Social investment for a stronger economy

Policy moves in mysterious ways. What seems outlandish one decade can become settled the next: abortion, legal homosexuality, civil unions, the whacking ban. Next the idea of investing in children and young people?

Test this against asset sales and a capital gains tax. Half a decade ago they were both assumed to be suicide notes by any government that did them.

But if John Key gets a second term he will sell just under half of four big state-owned enterprises. If he does that sensibly and not in the fire-sale way of 1986-92 — whatever price was offered was the “right” price and whoever offered that price was the “right” buyer, even if they then raped the assets, as some did — it is highly unlikely to be reversed by the next Labour-led government. Shareholding iwi, shareholding middle-ground voters and the cost will see to that.

Then if Labour leads the government after 2014 it will likely bring in a capital gains tax. If that is done sensibly, as in the South African model, which Labour is loosely following, a future National-led government is less likely to reverse it than use the wider taxing of income to reduce overall rates.

National and Labour this year have brought these two political ghosts out of the cupboard and invited voters to look through them.

Labour will demonise asset selldowns this year. National will demonise capital gains tax. But the longer Labour has to argue the case that it is unfair that some people (notably well-off people) don’t pay tax on some of their income, the less middle-ground voters are likely fear it.

Labour has been gratified and National unsettled that a number of people who are not envy-socialists have backed Labour raising the issue and, some of them, backed its actual proposal. It will need a vote collapse this year clearly blamed on the policy to stop Labour pushing it at the 2014 election.

Decade by decade, the “mainstream” evolves. Treaty of Waitangi settlements are now mainstream. Over time elements of the WAI262 report will become mainstream.

A similar evolution might be under way for the idea of investing in children and young people to reduce current large inequalities of opportunity to become productive, taxpaying citizens.

An Otago University Wellington medical school symposium last week detailed the huge individual, social and economic loss from children not getting a healthy start. Those inequalities and inequities persist because most voters think of “health” as “fixing sickness” and demand a large, expensive “sickness industry” to fix it. Hospitals are revered; healthy eating is a nanny-state bore.

Some health inequalities — physical and mental deformities and disabilities, genetically determined conditions, damage from accidents — can’t be fixed, though intelligent policy can render them less disabling. But inequalities which stem from unhealthy houses, poor diet and poor or damaging parenting, all made more likely by poverty which makes good life choices harder, can be reduced. These inequalities are inequities.

The sickness industry is much more focused on costly end-of-life interventions — cutting people up and filling them with dangerous drugs — than start-of-life enabling of children to be healthier. The economic return on investment in the first two years of life is huge and in the last two years tiny.

The idea that “spending” on enabling a better life is “investment” is still not mainstream, though for more than a decade some officials and the odd politician have argued it. Social activists, as was evident at the symposium, are uncomfortable with the hard-edged thinking economics demands.

But is change coming? A sickness industry lobby, the Medical Association, co-sponsored the symposium.

And some younger Labour MPs are edging towards “investment” thinking as they rethink “social” policy, including health policy, to be “child-centred”. Some insiders think Paula Bennett’s “green paper” due soon might edge down that line.

Next note a report today by the New Zealand Institute on youth disadvantage. This counts the economic (and individual and social) waste and cost ($900 million a year) of young people not getting into paid work and/or going bad. New Zealand ranks badly in the OECD on this.

The institute proposes picking up an e-learning initiative already proven in a low-decile school to engage otherwise alienated young people and wants it “urgently and systematically” rolled out to all other low-decile schools. And it wants centrally-driven, systematic mechanisms to pilot youth through school and training into paid work.

The institute estimates its proposals would cost $200 million a year.

You might think baby-boomers, needing a strong workforce to pay their pensions, would think that reasonable. But it would require a shift from “cost” thinking to “investment” thinking.

Neither major party has made that shift yet. But there are signs both may be starting to. If so, in a decade we might be asking what took them so long.