Change requires financial boldness
LABOUR’S economic orthodoxy presents its supporters with an Agrade conundrum. If all you ever do is all anyone has ever done, then what are the chances that anything will ever change? Something in the Marxist nucleotide of Labour’s DNA continues to carry forward the message that economics and politics are inextricably linked. Stuff up the former and the latter will swiftly follow suit. That being the case, Grant Robertson could be Labour’s worst enemy.
Not that he should feel too badly about that, because Labour finance ministers have a wellestablished historical reputation for being their party’s worst enemies.
One has only to think of Philip Snowden, chancellor of the exchequer in Britain’s first and second Labour governments. While noone could fault the old man’s dedication to Labour’s workingclass voters, his utterly conventional economic ideas left him helpless in the face of the Great Depression. In the words of his biographer, Keith Laybourn: ‘‘He was raised in an atmosphere which regarded borrowing as an evil and free trade as an essential ingredient of prosperity.’’
It was Viscount Snowden’s unwavering faith in these 19thcentury liberal orthodoxies that broke his party and discredited his government. The people who paid the price for their chancellor’s intellectual rigidity were (as is so often the case) his beloved workingclass.
Things might have gone the same way here in New Zealand just a few years later, had the proposals of Labour’s economically orthodox leaders (Michael Joseph Savage, Peter Fraser and Walter Nash) not been voted down by the more radical members of their party’s caucus.
It was thanks to this latter group that Labour went into the 1935 election with an economic policy calling for the ‘‘immediate control by the state of the entire banking system; the provision of currency and credit to ensure adequate production, guaranteed prices and wages; readjustment of all mortgages’’ — along with a policy of statefostered industrialisation which, today, would be described as ‘‘economic nationalism’’.
How very different these policies were from the policies of Roger Douglas, the Labour finance minister who championed the same laissezfaire economic policies implemented by Philip
Snowden between 1929 and 1931. ‘‘Rogernomics’’ radically transformed New Zealand’s economy and politics — and very nearly destroyed the New Zealand Labour Party!
The two politicians most responsible for rescuing Labour from political oblivion were Helen Clark and Michael
Cullen. In a double act of extraordinary sophistication, Miss Clark and Mr Cullen kept hold of the political reins for nine years by cleverly masking both the true extent of their government’s economic success, and the political opportunities it opened up.
As finance minister, Mr
Cullen proved a master at making his burgeoning revenue surpluses, which might have funded a much more ambitious socialdemocratic programme, disappear.
Some of Mr Cullen’s billions were invested in the special superannuation fund that still bears his name. Even more went into Working for Families, the massive employer subsidy which Mr Cullen introduced in preference to allowing the trade unions to extract the money from corporate shareholders. Most of Mr Cullen’s surplus billions, however, were directed towards paying down Crown debt.
The opportunity cost of these fiscal diversions would only become apparent towards the end of the next decade, when New Zealand’s physical and social infrastructure began to, quite simply, fall apart.
That Michael Cullen has for many years been Grant Robertson’s political patron and mentor bodes ill for the expectations of Labour, NZ
First and Green Party members that Jacinda Ardern will, indeed, usher in the ‘‘transformational’’ change promised in the new government’s coalition agreement.
Even before he received his ministerial warrant, Mr Robertson was at pains to bind Labour to precisely the same diversionary economic strategies pioneered by Mr Cullen.
A finance minister who repeatedly swears allegiance to his own ‘‘Budget Responsibility Rules’’ is unlikely to champion the sort of creative and progressive economics that makes for creative and progressive politics.
Unless — like Messrs Savage, Fraser and Nash — Ms Ardern, David Parker and Mr Robertson are reined in by a Labour caucus determined to fulfil their Government’s ‘‘transformational’’ ambitions, then the longdeferred renovation of New Zealand’s disintegrating institutional and physical infrastructure will not receive the resources it requires.
A transformational government cannot be brought into being except by means of transformational economics. For all his faults, Roger Douglas understood this fundamental proposition. Progressive voters need a finance minister whose economic policies are as bold as his government’s political promises.