The rising popularity of Jacinda Ardern, New Zealand’s Labor Minister, and the high praise for her leadership make it difficult to judge her achievements honestly. The rise of Ardern, a charismatic and hot figure, to the Labor leadership in 2017 has undoubtedly breathed new life into the previously languishing party and given much of the New Zealand left reason for hope.
Before Ardern, Labor was in a state of decline and disorder. The figures for the party’s polling stations were reaching new depths, and could not suggest a credible alternative to the fifth national government and its ‘compassionate conservatism’.
Ardern reversed this predicament with the promise that Labor, under her leadership, would form a transforming government. “Neoliberalism has failed,” she insisted, and it was time for a change.
But if we look beyond the media hype, Ardern has not ushered in a new era of progressive reform. On the contrary, it has been proven that she is an extraordinarily talented centrist politician with the aim of managing the status quo rather than transforming it. Her ‘be kind’ message may be good sentiment, but she has made no effort to impose these standards of decency on the capitalists who increasingly dominate New Zealand’s political and economic life.
But it’s not just about Ardern. To make sense of her leadership and the constraints she faces, we need to place her approach in the long-term context of New Zealand politics – and especially the evolution of her party. By the time Tony Blair was an unknown MP in the back seat, New Zealand Labor was already a pioneer in the Third Way approach that became known as ‘Blairism’.
In the 1980s, New Zealand was one of the first countries to radically change its economy as part of the neoliberal revolution. What is striking about the story of neoliberalism in New Zealand is that it was a Labor government, first elected in 1984, that brought about this radical transformation of society for the benefit of the rich, with Prime Minister David Lange on the steering.
Labor, traditionally the working class party, campaigned for a promise to strengthen New Zealand’s disputed social democracy amid the economic downturn of the 1970s and early 80s. Once elected, Labor instead began to undermine New Zealand’s social democracy, while Finance Minister Roger Douglas argued that it was the only solution to the economic turmoil of the era. The miraculous turnaround of Labor was so strong that, according to left-wing journalist Bruce Jesson, it can be said that neoliberalism came to the shores of New Zealand through a ‘bureaucratic coup’.
Labor began a process of deregulating the industry, making the tax system more unequal and enacting legislation to curb the trade union movement. The intention with these reforms was to create a profitable state that would facilitate the building up of prosperity at the very top of society.
Labor sold this policy with the false claim that the wealth generated in this way would ‘drip down’, which would raise the standard of living for the majority. As part of its project to turn New Zealand into a profitable state, Labor has privatized state property, including the Bank of New Zealand, telecommunications (formerly managed by the New Zealand Post), the State Insurance Office and Air New Zealand.
The result of this ‘neoliberal revolution’ was a massive upward transfer of wealth from the working class to capitalists. In the last thirty years, the New Zealand economy has grown by about one third, but wages have declined in real terms for the vast majority of workers. More than half of all these profits went to the richest 10 percent of households.
Today, New Zealand is considered one of the easiest places in the world to do business – a euphemism for the fact that the economy is under-regulated, with low labor protection and relatively low tax rates. New Zealand is indeed an outsider in the OECD, with the lowest marginal tax rate and almost no tax on wealth, capital gains, inheritance or land.
This lost tax revenue could have been aimed at supporting public services that have been underfunded and neglected for decades. Instead, the upper classes increased wealth, while working people carried most of the tax burden.
Before the 1980s, New Zealand was one of the most egalitarian societies in the developed world. Thanks to the neoliberal revolution of Labor, it was one of the world’s largest increases in inequality between the mid-1980s and the late 1990s.
Successive Labor governments elected between 1999 and 2005 did little to reduce the trend. At the same time, the New Zealand Labor Party changed its brand and removed it from its historical image as the working class party, in the same way as Tony Blair’s new Labor.
Labor also changed its composition. Previously, it was a party with a mass base, embedded in working class life and the trade union movement. By the 2000s, Labor was structured around a group of professional politicians and aspiring politicians, who relied more on marketing and media to reach voters than to organize grassroots.
These developments shaped Jacinda Ardern’s outlook and instincts. As a career politician with a degree in communications who worked as a senior policy adviser to Tony Blair’s government, Ardern is in many ways the perfect personification of this new kind of media-savvy, professional Labor politician.
It is therefore little surprise that, despite Ardern’s progressive prosperity, Labor’s election platforms have promised to keep both government debt and spending low – two features of neoliberal economic policies. Although, as we have seen, New Zealand is one of the few OECD countries without a capital gains tax, Ardern fell back on Labor’s promise to introduce one after coming under fire under the right-wing National Party. Ardern then paints her even further into a corner by excluding any form of wealth tax.
In 2017, Ardern’s Labor Party won the election by forming a coalition government with First Zealand, a populist party on their right flank, and the Greens on their left. However, a series of national tragedies and crises has done more to define Ardern’s first term than her initial policies or coalition partners. First came the terrorist attack in Christchurch in 2019, followed by a deadly volcanic eruption at Whakaari. And then hit COVID-19.
There is no doubt that Ardern is good in a crisis. Her government acted quickly after the attack on Christchurch to introduce stricter arms control laws. It again acted swiftly in March 2020, when Ardern ordered a strict exclusion to limit the spread of COVID-19. Ardern’s deft handling of these disasters – and her repeated emphasis on the ‘politics of kindness’ – captured her in the minds of many liberals as the antithesis of right-wing populism.
The international praise was exuberant and exuberant. One heading from the Atlantic ocean Ardern was named the “most effective leader on the planet”. Another article from the New York Times described her leadership during the pandemic as a ‘master class’. The Guardian argued that Ardern had set the ‘global standard in leadership’, while Outlook magazine ranks second in a list of the fifty best thinkers in the world. Umair Haque, a British economist and businessman, even referred to Ardern as the ‘new leader of the 21st century’, praising it as ‘democracy, civilization, equality, goodness and truth, in an era of collapse and chaos’.
Ardern certainly had her chance to change things. In 2011, while still in opposition, she refer for New Zealand’s economy as a “single-market housing market.” The sentiment was in itself – low interest rates fueled runaway housing prices, coupled with a lack of government and private housing, unbridled speculation and the absence of capital gains tax.
The result is that an entire generation is excluded from home ownership. Meanwhile, rents have skyrocketed. In New Zealand, real estate is a rare investment category where returns are not only guaranteed but also untaxed. As a result, there is an almost Victorian owner class while tenants see their wages decline.
New Zealand was once a society of homeowners. During the inter-war and post-war periods, New Zealand’s much-announced state housing program gave the country the reputation of being an egalitarian paradise. It has now been reduced to a shell.
Successive governments sold large chunks of state houses to private bidders, especially in the 1990s. Today, there are only sixty-nine thousand left, and New Zealand has some of the cheapest housing in the world. About 34 percent of the population rents housing at the country’s private, sub-standard homes, and enjoys little protection or rights. Yet the housing bubble remains the focal point of the economy.
Although extremely restrictive criteria determine the allocation of state housing, there are still more than twenty thousand people on the waiting list. Predictably, the value of private real estate has risen at the same time. Real estate investors have enriched themselves at the expense of tenants and households that are heavily occupied by owners.
During her reign, however, Ardern showed no interest in reversing it – or indeed, any other aspect of New Zealand’s neoliberal transformation. Labor’s economic response to the pandemic has seen it reduce mortgage rates and build up asset values.
As economist Bernard Hickey noted, wealthy property owners and businesses helped their property while tenants and working people deteriorated. The result was a ‘K-shaped’ recovery, meaning that the rich recovered from the economic shock of the pandemic, while the working class did not.
Initially, some hoped that Labor would break the mold and respond to the economic downturn by investing in communities. The wage subsidy scheme that was paid out to employers to transfer to workers did save a lot of jobs. But there is little more relief for workers, students or tenants, despite Finance Minister Grant Robertson’s promise that the wage subsidy would be ‘just the beginning’ of a larger stimulus package.
Though Ardern has brought little new to the table, members of the liberal commentary take her progressive credentials completely at face value, as with charismatic centralists elsewhere, from Barack Obama to Justin Trudeau and Tony Blair. She did not receive praise for transformative leadership, but rather because her victory evoked nostalgia among those who wanted to return to a rapidly disappearing era in Western politics.
Apart from wishful thinking, there will be no return to the 1990s or early 2000s. Instead of leading the way, New Zealand might be lagging behind, with Ardern soon to have some sort of pitfalls than those of Obama, Trudeau and Blair.
Both Obama and Ardern are charismatic leaders who have gained the support of working class voters in the midst of an economic crisis. And just like Obama, if Ardern cannot respond adequately to the challenge she faces, her failure could pave the way for economic instability, stagnation and the rise of right-wing populism.
Ardern is currently very popular – understandably so, given New Zealand’s success in containing COVID-19. But it can be short-lived if Labor does not deliver for working class New Zealanders.
After a generation of neoliberalism, New Zealand needs a political program to redistribute wealth to workers, communities and public services. To set up the program and build a movement that can promote it, we will have to go beyond “Jacinda-mania” and the mirage of liberal centristism.