The Fifth Labour Government's Growth and Innovation Framework 1999-2006: A Critical Analysis and Evaluation

Abstract

Following the implementation of a neoliberal policy regime by governments from 1984 to 1999, New Zealand’s Fifth Labour Government was elected with a clear mandate to adopt a different approach to policymaking. Although a considerable body of literature analyses and critically evaluates the neoliberal policy regime implemented by the Fourth Labour and Fourth National governments, there have been few comparable studies of the Fifth Labour Government, which maintained, but softened, the central features of the neoliberal policy regime. This thesis aims to address this gap by using a Marxist perspective to describe, explain, and critically evaluate the social and economic policy implemented by the Fifth Labour Government, focusing on the Growth and Innovation Framework (GIF). The GIF is the focus of this analysis because it was the most comprehensive statement of the Fifth Labour Government’s broad approach to economic management and policy-making.

This thesis focuses on three sets of questions. Firstly, what are the central features of the GIF? To what extent does the GIF maintain and/or modify the prevailing neoliberal agenda? This analysis of the policy framework and related literature identifies implicit neoclassical economic and political assumptions, demonstrating the extent to which the GIF is informed by neoclassical economic theory. In particular, the GIF assumes that innovation and economic growth are related and while some government intervention in the form of basic funding of research and development (R&D) is required, innovation is best generated by market forces. Although the neoliberal policy regime has been softened in some respects by adjustments to social policy, it does not constitute a new direction in policymaking to the extent claimed by the Government’s intellectual supporters.

Secondly, which class-based interest groups were most influential in the formation of the policy framework and why? What does this suggest about the relationship between these class-based interest groups and the Fifth Labour Government? To what extent does the policy framework reflect the interests of the various classes that constitute New Zealand society? To what extent does it favour different groups according to gender and ethnicity? The thesis examines the consultation process that resulted in the GIF, revealing that the components of the GIF most likely to have a direct impact on the lives of New Zealanders were left off the agenda of the public consultation process. In addition, analysis of key policy documents, media reports, and interviews with key political actors furnish considerable insights into the motivations and interests of groups involved in the policymaking process either directly or in their lobbying activities. Results indicate that the state in contemporary New Zealand society is disproportionately influenced by business interests. Although some concessions have been made to the working class, ultimately these concessions are the result of a concerted effort to pressure the state into offering compromise.

Thirdly, and most importantly, what impact did the GIF have on the economic and social conditions in which New Zealanders live? In particular, what impact did this framework have on economic growth and social inequality? The stated GIF goal of achieving economic growth that would put the New Zealand economy in the top half of the OECD by 2011 was not reached, although more moderate economic growth can be attributed to a limited extent to the GIF. While the social policy measures introduced by the Fifth Labour Government did improve the circumstances of some New Zealanders, this was by no means a universal experience, and positive outcomes were divided in terms of class and ethnicity. The retention of the neoliberal macroeconomic policy framework was combined with some social policy initiatives, particularly Working for Families. This has slowed the rate of growing inequality generated during the 1980s and 1990s, but the trend has continued.

The Marxist approach adopted in this study explains these outcomes by allowing us to view the Fifth Labour Government’s GIF through the lens of class politics. It helps us to appreciate how policy and policy frameworks are shaped by broader patterns of material history. The Fifth Labour Government presented itself as representing “modern social democracy” in the aftermath of the neoliberal experiment. Rather than responding to the political mandate granted by voters in the 1999 election to the Government to reject the neoliberal policies adopted since 1984, the thesis presents compelling evidence that the Fifth Labour Government’s actions disproportionately favoured business. Ultimately, although limited headway was made in social policy, the divide between the rich and the poor that was created by the neoliberal reforms of the 1980s and 1990s has not been reversed. This thesis argues that the Fifth Labour Government failed to move substantially away from the neoliberal policy agenda and while the GIF enjoyed moderate success, the economic growth and social progress promised in the GIF document was not achieved.