Monday 29 March 2021

Has Labour Embraced "Muldoonism"?

The Spectre Haunting The New Zealand Initiative: “The worst of Muldoonism is back in New Zealand politics. It is a morass of ad hoc interventions and spiralling public debt. We know how that ended last time.” The New Zealand Initiative – like the Business Roundtable, from whose forehead it burst fully-formed in 2012 – is marching as to war in defence of Neoliberal orthodoxy, determined to strike down what it clearly regards as this Labour Government's economic and political heresy.

“WITH NO PUBLIC CONSULTATION, a truncated Parliamentary process – and, as it turns out, without much consideration of Treasury and Inland Revenue’s advice.” These three, rather terse observations, offered by the New Zealand Initiative’s Executive Director, Dr Oliver Hartwich, on Friday, 26 March 2021, make it clear that he is not a happy-chappie. Commenting further on the mechanics of the Labour Government’s Housing Package release, Hartwich noted, drily: “This is not how OECD countries are usually run.”

A short sentence, but one freighted with political significance. For many years New Zealand has been held up as the shining example of how an OECD country should be run. Orthodox in its economic thinking; predictable in its politics: when it comes to welcoming business investment, New Zealand has long been feted as one of the world’s most hospitable countries. That same world will, accordingly, raise a metaphorical eyebrow when a body representative of New Zealand’s largest businesses comes out swinging.

“The worst of Muldoonism is back in New Zealand politics. It is a morass of ad hoc interventions and spiralling public debt. We know how that ended last time.” These are hardly words of conciliation! The New Zealand Initiative – like the Business Roundtable, from whose forehead it burst fully-formed in 2012 – is marching as to war in defence of Neoliberal orthodoxy, determined to strike down what it clearly regards as economic and political heresy.

Significantly, the wrath of the New Zealand Initiative echoes the reported anger and confusion of senior government officials struggling to come to terms with the Labour Government’s intentions in the days immediately preceding the Housing Package’s public release. With a firm resolve, unprecedented in decades, Labour politicians were insisting that their bureaucratic advisers implement their policies. Not advise them as to whether their policies can, or should, be implemented, but simply do as they were bid.

Small wonder Hartwich felt compelled to invoke the spectre of Sir Robert Muldoon. In New Zealand neoliberal mythology, “Muldoonism” has come to represent everything that was wrong with the “old” New Zealand. The New Zealand where a jumped-up accountant, advised by God-knows-what sorts of friends and cronies, felt entitled to over-rule the advice of experts who could buy and sell him intellectually before breakfast. The New Zealand where colossal debts were incurred in pursuit of “Think Big” projects whose primary purpose was to secure a handful of electorally vital “marginal seats”. The New Zealand that Labour’s Roger Douglas put to the sword in 1984. The New Zealand that people like Hartwich, Dr Eric Crampton, and that veteran of the free-market revolution of the 1980s, Dr Bryce Wilkinson, thought was dead and buried.

The discomfort, bordering on panic, among the government’s official advisers in the days leading up to the Housing Package’s release is, therefore, understandable. Most of us would struggle to remain calm if the dead started coming back to life, and then began pounding on the doors of the Beehive’s fifth floor!

Fear. You can read it between every line of this paragraph from a New Zealand Initiative “Policy Point” entitled “A Risky Place To Do Business”, released by Drs Crampton and Wilkinson on 26 March:

The normal routes for assessing such issues are being circumvented through haste. The bureaus have been unable to provide advice, and those outside of Parliament who might normally work through the implications of complex legislation have thus far been shut out entirely. We can hope that the eventual legislation will not be passed under urgency, but even a normal select committee process will have difficulty grappling with this issue.

While the detail of the Labour Government’s Housing Package has been sufficient to unleash the very worst impulses of New Zealand’s landlord class – whose screams of rage and wild threats of social vengeance have pretty much confirmed the rest of New Zealand society’s worst fears concerning “property investors” – it is the rank insubordination of the nation’s elected leaders which most rankles Neoliberalism’s true believers.

The level of official paranoia was admirably reflected in Jack Tame’s dogged insistence that Grant Robertson disclose the identity of his advisers. Tame, perhaps revealing the views of the “experts” briefing him, seemed convinced that the Cabinet had somehow latched on to an alternate (and worryingly heterodox) set of advisers, who were now driving Government policy. The notion that, as Robertson rather testily pointed out, he and his colleagues were democratically elected to lead the country, appeared to cut little ice with the Q+A host.

Had Tame bothered to register the large portrait of Prime Minister Peter Fraser hanging on the wall of Robertson’s office, he might have had less difficulty in believing that a Cabinet made up of MPs elected to drive through transformational change have always possessed the latent executive power to do exactly that.

Those who are now quaking in their shiny leather shoes at the spectacle of a cabinet flexing muscles made weak through years of underuse, should be grateful that this Labour Government did not take advantage of the Covid-19 emergency to do what Peter Fraser did to ensure his government had the powers necessary to manage New Zealand’s fragile post-war economy. The Economic Stabilisation Act 1948 gave Cabinet the power to control wages, prices and rents by means of Parliament-circumventing Orders-in-Council. Without it, “Muldoonism” would not have been possible. The repeal of the Act in 1987 thus constituted one of the neoliberal revolutionaries’ most symbolic victories.

What the boys and girls at the New Zealand Initiative have failed to understand, however, is that the world of 2021 is a very different place from the world of 1984. A country grown impatient with Rob Muldoon’s idiosyncratic and high-handed management of the New Zealand economy was more than ready for a few years of bridled executive power. Three decades on, however, swapping politicians subject to a triennial electors’ veto, for “market forces” seemingly answerable to nobody, no longer has the feel of a game-winning substitution.

The worldwide populist surge suggests that strong executive powers, harnessed in the people’s interest, are no longer regarded as unequivocal evils. Only the most hardened veterans of the Rogernomics Revolution continue to insist that New Zealanders should trust “the market” to resolve a housing crisis ripping apart their country’s weakest and most vulnerable communities. With the polling resources at their disposable, it is inconceivable that the Labour Party and the Labour Cabinet have not detected a sizeable groundswell of voter opinion that “something must be done” about housing. And, if what we have witnessed over the past week is any guide, they are going to do it.

Dr Hartwich and his colleagues need to think very carefully about their response to this tectonic political shift. Sending out signals to international investors that New Zealand has become “a risky place to do business” is unlikely to be interpreted by many Kiwis as the action of a patriotic group of capitalists. On the contrary, it may speedily give rise to calls for those businesses no longer willing to identify themselves as loyal members of the Team of Five Million, to be given a taste of what life is like outside it.

This essay was originally posted on the website on Monday, 29 March 2021.


Anonymous said...

Please, let there be a sustained move away from 'Neoliberal orthodoxy'. Such views as emanated from Hayek and the Chicago School of Economics have driven the cult of the individual as constant consumer, seeking happiness through endless consumption. Such consumption has driven the rape of the 3rd world, the monocultural plantings of things such as palms and pushed our one planet to a crisis.
Please let the Labour Government and Environment Minister Shaw, together with Robertson and Arden, move to a less devastating economics.
When the NZ Initiative is uncomfortable it can only be good news for societal wellbeing

Odysseus said...

"Tectonic shift"? All I see is a government out of its depth and under pressure to DO something clutching at straws and aggravating the problem they seek to address. As the fog of COVID lifts the damage they are doing will be plain for all to see.

petes new write said...

And no opposition parties to confuse the situation.

Phil said...

The trouble with these reforms is that they don't recognise the landlords who are not in competition with first time buyers. Student rental accommodation for example, landlords will put up rents and no doubt the Government will bring in rent controls. If Landlords are forced out of the market there is going to be a problem. In tourism hot spots like Queenstown if landlords are pushed out of the market where are the workers going to live. The Government needs to be identifying exemptions, perhaps even licencing properties for particular types of tenancy.

Tom Hunter said...


Of course Labour has embraced Muldoonism. That's hardly a surprise when it was Muldoon who fully embraced almost every Labour aspect of economic management.

But they're doing so because they have nowhere else to go in the face of four years of failure to achieve their goals. This is a reluctant embrace for they are just old enough to remember those days - and they fear them.

The New Zealand that people like Hartwich, Dr Eric Crampton, and that veteran of the free-market revolution of the 1980s, Dr Bryce Wilkinson, thought was dead and buried.

It is dead and buried! Unless you imagine that the government is going to buy up Spark, re-create the MOW ("Kat's" feverish dream), and then micro-manage everything else. Hell, they don't even run Air NZ like that now, and the government effectively did buy that back, after Cullen tried shopping it to the likes of Singapore Airlines. He knew what was involved in meeting such goals, and dreaded it.

Fear. You can read it between every line of this paragraph from...

More like rolled eyes at the stupidity of thinking a centralised command-and-control economy will work in 2021 better than it did in 1984, in world even more interconnected, flexible, and faster than it was then.

The Economic Stabilisation Act 1948 gave Cabinet the power to control wages, prices and rents by means of Parliament-circumventing Orders-in-Council.

And you obviously think this a good thing. That because it "worked" from 1935 to about 1967 it will work again. It won't, but I guess we have to have a trashed economy to learn the lesson all over again.

... “market forces” seemingly answerable to nobody...

I have some very bad news for you and the rest of the Left. They are answerable to nobody. They're the reason that the Fraser/Muldoon way of running the NZ economy steadily failed in the post-WWII world. And by steady failure I mean an almost relentless drop in our prosperity compared to the rest of the world, which eventully showed up in the mass exodus of Kiwis and increasing difficulty buying what we needed from the rest of the world.

Market forces are like a frozen river, with the ice as Left policies. You can imagine you're in control, but beneath your feet the water continues to flow.

greywarbler said...

O note in Greek mythology; 'Odysseus was well known among the Greeks as a most eloquent speaker, an ingenious and cunning trickster.'

So like man/or variably endered, like pseudo with ideas that don't stand a stern look.
We have had people like you at the helm - each day arising to give us a stable dose of what we had before, unsatisfactory though it was. Like the line about hot salesmanship 'Never mind the quality, feel the width'.

The whole neo-liberal thing has been an unfortunate experiment. Instead of observing how many women with incipient cancer of the cervix died, we have seen the politicians turn NZ over to business 'experts' using asset-stripping as a weight-controlling treatment and Filipino-type quacks have guided the alternative medics who have put their hands in our chests and almost removed our hearts. Labour has realised what a healthy economy and thriving inclusive nation need, and have started the sick man et al with life-building treatment and a green prescription similar to those provided by GPs to their patients.

I am applying analogies thickly. So many in NZ have no imagination or ability to ponder or reflect it gets to near kindy-reading-time where people need to sit on the mat and listen to the amazing story of the Little Country that Didn't want to Die.

Spam said...

As we saw with the "Captain's call" to ban the oil & gas exploration industry overnight, and now tax changes that go against fundamental principles of fairness in taxation (in that legitimate expenses are deductible), I'm not sure how you can conclude that New Zealand is NOT a risky place to do business, and faced with this, why should Hartwich et al be expected to be "patriotic"?

Similarly, the calls for "the market" to solve housing are more aligned to asking for government (central and local) to reduce regulation and free up land. If the Labour solution to the housing crisis is more intervention, then I don't think they'll solve it.

Kat said...

The song Fever, Peggy Lee made it a hit but Little Willie John did it first.

"Everybody's got the fever
That is somethin' you all know
Fever isn't such a new thing
Fever started a long ago........"

If the repeal of the Economic Stabilisation Act in 1987 constituted one of the neoliberal revolutionaries’ most symbolic victories then the reinstatement of a 21st Century MoW would have similar effect for the large swathe of voters who in unprecedented fashion democratically elected a Labour govt to grow a pair and get on with it.

It would seem Tom @12:06 and Little Willie have something in common, if in name only.

David George said...

What we are seeing is a government driven by ideology, damn the facts and damn analysis of the chances of success, costs and unintended consequences. As pointed out above the foolish banning of oil and gas exploration and the "100,000 homes" Kiwibuild fiasco were done without proper analysis by the people we are already paying for this sort of research. It's one thing to ignore expert advice; to not even seek it? Seriously bad governance!

I agree with Spam, the "Sending out signals to international investors that New Zealand has become “a risky place to do business” is the governments doing, Hartwich and co are simply pointing out the obvious. Our reputation as a trusted place to do business is being trashed with no regard, or even apparent awareness, of the consequences.

Sorry Chris, crowing about the wit, wisdom and courage of what is little more than seat of the pants governance is ridiculous. They're supposed to be adults running a country not a Kindy.

I agree, the housing problem is serious but could have been solved by activating market forces with the government acting to reduce obvious imbalances in supply (onerous regulation and land, labour and materials supply) and demand - immigration, incentivising alternative investment and tax breaks for bank deposits for example. Why was that not done and to then decry the value of the market, on principle, is simply ideological nonsense.

AB said...

"Most of us would struggle to remain calm if the dead started coming back to life, and then began pounding on the doors of the Beehive’s fifth floor"

The reverse is occurring - the living may have finally plucked up the courage to eject the morally and intellectually dead from behind the powerful desks where they have sat for 35 years.

PaulVD said...

The problem is not so much that the politicians are bypassing official advice in order to enact their policies. Rather, it is that the Labour Ministers themselves seem to have no idea what they are about. Grant Robertson cannot give any coherent explanation of what effects the latest housing package will have. Jacinda Ardern is clearly not across the details of anything her Government is doing. Helen Clark she is not!
If there was some sense that Labour is working towards a clear vision of society, I would be reassured even if I did not share the vision. But all I see is random responses to problems, chosen for their PR value, and a failure to deliver even quite simple accomplishments.

greywarbler said...

It's great to read AB - clever comment and one hopes it will come to fruition. And Kat - the MOW keeps cropping up; but you are thinking too small, let's have the whole government working under a plan to build BACK our NZ, rather smaller than previous grandiose schemes, but functioning well, thriving, and...funky as well.

Work, sip...enjoy; drop into the NZ cafe after work, mix and mingle, laugh, maybe sing - without getting drunk. That's the picture of a happy NZ that I am sure is out there waiting to get going, filled with vital NZrs mostly young, but not all. Just wanting Labour to pull some levers but at the same time to saddle up horses so we can reunite with the land and be people, not lonely, addled drivers and astronauts in metal tubes.

Sorry just got carried away there. I needed to uplift my mind after reading David George's scrapings. The main point to be drawn from his is that he doesn't think anything should be done that won't disturb his life plan, so ideas to the contrary come from the mouths of kindykids. All Scrooge McDucks who dive into piles of gold regularly can't see the inherent flaws in the system. Wikipedia has some intriguing story about it. Also talking about systems reminds me of the Pythons demonstration of how we might end up in a bi-polar world:

Scrooge McDuck - Wikipedia › wiki › Scrooge_McDuck
Scrooge McDuck is a cartoon character created in 1947 by Carl Barks for The Walt Disney ... Within the context of the fictional Donald Duck universe, he is the world's richest person. ... By 2011, it rose to $44.1 billion due to the rise in gold prices. ... Peter injures himself trying to dive into a pile of coins like Scrooge McDuck.

Keywords - Pythons peasants and politics:
I think we just will have to go on making our points and showing the 'violence inherent in the system' and taking time out to have a giggle now and then. It will keep us sane, we hope.

Patricia said...

I know I have said this before but do read Nancy MacLean’s Democracy in Chain and then The Powell Manifesto of 1971and you can then understand how the neo liberal order was reinstated. And reinstated is the right word. The aim post WW11 of a number economic departments of American Universities, which were infiltrated and funded by the very rich, was for the ‘return of ‘the economic liberty’ of the 1800s. This book tell how they did it incrementally until the 1980s when it was implemented worldwide. From slavery, serfdom to unregulated capitalism.
And Kate, I agree. The MOW should be reinstated.

Nick J said...

David, the government is ideologically driven is it? Now theres a surprise. Isn't that what party politics is about?

To not take expert advice? Is that such a problem? I'd refer to Ralston Sauls law of economists. Basically it says take any ten ideas and courses of action economists have recommended. Given them a point for each one they got right, add up. Result is always zero.

Leave it (housing) to the market you say. Is that not an ideological position? Almost religious I'd say when "invisible hands" are mentioned. Might I suggest that we vote for governments to act when marketsstop delivering or fail.

Nick J said...

AB, spot on.

Reva-bloody-lution said...

JS Mill says that land is different: no man made land. When someone in Christchurch owns 1000 houses and Meng Foon the Race Relations Agitator says "land is mana" and "time is nothing". I feel that land is territory and if there is ever a revolution needed it is to put land in public hands and make it leasehold. This gives you the potential to do what the Singaporeans do (and hopefully not the East Germans). It might also dampen our population Ponzi (people flows ensuring demand)?

David George said...

Nick, thank you for your reply.
There are ideological, political and practical motivations, my point is that obvious practical solutions were given scant opportunity. I'd have preferred that proper research and the courage to implement the results were prioritised. The recent changes have a high risk of serious unintended consequences and a high level of uncertainty attached to the outcomes

The changes I suggested above (National is just as much at fault here) amount to a rebalancing of real distortions that would allow the market to do what it does best.
Despite what you might imagine the recent changes are also intended to act in the same way - providing incentive for market based solutions, albeit tragically late. The other problem I see is the implementation of some inherently bad policy, treating an expense as taxable income not the least of them.