Structures

What's the best way to describe the present political economy of New Zealand?

In broad terms, I think the answer is "a social democratic superstructure on neo-liberal foundations". Up until 1984, we were a broadly social democratic nation, commited to full employment and a welfare state. That changed with the election of the Fourth Labour Government in 1984. The "reforms" implemented by that government and its successor form the foundations of our modern economy: an open, deregulated and globalised market; macroeconomic policies aimed at price stability rather than full employment; and a reduced role for government in the economy.

Despite being elected to provide a change of direction, the Fifth Labour Government (meaning both the Labour-Alliance coalition of 1999 and the minority government we've had since 2002) has largely left these foundations intact. It has tinkered - some additional regulations here, a reversal of an ideological nationlisation there - but it has not made any significant changes. It has remained commited to an open economy, pursued a free trade agenda, and continued to pursue price stability (though it has tweaked the Reserve Bank's Policy Targets Agreement a little). Perhaps the biggest changes have been to the role of government, with the revival of industrial policy through the Ministry of Economic Development, the (opportunistic) acquisition of Air New Zealand and the railway track, and the establishment of KiwiBank. But while the present government wants to play a larger role in the economy, it is still fundamentally commited to market provision and the SOE model.

Rather than attacking the foundations, Labour's policies have focused on ameliorating the worst effects of the neo-liberal economy. What people absolutely hated about the "reforms" was that they shafted the poor for the benefit of the rich. Tax reform (most notably the introduction of GST) benefited the wealthy while shifting the burden of taxation onto the less well-off; the pursuit of disinflation caused mass unemployment; the Employment Contracts Act drove wages down, while cuts to welfare benefits forced beneficiaries to increasingly rely on foodbanks. As Brian Easton put it, equity was largely abandoned as a goal of public policy.

With Labour, it is clear that equity is a consideration again. One of their first acts in power was to hike the top tax-rate to increase revenue and redistribution. Another was to raise the minimum wage - and not just once, but repeatedly, by $2/hour over the course of their term. The gradual reuniversalisation of primary health care through PHOs and the redistribution of the "working for families" package are further examples of this - Labour is trying to ease the inequality and suffering caused by the market.

The other significant change in this area has been the repeal of the Employment Contracts Act - except that "repeal" is really the wrong word. The replacement Employment Relations Act retains the underlying liberal paradigm of individual-centred bargaining and relationships governed by contract law; it simply crufts greater support for unions and collective contracts onto the top of it. It is in a sense Labour's economic policies in a microcosm: retain the foundations while trying to mitigate the worst effects.

Is this limiting of social democracy to the economic superstructure a betrayal of Labour's principles? I don't think so. According to Steve Maharey, the goals haven't changed at all:

Our goal is still the egalitarian project that has motivated all social democratic parties: the full development of every individual however disadvantaged they are by birth or circumstances

Instead what has changed is how those goals are achieved: Labour is now far more willing to work with the market. This is really what they've done all along - the First Labour Government made a similar compromise by eschewing state ownership of the means of production in favour of working within (and mitigating the worst effects of) the existing economic structure. Partly that was a matter of pragmatic electoral politics (they would never have been elected otherwise), but there's also an acknowledgement that we don't necessarily need to rebuild the foundations to create a just society. Michael Joseph Savage and his successors built a just society on top of the market in the 30's and 40's. If they get another term, Clark, Cullen and Maharey may manage to rebuild it for the 21st century.