Good Grief

With no real economic strategy, the Prime Minister is playing a dangerous game.

Listener: 26 December, 2009.

Keywords: Political Economy & History;

The reason the Government is thought to have a secret agenda is that it has no agenda. It has instincts, and commitments to keep, including ones to those that helped elect it, such as the well-off, business and farmers. And it has political debts to pay. The Hollow Men has a useful account of the insurance industry lobbying the National Party; one assumes it is now influencing the proposed changes to ACC.

When Act Party leader Rodney Hide said Prime Minister John Key “doesn’t do anything” whereas “Act did everything and we are hated”, he was broadly right. Key has no real economic strategy; he is an incrementalist – one step at a time, steady as she goes. Act has a comprehensive strategy. People don’t like it, and the last time it was applied it failed miserably.

The Tiggerish prominence of Hide in the political scene gives the impression that Act has more influence than it has, and that National’s hidden agenda is the Act one. But National will pick and choose.

That’s why National’s relations with the Maori Party are so important. The latter was seen as a centre party that would balance Act’s tug to the right. However, the Maori Party is not so much centre as broad-spectrum, covering the left to the right. A third of the voters who ticked a Maori electoral candidate, giving the party five seats, supported Labour with their party vote. Had these people also given Labour their electorate vote, the Maori Party would have won only three seats.

The party finds it difficult to make decisions unless it can find a Maori dimension. When it came to ACC, it could not find one, and the Government teamed up with Act.

Those who think National has a secret agenda recall radical Ruth Richardson and her ideological kin (who today support Act). But as Key has repeatedly said, his government will not “embark on a hugely radical, disruptive policy agenda”. Key’s approach is in the tradition of Keith Holyoake, one of our great prime ministers, who may have had a vision and certainly stayed a little ahead of the rest of the country. But as Barry Gustafson’s Kiwi Keith shows, he hid behind cautious incrementalism when responding to the challenge.

As National politicians sometimes explain, National was elected without a comprehensive policy framework. Of course, it had bits and pieces from its time in Opposition, some of which officials regret but are dutifully trying to implement, and others that officials see as a welcome step forward. The party view was that you could not form a policy framework in Opposition, so instead you won office and then got officials to develop one consistent with your instincts and visions. But that still has not happened. (In contrast, and as Hide was saying, Act had far more of a framework.)

Perhaps it was a good thing that National did not have too many ideas in Opposition. When it got into government, it found an economic situation quite different from what was expected. Sometimes it appears to be hoping the recession was a hiccup and things will soon be back to normal – but that’s not what the fiscal forecasts are telling us.

Key’s gratuitous trashing of the Treasury’s emission trading scheme projections may have been convenient at the time, but he undermined his ability to use Treasury estimates (which are usually the best there are) in the future. The episode nicely illustrates the Prime Minister’s need to be less day-to-day and more long term. It is this lack of strategy that leads to the belief of a hidden agenda.

It is easy for Father Christmas to maintain immediate popularity by buying off dissenters, but Key compromises the long-term fiscal position. Finance Minister Bill English may not be “the Grinch”, but Old Mother Hubbard – to mix the metaphor – knows the cupboard is increasingly bare.

Next year, there will be a tussle to resolve the tension between giveaways and fiscal prudence. Our great prime ministers are those who have stood shoulder to shoulder with their finance ministers and restricted spending to what can be afforded. They have not always been our most popular in the short run.