Dialogue: Why Parliament needs more than a twosome

Politics would become more like a closed shop if changes to MMP made life too hard for smaller parties, writes KEITH RANKIN.

With the fracture of the Alliance, our MMP voting system has once again come under the spotlight. In politics, perceptions reign and competitive political infighting always fuels negative perceptions.

The "debate" about MMP is problematic. It is totally negative in that it is driven by perceived disadvantages of MMP, and not about the positive advantages of alternatives to MMP.

From 1978 to 1993 it was different. Then, we got "majority" governments with about 37 per cent of the vote. They routinely governed, in dictatorial fashion, in ways that were quite different to voters' expectations.

MMP then became an alternative around which opposition to the first-past-the-post system could rally.

Today we have a government that is exactly what middle New Zealand wants. It has pulled no surprises. We have a government of the centre.

Hence, something almost unheard of has happened. The ratings of the Government have stayed high throughout its term of office. While the sideshows are distracting, we have come to like our governments.

Ironically, the popularity of the Labour-Alliance Government has been the Alliance's problem. Until a few months ago, there was nothing anti-Alliance in its low poll ratings - it was just the perception of the Government as Labour, not Labour/Alliance.

Even the National-led Government of 1996 to 1999 was nothing like as unpopular as governments routinely were in the 20 years before MMP. Despite the loss of support for New Zealand First (and its fragments), polls showed quite clearly that we did not want an early election.

It should be clear to any economist (or any other person who extols the virtues of competition) why MMP is so much better than the rejected FPP system that some suggest we should readopt. Political competition is closely analogous to business competition. Parties sell policies to the public; businesses sell goods and services.

Perfect competition, the economists' favourite, would not work in politics. Under perfect completion, many sellers sell exactly the same thing. The next best thing in the economics' textbooks is called monopolistic competition. That's what MMP is like.

The worst forms of market structure are monopoly and duopoly. A one-party state is like a monopoly. A two-party Parliament is a duopoly.

In business, monopolies and duopolies are economically inefficient unless they are genuinely contestable.

Under a system of monopolistic competition, competing businesses use branding to create a kind of monopoly. While many companies can sell milk, only one company can sell Anchor milk. Only one company can make Levi's, but many companies can make jeans. Only Microsoft makes Windows.

Political parties' policies are like branded goods. Paid parental leave is linked to the Alliance brand. Low flat taxes and education vouchers are linked in the public mind to the Act brand.

Imperfect competition, in general, is characterised by barriers to entry. MMP contains two formal barriers that parties wishing to enter Parliament must face. These are the 5 per cent threshold and the requirement to have an electorate MP. An aspiring party must overcome only one of these two barriers.

If we remove either of these barriers we raise the difficulty of getting into (or staying in) Parliament. If we remove the waiver to the 5 per cent threshold for parties with electorate MPs, Parliament becomes less contestable and more like a closed shop.

Under FPP, the barriers to entry were formidable. With relatively homogeneous general electorates, a nationwide party might need 20 to 25 per cent of the national vote to get just one MP. In 1984, the New Zealand Party got 12 per cent and was not even close to getting a candidate elected.

The smattering of minor-party MPs that we did get, usually through byelections, never came close to threatening the National-Labour closed shop.

Even under FPP the pressure on small parties was too great. Social Credit fractured twice after getting into Parliament - in the early 1970s with the John O'Brien split, and in the 1980s after Bruce Beetham supported the Clyde dam.

At present, New Zealand has a political system that embraces the spirit of competition. The barriers to entry are relatively low.

The main difference between business competition and political competition is that most business competition does not make front-page headlines.

John Roughan, in the Weekend Herald, was right to note that even under MMP we might end up with only two parties in Parliament. Or, if more than two, the additional brands (for example, the Greens or a Maori party) might not fit neatly on a left-right spectrum.

He is wrong, however, if he is suggesting that a two-party MMP parliament is the same as a two-party FPP parliament. A two-party MMP parliament would be a contestable duopoly. The two-party FPP Parliament was a closed shop.

If we ever end up, once again, with only two parties to represent us, under MMP the governing party will not be able to go on an ideological walkabout, as happened with Labour in 1984. It will be forever looking over its shoulder, knowing that an alternative party will need only 5 per cent of the vote to disturb the happy twosome.

The Alliance fracture is no more than a symptom of the competitive process at work. There has been a fatal dispute over how best to market the party. The tragedy is that there is a law, the Electoral (Integrity) Amendment Act, which tries to prevent such political competition.

That tragedy would be compounded if we made it too hard for smaller parties in government to survive - for example, by eliminating the electorate MP waiver to the 5 per cent barrier. Reverting to a non-contestable duopoly such as FPP would be the ultimate political tragedy.

* Keith Rankin teaches economics at Unitec.