When Tertiary Education is not a Public Good (31 August)
Labour on Ngai Tahu & the Cullen Bill (27 August)
Housing New Zealand: Regulator or Marketeer? (27 August)
Maurice Williamson on Public Goods (25 August)
How did Jenny and Winston Split? (16 August)
Independent MPs and MMP (15 August)
More Bluff from Jenny on MMP? (4 August)
Who or What should the Left blame for its Impotence? (4 August)
When Tertiary Education is not a Public Good
(31 August)An item "Education cuts 'damaging IT courses'" in the New Zealand Infotech Weekly (issue 360, 30 August 1998), which comes with the Sunday Star-Times, reports that "Professor Bob Hodgson, head of the Institute of Information Technology at Massey University, says that ... areas of education that are crucial to the economy are cut just as much as other areas".
Now Information Technology might be more important than, say, history, in generating total factor productivity growth (TFP; noting that TFP is the most technically correct concept of economic performance) or even in generating unadjusted economic growth. On the other hand, it might not be.
What we can be sure of is that there is a much more substantial market for IT graduates than there is for history graduates. But that is a measure of private good, not of public good.
Socio-economic well-being is a sum of private good and public good. That means that some things can be adequately funded by market means, and other things must be social wage funded. The "public good" means the acquisition of public domain resources; the enhancement of the public domain.
Professor Hodgson is arguing that IT education should be social wage funded. According to the report, he goes on to say that "Massey University Information Technology graduates are being snapped up by global organisations as the industry booms creating a shortage of skilled workers."
This is not a public good argument. The professor is saying that overseas companies like the New Zealand public to pay for the training of the workers who generate their profits. And that the New Zealand government should target tertiary spending towards the training of workers that are in demand in the international marketplace.
When we publicly fund the production of commodities that are undersupplied by the market (yes, professional IT skills are a commodity) we are not correcting a market failure; we are accepting and exacerbating a market failure. We might just as well gift the overseas IT employers telegraphic transfers for megabucks.
OK, IT education does provide public good "outputs". Computer literacy is as important today as is reading and writing. But IT education also provides many private good outputs. There is no economic argument for publicly funding the training of IT professionals. (There is an argument, however, for funding universities and government organisations to employ IT professionals at market rates.) And there is certainly no argument for cutting funding to History departments while raising funding to IT departments.
If we are going to have real microeconomic reforms, as distinct from policies to subsidise capitalists, then we would be making employers pay for the training of their workers. (The call for more skills-based education funding is a call by capitalists for more public support.) The unwillingness of international capitalists to pay for the training of their skilled workers is a problem of international market failure.
While IT training mainly produces private well-being, there is probably an international public good arising from IT professionalism. That can only be correctly supported by an international tax system that makes capitalists pay proportionately for their use of public domain inputs. As public domain inputs increase, taxes should rise.
Whatever works best at the international level, there is no New Zealand public good arising from the New Zealand tax-paying community paying to train students who will go on to earn high incomes in America.
Labour on Ngai Tahu & the Cullen Bill
(27 August)My concerns about the "opposition culture" of the Labour Party in this Parliament have been significantly alleviated by the decision of Labour to support the Ngai Tahu Settlement Bill, which represents the fruition of seven years of negotiation between the Crown and Ngai Tahu. Because Act oppose the Bill, one of the three Opposition parties is required to ensure that the bill is enacted by Parliament.
I am alarmed, however, by the agreement between Labour and the Alliance to resurrect the Cullen Bill (the "anti-defection legislation" - NZ Herald, 26 August) and to make it government policy if those two parties form a government after the next election. This is heavy-handed party politics of the worst kind.
The autonomy of MPs is an absolutely central facet of parliamentary government. While parties represent a very useful vehicle for getting people into Parliament, New Zealand's MPs are constitutionally accountable to the people of New Zealand, and not to the leadership of their parties. The people judge the performance of MPs each general election - individually through the electorate vote and collectively through the party vote - and that's the way it should stay.
If an MP leaves a party, s/he will be judged at the electorate level. If a party leaves an MP (as occurred with Jim Anderton in 1989 and Winston Peters in 1991) then, equally, that party should be subject to a performance review at the next general election. (Noticeably, Anderton and Peters were strongly approved of in the 1990 and 1993 elections; and Labour in 1990 and National in 1993 were soundly rejected. National got back into power in 1993 despite that rejection, thanks to the vagaries of the former electoral system.)
It is not possible for list MPs to seek reelection. And seeking reelection by electorate MPs is often not a meaningful exercise, as a large proportion of electorate MPs get in without a majority of the vote in their electorates. Thus, electorate results are determined as much by the pattern of support for the unsuccessful candidates as by support for the successful candidate. Electorate MPs are, in practice, as much dependent on their parties as a means of getting into Parliament as are list MPs. They are in no way more important than list MPs, and should not resign when a schism occurs between them and their party.
While the case of Alamein Kopu seems to be a case in which the Alliance was the innocent party, that is a relatively unusual case. Of all the many party defections since in the last 15 years, the only one that I can recall as being similar to the Kopu defection is that of John Kirk.
Political reality is that parties fracture, and that being in the cauldron as New Zealand First was increases the chance of fracture. Fracturing is a feature of democracy in a complex society. Blind party loyalty is not.
The Cullen Bill addresses a central constitutional issue. It's implications for our future governance are as profound as was our change of electoral system. As a constitutional issue (see "Facilitating Constitutional Change"), it should only be passed with 75% support in Parliament or following a constitutional referendum. And review procedures would need to be enacted if the proposal was supported in either of these two ways.
Housing New Zealand: Regulator or Marketeer?
(27 August)It was reported on Morning Report (Radio New Zealand) today (27 August) that many of Housing New Zealand's rental properties are empty while others are overcrowded. The obvious conclusion to be drawn is that Housing New Zealand is overcharging.
Housing New Zealand blames people for choosing to spend less than they should on housing and more on other things.
When accused of leading the market in low-income suburbs, Housing New Zealand deny this. They argue that, even though they hold 25% of all rental stock and more in some suburbs, they are following the private market. They say their charges are on average $10 less than private rentals.
Housing New Zealand should be regulating the market, neither following nor leading the private housing market. They are the only agency that can (i) ensure that ethnic groups subject to discrimination can be fairly housed, and (ii) that NZISS Accommodation Supplements are used to help people into housing and not to simply raise the incomes of landlords.
There is market failure in the housing market. That means the market must be regulated in order to achieve the best possible economic outcomes. Optimal economic outcomes recognise both social and private benefits as forming a part of the equation. One of the best means of regulation is for a publicly owned provider - following social objectives - to compete with the private sector which follows private objectives (namely profit).
The result is that the public provider prices its housing in accordance with the social objectives it is mandated to follow. That may mean, for example, setting rents in accordance with income. Myself, I favour a wider range of social criteria in setting Housing New Zealand rentals, and I favour non-renewable fixed term tenancies (eg 5 years). The problem with income-related rentals is that they form part of the poverty trap.
The activities of Housing New Zealand should be altering the nature of the market, obliging private sector housing providers to charge lower prices in order to maximise profits. The result is still very much a market, but a market in which the power imbalance between the demanders and the suppliers of housing is lessened.
Such a regulated market is more economically efficient than a market in which every supplier is driven solely by profit. This is an orthodox economic conclusion. Some markets, and the housing market is one, are enhanced by at least one large supplier setting its prices in accordance with social rather than market criteria.
Maurice Williamson on Public Goods
(25 August)In Question Time in Parliament today, the Mr Williamson stated that for every dollar spent on one particular public good that he administered, the public gained services to the vale of $28 for every dollar spent.
There is an economic law that states that, at equilibrium, prices of private goods will be set so that the cost of the last (marginal) item produced will be equal to the benefit conferred by the last item produced, and that this relationship will hold for all private goods.
The economics of public goods is essentially the same. If the public gets $1.20 additional benefit for an extra $1 of spending, then that $1 should be spent. That's what we pay the government to do.
Mr Williamson seems to be saying that the Government's criterion for public spending is that the average public gain should be $28 per $1 spend. Now, while that's consistent with a much lower marginal return than $28, the impression that he clearly gave is that the general criteria for public spending is that the gains should be a multiple of the costs.
To an economist, that is tantamount to a government deliberately running an inefficient economy; an economy that grossly undersupplies public goods. The irony is that the right-wing supporters of the Government would like to cut spending on the provision of public goods/services in order to cut taxes; they believe much such spending is low quality, and many economists count themselves among such supporters.
Mr Williamson's words indicate that public goods and services are underfunded by any rational cost-benefit criteria. They suggest to us that the pressure to cut taxes and the social wage has nothing to do with economic efficiency. Rather, the pressure is simply an attempt by one privileged section of society to grab more lots of $1, not caring that others are losing up to $28 in the process.
How did Jenny and Winston Split?
(16 August)For what it's worth, the following is my interpretation of the Cabinet schism of 12 August 1998.
Winston Peters needed to rebuild his constituency. The late realisation that the people of Wellington opposed the sale of their airport made the airport sale an important issue for him. The 51% "kiwi share" compromise that he sought was an obvious political solution, and in the end was the eventual solution. It was Peters' bottom line, and not an unreasonable bottom line.
Jenny Shipley did set an ambush, though, through the late introduction on the agenda of a new fall-back position. A fallback position was required in case the conditional sale of the airport to Infratil were to fail; eg because the terms set by Cabinet were not acceptable to Infratil. From Peters' point of view, any late introduction of a new fallback position could be interpreted as an ambush. Indeed, I believe that this was an ambush, but not the ambush intended to destroy the coalition. It was an experiment on Mrs Shipley's part; a test to see how Peters' might respond. She said "boo", and he jumped as if her pop-gun was a real gun.
Peters should have said that, as far as he was concerned, for the present the fallback position was to not sell, and that he would need to delay proceedings by at least a day to properly consider any alternative fallback position. He would have been right to ask for time to consider the economic and political implications of the new 'Plan B'. In particular, he would have needed to be sure that there was no chance of National sabotaging Plan A, and then going on to Plan B in a way that required no further Cabinet ratification.
As I understand it, that's how Peters meant his walkout to be interpreted. Unfortunately for him, Jenny Shipley misinterpreted his action. Peters could have made his point in a less dramatic fashion. But then he feared what might happen if a vote was taken in Cabinet while his Ministers were present; a vote that would have been split on Party lines. He, and his ministers, needed to be seen to be absent when that vote was taken.
I am sure that Jenny Shipley, in deliberately testing Mr Peters, ultimately caused the crisis by her misinterpretation of Peters' actions. Further, I think that she was genuinely upset; that despite the difficult personal chemistry between Winston and herself, that she did not want the dissolution of the coalition. (The fact that the final vote of confidence for 1998 was taken just before the Cabinet meeting does however suggest that she was in the frame of mind to interpret non-compliance on Winston's part as a walkout by him on the coalition.)
In my view Winston Peters over-reacted to a little bit of gamesmanship on the part of Mrs Shipley and her senior National Party ministers. More importantly, Jenny Shipley read far too much into Mr Peters actions. She panicked, called a press conference, and forced Winston into an adversarial position that he had been desperate to avoid. Having said that, Winston exacerbated the misunderstanding by reverting to populist type. He should have just said that Mrs Shipley had misunderstood the reason for the walkout, and had therefore overreacted. He could have made the odd quip about her inexperience, and then just left it at that, and got on with his normal business.
From the point of view of the Government (as an old-style FPP government), through mutual misunderstanding, the outcome has been 'lose-lose'. If the NZ First MPs get sensible this coming week, they will take their time and seek to use their strategic position on the floor of Parliament to block all further New Right initiatives and to get something real for, in particular, their Maori constituents. (Winston has already delivered everything possible for his 'grey' constituency.) Tau Henare is in a very powerful strategic position at present.
Ultimately the schism was about the determination of National to proceed with right-wing economic legislation without a mandate to do so. Under Mr Bolger and Mrs Shipley, they tried to use conventions (such as "collective Cabinet responsibility" in its first-past-the-post form) as a means of bullying NZ First (and thereby Parliament) into supporting unpopular legislation (see "Breaking the 20th Century FPP Connection").
I hope that a centre-left coalition becomes the government in 1999. But I am in no hurry. I am certainly not convinced that a majority Clarke-Anderton coalition with epitomise anything other than FPP culture. I would much rather see that government actually be a Clarke-Anderton-Fitzsimons-Henare coalition. And I would like a year or so of government by Parliament before we have an election. 1999 is a small window of opportunity for an MMP culture to develop before the 2002 review. Yo Tau!
(15 August)
The collapse of the National / NZ First coalition has created the possibility of our having a parliament with up to seven Independent MPs as Ministers of the Crown.
What happens if they seek re-election as Independents, rather than as members of a party? In fact, if they are re-elected, they all become "overhang" MPs. Given that they are a part of the government, and that they are in a position to do deals with the Prime Minister to stand as de facto National Party candidates (it is rumoured that Brian Donnelly has already struck such a deal in Whangarei), they could be the difference between the winning and the losing of the next election for National.
If this happens, we will get perhaps 127 MPs in the next Parliament. That might be 62 to Labour/Alliance/Green, representing 52% of the vote to the left and centre-left, and 65 to National, Act, United (Shipley can hardly refuse to do an electorate deal with Peter Dunne if she does one with Donnelly) and Government Independent, representing 48% of the vote.
This issue highlights the two main technical problems with the current MMP legislation; two problems that should be resolved by the 2002 electoral commission to review MMP. The problems are (i) the difficulties created when coalition (or likely coalition) candidates are forced to stand against each other in electorates under a system in which such candidates "split each other's vote"; and (ii) the overhang.
The first problem can be fixed by replacing first-past-the-post voting in electorates with preferential voting. The second problem is more difficult, and can occur in a number of situations: especially when a party is very popular (eg a party with 50% support is likely to be eligible for no list seats); when a party [such as NZ First] is unpopular while some of its personalities are popular enough to win electorates; and when there are independents. As I see it, candidates standing as Independent must be seen to be genuinely independent, and as such must be debarred from holding any Ministerial position.
What to do about "independent Cabinet Ministers"? Perhaps they could be required to stand as "associates" of a party. Thus, while not on the list of the party they are associates of, their election as electorate MPs should require the deduction of a list place that would otherwise be won by that party.
Thus, if the 7 NZ First Ministers do stay on as independent Ministers, and they are re-elected as electorate MPs in 1999, then, for the purposes of proportionality, they should be considered to be National MPs.
Whatever the 7 non-National Ministers do in fact do in the next few weeks, the issue of Independents and their impact on proportionality remains one that should be resolved at the first possible opportunity.
(4 August)
The editorial in today's NZ Herald, "Let MMP be for now" starts: "Does Mrs Shipley really want to go to the next election promising a referendum on MMP? It probably sounds like an election winner for a National Party languishing in public opinion polls, just as the new electoral system is right now. But if anything is likely to revive the popularity of proportional representation, it would be a campaign by the National Party to ditch it.
Of course Jenny Shipley knows that the referendum policy will be the first to go in any coalition negotiations following the next election. It will not be government policy after the next election. It is probably an attempt to exploit the cynicism of the New Zealand public, much as Winston Peter's anti-immigration crusade was in 1996.
Shipley may still be playing a game of bluff. She has still not been reported , to my knowledge, as expressing a personal opposition to MMP. But she is happy for us (and her caucus) to believe that she opposes MMP. I think that she is fully aware that a self-seeking campaign to ditch MMP will in fact galvanise support for it, as the Herald suggests.
Mrs Shipley cannot lose. She would be perfectly happy to operate under either MMP or the supplementary member (SM) system.
The bigger danger to MMP may be Winston Peters roadshow in support of MMP (Herald 4 August, p.A5). Voters, perverse as Mrs Shipley knows them to be, may oppose MMP simple to disagree with Winston. We did that with Sir Robert Muldoon on the economy. In the early 1980s, we opposed both his good ideas and his bad ideas for one reason and just one reason: because they were his ideas and we hated him.
I wish that the politicians and the media will just forget about MMP. They should just accept it as a given; it cannot be any worse than GST (goods and services tax) which is now uncontroversial, though not necessarily popular.
The Herald editorial ends: "A good electoral system aims for two goals: to produce a House of Representatives that accurately reflects the range of voters' decisions, and to produce an effective government. MMP was devised by a royal commission that carefully balanced exactly those aims and found the SM system wanting. MMP is not perfect but it deserves a decent trial." As I suggested elsewhere, a decent "trial" means a generation, at least 25 years.
Democracy itself is more important than any government or any single issue. My biggest nightmare is that the people, in a democratic election, vote to dispense with democracy in an attempt to dispense with politics.
Who or What should the Left blame for its Impotence?
(4 August)A letter in today's NZ Herald (by Bernard Francke of Titirangi) notes that the electorate voted for a left of centre government but got a right-slanting government. Francke wants a snap election.
In fact the 1996 election result was a significant swing to the right. Not all of New Zealand First's support came from the left. Some came from the more affluent "grey" population - people who would have voted for a conservative government, but voted for New Zealand First in order to get the NZ Superannuation surtax repealed. An ungrateful lot, many of those voters have now deserted New Zealand First with barely a thankyou, and despite Winston Peters' ongoing loyalty to them (eg re asset testing on geriatric care). If these conservative greys had not voted for NZ First, they would have voted most likely for National or for the Christian Coalition. If it wasn't for Peters' promise on the surtax, the Christians would have probably got 5% of the vote, and the three right-wing parties would have secured enough support to form a majority coalition of the right.
For those with short memories, the 1993 election (unlike 1996) under first-past-the post (FPP) gave a landslide popular vote to the left, yet we got a "majority" National government. Labour supporters yearning for FPP (or its crony "supplementary member" derivative, SM) should not forget that, nor the results of 1978 and 1981. A lot of our economic and social history would be vastly different today had centre-left governments formed, as they should have been able to, after those elections.
SM is even more self-serving than pure FPP, in that, as a two-party FPP system, typically 80-90% of the list seats (plus virtually all of the electorate seats) go to the two dominant parties. (Under SM, National would have won in 1978 despite getting fewer votes than Labour.) That means that both National and Labour could load their lists with their front bench ministers and shadow ministers, knowing that our most controversial politicians would be even safer on the SM list than in the FPP safe seats.
The left should not be tempted into short-term or instant remedies (such as snap elections or support for a non-proportional voting system) that may seem able to fast-track the left into power. Rather, knowing that 50% support for the left of centre guarantees a left-wing government at the next election, the left-wing parties should be garnishing public support for their policies, and defusing the sideshows that suit television's "sound-bite" formula.
And, if anyone on the left (such as Phil Goff, maybe Helen Clark?) does want an SM or FPP parliament, they should tell us now exactly what SM or FPP can do that MMP cannot do to ensure fluent long-term centre-left governance.
The New Zealand electorate needs a forward looking left of centre programme, and not just cliques of aggrieved politicians outdoing each other to heap opprobrium on the parties and personalities of the centre and the right. If the left parties lose the 1999 election, as they lost in 1996, they should just accept that they were not appealing enough to win, and try harder to give more people a positive reason to vote for them in 2002.
A left that blames MMP for its own failings, by both destroying representative democracy and failing to address the true causes of its failings, risks losing its historic opportunity to play a dominant role in the rebuilding of New Zealand society next century.
PS. Soon after writing this, the news has come through that the Alliance and Labour will present themselves to the electorate as coalition partners. That's a good sign, and I hope that it will place some discipline on Labour MPs who are having difficulty weaning themselves from the "first-past-the-post" adversarial culture that blighted our politics for so long.
© 1998 Keith Rankin