Transformational Politics Demands Transformational Economics.

Change Agents? Grant Robertson’s economic orthodoxy bodes ill for the expectations of Labour, NZ First and Green Party followers that Jacinda Ardern will, indeed, preside over the “transformational” change promised in her new government's coalition agreement.

LABOUR’S ECONOMIC ORTHODOXY presents its supporters with an A-Grade conundrum. If all you ever do is all anyone has ever done, then what are the chances that anything will ever change? Something in the Marxist nucleotide of Labour’s DNA continues to carry forward the message that economics and politics are inextricably linked. Stuff up the former and the latter will swiftly follow suit. That being the case, Grant Robertson could be Labour’s worst enemy.

Not that he should feel too badly about that, because Labour finance ministers have a well-established historical reputation for being their party’s worst enemies.

One has only to think of Philp Snowden, Chancellor of the Exchequer in Britain’s first and second Labour governments. While no one could fault the old man’s dedication to Labour’s working-class voters, his utterly conventional economic ideas left him helpless in the face of the Great Depression. In the words of his biographer, Keith Laybourn: “He was raised in an atmosphere which regarded borrowing as an evil and free trade as an essential ingredient of prosperity.”

It was Snowden’s unwavering faith in these nineteenth century liberal orthodoxies that broke his party and discredited his government. The people who paid the price for their Chancellor’s intellectual rigidity were (as is so often the case) his beloved working-class.

Things might have gone the same way here in New Zealand just a few years later had the proposals of Labour’s economically orthodox leaders (Michael Joseph Savage, Peter Fraser and Walter Nash) not been voted down by the more radical members of their party’s caucus.

It was thanks to this latter group that Labour went into the 1935 election with an economic policy calling for the “immediate control by the state of the entire banking system; the provision of currency and credit to ensure adequate production, guaranteed prices and wages; readjustment of all mortgages” – along with a policy of state-fostered industrialisation which, today, would be described as “economic nationalism”.

How very different these policies were from the policies of Roger Douglas, the Labour Finance Minister who championed the same laissez-faire economic policies implemented by Philip Snowden between 1929 and 1931. “Rogernomics” radically transformed New Zealand’s economy and politics – and very nearly destroyed the New Zealand Labour Party!

The two politicians most responsible for rescuing Labour from political oblivion were Helen Clark and Michael Cullen. In a double act of extraordinary sophistication, Clark and Cullen kept hold of the political reins for nine years by cleverly masking both the true extent of their government’s economic success, and the political opportunities it opened-up.

As Finance Minister, Cullen proved a master at making his burgeoning revenue surpluses, which might have funded a much more ambitious social-democratic programme, disappear.

Some of Cullen’s billions were invested in the special superannuation fund that still bears his name. Even more went into Working for Families, the massive employer subsidy which Cullen introduced in preference to allowing the trade unions to extract the money from corporate shareholders. Most of Cullen’s surplus billions, however, were directed towards paying down Crown debt.

The opportunity cost of these fiscal diversions would only become apparent towards the end of the next decade, when New Zealand’s physical and social infrastructure began to, quite simply, fall apart.

That Michael Cullen has for many years been Grant Robertson’s political patron and mentor bodes ill for the expectations of Labour, NZ First and Green Party members that Jacinda Ardern will, indeed, usher in the “transformational” change promised in the new government’s coalition agreement.

Even before he received his ministerial warrant, Robertson was at pains to bind Labour to precisely the same diversionary economic strategies pioneered by Cullen.

A Finance Minister who repeatedly swears allegiance to his own “Budget Responsibility Rules” is unlikely to champion the sort of creative and progressive economics that makes for creative and progressive politics.

Unless, like Savage, Fraser and Nash; Ardern, David Parker and Robertson are reined-in by a Labour caucus determined to fulfil their government’s “transformational” ambitions, then the long-deferred renovation of New Zealand’s disintegrating institutional and physical infrastructure will not receive the resources it requires.

A transformational government cannot be brought into being except by means of transformational economics. For all his faults, Roger Douglas understood this fundamental proposition. Progressive voters need a Finance Minister whose economic policies are as bold as his government’s political promises.

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, 15 December 2017.

Kindred Lizards

Bleak Evangelism: Last weekend David Parker's Presbyterian hymn to egalitarianism brought Labour's election-year congress to its feet. But there is little in his Alternative Budget to justify the standing ovation he received. Philip Snowden's messianic Methodism, similarly, could make grown men weep, but his utter failure to deal with the Great Depression made his name a by-word for laissez-faire retrenchment and ideological betrayal.

THERE ARE NAMES in every culture which – for good or ill – summarise a person’s character. In our own, branding someone a “Judas” vilifies him as irretrievably as calling someone else “Mother Teresa” extols her.

 

In the dwindling sub-culture of the English-speaking labour movement, the mention of just one name, Philip Snowden, continues to conjure-up the spectres of all those Labour finance ministers whose limited imaginations, excessive caution and unreflective orthodoxy condemned their parties to electoral disaster and their working-class supporters to years of undeserved and unmitigated hardship.

 

Snowden, himself, was a peculiar mixture of fiery Methodist evangelism and deeply orthodox Gladstonian liberalism. His personal vision of “socialism” (if that is what it was) consisted almost entirely of a redeemed Utopia brought into being by unrelenting moral struggle:

 

“But the only way to regain the earthly paradise is by the old, hard road to Calvary – through persecution, through poverty, through temptation … And then the resurrection to the New Humanity – purified by suffering, triumphant through Sacrifice.”

 

Sounds lovely!

 

Snowden’s blackened reputation dates from his second stint as Chancellor of the Exchequer under the Labour Party Prime Minister, Ramsay MacDonald; the period encompassing those three fateful years between 1929 and 1931.

 

As the Capitalist world spiralled into the most profound economic crisis of its history, Snowden clung to the orthodoxies of the vanished Victorian era. In the words of Keith Laybourn, his biographer: “He was raised in an atmosphere which regarded borrowing as an evil and free trade as an essential ingredient of prosperity.” Along with his advisers at the Treasury, Snowden dismissed out of hand the stimulatory formulae of the rising economist, John Maynard Keynes. This prompted Winston Churchill’s withering judgement: “The Treasury mind and the Snowden mind embraced each other with the fervour of two long-separated kindred lizards.”

 

To balance his Budget, Snowden insisted that the benefit paid to the rapidly swelling ranks of the unemployed be cut. His Cabinet colleagues jibbed at condemning so many of their party’s supporters to abject poverty. The Government split. MacDonald and Snowden invited the Tories (and what remained of the Liberals) to form a “National” administration. A general election ensued which reduced Labour’s seats in the House of Commons from 228 to 46.

 

For decades afterwards, whenever British Labour Party members came to the line in The Red Flag about cowards flinching and traitors sneering – it was the betrayals of MacDonald and Snowden that they recalled.

 

In New Zealand Labour Party circles it is, of course, the name of Roger Douglas that produces the most visceral reaction. And, when it comes to betrayals, “Rogernomics” holds pride of place. What Kiwi Labourites are less willing to concede, however, is that the neoliberal ideology introduced by Roger Douglas in the late-1980s continues to constitute (the rank-and-file’s antipathy notwithstanding) the orthodox economic ideas of the Labour Party.

 

Philip Snowden: The coward who flinched, the traitor who sneered.

It is in this regard that the party’s current finance spokesperson, David Parker, most closely resembles Philip Snowden. Like Snowden, Parker has made himself the guardian of neoliberal economic orthodoxy.

 

“Under our alternative budget”, Parker told last weekend’s party congress, “everything is paid for, plus we are in surplus. Let me repeat that. Everything is paid for, plus we are in surplus.”

 

As the historian A.J.P. Taylor remarked of Snowden’s first Budget: “it would have delighted the heart of Gladstone.”

 

But, as the economic commentator, Rod Oram, pointed out last Sunday, Labour’s tight spending cap – $1.5 billion over three years – and its ‘ring-fencing’ of health and education expenditure “means it will have to cut funding in some other areas. It needs to say where in the election campaign to prevent a voter backlash later.”

 

The other thing Parker needs to explain is how his economic programme contributes to his cherished dream of a more equal New Zealand.

 

“My political heart lies in something that has become a quaint notion these days, the notion of an egalitarian society.”

 

But lifting the top tax rate by 3 cents will not restore a New Zealand that is “not just about equality of opportunity. It’s about decent outcomes as well.” To house the working poor will require more than Kiwibuild. Just as the elimination of child poverty will require massive increases in welfare spending. Are these included in Parker’s boast that “everything is paid for”? Or, when Parker talks about making “tough choices” and expresses his regret that “not all the policies we would like can be funded”, are these the sort of policies he’s talking about?

 

They say that, on the stump, Snowden’s messianic Methodist rhetoric could make grown men weep. And last weekend, Parker’s Presbyterian hymn to egalitarianism brought Labour’s congress to its feet. Even so, when you’ve absorbed the detail of Parker’s Alternative Budget, it is Churchill’s image that lingers: Of Parker’s mind and Douglas’s mind embracing like “kindred lizards”.

 

This essay was originally published in The Press of Tuesday, 8 July 2014.