• Playing the Neo-Liberals’ Game

    The advice offered by some of its leading thinkers that Labour should switch the focus away from the role of central government and towards a greater devolution of power to the regions and communities has a fashionable ring to it.  But it is another, perhaps unwitting, admission of the left’s damaging loss of intellectual self-confidence.

    There is, of course, much to be said for bringing the exercise of power closer to the people; but the difficulty lies with its corollary – that expectations of what can be achieved by government should be reduced.

    A reduced role for government is, after all, an essentially right-wing – and, in modern terms, neo-liberal – preoccupation.   It was Ronald Reagan who famously claimed that government was the problem and not the solution; and since then, the political right has worked hard to scale down, and in many cases remove, any power claimed by government to intervene in the “free market” economy.

    The left, by contrast, has traditionally and valuably seen government, particularly when its role is legitimised by democratic election, as a necessary bulwark to protect basic freedoms and an essential defence for the interests of ordinary people against the otherwise overwhelming power of those who would dominate the market place.

    The shift in power away from democratically elected governments and in favour of large corporations, greatly aided as it has been by globalisation and the acceptance of neo-liberal economic doctrines, is after all already well advanced – which makes it all the more surprising that influential voices from the left should recommend that it should be further encouraged rather than resisted.

    It is one of the main indictments of New Labour that it showed itself to be so welcoming of the notion that government’s duty was to put business interests first – and it seems that the lessons to be drawn from that experience have still not been learnt.

    Not only do we live in a society where all values are increasingly subordinated to the bottom line, but we run an economy in which all the major decisions have been removed from democratic government and handed over to institutions which owe no loyalty to anything other than the profits to be made for their shareholders from – as the Bank of England acknowledged last week – an astonishing monopoly power to create huge volumes of new money.  Virtually all the important economic decisions are now made, not by a government accountable to the voters, but by banks accountable only to their shareholders.

    The craven attempt by politicians to hand over responsibility for economic management has a lengthening history.  The Exchange Rate Mechanism, the European Monetary System and the Euro – to say nothing of setting up an “independent” Bank of England to decide monetary policy – have all been devices to allow politicians to escape being held to account.  It is disappointing to find voices on the left advocating a further extension of this cowardly disclaimer.

    That disappointment is further compounded by the apparent failure to understand that fragmenting, localising and under-resourcing interests opposed to those of the business big battalions is a recipe for clearing the way for yet further domination by those powerful interests.  The only chance we have of countering the ever-growing power of international capital is to summon up, coordinate and combine the total potential power of government – all the resources potentially at its command and all the legitimacy that is derived from the ballot box.

    For the left to turn its back on this obvious truth is a painful – and totally unnecessary – dereliction of duty and counsel of despair.  Are we really ready to concede – as George Osborne asserts – that there is no alternative to the current destructiveness of austerity, and therefore no role for a government taking a different view and pursuing a different policy?

    Are we really saying that voters need not and should not look to a Labour government for a society that is fairer and more caring – a better society that is necessarily based on a better-performing economy?

    Do we concede that a better-performing economy is beyond the capacity of a Labour government?  Are we so lacking in intellectual curiosity and ambition that we are unaware of, and unwilling to pursue, the increasingly accepted possibilities of a quite different approach to macro-economic policy?  Do we really have nothing to say on these central issues, but are instead content to linger in the foothills so as to divert attention away from the need to scale the challenging peaks?

    Why not do some hard work on the central issues facing this country- and in particular on a different macro-economic policy – and then have the courage and confidence to say to the electorate that changing government will make a real and beneficial difference to the lives of most people.  If we don’t believe that, why should anyone else?

    Bryan Gould

    1 April 2014

1 Comment

  1. Brendon Harre says: May 9, 2014 at 3:21 pmReply

    Bryan I have long had an interest in devolution or a sharing of sovereignty as it can go up and down. I like Federalism because it formalises this process. But some countries like Denmark manage a significant degree of devolution while remaining in theory a constitutional monarchy.

    I have never seen devolution as a Neoliberal process. It seems to me that by formally sharing government you are acknowledging it is of value at both levels. If you devolve government you are acting to the opposite of the belief that ‘government is the problem not the solution’.

    I see overly centralised countries (But decentralised countries like the US can be influenced by this too) as particularly prone to laissev faire politics and neoliberalism is just a variant of this. Often this is in response to a overly political and domineering period of government -what we in NZ would call Muldoonism.

    Unfortunately in Britain and our country NZ we don’t like to formalise our political/governmental process. A century and a bit ago politicians in NZ thought NZ didn’t need to join an Australasian Federation because the British Empire would federate. But it never happened and then Britain ran off and joined that hopelessly conceived European ‘club’. There was no doubt many reasons for all of this but neoliberalism was not one of them.

    I think devolution works particularly well with heterogeneous public goods. Public services that vary from location to location. A post code lottery if you will. Now for most public services this is not what you want. Everyone should have the same access to say cardiac care treatment no matter where you live. But for some it is unavoidable.

    Transport infrastructure for example will vary from place to place depending on size and geography. Transport infrastructure as discussed in the link below influences housing supply, therefore house price inflation a major factor in national economics, influencing things such as interest rates, exchange rates and under or over investment in the productive sector of the economy.


    NZIER believes that the beneficial effect on housing supply should be taken into account when assessing transport infrastructure -public or private. Now that seems reasonable but their report focused only on Auckland, yet in NZ transport infrastructure is predominantly paid for by central government. John Key promised Roads of National significance, NZTA provides the state highways, rural councils receive grants from Wellington to provide and upkeep local roads and Wellington pays for any passenger rail.

    So some bureaucrats in Wellington have to analyse and decide what is best for every urban area -transport and housing wise. To decide if Ashburton needs a second bridge, what to do about Christchurch’s northern corridor and so on. Hundreds and hundreds of case by case unique problems. I think this will quickly degenerate into political game playing. You can see this already in regional development.

    Mathew Hooten recently described Steven Joyce’s Ministry of Business, Innovation and Enterprise that replaces Jim Anderton’s Regional Development Ministry. 1500 officials, no decisions that can be made without the Ministers micro management involvement. Arbitrary decisions on which businesses get assistance and which do not. Muldoon-lite?

    In the end of April New Zealand National Business Review, Matthew Hooton wrote “(Steven) Joyce Resurrects Muldoonist State” outlining the micro-management “Muldoonist” style of Minister Steven Joyce.

    Political interference -often done in a secretive underhanded manner in housing and transport has been going on since at least post the first Labour government and I would argue since Vogelism. Read about Auckland’s lost city plan as the National governments from the 50’s on undermined the first Labour governments urban plans.


    It seems to me, that it would be better to let the regions keep some of their taxes (some combination of income, GST and petrol taxes to go alongside rates) and do the case by case analysis and implementation regarding housing and transport themselves. Rather than having this on going national political football. This is what they do in places like Germany and Denmark.

    Labour could propose that they will transition to this model over a 10 year period as part of their Kiwi Build and Kiwi Saver package.