Russel Explains Green Economics
Russel Norman spoke in support of the Public Finance (Fiscal Responsibility) Amendment Bill and while it wasn't supported by Labour (for what it didn't include), there were actually many positive elements. In his speech Russel highlighted the best parts of the bill and also explained how it could have been greatly improved through using a Green economic approach.
The fact that the bill promoted efficiency and fairness as major considerations in the development of revenue strategy, it would logically support progressive taxation and a capital gains tax. Since many of our wealthier citizens pay very little tax on much of their income then such taxation would more fairly share the tax load.
Recognising the interaction between fiscal and monetary policy was another positive element and, while this was the aspect that caused most concern for Labour, in Russel's view, the amended version covered the economic relationship between the two well. It makes sense that a more holistic approach to economic management is needed.
Russel also praised the inclusion of the consideration of the impacts on present and future generations. If much of our current legislation regarded impacts on future generations, as this should require legislators to do, we would have had quite different outcomes.
The aspect that Russel praised most was regarding the inclusion of an 'investment statement'. This would make it a statutory requirement to look beyond the turnover of the Crown's accounts and have an overview of all capital assets and liabilities. If we used a private household as an example, it would mean that rather than just focusing on income and expenditure over a year, there would need to be an assessment of the total assets of the household (i.e. equity status of the family home) and existing liabilities (i.e. car loan). When this is applied to the Crown, any government wouldn't just look at GDP, they would have to quantify the growth or otherwise of the nation's capital assets. Although it wasn't obviously intended as such, this could be used to limit the degradation of the Crown's assets for short term gain and would also have to include our levels of debt.
To me the most interesting part of Russel's speech was his explanation of how the Greens would have extended the scope of this bill beyond economic capital and included environmental and social capital.
If we included environmental capital it would mean that we would have to regard our natural resources in a similar way to capital assets. For example, the mining of a natural asset is a consumption that involves the degradation of our natural capital. There should be the ability to quantify the short term value of exploiting a resource and assessing the value of this in relation to the long term impact on our natural environment. There would need to be a long term strategy to ensure that what we consume today does not reduce our environmental capital to the extent that a future generation is unreasonably penalised. If, for example, a family farm is handed on to the next generation after the natural assets of the property have been badly degraded then it would create unnecessary future hardship and the continuing the practice would be increasingly unsustainable. To quote Russel from an earlier speech, "no water, no milk; no environment, no economy".
The same approach can be used with social capital, our people are an asset. It has already been estimated that child poverty could be costing the country between $6 and $8 billion a year and investing in our children would actually build useful social capital. A well educated and healthy population has economic value and spending wisely on health and education and building resilient communities will not only serve social needs, but it also makes good economic sense.
A well managed and healthy economy can't be achieved by just looking at income and expenditure and "balancing the books". A strong economy is one that has a healthy, skilled workforce with high levels of participation. A strong economy has abundant resources that are managed sustainably, and a strong economy is one that has low levels of debt and growing capital assets.
Currently we have high levels of poor health and poverty, a low waged workforce with concerningly low levels of participation (especially regarding our productive industry). Our environment is being rapidly degraded for short term gain, we have high levels of debt and we are desperately selling off our assets to overseas interests.
We need a Green Minister of Finance!