Dialogue: Government's betting the bank on slow-return projects

By COLIN JAMES

The Government says it wants and needs three terms, that is, nine years. Heavy evidence of its need will be supplied in tomorrow's Budget.

The two themes that ministers have been billing are "closing the gaps" and "kick-starting the knowledge economy." Both are slow-return, long-range projects, with spare prospect of much to show by the 2002 election.

Moreover, what the Government can spend on those flagship projects will be constrained by a pervasive preoccupation to demonstrate tomorrow and for years ahead that it is fiscally careful and will stay within the overall spending limits it has set itself.

But in any case, spending is only one ingredient in the success or failure of the projects.

A Government spending more on, and dishing out grants for, research and helping innovative start-ups might well help to create a more conducive climate to new ideas and exploitation of them, and this might kick-start knowledge-economy activities.

The problem is that, even with a tail wind, the knowledge economy is not going to make much difference for many years to the structural deficiencies in the economy.

It is these structural deficiencies that deter investors. "Push" from the Government is an imperfect substitute for "pull" from investors here and abroad excited by the business climate and prospects.

That the Government is prepared to tie its colours to this slow-boat mast reflects refreshingly long-range thinking in a trade (politics) usually dedicated to the short and brutish. But the Government may be lucky: just as it starts its programme, several large companies have set up high-tech venture capital funds.

For "closing the gaps" no such luck is in sight. First, we should note that in Helen Clark's eyes this is as much an economic project as it is one of equity and social justice. She made that point at the time she set up her "gaps" cabinet committee.

Next, doing nothing threatens social and political instability. The more Maori there are who believe they are victims because of the gaps, the more widely will take root proposals for radical politics and constitutional change. This Government, in part, sees closing the gaps as a way of halting the spread of such agitation.

In the 1980s it was widely believed that settling grievances under article 2 of the Treaty of Waitangi with mana and money would help to lift the economic status of Maori generally and so make them more nearly the full "citizens" the treaty's article 3 assured them.

Now the belief is the reverse: that education and other social assistance enhancing "citizenship" is a precondition for drawing the sting from article 2 tino rangatiratanga demands for parallel decision-making and Maori sovereignty.

Instead, the Government aims to harness tino rangatiratanga to devolve responsibility for delivering social services through iwi and other Maori structures.

The theory is that Maori will learn better, improve their health status more, get more jobs and cross the law less if assistance comes in Maori ways from Maori.

Ministers say there has been considerable pre-Budget enthusiasm among Maori for such initiatives.

But are those, and similar initiatives with Pacific island community groups, all there is to closing the gaps? No. Much in the Budget "gaps" package is, unavoidably, just a share in what all underachievers get.

If Maori and Pacific Islanders are to stop overpopulating underachiever ranks, a higher proportion must find their way to average earnings and above - but any policies to achieve that cannot, by definition, also automatically promote other underachievers or the "gaps" will remain.

So it may come down to individual motivational psychology, not a topic budgets have been good at.

Moreover, closing gaps will take many years - maybe at least a generation, six terms.

Meanwhile, if one visible group of underachievers gets more attention than others, envy might derail the politics.

This is risky stuff. Which is interesting in one so risk-averse as Miss Clark.

* ColinJames@synapsis.co.nz