Early this year Australia’s Treasurer, Joe Hockey, introduced Bill English to G20 finance ministers as the man they should talk to learn how to do public service reform.
Hockey could have added other English-driven changes, such as fiscal consolidation, pursuit of “outcomes” and not just contracted “outputs”, professional accounting of the Crown’s net financial and physical assets (a part of last week’s social housing furore, about which more here soon), school “standards”, beginnings of a crime system switch to rehabilitation and importation into social security reform of the “investment approach”, now intended for wider application (as indicated here last month).
Hockey might have concluded, sotto voce, from that list that the New Zealand government is the English government. The face of the government is John Key and it is Key who is fronting the APEC, East Asia and G20 summits (and China’s push at APEC to resuscitate the Asia-Pacific trade zone idea). But history will put English’s name alongside the reforms at home, as Sir Roger Douglas’s is alongside the 1980s reforms.
But unlike Sir Roger’s noisy radicalism, English’s changes have stayed mostly below the general population’s radar.
It fits the strategy English advocated in 2008. His first year in Parliament was seared by Ruth Richardson’s vote-burning “mother of all budgets” in 1991. The strategy, modelled on Australian Prime Minister John Howard’s four terms in 1996-2007 and to a lesser extent on Helen Clark’s 1999-2008 turn here, is to make some changes each term which the public can be persuaded to accept or tolerate and which add up to quite a lot over three terms.
Howard’s broad thrust was towards freer markets but he left the labour market to his last term and then lost. National freed the labour market in its first year in office in 1991 and, after Clark reversed some of that, has made it a central focus in this spell in office, pushing the latest instalment through in the election afterglow.
That did not elicit great public outcry apart from the unions. So there may be more, new minister Michael Woodhouse hinted.
There is no mistaking the rightward thrust. If some see National as “centrist” that has been because it has taken the centre with it, not that it has moved to the centre.
To be sure, ministers have set out to dampen hotspots. Unaffordable houses (an international phenomenon, about which more here soon) has got the frenetic Nick Smith treatment. “Workplace safety” was dosed after immoral management of forests and a mine. “Child poverty” is getting sticking-plaster. Expect lotions on selected environmental itches.
But there is a broader shift, which is not a simple left-right one. If Labour and the Greens don’t look out, they may be passed by.
By way of illustration, note OECD Secretary-General Angel Gurria’s linking of inequalities to suboptimal economic performance in a message last week to the G20, which has faster GDP growth top of its agenda.
Then note a shift at the Treasury. It is cautious but it is significant.
In the early 1980s the Treasury brought here Chicago School and Virginia School market-liberalism, which fuelled Sir Roger’s reforms.
But in 2011 then Treasury Secretary John Whitehead promoted a “living standards framework”, which chief economist Girol Karacaoglu has refined. It counterpoints sustainability, equity and social infrastructure to GDP growth and managing risk. The aim is general, not just material, wellbeing.
The Treasury’s 2013 long-term fiscal outlook added the framework and tiptoed inexpertly into social and environmental issues. The next in 2016 will go deeper and will be paired with a long-term economic outlook.
The Treasury’s post-election briefing to English, issued tomorrow, modestly reaffirms this broader approach and is accompanied by a joint briefing from 13 economic agencies which is said to have gone down well with English and Steven Joyce.
Treasury Secretary Gabs Makhlouf took another step in a speech last week reminiscent of former British central bank boss Mervyn King’s mea culpa here in February.
Mahklouf quoted dead economists’ descriptions of economics as a psychological science or a study of human behaviour, then noted the rise in his time of a “dominant hypothesis” comprised of “models of economies with complete and efficient markets across space and time, populated by super-rational individuals with perfect foresight”.
From those models “we learnt a lot” but the global financial crisis showed their limitation. “The days when social achievement was measured exclusively by GDP are on their way out,” Makhlouf said. Economists must work with experts in other disciplines.
“We are working at the frontier of economic thought,” he asserted.
Labour likes to think it is at that frontier. (Greens, too). But what if, after it lifts its eyes from its safe-pair-of-hands versus new-generation leadership contest, Labour finds English and Makhlouf there? More on that next week.