Is There Any Limit to Australia’s Anti-Kiwi Hostility
My wife and I have often enjoyed holidays in Australia. A year or two ago, we returned to Noosa, and visited a café where we remembered having had good coffee a year earlier.
As he handed us our coffees, I asked the barista whether he was the Kiwi we recalled having met there briefly on our previous visit. To my surprise, he stiffened, glared at me and said through clenched teeth, “I’m a proud Australian”, and stalked off. We drank our coffees and did not return.
It prompted me to wonder, however, what had led him to react as though an innocent inquiry had grievously insulted him?
The incident was, at one level, of little consequence and we had many perfectly pleasant interactions with many other Australians during our holiday. But it has stayed with me, and I cannot help but recall it when, as has happened recently with increasing frequency, there is some fresh report of Kiwis now living in “the lucky country” being discriminated against and denied the usual rights of citizenship.
My mother, as it happens, was born in Australia and, like most Kiwis, I was brought up with the belief that we and the Aussies were “brothers in arms” – an article of faith reinforced each year as we jointly celebrate Anzac Day. We are assured constantly by our respective leaders that our close relationship is in our DNA – so where did this apparent hostility to New Zealanders come from?
The question is important, since if one side singles out the other for unfair treatment, what can be left of the relationship we have valued so dearly? If it is to be preserved, we need to understand what is going wrong.
I think I can have a pretty good shot at identifying what it is that lies behind Australian attitudes – and the answer is not encouraging. Most societies find it easy to be open-minded and welcoming when things are going well. But when times are harder, the stresses and strains mean that attitudes change – and the Aussies are no exception.
Even when – by virtue of the boom in mineral prices – Australians enjoyed growing prosperity and full employment, and Kiwis crossed the Tasman in droves in search of well-paid jobs, there was no doubt some resentment at those seen as at best opportunists and at worst as bludgers. The Aussies learnt to be somewhat contemptuous of their trans-Tasman neighbours.
That sentiment has no doubt changed direction a lttle as the Australian economy has slowed over recent years. But, when the going gets tougher, the search for someone to blame gathers pace – and anyone who is seen to be not “one of us” is likely to cop it.
And that is especially so when a little dose of Aussie racism is added to the mix. In many Australian minds, “Kiwi” means Maori or Polynesian – and that, sadly, is likely to be a further cause of hostility.
Paradoxically, the view that Kiwis cross the Tasman to make an unjustified grab for a share of hard-earned Australian prosperity has survived even when the cross-Tasman migration has begun to shift in the other direction.
It is as though the Aussies, having resented what they saw as Kiwi opportunism when the going was good, now resent the fact that Australia’s good fortune has recently diminished – and again, look for someone to blame or at least take it out on.
Whatever the reasons, our leaders must surely have the gumption to impress on their Australian counterparts that discrimination against Kiwis who have made their lives in Australia is doing significant damage to our relationship.
I like to think that, give or take the odd underarm bowling episode, we and the Aussies remain best mates, and that we share the view that everyone deserves a “fair go”. On this side of the Tasman, we should strive to make sure that that remains the case. If the relationship has become a little fractious, we must resist the temptation to retaliate. They might send us myrtle rust, but we should show them what the Anzac spirit means – perhaps by allowing them to win the odd Super Rugby match. Mind you, it would have to be pretty odd!
Bryan Gould
17 May 2017
Will the Voters Think?
Winston Churchill is reputed to have once said that “Democracy is the worst form of government, except for all the others”. If he did indeed say that, he was presumably trying to capture a somewhat paradoxical truth – that democracy, at its best, has great underlying virtues that are unmatched by other forms of government, but it can be easily subverted or exploited so that it produces unwelcome outcomes.
The recent US presidential election makes the point well. If Vladimir Putin’s purpose in intervening in that election was to demonstrate democracy’s propensity to elevate demagogues who are not up to the job, he will have been delighted with his success in producing disturbing evidence of how easily the voters can be misled.
If democracy is to deliver what it promises, it must be underpinned by an informed and thoughtful electorate and it must not allow one body of opinion to be unfairly advantaged over others by virtue of an imbalance in financial resources, or in access to or control of the media.
We do not need to look to a Hitler or a Donald Trump to recognise that the democratic process can lead to perverse outcomes. Even in our own domestic politics, we are constantly offered instances of both democracy’s strengths and its weaknesses.
One of the great virtues of a properly functioning democracy is that it will compel the rivals for power to compete as to which of them will best reflect the will of the people. Last week’s budget, for example, could be seen as a welcome, not to say overdue, response to the demands made by public opinion.
The government’s qualitative opinion polling will have told them that New Zealanders are increasingly concerned about the widening inequality and growing poverty in our society, and are particularly alarmed at the unaffordability of housing and the plight of the homeless.
The measures proposed in the budget to address these issues could accordingly be seen as a proper reaction to the wishes of the people – exactly what democracy is meant to provide.
But – with just four months to go before a general election – the budget could also be seen as a cynical attempt to divert attention from past failures, and to persuade people that we can now put those adverse consequences behind us as we enter upon the “broad, sunlit uplands”.
It is in these circumstances that democracy is put to the test. Will the electorate allow itself to be soft-soaped, or will it demand answers to the questions that should now be asked?
What price has been paid, for example, for the “surplus” that Steven Joyce is apparently now distributing so generously? Remember that a government surplus does little to alleviate the country’s continuing deficit – the one that really matters. It means simply that the government has taken more from us in taxation than it has spent on public services or on investment for the future.
It has managed to achieve this by leaving many important areas underfunded. Those who depend on that funding – the poor, for example, those in need of effective health care, our schools, the voluntary sector, conservationists concerned about water quality, horticulturalists reliant on effective biosecurity, the list is virtually endless – have all suffered as a consequence of “the cuts”, and we are a weaker and poorer society as well.
The budget largesse is, in other words, at best a belated attempt to undo, at least in part and temporarily, the harm suffered by so many parts of our society and economy as a consequence of years of underfunding.
The proper democratic response should be to ask “why were these injuries to our society allowed to happen in the first place” and “why has it taken so long to remedy them” and “is dieting for long periods followed by the occasional splurge the best way to maintain a healthy weight”?
Much will now depend, in terms of the health of our democracy, on whether voters are thoughtful enough to ask these questions. Should we be dazzled by the offer of a pre-election selection of goodies, or should we consider the unwelcome consequences of another three years of unchanged policies – policies reflecting the conviction that the unfettered market must always prevail, whatever social and environmental deficits might be created?
Bryan Gould
27 May 2017
A Trump Dictatorship
How do dictatorships come about? That is a question easily answered in most cases. The classic instances arise as the result of a military coup or at least with the support of the military or following a victory in a civil war. There is almost always an element of force – but not always.
Hitler, for example, came to power following a democratic election. Having achieved power more or less legitimately, he then entrenched his regime with the help of a whole apparatus of terror and repression. But the real source of his power was the conviction that he could not be resisted, and that it was therefore best to do what you were told – as everyone else did – since it was too dangerous to do otherwise.
Are we witnessing a similar scenario unfolding before our eyes in the United States? We have a leader elected according to the US constitution but acting increasingly as though he is subject to none of the usual constraints on the arbitrary use of power.
Donald Trump used all the familiar techniques of demagoguery to get himself elected. He showed scant regard for the truth, told “big lies”, attacked his opponents as “enemies”, targeted minorities, appointed his own family members and cronies to positions of power.
He took office as President with an alarming ignorance of the country he led and its history – and that included what seems to be a complete misunderstanding of how government works in a democracy and of his own role in that government.
His experience as a business tycoon and as a reality TV star seems to have persuaded him that being in the “top job” means that you can do what you like – without any constraint from the other elements of a democratic system of government – and that people are accordingly compelled to do what you tell them.
As a result, when the courts declared his ban on certain entrants to be illegal, he was outraged – and he is equally outraged when he is held to account by the media. In an attempt to undermine confidence in them, he has regularly lambasted them for publishing “fake news”. And his difficulty in getting his healthcare legislation through Congress led him to threaten to “close down” government.
His view of government seems to be that the courts, the legislature and the media should be allowed no role, and that it is the executive alone – in the person of the President – that exercises unbridled power.
It is his most recent exercise of Presidential power, however, that should really set the alarm bells ringing. His “termination” of James Comey, the FBI Director, has added the intelligence services to his list of those agencies from which he will brook no interference or even a hint of opposition.
It has hit the headlines because it seems so evidently an attempt to close down an inquiry into the Russian involvement in his election campaign. But, important though that issue is, the “termination” has a much wider significance. It sends the message that no one in government or beyond can afford to cross him.
Much now depends on the reaction made by the country’s leaders to this startling exercise of arbitrary power. If they do not respond and simply roll over, a major step towards a dictatorship has been taken.
A despot does not achieve power because he himself personally injures, threatens or restrains his opponents. The power is achieved because he controls the levers of power exercised by others. It is the willingness (or at least the lack of resistance) of others to carry out his orders that is the source of his power.
It is the conviction that resistance is futile – even in the midst of the trappings of democracy – that is the essence of a dictatorship. If Trump is seen to “terminate” a top official – one responsible for the country’s security – simply to protect himself and his own reputation, and does so with impunity, the lesson will be quickly learnt. The new FBI Director, for example, will know that he or she takes office on condition that the President’s own personal interests must prevail over all other considerations – and everyone else will learn that lesson too.
A huge burden now falls on those who are meant to be guardians and upholders of democracy in the United States. They cannot just close their eyes and pretend not to see. It may seem unthinkable in today’s American democracy that a Trump dictatorship is possible. But, as Edmund Burke famously warned, “All that is necessary for the triumph of evil is that good men do nothing”.
If they do nothing, the conditions needed to increase and underpin the power of the despot will be met. The leaders of the Republican Party already bear a heavy responsibility for their role in bringing about a Trump presidency. It is time for them to step up to the plate.
Bryan Gould
11 May 2017
What I would Have Said in the Herald
I have received in the last couple of days a number of inquiries as to whether, when and how I will respond to Don Brash’s latest exposition in the Herald of his understanding (or lack of it) of the banks’ role in money creation.
The answer is that the Herald – perhaps understandably – do not want to continue what they see as a “tit for tat” exchange. The consequence is that Don Brash is left with the last word, and no further comment from me on this subject will appear in that paper.
If I had been able to publish a response in the Herald, I would have, first, queried why they thought it was wise or helpful to publish Brash again, since he said nothing new and simply repeated his earlier errors. It certainly did him no favours – he succeeded only in further damaging his own reputation and in compromising the Herald by ensuring that their readers were left at best confused and with the erroneous impression that the matter is not settled but is still one of contention.
I would then have gone on to specify the precise errors and misapprehensions under which Brash seems to labour.
First, he chooses to assert that the banks (or rather, he says, “the banking system”) does no more than operate in effect a Keynesian multiplier, with which all economically literate people are quite familiar, and that it is only in that sense that it “creates” money. No one disputes that money in circulation will enable a large number of successive transactions as it passes from one hand (or deposit account) to another. But that has nothing to do with the matter at issue, which is – how is money in circulation created in the first place, and what role do individual banks play in that process?
On that subject, Don Brash has nothing to say, other than to deny (without any evidence or countervailing argument) what is now almost universally accepted – that the act of creating credit by an individual bank through placing a credit entry in a borrower’s account creates new money.
His second error is to ask, if it is the case that banks create money, why would they bother to do anything other than write cheques to themselves?
This simply betrays a failure to understand the process of money creation described authoritatively in the Bank of England paper. As that paper says, “Commercial banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created.”
“For this reason”, says the Bank of England, “some economists have referred to bank deposits as ‘fountain pen money’, created at the stroke of bankers’ pens when they approve loans.”
Commercial banks create money, in other words, by placing loans (or credits) into the bank accounts of borrowers. They cannot of course write cheques to themselves (the money they create is by advancing credit to borrowers) and, in asking why they don’t do so if it is the case that they can create money, Brash is merely putting up a straw man so that he can apparently knock it down.
The banks do of course need to have capital reserves of real money for prudential purposes in case of a run on the banks. They have no capacity to create money for this purpose, but, as the Bank of England explains, “The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the [central] Bank.”
Brash’s third and most important error is to dismiss the increasingly weighty opinion of most of those – like the Bank of England – who have studied the role of the banks in money creation.
In its 2014 paper, for example, the Bank of England says that “in reality in the modern economy, commercial banks are the creators of deposit money…Rather than banks lending out deposits that are placed with them, the act of lending creates deposits — the reverse of the sequence typically described in textbooks.
Bank deposits make up the vast majority – 97% of the amount [of money] currently in circulation. And in the modern economy, those bank deposits are mostly created by commercial banks themselves.”
The paper’s conclusions are accepted by almost all leading economists, including Lord Adair Turner (former Chair of the Financial Services Authority in London) and Professor Richard Werner of Southampton University, and were foreshadowed (in a 2008 paper) by the Reserve Bank of New Zealand itself.
Brash, however, seems unable to understand the process described by the Bank of England. I had earlier thought that his denial that commercial banks were responsible for creating most of the money in circulation had to be either a deliberate attempt to mislead or the consequence of simple ignorance. But, since he states that he “is aware” of the Bank of England paper (and has therefore presumably read it), I can only assume that his continued denial of what that paper tells us is the consequence of intellectual limitations.
It is very frustrating that what is now a virtually undisputed truth has been continually confused by palpable errors in Brash’s contributions and that they have been lent some unjustified credibility by their publication in the Herald.
I should be grateful if this posting could be given the widest possible circulation.
Bryan Gould
8 May 2017
Putting a Proper Value on Work
The success enjoyed by the trade unions recently in establishing that, across the economy as a whole, we can put a minimum value on particular categories of work has been of immediate benefit to thousands of low-paid workers, and particularly to carers, many of whose wages have been held down because of their gender.
But that success has also brought out of the woodwork those who are pathologically hostile to workers’ interests. The ubiquitous Mike Hosking in the Herald, for example, was quick to decry the unions’ efforts to extend that principle to other categories of work.
The trade unions are hopelessly out of date, he argued. There is no alternative but to have wage rates set by individual employers since only they can accurately assess the market forces that bear on them and that determine what they can afford to pay.
But every business has to take account all the time of a range of costs for which there is a going rate. Rent or other accommodation charges, taxes, rates and other levies, interest paid on borrowings, raw materials, power and transport costs – the list is almost endless. In each such instance, the business simply has to pay (perhaps after some negotiation at the margin) the rate that is set. And businesses simply get on with it, without any objection in principle being raised by the Mike Hoskings of this world.
So why should it be different when it comes to just one particular, and arguably the most important, category of costs? Today’s economy does not grind to a halt because individual employers cannot themselves fix what they are prepared to pay for power or fuel, or any other of the going rates with which they are faced. Why should it be any different in respect of a going rate for certain categories of work?
Hosking says that each individual employer must be free to drive down the wages they offer to the level that suits them. He seems to see the cost of labour as being different from other costs because the employer’s power in a one-on-one negotiation over wage rates means that each individual employer can have a crack at getting a competitive advantage by offering a wage rate that is lower than that paid by his competitors.
There must also be the suspicion that, as Hosking imagines it, employers see the employment negotiation as essentially a contest between themselves and their workers to decide who gets the lion’s share of any revenue the enterprise might earn.
It is precisely that mentality that underpins the low-wage structure of our economy. It is no accident that, in New Zealand as elsewhere, the share of profits in the economy has grown much faster over recent decades than the share of wages.
There is no recognition of the price we all pay as a result of this disparity or of the great benefits – economic and social – that would accrue if wage settlements were not always the subject of often acrimonious individual negotiations, but were based on a generally acknowledged economy-wide value for particular types of work. If that meant a higher overall wage level, that would boost purchasing power in the whole economy, to the great benefit, not least of businesses, as well as other parts of the economy. We would all be better off if the low-paid do better.
Even more importantly than the economic arguments, there is no understanding of the fact that wages are quite different from other costs, in that they have a huge social significance by directly impacting on the livelihood and living standards of many thousands of New Zealand families.
Low wages, along with unemployment, are the principal cause of poverty, and especially child poverty, in our country. That poverty creates miserable conditions, stress and blighted lives for the hundreds of thousands affected, but it also means a whole range of social ills that cost society time, effort and money to deal with.
A more orderly and agreed process for setting wage rates, based on a full appreciation of the value of labour, would be a step in the right direction, both for the economy and for society. The unions should be supported in their efforts to achieve it.
Bryan Gould
27 April 2017