Making Haste Slowly

So many hands, so little time: John Key, unlike Bernard Hickey, understands that economics is not a science - it's politics - and our Prime Minister is getting very good at it.

BERNARD HICKEY is a very angry man. His bleak vision of New Zealand’s future doesn’t so much boil down to a "clash of civilisations" as a "clash of generations". He foresees a long and vicious political struggle in which the "young and poor" are pitted against the "old and rich". His advice to young New Zealanders? Book a ticket on the next flight to Australia – now.

Who’s responsible for Mr Hickey’s bad temper? Predictably, it’s the Prime Minister.

Mr Hickey was hoping against hope that Mr Key would use Tuesday’s much-hyped Prime-Ministerial Statement to Parliament to announce a series of decisive measures designed to shift New Zealand’s risk-averse investors out of the residential property market and into investments more productive of national wealth.

A Land Tax. A Capital Gains Tax. The closing-off of tax loopholes. Any or all of the recommendations of the Tax Working Group. Any measure that brings the cost of purchasing a home back to earth with a resounding thump. Any policy that offers Generations "X" and "Y" the slightest hope of owning their own home.

That’s what Mr Hickey was waiting to hear: something to prevent our best and brightest packing their bags; and when Mr Key failed to oblige, Mr Hickey saw red.

Well, no, that’s not quite right. Mr Hickey didn’t "see red". What he "saw" was a much deeper shade of blue than any Mr Key or his government are ready to wear.

Like so many ideologues of the Right, Mr Hickey has no patience for either politics or politicians. In Mr Hickey’s eyes economics is a "science" – like physics. And, just as we would laugh at the idea of passing a law against gravity, so we should deride any politician who raises political objections against self-evidently sensible economic measures – such as forcing investment out of unproductive sectors of the economy and into sectors more likely to boost productivity and competitiveness.

But economics is very far from being a science. At most it’s a useful set of tools. Originally known as "political economy" – a term which conveyed much more accurately the discipline’s true purpose – its prime objective is to identify the contributing causes and practical consequences of organised human activity.

If politicians don’t understand why things are organised the way they are, and what is likely to happen if they try to change them too drastically, then they’ll soon find themselves in a whole lot of trouble.

Unlike Mr Hickey, Mr Key’s most important objective is to secure both his own, and his party’s re-election at the next general election. Should he fail to be re-elected, all hopes of changing the way things are organised will be dashed. Even worse, electoral defeat may result in people with radically different ideas about the way things should be organised finding themselves in a position to do exactly that.

National’s aim is to reduce the tax burden of the nation’s wealthiest citizens. Mr Key would be rendering poor service to those citizens if he embarked upon a course of action which brought to power a party dedicated not to reducing, but increasing the tax burden of New Zealand’s "rich pricks".

Had Mr Key announced the introduction of the sort of property-investment-unfriendly measures demanded by Mr Hickey, the National Party’s chances of winning next year’s General Election would have plummeted. One hundred thousand rental property investors and their families, fearing huge financial losses, would have turned away from Mr Key and National in exactly the same way elderly New Zealanders turned away from Jim Bolger’s National Government when, in spite of his "no ifs, no buts, no maybes" promise to lift Labour’s hated Superannuation Surtax, it refused to do so.

Like Keith Holyoake, the National leader he most closely resembles, Mr Key seems determined to "make haste slowly" – keeping intact for as long as possible the coalition of socio-economic groups which carried him to power. He will lower the taxes of the wealthy – but only in conjunction with measures designed to preserve the living-standards of the rest of his electoral base.

That does not include the poor – but it does include the rich, the young and the old.

Mr Hickey may think that Generations X and Y versus the Baby-Boomers and their parents is the battle New Zealand has to have.

Mr Key (thank goodness) knows better.

This essay was originally published in The Timaru Herald, The Taranaki Daily News, The Otago Daily Times and The Greymouth Evening Star of Friday, 12 February 2010.