Money And Morality: Oil And Water.

Familiar Excuses: Those wondering why our Prime Minister was so willing to countenance a reputationally damaging breaking of Air New Zealand's contract with the Saudi Arabian navy should wonder no longer. Pieces are in motion on the Middle East chessboard. The interests of the majority shareholder in Air New Zealand are, accordingly, in flux. Jacinda Ardern has sniffed the wind and smelled Joe Biden’s aftershave.

CAPITALISM IS CHANGING. Twenty years ago, the sole obligation of a capitalist enterprise (other than abiding by the laws of the states in which it operated) was to generate a return on its shareholders’ investment. So entrenched was this notion that it was specifically referenced in the legislation giving effect to the free-market reforms of the 1980s and 90s. Not anymore. In today’s climate, the interests of shareholders are expected to give way to the moral convictions and/or objections of journalists and politicians. The pursuit of profit now comes second to the quest for ethical perfection.

The current furore engulfing Air New Zealand’s commercial relationship with the Saudi Arabian Navy illustrates the many problems associated with mixing money and morality.

A quick Google search established that, in the words of the Sanctions Scanner website, “there are no formal international sanctions implemented against Saudi Arabia”. Following the gruesome assassination of the journalist, Jamal Khashoggi, in 2018, the US Congress briefly considered imposing unilateral sanctions, but nothing came of it. (In matters relating to “The Kingdom” nothing usually does.) Put simply, there was and is no legal impediment to Air New Zealand entering into a commercial relationship with the Saudis. The company saw an opportunity to make money for its shareholders – and took it.

Yes, but, the Saudi navy is blockading the war-torn nation of Yemen, a country constantly teetering on the brink of humanitarian catastrophe. Refurbishing the gas turbine engines of its warships places the national carrier in the invidious position of at least appearing to be aiding and abetting the perpetrators of acts which some critics of the Saudi regime have alleged to be war crimes.

Some critics? Therein lies the problem. Yemen finds itself in the unfortunate position of being caught up in the struggle for regional supremacy between the Kingdom of Saudi Arabia and the Islamic Republic of Iran. By means of its naval blockade, and intermittent bombing sorties, the Saudi regime has been able to prevent Iran’s proxies – the rebel Houthi militias – from over-running completely what remains of the Saudi-friendly forces associated with the government of President Abdrabbuh Mansur Hadi. The Saudis’ extremely restricted military options in this ferociously complex civil war leave them acutely vulnerable to accusations of war crimes. To date, however, international opprobrium has been deemed preferable to an Iranian ally controlling the geopolitically critical entrance to the Red Sea.

Not that the most vocal critics of Air New Zealand’s association with the Saudis have much to say about geopolitics. For the Greens’ Golriz Ghahraman, the fact that people (many of them children) die in wars is sufficient reason for New Zealand to have nothing to do with them. For Valerie Morse, one of the most outspoken critics of New Zealand’s small but innovative arms industry, there can be no excuse for even the most peripheral involvement of Kiwi companies in the production or refurbishment of military equipment – especially a company whose majority shareholder is the New Zealand state.

All very noble and principled of this outspoken duo, whose political stance, in addition to being high-minded, is also (dare we say it?) guaranteed to attract massive support on Twitter, Instagram and Facebook.

Less ethically lustrous, perhaps, is the consideration owed to Air New Zealand’s highly skilled engineering workforce. With their usual flow of contracts stemmed by the Covid-19 pandemic, the Saudi refurbishment job was likely seen as a godsend. That nobody asked too many questions about what these refurbished engines might be powering is entirely understandable. Air New Zealand’s engineering capabilities are an important contributor to its international success. Management had every right to assume that, as the company’s majority shareholder, the New Zealand state has a vested interest in keeping one of its airline’s most efficient operations economically viable.

It would have been equally understandable if those involved in, and associated with, the contract saw the whole exercise as part of a much bigger picture. New Zealand is, when all is said and done, still a member of what John Key called the Five Eyes “club”. With the two biggest exporters of arms to the Saudi kingdom being fellow Five Eyes members the United States and the United Kingdom, and with the Aussies revving-up their own arms industry in sympathy, New Zealand pitching-in to the geopolitical working-bee may well have been seen as the shrewdest move – diplomatically-speaking.

The Iranians already possess the capability of closing the Strait of Hormuz at the entrance to the Persian Gulf. Allowing them to close-off the entrance to the Red Sea would be greeted with alarm and dismay by all those nations dependent on the oil and natural gas reserves of the Arabian peninsula. That’s not just us, by the way, but also our biggest trading partners China and Australia.

To Ms Ghahraman and her Green colleagues, the prospect of so dramatically exposing the world’s dependence on fossil fuels was, no doubt, an alluring one. Unfortunately, the global economy is nowhere near being able to do without coal, oil and natural gas. For many years to come, the strategic criticality of Middle East oil will drive the decision-making of nations much larger and more ruthless than New Zealand.

That the very existence of the Air New Zealand-Saudi relationship came to light at all may be related very closely to the recent political shifts in the biggest and most ruthless nation of them all – the United States of America. On 4 February 2021, America’s new president, Joe Biden, delivered a foreign-policy speech in which he signalled the USA’s unwillingness to let the bloody stalemate in Yemen continue.

“This war has to end,” said Biden. “And to underscore our commitment, we’re ending all American support for offensive operations in the war in Yemen, including relevant arm sales.”

Those words should not be interpreted as an indication of the USA’s willingness to let the Iranians claim victory – far from it. What Biden’s announcement portends is Washington’s impatience with the Saudi regime’s military inadequacies. Donald Trump may have taken its Crown Prince’s assurances that his armed forces were more than a match for Houthi militiamen, but Biden is much more willing than his predecessor to believe the evidence of his military and diplomatic experts on the ground. Uncle Sam is getting ready to butt some intransigent heads together. Mohammed bin Salman’s ambitions will be put on ice, while the Iranians will be offered an end to crippling US sanctions if they undertake to help broker a lasting peace in Yemen.

Those wondering why our Prime Minister was so willing to countenance a reputationally damaging breaking of the gas turbine contract should wonder no longer. Pieces are in motion on the Middle East chessboard. The interests of the majority shareholder in Air New Zealand are, accordingly, in flux. Jacinda Ardern has sniffed the wind and smelled Joe Biden’s aftershave.

Maybe capitalism hasn’t changed that much after all?

This essay was originally posted on the Interest.co.nz website on Monday, 15 February 2021.

A Creative Solution To Tourism’s Demise.

Paradise Lost: The millions of tourists who collectively constituted New Zealand’s largest single source of overseas funds will not be returning to these shores any time soon. For the foreseeable future, tourism and the multitude of businesses that serviced its voracious appetites, will be – to use a technical term – buggered.

LET’S BE HONEST, most sectors of the New Zealand economy will recover relatively quickly from the Covid-19 Pandemic. Our primary production sector and all the businesses that support it will bounce back. Our secondary industries will, in large measure, do the same. Indeed, pressures are already building for our industrial sector to step up to the challenge of increasing New Zealand’s economic resilience. Winston Peters is far from being the only person who regards the virtual elimination of this country’s import substitution capability in the 1980s and 90s as a singularly unwise policy.

But, the millions of tourists who collectively constituted New Zealand’s largest single source of overseas funds will not be returning to these shores any time soon. For the foreseeable future, tourism and the multitude of businesses that serviced its voracious appetites, will be – to use a technical term – buggered.

There simply aren’t enough New Zealanders with enough time and money to fill the tourist void. For the past twenty years we have struggled to keep pace with the demands of our international visitors. For every hotel we built; every new adventure we devised; every taste-bud-titillating restaurant we opened; there were always more and more customers to satisfy.

They came on vast cruise ships – floating towns that disgorged virtually their entire populations to spend, spend, spend for hours – sometimes days – at a time. All the cruise liners in the world, however, could not compete with the unending stream of airliners touching down at our international airports. Most of them packed full of passengers eager to enjoy their very own New Zealand experience.

Future historians will look back with wonder at the age of hyper-tourism. They will observe how cost-cutting innovations in aviation technology combined with the exploding numbers of newly enriched middle-class citizens from countries hitherto priced out of international travel to produce a surge in tourist numbers so great that the attractions they travelled thousands of miles to enjoy threatened to collapse under the sheer weight to their numbers. In the late twentieth century the New Zealand tourist industry looked forward to welcoming a million visitors a year. By 2020 it was gearing up to entertain five times that number.

But the Covid-19 Pandemic arrived instead and now this country finds itself with more tourist-oriented enterprises than can possibly be sustained by its tiny population.

The first and most obvious victim of the pandemic was the national carrier, Air New Zealand. Practically overnight, the airline lost 80 percent of its business. Of necessity the Government bailed it out. Located as they are at the bottom of the world, New Zealanders simply cannot do without their own airline. What other carrier, in the prolonged absence of the tourist hordes, would come so far, and at such cost, except Air New Zealand?

Sadly, not every carrier has a state to bail it out. From the hundreds of airlines traversing the skies in the age of hyper-tourism, the post-pandemic world will likely be serviced by no more than a few dozen. Fares will sky-rocket and the number of international tourists will plummet. The days of the golden tourist weather will be well and truly gone.

And what of the cruise ships? After the horrors of the Diamond and Ruby Princesses, the world may have to wait many years for the return of those floating towns and their wealthy pensioner passengers. Indeed, History may record the cruise ship craze as the last hurrah of the death-defying Baby Boom Generation. The cost of insuring themselves against involuntary quarantine should, alone, be more than enough to put off their children and grand-children!

The urgent problem remains, however, of how New Zealand fills the tourist void. What can possibly take the place of those millions of international travellers and their oh-so-precious hard currency? An expanded “bubble” encompassing the whole of Australia? It’s a nice thought, but hardly a practical one. Making it work – without reigniting Covid-19 – poses a truly daunting number of questions. What’s needed is a product the world is willing to buy: a product unique to New Zealand.

If the world can no longer come here by ship or plane, then why not invite it to tour the landscape of our imagination? Let’s invest in movies, television series, plays, music, novels, computer games. Encourage the world to partake of New Zealand’s unique creativity.

This essay was originally published in The Otago Daily Times and The Greymouth Star of Friday, 8 May 2020.

Labour And NZ First: Partners In Populism - Or Not?

Kindred Spirits? The only way the coalition between Labour and NZ First can ever be made to work is if Jacinda Ardern, beneath the necessary veneer of “responsible government”, is actually every bit as populist as Winston Peters.

POPULISM VERSUS RESPONSIBLE GOVERNMENT. The Regions versus Metropolitan New Zealand. NZ First versus Labour. Shane Jones versus Grant Robertson. “Oh yes, Ladies and gentlemen, there’s Trouble: Trouble with a capital ‘T’; and it’s brewing right here in Political City!”

The only way the coalition between Labour and NZ First can ever be made to work is if Jacinda Ardern, beneath the necessary veneer of “responsible government”, is actually every bit as populist as Winston Peters.

No other political modus vivendi offers the slightest chance of success. In no time at all, an ideologically “responsible” Labour-led government would be placing a whole platter-full of dead rats before its coalition partners and expecting them to smack their lips with delight. How many of these delicacies NZ First could consume before its remaining followers threw up their hands in horror and disgust is uncertain – but it’s highly unlikely to be a lot.

It wouldn’t be quite so bad if Labour’s junior coalition partner possessed a solid buffer of popular support to keep it safely above the 5 percent MMP threshold. Enough to sanction a little tactical erosion. But this is not the case. By opting to put Labour on the Treasury Benches, Winston Peters instantly burned-off that part of his electoral base which had been expecting him to turn right. The 7.2 percent support NZ First attracted at the General Election was halved in the first of the big post-election opinion polls. A steady diet of dead rats is hardly likely to improve the party’s position!

The biggest of those rats – the CPTPP – was, perhaps, unavoidable. To take on the combined forces of MFAT, MPI, Treasury, Business NZ and Federated Farmers in the first crucial weeks of the coalition’s life was simply too big an ask. Even the most radical of NZ First’s populist followers could see that. Likewise, the need to cry ‘Tai Hoa!’ on the free-trade agreement with the Russian Federation. If Teresa May’s “sexed-up” accusations are proved to be as false as Tony Blair’s WMDs – as a great many of NZ First’s members expect – then Albion’s perfidy will soon be made clear and negotiations can resume with gusto.

The consumption of rat carcases must, however, end right there. Labour cannot afford to set any more before Winston Peters and his caucus colleagues. They have allowed Jacinda to take what she absolutely had to have – now it’s her turn to give NZ First what it needs.

But can she? Will her “Kitchen Cabinet” – David Parker, Grant Robertson, Phil Twyford – let her? The answer would appear to be ‘No’. Not if the Labour Party leadership’s reaction to Shane Jones’ full-scale populist assault on Air New Zealand’s treatment of the provinces is anything to go by.

Jones’ attack was perfectly pitched to the pissed-off provincial voters NZ First needs to win back. It was excoriatingly anti-corporate and anti-elitist: directed with pin-point populist accuracy at the Big End of Town. All that Labour had to do in response was avoid saying anything that could be interpreted as a reproof of Jones’ rhetorical axe-swinging.

After the arrogant telling-off directed at Finance Minister Robertson by Air New Zealand’s management, saying nothing should have been a no-brainer. No government can afford to let itself be lectured to by a corporation in which the people of New Zealand hold a 51 percent stake.  Certainly, a brief media release from Robertson (confirming that he would be carefully considering the composition of the Air New Zealand board in September) would have popped a cherry on the top of Jones’ populist sundae – but it wasn’t essential. Labour’s silence would have spoken loudly enough.

Significantly, neither Jacinda Ardern nor Grant Robertson were willing to keep silent on the subject of Jones’ populist broadside against the management of Air New Zealand. The Prime Minister felt compelled to tell the news media that: “Calling for the sacking of any board member is a step too far and I have told Shane Jones that.” Robertson, according to the NZ Herald, “said he disagreed with Jones and the board and chief executive were doing a good job.”

It is impossible to argue that Robertson’s comment was not also directed with pin-point accuracy at the Big End of Town. The problem is, instead of informing the corporate elite that Labour was standing shoulder-to-shoulder with its coalition partner, he let them know, in terms that could not possibly be misconstrued: “We’re with you guys.”

All of which leaves Winston Peters with some very serious thinking to do. Because the party in which he opted to place his trust in October 2017: the party he still believed capable of belting out Mickey Savage’s and Norman Kirk’s “Hallelujah Song”; is steadily demonstrating, both to NZ First and the New Zealand electorate, that the only songs it remembers how to sing are the ones it learned from Roger Douglas back in the 1980s.

And that won’t do – not at all. Thirty-nine working-parties and policy reviews are no substitute for NZ First’s plain and simple promises to put things right. Those promises were a big part of the reason why Labour, NZ First and the Greens won enough seats to form a government.  If they are not kept or, worse still, they are shown – by Labour – to be “just the sort of thing you say when you’re in Opposition and then forget about when you’re in Government”, then NZ First will simply have no to say “fuck it” – and walk away.

This essay was originally posted on The Daily Blog of Friday, 23 March 2018.