>Interesting critical discussion of how structural adjustment programs are
>defended in terms of undermining Mancur Olsonian "distributional
>coalitions" that impede growth. Mancur Olson's ideas about rent seeking
>are seen to be the basis of the new political economy. Underlines that
>organized labor is considered a key member of such growth undermining
>distributional coalitions
>
>BD also calls attention to the functionality of crisis in implementing key
>parts of structural adjustment.
No kidding. Here's an excerpt from Jane Kelsey's book The New Zealand Experiment: A World Model for Structural Adjustment? (Auckland University Press/Bridget Williams Books, 1995), on just that topic - and that touches on the virtues of having a social democratic party do the dirty work (Cardoso the ex-Marxist in Brazil, Keating the Labour Treasurer in Australia, etc.).
Doug
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CHAPTER TWO Capturing the Political Machine
CONDITIONS IN NEW ZEALAND in 1984 may have been conducive to fundamental economic change, but structural adjustment, as distinct from pragmatic reform, required something more. There had to be a systematic programme, carried out with precision and discipline by a group of strategically placed individuals, and supported by institutional power.
A 1993 colloquium, sponsored by the Washington-based Institute for International Economics (IIE), examined the political factors that made the implementation of structural adjustment possible in a range of developing and advanced capitalist countries, including New Zealand.' The goal of the IIE's colloquium was to devise a manual for technocrats (defined as 'those who advocate organisation and management of a country's industrial resources by technical experts for the good of the whole community')' and technopols (technocrats who have assumed a position of political responsibility) involved in implementing structural adjustment programmes.
The IIE study tested a number of hypotheses formulated by its convenor John Williamson. Societies, he suggested, have a natural tendency to become sclerotic and their flexibility declines. When a major crisis occurs within the existing system, it creates new opportunities for actors who until then have been prevented from taking the initiative. Where a crisis does not occur 'naturally', it might make sense to provoke one to induce reform. The most effective time for the reforming government to act is the honeymoon stage immediately after taking power, when the need for, and costs of, reform can be blamed on previous governments. Alternatively, the reforming government could seek a mandate and disclose the agenda in an election campaign. The problem of sustaining the changes until they bear fruit might be overcome by deliberately creating a group of beneficiaries likely to fight to protect the reforms. Structural adjustment is likely to be easier where the opposition can be discredited and disrupted, or repressed.
Successful implementation, according to the hypothesis, also requires a team of technocrats who have a common, coherent view of what needs to be done and who command the instruments of executive power. They need a leader with a vision of history who is unconcerned about the political or personal fall-out from radical and unpopular reform, and who will preferably be a technopol. Rapid and comprehensive reform will be more appropriate in some situations than others. Because 'theoretical merit and internal consistency in a reform programme are not enough to generate political support', those who implement the programme need to appeal to the general public through the media, and bypass vested interests (such as unions) which can be expected to oppose change.
Williamson's review of the twelve case studies strongly supported three of these hypotheses: the need for a strong political base, visionary leadership and a coherent economic team. The possibility of exploiting crises or honeymoons, and the importance of developing a comprehensive programme, occurred frequently enough to justify being 'borne in mind'. Profound economic reforms, he noted, need not be the product of authoritarian governments, but could be achieved by democratic governments, sometimes from the left of centre.
Preparing the ground
The New Zealand experiment was a model of orthodoxy in Williamson's terms. The unstable political and economic conditions in which the 1984 snap election was called seemed almost scripted to facilitate urgent and radical change. Some believe that Roger Douglas deliberately precipitated the crisis when he 'accidentally' released a background paper several weeks before the election saying that Labour would devalue the currency by 20 percent.' David Lange subsequently confirmed the significance of the crisis for the structural adjustment programme:
"The circumstances of those first few days in government gave Roger the opportunity to do what he had always wanted to do anyway, But he wouldn't have been able to do that had we gone through the orthodox routine of an election in November, then a budget in June.... When the crisis hit in July 1984 it was Roger Douglas who, above all, had thought through the economic issues-so when the Cabinet needed to fall back on an economic philosophy, it was Douglas who had one."
Douglas operated as a classic technopol, committed to the project irrespective of the electoral consequences. Although Alan Bollard suggests that Douglas had no long-term commitment to a political career, his distaste seems to have been more for democratic process than for political power. He was heavily influenced by, and dependent on, his economic advisors, and probably had a less systematic and sophisticated understanding of economic issues and the overall programme than at times was made to appear.
Douglas had a strong Labour pedigree. His father and his maternal grandfather had been Labour MPs. In 1993 he still claimed: 'My political beliefs and my general philosophy of life are all products of that Labour line." But his approach to Labour politics had always been unorthodox. Back in 1971, the accountant-turned-politician had called for the abolition of double taxation on company profits, the abandonment of various state activities, and the establishment of an efficiency measure similar to the private sector yardstick of profit. Douglas carried these objectives into the 1972 Labour government. As a junior minister, he divided the then New Zealand Broadcasting Corporation into three competing state-owned enterprises and introduced an income-related contributory pension scheme. Concerns over the state's accumulation of such a large superannuation fund were exploited by Muldoon to help the National Party win the 1975 election. Labour and Douglas were returned to the opposition benches.
He refined his emerging vision in a paper prepared for the Labour Party in 1979, but it made little impact. Dissatisfied with Labour's direction, Douglas unilaterally issued an alternative budget in June 1980, expanded in his first book, There's Got to Be a Better Way!" This break with party discipline, coupled with his role in the unsuccessful attempt to replace Labour leader Bill Rowling with David Lange, saw him dropped from the shadow cabinet in 1980. With some reluctance, he agreed to stand again for election in 1981.
Labour lost that election. Douglas, assisted by a handful of other Labour MPs, several leading businessmen, an economist in the Opposition Research Unit and a Treasury official seconded to his office, set about preparing an economic blueprint for Labour's re-election in 1984. At this stage Douglas's vision became more concrete, although he depended heavily on his advisors. The team produced a 51-page 'Economic Policy Package' which sought to reduce the role of the state in the economy and foster the operation of domestic and international markets. Their strategy promoted detailed fiscal, monetary and price-income policies, radical changes in export assistance, employment, tax and industry support, and 'fairer distribution of the country's wealth' mainly through more precise targeting. According to Douglas, the package contained 'every step subsequently taken by the fourth Labour Government when it was elected to office'." Some have suggested that, '[i]n the lead-up to the elections, bureaucrats from the Treasury and the Reserve Bank assisted this group and their party beyond accepted norms'.
When Douglas placed his 'Economic Policy Package' before the Labour caucus and the party's policy council in 1983, in effect he asked them to turn their back on what the party stood for. This was a classic confrontation between the defenders of welfare capitalism and corporatist democracy, and the disciples of neo-liberalism and market forces. The caucus and policy council first considered the package in November 1983. Douglas claims they were split. Their position by the time the snap election was called in June 1984 remains unclear. Some say the policy was unresolved. Others, including Douglas, argue that there was a deliberate muddying of future intentions.
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The honeymoon
Labour's 1984 pre-election policy statement had promised 'a more democratic approach to economic management', including summit meetings on prices and incomes and on employment. The government made a show of consultation in its first few months, convening a multi-sectoral economic summit conference at Parliament in September 1984. Australia's Prime Minister Bob Hawke had made a similar move the previous year as part of Labor's 'Accord' to gain support for a more gradual and pragmatic programme of economic reform. Many New Zealanders assumed their Labour government was following the same path. The summit proceedings resounded with talk of unity and selfsacrifice. There were calls to maintain the pace of reform, with participation by all sectors at all levels in public decision-making, and on-going consultation and distribution of information to build on the new-found spirit of co-operation.
Whether the summit was a deliberate smokescreen or reflected a genuine desire for participatory decision-making by some within a divided Cabinet remains unclear. Douglas initially denied that it was a stage-managed affair, but did admit 'it was designed to dramatise the problems of the economy to the nation and create the right climate for change' leading up to his first budget. After his retirement and Labour's defeat in 1990 he gave a more forthright, if retrospectively tinged, explanation. In a speech to an accountants' conference where he attacked the practices of lobby groups, Douglas stated that '[b]lunting their power was the real role of the summit conference in that year'.
By giving them nationwide television exposure, in a sense, we put them on public trial. Under such a spotlight they had enough sense to realise that if they persisted in seeking their own selfish, short-term interest at the expense of the wider community, then they would instantly lose the support of the public.... Having forced them into a commitment to put New Zealand first, or at least publicly to do so, we used the 1984 budget to hit the privileges of all the interest groups at once.
The economic summit epitomised the honeymoon period of 'consultation with no real action'. That continued through 1985, and into 1986 with the establishment, under protest from the Treasury, of a Royal Commission on Social Policy. Consultations with Maori followed a similar line. A hui (meeting) to discuss Maori concerns and treaty policy was held at Ngaruawahia in October 1984, followed by discussions at Waitangi in February 1985. But inexperience, arrogance and the primacy of the structural adjustment programme saw any commitment to dialogue with Maori quickly fade. The general appeal of consultation soon worn off. People recognised that the rapidly accumulating economic changes bore no resemblance to the views being so assiduously harvested from their communities. The pretence largely stopped.
The blitzkrieg
The honeymoon phase, and the sense of economic crisis, gave the technopols the breathing space to get the programme under way. By early 1985 they were firmly in control, and began moving as far and as fast as the few institutional constraints allowed. Easton has called this the 'blitzkrieg' approach: 'In each case the lightning strike involved a policy goal radically different from the existing configuration, to be attained in a short period, following a surprise announcement and a very rapid implementation. ' Critics and opponents were always on the defensive and left debating last week's reforms. The major decisions would already have been taken; any consultation was limited to details. Bollard suggests that even faster implementation was constrained by the speed at which the technopols could work, not 'by any self-imposed requirements to consult with industry, or other groups, or by major concerns about correct sequencing'.
Douglas used this approach equally with the general populace and with his Cabinet colleagues." Speaking to the Reform Party convention in Saskatoon in 1991, he reportedly explained: 'consensus for "quality decisions" is achieved after they are made. He advised them not to reveal their program-but if elected, to implement it as quickly as possible to overwhelm the opposition."' Douglas offered similar political lessons to would-be structural adjusters in his 1993 book Unfinished Business:
* Do not try to advance a step at a time. Define your objectives clearly and move towards them in quantum leaps. Otherwise the interest groups will have time to mobilise and drag you down.
* Once the programme begins to be implemented, don't stop until you have completed it. The fire of opponents is much less accurate if they have to shoot at a rapidly moving target.
* Consensus among interest groups on quality decisions rarely, if ever, arises before they are made and implemented. It develops after they are taken, as the decisions deliver satisfactory results to the public."
As for consultation, Douglas observed: 'People cannot co-operate with the reform process unless they know where you are heading. Go as fast as you can but, where practicable, give the community notice in advance.'
Treasury's 1984 post-election briefing papers had a similar two-stage view of 'effective' communication. 'First, before any major decisions are taken there is often a need to develop a constituency for the proposed policy change.' Where a policy area affected a range of interest groups a broad consultative process might be constructive - provided it was 'carefully handled to avoid encouraging the belief amongst particular sector groups that consultative processes will provide a vehicle for furthering their particular interest'." Second came the need to publish analyses which justified policy decisions already made. Both stages sought to impart information and bring important interests on board, not to consult them about the nature and direction of change.
Despite this highly undemocratic approach, the media rarely held the new government to account. Muldoon had been notorious for his intolerance of public debate, media scrutiny and investigative reporting. journalists were regularly subjected to intimidation and ridicule. The ascent of Lange, Douglas and the Labour government in 1984 was enthusiastically embraced by the media. Many journalists were seduced by the glamour and excitement of the pre-crash bonanza, and some turned into little more than sycophantic propagandists for Rogernomics. 'State of the market' reports and economic updates became regular features of evening telecasts. Specialist business journals like the National Business Review (NBR) moved (unsuccessfully) to daily publication. The NBR became an important vehicle for the ideologues to attack obstacles, denounce critics, float new ideas and prepare the ground for the next round of change. At the same time, however, the NBR provided an important source of information to outsiders about the current thinking of the inner élite.
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