Leads and lags make politics a game of pass-the-parcel

Politics is often a game of leads and lags. These take many forms and can decide elections.

Take the economy. There seems to be a lag of around a year to 18 months between a change in the direction of growth and a resultant change in electoral behaviour.

This is because the economic driver of votes is not the big numbers economists pore over but the small numbers: households’ balance sheets and cash flows. And even when the household numbers change there seems to be a lag before a new psychology cuts in and votes shift.

At election time in 1999 the economy was recovering after the Asian crisis but that did not help the government. The recovery did help the (different) government in 2002 after it worked through into house values, salaries and wages.

Let’s say the next election is in September 2005. There are signs now of a general slowdown but wages usually lag. So incomes will likely rise for a year or so yet and the household economies may well still feel fine going into the election — on balance a plus for the government.

Moreover, cash flow for many middle-income households will get a boost from the second tranche of Michael Cullen’s big rebates in this year’s Budget.

If so, Don Brash’s message of economic bleakness is unlikely to resonate. He will have to score votes in other ways. Which he has set about doing on race, law and order and welfare.

On race another sort of lag is operating, very much to Brash’s advantage.

The political elite — National and Labour — has made a revolution in Maori policy over 20 years. But there is a long lag between the political elite’s grasp of such issues and the suburban dwellers’. The average suburbanite doesn’t delve deep and long into indigenous rights, Treaty of Waitangi minutiae and recondite court decisions.

The average suburbanite operates by core values and they do not change as quickly as political fashions in Wellington. Brash, a recent recruit to the political elite from outside, is promising a reffirmation of those core values. He is banking that the lag between the political elite and the suburbs will work for him next year.

The Maori party is banking on a different lag working the same way.

For a decade or so growing numbers of Maori have been connecting with a message that once was the preserve of a Maori political elite: the assertion of Maori tradition, spirituality and claim to special status in our society.

Ironically, this comes as the vanguard of Maori thinking appears to be moving on to focus on educational and economic development. But it will be another five to 10 years before that drives many rank-and-file Maori votes.

Brash’s Treaty message and the Maori party’s rise highlight another lag, a convenient one for electioneering. That is the lag between pre-election promises and policy initiatives in government.

Promises are less convincing than they once were because voters are generally more savvy. Nevertheless, outcomes can be implied — for example, big cut in crime and the benefit roll — which might get traction if policies include some ear-catching slogans. This is the core of National’s strategy.

Post-election reality might be different. It is a fair bet, for example, that in Maori policy what a post-2005 National-led government would actually do would be an attenuated version of the pre-election rhetoric. Practicalities of government, legislative time and constituency management would drive that.

But by then, of course, National would be in power.

Then another lag cuts in: between policy initiatives in government and outcomes. Long lags can cause a government to be blamed or rewarded for its predecessor’s deeds.

The 1984-92 policy changes produced higher productivity growth and a more flexible economy. Coupled with high commodity prices, those factors generated a boom, which has continued because a resultant house price bubble allowed households to borrow big and spend up very large.

This boom has sustained Helen Clark’s government in office and may get it a third term.

But what happens in that third term? Clark has lifted taxes, increased redistribution across a wide front and increased regulation. Behind the boom the economy has become less flexible and competitive.

And house prices will some time have to realign with rents from which they parted company last year. That is an iron long-term law of economics. The same is due in the United States and already under way in Australia. That will slow consumer spending growth there and so export growth and income growth here. Wage growth, lagging any general slowdown, might also ease.

No one suggests depression looms. But a less euphoric economy is likely post-2005. Households will be less buoyant and so less pleased — even less so if race and law and order outcomes don’t change quickly.

So Brash might be Prime Minister — only to get the blame in a pass-the-parcel sort of way. Or Clark’s bubble economy might keep her there to face the music. You will decide.