Friday 4 December 2009

Only Radicals Need Apply

Right Dish. Wrong Recipe: But Don Brash and his 2025 Taskforce were on the money when they warned that only a radical re-direction of this country's economic policies will allow New Zealanders to enjoy a prosperous future.

DON BRASH and the 2025 Taskforce he chairs, is right about one thing. New Zealand does need to do something dramatic about lifting the per capita income of its citizens – all its citizens.

He’s right, too, that the only solutions to the problem of our relatively poor economic performance vis-à-vis Australia are radical solutions.

Unfortunately for New Zealand, the 2025 Taskforce – having being stacked by the Act leader, Rodney Hide, with convinced adherents of the neoliberal school of economic theory – was always bound to recommend radically right-wing solutions.

John Key has, very sensibly, rejected their unhelpful advice. His own political instincts – not to mention those of his closest political advisers – tell him that unleashing Rogernomics Mark II on the long-suffering New Zealand public would be political suicide.

But, in rejecting the Taskforce’s right-wing radicalism, the Prime Minister is left with nowhere to turn. Or, more correctly, nowhere to turn but left.

It’s exactly the same problem which confronted Sir Robert Muldoon in the late-1970s. He also knew that any embrace of the monetarist ideas of Milton Friedman, or the radical neoliberal programmes pouring out of the "New Right" British and American think tanks, or, closer to home, the measures being urged upon him by his own Treasury advisers, would amount to political suicide.

His response was to tack to port. Using the immense powers available to him as Finance Minister under the Economic Stabilisation Act, he imposed wage and price freezes, reined-in the unions, cracked down on property speculators, subsidised the farmers and generally set about running the country, in David Lange’s immortal phrase, "like a Polish shipyard".

By 1984, with Sir Robert having tested the command economy option more-or-less to destruction, it was left to the Labour Party to implement the only viable option remaining on the table.

The Treasury’s blueprint for change, Economic Management, written by 2025 Taskforce member, Dr Bryce Wilkinson, became Labour’s de facto manifesto.

As Phil Goff told a rather sceptical left-wing audience in Auckland last week, Labour "saved capitalism".

And that is something Labour will have to do again – for the very simple reason that Mr Key can’t. This time around, New Zealand Capitalism can only be saved by the same sort of radical left-wing programme that rescued it in the 1930s. In other words, by rejecting – rather than following – Dr Wilkinson’s prescription.

In this regard, Mr Key resembles the unfortunate Gordon Coates. He, too, was a moderate and compassionate conservative who saw what his right-wing coalition government needed to do to haul New Zealand out of economic depression. His tragedy was, as I suspect Mr Key’s is likely to be, that he could not persuade his ill-informed, laissez-faire political colleagues to do it. Such measures as Finance Minister Coates was able to implement merely served to ease the passage of Labour’s more radical reform programme.

What is to be done? First and foremost the New Zealand state must regain some semblance of control over its own financial system: only then will it be in a position to facilitate the expansion of the country’s export sector and increase its productivity.

Crucial to this process will be the rapid accumulation of a large fund of domestic investment capital – primarily by creating a compulsory superannuation scheme.

(It is, after all, the degree of control which the Australians are still able to exert over their financial system, allied with their vast pool of domestic savings, that affords them the freedom to develop policies in their national, as opposed to their creditors’, interest.)

Of equal importance will be the State’s role in creating and maintaining a highly-skilled and productive workforce. In addition to an intelligent reconfiguration and co-ordination of the education and health sectors, this will also necessitate a permanent engagement with organised labour at every level of the economy.

Fiscally, it will demand a considerably increased contribution from high income-earners, complemented by a well-designed suite of land, wealth and capital gains taxes.

As New Zealand’s economic history makes clear – it is he who pays the piper that calls the tune. Dr Brash’s Taskforce 2025 would have that economic "paymaster" role go to New Zealanders international creditors. But it’s hard to get rich when most of your domestically-generated profits are sucked offshore.

My preference is for an economic tune the whole nation can sing.

One we write ourselves.

This essay was originally published by The Timaru Herald, The Taranaki Daily News, The Otago Daily Times and The Greymouth Evening Star of Friday, 4 December 2009.


Anonymous said...

"ALL its citizens"?
Jesus Christ arn't the like of Paul Reynolds, Ian Morrice, Rob Fyfe and David Baldwin already getting enough?
Your solution is not a big improvement on Don's my friend.

Olwyn said...

Well said!

Robert Winter said...

Here we agree. Selwyn Pellett's play for attention to the exporters' needs explicitly says that it is the parliamentary Left that alone can package the measures that will move the NZ economy forward. People like Bryan Gould, who,in my view, doesn't get anything like the attention that he serves for his economic thinking, is laying out that blueprint, as is the CTU with its AES. From that perspective, there is a remote possibility of common ground across the Centre on an alternative economic policy and, if you ask me, that's what's fuelling Fran O'Sullivan's current rancour - the possibility that something other than the Brash prescription might gain a cross-party hold. Politically, it's unlikely, but it's an interesting prospect

Omar Hamed, Socialist Aotearoa said...

2025 Aotearoa- a Radical Left wing programme.

Anonymous said...

It has to be pointed out that Rob Muldoon, like John Key, came from a humble background himself. He, too was brought up by a solo mother (his father was in hospital with a chronic illness during most of his hospital), and he grew up amongst the hardship of the Great Depression (He was incidentally, the last PM of this country to have served in combat, in Italy and the Pacific).

He knew that monetarist neo-liberal policies, like the ones mentioned in the 2025 report, would effectively force a large amount of the population into hardship never seen before, for pusuit of what amounts to be a pot of gold at the end of a rainbow.

This is probably giving him too much credit, but deep down, I belive that John Key knows this too. But we will see.

Incidentally, the same day this report came out, a private company launches a small rocket into space from an island in the Hauraki Gulf. While media probably overhyped it a little bit, I belive that we perhaps need to wake up the fact that the road to prosperity lies in the science, technology and engineering sector. Its a pity that the neo-liberal revolution effectively removed that perspective from the core public sector in the 1980's.


Anonymous said...

My wife and I disagree about John Key.

She believes he is feigning moderation for electoral reasons and will gradually emerge as no more moderate than Brash or (heaven help us) Shipley

I tend to the view that Key is a 'work in progress'. I think he entered parliament, his head filled with the neo-liberal simplicities that pass for axiomatic truth in corporate circles but is learning fast that you can't run a country the way you run a business.

I also think he's starting to enjoy the centrist, statesmanlike pose and that becoming a member of the international heads of government mutual admiration society might also be having an impact on him.

I should add that my wife tends to get things right more often than I.