Wednesday 6 September 2017

Jacinda's Biggest Challenge: Redefining "Economic Orthodoxy".

Economics Matters: The jubilation of Election Night 1984 was soon overtaken by the economic and social blitzkrieg that was Rogernomics. So, the two questions voters preparing to elect another popular Labour leader in 2017 need to ask themselves are: Does Jacinda's caucus contain the same number of radical change agents as David Lange's? And, if it doesn't, exactly how far will cautious economic orthodoxy carry Labour towards its goals of social equality and economic justice?

LET’S BEGIN with the assumption that Jacinda Ardern is about to become New Zealand’s next prime minister. And that, after nine very difficult years, Labour is poised to re-take the Treasury Benches. The next step, then, is to ask: “What happens now? What sort of Labour-led Government should we expect?”

More than one political observer has noted the similarities between this year’s general election and that of 1984. They have pointed out that Labour entered both campaigns with a new (or, relatively new) and inspiring leader. They also draw our attention to what they claim is a very similar sense of public frustration with the status quo. Socially, economically and politically, they allege, New Zealand finds itself stalled down a dead-end street. The dramatic response to Jacinda Ardern’s elevation, they say, has revealed the same hunger for bold new solutions to intractable old problems that made the 1984 election such an historical watershed.

The crucial factor in the 1984 equation, however, was the presence in Labour’s caucus of a critical mass of radical change agents. Even more critically, these change agents knew that their radical plans would be instantly endorsed and rapidly expedited by like-minded change agents strategically located in the Reserve Bank and Treasury. They were further reassured by the knowledge that important figures in the upper echelons of both the business community and the news media were sympathetic to their proposed “reforms”. Knowing this, Roger Douglas, Richard Prebble, David Caygill and Michael Bassett were supremely confident that the process of fundamentally changing New Zealand would begin the moment they made it into the Beehive.

In this respect, the contrast between the governments-in-waiting of 1984 and 2017 could hardly be greater. As evidenced by their self-imposed “Budget Responsibility Rules”, the leading figures of a Labour/Green/NZ First government pose no threat whatsoever to the underlying assumptions of the economic and social status-quo. Even the usually hostile right-wing newspaper columnist, John Roughan, seems relaxed about the prospect of electoral change, observing smugly that: “[T]oday’s economic orthodoxy, or ‘neoliberalism’ if you don’t like it, is well entrenched in the public service and there is little risk we will lose it.”

Certainly, as the acknowledged protégé of the former Labour Finance Minister, Sir Michael Cullen, Labour’s current finance spokesperson, Grant Robertson, has repeatedly reaffirmed his support for the standard political operating procedures of the Helen Clark-led Labour Government of 1999-2008.

At the heart of those procedures lies an unshakeable commitment to “responsible” (or, as Mr Roughan would put it, “orthodox”) economic management. No less than his mentor, Sir Michael, Mr Robertson has absorbed the lessons of the infamous “Winter of Discontent” of 2000, during which the New Zealand business community provided the Prime Minister and her Finance Minister with a short but effective demonstration of the sort of reaction any government foolhardy enough to stray from the paths of economic righteousness should expect.

It is difficult to imagine that, over the course of the past month, Mr Robertson has not reiterated those lessons to Ms Ardern. Certainly, her own public commitment to uphold the Labour/Green Budget Responsibility Rules points in that direction.

All of which presents Ms Ardern with a dilemma. On the one hand, her slogan, “Let’s Do This.”, suggests to voters that hers will be a government of action and achievement. On the other, her commitment to uphold the Budget Responsibility Rules speaks to the business community of a government committed to not rocking the boat – or, at least, to not rocking it very vigorously.

But, building “more homes” and delivering “better health and education” will require New Zealand’s social and economic boats to be rocked very vigorously indeed. Every bit as vigorously, in fact, as they were rocked by the “Rogernomes” of the 1980s.

Unfortunately, support for such radical rock-n-rolling will be extremely hard to find among the orthodox defenders of the status-quo populating the upper-reaches of the public service, news media and business community. As in 2000, their response to the merest hint that Labour is getting ready to embrace a genuinely progressive programme will be swift and brutal.

Ms Ardern’s response to their response should be guided by the political strategy of the First Labour Government. Take the people into your confidence. Explain what you want to do for them and identify the forces standing in their way. Reassure them that, with their support, the long-delayed changes in housing, health and education – the changes they voted for – will happen. And, finally, remind them that, in a democracy, crucial decisions about the future of their country must be made by – and for – the many, not the few.

Because the truly astonishing thing about all genuinely radical programmes for change – including those of 1935 and 1984 – is how quickly the utterly impossible of yesterday becomes the entirely doable of today.

This essay was originally published in The Press of Tuesday, 5 September 2017.


Nick J said...

In 1984 the radical change agents within Labour kept their powder dry even to party members, no way would I have worked or voted for them if I had known what they would do. So jacinda keep the powder dry.

Post election is the time to "uncover" all the dirty laundry of the last 9 years like the huge private debt of NZ companies, the endemic meal ticket for consultants that is the public sector, the huge over inflated salaries of the top echelon of the public service. And so much more. Exposed to public glare as you say the resistance will barely raise their heads over the parapet.

Di Trower said...

Thank you for your enlightening column. I have been wondering about exactly that, and what we might expect in the way of change away from neoliberalism (if any)
with a change to a Labour government.

pat said...

an unwinding of "orthodox" economic management will by its nature take time and therefore is unlikely to foment the outcries you suggest....take for example housing...the labour proposal to build affordable homes and increase both state and social housing will take considerable time to make an impact on the market (though I concede the very fact of the investment and other changes will potentially have...and all to the good) as the training of the required workforce, infrastructure and oversight have a lead in/ramp up period of years...certainly not in their first term in any great numbers. This aspect alone goes a long way to winding back the ' market forces' mantra.

mikesh said...

Given the emphasis given, in Labour´s campaign, to the setting up of a Tax Working Group and waiting till they have reported back before deciding tax policy it´s probable that Jacinda will be much more willing to heed the group´s findings than were Michael Cullen and Bill English to earlier TWGs.

Polly. said...

If NZ gets a Labour government, then we will get more of the same, WITH MORE TAX'S.
The press across all fronts is fawning on this Jacindarella tosh.
Jacindarella is acting for this compliant press. This compliant press then pushes her tosh to all of the media outlets.
Weak moderators like Gower do not get full answers ,then move on for the sake of time, Gower is a first class joke.
WTF is Gower frightened of?.
I want to know more of Labours economic policies, before I commit to slitting my economic throat.
Wake up NZ.
Tosh is not good enough.

Victor said...

Let us not underestimate the difficulties involved in steering a more leftwards course.

As far as I can make out, it means one of the following alternatives (or a mix thereof):

1. Substantially increased tax revenue
2. Further slowing down government debt repayment
3. Borrowing overseas
3. Printing "fiat" money

None of these will be an easy sell. That's not a reason to avoid trying (although there may be other reasons for holding back on some of them, e.g. printing money).

Just don't be too sanguine over what can be achieved.

A key fact that requires constant reiteration is that we have one of the world's most favourable government debt to GDP ratios. Last time I looked it was three times better than Germany's, despite that country's tight wad status.

So an incoming government could probably afford to be flexible. The problem is convincing business, the media and the public of this. We live, after all, in an age of knee-jerk Micawberism.

David Stone said...

In 1935 the world's financial system had collapsed following decades of Laissez faire capitalism having come to fruition. The present fruiting has been delayed by unprecedented money printing by all the major western economic powers and China.
How long QE and spiralling debt will delay the inevitable is hard to guess , but until such time as we have a comparable universal economic catastrophe there won't again be sufficient public and political alarm , or recognition of the failings of unrestrained capitalism coupled with uncontrolled debt creation to enable that kind of change.
It would be good if there was an organisation with a plan in place to clearly present to the public to resurrect a functional and fair economy again as was done in 1935, when the electorate has been motivated to pay attention. Recognition of the disfunction of Laissez faire capitalism having become impossible to ignore as happened back then.
Until those circumstances present inequality will get much worse before it gets better Jacinda notwithstanding. Always IMHO.
Cheers David J S

peteswriteplace said...

Eventually the crap will have to be rocked out of the boat and the leadership of the public service will have to satisfy the aims of the new government.

BlisteringAttack said...

True political leadership is standing up and stating what you are going to do.

For Ardern to say, we'll wait for the experts to get back to us on tax, is, at best, piss weak.

Interestingly, we don't see Robertson fronting the tax issue as he should as a Finance Minister in waiting.

Anonymous said...

To Polly.

I feel very sorry for you, obviously you are in the age bracket that does not like change.
Also I suspect you are a habitual National Party supporter.

To keep on parroting about "More Taxes" is just so boring.
If more taxes means that we can get an operation if we need, in our Public Hospitals, then I am all for it.

As it is now, many people who serious health issues cannot even get on a waiting list, the funding has been so under funded by this National Government.
And people are suffering as a result, as is the whole health system.

Hopefully, the current situation is about to change for the betterment of all in our society.

Jens Meder said...

The most constructively positive policy at this election is resuming national and retirement wealth creative NZ Super Fund contributions instead of freely consumable tax reductions, and if Jacinda manages to keep her wealth consumptive welfare benefits below what the profitability of production can deliver she will remain a prime minister for a long time.

Otherwise - it will be a "fizzle", because nothing is sustainable for long that is not profitable, and after all the reserves have been consumed, and there is no very profitable activity to subsidize the unprofitable ones.

thesorrowandthepity said...

“[T]oday’s economic orthodoxy, or ‘neoliberalism’ if you don’t like it, is well entrenched in the public service and there is little risk we will lose it.”
The meteoroid heading towards all of the old left & right orthodoxies of the baby boomer generation has already entered the atmosphere, it's name is the Law of Accelerating Returns & it's comprised of algorithms.
The question facing this countries choice of direction can be summed up in a Sam Mahon statue; whether your 'saviour' in the guise of St Jacinda will do anything about it Chris remains to be seen.
The question in direction is, continue & become a nation of paupers as the rivers flow towards to the point of no return in their degradation; or otherwise adapt to the change that is hurtling towards you through the sky.
The environment IS the economy!
We can either harness the change which is coming & drive it towards a better society.... or otherwise lock our children & grandchildren inside the mausoleums that the old generation of politicians have built to house their political legacies

Nick J said...

In actual fact Labour if they play it right can win the hearts and minds of those who keep NZ running, those who do the work.

"Those who do the work" include not only the workers who do the drudge, but the businesses who take risks with their capital to make profits that the whole community relies upon. Tradesmen, shop keepers, small businesses, people who produce things. Labour needs to create an environment that fosters and encourages these people, become the party that these people gravitate towards.

Why would they do this? I have from experience in years of business constantly been up against corporate power, both private and public. The big boys of finance, the big companies, the utilities, the regulatory bodies, the legal and accounting fraternity do their absolute best to take a rentier position and make small businesses pay. Its a natural outcome of unregulated capitalism. Yet without this parasitic rentier activity these "big" players would find life rather different and far less profitable. Labour have a golden opportunity to make this country small business, start up friendly. Its time to push the profits back to source, and if Labour do that they will be in power for a long time.

E.A.Blair said...

If Labour and Jacinda can't effect genuine change don't expect them to last nine years in office.

The effects of the "neo-liberal" orthodoxy might prevail in some places but the fallout is mounting and the desire for a move away from it is growing.

Something has to give.

Chris is right that it always looks hard to do something radically different but it can still be done.

greywarbler said...

My Pick of the Pops:

Nick J
That about small businesses so right. Labour and Greens, make start-up business easy with less paying tax in advance. Drop taxes for each worker taken on, encourage worker-rich business not the empty glamour of tech tech tech eating away at society like woodworm.

And the big boys of business are making it harder for people to run small businesses, do anything themselves, they encourage tight new petty regulations on small business while subverting regulations on quality of building products, methods. Ludicrous, inefficient and third world encouragement by government.

David Stone hits the nail on the head - bloody reality, I hate it.
It would be good if there was an organisation with a plan in place to clearly present to the public to resurrect a functional and fair economy again as was done in 1935, when the electorate has been motivated to pay attention. Recognition of the disfunction of Laissez faire capitalism having become impossible to ignore as happened back then.

Have economists taught in their schools that all is cyclical. Downturns, bubbles, wars - we never learn. When will we learn that we never learn??

Chris you make the point that it must happen and now:
Because the truly astonishing thing about all genuinely radical programmes for change – including those of 1935 and 1984 – is how quickly the utterly impossible of yesterday becomes the entirely doable of today.

Let us not underestimate the difficulties involved in steering a more leftwards course.

As far as I can make out, it means one of the following alternatives (or a mix thereof):

1. Substantially increased tax revenue
2. Further slowing down government debt repayment
3. Borrowing overseas
3. Printing "fiat" money

None of these will be an easy sell. That's not a reason to avoid trying (although there may be other reasons for holding back on some of them, e.g. printing money).

By the way, can one of you learneds commenters advise in a few sentences what happened in 2000 brought about by business in a quick edification process for government? I can't remember aqnd my brain is weary of facts, factoids, fat, oids, and whatever.

Polly said...

Anonymous, 6 Sept 15.50
You are talking crap, the hospitals are not as bad as you state, I have to go to hospital regularly.
The health system across the country is better in NZ than most countries.
Put a name to your post and stop telling blatant lies.

Victor said...


Circa 2000, I was running a small business and dutifully attending seminars and networking events, presided over by establishment gurus and the like.

The denigration of the recently elected Clark government was total, instinctive and more or less entirely fact-free. From memory, it helped tip us into something approaching a mini-recession, just when the rest of the world was recovering from the upsets of the late 1990s.

What it all came down to was political tribalism and cultural prejudice. I suspect that the business community would react more wisely this time around, reflecting, perhaps, enhanced awareness of the need for structural change to future-proof our economy.

But the tribal prejudices of many ordinary voters remain (e.g. those who've genuinely convinced themselves that Clark and Cullen were spendthrifts).

Labour now needs both to campaign against our culturally dominant Micawberism and to assure all the many varieties of us little folk that we're not going to be worse off if they take office.

The party (and particularly its able but excessively loquacious leader) must at all costs avoid muddle or deliberate obfuscation, such as yesterday's, over whether or not the land on which the family home is built might be taxable.

As an income-poor, elderly home-owner, this particular lapse sent a brief shiver down even my ancient, battered and crooked spine.

David Stone

I largely agree with you but believe that there's also a New Zealand-specific need to re-balance our economy and rebuild our infrastructure.

Moreover, our comparatively very favourable debt-to-GDP ratio might enable us to achieve these goals,in the process making this a fairer and more decent place than it would otherwise be.

Nick J

I also largely share your view of the importance of small business. For this reason, I'm concerned over the lack of a Jim Anderton type figure in the current, rather technocratic, Beltway-centric, Labour line-up.

Even so, I'm more than pleasantly surprised by how well they're doing.

Guillaume said...

Allons enfants de la Patrie,
Le jour de gloire est arrivé!
Contre nous de la tyrannie,
L'étendard sanglant est levé, (bis)
Entendez-vous dans les campagnes
Mugir ces féroces soldats?
Ils viennent jusque dans vos bras
Égorger vos fils, vos compagnes!

Aux armes, citoyens,
Formez vos bataillons,
Marchons, marchons!
Qu'un sang impur
Abreuve nos sillons!

greywarbler said...

Polly the economy isn't all about you. I am glad you get a satisfactory service from the hospital. Others don't. If you paid attention to getting informed about what professional people involved are saying about hospitals, you would get a wider perspective.

How dare you attack Anonymous for giving you the bad news. You don't need to know his or her name, just as we don't need to know yours. (Anonymous doesn't have anything unique about it as a pseudo that's all.) Unfortunately when one reads yours there is little unique comment to go with it. You are one of the many who regard NZ as a personal estate run for their benefit. You wouldn't know a blatant lie because you live one, you're soaking in it.

David Stone said...

@ Jens Meder
I don't think funds like the NZ super fund do create wealth or construct anything. Do you remember what happened to our ACC contributions, forcibly extracted from workers and employers in October 1987 ? It all went down the toilet with all the other speculative investor's money. And then they massively hiked our levies to recover the loss. At the moment the fund managers can't loose. The banks won't lend the QE money to anything constructive because it's too risky and unprofitable. So all savings and all the QE is going into the same share market type investments that the fund managers are playing. So on paper it looks like a bonanza . But it isn't creating anything , or generating an real income . It's just blowing a bubble that will burst. The world share market has become completely disassociated from the intrinsic value of the assets or profitability of the companies the shares represent.
Watching over a period of years or sometimes even decades such speculative investment funds can look good, and one can imagine that they will just go on making money, But over someone's working lifetime of half a century, which is the period that matters for every individual, they are certain to have experienced a catastrophic collapse. Like 1929 /1973/ 1987 / 2008.
From an individual's point of view you would have been better to use the money that has been removed from your care to pay down your own mortgage, or improve your own assets , or even have a holiday. Speculation even by a competent fund manager isn't asset building , it's speculation with other people's money that has been forcibly removed from them. It would be much more honest to call it what it is , a tax. And it would be much more useful in creating wealth if the government used it for legitimate national infrastructure . IMH but confidently stated O.
Cheers David J S

Anonymous said...

Polly sounds like a name a parrot would have.

I am sure the current polling goes to show that many voters feel as I do.

We have had nine long years of sweet F all from the National Government.

sumsuch said...

Long live ... you. Despite my lack of faith in the personnel I'll probably vote for the Greens for their supreme policiea. You tug Labour in the absence of push.

I enjoyed your chat tonight with John Campbell, and in that light, or even sound RNZ,I would like to come upon another Ralston Group (sans Ralston and his (resinously right) mates). Vivacity is what separates us from Oscar Wilde, for the better.

I have no faith in Labour's ability to crick its neck and do what you and we require. But keep on suggesting. If Jacinda's priority is really poverty as she claims then she must do what you suggest ---nah nah nah!

Can't see it.

Pinger said...

The test of a credible Labour leader:

To be able to fill and pour beer from a flagon.

Probably haven't seen that since Big Norm.

Polly said...

greywarbler 7 Sept, 19.32. Anonymous 7 Sept, 21.03.
You both sound like a couple of prats screaming in a tight tangle.
Get a grip.

greywarbler said...

After all that rousing stuff from Guillaume the last few lines are a bit of a fizzer. The translator says what you end up with is:

Only an impure blood
Water our furrows!

It doesn't have the right ring. The ghost in the machine isn't able to translate the proper spirit of the rousing anthem.

Victor said...


Give the guy a break! He's just quoting a song, albeit a more than usually rousing one:

greywarbler said...

Seeing that clip makes me think of Nancy Wake's husband, I think his name was Henri, and the woman in the video had a similar hairstyle to Nancy's.
He was suave, and died refusing to give information to the Gestapo about his beloved Nancy.

I see you and raise you to Mireille Mathieu.
Very rousing -

Victor said...


Raise you with the "Little Sparrow":

Victor said...

Seeing we're way off-topic, Greywarbler, this had better be my final thought on this thread:

I assume you realise that the heroic figure in the light-coloured suit in the 'Casablanca' clip is called "Victor"