Which is Helen Clark's bigger risk?

Risk and politics are usually oil and water. But some occasions call for some oil on the water. This, for the Labour party, is one of those times.

The Labour party, its leadership having been brought up to admire the welfare state achievements of Scandinavia, has set itself the objective of bringing our society up to that standard.

The problem is that we do not have Scandinavia’s economy. The real parallel is with South America — and South America has a potential lifeline in free trade with the United States. Even Australia is dawdling on deepening its free trade agreement with us.

No one is going to come our rescue. To lift the economy to levels that will sustain even a passable imitation of Labour’s beloved Scandinavia will require out-of-the-box policy initiatives — quite apart from some high-quality innovation and enterprise by business.

So far the government has shown anything but daring. First, it carried out its “credit card” promises and strengthened the Resource Management Act, to put social and environmental policy alongside rich Scandinavia rather than struggling South America. That reduced corporate international competitiveness and this economy’s attraction to foreign investors.

Then ministers cast around for an economic silver bullet. Surprise, surprise, this has come in the form of the “knowledge economy”, or “knowledge society” or — this month’s flavour — “knowledge wave”.

This is near riskless policy. None of Labour’s — or the country’s — sacred cows need to be slaughtered, or even dried off. Ministers can simply pile some exhortative and facilitative policies on top of the existing structure.

Most of it is contentious only in the detail, if that. As between the two main parties at least, there is not a lot of room for real dispute over the general aim of lifting research effort, getting more innovation out of business and tapping into the Kiwi “diaspora”.

National’s Maurice Williamson even joined the committee organising the early-August “Knowledge Wave” conference, jointly hosted by Auckland University and Prime Minister Helen Clark.

If there was actually a “knowledge wave” which all or most New Zealanders could (with a tweak of policy here and there to help) readily catch to ride all the way to the golden sands, the government’s riskless strategy might associate prosperity with Labour and embed it in office.

But in fact turning the existing knowledge ripple into a wave and then getting a wide cross-section of the workforce on to the surfboard will take years. And that is on an optimistic scenario, made unlikely by the puny resources the government has allocated to the project, including even rhetorically until shortly before the “Knowledge Wave” conference.

In the meantime the health services will slide deeper into debt and education will choke on short rations. The growth is not there in the economy to lift the fiscal shackles from this socially ambitious bunch of would-be Scandinavians. South America it is, for a time yet.

And that won’t do. On the reasonable assumption Labour leads the next government, by 2005 it is likely to be looking a bit ragged when set against its social services ambitions. Moreover, National’s strong recruitment of younger MPs in 1999 and 2002 may well by 2005 be making Labour look like the party of times past.

If Helen Clark is to achieve her political ambition of changing the face of politics so that for the next while Labour is the — or at least a — normal party of government instead of the bit-player to National’s main act it was in the past 50 years, she will need to demonstrate by 2005 palpable progress up the economic league.

And that requires risk: investor-friendly microeconomic reform back on the table, internationally competitive tax rates, cooption of private sector and other non-government initiatives to invigorate and sharpen the “public” services, innovation in which will be limited if left to necessarily risk-averse bureaucrats.

The risk, as you can see, is possible losing the Labour faithful if it cannot convincingly be presented as refashioned social democracy.

The conundrum is that Helen Clark is highly risk-averse but that, if she hides inside her comfort zone, she risks becoming yet another dismal footnote in Labour history, returning it (as her legacy) to also-ran status and potentially thereby burying social democracy as a major driving force in politics.

That prospect might just drive Clark to take risks. She has evolved impressively in office. Next we shall see whether she can redefine herself, her party — and maybe politics.