Watch Out! NZ Inc Is Everywhere (Especially In NBR Comments)

Over at an article highlighting the Twitter spat between Rod Drury and Russel Norman, NZ Inc is used in the comments. I almost spat out my midday coffee.

The Green/Labour NZ Power announcement didn’t sabotage NZ Inc. It sabotaged the government first and taxpayers second. It did not sabotage “NZ Inc”, because as I wrote the other day there is no such thing as NZ Inc except in the minds of those who came up with the concept and benefit from its implementation.

A clear explanation of why a single buyer model for electricity won’t work is given by Professor Lew Evans at the Institute for the Study of Competition and Regulation, whose ECON330 paper I’m taking this trimester. Snippet:

In recent years there has been a goal of promoting renewables; and since the cost of renewables plant is generally higher and quite volatile – depending as it does on resource consents and the volatile cost of equipment – one would expect the wholesale price to rise. The wholesale electricity price has risen reflecting determinants of cost that include an increasing proportion of renewable plant.

The ETS scheme has additionally increased the wholesale price because thermal generation that has an ETS charge affects the price directly in peak and water scarcity periods.

Paul Walker pointed me to the Paul Krugman essay “A Country Is Not A Company“. I can’t find an ungated copy though. Krugman talks about how what makes a good businessperson doesn’t necessarily make a good economist. It is a shame that Krugman is good on international trade, but not so good on what he writes in the NY Times.

Matt Nolan pointed out that the interests of those who are involved in pushing the “NZ Inc” agenda are not necessarily aligned to the interests of everyone else. It’s really hard to compete with the power of interest groups – it is easier for them to organise and lobby for marketing assistance from the government. The interest group that benefits from cheap imports – essentially every single NZ household – doesn’t have a lobby group because the benefits aren’t even realised by many people of how cheap imports are a substantial enhancement of welfare.

When you add in Eric Crampton’s work on political ignorance and economic ignorance in New Zealand, we should really be concerned at this stuff. The story that National tries to sell the electorate is “we’re generally successful businesspeople, we can successfully manage the economy too!” but then they do things like turn our biggest city into a bigger nightmare than it previously was and aggregate separate functions of business-related administration into a behemoth government department on Bowen Street.

This can be brought back to the perils of folk activism. Trying to have a rational discussion is difficult when some people don’t want to acknowledge that the “other team” can empirically prove that you are wrong and point to numerous examples of how the policy you are proposing hasn’t worked elsewhere.

While Arnold Kling would implore us to accept that we all have different ways of looking at the world, I would posit that the “NZ Inc” phrase is something that puts someone on the conservative axes. The goal of NZ Inc is to increase exports that depend on commodity prices where we are price takers, not price setters, and that’s not in any way close to how an economist would think about exports. Our most successful exporters are getting there anyway and don’t need any form of taxpayer assistance.

Exports are the price we pay for the things we want. I go to work in order to earn money to pay my bills. We sell milk products to China so that we can get foreign exchange with which to buy smartphones from South Korea. If we could get that stuff for free, we wouldn’t bother exporting. Both consumer surplus and producer surplus matter – but preferring one of them blindly is insane and that’s what NZ Inc seems to be about.

Like the central bankers want to sacrifice the world on a cross of bonds, the NZ Incistas want to sacrifice consumer welfare on a cross of exports. There is a trade-off that we face if NZ Incistas get their way. The trend for any government program is to increase over time – subsidies or tax credits for exporters are the sort of silly stuff we could be in store for if we don’t highlight the risks of preferring one sort of surplus to another.