Law Of the Jungle: Is Ours a Market Raw in Tooth and Claw?

Listener 20 June 1998.

Keywords: Governance;

Given East Asian financial corruption, we may ponder on the probity of New Zealand. It is often argued that government interventions generate manipulation and corruption. Compared to other rich OECD nations, New Zealand’s market interventions before 1984 were high (although by Eastern European and developing world standards they were not). But even by OECD standards, New Zealand’s level of corruption seems to have been low. Of course there was some, not all of it was exposed. Even so a myriad of opportunities were not seized upon.

The model of economic behaviour used to justify the post 1984 reforms says they should have been. The 1987 Treasury post-election briefing Government Management argued that economic behaviour was “opportunistic”. Why then did individuals not seize more of the opportunities presented to them by the interventions? Many will answer that we function on a degree of honesty and personal integrity, or that the system had non-economic sanctions which encouraged them. They are contradicting the 1987 Treasury theory.

Individuals, it argued, were opportunistic and acted mainly in their self interest, so they could not be assumed to act in the public interest unless they were made “accountable”. In fact most of us function according to personal and professional ethics, modified by short term self interest. Of course there is opportunism, but it is rarely rampant.

Ignoring this, the 1987 Treasury devised a system of public sector accountability which over-rode personal responsibility. No longer was one expected to do the best job possible. Instead contractual obligations were set down. Fortunately most public servants have maintained their personal integrity, although Alan Schick in his report The Spirit of Reform, suggests the accountability undermines the integrity of the old system, for it may diminish “the trust that comes from serving others, the sense of obligation that overrides personal interest, the professional commitment to do one’s best.”

Oddly, the shift from the intervened economy to a market one, seems to be associated with a rise of opportunism. That is the message in the writings of Bruce Jesson, Tony Malloy, and Ian Wishart. (I am reading the manuscript of a Keith Ovenden novel which makes the same point.) The interest here is not whether the law has been broken. Rather there appears to have been people acting within the law in a manner which many think unethical. Convicted Auditor-General Jeff Chapman argued he did not break the law. If the courts had agreed with him, many people would still have considered he let opportunism override his professional ethic. They feel similarly about the activities covered by the Winebox enquiry.

A world in which opportunism dominates ethics is not a pleasant one. Those who succeed become aware that the public’s assessment of their mana does not correlate with their wealth, nor does its assessment of the capitalist jungle correspond to the successful’s aspirations for social status. They seek to moderate the perception of the market raw in tooth and claw. There was much mirth over a Treasury-Institute of Policy Studies project which argued that the ability of individuals in a community to trust one another was a key component of economic progress. As so often, it was the latest fashion, arising out of Francis Fukiyama’s popular book Trust: The Social Virtues and the Creation of Prosperity. But the underlying analysis comes from the same stable as Government Management, in which trust is of instrumental advantage because it promotes material prosperity: honesty, personal integrity and ethical behaviour are not fundamental virtues worth pursuing in their own right.

Cereals manufacturer Dick Hubbard, in a tradition of Quaker businessmen and Methodist lay preachers, proposes a “Businesses for Social Responsibility” movement. You would have thought the Business Roundtable would have been quick to join. Instead they dumped on the proposal, arguing that the only social function of business was to make a profit, presumably as opportunistically as a Winebox witness.


Social Responsibility

Last April I spoke to an audience on the Social Responsibility Code, arguing that while it was deeply flawed, it offered the chance of a public dialogue to develop a national standard of the family, community. and government responsibility to the nation’s children.

Alas for my powers of rhetoric, the consensus of the meeting was to totally reject the government’s proposal. This group of decent New Zealand citizens were deeply suspicious of their government. They are not alone. That is probably the best interpretation of the outcome of the Taranaki-King Country by-election. As usual the voters were showing disapproval of the political incumbents. Thus National voters switched to Act not because of its policies, but because they wanted to warn National.

In earlier by-elections they would have voted Social Credit or New Zealand First. NZF voters of 1996 switched to the left (probably the one useful indication for the next general election). But some Labour voters seemed to have crossed to the Alliance. Hardly anybody seems to trust the main parties. The minor ones are probably only trusted if they have no chance of power. So much for the elite’s attempt to promote trust in them.