Friday, May 29, 2009

The Economics of Grinch


The Budget of 2009-2010 (http://www.treasury.govt.nz/budget/2009) is grim and expectingly forecasts a future of grimness and grinch-like economics. There is a lot of what is and little imagining of what could be. Its largely disappointing with the same old same thinking getting even more time to "work". And slashing some $166 million from foreign aid is simply a hypocritical practice of protectionism, isn't it?
Enough griping. Dream a little with me. What are the alternatives? What could we do? What could we do differently? How could you and I change how we interact with the economy? Where could you and I collaborate in our communities to witness of newness?

18 comments:

  1. Under the circumstances it simply looks like a fiscally responsible budget to me.

    Jesus said you wouldn't build a tower without first counting the cost and making sure you can finish it, didn't he.

    It's easy to point to parts of a budget like this but if you are going to complain, you need to be able to put up a comprehensive alternative that is something more than pie in the sky.

    What would you suggest Malcolm?

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  2. I couldn't agree more. The challenge is immense and maybe a crisis is a good opportunity to have a serious rethink and not a little tinkering. And, like you, I firmly believe we must start acting on and speaking of real alternatives... which is what I see in Jesus and in the early church where in place of anxious scarcity... they practiced a courageous redistribution of enough. Now what that could look like today is where I want to place my energy, faith, and wallet. You?

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  3. malcolm

    i'm not sure i understand what you're trying to say

    statements like "how we interact with the economy" and "you and I collaborate in our communities" are about personal/community action

    what jesus and his disciples did in the early church was also personal/community action - not done via government

    but the post is supposedly a commentary on now the government plans to spend public money raised via taxes etc

    also, using words like "grinch" imply you think the government should be spending more - but as the budget papers themselves show it is already spending way beyond the money it raises, and will continue to do so for many years to come - so how would you fund this extra spending? would you cut other spending? if so where? or would increase taxes? now? or delayed? (ie run higher deficits in the meantime)

    can you please clarify so I can better understand and engage in conversation

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  4. Firstly, Gavin it’s nice to see you making comment… we haven’t heard of you for a while at this site… I hope everything is OK.
    Secondly, I’m enjoying this conversation. It is helping the learning. I’m sorry if I haven’t been too clear. I’ll try and clarify what I’m thinking now…
    I posted on Monday May 18 2009 (A New Kind of Protest) that while there is a place for criticism of what is (confessional and grieving) there has to be a corresponding conversation of what could be (energizing, hopeful, practical, tangible). The Budget of 2009-2010 contains a lot of despairing and realist talk of what we already knew… the deficit, the debt, the contacting of the economy, and the loss of revenue to tax… sadly, there is little of what could be… little alternative thinking… in fact, the loudest message is that its simply going to get tighter… (sadder still, when the opposition launched into its critique and were pressed on how they could be different, how they would do things differently, the finance minister of the opposition declared that we’d have to hang on till the next election to see what they were thinking… which means they either don’t have any new tricks or they’re making more of political gain than of the future of our nation… I’ll be generous and say that there is not a lot of alternative in any of the current political camps… now… can the government dream of alternatives? is that the place of government? or, is the government simply a tool of management, a “frantic re-arranger of the parts, but always the same parts” (Walter Brueggemann)?... what I’m tying to fuel is a conversation that the church can start with others… (maybe my hope in government is ill placed)… the kind of conversation that we see in William Booth’s In Darkest England and the Way Out… a conversation that enables honest critique and then moves on from there to energize communities of faith and others to get involved and create something of what could be… to me, this is not pie in the sky thinking… and to me, this cannot be limited to what the government can spend or cannot spend… far from it… this conversation is a hopeful invitation to not be content with what there is, to not give in to the despairing talk of scarcity, but to live from and act from that harder place of promise… the good news of the gospel… is that clearer? it’s certainly longer … oops.

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  5. thanks Malcolm

    your position is becoming clear ... that's a debate I am very keen to engage in, and want to provoke more within my own church (SAJ)

    I've been a bit quiet here at Just Comment since becoming self-employed last September ... getting my business up and running is taking a lot of my attention ... but things are starting to stabilise on that front, so I expect to become increasingly more active again here at Just Comment and on my own blog in the second half of the year

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  6. From my personal experience i have always found that when I make sure the needs of others is at the top of my list, then i have enough $$$$ left to meet my needs. Weather or not such an approach would work on a national level could be debated, but it would seem the needs to the poorest in the world are not line on the list of prioities for this goverment. So based on my personal experience that would suggest that as a country we might be short for other areas.

    I think the budget and the political agenda could have looked at how we could trade fairer, i can import sweatshop made goods and pay no duty, yet buy fairtrade and i pay 12.5%.

    I wonder if the budget could have looked at higher taxes on alcohol and smoking, to better reflect the cost they are to the country?

    I wonder if instead of making room for more in prisons, we could have invested in ways of keeping people away from them,

    I wonder we could look at ways of reducing credit availible for non essentials.

    I wonder if we all said i could put 2% of my income into a pool to help people in need, crazy idea i know, but i wonder what would happen if we did it?

    I wonder if we invested into better public transport...

    I wonder if we promoting the idea of living more simple, and within our means rather than living on borrowed money.

    I did wonder if we could cut the cable and let the north island float away, but decided this wasnt a good idea....

    Will keep wondering



    Not sure if any of this would make much

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  7. darren, I'm not sure how to read your comments either, in the light of a government budget discussion, so I'll quote/challenge a few and see if I can understand you better

    [darren] From my personal experience i have always found that when I make sure the needs of others is at the top of my list, then i have enough $$$$ left to meet my needs. Weather or not such an approach would work on a national level could be debated,[/darren] [gavin] and should be debated as such a debate would discuss the values driving the government's budget - in which ways do you think this budget doesn't demonstrate such values? and given that most money spent in this budget is on programmes inherited from labour (many inherited by them too) in which ways do prior year budgets not demonstrate such values? [/gavin]

    [darren] it would seem the needs to the poorest in the world are not line on the list of prioities for this goverment[/darren] [gavin] what is your evidence of this from the budget? without evidence it seems more like a party political ideological statement than a rational challenge to the budget [/gavin]

    [darren] I think the budget and the political agenda could have looked at how we could trade fairer, i can import sweatshop made goods and pay no duty, yet buy fairtrade and i pay 12.5%. [/darren] [gavin] firstly I think you have our duty and tax laws wrong - they do not distinguish on the basis of whether a particular product is branded 'fair trade' or not - so please clarify ... secondly, a budget is the government's opportunity to state it's financial ("fiscal") policies, the budget is not usually a forum used to debate trade policies [/gavin]

    [darren] I wonder if the budget could have looked at higher taxes on alcohol and smoking, to better reflect the cost they are to the country? [/darren] [gavin] these things are currently under formal review, so no sensible government would preempt them by making a change in the budget until the review process is complete [/gavin]


    [darren] I wonder if instead of making room for more in prisons, we could have invested in ways of keeping people away from them, [/darren] [gavin] my understanding is that the government does spend money on the latter so why make a statement which suggests it is a choice between one and the other? [/gavin]

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  8. part 2 ...

    [darren] I wonder we could look at ways of reducing credit availible for non essentials. [/darren] [gavin] firstly, this is not a government budget matter, so not relevant to a government budget discussion ... secondly - are you saying the government should be deciding what people can spend their money on if they source that money from a loan? [/gavin]

    [darren] I wonder if we all said i could put 2% of my income into a pool to help people in need, crazy idea i know, but i wonder what would happen if we did it? [/darren] [gavin] from a government budget point of view, we already have such a fund, it is called taxes, and those spent on "people in need" well exceeds 2% ... or maybe you are talking about a fund created by private/community initiative? in which case it is not a matter for the government's budget [/gavin]

    [darren] I wonder if we invested into better public transport... [/darren] [gavin] the government (& local councils) already spend billions on public transport (that's one of the reasons why it is called "public transport", it is funded from public funds), yet your comments suggests they don't ... so maybe you think we should spend more? in which case how would you fund this? which spending would you cut? or would you increase taxes? or would you run a higher deficit now and impose those higher taxes (or spending cuts) on future generations? [/gavin]

    [darren] I wonder if we promoting the idea of living more simple, and within our means rather than living on borrowed money. [/darren] [gavin] does this apply to the government too? in which case which $10 billion of spending would you cut? or are you suggesting we increase taxes by $10 billion? (or a mixture) ... because as a country we are "living on borrowed money" as the current year deficit is estimated to approach $10 billion [/gavin]

    [darren] I did wonder if we could cut the cable and let the north island float away, but decided this wasnt a good idea....[/darren] [gavin] as long as the north island floats further north to where it is warmer!

    darren, i'm genuinely interested in engaging in discussion about these matters, so would love to hear your responses

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  9. Gavin - firstly to help clarify, i wrote more broadly than just in regard to budget which i suspect may be what Malcolm was asking or at least hoping to discuss, thinking policy was also important, and part of the discussion. Some of the i wonder comments could easily be entire discussions on their own as well. Will comment on some of them

    1- How the budget doenst look after the poorest - clearly a significant cut in overseas development, I suspect it was one of the first things to go. Having talked to the Min of Finance personally (grated it was while he was still in opposition) i got the feel it wasnt anywhere near the top of his agenda.

    2- Duty, I can import clothing made from sweatshops in Bangaldesh, and pay no duty, because it is made in one of the worlds poorest countries, this is a way of trying to help them trade. Does it do this? Or does it help the workers in these countries be exploted more? Maybe a bit of both. When i import clothing made in a fairer way from India, again from people who where living in total poverty, i pay a duty. Is there an incentive for NZ business to seek to trade in an ethical way, when those who are prepared to pay more for fairer goods, then also have to pay more on duty?

    3- Prison vs Prevention - there must be a choice, perhaps the choice is how much to spend on each, as you suggest both happen. I know of programmes keeping people out of prison which if funded more, could keep more out, give the cost of keeping someone in a cell, it would seem logically to work on a way to reduce the number we lock up, rather than increase the number.

    4- Re public transport - having travelled a bit, our public transport systems in our major cities are a long way behind. Significant funding is being spent on roading, it is this funding i suspect could be split more into making a more useful public transport system. I wont ever expect to be able to get a bus to work in Winton (i can bike to the office anyway), when i was in London i never got in a car, same in Melbourn, will be in Auckland this week, and will be relying on a rental.

    5- Borrowed Money
    a) Personal
    Yes i am suggesting the goverment acts to tighten up leading, i work with people who get into massive debt because it is easy, this is part of the current problem.
    b) Goverment Spending
    It does appear that the budget reflects a cut in extra spending, and a trimming of costs in many areas, how to reduce this by $10billon i am not sure. But if you borrow to run things every year, it is not sustainable. As the debt simply gets bigger and bigger and our ability to get out of dept gets less and less.

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  10. 1- How the budget doenst look after the poorest -

    [Darren] clearly a significant cut in overseas development, I suspect it was one of the first things to go. Having talked to the Min of Finance personally (grated it was while he was still in opposition) i got the feel it wasnt anywhere near the top of his agenda.

    Gavin's response: a) I know only of cuts to the massive increases announced last year in the Foreign Affairs Departmental beauracracy budget, but not to development/aid funding itself ... except I concede there might be reductions in the growth rate of future aid increases in the sense that the growth rate of all budget line items is being constrained due to economic circumstances ... b) in the midst of a global recession I wouldn't expect foreign aid to be at the top of the Finance Minister's agenda, but I would be interested in hearing the Foreign Minister's perspective ... c) please note my heart in this, if NZ were running surpluses I would be advocating for immediate increases in NZ's aid budget up to and over the 0.7% UN Millenium Project target (I think 1% should be the target actually), and for these to be spent through credible NGO agencies like the Salvation Army ... but we face a decade of deficits and so the reality is the growth in our aid spending cannot be rapid ... it is disgraceful that Labour wasted 9 years of surpluses on pandering to internal audiences (setting us up for a decade of deficits) and didn't significantly increase NZ's external aid spending as a percentage ... imagine the 'wow' if in Labour's budgets they had said "NZ is a comparatively rich country and we will increase NZ's aid spending by 50% every year until it reaches 1% of GDP, and we guarantee that we will keep it there, and we will use our international influence to advocate that other wealthy nations do the same" ... instead it still flounders under 0.3% with little prospect of increasing it significantly until economic conditions improve and we don't have to borrow every extra dollar (on current projections this is still at least a decade away)

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  11. 2- Duty,

    [Darren] I can import clothing made from sweatshops in Bangaldesh, and pay no duty, because it is made in one of the worlds poorest countries, this is a way of trying to help them trade. Does it do this? Or does it help the workers in these countries be exploted more? Maybe a bit of both. When i import clothing made in a fairer way from India, again from people who where living in total poverty, i pay a duty. Is there an incentive for NZ business to seek to trade in an ethical way, when those who are prepared to pay more for fairer goods, then also have to pay more on duty?

    Gavin's response: so, you agree that NZ's tax/duty is distinguishing by country not branding? ... and in favour of a poorer country (Bangladesh) over a richer one (India) ... I note that 'fair trade' is a commercial brand that is applied to goods by those marketing those goods ... I doubt it has the levels of proof required to support a government using it to determine the rate of tax/duty ... that said, my personal preference (and my family's) is to buy 'fair trade' even though I have nagging doubts about the veracity of the 'fair trade' brand now that global corporates like Starbucks are also using it (I think they do, but I don't buy from them so can't be sure]

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  12. 3- Prison vs Prevention -

    [Darren] there must be a choice, perhaps the choice is how much to spend on each, as you suggest both happen. I know of programmes keeping people out of prison which if funded more, could keep more out, give the cost of keeping someone in a cell, it would seem logically to work on a way to reduce the number we lock up, rather than increase the number.

    Gavin's response: let me make it clear that I support programmes which are effective in preventing criminal behaviour and therefore reduce the prison population as a consequential benefit ... the primary benefits being to society (lower levels of crime) and to those individuals (and their families) who would otherwise have offended (they live more productive and meaningful lives) ... but I doubt this would see a significant impact on prisoner numbers in the short term as such programmes are long/medium term by nature ... which means that in the short term the only way to significantly reduce the projected growth in prisoner numbers would be to change sentencing laws ... almost all of the projected increase in prisoner numbers is based on current sentencing laws which were inherited from Labour, not on any changes made by National ... so we do need to increase the number of prisoner beds ... are you proposing changing our sentencing laws? if so, how? ... please note that my active interest in justice matters motivates my personal involvement in prison ministry through my local church (corps) ... I discussed such things with my father-in-law over the weekend - he leads NZ's prison chaplain service ... I speak from a position of active involvement in this sector

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  13. 4- Re public transport -

    [Darren] having travelled a bit, our public transport systems in our major cities are a long way behind. Significant funding is being spent on roading, it is this funding i suspect could be split more into making a more useful public transport system. I wont ever expect to be able to get a bus to work in Winton (i can bike to the office anyway), when i was in London i never got in a car, same in Melbourn, will be in Auckland this week, and will be relying on a rental.

    Gavin's response: public transport v roading is a fair public policy debate, with clear implications for the budget, I was objecting to your implied assertion we don't fund it now ... note, I use public transport regularly, and used it more in the past when my work hours were more 9-5 type regular

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  14. 5- Borrowed Money

    a) Personal

    [Darren] Yes i am suggesting the goverment acts to tighten up leading, i work with people who get into massive debt because it is easy, this is part of the current problem.

    Gavin's response: this has very little to do with the government budget, but if you start another post specifically on it I would be happy to comment

    b) Goverment Spending

    [Darren] It does appear that the budget reflects a cut in extra spending, and a trimming of costs in many areas, how to reduce this by $10billon i am not sure. But if you borrow to run things every year, it is not sustainable. As the debt simply gets bigger and bigger and our ability to get out of dept gets less and less.

    Gavin's response: yet you seem to want the government to borrow for certain types of spending (see 1, 2, 3, 4]? when it is already borrowing nearly $10 billion this year to fund the spending in a supposedly 'grinch' budget? Labour left a looming legacy of at least a decade of deficits despite governing during the longest run of favourable economic conditions of my lifetime (I'm 41) ... treasury projections are that this year's budget is a start to arresting that trend and getting us back on to a path of heading for surpluses again ... there are areas where I would like the government to spend more, but I saw very very little in Malcolm's original post, or in your response, that recognises the reality that every extra dollar we decide the government should spend must be borrowed - and I think that creates a dishonest debate

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  15. Gavin will make one quick post, "fair trade" is a concept, "Fairtrade" is a registered trademark. Personally i choose to support the branded option as it gives accountability by a third party. The trademark is more a certification than a brand, as my products for example as sold as Micah Clothing, with the Fairtrade Cert.

    The debate over large companies using the certification is one that is a hot topic at present, i have an excellent book on it, if you would like to explore it futher. My personal feeling is mainstreaming of Fairtrade is a good thing, as if it carry's the logo it meets the standards and farmers lives are changed. The problem is when people link one certified product from a large company with the entire product range.
    I think if as a country we care about the issues of exploited workers, then our policy needs to reflect that. I beleive it would be possible to say certain ethical standards are worth supporting by a lower or nil duty. Very much in the spirit of the current policy, which has some negative side effects. Likewise products that dont meet this standard are have a higher duty.

    I get emails on a very regular basis from business in Bangledesh, exploiting the fact that if i was buy there products i wouldnt have to pay duty, I can tell you the prices i have been offered leave me in no doubt that the workers and farmers are being exploited. The business owners are playing our system.

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  16. but those bangladeshi producers are not finding a market for their goods through you as you reject what you interpret as their exploitive practises

    you do not need a change in duty rates to drive your behaviour - your are making a wise choice without it

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  17. sadly others are not making the same choice, and are supported in the practice by the policy.

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  18. fair enough, but I don't rush to the conclusion that further regulation is the answer ... we just need to find ways to get more and more people to make good choices like you are

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