Orthodoxy – Or Leadership?
My decision to leave British politics in 1994 and return to New Zealand reflected both the pull of my home country and my failure to convince my colleagues in the British Labour Party that they were embarking on a mistaken course.
I had become increasingly despairing of the determination of those who eventually became New Labour’s leaders to embrace policies that I believed were fundamentally flawed. Tony Blair, Gordon Brown, and their allies were convinced that Britain’s economic future lay in the financial institutions of the City of London. They were persuaded that the market should not be second-guessed and would always get the right answer.
They were, as Tony Blair told Rupert Murdoch, “all globalisers now.” They were “intensely relaxed”, as Peter Mandelson notoriously asserted, “about people becoming filthy rich” – with the corollary that they were equally relaxed about widening inequality. They accepted that government should treat economic policy as a largely technical matter of controlling the money supply that could safely be left to supposedly non-political bankers.
They welcomed the asset bubble and the conspicuous consumption of the rich as evidence that these policies were working. And, though public opinion deterred them from joining the eurozone immediately, they remained convinced that a single European superstate – insulating so-called free-market policies against popular scrutiny – could be imposed on the people of that hugely diverse sub-continent.
My decision to return to New Zealand was for me and my wife a good one. But it was disappointing to find that New Zealand had abandoned its long-standing commitment to social justice and community and had become the standard-bearer – lauded by The Economist – for the “free-market” policies that were expected to produce a new era of unparalleled prosperity.
Like everyone else in the developed world, we were constantly assured that there was no alternative, and that the huge wealth amassed by a tiny minority would eventually “trickle down” to provide at least some benefit to the rest of us.
These simple certainties were, however, stood on their head by the global financial crisis. We learned that asset bubbles would burst, that markets could not be relied on to get the right answers, and that only governments could step up to the plate to save us from disaster.
But the cheerleaders for (and beneficiaries of) the policies that had produced such a disaster were not to be deterred simply because all experience showed that they had been wrong. So, in the United States, for example, political leaders solemnly assert that – in the general interest – tax cuts for the rich must remain sacrosanct, while the unemployed must fend for themselves.
In Europe, the architects of the eurozone insist that the Greek people must shoulder the burden of the inevitable meltdown. And, right across the globe, our policy-makers defy all common sense by pushing austerity as the only remedy for recession.
Our political leaders in New Zealand offer no exception to this sadly defective performance. They, too, plod wearily along the same well-worn track, providing yet one more proof of Einstein’s famous dictum that to go on repeating the same process while expecting a different outcome is the definition of insanity.
Yet, we have good reason to expect better. This should be a time when New Zealand’s great advantages can be brought to bear. We have the huge benefits of climate and geography, we are politically stable, we have an educated workforce, we provide a safe and welcoming context in which to do business, and we have access to the world’s fastest-growing markets for the products we are uniquely skilled at producing. What more do we want?
Yet our government continues to give priority to its own finances. All the talk is of financial orthodoxy, of getting the government’s own (perfectly manageable) deficit down. Little attention and even less action is given to our real problems, getting our people back to work and reducing our propensity as a country to borrow from overseas – even though those are the issues that have led to the credit downgrades that we were told had to be avoided at all costs.
Those who practice what I call “politics by label”, however, judge arguments not by their weight but by their provenance. For such people, facts can be ignored if they appear in the mouths of the wrong people.
In pointing out what a depressing document is the Treasury’s pre-election forecast (even with the by now obligatory element of over-optimism), I do not merely draw attention to the wasted three years during which we have barely lifted our heads above the recession-imposed parapet.
What I do is re-affirm the arguments I have made over 35 years in public life. I bemoan the lack of ambition and leadership shown by this and other governments. I regret the failure to understand that economics is no longer (if it ever was) just a matter of the bottom line. It is, as Keynes said, “a behavioural science”; it involves how people lead their lives, how they interact with the natural world, and how they live and work together in society.
Where can we find the courage to break the shackles of a barren and discredited ideology? Where can we find even a glimmer of new thinking?
Bryan Gould
26 October 2011
Will He, Won’t He?
While much of the country is focused on the Rugby World Cup, there is at least one group of people with a quite different contest at the top of their minds.
With less than six weeks till the general election, the campaign managers for the major parties will be scanning the horizon for opportunities to advance their cause. While much that will be thrown up by the news stories over that period is unpredictable, other events are already well established in the calendar. Plans will be already well advanced to squeeze every last drop of political advantage from each of them.
That work – as I know from my own experience of election campaign management – will have been going on throughout the World Cup tournament. The Prime Minister’s campaign team, during what John Key laughingly described as an election-free zone, has most reason to feel pleased with what they have achieved over this period.
The rugby has provided not only a feel-good factor, but also a number of photo opportunities for the Prime Minister to confirm his role as the nation’s cheerleader. Not everything, though, has gone his way.
The NRL Grand Final did not quite deliver the triumphant climax that the Prime Minister’s trip to Sydney demanded. And there have been difficult moments; the bungled attempt to put words in the mouths of Standard and Poor’s on the credit downgrade did not play well, and the public concern about the apparently ineffectual response to the Rena disaster must be placed on the debit side.
The government has, not without reason, argued that the Rena is an operational matter, and is the responsibility of the appropriate authorities. The problem is, however, that a Prime Minister who succeeds in basking in the reflected glory of things that go well will sometimes find it difficult to skip away from those things that go badly.
The campaign team will have been pleased, though, at their success in shifting the blame for the World Cup opening night transport fiasco on to Auckland local government; and they will now without doubt be eyeing up the possibilities presented by what we all hope will be a triumph on Sunday night.
The stakes here for the campaign team will be high, and warrant a big play. But so will the risks if they get it wrong.
They will be encouraged by an earlier success in the World Cup scenario. The match against Japan at Waikato Stadium presented an entirely appropriate occasion to recognise – through a minute’s silence – the terrible natural disasters suffered by both countries this year.
It also allowed the Prime Minister, accompanied by the Japanese Deputy Prime Minister who may or may not have been aware of his supporting role in the drama, to walk on to the field and – having been unable to resist a cheery wave to the crowd as he did so – then be televised standing next to Richie McCaw and the All Blacks as the national anthems were sung. Of such moments are successful election campaigns made.
But Sunday night is a different proposition altogether. There is, after all, a precedent, and one which will tempt the Prime Minister’s team greatly.
Many people will remember the 1995 World Cup final in South Africa. The most enduring memory of that occasion is not necessarily Joel Stransky’s drop goal that won the match in extra time, but the appearance of Nelson Mandela, wearing a Springbok shirt, to greet the South African players and wish them well.
The moment was full of symbolism. Here was the father of the nation, the newly elected President of the whole of South Africa, the man who had represented through a lifetime of sacrifice the ultimately successful struggle against apartheid, wearing a uniform that symbolised for most South Africans the hated minority that had oppressed them for so long.
It was confirmation of the great generosity of spirit of the man that Nelson Mandela should choose to signal to his supporters in this way that South Africa was now one country – the rainbow nation. Here was one of the greatest men of the century showing huge magnanimity to his former oppressors and leading his new-born country to a new future.
Does John Key dare to emulate this example? Would the NZRU and the All Black management play ball? Would the television companies cooperate? Is a politician seeking votes quite the same thing as a Head of State celebrating and confirming the birth of a new nation which he had brought into being? Nelson Mandela was after all giving something of himself to the Springboks and his country, not expecting to get some benefit for himself.
These are the questions the campaign team will be agonising over. There will of course be thousands of supporters wearing the All Black jersey to signify their support on Sunday night. Why shouldn’t the Prime Minister do likewise? But how far can he push it? There will be more than one issue to be decided on Sunday night.
Bryan Gould
18 October 2011
The Human Wrecking Ball
Our Minister for Earthquake Recovery, Gerry Brownlee, has an unenviable reputation for putting his foot in his mouth.
The latest instance is his intemperate attack on Finland, which has – not surprisingly – aroused the ire of the Finns, both because it was so outrageous and because it was also completely misdirected. He apparently had not realised that the Finns might be listening and could understand English.
Mr Brownlee, of course, has what the crime writers describe as “form”. Even in his role as Earthquake Recovery Minister, he was roundly criticised for saying that the best thing to do with damaged heritage buildings was to bowl the lot of them – and more recently, he asserted confidently that “the market should decide” the future of those whose homes were damaged.
But there is another side to Mr Brownlee – an untold story that would certainly show him in a better and more unaccustomed light. Winston Peters may have insulted all woodwork teachers by describing him as “an illiterate woodwork teacher”, but he has other qualities that have enabled him to make an extraordinary (and unsung) contribution to earthquake recovery.
As most people will know, the Christchurch reconstruction cannot be started until a huge demolition task is completed. Demolition contractors have been working flat out against a tight timetable to get the job done.
Mr Brownlee’s enthusiasm for demolition is well known. But what may not be known is that he has found a way of converting that enthusiasm into positive action.
Whenever he can get to Christchurch, and once his working day is over, Gerry Brownlee meets in secret with the demolition contractors and spends several hours through the evening providing his services as a human wrecking ball.
The demolition contractors are delighted with what Mr Brownlee is able to achieve. One said admiringly that it was a great example of how a community-minded citizen could turn his natural assets to the general advantage.
“The Minister may be criticised at times for some of the things he does and says in his day job, but he has made up for any intellectual deficiency by his willingness to use his physical attributes to help achieve the huge task of knocking Christchurch down.”
“He may or may not be the sharpest knife in the drawer, but he is certainly an improvement in that respect over your average wrecking-ball,” said another. “It is a huge advantage to be able to communicate, even while it is in mid-air, with your wrecking-ball – something that just isn’t possible with your average lump of metal.”
Interviewed as he was about to don his crash helmet and have his ankles tied to together for attachment to the crane, Mr Brownlee was suitably modest about his contribution. “It’s no big deal,” he said. “I don’t want to receive plaudits for just doing what anyone would do. In any case, you could describe it as a labour of love – it’s something I enjoy doing and is the most useful thing I can do as Minister to get Christchurch back on its feet.”
Mr Brownlee dismissed suggestions that the work was dangerous and that repeated blows to the head might mean that he would pay a heavy price for his public-spirited actions.
“I can assure you that I have noticed no ill effects and my intellectual skills are as sharp as they ever were. I find it a kind of light relief from having to grapple with the difficult problems thrown up in my daytime work as Minister. And the skills required in my demolition work are just as intellectually demanding. I have to guide the crane driver as to where I should hit next.”
The Prime Minister said, when asked to comment on Mr Brownlee’s unusual activity, that it was news to him but that what Ministers did in their spare time was up to them. “This is not a matter for the government – nothing ever is,” he said, “but I’m sure that the citizens of Christchurch will hugely appreciate the Minister’s take on how best to do his job.”
Is The Mad Butcher Mad?
The love-in between the Mad Butcher and the Prime Minister, dutifully reported in every detail by complaisant media, is perhaps best described as reciprocal back-scratching – a term that is at least more polite than alternative anatomical allusions that might come to mind.
But while Sir Peter Leitch might have every reason, in view of favours received, to respond with a typically high-octane endorsement of the Prime Minister, the rest of us might be a little cautious. We might take the view that John Key and his government should be judged by other and more demanding criteria.
Like, for example, their success or otherwise in managing the economy. We all know, don’t we, that while the rest of the world is struggling, New Zealand is doing pretty well? At least, that is what we are constantly told.
And it is certainly true that we have good reason to suppose that the deep and intractable problems that afflict others have passed us by. Our main export markets happen to be, after all, two of the most buoyant economies in the world. Our commodity prices have reached record levels. The government’s debt, though constantly offered as the reason for public spending cuts, is – thanks largely to the prudence of the previous government – amongst the lowest in the developed world. Our often-maligned Australian-owned banks are a bastion of stability in a world facing renewed financial meltdown.
By contrast, other (and major) parts of the world economy are facing really tough times. The Americans are paralysed by political conflict. The eurozone is engaged in a losing battle with debt – a contagion that seems to be spreading like wildfire. And the British are determined to inflict on themselves a home-grown version of austerity that ensures that there is to be no early recovery from recession.
So, we surely have every reason to expect that our good fortune will be recognised by the credit-rating agencies and that we will show up as one of the bright spots in the OECD.
So, why have we suffered a credit downgrade? And why do Standard and Poor’s and Fitch seem not to have taken much notice of the government’s feel-good message? They are more concerned with our high external debt, which they say is on track to get worse, not better.
And if we really are bucking the trend, that should surely show up in the most recent quarterly GDP tables? Yet sadly, the OECD’s second-quarter GDP figures also tell a rather different story. New Zealand recorded a 0.1% growth rate in that quarter – a figure that means that we are out of recession by just about the smallest statistical margin possible.
But wait, as the TV ads say, there’s more. The figures show that while there are a few OECD members who have done worse than us (and one or two have actually gone backwards), the majority have done significantly better than us.
The paralysed Americans? They scored double our rate at 0.2%, as did the British, and the eurozone as a whole. European members of the OECD did better still at an average 0.4%. The debt-ridden Italians managed 0.3% and the equally debt-ridden Irish a whopping 1.6%. Our neighbours across the Tasman, on whom we are supposed to be gaining, did 12 times better at 1.2%.
We are told that we must expect tougher conditions to come. The Prime Minister, using a metaphor that typically places him in a sporting context, assures us that we can expect him to “roll with the punches”; but it is difficult to do that when you are flat on the canvas.
The story we are told is not, in other words, borne out by the facts. And those facts are most brutally apparent to all those who suffer directly from our failure to make the most of our relative good fortune, but who don’t make it into the media that often.
Foremost among them are those who go to make up our obstinately high unemployment total – a statistic that not only means a constant drag on our economy and a diminution in our national wealth, but that also represents tens of thousands of wrecked individual lives.
And sadly, the fastest growing element in the shameful jobless total is young people. Their rising numbers mean that young people now constitute a higher proportion of our unemployed – at 45% – than in any other OECD member country.
That statistic, coupled with the equally shameful and rising level of child poverty, shows that our failures are not just for here and now; we are building a divided and broken society for a generation and more to come.
Too many of our younger generation are condemned to a poor start, denied through public service cuts the early childhood education that would give them a chance, suffering poor health through the illnesses and diseases of poverty, unable to afford or qualify for skill training, vainly looking for paid employment in an economy that has already thrown thousands on the scrapheap, taking tragic refuge in drugs, prostitution and crime.
A constant diet of feel-good stories is all very well; but those who care about our country will want to dig deeper and make their judgments accordingly.
Bryan Gould
28 September 2011
This article was published in the NZ Herald on 3 October.
The Wilful Obstinacy of Europe’s Leaders
The first duty of political leaders is to deal with the world as it is and not how they want it to be. Yet too many of our global leaders insist that the world should accommodate to them and not the other way round.
Nowhere is this more true than in today’s Europe. Not only are Europe’s leaders grappling with problems they created themselves; they are wilfully refusing to learn the lessons of their past failures. We will all pay the price of their ideological tunnel vision.
Europe’s leaders created the initial problem by focusing exclusively on a political goal – the creation of a single European super-state – and ignoring economic common sense. The single-currency euro zone was never going to work. A single currency requires a single monetary policy – and Europe’s weaker economies were never going to live with monetary conditions framed to suit the interests of stronger economies like Germany.
But they were induced to take the gamble by the implied promise that the strong economies would help them out if they got into trouble. They survived for as long as times were good; and they tried to keep pace by taking on extra debt. But when the crunch came, the strong economies reneged on their promise.
The result? A debt crisis that has engulfed Greece and Portugal, to a lesser extent Ireland and Spain, and now – potentially – Italy. But instead of recognising their mistakes, Europe’s leaders have continued to ignore economic realities. They have treated debtor countries – not as victims of a failed political doctrine – but as moral lepers who must don hair shirts and pay for their sins.
Even more sadly, they have insisted that their political goals should take priority and be reinforced. Far from acknowledging that the single currency did not wash away economic differences across Europe, but exacerbated them by trying to suppress them, the remedy they now contemplate is an even more determined bid to create a single European state by moving further towards economic union.
What they obstinately refuse to recognise is that economic weakness cannot be wished away. Even if it is buried in a political framework so that it is out of sight, it will simply manifest itself in another way. Even if Greece or Portugal or even Italy became simply provinces in a wider Europe governed from Berlin, their lack of competitiveness could not be hidden; it would just mean that they became depressed regions, with no prospect of seeking their own salvation.
They would have no chance of pursuing a monetary or exchange rate policy more suited to their needs. They would have to rely on decisions made in Berlin or Paris; and those decisions are unlikely to be helpful. German and French taxpayers, whose patience has already worn thin, would have little tolerance of regions whose weakness was seen as threatening living standards right across the continent.
But the people of Greece and other debtor countries not only have to put up with the loss of self-government and lectures about their profligacy. Remarkably, the measures that Europe’s leaders now insist upon will make matters worse, not better – not just for the debtor countries, but for all of Europe and the rest of us as well.
As the Irishman said when asked for directions, “I wouldn’t start from here.” But what Europe’s leaders should do is accept that they have to start from here, and to prescribe policies that offer a chance of turning things around.
What they should do is cut Greece loose from the euro so that the Greeks can devalue sharply and then – on the basis of improved competitiveness – trade their way to generating the wealth needed to pay back their debts.
Yet, Europe’s leaders insist that Greece – already going backwards at a rapid rate, with national output dropping like a stone – must cut a further hundred thousand public-sector jobs, slash salaries and pensions, cut health spending, raise taxes and sell off assets. It is impossible to see how – by slashing and burning – an economy that is already overburdened by debt, and with no capacity to service that debt, let alone repay it, can hope to work and trade its way out of its problems.
And that problem will be compounded as other debtor countries are given the same advice. The whole European economy faces a bleak future if that advice is taken.
Does any of this matter to us, or is it a problem for the Europeans alone? If the European economy tips back into recession, and if European bank failures were to provoke a renewed financial crisis, we would all suffer. Global liquidity would dry up, interest rates would rise sharply, markets would contract.
But there would be longer-term implications as well. We might, for example, pause to consider, in the trans-Tasman context, whether a currency union as advocated by some would really be the panacea it is said to be.
And, in case we feel a sense of superior wisdom when we contemplate European difficulties, let us not delude ourselves. If by some miracle of geography we were to find ourselves in Europe, our government would support the same failed nostrums as are insisted upon by Europe’s leaders and for the same ideological reasons.
Bryan Gould
23 September 2011
This article was published in the NZ Herald on 26 September.