Sunday 8 July 2018

Undivided Power Is Perilous.

Unbridled Power? As Prime Minister and Finance Minister combined, National's Rob Muldoon wielded more raw political power than any New Zealand politician since the Second World War. His command of the political sphere could not, however, protect him from the unrelenting opposition of the economic and social spheres.

THERE’S A WIDELY-HELD misapprehension that “The Government” controls society. That the politicians commanding a majority in the House of Representatives, or a President duly elected by the people, possess the power to rule us as they see fit. Nothing could be further from the truth.

Power is very seldom concentrated in a single individual or party. The General Secretary of the Communist Party of the Soviet Union, Joseph Stalin, came terrifyingly close to exercising absolute control over his society, but his was the exception, not the rule. In just about every other time and place power is separated into three discrete locations: the political sphere, the economic sphere and the social sphere.

It is very difficult indeed for a person or a party to dominate all three of these spheres, and in a democracy it is next to impossible.

Take the present government of New Zealand, for example. Unusually, it does not include within its ranks the political party which received the largest number of votes. To secure a majority in the House of Representatives, the Labour, NZ First and Green parties had to join forces in a political alliance. Constant negotiation and compromise is required to keep this unlikely combination of social-democrats, populists and environmentalists from flying apart. With the National Party, on its own, retaining the support of just under half of the electorate, the political sphere is very far from being the all-powerful force that many New Zealanders still believe it to be.

The surveys of business confidence (which seem to have been released every other week since the Labour-NZF-Green government came to power) continue to present a consistent picture of unhappiness and mistrust among the business community. So much so, that they have become potent symbols of the power that lies within the economic sphere.

Falling business confidence puts the whole economy at risk. Fear of and/or resentment towards a government’s policies can easily persuade foreign and domestic investors to put away their cheque-books. Without investment and the economic expansion it encourages unemployment is likely to grow and the government’s tax-take decline. Fearful of the future, people stop spending and before long the economy begins a slow spiral downward into recession.

All governments know how crucial it is to avoid the all-important “back-pocket” issues turning negative. Securing re-election is almost impossible when the voters are fearful of themselves, or members of their family, losing their jobs and falling into debt. Small wonder, then, that politicians – Ministers of Finance in particular – spend so much of their time reassuring the economic sphere that its interests (and profits) are protected.

The social sphere is crucial to this process of political reassurance. Encompassing critical societal institutions like the news media, schools and universities, churches, the caring sector and the entertainment industry; it plays a critical role in conferring moral legitimacy upon the individuals and organisations entrusted with governing the population. Few governments can withstand the pressures brought to bear by a social sphere which has turned against it on account of its mishandling of the economic sphere.

One has only to think of the doomed National government of Rob Muldoon in the early months of 1984. It’s ability to preserve a majority in the House of Representatives was being sorely tested by maverick MPs like Mike Minogue and Marilyn Waring. Its handling of the economy was under fire from big business, the unions and even key bureaucrats within the Reserve Bank and Treasury. The editorial pages of the newspapers railed against Muldoon’s interventionism and academics demanded root-and-branch reform. Churchmen preached against National’s foreign and defence policies and entertainers lent their glamour to the efforts of Muldoon’s Labour opponents to bring him down. Not surprisingly, they succeeded.

It is worth noting here that in 1984 New Zealand prime ministers were able to exercise a great deal more political influence over the economic and social spheres than is the case today. Much more of the economy was under state – and hence political – control. Radio and television, similarly, were publicly-owned and therefore highly susceptible to political influence.

And yet, not even these huge advantages could save the most effective master of the political sphere since World War II from ignominious defeat. That said, however, if you see a prime minister amassing unusual powers over the economic and social spheres – be on your guard!

This essay was originally published in The Otago Daily Times and The Greymouth Star of Friday, 6 July 2018.


Anonymous said...

I think one can safely say Muldoon wielded more power over New Zealand than anyone since the *First* World War. Only Richard Seddon can really compete with him.

Patricia said...

When private investors stop investing that is when Governments step in by building infrastructure whether that be hydro dams, railways ports and roads. That gets everything going again. That’s how it has always been.

Kat said...

Interesting when you consider the irony that during both terms of the last two Labour led govts although business confidence was low, GDP high. The last two National led govts the opposite.

Take a look at the current high of the S&P/NZX Index and other more tangible indicators of the health of the economy. Mainfreight one of this country's biggest homegrown businesses operating in 22 countries, with revenue of $2.6 billion supports the coalition govt and stands out among the negative voices from the "business community".

I would argue that these business confidence surveys cannot be relied on and are nothing more than sour grapes stirred in the National party pots of negative narratives.

Guerilla Surgeon said...

Muldoon's power was partly informal though. He tended to bully people. And of course being finance minister as well as Prime Minister, if you were a minister in his government, you did as you were told or your ministry got fewer resources. Much though I hate to say it, I feel to prevent cases like this there is definitely a need for a written constitution.

jh said...

Who wields power in a multicultural country?
A Sydney Morning Herald editorial made this error in implying that the Australian Secret Intelligence Service’s mission is to stop the enemies of the open society. That would be a congenial outcome but is not its prime mission, which is to defend the Australian nation, whatever its present economic or social system. The great Enoch Powell made this point in discussion with Margaret Thatcher shortly before the Falklands War. The prime minister said that a strong defence force was needed to protect Western values.
Powell: No, we do not fight for values. I would fight for this country even if it had a communist government.
Thatcher: Nonsense, Enoch. If I send British troops abroad, it will be to defend our values.
Powell: No, Prime Minister, values exist in a transcendental realm, beyond space and time. They can neither be fought for, nor destroyed.
Mrs Thatcher looked utterly baffled. She had just been presented with the difference between Toryism and American Republicanism.[5]
Consistent with Powell’s distinction is the hierarchy of bonds. People are more likely to sacrifice for their nations than for abstract principles.[6] The nation is the largest secular entity able to elicit robust solidarity.
Implicit anti-white bias also contributes to the unbalanced analysis of the national question. A frequent approach is to treat Anglo ethnicity mainly as a risk factor for racism, but immigrant ethnicity as a legitimate and rich human value.

Frank Salter - The War on Human nature.

Muldoon was even a father figure to Maori (before biculturalism)

peteswriteplace said...

He certainly wielded more power than any PM since Peter Fraser, and then the lights went out. While I personally detested his politics, he had more acumen and balls than any other Tory PM.

greywarbler said...

If Treasury and the Finance Minister are on the same Current Account page
then what/who can intervene? How are we now? Does the Prime Minister have any agency? If so, in what direction?

If you think you know all about nations' finances and workings, remember that Don Brash our top-rating economist and previous Governor of the Reserve Bank of NZ holds dissenting views from the Governor of Bank of England. So there is always something to learn.
Bank of England bulletin.
Cover of the discussion between Don Brash and The Others:

A very cogent explanation of Current a/c workings here:
The current account is one half of the balance of payments, the other half being the capital or financial account. While the capital account measures cross-border investments in financial instruments and changes in central bank reserves, the current account measures imports and exports of goods and services; payments to foreign holders of a country's investments and payments received from investments abroad; and transfers such as foreign aid and remittances.

A country's current account balance may be positive (a surplus) or negative (a deficit); in either case the capital account balance will register an equal and opposite amount. Exports are recorded as credits in the balance of payments, while imports are recorded as debits. Each credit in the current account (such as an export) will be recorded as a corresponding debit in the capital account: the country "imports" the money that a foreign buyer pays for the export.

greywarbler said...

Further on 'the dead hand of economics'. Don Brash's regrets:

"My whole motivation for being in politics was to raise New Zealand's standards relative to Australia. And the big risk is that we will tinker around the edges and our gradual drift backwards will continue." ...

Also: "I would have been a bit more forceful on tax". He says he could have announced abolition of the top tax rate of 39c. He wanted to slash the 19.5c rate to 18c, and the 33c band to 30c, as recommended in the 2001 McLeod tax review. Such cuts would have delivered massive windfalls to the rich. But, argues Brash, they would also strengthen incentives for hard work....

The Dominion-Post put the story on its front page, saying the average worker would gain just 94c a week from the tax cuts, while someone on $100,000 would pocket $81 a week. Brash, and his wealthy finance spokesman John Key, would do particularly well from the tax cuts....

He gave a speech recently on his favourite theme, raising New Zealand's living standards. His proposed flattening the income tax scale, introducing electronic tolling on roads and halting any further growth in government spending in real terms.


No change there from this high-ranking economist for the little guys, not in thinking or cash.

The problem of the little guy getting a payout from all the money sloshing around in a good performing business market, is explained by this statement from Te Ara about the Reserve Bank.
The Reserve Bank has a number of levers to pull to manipulate the New Zealand economy. It can pressure banks’ interest rates and intervene in the foreign exchange market to keep the economy healthy. Since 1989 the bank’s mandate has shifted from ensuring full employment to restraining inflation.

The commitment to low inflation means that labour costs must be kept firmly under control in line with National's idea of making us competitive by having a low wage economy.* So the little guy would never get ahead in Brash's pursuit of bringing NZ up to Australian (living?) standards. The little guy would be averaged out in the statistics and conveniently overlooked.


Mark Hubbard said...

Hi Chris. OT (nothing to do with this post, so no need to put this up if you don't want), but just to say respect for fronting the free speech campaign.

You'll get more flack than anyone, so great you're prepared to stand by such an important principle for all points on the political spectrum, even though Identity, etc, don't get it.