By Mike Moore

The hardest thing in politics is to change your mind, it’s embarrassing to switch horses, it’s ungainly, and makes a politician vulnerable to attack. The great economist, Lord Keynes, was once challenged at a media event, they had the ‘gotcha’ press even back then. How he was asked, could he justify his statement when just a few years ago he had said the opposite? "When the evidence proves I’m wrong, I change my mind. What do you do?" he replied sweetly. I wish I had read and used that quote when I was active in politics, Parliamentary question time would have been easier.

I watched an excellent movie on Ché Guevara, Castro’s comrade and organiser during Cuba’s revolutionary struggle. At the time I like to think I would have first supported the trade unions in their strike against the Cuban dictator, that bastard Batista. When strikes and democratic action was brutally suppressed, I would have supported Castro. But within a few years the authoritarian tendencies of Castro would have repelled most free-thinkers. I confess that, as a young man, I thought Mugabe was a great freedom fighter. But it’s one thing to support Mugabe or Castro in the 1960’s, and quite another in the 1980’s. Now I carry a Zimbabwe $100 billion note in my wallet because, better than any speech I can give or book I can write, this explains how, when politicians go wrong, everything collapses. No need for a speech on economics – everyone gets it.

I was a protectionist, an economic nationalist, until the late 1970’s when, after studying our country’s negotiations for closer economic relations with Australia, I changed my mind and thought the NZ National Party was correct but too cautious. Pragmatism is not the opposite of principles in politics. What is right for one historic period or set of conditions, may not be right for different situations. This is not to say there are not core principles, those objectives are how to raise living standards, look after people, our physical, social and cultural environment, but how to influence these outcomes, the tools we can use, will change.

During the Great Depression, governments everywhere cut spending and raised taxes to bring the books into balance, a Labour Government in the UK actually cut the unemployment benefit to help balance the Budget. Keynesian economics arrived and, as Keynes explained in his case, The Paradox of Savings – normally savings are good, but in a recession they are fatal, then you have to encourage spending. Alas, deficit budgeting continued in good economic times by some governments that thought you could borrow and spend forever and the public loved it. Running deficits and borrowing in good times is as dumb as tax hikes and lowering expenditures in tough economic times. So much for principles and consistency.

In the tough, uncertain times, spending is in vogue again as are deficits, and we’ll be borrowing big time. Watch for some lazy opportunistic expenditure that will be wasted. However, in a few years, governments will have to wean the economy off the taxpayer teat and show some discipline. How big the deficits will be will depend on the quality of expenditure and how quickly confidence returns to the markets. No country, not even the U.S., can solve this crisis on its own. That we are all each other’s customers means our success is based on others. A healthy thing. De-globalisation and deflation are current threats, but help is on the way. We have elections, the political market works too.

We know of the genius of the ‘limited liability company’, of how its invention changed the concept of risk, inheritance, and the ability of a ‘paper entity’ to borrow. This and the rule of law gave democratic capitalism a growth spurt, and in part explains the success of the West for the past 300 years. Bankruptcy laws and the ability of capital and labour and ideas to regenerate around new concepts is fundamental to a growing economy. Democracy, the ability of the people through collective engagement, has the unique ability to transfer power peacefully. To start again, it’s a story of redemption, renewal and restoration. People can change direction through new leaders and policies. Democracy encourages people to change their minds with dignity after witnessing the everyday evidence of their lives and by their participation. Democracy is about voters, stakeholders, shareholders, looking for a better future, transferring their support. What a splendid idea and ideal. I’m a reckless optimist but through weary melancholy experience, I think the pessimist is more often right. But it’s the optimist who makes change, takes risks, and gets things done.

(773 words)

Mike Moore

former Prime Minister of New Zealand

former Director-General of the World Trade Organisation

Adjunct Professor, La Trobe University, Melbourne, Australia