Social democratic parties have traditionally occupied an ambiguous position in relation to the economic system. While maintaining various degrees of opposition to the consequences of capitalism, they agree to work within the framework of capitalism and bourgeois democratic institutions. Such ‘State socialists imply that although class conflict, economic crisis, exploitation and poverty are consequences of capitalism, they can be eliminated (through state action) while capital remains’ (Allen et al., 1978: p.24). Operating within this framework, such parties continually adjust to the constraints of that environment. [Read more below]
Illustrative of this, is a comment by Liz Gordon, an NLP National Councillor, that,
Thus, for ‘democratic socialists’, a gap has always existed between policies they perceive as desirable and policies they perceive as possible to implement within the constraints of the contemporary economic system and parliamentary democracy. Matt Rata, for example, when attacking a proposal from the NLP for a 40% top tax rate, said the NLP proposal was ‘economically correct but politically untenable’ (quoted in Trotter, 1992a: p.11).
Economic constraints on leftwing politics
Critiques of social democratic strategies for social change nearly always centre on the deradicalisation which occurs when a party becomes involved in government. However, little has been written about the similar process which affects parties during their ascendancy to such power or importance. As with political constraints, economic constraints on parties of government also have a subtle, but still substantial, influence on parties of opposition. This is because parties of opposition always attempt to behave as potential governments, and therefore come under most of the same pressures as ruling parties. Opposition parties create policy, and even alternative budgets, as if they were in government. They do this in order to give the electorate a chance to compare their policies with those of the government and to convince people that they are sufficiently adept and responsible to run the country. By making such policy, these parties submit themselves to the same forces as governments do. They must create policies that take their starting points from the same place that the government does. Therefore if a party advocates an increase in expenditure they will have to show where that extra funding is likely to come from in the current budget. Therefore, working in the same economic and political environment, opposition parties are constrained by the same forces as parties of government are.
The political power of ‘business confidence’ and investment
In particular, the dynamics of business confidence are equally applicable to all potential parties of government. Marxist theorist Fred Block explains how the dynamics of business confidence constrain parliamentary actors from pursuing anti-capitalist policies. He notes that individual capitalists are always making evaluations about the general political and economic climate. They ask themselves questions such as:
Obviously, as Block points out, these constraints vary depending on time, place and circumstances. But as left parties grow and become contenders for power, they are increasingly under the close observation of individual and collective capital. If such a party gets elected there is normally an increase in speculation against the nation’s currency. This leads to ‘a real deterioration in the nation’s balance-of-payments account... [and] the flight of foreign and domestic capital and increased foreign reluctance to lend money to the afflicted nation’ (Block, 1987: p.60). The declining economy means that a government is unlikely to be able to provide economic advancement to any of their supporters. However, even while in opposition a party is affected by levels of business confidence because such levels of confidence will be highly persuasive to an electorate sensitive to the need to avoid economic disaster.
Business unease with the Alliance
Sometimes the business community will make direct statements about their collective level of confidence in an opposition political party. For example, in the heyday of the Alliance’s popularity a Christchurch Press headline read: ‘Businesses warned of “disaster” under MMP’. The article reported the concerns of the NZ Employers Federation that Jim Anderton might become Prime Minister and therefore: ‘High-achievers, investors, and investment will be driven out of New Zealand leaving behind a shrinking [economic] cake’ (The Press, 24 June 1995).
Likewise, during the Tamaki by-election, the Alliance’s chances were greatly reduced when in the last days before the vote all the major banks announced interest rate reductions, the Dairy Board announced a high payout to farmers, and the government declared improved unemployment figures. At the same time, senior business figures and Government ministers warned of the dire consequences to New Zealand’s international financial links if the Alliance were successful. According to Jim Anderton, the Alliance had little chance of winning Tamaki against ‘All the financial agencies in New Zealand, almost in a united fashion, coming up with this miraculous and extraordinarily convenient set of hopeful and optimistic economic news’ (quoted in Luke, 1992: p.6). Political scientists Raymond Miller and Helena Catt noted a ‘sinister development’ in the by-elections of this period, in which there was a,
This offensive occurred when the Alliance looked like it might win a second seat out of a parliament of 99 members. An Alliance by-election victory would not have even threatened the Government’s ability to rule, as the National Party then had a parliamentary majority of 31, yet as Anderton pointed out, the financial and political agencies were suggesting that, ‘Western civilisation was going to come to an end if there was an Alliance victory in Tamaki’ (quoted in Luke, 1992: p.6). This begs the question: what would the financial markets have done if the Alliance seriously looked like winning a general election?
While the Alliance was at its peak of popularity, the media was full of reports that challenged the credibility of its economic platform. The Independent even descended to the exaggerated and emotive claim that the Alliance was ‘pushing the communist Bill Sutch’s Fortress New Zealand line’ (quoted in Cowan, 1994: p.3). A report by Ord Minnett Securities that was released for the media claimed that the Alliance’s economic policies would ‘likely result in low incomes and deficient social services’ (quoted in Cowan, 1994: p.3). Clearly then, organised business groups play some direct role in attempting to pressure social democratic parties to moderate their economic policies, by attempting to undermine their credibility with the electorate.
Next blog post: The Alliance oligarchy