International Socialists

What Should We Expect?

Alf King

Third Term of the Fifth Labour Government What Should We Expect

AFTER A CLOSELY fought election campaign the Fifth Labour government returned to office late last year. So what will the re-election of the Labour government mean for working people – should we be pleased that Brash and the National Party were defeated, or does it not really make a difference which party is in power?

Certainly both Labour and National economic policies are essentially the same. They are fully committed to core neo-liberal economic policies such as free trade, fiscal prudence, and keeping inflation low. While the two parties clearly have many policies in common, it is important to understand the real differences between them. A useful way to do this is to look at the way neo-liberalism has been imposed in New Zealand in two distinctive phases.

The first wave of the neoliberal project was begun by the Fourth Labour government in 1984 and then entrenched by the National government of 1990-1999. It can be described as roll back neoliberalism. This involved 'the active destruction and discreditation of Keynesian-welfarist and social-collectivist institutions (broadly defined)' (Peck and Tickell, 2002). Thus we saw the undermining of the unions, a shift towards more means testing of welfare, benefit cuts and the imposition of a free market in place of the old Keynesian demand management of the economy. The outcomes for this period were unsustainable though, with very low (historically) economic growth, falling or stagnant real wages, falling benefit levels and consequently rapidly rising inequality.

The election of the Fifth Labour government in 1999, was in many ways a reaction to and recognition of this unsustainability. Once elected they introduced policies which, while retaining the core principles of the neoliberal project, acted to ameliorate some of its worst features, earning the label roll-out neoliberalism. So we saw the removal of market rentals, the dumping of National’s workfare scheme, the introduction of paid parental leave, increases in the minimum wage, increased support for superannuitants and eventually more support for working families.

This softening of the neoliberal project appears, while still retaining its economic core, to have warded off the increased public disquiet which had risen under National. However, as Brian Roper shows in his recent book Prosperity for All?, the Labour government has failed to address the widening gap between rich and poor, which saw NZ become one of the most unequal countries in the OECD during the 1990s. In addition, they have continued to discriminate against certain groups in society by refusing to extend the Working for Families package to unemployed people with children and they have failed to address the high rates of child poverty. All this despite recording record budget surpluses and managing an economy which has grown 25 per cent since 1999 against an OECD average of only 16 per cent.

Should the economy experience a downturn, as is predicted this year, the Labour government will almost certainly respond to this by making life tougher for working people, rather than those at the top who could easily afford a tightening of their belts.