From visionaries to pygmies, Colin James

Politics and economics

Coming into the 20th century, the battle for the future was between socialists and triumphalist trumpeters of a “bigger and better Britain” here at the end of the world. The route out is likely to be along some muddy “third way” avoiding radicals to left and right – or into a “new conservatism”. Visionaries have given way to pygmies.

In the first decade of this century of counterpoints, European sociologists came to marvel at a model progressive state, a “socialism without doctrines”. In the century’s last decade foreign politicians, bureaucrats and business leaders trekked here to study, but never themselves adopt more than part of, a very different “New Zealand model”, of doctrinal free markets and the managerialist state.

We entered this century with frontier optimism in a spacious world, snug in the bosom of empire, supplying food in return for finished goods and finance. We exit the century thrashing about to find a place in a globe that has crowded in on us and left us little room to breathe. We bobble on the wild tides of a globalising and internationalising economy that not even big countries can tame.

Soon after we came into this century, we gifted a battleship to the mother country and then found a defining national moment in military defeat in an ill-advised and ill-executed adventure at our mother-country’s behest (at Gallipoli). As we depart this century, we send an ill-equipped battalion to fight occupying Javanese on a South-east Asian island, of whose people we know almost nothing. Each fight we thought our fight.

Our majority left the 19th century expecting to be one (master) race, smoothing the death pillow of the indigenous race and fending off the yellow peril. We enter the 21st century as two races – no mother-country now – vying with each other for cultural ascendancy even as we have become irreversibly multicultural and have elected our first ethnic-Asian MP.

One constant in this changeable century has been our smallness and vulnerability. For much, perhaps all, of our journey through this century we have been on a Quest for Security, as it was titled by economist, intellectual, public servant and acquitted spy Bill Sutch. By mid-century we thought we had cracked the code and opened the gate to the promised land.

So you might call this the social democratic century. We tamed 19th-century socialism into the mid-20th century’s liberal welfare state which guaranteed our jobs – and so our household independence and dignity – with import protection and thorough regulation and shielded us forever (we thought) from the random ravages of world capitalism. We got as near as any modern society has to that elusive elixir of utopians, equality.

But in 1999 all that is a world away. Now the state is vilified for having imprisoned hundreds of thousands in “dependency”. Inequality has been growing for 20 years as we respond to price signals, pursue efficiency and lionise individual responsibility, initiative and opportunity. Social democracy, it is said, was a chimera, possible only in a few countries like ours for as long as they dominated the world economy after the Second World War. Adam Smith’s invisible hand was always going to dismantle the overweening state; the inexorable laws of economics would prevail; social democracy was an interlude. So it is said.

2

Why this reversal? For two main reasons, one economic and one politico-social.

We inherited from the 19th century an easy relationship with the state as an instrument for projects private individuals and small communities could not themselves complete. Frontier societies may extol independence but cannot survive or advance without cooperative action. After a decade of recurring recessions and a world depression in the early 1930s, we turned, with the Labour party, to the state, both to smooth the ravaging cycles with Keynesian techniques of demand management and to build an economy capable of standing on its own feet. To make sure it worked, we gave the state plenipotentiary power of command.

Aided by innovative farming and thanks to rising world prosperity and a reciprocal trading relationship with Britain, this brought home the bacon for the next quarter-century. Unemployment was so low that in 1967 newspapers ran shock/horror stories when the rate nearly reached 1%.

But from the early 1970s, international economic disturbances seeped through the protective walls and unemployment began to climb. When we tried to keep up living standards and hold down our jobs regardless of world prices, the balance of payments skidded into the red. The budget followed. Inflation soared. We had to subsidise our main export industries to combat falling prices. In a last throw of the development economics dice to escape the terms of trade vice, Sir William Birch backed “think big” industrial projects which, however, manufactured debt instead of riches. In a parallel last throw of the command economy dice, Sir Robert Muldoon turned up the Keynesian gas far further than the inventor ever intended, with controls on wages, prices, interest and rents. That blew apart the social democratic economic construct.

When Labour took over in 1984, there was only one way to go: to liberalise, deregulate, deprotect. That happened also to chime in with the newly prevailing international tide of neoliberal economic thought. And it fitted the temperament of a generation of politicians in their 30s and early 40s whose formative years were during the “values revolution” that swept the West in the 1960s. That revolution valued individual self-gratification above security, moral freedom above social order, radical action above pragmatism.

Coincidentally, we were as a society at last casting off our colonial mentality. We had been formally fully independent since 1947 but remained dependent economically on Britain and for defence on the United States. Our arts, drama and writing were heavily derivative of Britain and even when self-consciously “indigenous” were so by distinction from Britain. But in the 1970s and 1980s craft, dance, literature, films, music became unselfconsciously home-grown – of course, influenced from abroad but not in thrall. We became independent in the way that matters: we found our voice.

It was this intoxicating combination, working through our politics, that propelled us farther and faster down the neoliberal path than any other comparable country. The government was like an adolescent pumping hormones, newly free of the parents.

But in the past five years the obituaries for social democracy written during the 1990s are being revised – here as elsewhere. Neoliberalism has proved unable to maintain the intellectual or policy momentum of the 1980s. Now the contest is of a less heroic kind. There are still social democrats and neoliberals on the flanks. But the main theatre of the battle of ideas is now between the “third way” and a “new conservatism”. It is rather like substituting the Beach Boys for Wagner.

The “third way” is the social democrats’ heirs’ uneasy fallback. Resembling a modest mid-century liberalism appropriate to its comfortable, educated, middle class cartographers, the “third way” accepts we cannot, or cannot yet, escape the internationalised economy to which we have opened up but asserts a role for the state beyond providing a subsistence for the deserving needy. The “third way” state’s role is to assure opportunity and to order the economy, albeit with great restraint and with pious genuflexions to “communities”.

The “new conservatism” is the fallback of diffident centrist heirs to neoliberalism. It asserts the need for constant reform, in the economy and social services, for want of which we would descend into penury in a wild world; but it regrets the social instability of the retreating state and accepts a large government role in health, education and welfare. Sir John Marshall, definer of mid-century liberal-conservatism for the National party he later briefly led in 1972, would approve. (It was National, grafting “freedom” on to “security”, which dominated governments in the halcyon years of social democracy, not Labour, its progenitor.)

To a small extent we have thought these things through ourselves, as to a large extent we did in the 1890s, in response to local social aspirations and fiscal imperatives. But, more than in the 1890s, we are transplanting from abroad the thoughts of a Robert Reich and actions of a Tony Blair. And these programmes are exchangeable: National has claimed Reich and Blair as closer to its programme than Labour’s. Though Labour and National are coming from markedly different perspectives, they are again converging on a new centre, as they did in the 1940s. There is now, as then, a sort of borderlessness of ideas as we search for stability.

But not yet a borderless world, as some have forecast, bewitched by the sight of money, capital, television images and “news” slopping around the world in ever-greater quantities and with ever-greater speed. We are not yet condemned to one world order.

3

The collapse of state socialism in Eastern Europe and Russia and the starvation of the North Koreans still holding to the catechism gave weight to a “Washington consensus” (of the United States Treasury, the International Monetary Fund and the World Bank) that open markets and trading systems are inevitable or there will be crises of the sort that racked East Asia in 1997 and impoverishment for countries which resist. Free trade, pronounced ill and sometimes even dead by some of its sceptics and opponents over the past five years, continues to capture adherents, among the unlikeliest national leaders, even in Asia and even in the wake of the financial crisis there. Far from rejecting the Washington prescription, countries caught up in the Asian crisis have mostly swallowed at least some of the potion.

Nation-state governments which accept free trade and open markets cannot tax too much, or capital (and with it jobs) goes elsewhere. Neither can they regulate too much. Modern free trade deals seek to go “behind the border” to competition policy, standards, government purchasing, investment rules, professional qualifications. Nations are also increasingly willing to contemplate joint action on the environment, social and human rights. They sign dozens of treaties a year limiting their own jurisdiction: little New Zealand signs around 30 a year.

In this free-range world, sprawling companies decide who works where. Decisions made in Frankfurt or Singapore or Dublin or Sydney, for reasons that have little or nothing to do with conditions here, add or subtract jobs from our workforce. There will be waves of resistance against this in the next century. The politics of that resistance are unpredictable but are unlikely to be calm.

The same will also apply to the swelling tides of migration. Even in our far-flung corner of the world we have become multicultural and will become much more so. Polynesians from the Pacific islands are our fastest-growing population segment. As Asian money builds the tourist industry that we are too profligate to fund ourselves, the Asian segment will grow fast, too.

4

But are we borderless? Not if we believe our eyes and ears. Nor if we believe our political will. Nor if we recognise that we are bicultural before we are multicultural.

Maori have reclaimed their culture, their place as first inhabitants and their right to respect. Unthinkable for the first 85 years of this monocultural century, we now seriously address past infractions of the Treaty of Waitangi and have started devolving functions, money and even some power to Maori. A notion of partnership has taken root after 150 years of subjugation and assimilation. This has been the biggest political change in this century of amazing change.

Maori have carried their new assertiveness into the political system, using to some effect the leverage it now gives them. They are debating institutional change to accord respect to Maori deliberations and constitutional change to give political effect to the Treaty of Waitangi. The majority will not agree to equality of power. But sometime in the next 10 years simple notions of majority rule will be adjusted.

Thus we will rewrite our constitution, that hotchpotch of laws and practices that defines us as different behind our borders. Such a redefinition of the nation – ourselves – is overdue. For all our having at last stood tall in the 1980s, we still have another country’s head of state, flag and supreme court. The koru on Air New Zealand planes’ tails has more distinction than our flag. Dame Kiri te Kanawa singing “Pokarekare Ana” has more resonance than the supine “God Defend New Zealand”. And why “New Zealand”, borrowed from Europe, and not “Aotearoa”?

Constitution writing and redefinition will de facto demonstrate that the nation-state has not withered away. Though it is under assault from without by tidal waves of ideas, capital and people and under assault from within from fractionating diversity, there is work for the nation-state to do yet.

That work is not to monopolise power. That was the social democratic dead-end, the assumption that Wellington could rule everything in Warkworth or Westport or Waipukurau, could treat us as interchangeably and uniformly as factories treated workers and processes.

We accepted that in the conformist 50s in pursuit of security. But people, human beings, are not rolled along an assembly line of hospital birth, factory schooling, boxed work-lives, rest-home retirement. The state in the 1990s has had to learn to be respectful of individuals and localities and lateral communities for there is no archetype. Muldoon’s romanticising of the “ordinary bloke” was out of date before he wrote the phrase into the history books in the early 1970s. When we changed the voting system in 1993, in fury at broken promises and Beehive autocracy and arrogance, we were coincidentally asserting that we are many peoples now, by race, culture, gender, sexuality, wealth, interests and place.

Nor is the work of the state to take the neoliberal project to its logical, economic conclusion of unregulated markets and atomised self-responsibility. Human beings have a “belonging dimension” which defies the laws of economics. That is where politics comes in, perversely perhaps (at least from an economist’s point of view) but inescapably.

Politics is more complex at this end of the century than at the other end. Not only is it the work of the nation-state to devise mechanisms to represent us to other nation-states economically and politically, it is also to reinforce our expression of our national characteristics in all their unity  and diversity, and to moderate interactions of communities and individuals far more independent and polyglot than the security-seekers of mid-century could have dreamed of or would have tolerated.

The “third way” and the “new conservatism” may be unexciting beside socialist and neoliberal radicalism. But they are capable of more subtle responses to complexity. And in any case for the next (short?) while they are all we have as with relief, nostalgia and apprehension we exit this hopeful, catastrophic, energetic, see-sawing century.

Colin James is a Wellington political commentator and a former editor of New Zealand Books.

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Posted in Comment, Economics, Essays
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