John Key and the Law
There are many reasons for concern about the GCSB Bill that has just passed into law, but one we might not have expected is the extent to which the Prime Minister seems unaware of its true implications.
It must surely have come as a shock, even to his supporters, that John Key seems not to understand some of the basic principles of democratic government. In particular, he seemed to see no distinction between his own personal assurances and the law of the land.
The great principle of English common law, both foreshadowing and endorsed by the Glorious Revolution, is that no man “be ye ever so high” is above the law. The great Chief Justice Edmund Coke would have made short shrift of any pretension that a mere politician could decide what was and was not the law by his mere say-so.
Yet that is what our Prime Minister apparently presumes to do. In assurances given in a television interview, he asked citizens to accept his word as to his intentions concerning the new power to intercept our communications that the security service he heads was about to have conferred upon it. He seemed to think that, merely because he had said it, it was equivalent to a legal obligation and could be relied upon in a court of law.
He was under a similar misapprehension when he proclaimed that he would speak in the Bill’s Third Reading debate so that future courts would know what the Act meant and, therefore, what the law was. He did not seem to realise that it is Parliaments, not Prime Ministers, that make law and that it is courts that interpret it.
But surely, it may be objected, we can trust John Key? If he says he will use the new power responsibly, why should we not believe him?
Let us leave to one side the obvious point that, however virtuous John Key may be, he will not be here forever, and we have no idea what view his successors may take, or what use they might make, of the wide powers he has claimed for himself.
The real point, though, is that liberty can be eroded if power is placed in just one set of hands, however well-intentioned, and is not subject to proper checks and safeguards – and that almost always means legal safeguards. It needs only a temptation to treat as identical or equivalent the interests of a particular party or government on the one hand and those of the whole country on the other to raise unacceptable risks that basic freedoms might be threatened.
Some of the most thorough-going despots in history have no doubt believed that the fortunes of their country and their own are indistinguishable. I have no doubt that Robert Mugabe, for example, genuinely believes that Zimbabwe would be a shambles without him.
Our own Prime Minister’s reliability in this regard is surely called into question by his easy assumption that his own (personal, political and partisan) interests are the only guide necessary to ensure that the huge diversity of interests of his fellow citizens is properly served.
The rationale offered by Peter Dunne for his own support for the Bill offers no more comfort. If the Prime Minister were to misuse these powers, Peter Dunne assures us, John Key would be “punished by public opinion”. Leaving aside the question of how the public would ever know, what makes Peter Dunne think that John Key is deterred by public opinion? If public opinion counted for anything, we wouldn’t have the Bill in the first place – and nor, for that matter, would we have Peter Dunne.
Perhaps the most worrying aspect of the whole episode – going beyond even the very real fears about our progress down a slippery slope to a surveillance state – is what it tells us about the Prime Minister’s increasingly slapdash way of doing business.
He seems more and more to believe that he can get away with flying by the seat of his pants – that he is able to resolve any problem with a quick fix or an easy promise. His government seems increasingly to be a law unto itself, answerable to no one but the Prime Minister himself, and he looks to be more and more prone to taking his eye off the ball.
The literally overnight timeframe of the foreign exchange dealer may have been ideal for the purpose of making a quick personal fortune on the foreign exchange markets, but we surely need a longer and more considered timeframe and a more thoughtful approach from the country’s leader.
The GCSB saga has been a shambles from beginning to end. Perhaps the only consolation is that it begins to offer us some explanation as to why so much else suddenly seems to be going wrong as well.
Bryan Gould
21 August 2013
This article was published in the NZ Herald on 23 August 2013
Making Sense of the News
Making sense of the news is always difficult and becoming more so. News stories come at us from all angles. It is hard to see how they relate to each other or to detect patterns in what is really happening.
A case in point is the report a few weeks back of a poll that showed Bill English as the most highly rated Cabinet Minister. The news value of the story was apparently that the government’s number two had outscored the Prime Minister. Students of politics might also have speculated on what the story might mean for the succession when John Key eventually steps down.
But the real significance of the story surely lies in the identity of those polled. The poll was conducted among the country’s leading CEOs. What it showed was that business leaders recognised how much they owed to those who were directing the government’s economic policies. John Key might provide the public face, but Bill English is the one who actually delivers what business wants.
It is no surprise that business leaders are grateful for the favourable treatment they have received. Whether it is the sacrifice of the environment to mining interests or the 35-year increased pokie deal for Sky City, the over-ruling of the Commerce Commission to protect Chorus profits or the $30 million gift to Rio Tinto, the government is increasingly overt in its solicitude for the interests of big business.
What is perhaps less obvious though is the corollary – the government’s willingness to make life easier for business leaders by further weakening the claims of working people on our economy. Perhaps not surprisingly, the government is a little more coy in advertising this aspect of what it is prepared to do for its friends.
That thought was brought to mind by the latest unemployment figures published last week. At first sight, for many ordinary readers, the figures represented something of a puzzle; while there was a small increase in the numbers of those in work, the rate of unemployment actually rose.
The answer to this conundrum casts a revealing light on an important part of the government’s strategy. What is happening in the labour market is that, particularly in Christchurch (what would we have done without it?), demand for labour is rising; as that perception takes hold, many of those who wanted work but had given up trying have come back into the jobs market.
There is, in other words, a large but unquantifiable pool of people available for and wanting work, but who do not show up in the unemployment statistics. They have been forced to drop out by a series of government measures designed to deter them from claiming benefits; they emerge only when they see some hope that there might actually be a job for which they could compete.
And “compete” is the right word. Because at the same time as we saw the unemployment figures, it was also revealed that the already small growth in average wage rates had slowed further. As these hidden unemployed emerge from hiding, in other words, they compete for the few low-paid jobs available, and they compete by being prepared to work for lower wages than are paid to those already in work.
We can conclude, therefore that business leaders have an additional reason for feeling grateful to Bill English. Here, at least, is one government economic strategy that is working brilliantly. On top of the other measures the government has put in place to hold wages down – the weakening of rights at work, the lower than minimum wage rates for young workers, the much tighter rules designed to force beneficiaries back into the job market, the failure to maintain the real value of the minimum wage itself – we can now see the real rationale for the government’s relaxed attitude to unemployment.
It suits employers very well if workers are in constant fear for their jobs; if their job expectations are increasingly weakened and made conditional on accepting even lower wages, life is made much easier for those whose main (indeed, it seems, only) task is to maximise profits for their shareholders.
But, as so often, this kind of thinking may produce short-term benefits to profitability but is bad for both the economy and our wider society in the long term. It encourages those who run our economy to treat labour as just another production cost, to be driven down at every opportunity, rather than as representing the lives and livelihood of real people and their families, members of the same society we all live in.
We pay a social price for these attitudes, in terms of wider family poverty and greater disparities leading to a less integrated and more conflicted society, but we also pay an economic price. What is economically efficient about driving down the real value of wages and therefore purchasing power of those on whom business depends for custom? What is economically efficient about maintaining a pool of unemployed so that we permanently lose their productive capacity?
Sadly, our business leaders see no further than their own immediate self-interest. Higher profits and a more quiescent workforce seem to be all that matter to them. Shouldn’t we expect better?
Bryan Gould
11 August 2013
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.
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.
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