Shock of the New

Oh for leaders who cushion us from economic blows and remain progressive.


Listener: 12 December, 2013


Keywords: Growth & Innovation; Political Economy & History;


We might pretend economic management is concerned with accelerating growth, but it is mainly about dealing with the myriad shocks that pepper the economy.


The market can absorb small blows reasonably easily. If everyone switches from tea to coffee, the economy will cope, even if the tea planters are upset. But the 1966 wool price collapse, the global financial crisis and the Canterbury earthquakes all required conscious public responses, as do revolutions wrought by new technologies such as broadband and changing attitudes such as feminism.


Politicians don’t always respond well to change. Like the public they represent, they would prefer to ignore the shocks, hoping they will go away or pretending they are unimportant. In the 1970s, a period of great social and economic change, the Muldoon Government was so hostage to the past that it failed to respond. The succeeding Fourth Labour Government of David Lange and Roger Douglas reacted with a vengeance, with many poor and ideologically driven changes, although we tend to forget their successes in areas such as environmental reform and social liberalisation.


Every government, none more than the present National regime, faces the tension of responding to and trying to thwart changes. The Prime Minister tells us that a future republic is inevitable, but in the interim he reintroduces titles, signalling left and turning right. No doubt facing both ways at once contributes to his popularity.


Today’s business sector, unlike in the Muldoon-era, doesn’t look backwards. Twenty-five years ago, Rogernomics opened business to market forces, making it more forward-looking and dynamic. Yet, business knows – in a way neo-liberals never understood – that the partnership between commerce and government requires interventions. The collapse of neo-liberalism is nicely illustrated by a recent report published by the New Zealand Institute, child of the Business Roundtable, in which former Rogernomic Labour minister Michael Bassett and his co-authors recommend government subsidies for land developers.


The Key Government is not neo-liberal. It is comfortably dirigiste – interventionist – in the New Zealand tradition, deviated from only by the Lange Government and the early years of the succeeding National one. Even Bassett was strongly interventionist when he was a backbencher in the Third – Kirk-Rowling – Labour Government.


The present Government is pro-business. Business is only neo-liberal – demanding it be left alone – when it is not asking for government assistance. It seeks help often. Fiscal considerations aside, this Government, faced with such requests, says “yes, yes, yes”.

I am not sure that it has the balance right. Perhaps the public is not as pro-business as the Government. It is certainly not as enthusiastic about some concessions that businesses are demanding, especially where the environment is concerned. Perhaps, too, it thinks some of the largesse ladled out to business – such as the activity the financial sector has enjoyed through the sale of state assets – could be put to better use.


And I wonder whether the public is really keen on light-handed regulation given workplace disasters such as Pike River, poor quality construction giving rise to leaky buildings and poor performance by monopolies.


More fundamentally, I see no evidence that the public wants the sort of society that business drives us towards. It readily accepts that business is a part of getting where it wants to go, but it thinks it’s the engine, not the driver.


Harnessing business for a wider social good is not easy. This Government does not try. Its opponents don’t seem to know how.


With an election next year, we can expect the Government to be cheering dressed-up non-achievements as the Opposition whinges about bureaucratic failures that would be just as likely to happen on its watch.


It would be wonderful if both addressed the fundamental issue of what sort of New Zealand we want: one that dealt with the ongoing shocks – good and bad – that press on us while maintaining our progressive values. Let’s hope we are spared too many new shocks next year.