Muller’s economic vision may be hard to stack up

In 2002, more than a decade after leaving office, Margaret Thatcher was asked what she thought was her greatest achievement. She replied: ‘‘Tony Blair and New Labour. We forced our opponents to change their minds.’’ Last week’s tumultuous week in Parliament saw Jacinda Ardern change her opponents’ minds as well, with dramatic results. National decided to blow with the wind of social change. While Todd Muller is himself from the rural conservative wing of the party, the big winners after the caucus reshuffle were all urban liberals, a sensible move in a country where 86 per cent of people now live in urban areas.

National is busy repositioning itself on the economy too. Muller’s inaugural speech said he wants his National to back ‘‘the economy that you live in’’ rather than ‘‘the economy the bureaucracy talks about’’ – expect to hear more of this line as the campaign rumbles on.

It is in many ways a rejection of the Key-English doctrine and its focus on GDP growth and deficits. English drifted away from this with his social investment approach, but the victory of Labour, the Greens and NZ First at the 2017 election was to some extent an acknowledgement of a dissatisfaction with the economic status quo.

During the campaign, the three parties (which don’t agree on a lot) each criticised what’s known as neo-liberal economics. It’s a catchall phrase, rendered somewhat unusable by overuse, but it refers broadly to an economic system based on deregulation and limited government intervention.

It would be wrong to say the 2017 election was a wholesale rejection of neo-liberalism, but big election issues – the costs of housing, education and healthcare – indicated the concerns of a middle class that, despite living with some of the highest GDP growth rates in the developed world, were struggling to keep pace with the rising cost of living.

The Muller doctrine is a slight pivot away from this. Growth is good, he’s saying, but it has to be growth where you can see it: ‘‘your main street, your marae, your tourism business, your local rugby league club . . .’’, as he put it.

It’s not quite a full embrace of Ardernism. Muller threw shade on the economy of the ‘‘Wellington bureaucracy’’ – a coded dig at the Wellbeing Budgets delivered by this Government. It’s a wise political move; the punter gets that Wellbeing is a move away from the hard-nosed Budgets of the Key-English years, but it all gets a bit woolly beyond that. Making sure the real economy – the economy of the rugby league club – is every bit as important as the square mile around Queen St is good politics.

But the pivot will force some interesting questions on to National going forward. Wellbeing Budgets aren’t just an invention of the Wellington bureaucracy – Wellbeing is real: it’s as much a creature of Paris’ OECD as it is of Wellington’s Treasury. In the 10 years since the Stiglitz-SenFitoussi commission, created by French President Nicholas Sarkozy, governments around the world have been moving towards their own versions of our Wellbeing Budget.

In 2015, National oversaw the development of Treasury’s CBAx tool, which both governments have used to analyse the social impact of spending – it’s a key tool of Wellbeing Budgets. As finance spokesperson, Amy Adams had much fun roasting Grant Robertson over some of CBAx’s eccentricities (it tries to put a value on friendship), but it would be hard to see National ditching it. It’s easy to jeer, but Treasury boffins often know what it takes to keep the economy of the rugby club running, even if they haven’t watched a game for a few years.

Even if Muller axes Wellbeing, National still faces some tough choices. The health of the economy where you live depends very much on where that is. Wealth, jobs, and prosperity have naturally flowed to the more productive urban centres. From 2013-18, Auckland’s economy grew by 38.5 per cent, considerably faster than the national average of 30.9 per cent.

This has created a massive gulf in prosperity between different parts of the country. Fixing it could require National to beef up the transfer system to ensure left-behind regions share urban wealth – that could mean some tough calls on retaining the largesse of things like the Provincial Growth Fund.

Muller does have some easy ways to boost regional prosperity. If he follows through on his opposition to water regulation, will that gild the coffers of the rugby clubs of Timaru and Southland, epicentres of the white gold rush. His pledge to axe the offshore oil and gas exploration ban will be welcome news to Taranaki, where petrochemical companies sponsor everything from events centres to music festivals.

But similar fixes don’t exist for the economies of Gisborne or Northland, and their beleaguered logging and tourism industries, parts of the country where NZ First and rural Labour are both strong. It’s hard to see those economies flourishing without intervention.

Say what you like about the invisible hand, it’s not very good at catching you when you fall.

Treasury boffins often know what it takes to keep the economy of the rugby club running, even if they haven’t watched a game for a few years.