Kiwi News and Views

In his Economists in the Cold War, Alan Bollard contrasts Saburo Okita of Japan with Zhou En Lai of China to highlight a critical issue.

Saburo Okita (1914-1993) was in Manchuria (northeast China), in the port city of Darien (Chinese: Dalien) which was occupied by Japan at that time. Because they were politically unsympathetic to the increasingly militaristic occupation regime, his family moved in his teenage years back to Tokyo, where he graduated in electrical engineering and joined the civil service. During the Second World War, and despite reservations about Japan’s war policy, he was involved in managing the supplies of raw material such as coal and iron necessary for the war economy and food.

Japan lacks sufficient local supplies of many of these critical resources. One of the reasons for its territorial ambitions was to secure alternate supplies by conquest. Manchuria was a key source.

Defeated Japan was grim. Okita set up a group immediately after the war to plot the economic recovery. It met in a half-destroyed building. Many of the official records they needed were missing and they lacked even paper. Okita’s home had been bombed and he and his family had to pile in with the in-laws. He had to scrounge for potatoes and other basic food.

Bollard uses Okita’s life to describe the Japanese recovery from this misery to become one of the strongest economies in the world with Okita playing a central role in the planning and advice system, although he was never Minister of Finance.

As the economy flourished, he moved into the international arena including chairing the Pacific Economic Cooperation Council in Bangkok from 1986 to 1988.

In the course of his career, he helped develop a solution to the Japanese resource deficit which did not involve conquest and colonisation. The alternative was trade. New Zealand is a beneficiary. We were on the edge of the Greater East Asia Co-Prosperity Sphere, the creation of which was a Japanese objective in WWII. Instead, Japan is our fourth largest export market, and an integral part of the East Asian economy which New Zealand depends upon.

If a Japanese empire was not realised, neither were some of the victors’s plans. They wanted to ensure that after their defeat Japan and Germany would revert to rural economies, unable to provide the advanced technological resources to pursue modern warfare. Wiser heads (and the need to resist Communism) prevailed and today both countries are advanced economies playing an important role in the liberal international order. (On the other hand, Russia and North Korea demonstrate that less developed economies can sustain militarily aggressive intentions – at enormous cost to their populations.) This is an important lesson to be recalled if the West ‘defeats’ Russia. Putin’s claim the West wants to dismantle Russia. The West should make it clear that it wants Russia to be a part of a civilised, affluent, peaceful world. (That Japan transformed successfully might provide some optimism for such a goal.)

Okita and other Japanese economists of his time explained this international economic interdependence as ‘flying geese’. As characterised by the diagram of a flock of birds flying in a V-shaped formation, there is a leader with the rest tucked in behind it, benefiting from those in front. *

 

The flying geese model is intuitively attractive to explain the evolving pattern of East Asian development despite significant differences in resource endowments. As Bollard writes:

       “As the lead goose (Japan) grew stronger, its rising wages and growing investment moved it towards more capital intensive industry, releasing its labour intensive operations for economies further down the formation. Each economy remained outward-looking and trade-driven, with the possibility of positive spill-over effects, technology transfer, and international investment speeding the growth process.”

The model can also be applied to the development of the European economy and to the North American economy (applied to regions and not just countries). Observe too, that in long flights the lead bird will ease back and another take over. Is China doing that? (Although you cannot see it, there is a small dot at the back of the right wing of the V; that’s us – New Zealand.)

Bollard contrasts Okita with Zhou Enlai (1898-1976) who also had a turbulent life until 1949 when the Chinese Communist Party took over the governance of China, and he came second only to Mao Zedong; unlike the latter he was a stabilising force.

Okita and Zhou met on a number of occasions. Bollard’s description of a conversation in 1971 is revealing.

      “As Zhou saw it, the main purpose of economic growth was to build defence and security, and Japanese growth could drive the country back to Manchuria in search of resources. Okita had been an advocate of peace policies in Japan, and he objected to the argument, saying the purpose of Japanese growth was to give its citizens better living standards and its consumers more choice. Indeed Japan’s internationalization would likely constrain militarism. The debate continued for some hours and, while very civil, there was no agreement. Zhou’s argument, that the economy must serve strategic national interests rather than improving the material lives of citizens, had deep roots in Chinese history but also fitted Communist Party thinking in many Cold War States. What was the real role of economics? To Okita, it was consumption for individual welfare, to Zhou it was production for state security.”

The answer remains unsettled. (In contrast, the big economic question of how to organise a modern economy – getting the balance between markets and planning – is much better settled. The review of Bollard’s Economists in the Cold War which explores this is here.) You can easily identify countries which prioritise national security over their citizens’ wellbeing. Zhou’s strategy may still dominate Chinese thinking. Even though its citizens have experienced substantial rises in their material standards of living, there is a growing popular desire for their interests to be given greater weight.

It is easy to claim that Okita’s rather than Zhou’s strategy has long applied in New Zealand. Recall that during the trench warfare of the Great War – which has similarities to what is going on in today’s Ukraine – the New Zealand leadership was not nearly as ready to sacrifice its troops in the way the British military command seemed to and which appears to be the Russian approach in its Ukraine invasion. On the other hand, our commentariat often gets carried away with describing the economy as an entity which has a significance beyond that of the citizens. I am reminded of the sentiment: ‘my economic advisers tell me the economy is doing well, but I know the people are not.’

* I wish they had chosen swans rather than geese. One of the most moving moments in music is the glorious ‘swan theme’ in the final movement of the Sibelius Fifth Symphony.

Alan Bollard, formerly Treasury Secretary, Reserve Bank Governor and Chairman of APEC, has written an insightful book exploring command vs demand approaches to the economy.

The Cold War included a conflict about ideas; many were economic. Alan Bollard’s latest book Economists in the Cold War focuses on the contribution of seven economists with each one paired with another, the contrast heightening the underlying theoretical tensions, I am not going to deal with two of the chapters, important as the topics are: the struggle by the US to dominate the international economic architecture (Harry Dexter White) and the development of the strategy for nuclear conflict (John von Neumann).  The focus here on the five which are about how to organise an economy.

The Cold War started almost eighty years ago. It began in the shadow of two economic events. The first was the Great Depression, when the capitalist economies miserably failed. It occurred closer to the publication of Marx’s Das Kapital than to today. That book seemed to predict the sort of economic catastrophe which happened and promised – albeit vaguely – an alternative economy. Many economists, including Keynes, whose General Theory had yet to be fully adopted, expected another great depression after the war.

Moreover, the Soviet Union, which was based upon Marx’s vision, seemed to have ridden through the Great Depression without the same agony. (The belief was not entirely true; things had been pretty rugged there too, including the Holodomor, the great Ukrainian famine of 1932-3 in which up to 7m died in a population of about 30m. Knowledge about what was going on in other countries was not as extensive as it is today.)

The second influential event was the Second World War, in which the economic power of the West – most notably the US – was harnessed by direction from the centre rather than by market demand, as is common in a capitalist economy. The detail of the direction during the war was extraordinary; in New Zealand it extended to the length of women’s dresses.

Again admiration fo the Soviet Union loomed large. During the war, a quarter of its people were wounded or killed, including around 27m dead. It was no wonder that many in the West, uninformed about the brutal internal oppression, admired the country. As Bollard records, some economists went so far as to become Soviet spies. Others were fellow travellers. And of course others were vigorously anti-communist.

It was a reasonable question straight after the war to ask how best to organise economy. The contrast was ‘command or demand’; was it better to have an economy directed and owned by the government from the centre or would a market-driven economy of individual decisions and private ownership work better?

Bollard covers the question by describing the life histories of five economists who answered the question in various ways. In each case he contrasts his choice with another economist who took a different view.

Oskar Lange (1904-1965) was a Pole who spent a lot of time in the US following persecution in his homeland. The contrasting economist is Austrian neoliberal Friedrich Hayek (1899-1992) who was a vigorous proponent of the market economy. Lange put much thought into how to make central planning work, especially by using price signals. He had an interesting life – sad because he when he returned to Poland after the war, this subtle economics thinker found himself having to mouth Stalin’s economic nonsense.

(It had not occurred to me how many of the era’s economists whom I respect lived politically turbulent lives. Unless you were American or British, you probably had to flee on at least once. Bollard also covers their personal lives. Some of those were turbulent too.)

The German chancellor Ludwig Erhard (1897-1977) was an economist who as Minister of Economic Affairs and later as Chancellor presided over the German postwar miracle. His strategy was a social market economy which aimed to provide a liberal market environment with public/social welfare support for individuals. He is contrasted with Jean Monnet (1888-1979), was a key founder of what became the European Union. French-German tensions aside, I am not sure they were too different.

Joan Robinson (1903-1983) was based in the stability of Cambridge, England. An ‘establishment rebel’ she was the closest to a Marxist of Bollard’s seven (but recall Karl said he was not a Marxist either). I greatly admire her economics but, sadly, she often ended up endorsing some very unsavoury regimes.

She is contrasted with American Paul Samuelson (1915-2009), with whom she had a long off-and-on correspondence. (Bollard does not discuss how Samuelson is probably the twentieth-century economist, second only to Keynes, provided a theoretical answer to big question of how to organise economies. It is called the ‘neoclassical synthesis’, combining Keynesian macroeconomics with an advanced version of neoclassical microeconomics.)

I am going to leave Japanese economist Saburn Okita (1914-1993), contrasted with Chinese premier Zhou Enlai (1898-1976), for another column because they moved on to an even bigger question of the purpose of an economy. Suffice to say here, that Okita played a key role in the Japanese postwar recovery and in the wider development of the East Asian economies.

Raúl Prebisch (1901-1986) is the last in the book. Although originally Argentinian, he fled to Chile, in between a number of internationally important jobs, to experience the turmoil which followed the Pinochet coup. His challenge was whether the models for the development of rich countries were as relevant to poor countries. His thinking was influential on New Zealand’s thinking about development policy in the early 1960s. In particular he argued that primary exports faced falling prices (terms of trade) relative to manufactures, which justified measures to diversify an economy. (There is an enormous literature about this ‘unequal exchange’.)

Prebisch was right for the first three-quarters of the twentieth century but the trend reversed towards its end as manufacturing-successful East Asia became hungry for food and raw materials.

Bollard contrasts Prebisch with American Walt Rostow (1916-2003), famous for his The Stages of Economic Growth: A Non-Communist Manifesto with its notion of an economy ‘taking off’ into sustained growth. (He was also national security advisor to Lyndon Johnson.) He too was also influential in New Zealand’s thinking in the 1960s.

So who won? Unquestionably, economic organisation via the demand side of the economy is dominant in today’s affluent economies. I am not sure that we should attribute its success to economists, even if they gave us a better understanding of how market economies work. Rather, the complexities arising from the increasing diversity of choice in affluent economies can only be met by a high degree of decentralisation. I watched how east-central European economies under the Soviet yoke became increasingly – but slowly – more wealthy. Eventually, central controls became over-burdened and failed. That was a major factor in the rise and fall of the Berlin Wall and hence the end of the Cold War.

The prize to one of Bollard’s seven – if any is particularly worthy of the prize – is surely to Erhard, whose vision of the social market economy (Samuelson’s neoclassical synthesis with an integrated welfare state) dominates much of our thinking, even in those economies seduced by neoliberalism.

 

A. E. Bollard (2023) Economists in the Cold War, Oxford University Press. 384pp. ISBN: 9780192887399 (Also available as an ebook)

The coalition party agreements are mainly about returning to 2017 when National lost power. They show commonalities but also some serious divergencies.

The two coalition agreements – one National and ACT, the other National and New Zealand First – are more than policy documents. They also describe the processes of the new government. This column focuses on policy. The agreements give the impression they were negotiated separately, with National running between the two rooms. There are some common policies, some policies which with just a little cooperation could have been written jointly, and each also contains policies or sentiments that the other party – ACT or NZF – would have liked to have had in their agreement too had they known about them. But there are also differences which may lead to severe political tensions – even to a breakdown of the coalition government.

Summarising their combined 4500-odd words on policy is not easy. I set aside a number of individual policy proposals of the sort which come up on the floor of party conferences. Some are aspirational or pious, ranging from good and bad ideas which may or may not be adopted to special interest group demands. (NZF’s include detailed demands for improving the Northland region but nowhere else.) Some could have appeared on the floor of the Labour Party conference and even been adopted by its government.

(This column does not cover the fiscal – tax and spending – aspects of the agreement. An economist waits until HYEFU. However implementing the proposed tax cuts within the borrowing limits will require major expenditure cuts. The NZF agreement includes increased spending proposals, while ACT also wants to spend a bob or two.)

The dominant policies in the agreements can be summarised as a return to 2017 when National lost power. (Each agreement states that items not covered by the National manifesto are the default.)

The most prominent change is the winding back of Treaty and Cultural issues. All three parties reject co-governance and agree ‘public services should be prioritised on the basis of need, not race’. NZF directs that ‘all public service departments have their primary name in English, except for those specifically related to Māori’ (adding that it requires ‘public service departments and Crown Entities to communicate primarily in English – except those entities specifically related to Māori’; something I would support if the word ‘plain’ had been inserted before ‘English’). Both agreements abolish the Māori Health Authority. NZF also wants to replace all references in legislation to the principles of the Treaty of Waitangi with ‘specific words relating to the relevance and application of the Treaty, or repeal the references’.

ACT is more ambitious. Its manifesto proposal for a referendum is replaced by introducing ‘a Treaty Principles Bill based on existing ACT policy [sent] to a Select Committee as soon as practicable’. NZF says nothing about this. Perhaps it will support the introduction of a more moderate bill than ACT had in mind. Neither National nor NZF is committed to supporting the amended bill when it is reported back to Parliament.

All three parties want to repeal the Natural and Built Environment Act 2023 and the Spatial Planning Act 2023, returning to the Resource Management Act 1991 which, however, they want to amend.

Both agreements stop some of the big projects that Labour had under way. ACT’s is most explicit:

‘Immediately issue stop-work notices on several workstreams, including:

            – Three Waters (with assets returned to council ownership).

            – Auckland Light Rail.

            – Let’s Get Wellington Moving.

            – Income Insurance.

            – Industry Transformation Plans.

            – Lake Onslow Pumped Hydro.’

ACT also wants to revert monetary management by the Reserve Bank to the pre-2017 approach without the ‘dual mandate’ which took unemployment into account. (Most economists think that will make little difference to the actual way the RBNZ manages monetary policy.)

Both agreements continue to support the zero carbon target, the NZF one more explicitly. However they presage a change in the way it will be done. My impression is that there is a realisation in the deep bureaucracy that the current system is not working, and some changes would be desirable. A change of government enables them to obscure the source of their proposals. Greenies will be wild any way.

Another unwinding is that parties want to revert to the more judgmental 2017 approach to law and order. (The Act document has changes it wants in regard to gun laws which were tightened after the Mosque Massacres.)

There are also reversions in education and healthcare policies. Perhaps the most contentious is the proposed repealing of the Smokefree Environments and Regulated Products (Smoked Tobacco) Amendment Act 2022. Renters will find it harder.

And so such things go back. There are a number of proposals which amount to commercialisation, outsourcing and privatisation. Both agreements have proposals to reorganise immigration although it unclear whether they want more immigrants or whether they just think the current system is a shambles.

Labour laws are to be returned to their earlier status which were more pro-employer. Even so, while National has agreed with ACT to repeal the Fair Pay Agreement regime, NZF has committed National to ‘moderate increases to the minimum wage every year’.

I leave nitpickers to reconcile these and other policies. However, the contrast between the two agreements on regulation is stark ACT’s proposals for economic liberalisation are the centrepiece of its agreement. Its leader, David Seymour is to be Minister of Regulation, there is to be a new ministry and numerous proposals aim to roll back government intervention to improve ‘efficiency’ (there will be other effects). There is a commitment to pass the Regulatory Standards Act as soon as practicable. I have cautioned that an Act in its form of the 2021 Regulatory Standards Bill is unworkable. Even so, it is the one really innovative proposal in the two agreements, which are otherwise unremittingly back to 2017.

If the RSA is passed, it is likely to be watered down. Even so, to pass it requires the support of NZF. Their agreement with National proposes a number of policies which would increase regulatory interventions in a way that is anathema to ACT. Will there be a standoff?

The agreements are clear that standoffs can happen. ‘As provided for in the Cabinet Manual, the Parties can “agree to disagree” in relation to matters on which the Parties wish to maintain, in public, different positions’ and ‘no Party is obliged to support another Party’s Members’ Bills’.

It has happened before. Labour’s ambitions for its Seabed and Foreshore Act were thwarted by – yes, it was coalition partner – NZF. (The NZF agreement mentions the need to revisit the legislation – now replaced by the Marine and Coastal Area (Takutai Moana) Act 2011 – following a decision by the Court of Appeal; since Te Parti Māori is not in power the parliamentary situation may not be as fraught.)

It will require the wisdom of Solomon to find a way through some of the potential conflicts. There are commentators on the right who think there is not such wisdom in the current National leadership. Any doubts are reinforced by the mess of the forty-day negotiation which generated these two coalition agreements.

A previous column looked at Winston Peters biographically. This one takes a closer look at his record as a minister, especially his policy record.

1990-1991: Minister of Māori Affairs.

Few remember Ka Awatea as a major document on the future of Māori policy; there is not even an entry in Wikipedia. The impression is that Peters left the writing to officials as was not greatly interested in it. We shall see a repeated pattern of his not being a policy wonk.

I am not sure about Peters’ vision for Māori in New Zealand. He is proud of his Māori heritage as well as his Scottish one. (He is not fluent in te reo; English was the language in his childhood home and he was not allowed to speak Māori at his primary school.) The right wing account of Māoridom is not well articulated; attempts to explain it are drowned by cries of ‘racism’, not all of which are justified. I am confident that Peters does not support the views of the majority on the left. He has specifically rejected the He Puapua report and co-governance.

1996-1998: Treasurer (And Deputy Prime Minister)

Peters is not remembered as a great minister in charge of the Treasury; his deputy, Bill Birch, did the grunt work. I am told his approach was ‘legalistic’ rather than policy-focused. My impression is that he does not have a grasp of the technical side of economics – just the political side. His limitations are illustrated by his failed retirement scheme.

During the coalition negotiations in late 1996, Winston Peters asked me to prepare a proposal for a contributory retirement superannuation scheme as a part of NZF entering government. His one requirement was that it had to be implemented within the three years of the electoral cycle. My advice was based on the 1974 New Zealand Superannuation Scheme which had been implemented within three years with much of the work already done. Peters’ scheme – the one I advised on – was adopted as a part of the coalition agreement with National under Jim Bolger.

When Peters became Treasurer he asked Treasury to design an earnings-related contributory scheme. The available papers suggest that the officials did not look at the scheme in the coalition agreement. Instead, they latched onto Douglas’s neoliberal scheme set out in Unfinished Business.

It was dreadful scheme. Some people – more of them women – would have made contributions throughout their working life and received not an extra cent in retirement support (they would have actually got less because the Treasury proposal cut back the level of the non-contributory scheme by indexing it to prices rather than wage changes). The Treasury proposal went to a referendum in 1998; it lost heavily.

It was Peters rather than Treasury who suffered. The trashing of his pet scheme weakened his political position. Peters’ original scheme would have been popular. Michael Cullen introduced it as Kiwisaver in 2005. Woe betide any politician who tries to abandon it. (When Treasurer Peters introduce the Treasury proposal to Parliament in 1998, Cullen pointed out it was far from the scheme agreed in the coalition document.)

Shortly after his death, Cullen’s name came up in discussion with a nurse of Asian ethnicity. She became effusive because her family had used their Kiwisaver funds to purchase their home. I said I had a small role in its development – I meant ‘small’; I kept the remembrance of the 1974 Labour scheme. She thanked me three times.

Perhaps the course of politics would have been different had a ‘Kiwisaver’ type scheme been offered to the voters in 1998 instead of a neoliberal one. Perhaps the strengthened Peters would have survived as Treasurer and NZF would have returned in the 1999 election – possibly it would have joined the Labour Government.

(Almost as an aside, I recall thinking when neoliberal Jenny Shipley toppled Bolger, that ‘they are out to get Peters’, who got on very well with Jim. Peters made a tactical error which led to his downfall – he interpreted the coalition agreement legally rather than politically. But my guess is that they would have got him anyway, especially after he lost the referendum.)

2005-2008: Minister of Foreign Affairs

By all accounts Peters was a successful Minister of Foreign Affairs. He liked the job of putting New Zealand first, listened carefully to briefings, while ministry officials were comfortable with his redirection towards the Pacific and delighted about his ability to extract additional funding.

There is a revealing story on the wider policy front. In 2003 the Court of Appeal ruled that iwi might (sic) have a limited claim to interests in the foreshore and seabed. The Clark-Cullen Labour Government decided that legislation was needed rather than leaving the matter to the tortuous processes of the courts. Its preferred solution was blocked by a lack of parliamentary support. (National opted out; according to Chris Finlayson, the Key-English Attorney General, who was not in Parliament at that time, their thinking was muddled.) Labour depended on New Zealand First, whose support came, according to Michael Cullen, at a ‘heavy price’, including the loss of ‘a lot of high moral ground’.

Peters’ objection seems to have been that the original Labour proposal created a new legal principle to which, as a legal conservative, he objected. Ironically the New Zealand First shaped legislation led to the formation of the Māori Party (Te Pati Māori) – a nice example of very unintended consequences.

(Cullen thought that National’s replacement 2011 Takutai Moana Act (supervised by Finlayson) was closer to what Labour wanted in 2004 than what could be negotiated with New Zealand First. Even so, when that bill was passed, Labour voted against it. The Court of Appeal has just raised serious objections to the Takutai Moana Act which will have to be sorted out by the Luxon Government. Peters will be involved again.)

2017-2020: Minister of Foreign Affairs (and Deputy Prime Minister)

Ministry officials were so pleased to get back Peters after the harrowing experience of his predecessor, National’s Murray McCully (after a brief interregnum by Gerry Brownlee). Labour’s Nania Mahuta, who took over after him, was not liked as much either.

An authoritative history of the first term of the Ardern-led Government is yet to be published. I shan’t be surprised if it shows Peters’ experience was a key element in stabilising the new government which consisted largely of ministerial neophytes. However, on his account, there seems to have been a breakdown in consultation and trust by 2020, presumably as the parties headed towards the election. Will this pattern be repeated in the Luxon-led government from 2023?

In summary, generally Peters has been a reasonable but not outstanding minister showing very good political skills but mediocre policy ones.

The picture the commentariat presents of Winston Peters is a misleading caricature. If we don’t try to understand the complexity of the man, we cannot understand what is going on in New Zealand politics.

Winston Peters has been active in New Zealand politics longer than any other current politician. He stood for Northern Māori in 1975 and was first elected to Parliament in 1979, 44 years ago before two-thirds of the 2023 electors had ever voted. Sure, he has been out of parliament for nine of those years, but he is the longest sitting MP and one of the most experienced cabinet ministers. Unfortunately, the commentariat description of him is shallow and incomplete. There is more substance to the politician than it allows.

Wynston (sic) Raymond Peters was born in Whangarei in 1945, the middle child of a family of eleven (six of whom got to university) and grew up on a Northland farm. His father was Māori (primarily Ngāti Wai but also of Ngāti Hine and Te Waiariki). His mother was of Scottish ancestry. The dairy farm must have been pretty marginal as his father also had to work long hours as a truck driver and construction worker. In Not in Narrow Seas I described such farming as ‘subsistence’ and pointed out it was common among Māori in the first part of the twentieth century.

Peters once remarked that the welfare state – presumably referring the high quality publically provided education, health care and social support – had not reached Northland when he was growing up, which may explain why, despite his abilities, rather than going to university, he first studied at the Auckland Teachers’ Training College, going out to teach. He then went on to work on blast-furnaces and tunnels in Australia.

Returning to Auckland, he studied history, politics and law, graduating LLB and BA, then going to work as a lawyer at Russell McVeagh where he represented his iwi in a land claim. (Earlier, he captained the Auckland Māori Rugby team.)

Had one been told at this stage in his life that Peters would have a political career, you might have predicted that it would have been in the Labour Party. However, during his university years, Peters joined the National Party. In his 1979 maiden speech in Parliament he explained:

     ‘I believe the most effective government the country can have is one that believes in free enterprise, encourages hard work, keeps control and regulation to a minimum, carefully controls State spending, and sets taxation rates that are an incentive, not a disincentive, to work.’

The typical ideology of a new National MP. More revealingly he went on:

     ‘By sheer hard work, beginning in the Depression, my father, with the help of his family, developed a dairy farm. Many such families exist in New Zealand – families who have worked together, who help one another, who serve the community voluntarily, who stand up for their children when they get into difficulties, and who help their members to achieve their goals.’

It was his small farming background which frames his thinking. As for ‘working-class Tories’, Peters thinks that success derives principally from hard work and personal discipline. Such Tories can be suspicious of welfare because it tends to sap initiative. While they are often sympathetic to those in difficulty, they have an antipathy to collective action.

Peters stood as National candidate in Northen Māori in 1975. He first came to national prominence when in the 1978 election campaign the National Party TV advertisements had him interviewing party-leader, Rob Muldoon. After a recount, he won the Hunua electorate in 1979 (from Malcolm Douglas, the brother of Roger). He lost the seat in 1981, and won Tauranga in 1984. He was a real scrapper in opposition and was made Minister of Māori Affairs in Jim Bolger’s 1990 cabinet when he was 45.

At this point life in his life there was a reasonable prospect of him becoming the next National Prime Minister, when the ten-years-older Bolger moved on. Within two years that possibility had turned to custard. He had been sacked from Cabinet and left National to establish New Zealand First.

The conventional wisdom is that he wasn’t a team player. Perhaps. In the ten MMP elections New Zealand First has collected an average of 159,000 votes, compared to 33,000 won by Peter Dunne’s parties and the 90,000 Jim Anderton’s parties won when they stood. (ACT’s score was 106,000; NZF beat them in seven of the ten elections.) You don’t get that support based only on charisma. (A longer account would explore the various ways NZF was handicapped compared to these other parties.)

The real story of the falling out is more complex. Peters loathes neoliberalism which was rampant in the early 1990s National Government. In his 2017 speech anointing Labour as the main party of next government, Peters said ‘[f]ar too many New Zealanders have come to view today’s capitalism, not as their friend, but as their foe. And they are not all wrong. That is why we believe that capitalism must regain its responsible – its human face. That perception has influenced our negotiations.’ Earlier he had commented, ‘[t]he truth is that after 32 years of the neoliberal experiment the character and the quality of our country has changed dramatically, and much of it for the worse.’

In turn, the neoliberals loathe Peters, even commissioning a biography Winston First, which was only the first of a number of character assassinations. Peters comes from the Muldoon wing of the National Party (as did Bolger). Again the public venom towards Muldoon – of what he was doing (in extremely difficult circumstances I should add) and his personality – has prevented a cool analysis of the underlying politics.

Peters has never been forgiven by the conventional wisdom for publicly walking out on his party. (Act members did so more sneakily.) I am not sure how widely his class origins or his Māori ones are held against him. It is too easy to dismiss him as a populis and ignore the deeper politician.

The sneering at Peters by conventional observers is the reason they so frequently fail to predict  his behaviour – not that failed predictions challenge their confidence in their predictions.

Peters is not without his flaws – remind me of a politician who is perfect. I am a New Zealand nationalist but I, with many others, found his occasional outbreaks of xenophobia unacceptable. He has not been the only politician to flirt with the anti-vaxxers, dog whistling support to them while arguing that the vaccination campaign could have been more sensitively managed. One of his challenges has been that without a secure electoral seat he is forced to seek support from all sorts of weirdos when attempting to get across the threshold for party list seats. I wish too his relations with the media were not so belligerent, although their responses are partly to blame.

I wrote this column as I thought through the implications for the post-2023 government. The tensions between the neoliberals and the supporters of ‘responsible capitalism’ within the National Party are great. I am told there are senior members in the National caucus on speed-dial to Ruth Richardson; presumably some are on speed-dial to Bill English. The tensions will be intensified by the associate parties. While they may agree on opposing the left’s wokeness, they are deeply opposed on economic policy. Governments are always tense coalitions of conflicting and confusing ideologies and personal ambition. This one may be unusually so.

A later column will evaluate Peters as a minister.

Did you think the incoming government promised to extend bowel screening to 50-59 year olds? The promise was more limited – and more feasible.

National’s Manifesto promised:

Bowel cancer is the second highest cause of cancer death in New Zealand, while we have one of the highest rates of bowel cancer in the world. More than 3,000 people are diagnosed with bowel cancer each year and over 1,200 will die from the disease. Screening is one of the most effective ways to find bowel cancer early before it spreads. The National Bowel Screening Programme is available for eligible men and women aged 60 to 74. National will immediately commission work on a business case for progressively lowering the bowel cancer screening age to 50.

A ‘business case’ is an investigation of whether and how a particular project should be undertaken. The commercialist jargon arrived with neoliberalism and often has the implication that the project will go ahead anyway although sometimes business cases conclude that proceeding may not make sense – which does not always inhibit enthusiasts.

The bowel screening program is separate from what happens to a patient with symptoms (which I’ve listed at the end), who is referred by a general practitioner to a hospital gastroenterologist. This is not confined to any particular age group; there is evidence of increasing rates of bowel cancer among those under the age of 50.

Whatever the GP’s conclusion, the specialist makes a separate assessment and may decline to proceed. It’s a clinical judgement so they may make the wrong decision – which may be lethal for the patient. But I have heard GPs suggesting that a particular specialist is rejecting too many. Perhaps they are overwhelmed with referrals but I have heard the claim that they may be holding back in order to meet screening targets (referrals are not included in the targets). There are some well-documented cases where the patient and their families were badly let down by the system.

A referred patient judged vulnerable gets a physical investigation (hopefully without too long a wait). The most common investigation involves a colonoscopy in which an endoscope inserted up the rectum. (There are other means but this account simplifies to get the essence of the issue.) They don’t look just for signs of cancer but also for bowel ‘polyps’ which can potentially turn cancerous, which are then excised – so the investigation is not just about identifying cancer but preventing it. (There is an analogy here with cervical screening, which is also concerned with precancerous conditions.)

Aside from the resources, the inconvenience and the time involvement of the procedure it is also necessary for the patient to first purge the bowel of any faeces which is not a pleasant experience – but neither is bowel cancer.

I’ve just described what happens if you go to your doctor. A bowel screening program is the other way around. The medical system reaches out to you to find out whether you should go on to a colonoscopy.

Designing an effective screening program is not easy. It took almost a decade to get the cervical screening program fully running. Today its success is evident in the falling rates of the incidence of and mortality from cervical cancer.

Indicative of the challenges, the national bowel screening program was rolled out between July 2017 and May 2022 preceded by a pilot program in the Waitemata DHB area which began in November 2011. Pilots are necessary to design an effective system, particularly as success depends on public co-operation on matters which are intimate, and where cultural differences may be significant.

Initially the intention was to follow the international recommended standard of screening all those in the 50 to 74 age group. The Waitemata pilot did that but the national program was restricted to 60 to 74 age group and the sensitivity of the test was decreased.

The reason for the beginning age of 60 being higher than recommended one of 50 years, for most of the population, is because it was judged that we simply did not have the resources – the skilled workers and facilities – to cover everyone. (However, for Maori and Pasifika the age of eligibility is 50 because bowel cancer occurs earlier among those ethnic groups.) Resource limitations are the reason why the 2023 manifesto promise is only for a ‘business case’ for lowering the age and not for immediate implementation.

Faced with the shortage the business case could politely say ‘I am sorry Minister, but no’ or ‘not for now’. More likely they will look at whether we can obtain more gastroenterologists, the main bottleneck. It takes years to train one. Could we obtain more overseas? Other possibilities would be to use simpler but not as effective investigating alternatives instead of a colonoscopy, which may be better than doing nothing but are more likely to miss some cases. Apparently some of the alternatives can be applied by less well-trained paramedics and GPs (but we are short of the latter too).

I would hope, too, that the business case looks at the question of GP referrals of symptomatic patients. I would like to think the grumblings I hear refer only to very limited instances. Perhaps not.

These sort of evaluations of medical treatments are of intrinsic interest to an economist. Over the years I have contributed to a number, always working with members of the medical profession who know far more than I ever shall about the medical issues. But they usually require assistance in thinking through the resource implications – which is not just having a plausible case to get Treasury to cough up the cash.

I thought it also useful to draw attention to the complexities of implementing a politician’s promises or popular demands. You are going to be disappointed because once again many manifesto promises got fudged in the heat of the campaign.

Don’t be too tough on them. In this case the Labour Party made a similar promise; perhaps it was softer because they understood the challenges better. From the longer term perspective, this is another step towards markedly reducing bowel cancer.

Appendix: Bowel Cancer Symptoms

Bowel Cancer New Zealand advises

‘Being aware of the symptoms is the first step you can take to prevent bowel cancer. Symptoms may come and go so don’t wait if you have any of these concerns, no matter what age you are. Symptoms may include:

     Bleeding from the bottom (rectal bleeding)

     Change of bowel motions/habits that come and go over several weeks

     Anaemia

     Severe persistent or periodic abdominal pain

     A lump or mass in the abdomen

     Tiredness and loss of weight for no obvious reason

If you have any of these symptoms, or you are concerned about your bowel health, see your GP right away.’

There is also a genetic component to bowel cancer so family history of it is another factor taken into consideration.

(This column has been checked out by medical specialists.)

There is a view that the world economy is entering a period of higher inflation and higher nominal interest rates, but who knows? Presumably New Zealand has to follow.

If you know everything about the inflation process, and are totally committed to central banks targeting inflation at 2 percent p.a., then there is no need to read this column. I am afraid its writer is not nearly as committed as you. Indeed, all this column offers is some guidance about an evolving discussion among overseas economists which is challenging past certainties.

Those certainties were that, some exceptional circumstances aside, inflation was a monetary phenomenon only, and that central banks should be able to reduce it to any desired level – usually set as consumer prices rising about 2 percent p.a. – although their actions would cause some short-term pain. The details of the analysis – some of which are often quite subtle – are rarely mentioned.

This view is summarised by Friedman’s alleged statement that ‘inflation is always and everywhere a monetary phenomenon’, which has become a mantra. What he (and his wife Rose) actually said was ‘substantial inflation is always and everywhere a monetary phenomenon.’ The Friedman analysis tells us little about what is happening when the inflation level is low – like at 2 percent p.a..

There is a concern that high inflation feeds on itself and will spiral out of control. However this seems to apply when the inflation is above 7 percent p.a. or so. The 2 to 4 range we talk about is chosen in the light of this conclusion. Zero inflation is not commonly the target because there is resistance to lowering prices in many markets. Zero inflation reduces the price flexibility necessary for a vibrant market economy. (Another concern is that the measured indexes of price changes do not align well, and that, especially in a service-dominated economy, they may not measure quality changes perfectly.)

Today, there are murmurings among some reputable economists against this conventional wisdom on the causes of and policy responses to inflation. For instance, the just published annual report of the United Nations Conference on Trade and Development said ‘central bankers should relax their 2 per cent inflation target and assume a wider stabilising role’. Of course, any single instance can be discounted as eccentric and I have yet to see a comprehensive account of the numerous, and not always well focussed, murmurings. Hence this very cautious column.

In practice what is likely to happen is that many central banks will not pursue the 2 percent p.a. target as vigorously as they have in the past. Perhaps they will tacitly think of a 3 or even 4 percent p.a. as an acceptable level, while continuing to talk up the conventional wisdom of 2 percent p.a.. One overseas commentator, the respected Gillian Tett, said ‘this strategy also smacks of burgeoning hypocrisy – and, most importantly, a whiff of impotence’.

I guess most of us can live with some hypocrisy; we have for years in many fields of public endeavour. But the ‘impotence’ signals what I have described as the ‘murmurings’. One danger of ignoring them is a lot of chest beating by central bankers and their acolyte commentariat with much pain added in the economy but without any gain.

What does this mean for New Zealand? I leave you to decide whether the Reserve Bank will line up with the burgeoning hypocrites or the impotent chest-beaters. The reality is whichever, and whatever the rhetoric, our interest rates are going to rise in the medium term if those in our major sources of overseas finance do. (There are various plausible assumptions in here, including about the exchange rate track.)

The expectation is that nominal annual interest rates will be rising by another couple of percentage points in the near future, although whether the effective inflation rate is also expected to increase by the same amount is not clear. My tendency is to assume that real interest rates are determined by factors outside a central bank’s control – even when the bank is not impotent.

I see real interest rates as reflecting growth prospects. If the world – or at least the rich economies which offer some security to investors – is entering a period of secular stagnation (another murmuring), then there are not good investment opportunities and interest rates remain low. (There is, of course, speculation on financial assets but that involves large wins offset by large losses; which side are you on?)

So, as best as I can understand, there is an expectation that nominal interest rates are going to remain high and may even increase, while prices are also going to be tracking above the 2 percent p.a. target. My guess is that real interest rates are not going to rise in the medium term.

That does not seem to be too bad a scenario, once one is not over-committed to price stability, does it? Except high nominal interest rates are tough on those who hold mortgages and cannot easily turn the offsetting rising housing capital gains into income for spending. (On the other hand, those depending on income from interest investments may seem better off, although the income tax regime claws a lot of that back.) As a consequence, the current grumpiness of mortgage holders is likely to continue.

Meanwhile the public commentary will lambast the government or the RBNZ (and usually both) for the bedding in of a higher interest-rate regime, thereby combining hypocrisy with impotence.

The more informed an economist is, the more they keep their head down during elections.

Elections are not a time to talk about economics in a serious way. Sure, politicians talk about the economy and what they will do to it, with promises soon forgotten when they take power. Elections are timely reminders of how shallow and poor quality our public discussion on the economy is. (You won’t be able to infer how I voted from this column. Economic issues were not a major determinant.)

The front page advertisement of my paper on the morning before election day proclaimed:

‘Vote Labour for help with the cost of living:

     – Free dental care for under 30-year-olds;

     – No GST on fruit and veges;

     – Free prescriptions;

     – $25 extra a week for 180,000 families;

     – 20 hours free ECE for 2-year-olds.’

My instant reaction was ‘Is that what the Labour Government is about? Where is the narrative?’

Providing such narratives is not an area of my expertise. Typically they are less pointy-headed than what I write and are developed by trying them out on audiences and modifying them in response to reactions. (Trump is a very transparent example of this behaviour.)

Had I been foolish enough to have been a Labour politician elected to office in 2017, I’d have started off with a narrative that the Key-English Government had suffered from inertia and failed to address a multitude of issues and ‘we are going to deal with the backlog’. One example would be the mess that housing had got into – it would take years to sort it out. (National is hinting that it will use the narrative but apply the backlog thesis to Labour. Oh well!)

Of course other events – the Mosque Massacres and the War on Covid – took over. In any case, a new narrative was needed following reelection in 2020. One which fitted in with actual events was something like ‘We’ve won the War on Covid; we are dealing with the recovery.’ (OK, it’s too pointy-headed.)

After the guns stop firing, there is an enormous readjustment necessary to get back to a peace-time economy. What happened after the Great War is not well documented and data deficient but it was turbulent. (Recall the sentiment in Man Alone: ‘I couldn’t tell you about the war,’ Johnson said. ‘It wasn’t a lot different from anything else. I could tell you worse things about the peace.’) In the case of the Second World War, Jack Baker points out that while it lasted five years, the recovery took another ten.

The War on Covid is in an uneasy armistice with guerilla warfare as the virus mutates and we respond with improved vaccines. Even so, we should celebrate our successes. Vigorous public health measures, including lockdowns until vaccines became available, restrained deaths to below 3000. There would have been another 20,000-odd deaths if our response had been as ineffective as the US’s. (One wonders how those who didn’t die, and their friends and relations, voted.)

To win that war we used a lot of economic resources, as is the way of warfare. That is the major reason for net public debt rising from around $5b in June 2019 to around $71b today. And as occurred during the Second World War, not only did government debt rise dramatically, but other economic activity got diverted. We had power cuts in the 1950s because we did not build enough power stations during WWII.

Today the pall of the War on Covid hangs over the world and New Zealand economies, in addition to the Russian invasion of Ukraine which is impacting on the world and hence on the local economy too. That pall hung over the 2023 election.

Is there a narrative to be constructed from this? As I said, this is outside my competence. But I do know that when faced with the 2008 Global Financial Crisis the government threw everything at it, public debt rose sharply, and National’s Key-English Government was re-elected in 2011 and 2014. People believed their narrative (although Labour did little to offer an alternative one).

The critical point is that the state of the New Zealand economy is shaped by what happened in its past and what is happening overseas. But, well illustrated in the election campaign, the public rhetoric assumes that the economy is isolated in time and space – a bit like a 101 economics textbook, I suppose. I infer that the commentariat find it very hard to follow what is happening overseas, while their knowledge of New Zealand economic history is thin, at best.

I am not saying that the more sophisticated in the local economics profession think this way and sometimes Minister of Finance Robertson showed he was aware of the international and historical impacts. But the public commentary was, shall we say, out of this world.

To go back to that front page advert. It could have been rejigged into this narrative. Something like ‘the economy is struggling under pressures over which the government has little control; but it is doing its best to shield the most vulnerable’. That is not to say that the promises were the most efficient way to protect them (some were more about targeting particular voters).

National’s story was similar. They were promising tax relief, funding it by cutting public services. Perhaps the tax relief was poorly targeted and indulgent. One fears the new government will repeat the Key-English mistake of cuts which cripple the public sector.

Even so, the choice for electors was not too bad (assuming you expected the promises to be delivered) although not very transparent.

Observe that neither party was targeting the group which was hardest hit – those facing substantial interest rate hikes. (I have a column to write about current international thinking on interest rates; prospects look grim for mortgage holders.) I take it that neither party could think of how to provide relief. It is a reminder that on many matters the government is impotent despite the political rhetoric. It makes promises to improve the situation but if it is realistic it knows it cant; if it is stupid it believes itself and is dismally disappointed. At best, politics hides behind promising policies which are largely ineffective. 

It’s often said that truth is the first casualty of war.

If that’s true, then humanity is second in line.

As the Israeli Defence Forces prepare a ground attack on Gaza, shifting concepts of humanity and its dark oppositional force, inhumanity, are being weighed and measured, promoted and deflected.

As distant observers we are asked to make an assessment from grainy images of bombed babies and kidnapped grandmothers about the degrees of humanity on either side.

Israeli politicians say they have suffered the biggest single loss of life since the establishment of the state 75 years ago, raising deep memories of European pogroms.

More than 1300 Israelis, mainly civilians, have been killed by Hamas militants who arrived from Gaza on motorbikes, trucks, speedboats and motorised paragliders, blowing holes in the security wall and widening gaps with bulldozers.

They mowed down concertgoers at a music festival and threw grenades at people hiding on kibbutzim – taking as many as 150 hostages, live bargaining chips, back to the Gaza enclave where Hamas is based.

These actions are made possible by a suspension of humanity. The inability to see your victims as people like yourselves.

Dehumanisation is an active tool of modern warfare, fought in the age of the 15-second video.

Hamas social media clips show young music fans cowering in holes in the ground, at the points of guns, being referred to by their captors as “pigs”.

The inability or unwillingness to see the opposing side as human beings, to instead regard them as sub-human or animals is a necessary pre-requisite for absolute war – conflict without restrictions – enabling the very worst behaviour imaginable.

It allows the suspension of protective humanising processes which would ordinarily prevent soldiers from targeting civilians.

And now the bombs fall on Gaza. In the first six days of the war Israel says it’s dropped 6000. The number of dead children, Palestinian health officials say, was greater than 500. A week further on the death toll in Gaza has reached an estimated 3700, including deaths at a bombed hospital, although who launched the rocket remains debated.

There are 2.3 million Palestinians living on a 41km long strip of land between the Mediterranean Sea and the State of Israel.

Gaza, originally a conglomeration of refugee camps, has grown into one of the most densely populated places on earth.

One by one, its neighbourhoods are being flattened by rolling airstrikes. Israel’s government has turned a 16-year economic blockade into a state of siege.

Supplies of fuel, food and fresh water have been cut off.

Announcing the siege, defence minister Yoav Gallant said: “we are fighting beasts (or human animals depending on which translation you use) and will act accordingly”.

On both sides, the accusation of inhumanity is being used as a justification for waging war on civilians.

Highly emotive interviews with survivors of the Hamas attacks and families of the hostages describe “barbaric” experiences.

On the sixth day of the conflict the office of Benjamin Netanyahu posted photos of a baby in a pool of blood and the charred bodies of two other children on social media.

The Israeli prime minister shared them with US Secretary of State Anthony Blinken, who had just flown into Tel Aviv.

Blinken speaks of the value that Americans place on “human life and human dignity” – that’s “who we are,” he says.

The ability of a newly formed Israeli unity government and Hamas to uphold some form of that ideal will have a major impact on the direction of this conflict, and the collateral human damage.

Throughout history the suspension of humanity has long enabled atrocities.

Look at the Holocaust, look at the terrors of Stalin, the Killing Fields.

Exterminate the cockroaches, was the cry of the Rwandan genocide.

As observers from far away, we are asked to judge accusations of inhumanity as we witness the opening salvos of what might become the mass extermination of civilians.

We are expected to weigh the pictures of dead babies, with a tiny infant lying in the middle of a huge orange stretcher or a lifeless child in the arms of a father, its back to the camera in a pink stretch and grow, one arm dangling.

Balance up the abduction of an 85-year-old woman in a golf cart with a inert two-year-old lifted from the rubble of a bombed building, and they all take us to a place of terrible outrage.

To try and balance atrocity is a fool’s errand. Each deserves its own investigation and condemnation.

The Israeli-Palestinian conflict has claimed tens of thousands of lives and displaced many millions of people and has its roots in a colonial act carried out nearly a century ago.

Israeli human rights organization B’Tselem has been tracking conflict-related deaths since September 2000.

The overwhelming majority of the deaths are Palestinian and have been for almost 14 years.

For every 15 people killed in the conflict, 13 are Palestinian and two are Israeli.

Within a week, the number of dead in Gaza at more than 1500 surpassed the number of Israelis killed in the Hamas attack. The bombing didn’t stop.

The concept of proportionality does seem to apply.

In President Joe Biden’s first major statement after the Hamas attack he said that the US stood by Israel but that said it was important that their ally operated “by the rules of law”.

The Geneva Conventions unequivocally forbid the taking of hostages. However, the rules around a siege like the one in Gaza are less clear.

Under laws of armed conflict a siege is acceptable so long as the target is military and the aim isn’t to starve the civilian population.

How do you assess the decision to cut off fuel to power generators which keep the hospitals running? Hospitals that are full of thousands of Palestinians injured in sustained Israeli bombing.

An article on the International Committee of the Red Cross website says legally justifying sieges in a time of war is a “slippery method of thinking”.

The Israeli Defence Force claims that Hamas uses civilians of Gaza as human shields. That their infrastructure is scattered among places where people live.

Protecting civilians under these conditions is incredibly challenging. Though it does not serve as a humane argument for killing innocents or perceived collaborators.

Labels are crucial to humanity.

When talking about Hamas, Israeli spokespeople invariably refer to the militants as terrorists.

The Chief Rabbi of Britain has criticised the BBC for not using the expression terrorists to describe Hamas militants. He said it showed they weren’t impartial.

Veteran war reporter John Simpson staged a spirited response insisting that the use of the t-word immediately designated one side as baddies and the other as goodies.

This simplistic dichotomy hides a more complicated truth – there are goodies and baddies on both sides.

To maintain humanity in times of conflict we perhaps need to nurture simultaneous and contradictory thoughts.

We need to entertain the thought that either side is capable of anything – bad deeds and good.

The complete suspension of humanity and the promotion of good vs evil takes us to an intractable place where the concept of peace and a cessation of hostilities is unthinkable.

The practice of looking for humanity in the actions and words of others, especially our enemies, may not solve the Middle East crisis, but it may help prevent an agnostic conflict turning into the slaughter of absolute war.

She may have progressed our understanding of women in the economy but that has not resolved all the issues.

A woman who was once chief executive of New Zealand’s biggest company said ‘It is true that a large percentage of the [women’s pay] gap is unexplained and that’s where the issue comes about; could it be bias even if that’s unconscious bias? Regardless of how we’ve got a gap … the much more important thing is, what are we going to do about it?’

That is so characteristic of the way we tackle policy in New Zealand. We don’t worry about understanding a problem; we focus on solving it. We don’t even bother about trying to find out what is known about it. Just get on with the policy.

There is, in fact, an enormous amount of research on the different income patterns of men’s and women’s earnings – very little of it in New Zealand. (Some of the overseas research has been used in the better policy work in New Zealand.)

If this general neglect as been unacceptable, hopefully it cannot be justified any longer given the award of the Bank of Sweden’s economics prize in honour of Alfred Nobel to Claudia Goldin.

She was not awarded just for her work in women’s economics – which is, after all, also in men’s economics because they are interdependent. Goldin is a bloody good economist (as were the other two female Nobel laureates).

(It was repeatedly mentioned that she is the first women to have been awarded the economics prize on her own rather than jointly. The reason is that in about 1975 the award should have gone to Joan Robinson who made some major innovations in economic thinking. But one member of the selection panel had a snitch on her and vetoed the choice. Never underestimate the extent to which the eccentricities of a panel determine awards.)

Goldin’s many contributions have been mainly in (American) economic history, including on inequality. She was a student of Robert Fogel, the last economic historian laureate, who, like her, imaginatively investigated important questions – in his case, most notably the economics of American slavery – often finding data which no one else thought existed. But she also addresses contemporary issues.

She traced the pattern of American women’s employment over time. For the generation of women born between 1878 and 1897, a successful career typically required forgoing children and sometimes marriage. The choice women faced was ‘family or career’. For their granddaughters born between 1924 and 1943, it was ‘family then job’ for a college-educated woman: work after graduation, marry (soon), have children and drop out of the workforce, returning once her children were in school. But her prolonged absence from work meant she did not have the skills and experience necessary to thrive in the workplace. For Goldin’s last group, born after 1958, many women aspired to achieve ‘career and family’. The shift was aided by access to better contraception, which helped women delay marriage and childbearing and by more liberal social norms.

The research she did on the impact of contraception was with her personal and research partner Lawrence Katz, who is also a very good economist. Using an ingenious research strategy they found that the contraceptive pill gave women more control over decisions about children, enabling them to plan their career and develop their work skills, so the age of first birth increased.

Demographer Natalie Jackson identified an interesting New Zealand twist. Māori mothers have their children about five years earlier than Pakeha ones. What do the latter do in those five years? They add to their qualifications and their paid-work experience. They are much better placed when they return to paid work as the children grow up.

Despite these changes there remains a clear gender gap for these women, most notably with respect to pay. In a recent 2021 book, Career and Family: Women’s Century-Long Journey Toward Equity, Goldin argues that most women no longer suffer unequal pay nor is the gender pay gap driven primarily by women’s choice of occupation. She argues markets generously reward anyone, male or female, who is willing to hold down what she calls ‘greedy jobs’, those which demand long and unpredictable hours. Parents needing to be on-call at home in case a child falls ill and needs picking up from school, or needs cheering on at a concert or football match, cannot hold greedy jobs which require being available for last-minute demands from a client or boss. Typically, it is the mother who spends more time raising children; the gender pay gap tends to open up after a first child. Goldin says ‘Men forgo time with their family and women often forgo their career.’

Does it always have to be like this? I’ve had friends in which the parenting roles have reversed. But there is still the inequality, even if it does not appear as gender inequality. Goldin is optimistic that the ability to work at home will reduce the gap – it won’t eliminate it though.

She is not telling the full story. Some of my own research illustrates another dimension. Fifty years ago, I was interested in how non-market work affected the market economy. (This was well before the popular literature on the deficiencies of GDP as a measure of human activity. The long history of economists concerned about the problem before my work is rarely mentioned by the populists.)

I got blocked because there was no data. That led me to advocate an official time-use survey which Statistics New Zealand first implemented twenty-odd years ago. It is an extremely valuable resource although sadly few people have tried to exploit it. (Where are the Claudia Goldins when we need them?) My findings are reported in Not in Narrow Seas: The Economic History of Aotearoa New Zealand but here is a summary of some of them.

Time-use surveys ask individuals to keep diaries of what they did each hour. It turns out that on average men and women spend roughly the same amount of time on most things such as personal care (including sleeping) at 76 hours a week (out of 168 hours) and leisure (40 hours a week).

The big difference is in their working time balance. Both spend about 48 hours a week on such activities, but men’s paid labour force activity (including travelling to work) is 30 hours a week while women’s is 16 hours. (The male figure appears low because it includes the retired and students.) The remaining time is mainly work around the house; men do about half the amount women do.

So men and women work as long but men get paid for almost twice as many hours. Hence women have lower incomes from working, even if you adjust for age and qualifications.

Additionally they get paid less per hour. The reasons they get paid less are various. Goldin gives some, such as women having less work experience and being less into greedy jobs. What she does not pay much attention to is discrimination. I think that comes from her ‘Chicago School’ tendencies. (She is at Harvard University).

Neo-liberals argue that discrimination is insignificant, it’s the way the markets work. Others suggest that labour markets are fragmented and do not work as competitively as the neo-liberals assume. A particular issue arises if a single employer dominates a particular market. (The technical term is ‘monopsonist’.) They can screw down wages. (One of the pioneers exploring such non-competitive markets was Joan Robinson.)

We have had much legislation since 1973 to weaken the discrimination. The gap has diminished but it is still there. New Zealand’s most widespread monopsonist is the government. To give the Ardern-Hipkins Government some credit, it was reducing its monopsonistic discrimination. The consequence has been higher taxes with no real increase in services – just greater fairness.

Claudia Goldin would seem to give little weight to the last couple of paragraphs. Many economists would disagree. Even so they will celebrate her Noble laureateship. Her research has contributed markedly to the progression of the scientific part of economics even if some of her policy conclusions may be limited.

Even more, the award recognises an area where economists ought to be doing more work, rather than leaving non-economists to argue from ignorance.