'The Nation'
Oliver Hartwich
Interviewed by RACHEL SMALLEY

Rachel When our next guest left the UK to take up a new job in Australia, then Conservative MP David Cameron remarked, the sooner he gets on the ship the better. Economist Dr Oliver Hartwich has critics and fans who've closely watched his work at Britain's leading think tank, the Policy Exchange, and more recently at the Centre of Independent Studies in Sydney. He's now in New Zealand to head up the New Zealand Initiative, a merger of the Business Round Table and the New Zealand Institute. And after his first week on the job he joins us now in the studio. Welcome to the programme Dr Hartwich. It's quite an interesting merger, two very different beasts. Why do you think they’ve brought you in, is it because for example you may have a blank slate when it comes to New Zealand?

Oliver Hartwich – New Zealand Initiative Executive Director
I think they were looking for someone with a sense of humour so they couldn’t go past a German of course. But seriously the organisation, I mean it's built on the legacy of two existing organisations, the Business Round Table and the New Zealand Institute, but the idea was really to form a new initiative, and that’s why it's called the New Zealand Initiative, and it's built to really promote policies that promote good policies for all New Zealand, for all New Zealanders. We're basically showing the same visions whether we're standing on the left or on the right, it doesn’t really matter too much, we all believe in sound economic management. Nobody wants to see high inflation, no one wants to see high unemployment. We basically believe in the same things, and we're trying to actually promote policies that work for the whole of the country.

Rachel Well as you know we're focusing much of this morning on policy and the future of the right if you like, and I'd like to tape into your global knowledge of economically and politically of Europe. If you look at Angela Merkel, if you look at David Cameron, if you look at Nicolas Sarcozy to a lesser degree, Silvio Berlusconi, leaders that we've always historically associated with the right, are they coming more central, they're edging every closer. Why are they moving away do you think from the traditional policies and economics of the right?

Oliver Well I think the whole political spectrum is basically converging towards the centre, it's not just a thing that you will see on the right, you actually see it on the left as well. I think we have seen quite a bit of a conversion in the last 20 years globally. So you’ve got the traditional left wing parties moving closer to the centre, traditional right wing parties moving closer to the centre, because in the end they're driven often by opinion polls, by focus groups, by short termism, and they're really trying to just grab the issues of the day and politics I think has become much less ideological after the end of the Cold War, and I think that’s probably seen in many countries around the world including of course most European countries, but I think I've seen the same in Australia, probably also New Zealand, but I've been too short in the country to give you …

Rachel Is that because we're moving away from fundamentalism, more towards a political realism do you think?

Oliver Well look I think the old left right dichotomy doesn’t work anyway, because it is actually a concept that goes back to the French Revolution. Okay nobody drives any more in the horse drawn carriages, or writes with quills and feathers, so I think we should leave that alone, we should put it to the museum, because these left right discussions don’t really get us forward any more.

Rachel I want to touch on something that in 2009 Kevin Rudd wrote in Australia, and we argued that the global crisis was in essence the result of a failure of 30 years of neoliberalism, that it was an experiment he said that had failed. He's one of many who say that neoliberalism is dead, where do you sit on that?

Oliver I actually responded to Kevin Rudd at the time, I wrote a little paper for the Centre of Independent Studies on neoliberalism, where this word actually comes from. If you actually look at the history of the word neoliberalism, what it actually meant in the 1930s when it was invented was a third way, somewhere between Communism, Socialism, and a complete free market, and I think this term neoliberalism has developed a life of its own, but I don’t think it quite encapsulates what's really happening. I'm an old Liberal, I'm not a Neoliberal, I really believe in individual freedom, I believe in policies that work, I believe in empirical research driving policy making. I think these real stigma and dogmas will get us any further in political debates any more. I think we need to move beyond that.

Rachel Well when you look at what staunchly would be a belief of the right is that it's the role of the state and how much the state should be involved, and economic liberals would argue that they should have less involvement. But then when you look at the crisis and you look at what happened with the freeing up of financial markets, and the deregulation of banks, and the wild speculation that followed, it was then the state across the world that had to step in wasn't it and bail out these banks. It's a difficult argument to make surely, that the state should have less of a role?

Oliver Well you can make this argument actually if you are doing good empirical research. I just recently reviewed a book written by Vito Tansi who is probably one of the world's leading experts on fiscal policy, and he and his colleague Lukna Schutnisch of the European Central Bank did a lot of empirical research into government spending, and found actually that beyond a certain level of government spending you do not actually improve social results any more. I mean we all want to see a good health system for example, we all want to see good education, but the question's really does the state have to spend every more to improve the results, or is there a certain cut off point from which extra spending actually doesn’t deliver any more, and the results which Tansi and Schutnisch came up repeatedly in their studies was always the same, beyond a certain level and it's probably around the 35% of GDP mark of government spending, you do not actually improve the results. There are very little exceptions to the rule, maybe the Scandinavian countries, but that’s a special case.

Rachel So you're saying with smaller government, smaller involvement from the state you can have that without jeopardising your social and economic goals?

Oliver Absolutely because for some social goals that you want to reach you don’t actually need government, you can actually trust society to deliver these solutions themselves, and of course a lot of government spending, if you look at most developed nations, most OECD countries is tax insurance, so people are pay into the government only to get the money back in benefits afterwards, so that doesn’t really serve anyone, because whenever you get the money back from the government, first the government actually takes a bit an uses it in administration, so that is actually a waste of money, that’s a dead weight loss, and I think they can do without that.

Rachel How do you think that theory would work here though, it's a very developed welfare state?

Oliver I know and we've seen developed welfare states in other countries as well and how difficult it is to reform them. Unfortunately there is a lot of pathological learning I think happening in many developed countries, it often takes a crisis, it takes a budget crisis to really consider reforms. What my role is at the New Zealand Initiative is actually to develop policies that work before you reach a crisis point, so you can actually reform in the good days when you still have some room for manoeuvre rather than being forced the reforms when they're really painful and really tough to take.

Rachel Do you feel that sometimes parties lose their support perhaps because not necessarily their economic policy, but because of their political policy?

Oliver Well yeah I mean personality issues of course always play into things. That’s something again that you can see in many countries around the world. In the end when parties fail I'm not talking about any specific parties here of course, it comes down to personality issues. We've seen this in Europe, we've seen it in America, we've probably seen it in this part of the world as well. I think we have seen a great degree of convergence really between the major political parties. I recently read an article in a German news magazine saying that the difference really between the hard left and the hard right in Germany is 5% of income tax.

Rachel I mentioned as much before.

Oliver If you're looking as personality issues I mean one of the reasons now why Sarcozy will probably lose tomorrow's presidential election in France is not so much because there's so much difference between the two candidates. Actually if you look quite closely they're quite similar, they're both lawyers, they're almost the same age, they went through the same schools and lived in the same suburb in Paris, but really because Sarcozy's personality is turning the French voters off. So often politics becomes a personality contest.

Rachel I know that you're non-partisan in your role with the New Zealand Initiative, but with the knowledge of international politics and economics that you have, if you were to set an agenda for the right, that would ensure a party's survival and crucially that they take their electorate with them, what form would that agenda take?

Oliver Well I would never develop a platform for the right, I would develop a platform that each party can really tap into. We are going to develop policies that are open to all parties to implement. We are really driven by empirical research, we are working for policies that really work, that deliver the results that everybody wants to see, and we're happy to talk to anyone. We're happy to talk to National to Labour to Maori, Winston Peters, to the Conservatives and to ACT, it doesn’t really matter. We actually want to develop parties, we're happy to develop policies, and we're happy to talk to every single political party that is willing to listen to us.

Rachel Do you think there's a need perhaps when you look at what's happened in Europe, and everyone to a lesser degree in the States at the moment too, with Mitt Romney. Do you think there's a need for the right to have some form of ideological overhaul, reforms at the very least? Is that how it can ensure its survival?

Oliver Maybe we should see a first light return of ideology in political debates anywhere, because what I actually miss from political debates is some clear divisions. We have this convergence to what is centre. What's really missing are debates, real passionate debates really based on principles not just on opinion polls, not just based on some focus group polling. I think the times when we actually had debates between people who believed in a more planned economy and other people who believed in a more free economy, I think that they're quite healthy for democracy. When democracies converge on the centre ground, political debates become quite stale, they become personality driven. I would actually like to have real debates upon policy.

Rachel In your opinion how does the equation work? Do good economics follow good policy, or do good politics follow good economics.

Oliver Well unfortunately many times it doesn’t quite. I mean that’s a whole branch within economics, actually explaining why that is so a public choice economy, it explains why politicians often choose policies that no economist would recommend. I mean most economists these days I would say probably 95% of my profession believe in free trade, and yet we still have terrorism in place that no economist would recommend, and then it is just politics that explains why we still have these remnants of bygone ages of protectionism. And unfortunately good politics does not always equal good economics. So again it is the job of think tanks like ours to actually promote policies that work and make them kind of feasible to politicians and easy to apply.

Rachel Right, Dr Oliver Hartwich the Executive Director of the New Zealand Initiative. We very much appreciate your time, thank you.

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