Farewell Sir Roger

Sir Roger Douglas has announced he won't be standing for re-election.

It's a tragedy that this is optimal.

Douglas's reforms were critically important in fixing the country in the 1980s. The best argument that can be made against them is that had reforms proceeded more slowly, public support for the reforms might have been built and we'd have had less backsliding around 2005-2008. I'd put less than even odds on the critique being right, but it's defensible. Other critiques I've been seeing around the traps subsequent to the retirement announcement are a little uglier.

The costs of the restructuring were unavoidable. Policy has a hard time turning on a dime; entrenched business practices can be even slower. A whole lot of firms had to learn how to operate in a deregulated and internationally competitive environment. Arnold Kling's recalculation story is probably the best explanation for the prolonged downturn - we don't jump from one equilibrium to another, and the path can be painful. It took a long time to figure out that the best use of some sheep paddocks was grape growing, dairy irrigation for others. You don't move from requiring government permission to get a foreign magazine subscription (currency controls) to a dynamic free trading economy without adjustment costs. The move's still worthwhile.

The country's a better place for Douglas having served. I can't think of many other politicians, here or abroad, about whom that's true.

The last term has had to have been frustrating for Sir Roger. Having National shoot down his bill on the youth minimum wage had to have stung. National voted against Labour's elimination of the differential youth rate, but Douglas couldn't get National onside for a policy move consistent with National's prior position and not ruled out by Key in the election campaign. And about 10,000 kids are now unemployed who otherwise likely wouldn't be. Sad fact is that most voters associate Sir Roger with the pain of the reforms rather than the worse pain avoided and the prosperity that ensued, like the kid that blames the doctor for the medicine's bad taste. And that's enough to poison the well against anything he might propose, regardless of how well grounded it might be in economic theory or how consistent it might otherwise be with the kinds of policies the National party might otherwise support. And so it's time to retire.

It's a good thing that economic reformers aren't in it for the kudos. The hipsters on the left might daydream about what reform package they might have implemented had they had their fingers on the button back in '84. But the risks of currency crisis, debt default, and the country being taken under statutory management weren't trivial. We can armchair quarterback now about whether it would have been possible to implement a superior alternative reform path. It's pretty unclear even now whether it would have been possible. If I put myself where he was in '84, I have a hard time seeing an ex ante better path than the one he took: fix as much as you can as fast as you can and hope the damned thing sticks. And most of it has stuck, despite serious backsliding since 2005 or so.

One of the profs back at Mason told us that perhaps the best any of us could hope for would be to delay the implementation of some bad bit of regulation by a week or two, but that even that would be worth doing - the benefits of those two weeks, aggregated over everybody, could be substantial. Sir Roger did a fair bit more than that. Enjoy the break!