The challenge of redefining the State for Labour & National

Fascinating column from the Political Pundit Godfather of NZ, Colin James in the Dom Post.

Making start on remaking Labour
So is anything different? MPs say they are making two other broad changes. One is "economic revisionism", influenced by post- crash international commentary by the likes of Robert Reich, Joseph Stiglitz, Paul Krugman, Dani Rodrik and Tony Judt plus Olivier Blanchard of the International Monetary Fund and Martin Wolf of the Financial Times.

THE emerging policy frame is said to be "internationalist and outward-looking", concerned with economic sovereignty but not protectionist. It will aim for an economy that is "clean, green and clever", not just an appendage of Australia, with an emphasis on saving ("a crucial issue" canvassed by Mr Cunliffe in a recent speech) and innovation, where Labour stalled in the 2000s. The state will be "highly active but not necessarily bigger". Mr Goff and David Cunliffe have been musing on changes in tax and monetary policy.

Labour has also rediscovered inequality. Annette King, who made a mea culpa confession to a post-budget breakfast that Labour had focused too much on "fairness" and too little on inequality (of "opportunity"), has drawn on a high-powered advisory "commission", some not usually associated with Labour, to develop an "evidence-based" - as distinct from "ideas-based" - children-centred social policy crossing portfolio areas. She will outline it at Labour's conference in October.

This challenge to redefine the role of the State post crash will depend on the severity of the double dip depression, we either pull out of the death spiral and limp weakly for a decade, or we fulfill the mechanics of Adam Smith Capitalism and collapse the exact same way the global economy did post 1929 stock market crash.

We face a crises of capitalism, in the 1970's the real economy and the financial economy were about the same, after the the Milton Friedman neoliberal model adopted from the 1970's and implemented by Thatcher and Reagan the real economy is now valued at $8 Trillion where as the financial economy is valued at $330 Trillion, the difference between the real and the financial have been allowed to build in an unregulated market to global bubble levels, and that bubble has gone pop. Apparently a consumer culture based on the never ending capitalist growth model that fueled SUV's, Plasma TVs and cosmetic surgery all on the credit card wasn't sustainable, who woulds thunk it?

The environment can't keep up with the resource needs a consumer capitalist state demands, and neither could the financial structures themselves, the response to the 1929 crash was the welfare state as politicians realized that 20% unemployment meant citizens no longer believed in democracy and turned to fascism or communism, Political parties post 2008 crash will need to make the same commitments to Keynesian managed capitalism, Labour will find this easy, National with their free market idealogues will not.

So are things getting better? No, no they are not...

Gloomy outlook on world recovery
Is the global economy out of the woods? Two years after near-meltdown, with the United States looking sluggish, equity markets groggy and Europeans fighting a debt crisis, experts gathered in Italy offered a generally gloomy outlook - especially for the US and much of the industrialised world.

* The stimulus deemed necessary to jump-start moribund economies soon causes deficits and debt, upsetting the markets enough to spur austerity - which undermines growth.

* Most of the world's growth stems from a developing world led by China - which is so dependent on exports that it needs the West to continue to buy, and so will suffer if recovery in the rich world proves short-lived.

* Europe continues to lose competitiveness partly because the euro, which - for all the fretting over its dip this year at the height of the Greek debt crisis - remains high in purchasing price parity terms versus the US dollar.

* The sector that is widely seen as the spark of the global recession - US real estate - has not recovered, with house-buying flat and the mortgage market, with its related financial instruments, essentially still in ruins.

* The jobs picture is not improving and in parts of the developed world - such as Spain, with some 20 per cent unemployment - it is disastrous.

...now while talk about a mini boom in Christchurch to rebuild the city is nice, it is just cheap talk when put in comparison to this chilling story re the NZ economy...

Kiwis spending $45 less every week - economist
The average New Zealander is spending $45 less a week than they were before the recession in a bid to wipe out debt and inject equity back into their homes - a move which is hurting retailers.

...the silver lining is that we can borrow more money to pay for the extra social services NZ will need to get us through this crash, and we need a political leader with the conviction of their vision to borrow knowing that better days will come beyond the emergency of the immediate. Labour in Government paid off the National debt to a level where we can take more on, to slash and burn in the manner National are doing will cause huge suffering to those who can least afford suffering.

The challenge for Labour is to have the answers once the October 1st GST rise proves Key's assertions to voters that they would be better off after his tax cuts to be really just vacant aspiration, once that hole in their pocket erodes faith in Key, voters will want to hear what Phil Goff has to say.