Not Being Venezuela: The Political Logic Of The Labour/Green "Budget Responsibility Rules".

Labour/Green's Responsible Face: Don’t be too quick to condemn Labour and the Greens for cautioning their supporters against excessive economic and political expectations. Both parties know how important it is to inoculate themselves against the Right’s accusations of economic ignorance and irresponsibility.

 

FOR THOSE WHO THINK Labour and the Greens are being too cautious, economically-speaking, I have only one word: “Venezuela”. Andrew Little may not resemble Hugo Chavez in the slightest. Nor are Labour and the Greens, by any stretch of the imagination, Bolivarian revolutionaries. But, to hear the Right tell the story, New Zealanders are being courted by dangerously left-wing political parties. Given half a chance, we are told, Little and his Green sidekicks, James Shaw and Metiria Turei, will happily transform New Zealand into the Venezuela of the South Seas.

 

The reasoning behind this outlandish charge is simple:

 

Because the Left has never seen a problem that could not be fixed by throwing more money at it, the Right argues, all left-wing governments end up spending themselves into a fiscal crisis. Afraid of taking the harsh economic measures required to balance the country’s books, these leftists then decide to maintain the living-standards of their followers by taxing the rich ferociously and borrowing like there’s no tomorrow. Very soon the country’s international lines of credit are exhausted. At this point, the clueless government decides to crank up the state’s printing presses – flooding the country with paper money. When the overseas suppliers of vitally important imported goods refuse to accept this increasingly worthless currency, the government responds with rationing and harsh import and price controls. In the face of widespread protests, the now desperate government resorts to increasingly authoritarian methods of political control. Pretexts are found for shutting down the oppositions’ media outlets. Government supporters confront government opponents in the streets. Violent clashes ensue. As the next scheduled general election draws near, the embattled left-wing government must choose between pushing forward into full-scale dictatorship (thereby risking a military coup d’état) or submitting itself to the judgement of an outraged and/or disillusioned electorate. Either way, their own – and the country’s – prospects are bleak.

 

Unfortunately, the historical record offers more than a little confirmation of this alarming right-wing narrative. Even here, in Australasia, the precedents are not all that encouraging. In the case of both the government of the Australian Labor Prime Minister, Gough Whitlam, and that of our own Norman Kirk, there are disturbing echoes of the above scenario. It certainly describes the sequence of political events in the Chavistas’ Venezuela.

 

Indeed, it is possible to argue that the grim fortunes of the social-democratic governments of the 1970s – especially the fate of Salvador Allende’s Popular Unity government in Chile – lay heavily on the minds of New Zealand and Australian labour leaders in the 1980s. Also before them was the abject failure of the French President’s, Francois Mitterand’s, socialist-communist government. Elected in 1981 on an avowedly left-wing programme, it was forced, within months, to execute a humiliating U-turn. The scale of French capital flight was economically unsustainable.

 

That the Right was in large measure responsible for the economic and political difficulties which brought these social-democratic governments to their knees, in no way invalidates its critique. The Right knows that a left-wing government genuinely committed to the uplift of its marginalised and exploited supporters has little choice except to adopt the “tax and spend” policies outlined above. They also know how, in the chilling language of Richard Nixon and Henry Kissinger, to “make the economy scream”.

 

So don’t be too quick to condemn Labour and the Greens for cautioning their supporters against excessive economic and political expectations. Both parties know how important it is to inoculate themselves against the Right’s accusations of economic ignorance and irresponsibility.

 

To a confirmed leftist, the Labour Finance Spokesperson’s, Grant Robertson’s, and the Green Co-Leader’s, James Shaw’s, statement that: “New Zealanders rightly demand of their government that they carefully and effectively manage public finances”, will undoubtedly sound a rather flat ideological note. So, too, will the “Budget Responsibility Rules” to which Little, Robertson and Shaw have pledged themselves.

 

Delivering “a sustainable operating surplus across an economic cycle”; reducing “the level of Net Crown Core Debt to 20 percent of GDP within five years of taking office”; and promising to “maintain [Government] expenditure within the recent historical range of spending to GDP ratio”: these are hardly the sort of slogans to summon the proletarian masses to the barricades!

 

What they just might do, however, is spike the rhetorical guns of Labour’s and the Greens’ political opponents – making it much easier for the swing voter to believe that voting Labour/Green to change the government, is not at all the same as voting for 1,000 per cent inflation and blood in the streets.

 

This essay was originally posted on The Daily Blog of Saturday, 25 March 2017.

The Common Affairs Of The Whole: Why The National Party Is So Bad For New Zealand Capitalism.

Capitalist Cronies: Prime Minister, John Key, and his Finance Minister, Bill English. There’s an enormous difference between managing the affairs of the employing class as a whole, and arranging sweet deals for your mates.

 

[T]he bourgeoisie has at last, since the establishment of Modern Industry and of the world market, conquered for itself, in the modern representative State, exclusive political sway. The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.

 

Karl Marx & Friedrich Engels – The Communist Manifesto (1848)

 

IF JOHN KEY’S GOVERNMENT is a committee, tasked with “managing the common affairs” of the whole employing class”, how’s it doing? Would it earn a pass mark from Charlie Marx and Fred Engels? Or, would they condemn Key for his failure to comprehend the whole meaning of the word “common”?

 

There’s an enormous difference between managing the affairs of the employing class as a whole, and arranging sweet deals for your mates. Indeed, it’s possible to argue that the difference between a “modern” state, and a state which merely aspires to that condition, is how successfully its political leaders have extricated themselves from the webs of personal, familial, and tribal obligations that characterise pre-modern societies.

 

The late Bruce Jesson shrewdly observed of New Zealand’s two major political parties that, although the National Party knew how to govern for capitalists, only the Labour Party had mastered the art of governing for capitalism.

 

Just think of the Sky City Casino deal. Or, the irrigator-driven dismissal of the Canterbury Regional Council. Consider the exclusion of the agricultural sector from the Emissions Trading Scheme. Or, the Government’s plans to make the Resource Management Act more developer-friendly. Think about Bill English’s plans to privatise social housing.

 

All of these policies are designed to serve the interests of either individual businesses, or favoured sectors of the economy. But none of them meet the Manifesto’s test for “managing the common affairs” of the employing class as a whole.

 

Bill English’s disastrous intrusion into the social housing scene is a telling instance of this government’s failure to comprehend the general good.

 

The provision of social housing in New Zealand will forever be associated with the First Labour Government’s massive state house construction programmes of the 1930s and 40s. State houses are, however, a little older than Mickey Savage and Jack Lee. It was the Reform Party leader, Gordon Coates who first authorised the building of “state” houses for the employees of the publicly-owned railway network. As a way of giving these workers’ a powerful “stake” in their employment it was a highly successful project.

 

Labour’s programme expanded the scope of worker housing tremendously. Moreover, by laying a floor of high-quality and affordable accommodation beneath the feet of the working-class, Labour’s “socialists” also conferred a huge benefit on the whole of the employing class.

 

Thanks to Labour’s state housing scheme, the health of workers and their families improved dramatically – lifting their productivity and reducing the economic burden of disease and chronic illness. Fixing the share of workers’ income expended on accommodation at around 25 percent similarly assisted the employers. By curbing property speculation and rack-renting, Labour’s state housing scheme kept prices stable across the entire housing market. Affordable housing meant that the incidence of workers attempting to offset rapidly rising accommodation costs by ratchetting-up the price of their labour, was reduced. Money not spent on accommodation could be spent on other things. In all these respects, state housing acted as a significant wage subsidy.

 

Which was just as well, because workers now needed to spend as much money as possible. Mass consumption was fast becoming the indispensable corollary to mass production. And, for mass consumption to continue, wages not only needed to rise – they had to keep on rising.

 

As the American inventor of modern mass-production techniques, Henry Ford, put it: “if you don’t pay your own employees enough that they can afford to buy your products, sooner or later, you’re going to go broke.”

 

Ford’s vision was clear – but narrow. He could see the advantage of paying his workers enough to purchase the Model-Ts they were putting together on his production lines, but he never made the next conceptual step: the one that would have allowed him to conceive of a society in which the working-class was paid enough, collectively, to consume its own production.

 

This was capitalism’s equivalent of a perpetual motion machine (assuming, of course, that capitalism had somehow discovered a way to exempt itself from the laws of planetary thermodynamics). The only downside (from the capitalists’ point of view) was that the full-employment and steadily rising living standards generated by the machine were bound to precipitate a concomitant decline in the political, social and economic power of the employing class.

 

The fatal paradox of capitalism’s perpetual motion machine (which actually operated throughout the West from 1950-1980) was that the more efficient it became at the equitable distribution of mass-produced goods and services, the more precarious the position of the capitalist system’s owners became.

 

With the efficient generation of surpluses ceasing to be an occasion for the obscene enrichment of a privileged few; and becoming, instead, the chief mechanism for ensuring better lives for everybody; those we now call “The One Percent” very quickly apprehended that economic inefficiency – even crises – were infinitely preferable to social equality. Even at the price of driving a large proportion of the employing class to the wall, the One Percent’s urgent mission became the election of “executive committees” dedicated to protecting the interests of only the most powerful capitalists – i.e. themselves. The rest of the bourgeoisie could go and join the proletariat in Hell.

 

The funny thing about Bill English is that 15 years ago he gave every appearance of understanding the crucial distinction between governing for capitalism as a whole, and governing for a handful of National Party cronies and Federated Farmers. His famous speech to the Balclutha Branch of the National Party in 2000 marked him out as a good, Disraelian, “One Nation” conservative. Even today, under Pope Francis, English, as a good Catholic, is obligated to take “the preferential option for the poor”. Why, then, has he allowed himself to become tangled up in a social housing policy that has been widely condemned as a “property developers charter”?

 

Could it be that Mr English, in his heart-of-hearts, knows that, in new Zealand, any Finance Minister who is serious about making capitalism work effectively and efficiently is much more likely to belong to the Labour Party than the National Party? That “One Nation” conservatism and moderate Social Democracy are, in practical political terms, indistinguishable. Could all the floundering around and making it up as he goes along be evidence of Mr English coming to terms with the fact that he has more in common with Winston Peters than John Key? Or, even more heretically, that in working out what “managing the common affairs of the whole bourgeoisie” truly entails, Mr English has come to realise just how far National’s “executive committee” has fallen short of Marx and Engel’s prescription?

 

This essay was originally posted on The Daily Blog of Saturday, 28 March 2015.

Mr Jones Goes To Taranaki

Defanging Misapprehensions: Labour List MP, Shane Jones', recent foray into Taranaki served as a forceful reminder of Labour's role as the party which, in order to serve its electoral base, must govern for capitalism as a whole - unlike its National Party rival which can and does govern narrowly for favoured capitalists - like Sky City Casinos and Warner Bros.

 

“THE DIFFERENCE BETWEEN the two main parties,” said the late Bruce Jesson, “is that National governs for capitalists, and Labour governs for Capitalism.”

 

In the course of a provocative foray into the energy-rich province of Taranaki, earlier this week, the Labour List MP, Shane Jones’, offered a neat demonstration of Bruce’s point.

 

“I am keen to defang these misapprehensions that are abounding that somehow industry has disappeared from our purview”, he told Fairfax NZ News.

 

“Nothing could be further from the truth and if my visit provides the opportunity to reinforce the centrality of jobs, the importance of industry and the need for a future Labour-led government to assuage whatever anxieties might be there in the minds of employers or future investors then I am up for the task.”

 

A great deal of very important information is packed into Mr Jones’ typically pithy statement.

 

First and foremost, Taranaki’s business leaders are being assured that, so long as he retains the Regional Development spokesperson’s role, they have nothing to fear from a future Labour-led government.

 

Mr Jones’ decision to offer that assurance in the form of a personal commitment: “I am up for the task”; was not, however, accidental. He was warning the Taranaki business community that, in Labour’s bitterly factionalised caucus, very few others are able to say as much.

 

Further decoded, Mr Jones’ message to the business leaders of Taranaki (most especially its powerful energy sector) may be read as an appeal for their support against those within his own party who have become reconciled to the centre-left vote being forever split between Labour and the Greens.

 

When Mr Jones talks about “the centrality of jobs” and “the importance of industry”, he is inviting his business audience to mentally complete the sentence Labour cannot utter for fear of alienating its most likely coalition partner.

 

“Labour wishes to reinforce the centrality of jobs and the importance of industry … ahead of the environment.”

 

The business community would be wise to take Mr Jones’ assurances very seriously.

 

When the National Party attempts to justify its current assault on the environment by talking up the likely expansion of employment opportunities, they are much less likely to be believed than when Labour talks about “the centrality of jobs”.

 

Voters look at the Government’s pokies-for-a-convention-centre deal with Sky City Casinos and all their prejudices about National governing on behalf of its “rich mates” are confirmed.

 

With Labour it’s different. The voters know that the bulk of the party’s electoral support is drawn from New Zealand’s wage and salary earners. Only a Labour Party whose priorities are “jobs, jobs, jobs” has the slightest chance of mobilising and sustaining that support.

 

This is what Bruce Jesson meant when he said Labour governs for Capitalism – rather than capitalists. To go on winning elections the party needs to foster job creation on a system-wide scale. It’s why Labour’s economic development policies have always been geared to promoting growth across entire industries – rather than just assisting individual firms like Sky City Casinos or Warner Bros.

 

When Helen Clark stated over and over again: “A rising tide lifts all boats.”, she wasn’t simply talking about the workers’ wages, she was also referring to the profitability of the bosses’ enterprises!

 

Unlike a great many of his colleagues, Mr Jones is far from convinced that, when it comes to promoting employment and protecting the environment, Labour can have its cake and eat it too. His response to the Greens plans for a new, “sustainable”, economic system: a variant they’re calling “Green Capitalism”; is brutal:

 

“Sustainability is as much about sustaining the livelihood of people as it is about guarding the ecological habitat of the Hochstetter’s frog. As long as I am in politics as a Maori politician I am going to be unambiguous in standing up for jobs and people.”

 

It’s difficult to think of a sharper contrast between Labour’s view of the environment and the Greens’. When Mr Jones’ uses the word he is not thinking of the unspoilt sands of the East Coast or the dense bush of Northland. In his mind he sees the bleak urban environments of Tamaki Makaurau and Porirua: a world without decent housing; without steady employment; without hope.

 

Labour makes capitalism work not in the interests of capitalists – but for the sake of their victims.

 

This essay was originally published in The Waikato Times, The Taranaki Daily News, The Timaru Herald, The Otago Daily Times and The Greymouth Star of Friday, 26 July 2013.

A Small History Lesson For Federated Farmers

It Ain't Wellington, Don: Far from being the innovative national icon described by Federated Farmers boss, Don Nicolson, the milk powder manufacturing business founded in New Zealand by 19th Century entrepreneur, James Nathan, was built on imported capital, imported patents and imported technology. The profits, as usual, went offshore - in Glaxo's case, to London.

DON NICOLSON needs a history lesson. In fact the current president of Federated Farmers could usefully invest in an entire history course. A surer grasp of where New Zealand has come from would allow the current leader of this country’s most powerful pressure-group to speak with considerably more authority about where New Zealand is now – and where it should be going.

Mr Nicolson began a recent newspaper article by lauding the achievements of Joseph Nathan, creator of the Glaxo brand of infant formula. "Joseph Nathan leveraged off agriculture and built a leviathan", wrote Mr Nicolson, before going on to sing the praises of the vast multinational corporation, GlaxoSmithKline, which long ago gobbled up Joseph Nathan’s highly successful Manawatu-based business.

Had Mr Nicolson taken the time to research the history of the Nathan family more thoroughly, he would have discovered a record of achievement which remains, to say the least, equivocal. Far from being a great innovator, Joseph Nathan was representative of a class of shrewd colonial businessmen who came to New Zealand in the 19th Century to make their fortune and then, hopefully, return with it to England.

The best business decision James Nathan ever made was to acquire the rights to the newly developed process for turning milk into powder. The process, along with the technology required to give it effect, were all imported. New Zealand’s only significant contribution then – as now – was grass, and the cows to turn it into milk.

The Nathans were fortunate in owning quite a lot of grass. To a degree which had raised eyebrows among their contemporaries, the land required to grow it had been acquired from soldiers returning to civilian life after the Land Wars. For services rendered these men were granted a small share of the lands confiscated from the defeated Maori tribes. By offering the penurious soldiery cash, the Nathans had built up a substantial base for agricultural operations.

Glaxo’s other great claim to fame was its masterful utilisation of advertising. The claim that Glaxo’s infant formula "Builds Bonnie Babies" secured it a significant share of the UK market, and contributed hugely to the decline of breast-feeding in that country – and ours. The consequences of Glaxo’s intervention, in terms of infant health, are difficult to calculate – but they were by no means entirely beneficial.

The history of Glaxo – as Mr Nicolson might have anticipated – is inextricably bound up with the history of New Zealand. The Nathan family’s obvious entrepreneurial talents cannot be separated from the fact that the industry they helped to establish, like so many of our industries, was based on imported capital, imported patents and imported technology transforming local raw materials into repatriated profits. Glaxo also provides an early example of how vulnerable local businesses are to foreign acquisition.

A more thoughtful president of Federated Farmers might have pondered the lessons to be learned from the history of businesses like Glaxo. It points to the huge financial benefits that flow from publicly-funded research and development. It directs our thoughts to the importance of limiting the vulnerability of local firms to foreign takeover. It speaks of the massive returns to the nation from encouraging and funding the expansion of science and technology in our universities. And it also reminds us of how important the teaching of New Zealand history is to forming an intelligent view of our country’s forward path.

Sadly, these are not the conclusions Mr Nicolson draws from his superficial references to successful (albeit foreign-owned) companies associated with New Zealand agriculture. Instead, Mr Nicolson defaults to a series of political demands which are now more than a century old.

It was in the early years of the 20th Century that New Zealand’s farming community first began to conceive of itself as something separate and distinct from the rest of the population. They construed the dominant role of agriculture in generating the nation’s export wealth as proof not merely of farmers’ economic centrality, but of their moral superiority. Indeed, town and city-dwellers in general, and working people in particular, were regarded as the source of all the nation’s vices – and in urgent need of rural reproof.

This lust to punish urban profligacy is still clearly discernible in Mr Nicolson’s prose: "If government spending was at year 2000 levels, adjusted for inflation, $30 billion would be left in the economy each year."

Which is probably true, Mr Nicolson. But, what’s equally true is that $30 billion would not be left in our hospitals, our schools, or our universities. It would not be available to assist and support struggling Kiwi families – your fellow citizens.

It would, however, be there for the modern equivalents of James Nathan – the businessman who died in London, aged 77, with his substantial, New Zealand-made fortune safely tucked away in the vaults of a British bank.

This essay was originally published in The Press of Tuesday, 18 January and in The Waikato Times of Wednesday, 19 January 2008.

Now It's Time For Realism

Bernie Madoff in a Vee-Dub? There are times when good intentions simply aren't good enough. As the war poet, Siegfried Sassoon, wrote of another old man who cost people all they had: "'He's a cheery old card,' grunted Harry to Jack/As they slogged up to Arras with rifle and pack./But he did for them both by his plan of attack."

THE COLLAPSE of South Canterbury Finance (SCF) is just the latest in a long line of serious business failures. What’s different about the latest debacle is that, this time, it’s taxpayers who are picking up the tab.

More than $1.5 billion is being paid out to SCF investors – a sum greater than the entire amount set aside by the Government for new spending in the coming year.

The Finance Minister, Bill English, has been quick to reassure us:

"The up front cost to the Crown of repaying South Canterbury's depositors is about $1.6 billion, but we would expect to recover the bulk of that as the receiver sells the assets over time."

An expectation is not, of course, a guarantee. Time alone will tell whether Mr English’s sanguine response to SCF’s collapse is based on fact or folly.

Right now, however, it’s time to face the brutal fact that New Zealand’s business community has become this country’s biggest liability.

For the best part of thirty years business-people have been telling us that all they need to restore New Zealand’s prosperity is for the State to get out of the way and let them get on with the job.

Labour’s Roger Douglas and National’s Ruth Richardson took them at their word.

And even though it cost us of tens-of-thousands of well-paid jobs and scores of thriving communities, we stoically and selflessly "bit the bullet" of radical economic "reform".

By the time Rogernomics and Ruthanasia had run their course, New Zealanders had lost control of their finance sector, most of their news media, and much else besides. Valuable state assets, the product of more than a century of public investment, had been sold-off to foreigners for a song.

Undeterred, we kept on chewing the business community’s ammunition. Why? Because they’d successfully brainwashed us into believing that the "long-term gain" would, ultimately, be worth the "short-term pain".

Unfortunately, "ultimately" turned out to be a moveable feast.

And while we waited for that ultimate pay-day, things went from bad to worse. The 1987 Stockmarket Crash revealed not only that New Zealand’s business titans had feet of clay, but that some them were also just plain, old-fashioned crooks.

If we’d been smarter, we’d have realised back then, in the early 1990s, that the entire neoliberal project was one almighty scam: a weird sort of political Ponzi scheme in which the early converts reaped all the benefits, and the late-adopters paid all the bills.

And pay we did – with the Employment Contracts Act.

The ECA absolved the business community of all responsibility for learning the lessons of the excesses of the 1980s. Instead of upgrading their technology and upskilling their workforce, New Zealand’s businesses spent the 1990s stripping their staff of hard-won conditions and allowances and putting an end to penal rates.

By the turn of the century thousands of New Zealanders were living off their credit-cards just to make ends meet. Indeed, the whole New Zealand economy seemed to be adrift on a limitless ocean of debt. Like Tennessee William’s fragile heroine, Blanche DuBois, New Zealanders had become hopelessly dependent on "the kindness of strangers".

Also, like Blanche, they no longer wanted Realism – but Magic. And, as it has done so often in our history, this unwavering faith in the "unseen hand" of the market, and the superhuman powers of entrepreneurial capitalists, has led thousands to financial ruin.

"Kindness" and "Magic" are certainly the operative words in the tragic demise of Alan Hubbard’s empire. How else should we explain the quaint anachronism of a man who, in an age of instantaneous data and light-speed capital flows, was still willing to put his faith in the unwritten contract of a handshake; the reliability of a Canterbury cockey’s spoken word?

Now it’s time for realism.

From Vogel to Muldoon, the growth and development of New Zealand’s economy has not been driven by the daring visions and fluctuating fortunes of individual capitalists, but by the cautious intelligence and financial solidity of successive New Zealand governments.

Over and over again, throughout our history, we’ve had to learn this lesson. That we are too small to let big things fail. And that the only institution with both the collective resources and the collective wisdom to make big things succeed - is the New Zealand State.

Who else could have rescued SCF?

This essay was originally published in The Dominion-Post, The Timaru Herald, The Taranaki Daily News, The Otago Daily Times and The Greymouth Evening Star of Friday, 3 September 2010.

In Praise of Radicalism

Beyond Pragmatism: "A Man's reach should exceed his grasp, or what's a heaven for?" New Zealand needs radical economic thinking if it is to preserve social peace.

GARETH MORGAN – radical. A few years ago that description would’ve been laughed off as oxymoronic. After his performance on Campbell Live, however, "radical" is exactly the right word.

His advocacy of a tax-free Universal Basic Income of $10,000 for all citizens, with a flat tax of 25 percent on every dollar earned in excess of that sum, certainly qualifies as "far-reaching, thorough, going to the root". And, when combined with his proposed 1.5 percent tax on capital, Morgan presents a truly radical challenge to the prevailing fiscal orthodoxy.

Morgan’s response to Campbell’s objection that his ideas would fail Finance Minister, Bill English’s "political practicality" test was similarly unorthodox. Unlike the 2025 Taskforce, whose ideologically-driven membership loftily eschewed such plebeian notions as popular consent, Morgan advanced the radically democratic notion that once you’d won the voters’ hearts and minds – the politicians would be sure to follow.

Morgan’s heterodox and iconoclastic turn of mind is exactly what New Zealand needs right now. With the obvious exceptions of Nick Smith and Gerry Brownlee, caution reigns supreme in the National Cabinet. And in spite of some welcome signs that the Leader of the Opposition, Phil Goff, is willing to dip his little toe in the bracing waters of unorthodoxy, the overall political scene is distressingly bereft of new – let alone radical – ideas.

That’s what was so very, very depressing about the first report of the 2025 Taskforce. It was the economic equivalent of gathering together half-a-dozen ageing generals and asking them to come up with a daring strategic plan for winning the economic war. We got one, of course, but it was a daring plan for fighting the last economic war – not the one we’re losing today.

And Dr Brash and his colleagues weren’t even all that daring. To get some idea of what genuinely radical right-wing thinking looks like, they should pay a visit to "Cactus Kate" – the outrageously right-wing blogsite of the equally outrageous, Hong Kong-based tax-lawyer, Cathy Odgers.

In a posting entitled "2025 – Be Cashed Up By Then", Odgers vouchsafes us a rare glimpse into an uninhibited neoliberal imagination utterly unencumbered by anything so economically unproductive as ethical qualms.

A sample:

"Emerging Nations have no minimum wage. Don Brash’s report at page 128 and 129 failed to mention what New Zealand should be lowering the minimum wage for - so 400,000 Filipino male and female workers could be imported to do jobs that New Zealanders will not do, such as domestic servants, farm labourers and cleaners. There is no reason for a New Zealand woman in the year 2025 to be doing housework when a Filipina can do it better and for next to nothing."

Whooah! They really should call the next big cyclone howling out of the South China Sea – "Hurricane Kate".

It makes one wonder where the equally outrageous, and equally radical, thinking of the Left has got to.

Ideally, radical ideas should make us raise our eyebrows, and gasp. Morgan’s plan for a Universal Basic Income, funded by a comprehensive Capital Tax, does all of that. And so does Odgers’ fantasy of Filipina maids slaving the kitchen, while the destitute sleep under flattened cardboard boxes in the street.

By giving us their visions of an economically and politically transformed New Zealand, Morgan and Odgers challenge our definition of what is possible. For minds locked into orthodox thinking this can produce the same effect as the interior designers of the BBC’s Changing Rooms: Yes, it’s the same roof. Yes, the space is enclosed by the same four walls. But, thanks to their radical imaginations – everything else is different.

That’s why Bill English’s dour counsels of caution are so profoundly disappointing. New Zealand needs to recover that intrepid willingness to experiment which, from the first Liberal Government of the 1890s, to Rogernomics in the 1980s, made this country the toast of the world.

Which is not to suggest that commentators like Fran O’Sullivan are right, and that John Key should simply consume his political capital in a firestorm of top-down reform – and the Devil take the hindmost. That’s not how Roger Douglas transformed New Zealand.

Rogernomics was sold to a New Zealand electorate already yearning for a fresh start, and a new direction, by infusing the Treasury’s neoliberal programme with just a small fraction of the faith Douglas himself possessed in its efficacy. In 1984, an intensification of Muldoon’s massive state intervention in the New Zealand economy was a political and economic non-starter. There had to be a better way.

In 2010, a return to the policies of 1984-1993 is similarly un-doable. Once again, the country is seeking a new direction.

It’s unlikely that very many New Zealanders would opt for Odgers’ vision of a New Zealand made-over in the image of Singapore, Hong Kong and the Peoples Republic of China. But Morgan’s ideas have already sparked considerable interest and enthusiasm across the political spectrum.

There’s an emerging public consensus that New Zealand’s existing fiscal machinery is indeed, as the Tax Working Group repeatedly insists, broken beyond repair. The political opportunity to respond to that consensus with a radical programme of fiscal reform is, therefore, just lying there waiting for whichever party leader possesses (if I may borrow O’Sullivan’s favourite expression) the cajones to seize it.

But in seizing this opportunity, the political parties must be careful to offer the voters a picture of New Zealand’s future in which they can see themselves forging ahead.

So, which vision is more likely to inspire the entrepreneurial instincts of all those Kiwi’s currently dependent on the State for their existence? Odgers’ vision of unemployed Kiwis competing with 400,000 Filipino immigrants in a labour market unprotected by even a minimum wage? Or, the vision of currently unemployed Kiwi workers banking their tax-free UBI – and then keeping 75 cents of every dollar they manage to scare-up on top?

Will the electorate go on voting for a system that inexorably nudges wage and salary earners into the top tax-bracket? Or, will they cast their votes in favour of a new fiscal deal based on taxing (at a very low rate) the value of their capital assets?

When I was a boy, growing up in North Otago, the countryside of was brown, and it carried sheep. Now it’s green, and full of cows.

The world can be changed - radically.

Ideas matter.

This essay was originally published in The Independent of Thursday, 10 December 2009.

Go West Young Man

Dr Andrew West

"NO ONE over 25 should be allowed to run this place." Says Dr Andrew West, the Chair of Innovation Waikato Ltd. Why? Because the Baby Boomers and their parents have made such a complete hash of the job.

In a provocative PowerPoint presentation to the Australasian Research Management Society conference held in Christchurch last week, West fleshed out his thesis with slide after slide of graphs and statistics illustrating New Zealand’s steady descent across nearly all of the crucial international indices.

"My generation of New Zealanders and the one before it have presided over a gradual, interminable decline in relative prosperity at least since 1950; that represents 60 years of retreat", says West.

"If our generation had been the management team our Board of Directors would have sacked us by 1965 at the latest. Somehow we have disgracefully hung on for a further 45 years."

"The remedy is simple", says West.

"Firstly we must ensure that our investment environment is neutral and that it does not favour relatively unproductive assets – land and buildings. A capital gains tax or land tax would assist that. Secondly, we need to introduce compulsory superannuation and focus a reasonable percentage of those savings into productive enterprise onshore. Opening up some of our best companies to mum and dads’ equity investment would help secure this. Then we need to abolish use of the price of money to regulate the economy, or, at the very, very least find other tools to supplement it. Singapore varies the savings rate to superannuation in this regard and it’s a very successful economy. So should we; it’s your money to be spent later rather than today, it will be invested in creating better jobs and it doesn’t disappear into an offshore bank reducing the balance of payments and destabilising the exchange rate in the process."

West insists that "there is nothing radical here". Most of what he proposes is "routine overseas". Our fundamental problem, he argues, is a business culture that is "speculative, impatient, intra-generational and focused on the balance sheet." What’s needed is a culture that’s "sophisticated, patient, inter-generational and focused on the profit and loss statement, that is, on consumers offshore who will pay us a decent whack for a new generation of knowledge-intensive goods and services."

　
THE LATE BRUCE JESSON used to say that while the National Party might be very good at governing for capitalists, only Labour knew how to govern for Capitalism. New Zealand’s economic history amply confirms Jesson’s thesis. Before attempting to change the New Zealand economy, it has always been necessary for Labour Party politicians to gain a thorough understanding of the way it worked. It’s why deep-structural economic innovation is, at least historically, more usually associated with the Centre-Left than the Centre-Right.

And precisely because social-democratic political parties are parties of reform, rather than revolution, their leaders have always sought out business leaders willing to think new thoughts and use new methods. Just think of the Fletcher family’s long history of co-operation with the Labour Party. Or, more recently, of Helen Clark’s attempts to forge a similar relationship with business leaders who were persuaded, like West, that New Zealand’s future lies in catching the "knowledge wave" and innovating "a new generation of knowledge-intensive goods and services".

Clark’s great failure, of course, was her inability to persuade her Finance Minister to either accumulate or deploy the public venture-capital required to expedite the "economic transformation" she was constantly promising to deliver. Cullen proved a master at sucking vast amounts of money out of the New Zealand economy. Sadly, he never quite mastered the art of squeezing it back in.

Well might West and his fellow innovators say: "It only takes vision and courage." Unfortunately, saying it has always been a great deal easier than doing it.

　
WHAT STOPS NATIONAL from doing it? That’s easy: relationships. As Rhys Derby never tires of telling us on TV, New Zealanders are a closely connected lot. And the degrees of separation within the nation’s ruling elite are even closer. It is, therefore, quite impossible for National Governments to enter office unencumbered by all kinds of favours, deals and quid-pro-quos.

Enmeshed in this vast and sticky web of obligations, National Cabinet Ministers cannot help pursuing erratic, and at times wildly contradictory, policy paths. The gains of the major carbon-dioxide emitters are only exceeded by the losses of the major forest owners. Looking after the dairy industry means placing the tourist industry at risk. Lowering the onshore costs of exporters (i.e. cutting wages, lowering taxes and slashing public spending) does nothing to lift New Zealand’s multi-factor productivity.

As Jesson observed: This is governing for capitalists – not Capitalism. Labour’s lack of intimate connections with the business community, usually construed as one of Labour’s most glaring weaknesses, is actually one of its greatest strengths.

　
AT THE PARTY’S annual conference there were clear signs that the caution and conservatism of the Clark-Cullen Era is slowly being replaced by a more open and creative approach to economic policy formation. It is time, one veteran trade unionist observed, for the Party to dispense with the neo-liberal shibboleths of the past decade and adopt a broader view of the State’s role in wealth creation. In the key economic policy workshops, Labour’s finance spokesperson, David Cunliffe, was relaxed and receptive to such suggestions. Phil Goff even included some of them in his keynote address. A future Labour Government will likely take a much more active role in economic affairs.

My suspicion is that the more active role contemplated by Cunliffe and his party activists will bear a very close resemblance to the role mapped out in West’s presentation. Not, I hasten to add, because Andy West is some sort of social-democratic Manchurian Candidate, but because his ideas are shared by scores of other progressive New Zealand business leaders: men and women who are desperate for something resembling a coherent economic programme from their political counterparts.

As West expresses it: "I have three young kids and I want them to stay in New Zealand in the long term. That is what motivates me … If my generation doesn’t decide to do it, then it’s time to pass the baton onto those who are 25 years and younger – who definitely will. After all, who else is going to pay for our retirement?"

This essay was originally published in The Independent of Thursday, 24 September 2009.

That Loving Feeling

A new historic compromise? Just as the post-World War II "historic compromise" between capital and labour ushered in a 30-year period of working-class growth and consolidation, the new relationship between the Pakeha and Maori capitalist elites (symbolised here by Tariana Turia and John Key) looks set to transform New Zealand's economic, cultural and political environment - and not, in this case, to the Left's advantage.

WAITANGI was a love-in this year. We must put to one side the assault on the Prime Minister by two Northland Maori protesting the National-Maori Party alliance. Their action was small, uncoordinated and aggressive precisely because it did not enjoy the support (much less reflect the generally positive mood) of the Maori people. For the first time in a long time there were no angry denunciations of colonial treachery, no argy-bargy with the Police, and no ambushes in the wharenui. Indeed, recalling the dramatic events of past Waitangi Days, this year’s love-in seemed positively unpatriotic.

What has happened in the five years since Don Brash’s notorious Orewa Speech inspired genuine mud-slinging and abuse? How is it possible that John Key can be welcomed onto our national marae with the same genuine warmth Norman Kirk received way back in 1973? What lies behind this extraordinary rapprochement between Maori and Pakeha?

At the root of all these changes lies the succession of Treaty settlements negotiated by both the National and Labour parties since the late-1980s. Though representing only a fraction of the value of the lands, forests and fisheries alienated from Maori control by the 19th Century colonial authorities, the capital base provided by the settlement process is, nevertheless, slowly transforming iwi corporates into key players in the New Zealand economy.

In less than a decade it is likely that the big iwi corporations will constitute this country’s largest domestically-owned business enterprises. Their holdings in the tourism, forestry and fishing industries will generate a growing proportion of our national income, and, even more significantly, as the legislation controlling the use of Maori land-holdings is made increasingly facilitative of Maori commercial development, the iwi corporates will be exerting a growing influence over New Zealand’s core primary production industries – dairying, meat and wool.

The explanation for this revolution in economic and, inevitably, political power is simple. The nature of iwi corporate structures renders them immune to takeover by foreign interests. The owners of the Maori corporations will always define themselves as tangata whenua before they define themselves as financial stakeholders in a commercial enterprise. That being so, they would no more countenance losing control of the tribe’s assets – its taonga – than they would countenance the loss of their people’s mana – which, in the world of the Maori, amounts to much the same thing.

Remarkably, it was the Right which first recognised the true significance of the Treaty settlement process: that tribal capitalism was destined to become the critical guarantor of capitalist relations generally in New Zealand.

National and Labour’s attempts to roll back the Treaty-settlement process – whether it be Helen Clark’s and Michael Cullen’s effective re-nationalisation of the foreshore and seabed, or Don Brash’s swingeing attack on Maori "privilege" – represented what was almost certainly the last, concerted effort on the part of the traditional, European elites to re-colonise the Maori-Pakeha relationship.

Maoridom’s response: the massive hikoi which descended on Parliament in May 2004, along with the simultaneous formation of the Maori Party; demonstrated the futility of this strategy. Wiser political heads, most notably in the Business Roundtable, realised that a more intelligent strategy, one based on the carefully managed assimilation of Maoridom’s economic and political elites into a broader, bi-cultural Aotearoa-New Zealand ruling class, has become Kiwi capitalism’s most urgent priority.

The skill with which Don Brash’s successor, John Key, has managed this recalibration of the Right’s relationship with Maori has been considerable. Not only has he been able to replicate the close ties National enjoyed with the Maori aristocracy throughout the 1950s and 60s, but by his assiduous courtship of the Maori Party MPs, he has also been able to harness the goodwill of the Maori Party’s supporters to National’s new deal in New Zealand race relations.

In doing so he has almost effortlessly parted the Labour Party from one of its most reliable bases of electoral support. The respect Maori culture bestows upon leaders, along with its infatuation with prestige, means that the Maori-National alliance has every chance of enduring well into the future. Underlying the new relationship will be the expanding amount of ideological common ground shared by Maori and Pakeha capitalists.

It is, indeed, a new day for the Maori people, not because, at the level of the typical working-class Maori family, life has got materially better, but because for the first time in a long time they feel that the colonial victors want (and need) more from them as a people than their sullen acquiescence at being last hired, first fired.

For that, John Key will win not only their support, he’ll claim their love.

The above is a slightly modified version of an essay which first appeared in the Timaru Herald, The Taranaki Daily News, The Otago Daily Times and The Greymouth Evening Star on Friday 6th February 2009.