1999 and All That

Strange as it seems, Helen Clark and Michael Cullen may be revolutionaries.
Listener: 24 January, 2004.

Keywords: Political Economy & History;

The standard New Zealand histories cite 1890, with the election of the first Liberal government, and 1935, with the first Labour government, as years of “revolution” –– albeit constitutional and evolving ones –– when the economy and society took on a new direction. So much so that the Reform government came to power in 1912 and the National government in 1949 primarily as consolidators rather than reversers.

But how are we to evaluate 1984? Although many would call it a “counter-revolution”, it is more complicated. As this column had been arguing, the time had arrived to change some of the central economic mechanisms. The economic diversification and the increasing social differentiation of the 1970s (reflecting affluence and aspiration rather than increasing social inequality) meant that the highly intervened and largely inward-looking economy had to be redirected towards a more market and open course. (My writings did, however, underplay the new technologies that pointed the same way.) Regrettably, Rob Muldoon’s government from 1975 tended to be backward-looking, delaying the required changes, so there was a need for major reform when it lost power in 1984.

But the incoming Labour government over-reacted with unnecessarily extremist policies, so much so that some markedly damaged the economic performance. Today, there are widespread calls for New Zealand to return to the top half of the OECD (measured by GDP per capita). What the advocates do not mention is that New Zealand was last there in 1985, and the policies they now demand were among those associated with the subsequent decline. (What did they do in the 1980s and 1990s to resist the policies that led to our falling out of the top half of the OECD?)

Roger Kerr, director of the Business Roundtable, quotes Prime Minister Helen Clark as saying that the 1990s were wasted years. He says the last decade has been a success. Clark, the epitome of orthodoxy, defines the 1990s in the usual way from 1990 to 1999, when economic growth averaged 2.6 percent pa –– below the OECD growth rate. Kerr, cavalier with definitions, replaces the first three dreadful years of the 1990s by years from 2000, and the growth goes up to 3.7 percent for 1993-2002. Clark and Kerr must agree that the Michael Cullen period has been much better than the Ruth Richardson one.

The reason, I think, is that the Clark/Cullen administration has abandoned the extremism of the Rogernomes –– indeed, it has reversed some of the loonier policies –– while sticking to the principles of a more market and open economy. So 1984 was a failed revolution. In 1999, Labour was given a second chance.

Will history record 1999 as a year of revolution? The previous ones were associated with periods of long political stability. (The Liberals were in power for 21 years, and Labour first for 14.) The political stability seems to have been associated with strong economic growth. Post-1999 economic growth has been above the OECD average. However, the economy faces the same danger as it did in the 1980s, when the exchange rate was allowed to rise, stifling the external engine of growth. The Rogernomes did not care then –– and the economy stagnated. This time the government sees the threat.

There are other challenges the government faces as it beds in. The first is arrogance, a natural state for any re-elected government, but compounded by the increasingly intimate relationships between politicians and their official advisers. That is no bad thing, until the politicians forget their constituents, for the Wellington-based advisers have little empathy with the public at large. A number of last year’s announced policies were followed by public outrage and a government backdown. Too many such incidents can cripple a government’s authority.

The government has still to get on with the business sector. The Rogernomics of the 1980s and 1990s gave business an almost unlimited licence. This government knows business is crucial to its economic strategy, but that is only a part of a wider social and cultural vision. On occasions, it has suppressed economic priorities for wider ones. Business has still not always understood this. Of course, it will show outrage when it is thwarted, but currently it is the outrage of crass stupidity rather than of a shrewdness that acknowledges the wider concerns, but insists that the economics must be taken into account. Meanwhile, the government is as uncomfortable with business.

And there is race relations ……

Writing 150 years after the French Revolution, historian G M Trevelyn said it was still too soon to tell its significance. That caution applies to any assessment of this government. But the prospect of 1999 being considered a year of revolution remains. I don’t think history will see 1984 as such a year.