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February 26, 2007 | by  | in Features |
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Why Is The Left So Right?

If a Labour MP met a foreigner who laughed when they described themself as a centre-left politician, they might have reason for concern.

But few Kiwis are aware that a large part of the world views New Zealand as one the most right-wing countries on Earth, with a feature of right-wing ideology being to emphasise the free market more than egalitarianism in wealth.

While the Labour Party describes itself as a centre-left and socially-liberal party, a new rating by right-wing think-tank The Heritage Foundation lists New Zealand as the fi fth-freest economy in the world.

The Heritage Foundation website states that: “New Zealand rates highly in almost all areas of economic freedom but is most impressive in fi nancial freedom, property rights, business freedom, labor freedom, and freedom from corruption. A globally competitive financial system based on market principles attracts many foreign banks, helped by low infl ation and low tariff rates. Foreign and domestically owned businesses enjoy considerable fl exibility in licensing, regulation, and employment practices.”

Another right-wing think-tank, The Fraser Institute, reiterates this fi nding by listing New Zealand as third-equal with The United States and Switzerland on economic-freedom scales. And while we score well-above the average of most countries and are almost equivalent in economic-freedom status to the United States, few Kiwis seem to be aware that we are so deregulated.

Researcher and writer Nicky Hager agrees that having such a deregulated economy is not the general perception. “Because Helen Clark is not as rabid about the war on terror as John Howard and Bush it feels a bit different, but in terms of base policies – the fundamentals of how our economy works, regulations and tariffs,” says Hager. “We are still way out on the right on many scales. I know that you hear that there’s too much red tape etc, but when you look at the evidence we have less regulation than practically any country on Earth.”

Why, then, is the Left in New Zealand so Right?

Hager says the misconception comes from New Zealand being pushed so hard to the Right in the ‘80s.

When the fourth Labour government took power in 1984, a series of free-market proposals began to counter the financial crisis caused by the previous National government’s tight regulations. Hager says that in the fi ve-year period following 1984, New Zealand was stripped of most of its infrastructure.

“Regulations and tax became a dirty word, it was a walkover. And by the mid-nineties when people had gotten right off it and they voted in MMP to try to stop the revolution that was going on we were so ground down that there wasn’t much more we could give away,” he says.

Since the failure of Muldoon’s regulations, Hager says Labour has been afraid to using the term ‘regulation’ because of the memories it evokes. “When Labour came in in 1999 they were pretty scared of business and so they started making all these speeches about how they weren’t going to challenge the fundamentals. In the last seven years…Cullen and so on have been doing the bare minimum basically and all those things like selling off our land – they won’t touch them.”

If the results of The Fraser Institute and The Heritage Foundation are correct then Labour is paradoxically more economically Right than a good deal of countries with governments that are actually called right-wing.

Do other paradoxes exist?

Another feature of left-wing ideology is concern for the lower classes.

The Ministry of Social Development’s The Social Report 2006 found that in 2000 and 2005, 24 percent of the population had living standards that they describe as experiencing ‘severe’ to ‘some’ hardship. Between 2000 and 2004, there was an increase of three percentage points in the proportion of the population experiencing ‘severe’ hardship and a drop of three percentage points in the proportion experiencing ‘some’ hardship. The proportion experiencing ‘signifi cant’ hardship did not change between 2000 and 2004.

Victoria University Associate Professor in Public Policy, Bob Stephens, argues that these results don’t necessarily mean that the Labour government is not addressing poverty issues, saying the results of government social interventions may take some time to show.

“Those who were in hardship were probably in more hardship prior to the Working For Families package. Some of the problems that are occurring will take years and years to fi x. It took 20 years to build them and it’s going to take twenty years to solve them,” he says.

The Working For Families package is designed to make it easier to work and raise a family by paying extra money to New Zealand families. Stephens lists domestic violence strategies, improving parenting skills for fi rst-time parents, and putting social workers into schools as current interventions: “They’re slowly having an impact but it will take a long time to turn around.”

Perhaps then the only way to tell if we have got a socially-minded government is to wait and see.

Stephens, however, is critical of the current government’s housing policy interventions for fi rst-time home-owners. Housing prices have a large impact on poverty because while everyone needs a house to live in, high market rates can prevent home ownership.

“The initial steps (when Labour fi rst arrived in power) were to improve lower income people by increasing the accommodation supplement and income-related rents for state houses rather than market rents. They haven’t done much since,” he says.

After 1984, one of the most significant areas of deregulation was the fi nancial sector, opening the door for borrowing money for mortgages. While interest rates went through the roof, individuals were now allowed to borrow 80-100% on a home. Stephens says this encouraged second-home ownership, as it was now possible to use existing property as collateral. This is one of the biggest demand factors for house-pricing in New Zealand.

“Housing is a reasonably good investment and it’s a tax preferred investment. So a lot of people are buying reasonable to low quality rentable accommodation and then that stops a lot of fi rst home buyers buying it at the same they’re gradually forcing the price up,” says Stephens.

Second-home-ownership makes it less affordable for fi rst-time home-owners because the second homes tend to be low to middle-class properties, mainly used as rental properties, he adds.

The rise of the second-homeowner may be one of the reasons why New Zealand has some of the highest housing prices (relative to income in the world). The third Demographia International Housing Affordability Survey, released this month, rates New Zealand as the second least-affordable country in the world.

Another report, Regional Housing Markets in New Zealand: House Price, Sales and Supply Responses, by Arthur Grimes and Andrew Aitken of Motu Economic and Public Policy Research, reiterates this finding. The report shows that land prices have increased much more rapidly than house-construction costs, which have remained static or slightly fallen in real terms.

Does concern for housing-affordability fit the defi nition of a left-wing socially-minded government? Hager thinks so.

“If I was your age, I would never get a house in Wellington…I wouldn’t have enough money. That’s not on the agenda because the Labour government – the good, lefty, socially-conservative government doesn’t want to go there.”

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  1. peteremcc says:

    I would agree that Labour are reasonably centrist on economic issues but you seem to have used this to portray them as centrist on all issues which simply isn’t the case.

    One image included in the article in the magazine is entitled “New Zealand’s Ten ECONOMIC Freedoms”.
    Unsurprisingly, the only one where New Zealand does worse than the world average is the one that isn’t really economic anyway, Freedom From Government.

    Labour is plenty left on all but economic issues and the only reason we still have economic freedom are the reforms of the 80’s and 90’s which Labour can’t touch because of their success.

    P.S. The other image included in the article was interesting too… WOW, we’re more free than the Asian average. That would be the same asia that includes billions of Chinese, N. Koreans and Indonesians with their extreme left governments.
    IE: Left is better than Communist Dictator, but not as good as Right.

  2. Steve Nicoll says:

    Of the 10 items measured by the Heritage Foundation NZ is lower on only two items (not one) in terms of economic freedom. These are Fiscal Freedom and Freedom from Government (which you pointed out). Freedom from government as defined by the Heritage foundation refers to government expenditure which is an economic measure.

    Asia as defined by Heritage Asia includes over thirty countries with a range of left and right governments. There are too many variations on political ideology there to conclude they are all “extreme left wing”

    How were reforms of the 80’s and 90’s so successful?

    Steve
    How do you determine success?

  3. peteremcc says:

    “Freedom from government as defined by the Heritage foundation refers to government expenditure”

    Government expenditure is an interesting definition for “freedom from government”

    “to conclude they are all “extreme left wing””

    that would be why i said “the same asia that includes”

    and about the reforms… those would be the reforms that solved the currency crisis and the high interest rates (that you claimed only occured after 1984).

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