State of the Nation address on behalf of the Honesty Party

"My fellow New Zealanders, whether citizens, residents or those just passing through en route to Australian pastures, it gives me little pleasure to deliver this State of the Nation address on behalf of the Honesty Party because the State of the Nation is, to use a variety of technical terms, knackered, stuffed, buggered.

"While I am sure many of you use far more less technical terms, we can all agree, in the spirit of total honesty that this great party proudly stands for and embraces, that the country is not what it was nor indeed what it claims to be – and hasn’t been for decades.

"The Honesty Party recognises that our problems and issues as a country predate Rogernomics and Ruthenasia. Muldoonism was a failed experiment in populist authoritarianism and economics that failed to adjust to a rapidly changing world. What was once the (if briefly) wealthiest country in the world had already begun its decline and fall. The long snooze of the Holyoake years had set the tone of a ‘steady as she goes’ mentality, one that too often has meant the ship of state has steadily gone aground on the rocks of despair and desperation.

"The basis of our economy is one that no other first world nation has decided upon. A primary-production exporting economy to which we have added tourism, an overinflated housing market and high levels of immigration sets us apart, for a reason. New Zealand used to be the social laboratory of the word; today in all honesty we could say New Zealand is the economic laboratory in how to over promise and under deliver. ...

"New Zealand has suffered from low productivity for over half a century because of the economic, societal and educational basis of our nation. When we had a Productivity Commission to determine what we could do, we decided to ignore it and then disestablish it because what it suggested was deemed too problematic and too politically unproductive.

"But just as we were declining and failing under a First Past the Post electoral system, there is no indication that our shift to MMP has actually improved things in the areas that count. ...

"The state of the nation is one that all of us need to take responsibility for, but we too often prefer not to."

~ Dr. Mike Grimshaw from his post 'State of the Nation Address: The Honesty Party (An exercise in political honesty)'

History without Economic Literacy

"Once I started studying economics, however, I was outraged by the economic illiteracy of my history textbooks. Mainstream historians barely mentioned the [Industrial Revolution's] unprecedented miracle of sustained economic growth. Instead, they focused on distribution: How poor workers used labor unions and regulation to pry their fair share from the heartless capitalists who employed them. These historians never mentioned the negative side effects of unionization and labor market regulation – or even the view that such negative side effects existed. My historical mis-education eventually inspired my lecture on 'Why the Standard History of Labor Is Wrong.'
    "Every now and then, though, I question the accuracy of my memory. Could my history textbooks really have been so awful? The other night, overcome by nostalgia, I decided to check....

"The good news: My memory turns out to be quite accurate. The bad news: [the] economic illiteracy is more severe than I thought. The more economics you know, the worse [it] seems....
"So what should history textbooks say about these matters? This: Working conditions during the early Industrial Revolution were bad by modern standards, but a major improvement by the standards of the time. Factory work looked good to people raised on backbreaking farm labor – and it looked great to the many immigrants who flocked to the rising centers of industry from all over the world. This alliance of entrepreneurs, inventors, and workers peacefully kickstarted the modern world that we enjoy today.
    "And what of the 'workers’ movement'? A halfway decent textbook would emphasize that it wasn’t quantitatively important. Few workers belonged, and they didn’t get much for their efforts. Indeed, “workers’ movement” is a misnomer; labor unions didn’t speak for most workers, and were often dominated by leftist intellectuals. A fully decent textbook would discuss the many possible negative side effects of labor market regulation and unionization – so students realize that the critics of economic populism were neither knaves nor fools.
    "The Big Picture: Industrialization was the greatest event in human history. Critics then and now were foolishly looking a gift horse in the mouth. Until every student knows these truths by heart, history teachers have not done their job.

~ Bryan Caplan, from his post 'The Economic Illiteracy of High School History'

"...New Zealand could hardly have developed as a high-income country."

 

"[I]f enterprise in 19th century New Zealand had operated under anything comparable to the legal requirements regarding conservation [and the environment] imposed on it today, and had it been confronted by comparably eager 'watchdog' groups [or political parties] anxious for their pound of flesh, New Zealand could hardly have developed as a high-income country. One need only reflect that the process of farm formation over much of the North Island, which involved burning down a large proportion of the bush cover, would have been quite impossible."

~ John Gould, from his 1985 book The Muldoon Years: An Essay on New Zealand's Recent Economic Growth

"Histories" without respect for history

 

Last week Labour's Minister of Education announced the compulsory "histories" that young New Zealanders will now be taught in government schools. 

Oddly enough, says historian Michael Bassett, the "histories" curriculum (for that is what it is) displays the authors' ignorance of some basic historical facts.

For example, far from rushing to add New Zealand to the British Empire, Britain was extremely cautious before dispatching William Hobson; the Colonial Office was seriously worried that the Musket Wars between Maori had reached the stage where nothing short of military intervention would protect Maori.

This is combined with an emphasis on three "big ideas" that don't so much summarise local history as sanitise it:

Translated, the first ["big idea"] is that Maori history is fundamental to understanding everything about New Zealand. 

Nothing, in other words, about the ideas and technology brought here by later settlers that we all now enjoy. 

The second one, translated, is that the consequences of unstated, but implied, wicked colonisation continue 'to influence all aspects' of our history. 

As if New Zealand's first and second settlements are the only "histories" to tell about this place, and grievance over the latter the only mode of recounting them.

The third is that colonists’ power exerted over the years has invariably inflicted damage, injustice and conflict on Maori. Nothing about economic development which lifted New Zealand after the Treaty from a state of anarchy ... The development of the modern economy is [also] of no account in the Ministry these days where no one seems to give a thought to where their salaries come from. 

This is the historic equivalent of a cost-benefit analysis that refuses to even acknowledge any benefit.

And, as I predicted, there’ll be no mention of the Musket Wars in the new curriculum. The government is intent on sanitising our history, presumably in the hope that henceforth we’ll all 'be kind.' ... 
    Unless someone has the intestinal fortitude to challenge this new proposed curriculum, history is a doomed subject. Certainly there is nothing in it to enthuse today’s students who prefer action, learning about the wider world, new ideas, wars and international affairs. 

You know, like explaining all those things that give the context to the history of this small island nation.

Bassett heaps blame for the mess:

Superficially, we can blame those ... devising this mumbo-jumbo curriculum, but I think the rot goes far deeper. This report follows on from those recent ones about falling literacy and numeracy in our schools...
    There is a pattern here. Educationally, New Zealand has lost its way.... Coming on top of the alarming reports about our educational performance overall, what is proposed is just another piece of evidence that substantial segments of the country’s bureaucracy, and the ministers who control it, aren’t fit for purpose.

This may be the most relevant local history that the next generation of students will need to learn: the gradual decay of learning in this place.

NB: A former minister himself (though not of education) Bassett studied history at the University of Auckland back when History was the University's third-largest department. He has three degrees in history, was a senior lecturer in history and a member of the Waitangi Tribunal. He has published 13 history books and authored four biographies for the Dictionary of NZ Biography.

[Hat tip Point of Order, from whence comes the short Bassett bio.]

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Bright Futures Depend on Radical Entrepreneurs, not Radical Politicians

The legacy of William Soltau Davidson's first profitable frozen meat shipment transformed
New Zealand more radically than anything any radical politician ever did.

Guest poster Maciek Chawolski reminds us that letting market chaos reign makes us and future generations richer and better off beyond our dreams.

Recently, a colleague disparaged my reliance on "market magic” over his activist preference to use the government and its tax power to impose changes to technology and society. He berated me for believing that entrepreneurs professionals are (and should be) at the forefront of changes that make lives better for fellow citizens. He derisively repeated the joke, how many capitalists does it take to change a light bulb None. If the government would just leave it alone, it would screw itself in.

What he fails to see is all the activity that happens when government does leave things alone: which is all the things that make us and future generations richer.

Market Chaos

Here is a little thought experiment to support my views: Imagine a hot July day in 1900. You are standing on a street corner in Auckland looking at horse manure-covered streets while flies are buzzing around your head and spreading various diseases. You are 60 years old, and you were born in 1840 in Western Europe to a father who was born in 1810. All your life, you lived in pre-modern, agrarian, and feudal societies. The technologies that surround you are primitive. The question is: What would have been the smartest and fastest way to get the society from 1900 to 2020 levels?

New Zealand's "activist" Liberal Government of the 1890s to 1900s saw it as passing legislation -- passing labour laws, legalising unions, raising taxes and tariffs. Yet it was not these things that transformed the country in just over a century: it was the "unplanned chaos" of self-interested tinkerers and dreamers in the marketplace.

Consider how hard it would have been in 1900 to decide on the best future technologies and trajectories to get there. Back then, Auckland had only just welcomed its first car, a one-cylinder Star (it was "not anticipated that 'the fastest kind of motor car' will become common in the city"), and a case of plague is diagnosed. The first telegraph cable linking New Zealand to the world had only been installed two decades earlier, by the Eastern Extension Australia and China Telegraph Company, and the first trams of the Kelburn and Karori Tramway Company and Auckland Electric Tram Company began opening up city suburbs two years later. The first controlled little puddle jump flight in the country was four years out. Overseas, a tractor would be invented in 1904. Penicillin would happen in 1928. Something as simple as a shipping container would wait until 1956. The structure of atoms and DNA were still mysteries. (Rutherford would not "split the atom" until 1909.) There would be many decades until widespread water fluoridation. It would take the imaginations of many insightful people to build the future.

Fast-forward to 2020, and let’s repeat the same exercise. You are standing on that same street corner in Auckland with your smartphone and watching Uber and Amazon delivery trucks. You just checked on your house webcam because someone knocked on your door. A few minutes earlier, you spoke with your daughter who is studying in Europe ...

We can continue indefinitely listing the conveniences of our modern civilisation. If the trend continues, and at a vastly accelerated pace, another 120 years out, in 2140, our descendants will be living stepped-up lives very much different than the distance between 1900 and 2020. The same question stands: “what is the smartest and fastest way between 2020 and 2140 amazing future?”

When comparing 1900 to 2020, we recognise the enormity of revolutionary and transformative changes to everything around us that has gotten us here. For example, the heart treatments, kidney transplants, smartphones, modern aeroplanes, and inexhaustible entertainment options that are common today required numerous inventions over many decades to eventually enable today’s products and services. These inventions happened mostly by happenstance and a great deal of imagination—not as a result of conscious planning. It would have been a fantasy for someone in 1900 to draw a plan for the smartphone market release in 2007 and decide what should have been done in each decade between then and now and by whom to come up with a smartphone.

The Effects of Economic Freedom

Still not sure? Thirty years after the collapse of the Berlin Wall, East and West Germany are still different. They are the same people, but the West has been much richer and better off due to economic freedoms.

Even technology predictions about short-term events are rarely accurate. Just ask people who recently shorted the Tesla stock waiting for it to collapse because they doubted the technology readiness. In late October, they must have felt silly when Tesla stock price shot up from $254 to $328 per share. Why do we expect an activist or a government planner to be more successful than people betting their own money?

The problem with my colleague is that he does not recognise how technologically primitive our world will be to those in 2140. He does not have skin the game. He is not investing his money and does not consider trade-offs and alternatives. His blind spot is that while the single-technology focus may accelerate it, it is impossible to correctly optimise the economy with thousands of products and services over even a few years.

Notice how many economic activities, investments, and trials happen out there. These are people who use their resources or for which they are responsible to investors at their risk. Some win, some fail—but they all learn. The "chaos" out there is entrepreneurs trying, and learning, and often succeeding -- sometimes spectacularly! However, it is unacceptable when the government taxes us so that unspecialised activists with no accountability decide which technologies should be funded. These people waste money on rear-view mirror ideas instead of building the future. They have good intentions and itch to do “something,” but the something they do is to destroy wealth.

In 2020, as was the case in 1900, there will be no virtual signposts for technologies to focus on, but there will be thousands of haphazard, "chaotic" and necessary discoveries that will happen in the meantime. From the perspective of 2140, what should professionals in 2020 be doing? Using their own (or investor) resources and relying on the chaos and unpredictability of the market to take us there. If we let activists take our money, we will end up much poorer and reach 2140 in 2240 instead.

Society is better off with visionaries and dreamers using their money to test and try whatever they fancy without any country plan whatsoever. Let the market chaos reign to make us and future generations richer and better off beyond our wildest dreams.

                                                                    * * * * *

 

Maciek Chwalowski is a Washington, DC-based international business consultant focused on improving performance outcomes. He is an adventurer and a world-traveller (126 countries visited). This post first appeared at the Foundation for Economic Education blog. It has been contextualised for New Zealand.