For Bruce Jesson: We Miss You
Published in the CAFCA “Foreign Control Watchdog”, April 2012, No 129, p.46-55.
Keywords: History of Ideas, Methodology & Philosophy; Political Economy & History;
The rise of the left and its socialist analysis was a response to the disruption and hardships of the nineteenth-century industrialisation (which we now know morphed into today’s globalisation). The ‘left’ analysis was not isolated from the main streams of European thought. Both its Marxist and democratic socialist (greatly influenced by Methodism) variants were deeply engaged with, and contributed to, the evolving social sciences.
New Zealand Labour came to power in 1935 with its leadership, on the whole, close to social science orthodoxy albeit with different social objectives, especially a concern for the economically weak and workers who had been hammered by the Great Depression. Within the caucus there were those of a more radical disposition, but the more vociferous were money reformers who, like the leadership, accepted the market economic system but also wanted to change the banking system. All, to some degree, saw an importance for the common (or public) ownership of the means of production, distribution and exchange, but while there was the odd nationalisation – the Bank of New Zealand for the monetary reformers, the mines because private enterprise managed them so badly – public ownership was not high on Labour’s agenda. (It turned down a proposal to nationalise the predecessor of Fletcher Building.)
To summarise their vision of the economy – although few if any them would have articulated it quite this way – Labour wanted not public ownership but social control of the means of production, distribution and exchange. Public ownership is one means of doing this but so is the use of markets which are particularly effective where there is a demand for diversity and choice. The distinction between democratic socialists and social democrats may be one of means; the former giving greater emphasis to social ownership, the latter to social control (although I have never met a social democrat who did not see the need for some community ownership).
The War Economy, the Post-War Economy and After
Ultimately it is difficult to assess what exactly Labour thought when it was first elected , because the war economy required a more centralised form of economic management, with its focus on commanding as many resources as possible to prosecute military success, an objective which had almost universal support. Centralised economic control was not then unique to New Zealand; it was practised to some extent by every economy deeply involved in the Second World War.
The consequence for economic thinking was that much of the New Zealand left, whatever its views before the war, became heavily committed to the controlling approach of the war economy. This has continued although the Second World War was 65 years ago with a standard of living around a third of today’s, with technologically primitive production by today’s standards with a very different relationship with the rest of the world and where there was much less social and consumer diversity. The sixteen-year post-war economic boom – with its low unemployment and, by today’s standards, high growth of material output – seduced many New Zealanders into thinking the controlled economy which came out of the war was broadly right, so they were more reluctant than those in other rich economies to abandon the controls.
The post-war boom came to an end in 1966 when the price of wool, which then earned two-fifths of export revenue fell (almost) permanently by about 40 percent. With the collapse of its principal foreign exchange earner (over half of export revenue came from sheep) the economy had to change dramatically; there was a major external diversification over the next two decades as new export markets and new export products were developed. However there was a reluctance to change the internal configuration of the economy even though a controlled domestic economy could not cope (indeed it could barely cope with the increasing diversity of consumer choice).
Critically the diversity of exporting impacted on domestic production. It was no longer possible to isolate the export economy from the rest, as had happened when over ninety percent of exports were wool, meat, dairy and other pastoral products. A diversity of exporters required more sophisticated external services than, say, routine foreign exchange dealing, while international competition meant they need sophisticated inputs of components and labour. In the 1970s exporting began to affect almost every part of the economy.
Muldoon to Douglas
During the War a handful of men could control the economy, even to the extent of prescribing the length of skirts (matrons’ hems were permitted to be nearer the ground); today the plethora of boutique fashion shops would make such an attempt impossibly laughable. Similarly as New Zealand began exporting myriads of products to as many markets, the central control of a few products which went mainly to Britain became impractical.
The great diversification following the wool price collapse of 1966 was presided over by Rob Muldoon (as Minister of Finance and later as also Prime Minister) for the following 18 years (except from 1972 to 1975 when there was a Labour government). Initially Muldoon tried to liberalise markets, withdrawing direct controls. In almost every case each reduction in intervention undermined a politically powerful sector which was privileged by the controls. Any affinity Muldoon may have had for ‘more market’ and less central control was over-ridden by his political instinct with its need to maintain his power base. (Muldoon was more decisive about liberalisation when it was workers who suffered.) Additionally there was inflation. In the hundred-odd years before 1966, prices had trebled. Now they were trebling every ten or so years.
In the end Muldoon gave up systematic market liberalisation – with a few exceptions – when in 1982 he imposed the most draconian wage and price freeze that New Zealand had ever experienced.
In July 1984 the tired and exhausted man was swept out of office by the Fourth Labour Government led by Prime Minister David Lange with Roger Douglas as its Minister of Finance. Its approach to economic management had not been resolved when the snap election was called; its manifesto was the result of a clumsy compromise among the warring factions within the party.
Traditionalists, Social Democrats and Neo-Liberals
By the middle of the twentieth century, the nineteenth century symbiosis between left thinking and the social sciences had begun breaking down as the society and economy developed. The left analysis began to fossilise, getting increasingly detached from the social sciences and the changing society despite, ironically, having had a major and positive impact on that evolution.
With its attention focused on foreign affairs and human rights, much of the left had long ceased to be interested in modern economic thinking, and were satisfied by the controlled economy. (In the 1980s a minister, expressing genuine surprise at the resistance to Labour’s economic policies, remarked to me that Labour annual conferences spent more time on Nicaragua than economic policies; for those born recently, the leftish Sandinistas had just attained power and were opposed by the Reagan administration.) This group might be called the economic ‘traditionalists’.
Labour’s economic ‘modernisers’ were a much smaller group. They recognised that the economic mechanism relying on central controls was becoming increasingly obsolete, that issues which Muldoon should have addressed had been avoided, and that decisive measures were necessary. The majority of social democrats wanted to adopt an approach similar to that of the Australian Labor Government (elected in 1983). With hindsight they were over-optimistic about the ability of the New Zealand unions to deliver in the way the Australian unions had. They lacked the coherence of their trans-Tasman counterparts, were poorly led, and the Labour cabinet had little union experience. (Whereas the Australians were led by Bob Hawke who had previously led the ACTU, the highest ranked New Zealand Labour Party cabinet minister with significant union experience was Stan Rodger at number 16 – from the state sector background.)
For a while the ‘third way’ was fashionable with some modernisers. The main theoretician was the eminent British sociologist Anthony Giddens, who was deeply grounded in the nineteenth century social sciences. While he was aware of Marxian thought he was not a Marxist but a social democrat (and aware of developments in the thinking and approaches on the European continent). He saw that the nineteenth century simplification of society into two classes (or three if landowners are included) was no longer tenable, and sought to provide a more complex account with a matching political program. Alas its political reputation was severely damaged by Tony Blair’s adoption of the ‘third way’ slogan although not the spirit of its analysis.
Unbeknown to just about everyone there was another group of modernisers in the party. Today they are called ‘Rogernomes’ but internationally they would be called ‘neo-liberals’. (Many traditionalists call all modernisers, including social democrat, neo-liberals in a manner similar to the right calling everybody to their left ‘Communists’ .)
The key politicians who were Rogernomes were the troika of Labour’s finance ministers – Roger Douglas, Richard Prebble and David Caygill – although many other cabinet ministers sufficiently allied themselves with them to be called Rogernomes (including Phil Goff who was leader of the Labour Party from 2008 to 2011 and Michael Bassett who became the Rogernomes’ quasi-official historian). Many of the Rogernomes’ allies had little genuine commitment to neo-liberalism but opportunists – like the Vicar of Bray – took advantage of the openings it created for them; as Rogernomics faded away they rearranged their resumés to disguise their youthful, but advantageous, indiscretions (some were promoted by the Clark-Cullen government).
How the troika were captured by the ideology has yet to be detailed, but their intellectual fire-power came from a group who at the time were public servants. Certainly the hierarchical decision process was critical. First capture the Ministers of Finance, who would bring Prime Minister Lange and Deputy Prime Minister Geoffrey Palmer on board (sometimes, presumably, voting 3 to 2 or 4 to 1); the five would have a majority in the inner cabinet, which was again bound to vote together in the full cabinet; similarly the cabinet, bound by unanimity, dominated the caucus.
That does not explain the ineffective resistance to the Rogernome policies outside the caucus. It was partly that the hardest hit were those represented by the Labour Party who wanted to be loyal to ‘their government’. There was also the fratricide which takes place after a coup; a bit like the Spanish Civil War where the left was so busy settling old disputes that it let the fascists win. Some modernisers got out of left politics altogether – notably Rob Campbell and Alf Kirk who had written the thoughtful pro-union After the Freeze in 1983. A consequence was that when the traditionalists needed to understand the neo-liberal policies there were few modernisers to consult; instead they made up fantastical conspiratorial accounts of what they imagined was happening.
The Rogernomes took no prisoners either – with numerous promising careers destroyed by their backroom manipulation. Lenin said the first thing after the revolution was to kill the intellectuals. The social democrats were put down vigorously because the neo-liberals were arguing there were no alternatives (except Muldoonism): those who could offer alternatives had to be eliminated from the public debate – even to the extent of approaching editors to say that certain persons should not be used – some journalists who acquiesced may be still so embarrassed that twenty years later they dont approach the black-listed.
There are few places to shelter for people treated this way. New Zealand does not have the plethora of independent think-tanks characteristic of, say, America and Britain, while those in power who were not Rogernomes did little to shelter potential allies (or prepare for the time when they would be in opposition). The universities proved as impotent as the Labour Party; not only did those who opposed Rogernomics find their careers blocked while its third rate supporters were promoted, but when it came their turn to be undermined by the Rogernomes the universities meekly acquiesced.
The modernising sympathies of both the social democrats and the neo-liberals meant that many traditionalists lumped them together. What was not appreciated was they had quite distinctive approaches to the market. The social democrats had social objectives; for them the market was a mechanism by which they could more efficiently pursue these objectives. In particular they saw the centralisation that the traditionalists relied upon as increasingly obsolete as the economy and society became more complicated. In any case there was an element of social libertarianism which distrusted the state and favoured individualism. (Social anarchism is an integral part of the left traditions, although it tends to get played down because some anarchism was very violent.) That meant that they did not unqualifiedly favour government intervention as a solution to all problems. Nor were they totally antagonistic to private property (although they were wary of it as it accumulated in corporations and financial institutions). A social democrat asks whether private ownership and the market is to be master or whether it is be the servant of society.
The neo-liberals had no doubt about the answer; for them the unconstrained market based on private property gave the right social objectives. There was no need to control it for the social good – commercial relations automatically gave the public good. Their rhetoric said it gave economic growth, low unemployment and ‘freedom’, although there was surprisingly little analysis or evidence to back these claims, especially given the absolute certainty with which they were held and promulgated.
Or at least – in one version of their argument – the unconstrained market was better than anything the government could do. If there was a need for a government it was to be a minimalist one – in justice and defence only. As much as possible was to be left to private enterprise and voluntary exchange. (We eschew discussion here just how ‘voluntary’ is an exchange between a huge corporation and one of its workers.)
Ironically, the chief advocates of Rogernomics had initially been public servants when they came to their conclusions. That might explain their deep scepticism of the government, for they had worked under Muldoon – they had hardly worked under any other Minister of Finance – and they had seen how corrupting politics could be. (The concern here is not financial corruption, but the way the politicians (i.e. Muldoon) had distorted the economy and society for short term political ends.) But deep in the bowels of the state services they had little experience of the private sector which they idealised. In a much quoted economic joke, they gave the prize to the second diva in an aria competition having only heard the first.
The Rogernomes’ vision of government was greatly influenced by American neo-liberals. Now it is hard to be generous to the American political system (including the way that political pressures from private enterprise have corrupted it) but the New Zealand system – and indeed the systems of most social democracies – is very different. (One American economist criticised Keynesianism because it assumed that there could be an impartial, competent and uncorrupt civil service – oblivious to there being one in Keynes’ London.) Such political systems may not be ideal – which are? – but neither is unconstrained private enterprise. So besotted were the Rogernomes with the American ideologists that they supported changes to the New Zealand public service which made it more like the American one, wearing their colonial cringe as a badge of honour (if they were aware of it at all).
A contempt of government permeated the neo-liberal thinking, so much so they had to assume an idealisation of human behaviour which markedly reduced the need for it. Subsequent research has showed that economic man is a very crude approximation of reality. It is said that when Daniel Kahneman collected together the research that showed the disconnection of rational economic man from reality, his mother told him she knew that already; it took three years studying economics at a university to find the research surprising and worthy of the Nobel prize in economics he received in 2002.
As a result its description of behaviour has been described as ‘autistic’. None of the Rogernomes I know are like rational economic men in their private lives (their marriages would be hell if they were). I mention this to draw attention to the divergence yet again between the world as it is and the neo-liberal account of it.
For the Rogernomes were detached from New Zealand political traditions. Their knowledge of New Zealand history and political theory was thin to non-existent; the public servants had little connection with ordinary New Zealanders and – ultimately – neither had the key politicians who were generally elected to safe Labour seats where a donkey would have been elected with the same majority had the Labour Party put one up (on occasions it did).
The much missed Bruce Jesson said ‘only their purpose is mad’. Certainly the neo-liberal agenda would be judged by most to be bizarre once it was transparent, but much of their analysis was faulty as a consequence of trying to get the real world to fit it. (I have provided a detailed critique of their analyses in The Commercialisation of New Zealand; characteristically the Rogernomes did not take up the challenge it presented to them.)
Rogernomics is Implemented
There is a sense that the Fourth Labour Government was the most revolutionary government since the signing of Te Tiriti o Waitangi. We think of the First Liberal and Labour Governments as being revolutionary but while they dramatically progressed the nation, their framework had roots in the governments before, in the long-held aspirations of most New Zealanders and in the reality of the political economy of New Zealand.
Rogernomics rejected all of this, even to the point it preferred to recruit foreign ideas and foreigners to run the show. Understandably so, for New Zealand ideas, New Zealand evidence and New Zealanders contradicted their beliefs and policies. Neo-liberals knew the truth without fear of contradiction. There was no room for doubt. People who disagreed were obviously wrong, and so measures to eliminate them were justified. The populace might not understand what was being done on their behalf, but when they saw the better outcomes they would come around. Ultimately the Rogernomes wanted to change the way that New Zealanders thought about the world and behaved in it. (The parallels with the rhetoric of authoritarian regimes may not have escaped the reader, but the Rogernomes missed them.)
The promised outcomes never appeared. Per capita incomes were much the same in 1994 as they were in 1984 after dipping in between. Ten years of Rogernomics (including its successor Ruthanasia) were a period of economic stagnation while the rest of the world economy steamed ahead. New Zealand has had five periods of prolonged economic stagnation since 1840 (we are probably in our sixth). The Rogernomics recession is unique in that every other one is associated with poor performance also occurring in the world economy. The Rogernomes brought the stagnation upon us.
Fifteen years on, the Rogernomes have still not addressed this failure. Perhaps it was because their theories say that it could not happen so they did not observe the failures, but another factor was that the fall in incomes did not happen to them. Taxes were cut on the top ten percent of households so their real incomes continued to grow at the same rate as they did when Muldoon was prime minister. The reductions were paid by higher taxation on the lower four-fifths and by cuts in social security benefits and other public expenditure, so the incomes of the rich continued to rise at the expense of reduced incomes for the rest of the population (and inequality increased). The breakdown of social cohesion meant that the Rogernomes and their friends were so isolated from the rest of society that they had no sense of the pain most New Zealanders suffered. In a four year period from 1989 to 1992 about half of the labour force experienced unemployment, but that hardly crossed the Rogernomes’ radar. By undermining social research – which they thought had to be wrong since it demonstrated outcomes their theory said would not happen – the Rogernomes reduced the possibility of monitoring the hardship.
True, many Rogernomes suffered from the 1987 sharemarket bust (as did most modest investors). The boom was an early example of the failure of Rogernomic theories, but the conclusion the Rogernomes drew was that any failure occurred because their policies were not being pursued intensely enough.
Even so their friends and relations were suffering. The neo-liberal rules said the state must not help them out. Not quite. They could be given further tax cuts at the expense of the rest of the population, so taxes on them were further reduced in 1988. And then there was privatisation. Many see the policy in terms of the alienation of public assets to the private sector, others that many of the privatisations were manifest failures in the public interest – the state had to buy back Air New Zealand and New Zealand Rail because of private mismanagement, set up Kiwibank because the private banks ignored its potential customers. It took two decades to unscramble the resulting telecommunications monopoly, while privatisation of safety led to deaths in mines and factories, and privatisation of the building regulations led to 110,000 leaky homes, as well as similar conditions in factories and public buildings, schools and hospitals.
The immediate effect of the privatisations was that the financial sector earned huge fees (mainly paid by the taxpayer) when the assets were sold (and more when they had to be brought back). No doubt the Rogernomes will swear this was not intended, but the record is that the sales policies benefited their friends and relations. (The logic of their analysis was to allow Maori the benefits of the privatisation, but they were not – then – friends and relations so they missed out.)
Any close observer concluded by the early 1990s that Rogernomics had manifestly failed in terms of its own objectives, although journalists would not declare the failure until the economic downturn of the mid-1990s. It was Jim Bolger who put a halt to its expansion, after being tricked by Ruth Richardson into adopting a mass of ineffective policies in the ‘Mother of All Budgets’ (which is why the period is known as Ruthanasia and not Bolgernomics). However it would be the Clark-Cullen government elected in 1999 which would reverse some, but not all, of the most egregious errors (more later).
Nevertheless despite Bolger ‘sacking’ Richardson, there remained a considerable overhang from the Rogernomic past. Many key positions in public life had been filled with Rogernomes – some overt like Don Brash at the Reserve Bank, others covert. Within the National cabinet there were those who had tasted the blood and could not be restrained, while such had been the demotion of the social democrats and their institutions that there was really no alternative except to muddle on.
Rogernomics also changed the political structure of New Zealand. In the Muldoon era there were a range of bureaucratic interventions (such as import licences) which made individual businesses dependent on bureaucratic (and hence political) goodwill. Today business is much more independent of government (although it still demands subsidies from the Treasury). So there is a strong public voice speaking on behalf of the business community (especially the Auckland business community – which very much has the ear of the Key government; its views are frequently expressed via Fran O’Sullivan in the New Zealand Herald.) The business community is privately very dismissive of Rogernomics although it is easy to confuse their demands for greater market freedom with that ideology.
There have been two further institutions which gave the impression to the casual that Rogernomics was thriving.
One was the Association of Consumers and Taxpayers Party (ACT), which has held a small number of seats in Parliament and occasionally ministerial positions. Its establishment followed the 1993 publication of Unfinished Business by Roger Douglas, which set out much of its underlying agenda for the next two decades.
Despite its homilies the book is a far better argued document than one normally expected from Douglas – it does reflect his concerns – and one cannot help wondering whether there was not only a ghost writer (mentioned in the acknowledgements) but a ghost thinker – possibly Roger Kerr (below). Especially chilling is the so-called ‘Blitzkrieg’ principles, where the book sets out political principles of reform with which Lenin would sympathise; the reformers should capture the centres of power, implement their policies without the consent of the public but in their interest, and they would come on board when they saw the success. (But what if the policies did not succeed? Fortunately democracies prevent the Stalinist stage of development.) A crucial assumption is that the bolsheviks know what are the ‘right’ policies and implement them with total confidence. That is why consultation is unnecessary. But suppose there is a mistake. Suppose they identify the wrong village as enemies; the population could be wiped out before the error is identified. Without any self-correcting mechanism – such as consultation or reference to the facts – the approach was not going to win the hearts and minds of the people, and any errors would magnified rather than minimised. (‘It must be the next village which is against us.’)
ACT was launched promising it had support of over 50 percent of the population, reduced later to 30 percent and more recently to 15 percent. It entered the election campaign when MMP made it possible to win seats in parliament without much electorate support; its average list vote support has been 4.4 percent. That followed after adopting morally conservative policies despite some of its advocates being moral liberals and the figure includes National voters disillusioned with the current state of their party who voted to ACT in 1999 and 2002. Despite National backing their Epsom candidate, ACT obtained only 1.1 percent of the vote in the 2011 election. (Perhaps in part because their principles required them to be led by an ideologically correct, socially inept, political naif.)
Ironically, although its natural inclination is towards an FPP electoral regime, ACT’s political success as a party is a consequence of MMP which was introduced to prevent the elected dictatorship that the neo-liberals exploited. The blitzkrieg strategy was to get elected by sufficient voters to impose their secret agenda without any need to consult. (Even in 2011 its manifesto included an innocuous sentiment on education which after the election proved to be a commitment to the contentious and – on the evidence – ineffective charter schools.) So confused is ACT on electoral reform that despite MMP being in its interests in terms of electing MPs, its 2011 leader supported the SM approach which would give them fewer seats but enables a return to elected dictatorships.
The future of ACT may depend on any changes to the details of MMP, but it is not easy to see, after the 2011 election, it becoming a vital political force in the near future (unless National makes an ass of itself). Their sole MP, John Banks, is more a moral conservative than a Rogernome (indicated by his overtures to the Conservative – i.e. Christian – Party immediately after the election). ACT’s electoral strength has been the funding from its rich supporters rather than from voter support – it spends more per vote than any other party, usually by a generous margin. It is not obvious, given its weak performance, that its private funders will continue to be as generous, although that we should never discount the passion of some of its rich supporters. (The smug rich think their fortune – whether the result of leverage from family inheritance, judgement or luck (and usually all of them) – demonstrates abilities in quite different dimensions; Methodists might remind them they need to unload their camels to get through the eye of the needle – the small postern gate – into the city.)
It is not obvious that the National Party needs the minuscule ACT support (the Conservative Party looks more attractive), although it has continued to tolerate Peter Dunne despite support for United Future proving equally insignificant.
The New Zealand Business Roundtable
The other centre for the advocacy of neo-liberal ideas over the last two decades has been the New Zealand Business Roundtable (BRT). Originally modelled on an Australian equivalent it developed in the late 1970s as an informal meeting place for chief executives of major businesses. (Adam Smith – otherwise much quoted by the neo-liberals – famously remarked that ‘People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public.’) In 1986 the BRT appointed Roger Kerr as its chief executive, who as a Treasury officer had actively promoted neo-liberal policies, and it became more publicly prominent as an active promoter of neo-liberals (rather than business) policies, especially if it thought the government’s resolve was weakening or needed extra support. It proudly claims it persuaded business to pursue policies which were against its immediate interests (yeah right).
While BRT activity did not diminish as Rogernomics fell out of favour, its advocacy became less effective as neo-liberal policies were seen increasingly to be irrelevant, except by journalists. (I once heard a couple of senior businessmen discussing one – not unreasonable – policy which they favoured, but not wanting to be associated with it because it was also being publicly promoted by the BRT.)
The trick of neo-liberal economics is that, like traditionalist economics, it skips over all the complexities and is so easy to understand and expound – even for a journalist. Too often we forget that there is always a simple, easy solution to any problem; and it is wrong.
Originally the BRT membership was chief executives of businesses (mainly industry) but – partly because a number fell (not least because of neo-liberal policies) – membership became more dominated by financial institutions, by the end of the 1980s. Apparently some of the more consumer-exposed institutions withdrew in the 1990s, although some may have returned as the BRT profile fell as the public became less agitated. Today it consists of about 50 members including various honorary ones.
In a certain sense it has been New Zealand’s premier thinktank; generously funded, very active but increasingly marginalised because like Rogernomics it has not been well connected to New Zealand reality. One could say its primary purpose has been to provide a platform for Roger Kerr. (He, not incidentally, was married to the president of the ACT Party).
It is too early to do a full assessment of Roger Kerr, but something can be said about the quality of the BRT’s work. It gets much praise from other neo-liberals but, as Mandy Rice-Davies might say, ‘they would wouldnt they’. There has also been much admiration within the business community although along the lines of ‘it is of high quality but impractical’. However businessmen and women are hardly judges of intellectual quality. There is very little comment on the Business Roundtable reports by New Zealand academics (other than the odd neo-liberal), partly reflecting how unconnected the academy is with public debate.
I have, on occasions, reviewed some of the BRT reports and have been less impressed. Despite the puffery about the expert credentials of the consultants. they were frequently both out of their depth and out of touch with New Zealand. A couple of examples will do.
An Anglo-American with neo-liberals credentials was brought over to support the BRT position on the health changes of the early 1990s. (The redisorganisation proved unworkable, and soon returned to the broad track before health minister Simon Upton got the bee in his bonnet.) It turned out the ‘expert’ knew little about health systems (her speciality was health insurance). At one seminar the pro-public health experts from New Zealand tormented her by arguing from a perspective on her right (that is, for greater privatisation) which totally stranded her because they were not keeping to the script. (A good analyst understands the other side’s arguments well enough to be able to make a fair fist of arguing them.)
On another occasion the BRT hired an Australian neo-liberal to write on immigration policy. I did not think it a great report despite the BRT claims that he was an expert; a little later I was looking at a comprehensive Australian bibliography on the economics of migration – pages of it – and the said Australian export did not have a single entry.
Despite the generosity of its funding, the BRT was never a thinktank in the way that the American Enterprise Institute, the Brookings Institute or their other American and British equivalents were. The BRT was not just insulated from the New Zealand community by the narrowness of its membership and its lack of research, which would have connected it to the society as a whole; it was isolated from the evolving New Zealand economy despite that being the focus of its concerns. That is why so much of the Auckland Business Community turned its back on the BRT; it was no longer talking about the economy they knew.
For the BRT was a thinktank which proselytised with an ideology; there was never any research dimension in its work – it would not even understand today’s notion of empirical research. The most pertinent parallel might be medieval scholasticism in its most restricted form. There was a well-defined orthodoxy based on a set of approved texts, which could be elaborated but could not be subject to the sort of critical analysis that Karl Popper, say, advocated. The orthodoxy was certainly not to be tested against reality; instead the world was to be reinterpreted to fit the texts. The BRT could only dismiss its critics, never engage with them. So it could not progress; instead it vegetated. (Fairness requires pointing out that some left thinking has been equally scholastically stagnant.)
Sadly then, the child of the post-Muldoon (or anti-Muldoon) era never grew up, but kept struggling with the Muldoon demons long after he had died and long after anyone of significance took Muldoon seriously (perhaps a slight exaggeration since both John Banks and Winston Peters might be said to be the last Muldoonists in parliament).
Whatever the limitations of the BRT, Roger Kerr’s extraordinary energy and commitment is impressive. There is a long entry on his blog filed but three days before he died at the end of October 2011 (at the age of 66). Will the BRT be able to recover from the loss of its key player?
Apparently the BRT is proposing to merge with the New Zealand Institute. Ironically, the NZI was established about a decade ago when the Auckland Business Community became impatient with the BRT’s extremism and stagnation and sought its own thinktank (which started out well but which, alas, has slid into a kind of platitudinous management-journalism). The merger is about as logical as ACT linking up with the Christian Conservatives, but indicative how irrelevant the neo-liberals in New Zealand are becoming.
Neo-Liberalism As Zombies
Neo-liberalism has been described as ‘zombie economics’. The end of ACT as a neo-liberal party, or the BRT as a neo-liberal think tank will not finish off neo-liberalism in New Zealand nor anywhere else; its living-dead will continue to haunt us.
The Global Financial Crisis has persuaded but few neo-liberals that their theory is wrong, even though on objective grounds it is hard not to conclude that the application of the neo-liberal principles has been a factor in the crash, while it was neo-liberals who once celebrated the financial boom’s success as the sober worried about its sustainability. (Among those who have retracted, at least to some degree, are Alan Greenspan and Richard Posner.) Instead, the more competent neo-liberals have been almost silent (sometimes providing helpful critiques when the critics have got it wrong), although there are numerous duffers trying to defend the indefensible, typically by misrepresenting the facts or the critics (but they have had a lot of practice doing that). The challenge the world faces is that beneficiaries of and believers in neo-liberalism are riddled through the institutions that matter and are unlikely to change their minds.
That does not mean that a new paradigm will soon replace the neo-liberal one. It is likely to be based on the old orthodoxy – sometimes called neo-Keynesianism, sometimes ‘saltwater’ (an allusion to the main American advocates being from universities on the eastern and western seaboards of the continent whereas the ‘freshwater’ neo-liberals came from inland universities). I rather liked Christine Romer – sometime adviser to President Obama – who eschewed such categories and said she was driven by the empirical evidence; neo-liberals are rarely evidence driven. (Another division is those who ‘calibrate’ – that is make the facts in their models fit their theories – and those who ‘estimate’, that is, who test their theories against the facts. The division is almost exactly freshwater versus saltwater.)
A Social Democrat Revival?
While this battle rages overseas the New Zealand left is faced with the challenge of renewal too. Neo-liberals may be zombies but every reader of thrillers knows that is not enough for social democrats to triumph. Neo-liberalism has been a much more fearsome opponent than the conservatism that the left faced in the nineteenth century. The likelihood is that in due course – perhaps after they open themselves up to the evidence and criticism – there will be some sort of neo-liberal revival. The traditional battle of radicals versus conservatives may be a thing of the past, or at least cut across by radicals of the right versus radicals of the left.
If trends continue, today’s left may continue to drift into the irrelevance that its traditionalism offers. Certainly its concerns of foreign policy, civil rights and social diversity are very important but over half the respondents to a survey just before the 2011 election said their main concern was the economy or one of its manifestations of failure, such as unemployment. (Expect the proportion to go up during the next three years.) Adding poverty and inequality to the traditionalists’ concerns does not help much unless there is a coherent explanation of how they occur and how to address them. Nor is adding a spiritual concern with the environment of much use unless there is a robust analysis of how the economy impacts on the environment. So we are back to a social democratic analysis.
Ultimately social democracy is a radical modernising vision. Yet there are only a the handful of battered and tattered remnants, who have desperately clung on after the traditionalist and neo-liberal assaults. There is a need for recruits and for a renewed vigorous vision more rigorous than uninformed but hopeful post-modernism (which may be characterised by its lack of attention to evidence in a manner similar to neo-liberalism). What are the key points which form the necessary framework of the social democratic analysis?
First, modernisation is an ongoing process whose need did not finish at some mythical date in the past – like 1938. (That means there is a need to know a bit of history.)
Second, the left analysis has to be symbiotic with the social sciences. Not in their post-modernist form which is as antagonistic to empirical analysis as neo-liberalism. That means following closely those who anchor the theories in an empirical reality and not – like the neo-liberals – ignoring or misrepresenting anything that is inconvenient.
Third, the left needs to stay in touch with – indeed closely follow – the social democratic debates which are occurring overseas, but it also needs to adapt them for New Zealand circumstances, rather than facilely imitating them. The colonial cringe has not been confined to neo-liberals.
Fourth, the left needs to reconnect with the whole of the New Zealand community and not to isolate itself, as did the neo-liberals, in the narrow – and almost uncertainly unrepresentative – community in which individuals live. An empirical based social science is a way of connecting to the whole society.
Fifth, it must tolerate, and even promote, intellectual diversity and dissent – unlike the neo-liberals and, sadly, too many traditionalists. While many dissenters prove wrong – and some go on obsessively long after they are proved wrong or proved that they have misunderstood the issues – some dissenters, often those who have been following the first four principles most closely, are reporting developments which the conventional wisdom will identify long after, and – of course – without acknowledgement of the pioneers.
Finally there is a need to develop institutions where social democrats can function. There is not going to be the generosity of the magnitude of those who funded the BRT; how sad so much of it was wasted on useless theories. (In passing one much admires those who support Murray Horton as the CAFCA organiser, but I suspect that Murray lives more frugally than most BRT acolytes.) Equally sadly any support from the universities – which once fostered the social sciences, modernisers, social democracy and debate – is likely to be accidental and small.
The evidence of recent months is not so much the diminishing of the New Zealand institutions which may promoted neo-liberalism; that process has been going on for two decades. (In any case the overseas neo-liberals remain active, well funded and vociferous despite their ineffectual response to the course of the Long Recession following the Global Financial Crisis). The real message is that the electorate has firmly told the Labour Party it has little confidence in its vision – if it can discern one.
Deduct Labour loyalists – the core vote which is diminishing over time – and the number of those who supported Labour actively must be pathetic. Some of the potential support voted Green in despair; others in their despair resorted to the apathy of not voting.
Indicative of the dilemma the left faces is the fate of the Clark-Cullen government which reversed some of the extremes of Rogernomics early in its term, but afterwards ran out of a vision or a program. The successor Key government has adopted more of the Clark-Cullen agenda than either side would admit – but it knows how to run better parties.
It is too easy to argue that the National Party has a secret neo-liberal agenda (a consequence of the neo-liberals secretly preparing to implement a blitzkrieg). There may be a handful of neo-liberals in it, while sometimes business interests advocate policies which sound neo-liberal but need not be; they will pursue others in their interests which are the opposite (the residual of neo-liberals are fuming over the broadband roll out).
Basically Key leads a business government heavily influenced by the social democrat innovations of the past – if more concerned with private sector solutions than public sector ones, more with the rich than the poor.
But while governments of the right may adopt past social democratic innovations, both by nature and by the interest groups they nurture, they will not progress them much. The likelihood is that the Key government will be too timid to address the evolving issues facing New Zealand including big ones like globalisation, social inequality and the environment as well as a myriad of smaller issues.
The danger remains that there may be a repeat of Muldoon’s legacy in which a future government of the left has to introduce major radical modernisation to resolve its predecessor’s failures to respond to change, while handicapped by the limitations that these failures cause. Will the incoming government be as bereft of analysis and vision as the left was after Muldoon? Last time the consequence was Rogernomics.