Bernard Darnton finds a government scheme so good it should be made ten times bigger.
To dispose of the obviously sacrificial comedy proposal first: let’s not build a country-length cycleway. Bicycles are children’s toys and children shouldn’t be allowed out to roam the backblocks of the South Island when they should be doing their homework. Regardless, anyone who has done their homework on this proposal will know, as many commentators have already pointed out, that we already have a perfectly good cycleway running the length of the country. We just need to lift the rails and sleepers.
The cycleway proposal only existed to deflect attention from the second proposal. That worked because I can’t remember what the second proposal was.
The dubious honour of being the “best” idea to come out of the Jobs Summit goes to the nine-day fortnight. The idea being that if we all do ten percent less work the country will get richer again. Presumably this idea is based on the observation that a lot of millionaires just swan around on superyachts and otherwise do bugger-all all day.
If doing ten percent less work will make us just rich enough to ride out the recession perhaps we could all do fifty percent less work and then we’d have scads of time for margaritas with Miss September in the Bahamas.
When Caribbean frolics with centrefolds are one of the possible options it’s no surprise that EPMU National Secretary Andrew Little described John Key’s five-hours-at-minimum-wage suggestion as “underwhelming.”
Just tangentially, Little is also president of the Labour Party, so he must be working a twenty-day fortnight at the moment. Selfish bastard hogging two jobs at a time like this. What about the workers?
Mocking the idea that working nine days is better than working ten assumes that said work involves producing something that someone else wants. That means creating goods and services. Not sitting in meeting rooms gazing without focus past PowerPoint slides on A Vision for Empowering Stakeholder Awareness Strategies. Or anything about Key Process Initiative Frameworks. Or Implementing Sustainable Commitments. Or Maximising Outcome Enhancements. Or … Christ, before it gets worse, please, just boil me in skunk urine.
There are thousands of people in the Molesworth Quarter who would become instantly more productive if their working weeks were cut short – by virtue of their current negative productivity. There are hectares of offices full of people who consume the wealth generated by taxpayers in every wrinkle of this country and do nothing but get in the way of those who feed them.
So perhaps the idea of the nine-day fortnight isn’t such a bad one after all. If it could be switched from the private sector to the public the advantages could be huge. Even if there were no corresponding pay cuts the country would be better off because those that do produce wealth would be freer to just get on with it.
Having proved the worth of the nine-day fortnight for public servants we could experiment with an eight-day fortnight. And then a seven. By then it would be clear that the recipe for New Zealand’s economic success is the scheme’s ultimate conclusion: the public sector none-day fortnight.
* * Read Bernard Darnton’s NOT PJ column every Thursday here at NOT PC * *
9 comments:
You say we don't get out of the recession by producing less, but surely there's no point in producing stuff that people don't actually want to buy? If a firm faces a decline in demand for its good (due to a general decline in AD) by 10%, why shouldn't it cut production by 10%?
A firm following your advice to keep producing no matter what would become insolvent. That certainly would not get us out of recession.
You could look at it like this. Unions are the main cause of wage stickiness. This move gets them onside, thus reducing the effect of inefficiencies they cause, i.e. resistance to downgrading workers in the face of declining demand.
If you want to continue previous levels of production, perhaps you ought to consider a fiscal stimulus package...?
Fiscal stimulus package?
The subsidy we are discussing here is part of Key's stimulus package.
Tom, you said "If a firm faces a decline in demand for its good (due to a general decline in AD) by 10%, why shouldn't it cut production by 10%?" Yes the firm should cut it's production if facing reduced demand. In the big picture spending on production would then move to where there is a greater demand - in these times probably for more important goods at better value for money unless the government takes some of our disposable income and spends it on those failing companies that we've chosen to patronize less.
The fact that there is a recession tells us that resources have been malinvested. Policies that encourage further malinvestment are not going to help the situation. It may well be that subsidizing the tenth day is wasteful spending. It is the proverbial invisible hand that is best left to pick the best targets for stimulation. Governments generally make a mess of it.
Tom, you miss an important point.
First, the problem is not so much producing stuff that people don't actually want to buy, but producing stuff that people don't actually want to buy at the price it's being produced.
That's a very different thing, and that's why reducing costs is so important to everyone.
Second, since businesses pay for their own purchases out of their revenue, in order to pay it's own way, a business needs to produce more -- but 9as I say above) at a price that clears the market.
Socialists would have the government pay people to produce stuff. The National Party - allegedly not socialists - want the opposite, which is to have the government pay people not to produce stuff.
Ten points for anyone who can imagine a third option.
Sally: I agree that a recession can be a useful tool for a economy to re-structure and reallocate resources. What I am saying is that is not the whole picture - there are efficient firms producing useful goods that are facing reduced revenue because of factors that have nothing to do with the nature of their firm or their good, but are instead due to a general decline in income of their consumers. As I understand it, Austrian economists (not to mention Rand) are generally sceptical that efficient firms could go under, I am saying that in a recession I think this is actually quite likely. Certainly if the transfer payment is universal you risk propping up inefficient firms, but I consider this the lesser of the two evils.
PC: I agree that firms will try to reduce prices. What I am saying is that firms cannot reduce prices indefinitely - it may be that the equilibrium price is lower than total costs. In this case the firms will make a loss, in the long term they will close down. Obviously the solution is for firms to reduce costs, but as it stands there are certain difficulties with this, i.e. unions. For example, the EPMU (I think) has advocated a 3% pay increase in face of the recession. Perhaps an even better solution (to this problem) is to abolish unions. In the world of political feasibility, I think a 9 fortnight negates some of their distortionary effects.
"there are efficient firms producing useful goods that are facing reduced revenue because of factors that have nothing to do with the nature of their firm or their good, but are instead due to a general decline in income of their consumers. "
Isn't that only part of the issue? The other part is about having a strong balance sheet to out-last your competitors, even the ones more efficient than you. After all, once they go under, the customers need to get their stuff from somewhere, and that may as well be your firm.
TomM
It may be that a firm can efficiently produce a product but that does not mean that people will want to buy that product in sifficient quantities to keep said firm in business. So, there is a choice to be made.
EITHER people are forced to sacrifice their money and resources for the purposes of propping up the firm OR they are left in peace to direct their own affairs (including the disposal of their money and resources).
Libertarianz and Austrian School Economists favour that idea people are left to direct their own economic affairs. But that might result in the collapse of "efficient" firms, you object. Yes, it may well do. The point to grasp is that the harm has already been done. Government tampering and interference in other people's economic affairs has caused the present mess. The central banking and fractional reserve banking Ponzi schemes, allied to all sorts of regulation, boodoggle projects and assorted other infantile regulation result in major distortions to the decision making of investors, managers, entrepeneurs, directors, sole traders, lenders, borrowers, workers, professionals, specialists, labourers, artificers, mechanics, IT experts, insurers, lawyers, IP practitioners, technocrats, teachers, etc. etc. etc. Now reality has intervened and the distortions can't be supported any longer. People realise they have made errors based on erroneous information. They now act to reallocate and protect what remaining resources they control. That necessarily will result in some organisations going to the wall. It is unavoidable. The stark choice is whether people are forcibly impoverished to prop up organisations and activities that should not continue as presently or whether those people be allowed to allocate their own resources as they see fit. I know which I prefer.
Finally, it is unfortunately that those responsible for the distortions will, in the main, survive intact. They'll do this by expropriating more of the wealth of other people. That, in turn, will drag everyone down, lowering the general standard of living, causing more stress, increasing impoverishment and increasing crime. Remember this, a system based on theft (which is what forcible expropriation amounts to) is a system based upon the commissioning of crime. Similarly a system based on fraud is a system founded upon the commissioning of a crime. Such things are not intended to succeed in promoting or preserving Individual Rights and freedom.
LGM
PS No company has a right to expropriate the property of other people- no matter how tough the times.
Unions are the main cause of wage stickiness. This move gets them onside, thus reducing the effect of inefficiencies they cause, i.e. resistance to downgrading workers in the face of declining demand.
So you're in favour of appeasement then?
As against say ACT (not even Libz) policy on corrupt and intimidating organisations - which would simply ban gangs and unions outright. This would make it an offense to belong to a union or to support one, and make it possible for employers not only to fire gang and union members (so all union members would be fired immediately from the public service!) but also to recover any costs they cause on them
So if a union is stupid enough to advocate for a wage increase - the cost of that increase plus overheads, negotiation costs etc can be recovered from union members. Similarly in a strike - the employer must be able to recover any costs of lost production and lost profits from the strikers.
That's how to deal with unions, not try to negotiate with economic terrorists
Oh - its not just unions, it's welfare & state super as well.
Which is why both of those should be abolished immediately - and why even the lIbz plans to offer annuities merely continue to distort the market by other means.
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