Brash and a land of plenty
Last weekend I saw two of the documentaries about unemployment, neoliberalism and the New Right. I`d already seen Someone Elses's Country a few years ago at the film festival.
I wasn’t going to blog about issues arising from
This Hayek Memorial lecture discusses New Zealand's "Remarkable Reforms" in light of the events in the early 1990's, where the Government's main goal was to eliminate inflation, which would supposedly lead to low unemployment. Of course most voters, particularly those who were unemployed, wanted the Government to eliminate unemployment.
Frederick von Heyek, a critic of Socialism, believed that unregulated marked capitalism would lead to growth, and so did Ruth Richardson and the Treasury.
So in 1991 the National Government cut benefits by up to 24 percent to reduce government spending and widen the gap between welfare and work to force people off the dole into jobs that didn’t really exist due to a struggling economy. The Government didn't want to reduce taxation as that would cut into the money it had to spend.
Reduction of Government spending was seen as a way of lowering inflation, but the benefit cuts also meant less spending on goods and services, leading to wages falls and job cuts. The general price level was lowered, but that raised the value of money to spend on goods and services. But of course that didn’t help those who all of a sudden had to pay market rents and copped interest rate rises. Inflation was kept down, all right, more was spent on goods and services (eventually) as economic growth started to kick in, but the unemployed were used as pawns in the process.
This is the kind of monetary policy Don Brash supports when things get tough. This lecture is not on Don Brash's personal web site, as it used to be. It is under "Don Brash National Party leader."
What will he decide if he was the Prime Minister in a struggling economy? Too much money chasing too few goods, or too many people chasing too few jobs.
At the moment, we seem to have too many employers chasing too few qualified workers - and too many unqualified unemployed chasing too few unskilled jobs.
Given the above comment, what is the answer to increasing productivity (and skills and wages), and decreasing unemployment in this current political climate, irrespective on what side of the monetarist fence you are on?.