Tuesday, October 31, 2017

Three years is plenty to screw up New Zealand

One of the more interesting pieces of work I've done recently is preparing a briefing for clients on the impact on their business of New Zealand's new coalition government. I went through the details of the coalition agreements between Labour, New Zealand First and the Greens and also, with a fine-tooth comb, through their manifestos. I believe I now have a pretty good understanding of all of their promises.

The total cost of new spending over the next few years is more than $15 billion. It is not obvious how they are going to pay for it, with only a few hundred million of new revenue identified. The source of the money, of course, will be new taxes and borrowing (i.e. deferred taxes) - they just weren't honest enough to admit it in the election campaign. They have revealed only that they intend to cancel the previous National Government's proposed tax cuts for next year and that they will establish a Tax Working Group to look at the tax system. The latter sounds to me like a surreptitious means of justifying the higher taxes the coalition will require to fund all that extra spending.

The other shocking aspect of my analysis is the sheer number of new policy initiatives and laws the Labour-led government plans to introduce. I have written before of how there are ordinarily about five hundred pieces of legislation winding their way through Parliament's processes. Expect this to increase substantially. If we are not already one of the most regulated countries in the world, we are about to become so. 

I believe the coalition government won't last more than three years (and possibly considerably less). Unfortunately, three years is plenty to screw up New Zealand, given that they seem to be seriously commited to the task.

Thursday, October 26, 2017

In Defence of Capitalism

The newly-elected (if you can call her grapple for power ‘elected’) New Zealand prime minister, Jacinda Arden, has criticised capitalism in her first interview. She said, "If you have hundreds of thousands of children living in homes without enough to survive, that's a blatant failure." The statement is simply untrue. There are not hundreds of thousands of children in New Zealand "without enough to survive." New Zealand has one of the most generous welfare systems in the world and no child is dying from deprivation unless it is caused by the criminal neglect of parents or caregivers, which is thankfully rare in our society. 

Ardern is employing the classic statists' ploy of creating a strawman issue to knock it down with the perennial solution - more taxes, more state control and more power for herself. The truth is, the natural state of humanity is subsistence living. Human beings lived in abject poverty for most of their existence. That began to change early in the 19th Century and today fewer than ten percent of the world's population still lives in historical levels of poverty, a dramatic fall as shown in the following graph. This trend is, of course, against an exponentially growing world population so the absolute numbers of people better off is a double-exponential graph.

What caused this dramatic change over the past two hundred years? It was a combination of events that we collectively call the industrial revolution, but that was the outcome rather than the cause. Historians disagree on the number and precise definition of the factors, but most are in general agreement about the nature of them. They include greater individual freedom, acceptance of the concept of intrinsic rights, and respect for the rule of law and property rights (and the importance of the latter is well-documented by respected Peruvian economist Hernando de Soto). These things provided the foundations of functioning free markets that allowed people to produce more than they could individually consume and to exchange and invest the surplus to produce even more. It meant the value of an individual's labour grew as the wealth that could be generated from that labour grew. The fact that it reduced the proportion of the world's population living in poverty at the same time as the population was growing exponentially meant that the increase in wealth was widespread and was not confined to a small elite.

The problem with defending capitalism is there is no generally accepted definition of what it means. Jacinda Ardern undoubtedly uses the Marxist definition, which is something like the exploitation of labour to provide a return to those who control the monetary resources. Marxists see the economy as a zero sum game and believe any return on capital is money taken from the pockets of workers. This is demonstrably nonsensical - capital enables us to leverage the very limited physical capacity of human beings to produce far more than the sum of individual workers' efforts. A person cannot produce a car or an iPhone, or even a pencil, on his own. Capital is the multiplier that enables people to produce these things, and in far greater numbers and for far greater reward than they could without capital's leverage effect. But capitalism is about more than capital (which is, incidentally, why I am not a fan of the term). Capitalism is the economic, political and social system that enables us to make the most valuable and productive choices with our resources, including our individual labour. It enables us to use our lives to the greatest value. The critical element is individual freedom - the freedom to make personal choices.

The arrogance of politicians like Jacinda Ardern is that they believe they are smarter than the countless people in a free market who make decisions about what is of most value to them, their families and their communities. They think they understand the incredibly complex system that is the modern economy better than the collective knowledge of all the people within it. In Ardern's case, this is spite of the fact that she has never had a full-time job outside of politics. She talks about housing as if she believes that she can create more, and more affordable, houses than all the builders, architects, materials suppliers and contractors in the market. She believes she can make better purchase decisions than all the buyers could make, and better financing decisions than all the bankers, if left to their own devices. The truth is that it is the interference of successive governments in the key market areas of building, land use and mortgage lending that has caused the current housing shortages and excessive prices, and Ardern's further interference will undoubtedly make those problems worse.

You would think a 37-year-old who had never held a truly productive job in her life would have a little more humility than to criticise the economic system that has lifted the vast majority of the world's population out of poverty.

Thursday, October 19, 2017

Good luck with that, Jacinda

The people have spoken - well, a minority of them anyway. We have a coalition government that doesn't even have a plurality of the votes. After a month of dithering, the leader of the New Zealand First Party, Winston Peters, who lost his own electoral seat in last month's election and whose party was reduced to 7% of the vote, decided to form a coalition with the New Zealand Labour Party. Combined, the two parties won 44.1% of the party votes - less than the National Party's 44.4% - and yet they have been able to form a government because the Green Party, with 6.3% of the vote, is prepared to support them on 'confidence and supply' (i.e. on budget votes). 

It is not as if the partners to the polyamorous affair have much in common. New Zealand First is a nationalist, protectionist, anti-immigration party and its leader moulds himself on Robert Muldoon, the authoritarian New Zealand prime minister from 1975 to 1984 who took the country to the verge of bankruptcy. Labour is a classic, left-of-centre social democratic party, and the Greens are a typical 'watermelon' alliance of environmentalists and Marxists.

The new prime minister, Jacinda Ardern, is not only New Zealand's youngest premier in over a hundred years, she is the least experienced, having never held a full-time job outside of politics and never having held even an executive position in government. She will need to rule over a rag-tag coalition with less mandate than National to govern and to keep the oldest political fox of them all, Winston Peters, from eating all her chickens. I give it less than twelve months until her government disintegrates and we have another election.

In the meantime, I wish Jacinda Ardern and her coalition good luck and implore them not to stuff up our great little country too much before the big kids take over again.

Tuesday, October 17, 2017

Greens enable Winston Peters to hold NZ to ransom

I wrote recently about why I thought New Zealand's electoral system was the dumbest in the world, and so it has proved to be. Nearly a month after the election we still don't have a government and while I don't think this is in itself a bad thing, watching our politicians jockeying for power has been unedifying. All the blind ambition, self-aggrandisement and incompetence we have come to expect of our politicians has been on display.

The uniquely unqualified, inexperienced and unproven Labour Party leader, Jacinda Ardern, who will become our prime minister in a Labour-led government, has been displaying a quiet confidence in her public comments. Bill English, the current prime minister and leader of the National Party, which won the largest share of the vote, is more inscrutable. Meanwhile, Winston Peters, whom the media have dubbed the 'kingmaker', cannot contain his delight at being the centre of attention again and continues to make the country wait for his decision. As the Guardian newspaper put it, Winston Peters and the anonymous board of his nationalist New Zealand First Party are holding the country to ransom.

This is all pathetic but the prize for the most damaging self-indulgence must go to the Green Party, the leftist environmentalists who have refused to consider negotiating with the centrist National Party, preferring to give Labour their proxy in coalition negotiations. This has, of course, strengthened Winston Peters' hand, an outcome for which their supporters surely could not have voted. A National-Green coalition could govern without New Zealand First's support and thus even the pretence of negotiations between these two parties would have taken the wind out of Winston Peters' sails. Many commentators have expressed disappointment with the Green's holier-than-thou attitude with even former Party MP Nandor Tanczos calling for his party to enter into negotiations with National.

Winston Peters may be holding the country to ransom but it is the Greens who have given him the means to do so. I hope the voters remember that when it comes to the next election, which, I am picking, may be not that far away.

Monday, October 16, 2017

The Hypocrisy of Hollywood

Hollywood has closed ranks against one of its most successful producers, Harvey Weinstein, who has been accused by dozens of actresses of sexual harrassment and even rape. Weinstein has been kicked out of his company and expelled from the Academy of Motion Picture Arts and Sciences. You may think that shows the American film industry has moral integrity, but I don't view it that way. Ironically it was Weinstein himself who said in 2009 that Hollywood 'has the best moral compass' while defending Roman Polanski, the director who is still on the run decades after pleading guilty to raping a 13 year old girl.

Hollywood has known for years that Weinstein was a sexual predator. In 2006, singer and actress Courtney Love publicly warned young aspiring actresses to avoid him. In 2013, comedian Seth MacFarlane joked on stage at the Academy Awards about Weinstein's predatory nature. Actress Rose McGowan, who says she was raped by Weinstein, has condemned Ben Affleck, himself the subject of sexual harrassment claims, for maintaining that he did not know about Weinstein's behaviour (incidentally, McGowan made the claim on Twitter and the social messaging service responded by suspending McGowan's account, a demonstration of that company's poor judgement when it comes to who gets suspended and who doesn't).

One could excuse Hollywood's convenient blindness where Weinstein is concerned if it wasn't for the industry's appalling hypocrisy. The American film industry presents itself as a paragon of liberal sensibility and tolerance, most recently in the attacks of many of its most prominent members on President Trump (e.g. Merryl Streep's speech at the Golden Globe Awards), but the Weinstein affair reveals that misogyny and abusive behaviour in the industry is far worse than anything Trump might have done. 

The holier-than-thou self-congratulation of the industry is sickening. Whether it is director James Cameron on Donald Trump or Leonardo di Caprio on climate change, those who have made a name for themselves directing or acting in films seems to think they have some special sanctity on the political and moral issues of the day. My view is the opposite - their privilege and fame has often distorted their perspective and they have little idea of the challenges facing the ordinary people who fill their box office coffers. They cannot understand, for example, why so many Americans voted for Trump, because they haven't suffered the economic and social privations of people in the 'fly-over' states whom they hold in such contempt. 

It is is the self-righteousness of Hollywood's leading lights that makes Weinstein's crimes all the worse. Perhaps if they all had a little humility, we could condemn Weinstein as an isolated fiend, but I am sure it is their very arrogance that enabled Weinstein to get away with his behaviour for so long.

Wednesday, October 4, 2017

The Mass Customisation of Politics

Business in the social media age is all about mass customisation. Industries such as telecommunications, banking and transportation have figured out that the key to success is to have economies of scale while allowing individuals to have products and services that are tailored to their needs. The commercial behemoths of old that insisted on one-size-fits-all have fallen by the wayside as new businesses exploit flexible manufacturing and service delivery models to accomodate individual consumers' needs.

Politics in the 21st Century is the same. Voters are increasingly unwilling to be boxed into traditional political definitions - left, right, socialist, nationalist. etc. Ironically, this is happening at a time when political labels such as 'extreme', 'Fascist' and 'Nazi' are being bandied about with increasing abandon and usually without justification. 

Many people, myself included, have a political philosophy that does not sit comfortably with most established party manifestos. We are a little bit left, a little bit right, and a whole lot completely outside the spectrum. This is not the same as being purely pragmatic - we have a philosophy that is well thought-out and articulated and are prepared to vote to maximise its realisation. We have little in common with the David Camerons and John Keys of this world who don't believe in anything much and who are willing to do whatever it takes to stitch together a coalition to keep them in power. We may vote for the lesser of evils but it doesn't mean we will accept the bland and uncommitted.

So how do we achieve mass customisation in politics when many countries seem to be locked into a traditional left-of-centre/right-of-centre, two-party paradigm? Partly it is achieved through breaking down the paradigm, and we have seen this with the rise of third parties in many Western countries. The other way it can be achieved is through localisation of politics.

Politics in many countries in recent decades has been characterised by greater centralisation. The European Community is the most obvious example and in the United States we have seen the growth of the federal government at the expense of the state or local government. The problem with this is that it means greater homogenisation and less opportunity for people like me, whose views don't fall into the traditional political buckets, to have our views represented. Localisation of political decisions means we can enjoy, at least at a local level, a more flexible set of policy setttings, and if we are not happy with the decisions of our local government, we can seek out somewhere more compatible with our political views.

It was the intention of America's founding fathers. particularly Jefferson and Hamilton, that the US Republic would be a place where different communities could experiment with different political and social settings, subject only to the universal rights enshrined in the Constitution. America today has become a highly centralised bureaucracy with the Federal Government interfering in every area of Americans lives from health care to what children eat in their school lunches. The complete dominance of US politics by the two major parties means that people who don't fall into the traditional Democrat and Republican camps have no real alternative, except that last year they chose a rebel Republican in Donald Trump to be president. Trump's support came from the disaffected middle and working classes, who rejected the big statism and identity politics of the Democrats and the social conservatism and crony capitalism of the Republicans, and is therefore understandable in terms of the mass customisation paradigm. Brexit was similarly a rejection of the traditional political choices.

Those who insist on seeing today's politics in terms of past dichotomies will continue to be surprised and bewildered by voters' choices. I think that the rejection of tradition political boundaries it is a very positive development but it needs to be accompanied by a decentralisation of political power if voters are to have genuine choices.