TCS Daily

Inertia and New Zealand

By Rowan Callick - October 25, 2005 12:00 AM

Voting systems often work well at delivering the outcomes that they are tailored to achieve. New Zealand is discovering this right now. It took four weeks, after its September 17 national election, for a new government to be formed. And then, it was virtually the identical centre-left regime that had ruled the country for the previous six years -- despite a strong shift to the centre-right at the election.

But the Labour party government -- which prides itself on its multilateral, multiracial and free trade credentials -- was obliged, to ensure a parliamentary majority, to suffer a burr in its saddle: a maverick foreign minister, Winston Peters, who is anti-Asian immigration, anti-free trade and anti-foreign investment.

New Zealand, a country of just 4 million people, adopted a decade ago the Mixed Member Proportional voting system introduced in Germany after World War II. This system reflected a response to the manner in which Germany's embryonic democracy had been hijacked during the 1930s. It was refined legislatively in 1956, and has since been adopted in scattered parts of the world: Bolivia, Venezuela, Hungary, Scotland and Wales as well as New Zealand.

Their parliaments are formed half from single member geographical constituencies, half from party lists. Thus electors are given two votes accordingly. The intention is for the overall representation to reflect the proportionality of party support.

The system was designed to prevent dictatorships, but also restrains decisive results or decisive governments. It should be no surprise that it has worked to this effect in both New Zealand and Germany, where its election the day after New Zealand's produced a similarly highly circumscribed mandate for the lowest-common-denominator coalition that has emerged, linking the Christian and Social Democrats in unholy wedlock.

Eighty per cent of voters in New Zealand supported the two main parties, centre left Labour and centre right National. This marked a big advance on the 62 per cent who backed the two mainstream parties last time, in 2002, due to an extraordinary doubling of National's vote, thanks substantially to the plain-speaking leadership of former central bank governor Don Brash. And the turnout of eligible voters rose slightly, to an impressive 80 per cent, compared with 60 per cent at the 2004 US presidential election.

But although the minor parties -- including the Greens, down a third -- virtually all lost significant ground, their power in the formation and operation of a new government was greater, since Labour and National are so close. The former won 41 per cent of the vote, the latter 39 per cent.

The result will be a form of inertia -- just what those New Zealanders wanted, who persuaded National Prime Minister Jim Bolger to hold in 1993 a referendum on MMP, alongside a national election. Politicians of both main parties had over the previous decade transformed New Zealand from a highly protected, sleepy agrarian socialist backwater, into a dynamic pioneer of deregulation and economic openness, a model that the World Bank urged developing nations to follow. A wide range of interest groups whose state-protected privileges were being discarded or eroded by this process, found in changing the electoral system a brilliant means of clawing back some of their authority.

Their revenge on the reform era from the mid 1980s to the mid 1990s -- not New Zealand's first; it was founded as a form of utopia and had pioneered the women's vote and the welfare state -- was to introduce MMP, to require any future government to be constrained by needing to placate coalition partners, effectively ruling out further radical reform.

This might not be so disastrous in an economy that handles well on autopilot. But New Zealand is a small country which is unusually open, for the best reasons, to global chops and changes. Particularly now, as growth is trending down, it needs sound management and a resumption of micro economic reform in order to remain truly competitive and to regain its gross domestic product per capita ranking in the top half of industralised countries.

Labour's Michael Cullen, who will continue as Finance Minister, is indeed sound. But he produced a lacklustre budget five months ago, and his party provided negligible ideas for accelerating growth during the election campaign. And the government, still led by Prime Minister Helen Clark, is likely to provide an even less convincing agenda for renewing New Zealand's economic vitality.

The Clark Labour government will rule through what Clark calls "working relationships" -- support in key parliamentary votes -- with the leftist Greens, and with the eccentric, centrist parties New Zealand First and United Future. Clark had, however, to hand out portfolios to the leaders of the latter two parties, Peters and Peter Dunne, who takes responsibility for revenue - though both stay, oddly, outside the Cabinet. Peters has twice been a Minister before, in National led governments, and was twice sacked for disloyalty.

While the 2 million voters in New Zealand shifted to the centre right at the election, a further 10 per cent, absentee voters, chiefly New Zealanders now working overseas, clinched the outcome by remaining more loyal to Labour and the Greens. Among the strongest elements of those parties' campaigns were their insistence on maintaining the legislated ban on nuclear powered and armed vessels -- which triggered the collapse of the country's longstanding alliance with the USA and Australia -- and on affirming its pioneering, and costly, introduction of a carbon tax to underline its eager ratification of the Kyoto Protocol.

National's Brash -- just three years a politician -- brought his party back from the brink of extinction, chiefly through offering big tax reductions. A ubiquitous bill board during the campaign showed Clark beneath the word "tax," and Brash beneath the word "cut." Brash pointed out constantly that the income gap between the average New Zealander and the average Australian has doubled in the past five years, to $US 7,200 a year, luring every week 650 Kiwis, including some of the most skilled, across the Tasman strait on a permanent basis.

Substantially thanks to MMP, this migration will continue.

Rowan Callick is Asia Pacific editor of The Australian Financial Review.


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