After the world had changed, Gary Hawke

The Great Experiment: Labour Parties and Public Policy Transformation in Australia and New Zealand
Francis Castles, Rolf Gerritsen and Jack Vowles (eds)
Auckland University Press, $39.95
ISBN 1869401344

The New Zealand Experiment
Jane Kelsey
Auckland University Press/Bridget Williams Books, $39.95
ISBN 1869401301

It is now as long since the general election of July 1984 as it was then from the beginning of 1973. That was before the first oil crisis, and the year Britain finally acceded to the European Community. A different world.

By July 1984 there was a reasonable degree of consensus on the nature and significance of what had been happening to New Zealand since the beginning of 1973. New Zealand was forced to share in the redistribution of world income to oil producers. There were still disagreements about the wisdom of local reactions. Early responses could be described either as joining an international consensus on the wisdom of recycling petro‑dollars or as “borrow and hope”; and the later response of “Think Big” could be described as responding intelligently to the enhanced value of local petro‑carbons or as expensive failures as politicians without vision sought to maintain the New Zealand they inherited. But these extremes clearly owed something to party allegiances and people of goodwill who were committed to reason could expect to make considerable progress towards agreeing on which were the elements of truth in the competing characterisations.

Can we say the same about mid‑1984 and what has happened since then? There have been many studies which attempt to help us, among the latest being The Great Experiment. Labour Parties and Public Policy Transformation in Australia and New Zealand and The New Zealand Experiment. But in comparison with the 1973‑84 period, we are still left with a large area of disagreement and a much smaller one of agreement.

Indeed, in some ways, we do better to turn to books which are not intended to help us. Hugh Templeton’s memoir, All Honourable Men: Inside the Muldoon Cabinet 19751984 (AUP), is intended to persuade us that important things happened in the eight-and-a‑half years before July 1984 but have the effect of reminding us just how much the world has changed since then. Or we could turn to comparable studies of overseas experiences. Martin Feldstein (ed) American Economic Policy in the 1980s (Chicago University Press) soon shows that economic policy in the 1980s, especially 1982‑84 when Feldstein chaired the Council of Economic Advisers, was very different in the United States from New Zealand. Not only is Feldstein’s account very much in terms of the conflict between the advice of economists and White House views on what was politically advantageous, but the economic advice was much less a coherent whole worked through from first principles than was the case here. The difference is not adequately described and explained in our current literature on the 1980s, despite the efforts of people like Francis Castles, Rolf Gerritsen and Jack Vowles.

One obvious reason for this is the extent and complexity of the changes we have experienced since 1984. And yet if we compare 1984‑96 with the equivalent length of time from December 1938 to mid‑1950, we might conclude that “extent and complexity” is not a sufficient explanation. In December 1938, New Zealand’s government took fundamental decisions about import licensing and exchange controls which created the “insulated” economy that lasted until 1984 and it had also, through the Social Security Act, set its course on what became known later as the welfare state. By mid‑1950, the second world war had been fought, there had been a major public debate over defence policy in which the government had prevailed over its party supporters, its political opponents had taken office and, although there was a major conflict over labour market management still to come, it was clear that the decisions of 1938 were to evolve rather than be reversed. There was plenty of social and political debate but there was a large measure of agreement on what had happened. The gap between different views, which had started as a gap between “applied christianity” and “applied lunacy” (then still almost universally seen as a large gap), had narrowed.

2

In the early 1950s, the political rhetoric applied to the developments of the preceding 10‑15 years remained full of conflict. It was in élite circles that the gap had narrowed. What is unusual about the 1980s is the lack of any convergence in informed commentary and in scholarly treatments.

We might also notice that the serious debate of the early 1950s found public servants and academic commentators seeking to resolve questions of nuance in evaluation of what had occurred. The public servants occasionally found that their politician‑masters thought they (the public servants) were emerging out of an appropriate obscurity even when they published through organisations like the Institute of Public Administration, but there was no dichotomy between those who had been actively engaged in public administration and outside commentators.

There is now. In looking at the similar situation in Australia ‑ and we are too inclined to think that New Zealand is unique so that the concept of The Great Experiment is very welcome ‑ Richard Mulgan has recently argued (Canberra Bulletin of Public Administration 78 [August 1995]) that there is a large element of unrecognised self‑interest on both sides. The practitioners who have formulated and implemented the public sector reforms which are central to disagreements about the nature of the 1980s emphasise rightly enough that the critical decisions were taken by politicians, but underestimate the extent to which they themselves guided politicians to particular decisions and the extent to which their own positions were favoured. Academic critics, on the other hand, were surprised by the speed with which new ideas were understood and accepted and do not recognise how deeply they resent being left behind. Furthermore, the new ideas generally had the effect of shifting decisions and control from the public sector and the critics tend to come from disciplines such as political science and public administration for whom the activities of the state are central and whose practitioners are concentrated in the public sector.

I would go further and, like Christopher Ball in the particular case of education, (Sharks & Splashes: The Future of Education & Training [IPS, 1991]), draw parallels with those scholars in the Renaissance who found that their learning was no longer wanted. It had become irrelevant to the way the world had changed. Eventually, some of that earlier learning was recovered but that was little consolation to those who found that in their lifetimes what they had struggled so hard to acquire was not valued.

In the 1980s, it was economics that was the “new learning”. The difference between economists and political scientists in the way they think of “theory” easily leads to confusion. As an academic discipline, economics has a central core in analysing constrained maximisation ‑ the importance of the “constrained” is often underestimated relative to the role of self ‑interest in “maximisation” ‑ but applied economics, including policy development, is seldom bothered by the origins of theoretical ideas. Applied economics treats economics as a bag of tools available for use in a particular context. The context is as important as the theory. Political scientists seek to systematise the thinking and produce a set of abstractions which they propose as descriptions of what happened. Participants do not recognise them either as accounts of what they did or as statements of the theory on which they drew.

Occasionally, policy implications are drawn directly from economic studies. The World Bank, for example, has done so with studies which show rates of return to be higher for female education than for male, to be higher for general education than for vocational education and to be higher for primary and pre‑school education than for tertiary, to formulate guidelines for its lending policies. But this is not the usual kind of connection between economic studies and policy development and it is noticeable even here that it is studies rather than theory which provides a direct connection. Certainly, in the 1980s, while New Zealand policy development used economic theory, the government did not simply apply implications of theoretical analysis.

In any case, in formulating policy, argument can take us so far but it ends in a need for judgment. We can agree that, given appropriate conditions (of perfect competition and so on), the market transactions of individuals can be expected to generate a social optimum, but some may think that this shows that the necessary and sufficient conditions are so restrictive that it amounts to a proof that we need a mechanism such as a government to modify the results of markets, while others may regard it as a proof that governments are needed only for specific unusual objectives.

To take a more recent example, several people have commented on different interpretations of the Coase argument that in the absence of transaction costs not only are firms unnecessary but the original allocation of property rights is irrelevant to the attainment of a social optimum. Coase saw it as pointing to the folly of pursuing arguments that do not pay explicit attention to the role of transactions costs, while others have interpreted it as meaning that if property rights are well defined, distributional issues can be left to look after themselves.

These different judgments are properly the subject of further theoretical exploration, but policy development proceeds, working with a lower level of abstraction. And those with a limited understanding of the nature of economic theory, who may be economists or political scientists, are easily misled if they assume that the higher level debates have been resolved one way or the other.

3

We can readily agree that simplification is desirable, whereas oversimplification is undesirable, but it is seldom easy to determine where we pass from one to the other.

The difficulty is obvious for those who seek to expound the basis of “policy transformation”. Political processes overlap with policy development in many ways, the most important of which is through ensuring that policy decisions are in accord with community values, or at least in accord with what political leaders can persuade voters to tolerate. That persuasion requires argument in public. And the public has limited interest in academic niceties.

We can observe the effect of this throughout the 1980s. The reform of the system of school governance rested on a sophisticated analysis, in which a central role was played by the Picot committee. Prime Minister David Lange, however, simplified, or oversimplified, this into a “partnership of parents and teachers” and caused an immense amount of confusion between the proper roles of teachers and parents.

Similarly, much policy development rested on a chain that began with dissatisfaction with New Zealand’s standard of living relative to what was becoming available overseas, proceeded through the importance of making best use of all New Zealand’s resources and several other steps, to consideration of whether some assets held by the public sector would be better used in private ownership. The critical policy debates focused on whether the price for which assets could be sold within a credible commitment to an appropriate future commercial environment exceeded the present discounted value of the stream of revenue which could be expected if they remained in public ownership. Not surprisingly, the task of explaining that in public was daunting. It was attempted and an Institute of Policy Studies seminar included an effort by a minister to do so. But for the most part advocates resorted to simpler (but misleading) arguments about selling assets to repay overseas debt. Another minister relied mostly on that argument at the same seminar.

The unfortunate consequences of this include a regrettable lack of recognition of the high standard of ethics which prevailed for the most part in government in the 1980s (and subsequently). The Labour government, in particular, was puritanical in much of its decision‑making. Notions of using sales of public assets to build a political constituency, for example, were rejected. This will eventually be seen to be far more important than the sensationalism which sometimes occupied the media. But the consequences go much deeper. Insufficient distinction is made between political rhetoric and the arguments which carried most weight in policy decision‑making. Determining what was most weighty is not easy.

The crucial decisions were always ones which involved many people and several stages of debate. Whenever a committee reaches a decision, it is not necessary for its members to agree on the reasons why they are supporting a particular option. Many committees find it hard to reach a decision and would be completely paralysed if its members had also to agree on the reasons for their decision. The cabinet is a committee.

Furthermore, the cabinet is a committee serviced by others (including other committees) and especially by public servants. Ministers like to think that they initiate policy decisions and make the key judgments and in some senses they do and it is right that they should do so. But they tend to underestimate the extent to which the choices which they finally consider are the result of the work of professional policy advisers. They also tend to ignore this when they seek popular support for their decisions. And commentators who rely on political debate for their information work with inadequate evidence.

Much commentary on the 1980s reminds me of historical studies of the nineteenth century more than what I expect historical studies of the 1980s to be like. Politicians did once make policy. John Vincent (ed) The Diaries of Edward Henry Stanley, 15th Earl of Derby (182693) between September 1869 and March 1878 (London: Royal Historical Society, 1994) is fascinating reading and presents a convincing picture of politicians deciding which policy questions should be addressed, which options should be considered and what decisions should be made. Such a picture is not convincing about New Zealand in the 1980s. It is not made convincing by adding to “politicians” some sinister figures presented as the storm-troopers of business.

On the contrary, what happened in the 1980s is that many new groups were brought into the process of consultation that is part of policy development. The concerns were consultation‑ overload and the difficulty of getting a distinction between being consulted and having one’s views adopted. It is true that the process broke down in the second term of the Labour government and was always less true of some initiatives than others. But the notion of blitzkrieg policy development belongs much more to political rhetoric than to history ‑ Sir Roger Douglas’s accounts are no more reliable than those of most single participants in major processes. A policy debate is a blitzkrieg to those whose arguments do not prevail and who think that they could have won if there had been another round.

4

The writers assembled by Francis Castles, Rolf Gerritsen and Jack Vowles for The Great Experiment: Labour Parties and Public Policy Transformation in Australia and New Zealand are more sophisticated than most commentators. But the key argument of the book is an oversimplification. The editors and many of the contributors want to use a simple distinction between Australia and New Zealand. Australia retained a “corporatist” approach whereas New Zealand followed a “commercial” approach and sought a reduction in the role of the state. The idea certainly captures a part of what happened, but it is not adequate.

It used to be common, following especially the work of Austin Mitchell, to describe New Zealand politics as “corporatist”, usually with reference to the role of organised interests like the producer boards as well as the Federation of Labour (FOL) and often with some uneasy thoughts about whether the echoes of Mussolini’s Italy were appropriate. So “corporatist” makes one wonder whether it can be appropriate to an Australia which shared in a “great experiment”. Given the debates about “economic rationalism” in Australia, it is difficult to see a basis for the term beyond the narrower point that the Australian Labor government maintained an accord with the union movement.

This does not escape the attention of various writers for The Great Experiment. More than one essay explores why there was an accord in Australia and not in New Zealand. Attention is paid to institutional factors such as the position of unions within the Australian Labor Party (ALP) and the New Zealand Labour Party and to the nature and capacity of the union leadership in each country.

I would give more weight to some historical features. The role of Bob Hawke and others in the Australian Council of Trade Unions (ACTU) contrasts sharply with the fate of those who attempted to create a policy analysis capacity within the FOL in the 1970s and early 1980s. The FOL had always had an ambivalent attitude to central wage‑fixing machinery. The idea of “social partners” was in the ascendancy for some of the 1970s but in 1984, largely in response to the lengthy preceding wage freeze, the competing idea of “Labour’s leg irons” was dominant. There is still room for academic debate about the relative force of particular influences, but the resolution of this debate is not going to lead to a simple answer at a higher level of abstraction that is captured by the concept of “corporatist”.

In the debate about an accord in New Zealand there were many approaches. There were those who were keen to reduce the power of unions (who may or may not have been keen to reduce the power of other interest groups); there were those who wished to pursue a path similar to that of the Australian Labor government; and there were many in the middle. The view which probably had most weight in the policy debate, although not in political discussion, was one expressed in a treasury report essentially along the lines that if it were possible to secure an agreement on a wage path it would be very desirable but that it was not worthwhile to compromise all other instruments of policy for an accord which did not contribute to the government’s objectives of economic growth and lower inflation.

If describing Australia in terms of “corporatism” stimulates thinking specifically about the accord, the characterisation of New Zealand in terms of a “competitive” model which required diminution of state activity is equally unsatisfactory. There were certainly politicians and officials who thought in terms of the private sector being better than the public, as there still are. The difficult issue is deciding where they are right and where they are wrong. And the significant policy debate addressed that question. The key arguments were always about the advantages and. disadvantages of different institutional structures, with an objective of the state doing better those things which were best done by the state and the private sector doing better those things which were best not done by the state.

In 1984, the public sector was doing some things which could be done better by private sector institutions, which is why “withdrawal of the state” is misleading rather than wrong. There is now a distinct tendency for commentators to accept that corporatisation and even privatisation was the right decision, although it is also argued cogently that transitional costs were underestimated. That was not what the political rhetoric suggested in the mid‑1980s. We might on that basis alone conjecture that there will be similar change over time in attitudes towards efforts to redefine what is best done in the public sector and what is best done in the private sector in areas like health and education. But we might think that an even stronger conjecture is that a framework of “withdrawal of the state” in any of its variants, will come to be seen as an inadequate framework.

Even now, The Great Experiment displays signs of its inadequacy. The chapter on “Transforming indigenous Affairs Policy: Labour’s Contribution to ‘Internal Decolonisation”‘ by Richard Mulgan and Will Sanders does not fit it and the authors do not attempt to make it do so. The essay on environmental issues by Elim Papadakis and Stephen Rainbow struggles to fit the framework and there are signs of tension in many other essays. The 1980s in New Zealand saw many cases where the state doing better what could be done best through the public sector involved initiatives rather than mere withdrawal.

So the problem of simplifying complex issues does not confront only politicians seeking support for their decisions. It confronts academics, who want clarity but have to deal with multi‑dimensional issues and processes. Although a search for balance may become a lack of principle and compromise may be mistaken for truth, there is only limited value in simply asserting a point of view. That is shown most clearly in the different responses to Jane Kelsey’s The New Zealand Experiment of Bryan Gould in the Listener 152 (29 10), February 3‑9 1996, and of Spiro Zavos in Quote Unquote 32 (February 1996). Congeniality is too often mistaken for value. The Great Experiment is much more constructive, even though as a whole it fails to carry conviction.

5

Does this mean that we cannot generalise at all about the experience of Australia and New Zealand? The Great Experiment is an admirable effort in comparative study. Each of the essays has two authors, one with specialist New Zealand knowledge and one with specialist Australian knowledge. The essays are genuine collaborations and, although it is sometimes possible to detect where one author gave way to the other, there is a coherence about each chapter. And the authors came together to discuss the work as a whole. (It is a minor curiosity that the book does not contain any biographical information about the authors, some of whom are not well‑known even to academics. And readers might find it useful to know that some have affiliations within the debates they discuss.)

The Great Experiment is specifically directed towards considering “Labour Parties and Public Policy Transformation” but it would still have benefited from looking more widely. The 1980s was a period when governments encountered more distrust in many countries. New Zealand commentaries tend to put a lot of emphasis on broken election promises but I find it hard to believe that there was a dramatic change from the gap between how politicians talked and behaved in earlier eras, such as Labour’s use of social credit ideas in 1935 or National’s talk of “socialistic restrictions” in 1949 and later maintenance of import licensing or even the gap between National’s rhetoric in 1960 and the quite separate later caucus debate on the Nelson cotton mill.

Manifesto commitments became binding when it was convenient for them to do so. It is ironic that an era when contract generally became more prominent was also a period which revealed the advantages of Burke’s preference for discretion over delegation ‑ politicians have to make decisions about what is not foreseen at the time of elections. Furthermore, Lange was much more explicit about how superannuation would be treated than most politicians are. The media nevertheless turned this into a broken promise. Something is due to the self‑interest of those who established the subsequent political rhetoric.

More fundamentally, local incidents are unlikely to be an adequate explanation in view of the very widespread growth of dissatisfaction with governments. Isn’t it likely that the problems faced by governments were not those which were the standard fare of debates among activists in political parties? And that the growing diversity of societies made it difficult for any government policies to be other than controversial? The world had changed.

It had changed in ways that reduced the power of familiar concepts and terms, for analysing either political debate or policy developments. Political scientists have appreciated this in studies of political culture and electoral studies but it has not often been integrated into discussion of the nexus between political debate and policy development, especially in relation to Labour parties. In political debate the most important influences were the greater prominence of women in defining the important political issues and the success of environmentalists in re‑ordering the values which were prominent in public debate. Neither of these changes fits easily with a concentration on Labour parties.

In the policy debate, the link with the key inherited party division between Labour and its opponents was the balance of what should be collective and what should be individualist, not as an abstraction but through questions such as who are the best agents for pupils in the education system, for those such as the very aged and people with disabililities in the health system and for monitoring the way the institution of public company is used by directors. But it will take some time to bring such issues within political rhetoric, let alone within the explicit competition of political parties. And probably longer still for the existing modes of thought of orthodox political science and public administration.

Gary Hawke is director of the Institute of Policy Studies

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