Wednesday 18 September 2013

Some advice for David Cunliffe.

Dear David,

Congratulations on winning the leadership of your party. Now the hard work begins. By that, I don’t mean uniting your party; I mean persuading the electorate that you are offering a coherent alternative to National, particularly on economic policy. Now I am an economist not a political commentator, but it seems to me that there are a few principles you need to follow that have been missing from your party over the past five years:
  1. Ask yourself in private, what do you really stand for? Politics is the art of the possible. But this should mean asking what desired outcomes you have to give up on in order to be in a position to implement the ideas that really matter to you. Too often in recent years, it has seemed like your party has based its manifesto purely on what it thinks would maximise its chances of winning an election without any thought about why it wants to win.
  2.  You will need to sacrifice some principles for populism; that is the nature of democratic politics. But you should aim to form a government that can win more than one election and will be judged well by posterity and so resist the temptation to cynically promote policies you know to be damaging. Your party’s 2011 promise to remove the GST from fresh fruit and vegetables was an example of such a policy.
  3.  As a corollary of point 2, minimise your use of bad economics. Regrettably, bad economics can often be good politics, but too much—in particular excessive promising of free lunches—will be seen as non-credible by the electorate.
  4.  In particular try to appear to be operating from consistent principles, not just offering to scratch the latest political itch. Your colleague, Clayton Cosgrove, recently and quite correctly in my view, castigated the government for paying a subsidy to Rio Tinto to keep the Tiwai Point aluminium smelter open. Three days earlier, you gave a speech as part of your leadership race in Dunedin in which you castigated the same government for “gutting” the Hillside Workshops in Dunedin. Campaigning against National’s corporate welfare could be a strong election plank for you, but not if you simultaneously criticise National for not having enough of it.
  5. This means, you should take economics seriously. Don’t take your advice from courtiers seeking to flatter or consultants prepared to provide any answer you are prepared to pay for. Your party’s recent fiasco in which you repeatedly cited the Wolak report as justification for your electricity policy only to have Frank Wolak repudiate your claims, was an entirely predictable outcome of your not having sought to understand the report before citing it.

Follow these points, and you could be leading a party that operates with a few core principles and with policy proposals that follow logically from those principles. And that would certainly be a way to distinguish yourself from your political opponents!


  1. How would removing GST from fresh foods be a 'cynical policy' 'known to be damaging'?

  2. For any objective you have in mind--encouraging healthy eating, redistributing to the poor, etc.--there is a policy that would achieve that better, and without crossing the line in the sand between a clean GST and the kind of administrative nightmare seen in value-added taxes overseas. (See my post linked to in the article). This is a lay-down misere, so any politician advocating it is either sacrificing principles for sound-good populism or is willfully keeping himself ignorant of expert opinion. And it is cynical because it is a transfer to the middle class sold as policy to help the poor.

  3. Yes I am confused by the Eric position to GST removal on fresh food.
    I don't care if it is regressive, progressive or pigouvian or deviant.
    Its simple to me remove GST on fresh food. If its good enough for financial transactions its good enough for quality food.
    Another thing. You are banned Mr Eric from giving advice to Cunliffe.
    It will be difficult enough as it is. Do not impart common sense to this megalomaniac
    Refusal to obey could result in expiration of NZ residency / Citizenship.
    Repeat, giving good advice to Labour/ Green is contraindicated and the word police will browse through your writing for other incorrect attitudes.
    Also we are watching that Mr Mat Nollan. Perhaps yopu could reming him how cold it is in a Manitoba winter.

  4. to Mr Seamus Hogan,
    A nice clean GST would include financial transactions.