All change

Colin James speech to Manukau City Council Midwinter Function 25 July 2008

South Auckland is a sort of shorthand. John Key says “South Auckland” when he means “underclass”. He doesn’t bother to qualify it with the word “problem”. It is an instantly recognisable symbol for a social and economic negative.

There are two ways of responding to Key’s symbolic downer. One is to see “South Auckland” as a social and economic inefficiency. If only we could fix “South Auckland”, the country would be a calmer and richer place. The second way is to see “South Auckland” as “opportunity”. With imaginative action programmes and energetic investment in them by the central government, local government, voluntary agencies and good individuals, there is talent to be discovered and valued and developed. The ways in which that could be done are to be found in the work of the likes of Peter Gluckman in pre-birth and early childhood influences, Richie Poulton in childhood and teenage development and Stuart McNaughton in teaching focused on learning.

These are not either-or options. Focusing on the “inefficiency” perspective is a way for politicians, public servants, non-government agencies and activists to sell expensive “investment” with long-delayed returns to a sceptical or scared or mingy or self-interested electorate.

The underlying issue is inequality, by which I mean inequality of aspiration and of opportunity to aspire. Without aspiration, there is only a limited life or life outside mainstream society and outside the economy. That inequality of aspiration has increased in the past 20 years, along with inequality of economic opportunity and outcomes, and appears to be entrenched. We used to say we were egalitarian, one of the most egalitarian societies in the world, by which we did not mean we were all equal but that we all equally had a place and we could make something of ourselves. Too many people now do not have that sense of a place. We are not egalitarian, at least not in the way we were.

There are two principal ways to think about this new inequality. We can think of it as an ethical issue: we can say it is wrong that some people should be handicapped from living a full, human life while others have a great start in life and confidence. That contravenes the principle of the fair go, which used to be a core belief in this country. Alternatively, we can think of this new inequality as an economic issue: we will all be richer if everybody can play a full part in the economy. In behind this second perspective is some interesting analysis that suggests capitalism works best when there is a high degree of economic mobility — that is, when the maximum number of people feel they have a stake in the system and they, or their children, can prosper and improve their standard of living. There’s that fair go principle again, a fair crack of the whip.

Until 20 years ago we managed mobility in our society quite well — we were in that sense egalitarian. But now there is reason to think there is less mobility. There is a direct cost from that loss of mobility in demoralisation: in drugs and crime and otherwise unnecessary hospitalisations. We as taxpayers pay more for police and prisons and hospitals. And there is an indirect cost: the loss of productive capacity of those whose poor starts result in poor education and poor productivity. This is not a one-off: demoralisation is passed on from generation to generation. Ultimately, the wondrous wealth-machine of capitalism works less well as a result and we all lose.

So the trick is not to think of inequality — which is a “condition” in need of a cure. The trick is to think of mobility — which points to opportunity.

South Auckland, it seems to me, is a useful place to do that. It is the Pacific. And it is Asia. And they are our present and our future.

Cutting-edge and traditional Maori in the 1970s and 1980s reasserted a claim for respect and a place to stand here. The response from the majority was the truth-and-reconciliation process for which the Treaty of Waitangi was a convenient vehicle. The result was the “reindigenisation” of Maori. This took place at the same time as the descendants of the colonisers were becoming at last truly independent of Britain and “indigenising” here. These parallel indigenisations made an astonishing transformation of this nation and its inhabitants. No longer is New Zealand just in the Pacific; Aotearoa is of the Pacific, as Maori always have been. I have called this reworking of our language and our customs and ceremonies the Pacific-ation of New Zealand. The large presence of Pasifika people underlines this. South Auckland is where this Pacific-ation is most visible.

This decade the focus for iwi, hapu and modern Maori has been shifting from rights to development. Iwi and hapu are becoming a significant commercial force. They are becoming more sophisticated and flexible in management of their assets. This is cause for optimism.

At the same time New Zealand is moving into the gravitational orbit of China and, to a lesser extent, India. We are moving out of the Atlantic sphere of influence, the source for 500 years of the dominant world ideas in science and for organisation of the economy and society, into the Asian, and particularly Chinese, sphere. Increasingly the ideas in science and for the organisation of the economy and society, will come from China (and to a lesser extent, India). That will be a wrenching adjustment for people here who have mostly been kin to the dominant ideas source and thus at ease with the ideas. It will help that we have Chinese and Indians — and other Asians — here in growing numbers. They can be a bridge and a conduit for our learning and of course for our commerce.

This phenomenon, too, is highly visible in South Auckland.

So here in South Auckland there is both the present and the future: the society we are and the society we are becoming. If you can make that work well here, we can make it work well everywhere.

That is a very tall order.

And we may be trying to do that in a world environment which is less friendly than it has been for the last 50 years. I shall mention six factors.

First, water, vital to both food and industry, is in short supply. In India the wells that have fed the green revolution which has fed a burgeoning population are drying up. In north China illegal wells have drained the aquifers and now China is damming and diverting rivers which flow on to other countries. The Himalayan sources of much of that water are less reliable. Will there be water wars?

Second, food is becoming scarcer and dearer. The biofuels fiasco has highlighted an underlying difficulty in ensuring supplies of enough food for the huge increases in population over the past 50 years and projected for the next 50. It isn’t helped by a serious erosion of topsoil around the world, reaching crisis in some areas. Scientists and technologists should be able at least partly to offset the water and soil problems and for the next 10 years or so our dairy farmers are likely to do very well and prospects are rising for our other producers. But if the screw continues to tighten over the longer term, the potential for conflict will rise. China is trying to buy up farmland — including here.

Third, we are starting to run up against supply constraints for hydrocarbons and particularly oil, on which much of what goes on in today’s intricately interconnected industry and supply networks and in daily life critically depends. Until alternative sources of energy become widely and affordably available there is the potential for things to go badly wrong — and quite suddenly. China is trying to buy up coal mines here.

Fourth, the scramble for raw materials to fuel the emerging economies of Asia and South America is straining supply lines and may well in time strain international relations. China is trying to buy into Australian companies to ensure supplies and has the Rudd government on edge.

Fifth, climate change adds new uncertainties. If the International Panel on Climate Change is right, the outlook for the next 20 to 100 years is uncomfortable at best. And even if the IPCC is not right, if politicians round the world think it is right and make policy on that basis and if supermarkets brand products according to climate-friendliness, that poses difficult policy issues here.

Sixth is mass migration. This globalisation of people is the often forgotten dimension of globalisation but it is huge and it is changing once stable societies. It is changing this one. The policy challenges have so far been ducked. But our politics won’t leave them un-ducked forever.

I make these points, not to suggest the Manukau City Council can or should do anything about them but to underline a change of pressure on policy. For the past 25 years we have had the luxury, given the relatively benign international environment, of focusing our policy on domestic drivers, especially in economic reform and Treaty-related issues. Over the next 25 years much of the policy will be driven by external developments over which governments here will have no or minimal influence.

And this transition comes at a time of political generational change here. This coming election may in fact be the pivotal election in that generational change. Half the electorate is 47 or under and the younger half thinks and acts differently from the older half.

A person now 50 or older firmed his or her political ideas within a frame of the Vietnam war, the rise of environmentalism, feminism and gay rights, anti-nuclearism, apartheid/Springbok rugby tours, indigenous rights, economic and social/moral over-regulation.

This did not determine the ideas that person adopted. In part those ideas reflected or were descended from a tradition of “left” or “right” or “liberal” or “conservative”, depending on the individual’s leaning. A Labour-leaning person of 30 or 40 in 1984 shared much in thinking and instinct with a Labour-leaning person of 50 or 60 at that time and the same went for National-leaning people. But the change in frame within which specific ideas were developed led to a different way of thinking and so to different ideas from those of the older generation formed against a background of economic depression, war and a strong desire for order and prosperity within the British sphere.

Similarly, a person in the mid-40s now has firmed his or her political ideas within a very different frame from that generation which was in its 30s or 40s in 1984 and is over 50 now. This next-generation frame includes the impacts of globalisation, the internet, the rise of China, mass migration, Asian immigration, how far the Treaty should reach, inequality and its fellow-traveller, economic immobility. Again, much is owed to tradition. But that tradition is modified by the responses to the changed set of circumstances.

John Key is 46. Helen Clark is 58. Only 12 years separate them in age but a political generational gulf separates the influences which helped shape their ideas. They argue about different things. To anyone Key’s age or less — that is, to half the voters — Clark’s battles are history, not matters of the moment. The Vietnam war was over long before John Key was out of short pants. Homosexual law reform when through in 1986. Jibes about Springbok tours are irrelevant.

And, whereas Helen Clark’s generation wreaked a revolution — our independence revolution, accompanied by drastic economic policy reform — John Key’s generation is more interested in the quiet life. Or should I say “self-interested”? The next generation and the one after that are more flexible in their political allegiances: they require their politics customised, just as they want their goods and services customised.

Paradoxically, while at the leader level National has the new-generation leader and Labour the older-generation leader, at the conference level Labour is exhibiting more generational change. As for the smaller parties, New Zealand shows no sign of generational change, ACT has some younger adherents but is pushing the ideology of the early 1990s, the Maori party is arguing rights more than pushing development but does have a lot of young idealists so we need to suspend judgment and the Greens are ageing though there is a rising generation which puts its energies into direct action rather than party politics. Peter Dunne and Jim Anderton are essentially one-man parties.

Within Labour, there are numerous younger delegates and they are readier to debate matters their elders swerved around because they caused schisms, mainly on generational lines. Until we see the final candidate lists, it is not possible to be definitive but Labour certainly has a lot of younger aspirants and some talented ones. Some of its 40-something ministers, notably David Cunliffe but also Shane Jones, David Parker and Clayton Cosgrove, with Charles Chauvel on the doorstep, are making their mark. If Labour does manage to lead the next government, it has the makings of a next-generation cabinet which could be expected to introduce some subtle and not-so-subtle changes in the cabinet’s positioning as the older generation, including those now in the leadership, move on.

I would expect those ministers to be more interested in working with, drawing ideas from and devolving service delivery to non-government and local-government enterprises. The statist generation of Helen Clark and Michael Cullen has edged gingerly down that route without ever demonstrating a convincing belief in that more diverse and more flexible way of running policy — though I was with Helen Clark the other day at a remarkable church-initiated enterprise in Palmerston North, Te Aroha Noa, which delivers day care, early childhood education, the HIPPY programme the KIDS programme and adult education and in her unscripted speech she did talk about the state being limited in what it could achieve and achieving more by backing organisations such as the one she was inspecting.

That is not to say this is the right — or wrong — way to do things. It is just the modern way. It also fits a world in which the mass-production, one-size-fits-all factory state is following into history the mass-production, any-colour-as-long-as-it-is-black industrial factory.

John Key is of that next generation. So is his deputy, Bill English — in fact, it was he who first alerted me to this generational shift in 1998, when it was just becoming apparent. But at this point we run into another paradox. John Key will have some impressive younger new MPs after the next election and, if he is Prime Minister, some next-generation senior cabinet ministers: Simon Power, at No 4, is a standout and in a second rank there are Jonathan Coleman, Nathan Guy and Chris Tremain, all of whom have promise. But he will also have among his new stars Tim Groser (trade), who pushing 60, and Chris Finlayson (Attorney-General), who is 51. And he will have 1990s politicians Nick Smith, Tony Ryall, Murray McCully, Maurice Williamson and Lockwood Smith in his senior and middle ranks. These people, with the exception of Nick Smith and possible exception of Tony Ryall, are passing-generation people.

In fact, the influence of this older thinking can be seen in National’s fear of the P word: “privatisation” must be denied, even to the absurd degree of saying a Key government would keep KiwiRail in public ownership after opposing the sale. A great deal else in the Key National party’s positioning is of this kill-all-controversy-in-case-it-loses-a-vote variety.

From this you can readily infer a huge difference between this pivotal generational change election — if that is what it turns out to be — and the last one, in 1984. After 1984 there was a revolution, the independence revolution I mentioned earlier. This time the watchwords of the would-be Prime Minister of change are “moderate”, “incremental”, “centrist”. The party’s intended move towards more private sector freedom, less regulation, lower taxes, less growth in government spending, more use of market instruments, more “choice” in education and more reciprocity in welfare would be gradual. The difference would become apparent only after three terms or so. That way, National intends, no horses will be frightened.

Nevertheless, part of the pre-election strategy is to present National as a party of the future, offering fresh energy. It aims to present two or three big policies that encapsulate that. So far we have seen only a broadband investment policy. There will be an emphasis on science, which is future-oriented, but announcement of this has been long delayed, in part because the party’s marketers think it isn’t a vote catcher. There will be a promise to restructure the personal tax system. And there will be “fresh” John Key, a phenomenal mix of determination and charm, smartness and laid-backness, such as I have not seen before.

Polls say that will be enough. So does the anecdotal evidence, though Helen Clark still connects when she is on the trail and the support numbers in the next Parliament could be tricky. The odds are that John Key will be Prime Minister in December. The economy alone is enough to make the difference with 2005.

So what would you get if John Key leads the next government? Without going into detail, you would get:

* a personal tax cut programme bigger than Michael Cullen’s, regardless of the impact on the fiscal balance

* over time, a rearrangement of the public service and its staff to focus on National’s preferred functions, reducing numbers by natural attrition, with special attention to policy analysts and “bureaucrats” but not savage cuts * more active use of the government balance sheet (shorthand for more debt) to fund infrastructure coupled with PPPs plus a new infrastructure agency

* a preference for lighter regulation but no bonfire

* immediate movement on the Resource Management Act to speed up processing and give greater weight to development and a longer-term plan to deal with Public Works Act issues, to deal with urban design and housing affordability, to clean up the aquaculture consent process, to introduce tradable water rights and to develop an oceans policy

* overall, a greener tinge than in the 1990s but with an emphasis on market instruments and development; extensive changes to the emissions trading legislation to (1) strike an environmental/economic balance, (2) be fiscally neutral (no “windfall” for government), (3) align it with the Australian scheme, (4) encourage efficiency technologies and reductions of emissions intensity to stop emigration of big emitters/staff, (5) not discriminate against SMEs, (6) respond to international negotiations and not set a rigid schedule

* changes to labour laws to allow collective agreements to be negotiated by non-union groups, a 90-day probation period for new employees when unfair dismissal laws would not apply, some winding back of flexible working conditions laws, a tidy-up of the Holidays Act but no windback of the four weeks holiday

* permissive deregulation of ACC

* more use of private sector/non-government organisations to deliver education, health, social services; over time more expectation private individuals will fund or part-fund themselves

* a focus on standards and wider choice of delivery agencies in education (the policy is to be released soon)

* in local government policy (to be announced at the annual local government conference), (1) a “common investment framework” spanning both central and local government for infrastructure, a “range of pricing, regulation and financing issues” and an “offer [to] local government [of] a broader range of tools” including “increased use of partnerships, charging arrangements and longer-term financing”, (2) on roads a national transport plan (defining a 20-year need and what could be realistically afforded, though only for state highways), an investment-focused approach to funding, including bonds and PPPs, and streamlined approvals but with awareness of environmental impacts”, the “need to look at effective public transport” and “other forms of road pricing”, (3) an unspecified “much better process” for the delegation of any new responsibilities to local government and clearer statements of what support local government gets for taking on new responsibilities, (4) “sensitivity” to differential capabilities and needs among councils when setting new nationwide standards or regulations with a fronting up to financial facts and (5) general agnosticism about amalgamations with, however, a wish for something imaginative in Auckland.

Whichever major party leads the next government will govern in uncertain economic times. The domestic economy is seriously unbalanced. Household debt averages about 180 per cent of household disposable earnings and interest on that debt runs about 15 per cent of disposable income (up from 8 per cent in 1999). Net country debt is 87 per cent of GDP and the balance of payments deficit is 7 per cent of GDP despite sky high dairy prices and a mini-boom in oil exports. If we grew bananas instead of kiwifruit, our creditors would have foreclosed long ago. These imbalances are starting to unwind. The unwinding will be painful — either a long slow pain or a fierce short pain. And this will be in a world economy which is changing profoundly in exciting and frightening ways.

And that poses serious management risks for John Key if he is Prime Minister. He has allowed public expectations to build to the point where he will find it difficult to satisfy them. Don’t bet the house on three terms. If — and it is a big if — Labour can get its list right and hold its nerve, Phil Goff could make life difficult at the 2011 election. But for that to be the so poses some big questions for Labour, which is another story. The pointers are for John Key to get more than one term.

Bring this back to where I came in: South Auckland.

It is for you to decide what South Auckland makes of itself and in turn for the country as a whole. You will do so at a time of huge international uncertainties, change and possibly turmoil, at a time in which the national economy will be readjusting from its debt-fuelled binge which will make life difficult for many, including budget-constrained governments at all levels, at a time of political generational change which will adjust the debates and ways of doing things we have got used to and at a time when economic mobility is lower than for many decades and the threats to social cohesion are correspondingly greater.

I wish you well.