Gareth Morgan, Director of Gareth Morgan Investments
Last week’s publication of the Alliance’s policy document raises the question of which opposition party provides the most credible alternative. To date Labour has had the role of opposition as its own preserve, irrespective of the quality or quantity of any policy initiatives it’s promoted. That’s changed there’s contestability in opposition now that the Alliance has presented a well enunciated alternative. Michael Cullen’s attempts to discredit it have been more hysterical than credible.
Indeed the reaction of Labour to the Alliance’s offering suggests the mantle of being the primary opposition is up for grabs. Even before its release Cullen was manning his fax machine showering the commentator/press community with a multitude of reasons as to why the Alliance’s offering was looney. Yet as it transpired it was Cullen’s contribution which was the more difficult to decipher. Firstly he lambasted the Alliance for a land tax grab which wasn’t even in the policy, then he described their financial transactions tax as a Social Credit device – which it hardly resembles given that Australia has had such a tax in place for years; and then his homework was shallow enough to describe the deficit result as $6 bn on the basis of some extremely crude figuring and a dearth of economic underpinning to his numbers.
The poor quality of Labour’s response reflects their vulnerability to well enunciated policy alternatives. Mike Moore referred to the “trap” of declaring policy before the last few weeks of an election campaign but Labour’s knee jerking to other parties’ offerings is a poor substitute for defining Labour’s own position. Fear of its own shadow will lead Labour to oblivion, Anderton’s advice to “put up or shut up” would be well heeded by Labour if they seek serious consideration as government in 1993.
In reality the Alliance offering resembles the type of fiscal expansionism which the UK and Australia have adopted and which the US is contemplating. The political issue is whether the costs, in terms of further skewing of the income distribution toward the rich is worth it. Fiscal expansionists argue governments can propel growth by spending more, no matter how that spending is financed. There remains no evidence this can be done in any other manzier than by stoking inflation and impairing the allocation of productive resources in the private sector, Policies that recommend expansion of government spending as a propellant of growth are defunct, certainly in the medium term, and arguably in the short term.
But it’s clear that the electorate isn’t happy about the distributional consequences of the current policy path, in spite of the fact that the economy is now growing again and the cake expanding. The decision they have to make is how much they’re prepared to risk growth for the sake of getting a more even allocation’ of the spoils. We know that too much redistribution undermines total in other generated communism being the example. Clearly though the electoral consensus is we have gone too far the other way.