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Insights 36: 1 October 2021
NZ Herald: Matt Burgess on Feebate - the Government's reverse Robin Hood scheme
Podcast: Oliver Hartwich discusses the German election results and possible government coalitions
Webinar: Why New Zealand needs better Covid testing systems, with Dr Anne Wyllie

Generation Lockdown
Dr Oliver Hartwich | Executive Director |
Last Sunday’s election results in Germany were clear. The Christian Democrats, Angela Merkel’s party, lost heavily. The Social Democrats made big gains with Olaf Scholz as their leading candidate. What remains is a coalition building exercise.

Still, there is a major surprise hidden in the overall result. That surprise lies in the voting behaviour of first-time voters.

Since Greta Thunberg started the ‘Fridays for Future’ movement in 2016, it appeared young people worldwide favoured Green politics. Climate change, anticapitalism, and identity politics seemed to be their top concerns.

At least, that’s what young voters are often portrayed as. Perhaps the reality is slightly different.

The Greens and the libertarian FDP were by far the most popular parties with German first-time voters (ages 18 to 22). Each garnered 23 percent of the vote. Among that young age group, the German equivalent of Labour, the SPD, was on 15 percent. National’s counterpart, the CDU/CSU, scored only 10 percent.

German commentators are perplexed. In the past, media often turned to left-wing influencers or anti-capitalist YouTubers when presenting a voice of the young. The election results show that such stereotyping ignores the diversity of viewpoints among that generation.

An old saying goes that a person under 30 who is not a leftie has no heart, and a person over 30 who is not a right-winger has no brains. Voting patterns do indeed suggest that people move rightwards as they age.

The FDP’s strong showing is therefore even more puzzling. A party of free markets, small government, and civil rights, it does not lean left at all. But it is now, along with the Greens, the party of youth. Why?

Three explanations are plausible.

First, youth typically rebel against the older generations’ views, no matter what they are. Today’s older establishment often relies on government and state-driven solutions. That makes individual liberty the radical alternative.

Second, the FDP campaigned for policies related to climate change, too. But it called for a market-based, freedom-protecting strategy to reach net zero: the Emissions Trading Scheme.

Third, Covid lockdowns showed the value of freedom by denying it. School and university closures disproportionately affected young people.

The young generation’s views are diverse. They are not all green or statist. Next time we hear about what ‘the’ youth wants, let’s remember this.

Were Budgets 2020 and 2021 Illegal?
Dr Bryce Wilkinson | Senior Fellow |
Parliament, not government, passes legislation. Legislation is law. Government Ministers must comply with the law. If they do not, and get a way with it, really bad things can happen.

The Fiscal Responsibility Act 1994 aimed to stop chronic government deficit spending that induces a debt spiral that ends in a searing recession. That was New Zealand’s 1974-1992 economic experience, in a nutshell.

That Act’s provisions are now in Part II of Public Finance Act 1989. They specifically require governments to comply with enumerated principles of responsible fiscal management.

Prominently, the government must achieve and sustain public debt at a prudent level to “provide a buffer” against future events that could “impact adversely”.

Such adverse events occur too often for comfort. In addition to self-inflicted crises they include natural disasters, wars, global financial crises and serious health epidemics.

Such adverse events can push public debt above its otherwise prudent levels.

The Public Finance Act allows for such variations. But only if (1) the departure is temporary and (2) the Minister of Finance explains three things: the reasons for the departure; the intended remedial response; and the timetable for restoring prudent levels.

Budget 2019 preceded awareness of Covid-19. In it the government committed to reducing net core Crown debt to 20% of GDP “within five years of taking office” and to “maintaining it at prudent levels thereafter”. Specifically, it would keep it within a 15-25% of GDP range.

Covid-19 subsequently “impacted adversely” on government finances. Budget 2020 projections showed large non-temporary departures from the government’s 15-25% range. It did not set any timetable for remedying the situation. Nor did it set a new target range.

Budget 2021 failed to restore compliance. Treasury projected net debt to peak at 48% of GDP in 2023 and to still exceed 30% of GDP in 2033. That is not a temporary departure.

Budget 2021 baldly and inconsistently asserted that debt “remains at prudent levels through the forecast and projection periods”. This is also Treasury’s view. But these Treasury’s projections simply assume no further adverse shocks. That is not a prudent approach.

What is needed is a careful assessment of how badly things could go wrong from here and therefore how large a buffer would be desirable.

Parliament and the Auditor-General should demand greater accountability and compliance from government than such bland, target shifting, complacency. Are they? Time may be short.

Amateur hour
Leonard Hong | Research Assistant |
If you want to know everything about ancient Egypt, read a magazine article about it. If you want to know a little less, read a book. If you want to know nothing, study Egyptology.

It is a paradox, but it is true.

As Einstein once said, “The more I learn, the less I know.”

Or was it Aristotle? Or Churchill? It’s usually one of the three, and who cares about correct attribution?

But I digress. The problem is not with those people who learn just enough to know they know nothing. The problem is all the others.

These are the people who believe they can land a jumbo jet on an aircraft carrier because they played Microsoft Flight Simulator a few times.

And the millions of sadly ignored All Black coaches who have watched a few tests on TV.

And, not to forget, our team of five million epidemiologists.

We know the issue as the Dunning-Kruger effect. People with low abilities often overestimate their competence. 

Surprisingly, the effect is named after David Dunning and Justin Kruger – although I am sure Einstein could have said it, too.

Dunning and Kruger also gave us a good explanation for their discovered effect. They claim that people are not just incompetent. But people also lack the ability to process enough information to realise how incompetent they are.

Well, I need to think about that.

Unfortunately, modern culture amplifies the Dunning-Kruger effect. Instead of warning people of their inability, it encourages them to live it.

If you have ever watched casting shows or reality TV, you know what I mean.

There are the would-be entrepreneurs going on The Apprentice who could barely calculate the GST on their products.

There are the singers on America’s Got Talent who should not even perform under the shower.

And there are the amateur chefs on Hell’s Kitchen who drive Gordon Ramsay to cascades of expletives.

We can but speculate where this exaggerated belief in one’s own ability comes from.

Is it the schools where every child is a winner? Where there is no failure but only deferred success?

Is it the helicopter parents who stop their children from ever failing – and if they do blame the teachers?

Or is it our general norm of non-offensiveness which makes us call every bent spoon a spade?

Honestly, I have no idea. I guess I am going to write a book about it.

On The Record
Initiative Activities:
  • Podcast: Oliver Hartwich discusses the German election results and possible government coalitions
  • Webinar: Why New Zealand needs better Covid testing systems, with Dr Anne Wyllie
All Things Considered
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