Rich Bastards, Poor Bastards

It looks like we’re in for another round of that tedious old debate about whether the rich in New Zealand are heroes or whether they are crooks.
This invariably turns into a moralistic whine-fest. 
Deborah Coddington kicks it off, ably assisted by David Farrar.   Danyl at the DimPost puts the contra view here. 
Where to start?  Well, I think Deborah makes some good points but she loses me when she talks of “championing” the well off. 
Successful people, by definition, don’t sit around whining no-one is championing them.
Danyl’s arguments, on the other hand, hinge on that sour, four-letter reductivist word, “just”.  It is always a good idea, whenever you see the word deployed in this way, to think very carefully about what is actually being said. 
This approach involves focusing on just one aspect of what went into someone’s success and implying its presence somehow invalidates the whole thing.
John Key and Sam Morgan were successful because they were just lucky, apparently. 
Well, no.  Other New Zealanders also set up web sites which copied eBay.  The fact you probably can’t name any tells its own story. 
John Key was part of a relatively lucky generation but unless he was a generation of one, which doesn’t seem very likely,  so too were a hell of a lot of other people.
(I’m not out to “champion” either of those two, btw – I’m citing them because others have. )
But I think we need to get a bit less prone to label all our more financially blessed fellow Kiwis as charlatans or silver-spooners. 

It seems odd to bewail our poor economic performance over the past 40 years and then in the next breath badmouth everyone who does do well for themselves.  

Doing well as a country, earning enough to pay for the lifestyle we think we deserve (and as a country we do have very high expectations) means learning to get a lot more comfortable with the fact some people are going to be better off than others. 
I don’t think we need a culture which “champions” wealth.  
But we do need one which does not automatically seek to pull down those who have wealth-generating abilities.  At present this is the default setting of all too many New Zealanders and, apart from being nasty and envious,  it is quite destructive. 

Budgets past…

Both Ele at Home Paddock and Inventory2 at Keeping Stock 

have memories of Budgets past, listening to the radio in the evening.
The first I remember was Bill Rowling’s second, and last, Budget as finance minister in 1974.  I was just starting to take an interest in what was in the newspaper and there was a Minhinnick cartoon, the morning of the Budget, of Rowling on the phone and saying ‘Good morning, Nordy…’
It was, of course, the first Budget after the First Oil Shock and it was expected to be a tough one. (it wasn’t). ‘Nordy’ was Arnold Nordmeyer, architect of the 1958 ‘Black Budget’.
It was either that Budget or the next one I was at a dance at the local hall on Budget night, and all the dads – farmers, all – were out the back in the kitchen, listening to the radio as it was being read. 
What hit me at the time was the atmosphere of … not quite dread, but disquiet.  The economic ground was shifting under our feet and things would never be the same again.  People knew this, even if they weren’t up on the detail of economics. A great part of Muldoon’s appeal was he seemed so certain – he provided assurance in what was becoming a very uncertain world. 
Whenever I think of Budgets now, I think of that country hall, and that room of worried farmers. 

Happy Friday

Snubbed from the Jobs Summit.

Oh well.
Spent the morning at Archives: then went and bought some beer.
A case of Kingfisher Strong, which google tells me is India’s fastest growing beer product.
Well, I like the stuff, anyway.  
Goes down a beaut with a curry. 
But Kingfisher also seems to have one of the cheesiest web sites on the Interweb.
Never mind.  I don’t actually have to drink their web page. 

Wet Day in the Dry

Spent most of the day steaming in at Archives NZ:  got so absorbed in what I was doing forgot I’d made vague provisions to have a coffee and catch-up with an ex-colleague.  Sorry Nick, make it Monday…

What engrossed me so much?  Economic reports.  Old Economic reports. 
I am not a well man. 
A useful reminder, going over these reports, just how quickly the NZ economy turns around.  One minute its brown-trousers-and-bicycle-clips time because commodity prices have done a big bungy: next minute there’s a surge in world demand and worried Treasury bods are telling the Minister of Finance he has to restrain the economy and the minister is saying bugger off, I’ve got an election to win…
Mind you, I don’t think our current recession is going to be that quick a turnaround: synchronised world recessions aren’t all that common, and nor is the volume of bad debt currently rotting like old cabbage in the bank vaults. 
Coming out, I popped into the World War One display which is on at Archives NZ at the moment.  I encourage anyone in Wellington to visit this:  it won’t cost you anything except a bit of your time.  And maybe a lump or two in the throat. 

On stimulus packages and the like…

…good line from the great Patrick Cook in this week’s Spectator [Down Under edition]:

“Male Self Employed thought that people in shiny suits flinging other people’s cash around while shouting ‘trust me’ and ‘put it on the slate’ was how we arrived up this creek, in that canoe, with both hands free, in the first place.”

Economic signs….

To Auckland and back.

Couple of thought provoking signs by the road: one at Tokaanu saying ‘We proudly serve coffee’. Which seems OK, I suppose, but at the same time a little excessive. I wouldn’t want anyone to feel ashamed of serving coffee, except maybe the stuff they serve in hotel conference rooms.

That is definitely grounds to hang your head.

Another sign in Manurewa, outside an Elim Church, suggesting people send their kids to the church’s ‘Genisis School’. Alternatively, I suppose, you could send your kids to a school where they will be taught to spell ‘Genesis’ correctly.

I mean, if you are, as these people are, believers the Bible is all literally true and the fundamental word of God, doesn’t that also mean the spelling is God’s literal words of Truth? And isn’t getting that spelling wrong kind of, well, taking the Lord’s name in Vain? You know, blasphemous?

Other thoughts: some years ago someone worked out that in recessions women’s skirts get longer and in boom times they get shorter.

I don’t know who did this. Some economist I presume. If you were an economist, and you had a choice between working on another study on why the Laffer Curve works/doesn’t work, or what’s the correlation between skirt lengths and economic booms, what do you think your marginal propensity to consume is going to be?

Actually, if you went for the skirt thing you’re probably not an economist: the bulk of them would go for the Laffer Curve job every time.

In fact I understand in some countries this used as a test to choose economists for the forecasting division of their Treasuries.

No, I suspect the skirts thing didn’t come from an economist at all…. I would imagine it being dreamed up by…well, now I think of it, now I examine the whole concept thoroughly, I suspect a journalist with a bit of historical knowledge and a touch of whimsy had a bit to do with it. It just has that ring about it.

Trust me on this one.

Exhibit A, on the short skirt thing, being the 1920s, Exhibit B being the 1960s, I suppose. It’s always seemed a bit of a dubious hypothesis to me: it rather ignores the entire Victorian era, which saw some remarkable economic expansion and the whole Industrial Revolution hit its peak. It made the 1920s and the 1960s booms look like small stuff.

If the rule holds true, Queen Victoria should have been getting around Balmoral in a G string and very little else. And I don’t want to explore that idea any further than I already have done.

Also skirts didn’t stagflate in the 1970s, unless you sort of develop some metaphor with feminism and bra-burning. Which I suppose you could do, if you were a bit strapped for something to occupy yourself with.

How did I get onto this? Only that going by what I saw in Auckland, the recession hasn’t hit there yet.

That’s if the skirt rule holds true.

Which it doesn’t, as I’ve established.

So all this is a bit pointless.

Message to China: Glenfiddich is the best whisky ever… buy a lot.

Right now.

Forget that silly Lagavulin stuff.

In fact, you can drop all the Lagavulin you’ve been buying up of late onto the NZ market.

We’ll take it off your hands, no worries.

The reason for this message to the emerging world economic super-power and general saviour of our dairy price, as well as probable future funder of current account deficits for the Y Generation….is something I learned this morning.

I’ve been trying to get hold of a bottle of Lagavulin. It is single malt heaven: I find a burst of it about an inch high (that’s 2.5cms to you youngsters) in a tumbler produces the right mix of aroma and flavour and general pleasing effect.

Haven’t found any anywhere, until today: Rumbles in Waring Taylor St.

Bloke there reckoned the only reason he had any was he’d bought up some from the estate of a deceased person.

Apparently the emerging Chinese middle class, as well as developing a taste for NZ protein products, are also pretty keen on Lagavulin. It’s why the stuff is increasingly hard to come by here, and a hell of a lot more expensive when you can get it.

Every silver lining has its cloud, doesn’t it?

Reform – where to from here?

There’s an interesting debate raging here about New Zealand, globalisation, the Roger & Ruth reforms and where we go from here.

There’s a fascinating thread on David Farrar’s blog on the same issues.

Funny how we’re still debating the legacy of 1984-93.

So much of what happened, whether it was a good thing and where it should go from here comes down to the age old debate between the role of markets and the role of government.

I’m not one who things the market is god, nor do I think it’s the devil. It is an extraordinarily efficient signals mechanism. And like all signals mechanism it is amoral – that is, indifferent to value judgements. (NOT the same as immoral, please note.)

The market – or capitalism, if you like – has two massive strengths. One, already mentioned, is its efficiency as a signals mechanism.

We need to get those market signals. One of the reasons New Zealand nearly went broke under Muldoon was that there was such an elaborate cats cradle of subsidies and what-have-you that the signals couldn’t’ get through.

That means, from a policy point of view, governments should intervene as little as possible with those signals.

The other great advantage capitalism has is that unlike Marxism or its various offshoots – socialism, social democracy, Frankfurt School Marxism (which is the basis of what we now call ‘political correctness”) or Greenery – no-one thought it up in advance.

It evolved. And it evolved out of humans interacting with each other, buying, selling and trading. It wasn’t dreamt up by some social misfit sitting in the British Museum library.

And because it evolved – and continues to evolve – out of human beings as we actually are it represents all that is best and all that is worst in human beings.

The efforts to constrict markets have mostly been driven two themes – a desire to put some ethical constraints on those market signals, and a desire to fill in the gaps of what markets would not do – the “market failure” argument.

The ethical side is through things such as labour law and welfare. Where this intervention should lie is the main divide between the Marxist and the liberal conservative political traditions. Where you put that divide will almost always come down to where you sit on that spectrum.

The ‘market failure’ area has become ideological and I can’t divine any clearly thought out reason for this. The only reason is pure self interest – some things governments do have been captured by certain groups who don’t want change.

Almost by definition, the ‘market failure’ area of government intervention should be based on what works and what doesn’t. In New Zealand’s early days, no-one else had the wherewithal or the interest in, for example, building the electricity generators and networks.

Or the telephone network.

So the government did it. But times change. What would not work then would work fine now. One might quibble with how Telecom was privatised (and it was a rushed, fiscally driven job) but it was still a positive move. Telecom invested a damn sight more in the network than the government ever would have.

Which is what should drive the privatisation debate. Can the private sector do it better?

Is Contact a better company than, say Meridian? Don’t know actually. Contact is, through the sharemarket, far more accountable than Meridian is as an SOE. You can actually get more information about Contact than you can about Meridian.

We do know though that Meridian has a board which isn’t elected but is appointed by politicians and we also know that Meridian will, from time to time, make decisions based on the politics of the day rather than what is best for the company.

Those decisions might be best for the shareholders but those shareholders are Michael Cullen and Trevor Mallard.

That’s on the acknowledged commercial side of government activity.
The area of this of the privatisation debate which generally drifts from the “market failure’ part of the argument to the “ethical” is health and education.

The assumption might be made that these services fit on the “ethical” side of the ledger but in fact the government’s involvement in them belongs more on the “market failure” side. Historically, much of those services would never have been provided by the private sector. In some parts of those services, that’s no longer true.

People justify the status quo though less on efficiency grounds and more because of a vague feeling no-one should profit from such services (why not?) or that provision of them is a “public good”.

The problem with both these arguments is that the three most basic human needs are all provided by the private sector, at a profit – food, clothing and shelter. If you don’t have any ethical objection to that, there can be no great ethical issue with the private sector providing health, education, electricity, whatever…

It has to come back to what works best. Health, for example, is an acknowledged shambles. Even the health bureaucrats say they are spending an extra billion dollars a year (that’s 1% of GDP folks!) and they don’t know what they are getting for that extra money.

A performance report on DHBs earlier this year pointed out that caseload output was up 2%, but spending was up 7%.
The same report also pointed to problems with what was being measured:
“The current indicators of district health board performance are process based, and do not comprehensively attempt to measure either outcomes or outputs gains.”

In other words, they’re spending a truckload more money and they don’t know if its doing any good or not.

There is scope for a lot more private sector involvement in health. One of the best things Jenny Shipley did – as ACC Minister – was to let ACC use private hospitals.
That is the main reason the numbers of long term ACC claimants has more than halved. (and not,as some will have you beleive, because ACC is too mean) Before then, they had to wait until the public sector could take them. The human benefit of that – we’re talking about 16,000 people a year here – is immeasurale.

There are some areas of health which will never be able to be run privately but the rest can’t possibly be run any less efficiently, and at greater cost to the country, than they are now.

This is a particularly important debate for New Zealand. We have a small, not particularly well paid population base spread out over a comparative large area and some very difficult geography.

That makes the cost of our infrastructure overheads – electricity, roads, schools, hospitals, and so fourth – quite high per capita. this is an expensive country to run.

that means that we need to constantly be focussed on whether there are more efficiient ways of delivering those services to ourselves – and we can’t afford to have a hangup over whether they are delivered by the public or the private sector.