The tragedy enshrouding both of Keynes’ Economic Consequences pamphlets is that their author had been powerless to prevent the disasters whose outcomes he so clearly foresaw. How much better the world would have fared had Keynes’ advice been heeded – both the Great Depression and The Second World War would likely have been avoided. Against entrenched viciousness and ignorance, however, even intellectuals as prodigiously gifted as Keynes find it impossible to make headway. In a battle between reason and passion the smart money has always favoured the emotionally incontinent.
Right now, in New Zealand, for example, feelings are running high on the vexed questions of homelessness and housing affordability. Perhaps the most passionate spokesperson for those currently struggling to house themselves securely is the financial journalist, Bernard Hickey. His call-to-arms on the housing issue has, of late, acquired a decidedly revolutionary tone. Behind his indisputably cogent expositions of the problem, one senses a rising anger, and what can only be described as a ruthless determination to sweep aside what he unabashedly identifies as the economic, social and political forces barring the path to homes for all New Zealanders.
The radicalism of his analysis is certainly not diminishing. In a recent opinion piece he lamented the absence of a clear bipartisan consensus on the measures needed to solve the housing crisis:
“National and Labour aren’t there on a bipartisan approach yet: not even close. They combined in the late 1980s and early 1990s to wage war on double-digit consumer price inflation by giving the Reserve Bank independence and setting a formal target of keeping inflation around 2 per cent. That involved passing acts of Parliament and essentially promising voters they would stick to that 2 per cent. It worked. Expectations changed.”
They did indeed, but only after New Zealanders were required to shoulder the enormous social costs of the economic revolution driven through with unparalleled ruthlessness by Roger Douglas and Ruth Richardson. Was that the sort of transformation Mr Hickey had in mind when he warned listeners to RNZ’s Sunday Morning Show late last year: “Come the Revolution”?
Certainly, Mr Hickey, following the historical precedent of Douglas and Richardson, has already picked out the enemies of the people upon whose necks his revolutionary blade is intended to fall. In the case of Rogernomics and Ruthansia the targets of the economic Jacobins were all those Kiwis too firmly attached to the State’s munificent teats. In Mr Hickey’s case, Madame Guillotine’s guests will be the generation of New Zealanders born between 1946 and 1965 – the notorious “Baby Boomers”. (You know them – they’re the ones with all the houses!)
The key objective of Mr Hickey’s revolutionary programme is a 50 percent reduction in the price of the average family home. This will be achieved by the introduction of Capital Gains, Land, and Wealth taxes, and by the opening up of currently RMA-protected real-estate. As revolutionary programmes go, it’s admirably succinct. But, what else would Mr Hickey’s deflationary property revolution bring?
The answer is, of course, social, economic and political mayhem. Thousands of ordinary middle-class New Zealanders would be ruined. The country’s leading banks would teeter on the brink of failure. Credit would dry up overnight. New Zealand would be plunged headlong into a deep recession. Thousands of “millennial” Kiwis would lose their jobs, closely followed by thousands of redundant Gen-Xers. Poverty would surge upwards to engulf layers of society untouched by deprivation for more than eighty years. In short order, shock and disbelief would give way to unrelenting political rage – and a lust for inter-generational vengeance.
House prices would, however, be halved. By that measure, at least, the economic consequences of Mr Hickey might be adjudged as entirely positive.
This essay was originally published in The Otago Daily Times and The Greymouth Star of Friday, 22 January 2021.