NZ Initiative wants to answer a question no one asked

A new piece perfectly encapsulates their strategy of framing an argument in terms that make it easy to dismiss opposing criticisms rather than engage with realities

Photo by Jordan Tallent on Unsplash

For anyone looking to follow the rightwing talking points here in New Zealand, it’s nice to take the temperature at the NZ Initiative from time to time. They’re involved in a lot of things, got their fingers in a lot of pies. This year, they’ve tackled education and supermarket reform, among other things. They’ve also been working hard to get the public to calm down already about the Regulatory Standards Bill. It’s not an ideological Trojan horse people. It’s just a simple, sensible bill that tries to hold ministers accountable to the people if they try to infringe on their property rights. It’s amazing that anyone would have a problem with such a non-issue.

They are usually very professional about all of this. After all, they don’t want to give the impression that they are at all ideologically-slanted, so they have to use very neutral or simplistic concepts in their discussions, much like David Seymour does when he is talking about one of his policies. Who wouldn’t want equality for all? Can you really argue against that?

Bryce Wilkinson seems to have settled on arguing that anyone who disagrees with the Regulatory Standards Bill doesn’t understand the history of liberty and property rights. Oh, you see, property rights have been around since the Magna Carta and are the foundation of a society with liberty. We didn’t want kings interfering with our property rights, so it’s stupid for us to disagree with a bill that will just protect them. After all, if we allow the government to take our property, what’s next? Socialism is next, duh. Say hello to the gulags.

These simple lines of argument are so maddening because they refuse to even acknowledge what are clearly problematic issues with the bill or policy, and instead frame the asker of these questions as if they don’t understand some deeper meaning that only the economists and talking heads at NZI are enlightened enough to understand. People asking about real concerns about the increase in corporate influence and power under the RSB or the sidelining of the Treaty of Waitangi, or the immense scope and power of the Regulatory Standards Board, are just brushed off as so many dullards who are making up conspiracy theories. Never at any time do they address how the language of the bill makes these concerns very likely to occur. They just stick with the same arguments and disparage those who are questioning them.

Another strategy that is common is to get the drop on the opposition by framing an issue in terms the NZI would like to highlight, even if this way of thinking about the issue is not at all how most of the public consider it. Case in point is Wilkinson’s report pushing for privatisation of public assets. After Christopher Luxon announced that National would campaign at the next election on privatisation of public assets the NZI came out with a report entitled “The People’s Portfolio”, in which Wilkinson argues that the real question people should be asking is whether the government should own as much as they do. I’m not going to spend a lot of time on this point here, as I cover the report in detail in a former post, but what I will say is that I don’t think the average person really cares much at all about how much the government owns. What I think they care about is whether they can afford to live. But Wilkinson centers this question of how much the government should own as if it’s the real question we should care about, and then proceeds in his report to argue that the government shouldn’t own as much as it does because they aren’t turning a profit so we should seriously consider privatising public assets. The question of profit is, after all, the fundamental question to NZI and their corporate backers, so I guess they assume that the rest of us should be as concerned about it.

The Initiative often use diplomatic language in their op-eds, but I like looking at their Insights Newsletters periodically to see how they really feel about something. These newsletters are less formal or sourced than a public op-ed, and so the lads at NZI often have a bit of a bar with one another, kind of cheekily lampooning their critics. But these are also informative because they often let the mask slip about issues that are being currently covered in the media and on which the NZI is commenting frequently. You can think of these as revealing what the NZI really think, rather than the carefully-curated position they put out to the public.

So when I read a recent Insights Newsletter from Roger Partridge, one of the founders of the NZI, who can lately be found arguing strongly for deregulation of the banking sector, it kind of caught my attention. This one was entitled “Trickle-down, again”. Right away, Roger gives away the game plan

Few ideas haunt economic debate as relentlessly as “trickle-down.” Perhaps it’s the appeal of attacking something that no one has ever argued.

The theory supposedly claims that making the rich richer benefits everyone as wealth “trickles down.” It sounds plausible and feels unfair – making it the perfect villain.

There’s just one problem. No economist ever proposed this theory. No Minister of Finance ever modelled it. Instead, the term was coined in 1932 by American humourist Will Rogers to mock Herbert Hoover’s policies during the Great Depression. It was satire, not scholarship.

Yet somehow, the joke gained a life of its own.

Partridge is positioning the idea of “trickle-down” economics as something that has no basis in fact. He’s arguing that those who make the argument that wealth given to the rich trickles down to others are not basing their arguments in any economic reality. Further, he’s saying that those who argue along these lines are saying that economists and finance ministers are explicitly advocating this position.

Here we have another case of the NZI trying to frame the debate in terms that no one else is arguing so they can poke holes in a position that no one is advocating. This is known formally as a straw-man argument, where you set up the weakest possible position as if it’s your opponent’s actual position so you can demolish their arguments. And the NZI are masters at using this strategy to deflect from the real issues.

His point in bringing up the whole idea of “trickle down” is to criticise the op-ed by Dr Neal Curtis in Newsroom entitled “Let’s call ‘taxing the rich’ what it really is”. And he argues that the whole piece is misguided because “trickle down” has not ever been formally advocated by economists, ministers, and treasurers.

The latest in a long line to wrestle this phantom is Dr Neal Curtis, writing in Newsroom. An academic in critical theory rather than economics, he joins the chorus claiming New Zealand has been enslaved by the trickle-down idea since the 1980s reforms.

Treasury officials must be confused: all those years managing budgets and analysing trade-offs when, apparently, they were just opening taps and waiting for the wealth to cascade.

Did you catch that little dig? An academic in critical theory, rather than economics. So obviously Curtis is not qualified to speak about anything related to economics. Just another critical theorist popping off about things about which they know nothing about.

First of all, Roger, Curtis has expertise in political theory as well as critical theory and has written a book about contemporary rightwing politics and strategies which argues, among other things, that the economic and social policies of the neoliberal era—you know, the things the NZI advocates for—have resulted in economic precarity that feeds into the scapegoating that is so prevalent in rightwing politics. So I think he’s qualified to comment here.

But if an economics degree is required to comment on economics, then what, pray tell, are you doing writing on this topic, Roger, given your education in law and your background as a corporate lawyer? Maybe turn that finger back around and point at yourself, because according to your own criteria, you aren’t qualified either. Kettle or pot?

In reality, the critics have things backwards. Wealth doesn’t trickle down. It gets pulled up.

Businesses prosper by convincing customers that their products are worth buying. Every dollar a company earns is a dollar someone chooses to spend. The rich don’t get money from the sky. They get it from us. Voluntarily.

Workers prosper the same way – selling their labour to those who value it. Not trickling, but trading.

Markets aren’t plumbing, where wealth flows downwards. They’re networks where money flows toward whatever people value most.

Oh please spare us the fairytale, Roger. Good grief. He’s almost correct here when he says that wealth gets pulled up, but then he launches into this fantasyland of neoclassical economics that refuses to acknowledge any of the social aspect or architecture of modern-day market societies. Businesses prosper because people are voluntarily choosing to spend their money. If they don’t give the customers value for money, the customer can choose to take their money somewhere else. And workers also prosper by voluntarily selling their labour to whoever can give them the most value for it. Silly people, you’ve fundamentally misunderstood the nature of markets. Take it from Roger, a lawyer who spent his formative years working for and representing corporations. Markets work by directing money towards what people value most.

There is no way anyone looking at our society here in New Zealand could honestly argue that money is being directed toward what people value most. What is happening is that people are required to spend a greater and greater proportion of their income on things they need to live. And this is getting to be more and more the case as government cuts funding for public programs and services. But rather than putting more money into the things that the public values, they are gutting the public sector to fund tax cuts for the wealthy.

Has Partridge actually talked to anyone or paid attention to what the general public is saying about their lives and whether or not his fairytale economic theories actually reflect the real lives of people in society? Probably not. He has either bought into the simplistic theories his colleagues subscribe to, or he is being willfully disingenuous.

He then takes aim at opponents of the Regulatory Standards Bill. Having established that people who think that economics work by trickling down money from the wealthy to the rest of us are idiots, he then slanders anyone opposed to the RSB

These same critics also attack a more recent phantom: the Regulatory Standards Bill. This proposed law requires ministers to “please explain” when proposed reforms depart from basic principles like property rights and the rule of law. None of the principles are new. Yet the critics fear the Bill somehow threatens democracy. Like trickle-down, they have created a threat from thin air.

These same critics. Ah, yes. The idiots who don’t understand economics also obviously don’t understand the RSB. They’ve once again made up something that has no basis in reality.

How do these phantom theories come to life? Perhaps because some people are happier blaming imaginary monsters for economic problems than bothering to understand them.

Phantoms are useful. Complex problems often require complex solutions. Blaming imaginary theories requires only imagination. When inequality rises, blame trickle-down. When wages stagnate, trickle-down again. It’s shadow-boxing at its finest.

Trickle-down economics deserves recognition – as economics’ most successful bogeyman. Forever attacked, never defended, because there’s nobody home.
It lives only in the minds of its critics, eternally irrigating grievances.

Forever trickling. Forever false.

As Insights pieces go, this one is particularly bad. It’s bad because Partridge blatantly misrepresents his opponent’s position on trickle-down economics. He cites the fact that the origin of the phrase can likely be traced to Will Rogers as evidence that it was never a serious economic theory. However, critics of so-called trickle-down economics never argued that this was the explicit position of economists and finance technocrats. The whole idea of “trickle-down” was a critique of economic policies that enriched the wealthy. No one was arguing that “trickle-down” was being advocated explicitly by economists. They were arguing that none of the wealth was making it from the rich to the poor and working class and so why are politicians continuing to make policy that transfers wealth to the rich?

So the more Partridge argues that trickle down doesn’t exist, the more out of touch he shows himself to be. That is the point. Economic policies that shift wealth to the wealthy, via tax cuts, austerity, and deregulation, do not benefit anyone else. That’s the trickle-down critique.

But he’s actually playing more ignorant than he must be or maybe he really is ignorant given he has no training in economics. The idea of trickle down comes from supply-side economics, which argues that tax cuts for the wealthy will result in more investment and job creation by business, thereby benefiting everyone. Although not always explicitly referred to as “trickle down”, this is exactly the idea behind this type of a policy agenda and it has been trotted out time and again by politicians the world over to justify their tax cuts, deregulation, and privatisation. Whether or not it’s called a “growth strategy” or referred to as “a rising tide lifts all boats” or something else, the idea of trickle down has been a part of political rhetoric for decades.

And it doesn’t work. Study after study has shown that the gains in wealth from such policies benefit the already-wealthy and that there is negligible benefit in terms of economic growth, jobs, or wealth for the vast majority of society. Here’s one from the IMF. Here’s one from the London School of Economics. Both of these studies conducted extensive analyses across a number of different countries and timeframes and found that tax cuts for the rich were associated with greater inequality.

Here are two summary figures. The top one is from the IMF study and shows that the greater the tax cut for the wealthy, the more wealth was shifted upwards towards the top 1%. The second figure is from the LSE study, and shows that inequality as measured by the increase in the income share to the top 1% increased following tax cuts, but there was no consistent effect on economic growth or employment.

Taken together—and these are only two examples—these results show that regardless of whether Partridge wants to argue that its advocates called it “trickle down” or not, the policy agenda of increasing the amount of wealth at the top does not result in increased benefits for everyone else. So whether or not he is unclear on the exact origin and history of the phrase as used by economists, the data are absolutely clear on the economic effects of policy that is captured by the phrase “trickle down”.

Once again, this seems to be a case of the folks at the NZ Initiative framing the argument in terms that allow them to paint their opponents as uneducated or unsophisticated or just plain stupid rather than deal with the real experienced effects of the free-market policies they advocate for in the lives of the public. When it comes the the Initiative, it is them who are disconnected from reality. Or rather, they have accepted and propagate a version of reality that is dictated to them by the interests of their donors and members (worth over $12.7 trillion) that what is good for business is good for Aotearoa. That massive wealth transfers to the rich will benefit all of us. But these arguments are getting harder and harder to square with the facts on the ground, and so the Initiative has to frame the argument in favourable terms, which don’t make a lot of sense. They have to answer a question no one is asking. More and more people seem to be unsatisfied with their answers.