Comparisons to President Trump are unfair to former PM Muldoon, writes Michael Reddell.
I observed a couple of local commentators (here and here) drawing parallels between Donald Trump and our own former Prime Minister, Sir Robert Muldoon. I commented on one of those pieces, somewhat sceptically, and didn’t give it much more thought. But Tyler Cowen devoted his Bloomberg column to attempting to make exactly the same comparison, which prompted me to think about the case more carefully.
What would you think of a Western democratic leader who was populist, obsessed with the balance of trade, especially effective on television, feisty and combative with the press, and able to take over his country’s right-wing party and swing it in a more interventionist direction?
Meet Robert Muldoon, prime minister of New Zealand from 1975 to 1984. For all the comparisons of President Donald Trump to Mussolini or various unsavory Latin American leaders, Muldoon is a clearer parallel case.
I’m still not remotely convinced. Any parallels seem superficial at best, and deeply unfair to Muldoon. Without claiming any particular expertise in Italian politics or history, I’m not sure why Cowen would go past Silvio Berlusconi if he wants to find parallels among leaders in modern democratic states. Even then, it is hard to believe that Italian governments were quite as shambolic as the Trump administration has been in its first few weeks.
If the similarities are few and superficial, the differences are pretty profound. We can start with the personal:
- Muldoon served in the army for several years in World War Two. Like many prominent Americans (Cheney, Clinton) Trump avoided military service in wartime.
- Despite suggestions of an extra-marital affair, Muldoon had one wife, for life.
- Muldoon was neither a product of, nor revelled in, celebrity culture.
- Muldoon wasn’t a wealthy man, and didn’t trade in influence or connections to build personal wealth. He lived pretty modestly and his finances weren’t a secret.
- Whatever people thought of him and his government’s policies, few doubted his genuine concern for New Zealanders, and no one ever thought that his motivation for being in politics was some sort of narcissism or craving for respect.
One can easily think of other differences. Muldoon held high office for almost 15 years – almost six years as Minister of Finance and then Deputy Prime Minister in governments led by other people, and eight and half years as Prime Minister (and Minister of Finance). Ours is a parliamentary system, with no history of outsiders suddenly ascending to office – and so, for all the talk of “taking over his country’s right-wing party”, Muldoon joined it young, worked hard for it, rose gradually within it, had his undoubted talents recognised by those who worked closely with him, was selected (by his fellow members, all selected at a local constituency level), first as deputy leader, then as leader. As leader of a parliamentary party – able to be ousted at any week’s caucus meeting, at any time – he won three general elections. And Trump? How many leading Republicans voluntarily chose him as their candidate?
As Cowen notes, Muldoon was also well-known for his fearsome command of detail. He was a highly effective minister with a huge capacity for work. And if he didn’t always agree with officials, those who worked for him recognised his respect for the role of public servants, as advisers. Muldoon ran a disciplined administration – in contrast, say, to the weak Prime Ministerial leadership and management in the administration that followed his. Trump has published numerous books under his name, but Muldoon wrote books himself.
Of course, some of these sorts of comparisons aren’t new. I pulled down from a box in the garage this morning, my copy of the Citizens for Rowling publication. Six weeks or so before the 1975 election – Muldoon’s first as party leader – a group of fairly prominent New Zealanders launched this high profile campaign, notionally in support of the then Labour Party Prime Minister, Bill Rowling. In fact, it was pretty openly a “Citizens against Muldoon” movement – people appalled at Muldoon’s pretty aggressive style, and at his popularity (“I ask the Nationals how they would feel if Mr Muldoon was the leader of the Labour Party” – I imagine the answer would be “worried that we were about to lose badly”). One of New Zealand’s leading journalists outdid himself lamenting the threats to individual freedom:
It happened in the United States during the era of Senator Joe McCarthy; it happened in Germany in the 1930s. I used to believe that it couldn’t happen in New Zealand. Now I am not so sure.
It didn’t, of course.
Was Muldoon’s style one I was particularly comfortable with? No, not really. He was a self-described “counter-puncher”, and willing to take on pretty aggressively those who challenged him. Politicians like Muldoon’s predecessor as National Party leader, John Marshall, and his predecessor as Prime Minister, Bill Rowling, probably naturally appeal more readily. But as party leaders, those two won no general elections at all. Rowling, a profoundly decent person and effective minister, fought three elections against Muldoon, and lost them all. The second and third were close, but the first wasn’t – it was one of the biggest electoral reversals in New Zealand history (popular vote, and parliamentary seats), led by Muldoon, who was a fearsomely effective campaigner. Not many people voted for Muldoon in 1975 because he “wasn’t Clinton” (or the New Zealand equivalent).
What of policy? Muldoon became Minister of Finance in early 1967. A year later, faced with a collapse in commodity prices, he oversaw a devaluation and an IMF-supported programme of macroeconomic stabilisation. It was tough – cuts to subsidy, fiscal restraint, markedly reduced access to credit – and effective. His first term as Minister of Finance saw a continuation of the slow progress towards financial sector liberalisation.
But when people focus they most often concentrate on his term as Prime Minister, in which he also served as Minister of Finance (in New Zealand until the late 1980s it wasn’t uncommon for the Prime Minister to also hold a major portfolio – Forbes and Holland had also been Ministers of Finance, several Prime Ministers had also been Ministers of Foreign Affairs, and David Lange also served as Minister of Education). Even then, the focus is often on the later years of his term – and recall, by contrast, we are less than one month into the Trump presidency.
The external circumstances were probably the most difficult any New Zealand government has faced since the Great Depression. The terms of trade had fallen very very substantially and New Zealand was grappling with reduced access to its major foreign market, the United Kingdom, following the UK entry to the EEC. Official opinion was quite divided about the best way forward – how temporary should the fall in the terms of trade be treated as for example. In the earlier years of the Muldoon government, much of the policy news was pretty positive: elected on a mandate to “restore New Zealand’s shattered economy”, Muldoon markedly cut back key consumer subsidies, and – over the doubts of some key officials – undertook a quite far-reaching (for its time) liberalisation of the financial sector. The fiscal deficit was reined in. (A few years ago one pro-market former senior public servant, not exactly a fan of the Key government was to note to me his view that the first three years of Muldoon were materially better than the first three years of Key).
There were mistakes: the new public pension system, materially better in concept that what the previous government had put in place (and still the basis of our effective system) was excessively, and unnecessarily, generous. But the details had been explicitly campaigned on – policy wasn’t simply a matter of few idle phrases and attitudes.
For those looking for direct parallels, the early days of the Muldoon government did see a defeat in the courts. Having campaigned forthrightly on replacing the system of public pensions, Muldoon on assuming office indicated that contributions to the previous system could now cease. That hadn’t yet been legislated by Parliament, although with the huge parliamentary majority National had, there was never any doubt it would be. In Fitzgerald v Muldoon the courts did their job in restraining executive over-reach.
The economists’ indictment of Muldoon mostly focuses on his second and third terms. Fiscal deficits weren’t kept in check – although the high rates of inflation then quite common in advanced countries (Muldoon’s biographer notes that as late as 1981, Australia, the US, the UK and New Zealand all had double-digit inflation) – tended to exaggerate just how bad those deficits were. And if I think Cowen is quite wrong to describe Muldoon as “favouring easy money” – it was mostly a case for favouring low unemployment, in a country where for several decades there had been almost none, and where everyone accepted that getting on top of inflation might involve transitional unemployment costs – there was no consistent sustained effort to get inflation down, even gradually. He’d rather have had inflation down, and kept unemployment low – thus his ill-fated heterodox approach in 1982 (a wage and price freeze, and a cessation of the continuous devaluation of the exchange rate, all designed to break the cycle of wage inflation expectations and high wage settlements). But then not wildly dissimilar policies had been tried in the US only a decade earlier.
Cowen also calls Muldoon a protectionist. There is little evidence for that claim. He wasn’t the enthusiast who drove the CER agreement with Australia – generally seen as material liberalising measure, even allowing for trade diversion risks – but as the process went on he was instrumental in making it happen, despite the mutually disdainful relationship between Muldoon and his then Australian counterpart. Initiatives that Prime Ministers really oppose typically don’t happen. Muldoon recognised that an economically successful New Zealand required international trade, and more of it – and his government was one constantly grappling with threats to access to the European markets for meat and dairy exports. His government initiated industry studies to help wind back domestic protection for manufacturers servicing the domestic market (car assembly, TV assembly etc) and if the programmes of export incentives were expensive and misguided, the fundamental insight wasn’t – a successful New Zealand was likely to be one in which New Zealand firms found competitive niches internationally, in a world in which we had no bargaining power and no one owed us any favours.
And what of Think Big? Here is Cowen:
His most significant initiative was called “Think Big,” and, yes, it was designed to make New Zealand great again. It was based on a lot of infrastructure and fossil fuels investment, including natural gas, and it was intended to stimulate the country’s exports and remedy the trade deficit. Because New Zealand’s parliamentary system of government has fewer checks and balances than the American system, Muldoon got more done than Trump likely will.
Yet this bout of industrial policy worsened the already precarious fiscal position of the government, and Muldoon’s public-sector investments did not impress.
Cowen elsewhere quotes Muldoon’s biographer, Gustafson, who makes it clear that Think Big was never primarily Muldoon’s project. And while I won’t defend those projects, it is important to recognise some of the context: a take or pay agreement in respect of major gas resources that had been signed by the previous government, and yet another large upward shock to oil prices in 1979. I’m deeply sceptical of most government investment projects – perhaps especially those that rely on commodity price forecasts – but I’m told that even within the Treasury at the time, a fairly large chunk of the staff were sympathetic to at least important parts of the set of projects eventually under the label “Think Big”. It all ended up ruinously expensive, and Muldoon has to accept responsibility – but it wouldn’t have happened without the able (if misguided) responsible senior minister at the time, Bill Birch. And we run Cabinet government here.
New Zealand, of course, is rather unimportant to most people (New Zealanders aside). The United States remains one of the most important international powers. And so while our foreign policy doesn’t matter much to others, theirs does. Whatever concerns people have about Trump’s knowledge of, or approach to, Russia, Iran, Saudi Arabia/Yemen, China, North Korea or wherever, Muldoon was a consistent and fairly predictable member of the western alliance. To the distaste of some, but consistent with our 30 year membership of ANZUS, he welcomed visiting American warships and – whether he did it for reasons for sentiment or realpolitik trade considerations – won my admiration for his military support for Britain in the Falklands conflict.
Even at this distance in time, I’d argue that Muldoon remains a profoundly ambivalent figure. But I’d argue that, against extremely challenging circumstances, New Zealand moved forward rather than backwards under his stewardship. There were plenty of backward steps, and quite a few mis-steps, and he was a politician not a saint – so when Tyler Cowen writes of one policy that perhaps his “intentions might not have been entirely benign”, one might only observe that most politicians operate with the next election in mind – but there was plenty of progress too. Muldoon appointed plenty of able people as ministers (and some duds too), and if he was suspicious of some of them, he allowed or enabled a whole variety of useful reforms to happen – small, certainly, on the scale of what came afterwards, but he was a product of his times, his party, and his background.
What do I have in mind? Milk and bread were heavily subsidised when Muldoon took office, they weren’t when he left. The CER agreement did facilitate a material opening of trade with Australia. Saturday shopping was generally banned in 1975 – it wasn’t by 1984. Restrictions on road transport – favouring rail – had been materially wound back. The Official Information Act was introduced on Muldoon’s watch. The foreign exchange market was being freed up, and government bonds were being auctioned for the first time. Even the price freeze had actually expired under Muldoon – and official forecasts then suggested inflation subsequently could have been kept to 5-7 per cent. Voluntary trade unionism became a reality late in Muldoon’s term, and one of his last acts as Minister of Finance had been to announce that subsidies to farmers would be wound back.
Was it a great record? Probably not. Were there mistakes? For sure. But was democracy, the rule of law, the freedom of the press, or the strong anti-corruption conventions that governed New Zealand society, government, and public sector seriously threatened or eroded? Not at all. Did he, or his ministers, enrich themselves or their families? No. And we had a Prime Minister with the attention span, and intellect, to make considered (if perhaps often wrong) decisions, and to defend them coherently.
From this standpoint, only a month in, Americans – and the rest of the world – should probably count themselves very fortunate if the Trump administration turns out anything like Muldoon’s.
And if people are still looking for precursors and comparators, the Berlusconi precedent looks more relevant, and frankly more disconcerting.
*Michael Reddell is a Wellington-based economist who previously worked at the Reserve Bank; his tenure included the turbulent final nine months of Robert Muldoon’s term as Prime Minister and Finance Minister. Michael’s article, his first for Newsroom, was originally published on his blog Croaking Cassandra.
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