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Saturday, January 20, 2007

Hide's Speech to ACT on Campus Conference

I think this is one of the best speeches that ACT Party leader, Rodney Hide, has ever written. Read the full text here.

Speech to ACT On Campus Conference Dinner, Auckland, 20th January 2007.

Being a happy classic liberal

When I first made it to Parliament I was asked by a fellow who had been around the complex for a long time why I was always so happy. New MPs are supposed to be miserable, he said. The direct comparison was Pam Corkery. She was always sour.

I thought about it for a time. The reason was that I am a Classical Liberal. For me, the government that governs best is the government that governs least.

I don't believe that politicians and bureaucrats have the information or incentive to tell us what to do better than we can for ourselves. We certainly know how to spend our own money better than politicians can spend it for us. That was my view when I first turned up to Parliament.

For Pam Corkery it was quite different. She believed that government is the solution to every problem and that all government needed was people like her who cared and who knew what the problems were. She figured the problem with government was that the wrong people were running it, i.e. they weren't her.

Every screw-up, every cynical move by politicians, every couldn't-care-less bureaucrat was a shock to her view of the world and a frustration. She herself could do nothing about it. She was a part of it and still couldn't. She was caught up in politics and the machinery of government.

For me, the government screw-ups just made me better realise how much better we all could do if government took less of our money in the first place - and let us get on with our lives and business without perpetually bossing us around.

My first experience of Parliament confirmed my view of the world and made me realise the huge potential of our country and New Zealanders - if we just trusted people more and put them first, instead of politics.

I was happy because I was right and doubly happy because I realised how much New Zealand could gain with the right policies and triply happy because I was in the one place where I could do something about it rather than just talk about it.


On the environment and economics

I started to reflect on what I had learned from Parliament and what my studies had taught me. I wanted to figure out how we could make politics and government work better for the country.

I had started out a passionate environmentalist. I still am. It's impossible to grow up in New Zealand and not feel a deep connection with the land, the forests and the sea. I studied Zoology and Botany at Canterbury University, specialising in Ecology. I spent some time travelling the world and working on oil rigs in the North Sea and a gas stripping plant in the Shetland Islands. I returned to New Zealand to complete a Masters in Resource Management at the Joint Centre for Environmental Sciences based at Canterbury and Lincoln Universities.

My intention was to work in better conserving and protecting New Zealand's native habitat.

However I stayed on to lecture and research at Lincoln University for some years in environmental science.

That's when I became disillusioned with big government. It seemed to me that the biggest problems in caring for the planet weren't caused by people, but governments. Everywhere I looked it was government action - and inaction - that was destroying native habitat and compromising sound attempts at nature conservation.

It was government that was committing our resources wastefully to Think Big projects, that locked land up thinking that alone was enough to conserve habitat, and it was government that was all about the here and now and day-to-day headlines rather than the long term and the science of nature conservation.

I found individual landowners were far more passionate about the land than government, far more knowledgeable and caring, and genuinely interested in nature conservation. What they weren't keen on was government coming along and pinching their land to better care for it - and understandably so. In fact, the government pinching land for the purposes of "saving" it was a major reason for much of the habitat destruction that I documented.

I realised it wasn't enough just understand ecology and science. I needed to understand why people use resources the way they do and why governments so often screw it up.

I went to Montana State University - which, up beside Yellowstone National Park, specialised in resource economics - to complete a Masters in Economics.

Economics to me was just like ecology in studying how complex systems operate, interact and evolve. We know that intervening in nature can produce perverse and distant effects, but so too can government interventions in the economy.


On curing inflation

For years New Zealand suffered the ravages of high inflation. It distorted the economy, hindered our prosperity and favoured the rich over the poor.

Politicians like Muldoon blamed the unions. Jim Anderton blamed big business. Winston Peters blamed Asians.

But the real cause was politicians themselves.

They controlled the money supply through the Reserve Bank. It made political sense for a government to run loose monetary policy to create the illusion that with more money the country was doing better. We had more money; but it was buying less and less. In the short-run it was a boost, the medium term was more money that bought less and less, and the long-term result was ever-increasing inflation and a faltering economy.

The best thing for the economy and the country was for politicians to get inflation under control. That would mean a dollar would be worth the same tomorrow as it was today - not something unpredictably less.

But controlling inflation made for bad politics. The expectation was for ever-increasing prices - reversing that expectation would be painful as people took time to adjust to stable prices. Besides, a Minister of Finance doing the right thing would probably get chucked out of office for the pain they caused - only to see the new government re-igniting inflation to short term political gain and long term economic cost. Nothing would be gained politically by getting inflation under control and everything could be lost. Inflation was built into are our political and economic system.

The answer lay not in trying to make politicians more virtuous but in changing the rules within which they made decisions. The Reserve Bank Act 1989 makes monetary policy more transparent, puts greater accountability on politicians and allows the public of New Zealand to see what's going on.

The Act requires the Minister of Finance to set an inflation target. Minister's previously never had to do this. They had no stated target and their directions to the Reserve Bank were secret not transparent. The target set originally was zero to two percent. It is now one to three.

It's the Reserve Bank Governor's job to keep to the target.

So the elected politicians are still in charge of the policy - it's just they have to be transparent and accountable for their decisions. They can't just give a nod and a wink to the governor and imply ‘an election is coming up - how about lightening things up a bit?'

The result has been dramatic. Double-digit inflation is now a thing of the past. Our money is stable and our economy stronger as a result. Our economy is no longer ravaged by inflation and inflation no longer hinders our ability to prosper.

The Reserve Bank Act was controversial in its early days but it has now survived six elections, changes of government, and the introduction of MMP. Politicians have only tweaked the target somewhat - to no net effect - but to look at least as though they were doing something differently from the previous government.

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