1. Lockdown resistance.
Well first thing's first. The level-4 Covid-19 lockdown gives us only the initial (though sizable) economic impact. The secondary effect may ultimately be worse.
Once investors understand (or believe) that another level-4 lockdown can easily happen, anytime, sooner or later, they will be highly averse to investing in New Zealand. The perceived risks of doing so become very high.
The result? Capital investment and economic growth is instead averted to more attractive countries, such as China. New Zealand's living standard may then slowly but consistently degrade. And our welfare system, including our health system and pensions, will eventually degrade along with it.
So what is the solution?
We need to establish strong mechanisms that can increase certainty that we will, most likely, never need to enact a serious economic lockdown again. To that end, we need to focus on better early detection and fast responses to a pandemic threat.
Close a border or two - not the whole world. Facilitate rapid and targeted quarantining - not economic devastation. And make the open commitment that we will never again move to a Level 4 or 3 lockdown. Again investors need to hear that.
We can look at technology. A mandatory national civil defence app (example included here) can allow us to more effectively police ourselves, and diagnose ourselves, so that controls in the future can be more surgical and permissive as opposed to draconian and costly.
One app used in Singapore, is a system that tracks and forms a history of people you have come into contact with, when and where, using bluetooth that links to other people's phones. It has been highly successful in allowing Singapore to rapidly track and isolate where the Covid-19 virus has come from.
Developing a comprehensive app--and maybe other technologies--would be invaluable to protecting investor confidence, by reducing the threat of another economically devastating lockdown. And note, every time a lockdown happens investor confidence can only get worse.
-And finally, we should look at prevention-based public health. Strong immune systems don't tend to get sick. Good sleep, diet, non-sedentary lifestyle, sun, etc. And yes, stress is the No 1 killer. Stress and depression is toxic in itself, and it's specifically what makes people abuse themselves in the first place. We can do a lot to alleviate stress in here-and-now terms, though the permanent stress imprinted from early child abuse and neglect is a tougher nut to crack.
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The threat of Level-4 lockdowns is just one variable that will have a major impact on investor confidence. We already have bad policy that tells people with initiative and capital to get out of New Zealand and go elsewhere. Now is the time to reform. We are going to want all the help we can get.
2. Reduce or eliminate the minimum wage.
This is one of the best things we can do right now. It ensures the rapid reemployment of the whole workforce, which gives us as much productivity as we can get, as soon as possible. Yes there will be a perceived (though temporary) pay-cut for some people, but it's not nearly as bad as the pay-cut from being completely unemployed. I write about this in detail here.
-Probably the best practical policy, would be for central government to hand the power to set minimum wage rates over to the regions, giving different rates for different regions. Their local unemployment levels will lead to the quick adjustment of the minimums.
-Another possibility is to facilitate a freelance society, by making it very easy for anyone to work for themselves. This would probably be the most effective option. I write on this here.
-In the middle of the Level-4 shutdown we have seen the government raise the minimum wage from $17.70 to $18.90. What can I say? This is what you do when you actually want to destroy an economy.
3. Eliminate artificial urban land rationing.
What does it mean to business, when they have to pay three times the rent on premisses than normal, and only because the cost of urban land has been deliberately inflated by a factor of ten? And on top of that, add that they have to pay their staff enough to compensate inflated residential rents.
Like with the lockdown, it incentivises people to invest elsewhere as your country is then offering a bad deal. Artificial land rationing must end. We cannot afford this decades-long foolishness anymore. I speak in more detail about this here.
The included image gives my more detailed thoughts on the potential for a modern building-boom.
4. Sharing the load.
New Zealand today has low fertility, just about replacement level, because like most western nations we've made it hard and costly to have children. Clearly we need to consider how we share the load, today?
With the economic hit from the virus especially, there's a good argument to means-test pensions so that people between the ages of, say 65 and 70, may be awarded only a partial pension if they are fit to work. This is not as harsh as it might look. By means-testing pensions you are ensuring that full pensions will be available for people when they really need them.
5. Cut regulations and company taxes as much as reasonably possible.
Over-regulation and excessive taxation always hampers investment, and ultimately degrades the tax base as well as productivity growth.
New Zealand could employ the United States' highly effective policy, where regulators must remove two regulations for every one new regulation they introduce. (It's a simple way of forcing regulators to review and remove outdated junk).
6. Drastically reform institutional education.
Research has indicated that most (not all) education on the primary and secondary-school level, is inconsequential to a child's long-term education and professional achievement. What really counts, long-term, is simply child abuse and genes. I write about this here.
Complemented with the near-costless internet, we can almost eliminate institutional schooling if we so wished, and at great savings. Somewhat informal homeschooling clubs could pick up the demand. (Also note, you win the improved pandemic resistance with smaller groups of children).
We can also save massively on tertiary education, which is not only extremely inefficient (it mostly operates like the internet never happened) but too often irrelevant. We need to stop funding vanity degrees that have no appreciable productive value to our economy. The real value in so many degrees today exists mainly to signal a given level of intelligence and discipline, to a prospective employer. I have an important video on this here.
Streamlining tertiary education also gets the young out of (worthless) education and into work sooner. So it gives us not only reduced costs, but higher productivity.
7. Driverless technology.
Waymo is testing a driverless taxi service today, without safety drivers. Soon they will obtain a proven safety record in true driverless mode, making driverless taxis widely deployable.
As much as any other country, New Zealand has an enormous amount to gain from this revolutionary technology. This is a long story but I would like to link a 5 minute video here. We need to look seriously at this new opportunity as it can do so much for New Zealand in particular.
8. Invest in working from home.
People are often surprised at how much more they can get done, with less mistakes, working from home (no parasitic distractions and it's often more socially comfortable). Obviously telecommuting is far more efficient than commuting.
To enhance this efficiency gain, we can investigate how homeworking can be facilitated better, using or developing various new technologies. Technology supporting telepresence is expanding rapidly.
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If we moved in my direction, New Zealand would become extremely prosperous, with or without the legacy of the Covid-19 shutdown. And prosperity means buying new and better houses for $300,000, not $600,000, and working 35 hours a week, not 55 hours a week, to pay for them.
If you think my ideas will induce vast job losses, then please understand that it does not work that way. If people are not paying for bloated education, painful work commutes, and crazy land rents, etc, then they can and will spend their money on other things. And that liberated demand leads to liberated supply - and new jobs to support that new supply. That's how economic development works and always has worked.
We should always target efficiency, especially now in this new age of the pandemic economic kill-switch that can, potentially, take countries such as New Zealand back to the third world - if governments go too crazy every time a virus hits.
My suggestions are about building real resilience - and on every level.
Andrew Atkin
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Further thinking: 20 - 06 - 2020:
Why stop colonisation in such an underpopulated country?
Interesting read! May I borrow the phrase "vanity degrees"?
ReplyDeleteThank you, Tani.
Delete...of course use it. I know it's a good way of putting it - paints the right picture :)
If New Zealand's average life expectancy dropped by one year, due to the far-reaching impact of the economic cost of this "war", then that would equate to 62,000 deaths in terms of lost man-years. Has Jacinda Ardern or Ashley Bloomfield factored this in? I doubt it. They desperately need to talk to and work with down-to-earth economists.
ReplyDelete