Posts Tagged ‘Fifth Labour Government’

New publication: ‘The Power of Ideas’ collects ‘theoretical foundations’ posts

Wednesday, December 22nd, 2010


It’s finally arrived! The most anticipated (by me at least) Policy Progress publication of 2010, The Power of Ideas: Decline and renewal in the theoretical foundations of progressive thinking, is now online.

From my foreword:

This report collects together all of my writings on the ‘Theoretical Foundations’ topic, one of the main themes for the Policy Progress website in 2010. This topic goes right to the heart of what Policy Progress has been trying to do as a policy ‘think-site’ devoted to developing and supporting progressive initiatives and ideas. Over the course of this year, I’ve tried to grapple with the history and prospects of progressive thinking and renewal. And, perhaps miraculously, I feel that the 35 or so posts that formed the basis for this report really do add up to something that hangs together.

As I said yesterday, I won’t be able to write for Policy Progress anymore next year, so I’m pleased to have managed to complete this giant compilation as a record of (much of) the year’s work.

You can download a copy here.

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Did the ‘third way’ give New Zealand ‘a new politics’?

Tuesday, November 23rd, 2010

This is the last in a series of three posts about the ‘third way’ strand of progressive thinking in New Zealand. Part one looked at Helen Clark’s perspective, while part two looked at Steve Maharey’s identification with the ‘third way’. An earlier post introduced the ‘third way’, looking at its leading UK theorist, Anthony Giddens.

Although Steve Maharey was the Cabinet minister most identified with the ‘third way’, the most indepth account of what a New Zealand ‘third way’ approach might mean can be found in a book that was published immediately before the 1999 election that brought Helen Clark and the Fifth Labour Government to power.

Entitled The New Politics: a Third Way for New Zealand, it was written by a group of eight academics and trade unionists and produced with the assistance of a progressive thinktank, the Gamma Foundation, that was active at the time (the Public Service Association and FinSec also provided support).

Although the book doesn’t have any identified editors, both the preface and concluding chapters were co-written by Peter Harris and Chris Eichbaum. Harris had been the economist for Council of Trade Unions (and prior to that for the PSA), while Eichbaum was a Massey University academic (who also had credentials with the union movement and as a former Labour staffer). Both would go on to become highly-placed ministerial advisors during the first term of the Fifth Labour Government, Harris for the second-ranked Labour minister Michael Cullen and Eichbaum for the third-ranked Labour minister Steve Maharey. Eichbaum then did a stint in the Prime Minister’s office before returning to academia. Harris later chaired the Ministerial Savings Product Working Group, which formed the basis for the establishment of the KiwiSaver scheme.

Therefore, The New Politics can be seen as reflecting a perspective that was very compatible with that of the Fifth Labour Government itself. In addition to Harris and Eichbaum, its authors included Peter Conway, who replaced Harris as CTU economist and is now their general secretary; Paul Dalziel, Canterbury university (later Lincoln) economist and brother of Cabinet minister Lianne Dalziel (he is currently a member of the Alternative Welfare Working Group); and academics Srikanta Chatterjee (Massey), Bryan Philpott (Victoria, now deceased) and Richard Shaw (Massey).

As it happens, I have worked with both Harris and Eichbaum and know them fairly well now, but I hadn’t met them at all when I read their book in 1999. (And I wouldn’t automatically ascribe exactly the same views to them today.) Going back and re-reading The New Politics, a few themes stood out for me with the benefit of hindsight.

In his chapter, Peter Harris writes:

There is a core idea that marks out the Third Way: people need jobs. It is a core part of their social persona, it contributes to more stable family life and so on. Dependency can never be a satisfactory long-term status and creates intergenerational cycles of dependency and despondence.

. . . A new consensus has to be built around some form of social concordat. In reducing previous protections via deregulation, privatisation and a free flow of finance and trade, the government assumes an obligation to make it easier for the displaced to get other jobs . . . The other side of the deal is that those who are dislocated must be active participants in job readiness and job search programmes.

Harris also sets out ’subsidiarity’ as a defining characteristic of the ‘third way’:

The principle of subsidiarity means that a decision should not be taken at a higher level if it can be more appropriately be taken at a lower level. For example, the state should not make a decison on what a school community can more appropriately make.

. . . There are two dimensions to this. One is that the state should not intrude in some areas. it should not absorb and stifle when there is no need to do so. The other is that the state should not be expected to do everything. There are structural levels of responsibility – individual, family, community, etc. that need to be both respected and expected. Subsidiarity involves the state ‘helping out’ by contributing indirectly to the ability of the social networks to contribute to that notion of public good.

Similarly, Eichbaum in his chapter writes:

The renewal of civil society, through the refurbishments of democratic institutions and the kind of institutional ‘in-building’ suggested by the stakeholder model [advanced by Will Hutton], is central to the new economics as well as to the new politics.

. . . The neo-liberal project is one that denies the legitimacy of interests within the policymaking apparatus on the grounds that credible policy must be manifestly independent of any ‘vested’ interests . . . In seeking a renewal of civil society, the Third Way holds out the prospect of a political economy that provides the kinds of structures capable of sustaining fexibility and commitment.

And on macroeconomic policy he takes issues with Giddens, arguing that it must go beyond simply “macro stability” to address “the institutional environment with which policy is developed and implemented” and recognise the importance of the “institutions of macroeconomic management”.

If we add to these prescriptions Maharey’s focus on the ‘knowledge society’, then it is possible to see ‘third way’ ideas as permeating much of the Fifth Labour Government’s activity, even though it was not framed as such at the time.

The focus on employment as the “best social policy”, which was reinforced and validated by historically rates of employment growth, became a lead feature of social development policy, and informed the design of Working for Families, which was at least partly founded on the conception of making work pay.

It also fed into Jim Anderton’s idea of the economic development portfolio as a ‘jobs machine’. But this area also reflected an attempt to answer the question about how to operate the “institutions of macroeconomic management”.

And increasingly it also reflected an effort to conceptualise and achieve a New Zealand ‘knowledge society’. This also inflenced the new institutional framework for tertiary and science policy.

The way the government went about things also reflected the emphasis on stakeholders and the rejection of the neo-liberal delegitimation of ‘vested interested’. Consultation and partnership became watchwords for the public service, and periodic efforts were made to improve the footing of community sector. (It’s worth noting that Harris and Eichbaum’s final chapter includes an admirably clear-eyed and prescient account of the likely challenges that increased reliance on the community and voluntary sector would bring.)

On the other hand, the principle of subsidiarity made only an intermittent appearance. More often, it seems to have been eclipsed by the centralising tendencies of the state in general and Labour instincts in particular.

What is also intriguing is how many specific proposals made in The New Politics seem to only be making it onto the policy agenda now, ten years later, in the post-defeat post-’global financial crisis’ Labour Party:

  • Chatterjee, Dalziel and Eichbaum all called for reform of monetary policy;
  • Dalziel argued for workers at a particular worksite to be allowed to vote by a suitable majority for compulsory union membership at their site (a ‘closed shop’);
  • Philpott argued for tighter controls on the overseas purchase of existing assets including land;
  • Dalziel advocated for a greater involvement of the government in capital production; and
  • Harris, Eichbaum, Chatterjee and Dalziel all talked about the urgent need to “restore some order to finance markets”.

Perhaps, in fact, the real ‘third way’ is not an historical relic. The name may have been discarded, but it may be that it is only now really beginning to take root.

Another way of looking at it is to identify three different components to ‘third way’ thinking.

Firstly, there is the partial accommodation to the Right’s critique of the capacity and effectiveness of the state. This is where the UK ‘third way’ has drawn most criticism from other progressives. As we have seen, however, ‘third way’ thinking in New Zealand included some rather more extensive revisiting of neo-liberal ‘nostrums’, though much of this wasn’t taken up in government at the time. In this sense, post-Crisis progressive rethinking may involve more continuity with its ‘third way’ tradition in New Zealand than was the case elsewhere.

A second component relates a particular style of government (subsidiarity, partnership, reverence for ‘civil society’). Some aspects of this got more traction than others, and some of it has gone out of fashion, but the appropriation of this approach by the Right in the UK (David Cameron’s ‘Big Society’) suggests that it still has quite a bit of mileage left.

Thirdly, the idea of an ‘investment state’ informed thinking about a ‘knowledge society’, the primacy of employment and the ‘institutions of macroeconomic management’. Some of the language and the framing of ’strategies’ has faded a little, and economic conditions no longer as propitious for a focus on employment growth as a driver. Nevertheless, this was a central and generally still well-regarded aspect of the Fifth Labour Government’s tenure.

In my next series of posts, however, I want to explore some emerging trends in progressive thinking that may amount to a significant move away from the ‘investment state’ approach.

Further Reading:

Srikanta Chatterjee, Peter Conway, Paul Dalziel, Chris Eichbaum, Peter Harris, Bryan Philpott and Richard Shaw, The New Politics: a Third Way for New Zealand (1999) — available online from Wheelers Books.

Brian Easton, The Model Economist: Bryan Philpott (1921-2000) (2000)

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Steve Maharey and New Zealand’s third way

Tuesday, November 16th, 2010

This post is the second of three posts on New Zealand’s relationship to the ‘third way’ strand of progressive thought, as theorised by sociologist Anthony Giddens and made famous by Tony Blair. In part one, we looked at Helen Clark’s statements about the third way.

Disclosure: the author worked for six years as a ministerial advisor to Steve Maharey.

By the end of its tenure, there were two differing perceptions about the Fifth Labour Government. The general public saw it as a one-person show dominated by Helen Clark. People who considered themselves more informed saw it as a two-person outfit, co-steered by Michael Cullen (with the real insiders adding in Helen’s chief of staff Heather Simpson for good measure).

All perspectives are partial and subjective, including my own, but I tended to see the Fifth Labour Government as more pluralist than that. There were a handful of senior ministers who seemed to have a fair bit of autonomy over their own portfolios and some ability to influence the wider agenda (the influence of the Alliance in the first term is not to be disregarded either). The most visible of these to me were Trevor Mallard (who Helen early on had mooted as her possible successor) and Steve Maharey.

Steve Maharey is of particular interest in this context, as he is the New Zealand politician most associated with the ‘third way’. As Colin James said in 2001,

Steve Maharey earnestly read the new social democratic texts, the “third way” tracts, but few of his colleagues have.

To my mind, the most direct and personal statement that Maharey made while in government about the ‘third way’ approach was a lecture he gave to a group of Massey University students in June 2003, entitled “The Third Way and how I got on to it”.

In this lecture, he traces his intellectual pathway back to the 1980s, where he distinguishes his perspective from that of other, more traditionalist critics of Rogernomics:

I found myself in a curious position. The left opposed Rogernomics and as someone who regarded himself as part of the left I felt sympathetic. Yet it seemed to me that the defensive posture adopted by the left would lead nowhere. While I accepted that the traditional left values of solidarity, collectivity and social justice remained valid, new ways of delivering them were needed.

I took up a rather isolated position in the debate that raged during the 1980s criticizing both the right and the left. I wanted to see social democrats acknowledge the need for change and offer a new political agenda based on social democratic values. The British politician and academic David Marquand called this – old values, new politics.

This stance, he says, led him to the New Times thesis (associated with Martin Jacques and Stuart Hall). He also cites as influences Giddens, Geoff Mulgan (who co-founded the Demos thinktank with Jacques), Charlie (Living on Thin Air) Leadbeater, Swedish sociologist Goran Therborn, ‘communitarian’ writers Amitai Etzioni and Robert Putnam, Clinton’s dissident Secretary of Labor Robert Reich, and Australian Labor politician Mark Latham.

Maharey seeks to correct what he sees as two misconceptions about the ‘third way’. Similarly to Giddens and many others seen as associated with the ‘third way’, he states:

It is often said that the Third Way is just a compromise between the concerns of the market and social justice. I do not agree. Or at least I would argue that the Third Way does not need to be reduced to a political agenda that appears to be just a clever mixture of ideas from across the political spectrum. What has antagonized its critics is that so often it has in practice turned out this way.

Also, the ‘third way’ was not monolithic; there was not one single version. Rather, what united its proponents was:

an understanding that new times demand new answers from social democratic politicians. They could see that right wing neo-liberal politics had dominated the 80s and 90s by appearing to respond to social change and they wanted to “modernize” their own parties.

He lists a range of challenges that make up these ‘new times’ (renewing democracy, international engagement, inequality, etc.) but the prevailing theme is around the implications of technological change. While ‘third way’ social democracy’s ‘egalitarian project’ is unchanged, he says,

the means by which we intend to further the project have altered. The focus now is on the creation of a knowledge society and investment in policies that make this goal a reality.

Citing Latham, he describes the ‘third way’ as:

an attempt to answer the core challenge of Information Age politics: is it still possible to practice the shared bonds and responsibilities of a good society? Is collectivism still viable? The Third Way thinks that it is.

And he quotes Leadbeater to emphasise that this has significant, and progressive, consequences:

The goal of becoming a knowledge-driven society, however, is radical and emancipatory. It has far-reaching implications for how companies are owned, organized and managed; for the ways in which rewards are distributed to match talent, creativity and contribution; for how learning and research are organized; and for the constitution of the welfare state and the political system.

In terms of Maharey’s own portfolios, this had ramifications for tertiary education, where he sought to institute a more strategic approach. And, with regard to social welfare, or ’social development’ (as he reframed the porfolio), he says:

if everyone is to be included in the kind of knowledge based future at the heart of Third Way thinking the focus of traditional models of welfare on the transfer of income is not enough . . . Achieving social justice requires the extension of economic opportunity as much as the redistribution of wealth.

The new social democracy places the welfare state, or the new welfare state, at the confluence of economic and social justice.

How far beyond Maharey’s own areas did this thinking go, though? He is frank that, notwithstanding Helen Clark’s willingness to identify herself with it, “During its period of renewal, New Zealand Labour did not consciously decide to become a Third Way party.”

Nevertheless, if we take this ‘knowledge society’ project as central to a ‘third way’ approach (perhaps even moreso here than elsewhere) then we can see it as a recurring thread through the Fifth Labour Government: from the Knowledge Wave conference, through the Growth and Innovation Framework, and on to the Economic Transformation Agenda.

For Maharey, there was a particular imperative for New Zealand in seizing the knowledge society agenda. On other occasions (in May 2003 for instance), he said that a “‘developmental’ approach, seeing New Zealand as essentially a ‘developing nation’ whose circumstances can and must be transformed, is a distinguishing characteristic of this Government”.

That particular metaphor wasn’t one that other Cabinet colleagues used. But, even so, something of the approach that it implied can be seen as a distinctive (though perhaps somewhat tentative) New Zealand dimension to the ‘third way’ project of achieving a knowledge society.

In part three: we look at the 1999 New Zealand ‘third way’ manifesto, The New Politics.

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Was Helen Clark a ‘third way’ Prime Minister?

Tuesday, November 9th, 2010

This post follows on from an earlier one entitled Looking back on the Third Way, which examined the ‘third way’ strand of progressive thinking through the writings of its leading theorist Anthony Giddens.

The Fifth Labour Government in New Zealand led by Helen Clark came to power a few years after Tony Blair’s ‘New Labour’ in the United Kingdom. Can it also be seen as a ‘third way’ administration?

And if so, what did this mean in the New Zealand context, particularly with regard to the role of the state and ideas about the desirability and efficacy of state action?

The two leading figures of the Fifth Labour Government were Helen Clark and her deputy Michael Cullen. But only limited guidance can be gleaned from their public statements and writings.

This reflects the rather pragmatic and practical style that their government adopted. Veteran political commentator Colin James has written extensively over the years about the intellectual influences of successive governments including this one. His columns over the 2000s repeatedly trace its leaders reaching tentatively towards an overarching project or distinctive philosophy, only to pull back again.

“They are not a theoretical lot, even the boss herself with her political scientist’s training.” (May 2001)

“Clark and Deputy Prime Minister Michael Cullen have shied away from visions and proclamations of philosophy. Attempts to engage them in that sort of conversation don’t often get far.” (February 2003)

Perhaps most strikingly of all, he quotes “one Labour grandee” as saying on the topic of ‘vision’, “Hitler had one of those and look where it got the world”. (May 2005)

Even so, Helen Clark did from time to time describe her government in ‘third way’ terms, at least at first. (Michael Cullen never did, so far as I could find.)

In 2000 she said to the Auckland Chamber of Commerce that hers was “a classic Third Way government – committed to a market economy, but not to a market society”, and told that year’s Labour Party conference that their’s was “a third way approach” to dealing with the issues of how to adapt to globalisation and new technologies. In a 2002 address at the London School of Economics, she explicitly linked her government to the  writings of Anthony Giddens.

Two of her most specific explanations however came in speeches to the Local Government Conference in 2000 and the annual conference of the Meat Industry Association in 2001, respectively:

our third way government is seeking a new role, built around that concept of partnership, acknowledging the limitations of government, but also accepting the responsibility of leading, facilitating, enabling, brokering, and funding where appropriate to get results. (July 2000)

Labour takes the view that neither the excesses of hands-on nor of hands-off have served New Zealand well. That’s why we have articulated a third way for the state in the economy. That third way sees government as a leader, a facilitator, a co-ordinator, a broker, and a partner. It is a strategic role which also sees us apply funding where there is a public interest and/or market failure. (September 2001)

These statements are certainly consistent with Giddens’ conception of the ‘third way’. But to get further elaboration, including a sense of any specific New Zealand dimension to the ‘third way’, we will need to look elsewhere.

In part two of this discussion I will turn to the articulation of New Zealand’s ‘third way’ put forward by Steve Maharey, who Colin James at the time described as “Cabinet’s thinker” and Labour’s “most theoretical minister” (February 2005). Then, in part three I’ll look at the 1999 publication The New Politics: a Third Way for New Zealand.

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Core Crown Expenses 1999-2009: an overview [re-post]

Wednesday, September 1st, 2010

Originally posted on 6 April 2010. This was the first post on the Policy Progress work programme topic ‘Progressive Fiscal Policy – Lessons from the Fifth Labour Government’.

It may come as a bit of a surprise that there really isn’t any readily available database that shows the fiscal record of any particular administration. We will have to construct this for this topic, and there will be some complications involved in doing so.

For today, however, I just want to use some currently available information to present a bit of the ‘big picture’. I’m going to use Core Crown Expenses, which is the standard measure, and look at the period from 1998/99 to 2008/09. I think that timeframe is the best one for a simple analysis, but no year-to-year analysis is perfect. The budget for 1999/2000 was actually set by Bill Birch in the Shipley government, but the incoming Clark-Anderton government committed significant additional spending during 1999/2000 ahead of their own first Budget in June 2000. Similarly, the current government made significant changes to the 2008/09 appropriations but the budget for this was originally set by Michael Cullen.

Plus, of course, the Core Crown Expenses are a mix of deliberate initiatives, responses to cost and salary pressures, and automatic adjustments (benefit CPI increases, additional superannuitants etc). With these caveats in mind, then, let’s look at the figures.

The graph above shows the growth in Core Crown Expenses from the 1999 fiscal year (1998/99) to the 2009 fiscal year (2008/09). The yellow line is the CPI index for this period, so the area above that line represents a real increase in government spending. Anything below that can be argued to be simply reflecting general price inflation.

We can see that expenses increased from $34 billion to $62 billion during the period. That’s an increase of $28 billion, or almost a doubling of Core Crown Expenses. Probably about a quarter of that, or $7 billion, can be accounted for by general CPI inflation, so the real increase would be about $21 billion.

Where did all that additional money go to? We have data breaking the money down into Core Crown Expense Classes, a slightly odd grouping of spending areas that don’t seem to be used anywhere except the Crown accounts.


The graph above presents the composition of the $28 billion increase by Core Crown Expense Class. It shows that the two largest areas of additional spending were ‘Social Security and Welfare’ and ‘Health’, followed by ‘Education’. Between them, these three classes accounted for almost two-thirds of the total $28 billion increase.

Such broad categories, however, raise as many questions as they answer. For instance, what drove that extra ‘Social Security and Welfare’ spending? It might be thought that it went on additional benefit expenditure, but actually it was more likely to have been a combination of an ageing population increasing the cost of Superannuation, and Working for Families tax credits.

Also, since some Expense Classes are much bigger than others, those large slices of pie above may simply reflect the fact that those areas made up a large proportion of spending to begin with.

To test that, let’s use an index approach to show the growth pattern in each Expense Class over time irrespective of the overall size of spending in each.

This shows that, when viewed in relative rather than absolute terms, growth in ‘Health’ and ‘Education’ was actually only mid-range amongst the Expense Classes, and ‘Social Security and Welfare’ was one of the lowest-growth areas.

By far the fastest growing Expense Class was ‘Economic and Industrial Services’ followed by ‘Transport and Communications’. ‘Defence’ by contrast has grown quite slowly — however Core Crown Expenses do not include capital expenditure such as military equipment.

All this is just the first layer of the onion. Over the course of this topic I intend to peel further and look at the particular initiatives and expenditure lines that have driven costs in each of these Expense Classes, and also look at other areas like capital expenditure that are left out of this initial analysis. Let me know of any insights you have about how to proceed, or requests about particular areas of expenditure that you feel are important.

Update: I should also reference my data sources. Most of the data comes from the very useful Treasury file Fiscal Time Series – Historical Fiscal Indicators 1972-2008. The data for 2008/09 is from Core Crown Expense Tables in BEFU 2009.

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What’s so special about Generation-X?

Thursday, July 8th, 2010

Recently David and I had lunch together at the Dixon Street Deli where, aside from having an enjoyable meal, we indulged ourselves by throwing loads of ideas at each other.

Towards the end of lunch, as I departed to make my next meeting and he to get busy writing the next post for this site, he quizzed me on my next guest post. Peter Harris’s wonderful (and oh so needed) post defending voluntary retirement saving had just gone up and David needled me about not wanting to let Peter get too far ahead. David knows me well – put something as a competition and I’ll bite.

There are plenty of posts to write that follow-up on my first guest post. In particular I want to come back to concepts of poverty and expand on where David Craig’s comments took us. It was a fascinating discussion, and I’d never meant to come across as so dismissive of relative poverty.

But David pointed out that the most comments made to him following that first post were about why I think Generation X is so special. What’s it got over the Baby Boomers which means it can solve these problems, where they can’t? And I can see why my assertion might have irked some people.

Certainly a generational frame, like the one I put forward, is necessarily a pretty crude way of looking at the world. It’s getting increasingly popular it seems to raise the generation flag and march into sunlight. And while I’m guilty of doing the same thing, readers should know it makes me a little uneasy. “Generations” are a fairly arbitrary and fake way of aggregating people. But, more importantly here’s the simple answer:

There is nothing special about Generation X.

Except we’re younger, fresher, and not committed to particular solutions that we feel we need to defend because we’ve already invested so much political capital into getting to a particular position.

Gen-X doesn’t have super powers (although I’ve always wanted to be able to fly and I continue to hope Steve Jobs or someone will grant me this for one easy online payment). There’s nothing magical about the Gen-X world view, it’s just different from that of our parents – and our children’s will be different again.

Senior ministers in the fifth Labour government cut their teeth on Vietnam, the Cold War, Nuclear-Free, Anti-Apartheid, Equal Rights for Women, the neo-liberal rise and countering it. My generation, (Generation X and the MTV Generation) born collectively between 1965 and 1986, takes most of those fights for granted. We’ve banked those gains, now we need to strive for more. We’re less invested in holding the line, and more interested in extending those gains – and not always extending them in the exact direction that Boomers would assume.

Boomers know how hard these things were to fight for, and I think that makes them less able to see beyond those fights to new ones. Working for senior ministers in the last Labour Government was an eye-opening experience. Some of them were great at stepping back from themselves and thinking about how to be innovative and fresher. But others seemed stuck and unable to step outside of the fights that had got them to Parliament decades ago. It could be really frustrating watching them and asking yourself, “why can’t they see it this way?” But of course they couldn’t, because that wasn’t the way their world was put together in their heads. That wasn’t how they thought about politics. And it still isn’t.

We have much to be thankful for. The political careers of the greatest social democratic boomers re-energized progressive politics across the liberal democratic West. The 1990s, in particular, were characterized by the rise of progressive, left-wing governments espousing a “third way” approach to government. They synthesized the tools of market liberalism with the moral imperatives of social democracy.

Yet, these leaders and thinkers, politicians and campaigners, have all left the political stage. Some are still making meaningful contributions, but they are no longer leading their national versions of the progressive movement. Too many of the boomers that are left seek to mimic past success, re-tread the branding and re-arm to fight the same old fights. As though pursuing the same course, but with different names at the helm is the only path to success. It’s a path I flatly reject.

As my generation comes of age and seeks greater influence it is undeniably important that we acknowledge the gains of the past, the achievements of the boomers. To ignore the history of our movement is unforgivable. But we must also force our voices to be heard; to state clearly what we know to be true: we come to politics with a different set of experiences, informed by the work of those before us, but not bound by or to them. We see problems and solutions in ways that our forbears cannot. We see life through different lenses. It is not good enough to simply try to re-create the conditions of past success, and hope. To recreate the coalitions and compromises that have provided the path to power in the past, is to accept terrible capitulations and continue to turn a blind eye to unforgivable injustices.

Generation-X is still fearless. We have not yet learned to be scared of ourselves, we have not yet taught ourselves to fail. We have not discovered our limits. We must commit ourselves and our generation to the advancement of human progress and social justice.

With the rise of a new generation, and the wisdom of previous ones, nothing is beyond our ability to make right.

——

James lives in Christchurch where he works in local government. He worked for the Clark-led Labour Party in government as a ministerial advisor to Cabinet ministers Margaret Wilson, Mark Burton, Pete Hodgson, and in the Prime Minister’s Office.

Alongside his day job, James continues to work and think on progressive politics. His previous post for Policy Progress was The four progressive projects.

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Redistribution v altering market outcomes

Thursday, May 6th, 2010

In Tuesday’s post I covered a speech by James Purnell of the Open Left project that talked about how in Britain New Labour’s “unwillingness to be more hands on with the market” had “required it to be too hands on with the state”. In particular, I identified a theme in what Purnell was saying about the tension between redistribution after the fact on the one hand, and intervening to alter the initial market outcomes on the other.

I think this an important issue, and, as I’ll explain, it’s one that has a lot of relevance to New Zealand.

First, a bit of history. As Frank Castles has argued, during much of the twentieth century New Zealand and Australia had quite a distinctive “wage-earners’ welfare state” that relied more upon ensuring the standard male breadwinner could earn enough to provide for his family than upon generous social provision. In New Zealand, the Industrial Conciliation and Arbitration system was a centrepiece of this approach.

This broke down over the ’70s and ’80s, and by contrast the approach of the Fifth Labour Government has strong parallels to Purnell’s description of New Labour that I outlined on Tuesday.

There were attempts to influence market outcomes — the Employment Relations Act, minimum wage increases, an extra week’s statutory annual leave — but most of the heavy lifting was done through government redistribution, in particular Working for Families. This appears to have been a deliberate preference, as illustrated by the Paid Parental Leave policy, which was quite consciously designed as a government income-transfer programme rather than an obligation on employers, despite the preference of Labour’s coalition partner the Alliance that it be paid for through an employers’ levy.

Of course, there are some sound reasons for the state being cautious about trying to directly alter market outcomes, particularly in a globalised world. But not doing so has consequences.

For instance, I had often been puzzled by the vehement resentment many people seemed to feel towards Labour’s pro-family redistributions. In a time of general growth and prosperity (as it was up until mid-2008), surely a rising tide was lifting all boats, so who could begrudge a little extra assistance to those with extra mouths to feed?

But then I came across a figure in the 2008 edition of the Ministry of Social Development’s excellent Household Incomes in New Zealand series. It showed that for a single-person household without children under the age of 65, the real income of someone at the middle of the in income distribution (i.e. the median) had actually fallen between 1998 and 2007.

Based on data from Household Incomes in New Zealand: Trends in Indicators of Inequality and Hardship 1982-2008 (2009), Table D.4 on page 53. It should be noted however that, in this latest edition, this trend has turned around with the addition of the 2008 data.

Now, this is only one figure, but it does tend to show that not everyone was benefiting from the boom. That reflects the fact that growth during 2000-08 was generally extensive, i.e. it was manifested in employment growth (and thus impressively low rates of unemployment) rather than significant wage growth.

At least, not significant wage growth at the median: high-income earners continued their trend of increasing their incomes more rapidly than other New Zealand, further widening market income inequality (and meaning that any state system of redistribution had to run just to keep up).

To me, this illustrates the risks and limitations of relying primarily on after-the-fact redistribution as our main engine for ensuring inequality. I interpret Purnell’s lecture as indicating that we may need to think more radically and innovatively about how to achieve more equitable market outcomes in the first place.

The challenge, of course, is how to do that.

Here, Purnell doesn’t really offer us that much. At one point he does talk about aiming to “ensure that anyone who works hard earns enough to have a decent life” and suggests a combination of the national minimum wage, campaigns for a Living Wage, and offering a reduction in labour costs (in the UK this could be done through lower national insurance contributions,) for employers who have a higher wage floor.

On the one hand, this doesn’t seem very radical — it hardly seems likely to radically transform market outcomes — and on the other hand it still seems to rely on state spending pretty heavily.

I wonder, is it possible to envisage something that goes further than this? Possibly something that brings back the traditional focus of the New Zealand welfare state to find new ways to ensure that people can earn enough market income to provide a good living for themselves and their children. What would a 21st century distant cousin of the Industrial Conciliation and Arbitration system look like? It would almost certainly be less centralised and restrictive, and probably more focussed on skill development; perhaps it might involve some way of sharing out the dividend from productivity growth.

Is such a thing possible? Could a country like New Zealand find a way to influence the market system towards fairer outcomes? Or do we need to reconcile ourselves to largely accepting the market as it is, and then using the tax and redistribution system to distribute income in a more progressive way as best we can. What’s your view? Leave a comment below.

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Posted in Theoretical Foundations | 18 Comments »

Core Crown Expenses 1999-2009: an overview

Tuesday, April 6th, 2010

This is the first post on the Policy Progress work programme topic ‘Progressive Fiscal Policy – Lessons from the Fifth Labour Government’.

It may come as a bit of a surprise that there really isn’t any readily available database that shows the fiscal record of any particular administration. We will have to construct this for this topic, and there will be some complications involved in doing so.

For today, however, I just want to use some currently available information to present a bit of the ‘big picture’. I’m going to use Core Crown Expenses, which is the standard measure, and look at the period from 1998/99 to 2008/09. I think that timeframe is the best one for a simple analysis, but no year-to-year analysis is perfect. The budget for 1999/2000 was actually set by Bill Birch in the Shipley government, but the incoming Clark-Anderton government committed significant additional spending during 1999/2000 ahead of their own first Budget in June 2000. Similarly, the current government made significant changes to the 2008/09 appropriations but the budget for this was originally set by Michael Cullen.

Plus, of course, the Core Crown Expenses are a mix of deliberate initiatives, responses to cost and salary pressures, and automatic adjustments (benefit CPI increases, additional superannuitants etc). With these caveats in mind, then, let’s look at the figures.

The graph above shows the growth in Core Crown Expenses from the 1999 fiscal year (1998/99) to the 2009 fiscal year (2008/09). The yellow line is the CPI index for this period, so the area above that line represents a real increase in government spending. Anything below that can be argued to be simply reflecting general price inflation.

We can see that expenses increased from $34 billion to $62 billion during the period. That’s an increase of $28 billion, or almost a doubling of Core Crown Expenses. Probably about a quarter of that, or $7 billion, can be accounted for by general CPI inflation, so the real increase would be about $21 billion.

Where did all that additional money go to? We have data breaking the money down into Core Crown Expense Classes, a slightly odd grouping of spending areas that don’t seem to be used anywhere except the Crown accounts.


The graph above presents the composition of the $28 billion increase by Core Crown Expense Class. It shows that the two largest areas of additional spending were ‘Social Security and Welfare’ and ‘Health’, followed by ‘Education’. Between them, these three classes accounted for almost two-thirds of the total $28 billion increase.

Such broad categories, however, raise as many questions as they answer. For instance, what drove that extra ‘Social Security and Welfare’ spending? It might be thought that it went on additional benefit expenditure, but actually it was more likely to have been a combination of an ageing population increasing the cost of Superannuation, and Working for Families tax credits.

Also, since some Expense Classes are much bigger than others, those large slices of pie above may simply reflect the fact that those areas made up a large proportion of spending to begin with.

To test that, let’s use an index approach to show the growth pattern in each Expense Class over time irrespective of the overall size of spending in each.

This shows that, when viewed in relative rather than absolute terms, growth in ‘Health’ and ‘Education’ was actually only mid-range amongst the Expense Classes, and ‘Social Security and Welfare’ was one of the lowest-growth areas.

By far the fastest growing Expense Class was ‘Economic and Industrial Services’ followed by ‘Transport and Communications’. ‘Defence’ by contrast has grown quite slowly — however Core Crown Expenses do not include capital expenditure such as military equipment.

All this is just the first layer of the onion. Over the course of this topic I intend to peel further and look at the particular initiatives and expenditure lines that have driven costs in each of these Expense Classes, and also look at other areas like capital expenditure that are left out of this initial analysis. Let me know of any insights you have about how to proceed, or requests about particular areas of expenditure that you feel are important.

Update: I should also reference my data sources. Most of the data comes from the very useful Treasury file Fiscal Time Series – Historical Fiscal Indicators 1972-2008. The data for 2008/09 is from Core Crown Expense Tables in BEFU 2009.

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Posted in Progressive Fiscal Policy | 11 Comments »

Proposed Topic: Fiscal Record of the Fifth Labour Government

Thursday, March 11th, 2010

Notwithstanding attempts on the Right to discredit it, the fiscal record of Michael Cullen and his colleagues is a proud one. Even Bill English has acknowledged this, at times. His first Budget Policy Statement, drafted of course by Treasury officials but approved by and attributed to him, sums up the state of play at the time of the change of government:

After peaking at just below 80% of GDP in 1987, debt has steadily declined and was 17.5% of GDP in June 2008. Net worth has lifted sharply, moving from a negative position in the mid-1990s to now be strongly positive, at just below 60% of GDP. These developments mean that New Zealand is coming into a period of weak growth from a stable starting fiscal position. [emphasis added]

(English said much the same thing in person at the time as well.)

Now, Policy Progress is primarily interested in looking forward. We’re more concerned about what the next (progressive) government should do, rather than raking over the record of the current government or the previous one.

Why, then, are we proposing to study the fiscal record of the Fifth Labour Government?

Because it has a lot to teach us, when considering spending (and revenue) plans for the next progressive government.

(Policy Progress reader Achela summed this up nicely in a recent comment by suggesting that this topic be renamed “Progressive fiscal policy – lessons from the 5th Labour-led government”.)

I think it’s fairly uncontroversial to say that the Fifth Labour Government was a competently-run progressive administration that governed for a fairly decent period of time (nine years) during unusually good economic conditions.

This gave it more fiscal headroom than its predecessors have generally had – and probably more headroom than the next progressive government will have, either (particularly given current economic forecasts for the coming decade).

Yet, I think it’s fair to say that it left a lot of its supporters a little disappointed by what it didn’t achieve in terms of spending. Couldn’t it have gone further in terms of eradicating child poverty? Tackling student debt? Achieving a step-change in the levels of investment in schools and tertiary education institutions? Lifting our Official Development Assistance contribution?

I think it’s worth treating the Fifth Labour Government as a case study, and looking at what drove expenditure growth during the period. To what extent did some ‘insatiable’ portfolios crowd out expenditure in other areas? What was the balance between discretionary and non-discretionary initiatives? What was the cost of simply ’standing still’ in terms of inflation and wage pressures? How might different choices on a few major spending areas have altered the government’s overall expenditure profile?

The progressive movement may face some pretty hard choices in terms of spending priorities over the next few years. I think that in this case looking back might provide some valuable guidance for moving forward.

What do you think? Does this sounds like an interesting, achievable and worthwhile topic for the work programme?

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Posted in Work Programme | 8 Comments »

2010 Work Programme – Have Your Say

Tuesday, March 2nd, 2010

As I said last week, this blog is just part of Policy Progress’s activities. We also undertake longer-form work, and will produce 3-4 reports each year that aim to advance thinking on particular topics.

We are now developing our work programme for the first year, and invite suggestions from our readers.

A draft of the work programme is now available. It proposes three major themes:

  • A Progressive Path to Prosperity
  • Theoretical Foundations
  • The Fiscal Record of the Fifth Labour Government

There’s a short description of each theme on the Work Programme page, but I will also elaborate on these over the next fortnight on this blog.

This Thursday’s post will cover ‘A Progressive Path to Prosperity’, and then next week I’ll deal with ‘Theoretical Foundations’ (Tuesday) and ‘The Fiscal Record of the Fifth Labour Government’ (Thursday). Hopefully, this will provide a pretty clear idea of what’s being proposed in each area.

A fourth proposed topic, for initial work and thinking in 2010 before developing into a major theme in 2011, is around child poverty and cycles of disadvantage.

I’m keen to hear your feedback, both on ways of tackling these topics or on other issues that you see as more urgent and/or important.

The comments thread on this post will be the central location for feedback on the draft work programme, although you are also welcome to put forward your views in the comments for later work programme-related posts. Alternately you can email us directly at workprogramme@policyprogress.org.nz.

I will close off feedback on the work programme on Friday 26th March, with a view to finalising the 2010 work programme at the beginning of April.

In the meantime, many of my blog posts are going to focus on the proposed initial themes. Hopefully these will be interesting in their own right and will also help to clarify further the direction and scope of proposed work in these areas.

It doesn’t mean, however, that any topic is a fait accompli until we’ve heard from you!

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Posted in Work Programme | 7 Comments »