Govt thinking inside the corporate box

In his speech to the National Party conference in August 2022, Christopher Luxon reiterated his business credentials and said “Labour MPs wouldn’t have a clue how it feels to be responsible for a business whose employees’ jobs depend on that business succeeding”.

In arguing why he should be the next Prime Minister he drew an analogy not just between running a national economy as a business but also society. We have now had the first Budget in this experiment that treats society as a commercial entity and it is worth briefly addressing the fundamental myths underpinning the project to see where this will take us if left uncontested.

A simple economic account of why a national economy is not a business can be found in an essay by the New York Times columnist and Nobel prize-winning economist Paul Krugman, ‘A Country is not a Company‘ published in the Harvard Business Review. But rather than simply paraphrasing Krugman’s analysis it’s important to interrogate some of the principles that support the PM’s worldview.

An integral part of the corporatist worldview – by which I mean a view in which corporations and their executives should be given free reign to shape society because, it is claimed, what is in their interest is in everyone’s interest – is a specific theory of the role of companies as set out by Michael Jensen and William Meckling in their 1976 essay “Theory of the Firm”.

They argued the principal function of any business or commercial entity was to maximise profits and return them to shareholders or investors. To do that the business needed to create a gap between revenue and costs.

The question for us is to ask who the Prime Minister considers to be the shareholders in New Zealand Inc. and who and what are the costs. It’s apparent to this writer that landlords are considered shareholders, as well as, I assume, the rest of the property-owning class. Shareholders would also be those invested – politically and financially – in the National Party and its commitment to individualisation and privatisation; funders or donors as well as the demographic deemed to be National Party voters.

All evidence suggests Luxon views public services and public servants as costs, along with public education and public health; regulation and oversight; the environment; people with disabilities; welfare recipients more broadly; those facing mental health problems; and minority ethnic groups better served by their own health authorities. Given the fast-track scheme, it is also possible the party regards democratic deliberation and consultation as a cost.

The goal, then, is to clear the path to profit for those considered shareholders, which is either to offer tax breaks to those with the most money and therefore considered the most likely supporters of the corporatist approach, and remove the “red tape” that prevents companies maximising their profits through the exploitation of new resources. We can see this in Shane Jones’ desire to allow overseas mining companies access to huge tracks of pristine land in exchange for a meagre royalty (2 percent) that would dribble into public coffers.

As a side note on tax cuts, it should also be recognised that this has slowly become fundamental to conservative politicians since the 1960s and was central to the administrations of Ronald Reagan and Margaret Thatcher. This is because tax cuts moved wealth towards those with a shareholding in the corporatist project but also because they grew the national debt and therefore curbed future government spending, which in turn starved public services and utilities of funding and opened them up to privatisation.

Two other fundamental principles underpin the corporatist worldview. The first is the myth of “trickledown economics”, a central pillar of neoliberalism for over 50 years. Yet even the International Monetary Fund – one of the principle architects of the global neoliberal project – has admitted it doesn’t work.

When the World Economic Forum commented on the IMF report in 2015 it noted how findings showed the benefits of growth were “rarely spread evenly” and that “an unequal rise in incomes can actually slow the rate of economic growth altogether”. And yet we carry on pushing wealth upwards as if all our problems will be solved if we continue to make the rich richer. This has become the central dogma of our age.

The second myth that supports trickledown economics is the view that wealth should be moved up because the “wealth creators” deserve it. Unpacking the nonsense that only a small group of people in society produce its wealth would require a longer piece of commentary.

Alternatively, if you have time I’d recommend The Value of Everything by Mariana Mazzucato, a capitalist economist who argues value is collectively produced but workers are continually short changed. Or you may reflect on the Covid lockdowns and how eager Luxon was to get people back to work because the “wealth creators” couldn’t actually create wealth on their own.

The corporatist agenda and society-as-business model also helps explain the Government’s attack on Te Tiriti o Waitangi. Certainly this is informed by residual colonial attitudes concerned that Māori influence is undermining white European dominance, but also because the Treaty protects certain national resources from exploitation by business. As such, it is a friction that impedes the maximising of profit and shareholder value, and therefore flies in the face of the corporatists’ central dogma.

Lots more needs to be said and debated on these matters, but in the interim don’t let yourself be fooled by the confidence of the businessman. Much of what he’s selling is snake oil and we need a serious discussion about the benefits of what we’re being sold.