Friday 15 December 2017

Transformational Politics Demands Transformational Economics.

Change Agents? Grant Robertson’s economic orthodoxy bodes ill for the expectations of Labour, NZ First and Green Party followers that Jacinda Ardern will, indeed, preside over the “transformational” change promised in her new government's coalition agreement.

LABOUR’S ECONOMIC ORTHODOXY presents its supporters with an A-Grade conundrum. If all you ever do is all anyone has ever done, then what are the chances that anything will ever change? Something in the Marxist nucleotide of Labour’s DNA continues to carry forward the message that economics and politics are inextricably linked. Stuff up the former and the latter will swiftly follow suit. That being the case, Grant Robertson could be Labour’s worst enemy.

Not that he should feel too badly about that, because Labour finance ministers have a well-established historical reputation for being their party’s worst enemies.

One has only to think of Philp Snowden, Chancellor of the Exchequer in Britain’s first and second Labour governments. While no one could fault the old man’s dedication to Labour’s working-class voters, his utterly conventional economic ideas left him helpless in the face of the Great Depression. In the words of his biographer, Keith Laybourn: “He was raised in an atmosphere which regarded borrowing as an evil and free trade as an essential ingredient of prosperity.”

It was Snowden’s unwavering faith in these nineteenth century liberal orthodoxies that broke his party and discredited his government. The people who paid the price for their Chancellor’s intellectual rigidity were (as is so often the case) his beloved working-class.

Things might have gone the same way here in New Zealand just a few years later had the proposals of Labour’s economically orthodox leaders (Michael Joseph Savage, Peter Fraser and Walter Nash) not been voted down by the more radical members of their party’s caucus.

It was thanks to this latter group that Labour went into the 1935 election with an economic policy calling for the “immediate control by the state of the entire banking system; the provision of currency and credit to ensure adequate production, guaranteed prices and wages; readjustment of all mortgages” – along with a policy of state-fostered industrialisation which, today, would be described as “economic nationalism”.

How very different these policies were from the policies of Roger Douglas, the Labour Finance Minister who championed the same laissez-faire economic policies implemented by Philip Snowden between 1929 and 1931. “Rogernomics” radically transformed New Zealand’s economy and politics – and very nearly destroyed the New Zealand Labour Party!

The two politicians most responsible for rescuing Labour from political oblivion were Helen Clark and Michael Cullen. In a double act of extraordinary sophistication, Clark and Cullen kept hold of the political reins for nine years by cleverly masking both the true extent of their government’s economic success, and the political opportunities it opened-up.

As Finance Minister, Cullen proved a master at making his burgeoning revenue surpluses, which might have funded a much more ambitious social-democratic programme, disappear.

Some of Cullen’s billions were invested in the special superannuation fund that still bears his name. Even more went into Working for Families, the massive employer subsidy which Cullen introduced in preference to allowing the trade unions to extract the money from corporate shareholders. Most of Cullen’s surplus billions, however, were directed towards paying down Crown debt.

The opportunity cost of these fiscal diversions would only become apparent towards the end of the next decade, when New Zealand’s physical and social infrastructure began to, quite simply, fall apart.

That Michael Cullen has for many years been Grant Robertson’s political patron and mentor bodes ill for the expectations of Labour, NZ First and Green Party members that Jacinda Ardern will, indeed, usher in the “transformational” change promised in the new government’s coalition agreement.

Even before he received his ministerial warrant, Robertson was at pains to bind Labour to precisely the same diversionary economic strategies pioneered by Cullen.

A Finance Minister who repeatedly swears allegiance to his own “Budget Responsibility Rules” is unlikely to champion the sort of creative and progressive economics that makes for creative and progressive politics.

Unless, like Savage, Fraser and Nash; Ardern, David Parker and Robertson are reined-in by a Labour caucus determined to fulfil their government’s “transformational” ambitions, then the long-deferred renovation of New Zealand’s disintegrating institutional and physical infrastructure will not receive the resources it requires.

A transformational government cannot be brought into being except by means of transformational economics. For all his faults, Roger Douglas understood this fundamental proposition. Progressive voters need a Finance Minister whose economic policies are as bold as his government’s political promises.


This essay was originally published in The Waikato Times, The Taranaki Daily News, The Timaru Herald, The Otago Daily Times and The Greymouth Star of Friday, 15 December 2017.

7 comments:

Polly. said...

Well said Chris.
Its my belief that to solve the riddle of the Governments dance of "one foot in then one foot out".
Then we must see the 33 page coalition document, Labour/ winnie.
The Greens seem to be out of this secret power document.
The NZ voters are also in the dark.
Can someone please turn the lights on.

countryboy said...

" Lookin' good homeless people and all you others in poverty! Keep up the good work! Big thumbs up!"

pat said...

There remains a glimmer of hope...though partly deep rooted in neolib dogma (theres a surprise)..

".Grant Robertson has 'squared the circle' of fitting the coalition Government's big new spending plans into its self-imposed surplus and debt restrictions, but it means he will have to embrace "innovative financing mechanisms" such as Public Private Partnerships (PPPs) and off balance sheet bond issuance to fix the infrastructure deficits the Government has found".

https://www.newsroom.co.nz/2017/12/14/68554/analysis-debt-anchor-dragging-labour-into-ppps

...PPP's an appalling option, though 'off balance sheet bonds' may be a sleight of hand that may provide the investment needed within the self imposed restraints....although Im not sure how theyll be viewed if theyre as substantial as needed.

countryboy said...

" A transformational government cannot be brought into being except by means of transformational economics. For all his faults, Roger Douglas understood this fundamental proposition. Progressive voters need a Finance Minister whose economic policies are as bold as his government’s political promises."

But roger douglas wasn't a finance minister trying to understand fundamental propositions. He's a fucking crook. He came to understand how the so called 'neo liberal' mechanism worked and exploited it to steal our tax paid for stuff and things then making sure the profits of those sell-offs went to him and his private sector cronies.
And it doesn’t need mentioning that the money to build those public amenities and cash reserves were derived from our flourishing primary industry which was, as it is today, agrarian. That fact in itself must ask: Why Auckland, why NZ billionaires, why poverty, why a brainwashed, beige paint mentality seeping out from under the cracks of the paranoid palisades of the middle class?
The creepy psychology that’s lead us into a morass of acquiescing subservience to our Masters, via ‘ Health and Safety’ for example, is daringly outrageous when one ponders that our Masters could care less whether we live or die, so long as we die working ever harder for them and to pay them for what were once OUR services and amenities.
Getting back to douglas, the weasel eyed, pig incarcerator.
Call him, and it, what it is. Criminals behaving in a criminal manner.
In Saudi Arabia it is, I believe, illegal for a woman to drive a car or go out and about without a male family member escort. In NZ, it's clear to me, illegal, and 'not the done thing old boy' to rise up and challenge douglas and his seedy mates because they were cunning enough to change acts of parliament and introduce laws to prohibit us from challenging them. I.e. hanging the fuckers from a lamp post then getting our money and amenities back.
grant roberston is a common fellow. He’s as common as a house fly hanging from the light bulb in the laundry. Needing, driven his psychiatry, to be close to the lime light while not having a gram of gumption to try and work the washing machine to clean NZ’s dirty laundry. He doesn’t want to be the blow fly to upset the apple cart.
We Kiwis need a Minister of Finance who would knock bill english out in the halls of parliament. We don’t need a thumbs-up suit full of gold fish water pretending to be a pint and a fight in the carpark.
Do we have one such political person in waiting? Anywhere? In any political party?
In my view? No. We do not. And that should worry every Kiwi who isn’t a narcissistic sadist.
Do we have politicians like, say, yourself @ Chris Trotter? Or Martyn Bradbury, or Jane Kelsey? Or Keith Rankin... etc? The answer is No. No we don’t.
There’s no one with wit, humour, an interest in societal harmony and isn’t, frankly, fucked in the head who’s also a politician? The ones we have, all of them, seem so fucking horrible. Dumb. Cowardly. Greedy. Arrogant. Careless. Rich.
Eye roll please..
4.7 million Kiwi souls, give or take. ( Deaths/shagging. )

52,000 people deriving their soul income from agrarian enterprises. (Dept Stat’s.)

That begs the question, what do the balance of 4,648,000 Kiwis (give or take as above) do ?

I think I can tell you.

They live on a false economy, that’s what they do. ( Auckland house prices anyone? )

The interesting thing ( for me at any rate.) is that there’s a va$t gap between the fal$e economy that is 4,648,000 money-spending people and the 52,000 people who earn foreign currency for our country.
The problematical problem for politicians is maintaining that warped reality.
The Lie requires high level fuck bags sieving through Universities for educations to enable them to fabricate logical fallacies to feed us while thieving from our farmers to create a false economy within which they dictate we must all live.

Loz said...

Michael Cullen's economic mastery is a myth that never seems to be deservedly challenged. Labour held government benches for 9 years preceding the arrival of the GFC. Helen Clark called for the election three days before Lehman Brothers collapsed September 15th 2008.

We know now that world finances prior to the GFC had been awash with capital from unsecured debt - inflating consumer demand, business balance sheets and government ledgers alike. Peter Costello, Australia's Treasurer (1996 - 2007) - also gained a title of being a financial wizard at the time - so too did Gordon Brown (Chancellor of the Exchequer 1997–2007).

Instead of mastery, it was mountains of private debt fuelling the so-called recovery.

Under Michael Cullen's stewardship the NZ's total household financial liabilities increased more than 250%, largely due to the absence of lending controls massively inflating the property sector. It doesnt seem like a great model from Grant Robertson to try and replicate.

David Stone said...

Loz said...
"Michael Cullen's economic mastery is a myth that never seems to be deservedly challenged. Labour held government benches for 9 years preceding the arrival of the GFC. Helen Clark called for the election three days before Lehman Brothers collapsed September 15th 2008.

We know now that world finances prior to the GFC had been awash with capital from unsecured debt - inflating consumer demand, business balance sheets and government ledgers alike. Peter Costello, Australia's Treasurer (1996 - 2007) - also gained a title of being a financial wizard at the time - so too did Gordon Brown (Chancellor of the Exchequer 1997–2007).

Instead of mastery, it was mountains of private debt fuelling the so-called recovery.

Under Michael Cullen's stewardship the NZ's total household financial liabilities increased more than 250%, largely due to the absence of lending controls massively inflating the property sector. It doesnt seem like a great model from Grant Robertson to try and replicate."

The tendency for Loz's excellent comments to arrive a bit late (this to the blog before last) might be because she(?) does her homework first . I never did any homework.
But I do claim to have challenged Michael Cullen's wizardry on this in the past.
I have also in the past here made the point that as almost all if not all money comes into circulation as a loan issued by a bank, then almost all money (more than all money actually but that's another step) held in deposits by people who have "money in the bank" is only made possible by someone else having a debt. And that the government can only reduce debt (operate fiscal responsibility) by transferring that debt onto the private sector or actually reducing the money supply which would lead to deflation and depression as in the '30s. And here in her(?) last paragraph Loz has done my homework for me.

David Stone said...


Long ago my uncle, a social credit enthusiast , who wanted me to understand how banks create money, lacking the confidence to explain it adequately himself , got me to visit his home and have Alisdair Thomson explain it to me. He was about to stand for election for Social Credit in Coromandel at the time. All he said is now much more readily available on Wikipedia than it was then.
The most difficult concept I found to digest was that while an original loan is multiplied through subsequent deposits generating subsequent loans up to the bank's deposit reserve ratio limit,what happens to the money used to pay the original loan back to the bank? It seems that must be money too , and where did the multiplication ever stop?
I left that interview still struggling with the indigestible concept that after I have scrimped and saved and worked my ass off, sometimes from 4 or 5 in the morning till 10 at night to pay off my mortgage , that the money paid into the bank was just crossed off by the bank never to come into existence again, never to be lent to anyone else , just extinguished.
But the point is that my loan was still in existence in the bank deposits of my workers, the grocery store ,the fuel company etc. If it isn't extinguished at some point total money would just increase by every loan a bank makes and Zimbabwean inflation would be the result.
I think that conceptualising and understanding that this righting off and extinguishing of money as it is used to repay bank
loans is the biggest obstacle to people, who haven't made a bit of a study of it to understanding the insubstantiality of the money supply. It is just an accounting record. But it is all debt on which someone is paying interest to a bank. If these debts were all paid off there would be no money, no one would have "money in the bank", it would have to have been accessed some how or other for debtors to have been able to repay their debts.
I don't know if everyone understands this or if nobody believes it, but to my mind grasping what money is makes" fiscal responsibility" ridiculous as well as highly irresponsible. Recent discussion of Cullen's and Brash's statements that banks only lend out a portion of saver's deposits, without explaining that those deposits only come into existence out of previous loans , is either deliberately misleading which can be the only explanation of Brash's statement, or else a complete lack of understanding which I would accept of Cullen .
The problems of providing an equitable society, providing proper health care, education, and fair wealth distribution and opportunity are never going to be resolved by people who do not understand this basic nature of money. It's the capacity to accept it, not the capacity to understand it that is the problem. We may not have anyone in government that does. If Grant Robertson thinks he can reduce government debt, not increase household debt, and remedy child poverty and improve health services without revolutionising the monetary system he is going to fail.
D J S