The Fallout from Brash’s Downfall
Don Brash’s attempt in the Herald a week or two ago to deny the accuracy of my account – also published in the Herald – of how the banks are not merely intermediaries but create out of nothing most of the money in circulation can be explained in two ways, but neither does much good for his reputation.
On the one hand, he might have known perfectly well that my account was accurate but nevertheless tried deliberately to mislead the Herald’s readers. Or, and perhaps more probably, he might genuinely have been ignorant of the true state of affairs.
In either case, my rebuttal – again in the Herald – of his assertion that I was “peddling nonsense” has a number of ramifications that are worth pursuing. For a start, here was one of our most high-profile public figures revealing that he was woefully ill-informed on a subject on which he was widely regarded as expert.
He had, after all, been the country’s top banker, and that is to say nothing of his eventual emergence as a “hard right” politician – leading first the National party and then Act, and only narrowly failing to become our Prime Minister in 2005.
As Governor of the Reserve Bank, he had been the principal champion and practitioner of the neo-liberal economic policies which became known as “Rogernomics”. Are we happy that our economic fortunes were entrusted to a single individual who understood so little of his subject, and that ministers applauded themselves for their disclaimer of any responsibility for the decisions he made?
His woeful attempt to deny what is now accepted must cast huge doubt on the continuing legacy of “Rogernomics” in our economic policies. The whole myth of prudent economic management under neo-liberal policies must be reconsidered in the light of what we now know is the banks’ self-interested creation (or “printing”) of billions of new money.
The frequent condemnations of any suggestion that governments might “print money” (unless it is “quantitative easing”, with the purpose of bailing out the banks) must now be viewed against the relaxed attitude towards the banks doing precisely that – day in, day out, and on a massive scale – for their own profit-making purposes.
An acknowledgment of the true role of the banks should lead us to reconsider many of the hitherto accepted nostrums in tackling economic problems. Inflation? No, not created by greedy workers claiming higher wages but by banks printing more and more money to boost their profits.
Housing unaffordability? No, not attributable exclusively to a shortage of supply but fuelled by the bellows applied to inflating house prices by billions of new money being created out of nothing by the banks to spend on house purchase. Those many well-intentioned people attempting to explain why house prices go on rising need look no further.
And what of the constant drag on our balance of payments as a result of the transfer every year back to Australia of the billions of dollars in profits made in New Zealand by our Australian-owned banks – profits made from the interest we pay on money created out of nothing by those banks? How did we allow this situation to develop? And should we let it continue?
Perhaps the most fundamental questions arise in respect of how long it has taken to bring the true state of affairs to public attention. Why have the media not blown the whistle long before now? Why is the revelation of the truth even now largely ignored, and even denied, by media outlets?
And what of our politicians? It is perhaps to be expected that politicians on the right might see it as in their interests to conceal and obfuscate.
But what of the left? Are they too timid or lacking in confidence or too imbued with neo-liberal convictions themselves to challenge an orthodoxy they profess to criticise and oppose? Are they really so frightened of losing the argument that they dare not take it on?
And are they so focused on winning approval from the guardians of neo-liberal orthodoxy that they are prepared, for the sake of staying in the good books of bankers and their ilk, to ignore the truth, and to fail thereby those who have no one else to defend their interests?
Bryan Gould
29 April 2017
What Lies Behind the Missile Attack in Syria?
Donald Trump would not be the first leader to try to revive his flagging fortunes by embarking on a foreign adventure. The missile attack he authorised on a Syrian airfield comes after his Presidency has suffered a decidedly shaky opening few weeks.
His term so far has seen one failure piled on another. He has not been able to break free from the constant suspicion that Vladimir Putin had a hand in his election; and, on that account, he has lost some of his most senior appointments and has soured his relations with his intelligence services. That issue is now under investigation by a Congressional committee.
Then he failed both to put in place a legally effective travel ban on visitors from mainly Muslim countries, and to get the support of his Republican majority in Congress for the replacement of Obamacare by his own healthcare legislation – both suggesting strongly that he does not know how Washington works and that the “deal-maker” cannot even persuade his own side.
Add to that some unlikely appointments made in critical areas like education and the environment, and his inability to separate business affairs from Presidential responsibilities, capped off by his delegation of many of those responsibilities to his son-in-law, Jared Kushner – someone entirely untried, unqualified, and unelected.
Little wonder, then, that his eyes lit up when he saw the coverage of the chemical weapons attack on civilians, including children, by forces loyal to President Assad in Syria. There is no reason, of course, to suppose that he was not genuinely moved by the graphic pictures of dying children.
But he would also have seen the possibilities of immediate redemption in the eyes of US voters. Here was a chance to make common emotional ground with millions of Americans, and to do something dramatic of which they would approve. He could show how decisive he is (hoping, on this issue, to point up a contrast with his predecessor), he could show himself ready to confront the Russians – whatever the doubts about his links to them – and he could impress the world (and not least President Xi of China whom he was hosting at Mar-a-Lago at the time) with his unpredictability.
Since most of us would want to see President Assad and his Russian supporters held to account for a heinous war crime, why would we not join in the applause for the missile attack? Is this not the kind of leadership that the “free world” has been waiting for?
There are, though, several good reasons for restraining our enthusiasm. Let us recall, first, that the most recent exercise in using Western military force against a Middle Eastern dictator – the invasion of Iraq – proved to be disastrous and is almost certainly the genesis of most of the problems we have faced in the region since.
Like the Iraq war, the missile strike in Syria paid scant regard to international law and was totally lacking in United Nations endorsement. It was instead a unilateral decision taken at short notice by a bombastic populist seeking to shore up his support at home.
It represented an almost complete volte face on the part of a President who had, up till that point, been more inclined to support Assad than to condemn him. And it was taken in response, not to careful and mature consideration, but to television pictures watched – one imagines – late at night and in lonely isolation. Is that how we want momentous decisions that might threaten world peace to be taken?
Such a “shoot from the hip” approach has something of the Wild West about it. We cannot afford a US President who sees himself as the Sheriff, ready to act as the world’s law enforcement officer and to blunder into complex international situations, fists (or missiles) swinging. What thought was given to the possibility of military conflict with the Russian forces already in Syria, to the impact on relations with regional powers like Iraq and Iran, or to the boost to the recruiting efforts of Isis?
And isn’t world peace and order better preserved by considered international action rather than by the idiosyncratic overnight impulse of a maverick, however many missiles he has at his disposal?
Launching a military adventure is not enough to make good a loss of confidence in the decision-maker. It is the confidence that has to come first; the action can come once the confidence is established.
Bryan Gould
9 April 2017.
Did Trump Really Want to Be President?
Cast your mind back to the moment when Donald Trump announced that he was running for President. Like most people, no doubt, you were bemused, entertained and intrigued, but at that point his chances of actually reaching the White House would have been rated at zero. The possibility of a President Trump seemed very remote.
The doubters might well have included the newly announced candidate himself. Indeed, there were, and are, many commentators who believe that Trump never contemplated the possibility of actually becoming President, but launched his candidature as a means of burnishing his image and thereby promoting his business interests, which were apparently in need of resuscitation.
Even if, in his more optimistic moments, he had actually rated his chances, it seems likely that he would have looked forward to the trappings of power rather than the burdens of actually exercising it. His performance since taking office suggests strongly that – armed only with the few improbable campaign slogans that served him well with the voters, and handicapped by virtually total ignorance of how government works and of the actual role of President – he was totally unprepared for turning those slogans into policy or into anything vaguely resembling a programme for government.
He will also have found that, however pleasing to the ego it may be to be greeted by “Hail to the Chief” wherever he goes, it is less pleasant to find that his fumbling efforts at making good his campaign promises are scrutinised, opposed and frustrated at every turn by the machinations not only of his opponents but of all those who believe that he is simply not up to the task.
And he will now realise that there is no hiding place or comfort zone, even though his frequent recourse to campaigning mode suggests that he is desperately seeking one. Everything he does and says – spot-lit and amplified – is now in the public domain and is the subject of analysis and comment not only in the United States but around the world. Because he is someone who has assiduously courted publicity throughout his career, he cannot expect to turn it off when it suits him.
His election victory has, in other words, ensured that he will now be judged at every turn according to criteria with which he is unfamiliar. His role as a reality show television star, his probably inflated reputation as a successful businessman, his unexpected success as a political campaigner, no longer count for anything. He has now launched himself into a completely different orbit – one in which he is quite likely to crash and burn.
The qualities that worked for him in other contexts are now seen as weaknesses and handicaps. The bluster, the braggadocio, the cavalier attitude to the truth, the almost infantile sensitivity to criticism, are all obstacles to the careful consideration of consequences that is required at the top level of politics. And who can predict the toll that will be taken on him by the realisation that his inadequacies cannot be hidden and make him the object of ridicule and derision?
Most worryingly, the quality of his decision-making seems likely to nose-dive further. The appointments he has made to top positions in his administration, the sometimes ill-judged foreign policy decisions he has taken, the fights he has picked with the courts, the wild allegations he has made about those he regards as his enemies, the impact he threatens to have on world trade and the global economy, all point in a direction that suggests that worse is to come.
There will be those who celebrate what they will see as poetic justice, that Trump’s efforts to promote himself have served only to expose his frailties to a wider public. But, for the rest of the world, the implications are less welcome. The “free world” is now led by an incompetent, and we are all the weaker and more at risk as a consequence.
Bryan Gould
19 March 2017
A Revival of Fascism?
The epithets “fascist” and “Nazi” are, in some quarters, tossed about so casually as to have lost most of their meaning. But that should not lead us to think that the behaviours they might describe are things of the past. Those of us with longer memories can still scent the whiff of fascism on the wind – and we should not hesitate to say so when we do. This might be one of those moments.
What phenomena might we expect to recognise as evidence of a revival of fascism? We do not need to ponder the question too long.
We would certainly expect to see a regime that exhibits an extreme form of nationalism. It would describe in grandiose terms the role of the country and its government – the Third Reich, for example, was to last “a thousand years”. It would proclaim its determination to enhance the “greatness” of the country, its readiness to be ruthless in pursuing its own interests, and its disregard of the interests of others. It would increase its spending on the military and express its disdain for helping others.
It would be led by a larger-than-life personality who – as with a Benito Mussolini or even, on occasion, an Adolf Hitler – was not afraid to appear ridiculous or buffoon-like if it meant staying in the headlines. The leader would surround himself with like-minded (and sycophantic) supporters, appointed to positions of power in the government on the strength of their subservience rather than their experience or ability.
The policy of the government would be presented, not as the product of careful consideration by a properly constituted legislature, but as emanating from the personal vision of the “leader” – the “Fuehrer” or “Il Duce”.
Policy would be announced in equally personal terms, directly from the lips of the leader and, as often as possible, at rallies and public events, conducted with fanfare and razzamatazz, where the leader was able to renew the tactics that had enthused his supporters in the first place. Those tactics would include the relentless repetition of slogans and catch-cries, of insults aimed at supposed enemies and non-believers, and attacks and threats against those who were seen as standing in the way.
Those supporters would be encouraged to chant their hatred of opponents of the regime and to demonstrate their enthusiasm for the leader. But they would also be encouraged to identify and express their hostility to groups within society who could be seen as different or as unwelcome minorities or as too weak to defend themselves. Fear and hatred would be seen as the proper attitudes to adopt towards those minorities.
The regime itself would use officers of the state to harass them, to “weed them out”, on the grounds that they could not properly be accepted as part of the host community. Religious, political or ethnic differences would be barely tolerated and carefully monitored.
Propaganda, not necessarily based on truth and fact, would be used constantly. It was, you may recall, Goebbels who practised and perfected the technique of the “big lie.”
Foreign affairs would be conducted on a personal basis. Foreign dignitaries would be expected to show proper subservience to the leader. Smaller and neighbouring countries would be treated with disrespect and threatened with reprisals if they did not do as they were told.
The government, which would be represented as merely an emanation of the personal power of the leader, would attack other sources of power in civil society. The courts would be under heavy pressure to interpret the law to suit the government’s interests, and appointments to the bench would be made on political grounds so as to ensure that this was done.
A free press would be seen as a threat, and would be reined in, through a mixture of threats and controls.
The power of government would be allied with, and regarded as barely to be differentiated from, the interests of big business. All major activities, especially in the economic sphere, would be directed to increasing the power of the state. It is not for nothing that “Nazi” was a contracted form of the German for “national socialism”.
Does any of this ring any bells? Does anyone feel a sense of discomfort at the apparent revival of a scourge that brought the world to the brink of destruction?
Is it really so unthinkable that a major modern democracy, one on which the future of the free world – and therefore of the world itself – is said to rest, could lead us back to a dreadful future? If not, should we not speak up before it is too late?
Bryan Gould
1 March 2017.
Why Not Try “Bubble Up”?
Thomas Picketty is a French economist who recently took the economics world by storm. He demonstrated that, in a modern, “free-market” economy, growing inequality is inevitable, unless we do something deliberately to counteract it.
Picketty shows that, over hundreds of years and in technologically advanced economies in particular, the return on capital will always rise faster than the growth rate in the economy as a whole. The rich, in other words, will inevitably get richer, while the rest of us get comparatively poorer – and sometimes absolutely poorer as well.
It was only in exceptional times – for instance, in the period immediately after the Second World War – that we were able to buck this otherwise inexorable trend, and that was only because we elected governments that were inspired by post-war optimism to make a fresh start – to try consciously to create better and fairer societies, and to include everyone in what was hoped would be better times.
But, in New Zealand and the UK and in most of the western world, the long-term trend is now back. The gap between rich and poor is widening again, and more rapidly, and – in the absence of governments willing to do much about it – it will go on getting worse.
We are constantly urged by the wealthy, and by politicians representing their interests, to accept that it is good for all of us that the rich should go on getting richer. Wealth at the top will, we are told, “trickle down” to benefit the rest of us. This, it is argued, is the mainspring of economic growth; if we interfere, then the economy as a whole will slow down and we will all be worse off.
The “trickle down” theory enjoyed a considerable vogue for a time, and it has certainly been given an extended trial period. But the results have confirmed the doubts of the sceptics. Gravity, as an economic driver, doesn’t seem to have worked too well.
Not only have the poorer sectors of society continued to miss out on the prosperity enjoyed by the better-off, but the economies which have most assiduously applied the theory have done worse in economic terms than those (in Scandinavian countries, for example) which have consciously tried to maintain a reasonable degree of wealth and income equality.
The reasons for this are not hard to find. If most new wealth ends up in the hands of those who are already wealthy, (which is exactly what has happened in much of the post-war world), it is odds on that much of it will be hoarded or used to produce an unearned income or spent on conspicuous and non-productive consumption.
To the extent that it goes into productive investment, it will be spent on new capital equipment, which does little for the jobs and wage rates on which the poor depend but simply extends the income-maximising advantage enjoyed by the wealthy.
It has always seemed to me that the metaphor that envisages money as a liquid that “flows” or “trickles” downwards is a misconception of what really happens. Rather than hoping to see money automatically “trickle down” from the wealthy, in the vain hope that it will somehow reach those who need it, it is surely better to direct money quite consciously into the hands of the poor where it can do most good and so that it can “bubble up”.
It will then benefit us all since we can be very confident that every dollar in the hands of those with little money to spare will be spent and will do much to alleviate poverty. Every cent will then bubble up through the whole economy, like yeast in dough, passing through one set of hands after another, the increased purchasing power and demand providing higher incomes to tradesmen, small shopkeepers and businesses, and in turn leading, as the great John Maynard Keynes argued, to increased economic activity and to more employment and investment.
We pay a heavy price for failed “trickle down” policies – not only a poorer economy, but a weaker and less integrated society as well. Why not give “bubble up” a chance to build a stronger economy and a healthier and happier society?
Bryan Gould
4 February 2017