Treasury: The New Zealand Treasury 1840-2000
Auckland University Press, $50,
At the launch of this book a former assistant secretary to the Treasury pointed out to me that this is an administrative history of the Treasury, “not an intellectual history”. I suggested to him that he might like to fill the gap himself if he perceived it as such. But it caused me to wonder if senior officials of any other government department would dream of thinking that their institution could or should have “an intellectual history”.
One might perceive this as a strength of the Treasury – it can be no bad thing that they take their internal intellectual discourse seriously. Or one might perceive it as dangerous hubris. Surely Treasury, like any other government department, exists to do the bidding of the government of the day? Of course giving “free and frank” advice is what the Westminster system requires of civil servants. But any civil servant who seeks to advance an agenda other than that of the elected government crosses a perilous constitutional divide and should seek less frustrating employment.
The Treasury is one of our more enduring institutions, but also somewhat shadowy. No other history has been written of it, and until 1989, McKinnon tells us, “in contrast to all other departments of government, the Treasury did not table an annual report to Parliament.” How strange for a department that requires accountability from all others. From the beginning its twin tasks have been financial management and economic management. In the pre-war Treasury, accountants dominated; in the last several decades, economists have had the upper hand. McKinnon sets out the complex story with welcome clarity. Be reassured that it is completely accessible to non-economists.
Being a good historian, McKinnon organises his book along time-lines. Part one deals with the colonial period, 1840-1910. Part two covers the period when accountants were in the ascendant, 1910-1961. Part three, from 1961 on, has the economists coming into their own. For the earlier periods, McKinnon is necessarily dependent on the written record, and pre-war archives were patchy. Nevertheless he makes a lively read of it, and a generous sprinkling of photos, cartoons, and facsimiles of documents helps in this. For the more recent story, McKinnon has interviewed a wide range of participants and observers, and quotes from them liberally. This fleshes out the story in often engaging and humane ways. McKinnon has a real ear for the significant detail.
New Zealanders have always expected their governments to make the economy work, and have punished them electorally when they haven’t. When Britain joined the EEC in 1973, New Zealand began its seemingly inexorable slide down the OECD’s tables of comparative wealth and wellbeing. We didn’t like it, and successive governments have struggled mightily to arrest the trend.
Muldoon’s instinctive response was to try to micro-manage everything. Even though he headed a government that was supposed to be dedicated to the philosophy of the free market, more and more he intervened in it with increasingly desperate measures, such as Supplementary Minimum Prices, Think Big, and finally, the Wage and Price freeze. (The record, by the way, shows that Treasury advice to him was frequently ignored.) By the time Labour won the Treasury benches in 1984, David Lange described the economy as resembling a Polish shipyard.
The Fourth Labour Government was as innovative as the first, but in ways that none of its supporters would have expected. When the implications of Roger Douglas’ economic reforms began to dawn on a startled nation, many conspiracy theorists began to develop the notion of “Treasury capture”. Indeed a protestor’s banner outside Parliament one day read “Cut out the Middleman. Elect Treasury Directly” – much to Douglas’ amusement.
As it happens, I can give the lie to that particular conspiracy theory. In the very first week of the Fourth Labour Government’s term in office, a visiting VIP was guest of honour at a state luncheon. I went to Treasury to pick up my husband and to join the hundreds of other guests. As we walked from number one the Terrace to the Beehive, he recounted the excitements of his morning. Roger Douglas and his two associate finance ministers –David Caygill and Richard Prebble – had come across Bowen Street to brief senior Treasury staff on their planned economic reform programme. “You wouldn’t believe it,” Bernard marvelled. “They plan to turn the place on its head.” Floating the dollar, removing SMPs, abolishing import licences, lowering tariffs, downsizing the state sector, and corporatising the commercial activities of government departments were all in that first list of plans.
In the long years in opposition, Roger Douglas had had plenty of time to think and to observe what had not worked under Muldoon’s system of economic management. Besides, the snap election meant that he was not as bound by reams of party policy nor even a manifesto as he otherwise would have been. The economic revolution wrought by the Fourth Labour Government is rightly dubbed “Rogernomics”. He did not need Treasury to invent his vision for him, though some individuals undoubtedly helped. Also, despite the controversy caused by the reforms at the time, they remain essentially intact to this day. No one at all suggests the reimposition of import or exchange controls, and the independence of the Reserve Bank is never questioned. Roger Douglas’ influence on our collective history has been incalculable.
All of this drama McKinnon deals with deftly, capturing the organisational tensions engendered within Treasury, and the ideological conflicts within the Labour Party and wider society. Treasury was not used to being the centre of so much public attention and controversy, and I imagine that many working there today are relieved that that phase has passed.
My second-hand experience of the Treasury was that it had a certain monastic quality. It seemed to me that it had a palpable culture into which people (usually men) were inducted, and to which they were abidingly committed. I worried in the run-up to the Budget each year that young Treasury officials full of zeal for the public weal seemed never to go home to their wives and children. (I wonder if anyone has ever done comparative research on the proportion of failed marriages in the various government departments.)
In a recent fascinating book mourning the decay of public language (Death Sentence, Random House, 2003), Don Watson writes: “Among Druids, Masons or economists we expect the language to be unfathomable or at least unclear or strange … When we hear this sort of language it is, therefore, commonsense to assume there is a cult, or something like a cult, in the vicinity.”
On this criterion alone, during the 1980s and 90s, Treasury did indeed become “something like a cult”. McKinnon has captured this, and written a fine history of the whole of its 160 years.
Margaret Clark is Professor of Political Science at Victoria University of Wellington. Her husband Bernard Galvin was Secretary to the Treasury 1980-86.