Election in a bubble

Colin James to the Victoria University post-election conference, 3 December 2014

The 2014 election came 30 years after the 1984 election which triggered a tectonic shift in policy, ideology and our understanding of ourselves. There was no tectonic wrench in 2014, though the Labour party could be forgiven for thinking the ground was liquefying under its ageing edifice. But pressure had been building up in the political, ideology and social plates and seismic analysis is appropriate in addition to the usual microscopic and telescopic inquiry.

In the 20 years leading up to 1984 the tectonic tension comprised two main elements.

One was the rise of a generation born late in or after the second world war, which began to reach its twenties from the mid-1960s. This was a generation born into security and plenty and the first to go to university in large numbers. Security and plenty gave it the confidence and brashness to demand and live out personal freedoms its parents had suppressed in pursuit of security after a severe economic depression and a world war. Security and plenty also allowed the new generation scope for idealism, to demand a society of equal opportunity – access to education, health care plus decent jobs and wages and gender and racial equality. This idealism extended into international affairs in opposition to nuclear weapons and apartheid and cold war imperialism, as in the United States’ intervention in Vietnam.

This new-generation phenomenon was widespread in various forms and to various degrees among this rising generation in other rich countries – even, behind the veil, in the Soviet Union and its satellites [Riga Theatre]. In New Zealand there was an additional dimension: the confidence to separate from empire and express a distinct culture and way of life, evident first in the arts, then business, then political radicalism, then revisionist history. The 1980s were New Zealand’s independence revolution, a tectonic shift of mentality.

That mentality shift applied also to our demography, specifically to accepting the value of our indigenous culture as equal in status to the culture bequeathed from empire. That invention of biculturalism and its formalisation in the power structure through legislation and practice, endorsed in court decisions, was another tectonic shift.

There was also pressure – one might say a tsunami – from outside: a combination of a changing global economy and a challenge to the Keynesian orthodoxy of the post-1930s-depression decades.

The post-1945 job-and-wage-rich rebuilding of North Atlantic economies – known in France as the “trente glorieuses”, the “30 glorious years” – stalled when the Organisation of Petroleum Exporting Countries quadrupled the price of oil in late 1973. Inflation, which had risen through the 1950s to 1970s, turned to “stagflation” as GDP growth stalled. In addition, the rapidly industrialising countries on the east Asian periphery challenged the North Atlantic’s dominance.

A new cohort of market-liberal economists blamed stagflation on the state’s substantial role in taxation, social spending, business and resources regulation and ownership of major companies and utilities, the Keynesian mixed-economy. They argued that this fuelled inflation, veiled price signals, added to transaction costs of doing business, discouraged innovation and investment and undermined productivity and profits. This market-liberal critique and resultant policy prescription, which I call Friedmanism after its highest-profile exponent, Milton Friedman, urged strict control of the money supply to contain inflation and a smaller role for the state in taxation, regulation and ownership of business assets. [Note 1]

In New Zealand the Treasury adopted the analysis and prescription and argued for it behind the scenes, including to Labour’s finance spokesperson, Roger Douglas. A dissident National backbench advocated “more market” policies from 1979, which some senior Labour members of Parliament echoed mildly in speeches. The direction of policy change was clear, though it was unclear when and how vigorously and extensively it would be adopted and implemented.

The “when” turned out to be the period after the 1984 election. The rising postwar generation was prominent in the new Labour cabinet. Its valuing of freedom predisposed it to market-liberalism. Deprotection, deregulation, privatisations and tax reform followed in fast order in a series of rolling waves that added up to a policy revolution. The result was an upward transfer of income and wealth which greatly increased inequality and insecurity of employment and income – in effect ending the near-guarantee established by the 1935-49 Labour government of employment and of an income from that employment that ensured a reasonable standard of living. On the other hand, in keeping with the rising generation’s idealistic dimension, the post-1984 Labour government actually increased social assistance (health care, education, housing, benefits, assistance to Maori) as a percentage of GDP. It also continued to support collective workplace bargaining. [Note 2] The National government that replaced the Labour government in 1990 carried on the policy revolution, deregulating the labour “market” and cutting social security payments.

Broadly, this Friedmanite orthodoxy has held since then, modestly qualified with some “third way” modifications by the 1999-08 Labour government and some re-regulation by the fourth National government since 2008 to fix serious failures of light regulation, notably in the non-bank finance sector, building rules and workplace safety.

A fresh challenge to orthodox thinking
But now the Friedmanite orthodoxy is under sustained scrutiny, debate and attack. That has developed over the past six years in the wake of a convulsion of financial capitalism, the “global financial crisis” (GFC) precipitated by the bursting of the “derivatives” bubble in 2007-08. The GFC was a disjunctive shock, of the sort from which there can be no return to business as usual. We are commemorating a similar shock – the first world war – right now.

The challenge has come from many angles, including from those who want to secure market capitalism and those who think it needs considerable modification or replacement. [Wolf et al, 2011-14] The most influential challenge so far has come from the French economist, Thomas Piketty, who in 2013 published a detailed analysis of the relativity between capital-income and labour-income which finds a major shift in favour of capital during the Friedmanite period. [Piketty 2013-14].

There is as yet no replacement orthodoxy. But whatever it turns out to be, it cannot be a simple revival of Keynesian with modifications. The world has changed and is continuing this decade to change rapidly, disturbing social order, reshaping and relocating global value chains and markets and redefining the nature and location of work and income.

Drivers of change
There are two main drivers, which intersect and interact.

One is the rebalancing of the global economy and, with that, global politics.

This is well known and has been rapidly and deeply relocating production and work. It has lifted hundreds of millions of people out of poverty, has created global companies owing allegiance to no country and has changed supply chains into global value chains which make tariff protection less effective or counterproductive and potentially obsolete. China, India and other “emerging economy” nations are demanding a bigger role in the rules, conduct and leading positions of international forums and organisations and those rules may change in ways that are suboptimal for New Zealand. These countries also assert different forms of government and political organisation to compete with liberal democracy and different forms of economic organisation to compete with liberal market-capitalism They will also generate new science and other innovations (for example, in surgical and other healthcare procedures). Half a millennium of North Atlantic – “western” – dominance of ideas is coming to an end. There is a contest now.

At the same time global security structures are being reframed, reworked and remade. In place of global order – four decades when the United States and the Soviet Union kept an uneasy but mutually self-interested “peace” then two decades in which the United States assumed unipolar dominance – there is global disorder. [Haass, 2014] China and Russia are asserting the reconstitution of their past empires. The Arab world has gone tribal and sectarian in Iraq, Syria, Lebanon, Palestine, Yemen and Libya, with serious implications for the stability of Saudi Arabia and the Gulf States. Egypt has reverted to authoritarian rule. Turkey is increasingly authoritarian. Others, including non-Arab Shiite Iran, may be drawn into the turmoil, with unpredictable results. New types of conflict both localise and globalise insecurity. Identifying the “enemy” is not simple, as the “western” forces found in Afghanistan and they are others and finding in Iraq-Syria.

Moreover, in addition to the well-known globalisation – or hyperglobalisation [Rodrik, 2011] – of capital, finance and production there is a globalisation of people. Some 300 million live outside the borders of the countries they were born in. This is changing and in some cases destabilising the societies they have moved to – once homogeneous societies are becoming multicultural. At the same time the GFC and consequent economic contraction or disruption have generated considerable economic and social stress, spawning populist movements with substantial followings in Europe and the United States, which can destabilise politics and policies in non-rational and unpredictable ways.

The second major driver of global change is a disruptive technology, digital technology, which has been developing since the 1940s but has come of age in this decade. It is turning the hyperglobalised world into one which is hyperconnected (both between and among individuals and between individuals and organisations ranging from terror groups to firms and state authorities). It is also hyperdatamined, stripping privacy from individuals as their identities, shopping habits and other activities become the property of firms, other organisations and state authorities.

Digital technology is rapidly and radically transforming how goods and services – no longer distinct categories ¬– are designed, funded, produced and marketed and how “factories” are organised, operated and located. It is robotising production and processing lines. With “additive manufacturing” (3D printing) in 10 years much “trade” may be in raw materials and software and “production” may be at the point of sale or consumption. Digital technology is changing how children are educated and how adults add to their skills and is changing the nature of skills, not just the specific technical skills, workers need. It is changing how illness and disability can be diagnosed, offset and treated, for example with nerve interference and gene manipulation. It is changing the definition of scale, enabling niche operators to find collaborators, backers and buyers. It is redefining national, firm and individual “security”.

The social impact is profound, deep and fast – and global. Called by some the third industrial revolution and by some the fourth, it is akin to the first industrial revolution, but multiple times faster – within a cohort, not across generations. Coming on top of the relocation of jobs in the 1980s and 1990s globalisation which changed the location of work, it is changing the nature of work and income.

The coming changes in politics and policy
This social change will in turn drive big, possibly wrenching, changes in our politics and policy imperatives. We are only beginning to get an inkling of the extent and complexity of the privacy, trust, ethical and intellectual property issues, let alone write laws for them or develop social customs to manage them and laws go quickly out of date.

In addition, global life-sustaining ecosystems are being destabilised and other resources put under increasing strain. Water is scarce in many places. Climate change is coming. There is serious pollution in many “emerging-economy” countries. Food security is a worry for at least 1 billion people and global population is projected to increase by another 2 billion by 2060. That opens both opportunities for resource-rich New Zealand but also the risk that the world becomes a much more hostile place or that big, strong nations muscle in here. A tiny indicator of that possibility was the pre-election controversy over the sale of farms and houses to Chinese.

Add all this up. We are in a very different world from 20 years ago and probably a very different one from 20 years hence. The 2014 election came in the middle of a decade of tectonic change, which might slide through smoothly but may be wrenching.

In short, deep, fast, disorienting, exciting and scary change was the context for the 2014 election: one presaging a shift in political-economy thinking at least on the Keynes-to-Friedman level and possibly at the more fundamental level of the Enlightenment and the decades that followed.

An election in a bubble
But within New Zealand as the election campaign wended through August and September there was no general-public sense of impending or actual tectonic change, either at home or abroad. So to examine the election we need to put aside the seismic instruments and reach for the GPS locator and the microscope.

New Zealand was in a little bubble of fortuitous economic growth. Rapidly expanding demand for and high prices for dairy, and to some extent other primary, products, was one factor. The rebuilding of Christchurch, by early 2014 fully in gear, was another. They generated economic numbers that built very strong business confidence. The commentary was optimistic.

This fed into improved household finances, which are the marker for how the economy plays in elections. There had been modest gains in income and jobs and there was cautious to modest confidence the improvement would continue. Consumer confidence was strong through 2014, though it peaked midyear.

A tight government
Also, the government projected confidence in itself and competence.

At its apex was a tight trio. John Key was the presenter. Bill English was the fiscal manager and policy wonk who at the ministerial level was associated with most reforms, including the public service (“more with less”, then a set of quantified “results” stretching out several years and in some cases crossing portfolio boundaries), tax, water policy (using the “collaborative governance” technique involving all interest groups to generate a consensus), education and social assistance (welfare). For welfare English imported from ACC the actuarial-investment approach which may be the National-led government’s most important policy change. Steven Joyce was the project manager, focused on short-term measures designed to lift GDP growth (a way of thinking akin to business quarterly reporting) and quick to heavy those who got in his way, overshadowing the ministers in related economic development portfolios such as energy and ensuring other initiatives didn’t get in the way of GDP growth.

These three formed a strategic inner cabinet with Gerry Brownlee, who brought the “ordinary person’s” perspective, and Murray McCully, billed as a political strategist though actually more of a tactician with a touch of Rasputin. Paula Bennett and Simon Bridges occasionally looked in.

Down the cabinet Tony Ryall squeezed more from hospitals and kept the pips from squeaking too much, Chris Finlayson set a cracking pace in Treaty of Waitangi settlements. Tim Groser managed trade relations with aplomb and but was hampered in climate change by conceptual and Joycean difficulties.

Failures and lapses of oversight management of weaker or blinkered ministers didn’t detract significantly from public confidence (though did raise questions about Key’s management). Likewise, growing agitation about “inequality” didn’t translate into a shift in support for opposition parties riding that issue. And when something went badly wrong, as in the collapse of the badly managed Pike River coalmine in 2010, the response was remedial legislation.

Moreover, Key proved remarkably adept at getting underperforming or ageing ministers and MPs to contemplate life after politics. Come election time 2014, 15 of those elected in 2011 had moved on, with zero fuss. No such regeneration of a major party has been done in “peacetime” (that is, while in power) before.

And a macro-personality
Key himself was the fourth main factor working for the government. He is likeable, blokey and jokey and at home with radio “shock jocks”, good with his family, an easy mixer, moderately pleasant-looking and plausible. He was trusted to get things more or less right, even if some things he did were not entirely in accord with proper process. [Note 3]

Key, in short, is a macro-personality. A macro-personality personifies the party and attracts votes to him/herself, including of many who would not otherwise vote for the party. [Anderson 2014]

Voters are prepared to give such macro-personalities the benefit of the doubt – as they did in Key’s case over the revelations by the self-regarding Nicky Hager in his book of emails detailing grubby behind-scenes National party machinations, launched on 13 August [Hager 2014]. This was despite Key’s evasive responses to the book’s charges and his implausible labelling of the controversy it caused as a “leftwing conspiracy” and despite, or because of, his firing of Judith Collins on 30 August when a rightwing blogger publicised claims (not upheld in the subsequent government inquiry) that she had helped undermine a senior public servant. Voters told focus group pollsters they didn’t understand the implications of the Hager assertions and their relevance to the election and few deserted National on that score. (The actual relevance was that rules-observing conduct and process – that is, a well-functioning democracy – is the issue in an election [James 2014, 1]. But that would likely play a decisive part in people’s decisions as to how to vote only if it stripped trust off a party or leader.)

The improved economy and household finances, the picture of government competence and Key’s macro-personality added up to very strong positive readings in the UMR and Morgan polls that the country was on the right track/going in the right direction. Such a high reading normally points to re-election of the incumbent government in some forms.

And no visible alternative government
There was a fourth factor: the lack of a clearly visible alternative government.

Through 2013 the combined polling by Labour and the Greens headed National’s polling by 0.5%. This suggested there was a genuine choice between a Labour-Green-led government and a National-led one.

It also suggested, given reasonable polling for New Zealand First, that the outcome could very well depend on the choice Winston Peters made after the election.

By April or May – and certainly by July – Peters was looking more likely to go with National. This was even though he harboured a deep resentment at Key’s treatment of him in 2008 over his (Peters’) acceptance of business donations, which probably contributed to New Zealand First party’s exit from Parliament in the 2008 election. The likely choice of National was also despite New Zealand First’s manifesto being much close to Labour’s policy line than National’s, its conference-delegate-level rank and file also being nearer Labour than National and some serious sticking points with National, including over immigration and inward foreign investment.

Labour could at best offer Peters only third in a Labour-led lineup after the Greens – and even then might need Internet Mana votes for a majority. With National, New Zealand First would have been second biggest, far ahead of National’s three supporting micro-parties.

Moreover, by April-May Labour’s support was sliding. There is a range of reasons for that but one is that David Cunliffe as leader fluffed his lines on several high-profile occasions, was exposed as having a secret trust to fund his campaign for the Labour leadership in 2013, accused Key of having a house in a leafy suburb when he did too and said different things to different audiences. Cunliffe, though personable, a capable former minister, a capable debater of Key on television and an orator with presence, was no macro-personality. If anything, he was a negative factor.

In addition, Cunliffe had drawn back from the cooperative relationship with the Greens that had been developing in 2013 under previous leader David Shearer. When the Greens tried to resuscitate the cooperation in May, proposing the two parties campaign as a coalition, Cunliffe rejected that – but then did not fill the void with a formulation that would have given a clear voting option to those looking for an alternative government to vote for.

That turned away those looking for an alternative government and set a spiral. Labour slid in the polls and the more it slid the less attractive it looked and the more it slid.

Populism and poison
And as Labour slid, some voters wanting a brake on National shifted to New Zealand First, which climbed from a poll average of 4.9% at mid-August to 8.7% in the election. There may also have been an element of brake-seeking in the Conservatives’ 4.0%: while the Conservatives were to the right of National on moral and social issues, they were not market-liberals: they were against open foreign investment and asset sales and wanted binding referendums as a restraint on governments.

There was also probably an element of populist response in the rise in these two parties’ votes: populism is a channel for voting “against” policies and people, especially the elites, or just in protest at financial and other stress. But, compared with the populists waves in Europe and the United States, in New Zealand in 2014 it was very mild – unless, that is, Key’s macro-personalisation of National could be interpreted as a brand of populism.

Might the Hager exposures have generated a quasi-populist surge to Labour away from National? If anything, polling suggested Labour was damaged as much as National. Voters seemed to read the phrase “dirty politics” as a tautology: all politicians do it, so what? Key rode it out, even though initially handling it ineptly. [Note 4]

In addition, Kim Dotcom administered what he himself on election night called “poison”. The more Labour slid in the polls, the more it looked to voters it would need Dotcom’s faustian Internet-Mana concoction: Dotcom’s lavish funding of a joint campaign in return for leveraging some seats on the back of Hone Harawira’s Te Tai Tokerau seat. The poison killed Harawira’s hold on his seat. It attracted few of the young freedom-and-idealism voters whom Internet leader Laila Harre (ex-Alliance, ex-Green) discerned as potential recruits (as the Pirates had briefly in Germany). Those it did attract were mainly in the “university” seats where the Greens do best. At one of the rock-concert parties Dotcom put on to attract young people he got them chanting “Fuck John Key”. His trumpeted king hit on Key on 15 September featuring United States spy leaker Edward Snowden, Snowden write-up journalist Glenn Greenwald and Wikileaks’ founder Julian Assange detailing spy cooperation with the United States fell flat. An alleged 2010 Warner Brothers email of a secret plan involving Key about Dotcom’s extradition appeared to be a fake.

Dotcom’s achievement, apart from destroying Mana and tainting Labour, appears (from discussions with National activists) to have been to add weight to National’s campaign to persuade National-leaning potential non-voters to vote. That, plus dumping Mana’s support into the wasted vote, was likely the difference between National forming a government with its three lapdog support parties and needing New Zealand First.

Targeting the vote
After the 2011 election there was much talk, especially on the Labour side, of the “enrolled non-vote” and of declining overall voter turnout. On 29 May 2014 the Electoral Commission sponsored a one-day conference to discuss this and promote, especially to young people, the value of voting.

In the run-up to the 2014 election National worried that its supporters might become complacent and deprive it of the votes needed to form a stable government post-2014. At the party’s annual conference on 28-29 June John Key and campaign manager Steven Joyce hammered home the need to activate every possible National vote. That message was repeated at the launch on 24 August. According to party officials, twice as many phone calls were made to actual and potential supporters as in 2011. By using electorate demographic data from the election study and coupling that with the party’s own extensive canvassing data, National was able to target its calls and the content and vehicle of its messages and follow-up contact better.

Labour drew on United States techniques [Issenberg, 2013] to run an even more targeted campaign than National, trialled successfully in the Ikaroa-Rawhiti and Christchurch East by-election campaigns in 2013 and drawing on meshblock-level data (as described in detail elsewhere in this book by Rob Salmond). The voters targeted were those who had not voted in 2008 and/or 2011 who had characteristics likely to tip them into the Labour camp if they voted. Labour officials say around four times the calls were made than in 2011.

Logically, if the two main parties were equally effective in getting sympathetic non-voters to vote, Labour should add more votes to its total than National. That is because past experience indicated more Labour-leaning people were likely not to vote than National-leaning voters. One argument is that those in lower socioeconomic and minority ethnic groups perceive less of a stake in the system than those in higher socioeconomic strata and those of mainstream ethnicity, as evidenced, for example, in the low turnout in successive elections in Maori electorates and in general electorates with a high proportion of Maori and Pasifika.

But the broad results suggest National was more effective than Labour: the biggest swing to National in a block of seats was in its strong seats on the Auckland isthmus. Labour could not counter the strong tide running for National and against itself.

The Greens also did far more canvassing, in keeping with their status as clearly the third largest party and their greater political professionalism.

National’s small parties – and the going home of the Maori vote
In the election voters did serious damage to National’s three small support parties.

ACT, which early in 2014 had grandiose visions of nine MPs, [ACT 2014] finished with only the Epsom seat, by grace of National indicating to its supporters that they should cast their electorate vote for ACT’s David Seymour. ACT’s party vote was 0.69%, down from 1.07% in 2011. United Future got Peter Dunne’s Ohariu seat, also by grace of National’s nudging its supporters Dunne’s way. But Dunne won only narrowly and United Future won only 0.22% of the party vote, so low that Dunne’s is an overhang seat. ACT might well survive and even possibly grow a bit in 2017. But United Future is close to extinction, which was in effect acknowledged by Dunne himself in an address to the United Future board on 15 November in which he said the party needs to go back to basics and focus afresh on core principles – though Dunne also said in that address that membership had grown. [Dunne 2014]

For the Maori party the election spelt near-asphyxiation: a total of two MPs and down to one electorate seat from a high point of five of the seven Maori electorate seats in 2008. The Labour party is in control with six of the seven – or is it?

From a Maori perspective the logic is that a Maori party or grouping holds the Maori electorates. This has been the case three times in the past 100 years: after 1935 when the Ratana movement progressively won all four seats (the total at the time); in 1996 when New Zealand First’s “tight five” held all five seats (the total at that time) in a party led by a Maori, Winston Peters, who was endorsed by Tuwharetoa paramount chief Sir Hepi te Heuheu; and in 2005 and 2008 when the Maori party won four, then five, of the seven.

In each case the Maori grouping lost its independence. Labour over time absorbed the Ratana movement and the seats became Labour seats that happened to be Maori, not Maori seats that happened to be Labour-aligned. Labour lost one of the seats in the 1993 election, then all five in 1996. Four of the “tight five” split from New Zealand First when it left its coalition with National in 1998 and all five lost their seats in 1999. The Maori party, which entered National’s governing coalition in 2008, split in 2010 when Hone Harawira formed Mana, then lost support.

The bulk of voters in Maori electorates, if pushed to a choice between Labour and National, choose Labour, as the party votes since 1996 reflect. In effect, New Zealand First’s “tight five” and the Maori party delivered Labour-side votes to National.

The Maori party’s decision to formally support the National-led governments of 2008 and 2011 was logical. It gave the Maori party some influence with the government and it used that to advance specifically Maori cultural or self-management ambitions. Among the gains were: the whanau ora Maori-run social services programmes; New Zealand’s signature to the United Nations Declaration on the Rights of Indigenous Peoples; and a rewrite of the 2004 Labour-led government’s legislation which overrode a Supreme Court decision that iwi and hapu could argue traditional ownership of stretches of foreshore and seabed – the trigger for then Labour MP Tariana Turia’s defection to form the Maori party.

Despite the cost to its support, the same logic continued to apply even after the 2014 election – principally to preserve and develop whanau ora, out of respect for Turia whose policy it was and for fear that if the Maori party was absent from the ruling coalition National would let whanau ora atrophy. Yet there was a strong view within the party, expressed vigorously at the post-election annual general meeting on 1 November, that the National link was toxic, that the Maori party was seen as in effect an arm of a National-led government which had not operated in the interests of lower socioeconomic strata where the bulk of Maori electorate voters were. That only 55% of Maori opted for the Maori electorate rolls after the 2013 census compared with 58% in 2006 (from 55% in 2001 and 54% in 1997) may reflect disenchantment with the Maori party; the percentage had been expected to rise, not fall; the eighth seat hoped for did not eventuate.

Come 2017 it is possible the Maori party’s vote might lift a bit if some of Mana’s voters return. More likely, it will either stay at two seats or contract on to Te Ururoa Flavell’s Wairiki electorate or even possibly lose that seat if Labour continues to pick up votes there and if Mana’s Annette Sykes is not a contestant. If Flavell were to hold his seat and join a Labour-led government, that would de facto deliver that seat to Labour.

But that is not to say Labour has the seats back for good. There will be more Maori movements. To develop a durable hold on the seats, Labour will have to learn to treat those it holds as Maori seats that happen to be Labour.

What does National do now?
Unusually for a third-term government, National has strategic policy aims which break new or expand existing territory: natural resources (initially freshwater management and waterway pollution, where the government fears coming adrift from public opinion); a shift in education focus to lifting teachers’ professional status and performance; reducing regulatory complexity and making legislation and regulation fit for purpose; and widening the application of the “investment approach” to other services. These are in addition to continuing the policy line of the first two terms: principally fiscal consolidation and associated public service reform (including devolution of some activities to private, not-for-profit and local government agencies) and policies aimed at boosting GDP growth, including infrastructure investment, business-friendly regulatory reform, oil and minerals exploration and trade deals. And they are in addition to potholing issues as they arise or become politically embarrassing, notably “at-risk” children, (un)affordable housing, security threats and foreigners’ purchases of land.

National will face the usual third-term erosion of public trust and confidence. This will be compounded by slowing GDP growth as the Christchurch rebuild peaks then slows and as commodity prices settle on a more sustainable path, which will slow or reverse the lift in household finances and reduce consumer confidence. The hospital system will at some point need release from the straitjacket Tony Ryall applied to it, at some fiscal cost. The inequality/poverty and (un)affordable housing noises are likely to get louder and start to bother moderate conservatives who like an ordered, cohesive society, not a fractious one.

John Key lost some personal authority as a result of his and his office’s dealings with Cameron Slater and his evasion of responsibility, which he repeated in late November when the Inspector-General of Intelligence Services tabled her report on the Security Intelligence Service’s part in those dealings. That did not affect the election result but may affect his prospects in 2017.

Key has said he will serve the whole 2014-17 term. That accords with his practice of doing the bigger and riskier currency trades early in his past occupation. Whether Bill English will be alongside him is unclear: on one hand English is driving the strategic policies and is constantly looking for new ideas; on the other, he went on the list, which could be taken as signalling retirement. Tim Groser is set to depart in 2017 and Murray McCully’s 2015 new year honour suggests he will go then, too.

National also will need new support parties. That means starting to cultivate New Zealand First – which, however, may not survive the 2017 election if, as many in the party think, Winston Peters is now in his last term – and maybe setting up an arrangement with the Conservatives, which would require skilful and assiduous nurturing.

There is a deeper issue: whether National in 2017 will be seen as in tune with those now under-45 who will be a majority of voters by 2017, especially if it sticks with market-liberal Friedmanism, even if modified. In its employment and business policies, it has been the most business-friendly – right-leaning – government since the end of the radical reforms of 1984-92. As Friedmanism is increasingly questioned, challenged and debated through these next three years, National risks coming to sound outdated, despite its acquisition of five under-46 new MPs in the 2014 to add to its existing three.

Labour’s opportunity
That is both the challenge and opportunity for Labour as it rebuilds from its 25.1% party vote. Can it recover the lead in policy thinking and reform that it had in the late 1930s and the late 1980s?

Labour went into the 2014 election still in the long shadow of Helen Clark’s “third-way” modification of market-liberalism (though it did add some substantial modifications reminiscent of the 1940s-70s mixed-economy) and was still stamped with the Clark-era image as the party representing disparate minorities – gays, feminists, ethnic groups and the disabled – and the poor (and unions) and so not as a party of the majority. Grant Robertson, a gay and also a former rugby front-row prop, summed up the party’s dislocation from the majority in a Nine-to-Noon Radio New Zealand interview on September 22 when he said Labour had to be “part of the communities we live in”, implying that it wasn’t. Many MPs are well-ensconced in their communities, as evidenced in Labour’s 34.1% of the electorate vote (down only 1.1% on 2011). But the party generally is not a strong, visible presence, especially in the provinces and mortgage-belt suburbs. Its membership is much smaller than National’s and so the networks which tie a party into the public are less pervasive and visible. For most voters Labour appears to speak for others, not them. If Labour is to “swim among the people”, as Mao Zedong put it, it needs multiples of its present membership.

And in policy the party has often sounded “as if we talk from the head and not from the heart”, as British Labour MP Simon Danczuk put it in the wake of a poor by-election result on 9 October. [Lowe 2014] Some of Labour’s 2014 policies, for example to control the electricity market or adjust monetary policy, had a “geeky” feel.

New leader Andrew Little brings from his union background a blunt, direct way of speaking which may reconnect some lost voters. The commission he has set up under Grant Robertson to refashion economic policy is predicated on a very different notion of “work” from that of the Clark generation. Robertson has international contacts on whom to draw. He understands the need to apply Labour first principles to modern realities.

And at 43 Robertson is of the under-45 generation. His No 2 in economic development is David Clark, 41. His running-mate in the post-election leadership contest was Jacinda Ardern, 34, who might possibly be deputy leader a year from now. With Chris Hipkins, 36, in the crucial education portfolio, Megan Woods, 41, in environment and climate change, and Carmel Sepuloni, 37, in social development, Labour has a claim to be the party of the “new generation” despite the fact that Little is 49.

That gives Labour the opportunity to present itself as a party focused on aspiration, not problems. It was not in 2014.

Then there is the Green factor
And, for Labour to be competitive in 2017, it needs to re-forge a working relationship with the Greens so that there is a visible alternative government.

The Greens have become well established, with close to 11% of the party vote in both 2011 and 2014. They have become a respectable option for disillusioned Labour supporters or environmentally conscious National supporters. In 2011 they decided they did want to be part of a government, with all the risks of attrition for smaller partners in coalitions. In 2014 they proposed to Labour that the two parties run as a coalition.

Labour rejected that. But Labour also knows it is unlikely to be the government in 2017 without the Greens alongside. Ideally, it would like the Greens under 11% but not so far under as to drag the combined vote down short of a majority. The Greens in 2014 wanted a higher vote and talked of getting 15% but recognised privately that too high a vote would reduce Labour’s vote and could cause the combined vote to fall short of a majority.

In fact, the Greens’ vote went down slightly, by 0.4%, not up. This may have been in part because some potential young voters went to the Internet part of Internet Mana, which did best in the same general electorates as the Greens did, in part because other potential voters concluded there was not going to be a Labour-Green government and in part because the Greens were stereotyped as well to the left of Labour on social and economic issues – and too sympathetic to “poisonous” Kim Dotcom on spying matters – which may have discouraged environmentally conscious centrist or National-leaning voters.

The static vote has triggered a debate within the party. Kennedy Graham, in an opinion piece in the New Zealand Herald on 9 October, argued that the Greens need to reposition themselves on a “vertical sustainability axis” as distinct from a left-right axis, which he said consigns sustainability to secondary status when it is the primary issue – “whether we shall live, tomorrow”. He noted that one of the Greens’ charter’s four principles is “social responsibility”, a centrist notion flowing from sustainability and implying individual obligation, and not “social justice” (a left-right term, which is one of the Global Greens’ six principles). “The vertical axis of sustainability allows us to move more freely along the left-right axis in analysis and prescription,” Graham wrote, implying Greens could (in theory) be open to coalition with National as well as Labour. [Graham 2014]

With new MP James Shaw, a business consultant, Graham also shares an understanding that the economy is global (as well as the environment) and that policy has to reflect that reality – which poses difficult policy questions similar to those Labour faces.

So which party will define the new way of thinking?
This brings us back to the rapid and deep changes in the 2010s in geopolitics, in the geo-economy, in geo-demography, in technology and in political-economy thinking. The 2014 election was in a bubble, sealed off from all that. That bubble is likely to become permeable by 2017, so more of the outside world is likely to seep through, as in the elections leading up to 1984.

Traditionally, of the two main parties, Labour has been the progenitor of major policy change and its younger-generation policy commission may promote more innovative rethinking. True to its moderate liberal/moderate conservative core, National has been incremental in its policy reforms. And John Key and Bill English explicitly adopted an incremental approach in 2008 – making some change each term and carrying public opinion along.

But notably it is English who has applied the “investment” approach, though so far only cautiously to some aspects of welfare reform, with a fiscal focus, and, in a small way, to intervening to help “at risk” children in their very early years. [James 2014, 2] Only recently has Labour begun to come round to seeing application of the “investment” concept as a way to legitimise the welfare state. A logical next step for Labour, which English is unlikely to take, could be to join the Greens in applying the investment approach to environment and climate change policy.

Also notably, the Treasury has been evolving. In 2011 it adopted a “living standards” framework and in its 2014 post-election briefing [Treasury 2014] to English it set “prosperity” inside “inclusiveness” and both within “sustainability”. Treasury Secretary Gabriel Makhlouf took this further on 5 November [Makhlouf, 2014] in which he quoted long-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 learn 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.” Economists must work with experts in other disciplines. “We (the Treasury] are at the frontier of economic thought.”

The Treasury, in other words, is edging beyond or away from Friedmanism. This should not be over-interpreted but it underlines that the debate is open and that it is not a foregone conclusion that the next orthodoxy – if there is one – will be Labour-Green-generated.

You wouldn’t have thought so just watching the 2014 election, sequestered inside its bubble from seismic forces. But beneath a placid surface deep pressures can be building.

Note 1: In fact, it proved difficult to determine which measure of money supply to use so central bankers used inflation as a proxy. This led United States Federal Reserve Board chair Alan Greenspan to run a policy which greatly expanded the money supply by targeting above-zero inflation at a time when strong global forces and technological innovation were reducing manufacturing and some services costs and prices. This was an underlying factor in the global financial crisis of 2007-08.

Note 2: The post-1984 government also ended sports contact with apartheid South Africa, banned nuclear warships from New Zealand waters, thereby adopting an independent foreign policy and made constitutional changes, including some legislative recognition for the Treaty of Waitangi.

Note 3: An illustration of how trust works in politics is that Australian Prime Minister John Howard was re-elected in 2004 despite being exposed as having larded the facts in the 2001 campaign over an incident involving would-be illegal immigrants.

Note 4: Labour initially tried to stay out of the controversy so as to leave all the focus on Key and National.

ACT 2014: “Richard Prebble returns to politics in key ACT role”, press release by acting ACT president, Barbara Astill, 23 February 2014.

Anderson 2014: Perry Anderson, “The Italian Disaster”, London Review of Books, 22 May 2014.

Dunne 2014: Fraiser Seifert, Dunne tells United Future to “go back to basics”, press statement by Fraiser Seifert of Dunne’s comments, issued 15 November 2014. Dunne explained in spoken comments to the post-election conference that the membership growth was (mainly?) a response to the Electoral Commission’s deregistration of United Future in 2013 for not having the requisite 500 members (signed on paper); it was re-registered 13 August 2013.

Graham 2014: “Why green isn’t just a shade of red”, New Zealand Herald, 9 October 2014.

Haass 2014: Richard N Haass, “The Unravelling. How to respond to a disordered world”, Foreign Affairs, November-December 2014.

Hager 2014: Nicky Hager, Dirty Politics. How attack politics is poisoning New Zealand’s political environment (Craig Potton, 2014)

Issenberg 2013: Sasha Issenberg, The Victory Lab. The Secret Science of Winning Campaigns (Broadway Books, 2012 hardback, 2013 paperback. Issenberg has updated his analysis since, including http://www.technologyreview.com/featuredstory/509026/how-obamas-team-used-big-data-to-rally-voters/ on the Barack Obama 2012 presidential campaign.

James 2014, 1: Colin James, “The foundation and a pillar of good government”, Otago Daily Times, 25 August 2014, http://www.colinjames.co.nz/the-foundation-and-a-pillar-of-good-government/.

James 2014, 2: Colin James, “Investing, not spending. A tougher way of thinking”, Otago Daily Times, 14 October 2014, http://www.colinjames.co.nz/investing-not-spending-a-tougher-way-of-thinking/.

Lowe 2104: Josh Lowe, “Simon Danczuk: Hayward and Middleton by-election was a wake-up call for Labour”, Prospect, 10 October 2014.

Makhlouf 2014: Gabriel Makhlouf, “Economics: Teaching, Applying, Learning”, speech to the GEN annual conference (Treasury, 5 November 2014).

Piketty 2013-14: Thomas Piketty, Capitalism in the Twenty-first Century (Harvard University Press, Cambridge, 2014) This is an English translation of the French original, which was published in 2013.

Riga Theatre: New Riga Theatre, Latvia, “The Sound of Silence”, play presented at the 2010 New Zealand Festival of the Arts. Reviews are at www.nzherald.co.nz/entertainment/news/article.cfm?c_id=1501119&objectid=10628240 and http://www.theatreview.org.nz/reviews/production.php?id=1469

Rodrik, 2011: Dani Rodrik, The Globalization Paradox (Oxford University Press, Oxford, 2011).
Treasury 2014: Holding on and Letting Go, Treasury briefing to the incoming minister, October 2014.

Wolf et al, 2104: Among the many divergent commentaries in the author’s files is this column by Martin Wolf of the Financial Times, once a cheerleader of Friedmanite market-liberalism, “Strip private banks of their power to create money”, Financial Times, 24 April 2014.