Not Being Venezuela: The Political Logic of the Labour/Green “Budget Responsibility Rules”.

By
Chris Trotter
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34
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FOR THOSE WHO THINK Labour and the Greens are being too cautious, economically-speaking, I have only one word: “Venezuela”. Andrew Little may not resemble Hugo Chavez in the slightest. Nor are Labour and the Greens, by any stretch of the imagination, Bolivarian revolutionaries. But, to hear the Right tell the story, New Zealanders are being courted by dangerously left-wing political parties. Given half a chance, we are told, Little and his Green sidekicks, James Shaw and Metiria Turei, will happily transform New Zealand into the Venezuela of the South Seas.

The reasoning behind this outlandish charge is simple:

The Right argues that, because the Left has never seen a problem that could not be fixed by throwing more money at it, all left-wing governments end up spending themselves into a fiscal crisis. Afraid of taking the harsh economic measures required to balance the country’s books, these leftists then decide to maintain the living-standards of their followers by taxing the rich ferociously and borrowing like there’s no tomorrow. Very soon the country’s international lines of credit are exhausted. At this point, the clueless government decides to crank up the state’s printing presses – flooding the country with paper money. When the overseas suppliers of vitally important imported goods refuse to accept this increasingly worthless currency, the government responds with rationing and harsh import and price controls. In the face of widespread protests, the now desperate government resorts to increasingly authoritarian methods of political control. Pretexts are found for shutting down the oppositions’ media outlets. Government supporters confront government opponents in the streets. Violent clashes ensue. As the next scheduled general election draws near, the embattled left-wing government must choose between pushing forward into full-scale dictatorship (thereby risking a military coup d’état) or submitting itself to the judgement of an outraged and/or disillusioned electorate. Either way, their own – and the country’s – prospects are bleak.

Unfortunately, the historical record offers more than a little confirmation of this alarming right-wing narrative. Even here, in Australasia, the precedents are not all that encouraging. In the case of both the government of the Australian Labor Prime Minister, Gough Whitlam, and that of our own Norman Kirk, there are disturbing echoes of the above scenario. It certainly describes the sequence of political events in the Chavistas’ Venezuela.

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Indeed, it is possible to argue that the grim fortunes of the social-democratic governments of the 1970s – especially the fate of Salvador Allende’s Popular Unity government in Chile – lay heavily on the minds of New Zealand and Australian labour leaders in the 1980s. Also before them was the abject failure of the French President’s, Francois Mitterand’s, socialist-communist government. Elected in 1981 on an avowedly left-wing programme, it was forced, within months, to execute a humiliating U-turn. The scale of French capital flight was economically unsustainable.

That the Right was in large measure responsible for the economic and political difficulties which brought these social-democratic governments to their knees, in no way invalidates its critique. The Right knows that a left-wing government genuinely committed to the uplift of its marginalised and exploited supporters has little choice except to adopt the “tax and spend” policies outlined above. They also know how, in the chilling language of Richard Nixon and Henry Kissinger, to “make the economy scream”.

So don’t be too quick to condemn Labour and the Greens for cautioning their supporters against building-up unrealistic expectations of an incoming centre-left government. Both parties know how important it is to inoculate themselves against the Right’s accusations of economic ignorance and irresponsibility.

To a confirmed leftist, the Labour Finance Spokesperson’s, Grant Robertson’s, and the Green Co-Leader’s, James Shaw’s, statement that: “New Zealanders rightly demand of their government that they carefully and effectively manage public finances”, will undoubtedly sound a rather dull ideological note. So, too, will the “Budget Responsibility Rules” to which Little, Robertson and Shaw have pledged themselves.

Delivering “a sustainable operating surplus across an economic cycle”; reducing “the level of Net Crown Core Debt to 20 percent of GDP within five years of taking office”; and promising to “maintain [Government] expenditure within the recent historical range of spending to GDP ratio”: these are hardly the sort of slogans to summon the proletarian masses to the barricades!

What they just might do, however, is spike the rhetorical guns of Labour’s and the Greens’ political opponents – making it much easier for the swing voter to believe that voting Labour/Green to change the government, is not at all the same as voting for 1,000 per cent inflation and blood in the streets.

34 COMMENTS

  1. I’m not sure why Labour have to ‘defend’ their economic record. Just juxtapose Labour’s borrowing against National’s borrowing on a billboard and let the facts speak for themselves…

    Then work out if we hadn’t sold those power assets – we would be much better off. National love selling the country, the fuckers.

    How much they have National got from the state house sell offs vs how much they are worth?

    The honey Peter Thiele deals..plus free citizenship.

    National are appalling economic managers.. Labour are better.

    Labour bought us Kiwisaver, Kiwibank, State houses etc etc

    What the Fuck has National every given Kiwis??

    Fuck all, apart from dirty water, asset sales and a transport and housing nightmare!

    Now people can’t even afford to be tenants in their own country!

    I also think that Labour/Green need to get past ‘the economy’ in their messaging to what really matters. What’s the point of it all, if we are worse off and having dirty water, working 2 jobs and 50 hours a week and never have a quality of life to spend with loved ones?

    English is more interested in selling out our country and calling our youth ‘hopeless’. He’s every bit an arsehole as Key, only less smarmy and more of a neoliberal robot.

    Another example of our ‘brighter future’… Immigrant workers felt helpless during exploitation
    http://www.nzherald.co.nz/hawkes-bay-today/news/article.cfm?c_id=1503462&objectid=11824043

    What sort of country are we becoming!! We already know we are a banana republic because one of our biggest exports is now profits, now we don’t even need to pay employees!!

  2. So it will be a choice of personality and traditional support, not of policy.
    This says no change is possible till the existing system has collapsed.
    This is probably quite true, but there needs to be an organisation ready with a comprehensive alternative to quickly put into place when that happens and the public mood supports it.
    Cheers D J S

  3. Labour $10 Billion debt

    National $91 Billion debt

    Yet National purport that Labour throw money around to fix things! They are are a lying , thieving party, National.

  4. Thats pretty much the reasoning Im sure but you are being unneccesarily generous to the political right here.
    The national (National?) debt http://www.nationaldebtclocks.org/debtclock/newzealand at approaching 100 billion from virtually zero under labour must be mentioned, and no the arthquakes didnt add up to that, borrowing for tax cuts was part of it.
    Also lest we forget the disaster of Muldoons financial mismanagement.
    National should never be allowed to preach from the moral highground on this.

  5. You say all this, somehow without mentioning the FACT that the current right-wing government has racked managed to “borrow and hope” to the tune of an eye-watering $91,200,000,000 (and that is NOT a typo).
    http://www.nationaldebtclocks.org/debtclock/newzealand
    Labour have been FAR better economic managers than National in recent history.
    https://robinwestenra.blogspot.co.nz/2016/04/the-story-of-new-zealand-debt.html
    https://thestandard.org.nz/who-was-the-better-economic-manager-helen-clark-or-john-key/

  6. Clever speel , Mr Trotter, with some merit….perhaps…

    However , doesn’t it strike you as odd that the Saudi Arabians redistribute their oil money to much of the Saudi populace, – whereas New Zealand lets NZ company’s that donate to the National party take our precious bore water by the truckload and sell it overseas – and then pocketing ALL the proceeds….

    THAT IS AN EXAMPLE of how the Far Right wing can induce fear by using its narrative in this country…

    Have a read of this to see what I mean regarding the differences between Venezuela and Saudi Arabia – both about the same population with the former having more oil. Then you will see the fallacy of the Far Right wing narrative in its total deception.

    Venezuela and Saudi Arabia: Sharing wealth | The Gisborne Herald
    gisborneherald.co.nz/opinion/2360740…/venezuela-and-saudi-arabia-sharing-wealth

    I would suggest all read the above link to get a clearer picture of just whats been happening in New Zealand for the last 33 years…

    • A pity that article doesn’t mention how Saudi Arabia is an ally of the US while Venezuela has had to endure constant efforts by the US to destablise the country

  7. Talking about Venezuela, Mr Trotter, perhaps it is not simply politics that has led to the crisis there?

    http://www.tradingeconomics.com/venezuela/gdp

    Yes, present reports make for a grim reading:
    http://www.reuters.com/article/us-venezuela-economy-idUSKBN154244

    “The oil sector, which provides nearly all of Venezuela’s hard currency, in 2016 shrank 12.7 percent, according to an excerpt of a document containing the figures that was shown to Reuters. The non-oil sector shrank by 19.5 percent, according to the document.”

    But it may simply be the over dependence on petroleum exports for GDP and the country’s survival, that has caused this crisis. That dependence was already created by previous governments, who ran a very corrupt and socially unjust, divided society:

    https://en.wikipedia.org/wiki/Economy_of_Venezuela

    “The economy of Venezuela is largely based on the petroleum sector and manufacturing.[17] Revenue from petroleum exports accounts for more than 50% of the country’s GDP and roughly 95% of total exports. Venezuela is the sixth largest member of OPEC by oil production. From the 1950s to the early 1980s the Venezuelan economy experienced a steady growth that attracted many immigrants. During the collapse of oil prices in the 1980s the economy contracted, the monetary sign commenced a progressive devaluation, and inflation skyrocketed to reach peaks of 84% in 1989 and 99% in 1996, three years prior to Hugo Chávez taking office.”

    Add the virtual boycott by banks, due to Venezuela leaving the IMF and World Bank due to them being highly influenced by US governments, and the country was then basically set up to fail, as those organisations and the large banks will not tolerate any state to refuse dependence on them.

    https://www.theguardian.com/business/2007/may/01/venezuela.imf
    “Speaking at a May Day event, Mr Chávez said: “We don’t need to be going up to Washington … We are going to get out. I want to formalise our exit from the World Bank and the International Monetary Fund.” ”

    I am not saying that the Chavez and now Maduro led governments have done everything right and well, they made mistakes in my view, as they must have diversified economic activity and managed the economy more carefully and wisely, but the global system is so set up, to seriously disadvantage any government and country and people, who choose not to collaborate with the global financial systems and the banks and powers that maintain and dominate it.

    Chris you have fallen for the propaganda that prevails, and use it to justify the ‘Pale Greens’ and ‘Nat Light’ aka ‘Labour’ moving further to the right again.

    • ” I am not saying that the Chavez and now Maduro led governments have done everything right and well, they made mistakes in my view, as they must have diversified economic activity and managed the economy more carefully and wisely, but the global system is so set up, to seriously disadvantage any government and country and people, who choose not to collaborate with the global financial systems and the banks and powers that maintain and dominate it. ”
      ———————————————————————————

      As AARON mentioned above , both strong arming by the USA and their banks / foreign policy’s etc coupled with the oil downturn worked against Chavez – also as you mentioned, the time it would have taken to diversify into other industry’s etc… it was simply unfortunate that the American neo liberal system was pitted against them.

  8. all the while reassuring internationally mobile capital their eggs are safe in a Labour/Green (NZF) basket, so no need to pull out all the stops to prevent the occasion….two birds with one stone.

  9. I find it odd that Chris can condemn Gareth Morgan as promoting more neo-liberalism in one breath, then with his very next breath, make piss-weak excuses for what Mike Treen condemns in his piece on this announcement as “Labour and Green’s promise to uphold neoliberal dogmas”.

    TOP policies don’t even vaguely resemble neo-liberalism, neither its economic face (consolidate, de-regulate, commercialize, privatize wealth, socialize risk) nor its political face (corporatize public administation, centralize power, “consult” the public on pre-decided options, spy on and sabotage democratic social movements). So why would Chris – who ought to know better – condemn them as “neo-liberal”?

    In contrast, according to Mike, Labour and the Greens are “are proposing to adopt the dogma that ‘surpluses’ are necessary and we need to reduce the debt to GDP ratio from 30% (already one of the lowest in the OECD) to 20%”, even though these are thoroughly neo-liberal goals, based on delusional and throughly debunked neo-classical economic models. So why would Chris make excuses for this?

    Could it be that rather than using “neo-liberalism” as a critique of a specific ideology and set of polices that successive NZ governments has been in thrall to since 1984, Chris is just using it the same way right-wingers use the words “communist” and “socialist”? Meaningless smears against anyone who threatens the interests of the horse they’ve already put their money on, in the political steeplechase?

    • or it may be the answer is in the fact that incrementalism works both directions….

      “INCREMENTAL CHANGE is, generally-speaking, the most effective expression of democratic government. Most human-beings are uncomfortable with sudden and dramatic change. They can live with it, and through it, if they have to. (Just ask the citizens of Christchurch and Kaikoura!) But most people, given a choice between the status quo and massive upheaval, will opt for the status quo.”

      https://bowalleyroad.blogspot.co.nz/2017/03/john-keys-legacy-protected-status-quo.html

      It is all but impossible to make policy from the opposition benches.

  10. I just wonder how Labour and Greens want to solve the housing affordability crisis, especially here in Auckland, when they will tie their hands like this?

    One bedroom units cost about 400 bucks a week now, in much of Auckland, two bedroom homes cost 500 or even more dollars in rent per week, and three bedroom ones are above 600 or even over 700 to 800 bucks a week in rent.

    Building 10 thousand new homes per year sounds good, but given the high shortage, also because of the since years rather unrestrained immigration, and given that the launching a state funded and supported building scheme takes time to get pace traction, it will be a massive task for Labour/Greens to make rents more affordable again.

    And as they swing towards the neoliberal policies of the Nats, they will likely not dare putting into law rent increase limitations and the likes.

    Here is what goes on Trade Me at present – mostly not really that “affordable”:
    http://www.trademe.co.nz/browse/categoryattributesearchresults.aspx?134=1&135=7&136=&153=&132=FLAT&59=0&59=0&122=0&122=0&29=&123=0&123=0&search=1&sidebar=1&cid=5748&rptpath=350-5748-

    And this humble home for rent was only advertised since yesterday, and already has well over 500 views on it:
    http://www.trademe.co.nz/property/residential-property-to-rent/auction-1288533100.htm

    We need much more radical and firm action than what Labour and Greens have signaled with this announcement!

  11. If its an “outlandish charge” then why on earth would you want to build policy around trying to counter it??

    sheesh.

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