Accidentally Pandering To The Rich – On Purpose.

Glad You Liked It! In a nutshell, what Bernard Hickey’s Kaka podcast seems to be saying is that in an unabashedly capitalist nation, a government elected on the strength of middle-class (i.e. homeowners) votes, made sure that the massive transfers of cash required to keep the economy afloat in the midst of a global pandemic went to capitalists, and the people whose votes it really, really, really didn’t want to lose. Well, duh! Who would have thought it?

THERE’S NO DISPUTING the shock-value of the statistics assembled by Bernard Hickey in his latest Kaka podcast. What they show is that, in responding to the Covid-19 pandemic, the New Zealand Government transferred vastly more money to the business sector and homeowners than it did to beneficiaries and the working poor. Or, as he puts it: “The Labour Government, supported by the Greens, presided over policies that accidentally on purpose engineered the biggest transfer of wealth to asset owners from current and future renters in the history of New Zealand.”

Well … maybe. The problem with statistics is that they are generally presented without regard to context. To be honest, that’s probably a good thing. I don’t think it would be all that helpful (or ethical) for the Department of Statistics to encase its data in a carapace of tendentious ideology. In the 1950s American cop show, Dragnet, the hero’s signature line was: “Nothing but the facts.” That sounds about right to me.

So, let’s not argue about the facts. I’m sure a financial journalist of Mr Hickey’s experience has got the numbers right. What I’m much less certain of is whether his interpretation of the facts makes a great deal of sense.

In a nutshell, what Mr Hickey seems to be saying is that in an unabashedly capitalist nation, a government elected on the strength of middle-class (i.e. homeowners) votes, made sure that the massive transfers of cash required to keep the economy afloat in the midst of a global pandemic went to capitalists, and the people whose votes it really, really, really didn’t want to lose.

Well, duh! Who would have thought it?

And, with all due respect to Mr Hickey, it is nothing short of facile to evince horror and outrage that the perpetrators of this exercise in maintaining class (and, let’s be honest, racial) privilege were Labour and Green politicians. Labour gave away its historical role as the workers’ friend in 1984 – nearly 40 years ago. What’s more, since the introduction of “Rogernomics”, the Labour Party has occupied the Treasury Benches for a total of nearly 14 years. In all that time, it has made no serious attempt to dismantle the neoliberal regime it created. Expecting Jacinda Ardern to behave like Mickey Savage is just silly.

Especially when you consider the makeup of New Zealand’s House of Representatives. Labour, an unabashedly capitalist party, holds 65 seats. National, another unabashedly capitalist party, holds 35 seats. Act, a fanatically capitalist party, holds 10 seats. The Greens, supposedly not a capitalist party, but one which has, to date, done nothing to suggest that it is an anti-capitalist party, also holds 10 seats. Which leaves the Māori Party, an ethno-nationalist party which appears to be okay with capitalism – but only if it’s Māori capitalism – with just 2 seats.

The question I would put to Mr Hickey is: How would he have persuaded this House of Representatives, composed more-or-less entirely of MPs committed to the preservation of New Zealand’s capitalist system, to adopt policies which differed in any meaningful way from those actually implemented by the Labour Government of Jacinda Ardern? Not forgetting that for the first few months of the Covid-19 pandemic, the Prime Minister was dependent on the support of NZ First – a party convinced that capitalism could, and should, do better.

Presumably, Mr Hickey believes that New Zealand’s parliamentarians, alerted to the sheer bloody inequity of their Covid response, should have felt obliged to come up with something much kinder and fairer.

But why would they feel obliged to do that? Just recently I learned that in the United States the friends of capitalism (about 90 percent of the country!) not only believe in the doctrine of laissez-faire – French for letting the market rip – but that they also subscribe to what they call “lazy-fair”. Apparently, because so many of the underprivileged are lazy, it’s only fair that they’re poor. I know, I know, it’s an awful thing to say – although I’m sure it raises a good guffaw among the Country Club set. But, you know what? Although they would never repeat such an awful “joke” out loud, there are plenty of Kiwi MPs (some of them in the Labour Party) who subscribe wholeheartedly to the underlying philosophy of the “deserving” and “undeserving” poor.

Even worse, there are hundreds-of-thousands of ordinary Kiwi voters who subscribe to exactly the same philosophy – with bells on. The awful truth about New Zealand politics is that practically all of our political parties are just too scared to suggest anything like the massive transfer of wealth to the “current and future renters” whom Mr Hickey clearly believes the Government’s Covid response should have targeted.

The only way such a transfer could possibly have eventuated is in a political context dominated by the electoral success of a party aggressively representing the interests of the working poor and beneficiaries. Assuming such a party drew the bulk of its support from the 700,000 eligible voters who declined to participate in the last election, its impact on what politicians considered both possible and acceptable would be huge.

The problem, of course, is that every party which has tried to mobilise these voters has failed miserably. The Internet-Mana Party may have had a brilliant manifesto (so brilliant that I voted for it!) but its share of the 2014 Party Vote was a demoralising 1.42 percent.

In other words, if all the “current and future renters” had voted for Internet-Mana in 2014, its ideological and political influence would have made the Covid-19 response delivered by Labour over the past 21 months unthinkable.

And that’s what I mean by statistics shorn of context not amounting to very much. For the only people who counted – the people who voted – Jacinda Ardern’s and Grant Robertson’s Covid response was good enough to see them returned to office with 50 percent of the Party Vote. That Mr Hickey should be surprised that the values of politicians tend to reflect the values of their supporters is, itself, surprising.

If he wants a revolution, Mr Hickey will need to do more than excoriate Labour and the Greens on Substack – he’ll need to organise one.

This essay was originally posted on The Daily Blog of Thursday, 27 January 2022.

The Choice: Giving Up, Or Keeping Hope Alive?

Which Way Should We Go? How I wish this country possessed a playwright of Edward Albee’s skill. Someone who could give us our very own version of Who’s Afraid of Virginia Woolf. A dramatist with the ability to peel back all the layers of posturing political rectitude and fashionable self-criticism until we are able, finally, to look upon the hard-boned determination of those who “have”, to make sure that nothing of theirs is wasted on those who “have not”. To see the grinning neoliberal skull beneath the superficial “progressive” smile.

DECIDING whether Bernard Hickey or Megan Woods deserves a big fat raspberry is the task I’ve set myself. To understand why, I’m afraid you’ll have to visit The Spinoff website (a trial, I know, but there’s no other way) and read their respective contributions. (Spoiler Alert: Bernard gives up all hope for a better future, while Megan struggles to keep hope alive. ) What are they arguing about? Housing supply and affordability – what else! Is there a clear winner? No. Neither of the protagonists offers much in the way of convincing answers. Even so, after considerable cogitation, I’ve decided that the big fat raspberry should be blown at Bernard. Self-flagellation, middle-class guilt, and a gutless capitulation to the status-quo is a pretty ghastly combination – but Bernard pulls it off.

At the root of Bernard’s despair lies his inability to think outside the market square. Like so many of his generation he drank deeply of the neoliberal Kool-Aid, and it left him with a permanent aversion to left-wing ideas. Being born and raised in rural Waikato (New Zealand’s equivalent of Alabama) wouldn’t have helped. Nor would his decision to become a financial journalist. (You don’t find many Marxists on the world’s business pages!) It does, however, explain why, when confronted with the irrefutable evidence of the markets’ failure, Bernard flounders in ideological and moral confusion. Like those poor old codgers who invested all their intellectual and emotional capital in the Soviet Union, he had nowhere to turn when reality laid his ideology low.

Conveniently missing from Bernard’s history of the Neoliberal Era in New Zealand is any reference to Jim Anderton’s Alliance. Now, he would no doubt object that he was out of the country for most of the 1990s – earning the big bucks in Australia and Europe. But that’s the whole point. People like Bernard bade their country farewell at the first opportunity. All that free education and health care, all that social security: the tens-of-thousands of dollars invested in him by his fellow citizens; it all went to foreigners. If all the Bernards and Bernadettes of the 1980s and 90s had thrown in their lot with Anderton and his followers, the tragic failures detailed in Hickey’s Spinoff post might have been avoided. But Bernard and his ilk sneered at Anderton and the Alliance. The Left were economic Neanderthals. Losers.

Which is why, even now, with the evidence of neoliberalism’s failure all around him, the best advice Bernard can offer young New Zealanders is to do what he did. Leave their country to its fate. Run away. Refuse to stand and fight for a future worth living in. Abandon ship. Abandon hope.

Gutless.

But he’s not alone. Something tells me that a great many young New Zealanders remain secret adherents of the debunked mythology of free market forces. That underneath all that lovely woke window-dressing (which Bernard buys into with his guilt-ridden confessions about “endowments”) lies a disreputable grab-bag of neoliberal assumptions about how economies work, and, perhaps more importantly, about why economies run along any other lines won’t work. With a guilty thrill, Generations X and Y will own up to being racists and sexists – but not socialists. At least, not the sort of socialists who refuse to be guided by properly credentialed professionals and managers.

How I wish this country possessed a playwright of Edward Albee’s skill. Someone who could give us our very own version of Who’s Afraid of Virginia Woolf. A dramatist with the ability to peel back all the layers of posturing political rectitude and fashionable self-criticism until we are able, finally, to look upon the hard-boned determination of those who “have”, to make sure that nothing of theirs is wasted on those who “have not”. To see the grinning neoliberal skull beneath the superficial “progressive” smile.

Not that Housing Minister Megan Woods vouchsafes too many smiles these days – progressive or otherwise. These days Megan’s more into frowns. The earnest frowns of the political realist who knows that there is no simple or quick fix to New Zealand’s housing crisis. The stoical frown of the left-wing politician who yet remains unflinching in her determination to keep on doing what she can with what she’s got.

The problem, of course, is that what Megan’s got is a bunch of Labour people whose view of “practical economics” is not that far removed from Bernard’s. I’m pretty sure that Megan – who did join the Alliance and did battle against the forces of neoliberalism – would like nothing more than to initiate a full-scale mobilisation of the state’s resources to build, build, build and build some more. Build until, at last, the supply of houses exceeds the demand, and – horror of horrors! – the upward curve in the price of housing flattens-out and – yes! – commences a slow but unmistakable decline.

Frustrated? I’m sure Megan is incredibly frustrated. Angry? That too, undoubtedly. But for all the obstacles placed before her; for all the stupid and unhelpful decisions of her colleagues; for all the carefully rehearsed talking-points prepared for her by overpaid former journalists who should be ashamed of themselves; Megan Woods is still fighting. Still hoping for a better tomorrow.

Unlike Bernard, Megan hasn’t given up.

So, a big fat raspberry for Mr Hickey. And for Megan a gentle (but no less sincere for being just a little bit muted) round of applause.

This essay was originally posted on The Daily Blog of Friday, 2 July 2021.

New Arrangements: How Substituting ‘Aotearoa’ For ‘New Zealand’ Could End Up Destroying Both.

New Arrangements: Those who unthinkingly endorse the formulaic imprecations against systemic racism pouring from Race Relations Commissioner Meng Foon’s mouth, should remember the above scene from the movie Dr Zhivago. Revolutions do not always fail, but they do not always improve matters, either. In the name of social justice, the poor and the marginalised may seize the big houses of the rich, but they cannot live in them as the rich lived in them. Nor will they be taken without a fight.

 

MENG FOON, currently serving as the Human Rights Commission’s Race Relations Commissioner, epitomises New Zealand’s emerging ethnic crisis. His repeated refusals to view New Zealand society through anything other than the lens of entrenched ethnic privilege is exacerbating this crisis, not ameliorating it. That he receives no reproof from his fellow Human Rights Commissioners confirms that these are not considered personal lapses. The exacerbation of ethnic animosities in New Zealand should now be seen as both deliberate and systemic.

For the Labour Government of Jacinda Ardern the situation could hardly be more precarious. Over the next 5 years, as the Maori nationalist agenda is steadily advanced by its supporters both in and out of Parliament, more and more New Zealanders will demand an answer to the question: “Are these policies – and the radical changes their acceptance requires – understood and endorsed by Jacinda Ardern and her Labour colleagues; or, is she and her Government being played for fools?”

If the Prime Minister affirms her understanding and endorsement of the Maori nationalist agenda, then the ethnic crisis will become a straightforwardly partisan issue. With varying degrees of enthusiasm, the Left will support it. With steadily rising levels of vehemence, the Right will oppose it.

From some perspectives, this could be seen as the best option. By submitting the issue to the collective judgement of the voters, the strength of the contending forces will be exposed. The raw political calculus of the ballot box will clarify once and for all which of the two contenders’ assessment of the New Zealand electorate is correct.

The Left’s optimistic view of this country’s future will be put to the test. We shall discover whether most voters under the age of 55 really are uninfected by the racist colonialist prejudices of their parents and grandparents: really are so undaunted by the prospect of living in “Aotearoa”: a nation attuned fundamentally to the needs of te ao Maori; that they are willing to see the colonial legacy of Pakeha “New Zealand” fade away like a nineteenth century sepia print?

If that is the judgement of the electorate, then the Right will have to accept that its understanding of what it means to be a New Zealander no longer enjoys majority support. The proposition that New Zealand is a nation founded upon the philosophical and scientific precepts of the European Enlightenment, and governed according to its core principles of Liberty, Equality and Social Solidarity, will have been rejected. It would be a remarkable judgement, occasioning prolonged and impassioned remonstration, but the relentless passage of time would thin the ranks of the remonstrators, rendering it permanent.

It is, of course, highly unlikely that Jacinda or her party will ever openly endorse the Maori nationalist agenda. Principally, this is because neither the Prime Minister, nor her Pakeha colleagues, fully grasp its significance. The reason for this is set forth with brutal honesty and simplicity by the author of “Maori Sovereignty”, Donna Awatere. When challenged to explain why Pakeha would simply sit back and let the tangata whenua re-establish their hegemony over Aotearoa, Awatere responded:

“The strength of white opposition will be allayed by the fact that Maori sovereignty will not be taken seriously. Absolute conviction in the superiority of white culture will not allow most white people to even consider the possibility.”

In this regard, “Maori Sovereignty” belongs in the same category as “Climate Change” and “Housing Affordability”. People support the notion because, stated theoretically, it is difficult to identify a good reason for opposing it. Until, that is, they begin to get some idea of how much their lives will have to change if these propositions are ever taken seriously by government.

As Bernard Hickey pointed out in a recent (and excellent) posting on his website “The Kaka”:

“New Zealand is currently in the strategizing phase of dealing with its enormous housing affordability and climate change issues and politicians of all shades and sizes are doing plenty of swinging and falutin’. They are set to get eaten for lunch by an entrenched culture and love of suburban houses, double-cab utes, SUVs, low taxes and ‘small target’ political strategies.”

The moment the Prime Minister and her Cabinet colleagues register that their Maori caucus, the Greens, and Te Paati Maori are serious about carrying through a revolution in New Zealand’s constitutional arrangements – and what endorsing such revolutionary proposals is likely to do for Labour’s poll-ratings – they will execute a policy handbrake-turn of Tokyo Drift proportions.

Jacinda, herself, could profitably ponder the reasons behind Helen Clark’s description of the Maori nationalist movement as “haters and wreckers”. Even a moderate centre-leftist like Clark, could not avoid the painful impact of the first great wave of identity politics that swept through progressive politics in the late-1970s and early 1980s. To know the founding zealots of the Maori Sovereignty movement was not necessarily to love them – or their programme!

Jacinda’s easy acceptance of the new ethnic orthodoxy – so perfectly embodied in the outpourings of Meng Foon – points not to her wholesale conversion to the Maori nationalist cause, but to its impressive institutional advance. The successful implementation of a succession of superficially harmless measures (e.g. the substitution of ‘Aotearoa’ for ‘New Zealand’) will, should it ever achieve “critical mass”, precipitate a nationalist victory. The relentless accumulation of these “minor” reforms confirms the essential truth of the “slowly boiled frog” fable.

That said, those people on the Left who put their faith in a “generational fix” to the problems “caused” by ethnic privilege should, perhaps, ask themselves the following questions:

“Will the tens-of-thousands of middle-class teenagers who poured out onto the streets in support of Greta Thunberg’s call for action on Climate Change, really be willing, as young adults, to give away all hope of living as their parents lived?

“Do they really see their fathers, brothers, cousins and boyfriends giving up their cars, their double-cab utes, their SUVs?

“Are they willing to abandon the dream of one day attaining the blissful suburban security they grew up in?”

There’s a scene in the movie Dr Zhivago where the hero and his family return to Moscow to discover their elegant bourgeois mansion occupied by dozens of poor families. The local Communist Party representative primly announces that the building which once housed a few privileged individuals now provides shelter to many working-class families. She fixes him with a basilisk glare, daring him to disagree. Zhivago looks around at the squalid, over-crowded and unsanitary sink of poverty that his family home has become, and summons up a smile: “Yes”, he says, “this new arrangement is much better – much fairer.”

Those who unthinkingly endorse the formulaic imprecations against systemic racism pouring from Meng Foon’s mouth, should remember that scene. Revolutions do not always fail, but they do not always improve matters, either. In the name of social justice, the poor and the marginalised may seize the big houses of the rich, but they cannot live in them as the rich lived in them. Nor will they be taken without a fight.

Aotearoa was seized from the Maori at gunpoint by the Pakeha. History suggests that New Zealand will only be reclaimed from the “colonisers” by the application of similar force. But those eagerly anticipating such an ethnic revolution should understand that the country which emerges from it will be neither Aotearoa nor New Zealand, but something else. And the new arrangement won’t necessarily be better – or fairer.

This essay was originally posted on The Daily Blog of Friday, 12 March 2021.

The Economic Consequences Of Mr Hickey.

"Come The Revolution!" The key objective of Bernard Hickey’s revolutionary solution to the housing crisis is a 50 percent reduction in the price of the average family home. This will be achieved by the introduction of Capital Gains, Land, and Wealth taxes, and by the opening up of currently RMA-protected real-estate. As revolutionary programmes go, it’s admirably succinct. But, what else would Mr Hickey’s deflationary property revolution bring?

 

JOHN MAYNARD KEYNES, whose economic ideas are enjoying a modest revival in this time of Covid, was a formidable communicator. He shot to global prominence in 1919, following the signing of the disastrous Versailles peace treaty. His hastily written pamphlet, The Economic Consequences of the Peace, prophesied with considerable accuracy Versailles’ fatal economic impact upon victors and vanquished alike. Six years later, leveraging linguistically off his first great success, Keynes published another pamphlet – The Economic Consequences of Mr Churchill – in which he set forth with equal prescience the price Great Britain would pay for its Chancellor of the Exchequer’s pig-headed decision to resurrect the Gold Standard.

The tragedy enshrouding both of Keynes’ Economic Consequences pamphlets is that their author had been powerless to prevent the disasters whose outcomes he so clearly foresaw. How much better the world would have fared had Keynes’ advice been heeded – both the Great Depression and The Second World War would likely have been avoided. Against entrenched viciousness and ignorance, however, even intellectuals as prodigiously gifted as Keynes find it impossible to make headway. In a battle between reason and passion the smart money has always favoured the emotionally incontinent.

Right now, in New Zealand, for example, feelings are running high on the vexed questions of homelessness and housing affordability. Perhaps the most passionate spokesperson for those currently struggling to house themselves securely is the financial journalist, Bernard Hickey. His call-to-arms on the housing issue has, of late, acquired a decidedly revolutionary tone. Behind his indisputably cogent expositions of the problem, one senses a rising anger, and what can only be described as a ruthless determination to sweep aside what he unabashedly identifies as the economic, social and political forces barring the path to homes for all New Zealanders.

The radicalism of his analysis is certainly not diminishing. In a recent opinion piece he lamented the absence of a clear bipartisan consensus on the measures needed to solve the housing crisis:

“National and Labour aren’t there on a bipartisan approach yet: not even close. They combined in the late 1980s and early 1990s to wage war on double-digit consumer price inflation by giving the Reserve Bank independence and setting a formal target of keeping inflation around 2 per cent. That involved passing acts of Parliament and essentially promising voters they would stick to that 2 per cent. It worked. Expectations changed.”

They did indeed, but only after New Zealanders were required to shoulder the enormous social costs of the economic revolution driven through with unparalleled ruthlessness by Roger Douglas and Ruth Richardson. Was that the sort of transformation Mr Hickey had in mind when he warned listeners to RNZ’s Sunday Morning Show late last year: “Come the Revolution”?

Certainly, Mr Hickey, following the historical precedent of Douglas and Richardson, has already picked out the enemies of the people upon whose necks his revolutionary blade is intended to fall. In the case of Rogernomics and Ruthansia the targets of the economic Jacobins were all those Kiwis too firmly attached to the State’s munificent teats. In Mr Hickey’s case, Madame Guillotine’s guests will be the generation of New Zealanders born between 1946 and 1965 – the notorious “Baby Boomers”. (You know them – they’re the ones with all the houses!)

The key objective of Mr Hickey’s revolutionary programme is a 50 percent reduction in the price of the average family home. This will be achieved by the introduction of Capital Gains, Land, and Wealth taxes, and by the opening up of currently RMA-protected real-estate. As revolutionary programmes go, it’s admirably succinct. But, what else would Mr Hickey’s deflationary property revolution bring?

The answer is, of course, social, economic and political mayhem. Thousands of ordinary middle-class New Zealanders would be ruined. The country’s leading banks would teeter on the brink of failure. Credit would dry up overnight. New Zealand would be plunged headlong into a deep recession. Thousands of “millennial” Kiwis would lose their jobs, closely followed by thousands of redundant Gen-Xers. Poverty would surge upwards to engulf layers of society untouched by deprivation for more than eighty years. In short order, shock and disbelief would give way to unrelenting political rage – and a lust for inter-generational vengeance.

House prices would, however, be halved. By that measure, at least, the economic consequences of Mr Hickey might be adjudged as entirely positive.

This essay was originally published in The Otago Daily Times and The Greymouth Star of Friday, 22 January 2021.

Goff And Tamihere Are Both Wrong. (But Bernard Hickey Is Right On The Money!)

Show Me The Money! The alternative to state funding of infrastructure is, of course, to fund it by taking on massive amounts of private debt. On this issue, at least, Auckland mayoral challenger, Tamihere, has some solid points to make. In his own colourful turn of phrase, the incumbent mayor, Phil Goff, and the Auckland Council, have “maxed-out the credit card”. If the City is to preserve its international credit rating of AA, then it simply cannot afford to take on any more debt.

NEITHER PHIL GOFF, nor John Tamihere, are telling Aucklanders the truth about their city, but Bernard Hickey has given it a pretty good shot. In a powerful and deeply insightful article, posted on the Newsroom website, Hickey not only explains why KiwiBuild failed, but why it could never have succeeded. In the process, he lays bare the fundamental failures of political and economic intelligence fuelling New Zealand’s conjoined national and local infrastructure crises. Goff and Tamihere are part of that intellectual failure, and that is why neither politician is giving Aucklanders meaningful answers to their most pressing questions.

Tamihere has proposed selling 49 percent of Watercare to either the Accident Compensation Corporation, or the Superannuation Fund, or both, and using the proceeds (estimated at around $5 billion) to fund Auckland’s urgent infrastructure needs. Goff, who, in his years as a member of the Fourth Labour Government, never once voted against the privatisation of state-owned monopolies, has come out as a staunch defender of the municipally-owned Watercare company. He is warning Aucklanders that Tamihere’s plan would increase the average Aucklander’s water bill by $200-400 per year – falling most heavily on the poorest Auckland families.

What does Hickey say about the funding of local government infrastructure?

“After the mid-1980s, the Government saw the private sector as the provider of housing and saw any infrastructure as a cost that needed to be borne by those building the new houses and local Government, not the wider taxpaying public. Even now, that thinking is infused through Treasury and into the minds of the current Labour leadership, going from Ardern through Finance Minister Grant Robertson to Twyford.”

In other words, the neoliberal principle of “user pays” has been extended well beyond its original target, the hapless individual consumer of government services, to encompass everyone: consumers, businesses, central and local government institutions; everyone. The contrast between the neoliberal approach and the nation-building approach, which, historically, has informed the policies of successive New Zealand governments, could hardly be starker.

As Hickey makes clear:

“[N]neither the National or Labour-led governments of the last 35 years have seen it as their role to pay for [housing’s] underlying infrastructure. Their instincts have been to get others to pay for it, unlike during the golden eras of the 1930s, 40s, 50s, 60s and early 1970s when governments of both colours used the national balance sheet to build and subsidise that infrastructure through the Ministry of Works, State Advances Corp and various Group Building schemes and child benefit capitalisation policies.”

The alternative to state funding of infrastructure is, of course, to fund it by taking on massive amounts of private debt. On this issue, at least, Tamihere has some solid points to make. In his own colourful turn of phrase, Goff and the Auckland Council have “maxed-out the credit card”. If the City is to preserve its international credit rating of AA, then it simply cannot afford to take on any more debt. What’s more, the rest of the country cannot afford for Auckland to take on any more debt.

Hickey tells us why:

“The technical problem is the Auckland Council is almost at its debt-to-revenue limit ratio of 270 percent, which is the level specified by Standard and Poor’s for Auckland to keep its AA credit rating. This is important because taking on more debt would mean Auckland’s credit rating would be downgraded, which would increase the interest costs on existing debt and force up rates. But it would also breach the rules set by the Local Government Funding Agency [LGFA] about Auckland’s credit rating not falling more than one notch below the Government's AA+ rating. That’s important because Auckland’s rating essentially sets the base for all local government borrowing through the LGFA. It means there is enormous political pressure locally and financial pressure from other councils (and the LGFA) for Auckland not to borrow much more. Councils beyond the Bombays and north of Orewa would scream blue murder if their interest bills went up because the Auckland Council decided to solve a funding problem the central Government won’t solve.”

Unable to take on any more debt, Tamihere knows that the only way for Goff to fund infrastructure development in Auckland is by increasing rates, raising user-charges, and/or adding another 5-10 cents to the price of a litre of petrol. Tamihere is far from convinced that Goff (or anyone else) is willing to risk a ratepayers’ revolt by leading Auckland up that particular garden path, hence his plan to access five billion desperately needed dollars for urgent infrastructure development by selling 49 percent of Watercare.

The politics of this is quite clever, because, by the time ACC and/or the Superfund take the necessary steps to secure their standard rate-of-return from Watercare by taking it out of everybody’s water bill – Goff is quite right about that – Tamihere may have earned himself enough public good-will to be re-elected Mayor in 2022. (Assuming, of course, that this partial privatisation policy enables him to beat Goff in October 2019.) Five billion dollars builds a lot of infrastructure, so, who knows, Tamihere’s use of Peter’s central government funds, to pay for Paul’s local government needs, might just work. “The Mayor who rebuilt Auckland without plunging us all into deeper debt!” – has a rather nice political ring to it.

In the long run, however, Tamihere’s gambit can only be a bust. Liquidating and then spending Auckland’s capital assets can only end up dragging the city to the same point Goff has already reached. Namely, facing the politically unpalatable reality of requiring people to give up an increasing proportion of their income to the Council and/or its commercial arms. While the New Zealand political class – and that includes you, Jacinda Ardern, Grant Robertson and James Shaw – remains incapable of thinking outside the neoliberal box, New Zealand’s crumbling infrastructure, not to mention the many large-scale public works projects that will be required to meet the challenges of the future, cannot be addressed.

Goff and Tamihere would be better advised to jointly demand, as the leading mayoral candidates, that the State once again steps up to the plate of nation-building. In a country whose entire population is smaller than that of a medium-sized global city, there never has been, and still isn’t, any other viable alternative to turning the state into New Zealand’s angel investor.

This essay was originally posted on The Daily Blog of Thursday, 4 July 2019.

Making Haste Slowly

So many hands, so little time: John Key, unlike Bernard Hickey, understands that economics is not a science - it's politics - and our Prime Minister is getting very good at it.

BERNARD HICKEY is a very angry man. His bleak vision of New Zealand’s future doesn’t so much boil down to a "clash of civilisations" as a "clash of generations". He foresees a long and vicious political struggle in which the "young and poor" are pitted against the "old and rich". His advice to young New Zealanders? Book a ticket on the next flight to Australia – now.

Who’s responsible for Mr Hickey’s bad temper? Predictably, it’s the Prime Minister.

Mr Hickey was hoping against hope that Mr Key would use Tuesday’s much-hyped Prime-Ministerial Statement to Parliament to announce a series of decisive measures designed to shift New Zealand’s risk-averse investors out of the residential property market and into investments more productive of national wealth.

A Land Tax. A Capital Gains Tax. The closing-off of tax loopholes. Any or all of the recommendations of the Tax Working Group. Any measure that brings the cost of purchasing a home back to earth with a resounding thump. Any policy that offers Generations "X" and "Y" the slightest hope of owning their own home.

That’s what Mr Hickey was waiting to hear: something to prevent our best and brightest packing their bags; and when Mr Key failed to oblige, Mr Hickey saw red.

Well, no, that’s not quite right. Mr Hickey didn’t "see red". What he "saw" was a much deeper shade of blue than any Mr Key or his government are ready to wear.

Like so many ideologues of the Right, Mr Hickey has no patience for either politics or politicians. In Mr Hickey’s eyes economics is a "science" – like physics. And, just as we would laugh at the idea of passing a law against gravity, so we should deride any politician who raises political objections against self-evidently sensible economic measures – such as forcing investment out of unproductive sectors of the economy and into sectors more likely to boost productivity and competitiveness.

But economics is very far from being a science. At most it’s a useful set of tools. Originally known as "political economy" – a term which conveyed much more accurately the discipline’s true purpose – its prime objective is to identify the contributing causes and practical consequences of organised human activity.

If politicians don’t understand why things are organised the way they are, and what is likely to happen if they try to change them too drastically, then they’ll soon find themselves in a whole lot of trouble.

Unlike Mr Hickey, Mr Key’s most important objective is to secure both his own, and his party’s re-election at the next general election. Should he fail to be re-elected, all hopes of changing the way things are organised will be dashed. Even worse, electoral defeat may result in people with radically different ideas about the way things should be organised finding themselves in a position to do exactly that.

National’s aim is to reduce the tax burden of the nation’s wealthiest citizens. Mr Key would be rendering poor service to those citizens if he embarked upon a course of action which brought to power a party dedicated not to reducing, but increasing the tax burden of New Zealand’s "rich pricks".

Had Mr Key announced the introduction of the sort of property-investment-unfriendly measures demanded by Mr Hickey, the National Party’s chances of winning next year’s General Election would have plummeted. One hundred thousand rental property investors and their families, fearing huge financial losses, would have turned away from Mr Key and National in exactly the same way elderly New Zealanders turned away from Jim Bolger’s National Government when, in spite of his "no ifs, no buts, no maybes" promise to lift Labour’s hated Superannuation Surtax, it refused to do so.

Like Keith Holyoake, the National leader he most closely resembles, Mr Key seems determined to "make haste slowly" – keeping intact for as long as possible the coalition of socio-economic groups which carried him to power. He will lower the taxes of the wealthy – but only in conjunction with measures designed to preserve the living-standards of the rest of his electoral base.

That does not include the poor – but it does include the rich, the young and the old.

Mr Hickey may think that Generations X and Y versus the Baby-Boomers and their parents is the battle New Zealand has to have.

Mr Key (thank goodness) knows better.

This essay was originally published in The Timaru Herald, The Taranaki Daily News, The Otago Daily Times and The Greymouth Evening Star of Friday, 12 February 2010.