Robert MacCulloch: How our Kingdom of Kindness Lost its Way

A question that has gripped this country these past five years is how former Prime Minister Ardern, who touted kindness as her brand, became so divisive.

The explanation may be simple. Political rulers with strong moral viewpoints have long created discord. Enlightenment philosophers like John Locke explained the dangers of governments exercising authority in the realm of individual conscience. Leaders who claimed to represent the moral high ground created the impetus for the separation of Church and State in Europe.

Yet Jacinda Ardern put matters of conscience right back into the heart of affairs of State. If you have any doubt, then read her Commencement Speech at Harvard University back in May 2022. It starts and ends on the theme of kindness.

In between sits conversion therapy, gun control, gay marriage, abortion, trolls, responsible algorithms, disinformation lies, not to mention unhygienic keyboard warriors “dressed in poorly fitted superhero costumes”.

Ardern became more like a charismatic leader of a spiritual movement, promoting passionate conviction, than a traditional party boss. She converted many National Party supporters from her pulpit. They joined her congregation, better known as a “team”, singing her praises, at least for a time.

She even won over the hard-nosed Harvard University academics and graduating students. They gave her a standing ovation. However, a stunned silence would have likely greeted our former Prime Minister had she argued that the world’s economic challenges, in addition to its culture wars, could be solved by kindness.

Yet that is what she did three years before in an article in Britain’s Financial Times newspaper, which the Beehive called “the economics of kindness”.

It caused a problem. No-one had heard of kindness economics. No-one knew what it meant, including our own Treasury. Is it kind to reward effort? If so, is it kind to force hard workers to pay back their extra reward in taxes to support lazy ones? During the pandemic, was it kind to pay the wage subsidy to big firms? Was the Reserve Bank kind when it flooded financial markets with liquidity, causing inflation? Is it kind to now hike interest rates?

The meaninglessness of these questions reveals a lot about “kindness economics”. It was a brand-name for a product that was never built.

This article is not debating the importance of kindness as a personal virtue in our dealings with others.

It is arguing that the non-existence of kindness economics meant Arden had no framework to leverage the stand-out success she helped deliver during the pandemic’s first year into an enduring economic prosperity for the nation.

Our Gross Domestic Product fell by around 1% in 2020. Far larger drops had been experienced throughout the advanced economies of the world, like the United Kingdom, where it plummeted over 10%. Kiwis felt we were living in an incredible place. The rest of the world felt the same about us. Carving out our own path to take advantage of the unique virus-free situation in which we found ourselves was not a luxury. It was a requirement.

Yet our Finance Minister and Reserve Bank Governor instead went and not only copied fiscal and monetary policies from abroad, but did so on a larger scale. They wastefully spent and printed money, reversing our exceptional hard-won Covid gains.

The International Monetary Fund has now confirmed our GDP growth rate this year is below the average and our current account deficit the worst in the developed world. It never had to be that way, since we had been the world’s stand-out success in 2020. The billions subsequently thrown away could have been used for health-care, infrastructure and an education system of which we could all be proud.

Incredibly, we now face recession when most of the nations that did far poorer than us during the pandemic do not.

Meanwhile, Ardern’s Minister of Finance and Governor, who bear direct responsibility for our economic mess, stay on. Both defend themselves against accusations of error by saying others are also doing badly. When you copy folks worse than you, that’s what you get.

The Kiwi story these past years is one of our leaders snatching an extraordinary economic defeat from the jaws of the people’s amazing Covid victory. It reminds us that competency is important, not just kindness.

Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.