Election: Labour’s story

09/11/2011 § Leave a comment

Alright, let’s see what Labour’s economic story is.

The website has a number of economic policies. One central idea is that Kiwis ‘deserve’ better jobs and better pay. The Party also says that the wealthy have earned more than their share and not paid enough taxes. The other big theme is around assets: not selling state assets, making sure foreign direct investment is for the good of the country, and scrutinising land sales.

I’ve been trying to piece this together, and have decided there are two stories. The first story is around the characters in the election: Government, Workers, Wealthy, Foreigners. It is a story of Workers being tied to the tracks. They are not paid a fair wage, and Foreigners are ripping them off by buying up the country’s businesses and property. Government under Labour will step in to unchain the Workers and protect them from the dastardly forces of exploitation.

This is mainly a story of redistribution. The economy is big enough and produces enough, but Workers don’t share in the wealth. Workers don’t earn as much as Australians because someone else is taking too much of the pie.

This story also doesn’t really seem to be a 20th-century novel focused on the personal development of characters. It’s much more a 19th-century novel motivated by dislocation and dominated by impersonal forces.

Underneath that novel is the second story, which is Labour’s understanding of the economy. I can sum it up in three words:

Prices are wrong.

Labour is saying that wages — the price of labour — are wrong; they don’t reflect that actual contribution of workers to the economy. Labour is also saying that asset prices are wrong. Whatever price we get for state assets won’t fairly compensate for the lost dividends. Foreign investors aren’t paying enough for our businesses and land. So, the prices of both capital and labour are wrong.

Prices are fundamental to the functioning of a market economy. Once Labour decides that prices are wrong, they are in effect saying that the whole market economy is broken. That is the story that Labour is telling voters.

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