Sir Robert Muldoon had enormous control of the economy from 1975 to 1984. Photo / NZ Herald files
Sir Robert Muldoon had enormous control of the economy from 1975 to 1984. Photo / NZ Herald files
COMMENT:
We're about to see a level of state control over the economy that we haven't seen in almost 40 years – since the Muldoon era.
That's Sir Robert Muldoon to you, son.
Ok, fair enough. He was a colourful character. But he was a terrible finance minister and henearly bankrupted the country.
Now here we are suddenly facing levels of government support for industry - needed to get the country through this crisis - that take us back to a style of government many New Zealanders have no experience of.
For now, the scale of the Covid-19 crisis has put us on a war-time footing.
Longer term, when the lockdown is over, this country is still going to be running on government money for many months.
It's our money of course…or perhaps I should say our kids' money - as we're borrowing most of it and they'll be paying it back over the coming decades.
But of course, there's no serious opposition to this right now. We simply don't have a choice.
So, right across the political spectrum, we've seen a remarkable and rapid acceptance of economic policies that would have been previously condemned as socialist - even by the Labour Party.
Muldoon's legacy should serve as a reminder of how not to run a centralised economy.
It's a reminder that won't be lost on students of New Zealand political history, like Finance Minister Grant Robertson.
But, even with the best intentions, there are risks for any government trying to manage an economy so comprehensively.
The biggest of those is that its bureaucracy can stifle the kind of business innovation and growth which will be vital to New Zealand's chances of, not just surviving this downturn, but thriving out the other side.
Now, more than ever, we are going to need business to be freed up to adapt, to move quickly into areas of the economy where there is new opportunity.
The point of keeping businesses afloat with taxpayer money needs to be for them to get back on their own feet and start employing people.
Many younger New Zealanders have no idea what life was like in this country 40 years ago.
Businesses needed licences to import foreign goods as basic as household appliances.
To deal with fuel shortages, the government told people what day they could drive their car.
Car-less days. The Government's answer to the fuel crisis in 1980. Photo / NZ Herald files
Attempts to control inflation saw the introduction of laws banning wage and price rises.
Unemployment was tackled with arbitrary and often sexist rules about who could work in certain professions.
And the taxpayers supported numerous business sectors – including manufacturing and agriculture - with subsidies.
For those old enough to remember, there are few who recall the years fondly.
Muldoon's political legacy has been hampered by the Left's distaste for his conservative cultural views and the Right's embrace of the free-market.
There's also the fact he borrowed and spent until the country was almost broke.
For all the criticism of this country's economic management since 1984 - particularly the brutal period of adjustment through to the mid-90s – successive governments have left the country's books in a much better state to survive a crisis like this one.
That fiscal position this Government is drawing down on now was hard-earned.
And again, I'm sure that's not lost on the current leadership.
It was a Labour Government that broke Muldoon's grip on power and freed the economy, after all.
Sir Robert Muldoon had enormous control of the economy from 1975 to 1984. Photo / NZ Herald files
It really was in a grip.
As both prime minister and finance minister with an iron-fisted control of his Cabinet, Muldoon had more power than any one politician should ever have in a democracy.
That's one of the reasons we now have MMP diluting the control of any one party.
But these are unusual times.
And having good people in power doesn't make us immune to the risk that well-meaning ideas and attempts to push social change can become counterproductive.
So here's hoping the economy never looks back to the 1970s, even if the Government does stay much more intimately involved in the economy.
We need trade to stay open and free.
We need labour laws to stay flexible as well as fair.
We need business freed up to grow and create jobs - even though we also need the Government to help support business to do that.
Just a few months ago that would have made no sense to most people. The old boundaries of Left and Right have blurred forever.
