Next of Kim

As a classical liberal, I’ve long had a morbid fascination with the world’s least liberal country.

It is hard to think of any good historical parallel for North Korea. Not even under Stalin was the cult of the personality taken to the extremes it has been under the Kims.

Despite being officially atheist, North Korea has elevated its leaders, Kim Il Sung and his son Kim Jong Il, to the status of demi-gods. Kim Jong Il’s official biography records that his birth was marked by the spontaneous appearance of a double rainbow, and the sudden end of winter and outbreak of spring across the country. Kim Jong Il also, we are told, scored a 38 under par on his first ever game of golf, and penned six operas in two years, each of which was better than any other opera written in the world. Ever. It’s a backstory to put David Shearer’s to shame.

The problem with demi-gods is that they die. Even when they’re immortal, like Kim Il Sung. Although, to be fair I think he only became immortal post mortem, oddly enough.

And so it comes to pass that the Dear Leader, who is a perfect incarnation of the appearance that a leader should have, the Party Centre, the Wise Leader, the Commander-in-Chief, the Unique Leader, the Father of the People, the Sun of the Communist Future, the Shining Star of Paektu Mountain, the Guiding Sun Ray, the Leader of the Revolutionary Armed Forces, the Symbol of the Fatherland’s Unification, the Fate of the Nation, the Beloved Father the Leader of the Party the Country and the Army, the Great General, the Beloved and Respected General, the Ever-Victorious and Iron-Willed Commander, the Sun of Socialism, the Sun of the Nation, the Great Sun of Life, the Great Sun of the Nation, the Father of the Nation, the World Leader of The 21st Century, the Brilliant Leader, the Peerless Leader, the Great Sun of the 21st Century, the Amazing Politician, the Great Man Who Descended From Heaven, the Supreme Leader of the Nation, the Bright Sun of Juche, the Leader of the Party and the People, the Great Marshal, the Glorious General Who Descended From Heaven, the Invincible and Ever-Triumphant General, the Beloved and Respected Father, the Guiding Star of the 21st Century, the Great Man Who Is a Man of Deeds, the Great Defender, the Saviour, the Mastermind of the Revolution, the Highest Incarnation of the Revolutionary Comradely Love, the Central Brain, His Excellency Kim Jong Il has popped his clogs.

With his passing begins only the second hereditary transfer of power in communist history. The first was in 1994 when Kim Il Sung died and handed power to Kim Jong Il. This time, however, power is being passed to the twenty-something year old Kim Jong Un, whose grooming for the position began only two years ago. This has left him with much less time to consolidate his power base than he or his father would have wished – by contrast Kim Jong Il had around 20 years of preparation for the top job.

The key questions posed by Kim Jong Il’s death are whether his son will be able to secure the loyalty of the hierarchy, and how will he go about doing it. The ‘how’ perhaps has the most immediate relevance to the rest of the world, because, should he feel threatened, there’s a real risk that Kim Jong Un will decide he needs to prove his mettle with some form of military action, presumably directed against South Korea. Already South Korean officials are backing away from plans to provocatively place Christmas trees near the border with the North. But the ‘whether’ is more important in the long-run. If Kim Jong Un cannot secure his position, the jockeying for position will likely undermine the stability of the regime rather more gravely.

If the new Kim can, with the support of his aunt and uncle, maintain his grip on power, many have begun speculating whether there is any chance of reform now that the elder Kim has left the scene. I doubt it, personally. I suspect that the machinery of power in North Korea relies too heavily on state patronage to allow the decentralisation of wealth creation without risking a fundamental shift in power structures. I believe this is why Kim Jong Il pulled back from the economic reforms with which he did experiment. It’s far more convenient to rely on foreign aid which can be distributed as a form of patronage.

If the Young General can’t stay the course, then things could become very hairy indeed. And he will definitely have some significant challenges to overcome. The Economist reported last year that many members of crowds in Pyongyang had conspicuously failed to join in the cheering of the Dear Leader and his recently-annointed heir. And among the wailing crowds in Pyongyang who have made it onto youtube, I’m sure I see a number of people who don’t really seem to be getting into the spirit of things. This isn’t entirely surprising given the proliferation of DVDs from South Korea demonstrating graphically the vast gulf between living standards in the two countries. If the relatively pampered denizens of the capital now have their doubts, the rural poor who have borne the brunt of the regime’s economic mis-management must too occasionally question whether the military regime really have the ability or inclination to run the country for the benefit of the people. Kim Jong Un will have his work cut out to win the confidence of the military and the party, let alone the people.

It is confidence, in fact, that goes to the heart of the matter. Even without being disloyal, if individual members of the various hierarchies that keep the regime afloat lack confidence that Kim Jong Un will be able to retain his grip on power, then they may start taking actions to hedge their futures against some form of change. Those actions collectively could begin to undermine the regime. Some sign that the state apparatus may not yet be fully united behind the Great Successor is seen in the head of the Korean Friendship Association, Alejandro Cao de Benos, apparently denying that Kim Jong Un was about to take over from his father. Although not a North Korean, de Benos has better links to elements of the regime than any other foreigner, save for senior Chinese officials. It may be that those parts of the North Korean establishment with whom the KFA interact belong within the sphere of influence of someone other than the Great Successor. Or it could be that Alejandro doesn’t know what he’s talking about, which is a possibility that cannot lightly be ignored.

I think the most likely outcome is a relatively orderly transition and that Kim Jong Un will be secure at least in his titular position for at least the next few years. But it will be hard to know who is really making the decisions, and the long-term prospects for stability in North Korea have, in my view, declined significantly given the lack of time allotted to the grooming of Kim Jong Un. Unfortunately, I do not see any corresponding increase in prospects for significant improvement in the lot of the average North Korean without a very painful transition process.

One of the worst things about tyrants is that as much as one might hate them, sometimes one is forced to acknowledge that the world is not automatically better for their passing. Change must eventually come to North Korea, but I do not imagine it will be as orderly as was the re-unification of Germany.

Inequality of inequalities

Inequality has long been a topic of great interest to politicians and political commentators.

Most on the Left believe that it is ‘unfair’ that ‘rich’ people have lots of stuff and ‘poor’ people have much less stuff. Because it is ‘unfair’, they argue, government policy must seek to re-distribute wealth from the haves to the have-nots. It matters not that however poor you are in New Zealand today, you are incomparably well off compared to the vast bulk of humanity outside the first world. Nor does it matter that New Zealand’s disadvantaged enjoy luxuries undreamt of by even wealthy denizens of developed countries even 50 years ago.

For whatever reason, concerns about inequality are very tightly focussed. First, for the most part inequality is only considered relevant where it occurs within an arbitrarily-defined geographic region, to whit, the borders of whatever nation state is being discussed.

Secondly, it is generally only financial inequality that is considered worth talking about, although an honourable mention goes to educational inequality but mostly because it perpetuates the former.

Thirdly, even within the broad rubric of financial inequality, the Left tend to focus solely on income inequality and largely ignore asset wealth.

Each of these features is evidenced by the recent OECD report Divided We Stand: Why Inequality Keeps Rising . The sole focus of the report was on income inequality within each OECD state. Inequality between citizens of OECD countries was apparently not a problem. Nor was asset wealth inequality. Interestingly, in his critique of Wilkinson & Picket’s awful book The Spirit Level: Why More Equal Societies Almost Always Do Better, Christopher Snowdon points out that asset wealth inequality is mentioned only once in the whole book. The reason, he believes, is that Sweden and Norway look a lot less egalitarian when that measure is employed and that this was not germane to the authors’ message.

There are numerous other inequalities that apparently do not concern those on the Left, one amusing example of which is the subject of a post at Offsetting Behaviour.

I have yet to come across a convincing line of reasoning as to why anyone should be concerned about income inequality. Poverty, in absolute terms, is certainly an issue, but where everyone is comfortable, why should we care that some are more comfortable than others? And relativistic definitions of poverty are an iron-clad guarantee that we’ll never eradicate poverty and that it will always be there as a political tool for those on the Left.

There are a number of questions I would love to have answered from those concerned about income inequality. No-one to my knowledge has articulated clearly how much income inequality is acceptable. New Zealand’s Gini coefficient is .33, which is on the high end within the OECD, and so is apparently bad. But would income inequality cease to be an issue if all OECD countries’ Gini coefficients were .33? If so, would .5 be OK as long as inequality was equal within a select group of wealthy nations? Only a tiny proportion of the population seriously believe that we should aim for a Gini coefficient of zero, so everyone else who is concerned about inequality believes that it should be more than 0, but less than .33. What is their target level of inequality, and how did they decide upon that level? And would it still be an acceptable level if everyone else in the OECD was lower?

My own theory on income inequality is that it can largely be explained by technological development. I haven’t bothered to do any research to determine whether anyone else has the same theory, and if so whether they’ve done the numbers, but essentially my theory is that technological improvements magnify natural differences in productivity.

In a non-technological society a 10% difference in baseline productivity between two people would result in a 10% difference in total output. If a technology is introduced to increase productivity by 50%, then the individual who is only 10% more productive is still responsible for 10% more output, but the difference in total income if the difference is monetised increases by 50%.

Let’s assume that the two individuals do different jobs, and that the 10% difference in productivity is a result of the difference in how their society values what they produce. Because relatively small differences in total income would result in larger differences in disposable income, technological innovators would have an incentive to focus their innovation on increasing the productivity of more valuable roles, because the individuals in those roles are able to pay the innovators more.

Technology, therefore, disproportionately increases the productivity difference between individuals in high-value roles and those in low-value roles. As such, assuming no change in government wealth redistribution, income inequality and labour productivity should be strongly correlated. I might do some research on this, but controlling for government wealth redistribution would be a pain.

If this theory is correct, then continued technological growth will spur both increased living standards overall, and more inequality for leftists to use threat of force to address. Given that successful entrepreneurs, or indeed almost anyone who manages to make a lot of money, generates their personal wealth by creating even more value for society, we really should accept income inequality as an inevitable, and morally neutral, consequence of progress.

Nobody, with the possible exception of left-wing politicians and the odd unionist, is made better off by worrying about inequality.

And remember, it was wealthy business people and entrepreneurs who made big-screen TVs, home theatre systems and Nintendo Wiis cheap enough for each household interviewed for Bryan Bruce’s stupid documentary on child poverty to afford.

Not a poodle

In my last post but one, I confidently asserted that ACT had survived the election in the same way that Christopher Reeves had survived his riding accident. I was not alone in my assessment of ACT’s future prospects. Nevertheless, news of the National-ACT confidence and supply agreement makes me think that rumours of ACT’s demise may have been greatly exaggerated.

There are some excellent policy wins in there for ACT. It would appear that this term, with one MP, they are likely to get more runs on the board than they did last term with five MPs.

Here’s the list of initiatives that ACT got in their agreement:

Economy-Wide Monitoring
Regulatory Standards Bill
Legislated Spending Limits
Resource Management Act streamlining
Charter Schools
ACC Competition
Welfare Reform

With the possible exception of the legislated spending limits, I think these are all excellent gains.

I am not opposed to spending limits in principle. However, this is essentially an effort to constrain the spending behaviour of future governments. I have concerns about the practical effects that this will have. The next government is unlikely to consider itself bound by spending limits imposed by the current one. They will therefore either repeal the legislation, or, if they feel that repeal is impractical for whatever reason, they will seek to circumvent the cap. And circumventing the cap entails a risk that the overall transparency of public expenditure will be undermined. If these risks are adequately addressed, then I think the idea has a lot of potential.

More publicly-available data on the performance of various measures of economic performance is a Good Thing. I don’t expect it to work any miracles, but I am optimistic that over time it will improve the quality of public discourse on the economy, and make it harder for governments to pick and choose certain measures, such as GDP growth and unemployment, and use them to claim that all is well, when other indicators highlight significant upcoming risks.

Similarly, a regulatory standards bill has the potential to modestly improve the overall quality of governance along the lines of what the Fiscal Responsibility Act has done for the management of public finances. And, although RMA reform isn’t something I’ve paid a lot of attention to, improvements to the RMA ought to have positive effects on the economy by making it easier for landowners are able to use their land to generate wealth.

The ACT win that has grabbed the headlines, however, is the agreement to trial some charter schools. This is a hugely exciting initiative. Charter schools have been responsible for some excellent outcomes overseas. And despite Leftist assertions that those gains are purely due to a selection bias (in that the schools choose better students and more educationally-motivated parents are more likely to try to send their kids to a charter school) there is ample evidence that there is more at work than a simple selection bias.

Another objection is that charter schools succeed by utilising young (and therefore cheap) teachers to enable them to reduce class sizes, and that this strategy is not sustainable except on a very small scale. This seems a reasonable concern, but, happily, there is more research into what makes charter schools successful indicating that class size is not a key metric.

It would be interesting to know the reasons behind National agreeing to support so many ACT initiatives. I cannot help but suspect that it is at least in part an attempt to help ACT rebuild its support. If so, National and ACT will need to find a way to ensure that it is the ACT Party that gets the credit for any success, because for ACT to stage a comeback over the next three years would be unprecendented.

Banks has delivered a good result for his party, and defied expectations that he would, to all intents and purposes, be another National MP. Even if ACT fails to thumb its nose at history and build its support while part of a coalition government, at least it won’t now be going out with a whimper.

Economic sabotage

Before the election, we were told by Labour that once 49 per cent shareholdings of state-owned enterprises had been sold there was no getting them back. This, of course, was bollocks. Clearly any future government would be well within their rights to purchase shares from the other shareholders at a mutually-agreeable price. What Goff meant was that once the 49 per cent shareholdings had been sold, and the sky had failed to fall, there would be no public appetite to take on debt to re-acquire them.

Apparently without any sense of irony, David Cunliffe, Goff’s finance spokesman, hasn’t even waited for the ink to dry on Phil Goff’s eulogies before effectively acknowledging that the claim that they could not be re-purchased was bogus. He has now promised that, if he becomes leader of the Labour Party, he will re-acquire the assets.

From an investor’s perspective, this ought not to be a problem. Indeed, Labour promises to the effect that they’ll re-purchase the shares could play into National’s hands by ensuring that there is a steady stream of investors ready to buy now and re-sell the shares at an inflated price to a future Labour government who can’t afford the political risk of backing out of an election promise.

Except that Cunliffe has referred to “re-nationalisation” as a “regulatory risk”. As I pointed out in a comment on Whale’s post on Cunliffe’s announcement, a simple buy-back of shares is not a “regulatory risk”. Cunliffe is attempting to sabotage the share float by raising the prospect of a future Labour government using its regulatory powers to re-acquire the shares for less than their market value. Or, as Chris Trotter has proposed, for a Labour government to use its regulatory powers to undermine the value of the shares, then re-acquire them.

I doubt that any Labour government elected in 2014 or later would actually pursue either path. Many of the shares in the floats of the power companies will be purchased by Kiwisaver providers. Once that has happened, proposals to undermine share values won’t fly with swing voters.

Cunliffe’s promises to re-acquire the assets therefore are entirely cynical. He hopes to fire up the Labour base by demonstrating that he is not just a “paler shade of blue” (and that by implication Shearer is). Secondly, if his leadership bid is successful, he hopes that fears of “regulatory risk” will undermine the sale of shares, thereby embarrassing the government and allowing Labour to label the whole escapade a failure of ideologically-driven free-market policy.

I would expect then that Cunliffe will avoid any details of how he would re-nationalise. Any specifics on how he would ensure that the government was able to re-nationalise cheaply (for instance by following the Chris Trotter prescription) would leave him open to attack. But he will need to avoid any suggestion that a Cunliffe government would simply re-purchase the shares, because that would effectively be a deposit guarantee for investors, ensuring over-subscription and handing National a free win.

So, if he continues to discuss it at all, he will continue referring to “re-nationalisation” rather than “re-purchasing” and talking in foreboding terms about unspecified “regulatory risk” to investors.

The actual damage Cunliffe’s sabotage could do is pretty limited, but it’s disappointing that someone who would be Prime Minister would resort to it.

The worst of all possible good outcomes

Barring highly-unlikely results from the special votes, New Zealand has re-elected a right-of-centre government. Labour and the Greens are kept from the Treasury benches at what would have to be one of the worst possible times to have them there.

So much for the good news.

The bad news starts with the fact that, to all intents and purposes, New Zealand is now bereft of a classically liberal party. ACT survived the election in the same way that Christopher Reeves survived his riding accident. But there’ll not be anything inspiring or ennobling about the crippled half life of the ACT party.

With just one more seat, Don Brash would have made it into Parliament and then resigned, vacating his seat for Catherine Isaac who could have become leader. Instead, the arch-conservative John Banks will be leader and sole MP.

Catherine Isaac could have revitalised ACT in a way that Don Brash probably never really stood any chance of doing, and John Banks will have no interest in doing. Banks’ response to Brash’s comments on marijuana law reform made it clear that he simply doesn’t agree with the party’s stated principle that “individuals are the rightful owners of their own lives” (although nor did the party executive). Unless he decides to borrow some of Rodney Hide’s suits, there’ll be no telling Banks from a deep-blue Nat MP.

Classical liberals in National, ACT and Libertarianz will need to regroup and think about how to capture the public’s imagination. I cannot believe that 10 times as many New Zealanders seriously support the massive increase in state control advocated by the Greens as support ACT’s small government platform. The Greens did as well as they did because they were able to exploit warm fuzzy feelings associated with “equality, rivers and kids”. ACT were destroyed at least in part because no-one knew if their vote would be wasted on ACT or not.

Somehow, liberals need to get people to engage at an emotional level with individual freedom, personal responsibility and economic growth. The notion that income inequality is a social evil needs to be seriously challenged, without recourse to graphs and charts. The politics of envy needs to be confronted by the politics of aspiration.

A new vehicle will need to be created to carry that message to Parliament. I seriously doubt that the ACT party has any ongoing value in that regard. This time around, classical liberals should present themselves as being willing to work with Labour on socially liberal issues, or with National on economically liberal ones. This ought to win them more votes, and, more importantly, give them more influence on whichever of the major parties they work with.

Winston Peters’ return to Parliament is certainly no cause for celebration. Peters’ utter cynicism has a corrupting effect on New Zealand politics. His political resurrection is a reward for his total disregard for the truth and for his unfailing eye for a political opportunity. 2014 is a long way off yet, but Peters looks well positioned to reprise his role as kingmaker. John Key is right to see that as a destabilising influence.

There are at least two countervailing forces that could yet prevent this, however. The first is Peters himself. Three years could be enough time to remind voters why they got rid of him. The second is that 2014 is likely to be a closer fight between Labour and National. Labour voters who voted tactically to get Peters over the line this time may well not do so next time.

On the other hand, it is likely that the threshold required to get MPs in on the list without an electorate seat is likely to be lowered when MMP is reviewed. This will work in Peters’ favour, as will the fact that he’s not in government.

A lower threshold would also make it more likely that new minor parties will emerge as potential coalition partners for National. I would not be surprised to see Colin Craig’s Conservative Party make it in next time if the threshold is, say, 3%.

Hopefully a lower threshold will also allow for a new liberal party to rise from the ashes of ACT’s demise.

We could do a lot worse…

When I set up this blog, I did so with the intention of promoting classical liberalism and not with the intention of endorsing any political party. Unfortunately, my primary motivation for writing, as it has turned out, is anger. As such, I usually only work up the motivation to write something when someone on the Left advocates something stupid. So while I haven’t endorsed anyone on the Right, I have frequently dis-endorsed those on the Left.

This is no doubt partly reflective of my various personality flaws, but it’s also because there are simply no classically liberal parties in Parliament. ACT, who could be, have yet to shed their socially conservative element, as was made all too clear during the debacle that followed Brash’s tentative suggestion to maybe decriminalise cannabis a little bit at some point. Maybe.

So, I shall cleave to my original purpose and refrain from giving a positive endorsement to any one party in this election. I will be voting, however.

I stand firmly behind my dis-endorsement of all parties on the Left. Labour under Phil Goff has veered wildly toward its Old Labour, unionist roots. This, combined with the fact that any Labour-led government oozing forth from this election would include a substantial Green contingent, would make it the most statist, interventionist, heavy-handed meddlesome government since Muldoon. Not since McGillicuddy Serious has anyone proposed so great a leap backward as would be visited upon us by Goff and his five-headed chimera.

While some of their policies have merit, taken as a whole, particularly as a coalition, a left-wing coalition would be economically ruinous.

While the current government have not shown the flinty, reformist zeal of Roger Douglas or Ruth Richardson, they have demonstrated a willingness to incur some political risk to advance an economically liberal agenda. This is the first government in New Zealand history I am aware of that has passed a zero budget in election year. And starved of the oxygen that the proposed partial sell off of the state-power companies has provided, it’s hard to believe that the Left’s campaign would have got the legs it has done.

When you vote this weekend, I urge you to use your vote to keep the current government in power. They’re not classical liberals, but they’re a bloody sight better than the alternative.

Greenwashing

Libertyscott has written a good post on why the Greens get such an easy ride in the media. In essence he argues that their brand conjures wholesome images of a cool, fresh breeze blowing through open fields on a clear summer’s day and children frolicking in sparking streams and the such like, and that no-one wants to attack children playing in streams. Americans would recognise the Green brand as motherhood and apple pie.

I think that Liberty’s assessment is on the money, but I also think there are a couple of other factors at play.

One of which is the fact that the Greens are the only party currently in Parliament unsullied by the actual business of being in government (except for Mana, and Hone Harawira was a government MP, and unlike the Greens he wears his racism on his sleeve). Should the Greens ever be given the opportunity to implement any of their more ridiculous policies, I predict a much rougher ride for them in the media, and a significant contraction of their vote share.

Another factor is that it’s not just their brand that people don’t like to attack. Green MPs talk so passionately about wanting to alleviate other people’s suffering that they are seen as philanthropists. Who could criticise such transparently kind, generous people? Few actually question whether being generous with other people’s money is really being generous at all, or whether genuine generosity might actually require some personal sacrifice. The Greens, even more so than Labour, employ a form of generosity that Seamus Hogan refers to as “offering the other kid’s bat”, in that the money they promise to spend so liberally in exchange for your vote doesn’t belong to them.

In contrast, pointing out that while throwing more of other people’s money at the problem will alleviate the immediate problem, it will merely result in more of the same problem in future is cold-hearted. Pointing out that, at some point, we must demand personal responsibility from parents for their children’s well-being is uncaring. Asking whether we can afford to ensure that no child is in poverty no matter how utterly feckless their parents is plain callous.

A good example of this is provided by the debate about Bryan Bruce’s documentary on the subject of child poverty. The response from most on the Right has been that the documentary is factually incorrect, unbalanced and politically biased. Karl du Fresne and Lindsay Mitchell excoriate Bruce and his documentary far more eloquently amd concisely than I could, so I shall leave it to them.

Those on the Left, meanwhile, have taken the view that responding to a documentary on such an emotive topic by pointing out that it’s inaccurate, unbalanced and biased is somehow avoiding the issue. They argue that the mere existence of any child poverty merits ever greater government expenditure until the problem is erradicated. As such, so long as the documentary wasn’t a total fabrication, it’s gross inaccuracy is not a problem because “it raises an important issue”.

That said, I still don’t think the Greens’ (presumably renewably-sourced) teflon coating will survive their first term in government, whenever that may be. The entirety of their time in Parliament has been spent not merely as just a minor party, but as a minor party excluded from government. So the daft things their more junior MPs say get very little air time. Most people I know who consider voting Green have very little idea about the Greens’ policy platforms beyond environmentalism and sustainability. Should they ever make it into government and their MPs start pushing to implement policies further down on the Green agenda, and as the financial costs associated with them become clear, I suspect their privilaged position would become a thing of the past.

Why I’ll be voting for STV

I wasn’t planning to post on the voting system, since my intention is to promote classical liberalism and the voting system is somewhat peripheral.

But I was a bit disappointed by the Vote for Change movement’s decision to plump for Supplementary Member, so I thought I’d put up a short not-quite-so-short-as-I’d-intended post in support of my preferred system: Single Transferable Vote.

My primary reason for supporting STV is that I object to having foisted on me a local MP with whose politics I strongly disagree. If I have a local issue that I feel demands the attention of an MP, I would like to be able to speak to an MP whose views I felt at least somewhat aligned with my own. Moreover, if, like Grant Robertson, my local MP is someone who will happily sell his constituents’ down the river in the interests of some petty party-political scrap, then I would like an alternative.

By creating multi-member constituencies, STV provides those alternatives.

Secondly, I have never been a big fan of party lists. I can’t think how one would go about creating an objective measure for the quality of MPs, but I suspect that the lists allow a lot of decidedly average candidates to enter parliament. Under STV, all MPs would need to win election on their own merits, and this, on the whole, ought to result in a better class of MP.

Moreover, because list MPs end up being accountable only to their party hierarchy debate within parties is stifled, or at least kept behind closed doors. No electoral system in which endorsement by a party is crucial to a candidate’s election is going to allow for completely open debate between a party’s MPs. But a system in which all MPs need to convince local electors to support them is more likely to allow MPs some dissent. And with STV, major parties would stand multiple candidates in most if not all electorates, and those candidates would in effect be competing with each other. This would mean that they would each need to identify some personal point of difference to promote themselves.

Undermining party cohesion has been cited by some as a potential downside of STV, but I see it as a positive. I would like to see more debate within parties moved out into the open. STV is the only system likely to promote this.

My only concern is that STV could increase the importance of local issues in deciding national elections. Both FPP and SM would do likewise. This strikes me as a fundamental tension in our Westminster-style Parliament. In the early days of the Westminster system, MPs were very much local representatives whose function was to secure crown funding for swamp drainage or bridge building in their electorate. Under FPP in a modern Westminster system, the vote for one’s local representative in the legislature is in effect a proxy vote for who you want to see form the executive.

MMP offers the opportunity for a more direct vote for the executive (albeit by giving them a majority in the legislature), but it does make the process of electing a local MP somewhat redundant, unless of course one or more of the parties is trying to game the system to circumvent the threshold requirement or to cause an overhang.

Yes you can choose an MP you like even if they’re not from a party you want to see in government, but what for? As Grant Robertson demonstrated, the primary importance of the party vote means that where an electorate MP has a decent list position, their constituents’ concerns are secondary. In a previous post I mentioned Grant Robertson, in his role as a local MP, using a letter from a constituent concerned about state sector redundancies to attack the PM. Would Wellington business owners be able to count on Grant to advocate so publicly their concerns about Labour’s industrial relations policy? I doubt it.

If we are going to maintain the concept of the ‘local MP’ instead of having a parliament elected solely from party lists, then STV is a much better system. No longer would constituencies be represented each term by a single voice, with their MP picking and choosing constituents’ concerns to advocate based on their party’s interests.

To be fair, MMP has a slightly bastardised version of this, in which defeated electorate MPs who make it into Parliament on the list hang around in the electorate pretending to be the “Labour list MP for Otaki” or the National list MP for Ohariu or some such, when in fact they are nothing of the sort. This is the reason many object to MMP – it’s not because MPs defeated in the electorates still end up in Parliament, it’s because they hang around pretending that they still represent the electorate somehow. This only applies to electorates where the defeated electorate MP makes it in on the list, and as such it even becomes a feature of local electorate campaigns. Hone Harawira made this point in the by-election for Te Tai Tokoro, noting that Kelvin Davis would be in Parliament anyway and that the voters would thus have two MPs if they elected Hone. Quite how the MMP advocates square the fact of some electorates effectively having more MPs than others with “all votes being equal” is beyond me.

The most common objection I hear to STV is that it’s too complicated. I don’t buy this at all. All voters have to do is rank the candidates in order of preference. What 5-year-old can’t do that with ice-cream flavours, or even their classmates?

STV won’t be without its problems, but:
· SM doesn’t get rid of list MPs, and still means everybody has but one local MP like them or lump them;
· FPP would return us to a two-party parliament, which I don’t think is desirable; and
· MMP just isn’t what its supporters make it out to be.

NB: I just noticed that David Farrar has also come out in favour of STV for similar reasons. He’s a good sort, that Farrar fellow.

Epic Phail

In the 90’s, I recall it was commonly asserted that there was little real difference between the main parties, and that there was speculation of a ‘grand coalition’ between National and Labour.

Looking back, I suspect that this sentiment was due to the fact that both parties more or less embraced the market economy, and neither was campaigning for a return to any version of New Zealand’s pre-1984 fortress economy/welfare state.

Since 2008, however, the Left have been able to mount attacks on the free market that sound more credible than they have in a long time. The financial crisis has allowed them to piece together a narrative that makes it seem that capitalism has failed, and that the time is ripe to have another go at a planned, socialist economy.

The notion of big government riding in on a white charger to rescue a benighted economy finds fertile ground in the imaginings of some of New Zealand’s under 40s, who never participated in a planned economy, or among those over 40s for whom the pain of reform dulled their recollections of what preceded it.

And so it is that in 2011 around 40 per cent of voters favour a return to state control over the economy to a degree not seen since 1984. It is true that National doesn’t wholeheartedly embrace the free market, and that Labour are not proposing full-throated socialism, but it was with some surprise that I found Bryce Edwards still arguing that the two parties’ policies were almost identical.

This argument seems to me to be a little like arguing that there are no important differences between humans and chimpanzees, since we share 96 per cent of our genome.

Where Labour’s policies differ from National’s this year, with one exception they would slow economic growth and/or further increase national debt. The heroic exception is their proposal to lift the age of entitlement to national super, which is eminently sensible.

National under John Key are dominating the centre ground, and are being careful to alienate as few voters as possible. As such, to a large extent it is Labour’s ineptitude and irresponsibility that make the difference: National’s incrementalist approach being safe but not earth-shattering.

Labour’s key platforms in this election are:

· increasing the minimum wage to $15 per hour
· the reintroduction of compulsory unionism by stealth
· increasing the incomes of beneficiaries
· a capital gains tax
· removing GST from fruit and veges
· a higher top income tax bracket
· opposition to asset sales

National’s campaign has focussed on maintaining the status quo, balancing the books sooner and debt reduction. Its only significant economic announcement was its welfare reform policy, and for the most part it appears content to demonstrate that Labour are fiscally imprudent, while Labour do their level best to make National’s job as easy as possible.

I fail to understand how, but for whatever reason, Labour appear to believe that demand for labour is inelastic. It is central to their economic policy that they can increase the cost and risk of hiring staff, and that this will have no effect on how many staff businesses take on. Occasionally, they even proffer the view that increasing the minimum wage will increase the number of people in employment because those on minimum wage will spend more, thereby increasing demand for goods and services and leading to higher employment. If this is the case, I have asked their members on more than one occasion, why do they not propose a $1,000,000 per hour minimum wage? The answer appears to be, in a nutshell, that a little bit of nonsense is OK, but a lot of nonsense is just silly.

To be fair, there is no question that some businesses would benefit from an increase in the minimum wage. Businesses whose customers are on or close to the minimum wage, but whose staff are paid sufficiently more than the minimum wage that the increase wouldn’t affect their own payroll costs would do nicely. The poor have long been a goldmine, and boosting the yield of that mine will benefit some. But regardless of what the latest OIAed email from Treasury dating from early 2010 might say, there is ample evidence that increasing the minimum wage beyond about 60 per cent of the median wage does cost jobs. [Update: Eric Crampton says his piece on Treasury’s minimum wage email.]

Moreover, I can think of very few employers who would be unaffected by the massive increase in the role of the unions proposed by Labour. Since that was the subject of my previous post, I shan’t devote much space to this point, but suffice it to say that the recent grounding of Qantas flights should sound a cautionary reminder about legislating to artificially inflate the power of unions.

Apparently desperate to stem the flow of votes to the Greens, Labour have given up contesting for swing voters and have started stealing Green policies. Or rather continued, seeing as the Greens have been pushing for a $15 minimum wage for some time. Their most recent acquisition from the Green’s manifesto is the extension of in-work tax credits to those not working. In total, Labour’s policies would boost the income of beneficiary families by around $60 per week. Ironically, given their proposed minimum pricing on alcohol, this combination of policies is likely to in effect be a subsidy to retailers of cheap alcohol.

Given that Labour appear to agree in principle on the need to reduce debt, announcing another $2.6b in reducing the marginal returns from getting a job, while at the same time reducing the number of jobs available is ludicrous and grossly irresponsible.

Labour’s capital gains tax policy was among its least bad. A clean CGT could be a good thing, but Labour’s proposal is not clean and is riddled with exemptions that would seriously undermine any potential benefit. Moreover, I am inclined to accept Eric Crampton’s Seamus Hogan’s argument that capital gains are already taxed and the introduction of a new tax would increase, rather than reduce, distortions caused by the tax system.

Labour’s promise to remove GST from fresh fruit and veges is also fraught. Not content with increasing the risk and cost of hiring staff, Labour also intend to make businesses’ monthly GST returns more complicated, and transfer more public money to lawyers while businesses and IRD go to battle over what constitutes fresh fruit and veg.

While bemoaning the wage gap with Australia and the resulting brain drain, Labour have effectively promised to exacerbate the wage gap for our best and brightest by imposing higher taxes on them. The only section of the population who would come close to closing the gap with Australia under Labour are beneficiaries and those on minimum wage. The proportion of the population closing the wage gap for themselves by moving to Australia would increase.

The only policy difference where Labour enjoys clear support is its opposition to asset sales, but it too is incoherent policy. If asset sales are so bad, and if indeed SOEs are the ladder with which we shall dig ourselves out of our hole, why then does Labour not propose to acquire more? If the dividends from profit-making entities are so important, why does Labour not propose to buy back the rest of Air New Zealand? Or other formerly state-owned businesses, such as Telecom? Indeed, why does Labour not borrow to invest in the New Zealand share market if the dividend returns are so good? If you’re a Labour Party member, the answer, once again, is that a little bit of nonsense is OK, but a lot is just plain silly.

The onus should be on Labour to explain how it is we happen to have precisely the right amount of state ownership of profit making enterprises. It seems a remarkable coincidence, and frankly the mainstream commentators have been outright lazy in not calling Labour on it. I can understand National being reluctant to try to make the point in a soundbite, but the plethora of so-called political journalists have plenty of column inches to ask the question.

Moreover, in their attacks on National for surrendering future dividend income, Labour forget to mention that there is a tax on corporate income and the government will, therefore, sell the shares for 100 per cent of their market value, and get to keep 30 per cent of the income generated from those shares. It’s a fantastic deal, and one which any private company would jump at if they had the opportunity.

The relatively low-key campaign from National masks the extent to which New Zealand faces, in my view, the starkest choice since 1984. Phil Goff’s Labour has put forward the worst economic policies from a major party since Muldoon.

It is an old aphorism that all political careers end in failure. This could hardly be more true than it is for Phil Goff. Entering Parliament on the side of the angels opposing our most disasterous prime minister, he contributed to the most transformational government in New Zealand history. Having finally taken the helm of his party after a 30-year career, he has turned against his own convictions and followed his caucus ever leftward. In doing so, he looks set to go down as the least successful leader in the history of the Labour Party. He will leave Parliament, probably shortly after the next election, unmourned and unmissed. And in the long years of his retirement he will lack even the consolation of reflecting on a noble defeat, earned fighting bravely for what he knew to be right.

Is it any wonder he now wants to talk about voluntary euthenasia?

Government of the unions, by the unions, and for the unions

I don’t know why, on reflection, but I actually expected Labour’s employment policy to be rather bland. I guess I thought that a poorly-considered populist bribe in the form of a massive increase to the minimum wage would be all they would feel the need to do. What I didn’t consider is the extent to which the once-sensible Phil Goff’s blind pursuit of his caucus ever leftward has delivered his party well and truly back into the union fold.

It’s hard to believe that this policy is seriously being advocated by what was once a mainstream party. It’s so bad that Labour was already on the defensive before the policy even hit the mainstream media, so the first news item that Stuff ran on it was titled “Labour defends jobs policy“.

Labour, in mounting said defence, say that their policy would “bring New Zealand in line with other developed countries”. David Farrar has already pointed out that by abolishing the probationary period and by lifting the minimum wage to 72% of GDP per capita, Labour would in fact be taking New Zealand even further out of line with other developed economies. Amusingly, Labour refer repeatedly to Australia in their policy, and cite our low minimum wage as a reason that New Zealanders emigrating to Australia. Yet Australia’s minimum wage is a paltry 52% of GDP per capita.

Don Brash has pointed out that Labour seem determined to ignore the fact that “the more something costs, the less people buy [and that] employers are no different to their customers in this regard”. This has been proven, at huge cost to young people, in the case of Labour’s misguided abolition of the youth minimum wage. Eric Crampton has shown the effects of this policy about as graphically as one could imagine, and yet still Labour pretend that demand for workers is inelastic and not affected by price increases.

Except when it suits them to do acknowledge the laws of supply and demand are in play in the labour market. In part one of the policy that their union masters drafted for them, Labour claim that low wages provide employers little incentive to lift productivity. So Labour appear to believe that higher wages will encourage employers to invest more in technology to improve productivity so that they require less labour, but that this won’t cause them to use (and therefore hire) less labour. It is worth nothing that the last Labour government’s record on productivity growth was atrocious.

Having recently fought tooth and nail to defend left-wing students’ right to force other students to pay fees to support their left-wing political activism, Labour now acknowledges that “a return to compulsory unionism is not the answer”. Instead, Labour plan to give their affiliated unions a privileged position to negotiate employment conditions on behalf of the more than 80% of workers who have chosen not to join a union. Instead of making people join unions, Labour will simply make irrelevant the decision of 80% of the workforce not to.

Almost every line of Labour’s new policy increases the risk and cost to business of employing staff. That is seldom good policy, but to do so at a time of flat demand for labour is mind-bogglingly stupid. Labour’s policy, if implemented, would increase unemployment, increase net migration to Australia, reduce productivity, reduce GDP growth and make New Zealand poorer and more backward.

If any were needed, the fact that Labour’s policy was released by the unions before the party is proof positive that Phil Goff’s only remaining ambition is to be a figurehead leader of a government of the unions, by the unions and for the unions.