We can avoid a recession if companies invest wisely in their future; our mood will be the crucial determinant. A stumped Rod Oram asks for your advice: how can we improve our political discourse?
Opinion: When it comes to great disruptions, every cloud has a silver lining. So, let’s start with some of the bright stuff this week before we move on to the dark.
The IMF has increased its growth forecast for the global economy this year. It’s up by 0.2 percentage points from its previous forecast in October to 2.9 percent, strengthening to 3.1 percent in 2024.
Yes, that would still be below 2022’s 3.4 percent and the average of 3.8 percent 2000-19. But it's a creditable performance given geo-political and economic turmoil.
Here in New Zealand, we’ll likely avoid a recession. Our mood will be the crucial determinant. If companies invest wisely in their future, then their staff, suppliers, and customers will benefit. That’s particularly vital for households struggling with inflation. But if we hunker down, the risk of recession will rise.
The IMF forecasts global inflation will fall from 8.8 percent in 2022 to 6.6 percent in 2023 and 4.3 percent in 2024. That’s still above pre-pandemic (2017–19) levels of about 3.5 percent.
READ MORE: * Rod Oram: NZ is on climate glide time * PM could never have won back her deeply disparaging critics
So, to curb it, interest rates will rise a bit more, albeit more slowly in the next six months here and abroad. The pressure on many prices is starting to ease. Companies and consumers alike can help further ease the pressure on prices by spending wisely.
Our policy positions remain deeply entrenched, new initiatives are often sub-optimal, backlashes brutal and political will weak. How could we change all those for the better? I’d very much appreciate your views on that because I’m stumped.
More good news: We have retained our ranking as the second best democracy in the world, according to the annual Democracy Index of the Economist Intelligence Unit.
Once again, Norway pipped us to first place. They beat us on ‘functioning of government’ and ‘political culture’; we beat them on ’civil liberties’.
We’re in select company. Only 24 countries, home to 8 percent of the world’s population, score as ‘full democracies’; a further 48 are ‘flawed’ democracies (37.3 percent of people – with the US ranking 30th overall).
Fifty-nine countries (home to 36.9 percent of people) are rated as authoritarian; and the balance are ‘hybrid regimes’.
But here in Aotearoa we have to ask ourselves a blunt question: If our democracy scores so highly, why do we achieve so little?
We argue for years through reports, commissions, select committees, elections and other democratic processes. But our policy positions remain deeply entrenched, new initiatives are often sub-optimal, backlashes brutal and political will weak. How could we change all those for the better? I’d very much appreciate your views on that because I’m stumped.
Above all, now more than ever, our great disruptions in the likes of economics, politics and climate are different from those of the past. They are more intense, more profound and more inter-linked. Thus, we need new solutions which deliver substantial co-benefits. When we solve a problem, we do so in ways that help solve related ones as well.
A good example this week comes in a report on the UK economy. Some 20,000 companies are locked onto net zero emission goals, according to a report just out from the Energy and Climate Intelligence Unit.
They are contributing £71 billion (NZ$135b) in Gross Value Added a year to the UK economy, some 3.7 percent of the total and double the size of the energy sector. GVA per employee is £112,300, which is 1.7 times the national average; and they have created 840,000 jobs (3.2 percent of all jobs) with an average wage of £42,600, 27 percent higher than the £33,400 national average.
But the UK economy would be doing far better if recent governments had not made such a hash of climate policy design and implementation. This is compounding the general economic and political dysfunction of recent decades. Last year, India overtook the UK as the world’s fifth largest economy.
Overall, the UK economy is a basket case. Real wages (that is, adjusted for inflation) are lower than they were 18 years ago. It’s the deepest decline in British living standards since the 1950s. The rich are certainly far richer, but by the end of this year the average British household will be poorer than their counterparts in Slovenia.
By the end of this decade, they will be poorer than the average Polish family, according to analysis by John Burn-Murdoch, a data journalist at the Financial Times.
One reason is UK government public sector spending and investment has plunged since the Global Financial Crisis. As a result, some 500 people a week are dying for lack of timely emergency room care in British hospitals, David Wallace-Wells wrote in his latest cautionary column in the New York Times. Oh, and one in 10 British citizens are on hospital waiting lists.
The anger and frustration of British workers is driving their biggest surge in strikes in some decades. StrikeMap, an interactive website, is keeping tally.
On Thursday, 26,830 places of employment (shops, factories, school, hospitals and the like) were under official strike notice.
The bulk were in London, the home counties and the Midlands, with transport, health and education the most heavily affected sectors.
Yet, astonishingly the UK still rates as a full democracy, ranking 19th in the world. Its worst scores in the five categories are ‘political culture’ (6.88 out of 10, compared to our 8.75) and ‘functioning of government’ (7.5, compared to our 9.29).
Our lead over the UK on those two democracy scores are far too close for comfort.
Will, for example, the recent floods shake us out of our climate complacency? Will crises in housing, child poverty, cost of living, mental health and other aspects of our lives spur us to debate, create and deliver real breakthroughs?
They will if we are honest with each other; and if we believe in the upside of wise action.
