02 February 2005

Ends and means

Treasury estimates that our GDP per capita would rise by 5.1 per cent if we lifted our participation rates overall to the average of the top five OECD nations. That's a worthwhile objective and at this time of labour shortage, it's a good time to be pursuing it. Extract from the New Zealand Prime Minister's statement to Parliament, 1 February

There is understandable confusion, at the highest levels of government, between means and ends. The only accepted ways of measuring the welfare of large societies involve numerical data, and the most widely used indicator has come to be GDP per capita. But as an indicator of welfare it is inadequate. It does not distinguish between helpful and harmful economic activity. It puts no value on any activity that bypasses the monetary economy. So it ignores leisure time, the environment, crime, health, and other things that are meaningful to natural persons.

Big business is very much the same in that its objectives are not those of real people: its goals are expressed in terms of profits, sales, growth and market share. Government and big business together are the major determinants of the sort of society in which we live. Their interests drive the current policymaking system. Yet their goals are quite different from, and often in conflict with, those of real people. Natural persons feel disenfranchised so it is hardly surprising that there is widespread cynicism about politics, a growing distance between government and people, and a growing disengagement from the political process.

A Social Policy Bond regime would be driven entirely by outcomes for real people. Under a bond regime, all government activity would serve broad outcomes, such as basic health and educational standards, low crime and a cleaner environment. Unlike the meaningless, abstract drivers of current policy, these outcomes would be explicit and transparent, as would the trade-offs between them. Policymaking would become comprehensible to real people and there would be informed debate about policy and where, as a society, we want to go.

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