Archive for the ‘Targets’ Category
Regular followers of BigCake will know of my fondness for cycle race analogies.
An old one is that the world economic wealth race between countries has sorted itself out into bunches, just like a bike race. There are clear groupings of countries and some are going faster than others.
Stretching this analogy a bit further. The best time to jump across to another bunch that’s up the road is when the conditions are tough, as in a climb.
It’s virtually impossible to span any serious gap between bunches when there’s a downhill or a tail wind. Minimal effort is required by the other racers to stick with you.
Not so on a serious hill. Most riders are often already maxed out, so anyone going faster, either because they are in better physical shape or tougher mentally (or both), is going to get to get away.
If that superior speed can be maintained during the whole climb, the rider will find themselves in a new bunch that’ll form at the top.
Then of course this bunch can’t get caught till the next climb.
They say the world’s toughest bike race, the Tour de France, is won in the mountains.
When I first looked at this speech by John Whitehead, outgoing Secretary to the Treasury, I thought hey, BigCake’s first victory – Treasury abandons wealth (as revealed by gdp) as the only measure of our welfare.
This is a very good thing. For the last 10 years, gdp-related economic growth targets have been astary because Kiwis are more motivated by national wellbeing, our health, education levels and environment than by pure wealth.
We’re much more interested in a better quality of life than a higher standard of living.
The Dominion Post chose to mock Treasury’s new direction as going “cuddly” and getting into the science of happiness.
But I think something significant has taken place.
The Government’s leading economic advisor has shifted its goal posts and we’ll see – if the policy wonks are on target – more rounded advice emerging.
A broad quality of life measure of how we’re going is something BigCake has campaigned for from the start, but organisations like the New Zealand Institute, with its NZ Ahead project, have been much more influential.
I had no influence at all, but yeah it’s good to be on the right side of the shift. Also as Whitehead says, the change was not a Road to Damascus conversion at No 1 The Terrace. The idea of a broad measure of welfare has been debated at least since 2002 when the Government’s Growth and Innovation Advisory Board suggested it. Treasury I think has been pottering around with the concept ever since.
It’s interesting to think about why Treasury made this change now. Whitehead makes a connection with the way the public regards Treasury.
“…Treasury at large, would like to see a shift – hopefully quite a noticeable shift – in the way that we are perceived externally. I see that as an important part of this exercise.
“…some of the historical baggage is still with us. ”
Baggage is a pretty loaded term. The image issue has been playing on Treasury’s mind for a while, but it’s interesting that it should get a public airing in the time of a Government that feels more comfortable with that baggage. Within Treasury there are also those who are also at ease with this baggage. These people of course would never call it that.
So a real change has taken place.
Back to Treasury’s new framework. It has five elements that recognise:
• there is a broad range of material and non-material determinants of living standards;
• that individual freedoms and capabilities are very important for living standards
• that the distribution of living standards across different groups in society is an ethical concern for the public, and a political one for governments, and economic analysis can provide useful insights;
• that the distribution of living standards over time is of high importance, both for equity concerns but also to make sure we are sustainably managing our resources;
• that measuring living standards directly, using self-assessed subjective measures of well-being, provides a useful cross-check of what is important for people’s living standards.
Whitehead says the “starting point has been thinking about the stewardship role we can take to ensure our stocks of financial, human, social, and natural capital are managed in such a way that we maximise current living standards while not disadvantaging future generations”.
There’s a whole working paper on this if you want to check it out.
Another international survey has NZ rating highly in overall wellbeing with 63% of Kiwis saying they are thriving in their day-to-day lives – 8th best in the world.
It’s further evidence that in terms of quality of life, we are holding up well even if in many ways (for example in health and education spending) we are spinning out of the orbit of first world countries.
Predictably in this latest survey we are behind Australia (4th with 65%), but we’re ahead of the US (12th with 59%).
The top three in the Gallup survey of were:
- Denmark (72%)
- Sweden (69%)
- Canada (69%)
Gallup says the survey of 124 countries is based on how people rated their lives at the current time and their expectations for the next 5 years.
A lowly median of 21% of countries were thriving ranging from Denmark through to a low of 1% in Chad. The survey again showed the strong relationship between wealth and wellbeing with majorities of residents in only 19 countries — mostly in Europe and the Americas — rating their lives well enough to be classed as thrving.
(Hat tip – The Atlantic via Richard Florida)
There’s been a bit of media triumphalism around NZ picking up 3rd place in the United Nations Development Programme’s (UNDP) 2010 Human Development Index.
For Brash 2025 lot, releasing their downbeat progress report on catching Australia, at the same time as the UNDP report was bad timing. Many Kiwis would be left wondering what Brash was on about, though we were pipped by Australia.
‘But hey, 3rd in world. We’re doing okay.’
BigCake is not so sure as there are signs we are working harder than other countries to keep up. But back to the reaction to the UNDP report.
Online there looked to be a lot of scepticism about the report – “More NZ Government funded UN PR smoke” – but as the media coverage indicated, it played right in the mindset of a sizeable chunk of the NZ populace including:
• Growth sceptics – Kiwis sceptical of the motives of growth proponents and in need of convincing that there’s an issue anyway.
• Growth apathetics – those who believe economic growth doesn’t matter or if it does, it’s a close run thing between the benefits of growth (more jobs etc) and its costs (increased congestion etc) so ‘who cares’
• Growth fatalists – those who believe our ability to improve our economic lot is beyond our control.
The UNDP report also shows up the sterility of pure gdp/income measures which put us way back in the field in terms of wealth. As the report says “It is now almost universally accepted that a country’s success or an individual’s well-being cannot be evaluated by money alone.”
But at the same time, key contributors to the index are money-hungry services such as health and education.
So if we’re substantially poorer than other countries we like to think ourselves the equal of, how come we’re 3rd?
Are we a bunch of jammy buggers?
If you look at just income, NZ is lowest in top 30 (bar Iceland and the Czech Republic) in terms of gross national income (GNI) per capita. The GNI measure the UNDP uses is converted into purchasing power parity (PPP) terms, eliminating differences in national price levels, giving a truer comparison of standards of living between various countries.
(Note standard of living is mostly about income; quality of life includes broader things like health).
We basically pull it off because of our strong non-income HDI performance, such as in environmental issues. Non-income HDI wise we come 2nd, ummm again after Australia.
Which gets you thinking that maybe we should be measuring ourselves against Australia on the HDI. It’s more achievable target and a much better measure of how we’re doing as a country. Time to swap horses as the NZ Institute and BigCake has been advocating.
Anyway, we did relatively well in:
• High expenditures (as a percentage of gdp) on health and education
• Being relatively more happy about our personal health
• Relatively high perception of personal safety
• Good air quality (but not water)
• High employment ratio (though we have a relatively high rate of vulnerable employment)
• High tertiary enrolment ratio
• High share of renewable energy
• Low carbon dioxide emissions per capita
• High percentage of protected areas
• Low levels of arms imports and exports.
We did relatively badly in:
• Income inequality
• Education attainment (% of labour force with primary and secondary education) and percentage of population with at least secondary education
• Gender inequality, including paid maternity leave
• Low expenditure on health (per capita and based on purchasing power parity) including relatively poor immunisation rates, but high number of hospital beds
• Low average gdp growth 1970 – 2008
• Low gdp per capita
• Poor ecological footprint of consumption.
The health purchasing power parity thing is why I think we’re struggling (or are jammy buggers).
We’ve managed to stay relatively healthy as a nation by, as the Ministerial Review Group on health bluntly saysconsuming health services like other OECD countries, but being we are less able to afford it.
We’ve got around our shortage of purchasing power in health by skimping in other areas such as infrastructure and passing on the extra bucks on to our hospitals etc.
So yeah, money still matters.
The HDI measures average achievements in three dimensions:
• A long and healthy life
• Access to knowledge
• A decent standard of living.
I haven’t been able to figure out how each is weighted, but guess it must be pretty generous towards the non-income stuff. The HDI is apparently the “geometric mean of normalized indices measuring achievements in each dimension”.
How much do Kiwis want more economic growth?
At the moment, not enough to do anything that’ll make it happen.
And it won’t happen till we take ownership of the issue, says Infratil director Lloyd Morrison on the NZAhead website, the NZ Institute’s report card on our social, economic, and environmental wellbeing.
He says achieving greater economic growth is not about what the politicians or influential people do or say, it “will only occur when we engage with the wider population”.
To do this, Morrison says we need simple measures so that the average person can understand the connection between performance and health, crime and wealth.
The NZ Institute has had a shot at this with NZAhead which has sixteen measures that are relevant to the quality of life of all NZers including social, environmental and economic dimensions.
Morrison says Kiwis understand rankings in rugby – “They understand whether we are 7th or 1st.
“If they understood that instead of being 23rd in gdp we were 15th , we would have better health, better education, lower unemployment…
“Probably because of our history we are looking for other people to sort it out. If you talk to people about making NZ better off, most people start with criticising other people – Why doesn’t the government do this? Why doesn’t such and such do that? Why don’t we tax these people or take less tax off these people?
“The fundamental issue should be just agreeing that we have to be better off, then iteratively finding the solutions.
“They won’t appear immediately but the commitment is as important as the way we get there.
“If we want to be better, we are going to have determine that for ourselves. Not if a small group of politicians or a small group of influential people.
If [Kiwis] are asked to do things they believe in, they will do so.”
This post has been boiling away for awhile.
It pretty much gets some thought every time I do a post when I’m hit by the dull uninspiring language I’m sucked into using to describe economic growth.
Words and images are powerful beasts if they’re attached to vibrant, relevant and exciting ideas. I’ve found heaps of these ideas in the economic growth arena, but the life is crushed out of them by the words we use to describe them.
I’m not ignoring the fact that one person’s exciting idea is another’s crap one. However, most NZers have no fundamental problem with economic growth, as in they’d rather have it than not. It’s just that they’re not very enthused and that’s got a lot to do with the way it’s being sold.
Basically we need a new economic growth lexicon.
“Economic growth” as a way of describing our goal is both polarizing and dull.
.
There are negative connotations around both words. Economic, well there’s always been an public perception problem there, and growth is increasingly seen in cost terms rather than benefits.
Put the two words together and you’re pushing sh!t up hill.
The same problem applies to chunks of the way the pro-growth debate is couched:
• Wealth
• Productivity
• Gross domestic product per capita.
BigCake reckons anyone trying to sell economic growth to growth-sceptic Kiwis is going to fail if they solely push these buttons.
The (in PR speak) framing is just wrong:
• The majority of us are more interested in lifestyle than wealth
• Productivity improvements we have made have come from working longer (at the cost of lifestyle)
• GDP per capita – see lifestyle.
Governments have tried to sex up the issue with “economic transformations” and “economic agendas” with pretty dismal results in terms of rallying the troops.
So how do you frame the economic growth issue.
One word BigCake has always liked is progress. Definitions:
• Gradual betterment, especially the progressive development of human kind. (Merriam Webster)
• Advance or development, especially to better state (my old Pocket Oxford).
But that word has become old fashioned and a little bit political. It’s probably why it appealed to fellow blogger Policy Progress – a great word with a political subtext.
For a long while I think it was a powerful word for New Zealanders. It was a common theme in the first Labour Government’s thinking.
Some of its power came from the suggestion that progress was inclusive – everyone benefitted.
But it probably began to lose its power around the time people started saying ‘you can’t stand in the way of progress’. Then it was clear there were some losers.
Part of the problem is we now live in a much more complex, fast-moving, interconnected world. Finding an inclusive and non-weasel word or phrase to describe economic growth, that’s not so general that it becomes meaningless, is tough.
BigCake can’t think of one.
But I reckon part of the trick is to move away from having the economy as the central (and sometimes only) focus of what we want to achieve.
It’s more than that.
So…any suggestions?
US researchers have come up with a magic level of annual income – US$75,000 or NZ$100,000. Earn more than this and you’ll see little improvement in your emotional wellbeing, such as having time to spend with loved ones, avoiding pain and disease and enjoying leisure.
And you’ll be increasing your chances of being a smug arsehole.
The study was done by Daniel Kahneman and Angus Deaton from the Center for Health and Well-being at Princeton University. The $100,000 number of course relates to the US.
Their findings were based on analysis of more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1000 US residents.
The pair point to two different aspects of wellbeing:
• Emotional – the quality of your everyday experiences such as joy, stress, sadness, anger, and affection. Basically what makes your life pleasant or unpleasant.
• Life evaluation – what you think of your life. [ie Struggle St or smugness] Income and education are big factors here.
When plotted against income, they say life evaluation rises steadily. Emotional well-being also rises with income, but grinds to a halt beyond an annual income of US$75,000.
“Low income exacerbates the emotional pain associated with such misfortunes as divorce, ill health and being alone.
“We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being.
“What the data suggest is that above a certain level of stable income, individuals’ emotional well-being is constrained by other factors in their temperament and life circumstances.”
Kahneman and Deaton say if measures of well-being are to be used to assess human welfare and to guide policy, their findings raise the question of whether life evaluation or emotional well-being is better suited to these aims.
One of the earliest ideas behind BigCake was that wealth is relative – if NZ wasn’t becoming less wealthy (or if you like, poorer) compared to the nations we usually liked to rate ourselves against, then no worries, no need to catch Australia by 2025.
A slightly newer idea was that wealth alone wasn’t a great way to measure how we’re doing as a country. A more accurate state of the nation would have to include life style factors such as the environment, education, health etc.
Economic growth is a means to an end, not just an end. And the end?…maybe just being happy.
And just arrived on the BigCake agenda is equality, mostly based on the book “The spirit level – Why equality is better for everyone”.
The guts of this book is that wealth inequality is tearing some Western societies apart. The greater the difference between rich and poor, the greater the problems such as crime, obesity, smoking, drinking…
The scary thing here is that NZ, relative to many Western countries, is a very unequal society.
Of the 23 nations the authors look at, NZ has the 6th highest income gap – as measured by the difference between the richest 20% of citizens and the poorest 20%. Worse than us were: Australia, UK, Portugal, the US and Singapore (with the biggest difference).
The book’s big weapon is a series of graphs that show the relationship between income inequality and a bunch of ‘bads’ such as health problems and social issues. (For the wonks, the graphs have regression lines). Basically countries with high levels of inequality are likely to have high incidences of health and social problems.
And mostly this is true of NZ.
Of course the opposite is true also –countries with low levels of inequality (such as Japan and the Scandinavian countries) enjoy better health and so on.
A lot of the time the ‘bads’ of the poor get dismissed as the result of poor housing, poor diets etc, so fix these and you’ll fix the big issues.
The challenging bit of “The spirit level” is the claim that this won’t work because they are symptoms not causes. “The problems in rich countries are not caused by society not being rich enough…but by the scale of material differences between people within each society being too big. What matters is where we stand in relation to others in our society.”
What corrodes society is high levels of inequality. The active ingredient at work here is the way we humans rate and compare ourselves. The thing that causes us greatest stress is being evaluated by others – what we wear, where we live, what cars we drive…
And how we measure up in these tests mostly depends on how much money we have.
As theBigCake moniker implies, I’m not much into a redistributive fix, but this is food for thought.
Anyway, still working my way through the book.
Expect more posts on inequality.
Sometimes our fragile Kiwi egos get overly hung up on our immigration loss.
What we forget is that NZ is still a sh!t hot place to live and many people around the world would give an arm and leg for the right to reside here.
In Gallup’s latest Potential Net Migration Index (PNMI), NZ ranks second to Singapore as a migration destination. Ego boost – Australia is 6th. Rounding out the top seven are: Saudi Arabia, Canada, Switzerland and Kuwait.
According to the PNMI, if all adults worldwide who wantedto migrate permanently to other countries actually moved where they wanted to today, these top-PNMI countries would see their adult populations double or even triple. The index reflects people’s wishes rather than their intentions.
The PNMI score is the estimated on the number of adults who would like to move permanently out of a country if the opportunity arose, subtracted from the estimated number who would like to move into it, as a proportion of the total adult population.
The higher the resulting positive PNMI value, the larger the potential net adult population gain.
The top rankings are:
• Singapore: +219%
• New Zealand: +184%
• Saudi Arabia: +176%
The last one is a bit weird, but the survey only included Arab nationals and expatriates.
BTW – BigCake supports increased immigration to NZ.
Countries of course have negative PNMIs – countries that could potentially lose as much as half of their adult populations to migration. These include Liberia, El Salvador, Ethiopia, Nigeria, Zimbabwe, Haiti, and Sierra Leone at the bottom of the list.
Hat tip – Richard Florida
It’s scary how shakey support for economic growth in NZ is.
Most of us support growth, but that backing is delicately poised. It doesn’t take much to tip support over into opposition.
I’ve had a shot at grouping levels of Kiwi growth support:
| GROWTH SUPPORTERS |
- The majority of NZers. However, a 2004 Growth and Innovation Advisory Board survey described this support as “polite”, “fragile” and lacking “passion”.
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- Few register as opposed to growth, but a significant number are at the ‘lukewarm’ end of positive.”
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- And as Bridget Liddell has pointed out: “[We] don’t want too much growth that might mean too many people and that might mean a deterioration in access to this wonderful country”.
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- Passionate growth support is largely the domain of the business community, particularly so-called ‘big business’.
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| GROWTH SCEPTICS |
- Mainstream NZ. The term ‘growth scepticism’ refers to the idea that previous promises of economic growth have either not been fulfilled, or if they have, the benefits have gone to the already rich and powerful. As a result Kiwis are very sceptical of the motives of growth proponents.
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- BigCake figures this phenomenon spans the political spectrum with both main political parties open to attack in this regard.
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- Many in the business community, particularly small enterprise owners, subscribe.
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| GROWTH APATHETICS |
- A minority. As the GIAB survey showed, those who believe economic growth doesn’t matter are few.
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- If it does matter for growth apathetics, it’s a close run thing between the benefits of growth (more jobs etc) and its costs (increased congestion etc) so ‘who cares’.
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| GROWTH FATALISTS |
- Another minority who believe our ability to improve our economic lot is beyond our control.
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- Much of this attitude maybe instinctive, but it has academic support from people like Philip McCann who believe factors we can’t control, like our geography (small and peripheral) and globalisation, mostly determine our destiny.
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| GROWTH OPPONENTS |
- A significant minority, not for its size but organisation. Opposition is based on the premise that growth, and particularly capitalism’s drive for ever greater levels of private consumption, have put us well down the road to environmental disaster.
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From a growth backers’ view point, that’s that adds up to an ugly picture.
The main aim of the BigCake blog is to help increase Kiwi support for economic growth that improves our quality of life (which wraps in our personal wealth, how healthy we are, education levels, the quality of our natural environment, our lifestyle etc).
But without greater wealth, our quality of life will eventually suffer.
Anyway when BigCake’s is faced with a communications-type problem, he falls back on his PR training and lists the stakeholders (as above), and then tries to figure out what’s going on in their heads, then how do you get them from point A to desirable point B.
Support for growth is, in the words of the Growth and Innovation Advisory Board “fragile”. The GIAB’s work is getting a bit old now, but there’s no reason to believe our attitudes have changed that much.
The Global Financial Crisis and Recession represented what the GIAB would call “burning platforms” for change, but they’re now just smouldering, so not much hope there.
BigCake figures we still don’t see our lifestyle as being that bad compared to other countries and for the moment international surveys support this.
But it looks like we’re betting that this will remain the case, even if our level of personal wealth continues to fall relative to that of other countries.
And that’s a pretty dodgy bet.