45 years ago, National MPs found an unlikely saviour in the abrasive and controversial Robert Muldoon. The Member for Tamaki had already lost one leadership contest before and few expected a comeback. But a quiet campaign to win the confidence of his colleagues paid off. The following year, Muldoon led National to a stunning victory. Is history about to repeat?

In June 1974, the National Party’s Dominion Council passed a unanimous resolution endorsing former prime minister John Marshall to remain in the leadership. His timidity and consensual approach to politics had earnt him the nickname ‘Gentleman Jack’. But Marshall’s style proved no match against the larger than life personality of Norman Kirk. Yet, despite losing the popularity contest, Marshall was head of a party that retained significant support. Opinion polls had National and Labour neck-and-neck. The soaring cost of living and a housing shortage loomed large in voters’ minds. The hope and change promised by a new Labour government was beginning to fade.

With Marshall’s leadership apparently secure the press gallery was content to run the official party line: Gentleman Jack would have one last chance to face off against Big Norm.  But behind the public display of unity there was growing disquiet in the National caucus. Having spent most of the past year resigned to Opposition, there was now a whiff of victory in the air. They could win the 1975 general election. If only they had a leader who could get the measure of Kirk. But there was only one man up to the job. And he was not available.

Since the 1972 election, Robert Muldoon had been lying low. At least when it came to direct questions of leadership. He had lost to Marshall once before and would not allow himself to lose a second time. Thus, Muldoon portrayed himself as the ever-loyal deputy, keenly focused on the issues of the day, and holding the government to account. He argued policy details and administrative technicalities. What kept him up at night, he said, was not ambition for high office, but a burning desire to solve New Zealand’s economic problems. Leadership of the National Party? That was for the caucus to decide, and evidently, the caucus had chosen Marshall.

A few weeks later something changed. National MPs finally turned on their leader.  To the press gallery’s shock, Marshall summoned them for a Friday announcement. He was resigning and there would be a special caucus meeting the following Tuesday to select his replacement. There was only one contender. And until that moment he had been unavailable. But, as they say, a week is a long time in politics.

Back to the present, and Judith Collins finds herself in the role of a latter-day Muldoon. She alone can rescue the National Party from certain defeat.  Yet her claim to the leadership depends on the Member for Papakura remaining above internal politics. Collins’ silent campaign has now reached its climax. What happens next may be more accident than design. It is but a waiting game. When Bridges goes, Collins will be the only real contender.

The capital gains tax was an article of faith for left-wing supporters of Jacinda Ardern. Its failure to materialise has been attributed to weak leadership or, worse, political  deception. But there is a further explanation: Ardern’s devotion to the legacy of the Fourth Labour Government. An uneasy marriage between neoliberalism and social justice has been at the heart of our politics since 1984. Confronted by the prospect of a divorce, Ardern chose to renew the wedding vows.

Once asked by a journalist how much of her thinking is ‘socialist’, Jacinda Ardern replied ‘not much’. Yet, her announcement that there will be no capital gains tax – for as long as she is leader – shocked New Zealand’s media and political establishment. The belief that Ardern would lead major tax reform had become an article of faith for many on the left. After all, what was the use of a Labour government if not to tax capital? Such was their faith that most leftists overlooked the conservatism of Winston Peters and New Zealand First. Peters, who turned 74 earlier this month, has been an opponent of a capital gains tax since the idea was first mooted by Labour in the 1960s. Yet, the media consensus – perhaps owing to the confidence of the left – was that Labour would reach a compromise with Peters. They were wrong.

So, what happened?  Bryce Edwards has speculated that the entire tax reform programme was a cynical exercise in virtue signalling. When she established the Tax Working Group, Ardern must have known that Peters’ entrenched opposition to the capital gains tax was unlikely to change. But to rule out the tax then would have betrayed a total lack of principle and undermined faith in the Labour cause. After all, support for Ardern’s ‘politics of kindness’ has relied on the belief that her government is making a genuine attempt to address poverty and inequality. The failure to implement the capital gains tax could be forgiven if Labour was seen to have at least tried. Indeed, centre-left voters may now blame Peters and NZ First for any lack of progress.

Ardern has been widely criticised in the media for weak leadership. But once they had got over their shock, long-time political commentators such as Audrey Young praised Ardern’s decision as ‘pragmatic’. I suspect this will become the accepted narrative. By defusing the issue of tax, and denying National a powerful weapon, she has improved Labour’s re-election chances. Though it may breathe new life into the Greens. But I think there is more to Ardern’s decision than leadership failure or electoral strategy. As a child of the 1980s, Ardern grew up in a period of major social and economic transformation. She would later join the political party responsible for this change. Ultimately, it is Ardern’s belief in the Labour Party that explains her decision to break faith with the left.

Ardern’s Labour Party: A Brief History

The term ‘neoliberalism’ is often used to describe the policy consensus that emerged out of the 1980s. This concept refers not just to a set of policies, but an ideology of the state. David Harvey, the Marxist scholar, describes neoliberalism as a “central guiding principle of economic thought and management” based on the belief that “liberating individual entrepreneurial freedoms and skills’” should be the main purpose of government. Most commentators see fit to classify neoliberalism as a ‘right-wing’ project. However, in New Zealand, it was the social democratic Labour Party that deregulated the economy and introduced market-based reforms to the public sector.

The popular narrative is that the Fourth Labour Government (1984-1990) was ‘captured’ by a small clique of right-wing ideologues led by Finance Minister Roger Douglas. The reforms caused major dissent within the Labour rank-and-file. The resulting ideological conflict eventually led to the downfall of that government, and a schism in the Labour Party. However, the neoliberal project was continued by the National Government of Jim Bolger in 1990-1993. Major cuts to welfare spending, deregulation of the labour market, and reforms in the health sector were introduced. This agenda was led by Finance Minister Ruth Richardson. However, public opposition resulted in a hung Parliament at the 1993 general election. The country also voted for MMP. This new system of proportional representation would hand considerable power to minor parties. Richardson was sacked, and the Bolger Government retreated.  The forward march of neoliberalism was halted.

But there is a problem with this narrative. Academics and commentators have often overlooked the social democratic character of the Fourth Labour Government. In doing so, they blur the lines between ‘Rogernomics’ and ‘Ruthanasia’. Douglas and his Cabinet colleagues never intended to dismantle the welfare state. On the contrary, distributive justice remained a priority for that government. Spending on health, education and welfare was increased significantly. Government spending on benefits and social security, alone, soared from $4 billion in 1984 to over $10 billion in 1990. Tax reform provided relief to low and middle-income families, while beneficiaries were given substantial income exemptions and abatement rates. However, the Fourth Labour Government did cancel the universal family benefit in favour of a more targeted approach. This represented a significant departure from the approach of past governments but did not result in the decline of the welfare state.

The Fourth Labour Government also used the state to promote wider social justice. Gender equality was made a serious priority with the passage of the Employment Equity Act and a new Ministry of Women’s Affairs. A Māori housing scheme was introduced, the Waitangi Tribunal was given the power to investigate Treaty claims back to 1840, and Te Reo Māori became an official language backed by an official body. The Fourth Labour Government also rewrote the country’s immigration laws to end racial discrimination at the border. These were major policy achievements that had a lasting impact on New Zealand politics and society. In fact, this progressive social agenda formed a key part of the public policy regime that developed out of the 1980s. The Bolger Government largely continued this work, advancing the Treaty settlement process, and passing specialised anti-discrimination legislation.

Deregulation of the labour market and retrenchment of welfare in the early 1990s are usually seen as a continuation of Rogernomics. But these measures do not sit comfortably with the Fourth Labour Government. On the contrary, the Fourth Labour Government passed legislation to protect workers’ rights and address inequality.  Labour would spend much of the 1990s vigorously opposing National’s attempts to introduce a more laissez faire approach to social policy. Ultimately, National failed in this agenda. The election of a new centre-left government in 1999 restored social spending and reversed market reforms in health, housing, and employment relations.

The Labour-led Government of Helen Clark did not repudiate the main tenents of the post-1984 consensus, however. Clark and her finance minister, Michael Cullen, had both served in the Fourth Labour Government. They were social democrats who embraced fiscal conservatism. The emphasis was on maintaining business confidence through low inflation, low taxes, and a high degree of economic freedom. To this end, the Clark Government avoided major reform to address unfairness in the tax system. The Clark Government also refused to increase core benefit rates above inflation. Welfare remained targeted, with the focus on personal responsibility and incentives to work.

Ardern’s election as a Member of Parliament in 2008 coincided with the defeat of the Clark Government. But a decade later, the party remains in an uneasy marriage between neoliberalism and social justice. Ardern’s disavowal of socialism was in keeping with this marriage. Whatever she may believe about the virtuosity of tax reform, Ardern’s political ends can only be realised within the ideological parameters set by her Labour predecessors.  And so when confronted by the prospect of a divorce, Ardern did what Clark before her did. She renewed the wedding vows. 

So long as Ardern is leader, there can be no capital gains tax. Yet there is a problem with her position. The government is composed of more than Labour. Greens co-leader James Shaw has been explicit in his view that the Coalition was elected on a platform of reducing wealth inequality. The CGT was to be a key part of this.  His colleague, Marama Davidson, elucidated the Greens’ position in a speech last month. According to Davidson, the CGT was “just the beginning” of transformational change. She envisioned a society in which houses would no longer be used as a commodity to be traded for untaxed profits. That vision has been shattered by Ardern.

While large numbers might oppose the CGT, however, we should not overlook the ambivalence of public opinion. The recent Business NZ/Reid Research poll reported by Newshub found that 32 percent were in support of the CGT (with 14% undecided). This represents a significant voting bloc. How many of these voters, swept up by ‘Jacindamania’, switched their vote from Green to Labour in 2017? Anecdotally at least, there is growing disillusionment on the left. The Coalition has failed to make any meaningful progress on child poverty and housing affordability.

So far, Ardern is absolved of responsibility for these failures. And her personal support has reached new heights in the wake of the Christchurch mosque shootings. The CGT announcement will ensure that centre-left voters blame NZ First for any betrayal on tax.  But where do they go? Ardern has made it clear that Labour is unwilling to challenge the status quo further. Those wanting fundamental tax reform must look elsewhere. Shaw and Davidson offer a clear alternative. They hold the promise of a transformational centre-left government in 2020.

The Greens now have a major point of difference with Labour. If they choose to, Shaw and Davidson could rally support around the CGT in 2020. This would provide the Greens with the traction they need to displace NZ First as the third party and form a truly progressive coalition with Labour. Such an outcome would prove, once and for all, that Labour cannot take its status for granted. With centre-left voters going back to the Greens, Ardern would likely find herself leading a party not much larger than it was in 2017.

And even if the Greens do not take this approach, National will make sure that voters know precisely where Shaw and Davidson stand on the issue. The CGT may be dead and buried. But its ghost will haunt Labour.

In my final post before the election I boldly predicted a fourth term for National. This was based on the belief that National would hold the most seats and govern with ACT and the Maori Party or secure the support of New Zealand First. I was right about the first part and wrong about everything else.

National remained the largest party by a wide margin but it was unable to form a government. This makes 2017 most unusual. The closest historical analogy would have to be the 1928 general election when United formed a minority government with confidence and supply from Labour.

Now the excitement is over, it’s time for some sober analysis. I claimed at the outset of this blog that the only realistic outcome was one in which National would remain the single largest party by a wide margin and that this would represent an epochal moment in our politics. I argued that the election would result in a major change to the party system.

I maintain that 2017 is a turning point in New Zealand politics. The resurgence of Labour notwithstanding, this election has confirmed the significance of minor parties. Despite its hold on government, Labour is in a weak electoral position. It did not win the election. It did not come close to winning.

The historic swing to Labour belies a very low base. With 37% of the vote and 46 MPs, Labour is only three seats better off than it was in 2008. Indeed, the Labour-NZ First Coalition lacks a majority and must rely on the Greens to govern. Such an arrangement gives disproportionate power to the smaller parties.

The early indications are that this government will go the distance. But it will not necessarily be to the long-term advantage of Labour. Historically, minor parties have been tainted by government, the burdens of office proving too great for them. Yet this time could be different.

NZ First and the Greens have a wealth of political experience behind them. These are parties that pre-date MMP. Each has solidified a loyal core of supporters who provide an electoral bedrock. To write either off in 2020 would be naïve, given the enduring strength of their appeal.

It is possible that the Greens will experience a resurgence under its new co-leadership, and it is equally plausible that Winston Peters or a successor can return NZ First to Parliament in 2020. Should either happen this would most likely come at the expense of Labour’s aspirations to be the largest party once more.

If Labour fails to beat National in the party vote for a fifth time, it could give way to further growth in support for alternative parties, and perhaps lead to a permanent realignment of the party system. That Labour should remain the dominant party of the centre-left is no more guaranteed than the largest party’s claim to government.