Juan Linz wrote that political time was like cloud timeâ€”it moved at a different pace than chronological time, yet had a discernable rhythm of its own. I would like to reverse the metaphor to note that when it comes to political and economic cycles in liberal democracies, it is political time that is more chronological, whereas economic time is more akin to cloud time.
Â Under conditions of liberal democracy, political time is codified, demarcated and predictable. Elections are held at regular intervals, parliaments sit for a given amount of days in a calendar year; government departments issue annual reports and respond to inquiries in prescribed (if not timely) fashion, bills are introduced in specified ways within specific timeframes, etc. Even political debates take on a predictable rhythm, with arguments over finances occurring around the time of government budget announcements (in New Zealand that is usually in May), and partisan and personal attacks occurring during periods of relative policy stability. Come summer, most things political more or less stop for the holidays, then resume in the Fall.
Economic time, however, is another matter. Capitalist economies are obviously cyclical, but the cycles are twofold and not coincident with political time. First, there is the â€œboom and bustâ€ cycle in which markets expand and contract in pursuit of (re) equilibrated growth. This is the cumulus cloud time of economic cycles. That is, the short cycle dimension of capitalist economics, marked by sudden shifts in direction driven by the warming or cooling of market preferences. In parallel, there is a long cycle in which capitalist economies shift between market-driven or state-managed forms. This is the cirrus cloud dimension of economic time. The sclerosis, stagnation or failure of one economic form, such as the market failures now evident, leads to the shift to the other. Thus, the Great Depression spelled the end of laissez faire market economics and the advent of welfare statism, which after the resolution of World War 2 led to nearly forty years of prosperity in the liberal democratic world. In turn, by the 1980s the era of state-centered economics had come to an end, saddled as it was by rent-seeking behaviours, clientalism and systemic inefficiencies produced by bureaucratic distortions of the productive process. What emerged in response was neoliberal market economics. This era was driven by deregulation, trade opening and monetarist macroeconomic prescriptions that were premised on the beliefâ€”subsequently proven to be unfoundedâ€”that finance capital would be the most accurate determiner of global productive investment.
Two decades later, the era of neoliberal economics has concluded in ignoble fashion. Note that this market-oriented cycle lasted half as long as the previous state-centered cycle, which in turn was shorter than the original period of laissez faire. This shortened lifespan is due to the combination of market-driven globalization of production coupled with exponential advances in telecommunications and transportation. Phrased differently, it would seem that the economic cirrus clouds have sped up at a time when the negative cumulus layer has deepened, all while political time remains constant. Therein lies the rub.
It is generally held that market failures lead political shifts to the Left so as to facilitate the move to state-centered macroeconomic policy. Conversely, state-centered failures are said to lead to shifts to the political Right so as to facilitate the adoption of market-oriented strategies. In the 1930s and 1980s this rule generally held true for advanced democracies. But since economic and political time are not coincident, it is by no means a universal truth that such will occur at every moment of cyclical transition. The current moment is a case in point.
In the US the rule seems to have been upheld, as is true for several European countries. But in France, New Zealand, Japan and Italy, among others, Right-oriented governments are confronted with market failure and the need to provide political space for an economic transition. The political cycle in these countries does not allow for their immediate replacement with Left-oriented governments. There is a lack of synchronicity between political clock and economic cloud time in these countries. This places the ideological beliefs and policy prescriptions of such Right governments under pressure, since in principle they are averse to increasing the role of the state in macroeconomic affairs. Yet the magnitude of the current market failure is such that the role of the State, at least as a macroeconomic regulator, needs to be considered. This consideration needs to happen quickly, since the temporal horizons on finding solutions is near immediate given the speed at which the global recessionary pressure wave is advancing. Put another way, Â the cumulus and cirrus aspects of economic time have come together in a perfect storm of economic necessity that Right governments find particularly difficult to address, much less resolve without betraying their foundational principles. To do so is to tacitly admit that there are inherent flaws in market logics that require State intervention in order to be overcome (in the reverse of the betrayal of foundational principles and tacit admission of State-capitalist failures by so-called “Third Way” Labour parties).
Thus the dilemma for Mr. Keyâ€™s government: how to reconcile clock and cloud time in a small island democracy at the outer edge of an economic storm front? From what has been seen so far, it appears that he has opted to shift to the Left, but as of yet without categorically stating that he is doing so. With ACT in the government coalition, that makes for interesting theater in the months ahead. Or to conclude with yet more metaphor abuse: could there also be internal storm clouds on NACTIONALâ€™s horizon?