People are grumpy.

Voters have turned out the UK’s Conservatives, sending them to their worst ever defeat. France’s modernising president has seen his party lose out to the far left and the far right – an impressive pair of own goals. In the US, a jaundiced electorate may re-elect a narcissistic blowhard: the Pew Research Centre reports that only 22% trust the US Government to do what is right, down from 77% in Lyndon Johnson’s day (1964). 

Across the Organisation for Economic Co-operation and Development (OECD), the people with low or zero trust in government (44.2%) outnumber those with high or moderate trust (39.3% – the other 15.6% being neutral). In Australia and New Zealand, the story’s a bit better: in Australia high trust edges out low trust by 46% to 38%, and in New Zealand by 46% to 36%, but there are clearly large minorities who are disenchanted with what’s on offer. Throw in the ‘neutrals’, and there’s a majority for mistrust.

A lack of progress

Why people are unhappy, and why they’re now willing to junk long-established parties in favour of often untried, often incoherent, often unpleasant and often barely democratic alternatives, is a big question and it’s not exclusively economic. Politics – the culture wars, foreign policy, human rights – clearly plays a big role.

But there’s a strong economic component, and it’s not just the cyclical one of households rolling over onto more expensive mortgages and paying more for groceries. The longer-run reality is that governments in many economies have been getting worse at delivering what they are supposed to deliver, so it’s not surprising that many voters have been willing to give someone else a go to see if they can do any better.

This column has previously canvassed some delivery failures – secondary schools in both Australia and New Zealand are turning out kids with progressively lower attainment, for example – and they continue to accumulate.

In the health sector, the latest (2022–2023) data on elective surgery from the Australian Institute of Health and Welfare reveals that, “For almost all intended procedures waiting times increased compared to both 2021–2022 and 2018–2019”. Five years ago, few (2.1%) waited more than a year, now almost one in 10 (9.6%) do.

In New Zealand, people in the public health system are supposed to be able to see a specialist within four months of a referral from their GP. More than 50,000 people are now overdue and the arrears are climbing. I recently paid to get a somewhat obscure medical diagnostic test done: the provider told me I’d have been lucky to get it through the public system before 2026.

Obviously neither Australia nor New Zealand are yet anywhere near the dysfunction of the UK’s NHS, but it’s the wrong direction of travel.

Going local

It’s easy to gripe about government services going to the dogs, not so easy to come up with constructive ideas to turn things around. But there are two proposals that could go some way to gruntling the currently disgruntled.

One promising approach, which goes under the uninformative name of ‘social investment’, is to recognise that the traditional one-size-fits-all mega-ministries like education, health and social welfare don’t perform well when one key issue is that 20% of the population need 80% of the help.

The other issue is that you can’t always see what’s needed locally from your centralised eyrie in Canberra or Wellington. It could well be better to channel resources to alternative providers on the local ground who (subject to performance measurement) would be likely to do a better, more informed, more customised and less expensive job.

One example, quoted at an economics conference I went to this year, was a local support group that found a better way of housing someone who had previously been spending 100 nights a year in a hospital bed – an insanely expensive way of addressing his problems. He still ended up in hospital 10 nights a year, but the savings were huge and the outcome better.

Another is a mental health service provider I did a cost-benefit analysis for: conservatively, it produces benefits worth $4.70 for every $1 it spends. That’s an excellent result financially and medically, and it works because the provider is leaner, clinically effective and locally plugged in.

All together now…

Social investment is all about making each of the various government welfare services work better. Another good plan is to ensure that all the different government entities pull together.

Here I’m channelling David Vines, an Aussie economist who is professor at the University of Oxford in the UK, and who gave a keynote speech to this year’s NZ Association of Economists’ conference. He pointed out that, at the moment, policies tend to be run in siloes: Treasury does fiscal policy, the central bank does monetary policy, someone else does regional development, some kind of trade and industry body runs industrial policy. So far, the only coordination that tends to get any focus is the one between fiscal and monetary policy. But what about better coordination of the whole bag of tricks?

Here’s an example. Cast your mind back to the early days (1980s) of the Thatcher administration in the UK. Fiscal policy got tightened, as did monetary policy. An entirely predictable outcome was an uncompetitive exchange rate, which devastated British manufacturing and hollowed out much of the Midlands and the North East. With those fiscal and monetary settings, there should have been a complementary active labour market policy providing retraining for people displaced, and perhaps an activist industrial policy supporting new sectors, maybe with a competition policy making new startups easier. Never happened.

As Boris Johnson discovered in 2019 when he routed Labour in its traditional rust belt heartland, there was a massive demand for this coordinated ‘levelling up’ of regional inequities. His and subsequent Conservative administrations descended into chaos, never delivered on the promise and rightly got chucked out. But he was on the right track: governments could be a lot more effective, and rebuild public confidence in their competence, if ministers did more to pool their efforts.