The return of mercantilism

Our brief era of non-intervention is fast slipping away

WHAT DO YOU call a government that subsidises the film industry, pays sweeteners to keep aluminium smelters open, and chooses who it wants to build a new national convention centre without much heed for due process?

Or a government which, in pursuit of a public policy outcome such as the fastest possible uptake of fibre-based broadband, sets about trying to ensure make the price of copper-based broadband services unattractive by comparison?

To a growing number of New Zealanders, there’s a tendency to call such a government crooked, in bed with its mates, determined to feather the nests of the elite. At its mildest, such actions are derided as ‘corporate welfare’.

There’s an increasingly shop-worn, used car salesyard feel to the way that the National-led Cabinet is willing to get its hands dirty, to wheel and deal. It’s in the nature of two its most powerful protagonists, John Key and Steven Joyce, both of whose pre-politics experience was in the commercial world, where decisions are often made unilaterally, not in full possession of all the facts, but in line with commercial instinct as well as strategic intent.

This is a government, for example, that wants more mining and oil exploration to occur. Key has willingly kept a block of Bathurst Resources’ Denniston Plateau coking coal in his office,

There’s a increasingly shopworn, used car salesyard feel to the way National is willing to get its hands dirty

expressing that support. He routinely asks after the fate of various resource plays when he rubs shoulders with their senior executives.

Yet a part of this antipathy to the Key government’s decision-making style comes down to a matter of culture and familiarity.

Since the mid-1980’s, New Zealand has been governed by governments that have been by turns radically reforming (the Roger Douglas era), disciplinarian (the Ruth Richardson era), steady-as-she-goes (the Bolger years) or statist (the Helen Clark era) in their dealings with business and the economy.

A common thread through those administrations was a high degree of ideological antipathy to rewarding industries that engaged in special pleading. The dismantling of subsidies and tariffs in the 1980s and 1990s profoundly shifted New Zealanders’ experience of what governments would and wouldn’t do.

While there continued to be a vocal political constituency for economic intervention, it was surprisingly unsuccessful for the best part of three decades, thanks as much as anything to the inter-generational poison of the Muldoon era. But Muldoonism was a long time ago. And we are watching the rise, for the first time in a generation, of a mercantilist government – an administration not only happy to intervene but comfortable with the notion that doing business involves doing deals.

To an Australian, it would like business as usual. To New Zealanders raised on a generation of policy purity, it looks dodgy.

The interventionist strain is also being unleashed on the left. The Labour leadership of David Cunliffe, particularly because it’s backed by the deputy leadership of avowed iconoclast David Parker, is casting about for policy differentiation.

Its instincts may be less that of the wily trader and more of the social activist, but under either regime after next year’s election, it’s safe to assume that our brief era of non-intervention is fast slipping away.