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And even more from the book it is based upon: “American Prometheus: The Triumph and Tragedy of J. Robert Oppenheimer” by Kai Bird and Martin J. Sherwin.

Christopher Nolan’s award winning film Oppenheimer is based on the 2005 biography American Prometheus. I really liked the title. Prometheus was the Greek god who gave mankind fire, and was punished for doing so. J. Robert Oppenheimer gave us atomic weapons and energy. The ugly and enthralling core of the book and the film is about the story of his success and the resulting punishment.

The film is not quite accurate, but in a related context Oppenheimer justified some changes to other theatrical accounts of his life as legitimate dramatic licence. The 700-page book has to be more scrupulous. There are 85 pages of notes and the bibliography is another 15.

An enquiry was set up in 1954 to consider Oppenheimer’s security status. The book calls it a ‘kangaroo court’. Lewis Strauss, his main antagonist, chose the enquiry panel and kept in constant touch with them and the ‘prosecuting team’. Between meetings Oppenheimer’s rooms were bugged, including discussions with his counsel. It was not a court, so illegally acquired evidence from FBI wire-taps was used against him. Not that Oppenheimer or his counsel always knew because much of the evidence was not disclosed to them. The enquiry was in secret with no independent journalists reporting it.

I was continually reminded of the detestable show trials under Stalin where the conviction was predetermined and the defendant never had a chance. I was appalled, because I have had so much respect for the American judicial system. Of course, it has failed on numerous occasions – there are the terrible stories of McCarthyism at about the same time while those involving blacks go back centuries – but this was the authoritarian state out to get someone. Prometheus was being punished.

The difference from the Soviet Union and similar trials was that there was widespread public uproar from the science community when the verdict was announced; the panel revoked Oppenheimer’s security clearance by a 2–1 vote (while unanimously clearing him of disloyalty). That sort of outrage cannot occur in an authoritarian state, so one was still left with some respect for the robustness of American public life.

Eventually the decision was revoked and Oppenheimer’s official status was reinstated. But he was a broken man when the presidency acknowledged him and dead when his security status was restored.

It is difficult for a film to capture the gruelling detail of the ‘trial’. When I saw Nolan’s film, I did not come away with the knowledge or extreme outrage I had following reading the book. The best that the film could do is juxtapose Oppenheimer’s ordeal with a 1957 senate hearing into Strauss’ suitability to be commerce secretary in an Eisenhower cabinet. You may not have a lot of respect for such hearings, recalling the disgraceful McCarthy ones of the 1950s. But it was in public and there was due process. The Senate rejected Strauss in what was described as ‘one of the biggest, bitterest, and in many ways most unseemly confirmation fights in Senate history’. (The nays included  John Kennedy and Lyndon Johnson.) The film makes it seem that Strauss was being punished for his treatment of Oppenheimer, but the charge sheet of his misdeeds was longer, including the Democratic majority’s main argument that Strauss’s statements before the committee included semi-truths and outright falsehoods and that under tough questioning he tended towards ambiguous responses and petty arguments; given the way he treated Oppenheimer one is not surprised.) I doubt the outcome gave much comfort to Oppenheimer.

There are a couple of other themes in the book worth pondering, even if there is not room here to explore them. First is the clash at Los Alamos, where the atom bomb was developed, between Oppenheimer, who headed the scientists, and Lesley Groves, who headed the military. The military wanted great compartmentalisation between scientists for security reasons. Oppenheimer argued that a free flow of information was necessary for scientific endeavour. He won, the scientific community shared, and produced a bomb in a remarkably short time. After the war, Oppenheimer argued that scientific communities sharing their understanding across nations was the best way to prevent the misuse of atomic weapons. He lost that one.

Second, I was also struck by the contrast between Oppenheimer’s success at Los Alamos and his lesser achievements at the smaller Institute of Advanced Studies near Princeton which he headed between 1947 and 1966. (However, his insistence that Fellows at the Institute should include the arts and humanities was farseeing; he was well read, with a wide variety of tastes and interests.)

Oppenheimer came to Los Alamos with little management experience (generic managers would be appalled). His success there was because its scientific community had a single common goal (to produce an atomic bomb). There was no such commitment at the IAS, which was staffed by able eccentrics with personal agendas, just like universities. Vice-chancellors might like to reflect on the parallel; it is not just trying to herd cats but sometimes, to be zoologically inaccurate, the cats hunt in packs.

The film Oppenheimer is doing very well in the rankings. It has many strengths, although its sound is not one – the advice is to go to a session with subtitles (if you can find one). But I can’t help thinking that part of its recognition among Americans arises from its representation of one of the nastier shadows in US history – the repeated failure of its justice system to be judicial. The shadow has not gone away. Perhaps many of the film’s enthusiasts are deeply worried about how Donald Trump is using the courts and how he might use them even more malignantly if he became president again.

Footnote: Many images of Oppenheimer (including the cover of the book) show him with a cigarette or pipe. He died of throat cancer in 1966 at the age of 62; I found the book’s description of the treatment gruelling. It is thought that tobacco killed – caused the premature death of – about a hundred million people in the last century with over 25m this one. The number contrasts with perhaps less than a million killed by atomic weapons. Both are unnecessary scourges of mankind.

Luxon has to address the need to maintain and enhance New Zealand’s social cohesion.

Dear Christopher Luxon,

The greatest challenge you face is that of the nation’s social cohesion (rather than the economy). The problem has been with us ever since Hobson arrived.

New Zealand is a diverse society. For over a century we suppressed this truism by relegating women to the kitchen, Māori to the pa, gays to the closet, and ignoring the role of religion in secular life. We practised majoritarianism by a group – who among other things were straight, Pakeha, Anglican, middle-class, male, rugby followers – which pretended theirs was the only acceptable lifestyle and the country should be run in their interests. Those who did not conform to this majority were ignored, treated as quaint eccentrics, or repressed.

Today that diversity is more apparent. Affluence has enabled individuals to exhibit their differences, while social media enables like-minded minorities to join together. We are also importing the fashions of antagonistic public dialogue from overseas, most notably the rhetoric of conflict from the US – a society which seems to be falling apart because it lacks social cohesiveness.

All societies are under these pressures for roughly the same reasons. Some rigidly suppress differences, perhaps emphasising a dominant ethnicity or religion at the expense of everyone else and ignoring that there can be great diversity within the dominant group. Others face, in despair, the terrifying prospect of social unrest and breakdown.

Each country is different and has to find its own resolution (or not). New Zealand has three major differences. We have no significant external threat (except global warming); we are small; we have MMP, which recognises the diversity in a way that Frontrunner/FPP did not (Its electoral system is exacerbating the disruption in US politics).

You, Mr Luxon, will be reminded of MMP every time you enter Parliament’s chamber. You are not there because a majority of the electorate voted to support you. You look at your benches and see three disparate parties, none of which is entirely unified; the other side of the House looks no better.

You know, even if the commentariat does not, that the voting outcome of the 2023 election was not very different from that of the 2017 election except that the parties at either extreme garnered a little more support. But if the electorate did not change much, the government has shifted dramatically (because New Zealand First changed its mind).

So you have not really been given the radical mandate some of your colleagues aspire to. You are tentatively charged by the electorate to govern New Zealand in everyone’s interests; you will be judged by an unforgiving electorate.

The easy approach might seem to be a majoritarianism which attacks any dissenters. As tempting as it may seem, it is unlikely to work. Recall Rob Muldoon. He could argue his abrasiveness got him re-elected. But that was under Frontrunner. Had it been under MMP he would have lost both 1978 and 1981 as well as 1984.

There are numerous counterexamples. Prime Minister Bill Massey (1912-1925), a founder of a key precursor of the National Party, was a member of the Orange Order, notorious for his harsh response to the miners’ and waterfront workers’ strikes in 1912 and 1913. He matured.

He was against the charging of Cardinal James Liston for sedition in 1922; he saw little advantage in sharpening the religious antagonism of the times. A cabinet full of hard-line Protestants overruled him. (Liston was found not guilty.) You may be on Massey’s side, Mr Luxon, but you will not be given a decade to mature.

So how are you going to deal with the tensions and divisions, especially as you have people on your side of the House who revelled in intensifying them when in opposition?

The first obvious action is to talk to your cabinet and caucus about the issue, explaining the importance of not exacerbating social tensions and of healing social divisions. Keith Holyoake gave excellent advice when he told MPs to breathe through their nose – not opening their mouths at inconvenient moments. You need to discuss the same message with the leaders of your coalition parties and ask them to pass it on to their caucuses.

One of the nastiest rising tensions is between media and politicians. What is going on is surely mutually agreed destruction invigorating public extremists; apparently journalists are receiving death threats too. Your press office needs to talk to the press gallery and agree to take a more courteous approach. It must recognise that both sides are doing necessary tasks but they need to avoid abrasive, stupid and useless questions and answers.

Does that deal with around Parliament? You also need to change Parliament’s approach to the wider community. In particular it, needs to resist the temptation to interfere. Apparently over half of the population are opposed to trans-women being involved in women’s sports. (That’s something outside of my expertise.) It is easy for Parliament to pass a law but I suggest that it instead leaves the decision to individual sports bodies. Many will get into a pickle but explain it is their responsibility, not Parliament’s.

Another area to restrain is the nation’s habit of simplifying what is going on into two opposing and antagonistic camps. The obvious current example is Māori and non- Māori. You do not have to be very socially perceptive to know that there is enormous diversity within each group and much overlap. When someone claims to speak on behalf of Māori or whatever, the one thing that is certain is that the speaker is at best, representing just one of the group’s segments.

Take a leadership role; say your government respects all Māori or whatever, will listen to all of them and not just some self-appointed spokespeople, and will govern on all their behalfs. Get your speechwriters to always include a reference to the diversity within any group whenever a speech mentions them.

The issues of delegating down and recognising diversity applies in many other areas. It might be summarised by ‘subsidiarity’, the notion that decisions should be taken at the lowest possible level. It has not been prominent in the thinking of the New Zealand government. For instance, it loves to bully local government, directing what they should or should not do. It is time for the centre to withdraw and leave them to make as many local decisions as possible, even if they make ones with which you personally disagree.

Subsidiarity is about respect for local and individual decisions and tolerance of diversity. As far as I can see, respect and tolerance is the way to maintain social cohesion in a liberal democracy. The alternative is centralisation, majoritarianism and authoritarian repression followed by ugly civil strife.

There is an economic dimension. The market is a very powerful means of decentralisation – of practising subsidiarity. In that sense, I was a supporter of the market liberalisation we associate with Rogernomics (and I wrote about it before 1984). Unfortunately, the neoliberals decentralised very badly. Very often their economics was embarrassingly shonky and they never really understood the issue of market design – getting the right balance of regulation. Paradoxically, they were bullies using their centralised powers to impose their theories – look at the way they treated local government. And a properly working market requires a fair income distribution – instead, the policies increased its unfairness. Ironically, the neoliberals’ arrogance brought on MMP which is designed to reduce the power of the centre.

Mr Luxon, you govern with the consequences of that heritage, and the real danger that, because of the way its institutions operate, you will govern a deeply divided society if you pursue a majoritarian strategy. There has to be a better way. Decentralisation and subsidiarity, respect and tolerance are keys to it.

Yours sincerely, Brian Easton.

The New Zealand economy is struggling; the new government will struggle to implement its economic promises.

There is not a great deal of difference in Treasury’s projected GDP growth patterns between the May 2023 Budget Economic and Fiscal Update (BEFU) and the December 2023 Half Yearly Economic and Fiscal Update (HYEFU). But there are some other important underlying changes which suggest the incoming government has a tougher task than it expected. (I am skipping the September 2023 pre-election update because there is a lot of noise in the series, and the longer perspective gives a clearer account of any changes.)

Surprisingly, for me at least, the more recent HYEFU forecast suggests a slight improvement in the external account compared to the forecast six months earlier. But any difference is well within the forecasting fans, which indicate the inevitable uncertainties. (A footnote below describes how the Treasury may want to change its forecasts in the light of new developments since HYEFU was locked up in November 2023.)

The big difference between the two forecasts is population growth arising from higher immigration than was expected in BEFU. Since the GDP projection has not changed much, that means GDP (output) per capita is lower in HYEFU than BEFU.

This column treats population growth from migration in the standard way where the distributional impact of the new arrivals is neutral. The assumption is probably wrong and I plan to investigate whether the effect is significant. I’ll let you know (if anyone does the job before me, I am happy to report their work first).

As a result of the population growth, private consumption spending per person is falling over the next few years. HYEFU thinks spending will be rising again from 2025/6 but even in 2027/8 the per capita level will be below this year’s level.

You may think the changes are small, but averages can be misleading. Some will get an income  boost, so many of those suffering will experience a greater fall than average. Losers include those facing higher interest rates; on the other hand depositors will be benefiting from the higher rates. Probably well over half the population will experience a fall in their spending power over the next two years.

The HYEFU forecasts are based on government policy decisions made up to November 24,before the new coalition government was sworn in. It reflects the outgoing Labour Government’s policies and did not incorporated the new government’s December Mini Budget decisions. HYEFU comments that they ‘will improve the fiscal outlook’, although the announced changes were small. The Mini Budget included neither the coalition government’s proposed income tax changes nor the offsetting cuts to public consumption. HYEFU says – perhaps piously – that the ‘other signalled commitments … expected to be agreed in the future … would be broadly neutral over the forecast period’.

The centre of those commitments is to give income tax relief, in order to allow some increase in private consumption after June 2024. (We shall have to wait to see how well the relief is are targeted on those most suffering.)

As HYEFU implies, the relief is to be offset by cuts to public expenditure. The Minister of Finance, Nicola Willis, has announced that the cuts will be in the order of 6.5 percent and more, but I am not sure of what. (‘Backrooms’ are a nebulous concept.)

My reaction was to recall the 3 percent cutting exercise on 1982 under Muldoon. (Willis had just been born; I doubt many in the cabinet will remember them.) I checked my memory with some on the frontline at the time. One described the outcome as a ‘sham’, with few real cuts.

Admittedly, Ruth Richardson slashed government spending in 1991’s ‘mother of all budgets’ but that was as much about ‘redesigning of the welfare state’ from a European to a minimalist American approach. As well as impoverishing many New Zealanders, the cuts to the health system killed people while they waited for treatment.

Perhaps a more relevant instance was the measures the Key-English National Government imposed after the 2008 Global Financial Crisis. They were more a squeezing in which each year government departments were given a little less than they needed. Consequently, government borrowing remained high, coming down only slowly. The public agencies struggled with the under-funding. Part of the increase in government spending under the Ardern-Hipkins-Robertson Government was restoring what had been squeezed. (On the other hand, some of their additional spending seemed to me to be wasteful or ineffective.)

To my surprise – remember it was about Labour’s spending plans – HYEFU forecast a fall in per capita public spending of around 6 percent over the next three years to June 2026. Where Labour expected to get the reductions is unclear. Labour’s already assumed planned squeeze suggests that the Coalition Government is going to be struggling to get the cuts they need unless they have a dramatic (and, thus far, secret) agenda in the way that Richardson had.

We won’t fully know until the May 2024 budget brings the coalition government’s decisions together, although there will be various indications – cries of pain – before then. I have no doubt that Treasury officials will be struggling to meet their political masters’ demands. The real decisions are yet to be taken which is why the December Mini-budget was vague.

Being a member of the Opposition or commentariat is a bit like being a couch fan watching a football match, shouting advice like ‘you should run faster’. Now Luxon, Willis and a gaggle of associate Treasury ministers are on the field. Welcome to the real game.

Footnote: HYEFU observes the following new information since the November forecasts were made: the September 2023 quarterly GDP figure turned out lower than expected (it may be revised), indications are that the December 2023 CPI increase (to be released on 24 January) may be lower than forecast and that house prices rises are also more subdued, while the net migration inflow is higher. My impression is that international thinking about the world economy is becoming gloomier. We await more data and the 2024 BEFU to find out how that will affect the Treasury forecasts.

Robert Solow transformed the way we think about economic growth.

When you are in the trenches, you may not always realise what the war is about. Years later you read an account and see more clearly. Thus it was with me in the 1960s when economic analysis went through a revolution.

My insight came later when reading the budgets in the 1960s of Minister of Finance Harry Lake about whom I had been asked to write. The speeches expressed an ambition to increase economic growth, but the analysis was around capital investment only, which sounds very incomplete to today’s economist. Reflecting, I realised Lake was using the explanation I had been taught in my economics courses.

However, I was also working at the NZ Institute of Economic Research, whose first director, Conrad Blyth, had brought back from his overseas studies a different account of economic growth which I had absorbed into my thinking without realising how radical it was. Later Bryan Philpott and I worked together in the area. The key founder of this approach was Bob Solow, who has just died at the age of 99.

Solow’s key finding was that output per worker rose faster than the quantity of capital in the long run. You may know the standard assumption in classical economics as the ‘falling rate of profit’ as in Das Kapital, but Marx was drawing on orthodox economics, beginning with Malthus and Ricardo in the early nineteenth century, and still held by great economists such as Keynes and Schumpeter in the 1930s.

The decreasing marginal return on capital is really a consequence of the laws of thermodynamics. So the laws must imply that there are other things affecting production as well as capital and labour. Solow was humble about what he found. (It was such a gigantic insight he could afford to be.) His seminal 1957 paper explained the paradox by ‘technical change’:

I     “I am using the phrase ‘technical change’ as a shorthand expression for any kind of shift in the production function. Thus slowdowns, speedups, improvements in the education of the labour force, and all sorts of things will appear as ‘technical change’.” (His italics)

Solow’s paper is the source of the widely quoted claim that 80 percent of economic growth (output per person) is attributed to technology. But only if the word ‘technology’ has Solow’s particular meaning of what we cannot explain. Economist Moses Abramovitz called the unexplained residual the our ‘ignorance’. Today we call it ‘multi-factorial productivity’ (MFP) or Total Factor Productivity (TFP)..

Sloppy thinking has empowered any group – educationalists, managers, scientists, those in the creative sector – to promote its interests by claiming it is making a major contribution to the coefficient of ignorance. Each seizes on their version of the meaning of technology; it makes them seem important and seems to justify spending large quantities of public money on them. (Many of those who argue for increasing our ignorance are well placed to make a contribution.)

Economists have tried to explain MFP/TFP – to reduce the coefficient of ignorance. We have never been able to explain it all. (It has been difficult because we cannot do experiments.) Over the years economists have concluded it is not just a matter of technology in the narrow sense of plans on how to use resources but also covered such things as managerial performance and the speed at which innovations are taken up and adapted to local circumstances. But we have not been able to measure by how much.

More recently, a crucial feature of economic development has hit home. (It is a central notion of my Not in Narrow Seas.) There has been a shift to economic activity in the market from economic activity outside it. Women moving from the kitchen into the factory are included in the calculations, but what about the refrigerators and washing machines which reduced their household grind, making the move easier?

Or consider when in the 1860s New Zealand had the highest productivity in the world as conventionally measured. It was not that we were working smarter or using more advanced technologies then. Rather, we were moving alluvial gold in the river beds outside the market into the market economy – bank vaults. Had the effect been drawn to Solow’s attention, he would have wished he had mentioned the effect moving from outside the market to inside among the ‘any kind[s] of shift’ in his 1957 paper. But in those days, economists were not as sensitive to the resource issue in economic growth (land excepted).

Economists have never said that capital and labour were irrelevant. They are as necessary as classical orthodoxy thought they were, but in a different way. Technology (in the narrow sense of ‘plans’) has to be embedded in capital and labour. So developments in information technology are embedded in personal computers and so on – capital goods. And the developments have to be also imbedded in the skills of the persons using them.

Nor should we ignore the social technologies of how an economy is organised. They range from having a good judicial system, so that contractual arrangements run as smoothly as possible, to how workplace relations are organised.

A curious feature of economic growth is that over a long period the rate of change of New Zealand’s MFP/TFP (the residual contribution to economic growth) does not seem to have changed much. I’ve looked and looked.

Had another go with a new data base a couple of weeks ago and failed, yet again. I was looking for a slow-down in hourly labour productivity growth early this century, as posited by some economists internationally. I thought I had found a slight one but it turned out to be not statistically significant. Bother!

And so to the uncomfortable question of whether we can accelerate the rate of long-run productivity growth. Everyone has been saying that since seven decades ago when we first had reasonable measures of the rate of economic growth. Economists do it as a mantra: ‘adopt my economic policies and the economy will grow faster’. (The commentariat echoes them.) But they provide no systematic evidence that their prescriptions will work. It is more ‘trust me, I know what I am doing’, but since the prescriptions all differ whom do you trust?

The politicians’ slogan is that faster economic growth will mean we can meet the public’s demands for tax cuts and more public spending. It is easier to say this when one is opposition. In government the cruel reality is that no matter what they do, the long-term MFP/FTP growth rate chugs along much as it has for the last century.

It is difficult to identify any New Zealand government that has really changed the growth rate (with the possible exception of the neoliberal policies of the late 1980s and early 1990s which  stagnated the economy; we still have not recovered from their damage). Short-term burst, such as the upswing of a business cycle, can be identified by judicious choices of end points which may satisfy those with an ideological bent. A scientist is less able to find a significant long-term change. (A change of 0.1 or 0.2 percentage points in the growth rate is difficult to identify because of noise in the data.)

Most of the paragraphs of this column could not have been written before the systematic measurement of economic output, led by Simon Kuznets, and the resulting analysis, led by Solow. One honours him for his pioneering insights. In the study next door, Paul Samuelson changed how we thought about economics; Bob Solow changed how we thought about the economy.

He wrote with elegance and clarity – he was drawn into the social sciences by reading great novels in his adolescence. They were spliced with wit. Here are some:

    “Economists are divided between those who look at economic aggregates and those who look at the details. I belong to both sides.”

    “Everything reminds Milton [Friedman] of the money supply. Well, everything reminds me of sex, but I keep it out of my papers.”

As an economist, Solow liked formal models and mathematics. But nothing too fancy. Over-refinement reminded him of the man who knew how to “spell banana” but did not “know when to stop”.

    “Part of the job of economics is weeding out errors. That is much harder than making them, but also more fun.”

    “Why does a public discussion of economic policy so often show the abysmal ignorance of the participants?”

When Frankiln D. Roosevelt in July 1933 coined the phrase “first 100 days”, those first few months were already done and dusted. He was looking back over a start to his presidency that had seen him call Congress into urgent session, during which time it had passed 15 major new laws. While some were more successful than others, they pushed back against the Great Depression and sparked new hope and ecomic activity.

The National-ACT-New Zealand First government made much its 100 day plan, which Prime Minister Christopher Luxon has repeatedly described as “ambitious”. Luxon likes to say things, like his government will “deliver and get things done” and “work incredibly quickly”.

So as the year comes to a close and we reflect on the first stage of this new government’s life, how’s it looking so far?

Well, 24 days into its government, parliament has closed and MPs have gone on holiday for more than a month. Most of the legislative work thus far has been to repeal laws and stop things. And, many voters may be surprised to learn, most of the actual changes promised are months – if not years – away. This National-led government’s big promise, its point of difference from the previous lot, was delivery. But if the 100 Day Plan has done nothing else, it has suggested the current lot are going to struggle just as much as the last.

To be fair, a few of its actions have been prompt: The so-called “ute tax” – a subsidy for low emission vehicles funded by taxing high emission imports – will be gone on December 31. Fair Pay agreements have been repealed, effewctive December 20. The first law the government passed was repealing the Reserve Bank’s dual mandate of inflation and employment, returning it to its pre-2018 focus on inflation alone.

Sidebar: It was an odd priority, given experts tend to agree that even with a single mandate, its approach to price stability since 2018 would have been nigh identical to what it did. What’s more, this law was passed with support from New Zealand First, whose leader Winston Peters just 11 years ago introduced a private members bills demanding the opposite. Back then he was concerned about the high New Zealand dollar and attacked the Bank’s “myopic obsession” with inflation.

But – back to the 100 Day Plan – most of the promises involve large globs of smoke, mirrors and spin. Lots of promises to do something later. It looks like National’s promise to get the country back on track will be a wee way down the track.

One of the defining aspects of National’s election camapign was its heavy reliance on slogans and Luxon’s and Willis’ refusal to go off-script to discuss policy and debate ideas. They would repeat scripted lines ad nauseum. They have started in government much the same way.

It’s noteworthy that National’s two senior leaders have corporate backgrounds where “messaging” and “comms” prevail as a way to talk to “stakeholders”. No-one seems to have explained to them yet that speaking to citizens in a democracy requires a different approach.

In truth, the 100 Day Plan might be better called ‘the great undoing’. This is a Do-over government like none before. In the past, New Zeaand has been saved the curse of great pendulum swings as governments come and go. Arguably it’s one of the blessings of short, three-year terms. Parties have tended to accept the bulk of a previous government’s manifesto and moved on. Not this time.

Luxon and co have deified the previous Key government and seem to want to return us to 2015. (Which is interesting given Winston Peters was railing against it from the Opposition benches). Regardless of what you think of the Key years and what’s happened since, pendulum-swing governments are bad for a country long-term. Let’s hope the do-over approach of the sixth National government is a blip, not a trend.

So what does it want to undo, precisely? Central to its “ambitious” list of plan to stop things are removing Auckland’s regional fuel tax, repealing three waters laws, stopping work on Auckland’s light rail, repealing RMA reforms, and stopping the Lake Onslow scheme.

For all Luxon’s words about working incredibly quickly, unpacking some of these laws will eat up millions of public servants’ hours and heaps of National’s political capital in its first term.

Much like the 100 Day Plan, Nicola Willis’ mini-budget this week hints at urgency and the ghosts of mini-budgets past. But while Ruth Richardson came in with a howitzer, Willis deployed more of a bow and arrow.

Her big moves announced in her statement?  “Confirming the Government’s commitment to fully restoring interest deductibility for rental properties, with details of the phasing of this commitment to be the subject of an announcement in the New Year”.

 Oh, and, “progressing work to deliver meaningful income tax reduction in next year’s Budget” or “continuing to uphold the commitment in the ACT-National Coalition Agreement to consider the concepts of ACT’s income tax policy”. “Progressing”? “Confirming”?

The Labour-led government was not unfairly ridiculed at times for announcing announcements and failing to act. But I struggle to remember a statement from them promising to continue a commitment to consider a concept.

While the new government’s main “delivery” thus far has been slogans and promises to get round to its promised repeals next year, it has also been buying into a fistful of fights. With the health sector over smokefree legislation; with environmentalists over mining on the conservation estate; with China over AUKUS; with Maori over te reo, treaty principles and affirmative action programmes; and with KiwiRail over the Cook Strait ferries.

All of this has – within just a few weeks – prompted questions about this government’s experience and discipline, usually National’s strong points. Each of those issues could consume huge chunks of political attention and capital with very little delivery for your average voter or impact on the cost of living.

And if, for example, the three water repeal means higher rates and the tax deductibility changes mean higher house prices, the money back into people’s pockets – the centrepiece of National’s campaign – could soon disappear back out of those pockets, leaving some very aggrieved voters.

National in Opposition liked to use accuse Labour and the Greens (and New Zealand First 2017-20) of “virtue signalling”. A lot. The Child Poverty Action bill, feminism, the gender split in boardrooms, refugee policy, Healthy Homes, the offshore drilling ban… all were examples of virtue signalling, according to National. Yet look at the headlines around this government in just one month – stopping higher pay for public servants who learn te reo, promises to make English an official language and require public service agencies to have their first name in English, gender-based funding for grassroots sports, going to “war” with the media and more. The risk of distraction and chasing rabbits down holes in 2024 looom large.

As politicians up sticks and begin their summer break, the clock is still ticking on the government’s 100 Day Plan. It runs out on March 7. With so much fuss having been made about this timeframe and this government promising to be the great deliverers, voters will be waiting with interest to see come summer’s end precisely how much has been delivered.

 

The new Minister of Finance implied that Treasury’s ‘books’ were deceptive. Can’t see it myself.

I was disturbed by media reports that the new Minister of Finance, Nicola Willis, had criticised the previous Labour Government ‘for leaving the books with “nasty financial surprises” that National will have to clean up’ and that ‘after looking at the books Willis said the outgoing Labour Government had left some “nasty surprises”.’ She went on that ‘the Labour Party had left the “cupboard bare” and spent New Zealanders’ money with “pretty wild abandon” … What I’ve now learned is it’s not just that the cupboard is bare, it’s that there are snakes and snails and all sorts of things in there, nasty financial surprises that we as an incoming government are going to have to deal with.’

I do not have an exact transcript of what she said – hence the confusion of quotation marks – and it is not uncommon for an incoming minister to make extravagant claims about an outgoing government.

What disturbed me was that the new minister seemed to be saying that the Pre-election Economic and Fiscal Update (PREFU) was misleading, with the implication that the Treasury was incompetent or dishonest. She was not probably intending to do so, but ‘the books’ are the Treasury’s, not the Minister of Finance’s.

To give a context. In 1990 the incoming National Government was surprised by the fiscal situation it took over. To ensure this would not happen again, it passed the 1994 Fiscal Responsibility Act (now incorporated in the 1989 Public Finance Act), which required two reports a year on the state of the government’s finances, one at budget time (BEFU) and one half-a-year later. (The Half-Yearly Economic and Fiscal Update (HYEFU) has just been published.) Additionally, it required a PREFU to be published a few weeks before any election. (September 12 in the case of the 2023 election.)

Willis seemed to be challenging the integrity of the 2023 PREFU. Each EFU makes it very clear that it is a Treasury document. Here is what HYEFU 2023 says:

     “On the basis of the economic and fiscal information available to it, the Treasury has used its best professional judgement in preparing, and supplying the Minister of Finance with, this Economic and Fiscal Update. The Update incorporates the fiscal and economic implications of government decisions and other circumstances as at 23 November 2023 that were communicated to me by the Minister of Finance as required by the Public Finance Act 1989, and of other economic and fiscal information available to the Treasury as at 24 November 2023.”

Note that, as Treasury also states, HYEFU 2023 was ‘completed prior to the release of the Coalition agreements, the Government’s 100 Day Action Plan commitments and the decisions made on the Mini Budget.’ So it is really the Labour Government’s last EFU, rather than the National Coalition Government’s first EFU. (It is due in May 2024, just before the Budget.) The commentariat treated it as a dead duck, and focused on the Minister of Finance’s financial statement released at the same time.

I looked carefully at HYEFU 2023 to see whether it had changed much from PREFU 2023. Yes, there are differences but no more than normal. I am not surprised. Yes, there is a deterioration in the fiscal position between August and November 2023 but by far the most important reason is that the economy has deteriorated more than expected, which reduces government revenue. In my experience Treasury is scrupulous about following the law, although it readily acknowledges that it has to make its best judgements in applying it. Treasury macro-economists loathe getting their forecasts wrong; there would be no intention to mislead in PREFU 2023. The HYEFU economic forecasts were finalised on 6 November. Since then there has been more bad news. (I’ll review the state of the economy early next year, when I’ve had time to put in the grind.)

What then is Willis going on about? I put aside that she is trying to portray a crisis – the strategy of incoming governments in 1975, 1984, 1990 and 2008. Not all those portrayals were justified but some gave the new government the excuse to make radical changes including reneging on election promises. Undoubtedly though, Willis wants to portray the previous government as a fiscal disaster – that’s politics.

One problem she faces is that she may not have a good grasp of the ministerial challenges she faces. No matter how hard Treasury tries, there is always a bit of a fiscal shambles of things popping up unexpectedly. Cabinets never resolve all that they face each Monday morning. There were issues which the Labour Cabinet had not yet addressed when it closed down for the election campaign.

One such example may have been Kiwirail’s ambitions for the Cook Strait ferries. Willis has scotched them for being too expensive. The way she did so was unfortunate. Old Wellington hands – Willis is not among them – are too familiar with government agencies making ‘gold-plated’ claims for taxpayer funding in order to get a less ambitious project approved. The Treasury paper rejecting the proposal probably suggests alternatives.

There are also the ‘risks to the fiscal forecasts’, which take many pages in an EFU (48 pages in HYEFU 2023 compared with 19 pages of fiscal outlook). You have to be a bit of a geek to pay them much attention (I plead guilty). Many carry over from EFU to EFU, there are new ones and some have come to book in the period between. They might be deemed ‘snakes and snails’, but they can be identified if one puts in the effort.

One is left with the impression that the National Opposition did not. Willis complains that there were spending programs due to terminate which she did not know about. A bit of diligence in the Opposition Research Unit would have identified them – did they tell her? Or was the Opposition badly prepared?

I do not want to suggest that there are no fiscal problems facing the incoming government, even if it were not giving major income tax cuts. Days before the release of PREFU 2023 the then Minister of Finance, Grant Robertson, announced that most government departments were told to cut back their spending, alerting old hands to the challenges. (A few days before the election, a leaked paper reported that the Ministry of Business Innovation and Employment was reducing staffing and tightening up on expenses. Newbies reported this as though MBIE had assumed that a National-Act government would be elected and were anticipating the expenditure cuts it would impose. In retrospect, Robertson may want us to think that, but the reality is that MBIE was responding to his directions.)

As far back as I can remember, there has been Wellington-based gossip about Treasury losing its grip. There is no evidence of this in HYEFU 2023, despite what their new Minister said. In parallel, as far back as I can remember there has been a view that Oppositions are badly prepared for taking over the government.

PS. Some of the commentariat report that Willis had announced ‘expenditure cuts’ worth $7.5b up to June 2028. However, that total includes a tax hike of $2.3b from commercial depreciation becoming non-depreciable for tax purposes from 1 April 2024.  (The outgoing Labour Government went into the election with the same policy.) There are more expenditure cuts to be announced.

In his Economists in the Cold War, Alan Bollard contrasts Saburo Okita of Japan with Zhou En Lai of China to highlight a critical issue.

Saburo Okita (1914-1993) was in Manchuria (northeast China), in the port city of Darien (Chinese: Dalien) which was occupied by Japan at that time. Because they were politically unsympathetic to the increasingly militaristic occupation regime, his family moved in his teenage years back to Tokyo, where he graduated in electrical engineering and joined the civil service. During the Second World War, and despite reservations about Japan’s war policy, he was involved in managing the supplies of raw material such as coal and iron necessary for the war economy and food.

Japan lacks sufficient local supplies of many of these critical resources. One of the reasons for its territorial ambitions was to secure alternate supplies by conquest. Manchuria was a key source.

Defeated Japan was grim. Okita set up a group immediately after the war to plot the economic recovery. It met in a half-destroyed building. Many of the official records they needed were missing and they lacked even paper. Okita’s home had been bombed and he and his family had to pile in with the in-laws. He had to scrounge for potatoes and other basic food.

Bollard uses Okita’s life to describe the Japanese recovery from this misery to become one of the strongest economies in the world with Okita playing a central role in the planning and advice system, although he was never Minister of Finance.

As the economy flourished, he moved into the international arena including chairing the Pacific Economic Cooperation Council in Bangkok from 1986 to 1988.

In the course of his career, he helped develop a solution to the Japanese resource deficit which did not involve conquest and colonisation. The alternative was trade. New Zealand is a beneficiary. We were on the edge of the Greater East Asia Co-Prosperity Sphere, the creation of which was a Japanese objective in WWII. Instead, Japan is our fourth largest export market, and an integral part of the East Asian economy which New Zealand depends upon.

If a Japanese empire was not realised, neither were some of the victors’s plans. They wanted to ensure that after their defeat Japan and Germany would revert to rural economies, unable to provide the advanced technological resources to pursue modern warfare. Wiser heads (and the need to resist Communism) prevailed and today both countries are advanced economies playing an important role in the liberal international order. (On the other hand, Russia and North Korea demonstrate that less developed economies can sustain militarily aggressive intentions – at enormous cost to their populations.) This is an important lesson to be recalled if the West ‘defeats’ Russia. Putin’s claim the West wants to dismantle Russia. The West should make it clear that it wants Russia to be a part of a civilised, affluent, peaceful world. (That Japan transformed successfully might provide some optimism for such a goal.)

Okita and other Japanese economists of his time explained this international economic interdependence as ‘flying geese’. As characterised by the diagram of a flock of birds flying in a V-shaped formation, there is a leader with the rest tucked in behind it, benefiting from those in front. *

 

The flying geese model is intuitively attractive to explain the evolving pattern of East Asian development despite significant differences in resource endowments. As Bollard writes:

       “As the lead goose (Japan) grew stronger, its rising wages and growing investment moved it towards more capital intensive industry, releasing its labour intensive operations for economies further down the formation. Each economy remained outward-looking and trade-driven, with the possibility of positive spill-over effects, technology transfer, and international investment speeding the growth process.”

The model can also be applied to the development of the European economy and to the North American economy (applied to regions and not just countries). Observe too, that in long flights the lead bird will ease back and another take over. Is China doing that? (Although you cannot see it, there is a small dot at the back of the right wing of the V; that’s us – New Zealand.)

Bollard contrasts Okita with Zhou Enlai (1898-1976) who also had a turbulent life until 1949 when the Chinese Communist Party took over the governance of China, and he came second only to Mao Zedong; unlike the latter he was a stabilising force.

Okita and Zhou met on a number of occasions. Bollard’s description of a conversation in 1971 is revealing.

      “As Zhou saw it, the main purpose of economic growth was to build defence and security, and Japanese growth could drive the country back to Manchuria in search of resources. Okita had been an advocate of peace policies in Japan, and he objected to the argument, saying the purpose of Japanese growth was to give its citizens better living standards and its consumers more choice. Indeed Japan’s internationalization would likely constrain militarism. The debate continued for some hours and, while very civil, there was no agreement. Zhou’s argument, that the economy must serve strategic national interests rather than improving the material lives of citizens, had deep roots in Chinese history but also fitted Communist Party thinking in many Cold War States. What was the real role of economics? To Okita, it was consumption for individual welfare, to Zhou it was production for state security.”

The answer remains unsettled. (In contrast, the big economic question of how to organise a modern economy – getting the balance between markets and planning – is much better settled. The review of Bollard’s Economists in the Cold War which explores this is here.) You can easily identify countries which prioritise national security over their citizens’ wellbeing. Zhou’s strategy may still dominate Chinese thinking. Even though its citizens have experienced substantial rises in their material standards of living, there is a growing popular desire for their interests to be given greater weight.

It is easy to claim that Okita’s rather than Zhou’s strategy has long applied in New Zealand. Recall that during the trench warfare of the Great War – which has similarities to what is going on in today’s Ukraine – the New Zealand leadership was not nearly as ready to sacrifice its troops in the way the British military command seemed to and which appears to be the Russian approach in its Ukraine invasion. On the other hand, our commentariat often gets carried away with describing the economy as an entity which has a significance beyond that of the citizens. I am reminded of the sentiment: ‘my economic advisers tell me the economy is doing well, but I know the people are not.’

* I wish they had chosen swans rather than geese. One of the most moving moments in music is the glorious ‘swan theme’ in the final movement of the Sibelius Fifth Symphony.

Alan Bollard, formerly Treasury Secretary, Reserve Bank Governor and Chairman of APEC, has written an insightful book exploring command vs demand approaches to the economy.

The Cold War included a conflict about ideas; many were economic. Alan Bollard’s latest book Economists in the Cold War focuses on the contribution of seven economists with each one paired with another, the contrast heightening the underlying theoretical tensions, I am not going to deal with two of the chapters, important as the topics are: the struggle by the US to dominate the international economic architecture (Harry Dexter White) and the development of the strategy for nuclear conflict (John von Neumann).  The focus here on the five which are about how to organise an economy.

The Cold War started almost eighty years ago. It began in the shadow of two economic events. The first was the Great Depression, when the capitalist economies miserably failed. It occurred closer to the publication of Marx’s Das Kapital than to today. That book seemed to predict the sort of economic catastrophe which happened and promised – albeit vaguely – an alternative economy. Many economists, including Keynes, whose General Theory had yet to be fully adopted, expected another great depression after the war.

Moreover, the Soviet Union, which was based upon Marx’s vision, seemed to have ridden through the Great Depression without the same agony. (The belief was not entirely true; things had been pretty rugged there too, including the Holodomor, the great Ukrainian famine of 1932-3 in which up to 7m died in a population of about 30m. Knowledge about what was going on in other countries was not as extensive as it is today.)

The second influential event was the Second World War, in which the economic power of the West – most notably the US – was harnessed by direction from the centre rather than by market demand, as is common in a capitalist economy. The detail of the direction during the war was extraordinary; in New Zealand it extended to the length of women’s dresses.

Again admiration fo the Soviet Union loomed large. During the war, a quarter of its people were wounded or killed, including around 27m dead. It was no wonder that many in the West, uninformed about the brutal internal oppression, admired the country. As Bollard records, some economists went so far as to become Soviet spies. Others were fellow travellers. And of course others were vigorously anti-communist.

It was a reasonable question straight after the war to ask how best to organise economy. The contrast was ‘command or demand’; was it better to have an economy directed and owned by the government from the centre or would a market-driven economy of individual decisions and private ownership work better?

Bollard covers the question by describing the life histories of five economists who answered the question in various ways. In each case he contrasts his choice with another economist who took a different view.

Oskar Lange (1904-1965) was a Pole who spent a lot of time in the US following persecution in his homeland. The contrasting economist is Austrian neoliberal Friedrich Hayek (1899-1992) who was a vigorous proponent of the market economy. Lange put much thought into how to make central planning work, especially by using price signals. He had an interesting life – sad because he when he returned to Poland after the war, this subtle economics thinker found himself having to mouth Stalin’s economic nonsense.

(It had not occurred to me how many of the era’s economists whom I respect lived politically turbulent lives. Unless you were American or British, you probably had to flee on at least once. Bollard also covers their personal lives. Some of those were turbulent too.)

The German chancellor Ludwig Erhard (1897-1977) was an economist who as Minister of Economic Affairs and later as Chancellor presided over the German postwar miracle. His strategy was a social market economy which aimed to provide a liberal market environment with public/social welfare support for individuals. He is contrasted with Jean Monnet (1888-1979), was a key founder of what became the European Union. French-German tensions aside, I am not sure they were too different.

Joan Robinson (1903-1983) was based in the stability of Cambridge, England. An ‘establishment rebel’ she was the closest to a Marxist of Bollard’s seven (but recall Karl said he was not a Marxist either). I greatly admire her economics but, sadly, she often ended up endorsing some very unsavoury regimes.

She is contrasted with American Paul Samuelson (1915-2009), with whom she had a long off-and-on correspondence. (Bollard does not discuss how Samuelson is probably the twentieth-century economist, second only to Keynes, provided a theoretical answer to big question of how to organise economies. It is called the ‘neoclassical synthesis’, combining Keynesian macroeconomics with an advanced version of neoclassical microeconomics.)

I am going to leave Japanese economist Saburn Okita (1914-1993), contrasted with Chinese premier Zhou Enlai (1898-1976), for another column because they moved on to an even bigger question of the purpose of an economy. Suffice to say here, that Okita played a key role in the Japanese postwar recovery and in the wider development of the East Asian economies.

Raúl Prebisch (1901-1986) is the last in the book. Although originally Argentinian, he fled to Chile, in between a number of internationally important jobs, to experience the turmoil which followed the Pinochet coup. His challenge was whether the models for the development of rich countries were as relevant to poor countries. His thinking was influential on New Zealand’s thinking about development policy in the early 1960s. In particular he argued that primary exports faced falling prices (terms of trade) relative to manufactures, which justified measures to diversify an economy. (There is an enormous literature about this ‘unequal exchange’.)

Prebisch was right for the first three-quarters of the twentieth century but the trend reversed towards its end as manufacturing-successful East Asia became hungry for food and raw materials.

Bollard contrasts Prebisch with American Walt Rostow (1916-2003), famous for his The Stages of Economic Growth: A Non-Communist Manifesto with its notion of an economy ‘taking off’ into sustained growth. (He was also national security advisor to Lyndon Johnson.) He too was also influential in New Zealand’s thinking in the 1960s.

So who won? Unquestionably, economic organisation via the demand side of the economy is dominant in today’s affluent economies. I am not sure that we should attribute its success to economists, even if they gave us a better understanding of how market economies work. Rather, the complexities arising from the increasing diversity of choice in affluent economies can only be met by a high degree of decentralisation. I watched how east-central European economies under the Soviet yoke became increasingly – but slowly – more wealthy. Eventually, central controls became over-burdened and failed. That was a major factor in the rise and fall of the Berlin Wall and hence the end of the Cold War.

The prize to one of Bollard’s seven – if any is particularly worthy of the prize – is surely to Erhard, whose vision of the social market economy (Samuelson’s neoclassical synthesis with an integrated welfare state) dominates much of our thinking, even in those economies seduced by neoliberalism.

 

A. E. Bollard (2023) Economists in the Cold War, Oxford University Press. 384pp. ISBN: 9780192887399 (Also available as an ebook)

The coalition party agreements are mainly about returning to 2017 when National lost power. They show commonalities but also some serious divergencies.

The two coalition agreements – one National and ACT, the other National and New Zealand First – are more than policy documents. They also describe the processes of the new government. This column focuses on policy. The agreements give the impression they were negotiated separately, with National running between the two rooms. There are some common policies, some policies which with just a little cooperation could have been written jointly, and each also contains policies or sentiments that the other party – ACT or NZF – would have liked to have had in their agreement too had they known about them. But there are also differences which may lead to severe political tensions – even to a breakdown of the coalition government.

Summarising their combined 4500-odd words on policy is not easy. I set aside a number of individual policy proposals of the sort which come up on the floor of party conferences. Some are aspirational or pious, ranging from good and bad ideas which may or may not be adopted to special interest group demands. (NZF’s include detailed demands for improving the Northland region but nowhere else.) Some could have appeared on the floor of the Labour Party conference and even been adopted by its government.

(This column does not cover the fiscal – tax and spending – aspects of the agreement. An economist waits until HYEFU. However implementing the proposed tax cuts within the borrowing limits will require major expenditure cuts. The NZF agreement includes increased spending proposals, while ACT also wants to spend a bob or two.)

The dominant policies in the agreements can be summarised as a return to 2017 when National lost power. (Each agreement states that items not covered by the National manifesto are the default.)

The most prominent change is the winding back of Treaty and Cultural issues. All three parties reject co-governance and agree ‘public services should be prioritised on the basis of need, not race’. NZF directs that ‘all public service departments have their primary name in English, except for those specifically related to Māori’ (adding that it requires ‘public service departments and Crown Entities to communicate primarily in English – except those entities specifically related to Māori’; something I would support if the word ‘plain’ had been inserted before ‘English’). Both agreements abolish the Māori Health Authority. NZF also wants to replace all references in legislation to the principles of the Treaty of Waitangi with ‘specific words relating to the relevance and application of the Treaty, or repeal the references’.

ACT is more ambitious. Its manifesto proposal for a referendum is replaced by introducing ‘a Treaty Principles Bill based on existing ACT policy [sent] to a Select Committee as soon as practicable’. NZF says nothing about this. Perhaps it will support the introduction of a more moderate bill than ACT had in mind. Neither National nor NZF is committed to supporting the amended bill when it is reported back to Parliament.

All three parties want to repeal the Natural and Built Environment Act 2023 and the Spatial Planning Act 2023, returning to the Resource Management Act 1991 which, however, they want to amend.

Both agreements stop some of the big projects that Labour had under way. ACT’s is most explicit:

‘Immediately issue stop-work notices on several workstreams, including:

            – Three Waters (with assets returned to council ownership).

            – Auckland Light Rail.

            – Let’s Get Wellington Moving.

            – Income Insurance.

            – Industry Transformation Plans.

            – Lake Onslow Pumped Hydro.’

ACT also wants to revert monetary management by the Reserve Bank to the pre-2017 approach without the ‘dual mandate’ which took unemployment into account. (Most economists think that will make little difference to the actual way the RBNZ manages monetary policy.)

Both agreements continue to support the zero carbon target, the NZF one more explicitly. However they presage a change in the way it will be done. My impression is that there is a realisation in the deep bureaucracy that the current system is not working, and some changes would be desirable. A change of government enables them to obscure the source of their proposals. Greenies will be wild any way.

Another unwinding is that parties want to revert to the more judgmental 2017 approach to law and order. (The Act document has changes it wants in regard to gun laws which were tightened after the Mosque Massacres.)

There are also reversions in education and healthcare policies. Perhaps the most contentious is the proposed repealing of the Smokefree Environments and Regulated Products (Smoked Tobacco) Amendment Act 2022. Renters will find it harder.

And so such things go back. There are a number of proposals which amount to commercialisation, outsourcing and privatisation. Both agreements have proposals to reorganise immigration although it unclear whether they want more immigrants or whether they just think the current system is a shambles.

Labour laws are to be returned to their earlier status which were more pro-employer. Even so, while National has agreed with ACT to repeal the Fair Pay Agreement regime, NZF has committed National to ‘moderate increases to the minimum wage every year’.

I leave nitpickers to reconcile these and other policies. However, the contrast between the two agreements on regulation is stark ACT’s proposals for economic liberalisation are the centrepiece of its agreement. Its leader, David Seymour is to be Minister of Regulation, there is to be a new ministry and numerous proposals aim to roll back government intervention to improve ‘efficiency’ (there will be other effects). There is a commitment to pass the Regulatory Standards Act as soon as practicable. I have cautioned that an Act in its form of the 2021 Regulatory Standards Bill is unworkable. Even so, it is the one really innovative proposal in the two agreements, which are otherwise unremittingly back to 2017.

If the RSA is passed, it is likely to be watered down. Even so, to pass it requires the support of NZF. Their agreement with National proposes a number of policies which would increase regulatory interventions in a way that is anathema to ACT. Will there be a standoff?

The agreements are clear that standoffs can happen. ‘As provided for in the Cabinet Manual, the Parties can “agree to disagree” in relation to matters on which the Parties wish to maintain, in public, different positions’ and ‘no Party is obliged to support another Party’s Members’ Bills’.

It has happened before. Labour’s ambitions for its Seabed and Foreshore Act were thwarted by – yes, it was coalition partner – NZF. (The NZF agreement mentions the need to revisit the legislation – now replaced by the Marine and Coastal Area (Takutai Moana) Act 2011 – following a decision by the Court of Appeal; since Te Parti Māori is not in power the parliamentary situation may not be as fraught.)

It will require the wisdom of Solomon to find a way through some of the potential conflicts. There are commentators on the right who think there is not such wisdom in the current National leadership. Any doubts are reinforced by the mess of the forty-day negotiation which generated these two coalition agreements.

A previous column looked at Winston Peters biographically. This one takes a closer look at his record as a minister, especially his policy record.

1990-1991: Minister of Māori Affairs.

Few remember Ka Awatea as a major document on the future of Māori policy; there is not even an entry in Wikipedia. The impression is that Peters left the writing to officials as was not greatly interested in it. We shall see a repeated pattern of his not being a policy wonk.

I am not sure about Peters’ vision for Māori in New Zealand. He is proud of his Māori heritage as well as his Scottish one. (He is not fluent in te reo; English was the language in his childhood home and he was not allowed to speak Māori at his primary school.) The right wing account of Māoridom is not well articulated; attempts to explain it are drowned by cries of ‘racism’, not all of which are justified. I am confident that Peters does not support the views of the majority on the left. He has specifically rejected the He Puapua report and co-governance.

1996-1998: Treasurer (And Deputy Prime Minister)

Peters is not remembered as a great minister in charge of the Treasury; his deputy, Bill Birch, did the grunt work. I am told his approach was ‘legalistic’ rather than policy-focused. My impression is that he does not have a grasp of the technical side of economics – just the political side. His limitations are illustrated by his failed retirement scheme.

During the coalition negotiations in late 1996, Winston Peters asked me to prepare a proposal for a contributory retirement superannuation scheme as a part of NZF entering government. His one requirement was that it had to be implemented within the three years of the electoral cycle. My advice was based on the 1974 New Zealand Superannuation Scheme which had been implemented within three years with much of the work already done. Peters’ scheme – the one I advised on – was adopted as a part of the coalition agreement with National under Jim Bolger.

When Peters became Treasurer he asked Treasury to design an earnings-related contributory scheme. The available papers suggest that the officials did not look at the scheme in the coalition agreement. Instead, they latched onto Douglas’s neoliberal scheme set out in Unfinished Business.

It was dreadful scheme. Some people – more of them women – would have made contributions throughout their working life and received not an extra cent in retirement support (they would have actually got less because the Treasury proposal cut back the level of the non-contributory scheme by indexing it to prices rather than wage changes). The Treasury proposal went to a referendum in 1998; it lost heavily.

It was Peters rather than Treasury who suffered. The trashing of his pet scheme weakened his political position. Peters’ original scheme would have been popular. Michael Cullen introduced it as Kiwisaver in 2005. Woe betide any politician who tries to abandon it. (When Treasurer Peters introduce the Treasury proposal to Parliament in 1998, Cullen pointed out it was far from the scheme agreed in the coalition document.)

Shortly after his death, Cullen’s name came up in discussion with a nurse of Asian ethnicity. She became effusive because her family had used their Kiwisaver funds to purchase their home. I said I had a small role in its development – I meant ‘small’; I kept the remembrance of the 1974 Labour scheme. She thanked me three times.

Perhaps the course of politics would have been different had a ‘Kiwisaver’ type scheme been offered to the voters in 1998 instead of a neoliberal one. Perhaps the strengthened Peters would have survived as Treasurer and NZF would have returned in the 1999 election – possibly it would have joined the Labour Government.

(Almost as an aside, I recall thinking when neoliberal Jenny Shipley toppled Bolger, that ‘they are out to get Peters’, who got on very well with Jim. Peters made a tactical error which led to his downfall – he interpreted the coalition agreement legally rather than politically. But my guess is that they would have got him anyway, especially after he lost the referendum.)

2005-2008: Minister of Foreign Affairs

By all accounts Peters was a successful Minister of Foreign Affairs. He liked the job of putting New Zealand first, listened carefully to briefings, while ministry officials were comfortable with his redirection towards the Pacific and delighted about his ability to extract additional funding.

There is a revealing story on the wider policy front. In 2003 the Court of Appeal ruled that iwi might (sic) have a limited claim to interests in the foreshore and seabed. The Clark-Cullen Labour Government decided that legislation was needed rather than leaving the matter to the tortuous processes of the courts. Its preferred solution was blocked by a lack of parliamentary support. (National opted out; according to Chris Finlayson, the Key-English Attorney General, who was not in Parliament at that time, their thinking was muddled.) Labour depended on New Zealand First, whose support came, according to Michael Cullen, at a ‘heavy price’, including the loss of ‘a lot of high moral ground’.

Peters’ objection seems to have been that the original Labour proposal created a new legal principle to which, as a legal conservative, he objected. Ironically the New Zealand First shaped legislation led to the formation of the Māori Party (Te Pati Māori) – a nice example of very unintended consequences.

(Cullen thought that National’s replacement 2011 Takutai Moana Act (supervised by Finlayson) was closer to what Labour wanted in 2004 than what could be negotiated with New Zealand First. Even so, when that bill was passed, Labour voted against it. The Court of Appeal has just raised serious objections to the Takutai Moana Act which will have to be sorted out by the Luxon Government. Peters will be involved again.)

2017-2020: Minister of Foreign Affairs (and Deputy Prime Minister)

Ministry officials were so pleased to get back Peters after the harrowing experience of his predecessor, National’s Murray McCully (after a brief interregnum by Gerry Brownlee). Labour’s Nania Mahuta, who took over after him, was not liked as much either.

An authoritative history of the first term of the Ardern-led Government is yet to be published. I shan’t be surprised if it shows Peters’ experience was a key element in stabilising the new government which consisted largely of ministerial neophytes. However, on his account, there seems to have been a breakdown in consultation and trust by 2020, presumably as the parties headed towards the election. Will this pattern be repeated in the Luxon-led government from 2023?

In summary, generally Peters has been a reasonable but not outstanding minister showing very good political skills but mediocre policy ones.