I have read Chris Trotter’s columns for many years, since well before I stopped being a leftist. He is consistently interesting, even if his opinions veer haphazardly from the eminently sensible to the silly and destructive. Even those that reach neither extreme are generally entertaining and thoughtful.
I was disappointed then to read his deeply-confused piece, Just Leave Us Alone, posted recently on Bowalley Road and published in the Dominion Post. Trotter’s endorsement of the aphorism “that government is best which governs least”, and his injunction to John Key to intervene less and embrace laissez-faire might lead one to conclude that he had switched sides and was batting for Act.
But when Trotter urges less intervention, he isn’t seeking a reduction in the government’s role in the economy, or of its ability to interfere in the lives of its citizens. On the contrary, in a previously unknown definition of the term, Trotter’s version of laissez-faire is a government that doesn’t do anything to roll back the excesses of the previous socialist government. Attempting to redress some of the distortions in the labour market caused by the welfare state, far from being a being a non-interventionist policy is, according to Trotter, a new form of intervention, and a sadistic one at that. Quite how Trotter thinks that a government can legitimately claim to be laissez-faire while presiding over a bureaucracy that consumes nearly half of all wealth produced by its population is a mystery to me.
I think Chris is too decent a person to be trying to manipulate political discourse through the intentional misuse of terms, but I also think he’s too smart for this to be a genuine misunderstanding. I admit to being puzzled by this.
More disappointing than his curious misappropriation of classical economic thought, however, is his labelling of anyone who genuinely wants less intervention and laissez-faire government as ‘social sadists’. Drawing on the language of the fatuous ‘Occupy’ movement, Trotter asserts ‘one percenters’ are in the grip of a peculiar and dangerous social pathology, and that:
Where a normal person would happily sit back and enjoy their superfluity of wealth and power, these folk cannot rest easy until they are satisfied that their “More” is the product of someone else’s “Less”. Their comfort is made from our misery; their pride from our humiliation; their strength from our weakness.
The reason that normal people do not have a superfluity of wealth and power is precisely because most people are not willing to devote the energy that it takes to make it big. Very few become rich without massive sacrifice in terms of family life and leisure. Anyone possessed of a mindset that would see them sit back and enjoy their wealth once it was acquired is very unlikely to become wealthy in the first place.
The common misconception that those who become wealthy do so at the expense of others is dangerous and counterproductive. Without question, there are some specific instances where that is the case, but in a capitalist system it is the exception rather than the rule. Indeed, such cases tend to be the product of crony capitalism, or bureaucratic corruption, or of actual criminal behaviour. Michael Fay’s recent attempt to screw Crafar Farms’ creditors out of tens of millions of dollars by manipulating xenophobia and the regulatory system springs unbidden to mind.
To be fair, viewed through the span of human history, productivity as a pre-requisite for wealth is a new-fangled innovation. For most of history, the More for some was almost always the product of someone else’s Less. If Trotter were (a very old) Russian and had spent his years first under the Tsar, then the Soviets and finally under Russia’s new crony-capitalist cleptarchy, one could understand his error. But he didn’t. And the very wealthy in New Zealand, with few exceptions, are those who have produced the most value for society. Trotter is a beneficiary of their productivity, and his attack on the ‘one percenters’ is hopelessly antiquated.
While politicians and political commentators are willing to pretend that businesses and entrepreneurs generate riches for themselves without also benefiting other members of society, New Zealand’s economy will never reach its potential. While it remains acceptable to attack those who create wealth as being selfish and greedy, while they can be labelled ‘social sadists’ because they’re sick of seeing their property confiscated and wasted by an inefficient bureaucracy, we will remain firmly stuck in the bottom half of the OECD.
It’s been a longish break, but it’s time to start blogging again.
I had been looking for a new topic to start the year with, but as it happens the only discussion thus far this year to capture my interest sufficiently to break my lazy retreat is a continuation of a discussion from last year – namely Brian Bruce’s stupid child poverty documentary.
It’s in the news again because John Key’s electorate chairman Stephen McElrea has, in his capacity as a member of the NZ on Air board, raised concerns within NZ on Air regarding the timing of the documentary, which led to NZ on Air, who funded the documentary, complaining to TV3.
McElrea (and plenty of others) believe that the documentary was politically biased and when shown so close to an election was, in effect, propaganda for National’s opponents. For their part, the Labour Party believe that it is National who are now guilty of political interference via a vis NZ on Air.
I read with interest John Pagani’s Stuff blog on the subject. Pagani showed some brief flashes of sanity toward the end of last year, and so when I saw the headline “No Political Interference in TV”, I rather hoped that his newfound good sense would hold. Alas, it appears to have deserted him in the same way that voters deserted his party.
Pagani could have recalled Labour’s fight to exclude outside interference in political debate during elections that culminated in the ill-considered Electoral Finance Act, and suggested that, regardless of one’s views on the merits of the documentary, it was inappropriate for it to be screened so close to the election.
Instead, drawing on the analytical skills that have made him a regular in Auckland University’s Stat of the Week awards, he labelled McElrea’s complaint ‘dodgy as’.
Reading through the comments on Pagani’s post, I was reminded that, for the most part, the rule of thumb in determining whether something is ‘objective and factual’, or ‘biased and innaccurate’, is whether you agree with it or not.
I suspect this is inevitable. I doubt it would be possible to make a documentary both interesting and objective. As soon as a documentary maker selects people to interview, she or she biases the documentary. For anything other than the most narrow of subjects, it’s not realistic for documentary makers to meaningfully represent the full range of opinion. Even if they try, the documentary will usually favour speakers given the final say on any given matter. Meanwhile, even a purely ‘factual’ documentary will be biased in one direction or other through the selection of facts, seeing as it’s hardly likely that any documentary would be able to faithfully report every potentially relevant fact.
Every documentary will be a summary of sorts, and every summary knowingly omits facts that the makers consider less important or relevant than others. Those on the Left perceive Bruce’s documentary as ‘balanced’ because the facts that he ignores are not among the facts they consider important. Those disinclined to believe that the solution to poverty is more welfare, are likely to take issue with the fact that Bruce ignored the large-screen TVs, Nintendo Wiis and expensive surround sound systems in the houses he visited.
Given that this is an intractable problem, I think the only approach is to stop expecting documentaries to be balanced and accept that any documentary on any subject will have a slant of some sort.
That being the case, I think that concerns expressed about the documentary’s screening are entirely legitimate, given that it was funded by NZ on Air. Any documentary on poverty in New Zealand made from whatever perspective could reasonably be expected to influence voters when screened immediately before an election. Having fought so hard to limit the input of third parties into elections when they passed the Electoral Finance Act, you would think Labour and their supporters might be a little circumspect when defending the use of taxpayer funds for a documentary on a subject clearly relevant to an election two days later.
Pagani et al pretending that the documentary was entirely ‘factual’, and therefore ‘balanced’ is naive in the extreme. Pagani notes that the documentary discussed solutions to poverty, but he cannot be blind to the fact that there is more than one opinion on how to best alleviate poverty, and I doubt even he would claim that the documentary seriously engaged with options beyond spending more money on state houses and benefits.
What’s more concerning is the suggestion that ‘poverty’ shouldn’t even be a political issue. Pagani doesn’t make that position explicit, but I think it’s implied by his comment that “Steven Joyce defam[ed] the documentary … calling it left wing. By this he means it discussed poverty and solutions to it.” So what Pagani is saying is that a documentary advocating in favour of a much larger welfare state shouldn’t necessarily be considered left wing. It’s not right wing, so the alternative Pagani leaves is that a massive expansion of the welfare state is apolitical. Various commenters were much more explicit, arguing outright that “poverty should not be a political issue”. Which is to say that expanding the welfare state to alleviate the latest definition of poverty shouldn’t be up for debate. Lindsay Mitchell points out a similar line of reasoning from a Herald columnist regarding child abuse.
If you believe that 50 per cent of the population plus one have the right to forcibly acquire wealth and from the other 50 per cent minus one, you cannot then plausibly argue that 50 per cent plus one don’t have the right vote against having their money taken. It’s a worrying demonstration of how thin their commitment is to democracy. It’s not enough that a system that allows people to vote themselves wads of other people’s money will inherently favour left-wing policies, but if the electorate demonstrate too much restraint in their acquisitiveness, then debate should be shut down.
Rather than shutting down debate, I think we should accept that there’s no such thing as unbiased commentary. I don’t think we should restrict the publication of politically charged material at any time. Nor, however, do I think the taxpayer should fund either side of the debate. That’s what I would call ‘no political interference in TV’.
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 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.
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:
Regulatory Standards Bill
Legislated Spending Limits
Resource Management Act streamlining
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.
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.