Saturday, 2 December 2017

Radical Transformers? Doesn't Sound Like It.

Labour's Responsible Fiscal and Economic Manager? Or, will Grant Robertson's unwavering adherence to his own "Budget Responsibility Rules" strap New Zealand into a fiscal and economic straightjacket, the primary effect of which will be to render the Labour-NZ First-Green Government’s “transformational” promises incapable of fulfillment?

TO ACCUSE POLITICIANS of being part of a “tax and spend” government is just another way of calling them social-democrats. By the same token, politicians who explicitly renounce the policies of tax and spend are signalling that they are anything but social-democrats. What, then, should we make of Grant Robertson’s speech to the ANZ Business Breakfast of Friday, 1 December 2017? The short answer is: if Finance Minister Robertson is a social-democrat, then he’s not a very good one.

Let’s begin with the most positive paragraph of his address to the assembled business leaders. Unfortunately, it’s not his. Robertson is merely quoting the core objectives of the Labour-NZ First- Green Government’s “common mission statement”:

 “Together, we will work to provide New Zealand with a transformational government, committed to resolving the greatest long-term challenges for the country, including sustainable economic development, increased exports and decent jobs paying higher wages, a healthy environment, a fair society and good government. We will reduce inequality and poverty and improve the well-being of all New Zealanders and the environment we live in.”

There is no avoiding the radicalism of this declaration. “Transformational government” is what happens when the old ways of doing things are jettisoned in favour of news ways of managing a nation’s economy and society. The 1984-1990 Labour government of David Lange and Roger Douglas was unequivocally transformational. It cast aside the political, economic and social assumptions of the previous fifty years of New Zealand history in favour of a market-led society in which taxing and spending would be relentlessly “downsized”.

Significantly, the current Labour-NZ First-Green Government has, in large measure, come into being because just over half the New Zealand electorate was determined to bring an end to and, if possible, reverse, that downsizing.

Unfortunately, it just isn’t possible – on the basis of Robertson’s address to the ANZ Business Breakfast – to see how that can happen. The Finance Minister makes it very clear that the Ardern Government (its promises to bring about “transformational” change notwithstanding) is absolutely determined to offer “responsible fiscal and economic management”.

In case his audience was in any doubt as to what this entailed, Robertson spelled out Labour’s “Budget Responsibility Rules”:

“To recap, this means that we will deliver a sustainable operating surplus each year unless there is a significant disaster or major economic shock or crisis. We will ensure that government spending as a proportion of the economy won’t rise above the recent historical average of 30% of GDP. We will reduce net core Crown debt to 20% of GDP within five years of taking office.”

It’s important to identify these commitments for what they truly are: a fiscal and economic straightjacket, the primary effect of which will be to render the Labour-NZ First-Green Government’s “transformational” promises incapable of fulfilment.

Robertson’s Budget Responsibility Rules will achieve this result all on their own. Throw in Labour’s election campaign commitment to leave income and company taxes unchanged for three years, and what New Zealanders are faced with is thirty-six months of “Austerity-Lite”. Which isn’t quite the “transformation” New Zealanders had in mind when they accepted Jacinda’s invitation to “Let’s Do This”.

Somehow, Robertson’s rigid adherence to “responsible fiscal and economic management” will have to be overcome. Failure to reclaim the ability to tax and spend, or, to put it in less tendentious language: the ability to redistribute wealth from the rich to the poor while accelerating the nation’s infrastructural development in ways that both reduce social inequality and expand individual opportunity; can only result in the Labour-NZ First-Green Government being thrown out on its ear in 2020.

Most of all, the Labour caucus needs to be weaned-off the self-denying-ordinances of neoliberalism. The whole history of our democracy has been about the determination of ordinary people to claim the same rights and privileges that King John’s barons acquired in Magna Carta. Namely, that before the King can tax them, he must first obtain their consent. In other words, determining the quantum and purpose of revenue gathering is the people’s prerogative. Winning control of the Treasury Benches becomes meaningless if the winners then refuse to exercise their right to raise revenue and spend it as they see fit.

If this is, in truth, to be a radical, transformational government, then perhaps its parliamentary majority should consider delivering a small demonstration of radical, transformational politics. All the Labour, NZ First and Green MPs outside Cabinet could agree to meet as a single entity and demand that the “Red October” appendix to the Coalition Agreement be made available for discussion and debate. This revolutionary “Common Mission Committee” could then communicate to Finance Minister Robertson which of the many promises agreed to by Labour were to be financed and implemented. If he refused, a new Finance Minister could be suggested.

Fanciful? Of course, it is! Not least because the Executive could easily thwart such a rebellion by entering into a grand coalition with the National Party. Would that cause the Labour Party to self-destruct? Probably. But wouldn’t that be a more honest outcome than forever putting up with governments run by unelected neoliberal civil servants?

A Labour Party that refuses to tax and spend really should call itself something else.

This essay was originally posted on The Daily Blog of Saturday, 2 December 2017.


peteswriteplace said...

Nobody is going to form a grand coalition with this National Party, Chris. Nobody trusts National anymore. Give Grant some time to really explain his financial intentions.

Guerilla Surgeon said...

Given that conservatives – at least in the US – decided on policies of slashing taxes and the hell with deficits, what should we call them? And I might say, they only decided that deficits don't matter because slashing taxes caused them – "unexpectedly". What sort of person doesn't expect deficits when you drastically reduce taxes I don't know. Perhaps the ridiculously overoptimistic sort. But it's funny, I've heard that most people would accept a raise in taxation if it meant better services. So why do we let a small vocal minority scare the crap out of us – or at least scare the crap out of our politicians? Increased taxes, and make it extremely clear where the money is going – be transparent. After all, I suspect at least some Brexit voters decided because they thought they were going to get 350 million pounds a week assigned to the NHS. People definitely want better government services.

countryboy said...

Nothing, about this Post surprises me. And I’m truly sorry for those who had hope for a new, Old Labour philosophy to rise from the cheap, shitty ashes of a lost soul population burned down by a cadre of greedy, narcissistic, right wingers. ( Crooks, by any other name would stink as putrid. )
Breakfast at ANZ? Is that ‘CEO of ANZ on $2000.00 an hour’ ANZ? Is that now where yankee doodle psycho jonky-stien is a board member or some such?
Is that ‘trapping some farmers into interest rate swaps then bankrupting them then taking their farms/homes off them' ANZ?
There’s a reason why adern and her little buddies never mentioned Farming prior to the last election farce. Farming is our foreign currency earner and the Under-The-Middle-Wing, the Wing that flaps closest to the arseholes, all have their stents in the $-vein.

Labour? Hates farmers.
Green Party? Hates farmers.
NZ First? Hates farmers.
TOP Party? Hates farmers.
City people? Hate farmers.
Sundry ding bat minority parties? Hate farmers.

Farmers? Hate themselves, have no real idea what’s going on generally, much less politically, thanks to sketchy internet service, shit TV, shitier radio, cultural starvation and a confusing cadre of corporate swine feeding their cranial void with logical fallacies, hyper-normalised yap and debt via foreign owned Banks, then once having convinced farmers that financial uncertainty, its bastard cousin anxiety and exhaustion is the new, rural sexy? Just keep up the $ame-$ame game.

National Party? Loooooooove farmers.

Our economy? Our politic? It's entirely a swindle and God help any elected politician who tries to draw attention to that.

Polly said...

a timely piece.
It looks like Winnie could well be in command.
A open government with secrets is not open.
Secrets across the 3 party coalition will surely be tested by the main stream media.
The festering over the coming months, within the 3 party coalition will probably cause breach.

Kat said...

"Namely, that before the King can tax them, he must first obtain their consent. In other words, determining the quantum and purpose of revenue gathering is the people’s prerogative"

Great, and Jacinda offered that prior to the election and got hammered almost to the point of not gaining power. Turning around thirty years of ingrained neolib economics will take more than two or three terms. Bloody stupid for this coalition govt to signal running up a massive deficit in the first term just to get kicked out.

Slowly slowly catch the monkey is the way to go. Patience is required.

Jens Meder said...

I think "slow and steady" in a fiscally responsible way where the only money borrowed is intended for profitable investment, and not for unprofitable investment and/or consumption above earned income from profitable productivity -

will be a more trustworthy and effective long term govt. policy than a radical attempt to heal all ills at once, regardless of cost.

And the most radical innovation needed to overcome all needs on the economic level is to raise the country's profitable productivity rate by raising the country's savings rate to achieve a higher rate of capital investment and ownership per head of citizen.

greywarbler said...

I like your scrutiny of the tax and spend cliche Chris. Perhaps this is one of those cases where a previous frowned-on term which has become dirtied in the mouths of those with dirty minds, gets hauled out, scrubbed down and shown up as a shining example of value. Bit like the word bitch which has been owned by forthright women and accepted as an everyday term for a woman who gets on with some good idea that annoys the conservatives.

I am quite prepared to be called a tax and spend dreamer. Set infrastructure and social targets and find the money to work towards them using a variety of financial devices that don't upset our system but feed into it in helpful ways. Those who don't want to do this, have had their time on the pot, need to move off and let others still living use it.

sumsuch said...

Keep at it Chris. There is an easy radicalism in this time of budget surplus. Keep raising the issue til it becomes one. But I'm very glad the Left is in government dealing with it, in the absence of an old hero (e.g.Bryan Gould).

Post-1980 in the English-speaking world it has been difficult to impossible for any vote to kick the rich off our backs. Or, plutocracy.

You are right, this is the right time it could be done, like Clark abolishing knighthoods ( and in the same time-frame, being defeated by the business born-to-rulers, 1999 ).

I'd like our Leftist politicians to carry around with them soapboxes which they would set up on any corner available, persuasion like their immensely courageous and deeply poor ancestors. My g.grandfather being showered by Papal Bull-shit from chamber-pots in Lancashire Irish Catholic slums.

Guerilla Surgeon said...

"the Joint Committee issued its official analysis of the plan. The analysis—based on a preliminary version of the bill—incorporated the results from three different models: the committee’s traditional macroeconomic model; its newer dynamic one; and a third model, also dynamic, which it leased from a private consulting firm. After averaging the results from all of these models, the Joint Committee estimated that, over the next ten years, the bill would boost the level of G.D.P. by about 0.9 per cent, expand the capital stock by 1.1 per cent, and increase the budget deficit by about a trillion dollars ($1,006,700,000,000.00, to be precise)."

An analysis of the latest US tax plan which greatly reduces taxes for the rich and well off. Interesting, they surveyed CEOs of large companies and asked them what they would do if taxes were cut – i.e. would they hire more people. Almost to a 'man'(because most of them were) they said they would not hire any more workers, but buy back their shares, thereby increasing share prices and coincidently their bonuses. So it's all bullshit anyway.

Anonymous said...

Trouble trouble trouble always the same now because our ownership and sovereignty of our nation has become so heavily indebted to the neoliberal system of world commerce rules that to do anything radical or retrospective to create an egalitarian system for us in nz would be viewed like Venezuela or any other nation that has tried to create its own path in relation to its indigenous resources.
If we fail to do in the style of Lange on say the Rainbow Warrior and lose again to our current invaders who will build so many houses and raise our population levels way past the ability of this govt or has been seen the last govt to control the cost of because of the demands of our international debt. Causing us to kow tow.
And we watch our costs go higher more and more til we are in such a gap rich to poor that the rich will own this country and our govt will be defunct at worse
Then what hope do we have if we become controlled by TPPA that is an international corporate trojan horse which the evidence now is all to obvious .
Our agricultural options over time will be more controlled the market and its TPPA raconmarketeers to the point that farming will be a complete slave to the banks if it aint already, and who also control the extractionist practises of our manufacturing and lobby the govt continually for more access to our protected areas to pay our debt to China the US Australia Japan and who ever else is in the mix especially when it comes to military imperialism in the Pacific .
Simply ,the more debt the less control we have in our govt with the rest of the world to protect the limited natural resources we have .

David Stone said...

The reality of politicians is that they are actually ordinary people with only ordinary intelligence education and wisdom.
Though we constantly criticise them, in the back of our minds is an assumption that they must really know and understand the functions of state far better than we common mortals do. To think they may not have any better grasp of it all than we have ourselves would be appalling ..... Well the awful truth is the are not superior beings at all , and in many cases quite the opposite.
What they have that sets them apart is egotism and self belief , often demonstrating at the outset an inferior grip on reality.
Two cases in point I might suggest are Grant Robertson and his financial guru Michael Cullen who after managing the economy for years doesn't seem to know how banking works.
It may be that Jacinda's IQ is a good notch above that of many of her senior advisory team. But it's too much to expect her to have the self confidence to reject their beliefs and direct them to follow what would now be an adventurous outlier's path and return us to the sensible socialist management of a pre Douglas economy. It is the world she would have to defy , not just her own government collogues.
Keep up the pressure, but TINA has a way to run yet.
Cheers D J S

Wayne Mapp said...

Hi Chris,

Just wondering if I have been banned as a commenter? Over the last month or so I have sent in three or four comments but none of them have made it on.

Regards Wayne

greywarbler said...

OMG David Stone
You sound so on the button and I wish you were not. But an ancient saying comes to mind 'If wishes were horses, beggars would ride'. An oldie but a goodie it seems very appropriate to now. (Wikipedia says it dates back to 1628. It seems they knew a few things way back then.)

Chris Trotter said...

To: Wayne Mapp.

No, Wayne, not at all!

You remain a valued contributor to the Bowalley Road conversation.

As you can see from this exchange, your comment made it through this time. I'm at a loss to explain what happened on those earlier occasions.

But please, don't give up - keep those comments coming!

David Stone said...

I might have been feeling a bit despondent.
Maybe Winston has some worthwhile stuff in those 38pages.
Cheers David J S

sumsuch said...

6.43. Ko-rrect your sleep patterns Chris. And mine while you're about it.

I admire Wayne Mapp for his honest dispute. So many past politicians dispute no more after their pensions. Truth has nothing to do with money or esteem. We, and Wayne also, are wed to the selflessness of M.J. Savage.

On the other hand I don't think he knows when he's been ... (politeness interferes).

Scouser said...

"A Labour Party that refuses to tax and spend really should call itself something else."

One could make a similar-ish statement around National. In the last 18 years both parties have taken a softly, softly approach to moving to the right or left because Kiwis are wary of radical approaches. For instance, the Clark government took a long time to increase government spending (as a proportion of GDP) to its peak in the late 2000s. A reasonable proxy measurement.

The issue I feel is that there has been a lot of big talking around doing radical stuff now Labour are in power. However, the inertia of large governments, regulations, the fear of getting voted out if they get too radical and some of the commitments are just not reasonably achievable e.g. they're really going to struggle to get the houses built are putting a brake on what they're actually going to be able to do.

I expect more watering down of promises. Expect a lot of disappointed on the left.

pat said...

"I expect more watering down of promises. Expect a lot of disappointed on the left."

and even if that comes to pass it will still be infinitely superior to the absolute disaster of the previous 9 years

Charles E said...

"A Labour Party that refuses to tax and spend really should call itself something else."
It is not the Labour Party that is in power. It is a government and as we all know the bull they talked to get into government does not actually bind them. A bot did they tell a load of porkies. Almost nothing the 'promised' will come about it seems.
They will either do a 'good' job, meaning not frighten the horses, even the ones with beggars imagining they are on, or they will get booted out in just under three years. Maybe a lot less if Peters decides to wreck the party. I bet now he will.

Guerilla Surgeon said...

Charles, you should maybe do what one of your dear leaders once said and learn to breathe through your nose. Your record on predictions is to say the least, not good. Still, perhaps I'm being a bit mean – keep predicting Charles it provides me with whole minutes of innocent amusement when it all goes pear-shaped. Although I notice you're having a bob each way on some of it this time. Very wise.

Charles E said...

GS: Do you mean I should predict that this new set up will actually clean up the lakes and rivers; plant a billion trees; build 100k houses; increase average net incomes and end poverty; make us all slim with perfect teeth and bring peace to the ME.
Ok I predict it, and you no doubt will say I got it wrong.