The business of business

by Listener Archive / 22 December, 2012
Money makes the world go around. Too bad about the consumer flotsam that goes with it.
The business of business - consumerism and the economy
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A reader has challenged my arguments about trying to control the value of the dollar (“We wuz robbed”, November 24), raising issues of waste and inequality. Gavin Maclean, of Cullerlie, Gisborne, writes that I develop “a diatribe against trying to control the dollar from hideous assumptions”. He disputes my claim that you can’t interfere with key economic settings and expect everything to stay in equilibrium. “To pretend that there is equilibrium amid galloping debt, pollution and inequality is, to turn [your] own words against [you], plain dumb and dangerous.”

Maclean disagrees that raising import prices would cut everyone’s standard of living because he says much of what we import is luxury or junk. He argues that raising prices and cutting imports would help us all. “[Imports] might raise the standard, in a narrow consumerist sense, for a few, but for everyone at large, especially if you’re intelligent enough to think of the whole world, it does the opposite.”

He also rejects the assertion that the way to a balanced economy is to boost productivity, eliminate the Budget deficit and let business build things and generate jobs. “Empirically, that is the business-as-usual formula for disaster.” To sum up, he writes: “The column’s saving grace is its heading, Money. Had it been called ‘real world’, you would be in trouble.”

The premise for the column was the idea that if governments meddle in one area, they inevitably cause a distortion somewhere else. It’s an argument I stand by. No economy will ever be perfectly in balance, but we’ve had countless demonstrations both here and overseas over recent decades of economies getting severely out of whack. The fact is we are in relatively good shape despite the global financial crisis being the worst international economic setback since the Great Depression. That is the result of both good luck and good management before and after the event.

I agree imports include a lot of consumer rubbish we could do without. But they produce jobs for people in many countries and provide goods for everyone that are much cheaper than in the days of import protection. Sure, many of those jobs in countries such as China and India are low paid and some are in sweatshops. But in the 1960s, Japan produced what was often considered cheap junk, and more recently Korean products have been seen as second-rate. Both countries are now at the top of the economic tree, producing high-quality exports.

Like it or not, money makes the world go around, and although middle-class liberals can afford to muse about wasteful consumerism, poorer nations’ citizens want the chance to make an income to feed and educate their children so they can have a better life. If that means making tacky junk in a sweatshop, they’ll do it.

Many Kiwis aren’t too different. My business interests are in the mining industry that some environmentalists regard as inherently evil because they believe claims of poor environmental practice. Without doubt, businesses exist to make money, but most also aim to do something productive and creative. They want to grow New Zealand’s wealth, generate jobs and contribute to regional development. Otherwise, their owners would put the money in the bank or buy an investment property.

It is a protracted business dealing with the processes and regulations involved in launching a new project. Delays and costs can severely dent a project’s financial return, leading businesses to question why they bother – or driving them overseas. The ventures MacLean disapproves of keep communities functioning. They provide jobs and pay taxes that fund our health, education and welfare systems. Perhaps I’ve missed something but I can’t see how that is the road to disaster.

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