Bill English waxed eloquent last Thursday on “social investment”, saying speeches on the topic “are universally the most popular ideas I have presented in 25 years in politics”. But he reminded his large public servant audience: “The government’s top priority remains the economy.”
So the two are separate and different? There is something called society and something else called the economy?
Listening to ministers, you would think so.
There is cause for caution about this all-important economy.
For now New Zealand is in a little bubble of firm confidence, rising manufacturing and services output and a tourist boom offsetting the lengthening dairy bust.
But Federated Farmers said last Wednesday 11% of dairy farmers are “under pressure from banks over their mortgages”, a number sure to rise as the world price stays low for longer. Low farm revenue will flow on to households in provinces, then the cities.
Moreover, Reserve Bank figures last December showed per capita gross domestic product (GDP) growth was just above zero in 2015. It was record net immigration that kept up overall GDP growth, not rising personal prosperity.
And, as dairy farmers and returning Kiwis can tell you, there is trouble out in the world.
A growing number of serious rich-world commentators are rating another big global downturn probable, not just possible.
And, they say — last week’s Economist magazine among them — the standard tools to combat a downturn are blunt or badly worn.
Rich-world governments are far more in debt than before the 2008 financial crisis, subsequent 2009 recession and emergency measures. Rich-world central banks have printed so much money without spurring GDP growth that five have resorted to charging banks for deposits they must hold with them. This is uncharted territory.
China’s story is a rattling rich-world nerves, with huge dud loans in its banking system among serious imbalances which limit its capacity to offset a rich-world downturn as it did in 2009. India excepted (for now), other big “emerging economies” are in trouble, notably Brazil.
This global GDP weakness has got usually sober commentators musing on wild ideas like getting people to buy more by using nifty central bank manoeuvres to spray them with money — “helicopter money” is the term — or by forcing through a 5%-10% pay rise for everyone.
More buying, the theory goes, will get companies to invest and produce more, which the measures applied since 2009 haven’t got them doing. GDP growth will speed up.
But is that the point? Is more stuff the endgame?
Listen to the other Bill English, the one not obsessed with getting a fiscal surplus, and the answer gets fuzzy.
“Social investment” is a more appealing logo for the “forward liability investment approach”, which aimed to intervene, initially with beneficiaries, to stop them spending a life on the benefit and instead learn to work, get into work and stay in work.
English told the public servants on Thursday that since 2011 when the first “investment” steps were taken, “the welfare system’s future lifetime cost has reduced by $12 billion” as a result.
Great for taxpayers, if so. But is it great for society as a whole? Is it really “social investment” or just a fiscal measure?
English’s focus on Thursday was tightly on the “most vulnerable” and how increasingly sophisticated use of data is enabling officials to identify those most vulnerable, who will give the rest of us the biggest fiscal payoff when we “invest” in them.
English put it this way: “investing” so people become independent of welfare, social housing and urgent health services “ensures people lead better lives but also saves taxpayer money in the long run”.
This opens three questions.
The first is whether the funds “invested” in the “most vulnerable” are diverted from good works elsewhere, as critics argue.
The second is whether improved lives are the objective or just a happenstance outgrowth of budget savings? English does now put improved lives first in his description and said on Thursday “that is why we are all here”. There is in him something of the Catholic sense of social responsibility.
The third is whether society as a whole gets better — more unified, inclusive and equitable. Is he investing in society as a whole, which social investment implies, or just in some individuals?
English might plausibly argue that if the “most vulnerable” individuals become productive and raise socially integrated children instead of more “vulnerables”, that is investment in society.
But English the economic manager is wedded to policies which have kept real wages flat or nearly so and fed the gains to the most-well-off, as in most of the rich world. That, as the populist outrage in Europe and United States demonstrates, is not a recipe for durable social (or political) cohesion.
And it is that unequal economy that remains the government’s “top priority”. His “social investment” needs much work yet to earn its title.