Just Left

Taming globalisation

2008 changed everything.

The intellectual foundation of the policy framework we have used for thirty years was cut to pieces. The excuses and evasions of those in power across the West delivering stagnant wages, limiting opportunities, allowing asset price bubbles to explode and fertilising the soil that grew the Global Financial Crisis were at an end.

The lesson since is about how hard it is to change to a new approach even when you know the old one is a zombie, a dead thing pretending to live but unmistakeably past it.

If neo-liberal economy is bankrupt and a new thing needs to replace it, where are the points of attack?

One is global trade. What passes for a 'trade' framework has been frozen for over a decade in the 'Doha round' of WTO talks. It isn't a bad framework, and it has a functional institutional structure to drive it -- but it is too liberal to survive unchanged post 2008 and with the rise of developing country power in the international community.

In this case by liberal, I mean stacked in favour of the rich white core economies, and against poor developing ones. The rich export tariff free. The poor face steep market access barriers. This dynamic is what has jammed the WTO: the poor have said "enough is enough" — and for the first time, we have to listen. The same dynamic breaks climate change talks.

New Zealand is on both sides. Quite rich and quite white, we suffer from agricultural trade rules stacked against us. The rich erect barriers and soak farmers with subsidies. The poor suffer the consequences.

So in the face of this freeze at the WTO, the wealthy and powerful are trying to side step it, in part with agreements like the Trans Pacific Partnership Agreement, a cross-Pacific agreement being negotiated as I write. The next round is in Auckland in December.

This deal goes beyond trade. It seeks to limit policy choices in a wide range of areas, to rules that lock the zombie ideas of the 80s into the driving seat for all time (or until unravelled). SoE rules? Investor state disputes? Challenges to public services rights? Threats to environmental control? Copyright term extensions? A licence for Hollywood to tax Google?

It's all in there with more, aside from what you and I would recognise as more normal trade policy.

Countries like NZ face a choice.

Resuscitate the zombie?

Or let it die?

My preference is that we work in the WTO framework to serve our interests and fairness all at once: undoing the bias against primary production, and in favour of rich subsidisers.

Agreements like the TPPA might offer short term gains. But the costs are already apparent. As a small example, look how Australia got gypped in its 2004 deal with the USA. The gains are hard to see, especially with some parts of the US establishment now starting to position TPPA as a China containment strategy.

We don't know how things will change in future. Open trade is almost always for the better, where there is a true level playing field.

NZ ought to focus on that aim through the WTO framework. Not be helping dead ideas march on into a future that leaves Labour ideals - decent jobs, strong public services, democratic government, good environmental stewardship - harder to achieve.

I will be watching the NZ debate with interest...

Inflation is not the problem

This morning, we learned that consumer price inflation in the year to 30 September was 0.8%, the lowest in thirteen years.

Inflation is not the problem. Growth and exports are.

David Parker is right: the country's monetary policy is busy fighting the last war. It's a classic example of limited thinking, focusing on the past. We do it all the time, but sometimes we also have the imagination and wit to start working on the problems the future poses.

Hundreds of thousands of us are without enough work. Our incomes are too low. Our export economy is stuttering. Our economy wastes resources and abuses our environment.

Those are the challenges we need to be solving. Consumer price inflation isn't. We've beaten it. We need to keep an eye on it, but it isn't the central problem we face.

Our institutions and our policies should focus on the things that matter most. Jobs, development, progress.

Looks like a change of government will be required to bring that about.

Responding to the New Zealand doldrums

It just keeps on getting worse.

Today's reactionary announcement by the Government that it wants to cut the incomes of vulnerable young people comes at the same time as NZIER reports lowering business confidence and expectations about next year. Unemployment remains too high, manufacturing jobs are flooding out of the economy, and citizens are flooding across the Tasman to the land of milk and honey - or jobs and higher wages, at any rate.

How the hell did it all go so wrong for National? Why are ordinary New Zealanders getting quickly grumpier with the gang in charge, sensing (not before time) that the Nats are not on the side of most of us?

Values. Values and purpose.

The National Party was set up in the 30s with no better reason than to oppose Labour's social democratic ambitions. Explicitly founded to oppose a fair distribution of incomes. To oppose policies for full employment. To oppose policies that built a New Zealand economy that would deliver for New Zealanders. A dog eat dog value set guides everything they do. For them, cooperation is and always has been a joke. Savagery and competition are the only things that matter, and climbing over the top of everyone else to grab your winnings is the only path to the light.

Nothing's really changed. The plutocrats remain in charge of National. The smokescreens of distraction are still artfully deployed. Beneficiaries get bashed whenever things are looking rough. Vast seas of public debt are run up to shelter the slow erosion of the tax base and of the public services we all need. Job losses are simply lied about, with 170,0o0 new ones promised each budget but never actually coming into being.

People are losing out. Tempers are fraying. People don't like the idea that the only hope they can have is by leaving Aotearoa.

Labour is stepping up its criticism. That's good. The mood has well and truly started to shift. But with the criticism has to come more detail about the plan. Jobs, growth, sustainability, transformation, hope.

We have been through a weird experiment the past thirty years. 2008 was its intellectual death-knell. In 2012 we are watching the zombie start to stumble. New ideas are needed. Not just ideas but concrete proposals as to what difference they'll make on the ground.

The job of thinking through the policies that deliver a better kind of country is well underway in the Labour Party and the Green Party has its own perspective on what to do differently. The biggest risk that Labour faces is being too nervous to really drive change - fearful of orthodoxy, not certain that the public will back the depth of change needed to turn the country around.

Tweaks won't do it. It is not a time for the odd policy nip-n-tuck. Triangulating towards National or trying to fly into their slipstream could only guarantee failure. A big bold case for change is what we owe the country now.

David Shearer's education speech last month got a few solid ideas out. The work two more Labour Davids are doing on the economy is starting to show through. Our Conference, coming up in a few weeks, is another chance to showcase an agenda for change.

As long as we acknowledge these three things, we'll be fine:

• The experiment of the last thirty years has not delivered the kind of country, the sort of society, or the type of economy that New Zealanders want.
• Only Labour's values about equality, guardianship and opportunity can drive a really different programme that can turn things around.
• We have to set out our ideas and argue for them in order to get the public on side - voters aren't going to arrive at support for a new approach without us having, and winning, the debate about what to do differently.

I have some confidence that that is where we're headed.

Planet Key/National ""Facts"" #1

This is one for the books. Media, some fact checking? ANY fact checking? Please?

From the Dominion Post on Friday 14 September, page 2:

PM: economy on track - just ask the Aussies

Prime Minister John Key said his Government was doing enough for the economy despite a recent spate of job losses. "The overall outlook is slightly improving ... My view is we've got absolutely the right plan to lift economic growth."

Mr Key said many Australians were jealous of New Zealand's direction. "I guess that's the fact that they wanted me to go over and be their prime minister. That would be some indication."

Hmm.

Australia --- New Zealand

Unemployment
5.1% --- 6.8%

GDP growth
3.7% --- 1.7%

Net Govt Debt
9.2% --- 25%


I don't think we will be needing to ask for our Prime Minister back any time soon.

Fiscal responsibility

There was a nice set of numbers in a Stuff story yesterday about net Government debt levels in the past few years:

Net core Crown debt in $NZ:
2000: $25.9b
2002: $25.3b
2005: $19.9b
2008: $10.3b
2011: $40.1b

Forecasts:
2012: $53.8b
2014: $67.8b
2016: $72.5b

These numbers show Labour's prudence in office, and National's profligacy.

Yes, there has been damage to the government's financial position through the Canterbury earthquakes and the global recession. Those are granted. But the chipping away at NZ's debt levels has also come about through wilful cuts to government revenue through tax cuts to those who need them least, only partly offset by tax rises on those who feel the pain the most.

The story contains a broader narrative about public impressions of who is responsible for the debt.

I've never understood why anyone would think it's a left wing thing to run up public debt.

The Clark governments in 1999-2008 weren't exactly National-lite, and they paid off a large volume of net debt. The Nats in the 1990s left it more or less where they found it; Labour in the 1980s and National in the 70s both lifted debt significantly.

Modern social democrats aren't interested in running unsustainable deficits. Given the New Zealand private sector's obsession with borrowing to the hilt, it is more important for the NZ Govt to be conservative fiscally than is the case for many other countries.

That is why our policy last election was a mix of tax increases and spending restraint that would have seen borrowing a little higher in the short run but lower after about four years, and for all time after that.

David Shearer has decided the policy should avoid the confusions inherent in the 2011 pledge to re-start NZ Super fund contributions while the deficit still exists. That's fine. Since National is promising surplus by 2014/15, which Labour was too, I anticipate the incoming Labour led government in 2014 will pretty quickly be looking to start the pre-funding again.

Fiscal responsibility is what we are all about -- along with a broader responsibility to society and the economy which isn't part of National's DNA.

We will on average run higher levels of government spending and tax than National, because we have different judgements about where the line should be drawn between individual and community responsibility in some areas, and because we use the State to undo the inequalities the market creates by its ordinary operation.

We will be tougher on pollution than National because we don't believe in giving some sectors a free ride that they don't deserve.

We will be more careful about preparing for the upcoming baby boomer retirement and the costs it will impose on super and health spending. Thus our painful pledge to raise the retirement age over time; thus the KiwiSaver initiative; thus the creation of the NZ Superannuation fund; thus our determination to run fiscal surpluses and pay off debt.

Two final thoughts.

First, external prospects. If the world enters a prolonged low-growth period, then Labour will have to do tough thinking. It is easy to be fiscally responsible when revenue is rising through economic growth. When it is not, tougher choices will be required -- and our take on them has to be clear well before 2014.

Second, the broader economic fight between the parties isn't on fiscal issues - it's on how to grow and develop. The wider structures that are driving poor performance in our economy - flawed tax regimes that exempt capital and incentivise non productive investment; limits on firm scale growth due to lack of access to capital; an under-regulated labour market that keeps wages low and lets firms avoid tough choices about productivity - are the actual real difference between Labour and National these days. Even in a world of low growth, doing these things better will leave New Zealanders better off.

As David Parker said in his excellent pre-Budget speech this morning: "Change nothing, and nothing changes -- but don't blame Greece!".

2012 and interventionism in NZ's economy

The government in its pre-election economic update forecast rosy growth and an improving economy.

In its policy framework, National set out what it called a 120 point economic growth strategy.

World headlines are full of economic doom and gloom. Agencies as conservative as the I.M.F. are saying that the global obsession with cutting deficits is damaging all the things we want from our economies: higher wages and more jobs.

So: what happens to New Zealand if the rosy forecasts don't come true, and the non-plan in National's manifesto doesn't save the day?

Here is my prediction. More state.

Stronger economic development policies, more state investment, more regulation, corporate welfare, the lot.

Change will come because the global conditions will worsen, and because the hands off model isn't up to the job. Eventually the facts will out.

The Auckland business crowd will hate it, but I think I am right with this. National will not face a neo-classicly inclined opposition. Key's instincts and those of Joyce are pragmatic. From milk to broadband markets, heavy handed state is already visible. All the options and opportunities will be on the 'do more' side of the plate.

Assuming for a moment I am correct, what are the opportunities and consequences?

For National, the loss of some vote.

For a liberal right wing party (like ACT used to be, but unlike the nascent Conservative party), the chance to become a serious player with some real pull among those who would hate this direction for National.

For Labour, opportunities galore. The ability to poke holes in the gaps between National's actions and its principles or values; to poke holes in state centric approaches; to benefit from a resurgent consensus that government matters.

It's early days. But in a year from now we will know. So far and based on the past three years, the evidence is in favour of my prediction.

Work and Wages: more of both thanks, to #ownourfuture

Should we close the wage gap with Australia a bit?

Would organising the world of work a little bit more similarly to the way Australia does, to help with that task?

My answer to both questions is yes, which is why I was pleased with our release today of Labour's Work and Wages policy.

Ever since the 1980s, New Zealand workers have seen wages lower than they should have done.  The radical reforms of Rogernomics weren't the issue so much as the massive stripping away of labour market deregulation.

Instead of dealing with a sclerotic system of compulsory union membership by sorting things out, political parties of the right conspired with employers to remove almost every protection Kiwi workers have, other than the barest minima of procedural fairness.

The result, partly of this and partly of other anti-fairness policies, is a hollowed out labour market with poverty wages at the bottom, and stagnant incomes in the middle, with the rich running away with the loot, pardon the phrase.

Those people have had a dream run.  The basic attack on collective bargaining embodied in the ECA was not fully turned around by the Employment Relations Act.  The voices of the powerful made sure that Act could never be as effective as it should have been.

So today, aside from other important and welcome minimum code improvements like better minimum wages, we announced a new form of employment agreement that can join individual and collective agreements: Industry Standard Agreements.

These offer industries with some baseline collective bargaining going on, the chance to extend core norms for minimum conditions across the whole industry.  It's like customising the minimum code for a particular industry, depending on its ability to pay and other circumstances.

It's a great idea.  It avoids the pitfalls of compulsory membership of trade unions, but strengthens the impact of collective bargaining none the less.

Watch for the people who complain about it.  They will form into two camps.  They'll be motivated apologists for, or attack dogs of, the political Right.  Or, they will be representatives of employer and industry groups who have enjoyed a long period of free-loading on the shoulders of people who work hard and pay their taxes.

Neither should be given much attention on an objective basis, but the voices of the rich and the powerful are always amplified loudly - especially when someone challenges their assumed privileges (in this case, the privilege to under-pay people).

By moving towards the more regulated Australian labour market, we will see relatively higher wages in New Zealand than we otherwise would.

National is pledging further weakening of labour laws.  That would feed through into lower wages, greater inequality, and the top end pocketing the lot -- precisely what has happened every time it's been tried, no matter where.

Decent wages are a good thing for the people earning them, and for the companies who employ too.  They focus management minds on lifting productivity.  They honour the efforts people make in the work place.

There's only one hitch: it won't happen on its own. 

To make things better, you've got to vote for change, and that means a change to a Labour-led government.

The centre-right's policy is the opposite.  Lower wages and vulnerable work is their ambition. That is what National and ACT stand for.

The choice is up to you.

Will the #occupation movements fly in New Zealand?

My short answer is: they might if their organisers focused on mobilising the 99% instead of the 1%.

The protests, growing out of #occupywallstreet, seek to critique a global capitalist class whose negligence gave us the Global Financial Crisis, and who are smirking at us from behind their tinted windows as our taxes pay for their debts.

In New Zealand these problems are less acute, so the momentum for change is accordingly less. We have suffered less than many other places, incompetent government notwithstanding.

But you can't fight the global elite 1% by mobilising the protest-friendly 1% of Kiwis.

Real change will only happen when the 99% organise to make it.

Which comes back to my point. I remember my first student protest. Before it became intoxicating, it was deeply off putting.

People were loud and angry and shouty. There were socialist worker posters. The demo was calling for workers to occupy the factories while students should occupy the campuses and thus Revolution would emerge, or something.

It was a high hurdle to join. It was exclusive. It made no effort to get most people on board. Nobody joined it from the footpath. It felt like a dangerous place, not a safe one.

Now I haven't been down to OccupyQueenSt but from the sound of the march earlier today, and comments on twitter, I fear the environment may be similar.

I'm an armchair critic. Maybe I should be out trying to achieve this. But I have another commitment (the general election) and so instead I offer an observation and a question.

What would it take to build a movement for change that genuinely excited and involved New Zealanders?

One that was culturally relevant, inclusive, open and welcoming?

If the #occupy movement thinks about that and pulls it off, well the #changegonnacome....

I wonder...

We have had a double downgrade of our credit rating, because there's no plan for growing our investments & our savings for the future.

We have oceans of red ink in the public accounts, because of unaffordable tax cuts to the people who need it the least.

We see ongoing attacks on the capacity of the core public sector to do it's job.

Will people choose more of this approach?

Downgrades #gfc etc

New Zealand owes the world too much.  It's not a government problem, but government can help the privatae sector fix it. That stock of debt was the main driver for the downgrades we faced on Friday.  It's the main thing politicians have wanted to avoid, but now it has happened.

Our fiscal situation is broadly OK.  Government paid off a lot of debt in the 1990s and 2000s, and the level is quite low.  We need investments to drive growth that will help close the debt gap, and we need a tax system that drives productive investment and closes the fiscal gap in the future, but Labour's already set those things out.

Private sector savings is the next big frontier.  KiwiSaver was really starting to turn things around, building a culture of savings where people could see the cash adding up and plan what to do with it when they retired.

It was a good scheme that's been cut at, but it needs to be rebuilt and extended.  We need to tackle with even greater urgency the need for Kiwis to save more. It's the only way we can #ownourfuture.

By itself though it won't be enough, and Labour's acknowledged already that in the 2000s we didn't move in the right direction or fast enough on some things. I think savings is one. Regulation of the finance sector, and doing something about the property bubble are two others.

The election is now going to focus more sharply on these things than it was going to before the downgrades.  The country needs a credible plan to lift growth, reduce the government deficit without cutting needed investments, and get people saving again.