How the left could still win

I wrote a column in the National Business Review this weekend, and it’s driving right-wingers there nuts.

Bill English believes the government shouldn't bother with trying to promote added value exports. If the market wants raw logs, then that's what we should sell. (Listen to his interview on Newstalk ZB – he argues at length against the whole idea of government helping to create value in the economy.)

This is a clear fault line between left and right. The right believes that the best outcome for the economy as a whole is whatever the sum of individual market decisions adds up to. Individuals acting together in their own self-interest will act in the best interests of the community. 

Except we know that’s not how the market works if left to its own devices. Why, for example, would any business invest in a free primary and secondary education? If you just export raw logs, then you don't need a highly educated workforce to prune them, cut them down and load them on ships. You want to be able to grow them and sell them as cheaply as possible. You want queues of low-skilled people competing to work for as little as possible, helping to keep the cost of selling raw logs as low as possible.

If you have a highly skilled workforce aiming to making the incomes of workers in other developed countries, then that is going to drive up labour costs and land costs. Not good for raw log sellers. But very good for most people: most people in a high skill economy will be well paid, have great opportunities and the chance to succeed on merit and effort.

The only way you can make it work is through an economy that produces mostly high-skill jobs; those come from job-rich transformation of commodities into complex manufactured goods. They don't come from selling raw logs. 

That doesn’t mean tax-payer subsidies. It means tax incentives to encourage investment in processing, design centres, apprenticeships, access to overseas markets, and a razor sharp focus on our unique point of difference. Just as Icebreaker make something special the world wanted, with Merino wool, why can't New Zealand create an Ikea of the Pacific?

Why does the idea that this is anything to do with government policy enrage the right so much? Because an economy where we focus on raw goods exports and “wrapping around” a few services is an economy where only a few people prosper – the people who own the trees or the farms. 

So this is a classic struggle between the holders of capital and wage earners. 

Labour’s job is to be on the side of wage earners, and those who aspire to join them. This is the core stuff that  really makes a difference to people’s lives – high value jobs, higher wages.

It makes much more of a difference than spies and Judith Collins. As John Armstrong wrote in the Herald this weekend: “come September, nobody will be talking about whom Collins had dinner with in Beijing. Or how Parata could go to bed saying one thing and get up the next morning mouthing the exact opposite.” The 'crony capitalist' labelling – designed to drive a wedge between National and middle-income and upper-middle-income voters who possess a conscience – has so far been a flop.”


People will listen to the earnest and articulate David Cunliffe talking about upgrading the New Zealand economy and how that will create better, higher paying jobs in your town, because it is genuine and sincere. Cunliffe really believes this. 

The announcement of Labour’s forestry policy last week was a win. The fuss around Judith Collins stole some of the oxygen from it. And yet, as John Armstrong mentioned, “To watch Cunliffe extol the virtues of what he calls 'intelligent hands-on' economic management is to witness the Labour leader at his most confident and self-assured best."

Many on the right of politics are deeply uncomfortable with John Key’s embrace of interventionist government and subsidises for the film industry for example. This is a divide within National that Labour should exploit. A job-rich, high-skill, high-wage economy is a Labour idea. Bill English opposes government activity to create it.  

If I were Labour's economic team, I would harp on about this difference in every opportunity this election year. It makes equality and opportunity Labour issues. It sets out a vision for a better New Zealand. And it leaves the Finance Minister at odds with what many of his supporters believe the National Government wants to do.