In a recent interview with The New Zealand Herald, Christopher Luxon revealed that every year he studies the life of a great political leader, and this year he picked Ronald Reagan.
It’s a solid choice. Reagan has always been a hero to the right while being discounted as a lightweight by the left: “just an actor”. But for many historians and political scientists, his star has risen in the 20 years since his death and there’s a growing consensus he was America’s most significant president since Franklin Roosevelt. Like Luxon, he entered government during a period of economic stagnation and national decline and, also like Luxon, he was an optimist. He made America feel good about itself again.
There’s a famous story about Reagan. Before he went into politics he travelled across the US giving speeches to Ford Motor Company workers about free enterprise, and he spent the long train journeys studying political theory. He called it “a postgraduate course in political science”, and he read and re-read Frederich Hayek’s The Road to Serfdom, the most influential political text of the late-20th century; the bible of the neoliberal revolution.
When the Reagan government took power, it had a sophisticated critique of the dying Keynesian economic model: a theory of why the economy was failing, a coherent framework to build its replacement with a leader – “the great communicator” – who was a master at selling this vision to the general public. In these senses Luxon is distinctly un-Reaganesque.
Now, the neoliberal order seems to be collapsing, its death throes exhibiting the same morbid symptoms as the end of the Keynesian system: inflation, recession, industrial action. What comes next? No one knows for sure, but one potential candidate – especially for a small country like New Zealand – is the Singaporean model.
This is sometimes called state directed capitalism: a hybrid of an open and competitive economy (New Zealand is currently neither) but with the government playing a major strategic and regulatory role.
One of its most celebrated policies is its gigantic sovereign wealth portfolio, Temasek Holdings, that manages many of the city-state’s strategic assets. Does it signify anything that a details-lite version of Temasek was Labour’s first policy launch?
Maybe. Treasury has nagged successive governments about adopting this idea since the mid-1990s. The argument is the New Zealand state owns a large number of commercial entities compared to its OECD peers: Kiwibank, New Zealand Post, KiwiRail, Transpower, TVNZ. It also has majority shareholdings in many of the energy companies. These generally operate at a loss or minimal gain (energy companies excepted) and a potential fix is to bundle them all into a holding company that could govern them on a commercial basis.
Labour’s Future Fund would get an as-yet unknown mix of these assets along with $200 million in startup funding. The dividends, and any money borrowed against the assets, are then invested in a combination of domestic infrastructure projects and local startups. It will be administered by the guardians of the Superannuation Fund, which has averaged 10% returns over the past 10 years.
Genuinely innovative
Part of our perpetual productivity problem is lack of access to capital for new companies – the banks prefer to pour their money into the lower risk residential property market. Another is poor corporate governance. The Future Fund theoretically solves both problems.
It is that rarest of things in New Zealand politics: one of the major parties presenting a policy designed to solve systemic problems rather than bribe a cohort of low-information swing voters.
There are still questions about how any of this will work. The energy companies pay a lot of money into the consolidated fund, and this helps pay for health, education, superannuation, etc. If Labour is using that to invest in infrastructure and local business how does it make up the difference?
One of the reasons funds like Tamasek and NZ Super are so successful is they can sell down underperforming assets, but Labour leader Chris Hipkins is adamant the original state assets invested in the fund must remain government-owned. How profitable can this fund be if it needs to prop up KiwiRail and TVNZ?
Detail lacking
National has attacked the policy for its lack of detail, and it is correct: there’s nothing. But if there was any detail in the proposal, Labour would have been doomed to spend the week bickering over alleged fiscal holes.
National went into the 2023 election loudly insisting its tax proposal was credible while refusing to release its modelling. Perhaps we’ve reached a stage in our politics where the downsides of releasing policy detail outweigh the advantages. Bleak if true.
But the politics are shrewd. National has been salivating at the prospect of Labour releasing its tax policy. Instead, Hipkins and finance spokeswoman Barbara Edmonds led with economic development, an area in which National is unusually vulnerable.
There’s a theory of political strategy in which you attack your enemy at their strongest point, because after you’ve defeated that you have neutralised their competitive advantage.
National prides itself on its fiscal and economic credibility, but during the past two years, Luxon and his Finance Minister, Nicola Willis, have inflicted grave damage on that component of the brand.
It’s not an accident that Labour’s first strike in the election campaign is a policy that could easily have come from a right-wing government – albeit one that was interested in developing the economy rather than simply managing its decline.
It’s also not a coincidence that the most popular candidates within National to succeed Luxon are Erica Stanford and Chris Bishop – senior ministers who are personally driving significant changes in their portfolios.
A vision of what is wrong and how you’ll fix it is the essence of political leadership. There may not be much to Labour’s new idea but it’s something – and in politics something will usually beat nothing, which is what National is currently selling us.
