• The Voters Deserve Honesty

    When Don Brash failed by a hair’s breadth to become Prime Minister in 2005, it could be said that New Zealand dodged a bullet. Despite his undoubted intelligence, Brash would have been a disastrous Prime Minister, polarising opinion and splitting the country in the cause of extreme social and economic policies.

    I was certainly not alone in welcoming the advent of John Key, who struck me as a much more moderate figure who – though no doubt serving the interests of those who put him in power – I hoped would not do too much damage to New Zealand’s great traditions of social justice and equal opportunity.

    John Key himself was quick to understand the potency of an appeal to moderate opinion. He has courted an image as a politician who is difficult to categorise; we saw that facet of his political personality again in his announcement last week of plans to raise educational standards by paying top-performing principals and teachers to spread best practice.

    That initiative is typical John Key; on closer examination, it may well be asked whether this is the best way to spend $359 million and whether there is any established causal connection between incentive pay and improved educational performance, but it sounds good and is unlikely to cause any actual damage, and the Prime Minister was able to tout it as a step towards an egalitarian society.

    This occasional foray into his opponent’s political territory is all of a piece with the pragmatism shown by the Prime Minister in musing about potential allies if he seeks to form a government at the end of the year. It seems that the actual policies don’t matter; it is only the votes that count, provided they add up to enough to keep him in power.

    So, he is happy to contemplate a deal with the Conservative Party, about whom little is known other than the flaky views of its leader. Both Act and United Future remain in the frame, despite the problems both they and their leaders have endured – problems that should surely have disqualified them from any role in government. The Maori Party will again be welcome, notwithstanding the unhappiness of their voters, while the issues of principle that supposedly excluded New Zealand First have miraculously faded away when the parliamentary arithmetic demands it.

    So far, the voters seem not to mind too much that the Prime Minister gives such a convincing performance as a political chameleon, changing colour from one issue to another – indeed, depending on who he is talking to – from one conversation to another. For the moment, they seem ready to forgive him the ducking and diving; but there may come a time when they grow tired of the sharp tactics and demand something more principled.

    But, in any case, the flexibility – not to say slipperiness – apparently demanded by MMP politics conceals a very different truth. John Key’s carefully cultivated image as a pragmatist is a mask for a much more ideologically driven politician. It has suited him very well to pose as open-minded and ready to consider all options, especially by contrast with his predecessor, but in reality he is just as committed to partisan politics as Don Brash.

    Whereas Don Brash, however, ensured that anyone who would listen would know what his views actually were, John Key is much more circumspect. Perhaps he genuinely does not see himself as an ideologue – that he even believes, in the face of all the evidence, that his government really is a defender of an egalitarian society – but there is a growing gap between image and reality.

    It has surely become more and more evident, especially in his second term, that his starting point is always the same simple inquiry – what serves the interests of big business? This may or may not be described as an ideological bias, but it is certainly in practical terms a sure-fire recipe for ensuring that the interests of ordinary people, and of wider society, are always subordinated to those of business – and, for preference, of overseas business and the bigger the better.

    The result? An economy that is increasingly dependent on a single domestic industry (and the income stream even from dairying, too, is now passing into the hands of foreign owners), and on overseas mining and petroleum companies keen to dig up and drill for whatever they can find, leaving us to pick up the pieces when they leave.

    The price we pay is a polarised society in which increasing numbers of poor and dispossessed have to make do with the occasional well-publicised sop to give the impression that the government cares, while the proportion of national income going to profits (which are increasingly repatriated overseas) grows rapidly at the expense of wages.

    The Prime Minister’s apparent pragmatism conceals, in other words, a deliberate policy that has produced a widening and damaging gap between haves and have-nots, as destructive in economic as it is in social terms. He should stop dissembling and put that policy and its outcome clearly before the electorate; at least Don Brash ensured that voters could make a clear and properly informed choice.

    26 January 2014

  • The Don and Rodney Show

    Rodney Hide’s declaration of allegiance to the man who had just cut his political throat was, I suppose, only marginally less bizarre than Don Brash’s compulsion to lead something, anything. One suspects that, if he had been thwarted in his drive to lead a political party, he would have announced his intention to found a new country, so that he could lead that instead.

    Yet the extraordinary spectacle of the Don and Rodney show has a wider significance than the question of which of two egocentrics should lead a minor party on the margins of politics. Ever since the Labour Party was taken over in the mid-1980s by extreme “free-market” ideologues, New Zealand politics has struggled to recover some sense of what political labels really mean.

    It is in everyone’s interests – and is certainly an essential element of a healthy political system – that politicians should take up positions that are consistent with their true beliefs and policies. The Labour Party has at last re-established a recognisably left-of-centre stance, which the voters – whether they support it or not – can identify and understand.

    Don Brash’s migration to the leadership of the Act party is similarly helpful. It means that he is at last positioned where he should have been all along, and can now openly make common cause with his old mentor, Roger Douglas.

    It also provides confirmation, if we needed it, that his brief leadership of the National party was an aberration – the product of a “hollow men’s” conspiracy, not just against the voters in general but against the National party itself.

    It was, presumably, his success (albeit short-lived) in hi-jacking the National party – backed as it was by wealthy but largely undeclared co-conspirators – that explains his assumption that he could repeat the trick with Act. We should all be grateful that at least we all now know where we – and he – now stand.

    Most of us will have been open-mouthed but relatively detached observers of recent events. For the National party, however, there may be real consequences of the change in Act’s leadership.

    On the one hand, if Don Brash is right in arguing that his leadership will provide a lifeline for an Act party that was otherwise in a terminal condition, John Key will have good reason to welcome the change. The deal whereby an Act success in holding on to Epsom provides National with five or six additional support MPs will clearly be advantageous in the event of a close election result this year.

    On the other hand, a close link in the voters’ minds between John Key and Don Brash may not be helpful to National’s chances with voters beyond the boundaries of Epsom. John Key’s cautious reaction to the prospect of Ministerial office for Brash, and his rejection of any possibility that the new Act leader might take an economic policy portfolio, show that he is all too aware of the possible risks to National of a higher-profile Act leader – particularly when that leader is Don Brash.

    The risk is all the greater when the voters know much more now about Don Brash’s true politics than they did. Many voters will have concluded by now that we all had a lucky escape when Brash – in his National guise – was narrowly defeated in the 2005 general election. They will not welcome the prospect of a Brash re-entry to front-line politics through an Act back door.

    That is especially true at a time when New Zealand voters are being asked to re-evaluate their MMP voting system (interestingly, at the same time as British voters will also vote on a possible proportional representation system).

    Proportional representation inevitably throws up the issue of what role could and should be played in parliament and in government by small, perhaps extreme, parties on the fringes of politics. The fear of those who support first-past-the-post is that PR will allow extremists to exercise an undue influence over the government of the day.

    The good sense of the New Zealand electorate has, however, done much to lay those fears to rest. MMP has largely delivered the more representative parliament that was promised, with better representation of women and minorities, and has ushered in a style of government that operates more by negotiation than by diktat.

    And this has been achieved without sacrificing the central virtue of a first-past-the–post system – the voters’ ability to throw one lot out and replace it with another. The New Zealand electorate still chooses between a right-of-centre and a left-of-centre government, with a continuing assurance that small, extreme parties will not be allowed to exercise a disproportionate influence.

    A major party that allowed that assurance to be called into question could pay a heavy price. John Key cannot let it be thought that a vote for National is a leg-up for Don Brash. The back-stabbing intrigues of minor politicians should not be allowed to mean the intrusion of extreme policies into our mainstream politics.

  • We Owe the Brash Task Force A Debt of Gratitude

    Don Brash and his Task Force, with their bizarre ragbag of extreme nostrums from thirty years ago, have – in at least one respect – done us all a favour. We now know that we can safely consign to history the doctrines that have dominated our economic policy for so long. If we are to make any sense of the goal of closing the gap with Australia, we need to look forward rather than backwards.

    Even without the Task Force, it has become clear that the landscape of economic debate has changed substantially. The global recession has forced an “agonising reappraisal” of what works and what doesn’t. Phil Goff recognised this when he proclaimed that the consensus of the last 25 years was ended; and the Prime Minister was not far behind him in quickly acknowledging that the Brash Task Force report would be largely ignored.

    So, the search is now on for a policy agenda that will make the difference. In that search, there is an immediate obstacle to overcome. We have been told for so long that “there is no alternative” that we are inclined to think that any departure from the former orthodoxy will require something dramatic and revolutionary. Nothing could be further from the truth.

    The effective and sensible course that this country should now follow requires nothing more than the application of common sense and tried and true policies. It is only the absence of any real debate in New Zealand about economic policy over the past 25 years that has made them seem unfamiliar.

    The first step we should take is to re-focus our macro-economic policy. The Brash theory has been that, if we focus exclusively on controlling inflation and leave the rest to market forces, everything else will fall into place. The problem has been that the counter-inflationary instruments we chose – ever higher interest rates and a consistently overvalued exchange rate – distorted the operation of market forces and did enormous damage to our productive economy. Little wonder that, by loading the dice against ourselves so that we made it difficult to develop export markets or to resist import penetration, we fell behind those who did not handicap themselves in this way.

    What we need now is a better balanced, broader-based policy which treats inflation not as the sole focus of policy but as just one of the targets we should aim at. We need a macro-economic policy that aims at full employment, so that we fully use our resources, and above all maintains and improves the competitiveness and therefore profitability of New Zealand industry.

    This requires both monetary and fiscal policy to be integrated so that a stable level of demand is maintained and New Zealand’s competitiveness in world markets is improved. Interest rates and the exchange rate should be allowed to do their proper job and set accordingly. Government has a role to play in doing those things that private industry finds difficult. Other countries, like Singapore – more successful than we have been – have shown how this is done. Only if we can set ourselves on the path of export-led growth can we expect to arrest the long decline in our comparative economic performance.

    Oddly enough, this approach places more faith in the capacity of the market to show the way forward than the Brash-inspired distortions implicit in manipulating interest rates and the exchange rate for counter-inflationary, non-market purposes for which they are not intended. Only if our producers – in industry and agriculture – are able to compete effectively in world markets, including our own, can we expect them to make a return which will finance the investment in our productive capacity which is the key to better productivity and rising living standards.

    None of this means that we should abandon the fight against inflation – far from it. To stop prostituting the whole of macro-economic policy to the single, narrow task of controlling inflation does not indicate that we need not bother about it. It simply means that we should use all the instruments of macro policy for wider purposes – the health of the economy as a whole – and deal with inflation through measures specifically targeted at inflationary pressures.

    There is no shortage of appropriate measures available, if we are prepared to analyse carefully what stimulates inflation. It is increasingly clear that, with the prudent management of public finances over the last decade and the demands necessarily now made on public spending in recessionary times, it is not – as Don Brash continues to maintain – government spending that is the culprit.

    What we need to target is the excessive investment in non-productive assets, like housing, that is both the consequence and cause of the bias in our economy against productive investment. The fastest- growing element in our domestic money supply has been bank lending on housing. That is where we should be concentrating our counter-inflationary attention; it is no accident that the tax treatment of housing as an investment and the restraint of bank lending are rapidly moving up the agenda.

    A less doctrinaire and more commonsense approach to economic policy would, as a start, give us a level playing field on which to take on the Aussies – and, as we know, that’s all we need to give us a fighting chance.

    Bryan Gould

    6 December 2009