Who was Prime Minister John Key? A lovably uncool dad, goofing off on the breakfast TV couch? A proudly vicious parliamentarian, sticking the knife in at Question Time? A political genius with an uncanny knack for understanding voters better than they did themselves? Or a cautious conservative who avoided the real issues? Danyl Mclauchlan picks apart the man who, even when he lost, just kept on winning.
Originally published December 16, 2016
“Buy the rumour, sell the fact.” – old stockbroker’s adage.
Back in 1998 I lived in London. One summer evening I was eating dinner with a friend at a restaurant in Soho. It was late, but still light, and we sat outside on a balcony looking down on one of the narrow streets, lined with bars and restaurants and ad agencies, and after we’d finished eating my friend pointed at a café down the road and across from us and said, ‘Phil’ – a mutual and very wealthy acquaintance who worked at the same merchant bank as my friend – ‘has just bought that business.’
I looked at the café. The building was quite shoddy and run down; the café itself looked very unfashionable; there was a rainbow flag above the doorway. None of these were qualities I associated with Phil. I asked, ‘Why on earth has he bought a gay cafe?’
‘It makes sense,’ my friend replied. ‘The business probably brings in revenue of about fifty thousand per annum. Phil can borrow two to four million pounds against that and invest it and clear a profit of several hundred thousand a year.’
This explanation confused me at the time and it still confuses me now, and it is possible I have mis-remembered the details. My point is this: that was the first moment I realised that I didn’t really understand money. I’d been earning it and spending it for a while, and I had a vague intuition that people who worked in banks and other financial institutions could do complicated things with money, but the actual money itself seemed pretty simple.
But it wasn’t. When I stopped and thought about it I realised I had no idea what money even was. The more I learned about it – subsequent to that night – the more I realised that it functioned in ways that were complex and deeply counterintuitive, and there were people who understood that complexity and seemed to be able to leverage that knowledge to make more money in ways that defied basic common sense.
Here’s John Key – who was also working in London at the time, albeit at a much more lavishly remunerated level, as global head of FX trading for Merrill Lynch – talking about money and value and common sense in John Roughan’s 2014 biography:
Most people, he explains, take their profits too early and cut their losses too late.
If they buy a house for $500,000 and a month later somebody offers them $600,000, it is human nature to take the money and dine out on their good fortune. Conversely, if they put that $500,000 house on the market and the best offer it brought was $350,000, they would hold onto it.
A good dealer would not. As soon as he realised the asset was losing value he would get what he could for it and put the money into a new, hopefully better, investment.
This, by the way, is by far the most comprehensible thing Key tells Roughan about his time in the financial sector; the rest of his comments about it are rich in the complex jargon of the industry, and Roughan does not translate them. There’s another insight into Key’s quantitative side later on though: when the prostitution law reform bill is up for a conscience vote in Parliament, Key tries to work out his position by calculating the number of sex workers in the country, and the number of clients they’d need to see to be fiscally viable as businesses, and thus the potential number of sex worker clients who might support the bill.
A lot of people have written about John Key’s business background; it functions as a kind of negative space for people to project their own, often odd, fantasies and misconceptions and conspiracies about finance and banking. (He’s often celebrated for his incredible sales and negotiating skills, yet every time he’s sat down with a company to cut a deal on behalf of the taxpayer, the corporation always seems to come off far, far better than the Crown.)
I’ve made fun of the fetishisation of Key’s business/financial mojo in the past, but now I’m going to indulge in it myself and suggest that it helped him understand that complex systems – financial systems, political systems – often behave in ways that are counterintuitive, that defy common sense, but if you study the systems methodically you can bet against the conventional wisdom and win.
Let me give you an example. In November of 2006 Key became leader of the opposition. In early 2007 the main political issue was the ‘anti-smacking bill’: Sue Bradford’s controversial Private Member’s Bill amending the Crimes Act, which was slowly and agonisingly making its way through Parliament. Critics attacked it as ‘social engineering’, a perception Clark’s by-then unpopular Labour government was already struggling with.
‘Never interrupt your enemy when they are making a mistake’ is one of the oldest rules in politics, especially in opposition. When the government is doing something unpopular, and failing at it, let them keep doing it; let them fail. But Key did the opposite: he negotiated an amendment with Clark – an amendment carefully worded to mean almost nothing – and the bill was passed with a gigantic majority. I remember discussing it with work colleagues the morning after Key and Clark made their joint announcement, and mocking one of them who claimed ‘John Key just changed New Zealand politics’, but if you look back at the Colmar Brunton poll, which charts which politicians New Zealanders prefer as their prime minister, you can see Key start at the standard 10% baseline most opposition leaders languish in, and quickly soar to 40% in the early months of 2007, overtaking Clark.
Key’s move was based on a ‘deep dive’ into polling and focus group data, a National advisor told me a few years later. Bradford’s bill was broadly unpopular, they discovered, but it didn’t have ‘valence’: it generated a lot of media and was a very big deal to a tiny number of supporters and opponents but most people didn’t actually care about it that much, as opposed to how they felt about, say, the quality of their kid’s schools, or the healthcare system. What they did care about was the petty antagonism of politics, and what tested very well was the idea of a leader who could transcend that and deliver solutions.
It’s not unusual for politicians to consult polls and focus groups. But politicians are very susceptible to overconfidence bias; they prefer to indulge in a vast over-estimation of their own abilities and judgement. Most political leaders, when offered a choice between doing something that seems counter-intuitive but is driven by research, or something that their guts tell them is right, will go with their gut. It got them where they are today, they reason, forgetting that they’re generally there to replace prior failed leaders who also followed their gut.
Nine years later Labour opposition leader Andrew Little was offered an almost identical opportunity to Key, when Key’s attempt to change the New Zealand flag was floundering, at roughly the same point in the political cycle to Helen Clark’s struggle with Bradford’s bill. Little did not interrupt his enemy: he let him fail – no doubt his gut told him that was the smart thing to do – and fail Key did, to much crowing and gloating from his critics. But Key’s popularity remained high and Little’s very low popularity did not budge, because voter behaviour is more complex than a politician’s gut.
“You will never have another boss like me. Someone who’s basically a chilled out entertainer.” – David Brent, The Office
During the 2011 election campaign John Key hosted an hour long talk radio show on Radio Live. It was called The Prime Minister’s Hour. Key interviewed Sir Peter Jackson, Sir Richard Branson and Richie McCaw. (The All Black captain played a pivotal role in National’s media strategy during election years; a search on Knowledge Basket, a media aggregation database, shows that from 2010 to 2011 we saw a 200% increase in news stories about Key and McCaw; it dropped away for the subsequent two years then increased by 171% during 2015). Members of the public phoned in to discuss issues like the rescheduling of Coronation Street, and to congratulate Key on how well he was doing his job.
The Labour Party complained to the Electoral Commission. They argued that the lack of balance – where was Phil Goff’s one hour talkback show where callers told him how great he was doing? – meant it amounted to free advertising from MediaWorks, part of which was once owned by Steven Joyce, a senior Minister in Key’s Cabinet, and to which the government had extended a $43 million loan the previous year. The Electoral Commission referred the complaint to the police, an organisation that can never run away fast enough when called upon to investigate the many alleged breaches of electoral law by National and Labour over the years. They declined to prosecute.
Key’s defence of the show was twofold. Firstly, there was no need for balance, because the show was called ‘The Prime Minister’s Hour,’ and it wasn’t his fault that he just happened to be Prime Minister when MediaWorks created the show. Secondly, how could it possibly be a political advertisement when he wasn’t even talking about politics?
Key spent a lot of his time as Prime Minister not talking about politics: basically being a chilled out entertainer, appearing on breakfast TV and breakfast radio and women’s magazines and evening infotainment shows where the hosts would engage him very lightly on the issues of the day. “We’ve got the mix about right,” Key would assure them, perhaps adding that he was “looking at a range of options,” before hurrying on to discuss the rugby or the latest celebrity news story. He could – if pressed – discuss policy details. His discussions with Radio New Zealand host Guyon Espiner often played out like this:
Espiner: I’d like to ask you about this policy.
Key: Yeah, I haven’t been briefed on that so I can’t speak to it.
Espiner: Because Andrew Little has criticised –
Key: Well he’s wrong and I will now speak about why that is and what the policy means at length, almost as if I have actually been extensively briefed on it.
The eminent American political scientists Chris Achen and Larry Bartels estimate that about 3% of voters in western democracies cast their votes based on policy and ideology, and that these are all members of ‘the political class’: party members, activists, intellectuals etc. Everyone else – ie, for electoral purposes, everyone – is interested in and motivated by other factors. The economy, famously, is one; the personality of the party leader and the ability of voters to trust and identify with that leader is another.
Left-wing politicians and commentators come from an intellectual tradition in which economic class is paramount; when Key rose to become leader of the opposition they felt sure that Key’s enormous wealth would prevent ‘ordinary Kiwis’ from identifying with him. Labour deputy leader Michael Cullen dismissed him as a ‘rich prick’. A Hansard search of Key’s time as Prime Minister identifies 388 matches to the term ‘rich mates’ and they are almost all instances of Labour MPs attacking Key for alleged cronyism.
It never worked; the public never turned against Key because of his wealth, but his adversaries just couldn’t believe it wasn’t working so they just kept doing it. Surely in the wake of the global financial crisis and the publication of The Spirit Level and Piketty’s Capital in the Twenty First Century, the backlash against economic elites would come?
There is a backlash happening across western democracies, but to the confoundment of the left most of the backlash is against left-wing cultural and intellectual elites rather than right-wing economic ones. Key is very different from Donald Trump in many very significant ways, but identical in this: they’re both very rich but culturally proletarian. Trump genuinely loves wrestling and stock car racing; Key loves rugby and does not bother to hide his utter lack of interest in high culture (Helen Clark’s favourite movie was The Motorcycle Diaries, a critically acclaimed Argentinian film about a young Che Guevara finding his revolutionary soul. Key’s is Johnny English, a critically reviled spy spoof in which Rowan Atkinson wanders about covered in poo.)
You hear a lot about class politics in left-wing circles, and even more about identity politics, and there’s this huge debate about which of them is the right way to communicate values and win over voters. You don’t hear much about cultural politics, even though left-wing intellectuals have spent the last hundred years analysing culture and its intersection with politics and capitalism. Cultural identity and cultural signifiers seem to be important to a lot of voters – possibly because it’s something they know a lot about: they can judge politicians on their authenticity in a way they can’t do with policy and ideology. When British Prime Minister David Cameron forgot which football team he affected to support the entire country erupted in shocked disbelief. Key said many odd and artless and sometimes just plain unpleasant things during his time as Prime Minister, but he spent a huge amount of his time practising cultural politics, connecting with voters across the class and identity spectrum, and he never made a cultural gaffe.
“These people, some of them are rapists, some of them are child molesters, and some of them are murderers and these are the people that the Labour Party is saying are more important to support than New Zealanders who deserve protecting when they come back here.” – John Key, New Zealand Parliament, Questions for Oral Answer. November 10, 2015
Ask normal people what they don’t like about politics and they’ll usually talk about Parliamentary Question Time. Politicians screaming at each other and being thrown out of the House. Obscure points of order. Sprays of spittle illuminated by the expensive down-lighting.
There used to be a logic to it: if an MP behaved awfully enough they might get some media coverage – a few seconds on the TV news, or a mention from a political commentator in the paper the next day praising them for being ‘strong in the House.’ But most of that coverage has vanished with the media who reported it, and now Question Time is merely a hundred and twenty one – give or take – very highly paid, generally intelligent and well-meaning people being repellent to each other in a handsomely furnished room, with barely anyone watching.
And no one was more repellent than Key. There was the ‘rapists and child molesters and murderers’ comment above, in response to Labour MP Kelvin Davis accusing him of being ‘gutless’ for his refusal to stand up for New Zealand citizens resident in Australia being imprisoned in detention centres after a retroactive law change. Other low points include Key himself daring the opposition to ‘get some guts’ and support his decision to deploy kiwi troops to Iraq, as if it was Key himself off to fight ISIS; the Prime Ministerial Speech to the Throne, traditionally an occasion for the leader to set out his government’s policy agenda for the year, but in his second and third terms Key didn’t really have one of those so he spent his speech telling the Opposition that they were morons and losers, in highly colourful language; and then there was one of the great contributions to political debate in New Zealand – the invention of Prime Ministerial ‘hats’. If Key was caught behaving in a manner unethical to the office of Prime Minister he would, retroactively, decide that he wasn’t the Prime Minister when he did this. He was someone else: leader of the National Party, or just an ordinary bloke, maybe.
Most successful politicians have a chameleon-like quality. They are whoever they need to be in any given social situation, and the people they’re with almost always perceive the performance as real. Ronald Reagan was once asked if being an actor helped his political career, and he replied, ‘I can’t imagine how anyone who wasn’t an actor could do this job’. In his biography of Lyndon Johnson the historian Robert Caro often describes the mercurial nature of his subject. As a young Congressman Johnson would stand in his office screaming at his staff, a merciless and autocratic tyrant, only to be interrupted by a phone call from a powerful ally, and his demeanor would change, instantly, to a calm, reverential flatterer, and change again as soon as the phone was back on the hook.
What was unusual about Key is that he was often praised by political commentators for being genuine, yet it was possible to witness his radical transformation on a daily basis. You could watch the Prime Minister joking around on breakfast TV, a lovable goofy dad, and then watch him roar with laughter in the House as he joked away questions about climate change or child poverty: an obvious monster.
I sometimes wonder if Question Time transforms our politicians into monsters. Key was awful in the House, but only slightly more so than average, and less loathsome than some of the longer serving MPs. What does it do to them to have to stand up every day and claim that they ‘stand by their statements’ and then argue that something they’ve said actually means the opposite of what it obviously means, or that some statistic they’ve once cited is now meaningless, only to embrace it a week later when the political winds change again? I understand the adversarial nature of the system, and the theory that Question Time is ‘holding the government to account’, but that obviously isn’t working. It seems like a contest deliberately designed to turn decent, well-meaning people into dissembling, untrustworthy, heartless liars.
And you have to win at it if you want to run the country.
The 19th Century French economist Frederic Bastiat once wrote a famous celebration of the free market. Consider the city of Paris, he argued.
Here are a million human beings who would all die in a few days if supplies of all sorts did not flow into this great metropolis. It staggers the imagination to try to comprehend the vast multiplicity of objects that must pass through its gates tomorrow, if its inhabitants are to be preserved from the horrors of famine, insurrection, and pillage. And yet all are sleeping peacefully at this moment, without being disturbed for a single instant by the idea of so frightful a prospect.
That’s the magic of competition and free exchange, Bastiat claimed, and the neoliberal – or neoclassical, or laissez-faire, or whatever – reformers of the New Zealand economy in the 1980s and 90s believed very strongly in that magic and that the efficacy of markets should be extended to as much of the economy as possible.
“Hold on a minute,” a left-wing critic of that philosophy would say. Consider what happens to all that food flowing into Paris after it’s been eaten and digested. It passes into a monopolistic, state-owned, socialised sewerage system that functions just as well as the free market – arguably even better, because there’s none of the inefficiency of competition or the profit motive. Surely we should extend that model to as much of the economy as possible?
I think John Key’s small-c conservative take on all this would be “Actually, at the end of the day, you’ve got the market and you’ve got the state, and they both have their uses. But they’re both pretty critical and they interact in complex ways, and good government is about making incremental changes to them that hopefully add up to big gains over the longer term but don’t disrupt the status quo too much.”
“That’s very convenient for those that benefit from the status quo,” the left-wing critic would reply. And they’d be right. But Key wasn’t a change agent, as his biographer Roughan pointed out. He was a conservative who believed in incremental improvements rather than radical reform, and if that happened to benefit him and his caucus, and the parties membership and donor-class… well, that’s just politics, right?
This isn’t the worst way you can govern a country, as I suspect the various western democracies voting radical authoritarians into power are about to find out. But it did mean that most of the serious problems facing New Zealand, which could only be addressed by large-scale reform, never got fixed under his watch.
It’s frustrating, given Key’s obvious political genius, that he only addressed it to winning at the superficial elements of politics: raising money, winning elections, mocking the opposition as it self-destructed, getting good coverage, being popular. Understanding the game and then beating it. To me the most quintessential Key policy is his reform of the Emissions Trading Scheme: Key and his Trade Minister found a brilliant way to rort the international carbon trading system, buying hundreds of millions of dollars of quasi-legal Russian and Ukrainian carbon credits. It was an ingenious way to prevent New Zealand from having to reduce our carbon emissions, which would have lead to all sorts of reforms and costs that might have compromised Key’s popularity.
Now some other sucker will have to deal with carbon neutrality and climate proofing our infrastructure, along with fixing the sustainability of the superannuation scheme, and low productivity, and child poverty, and the broken housing market, and the broken tax system, and the cost blowout of our aging population on the health system, and so on; Key gets to retire with all of the political capital he accumulated through evading all of those problems intact. John Key won at politics. Good for him. But another few winners like that and we’re done for.
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