Air New Zealand Shows the Way
In the ten years or so before my wife (English born and bred but now a proud Kiwi) and I returned to live in New Zealand, we flew back to New Zealand from Britain on many occasions. We always felt, as we boarded the Air New Zealand flight at Heathrow, that in doing so we had already returned home.
There was something about the atmosphere on the plane, as we settled into our seats for the long flight, that was quintessentially New Zealand. Whether it was the soft New Zealand accent, the ready smiles of the cabin staff, that attractive combination of efficiency and friendliness that Kiwis seem to manage so effortlessly, there could be no doubt that we had already engaged with a slightly different culture from the one we were leaving.
That sense was reinforced, I recall, on one flight that took place while a rugby test between the All Blacks and South Africa was being played. We, with many others on board, were keen to know the result. The captain obliged by relaying the score to us throughout the flight, and he was greeted with a mighty cheer when he reported that the All Blacks had won (this is, after all, a good news story!)
On one of our earlier visits, I recall my wife wondering out loud as to why everyone we met (and by that she meant not people we knew but those we came across in shops, hotels, restaurants) was so friendly and helpful. I attempted an answer by observing that whereas the British class system meant that many of those obliged to serve others did so either with excessive obsequiousness or with sullen resentment, Kiwis had no such hang-ups.
These recollections were brought to mind when we once again boarded an Air New Zealand flight to fly home last week. We had flown with a different airline (which will remain nameless) on two legs of our journey there and back, and had bemoaned the indifferent service, the poor food and the uncomfortable seats.
The Air New Zealand flight, by comparison, was a revelation. The food (inspired by Peter Gordon) was excellent, the wine delicious, the seats (so far as they can be) comfortable, and the service – true to form – friendly and helpful.
When our young grandson was asked after a long night what he would like as a hot drink for breakfast, he wasn’t interested in the suggested tea or coffee but, when prompted, expressed interest in a Milo instead. A few minutes later, the steward returned with a cup made especially for him.
None of this means that Air New Zealand is perfect – no airline is, and long-haul air travel in particular is always a bind. But we are entitled to conclude that the particularly New Zealand characteristics they bring to their task do make a difference – and that is borne out by the consistently high ratings they register from passenger surveys and international awards.
That customer satisfaction is reflected, too, in the impressive commercial performance that Air New Zealand turns in. These are tough times for airlines but Air New Zealand, while having its own problems to overcome, has succeeded in business terms better than most.
But the real lesson to be learnt from Air New Zealand’s success is that treating customers as people and allowing the personality (and, in this case, the specifically New Zealand personality) of the company to shine through are not inconsistent with – and are indeed an important contributor to – a positive bottom line.
It is worth learning this lesson and applying it more widely, before we are all absorbed into the same homogenised global economy in which national characteristics and individual service are sacrificed to the over-riding drive to cut costs. No country has embraced the global economy more enthusiastically than New Zealand and – more than any other developed country – we have allowed large chunks of our national economy to pass into foreign hands.
The decisions that are made by those foreign owners are reached in boardrooms located far from our shores – in New York, Shanghai, or if we are lucky, Sydney – by people who know little and care less about what makes New Zealand and New Zealanders tick. They owe no loyalty or commitment to our values or ways of doing things; their sole concern is the short-term return on their investment.
What Air New Zealand’s success should tell us is that our peculiarly New Zealand way of doing things has a real value. That value can be measured and expressed in social and cultural terms by New Zealanders because they are familiar and comfortable with it but also by others who find it appealing precisely because it is unfamiliar to them; and, importantly, it also has a marketable value in commercial terms in today’s global economy. We would be foolish to give it up.
Bryan Gould
3 August 2013.
This article was published in the NZ Herald on 13 August.
Privatised Water Blues
Nick Cohen’s excellent piece in last Sunday’s Observer on the private water companies struck a chord with me. In September 1989, during the passage of the privatisation legislation and when I was Shadow Trade and Industry Secretary, I was asked by Ann Taylor (who was leading for the Opposition in the Standing Committee) to write a piece for the Financial Times setting out Labour’s position. The aim was to give potential investors pause when they came to subscribe for shares in the flotation to come.
I duly did so, explaining (as I recall in my subsequently published memoirs) that an incoming Labour government would expect a privatised water industry to see “its first responsibility to investment in a safe and efficient industry, and secondly, to maintaining fair prices to consumers. Only once these two needs had been met would there be any room for private dividends.” I refrained from saying anything about returning the industry to public ownership,since it was clear that this commitment was being quietly dropped.
I subsequently made a similar point in an interview with Jonathan Dimbleby in On the Record and was astonished to find myself repudiated by Neil Kinnock the following day, and the subject of some vitriolic press treatment, apparently engineered by the Labour Party’s Press Office, including a half-page article in the Sunday Times, portraying me as a Jekyll and Hyde figure, complete with graphic drawings showing my face being transfigured under the influence of a full moon!
It is little comfort to find that my recommended order of priorities has been vindicated by subsequent experience.
Tipping the Balance
In his first term as Prime Minister, John Key made a determined effort to be all things to all men – and women. In his second term, however, he hasn’t bothered; he has clearly calculated that he can still win an election while quite overtly tipping the balance of advantage further in favour of the better off and against those who are struggling.
The evidence for this can be seen, for example, in the alacrity and openness with which he meets the demands of big business; but nowhere is it more apparent than in the burdens he is increasingly ready to place on working people.
The ranks of the poor in New Zealand have been increased in recent years by the unemployed and their families. The Key government’s indifference to their plight has been one of the least appealing aspects of its skewed order of priorities. But what has attracted less attention, perhaps, is the pressure now being put on families that depend on the earnings of those in work.
We have come a long way since the heady days of John Key’s commitment to close the wages (and living standards) gap with Australia. Far from trying to lift wages, the government is engaged in an undeclared campaign to depress real wages still further.
And that is from a starting point where low wages were already the central element in the widening income gap in New Zealand. We suffered the fastest widening of inequality of any country in the last two decades of last century, and remain dishonourably in the top group. The top 10% of income-earners enjoy today an income 9 times greater than the income of the bottom 10%, up from 5 times in the 1980s.
As Treasury research shows, New Zealand households in the lower half of the income range had no increase in real incomes between 1988 and 2010; all the increase in national income over that period went, in other words, to those who were already better off. Although labour productivity in the private sector rose by 48% over a similar period (1989-2011), the average hourly wage rose in real terms by only 14%.
The price we have paid for this intensification of inequality is not just financial. As workers’ rights at work have weakened, our shameful record on health and safety at work has worsened. In industries like forestry, where employees work long hours in a virtually deregulated workplace and labour costs as a proportion of total costs have fallen sharply, the rate of industrial accidents remains unacceptably high.
It is against this background that the government has intensified its assault on the ability of ordinary people to protect their living standards and safety at work. That assault has taken the form of a whole range of measures, such as maintaining the minimum wage at a level that is inadequate to halt the increase in family and child poverty and introducing a young workers’ wage even lower than the minimum wage. Low-paid workers in industries such as aged care are still expected to accept minimal wage increases that mean a further fall in their living standards. The unemployed are forced by benefit cuts and tighter rules about eligibility to try their luck in a labour market where there are few new jobs so that they are forced to try to undercut those in jobs that are already low-paid.
These factors are not accidental. They seem part of a deliberate strategy to remove the floor under wages and force them lower as a means of re-stimulating the economy. It is an amazingly convenient coincidence, is it not, that our slow recovery from the recession apparently depends on sacrifices made by the poor while we can afford more goodies for the rich.
The government is still at it. International research shows that the most important factor in determining the rate of wage growth is workers’ ability to use collective bargaining to negotiate wage rates. This is not surprising; individual workers have little bargaining power in the face of powerful employers and in a labour market weakened by high unemployment. It is only by joining with each other that they have any hope of protecting their wage levels and working conditions.
It is easy for those whose economic fortunes do not depend on collective bargaining to underestimate its importance not only to trade union members but also to a properly functioning economy. The right to organise in a trade union is recognised as fundamental in international conventions and the Universal Declaration of Human Rights and is an essential element in ensuring that a market economy operates fairly and in everyone’s interest.
But our government is pressing ahead with so-called “reforms” that in effect remove the right to collective bargaining and allow employers to refuse to engage with their workers other than on an individual basis. Sadly, this is just one more step in the campaign to reinforce the disadvantage suffered by ordinary people when faced with the overwhelming power of their employers in an unregulated marketplace. It turns back the clock to a society disfigured by division and inequality and an economy that fails to fire because it serves an increasingly narrow interest.
Bryan Gould
26 July 2013
This article was published in the NZ Herald on 29 July.
Miliband’s Dilemma
Andrew Rawnsley in last Sunday’s Observer identified, quite correctly, the dilemma facing Labour. On the one hand, the economic arguments indicate more and more strongly that George Osborne has got it wrong and that a new approach is needed; but on the other hand, the political reality is that the voters continue to believe that tough measures are needed and that the Tories are best able to deliver them.
The dilemma is all too familiar. The left has always struggled to move the economic policy debate beyond the constraints imposed by right-wing orthodoxy. And they have never grappled with the fact that the proposed remedy – that they must conduct the debate as framed by their opponents – means that the dilemma can never be resolved.
The current dilemma illustrates this well. The Tory insistence that austerity and cuts are the only issue that matters has convinced a large part of the electorate that any alternative that fails to address this goal cannot be supported. But a Labour readiness to show, for the sake of credibility, that they too are ready to inflict pain will multiply rather than solve their problems.
The acceptance of the Tory analysis would saddle Labour with immediate and multiple disadvantages. Any criticism of Tory strategy is straightaway rendered ineffectual, because they are reduced to attacking the outcomes rather than the analysis and its conclusions; and if they are then challenged to explain how, in the context of the same analysis, they would produce different outcomes, they have no answer.
Furthermore, posing as ersatz Tories, committed to making the same “tough choices” but doing so with a sympathetic and regretful expression, is unlikely to persuade voters that they would not be better off with the real thing. And the Tories will in any case, as Andrew Rawnsley points out, play it both ways by casting doubt on the genuineness and reliability of Labour’s commitment.
So, is there no option other than a capitulation that not only jeopardises Labour’s electoral appeal but also – and more importantly – denies the economy the measures that it really needs?
My own political experience leads me to recommend a quite different strategy. It would require courage and hard work, but the benefits to Labour’s electoral chances and to the country’s economic prospects would be immense.
The starting point would require no dramatic rejection of the prevailing public perception of what is required from economic policy. It would accept that a reduction of the government’s deficit is highly desirable, and that vigilance must be exercised in ensuring value for money in public spending, though it would point out that the government’s strategy has meant continuing cuts that seem only to make matters worse.
It would go on to argue that there are much more effective ways of tackling the deficit, provided that it is no longer treated in isolation but is seen as a part of the overall economic picture – because it is, in many respects, a symptom rather than a cause of our wider and more deep-seated problems.
Those wider problems – of lost competitiveness, of inadequate liquidity, of a weakened productive base, of high unemployment – will not be resolved by ignoring them (as the Tories are doing), or by weakening the economy still more by further cuts. On the other hand, if we address them constructively, a stronger and more buoyant economy will not only raise employment, investment and living standards, but will in the course of doing so resolve the deficit problem as well.
There will be many who will quail at the prospect of trying to sell such an approach to a sceptical electorate. But there are good reasons to take courage.
First, we don’t have to win the argument tomorrow. We could expect an immediate barrage of criticism but we have until election day to build understanding and support for what we propose.
I recall, in the run-up to the 1992 election, the differing fortunes of two different Labour policy initiatives. The tax policies were held back until the election campaign and were a disaster because, with so little time to get them across, they were easily misrepresented. I released our alternative to the poll tax, on the other hand, (on which subject we had been constantly challenged by the Tories) well before the election, and it was widely accepted by the time polling day came.
This time, we have the further advantage of being able to work with a significant and continuing shift in expert opinion. From the incoming governor of the Bank of England to leading monetary economists, there is a renewed interest in a different approach. And the successful experience with that approach of leading economies overseas will also strengthen our case.
These factors may not impact immediately on public opinion but -with hard work on our part – will help enormously to force the Tories to join the debate on our terms.
Yes, the dilemma is not just economic but inevitably political as well. That means we can end it only through political action. Isn’t that what politicians are for – to build support for what they believe is right?
Bryan Gould
1 July 2013
A Sea-change in Economic Policy
It took a very long time, following the Great Depression, for a consensus to emerge as to what had gone wrong. It is taking world leaders a similarly long time to realise that the Global Financial Crisis was not just an unfortunate, one-off accident, but was the culmination of three decades or more of mistaken economic policies.
It is significant that it is those economies whose leaders have been slowest to recognise this that have remained most stubbornly in the economic doldrums. But even there, a change of heart is under way.
The euro zone is the most obvious example of a refusal to learn the lessons. But the IMF has, over recent months, changed its mind and made it painfully clear that austerity for Greece and other euro zone economies is not the answer and that a more flexible policy, allowing debtor countries to grow their way out of debt, is now required.
And the UK, still mired in recession and committed to austerity, has nevertheless experimented with quantitative easing (or printing money), while the incoming governor of the Bank of England, Mark Carney, has already indicated his interest in adopting a nominal GDP target rather than inflation as the preferred goal of monetary policy.
Leading British monetary economists like Adair Turner and Michael Woodford are publicly debating which precise mechanisms of both fiscal and monetary policy will be most effective in improving liquidity for business; they recognise that the quantitative easing practised so far has had the effect of merely strengthening the banks’ balance sheets.
Elsewhere, change is even further advanced. President Obama, in the face of determined and obstructive opposition from his Republican opponents, has succeeded in pulling the US economy out of recession and back on the road to recovery – and here, too, the Federal Reserve continues to stimulate the economy by systematically increasing the money supply.
Perhaps the most dramatic shift in policy has occurred in Japan, where Shinzo Abe’s government has abandoned the restrictive policies of the last decade or so and has reverted to the kind of expansionary policy, based on credit creation for productive investment, that served the Japanese economy so well in its rapid growth phase of the 1960s and 70s.
Then, there are of course the most successful economies – like China or Singapore – that have in their different ways always eschewed the Anglo-American insistence that the market must always prevail and must never be second-guessed by government. They have demonstrated that business does best when macro-economic policy provides them with an environment that is conducive to economic development.
Even in Europe, the most successful economies are those, like Germany and Switzerland, whose governments have ensured that their industries are not handicapped by factors, like overvalued exchange rates, that make them uncompetitive in world markets.
Here in New Zealand, our leaders seem oblivious to these developments. We seem to think that we have nothing to learn from other – and generally more successful – economies. We tell ourselves – as we sink back into our old failings of an inflated Auckland housing market, and increased spending on imports made artificially cheap by an overvalued dollar (with the consequent harm to our own producers, and a larger trade deficit that has to be financed by more borrowing and asset sales) – that we must not waver from applying the same old mistaken policies.
We have such a short time-span that we refuse to ask ourselves how it is that – over three decades – other economies have done so much better. We are so far removed from any rational debate on these issues and so focused on deficits and public spending that we scarcely recognise the terms, let alone the policies, that are adopted as a matter of course by the new powerhouses of the world economy.
Those economies focus on issues that are of crucial importance, like competitiveness and liquidity, manufacturing and an industrial strategy, full employment and productive investment – words that scarcely feature in our economic discourse.
While the Swiss and the Singaporeans target competitiveness so that they can sell everything they produce at a profit, we pay the issue no attention. While the Japanese and Americans quite consciously use monetary policy to bring their currencies lower, we do the reverse. While the Chinese ensure that their industry is constantly supplied with credit-created capital so that they can both invest in and buy new capacity (how else do you think they can afford to buy up so much of others’ economies?), we focus on cutbacks and putting people out of work. While the Chinese, Japanese, Germans, Singaporeans, and many others give their primary focus to manufacturing, we are content with a narrowing productive base in primary industry and selling off whatever remains.
But even here, change is afoot. The report on manufacturing, published by the opposition parties, is a belated recognition that we cannot go on as before. And there is a glimmer of hope even at the Reserve Bank. The new governor at least seems to understand that the overvalued dollar, the fall in saving and rise in imports, and the Auckland housing bubble are danger signals. The solutions are available, if only we care to look.
Bryan Gould
18 June 2013