Where is the open economy?

Where is the faultline the 1980s revolution opened up in politics? Between Labour and the Alliance. That is the underlying reason why they agreed midyear the coalition agreement could be about only process, not policy.

Monday’s skimpy “peace in our time” document is as unusual in its lack of even a general programme as was the National-New Zealand First coalition’s doomed attempt to tie everything down.

If Labour and the Alliance tried to go beyond their extremely vague subscription to “reducing inequality”, “environmental sustainability” and “economic wellbeing”, it would expose their fundamental disagreement on the open economy – the very point on which Jim Anderton split from Labour in 1989.

A process-only agreement allows the two sides to maintain a polite fiction. Confining policy to the specifics of the Speech from the Throne on 21 December on which they can agree leaves both able to maintain their positions on either side of the 1980s faultline.

The Alliance can notch up points on issues that don’t challenge Labour’s macroeconomic settings. Those points will be mainly in “reducing inequality” and, through Jim Anderton’s dispensing of goodies to promote economic development, “in economic wellbeing”. But in fact the Alliance has signed up to the open economy.

This is the stuff of coalition politics for small parties, especially for flank parties which want to, but cannot, go much further than their centrist partners.

The great challenge for Helen Clark will be to concede enough wins to the Alliance to keep it committed to the coalition but not so as to lose touch with the centre.

National failed to scramble its way back to the centre this year after Jenny Shipley’s politically incomprehensible lurch to the fringe in 1998 and so much of the centre fetched up on election day with Ms Clark. In opposition National will aim to recapture those votes.

Ms Clark is keenly aware of that. After the slightly leftward repositioning she will carry out over the next few months – on defence, on state sector organisation, on economic policy, on social services – she will aim to establish that position as the centre ground and win middle New Zealand’s endorsement for it.

Colleagues sometimes compare her with Peter Fraser, the driving force for 14 years in the first Labour government. Once the welfare state was established, Mr Fraser paid close attention to middle New Zealand.

Ms Clark hails in fact from middle New Zealand – a frugal small farming family. Often the higher a political leader rises the more he or she reflects formative influences.

So expect a cautious, conservative style of prime ministership, both in terms of her policy positioning and her management of the cabinet. That’s what got her the job.

Note, first, her flanking of Mr Anderton with Michael Cullen on one side in finance and trusted workhorse Pete Hodgson on the other in industry development. Ms Clark will not mind Mr Anderton’s rhetorical flourishes, big gestures and hyperactivity if her busy lieutenants are down in the engineroom.

Note, second, her careful positioning on free trade. She adds the word “fair” and says the World Trade Organisation should include minimum environment and labour standards in its rules.

But her comments are actually a long way from the protection of rich countries’ privileges that some protesters demand, hypocritically claiming to be on the side of the poor countries but in effect aiming to condemn them to the dependency of aid instead of the dignity of trade. Ms Clark recognises the value to New Zealand of rules-based free trade.

Neverthless, her repositioning enables her own left (including in her cabinet) more readily to accept the open economy – and gives the Alliance also some room to move.

Then note, third, that the Alliance itself has repositioned. It is wary of foreign investment and wants rules Dr Cullen will not impose. But on trade it has limited itself to a 5 per cent tariff – barely more than a token. On tax it has retreated a long way from 1996.

Mr Anderton, no neo-marxist, has repositioned his party so that it can support a moderate social democratic government. There will be eruptions, breakouts and disputes but a rupture is unlikely.

Maybe the faultline is losing its vigour, becoming obliterated by time and the silting sands of political realism.

But such things must not be said too loudly. So the coalition agreement speaks softly of process – and the open economy stays.