Standing Up for Ourselves
Charles de Gaulle was a pain in the neck. As the self-appointed leader of a defeated and occupied country, he had very few cards to play. But he nevertheless succeeded, through making a nuisance of himself, in making sure that the other Allied leaders – Churchill, Roosevelt and Stalin – had to take France’s interests into account.
It was his stubbornness that set the scene for France’s post-war reconstruction, and put France in the pivotal role in setting up what has become the European Union. He did it by convincing others that France was not going to be pushed around. De Gaulle showed that it isn’t the cards in your hand but the way you play them that counts.
New Zealand could learn a lesson or two from the French leader. As a small country, we are in constant danger of allowing ourselves to be pushed around, like a cork bobbing on the global economic ocean, the helpless victim of every tide or current that comes our way. Unlike de Gaulle, however, we seem to accept, even welcome, that there is nothing we can do in the face of superior power.
Sadly, we have no chance of defending our own interests if we signal in advance to all comers that we are so conscious of our weakness that we will do whatever is required of us. Yet, that seems to be the negotiating posture of our leaders.
We have seen enough instances of our government rolling over when told to do so to know that it is a deliberate strategy. We will, it seems, do anything if it means making a buck. Some recent examples make the point.
So keen were we to persuade Warner Brothers to make films here that we readily changed our labour laws (those laws that protect the rights of our workers) in order to accommodate the insistence of a powerful overseas employer that they must have the right to hire and fire at will. We were unconcerned about the rights of New Zealand workers, or the self-respect of a supposedly self-governing country.
The proposed deal with Sky City is another case in point. Another overseas company quickly twigged that, if they want more relaxed gaming laws as well as getting the inside running on what – with favourable tax treatment – looks like being a very profitable investment, it is only a matter of finding the right price. Our wheeler-dealer Prime Minister could be relied on to do the rest.
Concerns about the increase in problem gambling, or the propriety of a behind-the-scenes deal, are – we are assured by one of Auckland’s business leaders – a “distraction”; and we know, don’t we, that nothing must be allowed to distract from chasing the dollar?
These may seem relatively minor matters, but there are other more serious issues ahead. Who could doubt (as is now confirmed by the government itself) that the overwhelming issue in the Crafar farms saga was the fear of displeasing the Chinese government? The message is clear; we are so concerned about retaining Chinese goodwill that we will do whatever is asked of us. The Chinese will have marked, learnt, and inwardly digested this simple truth.
The irony is that, in China, business is an arm of government and does what government tells it, whereas here, and increasingly, government is an arm of business. The main reason for concern about the Chinese purchase is that it is not a normal commercial trade arrangement, but is the probably irreversible acquisition of long-term productive capacity in pursuit of a deliberate (and perfectly legitimate) Chinese government strategy to buy control of such capacity in a whole range of different economic areas worldwide.
That strategy will have been much encouraged by our government ‘s welcome for further “investment” of this kind – something we know from their keenness to sell yet more of our assets in return for similar “investment”. Overseas investment that develops new productive capacity is of course to be welcomed; but the purchase of existing assets, on the other hand, so that the ownership, control and profits from those assets move overseas, is quite a different matter. We are already world leaders in this latter category, having sold a higher proportion of our economy to overseas owners than any other developed country.
All of this means that the omens are not good for the trade negotiations now under way with the Americans and others. The Americans are insisting, as the price of a free trade deal, on changes to a number of our laws, including reducing the role of Pharmac; and we are also being pressed to accept the right of American corporations to sue our government in specially constituted tribunals if – either now or in the future – laws to protect New Zealand interests, on an issue like the plain packaging of cigarettes, can be argued to be contrary to American commercial interests.
Given our government’s clearly signalled willingness to yield to pressure, what confidence can we have of anything different from what is now the usual pattern – some tough talk, a period of obfuscation, and then a discreet cave-in? Oh for a Charles de Gaulle!
Bryan Gould
23 April 2012
Market Solutions Are Best
A government that seemed in its first term to be self-consciously pragmatic has revealed itself in its second term to be much more ideologically driven. An increasingly obvious sign of that tougher approach has been the government’s apparent conviction that most issues are best entrusted to market forces.
The evidence for this is now coming thick and fast. We have seen it in the contract with a private firm to build and run a major prison in Auckland, and in the appointment of a businessman to ensure that the Ministry of Foreign Affairs and Trade either replaces diplomats with businessmen or compels them to behave like businessmen.
We have seen it, too, in the sharply increased use of private consultants and contractors for work hitherto undertaken by the public service. The motivation here has been not so much to save money, since private consultants are – as the record annual expenditure of $189 million shows – an expensive option; rather, the government believes that it is worth spending extra money because the private sector will inevitably deliver better results.
That belief rests more on ideological preference than hard facts; the proponents of the view that market provision is always best do not always bother too much with looking at the evidence. A recent example is the recommendation from the chair of Auckland Council’s business advisory panel, Cameron Brewer, that future motorways should be funded from tolls on existing roads – an idea, it seems, plucked straight from the pages of a beginner’s manual of improbable “free-market” solutions.
But perhaps the most startling example of the government’s keenness to use private business to pursue its objectives in every aspect of our national life is the decision to contract private firms to build, own and run publicly funded schools for our children. We are not permitted to know the financial details of that arrangement. The only thing we do know is that it is part of the price that Act demanded in return for supporting National in government.
Act was able to “demand” such a price of course only because National arranged it that way, so we must suppose that the initiative is one that National wants to take anyway. But there are other and more substantial reasons for looking askance at the so-called “charter” schools.
The “charter” school is, like the privately run prison, an example of a public/private partnership or PPP. The case for such arrangements is that what would normally be funded by the taxpayer is instead financed by private business, with allegedly a saving as a consequence to the public purse.
But a moment’s thought would suggest that this is unlikely to be the case. The cost of financing a project will be the same in principle, wherever the funding comes from. While the initial capital cost, under a PPP, is borne by the private investor, that investor will want to cover the cost of capital and in addition earn a return on capital (or profit) over the lifetime of the scheme –typically, 25 or 30 years. Not surprisingly, in countries like the UK where such schemes were pioneered two or three decades ago, recent impartial research has shown that they often cost the taxpayer more over the whole period than if they were built and funded by more conventional methods.
The truth is that the main function of PPPs is to provide, through infrastructure projects, secure and profitable investment opportunities for the government’s friends in the private sector, while ensuring that the greater cost of funding the projects in this way is spread forward over decades to be borne by future taxpayers.
But that is only one of the reasons that we should be wary of such arrangements. It is not just the funding that the government would prefer to provide from the private sector. It is also the policy direction of the education we provide to our children that the government wishes to sell to business.
This is, in other words, one more instance – though a particularly significant one – of the extent to which the market has now invaded virtually every area of our lives. The view that everything has a market price, and should be traded as though it were a commodity, is now deeply entrenched in our daily lives.
How long before prisoners are able to “upgrade” their cells in the new private prisons, as is already being done in some American states? How about buying the right to drive one’s car down a bus lane? We’re getting perilously close to that in Auckland.
What about the right to shoot endangered species? You can buy that, too, for the threatened black rhino in South Africa. Buying the right to live in New Zealand? Yes, if you’ve got the money. And how long before pupils at the new charter schools are paid $2 for each book they read –which is what privately run schools in Dallas do to boost performance?
If the market makes everything available at the right price, we lose sight of other – perhaps more important – values. But it will suit some people; those with the most purchasing power will be delighted to find that nothing can be denied them.
Bryan Gould
12 April 2012
This article was published in the NZ Herald on 19 April.
Ministerial Irresponsibility
As a young law student at Auckland University, along with every other law student of my generation, and then subsequently as an Oxford law don teaching constitutional law, I became familiar with an obscure tract of land in England called Crichel Down.
Crichel Down had been compulsorily acquired for the war effort by the British government, with a promise that it would be returned to the owners when the war was over. After the war, the government broke that promise by retaining the land and leasing it to new tenants. When the error was discovered, the Minister, Sir Thomas Dugdale, although unaware at the time of the mistake made by his Department, resigned because he accepted that, as Minister, he was responsible to Parliament for what had been done.
We have travelled a long way from Crichel Down. Governments today seem to deny any doctrine of Ministerial responsibility. Public servants enjoy so little esteem, so it seems, that they are cheerfully thrown to the wolves when Ministers are asked to take responsibility for mistakes made by their departments but prefer to save their own skins.
A recent example was Anne Tolley’s refusal in December to accept any responsibility for misleading Parliament as Education Minister, on the ground that she had been wrongly briefed by her officials. But the prize for a bare-faced denial of any Ministerial responsibility must surely now go to Murray McCully.
The Minister for Foreign Affairs and Trade had, with the explicit goals of re-shaping the Ministry and – in line with the government’s general strategy -of saving up to $40 million, appointed a Chief Executive who knew literally nothing about diplomacy. The Minister had declared his intention to replace diplomats with businessmen and proposed to remove from those who remained the job security that would be essential if their services were to be retained. And he had authorised the spending of $9.2 million on a “cost-saving” plan – money spent mainly on outside consultants, reflecting his apparent belief that expertise in diplomacy counted for little and that his Ministry was incapable of reforming itself.
But when the disastrous nature of the plan became apparent, and the threat to New Zealand’s trade and foreign relations too serious to be ignored, the Minister ran for cover. It was only then that we were assured that the plan had all along been Chief Executive John Allen’s idea, and that the Minister had been so disengaged that he had barely noticed what was going on.
He was no doubt helped to adopt this unconvincing stance by the intervention of the Prime Minister, who had quickly scented an impending disaster. But Minister McCully is not lacking in chutzpah. He not only persisted in lumbering John Allen with the blame. He elevated the whole doctrine of what we must now call “Ministerial irresponsibility” to new heights – or depths.
In an interview last Thursday on Morning Report, he solemnly proclaimed that – as Minister – he was no more than “the purchaser of the Ministry’s services.” This is free-market ideology gone mad. It is an astonishing new take on what the role of a Minister is and should be, and betrays a shocking ignorance of what parliamentary government is about.
On this view, Ministers in this government, it seems, no longer decide policy or frame strategy. The actions of the ministries and departments they are appointed to lead have nothing to do with them, and they are no longer accountable to Parliament or to anyone else for those matters.
The whole doctrine of Parliamentary government – under which the executive arm of government is answerable to the elected representatives of the people – would be swept aside. Ministers would be merely shoppers in the market place – looking for the best bargain, weighing up where they can get the best deal. Their departments would be simply just another possible provider, no longer part of government or of what might reasonably be called the public service; they would be autonomous bodies –free agents, not subject to Ministerial direction – competing, like any other provider, for the Minister’s attention and custom.
New Zealand enjoys an enviable reputation as one of the most effective democracies in the world. In surveys of the total international community, we regularly find a place in the top three of those countries that offer a truly functioning democracy to their citizens. If the McCully doctrine that Ministers are merely “purchasers” who are not accountable to Parliament for the actions and policies of their Ministries were to be adopted, there would be little left of the democratic safeguards we have come to take for granted.
John Key has already lost one member of his new Cabinet, and – as controversy swirls around the heads of others – there may be more to come. He cannot afford to see his government weakened in this way.
Can he, in these circumstances, continue to have confidence in a supposedly senior Minister who has made an almighty hash of his brief, has had to resort to blaming those he appointed for doing what he had required them to do, and has revealed a complete ignorance of one of the basic constitutional principles of effective parliamentary democracy?
Bryan Gould
30 March 2012
This article was published in the NZ Herald on 3 April.
Second and Final Term?
As a former politician, I have often lamented the journalistic tendency to treat politics as a matter of personalities rather than policies. But there are times when political personalities – and their interaction – can provide an insight into what is really happening.
Just four months into his second term, it is already apparent that the Prime Minister is a very different John Key from the one we learned to know and (at least for some) love in his first term. The relaxed and amiable friend to everyone has – as John Armstrong has pointed out – somehow transmogrified into a tougher and much less accommodating political leader. The whole tone of the government’s approach is now very different.
The John Key of the first term showed a remarkably accurate sensitivity to popular opinion. He avoided controversy wherever possible and built an enviable popularity by unerringly identifying where the political centre of gravity on any given issue could be located.
Today, however, we see a different attitude from the Prime Minister. He is obviously now committed to an agenda that is increasingly likely to encounter opposition and controversy. He seems determined to pursue that agenda – for example, on asset sales – whatever public opinion may have to say.
If the Prime Ministerial smile was the defining image of his first term, the second seems destined to be characterised by the Prime Ministerial shrug – a shrug that seems to say that he is determined to do what he wants, whether popular or not. What explains this sudden and apparently inexplicable change?
What is now clear is that the goal of the first term was simply to win the 2011 election. The key to achieving that goal was to be the Prime Minister’s personal popularity – particularly with the politically uncommitted.
That goal having been achieved, a quite different goal has now been identified. A Prime Minister who was criticised in his first term for being lightweight and not making a difference seems now to have set himself the task of making his mark and leaving a political legacy.
The second term, it seems, will be used to push through an agenda of change which may commend itself less – or not at all – to the uncommitted, but which will deliver to the Prime Minister’s own closest supporters much of what they elected him to do.
It is, in its own way, quite refreshing to see a politician who sees the exercise of power, not as an end in itself, but as the means by which real change is to be brought about. But the Prime Minister’s change of focus warrants scrutiny on other grounds as well.
If his goal is to use power now rather than merely prolong it,that inevitably suggests that he does not see his premiership extending beyond the next election. He has given hints in the past that he does not see himself devoting the rest of his life to politics; his apparent determination to go for broke now is the best evidence we have that he sees two terms as Prime Minister as being quite enough.
That in turn means that picking up the pieces after the next election – whatever the outcome – is likely to be the responsibility of someone else. And that brings into focus the second major piece of evidence to support the proposition that we might be looking, in 2014, at a post-Key era – the likelihood that a similar thought seems to have occurred to some of those who might see themselves as being in with a chance of succeeding John Key, when the time comes, as party leader.
The most obvious contender might seem to be Bill English – the Deputy Leader, and of course supported by a significant group of MPs who have already had success in projecting him into the leadership on a previous occasion.
But there are growing signs of tension in the relationship between John Key and Bill English. There have been several recent instances when the two men have said – it seems quite deliberately – quite different things, to the point of embarrassing or directly contradicting the other.
Take, for instance, Bill English’s startling admission that the estimate of the proceeds from asset sales was “just a guess” – something that no politician of his experience would have allowed himself to say by accident, and certainly not what John Key would have expected from a loyal deputy committed to this central element in government policy. And look at the direct disagreement this week between Key and English on the issue of whether a renewed boom in house prices is getting under way.
These tensions do not arise by accident. The signs are that Bill English may know, or think he knows, about John Key’s plans for 2014, and may be distancing himself from his leader so as to offer a fresh start when the time comes.
Or, he may sense that there are other plans afoot. He will have noticed with apprehension the rise of Steven Joyce, and the new Minister for Everything’s closeness to the leader. There is nothing more guaranteed to engender a sense of angst than the sight of a rival being promoted. Watch this space!
Bryan Gould
19 March 2012
This article was published in the NZ Herald on 22 March.
Learning the Lessons
Once in a while, a single event can bring a whole range of apparently unconnected developments into a new and clearer focus. One such instance was the two-hour stoppage a week or two ago by 1500 employees of the Oceania Group, the country’s largest rest home operator.
The stoppage, although staged again this week, quickly dropped out of the news, as other industrial disputes in the port of Auckland and in Affco freezing works took centre stage. But that limited action by aged care workers gave us a valuable insight into so much that is going wrong in our country.
The facts can be simply stated and are wearyingly familiar. The Oceania workforce is largely female and part-time; many are paid just $13.61 an hour, only 11 cents above the minimum wage. Oceania will not budge from their offer of a 1% pay increase – much less than the rate of inflation. The workers – with very little bargaining power – tried to draw attention to their plight in the only way open to them.
But it is when we dig a little deeper that the real significance of the dispute becomes apparent. The aged care industry (as we must now call it) is a prime example of the privatisation of what was once a public service.
As public services that care for the elderly in their own homes have been – supposedly on financial grounds – wound back, the opportunity to make a profit by providing accommodation and care in privately owned rest homes has increased. The public purse still provides the funding, so the taxpayer still largely picks up the bill; but the money now goes via a per capita payment to private companies rather than public employees.
The expanding industry has offered a tempting investment opportunity to private investors. Two New Zealand-owned companies, ElderCare and Qualcare, had built a strong market position; Oceania achieved its dominant position in the New Zealand industry by buying both of these firms.
Oceania is a group of private equity investors which was set up under the aegis of Macquarie Bank, the Australian banking entity popularly (or should that be unpopularly?) known as the “millionaire’s factory”. The new Australian owners knew nothing about care of the elderly, apparently motivated solely by the prospect of making a good return on their investment.
But they had miscalculated. The new venture offered a smaller return on their investment than they had hoped, perhaps because they had paid too much. They found themselves owing a large debt to Macquarie Bank, rather than enjoying the fat profits they had expected.
The investors demanded that this position should be corrected. Since the operation’s income was largely pre-determined by the amount paid to them by the government, the only way of squeezing out a higher return was to cut costs – and that meant making real-terms cuts in the wages of an already low-paid workforce. With costs cut, and the debt re-paid, rich pickings were in prospect.
That exercise has been reasonably successful, at least from the viewpoint of the investors. The operation is now producing a profit and the debt is being reduced. But the profits have been squeezed out of the workers, and have no doubt meant as well a lower standard of service to elderly customers who have little power to insist on better.
Those profits – tens of millions of dollars produced from the funding provided by New Zealand taxpayers – are now being paid across the foreign exchanges into the pockets of Australians. They thereby add to the burden we face in trying to balance our overseas payments and compel us to borrow more from overseas.
Changes in employment law – both actual and planned – mean that New Zealand workers are pretty much at the mercy of their employers, and – as other industrial disputes currently demonstrate – employers are newly confident that they can do what they want. Like most overseas owners, Oceania have little knowledge of and even less interest in the welfare of their New Zealand workers – to say nothing of New Zealand customers and taxpayers.
The current ethos, after all, is that the bottom line is all that matters. As in the cases of both the Port of Auckland and Affco, owners need only specify a desired rate of return to ensure that everything else – including of course the interests of the workers –must be subordinated to that goal. We increasingly see workers treated as just another production component rather than as human beings with families to support.
What lessons can we learn from this sorry tale? They are short and sharp.
The real goal of privatised companies is profit, not service. We cannot prevent privatised firms – despite the government’s obfuscation on this issue – from falling into foreign hands. Enterprises owned overseas have little concern for the interests of their workforce. New Zealand workers are increasingly at the mercy of hard-nosed employers. Profits paid to overseas owners are not only a loss to the country but an unwelcome addition to our borrowing requirement as well.
As we look at the wider issues now facing us and our under-performing economy, can we have any confidence that our leaders are learning these lessons?
Bryan Gould
8 March 2012
This article was published in the NZ Herald on 14 March.