Upton-on-line Die Neue Mitte und die Alte Clark

As upton-on-line goes to press, the Prime Minister is winging her way to what must be the most exclusive talkfest in the world. On June 2nd and 3rd, Berlin will play host to a galaxy of political leaders gathered to talk earnestly about Modern Governance in the 21st Century. They will engage in weighty debate in public for three hours. But the real sanctus sanctorum will be the closed conclave with academics and experts!

They are members of something called "The Group for Progressive Governance" and there is nothing modest about their aims. In the words of their most celebrated member, President Bill Clinton, they are "striving .. to replace a divided way of looking at politics and talking about our common lives with a unifying theory."

On the face of it, this is a rather strange way of putting it. After all, the last century saw more blood spilt in the cause of unifying theories - Marxist and Fascist - than in all the rest of history. But this is the city of Frederick the Great and Leibnitz as well as Hitler and Ulbricht. The unifying theory they are after will be noble, uplifting and ... well, terribly, hard to grasp (like one of those little cherubs floating on the rococo ceilings of the Sans Souci in nearby Potsdam).

We were treated to a dose of this theorising prior to last year's election when Steve Maharey started to talk in tongues. The third way - he gushed - was all about "the search for a new political terrain" which, if I remember right included pleasant parks, public buildings and "the search for a model somewhere between the US and the Rhenish/institutional systems".

I'm sure Helen Clark will find plenty of pleasant parks and public buildings in Berlin but I'm not sure what else. Because the Third Way - which, like the Second Coming, is mysterious enough to command Capital Letters - is a creed for political eunuchs. It is intellectual candy floss that melts in the mouth and mushes in the mind.

Now if there's one thing Helen Clark is not, she's not a political eunuch. She's a very tough-minded, intellectual lady and she's going to the wrong meeting. Third Wave politicians are riding a completely different wave from the Clark-Anderton establishment.

Mr Maharey aside, New Zealanders haven't been exposed to too much Third Wave rhetoric. It is the Left's response to the collapse of its world view in the 1980s when market liberalism swept away governments of the left - democratic and communist. People like Tony Blair watched with dismay as the old Left was impaled by Thatcher who connected with the people against the unions and other vested interests with whom old Labour was allied. The old certainties evaporated.

The new generation social democrats had to wait a long time to take over - the British Tories lasted 17 years, Chancellor Kohl's Christian Democrats, 16 years. When social democrats were finally let back into government it was because they had reformed, discarded their socialist dogma and negotiated a modus vivendi with business. They acknowledged markets. They accepted that governments were much less powerful. They were modern and enjoyed being lionised by business.

Let's take a look at the some of the things Clark's third wave colleagues have been up to:

Tony Blair, Labour Prime Minister of Britain since 1997

Blair swept to power emphasising his distance from old Labour, his personal admiration for Margaret Thatcher and a preparedness to "think the unthinkable" on social policy. Privatisation has continued apace - a large part of the London Underground, the air traffic control system, the Royal Mint and the Commonwealth Development Corporation to name a few. The Post Office is being corporatised and readied for possible sale. Most radically, Blair's government is allowing private contractors to take over the running of schools where local (labour-controlled) education authorities are failing. Education Secretary David Blunkett has said there is nothing wrong with companies making a profit from education services.

Bill Clinton, Democratic President since 1993

America's mainstream left has never had the ideological fervour of the Europeans. But their welfare efforts from F D Roosevelt onwards were as expansive as anyone's. Hence the shock to many when Clinton lined up with the centre right and signed the Personal Responsibility & Work Opportunity Act of 1996 which introduced new work tests and limited lifetime benefits to 5 years of entitlement per family.. It also ended a 61 year old programme of aid for families with dependent children. Over half the recipients were expected to be back in work by 2002 with fiscal savings of $60 billion. All of this was softened with tax cuts for working families - exactly Jenny Shipley's formula during the 1990s.

Lionel Jospin, Socialist Prime Minister of France since 1996

Jospin has played the regretful surgeon role in privatising swathes of French industry. An Economist article in June last year noted that between 1986 and 1996, right-wing governments privatised FFr200 billion of state assets. In just two and a half years, Jospin managed to sell off FFr180 billion.

Gerhard Schroeder, Social Democratic Chancellor since 1998

Schroeder started off firmly on the left foot with Oskar Lafontaine as his finance minister. The collapse in economic confidence paralleled what has happened in New Zealand. Schroeder's fortunes picked up when Lafontaine was forced to resign giving the government a more moderate image. CDU scandals helped take the heat off. Now there is speculation that he will team up with the liberal, centre-right FDP and jettison the Greens . The Third Way for Schroeder has a distinctly right-veering kink in it.

Antonio Guterres, Socialist Prime Minister of Portugal since 1995

Privatised state owned Telecoms, Steel, Cement, Fertiliser and Roading companies. Also privatised Tabaqueria - the state tobacco monopoly. In NZ terms it's a bit like privatising the TAB!

Fernando Cardoso, President of Brazil since 1995

President Cardoso's contributiom to Third Wave politics has been to liberalise foreign investment laws leading to record levels of foreign direct investment. He has moved to increase labour market flexibility and sponsored a series of major privatisations spanning Telecoms, steel, utilities, banks and mining companies.

Now it's true that not all of those gathered together in Berlin have such brave records. Goran Persson of Sweden has presided over a pretty familiar left wing formula but now he has the books in better shape even he is talking about broad personal tax cuts as well as relief from wealth and capital taxes. (He is, according to the Financial Times authoritarian and accused by some commentators of running the country like a town mayor.)

In truth, these politicians don't subscribe to a "single unifying theory" of the Third Wave. They've been privatising with a vengeance. Like most politicians everywhere they like being in power and they want to be liked. If there is a common thread, it's that most of them realise that left wing parties can't ignore business and can't raise taxes to the point productive and enterprising people give up and leave.

And that's the message Helen Clark and her team completely missed. They are deeply embarrassed by the fact that the New Zealand Labour Party's conversion to market economics was the trailblazer that led to people like Tony Blair (enthusiastically) and Lionel Jospin (reluctantly) embracing a liberal market economy. They are determined to make good the ideological treason they committed in the 1980s. Visit the Young Labour website and you will read about rank and file labour supporters who are proud that the new government isn't Blairite.

Clark has openly declared that "neo-liberalism" is dead. She and Michael Cullen came to office believing that business had had the government's ear for long enough. They were going to listen to other audiences. She is now learning what that disdain for the wealth creation process can do - collapse business confidence in the middle of a strong growth cycle. It's almost unbelievable that they can have let things slip as far as they have.

Since coming to office the Government has:

* Raised taxes on the wealth creators * Re-nationalised accident cover * Called off any further privatisations * Started the re-regulation of the labour market with an Employment Relations Bill stacked in favour of union power * Halted further tariff reductions * Rolled back devolution in education by abolishing bulk funding of schools and the autonomy that goes with it * Started work on getting a People's Bank set up * Vetoed foreign investment in the fishing sector (after proposals were already received) * Cancelled plans for greater public-private partnership in the health system * Embarked on a huge spend-up on the Arts of which any European Social Democrat would be proud. * Created a new Ministry of Economic Development (Mr Anderton's "jobs machine")

This is all good old-fashioned socialist territory. There is nothing new, modish or third way about it. And you would not expect that of someone like Clark who knows her mind and doesn't need to sit around inventing new `unifying theories'.

How do we diagnose her government's position? Upton-on-line is in no doubt that Clark and her team want to change the paradigm. If there's a `model' they connect with it's a north-European, nordic model - small, rich, progressive, socially liberal and social democratic. There's just one problem. New Zealand is the last bus-stop on the planet. We're not part of the European Union. We're not part of NATO. We don't have a `home' market of 350 million of the richest people on the face of the planet. And we can't hide our inefficiencies and skill shortages the way companies in places like Europe can. [For an expanded account of this argument see How Does, and How Should New Zealand See Itself in the World? at www.arcadia.co.nz]

We have to be more competitive than anyone else. And you don't get there doing what Clark and Cullen have done. Some commentators who can't believe how fast confidence has nose-dived are pinning their hopes on the Budget. They shouldn't. In the House yesterday Cullen said:

"... the Budget will be a major move in terms of demonstrating the Government's commitment to economic industry and regional development, and indeed its commitment to fiscal responsibility."

That means some R&D grants, some regional development hand-outs and a budget that is still in surplus because the tax take is so far ahead of forecast. The Employment Relations Bill will have some changes made at the margins but they won't be anything the union movement can't live with. All in all, it's a pretty depressing formula. All we can do is take Dr Cullen's advice (see last week's upton-on-line) and enjoy the extra concerts and exhibitions coming our way.

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