August 1999
Metrowater should pay dividends (31 August)
Could Michael Cullen be a victim of overhang? (31 August)
Do Voters need to be Intelligent? (22 August)
Red Cross Helping the Turkish Economy (22 August)
Replacing Mike Moore (22 August)
Privatisation (20 August)
Rending 50-somethings Invisible (15 August)
The Effects of Increased Tax Credits (15 August)
Amnesty's Cinema Advert (13 August)
Theresa Gattung (13 August)
Laura Norda Referendum (8 August)
Is New Zealand's Welfare Ethos Skin Deep? (8 August)
Metrowater should pay dividends
(31 August)Last Wednesday, Kim Hill interviewed living legend Jock Barnes (union leader during the 1951 waterfront lockout) and a spokesperson for Auckland's Metrowater, with whom Barnes is in dispute (see Battler still fighting on the water front, NZ Herald, 26 August).
The woman from Metrowater agreed that their present system of charging disadvantages very low volume water users such as Mr Barnes, and charges high volume users too little. She added, as a palliative, that Metrowater neither makes nor seeks to make a profit.
Actually, Metrowater could solve this problem by making a profit and paying dividends. Mercury Energy - before the electricity reforms implemented in April - made a profit and paid equal dividends twice a year to all its owner customers.
If Metrowater charged an additional 10% on present charges, placed the additional revenue in a special profit fund, and returned the profit fund to all of its owner customers, then the net effect would be much more equitable than the present charging system. (By a 10% increase, I mean charging enough extra for water used to raise revenue by 10%; there would be no increase on the fixed charges that Jock Barnes was objecting to.)
Almost all of the profit fund would be raised from high volume customers, while the dividends would be paid equally to high and low volume customers. The net effect would be a redistribution of charges in favour of those who use little water. In principle, miserly water users might pay less in charges than they receive in biannual dividends.
In recognition of the greater use of water by households with children, Metrowater dividends - like those of the Alaska Permanent Fund (also here) - could be paid to each person rather than to each household. Thus a family of 5 would get 5 biannual dividend credits. Jock Barnes would get just one dividend credit every 6 months. I am sure he would accept the justice of that.
Could Michael Cullen be a victim of overhang?
(31 August)In the 1999 general election, there will be fewer list seats than in 1996. As the number of list seats diminishes, the likelihood of a major party receiving none increases.
Under MMP, the principal purpose of the list seats is to provide a "top up" for parties that are underrepresented by the electorate MPs who continue to be chosen via the FPP ("first-past-the-post") system.
Senior MPs standing for either of the two major parties take huge risks if they choose to not contest an electorate. Deputy Labour leader and Shadow Treasurer Michael Cullen is one MP who has decided to not contest an electorate this year.
As it stands, either National or Labour could find themselves in overhang, which simply means that they are overrepresented by electorate MPs and therefore do no qualify for any list MPs.
Under one scenario, voters will treat the electorate vote as a party vote, as they did during the old FPP days. If the National vote falls sharply, as it might well do, then National candidates might win less than 10 electorates. If that is so, then Labour candidates could win 50 or more electorates. In Canada (using FPP) in 1993, the Progressive Conservative's (under Kim Campbell) won 19% of the vote and scored only two MPs. How many electorates would National win if their support falls to 19%, and if electorate outcomes are determined by party affiliation?
In 1990, the Labour Party faced a similar Kim Campbell meltdown. It was only the 11th hour replacement of Geoffrey Palmer by Mike Moore that checked the decline in the Labour vote, enabling Labour's frontbench MPs to hold onto their seats.
Under an alternative scenario, the electorate vote will be taken by voters as a personal vote rather than as a party poll. In this case, many past National voters will return sitting National MPs, while choosing another party (eg Labour or Act) for their party vote. In this scenario, National candidates might win 23 electorates while getting under 20% of the party vote. National, rather than Labour, would overhang.
It remains most likely that all parties (except United, which is unlikely to qualify for more than Ohariu-Belmont's Peter Dunne) will gain some list seats. Some voters will choose their local member according to scenario one, while others will make that choice in accordance with scenario two.
Nevertheless, both politicians and voters should appreciate that the party list is not a soft option for career politicians. (The list is a soft option under the comprehensively rejected Supplementary Member system - SM. Despite its 1992 rejection, SM continues to be promoted by many would-be career politicians as an alternative to MMP. Indeed, the SM electoral system would guarantee the longevity of Dr Cullen's parliamentary career.)
Either major party might not qualify for any list MPs this November. A "landslide win" to Labour (meaning Labour getting twice National's vote) might leave Dr Cullen out of Parliament. He may come to regret his decision to not stand in an electorate. The Alliance's Jim Anderton might become Treasurer in Cullen's putative absence.
Do Voters need to be Intelligent?
(22 August)In a television documentary (1914-18, screened on Prime on 20 August) about the origins of World War 1, the commentary noted that the British suffragette movement of the 1910s was opposed by people who believed that women were less intelligent than men because they had smaller brains. This was seen at the time as good reason why women should not be allowed to vote. The general implication was that only intelligent people should be enfranchised.
This notion brings into focus the important distinction between direct democracy and representative democracy.
In direct democracy, the people rule through plebiscites and/or through delegates (called "representatives") who take instructions from their constituents. Hence the view that enfranchised constituents should be competent to rule. This view still runs through the American republican version of democracy, and leads to the American style "public choice" critiques of "politics" (meaning 'government') as being characterised by a "political failure" which is said to be more damaging than "market failure".
In representative democracy, however, Members of Parliament are autonomous and competent. They have passed two competency tests: those of their parties (to get selected) and of their constituents (to get elected). (Yes, list MPs are elected, through the party vote.)
Such MPs represent people's interests. Hence, all of the people need to vote in order to ensure that all nations' diverse interests are fully and proportionately represented. While intelligence may be required to govern well, almost everyone is intelligent enough to know which parties they wish to choose to represent them and their interests. Unintelligent people, inasmuch as they exist, are perfectly capable of electing intelligent representatives who will represent the interests of their constituents.
A parliament that proportionately represents our diverse interests can form the basis for good government. A parliament made up of members acting under the instructions of one or more 'intelligentsia' groups, on the other hand, will be hopelessly biased in its determination of the national or the public interest. Any attempt to limit the franchise completely misses the point of what democracy is about.
Of course, claims that any gender, ethnic, religious, class or age group is inferior per se are contrary to the principles of democracy.
Representative democracy is an efficient and just form of governance that does not require citizens to all have the skills required to hold public office.
Red Cross helping the Turkish Economy
(22 August)On the American PBS news last night (screened in Auckland on Triangle TV), a man from the American Red Cross said that, in providing aid for the victims of the Izmit earthquake, they preferred money rather than goods. The Red Cross would use the money to buy goods in Turkey, therefore supporting the Turkish economy as a by-product of the relief effort.
This claim, which seems obvious to most of us, is contrary to orthodox economic wisdom. An economist will assume that everyone in Turkey willing and able to produce goods and services will be doing so regardless of the earthquake. Thus, when the Red Cross purchases locally, they are bidding up local prices, depriving local consumers of the goods that they would have otherwise purchased and consumed.
Economic teaching says that local consumers who were not affected by the earthquake will either be worse off, or will have to turn to imports to satisfy their wants. If the latter, then the policy of the Red Cross to not import relief goods will turn out to have been futile.
The most likely truth is that unemployment and underemployment was and is endemic in the Turkish economy. If that is so, then the Red Cross's activities will have helped the local economy by raising aggregate demand.
Therein lies the problem with economics. Economic truths are relative, entirely dependent on the context of the real world economies that they are applied to.
Actually, Economic Principles' textbooks have a dollar each way. By teaching both microeconomics (that assumes full employment) and Keynesian macroeconomics (that suggests chronic unemployment is the norm) as part of a single course of study, students know that increased domestic demand by organisations such as the Government or the Red Cross is either good for or bad for a nation's economy.
Replacing Mike Moore and John Banks
(22 August)Clayton Cosgrove, the candidate chosen to stand for Waimakariri at the next general election says that he cannot assume that he will be elected, despite Mr Moore's large "majority".
What the Radio New Zealand reports did not say is that National polled higher than Labour in Waimakariri in 1996. It was only Mr Moore's personal constituency vote that won the seat for him.
Further, while Mike Moore may have had a large 'margin' in 1996, he certainly did not have a large "majority". One day the penny might drop with our media, and they will cease to misuse the word 'majority'.
It is likely that the Mr Cosgrove will win in Waimakariri. But this will be because of a collapse in the National vote may work to the disadvantage of the National candidate.
Whatever, we need to learn that the election within Waimakariri and every other electorate is about candidates and not about parties.
Take Whangarei as another example. I am guessing that New Zealand First's Brian Donnelly will win by a large margin. He has been the de facto MP for Whangarei for 2 years, with John Banks doubling as an Auckland talkback host.
Despite the negative things we say about our MPs, I am sure that local electorates will endorse sitting list and electorate MPs in November. Indeed, in a mature MMP system, most new MPs will be elected as list MPs and will be endorsed or otherwise in subsequent elections through the electorate ballots.
(20 August)
Brian Gaynor, in last Saturday's Business Herald column "Economists on wrong track", says "Few people would disagree with the principle that the private sector is better at managing commercial assets than the Government".
Usually I find that when people say "few people would disagree" or "the vast majority would agree" that the ensuing statement is actually quite contentious. In fact many people, including economists, question the view that private ownership is innately superior to public ownership. There is no obvious reason why public sector or SOE (state owned enterprise) managers should be any less mindful of their principals' interests than private sector managers; or any less competent.
What may be true is that a holding company may be more effective than a diverse group of small shareholders in reining in a group of managers pursuing agendas other than maximising the return to their principals. However, publicly owned holding companies can achieve the same efficiencies for their SOEs as private holding companies can for the companies they have a controlling interest in. A very good example of a successful public holding company was the elected Auckland Regional Services Trust.
Gaynor is writing about the privatised Tranz Rail - formerly the publicly owned NZR - which announced an "extremely poor result" just days after the publication of a Treasury discussion paper (The Privatisation of New Zealand Rail, by the NZ Institute for the Study of Competition and Regulation Inc.) that hails Tranz Rail as proof of the success of the privatisation strategy of recent governments. It is the economists from this institute that Gaynor sees as being "on the wrong track".
Brian Gaynor notes both publicly owned successes (eg NZ Post) and privately owned failures (eg the BNZ of the late 1980s). He is not a neoliberal ideologue. Nevertheless, given that Gaynor is one of our most sensible business commentators, it is of interest to note just how attached the business media must be to the mantra that privatisation, per se, is good while public ownership is inefficient.
Rending 50-somethings Invisible
(15 August)On Radio New Zealand's Insight-99 today, Massey University history professor David Thomson spoke of the growing employment plight of people aged 45-64. (See his When our working lives end at 45 and my New Zealand's Ageing Non-Workforce) In reply, Employment Minister Peter McCardle could only talk about "job-seekers".
Most men over 45 who are not in fulltime employment are not job seekers. Some have dropped out. Others work mainly outside the market economy while supported by partners and perhaps some benefit income. Others, while often underemployed, are self-employed. They are not job seekers.
When policymakers divide our working-age population into these three categories - "employed", "job-seekers" and "caregivers" - increasing numbers of us become invisible. Previously, it was mainly women who appeared not to exist. Now it is mostly older men, although it certainly includes many 50-something women.
The categories "employed", "job-seekers" and "caregivers" do not only exclude increasing numbers of us. Our policymakers tend to see these categories as mutually exclusive. Yet increasing numbers of our employed are also job-seekers and caregivers.
Instead of getting tied up with obfuscating language, our public servants should be making policy that recognises that: (i) the paucity of demand for hired labour, (ii) the supply-side of the labour market is complex, and (iii) the need most of us have to complement labour incomes with non-labour income. Further to (iii), we need to develop a social culture where we no longer identify ourselves - statistically and socially - in terms of our paid employment.
The Effects of Increased Tax Credits
(15 August)Ruth Laugesen reported (Doubts on tax cuts, Sunday Star-Times, 1 August), that "Treasury has done no research on whether National's tax cuts have spurred economic growth, despite the Government's contention tax cuts encourage the economy to grow".
Treasury continues to make a naïve theoretical presumptions, while the Treasurer (Bill English) seems to believe that (in Laugesen's words): "If [National] had been interested solely in growth it would have pitched tax cuts at high income earners, because it was the decisions of that group which more strongly affected investment and savings."
This naïve view, that household savings will be higher in a population with an unequal income distribution, is empirically false (as our present negative rate of household savings suggests) and has no basis in theory. The theory is that savings growth depends on the marginal propensity to save. The rich have a higher average propensity to save (meaning that they have more savings relative to their incomes) than the poor, but in many cases have a lower marginal propensity to save. Rather the rich do have a high marginal propensity to consume items such as the huge 4-wheel drive vehicles that clog up our cities' streets.
Low income recipients save additional income by repaying past loans. All capital repayments are savings. Thus, the relatively poor, inasmuch as they use additional income to reduce their indebtedness, may have very high marginal savings rates.
Mr English continues: "we've concentrated primarily on putting more money back in the pockets of low and middle income working families". By this, the Treasurer is not referring to the cut in the middle rate of income tax, which put (in 1996-98) $90 in the pockets of the richest households and only a fraction of that "in the pockets of low and middle income working families".
Rather, he is referring to "Family Support" tax credits, including the "Independent Family Tax Credit". The "tax cuts" that the Treasurer refers to are, in every respect, benefit increases.
Thus what the Treasurer (if not the Treasury) is really saying is that, by raising benefits (in this case, Family Support benefits), the economy has grown faster than it would have otherwise done, and that New Zealand's resources are now allocated more efficiently than they would have been in the absence of this benefit increase.
I only wish that the media would "call a spade a spade", to use one of Theresa Gattung's favourite clichés. The media should be telling us that Bill English really means "benefit increases" when he says "tax cuts". Further, our journalists should be asking why, if Family Support payments are good for growth and efficiency and equity, do we not have more benefit increases?
(13 August)
On National Radio this morning, I heard a news item about a controversial new advertisement by Amnesty International that will feature in our cinemas. It is an attempt to make New Zealanders realise that dissenters are not immune from political repression and murder.
The radio item featured the advertisement's soundtrack, which features a young man going on about what a corrupt lot of self-seekers our politicians are. For his efforts, he is murdered by (or at the request of) the New Zealand government.
Apparently the controversy was about the possibility that the message that political terror can happen anywhere might be misconstrued as a message that murdering political dissidents is somehow OK.
I was appalled by the advertisement, but for a different reason. The advertisement acts to reinforce the already dangerously commonplace view that our elected politicians are a bunch of corrupt, self-seeking pocket-lining no-hopers who couldn't care less about the people they are meant to represent.
In the early 1930s, in the Great Depression, democratically elected politicians in Germany were held in similar disregard. As Charles Wheeler said in Saturday night's BBC World documentary 'The Road to War': "confidence in parliamentary democracy largely collapsed. That was Hitler's chance." The anti-democracy vote (National Socialist and Communist) in Germany in 1932 exceeded 50%.
If Amnesty International does not want political terror to come to New Zealand, the last thing it should ever do is to perpetuate the view that democratically elected politicians have no virtues and will pursue self-preservation policies at all costs. Democracy is under threat at the present time. (See my "Democracy, MMP and Press Responsibility".)
We should have learned this lesson from history by now: however bad democracy may seem to be, it sure beats the alternatives.
PS [17 August]. I see some of David Fletcher's "Politician" cartoons has helping to create a dangerous anti-elected- representative mood. Today's cartoon is one of the worst in that regard.
(13 August)
Telecom's new X-generation chief executive Theresa Gattung may have more letters after her name than WINZ's Christine Rankin. Yet I am not convinced that she will prove to be a better "communicator" than the hapless Ms Rankin. Today's Herald feature "Young - brainy and seriously well-paid" told me just one thing about New Zealand's highest paid (to be) woman; she communicates in clichés.
The caption to the picture reads: "'I don't beat about the bush. I do tend to call a spade'."
I'm worried already.
(8 August)
Last week we found out what question would be put to the people in the "law and order" referendum to be held in conjunction with this year's general election.
It is a long conjoint question; it is actually two questions. Do we want tougher sentencing for violent crime? In particular, do we want minimum sentences? And, do we want to provide a higher level of restitution to the victims of crime?
What do people who support one proposition but not both do? (Does anyone support lower level of victim restitution? Does anyone know just how much support is available to victims at present?) Logically, on account of the 'and' word, we should vote 'no'. Yet the 'and' will probably be interpreted by most voters as an 'or'. Further, regardless of the Boolean logic, it is the kind of 'mum and apple pie' referendum that is sure to attract an 80% plus 'yes' vote.
It is unlikely that we will learn much about the extent that existing law can achieve the things that the propositions of the referendum imply it cannot. After all, there is a simultaneous election and referendum on the size of parliament to distract our attention from a decent debate about the nature of the problem and the nature of existing laws.
Such referendums are a totally meaningless exercise, that will tell us a big fat zero about what policies should be implemented. Nevertheless the result will be used to justify a simplistic 'get tough on crime' legislative programme, thus delaying further the kinds of social reforms that may help to make real inroads into crime. So long as welfare entitlements are determined in a way that Winz customers cannot figure out (except to realise that additional legitimate income does not may), we can expect plenty of the burglaries et.al that make it possible for low income families to pay their rent, and to pay their creditors.
A useful referendum must focus on one specific and constructive proposal; ie "Do you favour proposal X?" Even then, the referendum may not tell us all that much. Rather, it may tell us about a public mood; a mood that may have arisen from media-fuelled perceptions rather than from an objective assessment of the real situation that the change is intended to address.
Having gained representative democracy, for the first time in our history, in 1996, there are very few decisions that should not be left to Parliament to make.
Is New Zealand's Welfare Ethos Skin Deep?
(8 August)Anthony Hubbard, in "The Demon Politico", an article about Michael Laws' novel Dancing with Beelzebub, says of Laws' theory of New Zealand's welfare state:
New Zealand's welfare state, [Laws] says, was not necessarily built upon goodwill. "People said, 'We can't trust ourselves to be generous to those who are sick or elderly, so we'll create a system where the state looks after them and we don't have to be so altruistic'." In other words, our tax dollars are the extent of our altruism. So the welfare state was built as a way of enshrining altruism instead of us being generous of spirit ourselves. "When the welfare state got dismantled after 1984 there was no residual altruism out there to pick up the fences. I contrast that with the USA...."
Laws' view is not dissimilar to that behind the Jim Bolger school of 'social capital' theory, and strongly contrasts with the Tim Hazledine view of 1960s' New Zealand; a view that is strongly influenced by social capital theory.
The truth about New Zealand in the 1960s is probably somewhere between the Laws and Hazledine views. What we must acknowledge, though, is that a society that acts collectively to ensure that all are able to participate should be regarded as 'socialised' if not "altruistic". A socialised society is one in which individuals identify their individual interest with the collective interest, as in: 'I cannot be truly prosperous if I live in a society that condemns a segment of its population to poverty'. The USA is unfortunately characterised by much private wealth and much public squalor, acts of philanthropy notwithstanding.
If we choose to see welfare payments as a part of the social wage, and to see the social wage as a return on social investment, then the welfare state ceases to be an act of generosity. Rather, it represents an acknowledgement of public property rights. Once we cease to think of welfare payments as our quota of altruism, we come to realise that the same opportunities for altruism exist in New Zealand as in the USA.
New Zealand might not have a strong a tradition of visible altruism (do-gooding arising from a sense of guilt?) as exists in the United States. But we do have a strong tradition of collective action for the purpose of creating an inclusive society. I share Tim Hazledine's belief that that tradition went far beyond a willingness to pay taxes to fund a social wage.
Nevertheless it is true, as Laws suggests, that a welfare state that is generally perceived as a grand redistribution mechanism has the potential to undermine mutually supportive social values.
It costs us nothing to reinvent our welfare society; to examine our welfare ethos. Then we might come to see our welfare mechanism as distributive rather than redistributive. Welfare "benefits" are just another income stream; part of a (social wage or social profit) return on our income-generating resources that are not privately owned. Altruism is something else; part of the private domain.
© 1999 Keith Rankin
