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Thursday, December 01, 2011

Post election redux

The National Party's win on Saturday night was not unexpected. They had been floating high in the opinion polls following Christchurch, the Rena and the Rugby World Cup, which gave Key unprecedented coverage. This did not give the media much time to absorb the policies, given that they were keeping up with the releases of eight parties considered to be significant enough to get into government. They dropped slightly on the 50% plus that they were polling in the lead up to the election, which was widely predicted. However, their result was not as strong as has been interpreted - certainly a solid benchmark for MMP, but one that if they lose an MP on the special votes may still mean that they need the Maori Party as kingmaker.

John Key was not wrong in the days before the election in saying that elections are close. Apart from the strongholds, there were many seats in the 2008 election that were considered marginal: Auckland Central, Rimutaka, Waimakiriri, Waitakere, Harauki-Waikato, Christchurch Central and West Coast Tasman - and those are just those that had under 1,000 votes determining the outcome. Of those that had less than a 2,500 majority, you had seats like Tukituki, Wellington Central, Ohariu, Otaki, Hamilton West and Maungakiekie. There are seats that are traditionally the strongholds of one party - such as Dunedin North, which Labour has held since 1928. Then you have seats like Taupo that tend to swing between Labour and National. While I have only mentioned 13 electorates of 60, these are potentially enough to have a significant outcome on the vote. The electoral votes tend to go to National or Labour, with the relatively rare exceptions of Peter Dunne's Ohariu seat (responsible for the overhang this time), Winston Peters' botchy history with the Tauranga seat (which he did not run with this time) and Jeanette Fitzsimmons' brief run in the Coromandel. Since MMP, there has been more fluctuation with the Maori seats, which are traditionally dominated to Labour but saw NZ First dominating in 1996, then the rise of the Maori Party, and Mana as a new contender this election. So while we have seen National dominate this election and Labour suffering reduced minorities in some seats, the swing seats usually have such low majorities that is difficult to overstate the effect of National cleaning up this election.

We will need to wait for the special votes to come in to see if they hold their seats or drop down one on the specials as they did with Cam Calder in the 2008 election where they gained another Green MP. It is quite possible also that it could be NZ First that gains this time, being very close to the quotient for getting in.

In light of this, the comparison between Labour's collapse this election to its beginnings as a party in the 1920s has been perhaps overstated slightly, partially because there were still three major parties which led to the vote being split three ways. We are no longer in First Past the Post, and it would work better contextualized within a growing awareness of MMP, which has seen the Left splitting their votes more this election than the right. NZ First's entry into parliament this time, if one were to take the polls as an indicator, seems to have taken votes from Labour more than National, and Labour also shed a lot of votes to the Greens this term.

Labour certainly has problems, and in my opinion this is due to a few factors. First, you have people on the left that seem to be voting more strategically than the right. Their constituency also includes people who are far less likely to vote because of their socioeconomic background, which is a problem that Mana also picked up heavily this election. This bleed to the Greens has made Labour look as if they are weak, when really there is still a large proportion of left votes which had National biting their nails to the very last minute, or as Stephen Joyce remarked, he was like a cat on a hot tin roof. Second, you had the dominance of the economy as a key issue this election, rather than issues like Health or Education which tend to favor Labour. The Herald surveys leading up to the election showed that for 50% of voters this was their biggest issue, and this favored the incumbent. Communicating budgets to a population is in some ways a hard sell, particularly if you are the opposition. This was made even harder due to the highly publicized moments where Cunliffe and Goff struggled to remember their numbers on television - never a good look going into an election. The battle that Labour faced was exemplified in the Mood of the Boardroom debate for those who saw it - Cunliffe flicking through power points at the speed of light with figures and graphs, while English managed to write his whole argument off in a sentence by saying that for Labour, overspending is habit.

This focus on external economic movements led to some of the most painful debates I have ever seen on the economy as people struggled to explain what is going on in the Eurozone. Usually this was accompanied by an overload of simplification that distended Europe from the domino effect of the US that began the problems and their historical engagement in warfare that to a large extent has led to the current countries being at the top, or the globalization of labour that since the 1970s has hollowed out the manufacturing industry in so-called 'first world nations' so that they can be undercut by the race to the bottom for cheap labour in developing countries. It is really no surprise what is happening now: the writing has been on the wall for so long. As early as 1898, US Senator Albert Beveridge was boasting that America was creating more than it could ever consume, and this got worse during the post-war boom of the 1950s, which saw the beginnings and development of a globalized production of labour that would then create the conditions for the last three decades of overconsumption in the west. The idea that things can be simply ideologically divided between what is best for the economy simply does not make sense to me - one only has to look at the effect that David X Li's faulty equation of the Gaussian Copula function for risk and its impact on the sub-prime market in the US to see that there are ideas on both sides that fail. As far back as 2009 economists like Robert Wade from the London School of Economics were signaling problems in the over concentration of wealth in the top 10%, creating figures that correlated to those preceding the Great Depression. While it doesn't necessarily make sense to draw lines in the sand, it does make good election politics in an environment where both parties are trying to differentiate themselves from each other, and in this case it clearly favored National.

So National might be the winners on the day, but they are entering tough times and this may not benefit them in 2014 in the same way as other concerns for voters begin to be exacerbated by the economy over the next few years. We are riding on the Asian markets at the moment, but China has a drop in manufacturing caused by their export markets and has rising insecurity problems due to social unrest. At the same time, however, they have announced a $1 trillion investment into green tech even though they appear to be a little ahead of the wave with Buffett not doing as well on his green tech cars just yet. The Eurozone is looking increasingly fragile, potentially only having days, with the British government warning their citizens in places such as Italy and Spain to prepare for riots. Just a couple of weeks ago we had the US Fed issue more than a 50% chance of a double dip. The US is currently extending its huge military budget towards looking increasingly at securing regional dominance against China. While we are protected from this somewhat in New Zealand, if we have a drop in commodities or our property prices things are not going to be so easy, and at the very least we will be looking at slow growth. It is definitely not an easy time to be riding the giant elastic band, and could give Labour a chance to rebuild and take the election in 2014. That is, if they manage to recover from losing some of their good MPs this time around who were placed too far down the list.

7 Comments:

At 1/12/11 10:27 am, Blogger Gosman said...

You keep drawing an analogy with the Great Depression and the fact that the concentration of the wealth recently is pretty much the same as it was back then however you don't then go on to say how this causes economic problems. Just because the rates might be similar doesn't mean the situations are identical and the outcome will be the same. In short you are mistaking causation with co-relation.

The trouble with traditional left wing solutions to economic downturns is that they tend to be based around the idea of consumption led growth. The economic problems the world face are less to do with a lack of consumption but more to do with a surfeit of debt. You don't tend to resolve debt by encouraging more spending.

On top of that is the issues that Globalisation has brought. It is now inconceivable that the world could return to a situation where countries protected their strategic industries from competition from other nations. Cross border ownership means that these inductries are far too integrated to be protected. This means that there is now a two speed global economy in place. Those who have the Global skills in demand and those that don't. If you are in the second group then you will have a particularly tough time over the next few years.

 
At 1/12/11 12:46 pm, Blogger dave said...

I think the point that Key, no matter how he fooled NZers into selling assets, is sitting on a global time bomb, not to mention the rise of OWS, is the main one. I would add that Labour is no longer a vehicle for social protest, it's part of the problem. OWS is taking over that role, and at the same time, internationalising it, so we are seeing a global paradigm shift in the class struggle from parliament to the streets and squares. http://redrave.blogspot.com/2011/11/aotearoanz-end-of-parliamentary.html

 
At 1/12/11 2:43 pm, Blogger Phoebe Fletcher said...

Gosman, obviously in this kind of word count I don't have a chance to state my entire views on the economy. And I do remember stating very clearly that both sides had problems, so I don't know why you jump always to a left versus right wing problem. I do agree with you on the globalization creating two groups though. I only had time to mention a couple of factors.

 
At 3/12/11 8:15 pm, Blogger Frank said...

"The economic problems the world face are less to do with a lack of consumption but more to do with a surfeit of debt. You don't tend to resolve debt by encouraging more spending."

No, not more spending - but a better sharing of wealth would definitely help.

We have a consumer society where people are expected to spend, but many don't have the incomes. So they borrow. Eventually that debt becomes unamanageable.

(I've pointed this out before to you, Gosman.)

At the same time as low and kmiddle income earners are squeezed, high income earners accuimulate more weath. (See the NBR story about top 150 familues in NZ increasing their wealth by TWENTY PERCENT, whilst the rest of us stayed still.)

Yet, there's no pointr in the wealthy accumuluting more, whilst the rest of us stand still. he rich can't eat more; can't wear two sets of Armani suits, or drive two sport cars simultaneously.

You may be interested in this simple graph that illustrates how incomes have not kept pace with increased productivity: https://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday

That is why neo-liberalism is a failure. Like Soviet marxist-leninism, the benefits generally accrue to a privileged few.

 
At 4/12/11 3:24 pm, Blogger blueleopardthinks said...

Debt is also a symptom, not a cause.


Take a look at derivative markets and the regulations that were removed around 'The Reagan Era' if you want to look at some causes.

The depression is a good parallel because similar problems caused by similar activities amongst corporate organizations were occurring then. Regulations were put in place to address the problems and were removed at the time of and around 'The Reagan Era.'

 
At 5/12/11 9:13 am, Blogger Gosman said...

The problem with Europe is with Sovereign debt in mainly the Southern European countries. Deregulation in Anglo-Saxon economies like the US or the UK had little or no impact on Sovereign Debt in say Greece. Greece's debt problem is because it spends more money as a Government than it earns in revenue. Italy is slightly better but it still overspends against it's revenue. Nothing to do with regulations.

Frank, I have responded to your mistaken belief that you can increase the wealth of the less well off in society by taking from the wealthier and not suffer any negative consequences on your blog. The point being if it worked serious people would now be implementing these policies in Europe.

 
At 5/12/11 5:56 pm, Blogger blueleopardthinks said...

Re Gosman's comments:

I have no knowledge of Greece or Italy's economy, yet it appears that you are suggesting that these countries are not affected by the activities of any other countries'?

I find this hard to accept because I am aware that any given country's economy worldwide is now effected by all others,' due to the interconnected nature of our business activities, currencies, world markets etc.

As I understand it, it is very hard for one country, president, prime minister or even dictator to initiate effective policies within their own country because this affects a chain reaction in other countries and those with huge capital to lose with regard to these effects are discouraging such decisions from eventuating. ( I do not mean this as a conspiracy, simply as a scenario arising out of a knee jerk self interested response) That I expect such influences are occurring, and are doing so in broad daylight unchecked, makes your comment "...if it worked serious people would now be implementing these policies in Europe" sound a tad naive to me.

Increasing the wealth of the less well off in a country is a technique that has been proven historically to work, however probably won't suffice as a cure; capital needs to be directed toward productive activities and away from unproductive ones. The two approaches together probably would work, and serious people are suggesting policies to effect this, yet I suspect that others with serious wealth to lose are successfully (to date) discouraging it.

 

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