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Policy Quarterly Volume 5 Number 1
The financial crisis gripping the world since the latter part of 2008 has had profound and wide-range impacts – political, social, psychological and, of course, economic. There is doubtless a lot more to come, sadly much of it grim – although the full magnitude and duration of the economic impacts remain uncertain. Indeed, one of the more striking features of the past six months or so has been the enormous uncertainty generated by the crisis. Even seasoned economic forecasters and political pundits have been left baffled and have been forced regularly to revisit their basic assumptions, beliefs and projections.
More significantly, the crisis has posed serious policy dilemmas and intellectual challenges – challenges that are bound to occupy policy makers, as well as academics across a range of disciplines (including accounting, economics, law, management, political science and psychology), for many years to come. Quite properly, the crisis has prompted a vigorous questioning of many well-established ideas, theories and policy settings:
• ideas, for instance, about the capacity of markets to ‘self-correct’, the appropriate levels of risk and rewards, the design of corporate governance structures, and the role of trust, ethics, and responsibility in the functioning of market economies;
• theories, for instance, about ‘efficient markets’ (i.e. the notion that prices fully and efficiently reflect all the available information) and the nature and implications of globalisation; and
• policy settings in relation to such matters as inflation targeting, the regulation of financial markets, the merits or otherwise of public ownership of major businesses, the role of government subsidies and guarantees, and the design of social policies, such as unemployment insurance and housing assistance.Not since the Great Depression has there been such a questioning of long-standing beliefs and accepted practices. Where this questioning will ultimately lead – especially in terms of the longer-term policy responses, both nationally and internationally – remains to be seen; but there can be no doubt that the world has changed, and changed fast and profoundly.
With these considerations in mind, this issue of Policy Quarterly begins with contributions from five New Zealand economists on aspects of the financial crisis and its implications. The articles are based on papers presented at an IPS forum on the financial crisis, in Wellington in November 2008. Dennis Rose explores some long-standing issues facing the New Zealand economy, in particular the implications of the country’s high level of net international liabilities and the risk this poses in the context of global financial shocks and a potentially protracted economic downturn. Geoff Bertram, likewise, examines New Zealand’s high levels of indebtedness, focussing especially on the vulnerability of this country’s banks (given their heavy reliance on offshore funding) and the merits of the government’s decision in late 2008 to provide banks with a wholesale guarantee. Next, Brian Easton considers how the current financial crisis compares with previous cycles and depressions in New Zealand’s economic history and asks, amongst other things, whether the current difficulties are the same or different. His answer, in short, is both ‘yes’ and ‘no’. Following this there are two articles on some of the issues that the financial crisis raises for social policy. Bob Stephens explores what might happen to social policy expenditure and policy settings in New Zealand under three possible scenarios: a mild recession; a moderate to severe recession of a long duration; and a prolonged severe recession. He assumes that there will be a centre-right government in office, at least during the current parliamentary term. Next, Michael Fletcher outlines a number of priorities and principles for the design of social policies during a recession. He gives particular attention to three policy areas – employment support, training and education, and benefits and tax credits.These articles, needless to say, touch on only a few of the theoretical and policy issues that deserve attention in the wake of the global financial crisis. I trust that future issues of PQ will address many other topics of relevance to the crisis and, in so doing, contribute to the wider public debate and the framing of policy responses. This issue of
PQ concludes with a series of articles on four very different matters. Dennis Rose (in his second contribution to this volume) identifies the major issues likely to arise should New Zealand embrace a republican constitution, particularly those relating to the role and powers of the head of state. The final three articles offer perspectives from a number of distinguished overseas academics. Evert Lindquist explores contrasting narratives of public sector reform; Martin Lodge analyses the nature of public sector bargains (between politicians and senior public servants); and Brenda Bushouse considers the rationale for, and merits of, the recent introduction of 20 hours free education for three and four year olds in New Zealand. Notwithstanding the current financial crisis and impending large fiscal deficits, this policy seems destined to endure, albeit in a modified form.Jonathan Boston
ISBN: 1176 - 8797
Published in February 2009
Policy Quarterly - Entire Issue |
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Overseas Indebtedness, Country Risk and Interest Rates - Dennis Rose |
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The Banks, the Current Account, the Financial Crisis and the Outlook - Geoff Bertram |
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It’s The Same This Time? Cycles and Depressions in New Zealand History - Brian Easton |
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Social Policy, Cold Climates and Economic Recessions - Robert Stephens |
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Social Policies in the Recession - Michael Fletcher |
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Executive Power and the Head of State: Issues Arising from Proposals to Establish a Republic - Dennis Rose |
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Waiting for the Next Wave: Trajectories, Narratives and Conveying the State of Public Sector Reform - Evert Lindquist |
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Strained or Broken? The Future(s) of the Public Service Bargain - Martin Lodge |
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The 20 Hours (Free) Programme, Important Choices Ahead for New Zealand’s New Government - Brenda K. Bushouse |
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