The special case of political capital

John Key knows a thing or two about capital. Or does he? He seems to think political capital travels a one-way street — down. But didn’t his financial capital travel a one-way street — up — when he was in business?

Key is not alone in this one-way-street thinking in his cabinet. Many ministers, if they are to be bold, would like to do it by stealth, so political capital doesn’t erode too much too fast.

The spectre older hands see is the polls plunge after Ruth Richardson’s mother-of-all-budgets in 1991. Bill English, a new backbencher then and seared by the experience, has been determined not to repeat it.

Hence in the 2009 budget he let spending rise, to offset the recession. The total fiscal stimulus in the 2008 and 2009 budgets was around the same as Australia’s big-hit stimulus.

English used to be characterised as a “new conservative”. That is not American hardline free-market conservativism, often laced with old-style religion. English accepts the 1980s-1990s market reforms as a given and assumes greater flexibility and choice in government service delivery in response to his generation’s expectation of customised goods and services. But his type of conservative also rejects radical policies of all sorts.

Some have taken this to be English holding back a more adventurous Key. But that miscasts the relationship.

As one insider puts, when Key gets involved and interested in an idea for action he can be “quite lateral” and go “quite hard”: hence he billed in his prime ministerial statement last month his drive for ministers to find how to get their sectors growing faster. That sort of practical action fits the instincts of a one-time go-getter still relatively new to the National party’s traditions and leanings. English is then at times the “hey, but” voice.

But it was English who told his tax working group to do root-and-branch thinking and Key who was cool in public when it started publishing papers last winter. It was also English who a year ago tough-talked public sector chief executives to find ways to “do more for less”. He pushed the Treasury for new thinking — Secretary John Whitehead made controversial speeches and in December replaced the Treasury’s whole second tier.

Key and English sometimes look different because they have been the lead operators in different (even if complementary) spheres: English on the institutional side, getting the budget, tax and (in cahoots with Rodney) regulation nearer best practice, with Key at times the “hey, but” poll-watcher; Key on the “revenue”, or action, side of the economy, teaming with Gerry Brownlee to identify ways to get higher performance, sector by sector, with English cast as the necessarily wary finance minister.

These are not typecast roles. They both want to promote productivity growth and rebalance the economy from consumption and imports to savings and exports. In January they agreed a broad direction on tax reform, which they took to the cabinet. There are the usual tensions, especially on big decisions — government is not a picnic — but they are not cabinet breakers.

But when it comes to selling big decisions to voters, Key is No 1 and it is a long way to No 2.

That is, first, because Key is Prime Minister and the public takes his pronouncements to be gospel, far more than other ministers right up to No 2. Second, it is because he has oodles more selling power than English, who in 2002 led National to a 100-year low for a main opposition party.

Key is accessible, approachable, likeable and agreeable. He has a huge stock of political capital. The polls say that. But he worries that if he takes policy risks that political capital will be eroded too fast and shorten his government’s life — the 1991 syndrome.

There is an alternative way to view political capital: as something to be invested for a return. Just like in business.

That invites a government to make strategic decisions with long payback times instead of tactical decisions with an eye on polls. A government that gets such decisions right can earn political dividends in the form of third and fourth terms. Examples are the 1890s Liberal and 1960s National governments.

Key is in fact focused on the 2014 election but has yet to show whether he will be an adventurous or conservative political investor. If he needs a guide, the parable of the talents has something to say.