Thursday 20 July 2023

New Zealand is a developing country

There isn't much in this excellent piece from Sam Bowman that doesn't also apply in NZ. 

We don't have Brexit, and at least some of our political parties are pro-immigration. And there's more support for planning liberalisation here, at least in principle.

But otherwise, scratch out UK, write in NZ, and tell me this doesn't apply:

The UK is thinking like a frontier economy when it should be thinking like a developing country. We’re well off by global standards, but poor by the standards of the frontier. And how rich we get mostly won’t be determined by the Great Stagnation, but by more mundane factors like the cost of energy, the supply of housing and infrastructure, and returns on capital investment.

In a way this is optimistic: the UK has a policy problem, not a fundamental scientific one. 

But there is one problem. There is virtually no recognition of how bad things are among British elites. Stefan Dercon, author of Gambling on Development, has a theory about what allows developing countries to experience sustained economic growth: they need their elites to come to an agreement to pursue it. The reforms needed to grow are painful and unpopular in the short-run. Regimes that do them without an “elite bargain” behind them are opening themselves up to being removed. Similarly, when one party in the UK proposes planning liberalisation, almost inevitably the others swing heavily Nimbyish.

In the UK, the preoccupations of the “elite” – by which I mean the people, left and right, in politics, government and media whose views shape those of the country – are with things like Net Zero (above all), inequality, obesity, delivering Brexit, regulating Big Tech, data ethics and privacy, cutting immigration, gender and racial pay gaps, and other priorities that are either unrelated to, or diametrically opposed to, making the country richer. If growth gets mentioned at all it is usually to support some unfunded and poorly targeted tax cut. On the flip side, every proposed tax or spending cut is assessed in terms of its distributional impact, not its effect on growth.

There is no recognition of the UK’s poverty and low growth relative to the frontier, and a lack of seriousness about how important this is.

 Even degrowth is a fashionable idea in some circles.

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