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 Interest.co.nz website on Monday, 29 March 2021.