This item in Fairfax’s Dominion Post caught my eye a few days ago;
In this story, author John Anthony is reporting on a study by two academics – Massey University economics and finance senior lecturer Dr Chris Malone, and associate professor, Hamish Anderson. They came to the astonishing conclusion;
Small listed companies have performed significantly worse under Labour governments over the past 40 years because of major policy changes, a report says.
“The smaller firms have done abysmally poor during Labour terms of office.”
Funny thing about this article – it’s mostly rubbish. The Labour government in the mid/late 1980s was hardly a traditional left-wing administration as it implemented neo-liberal, free market policies at breakneck speed. It was the government that gave us the term “Rogernomics“.
In essence, it was a Labour government in name only, having been hijacked by future-ACT MPs and neo-liberal cadres. It was a foretaste of how Brash seized power in 2011 after a putsch overthrew Rodney Hide as ACT’s leader.
Yet the heading of the article is utterly misleading;
Labour governments ‘bad for small business’
Indeed, anyone glancing at the story would come away with entirely the wrong impression until their attention was caught by this bit;
The main reasons for poor performance in small firms during Labour governments included market under-performance, periods of falling inflation, harsh default-risk and credit conditions and the introduction of deregulation in 1984 that opened up firms to increased foreign competition and exchange rate pressures.
Notable features were the two Labour governments of the 1980s under Prime Minister David Lange.
In the first term from 1984 to 1987 the mean returns were amongst the highest in the sample but in the second term the smaller firms had a mean monthly return of minus 7.2 per cent.
Roger Douglas’s neo-liberal “free” market reforms truly kicked in during Labour’s second term in office (1987-1989) and the academic’s report is not very flattering;
“…in the second term the smaller firms had a mean monthly return of minus 7.2 per cent”.
It is interesting to note that overseas ratings agencies (Standard & Poors, Moodies, and Fitch) also seem to have a somewhat dim view of right-wing governments. Note the credit rating movements during right-wing Labour/National governments compared to the Clark-led Labour government;
Note the credit downgrades (red underlined) in the chart above and detailed belowed;
- Standard & Poors: From AA+ in April 1983, to AA in December 1986 (Rogernomics Labour)
- Standard & Poors: From AA in December 1986, to AA- in January 1991 (National)
- Moodys: From Aa1 Stable Outlook, February 1996, to Aa1 Negative Outlook on 30 January 1998 (National)
- Standard & Poors: From AA+ Stable Outlook in January 1996, to AA+ Negative Outlook on 10 September 1998 (National)
- Moodys: From Aa1 On Review for Possible Downgrade on 5 June 1998, to Aa2 Stable Outlook on 24 September 1998 (National)
- Fitch: From AA+ Stable Outlook on 28 November 2008, to Aa+ Negative Outlook Reaffirmed on 16 July 2009 (National)
- Fitch: From Aa+ Negative Outlook Reaffirmed on 16 July 2009 to AA Stable Outlook on 24 September 2011 (National)
- Standard & Poors: From AA+ Negative Outlook Reaffirmed on 22 November 2010 to AA Stable Outlook on 30 September 2011 (National)
Eight credit down-grades under two Right-wing governments.
By contrast, during Clark’s more left-wing Labour administration, from 2000 to 2008;
- Standard & Poors: From AA+ Negative Outlook on 27 March 2000, improved to AA+ Stable Outlook on 7 March 2001
- Fitch: From AA on 27 March 2002, improved to AA+ on 16 August 2003
- Moodys: From AA2 Stable Outlook on 24 September 1998, improved to Aaa on 21 October 2002
- Fitch: From AA on 27 March 2002, improved to AA+ on 16 August 2003
Eight years, four credit upgrades.
As Labour’s economic development spokesperson, Grant Robertson, stated in the same article,
“The last Labour government ran nine surpluses in a row while having the highest average growth rate of any government for 40 years.”
He’s right. Under Labour’s administration of the economy,
- Net sovereign debt was paid down to near zero;
- Finance Minister, Michael Cullen posted nine consecutive surpluses
- Unemployment was at a record low 3.4%;
- The minimum wage was increased nine times under Labour, from $7.00 to $12.00 – whilst National has raised it six times from $12.00 to $14.25,
- Building permits rose steadily until 2008;
- The NZ stock market showed a steady rise, until the 2007/08 Global Financial Crisis;
- Consumer Confidence vs Business Confidence – showed conflicting results, with consumer confidence staying bouyant whilst business confidence appeared to fall. (It seems bizarre that whilst customers were happy to open their wallets/purses to spend – businesses remained gloomy until nearly two years after the initial effects of the GFC were felt and the Recession was biting hard. Masochistic tendencies appear at play here?)
It seems farcical in the extreme that two academics – with the willing assistance of an uncritical journalist – have presented “research” which brands the Labour Party as “bad for small business” when the 1984-89 Lange-led administration was an undemocratic aberration that was closer to the ACT Party than the Kirk or Clark governments.
In essence, Malone and Anderson have passed judgement on governments implementing right wing, neo-liberal economic policies and, rather unsurprisingly, given them a *fail* mark. But you wouldn’t think it with the headline “Labour governments ‘bad for small business’” and the statement that “smaller firms have done abysmally poor during Labour terms of office”.
But at least this has given right-wing bloggers some joy – even if those same bloggers have been less than honest at what Malone and Anderson have actually written. But that’s the right wing for you; never let inconvenient truths get in the way of a good propaganda moment.
Fairfax media: Labour governments ‘bad for small business’
New Zealand Debt Management Office: New Zealand Sovereign Credit Ratings
New Zealand Debt Management Office: Summary of Direct Public Debt
Trading Economics: New Zealand Government Debt To GDP
National Party: What about the workers?
Statistics NZ: Unemployment Rate Falls to 3.4 Percent
Trading Economics: New Zealand Unemployment Rate
Ministry of Business, Innovation, & Employment: Previous minimum wage rates
Trading Economics: New Zealand Stock Market (NZX 50)
Trading Economics: New Zealand Building Permits
Trading Economics: New Zealand GDP
NZ Treasury: Recent Economic Performance and Outlook
Trading Economics: New Zealand Consumer Confidence
Trading Economics: New Zealand Business Confidence
Kiwiblog: Labour bad for small business
Above image acknowledgment: Francis Owen/Lurch Left Memes
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