NZ chooses hope over fear – we’ll find out which was the wiser choice

Viewed from the far side of the world, Jacinda Ardern’s triumphant re-election suggests an extraordinary level of hope and expectation behind the voters’ decision.  If it can’t be managed down, it’s hard to see how it can be met.

The opposition National Party were singularly unsuccessful in tapping into voters’ fears for the future and selling themselves as the safer option.  Instead, they appear to have leaked voters predisposed to such fears to the ACT party.  

Given that their signature tune in recent years has been the argument we can finesse the ‘hard choices’ more realistically and efficiently than the Labour party, they should not be altogether surprised that middling voters grasped at the government’s suggestion that some hard choices might be avoided altogether (for you and your family, and maybe even for the country).

But it makes the task facing the re-elected government very difficult.

To the deep regret of small-state liberals, economic history shows that it is possible to run a big and indulgent state – provided there is a sufficiently large private sector, kept on its toes by competition and decent incentives, able to innovate and adapt.

The lessons learnt during the last years of the twentieth century are that the state can’t get too big and the private sector needs to be able to keep steady growth flowing.  Otherwise, the competing claims for government action can become impossible to manage.

NZ’s private sector has a hard road ahead. It has to redeploy labour, increase primary productivity, improve the efficiency of supporting services like processing, banking, legal, distribution and retail, transport, infrastructure and housing. And also turn an external tourism sector into an internal one.  

While the government can avoid getting in the way, don’t for a moment assume it is going to do all this.

Rather, its role will be to juggle three potentially irreconcilable forces: giving the private sector room to do its job; imposing growth-sapping policies (eg, on climate change) to keep its supporters happy; and managing the demand for more public spending, higher state sector wages and expensive housing.

The key will be a highly disciplined relationship with the private sector, which needs to face competitive pressure, be allowed to restructure, change wage levels and invest in new technologies.  Subsidies (even assuming they were affordable) won’t get you there. The ability to earn and keep a market rate of return is needed.

It will be a challenge for a Labour administration which did not show in its first term conspicuous understanding of what it needed from the private sector or how to get it. It could also be demanding for some civil service advisers whose experience of bureaucratic tinkering without trashing economic growth might lead them to under-rate the impact of bad policy on private actors.  Economic histories of the 1960s and 70s could be profitably reviewed.

To get through will likely require a lot of borrowing (which looks plausible, although markets can change fast), a great performance from the private sector and plenty of luck.  And it would make a compelling re-election prospect in three years time.

It looks like Ardern’s government is to be tested in ways it did not experience in the last three years.  As will the abundant hopes of its supporters.

One thought on “NZ chooses hope over fear – we’ll find out which was the wiser choice

  1. It appears to me (having been outside the NZ goldfish bowl until last week).

    Than PM Ardern has excelled at PR.
    From a non performing government and falling in the polls, she was handed an opportunity almost crafted for her skills. (PR/Communication)

    A fear driven crisis where she was able to talk to the nation EVERY day on Nationwide TV.
    With initial messages of fear and dire predictions moving to the Saviour messages, crafted by her $16m PR team.
    We went hard and we went early
    The Team of 5 Million etc.

    As we all know, repeat something often enough(ie Daily TV appearances) and it becomes ingrained.
    I would put money on the fact that the vast majority of Labour Voters voted for Jacinda, because she saved us; rather than Labour policies and actions.

    We will see over the next 3 years whether the emperor has any clothes!

    I suspect that in 3 years the glow will be off the bloom.

    Time will tell


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