Election Reflection

The election result was well predicted by the polls, Te Ururoa Flavell’s departure excepted. So, no surprises that Winston Peters is the power-broker this time. Also, no surprises that Peters has no competition for that role, given that New Zealand First is the only truly independent party in the 2017-20 Parliament. One surprise was the very high number of special votes; with Labour gaining 43 percent of the specials, and National only 36 percent. Indeed Labour fell short – by just a few votes – of gaining 47 seats; that would have made it National 55, Labour-Green 55.

The other big surprise should have been how few votes were cast in Auckland, and how many were cast in the hinterland. So far, I’m the only one to have noticed: see my Auckland Population: Evidence from the Election. As reflected in much anecdotal evidence, Auckland is shrinking relative to the rest of the country. Statistics New Zealand estimates of Auckland’s population “increasing by 50,000 a year” are based on extrapolating 2006-13 growth trends. Easily the lowest number of votes cast in 2017 were in Tāmaki-Makaurau. Auckland Central also had a very low vote count, despite 8,400 specials (28% of all votes in that electorate). Auckland may even lose an electorate when the boundaries are redrawn after the 2018 census. Auckland’s demography has changed since 2013.

Following my pre-election reflection, Chris Trotter suggested that I my misguided view was “guided by the historical precedent of the 1969 “nearly-but-not-quite” election. Yes, in part my view was; I remember the 1969 election well. Certainly in 1972, the New Zealand electorate was better prepared for innovative change. In 1969, the still-conservative electorate had been freaked by the demonstrative disruptions to Keith Holyoake’s campaign, by a Progressive Youth Movement led visibly and audibly by Tim Shadbolt. Indeed, in 1969, to win its fourth term, National in government won two seats from opposition parties (a rare event in those days): Wanganui (as it was then), a seat Labour had taken for granted; and Hobson from Social Credit. (Chris Trotter reminded me of the 1969 Bob Chapman and Keith Sinclair election story. In 1942 my father served with Chapman and Sinclair in a gun-emplacement at the end of Whangaparaoa Peninsular; I was named after Keith Sinclair.) 1969 was a recovery year; wages started growing substantially, after a decade of general wage orders that did not allow for productivity gains. Also the moon-landings had been a marvellous distraction.

1969 was also the first election in which South Island electorate quota was adopted, meaning an increase in the size of parliament after each subsequent census (until MMP refixed parliament at 120 seats). Under the FPP version of the formula (ie had we retained FPP in 1993, we would have had over 120 MPs in 2020. (On that matter, by the end of this century, we will revert to FPP unless in future the South Island population grows as fast as the North Island population.)

I disagree with Chris Trotter about Labour’s relationship between 1935 and 1938. Sure, the 1935 Labour vote was well short of 50%. Indeed 10% of the vote went to Independents that year. Labour also had Ratana and Country Party support. What really made it (mathematically) for Labour was the spoiling effect of the new and short-lived far-right Democratic Party, which took eight percent of the vote. What really clinched it for Labour was its promise, on the hustings, to introduce universal and largely unconditional social benefits. Here we must appreciate that the cruel bureaucracy which surrounded entitlement to benefits in the depression years was not unlike the bureaucratic apparatus that is creating a mental health epidemic today; the very real problem that the Green Party tried to start a conversation about this election.

For much of the time, Labour in 1936 and 1937 tried to backslide on its electoral promise. The left of Labour wanted to focus on redistribution through raising conditional benefits. The right of Labour looked to create an early version of Roger Douglas’ 1974 actuarial superannuation scheme. With the help of some public servants, and with the coming election in mind, Savage rejected both of these, and resurrected the universal scheme from the bottom drawer. It was an extraordinary vote-winner. And, as Elizabeth Hanson pointed out in 1980, it came in well under budget.

This was Labour coming into the 20th century, creating a comprehensive social support system, and not just extending the ‘selective’ class-based welfare that developed in Australasia in the 1890s. That system still forms the philosophical basis for Australian social welfare; refer to Frank Castles’ 1985 thesis: The Working Class and Welfare. The other part (in 1936) of Labour’s entering the 20th century was the use of new monetary policies – specifically Reserve Bank credit – to enable the state-housing scheme that not only housed New Zealanders but also created the multiplier effects that got New Zealand back to full employment by 1939. (Chris Trotter’s Adults in the Room? is a particularly worrying exposition of how much courage and mental catch-up Labour still requires.)

Labour in 2020 needs to adopt 21st century macroeconomic management philosophies. In other parts of the world these began after the global financial crisis, with fiscal stimuli and quantitative easing. Not in New Zealand, however. New Zealand will need to adopt 21st century monetary policies at some time in the next decade. And Japan has shown the world how public debt can be a 21st century solution to late-twentieth century public investment shortfalls and private miserliness.

The world in the twenty-first century can address its inequality problems only through the adoption of public equity solutions. Otherwise the latter part of the century can only become as dystopic as so much of today’s contemporary popular fiction suggests. This conclusion is formed by the remorseless arithmetic of increasing inequality; it is not formed by an anti-rich ideology.

On this last matter of public equity, Labour can start by either adopting the simplified tax scale I have suggested or by embracing and reconceptualising the misnamed Family Incomes package legislated from the 2017 Budget. (It’s misnamed because it provides benefits for individuals as well as to families.) Labour says it is ‘tax cuts for the rich’. But it’s not really so. National’s legislation neither reduces the top tax marginal rate nor raises the threshold for which that rate becomes effective.

The 2017 Budget creates and extends what can alternatively be called a Public Equity Benefit (in this case, upto $195 per week). A simple reconceptualisation converts a ‘tax cut’ into a ‘benefit increase’. That reconceptualisation – embracing ‘public equity’ as a means of distributing capital income (social profit) to the masses – takes us into 21st century thinking. (The cheaper alternative creates an unconditional Public Equity Benefit of $175 per week.) In both cases, we have an unconditional though not universal benefit, created at zero cost from a tax-benefit-accounting framework that is relevant to present times. Of particular importance, changing the way we account for income taxes and benefits today creates the means to equalise (and raise) equity benefits in the future. It’s simple, it’s necessary, and it’s twenty-first century thinking.

Let’s make the next decade about solutions, not about problems. Let’s apply more new thinking to what we are for, less to what we are against. It doesn’t matter who is Prime Minister. We can have a twenty-first century multi-party democracy, through which all good ideas can be placed on the table, and considered on their merits.