The need for success, Sir Geoffrey Palmer

Leap Into The Dark – The Changing Role of the State in New Zealand Since 1984
Andrew Sharp (ed)
Auckland University Press, $34.95

One of the depressing features of New Zealand is the lack of sustained intellectual policy debate on virtually anything. Because of its size, New Zealand does not have a critical mass of varied and developed opinions which can engage with each other. There is little in the ordinary media which can be classed as serious discourse.

The university community seems strangely unable or unwilling to make serious contribution towards the debate about the direction in which New Zealand should travel in virtually any area. There does appear to be, however, amongst many of the academic commentators in New Zealand a well‑rehearsed set of convictions that what happened to New Zealand after 1984 was, on the whole, a mistake.

This book, edited by Andrew Sharp, Leap Into The Dark is full of condemnatory rhetoric about what has been done, but short of any alternative vision and rather lacking in analysis as well.

The book comprises 11 essays, two of them by Dr Andrew Sharp, one introducing the series and one entitled “Pride, Resentment and Change in the State and the Economy” in which he enlarges on the theme: “Politicians ought, as a matter of morality as well as prudence, to take into account people’s emotions.”

The book had its origins in a lecture series delivered at the University of Auckland. All the authors are academics; indeed the volume has all the caste marks typical of academic output in New Zealand.

This book deals with a number of subjects, but it has no overall coherence. Much of it contains the sort of political hyperbole that has been the resort of much of the academic community as the changes have proceeded. Indeed, in my bleaker moments, I feel that the New Zealand academic community is incapable of making any useful contribution to New Zealand society. Certainly it did not do anything of note while all the changes described here were being carried out and it has failed to make much sense of them now that the era is at an end.

One of the most popular fallacies about what happened in New Zealand is that it was really all a conspiracy between a few politicians and the New Zealand Business Roundtable. This theory was that the Labour Government and then the National Government were both captured by extreme right wing ideologues who were determined, to use Jane Kelsey’s phrase, to “roll back the state”. This theory has no factual basis and never has had despite its appeal to populists.

Most of the changes which deregulated the New Zealand economy had their origin in New Zealand’s poor economic performance over a period of 20 years. These basic economic facts were obvious to anyone who was prepared to look at them. Sir Robert Muldoon’s policies were conspicuous for their resolute refusal to examine the facts and act on them.

The Labour Government embarked on a programme of economic decision‑making which ended up being radical. But it was only radical in New Zealand terms. Many of the changes which were carried through by New Zealand governments in the last decade have been done by governments in other liberal democratic countries. Indeed, the possibility of carrying on the way we were never appears to be addressed in these essays or elsewhere. And for a good reason. New Zealand had to change.

The State‑owned Enterprises Act 1986 was born of the conviction that the Government was incapable of carrying out its duties when such a large portion of expenditure was to be found hi state trading departments. They were essentially engaged in commercial activities and over them minsisters had no effective control. They had, control in theory but not in practice.

Where the Labour Government came to grief was not in any of the policies that it implemented between 1984 and 1987. After the 1987 stockmarket crash, the two primary figures in the Government, the Prime Minister David Lange and the Minister of Finance, Roger Douglas, developed serious policy disagreements. This is not the place to go into the details, but the disagreements centred around the future of the welfare state.

It was not too difficult for the Labour Government to dish out stiff medicine to the farmers, the manufacturers and the financial sector. After all, they had never been Labour’s friends. The case for rationalism was overwhelming. But when it came to proposals to dismantle the welfare state, it was a different matter altogether.

After National was elected, promising one thing and doing another, the voters were doubly fed up. Labour had promised not to do some things which it then did. That air of cynicism generated by the breaking of election pledges was, in my judgment, an important element in bringing about MMP.

The National Party came to power in 1990 determined to make some important changes in the social welfare system. Its health and superannuation policies dismayed a lot of people. The changes made to accident compensation fuelled this sense of unhappiness as well. The electoral consequences were severe in 1993.

The political meaning of the decade’s development is not difficult to discern. New Zealand has not leapt into some strange new form of social experiment, having abandoned tried and tested policies which served it well in the past.

It embraced a measure of economic orthodoxy and most of the available evidence would suggest that economic orthodoxy has begun to work. What can now be seen from a decade of important change is that extreme ideology was not driving New Zealand’s changes. The need for success as a nation was.

No doubt there is a range of extreme opinion which opines the role of the state should be reduced and wither away. It is not going to happen. The welfare state in New Zealand is an established part of the New Zealand way of doing things. The provision of appropriate levels of care for people who cannot help themselves is regarded by a majority of the New Zealand electorate as a core responsibility of the state.

There will be arguments about the range and level of support. Adjustments to keep the incentives appropriate will always be necessary. The belief of a majority of the New Zealand electorate always seems overlooked by many of the proponents of change. There has been a tendency to examine the issues only through the lens of economic efficiency and public choice theory. These methods of analysis have the advantage of highlighting the importance of incentives and the unintended consequences of policy actions which are always lurking. In the end, however, such approaches offer little guidance on the key issue of which matters should be handled as a matter of collective community decision, and which matters are best left to the market to be dealt with on a commercial basis.

The biggest issue facing the development of public policy in New Zealand is when the market alone is the appropriate solution and when intervention in it is required. In this, the issues we face are no different from other western countries. It is true that the balance of that judgment has shifted in New Zealand in recent years, but it is a question of degree, not a question of total social shift. I expect this point to be better understood as time goes on than it is now.

New Zealand governments in the future are going to continue to be held responsible for such matters as income maintenance for the needy, education and the health care system. It is part of the ethos of New Zealand that the disadvantaged have to be given a fair go. I do not see any evidence of that having changed fundamentally in the whirlwind of the last decade.

The recent New Zealand experience is not to be understood as a massive retreat from the state. It is to be understood as an effort to build an internationally competitive economy and make the country live within its means. Trading activities carried out by the state were removed from the market and the old incentive rules relating to them pointed in the wrong direction.

Accountability rules for the use of public resources were too loose; they needed to be tightened up; and they have been. Better value has been secured for each taxpayer dollar. No doubt it is true that much greater rigour has to be applied to the elements of collective solutions than was once the case in the cosseted world we have lost. But the New Zealand experience in the last 10 years was not an approach that sets its face against all collective action. It is all a question of balance. Many of the support structures of the state in New Zealand will survive because they are both efficient and humane.

In New Zealand the unfinished business relates to the need to reconfigure the pattern of state programmes. Income maintenance, for example, requires removal of the anomalies which have been produced by different programmes at different times, while at the same time avoiding the creation of new ones.

I anticipate that MMP will produce a political consensus over time in relation to the manner in which a number of the functions of the welfare state should be conducted. The debate will not be driven by the extremists of either side. In the course of the reconfiguration which will inevitably take place, the major problem will be dealing with institutionalised unemployment, a point mentioned in Susan St John’s essay in this book.

Certainly government is going to be smaller in New Zealand and it will be smarter. But it is not a leap into the dark. As has happened in New Zealand in the past, after a reforming decade, a new orthodoxy will set in. That is about to happen.

Indeed, reading this volume made me wish that the changes which have taken place in New Zealand had reached more deeply into the universities and changed their culture. There is a need to make better use of what talent we have in this country by ensuring that academics become involved in matters which are relevant to the society. Carping cries from the unhallowed halls of the academy after the game is over will not receive attention. Constructive suggestions on how to proceed might.

Sir Geoffrey Palmer was Deputy Prime Minister at the time of the passing of the Stateowned Enterprises and State Sector Acts and Prime Minister when the Public Finance Act was passed. He now teaches law at Victoria University of Wellington and the University of Iowa . He has published several books on government practice and the constitution, including New Zealand’s Constitution in Crisis: Reforming our political system, published by John McIndoe.

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