On a Hide-ing to nothing
Colin James's column for Management magazine for March 2009
It is one of politics' ironies: ACT has got itself into the ministry just as its credo comes under heavy assault.
ACT carries the neoliberal (or neoclassical) banner: lower taxes, less government, lighter regulation, a reverence for markets and a belief that almost invariably individual and private enterprise produces better results than collective enterprise.
The ACT credo assumes that there is one right way to organise the political economy.
Marxists claimed such a truth: history was to end with the "dictatorship of the proletariat", a classless society in which each would contribute according to ability and each would receive according to desserts.
Francis Fukuyama asked in the early 1990s if the end of history had been reached in the triumph of liberal capitalist democracy.
Actual history, however, keeps going on. For every "end of history" there is a beginning.
In 1960 Daniel Bell in The End of Ideology argued that the great ideologies of the twentieth century had lost their grip. Just then Milton Friedman published his monetarist and market-oriented ideas which formed the base of the neoliberal ideological wave. Just when Fukuyama was positing the liberal democratic triumph, with neoliberal economics at its heart, Paul Romer began expounding a "new growth theory".
New growth theory identifies new ideas, rather than institutional organisation and settings, as the driver of development. It says, as later formulated by Dani Rodrik, that market forces and private entrepreneurship are in the driving seat but governments are also needed, in a strategic and coordinating role. And there is no immutably right form or size of government.
In addition, in this decade behavioural economics has challenged the neoliberal presumption that people make rational economic decisions. Behavioural analysis applies psychology and sociology to say they don't -- or don't always. If they did, there would be no housing and asset bubbles.
These analytical frameworks have their own critics. But to regular folk -- including politicians -- right now, in the grip of the credit-crunch recession, they sound more plausible than the neoliberal mantra of self-regulating free markets. Self-non-regulation was the raising agent in the cake the financial wizards baked that went flat when it came out of the oven.
Even neoliberal disciples and advocates in governments have been bailing out and nationalising banks in the resultant desperate scramble. The mood now is to regulate -- for the government to get bigger and more intrusive.
Australian Prime Minister Kevin Rudd got blunt about it. In a 7000-word essay he wrote that "the great neoliberal experiment of the past 30 years has failed. It falls to social democracy to prevent liberal capitalism from cannibalising itself." Rudd backed "open markets" but said they must be "properly regulated ... so as to prevent extreme reactions from the far left or the far right taking hold".
The National party would not use those words. But under John Key it has made it clear that it does not subscribe to ACT's economic ideology.
None of this spells policy triumph for Rodney Hide at his post-election conference mid-March.
Of course, he got five MPs compared with just two in 2005. One of them is Sir Roger Douglas, ACT's patron saint. And he got a review of the emissions trading scheme, private-sector-led reviews of government department books and a commitment to advance legislation to apply benefit-cost analysis to new laws and regulations.
Those commitments fit National's aim to reduce the cost of doing business and get tighter value for money from spending taxpayer dollars. They are also consistent with neoliberal policy. So at the margin Hide is advancing the cause.
As a result Hide can say to his conference flock that he is taking small steps in the right direction and that small steps are better than no steps. But is that enough? What do those small steps count if the government is also taking big steps in the opposite direction, with heavy spending and tax cuts building a big budget deficit alongside the retention of many of the former government's initiatives abhorred by neoliberals?
Hide's risk is that, by shacking up with Key and Co, he will disappoint his party and his voters and lose seats in the 2011 election.
So what can he take to his conference? First, his impressive populist skills, which got him Epsom (and some law and order votes) and keep him in the news. And second those small steps.
And a promise of more to come. That's what ideologies come to in the end: a promise.