Kindness is not enough – an open letter to the Prime Minister of New Zealand

Dear Jacinda,

It’s nearly six months since your government came to power with the first clear majority any party has had since MMP began, on the public expectation that you would lead the country out of the neo-liberal framework that has driven so many social problems. Instead, all that’s happened is – nothing. And then, this week, your government tweaked existing tax laws relative to housing – a move that risks loading the vulnerable with unaffordable rents as landlords compensate themselves.

The thing is, Jacinda, is that rule-changes within the monetarist framework your party’s ideological purists set up two generations ago will not fix the housing crisis or any other of the inequities neo-liberalism has caused. The real problem is that framework. Times change, society moves on; and neo-liberalism – founded in a late twentieth century reversal of mid-century liberal democracy and the ideological oppositions of the Cold War – is past its use-by date. As we now know, all that neo-liberalism does over the longer term is transfer money from the poor to the rich, then trap the poor in poverty. That is not a recipe for successful capitalism. Of late, it’s even been devouring the ability of even full-time workers to make ends meet.

A New Zealand Labour Party poster guaranteeing homes for all in 1957. This is on the Labour Party’s own website today. : Eph-A-HOUSING-1957-01. Alexander Turnbull Library, Wellington, New Zealand. /records/22870586

Into this mix has come the worst housing crisis since the Great Depression, a dynamite combination of shortages and spiralling prices that will echo for generations if you are not careful. Certainly you will not solve this problem by playing games with tax rules. The base problem is lack of housing stock, a failure caused directly by governments that have traditionally left housing up to ‘thuh markit’ (if that’s how they spelt it). These days it’s clear that the unregulated free market simply doesn’t provide solutions for such issues. On the contrary, a large part of the issue has been a direct outcome of that system. During the GFC, nearly 15 years ago now, the world economy teetered on the brink of a new ‘great depression’ – one feared likely to last a generation. One western government after another ‘bought’ their way out of it by pouring money into their economies – and most have continued to do so since, through quantitative easing (‘printing money’). At the time there were fears that this would fuel rampant CPI inflation. Instead, the money went into fixed assets such as property, blowing their prices sky-high, fuelling the rich while further dispossessing the poor. Add to that the fact that any item in shortage gains price, and that became a perfect storm here in New Zealand.

Housing shortage, of course, is merely one of the many social legacies of New Zealand’s neo-liberal ‘revolution’. Add to that widening income inequities, the increasing struggle even the middle class have to make ends meet, and two generations worth of underfunding in public infrastructure – such as the Wellington water and sewerage systems – and it’s clear how ethically and politically bankrupt the neo-liberal concept has become.

What worries me is that you’ve shown no sign of wanting to change any of the fundamentals of that framework, in any sector. But it is well within your power, leading an elected sovereign government, to do so if you have the vision. Or the intent. To say – as you have – that there is a long-standing consensus over such pillars of neo-liberalism as the Reserve Bank Act 1989, isn’t the answer. Of course the business lobby agrees over whatever makes it the most money. As for the focus on consumer price inflation? That was a 1970s problem. Not today’s.

You’re also wrong to imagine that to move away from neo-liberalism is to return to ‘Muldoonism’. Robert Muldoon is dead. He’s history. And the ideological issue never was an ‘either/or’ framework in the first place. The fact that the neo-liberal zealots of the fourth Labour government justified themselves that way does not make it true.

Michael Joseph Savage opening the Social Welfare and Health Department building, 27 March 1939. Alexander Turnbull Library Reference: 1/4-049203; G

What’s needed is a new vision, one that enables our society to move forward, that shows responsibility by government not just towards the necessary enterprise on which national prosperity rests, but also towards an increasingly divided and impoverished people. Playing games with rules designed by those who profit from ‘markets’ is not the answer to housing shortages, or any other of the social problems that neo-liberalism has bestowed on New Zealand. Nor is bandaging the wound by spending my taxes on motel fees for the poor and the homeless. A much more fundamental vision is required: one that asks why such a large slice of society has been dispossessed – one that finds a different balance between the needs of business and that of society. A vision that supports those whose misfortune is not of their own making, while enabling enterprise and effort to be also rewarded.

What is that vision, in the specific? I could talk about undoing the Reserve Bank Act, the Resource Management Act, the Fiscal Responsibility Act, about instituting a universal benefit, and about a whole raft of ways to swing society away from the notion that all transactions are about money and commerce. I could talk about incentives to get Kiwis to do what they do best – which is to run small businesses. I could talk about getting away from the idea that government finances have to be run like a failed business trading its way out of insolvency. Though hey – even in those terms, current real interest rates are negative. You’ll be making money by borrowing.

Of course any vision you associate yourself with has to be your own. Still there is, already, an inspiration: Michael Joseph Savage. He was, I’m sure you’ll agree, the greatest PM New Zealand has ever had. He came to power amidst a New Zealand riven by the social outcomes of the depression. I wrote a peer-reviewed paper on the economics of that period and the way society responded – it’s here, if you’re interested: https://www.rbnz.govt.nz/research-and-publications/reserve-bank-bulletin/2009/rbb2009-72-03-02

That paper outlines just how deep New Zealand’s problems were in 1935. Savage led the way out – shone a light for all to follow. Why? He had a vision – one that did not destroy the capitalist system, but instead harnessed it for society. Of course the specific answers he found were for 1930s problems. Those answers won’t work today. We cannot repeat history.

Still, there are parallels. Among other things, Savage’s government inherited a significant housing crisis. His answer was one you have yet to show the boldness to pursue: a system of accessible state loans, coupled with public spending on new suburbs and a significant state housing programme. The leather folios in which those loans were recorded were kept in the Reserve Bank’s basement, when I last looked. They might still be there. Go and have a look. Turn the pages. Realise that these rows of figures, carefully recorded by hand, represented human lives: families, people who were given hope and a sense of self-worth by one man, Michael Joseph Savage.

Michael Joseph Savage

As I say, the specific answers Savage had for New Zealand’s problems in his era won’t work today. That time is gone. But the concept he had for the country is still valid. It is a concept that government is there to serve the people who put it in power – not the needs of big business whose sole interest is profit to shareholders – and the concept that government needs to earn the trust of the population – not betray that trust by pandering to other voices. Savage’s vision was one by which government could, through example, morally lead the way and bring genuine kindness – through action – to society. He summed it up this way: ‘I want to see humanity secure against poverty, secure in illness and old age’. When his policies were lambasted in the House, he responded by calling them ‘applied Christianity’. And they were.

Today we live in a secularised world. But that does not remove the need for people to support each other. Indeed, the need for humanity to show care is all the more essential. In this, kindness alone is not enough. What is needed is a fundamental change of framework.

This does not mean abandoning capitalism: on the contrary, it means introducing essential change to save it. You do understand, don’t you? A society where the economy structurally disempowers all but the very rich, where money flows away from the poor, cannot survive for long. A society predicated on limitless economic growth – on the ever-expanding scale of industry and exploitation – will break the environment before long. Both crises are coming. It might take another generation – but history tells me a society with the scale of structural inequity that neo-liberalism produces will crack, sooner or later. When it does, capitalism will have destroyed itself.

That risk is not unique to New Zealand, of course. Or to history. Now, I don’t want that to happen, and I’m sure you don’t either. It would be a tragedy to fall back into the age of chaos and revolution that marked the nineteenth century after its flirtation with unbridled industrial capitalism. But that, I fear, is where the world is heading today.

As always, New Zealand is uniquely placed to step away from the train-wreck. We were once called the ‘social laboratory’ of the twentieth century. We have opportunity to become the same for the twenty-first. So now, a vision is needed to both save capitalism from itself – to preserve and enhance the best of it – and to find ways of bringing hope and a way forward for the largest number of people in society at the same time. A vision that embraces the spirit of Michael Joseph Savage.

But really, that’s up to you. Do you have a vision for the future that steps away from a failed economic paradigm? Only you can answer that question. But you need to act. You will lose the support of many who brought you into power if you do not; and your party – whose absolute betrayal of voter trust in 1985-90 still echoes among its supporters – will not have another chance.

As Savage said, ‘we are here to serve, not merely to talk’.

Well?

Copyright © Matthew Wright 2021