public understanding and opinion on directions for a successful
country. This is influenced by arguments based on sound analysis
and by national and international experience. In democracies, governments change
their minds in response to changes in public opinion, or electorates
change governments. That's the way it should be. Roger Kerr is the executive director of the New Zealand Business Roundtable. For more information, contact: Roger Kerr Web: www.nzbr.org.nz |