 |
|
23 September 2005 MMP Means Much More Paralysis
Wood might have added "apart
from Germany", since New Zealand's mixed member proportional
(MMP) system is similar to the German electoral model. According
to the Royal Commission on the Electoral System, Germany is the
only country to use MMP (although others use other forms of proportional
representation). When the Royal Commission recommended
in favour of MMP in 1986, Germany looked to many people to be a
successful country economically. To some it still does - finance
minister Michael Cullen has been a long-term admirer of what he
calls the 'Rhenish model'. The admiration is misplaced. Germany
rose from the ashes of World War II to become a prosperous nation
thanks to the free-market policies associated with chancellor Konrad
Adenauer and, particularly, economic minister Ludwig Erhard. But
by the 1970s stagnation was setting in with the growth of intervention,
deal-making between businesses and trade unions, a big welfare state
and high taxation. In the last 10 years, average annual economic
growth in Germany has collapsed to 1.3 percent (compared to 3.4
percent in the United States and 3.1 percent in New Zealand), according
to International Monetary Fund figures. Germany's unemployment rate
is 11 percent - similar to New Zealand's peak rate of unemployment
prior to the labour market reforms of the early 1990s. Despite its moribund economy and
the widespread recognition of the need to prune the expensive welfare
state, loosen labour regulations, cut taxes and wind back public
intervention in business, the German political system has thwarted
reform. As in New Zealand, Germany's election last weekend has delivered
an inconclusive result. The 'sick man of Europe' is likely to remain
bedridden for some time yet. Of course the economy is not the
only thing that matters. The basic test of an electoral system is
not what economic policies it delivers but whether it makes for
a sound democracy. No system is perfect but MMP has serious defects.
It tends to throw up weak governments without strong mandates; gives
small parties excessive influence in coalitions; institutionalises
promise-breaking in post-election negotiations; gives power to central
party hierarchies in drawing up lists, so that candidates that are
rejected in constituencies end up back in office; and, perhaps most
importantly, makes it difficult for voters to decisively throw out
a failing government. From an economic perspective, however,
there are other problems. Research suggests government spending
tends to be around 5 percent of GDP higher in countries with proportional
representation systems, and high spending and taxation are a drag
on growth. The reason for high spending is that parties do deals
at the expense of the taxpayer - such as the $5 billion planned
spend-up by National and NZ First after the first MMP election.
Also such systems are conducive to paralysis in decision making
because of the difficulties of managing coalitions, and to compromised
and lower quality policy outcomes. From many perspectives, New Zealand's
election outcome could hardly be worse. Overseas investors will
be shaking their heads about the prospects of a country that has
to cobble together agreements between perhaps five or six parties
to form an administration. Prime minister Helen Clark has
rightly emphasised the need for strong and stable government. Stability
is more difficult with PR systems, and in any case it is not the
only requirement. As Germany's experience shows, countries also
need to be able to continuously adapt and reform their institutions
to cope with economic challenges or they run the risk of long-term
decline. Since the advent of MMP, New Zealand
has done little to build on the earlier reforms that have delivered
today's stronger economy. There is no sign of the further improvement
in its growth rate necessary to rejoin the ranks of the high income
countries. Indeed the return to greater intervention and an end
to favourable economic conditions are pointing to a weakening economy
and a need for tougher economic decisions. Government paralysis
in this situation will be unhelpful, and may trigger a reconsideration
of whether MMP suits a small, open economy that needs to be nimble
and flexible. It is voters at large who should make this assessment. There has been a public expectation of another referendum to pronounce on MMP in the light of experience with it. Helen Clark has been a critic of MMP but to date has argued that it is "too soon" to put the issue back to voters. Twelve years and four elections after the 1993 referendum, that argument is wearing thin. Germany's plight should be a warning that it would be unwise to postpone a reassessment of MMP indefinitely. Roger Kerr is the executive director of the New Zealand Business Roundtable. For more information, contact: Roger Kerr Web: www.nzbr.org.nz |