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Rogernomics In The Era Of MMP

© 2000 Aaron Bhatnagar

Rogernomics, or the reform of social, political and economic institutions according to free-market principles was a product of the First Past the Post system. The architect of this reform, Sir Roger Douglas, envisioned large-scale policy packages being implemented at speed with the assistance of cabinet collective and a majority in the House of Representatives.

Now, under the MMP system, there are serious questions as to whether it is possible for Rogernomics to be implemented in the style advocated in Chapter 10 of Roger Douglas’ book “Unfinished Business”. The heir of Rogernomics and free-market policy in New Zealand is ACT New Zealand, co-founded by Roger Douglas in 1993 to contest the 1996 MMP election. It has been successful in first gaining representation in the 1996 Parliament, and then marginally improving its vote in the 1999 election. However, the likelihood of ACT gaining a majority of the vote is regrettably too distant a possibility for ACT party theoreticians to count on, and it is possible that policy influence that ACT gains as a result of coalition government will be diluted and compromised by the nature of such coalitions. In addition, ACT’s likely coalition partner, the National Party, is now considering a change in direction for its own policy agenda, with suggestions that it is likely to prefer a move towards pragmatic and prolonged decision making. This partly reflects the National Party’s own inherent conservatism, as well as its desire to be a broad-church party with cross spectrum appeal.

How then can ACT implement its vision for the future given the constraints of its own electoral polling, the constraints of being within a parliamentary coalition with National, and the expectations of likely ACT and National voters? It is therefore necessary for ACT to review the method of Rogernomics, and for ACT to ask itself whether new circumstances dictate a new style of free-market politics.

I have re-examined some of the principles of “The Art of Reform”, taken from Roger Douglas’ book, and have offered my own interpretation as to whether these principles are still applicable in the era of MMP, and if relevant, ideas for possible improvement.

For Quality Policies you need Quality People

This is undeniably true regardless of the electoral system. With MMP, ACT has and will continue to have the opportunity to send such people to Parliament.

How then, does ACT ensure that it can continue to attract quality people who are suited to the hurly-burly of political life, who are ideologically sound and committed to ACT’s vision in the face of parliamentary opposition, and who will become advocates of the vision to New Zealand? The most obvious and honest way seems to be to cultivate quality people from within the rank and file of the political membership – encouraging our membership to “take arms”, and to look within their own committees and regions/divisions for such talent. A culture of nurturing tall poppies within the party will further ACT’s cause into the future by ensuring a sense of continuity and generational success. A secondary option is to invite talented sympathisers outside of the party to consider standing for Parliament. However, it is not an easy step for newcomers to adjust to political life without having been properly prepared. A lack of political culture among our candidates, and particularly among our likely MPs may well cause unnecessary friction and frustration, as well as disappointment from members with high expectations.

It has been suggested by some that MPs could be paid more in an attempt to attract people of higher calibre to Parliament. I reject this approach on the grounds that it puts the wrong incentives to citizens for standing. The job requires considerable sacrifice, and for this reason, we should ensure that MPs are well looked after and receive adequate compensation. However, we must be aware that Parliament should never be seen as distant and removed from the voters. Politicians should be seen to be first among equals, not superior or aristocratic by virtue of title, perks or the like.

Implement packages in Quantum Leaps, using large packages

Here Rogernomics still holds true in the era of MMP. The recent change to a proportional electoral system does not alter the political truth that politicians are respected for what they do, not for achieving meaningless and inconsequential targets. Large packages will signify to voters that the Government is serious about what it is trying to do. By presenting a large package to voters, a government will successfully demonstrate that it has a vision for the direction of the country. Quality decision making would suggest that such packages are large because the ideas within them are grand too. If you simply have nothing to say to the voter, then don’t say anything. It is unwise to try and bribe voters with piecemeal legislation of little significance or excitement. By presenting policy in a piecemeal fashion, voters will be able to criticise the government with ease and media will be able to deconstruct the government with impunity.

The historical example is that of Bill English’s tenure as Treasurer in the last year of the 1990-1999 National Government. There was a general perception that National was looking tired and that it had run out of ideas. Instead of advocating vision for the country, the perception suggested that National was more interested on defending its record on economic management rather than what it wanted to keep on doing. Bill English’s mistake was to offer a 1c tax cut, with minimal other reforms. Voters and commentators were easily distracted from Bill English’s attempt to revive interest in the government’s direction because the package was small and insignificant. This should be contrasted with ACT’s proposals to implement an immediate 3c tax cut. While such a decision would have drawn the inevitable criticism that tax cuts in election years always do, it would have been an excellent contrast to that of the political parties that advocated higher taxes. National would have been seen as a party of progress and action, and would have been able to build upon this initiative during the election campaign.

Quantum leaps are a different matter. The advent of MMP means that reformers can no longer capture a broad church party and use cabinet to dictate a speedy conclusion to the implementation of the large package. Indeed, the mechanics of MMP has meant that the reformers have formed their own party, with responsibilities to themselves only.

The new dynamic of this principle is to ensure that popular support is first built, where such circumstances apply. In the case of privatisation of state owned enterprises, it is now more likely that any privatisation will be implemented at a much slower pace than had occurred during 1987-1993. With the case of TVNZ, it may be advisable for this state owned enterprise to be sold in a similar fashion to that of Telstra by the Australian government, where a minority offering was made to investors and institutions, followed by a further offering when circumstances dictated it. This way the government is able to potentially realise a higher value for its assets, spread over a time more politically acceptable to coalition partners and to voters alike.

Another option is to ensure that ACT is able to make more significant policy contributions in areas of key interest, foregoing a general interest in coalition policy in order to affect an outcome in the domains it prizes most highly. An example of such a domain is education, where free-market thinking in the distribution of educational services to citizens is both highly respected and becoming accepted internationally. By attempting to capture the education domain at the expense of other social portfolios like health, justice and welfare, it can achieve close to 100% of what it wants rather than achieve greasy compromises in all areas which would not satisfy party faithful and voters alike. In economic portfolios, one example might be the capture of Revenue or Privatisation/SOEs instead of seeking the role of Treasurer. According to Rogernomics, the underlying focus is that of achieving benefits for voters in the medium term timeframe. By focusing on strategic portfolios in a coalition, such medium term benefits can be delivered.

Speed is essential. It is almost impossible to go too fast.

This principle is a natural consequence of the second principle of quantum leaps and large packages. It still makes political sense to embrace this principle of acting quickly, but it must be qualified with an explanation. Political commentators have described MMP as the result of the desire to bridle the power that cabinet can wield. Specifically, this refers to the power that was wielded by cabinet during the reform period of 1984-1988 and the early years of Ruth Richardson’s days as Finance Minister.

It is here that the dichotomy exists with Rogernomics. Rogernomics was possible specifically because cabinet could move quickly. Roger Douglas effected the reforms as quickly as he did so that he could avoid the slingshots and arrows of political opponents and lobby groups. It was necessary to ram home the policy changes quickly so that extended criticism and opposition was not possible. This appears to be at odds with the sentiments behind MMP.

However, a precedent in good political management was set by the National/NZ First government when parallel importing (PI) was introduced in May 1998. Despite a lack of political mandate - there was no mention of the introduction of PI in National’s 1996 manifesto; the Coalition government successfully introduced PI. This was an especially noteworthy achievement as factors causing the government difficulty included pressure from the USA government, and a small majority in the house of Parliament with truculent government MPs and a vociferous parliamentary opposition. Despite this, the coalition government rammed the policy through under urgency using the budget as the means for accomplishing the policy. This represented good political skills by John Luxton, the MP responsible for the policy. Luxton’s use of the budget suggests the need for Rogernomics or its free market successor to use budgets and half-yearly mini-budgets as the device for the implementing of policy. This fits well with the second principle of using quantum leaps and large packages. However, it is also true that all governments like to announce policy initiatives throughout the course of the year, so that it is seen as being effective and proactive, rather than reflective and inactive. This suggests that budgets should be thematic with surprises, and the announcements during the year are supplementary to the budgets, or indicative of departmental changes outside of a broader cabinet agenda.


Conclusions and thoughts

There are only three of the ten principles behind Roger Douglas’ “The Art of Reform” discussed here. The other seven principles I have not discussed as I do not especially equate them as being relevant to the MMP electoral system, rather they are relevant to the character of the politicians that are elected and their personal dispositions.

The great quandary that seems to be raised is the question that I asked myself before writing this document – “Has Rogernomics run its course?” I believe that the answer is a qualified “No”. The real problem, as mentioned earlier, is that Rogernomics reflects an optimum policy choice assuming control of cabinet and special circumstances allowing for the rapid implementation of its policies. Now, the forces that represent Rogernomics in the new millennium (ACT) are faced with the prospect of not holding a majority in a future cabinet in coalition with the National Party. Therefore, Rogernomics in the old sense is no longer possible. ACT must therefore embrace the sentiment of the free market, applying its free-market philosophy in areas where it can choose to make a difference. By breaking free of the mechanics and dynamics of Rogernomics, it can then actually apply the policies that are closest to its heart. ACT must be honest in its intentions in government – it should not seek to shift its desires as it proceeds with its political agenda in power. Rather than by seeing how far it could go in applying a free-market philosophy in power, it should determine those objectives well in advance and stick to it.

Another outstanding issue is to ensure that its philosophy is clear of disparities like the contrast between ACT’s philosophy of freedom and liberty, and the compulsion it seeks in some policies. This is best illustrated in the thinking on compulsory super. Some party policy contributors, including Roger Douglas, see compulsory super as the optimum outcome. However, it has been a source of discontentment with some members and supporters that the party is clinging to what is both an unpopular and misunderstood policy as well as something that seems to clash with the spirit of the party’s policy.

It may well be that this issue represents the difference between the old and new school thinking within ACT. The old school, led by Roger Douglas, believes that the outcome is all-important. The new school, perhaps led by Richard Prebble and Rodney Hide, reflect the desire to have policies that win public approval. Because both Prebble and Hide derive their political existence from popular support, they are naturally conscious of the desire to have policy that does win political support. Charges of populism from both inside the party and without are actually misleading, as it would seem that the new school thinking is in fact attempting to adapt Rogernomics to MMP. Given that the most hardcore proponents of “pure Rogernomics” are not actually members of the ACT caucus, it would seem inappropriate for the caucus members to be sent into the public arena defending a policy which they themselves are not entirely convinced is applicable in their current political environment.

Lastly, it should be stated that the ACT Party considers itself the champion of freedom and prosperity. As long as it seeks to win popular support for these ideas and then implement those ideas, the party does not need a mid-1980’s nickname to define ACT’s raison d’être. As long as it stays true to its central tenets, ACT can only prosper politically and intellectually.

The comments and writing above are the opinions of the author only. They do not necessarily constitute ACT New Zealand policy or strategy.


About the author: Aaron Bhatnagar is 24 years old. He has completed an MA (Hons) at the University of Auckland, specialising in Russian Foreign Policy. He has been a member of ACT New Zealand since early 1995, and is the vice-Chairman of the Epsom Electorate for ACT. He is also a partner in a small property business in Auckland. Aaron invites email comments on his article at aaron@bhatnagar.co.nz

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