Ministers Should Not Lie
A politician who has enthusiastically cultivated an image as “Crusher” Collins will not expect much by way of public sympathy when she comes a cropper. Public sympathy will be in even more limited supply when she is seen to blame everyone but herself for her misfortunes.
Judith Collins has one loyal supporter, however, in the Prime Minister. Maurice Williamson made, on a single occasion, a naïve mistake and was summarily (and correctly) dismissed. Judith Collins, however, planned, executed and involved others in an elaborate arrangement to use her Ministerial clout to help the business interests of her husband and friends – and she survives.
The Cabinet Manual is quite clear. It says that “conflicts of interest may arise between Ministers’ personal interests and their public duty because of the influence and power that Ministers exercise”, and that “a conflict of interest may be pecuniary (that is, arising from the Minister’s direct financial interests) or non-pecuniary (concerning, for example, a member of the Minister’s family).”
It goes on to say that “a conflict may arise if people close to a Minister, such as a Minister’s family, whanau, or close associates, might derive, or be perceived as deriving, some personal, financial, or other benefit from a decision or action by the Minister or the government.”
It is puzzling that, in the light of these warnings and as the details of the efforts made by Judith Collins to organise a meeting between her husband’s company and a Chinese border official come to light, the Prime Minister does not recognise the inevitability that she cannot remain in office.
There are two indications as to why that may be. First, John Key – by acknowledging that he knows the name of, and the office held by, the Chinese official who attended the dinner with Oravida, but refusing to reveal that information – has made himself complicit in the deception attempted by Judith Collins.
Secondly, the fact that, within a few days of obtaining the necessary clearance, Oravida made a $30,000 gift to the National Party (on top of an earlier $56,000) indicates a relationship between the donor and recipient that in another country would be quickly identified as corrupt.
These failures to maintain the “high standards” John Key claims to have set for his government will no doubt become starkly clear as the conflict of interest implications of the Judith Collins saga unravel. But there are other charges to be laid at the door of the Minister and the Prime Minister.
No one doubts that the dismissive tone adopted by Judith Collins in explaining her meeting with Oravida as “dropping in for a cup of tea on the way to the airport” was an incongruous misrepresentation, intended to deceive. In ordinary parlance, it would be called a lie.
The Cabinet Manual surprisingly, makes no reference to lying in the performance of ministerial duties, but this was a deliberate lie designed to give the public an entirely false impression of what had really happened. I have never accepted, as a former politician myself, the easy excuse that “all’s fair in love and war – and politics”. We are entitled to expect, and John Key should insist, that Ministers tell the truth, or at the very least do not deliberately lie.
The question for John Key is that, if he is serious about “high standards”, how can he allow a proven liar on an important public matter to remain in office?
Lying to the press and public is one thing; lying to parliament, under the Westminster conventions that apply in our parliament, is quite another. Some of the most notorious ministerial careers – the Profumo case was an example – came to an inglorious end, not because of the original offence but because the Minster lied to parliament about it. Judith Collins will not relish a scrutiny of what she has said in the House.
There are two further issues which John Key must take seriously. First, Judith Collins has deliberately and unforgivably involved public servants both in the use of her ministerial office to help her friends and in trying to cover her tracks when it was discovered.
She has blamed her own private office for the confusion caused by her use of her ministerial status for private purposes. She has involved the Ministry of Foreign Affairs in a request for an eventually aborted official briefing for what she now claims was a private dinner. And she has involved our Ambassador in Beijing, both in the arrangements for the dinner she had organised for her own purposes and in the attempt to explain that uncomfortable fact away.
It is a fair bet that Judith Collins has only come clean to the extent that she has because she was advised that the Embassy and other public servants would not allow themselves to be used to confirm an inaccurate account of what had happened.
And secondly, she has wrongly implicated a reputable journalist, and threatened retaliation against the parliamentary press corps generally, for simply reporting the facts. Does this Muldoonian attitude reflect the “high standards” John Key says he wants? Or are threats to a free press just another price we are expected to pay for the government’s determination to help and protect its friends?
Bryan Gould
6 May 2014
Yes, There Is An Alternative
Phil Verry was a patriot, a leading businessman and head of New Zealand’s largest sawmilling firm. He was also an innovative thinker.
I was privileged to become his friend and colleague, and to help him develop an ingenious refutation of the assertion constantly made by those with closed minds that “there is no alternative” to the failed orthodoxy of relying entirely on raising interest rates in order to combat inflation.
Phil understood very well that New Zealand producers and investors, as a result of that orthodoxy, are constantly lumbered with an extra-market interest rate surcharge across the board, the cost of which is paid in the main to overseas speculators who contribute nothing to the New Zealand economy.
Their gain at our expense in fact costs us twice over – by worsening our current account deficit (through interest payments across the exchanges) and by penalising us – through prompting an inflow of short-term lending – with an overvalued currency. The result? Our whole economy is handicapped by our difficulty in competing, both at home and overseas, with foreign producers.
Phil devised what he called the Interest-Linked Savings Scheme – whose details are set out in my 2007 book Rescuing the New Zealand Economy – which would mimic the operation of interest rates as a counter-inflation tool without burdening the New Zealand current account with unnecessary payments to foreigners or harming our competitiveness.
Phil would have been delighted to learn that it is that scheme, or something very much like it, that David Parker committed to this week on behalf of an incoming Labour government.
The first element in Labour’s version of the scheme is to make the KiwiSaver scheme compulsory, thereby resolving our perennial problem of inadequate saving (and worth doing on its own account in any case); a variable savings rate would then be used as a supplement or alternative to the Official Cash Rate as a counter-inflation tool. If the rate was raised, it would, by lowering the immediate spending power of consumers, have much the same counter-inflation effect as a rise in the OCR.
But, instead of paying an interest rate premium to foreign peddlers of “hot money”, the savings surcharge would be paid into the individual KiwiSaver accounts of New Zealanders and would in due course be paid back, with the addition – in accordance with KiwiSaver rules – of whatever return had been made on investing the money.
The potential scope and practical operation of this scheme strongly suggest that it would be more effective and less problematic than the OCR in combating inflation. The ability to raise or lower the surcharge at short notice, and its immediate impact on pay packets, would mean that it would be much more quick-acting and better focused than interest rates.
It would be less easily evaded than the OCR, which has seen its effectiveness substantially reduced by the preponderance of fixed interest rate mortgages. A lower evasion rate would mean that the surcharge could be lower for a given counter-inflation effect than the less reliable and more easily evaded OCR. And the fact that the surcharge would eventually be returned to those paying it would reduce any political reluctance to taking quick action to deal with inflationary risks.
But the scheme will produce a number of further benefits as well. We would no longer be penalising ourselves and losing national wealth by making free gifts to short-term lenders from overseas. Foreign lenders would not be paid a premium above the market rate. Unnecessarily high interest rates would no longer deter new investment. We would no longer be burdening ourselves with an over-valued currency, an inflated current account deficit and a productive sector that was less competitive than it should be.
The wider remit to be given to the Reserve Bank would encourage a more balanced approach to macro-economic policy, which could be allowed to fulfil its proper purpose of promoting the continued development and competitiveness of new wealth-creation. Lenders and investors would be free to respond to normal market factors in agreeing on what interest rate should apply in a given transaction. Both interest rates and the exchange rate, in other words, would be freed up to perform their essential market-clearing functions in a properly functioning market economy.
Phil argued – and Labour agrees – that those who might be nervous about departing from the current orthodoxy should be reassured, since the OCR would not be abandoned, but would be kept in reserve and turned to as and when necessary.
The most important advantage of the scheme is the fact that we would raise the level of saving, improve the competitiveness of our industry, and encourage export success, while at the same time restraining inflation more effectively.
Phil sadly died a few years back and therefore did not live to see the adoption of his ideas. He would have been pleased at the largely positive reception accorded to the new proposals. And he would have been delighted at the belated discovery that “there is an alternative.”
Bryan Gould
30 April 2014
There Is A World Beyond Politics
Politics is a tough business. Politicians need a particularly robust temperament if they are to ride the roller-coaster of political fortune for any length of time. The bouquets, of course, are welcome and enjoyable when they come, but the brickbats – and they can come thick and fast – can hurt. Politicians, like Shylock, bleed like anyone else.
Politicians have a curious image in public opinion. As a class they are usually denigrated and reviled, but as individuals they are usually treated with, I often thought, exaggerated respect. And the truth is that, despite the strong public perception that they are a class apart, politicians are on the whole a group of perfectly normal people, exhibiting all the weaknesses and virtues that are found in the population at large.
In a properly functioning democracy, that should not be a surprise. Politicians are just a representative group of voters. We get the representatives we deserve.
So, why do people do it? It is certainly not – again, contrary to much public opinion – for the money; most politicians, especially those who reach the higher reaches of their profession, could have earned much higher incomes elsewhere. In the end, they are self-selecting – motivated in most cases by a desire to make a difference that, according to their lights, will make things better.
These thoughts were prompted by the news that Shane Jones is to leave politics in favour of a top job in an area that he knows well – the fishing industry, and particularly fishing as a means of advancing the interests of indigenous peoples.
He is not of course the first politician to make such a decision. Even in recent times, one can think of Simon Power – seen by many as a potential leader of the National Party – who left to take up a career in the private sector; and even more recently, Tony Ryall has announced his intention not to stand again and to seek, at the age of fifty, a new career.
Such decisions, particularly for senior politicians, will inevitably raise eyebrows, especially in the “chattering classes” where it is an article of faith that politicians are all mad with the ambition to climb the greasy pole, and that every action must have a political explanation. I know this well, because I recognise a parallel between Shane Jones’ decision and my own departure from British politics and return to New Zealand.
In 1994, I found myself in a situation with some similarities to the one facing Shane Jones. I, too, had contested my party’s leadership and had been defeated. I, too, had begun – partly as a consequence of that defeat – to consider other options, helped in my case by the fact that my wife and I had already formed the intention of coming back to New Zealand in our retirement.
It began to occur to me that, rather than continue to fight a losing battle in the UK for the policies I believed in, it would make sense to come back to New Zealand while I was still able to make a contribution in a different field. So, when I was shoulder-tapped about coming back to lead Waikato University, I decided – as much to my surprise as anyone else’s – to accept.
My political colleagues were aghast, not so much at the prospect of losing me, I fear, but more because of what my decision showed about the view I took of what they regarded as the only thing worth doing. But some of the British commentators showed some understanding of my decision, and expressed the opinion that politics itself would be healthier if some of its practitioners recognised that there is a world beyond politics.
The decision taken by Shane Jones will be analysed and mined exhaustively by the commentators for its political significance. Has he lost faith in the Labour Party or its leadership? HHHHHas he been bought off by John Key? Why is he going just before a general election?
My advice, though, is that we should look at Shane Jones, not so much as a politician but as an ordinary human being. On any reasonable basis, he has given the Labour Party excellent service, and politics a good shot. He has had nine years in parliament, been a respected voice and effective shadow minister, and made a creditable challenge for the party leadership.
He has had his share of the brickbats in politics, and it is unlikely that he would succeed in another shot at the party leadership. He has a good experience and understanding of what is required to succeed in other fields and there is another such field that is close to his heart. When an opportunity has presented itself – even if engineered by scheming political opponents – why should he not, after years of party and public service, put his own interests first for a change? Isn’t that what most of us would do, and don’t we want our politicians to be more like us?
Bryan Gould
23 April 2014
Who Owns the Future?
There is no novelty is arguing, as George Osborne does, that there is no alternative to his destructive and divisive policies of austerity – TINA was, after all, the Thatcherite catch-cry and as misleading in her day as it is today.
But it is surely stretching credulity too far to suggest, as John Harris does in yesterday’s Guardian, that the Tories, in making that claim, have also established their ownership of the future.
His sub-editors may have done him no favours with their headline, but let us be quite clear – George Osborne’s backward-looking reconstruction of a 1930s classical response to recession is not only discredited by history but has created a present in which living standards have fallen by a record margin, output has yet to return to pre-2008 levels, and poverty as a result is endemic and growing in many parts of our society.
The future to which George Osborne lays claim is one which many of his intellectual fellow-travellers, including the IMF, are quietly abandoning. It is a future of government cuts without end, of growing inequality, and of a Britain – with only 10% of our output accounted for by manufacturing – finding it increasingly difficult to pay our way in the world.
If that is the future that George Osborne now owns, he is welcome to it. Most people, given the chance, would choose something different. But John Harris is on stronger ground when he argues that Labour and the left more generally have so far not offered them that option.
Most people, probably a comfortable majority, would still sign up to many of the virtues of the kind of society that Labour propounds – one in which there is a fairer distribution of wealth and a greater concern for all our citizens. Quite apart from the obvious benefits – that people would feel less pressured and divided, that there would be fewer social ills of the kind that always accompany poverty and alienation, that we would feel the benefits of living in an integrated society more at ease with itself – there is every reason to believe that a more equal and caring society would produce economic advantages as well.
The statistical evidence shows, after all, that countries with lower levels of inequality – such as the Scandinavian countries and Germany – have performed better than those countries, such as the UK and the US, where high and widening levels of inequality have accompanied relatively poor economic performance over recent decades.
This compelling evidence should come as no surprise. A wide gap between rich and poor in an economy is inimical to economic success for reasons that apply at both ends of the scale.
If wealth is concentrated in a few hands at the top end of the scale, the result is significant economic inefficiency. The rich have a greater propensity to “hoard” – that is to accumulate large cash reserves which remain unspent and are therefore not available to stimulate activity so that the Keynesian multiplier effect is thereby much reduced. And when they do spend, it is often on arbitrary and capricious purposes – little wonder that “trickle down” is not supported by any evidence.
At the other end of the scale, why deprive the economy of the productive capacity of a large chunk of the population? Can it possibly make economic sense to relegate them to unemployment and minimum wages when they could be both working and spending to the benefit of the economy as a whole?
Can it make sense to consign them to a future where poor education, skills and health – all consequences of poverty – mean that they are more likely to become burdens rather than contributors?
The task for Labour and the left more generally is, in other words, not to abandon their vision of a better and more productive and efficient society, but to demonstrate more effectively how it is to be achieved. That will not happen on the basis of “we’ll be just as tough as the Tories, but do it with a smile.”
The whole point of an alternative strategy is that there is nothing alternative about it. It is a strategy that addresses our real, not imagined, problems – the need to rebuild manufacturing, the need to restore our competitiveness as a trading nation, the need to reclaim control from the banks over credit-creation and the macro-economy as a whole, the need to raise demand and get the economy moving, the need to recognise unemployment – not inflation – as the prime target of policy.
Nor is there any shortage of good ideas as to how these should be addressed. Look at the work of John Mills on improving competitiveness, of Michael Meacher on alternatives to austerity, of Richard Werner and George Edwards on investment credit-creation – and the growing debate among leading monetarist economists about the proper role of monetary policy.
Labour has not yet summoned up enough courage to strike out in these positive directions. It is not too late, but defeatism of the John Harris variety – look anywhere but where the real effort is needed, to make the economy function better than it does at present – is, sadly, not of much help.
Bryan Gould
7 April 2014
This article was published in the London Progressive Journal on 8 April.
If the Poor Are Worse Off, We’re All Worse Off
The Herald-DigiPoll last week cast an interesting light on the political debate as the election season approaches. The poll showed that no fewer than 74% of New Zealanders thought that inequality had widened over the past six years – that, in other words, the rich had got richer and the poor comparatively poorer.
On the face of it, this would seem to be good news for those trying to replace the current government with one that, it is presumably hoped, would have more of a social conscience. And the poll comes, of course, on top of the rising tide of concern about the increasingly manifest impact of poverty on so many of our young children – an impact that blights prospects and stunts lives.
It is certainly reassuring that Kiwis have not lost their traditional concern for the disadvantaged in our society. Whereas in some other western countries, the fact of poverty is simply denied or ignored, the polling shows that, in our country at least, inequality and its corollary – poverty, have registered in people’s minds as issues that warrant attention.
Yet the polls on voter intentions continue to show substantial support for the current government. What this quite clearly tells us is that, while the reality of inequality is recognised, it is not rated by many voters as important enough to determine the way they vote.
Inequality and poverty are, in other words, to be noted but need not be addressed. As long as it does not impact directly on people’s own lives, it can be treated as someone else’s problem. When it comes to polling day, the salience of inequality as an issue will have dropped well down the list, way behind the more pressing immediate problems of managing one’s own budget and prospects.
We get an insight into this kind of thinking from the Herald’s own poll of its readers following the publication of the Herald-DigiPoll. What the poll showed was that, while many respondents were concerned about widening inequality, many others were less concerned and just over a third were prepared to accept it as the necessary price to be paid for economic success.
The notion that inequality and economic success go hand in hand is, of course, well entrenched in the minds of those who embrace the modern doctrine that the market is infallible and must not be challenged; and it is a safe assumption that echoes of this view explain why, even for those who acknowledge the personal and social cost of poverty and inequality on both individuals and society, the need to do something about it tends to dim as polling day approaches.
Yet there is actually no evidence to support a belief that is cherished by so many. International comparisons of advanced western economies show conclusively that widening inequality is in no sense a corollary, let alone a pre-condition, of improved economic performance. Indeed, the opposite is the case.
The statistical evidence shows that countries with lower levels of inequality – such as the Scandinavian countries and Germany – have performed better than those countries, such as the UK, the US and, sadly, New Zealand, where high and widening levels of inequality have accompanied relatively poor economic performance over recent decades.
This compelling evidence should come as no surprise. A wide gap between rich and poor in an economy is inimical to economic success for reasons that apply at both ends of the scale.
If wealth is concentrated in a few hands at the top end of the scale, the result is a significant degree of economic inefficiency. The evidence shows that the rich have a greater propensity to “hoard” – that is to accumulate large cash reserves which remain unspent for long periods of time. They are therefore not available to stimulate activity in the rest of the economy and the Keynesian multiplier effect is thereby much reduced. And when they do spend, it is often on arbitrary and capricious purposes that do little for economic activity as a whole. “Trickle down” is not supported by any evidence.
At the other end of the scale, there is nothing economically efficient about depriving the economy of the productive capacity of a large chunk of the population. Can it possibly make economic sense to relegate those potentially productive people to unemployment and minimum wages when they could be both working and spending to the benefit of the economy as a whole?
Can it make sense to consign them to a future where poor education, skills and health – all consequences of poverty – mean that their productive contribution is limited for no good reason and they are more likely to become burdens rather than contributors?
The conclusions are clear. If the poor are worse off, we are all worse off. Those who lament growing inequality and poverty but reconcile themselves to it on the ground that it is a price worth paying are quite mistaken. Economic efficiency and greater equality are, together, the hallmarks not only of a successful economy, but of an integrated and happy society that is more at ease with itself.
Bryan Gould
3 April 2014