Can The Media Help Promote Economic Literacy?

Please find attached an article that appeared in the Otago Daily Times on Friday 11 January 2008.

Can The Media Help Promote Economic Literacy?

This article is an appeal to the media.

Speaking to the Journalism Education Association in Wellington recently, prime minister Helen Clark said she wished the New Zealand media were better informed about, among other things, economics.

This seems to be a case of not knowing how lucky she is. New Zealand’s rate of productivity growth has slumped on her watch.

Economic management matters to all New Zealanders because the quality of economic institutions and polices fundamentally determines how productive the economy can be.

In a healthy democracy we need penetrating media analysis of economic issues to help citizens assess the economic competence of incumbent governments and parties competing for office.

This need is particularly important in an election year when claims and counter-claims about policy directions abound.

The prime minister is right to suggest that New Zealand has few expert economic journalists. Probably the resources of media organisations don’t allow them to employ specialists of the calibre of The Australian’s Alan Wood or the UK Financial Times’ Martin Wolf. Their work is widely admired by academic and professional economists.

However, many media organisations do their best to compensate by featuring economic commentary by qualified people through articles and interviews.

Here journalists could do a better job of sorting out the wheat from the chaff. There is a large measure of common ground in the opinions of respected economists, although there are areas of legitimate debate. And while there are quacks in economics, just as there are in medicine and other professions, it is not difficult to screen them out.

A quick check amongst practising economists would soon establish who they respect among their peers.

Among academics, the names of professors Lew Evans at Victoria University and John Gibson at the University for Waikato would frequently surface. Both would have no trouble getting tenure at leading international universities.

In the area of public policy, the New Zealand Institute of Economic Research has for many years had an annual award for distinguished contributors. A disclaimer in my own case may be in order, but the list of recipients would be an obvious ‘go-to’ source.

Journalists would also find the Institute’s current director, Brent Layton, is highly regarded by his peers.

Regrettably, the Treasury, which employs many economists, can no longer be taken as a reliable source of politically neutral analysis.

As John Gibson has written, “It is no wonder that almost all of the researchers in Treasury have either left or taken secondments so that they spend as little time as possible at No 1, The Terrace. What’s the point, when research is systematically ignored or distorted by politicians? What’s the point, when senior management check which way the wind is blowing before taking a position and will even disassociate themselves from research done in their own department?”

It is astonishing, for example, that the Treasury has not advised the government that pursuing its carbon neutrality targets could do enormous damage to the economy, as research shortly to be released by the Business Roundtable will reveal. Nor does the Treasury appear to have bluntly told the government that its goal of restoring New Zealand to the top half of the OECD income rankings won’t be attained with present policies.

But at least journalists may now have access to researchers who have left the Treasury and are working in other organisations.

On many specific economic issues, journalists would find unequivocal views among economists. On inflation, for example, Nobel laureate in economics Ed Prescott has written that today “All respectable economists agree inflation is a monetary phenomenon”. Thus, contrary to finance minister Michael Cullen’s frequent claims, tax cuts cannot be inflationary given sound monetary management. At most – and even this is uncertain – they might cause a one-off increase in the CPI, not ongoing price increases.

Similarly, Dr Cullen’s claim that New Zealand’s household saving record is poor would find little support among specialists in the field (including ex-Treasury researchers). In fact household net worth has been rising, not falling. Moreover, households also ‘own’ government savings and much corporate savings.

In the run-up to the election, it is particularly important that journalists do their job well.

Former prime minister Robert Muldoon cynically traded on the public’s limited understanding of economics when he said most people wouldn’t recognise a budget deficit if they fell over it, and he went on to wreck the economy.

Today the public better understands the dangers of high public debt, but the hollowness of claims about achieving ‘economic transformation’ and carbon neutrality have not been clearly exposed. And we can ill-afford another election campaign with unjustifiable vote-getting policies like interest-free student loans.

We need the media to shine a spotlight on bogus economic claims by all parties in the election debate. Competent journalists have ample means of doing so.

Roger Kerr is the executive director of the New Zealand Business Roundtable.

ENDS

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