The decline of conventional religion has arguably created a vacuum for alternative end-of-the-world scenarios, and climate change has risen to prominence in the sequence of the self-destruction of capitalism, nuclear disaster, resource exhaustion, nuclear winter, and environmental disaster.
Even at a more trivial level, domestic politics was dominated for a while by a pale reflection of the British scandal over MP expense claims.
The government faced a demanding economic challenge, having inherited the consequences of fiscal indiscipline in the last years of the preceding government. Fortunately, New Zealand was sheltered from the effects of the global economic downturn due to its integration into Asian economic dynamism. Consequently, the government’s own inability to match strategic vision with operational decisions was not immediately damaging.
New Zealand’s government declared a commitment to closing the income gap with Australia by 2025. But its economic decisions, especially on infrastructural plans, were not consistent with such an objective. The report of the ‘2025 Taskforce’ chaired by Don Brash, former governor of the Reserve Bank and briefly predecessor of the Prime Minister, was essentially declared ‘dead on arrival’ and disregarded. The report’s emphasis on policy settings is indeed debatable, but it should have been seen as the first stage of a three-year research agenda rather than as an occasion for triumphal rejection of the supposed past. Sadly, the opportunism of most Opposition politicians was exceeded only by the folly and superficiality of the media. The current most likely outcome is abandonment of the strategic objective, unless reconsideration is forced by sober reflection on the consequences of this for New Zealand.
There was only a slightly less hostile reaction to the centerpiece of another report, by the Capital Markets Development Taskforce, which recommended partial floating of state-owned enterprises in the search for more sophisticated capital markets capable of supporting investment and innovation. ‘Privatization’ has become a slogan for those who are nostalgic for a mythical New Zealand believed to exist before the 1980s. More formally, the New Zealand electorate is presumed to have followed the dominant ethos of the local media, and become risk averse while claiming to want innovation. Holding on to what we already have seems to be more important than taking actions to enable us to have we want – whether in respect of thinking about how SOEs are structured, or how to turn Fonterra into an international corporation in the dairy industry rather than a mere producers’ cooperative milk processor.
A third major taskforce, concerned with improving New Zealand’s tax system, sensibly decided to delay its report to 2010. It floated several ideas during the year, and was discouraged from advocating anything which required too great an adjustment by an existing interest.
The underlying problem is that the government wants to make an impact on New Zealand’s social and economic development but is determined not to repeat the experience of a previous National government in 1993, when prompt action in its first term very nearly made it a one-term government and contributed to the electorate choosing to change the electoral system so as to constrain political change. We have a classic case of ‘time-inconsistency’ – the short-term measures to pursue an acceptable long-term goal are themselves unacceptable. Whether the government can use its continued electoral popularity to relieve its shackles in the election scheduled for 2011 is highly uncertain.
A bright spot for the New Zealand government over the last year has been in international economic policy and New Zealand’s participation in Asian affairs. The previous government was able to pursue the goal of an open internationally-oriented economy, collaborating vigorously with Asian economic dynamism, despite the presence among its supporters of strong protectionist pressures and wishes to subordinate economic goals to political correctness. The current government has had similar success, despite claims that it promised to protect everyone from everything. Thus, the Free Trade Agreement with China has been followed by increases in trade and closer economic integration notwithstanding the major difficulties of tainted milk products distributed by a subsidiary of Fonterra. Further agreements have been reached with ASEAN, and with the Gulf Co-operation Council, and patient diplomacy has had other success elsewhere.
New Zealand has participated fully in the economic integration initiatives of the East Asia Summit, and scored a diplomatic triumph in its early support for the Economic Research Institute of ASEAN and East Asia. While the Closer Economic Partnership of East Asia is not likely to be a conventional western free trade agreement even in the medium-term future, it will likely be a significant element in economic integration to which New Zealand has contributed and from which it will benefit. Additionally, the Trans-Pacific Economic Partnership Agreement may prove to be a major vehicle for keeping alive the idea of trans-Pacific economic co-operation, compatible with continued Asian economic cooperation and growth in a somewhat changed international environment.
The external success goes beyond the economic sphere to include New Zealand’s participation in the growth of a new form of community in East Asia. But there are challenges, not least in preserving trans-Tasman amity while pursuing somewhat different understandings of how Australia and New Zealand relate to Asia. New Zealand’s defence review, which is scheduled to be completed in early 2010, is an early test. There will be agreement about co-operation in the Pacific, and about the desirability of making relevant equipment and skills available for international peacekeeping (but not emphasising global citizenry in acquisition plans). The big issue is how the important middle ground is filled, with New Zealand likely to want its Defence Force to facilitate participation in East Asia’s management of its regional affairs.
There are issues of time-consistency in New Zealand’s international policies. But they are intellectual and policy issues. The government’s efforts have not been diverted by an impossible dream of achieving change without creating any dissent.
This is part of the special feature: 2009 in review and the year ahead.
Gary Hawke is Fellow at the New Zealand Institute of International Economic Research, Professor Emeritus and was formerly Head of the School of Government at the Victoria University of Wellington, New Zealand.