Bringing Back the Birch

Gareth MorganPolitics

Gareth Morgan, Director of Gareth Morgan Investments

The Minister of Finance’s “balanced budget by 1993” is a dead duck, overtaken by government’s desire to stop offending special interest groups such as superannuitants. But as the sun sets on fiscal austerity and the budget inclines to largesse, we should anticipate the quality of analyses underlying the politicians’ expenditure initiatives of 1992 and beyond. First it’s necessary to appreciate which politicians will be pivotal.

In contrast to the humbling of Richardson’s policy agenda, the demolition of Shipley’s, and the indecision of Upton’s, Bill Birch so far has managed to sponsor successful initiatives, He has overseen the Employment Contracts Act, and is introducing ACC reforms. Not bad for just one year back in power. The ascendancy of the pragmatist at the expense of the rationalists- whose aims till recently, were to take Rogernomics into social policy- is near complete. But of course Birch is best known for his deeds in the Muldoon government, and his works then were more celebrated by brickbats than bouquets.

An opportunity to assess the quality of the pragmatists approach to sustainable government was offered last week when Minister Birch was interviewed on the issue of Think Big. He was being offered the opportunity to reassess their contribution. With the same folly as his mentor Muldoon, he acknowledged those schemes delivered only net benefits to the private sector. Indeed he went further, to evidence their immense benefits to NZ.

The Birch interview is enlightening not because it dragged over old ground, but because it tells us how far the Bill Birch of 1991 has come, and the type of analyses his “pragmatic” approach to governing still involves. In the interview, Birch’s analysis of the private sector benefits of Think Big was encapsulated in the following.

“Where would Fletcher Challenge be today without Petrocorp, I hate to think.”

His defence of Think Big expenditure is notable in that (a) there is no mention of the cost to taxpayers nor comparison of that cost with returns obtained. Foreign exchange earnings are the justification, irrespective of costs to the taxpayer. (b) it is not necessary to consider the results of alternative uses of the money to justify government-sponsored initiatives, and (c) so long as taxpayer monies are helping somebody or some firm in the economy it’s worth spending.

Political pragmatists justify spending taxpayer funds by the tangible evidence of projects they authorise. They’re not interested in comparing net benefits with the far more dispersed benefits which accrue through leaving tax monies in the hands of the private sector. They yearn for evidence of their deeds to present to potential voters. They feel especially inadequate going to the voter with a record of reducing government’s influence over the economy.

Most of us recognise the folly of Think Big. We should remember the financial expertise of its sponsors and wonder whether 1992 will see parallel analyses applied to the expansion of the government sector as the political pragmatists ride again.

Bringing Back the Birch was last modified: December 15th, 2015 by Gareth Morgan
About the Author

Gareth Morgan

Facebook Twitter

Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.