The much touted smackdown between John Key and David Shearer – one gives a major speech at breakfast, the other at lunchtime! – turned out to be one of those occasions where the rivals spent the entire 15 rounds trying not to put their chin where it might be hit, while the relatively few committed fans of either Labour and National were left feeling deflated – is that all there is? etc.
Key’s speech on public service reform consisted primarily of a shuffling together of several departments into one “super ministry” – as feared beforehand by the editorial writers at the NZ Herald, who were plainly hoping for much more:
The merger Mr Key seems about to announce sounds like nothing more than a reshuffling of departments. This is the sort of reform public servants propose when they can offer little else. They are forever worrying about “silos” and suggesting ways to cross-fertilise their operations. Every so often a government carves them up and reconstitutes them in different combinations but nothing really changes.
Alas, an exercise in reshuffling is what it turned out to be.
The four-into-one merger unveiled by Key will create a single “dedicated, business-facing ” ministry under the control of Economic Development Minister Steven Joyce – with the usual related round of job cuts, leaner budgets etc set to follow in its wake. Not surprisingly, business lobbyists such as Phil O’Reilly of Business New Zealand seemed tickled pink at the prospect of a “business facing” super ministry led by Cabinet’s heavy hitter.
For everyone else, it looked more like another round of austerity-in-recessionary times that would allegedly, and magically, somehow help to lift New Zealand onwards, onto a path of better returns for the buck and sustained economic growth. Joyce will now co-ordinate and command the functions of economic development, innovation, housing and employment – despite the fact that the latter two are about social goals, while the first two about economic ones. It’s not hard to guess which will prevail. And in order to get economic growth… why, all that we needed to do, evidently, was to put everyone under the same roof! Who’d have thought it could be so easy?
If Key’s speech had an air of deckchair-arranging and empire building, the more disappointing effort was the speech by David Shearer – if only because it had been promoted so heavily. This speech was supposed to validate the slow start to the year by Labour under new management. It was pre-sold as a launching pad for Labour’s new strategy, offering not only insights into the personal philosophy of the still relatively unknown Labour leader, but outlining just how a Shearer-led party planned on making a clean break from its recent past, and positioned as a credible alternative government.
No such luck. The speech turned out to be the first stage in what promises to be a very, very slow political striptease. The structure of Shearer’s speech unpacked a series of clichés like a set of Russian dolls, in order to reveal… almost nothing in the last doll but a continued commitment to a capital gains tax on all but the family home, a strong hint that Labour will dump last year’s election policy of foregoing tax from the first $5,000 of income, and a re-positioning on welfare reform (more details in a subsequent speech) intended to ensure that Labour won’t be cornered in future as… you know, the party that stands up for beneficiaries who don’t pull their weight. Or as Shearer put it:
Number one: our community must take care of the needy. They deserve a share of the pie. And if people fall on hard times, we will help… Rights and responsibilities, that’s the social contract that binds our society.
The government’s part is to ensure that this transition happens – through up-skilling, education and a nudge behind those not meeting their side of the contract.
So all in all, what scant details were on offer would amount to a shift to the right of the party led by Phil Goff. Does Shearer, in fact, think that the Key government’s current welfare reform agenda is something more of “a nudge” to the needy than what he has in mind? Well we’ll have to wait a few more months, and hear Shearer later on this subject.
On the personal level, instead of the well worn anecdote about hungry kids in Africa scrabbling for his cast off mango peels, we were given a fresh anecdote about David Shearer delivering education materials down a road that had been mined, in the midst of war torn Sri Lanka. As for when the speech got around to presenting a vision… depicted by Shearer in the speech as sometimes being little more than a “kick me” label for politicians – things quickly became even more nebulous. Labour, it seems, is in favour of everyone working hard, working smart, looking after their kids, and being part of a brighter New Zealand future where effort is fairly rewarded. No word yet on whether Labour is in favour of apple pie.
The nominal subject of the speech was education. (Hey, who isn’t in favour of more money for educating little kids, and giving them a good start in life? OK, Treasury isn’t. But apart from them.) Little in the way of fresh education policy was hinted at, but bad teachers can evidently expect no coddling from Labour. The PPTA, which has been pushing for New Zealand to match Finland’s successful efforts in early education – it wanted to give John Key a book on Finland’s education system as a Christmas present – must have been happy to hear Shearer endorsing Finland as a country that New Zealand should be seeking to emulate.
Finland? It may be time for Labour to officially retire Finland as a role model. In citing Finland as an inspiration, Shearer was – lets hope, accidentally – eerily channelling Roger Douglas in his heyday. Compare these two passages. Here’s what Shearer said yesterday:
I’ve got a strong sense of where I want to take New Zealand to achieve that vision, and what we need to do to get there. Let me start with an example.
The former Finnish Prime Minister, Esko Aho, largely untested, came into office in 1991.He was almost immediately faced with a banking crisis. Jobs were disappearing. Its stock market was tanking. Its future was hugely doubtful. Aho’s message to the Finnish people was blunt and honest:
They had big problems. No-one else was going to fix them. And most importantly: only their brains and talent were going to take them forward.
Collectively, the people of Finland took that message on board. They moved forward. They transformed their economy through innovation and talent.
They put at the centre of everything they did great teachers and schools and great science, research and development. Aho made bold decisions. He was, I need to say, voted out at the next election. He thought it was more important to make a difference than to get re-elected. Though our prescription might differ, we could all take a lesson from that.
OK and here’s what Roger Douglas told the Listener in its February 23, 1985 issue. In a sidebar headlined “Rogernomics in Finland” that incidentally, marked the first ever use of the term ‘Rogernomics’:
Have the policies being tried here ever been tried elsewhere and shown to work? “I can give you the case of Finland, “Douglas replies, “which actually has done better over recent years than New Zealand.” Finland “bit the bullet” and “made the adjustment.” There was a small drop in living standards in 1979, he says, “but Finland has had increases in wages, real wages, ever since…”
Well, actually no. As the Listener article pointed out, Finland hadn’t tried anything like the same scale of reform as the fourth Labour government, and had derived poor results from the similar reforms it had enacted. What Douglas was relying on was that no one would bother to check. Shearer may be hoping for the same.
In the early 1990s, Finland heroically “made bold decisions” according to Shearer. So… how has that turned out? Well, despite gains made during the economic boom of the mid-2000s and the wonders of its early education system, Finland reportedly has one of the most steeply rising rates of income inequality in the OECD, albeit from an inherited base of income equality that would still be the envy of most member countries. The trend line, though, is of concern. Here’s the OECD in 2010, in a report on Finland headlined “Rising inequalities challenge Finland’s social model”:
Along with GDP, income distribution is an important indicator of well–being. While inequality of disposable income in Finland remains among the lowest in the OECD, it has increased in recent years despite a substantial decline in unemployment rates since the 1990s recession.
That 1990s recession and the “bold” policies taken to confront it that Shearer so admires – took a very long time indeed to show benefits for most of the population. Presumably, he would argue that’s exactly his point, that in the long term we all stand to benefit. Yet this study (from 2002) has the advantage of being carried out close to the near decade-long period of pain, and it makes it very clear who were the immediate winners in Finland, and who were the immediate losers:
Total inequality rose significantly during the late part of the 1990s. As a general pattern inequality rose proportionally more within those socio—economic groups with growing capital income shares, in particular among entrepreneurs..[and] this share grew most significantly during the 1990s… The number of unemployed below the poverty line has risen from 1994,,[and] since 1991 there has been a declining trend in the average real disposable income of unemployed households…
So… for all its success in education and in producing a global winner like Nokia, Finland hardly seems like a fabulous path for us to emulate. Been there, done that. Roger Douglas, as we all well remember, made “bold” decisions, too. He, too, wanted to “make a difference”. And if you look again at that Listener article from 1985, it’s quite poignant to find Douglas promising us only a brief period of adjustment, and then happy days ahead for everyone. In that 1985 article, Douglas explicitly rejected the criticism that the Labour government was out to create a low wage economy:
“The simple fact is we are already a low wage economy. Anyone who travels overseas realises that. And we are a low wage economy because we have no growth… Now, if we can go through this process of adjustment, get better investment decisions, then we’ll get growth. And then we’ll get an increase in real wages, and that’s the whole basis of our policy.”
Some 27 years later, a couple of generations of New Zealanders are still waiting, and still looking for a means of escape from the low wage economy and the rising income inequality that such policies have, if anything, only intensified. Meanwhile, the current crop of politicians and their media friends are still advocating the same failed policies (e.g. see the NZ Herald editorial in the link above ) dollied up one more time as a bold new direction that New Zealand needs to follow. On yesterday’s effort, Shearer is not offering much of an alternative, once you get past the capital gains tax idea. Onward, to Finland! Make those “bold” decisions, and reap the long term benefits from a short term (promise!) period of adjustment.
Roger Douglas was, in some respects, the original anti-politician. Remember the quote by Nietzsche that Douglas used to begin his book There’s Got To Be A Better Way? Well, it went like this: “A nation usually renews its youth on a political sickbed; and there finds again the spirit which it had gradually lost, in seeking and maintaining power.” That could be David Shearer, promising us not to play gotcha politics. I know, David Shearer is not Roger Douglas. But hopefully, in the coming months, Shearer will be offering a bit more than a warmed over version of 1980s economics tricked out with a capital gains tax as his vision of renewal, for when the John Key government has finally run its course.