Is it me, or does it seem like we have been living with a ‘gloomy’ economy ever since the housing market crash of 2007-08? Granted, we have had glimmers of hope since then, but for the most part the recovery has been quite lackluster. We have had habitually high unemployment, anemic GDP, and an over-all lack of confidence in the future of this country. What gives? How can we possibly think that for the last 6 years, the market has simply been correcting itself? I, for one don’t buy that. Sure, rising housing prices and low interest rates make people feel richer. But its a facade, its what our friends in Washington want you to feel. If you feel confident about your wealth, you are less inclined to blame them for what is really going on in D.C. See no Evil hear no Evil.
Since I think about this often, I decided to research what a real economic recovery looks like. Not a recovery where the government uses all the arrows in it’s quiver to create the image of a successful recovery. No, a recovery where everyone benefits, where opportunity abounds for all. What I came up with was the economic expansion which New Zealand experienced beginning in 1984.
Before the second world war New Zealand was the third richest country in the world, but by 1984 they had sunk to the economic level of a third world nation. They became an agricultural country who couldn’t even feed itself. Prior to 1984, much of the economy was owned and operated by the government. Strict regulations and government control over the economy was commonly accepted by it’s citizens. As a matter of fact, 45% of all farming income was paid to the government. Then, an unprecedented change occured. The labour party took office (which typically governs with the heavy hand of regulations and control), but ironically they decided to disban the bureaucracy and roll back regulations. They disbanded farm programs, abolished transportation departments, and privatized virtually all industries. From there, they created zero based budgeting, which said you had to justify any government program with available funds. The funny thing about this is, it worried the conservative party in New Zealand. The conservatives feared that such radical change, all at once, would cause an economic depression. Low and behold, New Zealand went from 23 years of deficits to 17 years of surpluses. Almost overnight! In the meantime it created the most favorable business environement in the world.
As a result, New Zealand became the most successful agricultural export in the world. There were no governement agricultural programs any longer, the private sector was free to thrive. Entrepreneurs, capital allocation, and the market, were the decision makers for the path of prosperity. New Zealand became more export oriented, weak production companies were weeded out of the market, confidence in the banking system was high, unemployment dropped, and tourism skyrocketed. They even competed so competitively in the dairy business, that the state of Wisconsin actually sued them. Wisconsin complained that New Zealand was using unfair trade practices, they felt threatened because they were selling cheeses and butter in Wisconsin, and that’s a no no!
So, if the United State’s true objective is to improve our overall economy, then maybe we ought to use the changes New Zealand made, as a model of success. Notice I say, if it is our ‘true objective’, cause maybe it isn’t. Maybe the thought process is if we have a ‘real recovery’ then the implied value of the government, lessens. I mean, if there are no pressing economic or social ‘issues’, then the government’s relevancy in the eyes of the people drops considerably. This affects their re-election platforms, cause what do they run on if everything is hunky dory?