Recently, while thumbing through some papers of Keith Holyoake's, I found a speech he'd made during the 1949 election campaign when National was on the way to burying Peter Fraser's Labour government. Promoting the slogan "Make the Pound go Further", National's then deputy-leader said the election would be "fought in the kitchen. It is a cost of living, a shortages, and a restrictions election, and women will play the biggest part in it". Compare that with now: women are even more to the fore in politics, but this election certainly isn't (yet) about the cost of living. Food prices are stable. It's a fair bet that none of our political parties will grizzle about prices before 27 July.
This is one of the novel features of today's world. During my early political career we constantly discussed rising prices. Inflation was a bogey of the original welfare state. Governments always over spent, ministers regulated the money supply, and we lived in fear of balance of payments deficits. Politicians never devised a system to keep inflation within tolerable limits. A Price Tribunal in the 1940s, a Trade Practices and Prices Commission in the 1950s, Warren Freer's Maximum Retail Price system of the 1970s; none, despite extravagant hype, could freeze prices in an inflationary environment. Inflation ate into the livelihoods of pensioners and those on fixed incomes. Some ordinary wage and salary earners thought they were getting ahead, but they kidded themselves: their share of national income kept declining from the 1960s through to the 1980s. It's only been in the last fifteen years when ministers finally bowed out of monetary control and Reserve Bank governors were contracted to keep inflation within limits that we finally muzzled the inflationary beast. In the process we altered campaign rhetoric. Instead of graphs and diagrams that had Robert Muldoon clambering around his charts, we can now reflect on more substantial issues like desirable levels of economic growth, health and welfare, and crime and immigration. We can even weigh the claims of the PPTA and their executive as they twist and turn before a public that has clearly switched off.
But do today's politicians really prefer a world without inflation? Not by the look of it. Old political habits die hard. We have so few leaders with economic understanding that people like Michael Cullen, Winston Peters and Helen Clark mistake higher inflation for growth. They are now saying that without Don Brash at the Reserve Bank, it might be possible to wrestle more growth from the economy. Winston Peters negotiated a new inflation regime of 0-3% to replace the 0-2% existing previously, and Jim Anderton and Michael Cullen now sound as though they want a wider margin still. After the election we'll see a less orthodox approach to the Reserve Bank and its governance. Labour will try hard to appoint someone more congenial to their agendas. They'd dearly like to appoint Helen Sutch from the World Bank, but may not be able to get her through the selection process. The appointment of an inflationist with a soggy contract will cause alarm in business circles, and dent investor confidence in New Zealand big time. But what's that if yet another male bastion falls to women, and politicians are able to kid themselves they'll get painless "growth".
The notion that Don Brash overdid inflation control at the expense of economic growth is absolute bunkum. This line is peddled by the mentally lazy who think there's an easy way to riches. If it had been true that Brash overdid controls on the money supply during his fourteen years at the Reserve Bank, why did we never experience nil or minus inflation during his time? In reality, inflation kept nudging the higher end of his contracted maximum of 3%, and occasionally exceeded it. That record in itself, gives the lie to Cullen's election posturing.
Inflation is a cruel beast. It fleeces those who can't pass on costs, and it feeds speculators. Ultimately it mis-allocates resources. Higher wage settlements only give an illusion of progress, which Michael Cullen might like as the economy slows. But if we want higher growth then there is nothing for it but to accept the necessary disciplines. Such as improving our education performance, getting many of the 20% of the working-age population on benefits back to work, and creating a congenial investment climate. We need off-shore investors chasing the New Zealand dollar to stay, instead of creaming currently higher interest rates, then running.
Nostalgic erstwhile socialists wanting to replay the 1970s might relish inflation, but it does nothing for realists. It breeds regulations and controls. Back will come the phoney world of yesteryear that sent our finances over the cliff in 1984. Let's keep our political discussions in the living room and out of the kitchens of Holyoake's day.
Historian, author and former Labour MP, Michael Bassett stood at each election from 1966 till he retired in 1990.