Some smart dead Greek guy once observed that you can never step in the same river twice. The good keen trampers of NZ don't need to be told the truth of that. Even the best of plans, through the entropy of time, erode downstream. Chaos theory is based on the concept of System Dependent on Initial Conditions. Due to measurement rounding and time, what started out as predictability is rendered to white noise.
So I've always treated economics with as much respect as religious tomes; spiked with historical observations and occasional pearls of wisdom, but still requiring too large a leap of faith to base an entire philosophy upon. Sacred texts of rationality and ineffable logic, all of them. But there's everything else as well.
It's also why I get so annoyed with the USA. The founding fathers were wise enough to realise that their sentiments would fall into disarray over time without the strong voice of its people to guide and reinvigorate their government. Now it's all professional lobbyists from K Rd riddling Washington DC, nutjob teabaggers swamping the forecourts of mainstream media and mid-term elections. Where are all the smart Americans? Offshore or working for a hedge fund?
I haven't been shackled to neo-liberal orthodoxy the way Bernard Hickey has. I'll defend what the Fourth Labour government did, but I never liked Thatcher or Reagan. Economics is only a tool, an abstract one at that. The larger task at hand for any government is the long term well-being and prosperity of its citizens.
Most of Bernard's wrath is aimed at the Global Financial Crisis. Sure, we had to deal with the ripples to our shores, as detailed in Bollard's book. The crisis, in part, can be blamed on the loosening of rules around investment banks under Clinton, as well as a heap of bad lending and mutton sold as lamb. Reagan's wholesale slaughter of regulation was also a big factor (Reagan's crimes go on, from corrupting the Supreme Court and regulatory bodies to the unresolved Iran Contra scandal, but that's another post).
The wild currency swings that the NZ dollar faces on the open seas has made it hard going for exporters. Not only do they need to be good at manufacturing and selling, they have to become experts in hedging the dollar as well. Wrong bets can and have killed businesses. It has been this way since the NZ dollar was floated in 1985.
Now don't go blaming Rogernomics for the floating dollar. The pegged dollar had been dead for some time, just stuffed with borrowed overseas cash and Muldoon's cackling ventriloquism. It died the day of the Nixon Shock, itself wedged between two other catastrophic effects on NZ exports of the era; falling wool prices in the late sixties and the UK joining the EEC in the early seventies.
The end of the Bretton Woods Agreement marked the end of the era of American Empire, just as Britain abandoning the gold standard had relinquished its empire decades earlier. The USA has limped along since then, relying on increased government borrowing for the last thirty years to keep up appearances of normality.
The absence of an international trading standard allowed the foreign exchange traders into the pond. These were amongst the scavengers feeding off the pegged NZ dollar before devaluation in 1984. George Soros did a similar thing to England on Black Wednesday. It is scenes such as these that makes me very wary of returning to a fixed peg currency.
There is talk of a new international currency, IMF Special Drawing Rights. Until something like that happens, there's no way a minnow like NZ can outbid the big fish in the international waters.
And as for tariffs, the big problem with tariffs is how to remove them when they're no longer warranted and the money could be more productively spent elsewhere. We went through all this with SMPs and farmers in the '80s. America has distorted its farm subsidies beyond belief. As the documentary Food Inc demonstrated so well, the price is much higher than that advertised. The US will one day have to face a balancing of the books. It will not be pretty. Do we really want to go back to that trap?
