Yuppie populism trumps old-right conservatism

If New Zealand had a genuinely conservative government one of the things it would do would be to try and balance the interests of producers and consumers and savers and spenders.
Unfortunately, in company with the US we have an unbalanced right-liberal economy in which producers and savers are hammered while consumers are pampered.

While conservatism is concerned primarily with stability and balance, today's reigning neo-liberalism emphasizes individual freedom, and when people are given unrestricted freedom they usually behave in an unbalanced way. Interest rates may well be a key aspect of this lack of balance in economic policy. Over the last decade or so interest rates in New Zealand have been running at about 8 per cent per annum on average.

Now you might think high interest rates would have led to reduced spending and more saving, but the opposite has actually occurred - savings have stagnated while consumer spending has skyrocketed.

Critics such as Kel Sanderson argue that the Reserve Bank's high interest rates attracted more overseas capital than the country needed for growth and development leaving the banks awash in surplus funds. Thus lending practices have been loosened and more consumers have been encouraged to max out their credit cards and take out heavily leveraged mortgages.

Possibly the only reason we haven't had the kind of banking crisis seen in the US is that in this country the gap between wage rates and house prices is so high that people with poor credit histories have almost no show of paying off their mortgages so even the most cock-sure mortgage brokers wouldn't entertain trying to get them into a home.

To add insult to injury, savers have been discouraged from taking advantage of these high interest rates by hefty withholding taxes.

High interest rates have also pushed up property prices by making property speculation one of the few ways of making a profitable living. Despite the fact that Labour (like its UK counterpart) is constantly patting it self on the back for its supposed fiscal prudence, the country is sliding back towards ongoing trade imbalances.

Yet another way in which savers and producers have been penalised has been in the government's attitude to research and development spending. Economic development experts are frequently pointing out New Zealand has one of the lowest rates of private research and development spending in the OECD.

After two terms in office Labour finally decided to offer businesses some tax relief for research and development spending. However even this token measure of producerism has been crushed by the rabidly consumerist National Party.

I was briefly considering voting for National after hearing about its plan to substantially increase spending on transport and communications infrastructure, but this latest insult means something pretty out of the blue would have to happen policy wise before I'd consider voting for either of the two main parties.