Thursday, July 4, 2013
The hidden price
At a gathering of economists in Wellington on Tuesday the chief economist at the Ministry of Business, Innovation & Employment, Roger Procter, ‘argued that New Zealand’s economic restructuring had consistently replaced high-productivity industries with lower-productivity alternatives’ [Patrick Smellie column, Dominion Post 4.7.13]. Smellie goes on to suggest that if Procter is right, he’s ‘effectively arguing that industries such as car plants, which disappeared in the 1980s when import tariffs came down, should have been allowed to continue. Adds Smellie: ‘Try telling that to the tens of thousands of New Zealanders who have enjoyed access to far cheaper cars as a result.’ That last remark is a giveaway. Blunt, scornful and at first sight unarguably practical, it’s a common response to any suggestion that the economic course adopted by this country since the 1980s might not necessarily be all for the best. But let’s think harder about that. So all it comes down to in the end is that we get cheaper imports and pay less for our cars, our clothes, our flat-screen TVs? That’s not a negligible factor, of course—we all have a keen interest in the cost of living—but this crude reductionism ignores all the benefits that come from a nation protecting its own industries and workforce (as many nations still do). The wasting of KiwiRail’s Hillside workshops in Dunedin is a recent example: a Chinese manufacturer offered to make wagons slightly more cheaply than Hillside could, so the contract went to them—never mind the deleterious effect on the local workforce, the wider Dunedin economy, the intangible moral and psychological impact on people’s belief in the meaning of work, community, nation. Ah yes—the intangibles. They can’t be measured by economic statistics, they don’t show up in spreadsheets. In that world, the case for cheaper cars will always win. But is that, ultimately, the god we want to sacrifice to? Everything has a hidden price. If there’s no such thing as a free lunch, then there’s no such thing as a cheap import. Smellie is an excellent journalist whose columns about business and economic matters are consistently readable but he lets himself down here.
Posted by Denis Welch at Thursday, July 04, 2013