A Revival for the Old Paternalism

Gareth MorganPolitics

Gareth Morgan, Director of Gareth Morgan Investments

The chasm between the views of John Luxton and Winston Peters on government ownership of productive assets, epitomises the distance that National has traveled since its ignominious defeat at the polls in 1984. That whitewash which gave rise to Rogernomics rendered Rob Muldoon's economics to the trash can and with that any chance he had of meeting his own expectation of his leadership – that he would leave New Zealand in no worse a state than his regime had inherited it. Despite a period in the Coventry of political opposition, Muldoon cohorts Jim Bolger and Bill Birch survived to rule another day, albeit as sponsors of economic policy markedly different to those they had overseen six years earlier. So rolls the dice of political fortune.

15 years on, the paternalism of the Muldoon political management style is attempting a comeback. Winston Peters of course holds similar values and having prised his way back into senior ranks of government, his influence matters. Back amongst the same Cabinet colleagues who had previously seen him sacked for disloyalty, Mr Peters is finding so far his penchant for autocracy just as limiting, his preference for centrist government even less acceptable, and his electoral support fragile.

I recently visited Singapore, the home in this part of the world of the type paternalistic governance which Muldoon often praised. Muldoon's error was to look at that economy before and after Lee Kwan Yew and conclude that he'd added value. That other economies in the region have achieved similar without an omnipresent ruling regime was ignored by Muldoon. From litter laws to birth control Singaporeans had much of the responsibility of everyday life taken from their hands by the government. They stopped Kwan Yew when he tried to extend his social engineering to the imposition of stricter birth controls on the lower educated, but other than that his influence still smothers that society even now.

At the heart of the Peters' philosophy is the Muldoon penchant for state intervention as an efficacious method of sheltering citizens from the risks of self reliance; risks of satisfactorily balancing their private income with their consumption demands and in so doing adequately providing for themselves – whether it be for their old age, their health needs, education requirements, or their mortgage payments.

The assumption that an electorate will be grateful for a welfare state so extensive that it can provide all these services, is one well past its day. The reason? – general acknowledgment now that government-run providers do not respond to the market-imposed discipline to the extent required to ensure an economically efficient outcome – even in the long run. Electors are generally aware of the inevitable taxation costs of inefficient government providers.

The hoary presumption that a government can effectively defend the citizenry from the perils of the risks of balancing their own income and consumption needs over their lifecycles, is one that has been dispelled here from all but the staunchest of Muldoon's peers. Winston Peters mistakenly assumed that the electorate still contained substantial numbers of voters of like mind. As time has revealed, his only core support was for his party's Maori policy.

The recent declaration from Mr Peters that government owned and/or operated trading enterprises can be as responsive to market needs as enterprises in the private sector, was a direct response to Mr Luxton's plea for an revitalised privatisation and deregulatory programme. The slippage New Zealand is now posting in international competitiveness tables, and more importantly in its ability to generate the incomes and standard of living which its citizenry aspire to, support the Luxton line.

So long as government continues to either be the provider directly, or exert undue influence over the supply of goods and services then we shouldn't be surprised that there is an economic cost. Without control of their own consumption and savings decisions households cannot be expected to make these trade-offs optimally. Draining income via taxation interferes with this decision while compulsory superannuation is just another example of households having this choice taken from them by a government that is confident it can make the choice better.

Singapore's compulsory superannuation scheme has been a nothing more than extortion via taxation. The rate of return to savers on their savings has been pathetically inadequate as the government has forced the accumulated savings into investments with dubious rates of return – public housing projects and industrial investments with political rather than economic spin-offs. Here, Mr Peters is on record as saying future governments should have the entitlement to so influence investment of the moneys his proposed scheme will gather. Lee Kwan Peters is not economic progress and it's of little surprise support for his politics of paternalism is perishing.

A Revival for the Old Paternalism was last modified: December 15th, 2015 by Gareth Morgan
About the Author

Gareth Morgan

Facebook Twitter

Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.