Monthly Archives: May 2012

Showing The Money versus Making Numbers Work.

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That simple phrase “make the numbers work” catches John Key’s approach to the perennial tension between efficiency and transparency in a democracy. To simplify things, it can be said that the more democratic and transparent the policy process, the less efficient it becomes. That is because the more actors are involved in policy decisions, the more likely that additional decisional sites and veto points will be placed in front of policy choices. They key is to find an appropriate balance between efficient policy formulation and implementation and open participatory representation by all potential stakeholders. If forced to choose, democrats err on the side of representation. Authoritarians prefer efficiency.

The corporate world has no objective need for balance. What matters are balance sheets in the black. Firms are structured so that decision-making is hierarchical rathe than horizontal, with decisions flowing from the top rather than as a result of inputs from the bottom or from external parties. Managers rule, workers obey, and shareholders or owners reap profits. Given the sensitivity of any given project, public consultations might be invited and consideration might be given to mitigating factors that impinge on profitability, but the bottom line is that the numbers work in favor of owners, investors and share-holders.

John Key came from (and is likely to go back to) such a world. In fact, with a personal net worth of around $60 million he is a small time member of the “Masters of the Universe:” the network of financial elites (stock brokers, money managers, currency traders, hedge fund administrators and bankers) built up in the 1990s and headquartered in London, New York, Geneva, Hong Kong and Singapore who made the calls on how global liquid assets should be invested. Theirs is a world of numbers, not morality or ethics, and their worth to the network was and is their ability to make the numbers work when constructing investment deals. They answer to themselves and their clients without regard to the public interest because, quite frankly, they are interested in private gain rather than the public good.

With that in mind the self-styled CEO of NZ Inc., John Key, advised himself that changing gambling laws so that SkyCity can have another 500 slot machines in return for building a convention centre on adjacent land at no tax payer expense was a neat deal that was in both the private and public interest (the public presumably being interested in the tax revenues and ancillary benefits that will accrue from having the convention centre up and running, which is a whole different story). By that logic the numbers work.

In order to come to this conclusion, however, NZ’s self-styled CEO had to ignore the counsel of the Auckland City Council, local iwi, problem gambling-related mental health organizations, the Police, traffic authorities, tourism operators and a host of other potential stakeholders (I mention these because the proposed site of the convention centre involves a myriad of urban planning considerations and is only handy to the Casino and not to the Viaduct, Cloud, Winyard Quarter, Ponsoby, Newmarket or other entertainment districts that depend on tourists). When I say “ignore” I mean that he chose not to solicit advice from any of these parties rather than turn his back on advice already given. Mr. Key’s self-advice also told him to order an end to all other tenders once SkyCity got involved, some of which might have contained the input from non-investor interested parties such as those mentioned above. But as a minor Master of the Universe why should he bother with pretenders and outsiders when he could seal the deal with SkyCity for a small change in an industry-specific law? The Hobbit saga taught him that allowing non-investors to have a say could well kill the deal, so this time around he made sure that negotiations were kept quiet.

Clearly Mr. Key is a man who understands numbers and efficiency. But perhaps he spent a bit too much time in Singapore, where public input into policy decision-making is inconsequential to the point that it is not even considered even when it comes to large public works projects (such as the expansion of the MRT train lines currently underway, which have displaced thousands without any input from them and with compensation determined not by market value but by government fiat). In Mr. Key’s world he does not have to waste time and money listening to the blather of a host of obstructionists and self-interested losers (because, after all, he only deals with winners). He is there to crunch the numbers and do the deals. In the pokies-for-convention-centre trade he has done so, efficiently.

No wonder it is rumored that he is tiring of the job. Here he is, cutting deals and helping commercial players make serious money just like in his good old days in the private sector. But now he has to put up with ex-post whingers and other plebians who all want a voice without a full command of the power of numbers. Plus, he is surrounded by career politicians who for the most part could not make a buck even if they won lotto, and the opposition is nothing more than a bunch of special interest namby-pambies who would not get past the lobby of his former corporate headquarters. Why should he stick around and have to listen to their nonsense about addiction, traffic and other social costs?

You have to feel for Mr. Key. Once he was in the stratosphere, unaccountable to anyone but his corporate masters and the private interests that they served. He made money off of money without having to add value or increase production anywhere, and he got rich doing so in part because he made his name in an authoritarian country in which numbers, not people, matter most. Now he has to smile and wave to a bunch of provincial hicks self-absorbed in some weird Antipodean PC navel-gazing where everyone has a say and little gets done.

Then of course there is John Banks, and how he reads the numbers. For Mr. Banks the deal is not about making public and private numbers work. It is about private interests showing him the money in order to advance his political fortunes. Whereas Mr. Key was looking for a way to balance a specific private actor’s desire with a vague public interest (again, assuming that a convention centre adjacent to SkyCity is in the public interest), Mr. Banks was looking for campaign contributions. Presumably there was a quid pro quo involved with at least two known private parties, SkyCity and Kim Dotcom (there are plenty of others who donated “anonymously” to Mr. Banks but let’s focus just on these since they are in the news). What the expectations were for deliverables from Mr. Banks is as of yet unknown, although whatever they were it appears that Mr. Dotcom now feels that he was stiffed on the deal and is exacting his revenge by releasing details of his donations to Mr. Banks’ mayoral 2010 campaign. Whatever it was it was not in the public interest unless one thinks that granting Mr. Dotcom special favors is a collective good.

In the end, what Mr. Key did was not very democratic but it was legal and efficient as far as the tightly defined numbers behind the deal are concerned. Mr. Banks, on the other hand, had no public interest in mind when he solicited funds from Mr. Dotcom and accepted those from SkyCity, even if the latter’s donation was the same as the amount donated to Len Brown at the time (to his credit Mr. Brown reported the donation from SkyCity to his campaign, which mirrored that given to Mr. Banks “anonymously”). SkyCity was just papering both sides of the mayoral aisle with its symmetrical donations to the two leading candidates, and whatever favor was purchased was bound to be equally small given the amounts involved no matter who won the election. But Mr. Dotcom was an individual who papered only one candidate as far as we know, and he did so in excess of the corporate entity known as SkyCity. He was, in other words, trying to purchase individual favor by backing one candidate over another.

That is why there is a difference between the two men. Mr. Key is an authoritarian-minded money man who thinks he knows what is best for the country without regard to the naysayers and whiners, and who makes the numbers work in favor of his preferred vision. Mr. Banks is an egotistical “show me the money” weasel. With the possibility of more revelations about Mr. Banks forthcoming, it could well be the case that the weasel brings down the money man, or at least accelerates his departure from office.

Putting the mandate to work

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I struggle to believe the National party that read and led the public mood so well for most of the previous six years has so spectacularly lost its way. Recent months, and the past few weeks in particular, have been the government’s hardest, and only part of that is due to ministerial incompetence and bad optics. Part of it is because they have chosen policies that contradict the very narratives Key and his government have so carefully crafted.

This can’t be accidental. I think the fact that they barely won a majority despite the worst performance in a generation by the Labour party has convinced Key that this term is probably his last, and he intends to make best possible use of it. This is good strategy for them. It’s a strategy I’ve been writing about since Key was in opposition, and one that the Labour party ignored, to their detriment, until late in the last term. John Key is no mere smile-and-waver, but a man of action who, when the time is right, will act ruthlessly and decisively. He has spent his five years as leader earning the trust of the electorate, gaining a mandate, and now he intends to put that mandate to work. This country will not be the same in three years.

There are many possible examples here: privatisation of state assets is the most obvious, but is well-covered by others more informed than I am. I’ll cover three more recent topics: two are bad politics, but I can see the point to them; the last is simply a terrible idea that, if not abandoned quickly, will have profound implications for the future of New Zealand’s political discourse.

Paid parental leave

The decision to call an immediate veto on Sue Moroney’s private member’s bill extending paid parental leave was badly handled. If it were to be done, it ought to have been done immediately the bill was drawn, in an offhand way so as to frame the veto as inevitable; as it was, sufficient space was left for the idea to take root in the collective imagination of the electorate, and now the use of the veto looks anti-democratic; signalling it before it has even been debated looks doubly so, and leaves about a year for sentiment to continue to grow.

Of course, the government has the procedural right to take this action, if perhaps not the moral right to prevent Parliament from passing something that a majority of its members supports. But it chips away at the Key government’s carefully-framed appeal to being pro-middle-class, pro-family, pro-women. Unlike welfare reform, this is not an issue that only impacts people who would never vote for the National party anyway. Paid parental leave predominantly benefits middle-class (rather than working-class) families, and especially middle-class women — those who, for five years, the government has been reassuring that we are on your side. Key is personally very popular among women, and this has been central to National’s success. It looks like the government are prepared to sacrifice this on the altar of fiscal responsibility. The comparison to Barack Obama’s strategy to win a second term on the basis of strong opposition to GOP misogyny could hardly be more stark.

This is in spite of the argument on the merits: a low-cost policy that yields considerable long-term benefits of the sort the government has been anxious to create (or invent, if need be). And the arguments being levied against the scheme are particularly weird: “Is it about labour force participation, or about women spending more time with children?” Well, yes. “It’s discriminatory against non-working mothers!” Well, yes, but I don’t see any of the people making that argument supporting a Universal Motherhood Entitlement, and in fact, I distinctly remember some rhetoric about “breeding for a business” whenever such ideas are raised.

A possible reason for this bad veto call is that it foreshadows a future softening of National’s position on the topic; as Key did with the Section 59 bill, when it looks close to passing the government will signal support, in the spirit of bipartisan cooperation.

Or, maybe it’s just that they don’t care any more — so they’re unpopular, so what?

Student entitlements

The latter argument also explains the decision, announced today, to limit the availability of student allowances and require higher repayments of student loans, although not completely. This is bound to be popular with those who have forgotten (or who never experienced) how hard it was to undertake tertiary study and build a career without Daddy’s cash and connections, and those of the generations who had it all laid on for them by the taxpayers of their day. But it will be less popular among the growing ranks of young voters, and it will be less popular among the parents of those young voters, who are having to provide financial support to their kids through their 20s and in some cases into their 30s, because said kids are finding the economic dream is more rosy than the reality.

This policy is also anti-middle-class, anti-family, and anti-women: because the middle class includes most of those who can afford to (and have the social and cultural capital to) undertake tertiary study; because it places an additional burden on their parents, and because women are already disadvantaged in terms of earning power, and therefore have less ability to avoid or pay back loans. It also erodes National’s aspirational, high-productivity, catch-up-with-Australia narrative, by raising the barrier to becoming qualified to do the high-productivity jobs that such a goal requires. More crucially, it erodes National’s “money in your pocket” narrative by imposing upon borrowers a higher effective marginal tax rate — over and above the existing 10% higher effective marginal tax rate — making it harder to survive on the wages that come with those jobs.

It could be worse. They’re not reintroducing student loan interest. But it is only the first budget of the term, and the same reasoning — this is good because it allows borrowers to pay off their loans sooner, and it will provide cost savings for the government — is true in spades when you charge interest. People can already pay their loans back more quickly if they choose — it is easy to do. People don’t, because wages are low and the cost of living is high, so the government wants to force them to do so. So much for choices.

Refugees

Although I disagree with them, there is some political justification behind both these previous positions. But nothing explains the government’s decision to take a harder stance against asylum seekers. In the Australian context (and in the USA and the UK, although I know less about these), immigration and the treatment of asylum seekers is a political bonfire. This is most obvious in terms of human life and potential. Able, resourceful and motivated people are imprisoned for months or years, barely treated as humans, and allowed to become disenchanted and alienated while hostile bureaucrats decide their fate, and cynical politicians on all sides use them as ideological tokens in a dire game — before being released into society to fulfill the grim expectations that have been laid upon them. But it is also a bonfire for political capital — the more you chuck on, the brighter it burns — and for reasoned discourse. Politicians, commentators, lobbyists and hacks of all descriptions dance around this fire like deranged cultists which, in a sense, they are.

The immigration debate in Australia, though it barely deserves that name, is toxic, internecine, and intractable; it has been propagandised to the point where it is practically useless as a policy-formation tool, or as a means of gauging or guiding public sentiment. It sets light to everything it touches; people take leave of their senses and run around shrieking whatever slogans fit their lizard-brain prejudices. The word “sense” is used so often it ceases to have any meaning: all is caricature, and in keeping with this, other ordinary words also lose their value: assurances that asylum seekers will be treated “fairly” or that systems will be “efficient” would not be recognised as such by an impartial observer. Somehow, it becomes possible to simultaneously believe that the policies are targeted against “people-smugglers”, while being fully aware that the punitive costs imposed by such regimes are suffered by the smugglers’ victims. Otherwise-reasonable people resort to idiotic bourgeois framing such as “jumping the queue” — as if it’s OK to escape from political or religious persecution, if only you do so in a polite and orderly fashion. Mind the gap!

What makes it all the more stupid is that a brown tide of refugees in rusty boats is not even an issue for us: we are simply too isolated, and surrounded by waters too hostile, to be a viable destination. Unfortunately this fact will not be sufficient to prevent people from getting worked up about it, and demanding that Something Be Done. Someone on twitter recently said that anyone who could get a boatload of people here from the third world deserved a beer and our congratulations, and I couldn’t agree more. We need people with the degree of daring, toughness and pioneer spirit to make such a journey, and qualities such as these were once most highly prized.

This policy also undercuts National’s mythology about itself, most assiduously cultivated over the past year in preparation for the sale of the Crafar farms and other assets — of New Zealand as a land of opportunity, welcoming to outsiders and open for business. National have been swift to condemn any deviation from this line as xenophobic, and yet this is somehow different. It is worse than a solution in search of a problem — it is a cure that is far more harmful than its ailment.

What’s more, while I can see the underlying political reasoning behind the two other policies I’ve discussed here, I can’t see the reasoning for this one. Most likely it is an attempt to cultivate some love in redneck-talkback land; to shore up slipping sentiment among the culturally-conservative base that National used to own. But even in this it is misguided: this is not a debate that does any major party any good. It is an opportunity for extremists to grandstand, to pander to society’s most regressive elements. It crowds out meaningful discussion of other matters, it makes reason and compromise impossible, and what’s worst: it never dies. We saw a glimpse of this with the Ahmed Zaoui case; by fearmongering about boatloads of Chinese en route from Darwin on the basis of just one isolated case National runs the risk of admitting this sort of idiocy to the national conversation permanently.

And that might be this government’s legacy. The former two topics, while they will change New Zealand’s politics in meaningful ways, are essentially part of the normal partisan ebb and flow. Asset sales is much bigger; other topics, like primary and secondary education reform and the proposal to cap government expenditure will also have longer-term and more profound impacts. The National government has a mandate, and they are using it while they can, in the knowledge that you can’t take it with you when you go. That is understandable, if perhaps regrettable.

But to use such a mandate to permanently poison New Zealand’s discourse, willingly driving it towards a permanent state of cultural war is a different sort of politics altogether — deeper, more ancient, harder to control, and much more dangerous. I hope I’m wrong.

L