Guyon Espiner: Labour needs some big economic ideas. NZ does, too

Opinion: Sometimes the official explanation seems so flawed that we have to question the orthodoxy.

In the Battle of Bến Tre, during the 1968 Tet Offensive of the Vietnam War, an American Major told the journalist Peter Arnett that “it became necessary to destroy the town to save it.”

In our own battle against inflation, we adopted a similar mentality. To save the economy it became necessary to destroy thousands of jobs, businesses and livelihoods.

The Reserve Bank deliberately engineered a recession to tame inflation. The central bank didn’t do that because it’s stupid, or even because it was blinded by the fog of war, but because it was the only weapon it had.

And let’s be clear: the enemy was evil. Inflation destroys economies.

The most famous example is in the Weimar Republic, where the government printed money to pay striking workers, sparking hyperinflation. A loaf of bread cost 250 marks at the beginning of 1923 and 200,000 million marks at the end of the year.

So, yes, the RBNZ chose the lesser of two evils.

But shouldn’t we be on the lookout for more sophisticated weapons rather than relying on the monetary policy blunderbuss?

Big ideas on economic reform are unlikely to come from the current government. That is not a criticism but a political reality.