Ben Kepes: How about some economic stimulation that trickles up, not down

Christchurch-based investor and entrpreneur Ben Kepes. Photo / Supplied

There have been many reckons of late for what New Zealand (and, for that matter other countries) should do to kick-start the economy to bring us out of the Covid-19 doldrums.

Now, I have to state my view upfront that some of the problems we're facing now directly result from our current economic system that requires constant growth and consumption to fuel itself. While I don't have the alternative model all worked out, it seems less consumption would stand us in good stead.

But saying things like that quickly descend into calls of socialism (and, as we know, many view socialism as worse than leprosy) so let's put such revolutionary ideas to the side for a time.

Outside of that sort of fundamental economic remodelling, however, I've been wondering about what sort of stimulus initiatives the New Zealand government could come up with that would not only fuel the economy but would do so in a bottom-up way.

You see, there have been many opinion pieces from business leaders, steeped in the multi-decade neo-liberal model - that have suggested that the way to success is to attract big money foreigners either as investors or landowners. Their theory goes that the riches they (theoretically) introduce into the country will flow down so that it benefits society as a whole.

Notwithstanding the fact that we've been sold this idea in the past to very little benefit (here's looking at you, Mr Thiel), even when it does go like this, we run the risk of creating a less equitable society. One in which New Zealanders have access to work, but work which sees them in servitude to a modern take on the landed gentry. I'm not sure that New Zealanders really want to mow the lawns and clean the pools for Silicon Valey tech gurus, Swiss financiers or South American industrialists.

But here's the thing, there is mounting evidence that the neo-liberalist theory of trickle-down economics doesn't work. Introduce wealth at the top and you certainly benefit the top strata of society, but generally, that results in increased property speculation which, rather than benefitting those lower down on the economic ladder, actually makes life worse for them through reduced affordability of housing and the like.

So how do we make the economy move, while benefitting those at the lower levels of society? How do we encourage economic flows at all levels, rather than just at the top?

Our government spends billions of dollars a year on its internal procurement - buying stationery, furniture, clothing, cleaning, catering and a myriad of other services that it needs. My business, Albion Clothing, has been directly involved with that given the contracts we have to supply uniforms for agencies such as the New Zealand Defence Force, Fire and Emergency New Zealand and the New Zealand Police.

But this is only a tiny proportion of the needs of these organizations and, not surprisingly, the vast majority of government procurement sees cash spent overseas. So how can we use that fact to change our own economic model?

How about our government enacts a policy whereby procurement must take place domestically if at all possible (no, I'm not suggesting we buy dismantled cars from Japanese car manufacturers and assemble them here in NZ the way we used to - I'm talking about stuff that CAN be made efficiently in New Zealand).

Imagine then, that in return for procuring locally, the government also enacted a policy whereby locally procured items would have to involve companies that pay the living wage.
All of a sudden those skilled technicians who make Police uniforms, who supply government stationery, and who supply the raw materials that Kainga Ora use to build state houses, would be paid a wage that was independently and neutrally assessed to be a living one. What happens then?

Well, all of a sudden, those people who are paid the minimum age and currently have to skimp and save in order to buy their kids school uniforms, pay their rent and put food on the table, will be paid a wage that allows them to do so. And in doing so, a significant proportion of that extra cash spent by the government directly facilitates economic stimulus at the grassroots. It's a circular economic move that keeps money flowing and does so largely within our own economy.

It's not a perfect scenario, and people will rightly point out the issues around relativity. Those on lower incomes tend to apply a relative lens between their and others' wages. If you're currently paid, say, $2 per hour more than minimum wage, then you're going to potentially be pretty dissatisfied if, under this new scheme, your relative position is seemingly worse.

But details aside, it seems to make sense to me. This is money that the government already spends. Simply spending it in New Zealand means our economy enjoys the financial benefits of that expenditure, not another economy.

In fact, I'd go so far as to suggest that the financial delta (ie the price difference between buying locally and buying from offshore) is more than made up for by the reduces government expenditure that would come from increased employment, better health outcomes (since people can eat better and afford better housing) and more optimal mental health outcomes (a gainfully employed citizenry is, generally speaking, a happier one).

So there's an idea, Jacinda. And while it's something that ACT might argue with, what logically-thinking party could deny a plan that both benefits businesses and workers?