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Be careful what you wish for

November 16th, 2008

Supporters of social democratic and labour parties have had plenty of experience of seeing their parties in office. Despite some substantial achievements there has been plenty of disillusionment, particularly in the case of coalition governments with centrist or liberal parties. Time after time, the promise of radical transformation has faded to hard slog for modest reforms or even (particularly in times of crisis) capitulation to the demands of capitalist orthodoxy.

By contrast, explicitly libertarian parties have hardly ever scored enough votes to elect candidates, let alone form governments. But now, thanks to New Zealand’s multi-member proportional system, a new government, led by the National Party, has been formed in which the ACT (Association of Consumers and Taxpayers) party (with a bit over 3 per cent of the vote) holds a couple of ministries. ACT was the subject of some enthusiastic commentary in open threads here, and an op-ed piece by John Roskam of IPA in the Fin (paywalled, maybe someone can find a link). They combine libertarian economic policies with the now standard accompaniments of climate change delusionism and coded law-and-order rhetoric.

Unsurprisingly, given the circumstances, the first announcement of the new government was that the longstanding requirement under the Public Finance Act for budget surpluses over the cycle was to be abandoned. At this stage, declining tax revenues are the main factor, but large-scale Keynesian stimulus is going to be needed, and soon.

Labour’s guarantee of bank deposits looks certain to be retained, and there’s every likelihood that more intervention, maybe even nationalisation, will be needed before the financial crisis is resolved.

As far as I can tell, ACT has had to settle for a review of public expenditure (plus the ministers’ jobs) as its price for participation in a government which seems likely to be forced in the direction of interventionism. It will be interesting to see how long they last.

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  1. gerard
    November 16th, 2008 at 12:25 | #1

    Maybe they can focus their attention on legalizing incest, LDP style.

  2. Father Mercy
    November 16th, 2008 at 12:48 | #2

    As a politician campaigning for office everything looks achievable. Once you are given the keys to the castle you are confronted by cold hard facts. ACT’s newly elected MPs will soon realize that generosity showered on one section of the electorate will bring howls of ‘what about us’ from other groups. Kev747’s Xmas present along with a dose of 2 Corinthians 9:11 tossed in underscores that theory.

    One thing that must be protected from any ACT razor gang is the sleuthing of those damned elusive facts. Discovering those facts can only be achieved by securing a seat on Air New Zealand – unfortunately in the first class section – and pursuing those facts. It matters not if those facts are secreted in the world’s most depressing 5 star hotels or if indeed the trail should take those intrepid MPs to very dangerous and deprived locales such as Paris, Rome, London, Vienna, and, New York. ACT’s priority is the continuation of fact-finding-missions no matter the cost.

  3. Michael of Summer Hill
    November 16th, 2008 at 14:54 | #3

    John, whilst Key’s may be able to form government with the support of the ACT, United Future and the Maori Party, I’m sure he is eyeing Rudd’s social inclusive style of governance very very very closely.

  4. Ken Miles
    November 16th, 2008 at 15:36 | #4

    If John Key’s wants more than a one term government, he will marginalise ACT. ACT’s policies aren’t particularly popular, and if they are perceived to be the tail wagging the dog, the Labour party will use them to beat National down.

    Helen Clark, went choosing between slightly strange centre parties and the Greens as coalition partners, always went for the centre parties – which in turn has made her one of NZ’s most successful politicians.

  5. gerard
    November 16th, 2008 at 17:03 | #5

    Regardless of the merits or otherwise of ACT, I think it is a good thing that there is room for smaller parties to exist in the NZ system. I wish we could have mixed member representation here in Australia. It might have been a good thing to discuss at the 2020 wankfest.

  6. Richard Allan
    November 16th, 2008 at 17:08 | #6

    John,
    I have read your blog for some time and as an expat Kiwi it was nice to see a NZ topic come up. The painful memories of the damage Roger Douglas and co. caused the NZ economy and social fabric are still clear in the collective memory in NZ. I agree with Ken’s comments, the perception of ACT wagging the dog would be electoral poison.
    I’ve been interested in many of the comments both in the MSM and blogosphere about NZ’s “weird” electoral system letting crazed, wild eyed wingnuts into government. While I entirely agree with the summary of the ACT party, it misses the point that in 1984 NZ voted in a Labour government and then found that they were being run by these very people. Due to the unicameral “first past the post” system then in place it took more than a decade before a centrist or even vaguely left leaning government to be installed. MMP has let ACT into government but the nature of proportional representation and the need for coalitions with smaller parties means that National can’t afford to move too far from the centre and any move to the extremes will be punished swiftly. Letting ACT run the agenda will mean electoral defeat for the right in 3 years not 15 years like last time. What MMP gives it can also take away (swiftly). The big problem for NZ could be if ACT and the right wing rump of the National party do lurch to the right they can do some serious damage even if they’re in power for only 3 years

  7. jquiggin
    November 16th, 2008 at 17:31 | #7

    To be clear, I endorse the MMP system, and accept the over-representation of parties like ACT as the cost of avoiding the pluralitarianism inherent in first past the post.

  8. November 16th, 2008 at 18:59 | #8

    I wondered as well, what extent has the National Party’s options in government been compromised by the agreement with ACT. What I think it means that the agreement with Maori Party takes on added importance.What is really commendable is that these coalition deals are made public.

    Equally, is it not a pleasant change to see Helen Clark staying in Parliament to act as the opposition foreign affairs spokesperson, rather than resigning and creating a by-election. It is too much to hope her example will be followed.

  9. philip travers
    November 16th, 2008 at 20:57 | #9

    Australia has had a history of Merchant Bankers entering the Court Room with tail between legs,and leaving the Court Room with tale firmly in mouth via hand cuffs.I would say,Mr Keys will not please Australians who have memories.

  10. TerjeP
    November 16th, 2008 at 22:30 | #10

    I’m very enthusiastic about ACT on account of their tax cutting rhetoric and there general endorsement of the free market but lets not get too carried away. Firstly New Zealand has a truely libertarian party called Libertarianz. The ACT party is pretty libertarian on economics but not on social policies such as drug reform. On the later they seem extremely conservative.

    In any case the tax cuts they have promised are bold but not during the current electoral term. National will in any case dominate the coalition and they have merely advocated some quite modest increases to the tax brakets. Most of which will get eaten up by braket creep.

    http://national.org.nz/files/2008/ECONOMY/Tax_Policy_Paper.pdf

    If instead New Zealand merely adopted Australias income tax brackets (adjusted for the exchange rate, or PPP if you prefer) then the vast bulk of kiwis would enjoy a substantial reduction in the trade barrier between households. The idea that they should have higher tax rates than Australians just because they are poorer is stupid. Okay, their top tax rate is lower than Australias if you earn more than A$180000, but mostly the tax rate is punitive relative to Australia, they don’t even have a tax free threshold.

    http://en.wikipedia.org/wiki/Income_tax_in_Australia#Personal_Income_Tax

    http://en.wikipedia.org/wiki/Taxation_in_New_Zealand#Individual_income_tax

    Unsurprisingly, given the circumstances, the first announcement of the new government was that the longstanding requirement under the Public Finance Act for budget surpluses over the cycle was to be abandoned.

    This idea was always fiscal conservatism. Even though libertarians (and social democrats) have not been immune to this logic it has nothing really to do with libertarianism in my book. The idea that you can cut peoples income (ie freebies and handouts) without first reducing their cost of government (tax revenue) is political folly in my book. Tax cuts should always take precedence over spending cuts or at least be done at the same time as part of a whole sale reform.

    Gordon Brown in the UK is currently making the right noises about tax cuts (although maybe for the wrong reasons). Such a pity nobody made these noises sooner. Although time will tell if they go for real supply-side tax cuts or if they instead give more debt funded handouts dressed up as “tax rebates”.

  11. Nick K
    November 16th, 2008 at 22:45 | #11

    @ Terje, Gordon Brown’s current talk of tax cuts is gross opportunism and desperation considering that as Chancellor he presided over vast increases in spending and increased budget deficits.

    Some have suggested that the Labour government may be adopting a scorched earth policy. That is, the government is almost certain to lose office at the next election. So they figure there is nothing to lose in running the budget deeper into deficit and buying back votes. That way they can minimise the defeat, while leaving the Tories to pay the bills.

  12. observa
    November 16th, 2008 at 23:06 | #12

    Association of Consumers and Taxpayers? Sounds like an association of Keynesians and Austrians. My take is the marriage won’t last if it’s based on some initial fiery sex but some long term disparity in sexual appetite. I can feel the headaches coming on already.

  13. gerard
    November 17th, 2008 at 09:05 | #13

    The ACT party is pretty libertarian on economics but not on social policies such as drug reform. On the later they seem extremely conservative.

    Urgh. I can respect genuine libertarians, but not posers like these. It doesn’t sound like they have any deep philosophical commitment to individual liberty, but are instead just another cardboard cut-out bunch of business-class wingnut thugs.

  14. TerjeP
    November 18th, 2008 at 23:19 | #14
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