Tide Turn at Treasury

Nautical skills came in handy for those wanting to talk about the economy last month. Political, business and academic leaders were gearing up to catch the knowledge wave in Auckland, when suddenly they were swamped by tsunami of reports on everything from genetic modification to the funding of tertiary education. The country was awash with ideas, proposals and recommendations. Then, out of the blue, the Treasury waded in and signalled something of sea-change in its approach to policy preparation and management.
Those who attended The Knowledge Wave conference were intent on quickening the pace of economic growth. The Treasury, in cluster of reports, seemed keen to ensure that everyone benefited from whatever growth is achieved. Its focus seemed to shift from the size of the economic cake to how it should be sliced, observed Infometrics economist Gareth Morgan.
And with the shift the Treasury suddenly became all “inclusive”. One paper emerging from the PCs of its policy wonks was entitled “Towards an Inclusive Economy”; another was called “Geography and the Inclusive Economy, Regional Perspective”; third was “Human Capital and the Inclusive Economy”.
We should not assume, however, that the Treasury discovered “inclusiveness” without some political prompting. The work was generated in response to Finance Minister Michael Cullen’s request that the Treasury tackle some of the tougher issues ignored for the past 15 years or so while free marketers ruled the policy-shaping roost.
During that period governing politicians, the officials who advised them and the claque of business leaders who encouraged from the sidelines, believed that Government need only adopt policies to enlarge and strengthen the economy, maximise efficiencies and minimise the role of the state. The benefits would ultimately trickle down to everybody.
It didn’t happen that way. The wealthy became wealthier while most others enjoyed no improvement in their standard of living or quality of life. In fact, many experienced the misery of redundancy and the hardship of unemployment. The “inclusiveness” reports are Treasury acknowledgement that it must, in future, take account of the social impact of the policies and programmes it promotes.
But while the papers reflect shift in Treasury thinking, it has way to go before anyone could accuse it of going soft. The department was “not necessarily looking at how to grow the economy so it can be milk cow”, from which some of the proceeds could be dispensed, secretary Alan Bollard told journalists at press conference. Rather, it was trying to understand how to nurture growing, innovative and prosperous economy while ensuring social cohesion.
The first thing about inclusiveness is the economy and the second is society, said one of the reports. Most of us, however, no doubt believe we are members of society, and that the economy is part of that society. Policy should perhaps reflect this reality.
The nature of some other arguments in the inclusiveness documents further attest to Treasury’s disinclination to have its arid doctrines dampened too much during the sea change. It is urging the Government to toughen up on getting beneficiaries who can work back into jobs. And it worries that policies like the minimum wage and codes like paid parental leave, like less flexible employment laws, will boost the number of unemployed.
Some commentators suspect the “inclusiveness” phase is mere window-dressing, and that the Treasury is biding its time, humouring the Government while remaining ready to revert to narrower focus again under new political regime that will arrive some time in the future. Maybe. But if the Treasury is earnest in its declarations of intent, the papers represent major shift in the way government spending decisions will be shaped.
More important, however, this is an attempt to merge social and economic policy and not have them competing for attention or for government resources. But it will be enormously difficult for the Treasury to accomplish this. Whether it has the intellectual fire power is open to question. More fundamentally, Bollard faces management challenge, trying to change department said to be “famous for its intellectually gladiatorial culture”, staffed by people described as “hard-line, dogmatic and bruising to deal with”.
“If you’re trying to change Treasury, you’re trying to change the culture as well,” Bollard told the Sunday Star-Times. He was reported to be encouraging officials to be kinder and gentler and to think more broadly.
Let’s extend the nautical analogy. In the good old days and long before either Rogernomics or “inclusiveness”, keel-hauling helped show dissident crew members who was boss. Walking the plank ensured that those who didn’t get the message, did. Not exactly inclusive I suppose, but effective.

Bob Edlin is Wellington-based economic commentator and journalist.

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