Tag Archives: Graeme Edgeler

The hazards of MMP

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David Cunliffe’s apparently-rash pledge to scrap the coat-tail rule that permits a party with less than 5% of the party vote to bring in additional MPs as long as it wins an electorate within 100 days turns out to not be quite so bold: it looks as if they simply intend to introduce Iain Lees-Galloway’s member’s bill — currently before Parliament — enacting (most of) the recommendations of the Electoral Commission as government legislation. That isn’t bad. It initially seemed as if he intended to ram through just this one cherry-picked rule under urgency, and some of us overreacted to it. There are still problems with the plan, but they are more complex.

Anyway, the episode throws light upon a lot of the tradeoffs and subtleties inherent in MMP — the major one of which is whether proportionality or equity in the distribution of proportionality is more crucial.

What MMP is good for
MMP is a rather ugly, instrumental system for balancing the expressed wishes of fickle and often arbitrary voters with regard to an volatile and rather shallow pool of political talent against the need for stability. It is not a means by which to determine moral merit, as trial-by-political-combat FPP claims to be, and nor is it a route to the mutually-least-bad choice, as in STV and related systems. It is what it is.

What it is not is an elegant expression of noble political aims. I guess this is why traditionalists dislike it viscerally: it feels kinda shabby, but it works.

“Rorts” and electorate-level match-fixing
So with that last point in mind, Danyl has said it best: the game is the game. Its job is not to look nice, it’s to deliver representative parliaments. I don’t much like it, but the utility of the kind of strategy in play in Epsom is obvious, so fair enough — as I said before the 2011 election, “If the electorate won’t punish them for doing so they’d be rude not to.”

Two things to add. The first is that the electorate clearly isn’t inclined to punish the ACT and UnitedFuture parties, at least not locally, because in the solitude of a cardboard booth, orange marker in hand, self-interest tends to overcome ethical compunctions. But the appeal to such compunctions is still the only way to reduce the viability of the “rorts”, so it is natural that those opposed will try to jawbone those compunctions. Patrick Gower is leading the charge here — although he, too, has been consistent in his derangement about this topic since before the 2011 election.

Second, the agreement between the Internet and Mana parties where Hone Harawira’s seat in Te Tai Tokerau will, they hope, bring in Internet party votes and list MPs is emphatically not of the same type as Epsom and ÅŒhariu, where major parties throw the electorate to exploit the coat-tail rule. Nobody is throwing anything in Te Tai Tokerau — in fact, it seems likely to be one of the most strongly-contested electorates in the country, a fact which is causing conniptions in some quarters. While the electoral outcome will look similar to the undiscerning eye, the Internet MANA deal is different — smaller parties allying to overcome structural barriers to their participation in democracy. Not only is it not only not a rort, it is perfectly just and rational behaviour in the face of an iniquitous system.

Consensus and timing of law changes
In general there should be consensus in changes to electoral law. But I agree with Rob Salmond that “should” is not the same as “must” — the object is to be sure that changes will be generally popular, and will be durable, and in this case an independent commission and the deep consultation that occurred during and after the referendum strongly suggests that implementing the recommendations via the Lees-Galloway bill will be both those things.

But timing matters: now that Internet MANA has declared its hand and chosen to take advantage of the coat-tail rule in a similar way as ACT and UnitedFuture, it would be unjust to change the rule immediately before the election. Depending on how things play, it might still be unjust to change the rule without further consultation after the election, because it may be that people see in the Internet MANA a new way to challenge the entrenched parties (I plan on writing more about this if I get time). For this reason it is good that John Key has ruled out supporting the Lees-Galloway bill.

Proportionality versus equity
All that having been said, I favour scrapping the coat-tail rule. Even though, as Graeme Edgeler has explained, it increases proportionality rather than decreasing it, mitigating the effect of the 5% threshold that kept New Zealand First, with 4.07% of the party vote, out of Parliament in 2008. The trouble is that it increases proportionality selectively rather than equitably — that is, among minor parties who are willing and able to become the vassals of larger parties — as Gower said in 2011 “It’s finally official: John Key owns the ACT Party.” Proportionality in an instrumental system is not an intrinsic good that automatically trumps other considerations. Process does matter. But outcomes matter too.

Political clientism in an instrumental system is not so much morally or ethically wrong as it tends to degrade representativeness, and delivers huge benefits to the strongest parties — who have the ability to burn political capital to take advantage of these sorts of relationships — in ways other parties cannot. So while you get the appearance of more diverse representation, the effect is more that the liege party gets to offload political risk and responsibility to its vassals. The clearest case of the present government is the charter school policy that, had National passed it of its own volition, would have endangered Key’s moderate reputation. ACT’s presence in parliament — even without deputy leader Catherine Isaac, who was outrageously granted the sinecure implementing the charter schools plan — gave the government cover to implement policy they wanted, but which was too politically risky.

Self-interest dressed as principle
So to an extent the proposal from Labour is sour-grapery from a political middle power that is neither big enough to be able to benefit from the coat-tail rule, nor small enough to potentially need it. For all their posturing about the integrity of the system, I am sure they would use it if they could get away with it (as they did in Coromandel in 1999), but they can’t. They have no potential clients, so they have no need for the coat-tail rule. The Greens, secure above the threshold, don’t need them for this, and they (correctly, in my view) regard Internet MANA as too radical for such a relationship. The retreat to electorate nostalgia is also strategic positioning from a party that has seen the resentment that exists towards list MPs, and has pledged to re-take the provinces and rebuild its electorate network.

National’s refusal to implement the findings of the commission also come clearly down to self-interest. They are so far the major beneficiaries of the coat-tail provisions, having used their two vassal parties to good effect through both terms of their government.

Ultimately while both the major parties’ positions are self-interested, Labour comes closest to the right conclusion: that the iniquity of the coat-tail rule’s additional proportionality is a greater cost than the additional representation gained by it is worth. The best cure for the problem is to cut the party vote threshold — to 1/120th of the party vote, or a “full seat”, which would obviate the coat-tail rule. Scrapping the coat-tail rule is a rather distant second-best outcome, but doing that as well as cutting the threshold to 4% as recommended by the commission seems like the sort of compromise with which nobody will be totally happy, but which will endure.

Because functionality is what matters, not perfection.

L

Labour: locking in lose-lose

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David Shearer says he won’t rule out buying back shares in state-owned power companies sold by the government. He won’t rule it in, either. Why? Does he need to consult his leader?

There’s so much wrong with this that I scarcely know where to start. This buyback agenda has been set by Winston Peters; it’s now two years since the 2011 election campaign kicked off with a pledge to sell these assets, and it’s like the boffins in Labour haven’t yet had an original idea about it. The problem with old generals is supposed to be that they fight today’s war with the strategies of yesterday’s war, but this is worse — it’s fighting yesterday’s war with the strategies that lost the one before that.

But enough about my thoughts on the referendum. This time the issue is what happens after the SOEs are sold. Chris Trotter has articulated strong political arguments for nationalisation, and I think these serve to demonstrate that nationalisation is not simply untenable for a left-wing political movement.

So while I’m not persuaded the opposition should do it, there’s definitely a right and a wrong way to go about nationalisation. The core principles are similar to those in play with the initial privatisation: that we should have good information about the intentions of the main political decision-makers; and that people should not have property expropriated without due process. This need not be perfect consent — an election result delivering under 50% was sufficient to grant a mandate to privatise half the value of these assets, for example.

Market and electorate signals
Shearer’s “maybe we will, maybe we won’t” is the worst possible position. The markets into which these shares will be floated need signals so as to judge risk, and the electorate needs signals so as to judge the quality and character of the politicians they might vote for in 2014 and beyond.

A clear “we will buy them back” or “we will not buy them back” would do that; it would tell the market and the electorate what to expect and they could act accordingly. Both groups would know we were dealing with politicians of at least some sort of conviction, and more to the point, someone willing to make some big calls, to put something on the line. Today we see before us a Labour leader who has neither the conviction to know what he wants to do, nor any will to do it.

As Chris says, a stance one way or the other would provide Labour with a mandate. If Labour considers nationalisation irresponsible, then as voters we ought to know that; but it is much more crucial to justify an actual nationalisation programme. Given that the current criticism of the government is that they lack a mandate to do something they campaigned for a whole election year on doing, I struggle to see how even the most one-eyed Labour partisan could honestly justify the massive expense of buying back SOE shares unless it was clearly signalled and voted on beforehand.

This need not be unconditional. Graeme Edgeler has suggested a provisional pledge — Labour could say that if, say, two thirds of respondents in the referendum vote to not support the asset sales then an incoming Labour government would seek to nationalise them. David Shearer has many options that are better than “maybe”.

Economics of a sell-off/buyback
If Labour genuinely believes — as it has told us for two years now — that the value of these assets is greater than the cost of borrowing to buy them, it should be easy enough to show that buying them back at fair market value is worthwhile. This will likely have the effect of inflating the price, but it would at least do our international reputation comparatively little harm.

It might be reasonable for Labour to pledge to buy the shares back at cost, but only if the pledge is made credibly and early — certainly no later than the first round of sales. The pledge would be fair warning to investors: if they choose to disregard it, that’s on them.

Because it allows the markets to price in the risk of a Labour-led government coming in and making good on its promise, signalling nationalisation in this way would likely depress the initial sale value of shares. If the threat was sufficiently credible it could, in principle, depress demand for shares to the point that selling them would be uneconomical — thereby preventing the sale, or limiting it to just one or two SOEs. While this would look bad for the government there is also a downside risk that the opposition would be seen to be sabotaging the scheme — but given that Labour seems certain the scheme is unpopular, that should not concern them too much.

Because there is an ideological imperative behind the sale (that is to say, the market already knows the government has to sell in order to retain political credibility) it seems likely the shares will already yield less than what an equivalent float by a less-motivated seller might yield. There are other industry-specific factors which could also depress the price — the fact that hydro generation is not much good in the middle of a historic drought, for example. I have no knowledge of the value of the assets as they stand, but it doesn’t seem totally outrageous that it might not be all that high as it is, and a little more risk might just be enough to turn people away.

Conversely, a nationalisation conducted after the shares have been sold has the opposite effect. An ideological bulk-buyer in a fair market will bid the price up. Even worse is the middle-ground: if there exists sufficient uncertainty before the float the sale price could be depressed; followed by a Labour election win and nationalisation, causing the price to rise. The government would be selling low and buying high.

Venezuela of the South Pacific
The worst of all cases is if Labour does not provide a strong and credible signal of nationalisation ahead of the float, and then proceeds with a “surprise” nationalisation on an at-cost or dictated price — or worse yet, expropriation without compensation, as has been suggested by some of the more wild-eyed idealists. Parliament is sovereign; in principle, an incoming government could do this. But it would be a brutal assault on property rights and repugnant to a modern liberal democracy, especially one so dependent on international trade as we are. It could justifiably lead to New Zealand being treated as a pariah kleptocracy, and since the SOEs are being floated on the ASX and will likely include some institutional investors there, it could also have deep trade, diplomatic and cultural implications. I expect there is also the risk of legal challenge.

The worst aspect of holding the “maybe” position Shearer has taken is that the risk of “Venezuela of the South Pacific” scaremongering exists as long as this scenario is not clearly and credibly ruled out. I don’t seriously believe this sort of expropriation would happen under a modern Labour government, but political narratives needn’t be based on reality.

If Labour commits to nationalisation then scaremongering will commence, but at least the party will be able to control the narrative around it, and articulate arguments in principle for it, as Chris has done. If the SOEs are that popular it shouldn’t be too big a risk. If Labour rules out nationalisation then such scaremongering may still eventuate, but will be weak. If they continue to sit on the fence, they get the scaremongering, but not the opportunity to rebut it. Lose-lose.

That Labour would even consider holding the “maybe” position is astonishing, but it is New Zealand First policy after all. It reflects an awareness that New Zealand First is here to stay, will probably hold the balance of power at the 2014 election, and could make nationalisation a condition of its being part of any Labour-led coalition. The deep problem is that Labour, lacking a political agenda of its own, is letting others define it. Until the party leader is prepared to lead, Labour will keep losing.

L

No democracy on the honour system

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This morning I posited a conspiracy theory that the government would use the temporary deregulation measures undertaken in response to the Canterbury earthquake to progress another tranche of wide-ranging reforms to the resource management regime and building and construction industries after the 2011 election.

Absurdly, if the Canterbury Earthquake Response and Recovery Bill is passed without very extensive amendments of the sort proposed by the Greens and voted down by both major parties (it’s going through all three stages right now), then all that and much, much more could happen this week, no election required, and without any review by the courts. The executive powers granted to the relevant Minister (that’s Gerry Brownlee) in this bill are so sweeping as to permit him to do almost literally anything as long as it has something to do with quake recovery — amend or suspend almost any piece of legislation, overturn any electoral decision — really, Dean Knight, Graeme Edgeler and Andrew Geddis (themselves no wide-eyed conspiracy nuts) are just three of the constitutional law experts who are boggling at the possibilities; Idiot/Savant is also much more than usually incandescent, and Gordon Campbell pulls few punches, either. Geddis says the law gives him “a case of the screaming collywobbles”. How’s that for a technical term. Their argument — contra government speakers such as Nick Smith — is that, because there is no real oversight to test whether actions taken are “reasonably necessary or expedient for the purpose of the Act”, the bill’s scope is not strictly limited in black-letter law to those matters, nor indeed to the region impacted by the quake, and the minister and his commission basically enjoy immunity. These are sweeping powers such as those which might be accorded an executive head of state in a command-government situation such as a major war.

Not would happen, mind. I don’t think anyone genuinely thinks Gerry Brownlee will decriminalise murder, approve mining across all schedule 4 land, enact wartime conscription or overrule the results of the forthcoming Supercity election. I don’t. But the point is (assuming Dean Knight knows what he’s talking about) that Brownlee can. Or will be able to tomorrow, until April 2012, which astute readers will note is a good half-year after the next general election must be held. There are no real checks or balances, much of the actions taken under this legislation are able to be taken in secret, and actions taken will not — at least on paper — be subject to judicial review. This means that we are relying on Gerry Brownlee to not be evil. But democracy doesn’t work on the honour system. It can’t. It doesn’t work on the basis that you give a government power in the hope that they use it legitimately; you give it power on the basis that you have the authority and ability to wrest it back from them if they misuse it, and on the assumption they will misuse it. The honour system is fine for bouquets being sold at the cemetery gates. It’s no basis upon which to run a country.

As I’ve often argued here and elsewhere, what sets liberal democracy, with all its failings, apart from authoritarian systems is the ability for the electorate to transfer power by the exercise of these sorts of checks and balances. Under orthodox authoritarian socialism for examplem — more or less the only form of socialism ever fully implemented on a nationwide scale, in the USSR and China, for instance — the transitional dictatorship is empowered with the sole authority and means to put down any such counter-revolution as might endanger the transition to genuine communism; and because of this, the dictatorship enjoys impunity. It has no reason to work in the interests of the people it purports to serve, inevitably becoming inefficient, corrupt and brutal. (Thus, the problem with socialism is authoritariansm which accompanies it, not so much the economic aspects, but that isn’t my point here).

The Canterbury Earthquake Response and Recovery Bill, of all the ridiculous things, brings into being the potential for just such a regime in New Zealand, and we can only hope it is not used to that effect. It is a colossal, hypervigilant overreach. And if any ill comes from this, Labour — and even the Greens and the māori party — will bear as much responsibility as National; they are all supporting it out of “unity”.

Where now are those who railed against the Electoral Finance Act, who speculated darkly that Helen Clark might not relinquish power after the election, or might suspend the operation of the free press; who shrieked about the Section 59 repeal; against ‘Nanny State’ and the illusory Stalinism of lightbulbs and shower heads, drink-drive limits and alcohol purchase ages and compulsory student union membership? Here the papers are being signed to dismantle robust constitutional democracy right under our very noses, and there’s barely a whimper.

(Updated to add Lyndon Hood’s fantastic image of Brownlee VIII, link to Campbell’s article, and tidy the post up a bit.)

L