Squaring (or not) Labour's economic nationalism circle

How does a small country do economic nationalism when the big fellas are waging currency wars? That’s a question from the Labour party conference. It comes in several parts.

The conference was in a markedly good mood.

That was in part because delegates could believe that, just conceivably, Labour might be able to do a Len Brown in the 2011 election. Brown’s win came in part by rousing out voters in lower socioeconomic areas, say his campaign manager and now political adviser, Labour up-and-comer Conor Roberts (30), and his offsider, Kate Sutton (29), an aspirant for Labour’s Te Atatu nomination.

The good mood also stemmed from Labour’s policy rethink.

Star item was a child-centred rebasing of social policy devised for deputy leader and policy council chair Annette King by a “commission” which included the Dunedin longitudinal study head Richie Poulton, former Children’s Commissioner Cindy Kiro and child health expert Liz Craig who spoke at a workshop.

In her keynote speech King promised to follow their early intervention prescription. A similar prescription is likely in a report to John Key due soon from chief science adviser Sir Peter Gluckman and a group of academics and professionals, including Poulton.

The second big policy focus was the centrepiece of leader Phil Goff’s speech: economic nationalism.

This line is not just populist opportunism, though Goff’s foreign investment rules rewrite, off the back of the Chinese bid for the Crafar farms, does smack of that (as does his GST-free fruit and vegetable pledge).

The new line reflects a conceptual shift.

Much of Labour has longed to escape the neoliberalism its 1980s government embraced. Its 2000s government knocked off some rough edges but could not disavow it. Now, in the aftermath of the great financial crisis (GFC), Labour can quote from a rising tide of hefty international writing.

Also at the conference financial commentator Bernard Hickey added to Labour’s reading list. Hickey got a standing ovation from a workshop for his damascene conversion from neoliberal orthodoxy.

A damascene conversion comes by way of a blinding light after which, when sight returns, a new way-truth-and-light is revealed and internalised. Labour’s hope is that the post-GFC new way-truth-and-light — when it can be seen and then codified after the global blindness subsides — is congenial to its instincts and values and frees it from the 1980s legacy. There was 1970s-throwback applause for a remit protecting coastal shipping for local seafarers and for Goff’s promise to build new trains locally.

Certainly, Labour has been emboldened to act on the plausible premise that neoliberal economics is no longer convincing politics. The enemies of capitalism who lurk multitudinously within capitalism and who, in precipitating the GFC, did such wide and deep and still persisting damage have brought that about. Labour sees its economic nationalism as fitting this “changed world”.

The damage those enemies of capitalism did to capitalism has set in train actions which will for a time curtail capitalism and diminish its capacity to enrich.

Around the rich world a number of governments are beset by an irresoluble conundrum.

They have had to bail out banks. They have put their budgets heavily in the deficit and their central banks have printed money wildly. None of this accords with neoliberal principles.

Do they keep pumping imaginary money into their economies in the hope of “recovery”? If they do, how do they deal with the huge government debt they are accumulating? If they slash state spending, will that still-birth the “recovery”, cut revenue and compound their problem? Should they, dare they (and New Zealand), attack the looming fiscal impossibility of pensions and health care for the baby-boomer bulge in over-70s?

Many countries, like New Zealand, need to “rebalance” from rampant debt-fuelled consumer spending to exports. But who can buy these exports if everyone wants exports to exceed imports?

Worse, that need to export is leading some large countries to try to drive down their exchange rates to get competitive advantage. China thinks it can sit this out and still get rapidly richer. It might find that doesn’t work out.

The spectre is universal economic nationalism. The much-travelled Goff was in good international company when he claimed: “No country I can think of would find the rules I am proposing unusual.”

Shadow finance minister David Cunliffe puts it this way: “We want to own our own future.”

Can we? The global economy is now densely interconnected, so much that if the United States penalises Chinese imports to force it to raise its exchange rate, that will hurt many United States firms making goods in China for sale in the United States.

Goff himself told the conference: “The future is in the connected, global, high-wage, high-skill growth industries of the twenty-first century.”

That sounds like the economy of the future. But is it economic nationalism?