As the Covid-19 pandemic rolls on, governments have a mandate to act like nothing we've seen for a generation or more. Photo / Claire Trevett
As the Covid-19 pandemic rolls on, governments have a mandate to act like nothing we've seen for a generation or more. Photo / Claire Trevett
COMMENT:
Whatever else the global Covid-19 crisis means for humanity, one thing is inescapable: big government is back.
All over the world, political leaders who just weeks ago were preaching either fiscal austerity or at least a prudent approach to government debt levels are injecting cash into their economies thesame way a duck-hunter sprays shotgun pellets into the sky.
They can see the target but know that a lot of their fiscal assistance is inevitably scattergun, unleashed at speed and with just one aim in mind: to save as many businesses and jobs as possible.
Implicitly accepted in this first phase of the economic response to the biggest upheaval to the global economy since at least 1929 is that not all assistance will be well-targeted.
As time goes on, however, and governments everywhere shoulder more previously private and commercial risk on to the public balance sheet, the role of government can only grow from here.
By the time a vaccine emerges – the only path to any kind of global economic new normal – governments will be so donkey-deep in debt and enmeshed either as owners or guarantors of so much of their countries' economic activity that their role will be huge by comparison with today.
For some countries, that will not be such a big deal. New Zealand is unusual for not having more crony capitalism than it does. Many countries operate far more porously, with private sector business connections to political power mediated far more by lobbying, cash and personal influence than by open process.
Yet even in those countries, large corporate entities have not found themselves as utterly dependent on government patronage and direct financial support to survive as many will find themselves over the next few years.
These trends look likely to upend the norms that have tended to guide New Zealand corporate and economic policy direction since Roger Douglas so successfully demonised the Muldoon era Think Big projects three decades ago.
Shane Jones has floated two "big government" ideas in the past two weeks. Photo / Northern Advocate
Politicians with a statist bent – New Zealand First's Shane Jones comes to mind – are already seeing the opportunity not to waste a good crisis.
In the past couple of weeks, Jones has floated two "big government" ideas that have a far better chance of getting legs in the current environment than they might have even a month ago.
The first is the re-creation of something like the old Ministry of Works, which would build as well as fund major national infrastructure.
The second is the proposal, apparently heading to Cabinet committees next week, to impose a levy on raw log exports to incentivise sales to New Zealand domestic timber mills.
To forest owners, this is akin to Henry the Eighth rejecting the Pope.
To Jones, it's a chance to tip the scales in favour of local mills and to make progress on initiatives such as the creation of a large-scale prefabricated housing sector in New Zealand. There's been a lot of talk about this under Housing Minister Megan Woods and her predecessor, Phil Twyford, but precious little action.
Now, with Crown Infrastructure Partners repurposed to come up with a prioritised list of "shovel-ready" projects by early May, there is a bow-wave of momentum for government-backed action whose primary purpose is to get the economy moving again.
Skidding to a halt for the lockdown was the easy part. Bringing the whole show back to life, when firms across the company are struggling with broken supply chains and dwindling cash reserves, is a job the Government must lead.
Quite apart from anything else, the Government has a moral obligation to lead because it imposed the lockdown – for the best of reasons – in the first place.
So, CIP chair Mark Binns has speculated this weekend that, for example, the housing ministry Kainga Ora might have to step in and complete residential subdivisions where a private developer simply walks away.
Crown Infrastructure Partners chair Mark Binns. Photo / Mark Mitchell
His team will become judge and jury on a vast number of infrastructure and construction projects, some of which just need their regulatory path smoothed quickly, but in other cases may need hundreds of millions of dollars' worth of funding or, at the very least, government guarantees.
Elsewhere, a rescue package for small and medium-sized businesses still seems likely, there is pressure for government intervention on commercial rent relief, and ideas floated for a Singapore government-style investment body to prevent strategic assets being sold overseas.
Behind the scenes, ministers are using diplomatic influence unavailable to the private sector to speed the delivery of vital health supplies to New Zealand and to jemmy open essential trade and aviation routes.
Meanwhile, particular industries find themselves in crisis and with their hands out either for emergency funding beyond the stopgap measures of the wage subsidy scheme, or for regulatory interventions that might give them a fighting chance.
The news media is one such sector, but there are many others in a similar position, where Covid-19 and its economic consequences have either accelerated or exposed deep structural weaknesses that current owners and their financiers will not be able to overcome without government help.
In the end, this is what governments are there for. The expectation that the government will help in crisis is most starkly demonstrated by the extraordinary spike in the level of trust in the Government that pollsters are uncovering.
That is in part because the New Zealand Government has looked as sure-footed as any other in the past few bewildering weeks. That trust has extended to accepting significant erosions of civil liberties as an acceptable price for that aid.
But that trust is also an expression of hope as much as confidence that governments will succeed. After all, if they don't or can't, who will?
In this environment, governments will have a mandate to act like nothing we've seen for a generation or more.
In doing so, they will also become far more entwined in all of our lives than they had been.
