Private Affluence and Public Squalor?

What does National’s just-released economic manifesto tell us about the state of economic discussion in New Zealand and where the economy might go?

The National Party noticeably shifted towards the economic centre when Simon Bridges took over. Actually it had been creeping in that direction under Bill English’s leadership. Apparently it concluded as the election neared, that the public’s political centre was slightly to the left of the National Party. Moreover, Bridges, an Auckland Westie, would be more comfortable with a more centrist stance; he describes himself as a ‘compassionate conservative’, Paula Bennett also came from modest origins.

The centre is a bit of a no-man’s land, and too often the Bridge leadership amounted to whining that ‘we agree with the general thrust of policies but we can do them better’. (That most of the current government’s scrambling about is responding to the previous government’s failures goes unmentioned.)

So the shift to the right in the party’s recently published economic manifesto, Discussion Document: The Economy, is intriguing. Some saw it as a return to a neoliberal stance; ‘it's the 1980s all over again with National’. (For other views see here.)

Why the shift? It was flagged by finance spokesperson, Amy Adams’ resigning from the Opposition front bench. Looking forward to her retirement, she said, ‘I want my life back ... I want to spend more time with my family’. But one wonders whether she saw little future for her kind in the National Party despite having come second in the previous leadership stakes.

She was replaced by Paul Goldsmith, one of the two Rottweilers on the Opposition front bench. (Judith Collins’ palpable leadership ambitions presumably ruled out her promotion.) Goldsmith is on the further right of the National Party and close to Don Brash, including writing his biography designed to promote his 2004 election prospects.

Two months later, he and Bridges released National’s discussion document. (So its shaping must have been well under way when Adams resigned.)

Why the shift to a position possibly more right than that of John Key or Bill English? I have not seen much comment on this, and I resist speculation – well, almost.

One rule in politics is ‘follow the money’. Were the funders of the National Party – perhaps similar to those who funded the Goldsmith biography of Brash – pushing the party in that direction? Do they expect to be electorally successful? Thus far, neoliberalism has never won an election in New Zealand, even though once in power its adherents have seized control of policy.

It almost won in 2004 when National was led by neoliberal Don Brash. But his success was not because of widespread enthusiasm for his economic policies; it was Brash’s cultural populism, triggered by the Orewa speech and summarised by the slogan ‘iwi or kiwi’. (If you are too young to remember, National could have formed a coalition government with the Maori Party but it refused because it objected to Brash’s anti-Maori rhetoric.)

This neoliberal strategy is similar to the one I discussed a fortnight ago with the rich with their neoliberal tendencies combining with a popular movement more focused on cultural issues than economic ones.

It has been a constant feature of the neoliberals that they have not been able to implement their policies except following a coup. One of the most interesting was Jenny Shipley’s seizure of power from the Bolger Government in 1997. Instructively, her shift to the right was reversed to a more interventionist stance as election day loomed

Perhaps there is a simpler explanation for the right shift. Earlier this year across the ditch, and to many people’s surprise, Scott Morrison’s Liberal-National coalition easily won the Australian general election. A major factor in its popular victory was that campaign hammered the claim that Labor would raise taxes.

So it is not surprising that prominent among New Zealand National’s proposals is the promise not to introduce any new taxes during its first term and there are other promises which indicate it wants to lower tax levels. Moreover, it says – a little less firmly – that it does not plan to borrow much. That means that government spending will have to be tightly constrained.

The preference for private spending over public spending is a standard difference between National and Labour, but it also shapes the development of the nation.

Every day, we see the consequences of parsimoney towards the public sector in our newspapers, with their myriad of stories which are desperate pleas for more public spending or an equally desperate government trying to meet the pleas.

National is not totally deaf to the demands, as is shown by its proposals to increase spending on cancer treatments. (Did National’s spokesperson on healthcare sign up to the discussion document?) Labour gazumped it, but we shall all be astonished if National does not make many more such demands before the election, oblivious to the fact that it cannot deliver all of them given its fiscal policy. No wonder it does not want an independent agency assessing the cost of its policy promises.

It does not seem to have learned that the country is currently struggling with the failure of the Key-English Government to provide adequate public services following it giving away huge tax cuts in 2009. The problem is not just that we lack badly needed social services and that we are paying the price in poorer wellbeing with subsequent additional pressures on public services. We seem to have ended up with a public service so run down that the current government struggles to deliver.

Kiwibuild has been a farce, but a better strategy has been delayed because there was no useful public sector agency to advise and implement what the government wanted. That applies in many other areas too. Geoffrey Palmer a senior member of the Lange-Douglas Government, is said to have remarked that they finally had their hands on the levers of government but found they were not connected to anything. I bet any of today’s Cabinet ministers reading this will give a wry grimace.

There is a sense that the neoliberals are right. To pursue the world they envisage requires much more private spending arising from the withdrawal from the public sector so that individuals have to fund more activities themselves – more private health, more private education, more dependence on market incomes rather than state welfare (and subsidised housing), more privatisation of law and order, poorer and less sustainable environments and so on.

That is the way the neoliberals want it, but do most New Zealanders? That is not what the surveys say. But here’s the rub. The neoliberals focus on lowering taxes without mentioning the offset of lower government spending. The electoral strategy seems to be to get elected on lower taxation and then cut government spending based on a claim that there was an implicit, if unstated, commitment in their manifesto – there will certainly not be an explicit one.

What is striking is that there is hardly any offsetting public argument making the point. Of course, we all demand more from the government, but in particular areas. There is no public lobby arguing for more public spending across the board..

Contrast the Taxpayers’ Union and the well-funded NZ Initiative, who advocate the low-tax strategy. A democrat does not begrudge their energy, but wish there was similar energy (and funding) on the other side of the argument.

Without two sides there is an imbalance in the public debate. The public sector suffers, and so does our wellbeing. Public squalor underpinning private affluence.