Listener: 23 June, 2012

Keywords: Education; Macroeconomics & Money;

Naomi Klein’s The Shock Doctrine opens with a description of the American neo-liberals using Cyclone Katrina’s devastation of New Orleans as a chance to replace the city’s public school system with charter schools. This is but one of the book’s examples of their seizing opportunities following civilian turmoil to pursue their political agenda. Klein would not be surprised that our Act Party, with its tenuous hold on parliamentary representation, has used its leverage in a way that United Future has not. (I have no expertise on charter schools, but I am struck that the notion was developed in the entirely different educational environment of the US. A colonial cringe dominates so much of our policy thinking.)

Seizing the occasion is not peculiar to the right; Lenin arrived at the Finland Station in Petrograd/ St Petersburg just as the tsarist regime in Russia collapsed. Nor does opportunism rule out some very disreputable alliances. Chicago school economists worked for the unsavoury Pinochet regime in Chile; the Soviet Union did a nasty deal with Nazi Germany at the expense of the Polish people. Yet sometimes opportunists are unable to pursue their agenda because it is wrecked by the occasion. We are in the greatest economic crisis since the Great Depression. The global economy is already in its fifth year of stagnation, and there is little sign of its end. But a neo-liberal response to the crisis hardly exists – I don’t think charter schools are going to resolve it.

So, right-wing opportunism is not happening in New Zealand macroeconomic policy. We are not getting a lot of neo-liberal input into the US economic debate, either. If we were, that country’s colonial imitators would be trotting out the same policies here in New Zealand, oblivious that a peripheral economy like ours has a quite different place in the global economic system from a core economy like the US. Of course, every one is different, but it is instructive that Australia, Canada and New Zealand have not had the same monetary and fiscal turmoil as much of the US and Europe. (Even so, we are dependent on their economies; if they fail, we struggle, too.)

We were affected differently because we have a different banking system from the international banks at the centre of the global financial crisis – ours are more like those in Oklahoma than New York. I once discussed this with a retired governor of the Canadian central bank; he agreed, adding that we were also lucky. (Luck is the single most powerful historical explanation.) But we should closely follow international economic debate. It has many fine economists grappling with the issues, although those who developed the neo-liberal analysis have left the defence of their side of the argument to politicians and journalists.

Which is disappointing, because the best way to understand a problem is to engage with good minds challenging your understanding. We are past the point of asking whether a commentator was surprised by the global financial crisis. The economists leading the international debate were not, even if they could not predict exactly when and how it would happen. Neo-liberals were surprised that it happened and still seem in a state of shock,. The questions now to ask are: what have we learnt from the crisis; how have we adapted our analytic framework in the light of events; what remains valid, what has to be discarded, what should be reconstructed? Every economist genuinely in the debate is struggling with these questions. Anyone who is certain of the answers has not understood the problems. That is also true in New Zealand.

The underlying framework will be probably the same but its application here will have to be adapted to our particular circumstances. And here, as elsewhere, there is hardly a squeak from the neo-liberals who were so certain they had it right up to the day of the crash. Like the Bourbons, they have learnt nothing and forgotten nothing. Which suggests they won’t be very good at reforming education, either.