The Dangers of Dominance
In 1980, I brought my young family for the first time to New Zealand to visit my homeland for a holiday. At the time, I had recently lost my marginal seat in the House of Commons and was working in current affairs television.
One of my clearest memories of that enjoyable holiday was the shock of discovering how much New Zealand was in thrall to a powerful – not to say domineering – Prime Minister. Robert Muldoon was at the height of his powers – and, as a student of both politics and the media, I was amazed to observe the excessive deference with which he was treated by the New Zealand media.
I particularly remember seeing him being interviewed in a television studio. One camera showed the interviewer addressing a question to him, and a second focused on the Prime Minister who answered the question by speaking directly into the camera – and therefore directly to each individual viewer – thereby ignoring the interviewer altogether.
No self-respecting studio director would have allowed a politician to get away with this. A simple two-shot would have shown the Prime Minister looking ridiculous as he talked to an empty space – at right angles to the person with whom he was supposedly having a conversation.
Muldoon was of course unusual in his ability apparently to terrify colleagues and opponents alike. But, how do we fare in 2011, when we have a Prime Minister who is, by virtue of his constant presence in the media, in some ways equally dominant?
John Key is of course a very different personality from Robert Muldoon. He is by nature a conciliator and seeker of consensus. But – just because he is nicer – that does not mean that he does not in his own way pose an equally serious threat to a full reflection of what should be a serious political debate.
There are times when it seems that nothing can happen, either internationally or domestically, so far as our media are concerned, unless the Prime Minister is on hand to comment on it or otherwise certify by his presence that it is indeed news. He seems to serve the roles, variously, of national leader, moral guide, social commentator, sports journalist, pub drinking companion, comedian – and even politician. There is scarcely a television news bulletin which does not feature his appearance at some point in one or other of these roles.
New Zealand is of course a small country with nothing like the range of media enjoyed by a larger country like Britain. When I was a senior British politician, the number of media outlets was so large and their appetite for comment and interviews so voracious, that I would habitually do two or three significant interviews every day – and many more as an election approached.
We cannot hope to have the depth and coverage of news and analysis they provide. But New Zealand’s political media have compounded the problems arising from their small numbers and limited resources by treating the Prime Minister as virtually their sole determinant of what is news.
Surprisingly, it may seem, the Prime Minister’s own colleagues may be among those who share that concern. As the Herald pointed out last week, his Cabinet colleagues have difficulty in shining when the Prime Minister is constantly available to take over anything newsworthy from them.
The consequences for our political system are more extensive than may be thought. It is not just members of the government who suffer from being denied a voice in the media. In a properly functioning democracy, politicians from all sides need to feel that they have a well-tried and reliable way of getting heard.
If that access is available only occasionally, both sides of the transaction get used to doing without it. Expectations are lowered. Understandings of what might be newsworthy are adversely affected by both media and politicians. Those who find that they are not regarded as worth listening to give up trying.
My own experience in the year or two before a general election in Britain was that I would be involved almost daily in a press conference – not just commenting on the news but trying to set the agenda and make the news as well. Both media and politicians got used to this. The result was a rich and varied diet of political news and views that helped to promote a healthy political climate.
With three months to go before our own election, I look in vain for that kind of debate. The deficiency is likely to get worse during the World Cup. It is not good enough to say that opposition politicians are not heard because they have nothing to say. How do we know?
No one can blame John Key for using his charm and likeability to the best advantage. The concern is whether the media have become so used to it that they are now constrained by it as well.
No one needs persuading of John Key’s value to his party and government, and it is inevitable and right that he should play a major part. But a strong and effective government needs more than a single foundation stone. The Prime Minister’s dominance, paradoxically, weakens his government and – by constraining the scope of the political debate – diminishes our democracy as well.
Bryan Gould
27 August 2011
This article was published in the NZ Herald on 30 August.
Austerity or Jobs?
Two issues – the turmoil on world stock markets, and the riots in English cities – have dominated news bulletins over recent days. Each is a significant news story in its own right, but the interesting question is whether they are in any way linked.
What looks suspiciously like the global financial crisis, Part II, is widely reported as a problem of government debt. Those many governments that have identified debt reduction as their top priority have seen the renewed crisis as vindicating their analysis. In reality, however, what it demonstrates is that they have got it completely wrong.
No one doubts that government debt in the US, the UK and the eurozone is higher than it should be and is a drag on economic recovery. Debt arises, however, because spending has outpaced revenue. As a matter of logic, therefore, there are two (and not necessarily mutually exclusive) ways of remedying the situation.
Governments can choose to focus on cutting spending, or they can try to increase revenue. These further economic shocks show that, in focusing exclusively on cutting spending, they have made the wrong choice.
The problem is that the level of debt is a function of the level of economic activity; the higher the level of economic activity, the more buoyant the government’s tax revenue. A government that has trouble in balancing its books in a recession, and that seeks to deal with that issue exclusively by cutting its spending, necessarily reduces the level of economic activity and – by depressing its tax revenue – makes the debt problem more difficult to resolve.
Sadly, we have seen, in the economies that have spawned the current crisis, extreme examples of this error. In the US, the Republican majority in the House of Representatives has been wagged by the Tea Party tail, with the result that the usually technical issue of raising the government’s debt ceiling became an issue of moral probity.
The Republicans not only resisted any increase in the government’s ability to borrow but refused to countenance any reversal of the tax concessions that George W. Bush made to the super-rich. A refusal to allow any tax increase, and an insistence on massive spending cuts in the short term – while the economy is still in recession – have rightly been seen by the credit rating agencies as a cause for concern.
In Europe, the problems are more structural. The eurozone lured into its membership smaller and weaker economies – and some not so small – that could not hope to live with monetary conditions established to suit the interests of the dominant German economy. Those countries were lulled into a false sense of security when money and credit were plentiful; but – come the recession – they are now denied the usual remedy of devaluing their currencies. The only course open to them is savage cuts and austerity.
The problem with austerity as a supposed remedy is that closing economies down in an effort to cut spending means that they cannot hope to repay the massive further borrowing they need just to keep their heads above water. Little wonder that European banks look nervously at the probably worthless securities they hold from deficit countries, that bank failures are now seen as a grim possibility, and that contagion threatens to spread not only throughout the eurozone but across the global economy.
The problem is less stark in the UK, which sensibly stayed out of the eurozone. In the British case, however, the damage is self-inflicted. The coalition government, elected last year, has insisted that giving priority to savage cuts in spending will give confidence to the money markets, a view thoroughly discredited by the US and eurozone experience, and – as the “confidence fairy” fails to materialise – by the increasingly obvious failure of the British economy to recover from recession.
The only fairy that has made its presence felt has been a very wicked one indeed. The recession – and, in particular, rising levels of poverty, high levels of youth unemployment, severe reductions in post-compulsory educational opportunities, and sharp increases in public sector rents – has certainly played its part in creating the conditions for last week’s shameful riots.
Each of the many thousands of individual acts of criminality should of course be condemned and punished. But it is pointless and wrong to ignore the fact that riots on this scale are a social phenomenon. Many of us will have been bewildered by the absence – in the television pictures broadcast around the world – of any decent impulse, any sense of social responsibility.
But the young people who behaved like a feral rat pack feel that they owe very little to a society that has banished them to its extreme margins and that treats them as worthless. This is not a question of making excuses, but an attempt to find an explanation for what is otherwise inexplicable to most people.
And before we bless our own good fortune in New Zealand, let us recognise that many of these conditions apply here as well. We have a government that talks of nothing but deficit reduction while the developed world’s worst youth unemployment is allowed to fester. Like misguided governments overseas, given the choice between austerity and jobs, we have made the wrong choice.
Bryan Gould
This article was published in the NZ Herald on 15 August.
GFC Part II
The collapse of Lehman Brothers in September 2008 ushered in the global financial crisis, and seemed to bring an era to an end. The orthodoxy that had prevailed for thirty years crumbled overnight. Markets, it was realised, are not infallible and self-correcting; private business skills and disciplines are quite different from those needed to run a whole economy; governments are not obstacles to economic development but its indispensable guarantor.
Suddenly, lifelong sceptics sought salvation in Keynesian prescriptions, for fear that the crisis would turn into full-scale depression. The taxpayer shelled out billions to save the global economy from total collapse.
The prescriptions worked. The depression was averted. The banking system was shored up. We lived to fight another day.
But the stimulus to make good the sudden collapse in global liquidity took us only so far. It was enough to steady the ship but not enough to prevent the vessel from foundering in the longer term.
Most of the taxpayers’ money went directly to the banking sector where it was used to re-build balance sheets and resume the payment of large bonuses. Surprisingly little went to re-build the economy, with the result that employment, investment and production continue to languish. But it was not only the banks that were keen to return to business as usual.
The global establishment quickly – and without waiting for the recession to be over – put Keynes’ General Theory of Employment, Interest and Money back on the shelf. In a surprisingly short time, the old orthodoxies were re-asserted.
Paradoxically, the main lesson drawn from a crisis that had been created by private sector failure and averted only by government intervention was that the role of government should be wound back. It was constantly asserted that governments should behave like private individuals or companies and must cut back their spending, irrespective of the deflationary impact on economies still struggling with recession.
The Keynesian lesson that governments have a responsibility for the economy as a whole and not just for their own finances was quickly forgotten. While some economies – like China and, on the back of a mineral commodity boom, Australia – continued to prosper, most others plunged willingly into austerity programmes that, in effect, closed down their economies.
The theory was that austerity was needed in order to preserve credit ratings and to reduce the need to borrow. The money markets, it was calculated – the same money markets that had created the crisis in the first place – had to be placated. If they did not have confidence that deficits would be reduced, they would be less willing to lend.
But, like most fairies, the “confidence fairy” has failed to materialise. Despite doing what the money markets are assumed to want, economies continue to languish. Austerity continues to do its depressing work and remains the order of the day.
In Europe, countries like the UK press headlong on into austerity programmes, even while the economy is stalling and less ideologically committed commentators look in vain for anything that might bring the recession to an end.
The financial crisis in Europe is of course exacerbated by the disaster that is the eurozone – a project that subjects weaker economies to monetary conditions that are dictated by much stronger economies, that denies to them the usual escape route of devaluing the currency, and therefore requires them to deflate savagely so that they are less and less able to afford – let alone repay – the huge borrowings that are needed simply to keep them afloat.
How is debt to be repaid and deficits reduced by economies that are going backwards? Can we be surprised that the world economy is increasingly threatened as the contagion spreads from Greece, Portugal, Ireland, and Spain to a growing group that includes Italy, Belgium and possibly others?
The picture is equally depressing in the United States. An expensive but only partial stimulus programme slowed down but did not solve the crisis. Unemployment continues at a high level and the recession persists, yet – reflecting an almost religious zeal – a minority of legislators has ignored those pressing problems and artificially elevated the raising of the government’s debt ceiling into the USA’s number one economic problem. The consequent US credit downgrade leaves the real problems more intractable than ever.
Almost everywhere we look, in other words, policy-makers seem determined to ensure that the conditions for recovery are displaced by the requirements of a failed ideology. Can we wonder that even the architects of these errors, as they survey the results of their handiwork, have lost confidence in the outcomes, and that another round of crisis is threatened?
We in New Zealand will of course be directly affected if the global financial crisis is given a new lease of life. It may be thought that there is little we can do to influence the situation. But we cannot escape responsibility for making our own small contribution to the general malaise.
We have – like so many others – treated unemployment, investment and productivity levels as of little importance and denied that government has any responsibility for them. We have eschewed intervention and treated the reduction in a modest government deficit as our over-riding priority. By placing ideology above common sense, we have played our own small part in prolonging an avoidable disaster.
Bryan Gould
7 August 2011
The “Best” System?
In 1974, as a newly elected MP for Southampton Test in the British Parliament, I was interrupted mid-speech on one occasion by a Liberal from the benches opposite. “How can you claim to speak for the people of Southampton,” he demanded “when you got only 39% of the vote?”
“Who would you replace me with?” I rejoined. “With the Liberal candidate, who got only 23%?”
That summed up for me a powerful advantage of the first-past-the-post voting system. If the purpose of a general election is to send a representative for each community to Parliament (and a House of “Commons” is historically a house of “communities”), it is hard to go past the candidate to whom that community gave more votes than any other.
The other great virtue of first-past-the-post is that it almost always produces a clear-cut winner. This is valuable in itself, but it also has a couple of further advantages. It means that the voters themselves – rather than deals done by the politicians after the votes are counted – decide the result. And the voters have that greatest of all powers in a democracy – the ability to throw out one government and to replace it with an identifiable and alternative government-in-waiting.
These virtues of certainty and predictability could be contrasted with the confusion and uncertainty that so often followed general elections in countries that used proportional representation systems. It seemed often that the voters played only a bit part and that the real decisions were left to the manoeuvrings of the politicians after the election.
In some countries, this meant that – however often the voters were asked – the outcome did not change. Post-war Italy, for example, had a record number of general elections, but the voters could never get rid of the Christian Democrats who simply came up with differing combinations of themselves and minor parties. In other countries, by contrast – and Israel was for a time a prime example – the results were completely arbitrary, with small, extreme parties often deciding who should form the government.
For all these reasons, I remained committed while in Britain to the traditional first-past-the-post system. Indeed, I once sat on a Commission that was asked to recommend any changes that might be needed to the British electoral system. I confess that I was instrumental in ensuring that the Commission made no such recommendation.
And I recall that, at the time of the 1993 New Zealand referendum on MMP, and while I was still in the UK, I was telephoned by the organisers of the anti-MMP campaign and asked for advice and a statement of support for their position. I would have voted against MMP in that referendum.
Eighteen years later, I am older and, I hope, wiser. My reasons for seeing virtue in first-past-the-post seem to me still to be valid, and my concerns about the dangers of proportional representation still carry weight.
But my experience of MMP has given me a greater appreciation of how its advantages stack up against the downsides of first-past-the-post. And what I now understand is that no system is ideal. Each has its strengths and weaknesses, and delivers its own particular benefits and drawbacks. In the forthcoming referendum, the question is not so much which system is “best” but rather, what do you want your system to deliver?
MMP supporters have always promised that it will deliver a fairer and more representative parliament and a more effective voice for otherwise unrepresented minorities. That promise has largely been delivered. And MMP has also meant to an end to what Quintin Hogg famously called the “elective dictatorship” – the power of a party with a parliamentary majority (even if it obtained only a minority of the total votes) to do whatever it wants without regard to anyone else.
MMP has meant that major government parties have been forced to take a more inclusive and conciliatory approach to other views and interests. They have seen the need to negotiate for support before introducing legislation, rather than relying on a parliamentary majority to ram it through – and that has meant, on the whole, better legislation and a more constructive parliament.
But the major surprise is that, even with these advantages, MMP has not denied us a fairly straightforward choice between broadly right-of-centre and left-of-centre governments. We get, in other words, the best of both worlds; we have made the promised gains in the sense of a more equitable representation without sacrificing our ability to choose between readily identifiable options as to who should form the government. And we still have that essential power to throw one government out and replace it with another.
This is not to say that MMP should be uncritically supported. No one watching the machinations in Epsom, for example, could say that change is not needed. I, for one, remain unhappy at the power exercised by party machines in deciding who should get into parliament via the party lists. And we need to watch carefully that fringe parties do not gain disproportionate influence over what our governments do.
But, in deciding which way to vote in the forthcoming referendum, we can at least applaud the genius of the New Zealand electorate who have ensured that, without achieving anything like perfection, we have at least created a system that works pretty well.
If Things Are So Good, Why Are They So Bad?
It is a measure of how subdued is the national mood and how modest are our current ambitions that we expect so little of our elected governments. Even nearly four years after our own home-grown recession began, we are, for example, expected to acclaim as a triumph of economic management the first signs of a patchy and fitful recovery that still leaves us well short of 2008 levels.
We might have expected much better. We were largely insulated from the direct effects of the global financial crisis. Our two major export markets remained surprisingly buoyant. And we have enjoyed record high commodity prices.
Yet, to hear our leaders tell it, even our woes are a sign of success. The soaring kiwi dollar, we are assured, shows that foreign investors see us as a “safe haven” – a claim that sits oddly alongside the repeated warnings about the risk of a credit downgrade and of the need to wind back public spending so as to reduce a rampant government deficit.
The truth is that the soaring dollar reflects a conviction on the part of overseas speculators – based on 25 years of experience – that our governments will go on paying them a premium and that the short-term demand for our currency thereby engendered will produce a capital gain as well.
This is entirely consistent with the growing evidence that, as the recovery at last manifests itself, we will use the opportunity to repeat the recurrent mistakes of the past 25 years all over again. We will continue to treat any prospect of growth as an inflationary threat, to be knocked on the head by a combination of high interest rates and an overvalued currency. We will continue to express puzzlement as to why – in this policy framework – productivity languishes and our economic performance falls behind that of our competitors.
There are occasional flickers of interest in a change of policy. Geoff Simmons, for example, points to the prospect of using tighter rules for bank lending as a counter-inflationary tool and as an alternative to high interest rates. But he also warns that the Reserve Bank – with its single focus on inflation (and it is, after all, a bank) – is unlikely to change course.
And governments, of course, particularly at this stage of the electoral cycle, may wring their hands at the high dollar, but will secretly welcome the consequently cheaper imports – a short-term advantage that helps to holds down a soaring cost of living through to election day but that is bought at a huge cost to our long-term economic performance.
It could be said that these problems are like old friends; they may be a nuisance and somewhat boring, but they are at least predictable, and it is true that there is a certain comfort to be drawn from getting what you expect. A right-of-centre government could be expected, for example, to stick closely to monetarist theory, and to pin its hopes for an improvement in economic performance on tax cuts for the well-off, asset sales, cutting government spending, taking a tough line on benefits, and seeking free-market solutions to most problems.
That is exactly of course what we have got and presumably what people voted for. In the past, after giving these measures a fair trial, they have judged that they have not worked and then voted to get rid of them. This time, the policies look like surviving for a little time yet. It is not that the policies are different – merely that the salesman is better.
But there is one consequence of current policy that even the most brilliant salesmanship cannot so easily sell to the public. The now unmistakable evidence of rising poverty, with children as the most vulnerable victims, is the inevitable result of widening inequality, higher unemployment, falling real incomes for the poor, less effective public services, and rapidly rising living costs.
The myth that families choose poverty as a lifestyle option can only be sustained in a society that is divided – where the well-off are comfortably shielded from the realities of life for the worse-off.
One of the advantages of being well-off is that it is possible to buy your way into a better neighbourhood, to go to better schools, to mix with better-off work colleagues and friends.
You do not then need to venture into the poorer neighbourhoods, to sit around the table to share inadequate and poor-quality food or to feel the cold and damp in overcrowded bedrooms. You do not feel the humiliation of being rejected for job after job or having to present yourself for close questioning as the condition for receiving a weekly benefit which – in a well-off family – might be entirely spent on a single meal for family and friends at a good restaurant.
Individual instances of hungry children might be dismissed as cases of fecklessness and inadequate parenting. But a rising tide of such children, whose health, education and very lives are threatened by hunger, is a social phenomenon with widespread social and economic causes. It might be – indeed, is – a predictable consequence of current policies, but that, surely, does not make it acceptable? Predictability in this case should not produce resignation but rather a clarion call for action.
If things are so good, why – for so many of us – are things so bad?
Bryan Gould
27 July 2011
This article was published in the NZ Herald on 2 August.