Showing The Money versus Making Numbers Work.

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.

6 thoughts on “Showing The Money versus Making Numbers Work.

  1. Half a pound of tuppenny rye,
    Half a pound of treacle;
    that’s the way the money went –
    pop goes the weasel

  2. Just remember Mr Key entered NZ politics in the 2002 election. So our own home grown master of the universe missed the biggest financial bubble in history from the inside.

    That’s gotta leave a mark, on an ego that runs in those circles.

    it must hurt knowing that if he stayed another 5 years he would have tripled his net worth. When your a gambler making that kind of mistake is painful and you have to double down to get the return…

  3. You do have to understand of course that John Key is accountable to the New Zealand public in that we have an election every 3 years – which is quite a short time frame compared to other places in the world. Secondly the way democracy works in NZ is that we elect a group of people and then let them work out how to form a government – once they have formed a government we expect them to govern on our behalf until in a short 3 years time we again have a say in how we think they are doing. Due to this very short timeframe if we also let people have the controlling say on every issue, issue by issue then nothing would ever get done – and in fact over the years we have tended that way hence our sorry state. I think the sorts of decisions like the Convention centre is exactly what we need and how we need to go about -it we have a once in 2 or 3 decades chance on making some progress with this government – and if we don’t like it we can chuck them in 2 years time and go back to mediocracy and continue on our sinking lid policy.

  4. OK Peter.

    I know where you stand on the efficiency vas representation issue. The bottom line to your view appears to be that we should be happy Key gets deals done by ramming things through without regard to anything other than the numbers, and that we should cope with the consequences and costs later. But is that efficient?

    Any thoughts on Banksie?

  5. Brilliant.

    Brian Edwards recenttly mused similarly Question: Can being fabulously rich and still in one’s prime affect a Prime Minister’s approach to the job?

    Great article and very intersting and active comment section. e.g. “Politically Corrected April 30th, 2012 at 18:56

    The problem is Key has a carefully constructed back story, one that was regurgitated to us largely unchallenged. There is no doubt he has a substantial bank balance but given the industry he was in, surely a healthy bank balance would be a given?

    Okay so he made it to CEO of Merrill Lynch, but at the time Merrill Lynch were known for having exorbitant salary packages because they struggled to attract candidates, let alone keep them. Is this how he made his wealth? Just how well did Merrill Lynch perform under his watch? We’re told they performed well enough but without context that call is without merit.

    His term on the Foreign Exchange Committee of Wall Street lobby group the New York Federal Reserve. The media lauded Key’s invitation to join the committee as as prestigious thing but the NYFR is nothing but a glorified lobby group and his appointment is no more auspicious than Jenny Shipley’s been appointed to CERA. Just what regulations did his FX Committee support? Laws passed or changed during this time have been attributed to causing the global financial collapse. Did his committee argue for or against regulating credit default swaps and derivatives, or what Warren Buffett called “weapons of mass destruction”?

    His love affair with Ireland; his midas touch worked a treat there didn’t it?

    He went to Singapore in the mid 1990s when he left the place the Asian financial markets were on the verge of collapse. How well did his company/his investments fair?

    And what of his time in New Zealand? He worked for a subsidiary of Bankers Trust New York, his Auckland branch mostly trading in the kiwi dollar in the offshore market. It was the most volatile and therefore the one in which a trader could make the most money. Most of the movement in the kiwi occurred in New York. Funnily enough it was a New York based Bankers Trust currency trader Andrew Kreiger that made the infamous raid on the New Zealand dollar in late ’87.

    Even his non-politico, state house boy made good story requires context.

    Our media are so bereft of intellectual curiosity it hurts.”

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