• History’s Judgment

    As he finds himself sailing into increasingly choppy waters, it is perhaps not surprising that the Prime Minister’s thoughts might turn to the judgment that history might make of his term in office. There have been several occasions recently when John Key has speculated on that matter; and, amongst other predictions, he has confidently forecast that he will be remembered as having left the economy in a stronger condition than when he took over.

    It is hard to conjure up much by way of statistical evidence to support that assertion. Indeed, the contrary seems more likely – that history will regard the Key government as having been responsible for a further and possibly decisive relapse in a long-term comparative economic decline that might even threaten New Zealand’s viability as an independent, self-governing state.

    Could such pessimism be justified? Surely, it may be argued, in a world that is likely to provide an ever-expanding market for premium food and other primary products, New Zealand’s expertise in this area will guarantee a rosy future?

    That should certainly be the case; our advantages as a primary producer, coupled with our political stability, our freedom from corruption and our access to expanding markets should mean increasing prosperity. But optimism on this account has to be tempered by our government’s insistence on pursuing policies that we know from hard experience will hold us back rather than take us forward.

    Despite the advantage of conditions, like a stable banking sector and buoyant export markets, that are more favourable than most other countries have enjoyed, we have spent the last four years or more bumping along the bottom of recession. Even more worryingly, as a recovery of sorts gets under way, it is driven by factors that make it inevitable that we will compound the very problems that have dogged us for decades.

    Far from resolving our economic problems, we are about to intensify them. The long-awaited “recovery” is a function of increased domestic consumption and a building asset inflation. We are heading straight back into the same old familiar vicious circle, and each time we do a circuit, yet more escape routes are closed off.

    The Auckland housing bubble and the consequent diversion of savings and bank-created credit into property rather than the productive sector means that our manufacturing and other productive industries are denied the investment they need to compete in international markets.

    The inflationary stimulus produced by rising Auckland house prices will mean higher interest rates – rates that are already offering a premium to “hot money” speculators – and that in turn will mean that the dollar remains over-valued.

    High interest rates and an over-valued dollar will further handicap our manufacturers and exporters and will knock the top off the returns we are able to make even on the products we can still sell overseas – ask the dairy farmers.

    The over-valued dollar will also trigger an orgy of imported consumer goods, worsening our balance of trade, necessitating more borrowing and therefore a higher premium to overseas lenders to induce them to lend to us, and the constant temptation (to which the current government willingly succumbs) to sell off more of our dwindling assets into foreign ownership so that we can balance the books.

    The costs of increased borrowing and repatriated profits made by foreign-owned businesses have to be paid across the foreign exchanges, thereby worsening our indebtedness as a country and weakening our ability to control our own destiny. The damage to our productive sector means that, far from developing new products, our productive base has become dangerously narrow – and as the assets of, and income streams from, even that narrow base pass into foreign hands, we will look in vain for the national wealth to re-invest in our future.

    Indeed, John Key sees overseas ownership (often given a positive gloss by being termed “investment”) as not just a painful necessity but as the most promising path to future prosperity. The short time horizon of a foreign exchange dealer does not apparently equip him to ask what will happen when the profits and assets of our shrinking productive base are in foreign hands, and foreign owners (think Rio Tinto) have extracted what profits they can from our mineral resources.

    To paint this picture is not to speculate in pessimism; it is merely an extrapolation of trends that are already long-established. Those who resist such a scenario should ask themselves which part of it is not already familiar. If these trends are allowed to continue for much longer, our national future is grim. We would have lost any possibility of deciding our own future. The only question worth debating then would be whether we become an economic satellite or colony of China directly or whether we are first absorbed into a greater Australia on the way.

    But none of this – either the inheritance left us by our forefathers or the mortgaging of our future – seems to matter to New Zealanders today. History’s verdict on today’s economic policy is likely to be harsh. But that will not be our concern; history, after all, is written by winners.

    Bryan Gould

    17 April 2013

    This article was published in the NZ Herald on 19 April.

  • One Gaffe After Another

    David Cameron is deservedly up against it, it seems, in trying to persuade the voters to see his public spending cuts in a positive light. Not surprisingly, many will marvel at how the greed and irresponsibility of the financial sector’s fat cats should somehow have been parlayed into the launching pad for what the Prime Minister admits is intended to be a long-term assault on the role of government.

    But it seems that he is determined to make the task even harder than it need be by insisting on offending his audience and then compounding one gaffe with another. His apology to a pensioner in Hove for depicting Britain in 1940 as a junior partner to the United States in the war against Hitler was achieved at the cost of offending a whole new range of people who might also claim to have played a role in 1940.

    David Cameron was almost pathetically keen to correct his blunder. He assured his critic that he was well aware of the true situation in 1940. Apart from, we were told, a few Polish and French pilots, Britain had stood absolutely alone against the Nazi threat.

    Well, no one who lived through those days (and admittedly I was only one at the time) could cavil for a moment at David Low’s famous cartoon following the fall of France and his sombre and defiant pledge, “Very well, alone.” Nor would anyone begrudge the recognition of those French and Polish pilots who played their part in helping to fight the Battle of Britain.

    But, while he was about it, one might have hoped that Britain’s Prime Minister would not so pointedly have revealed an apparently complete ignorance of the significant role played by pilots from the Commonwealth. Australian and New Zealand pilots in particular were especially prominent. Many distinguished themselves with feats of valour and daring; many lost their lives, flying alongside British pilots over British skies.

    The statue of New Zealander Sir Keith Park in Trafalgar Square is testimony to the leading role he played in helping to direct the Battle of Britain. And David Low himself was of course a New Zealander.

    New Zealanders and other Commonwealth citizens have long since reconciled themselves to the fact that their relationship with Britain has travelled a long way since a New Zealand Prime Minister could say at the outbreak of the Second World War “where Britain stands, we stand; where Britain goes, we go”, and then commit the farm workers and shopkeepers of his tiny country to a war half a world away in which they suffered a greater proportionate loss of life than almost any other country.

    We have grown sadly used to the euro-centricity of modern Britain that allows visitors from Europe to join the UK citizens’ queue at entry ports while New Zealanders must queue as aliens. We accept that Britain has the right to decide its own future, even if that meant turning its back on a trading partner which denied itself the produce of its own land in order to send food supplies to Britain at a time of great danger.

    What is disappointing, however, is that – in the course of correcting one error – today’s British Prime Minister could so thoroughly demonstrate how little value is given to the history that Britain and New Zealand, and the Commonwealth more generally, share. If, quite properly, he was ready to recognise the role of pilots from other countries, did he have to reveal so little awareness of the sacrifice made in that common cause by those from far-flung countries who chose to make that distant theatre of war their business too?

    It is one of the mysteries of the post-war world that a Britain which found itself at the head of the most extensive and potentially influential group of countries in the world – a Commonwealth embracing a quarter of the world’s population and some of the world’s most significant emerging economies – should so carelessly, through neglect and ignorance, have thrown that huge advantage away. If realpolitik counts for little, one might at least have hoped that common courtesy and common sense would have avoided giving unnecessary offence. Iran and Pakistan are bad enough. Does he have to add Australia and New Zealand to the list?

    Bryan Gould

    6 August 2010