14 November 2011

ACT should push Brash for North Shore

I've said before that ACT under Don Brash could be very promising, but policies to date have been disappointing.

However, let's look at the bizarre spectacle the whole National-ACT scene is as of late.

ACT came from the Backbone Club, a branch of the Labour Party upset that Roger Douglas had been hounded to the boondocks, and had Douglas's book "Unfinished Business" as its bible.  Douglas proposed abolishing income tax, replacing it with GST and a host of compulsory insurance policies for pensions, health care and education.

ACT didn't have a natural leader, until Richard Prebble lost his seat in 1993 to radical Alliance MP Sandra Lee.  ACT by then had started attracting National Party interest after Jim Bolger unceremoniously knifed Ruth Richardson in the back (Bolger after all, having once been an acolyte of Muldoon).  As we fast forward to 2002, John Key entered Parliament at a time when National, under Bill English, had its worse ever election result.  Less than 21% of the vote, and only 27 seats.   Don Brash also entered Parliament at that election, as a list candidate and became Opposition Finance Spokesman.   Of course, just over a year after the appalling result in 2002, Brash went on to lead the National Party, remember that?  Suddenly, National had policies to cut taxes, to remove race as a factor in government and to reduce welfare dependency.   These policies helped rescue National by boosting the vote to 39%, yet most of that swing was from minor parties - by taking some policies from ACT and NZ First (and making the Nats electable so eviscerating United Future), Brash had moved National to have some policies of principle.

Yet a series of gaffes and the media obsession with Nicky Hager's belief that Brash should have told the Exclusive Brethren not to embark on a campaign that was anti-Green Party, saw him ultimately fall on his sword.  National then backtracked on abolishing the Maori seats, and started moving to the centre, whilst ACT had been reduced to a rump under Rodney Hide.

The 2008 election saw the Nats finally get the swing needed to be the largest party, and with confidence and supply agreements with the Maori Party and ACT - created a moderate centre-right government, by and large not touching most policies Labour had implemented.   ACT had done better than expected, but being in government would take its toll.

ACT started to implode for a number of reasons.  Rodney Hide no longer seemed to be the man fighting for less government and lower taxes, but the face of mega-local government in Auckland.  David Garrett proved to be a walking embarrassment and so Hide was rolled, for Brash.

So John Key and Don Brash, once Parliamentary colleagues, both leaders of the same party, now face an election fighting for the same votes.   However, why is John Banks there?   Who knows - especially with the possibility it will be only him or him and Don Brash forming the ACT caucus after the election...

Don Brash on the campaign launch said there were nine policy areas ACT is looking to work on, but does this look any better?

- Pass Spending Cap (People’s Veto) Bill and Regulatory Standards Bill - This would ensure government spending doesn't rise faster than GDP (and indeed would be slower) and help stymy growth in regulation.  Far better than nothing.
- Reduce government spending relative to the size of the economy to enable radical tax reduction, and a lower exchange rate - The simple point that National is spending more than Labour as a proportion of GDP should cause many National voters to think twice about ticking National for the Party vote.   Brash is suggesting company tax reduced to 12.5% and the top income tax rate to 25%.   Both would make a worthwhile difference to the economy.
- Radically reduce bureaucracy - Brash suggests radical reform to the RMA and Local Government Act, whereas National tinkered with the RMA and the Local Government Act wasn't touched.  He also mentioned amending the Bill of Rights Act to include private property rights "possibly".  Not really enough of a commitment for the Nats to care.
- End ETS - New Zealand rightfully shouldn't cripple itself to save the world, when so many others refuse to do so.   
- Give parents effective control over their children’s education - Bulk funding in effect, with more autonomy for state schools.   Still ridiculously limp wristed compared to Ruth Richardson's 1987 National election policy for education, which was essentially replicating Sweden's successful experiment in vouchers.   Let anyone set up a school and let parents take their taxes back and pay for that school.
Promote a multi-party consensus on changes to New Zealand Superannuation - The worst thing about a consensus is that the strongest thing that can usually be agreed is fairly weak.   This is virtually worthless, whereas while I did not agree with compulsory superannuation, it had the merit of granting property rights in a retirement income - something that doesn't exist now, and particularly disadvantages the heirs of those who die before retirement.
- Promote a safer, more secure, society - Supporting the right to self defence is important, and so should be seen as a positive move.
- Push for equal legal status for all New Zealanders, irrespective of race  - Enough said, it should be obvious, except of course to the Greens and Maori Party, who think this is racist.
- Re-establish a constructive relationship with Fiji - Sorry?  No.  This obvious pander to the local Fijian vote is absurd.

Yet while that looks mixed, Brash comes out with gems like this rural policy announcement saying "ACT will overhaul the RMA and reinstate the right for property owners to use their land as they see fit, subject to respecting the rights of others. "  Beautiful stuff for those of us who believe in property rights, but is it a case of the policy being right when Lindsay Perigo is drafting the press releases?

For me ACT should keep things simple. 

It should be about property rights - which means not only the RMA, but about businesses doing as they see fit, about lower taxes and about the right to self defence.

It should be about moving public services into the hands of consumers and suppliers.  So that people can take their taxpayer funding of education to new schools and educational institutions set up freely.  The same with healthcare and pensions.

It should be about personal rights.  That means property rights, but also recognising that people should feel free to live their lives as they see fit,  and that less government promotes more personal responsibility.  It also means treating laws on personal matters, like drug use, tobacco and alcohol, as being up to adults.   ACT should, at least, support medicinal use of cannabis, and taking a radical look at drug laws and whether they are working.

Finally it should be one law for all.  That does not mean denying people national identity, or acknowledging Maori as indigenous people, but it does mean the state is colourblind. 

ACT is relying on John Banks, a man who I don't believe has any real belief in any of those concepts.   It should rely on Don Brash.

Don Brash is standing in North Shore, against no other than Maggie Barry.   It doesn't take two seconds to figure out which of those two is the one with intellect and the one to be more effective for North Shore. 

ACT should be pushing Brash for North Shore.  With Wayne Mapp's retirement, North Shore would be far better represented by a man who would be Party Leader and also be elected in his own right as an MP - by Don Brash.

Then ACT wouldn't be relying on John Banks.

Forget nine points, stick to four:
- It's your life
- It's your property
- One law for all
- Services for the public, not the public service.

and Brash for North Shore. 

It's too late to remove Banks and it would look awful to do so at this stage, but the show should be the Don Brash show.   Besides, does New Zealand need someone in Parliament whose main contribution in recent years has been to warm the hearts of pensioners who like gardening?

10 November 2011

The failings of unconstrained liberal democracy

There is literally no excuse for newspapers and news broadcasters not to be filled to the brim with substantive global news.  However, as there is always trivia about celebrities, sports and the fetish for disaster porn, these will always come first, yet 2011 is becoming one of those years that may go down in history as marking a turning point.   It is a time when critical decisions are needed by elected politicians, most of whom are not really up to the job.   The difficulty comes from the nature of liberal democracy.

It takes a certain type of person to stand for elected office.  At best they are well educated, have benign intent (in their eyes), are willing to take advice, and will carefully weigh up the options before choosing policies that appear to generate more good than harm.   In fact, that's what voters by and large expect.

What people get is something else.  Despite the ravings of tabloid media and talkback radio, political office in and of itself doesn't pay well for the hours that politicians are expected to put in.  That is, if you're professional or entrepreneurial.  However, if you're Georgina Beyer, Ken Livingstone, Alamein Kopu, George Osborne, Jack Elder, Diane Abbott, Danny Alexander or Jami-Lee Ross (yes go read up on them to see what genius is behind them), then this is the pinnacle.  You're unlikely to be earning that much doing anything else.  If you want more, you need to be at best planning your future career (consider Simon Power), or to be corrupt.

Your first and biggest concern as a politician is getting elected, which means telling people what you think they want to hear.  It is an exercise in marketing, and to be fair most voters are either loyal customers of a single party (and so uninterested in results, but act tribally), or make the decision based on hunches and feelings, or single policies that tap their emotions.   The number of voters who thing of the long term, and use any combination of economic or scientific analysis (even flawed) to decide who to vote for is insignificant, and engaging with those who do, one on one, is a waste of any politician's time.   Avoiding conflict and avoiding difficult decisions is what they do, because to do so means upsetting people, and those are people you need for support.  

The Eurozone crisis is entirely because of that factor.  Politicians in Greece, Italy, Spain, Portugal and other European countries promised voters a lot of "free" things, whether it be healthcare, education, pensions, welfare, housing, or at least lots of cheap things.  They offered more, year in year out, they promised more, spent more money, didn't ask for it in taxes, and simply borrowed.  There were banks that were willing to loan because it was governments borrowing - Eurozone governments - the risk was perceived to be minimal, so they ignored it.

The politicians offered something for nothing, the voters took it and the bankers loaned to the politicians, in a cycle of delusion that is now breaking apart - because the bankers have finally figured it out.

It isn't confined to the Eurozone either.  The US is finally facing the same hiccup, the UK became close to it, all because for year in year out, governments overspent.

Some on the left will glibly blame it all on "capitalism" and "the banks".   Uncontrolled growth in government spending is about as capitalist as Che Guevara.  The blame banks get is for lending to governments in the first place, although you can be sure if they did not, that they'd be blamed for being "obstructive" and not "socially minded", although there are quite a few countries that find it difficult to borrow on international markets.

Certainly the bank bailouts tipped many government finances over the edge in terms of sheer debt load, particularly Ireland.   However, the counter-factual is rarely argued.  If banks were not bailed out, and they were allowed to collapse, and people faced their businesses, properties and deposits being lost, then would that have been preferable?  I'd argue that yes, there should have been a process for the orderly collapse of banks.  However, neither Bush nor Obama, nor Brown, nor Sarkozy nor Merkel, wanted to contemplate that.   

The arguments about debt claim it is all about the banks, but a cursory look at public debt before the financial crisis shows that is simply untrue.  Greece, Italy, the UK and the United States all had growing public debt burdens, the bank bailouts made it worse, but had the public finances for any of those countries been in a far better state - the current crisis would simply not exist.

So now there is the spectre of Western European governments asking a one-party state - the People's Republic of China - to "invest" in lending to their spendthrift governments.   The idea that the Communist Party of China (which, by the way, runs an economy that has a smaller state sector than most Western countries) will take lessons or instructions that suggest liberal democracy has anything to teach it, is laughable.

The one lesson unconstrained liberal democracy is teaching the rest of the world is that in democracies voters are short term thinkers, politicians are driven by popularity and placating whatever rent seekers are the loudest - and the result is the same as if you had a teenager with a credit card seeking to be popular with his or her friends. 

In other words, Europe and the United States are telling the dictatorships in China, Russia, the Middle East, Asia and Africa that their way, is the path to economic ruin. 

Even those who were elected on the basis of dealing with this are largely impotent for they face the opposition from the rent seekers who benefit from the borrowing state.   The Tea Party Republicans in the US who were voted in on a platform of smaller government and less tax, are finding it rather difficult to cut spending.

The political landscape of liberal democracies has evolved to be dominated by the middle ground, that which Tony Blair called "the third way", or which Bill Clinton embraced.  It is naturally "conservative" in that it isn't dominated by radical reform, but is fundamentally corporatist.  It tinkers with the free market, meddles with business, regulates and taxes and tries to manipulate the economy, whilst maintaining a dominant public sector role in areas such as education, health and retirement incomes.  It is neither old left, nor free market "right".   It did require economic growth to keep tax revenues up to sustain budget deficits, and for the Eurozone, for cheap credit to remain on tap, forever.  The brief interlude of budget surpluses in the US in the late 1990s were quickly eaten up by the post 9/11 hit to economic growth, and then devoured as Bush spent up on wars, and everything else as well!

The problem with this model is that it was incapable of responding to the financial crisis, which it begat because at the heart of this model was belief that centrally managed fiat banking could deal to "boom and bust", and because in the US the tinkering was on a grand scale with Fannie Mae and Freddie Mac as the state owned mortgage guarantor, whilst banks were required to lend to those who would not otherwise be able to borrow.   When this corporatist approach unwound because of the property bubble IT begat, and banks faced collapse, the "middle way" suddenly bolted to the left.  Bureaucrats and politicians decided doing something was necessary, so they printed and borrowed. 

The choice was to be Keynesian - or not.  To be Keynesian, was to spend borrowed money and print some more, in the hope it could generate economic growth.  The problem was that public debt in a few countries looked so large, that banks, who had been warned about being profligate (and faced considerable new rules on the amount of leverage they could have), could see enormous risk, particularly in parts of the Eurozone, but also the US and the UK.

Now in the Eurozone reality is hitting home.  The Greek government needs to either cut spending by around 20%, or hike taxes by the same amount or some combination of either to avoid a crisis.  It is unable to do so, because Greek taxpayers are fed up.  Half of them are rent seekers who have been enjoying bank subsidised jobs and benefits, the rest are tax avoiders who don't want to pay for the rent seekers.  Italy is little different.  The German government faces telling German taxpayers to pay more because the Greeks and Italians have been living on borrowed money and they wont pay it back.

There no longer is a middle way.   Either governments live within their means, cutting back or raising taxes, or other governments bail them out.

It is either less government, more free markets and more of people paying for what they use.

Or it is more government, more transfers from those who are productive (in this case Germans, but also Austrians, as well as Dutch, Finnish and French people), to those who are not. 

Merkel and Sarkozy are looking for a middle way, of the banks that loaned to Greece and Italy taking a big hit, of Greek and Italian taxpayers getting less for more, and for German and French taxpayers to save their own banks.  Yet even this wont wash.  Obama also can't find a middle way, because he can't convince enough Americans to pay more tax, while he is unwilling to cut spending on anywhere remotely near the scale he needs to.

For the period from 1989 to 2011, it could reasonably be argued that mixed economy liberal democracies had "won" the battle of ideas, both in terms of economics, but also socially.   The moral and economic bankruptcy of "actually existing socialism" was obvious,  China and Vietnam already knew the economic bankruptcy of it and had started to change.   The moral dimension of freedom vs. dictatorship had won, at the time.  However, since then, it has been challenged.

Russia has seen some measure of economic success, coinciding with authoritarianism, as it has ridden on a wave of community price booms for energy.  China has gone from strength to strength to be the second largest economy in the world.  Meanwhile, Western Europe has been sclerotic, and the US, following the bubble of productivity and innovation arising from IT and telecommunications, is looking like it did in the 1970s - morose and stagnant.

The trend towards more personal freedom continues.  The Arab Spring is, in one part, about that, as people throw off the shackles of dictatorships, although whether they elect their new shackles is a moot point.  China too, is experiencing freedom of speech and debate unseen in over 60 years, although there are still lines that are dangerous for citizens to cross.

However, on economics, mixed "third way" economies are now seen to be wanting.   It is, in part, due to fiat banking (the inflationary bubble created by printing money is only starting now to apper), but is moreso due to politicians being incapable of being fiscally prudent.   In the US the debate is becoming one about whether Americans want a smaller government, with lower taxes, but less benefits/subsidies, or a bigger government, with higher taxes (for a few), more like Europe.  At least there, the debate is being opened up.  In Europe, the debate is yet to be entered into, but the far-left and far-right are starting to sound off where they want it to be.  The far left want to squeeze business and run big governments, the far-right want to reassert national sovereignty and not pay for bankrupt foreign economies.

The centre is floundering about wanting a "solution", but given their philosophical base is neither to increase taxes, nor dramatically shrink the state - they have no clear answer to fiscal profligacy.  Their bumbling attempt to discuss a financial transactions' tax being inept, and largely pandering to the far-left desire for blood, theft and destruction of the financial sector.

You see, it comes down to politicians.  Most do not understand economics, let alone finance.  A TV journalist some months ago asked a cross section of UK MPs what the difference is between the deficit and debt, and many had no clue.  Why would anyone trust any of them to spend your money or borrow in your name?

They do not know what they are doing, and the voters do not understand what is going on, and will vote based on short term imperatives rather than long term ones.

In other words, liberal democracies can't find an answer because they are inherently incapable of making difficult decisions that must be made.

In this climate, is it any wonder that China is looking on to see the eclipse of the West and the slow withdrawal of Pax Americana from the world, as Obama withdraws from Iraq, seeks withdrawal from Afghanistan, plays a back seat role in Libya, and seems ready to leave the world to others, whilst seeking to follow the European example on economics.

The only way this will be confronted is if voters decide they will no longer expect politicians to deliver them answers, but that government should stick to what it is good at, and do less, and tax less.

The alternative is what the "Occupy" lot incoherently seem to want, which is more government, more taxes on those they don't like, to confiscate property and bugger the consequences.

You see the approach being taken now, of spending a little less and taxing a little more, doesn't deliver an environment for economic growth and more jobs, nor does it meet the demands for blood and money that the far-left are bullying for, because it maintains the corporatist state - that borrows and taxes to give privilege to some.

Meanwhile, figure out for yourself who represents what view in the New Zealand elections and in mainstream politics everywhere else.  Good luck at finding those who aren't of the middle ground or the grow the government mob, or indeed journalists who can understand it at all.

06 November 2011

Fear unbridled government? The answer isn't a coalition

When Geoffrey Palmer wrote "Unbridled Power" his concern was primarily about the lack of constitutional limits on government in New Zealand, and how Cabinet would dominate single party government which itself would almost always dominate Parliament.   Jonathan Milne has taken the latter tack in his latest article in the NZ Herald.  His hypothesis is that small parties will do badly this election, and that there is a real chance of something "dreadful" - one party government.

Of course he might think he looks like he is making a rather generic point about the advantages of coalitions and minority governments compared to single party majority government.   Yet he hardly hides his colours at all.  He doesn't pick on Rob Muldoon "banning inflation", spending billions on Think Big and bribing voters with national superannuation, he doesn't pick on Norman Kirk for creating big government businesses, expanding the welfare state and greatly expanding subsidies for government trading departments.  He wouldn't.  You see he isn't exactly an economist, or a historian or a political scientist, he's a leftwing reporter.  What other explanation is there for this comment:

The controversial free market reforms of the Rogernomics era were pushed through by the all-powerful fourth Labour Government without warning or by-your-leave. Similarly, there were few fetters on the National Government when Ruth Richardson presented her slash-and-burn Mother of All Budgets. No presidential veto, no senate or upper house sitting in oversight, and no small coalition partners to soften the hard edges of these governments.

All governments are "controversial", but you'd only say that if you thought that.  Except Jonathan is naive.  In 1987 Labour asked for a mandate to continue the reforms, got one and continued.   "Softening the hard edges" is the sort of comment one would only make if you disapprove, and those who disapproved were Jim Anderton and Winston Peters, and their bands of socialist, nationalist and xenophobic state worshippers they founded.

I opposed MMP in 1993 primarily because I had seen the previous two governments implement the most politically courageous policies in modern history.   Governments that cut subsidies, cut public spending, including cutting benefits.  They restructured government departments, made thousands redundant and privatised in the face of venal xenophobic hysteria.  Farmers, state sector workers, beneficiaries, pensioners and unemployed people were unhappy at the time, not a state of affairs most political parties are keen to promote if they want to be re-elected.  Contrast that era to the smile and wave of John Key, and Helen Clark's middle class welfare, and cash thrown at various interest groups (and craven acceptance of support from Winston Peters).

Even at the time of the 1984-1993 governments, the "hard edges" had plenty going the other way.  The fourth Labour Government opened up the Treaty of Waitangi settlement process, created bureaucracies for conservation, the environment, womens' affairs, youth affairs, Pacific Island affairs, and sowed the seeds for the Bolger government to pass the RMA.  Foreign policy saw New Zealand effectively step away from being aligned with the United States in the Cold War.   Education and health care remained firmly within the grip of the state sector and the rent seeking unions that dominated them. 

For Jonathan, stopping governments doing all they want is a good thing.  Which of course would be all very well, if what they wanted to do is more.  However, Jonathan's opposition to single party government is not that, indeed he rejects it because of history when governments were deliberately pulling back from spending money they didn't have, and telling people what to do.

He showed a childish thrill to think of the Greens and National working together on transport policy - because two conflicting ideologies must produce the best results.   He mentions NZ First, ACT,  Jim Anderton, Peter Dunne and the Maori Party, as if he misses them having influence (remember the positive influence of NZ First after 1996?).

Somehow he links Brian Tamaki to Peter Dunne, and then concludes while the Greens might not be good on "roading policy", one party government is "far worse", and his only evidence is the reforms of the 80s and early 90s.   That's just being rather vacuous.

Frankly, if either National or Labour were committed to privatisation, commercialisation, cutting government spending and winding back the state, I'd say bring on one party government.  However a Labour-Green-Maori-Mana government would be a four headed hydra of disaster, which would easily spook foreign investors and send more aspiring New Zealanders abroad. 

Unfortunately Jonathan hasn't really bothered to check what the two main parties have on offer.  National is hardly driven by a desire to engage in major reforms, it is instinctively conservative.  Labour is hardly seeking to engage in radical reforms, although is at least masochistically more interesting than National.

So no Jonathan, one party government after this election wont be perilous or dreadful, it will be "meet your new boss, same as old boss".  Politicians wanting to boss people around, spend their money while saying "it's good for you".  The only difference with a coalition is that the flavour changes.  Maybe if National needed ACT, and ACT gained 10 seats, there might be something more radical - presumably that's when Jonathan gets upset because that's not what he meant.  You see to him, like so many reporters in New Zealand, government should be there to fix problems, not get out of the way.

04 November 2011

So you're having an election

Get a feeling it is a little like 2002?

Elections in New Zealand haven't been the same since 1996 when MMP meant that "winning" wasn't all it used to be.  However, sadly, neither the media nor the public have fully got to grips with it.  The simple truth is that it is extremely unlikely that National will get to govern alone, just as it was the same for Labour in 2002.  

A cycle has commenced.  In 1999, 2002 and 2005 Labour cobbled together coalitions, in 2008 National did, and it will likely do so again.  However, it cannot be guaranteed.  You see after one term, with a media essentially presuming a simple result, voters get complacent.

National will desperately want to ensure it gets a good turnout, for it will fear a low turnout will mean things are far closer than usual.  Bear in mind MMP means that it is getting party vote out that counts, and that means all electorates.  The flipside is that Labour will also be seeking a turnout, when it knows most assume it cannot win.

Yet it isn't quite as simple as that.  2002 is an object lesson for the two main parties, because it saw a significant shift in votes.

In 2002, Labour saw polling say it might win an absolute majority, yet it gained only a small swing of 2.5% in its favour, primarily because it gained at the expense of the Alliance.   National was decimated.

One interpretation of what happened was that support for the government, which had been slim, shifted around a bit, from the Alliance to Labour and the Greens.  There isn't quite the same parallel for National.  The Maori Party isn't a natural ally, and ACT is more likely to face fear of oblivion seeing its support go to National.

In 2002, the decimation of National was due to an assessment by many of its supporters that it had no chance, so they voted for United Future to give Labour a tolerable coalition partner.  This time, it is Labour that may be seen as having little chance, but Labour supporters aren't going to back Peter Dunne the same way (why would they? he is back to being a one man band), unless he gets some lucky media traction.

Some Labour supporters may choose to vote Green for the same reason ACT did better in 1999 and 2002, because they prefer a more principled opposition. 

This time round there is another dynamic - the Maori seats.

Mana Maori is making them a three horse race, and my pick is that it benefits National. 

You see, Mana Maori is more likely to take votes from the Maori Party than Labour.  Odds are this will not see Mana Maori pick up seats besides Hone's one, but could decimate the Maori Party.  It could eliminate the Maori Party overhang (but create a one seat one for Mana Maori), which can only benefit National.  Moreover, if Labour has a clean sweep of the Maori seats, the overhang is gone, but it only takes seats away from Labour's list allocation.  It can only be good for National.

Except of course, if ACT doesn't get Epsom or North Shore, and National is just short of 60, and Peter Dunne isn't enough.
National is playing its traditional game, being the classic "do next to nothing" party that saw it win most elections since the war.   It impresses the masses who like the smile and wave.  Labour will get out its core vote of public servants, low level aspirational control freaks, beneficiaries and some of the working classes.   What's left is who votes for the other parties.

The Greens have the clearest consistent brand for those who want someone else to do the thinking for them, or at least the emotive neo-Marxist posturing.  It's the party for people who believe the end is nigh, but also those who think they know best for other people.  The classic authoritarian party.

ACT is on its last legs, on life support, but still offers - just - a more "National than National" party with policies that are closer to National's own principles.

The Maori Party has shed its most racist, Marxist, pro-violence wing in the form of the Mana Maori Party.  However, will it have satisfied its supporters?  Has it handed them enough in coalition?

Beyond that, we are saying bye bye to Jim Anderton's personality cult party as he retires, and Winston Peters is having another go at attracting malcontents, but most of his past voters have passed away.   Peter Dunne faces his repeated challenge from two sides, and the only minor parties that remain outside that which have survived are the Alliance retards, Libertarianz and the ALCP.

Of that lot, only three parties offer any hope of less government.  ACT has a leader who talks the talk, and policies that mostly face the right way.  Libertarianz is consistently pro-freedom, with a nicely refreshed lineup, and ALCP maintains its single policy.

I hope to do a bit of a quick review of the main people on the party lists and the electorates, if the psephologist in me gets the time.

02 November 2011

Greece is to collapse under the weight of its own reality evasion

Greek Prime Minister George Papandreao's decision to hold a referendum on the "bailout" plan agreed with other Eurozone countries has sealed the final act for Greece's democratic socialist attempt to live a life that it wasn't willing to pay for, and should serve as a warning for the economic catastrophe that the Euro project has become.

Let's recap what happened.

Since Greece became a liberal democracy in the 1970s, it has run policies that could broadly be called "democratic socialism".  A typical right/left democracy saw little difference between policies, but the Communist Party consistently would come third.  Progressively more generous welfare policies and a growing public sector, combined with a lackadaisical approach to tax collection, and feather bedding the armed forces.  Meanwhile, the Drachma devalued again and again.

Greece joined the EEC in 1981 and the money came rolling in.  As the poorest Member State it gained funding to build infrastructure, generous agricultural subsidies and access to markets in Western Europe.  The typical EU type deal was made.  Greece gained new markets for its goods and services, grew tourism and attracted investment, whilst the money flowed in from Brussels to prop up a burgeoning public sector, inefficient state companies (Olympic Airways being one of the perpetually near bankrupt ones). 

The delusion worked for a while, and then Greece got the next offer - get a Western European currency.  The Euro.  Greek governments lied their way into the Euro, not really having a 3% budget deficit (hiding defence and hospital spending) at all.  So out went the Drachma, and Greece borrowed - more and more.  Borrowing for the Olympics in 2004, and this time credit flowed freely.   The Euro was being loaned out at interest rates reflecting the economic environment of the dominant Euro Member States - Germany and France.  So Greece was receiving credit not on the basis of running large budget deficit and public debt approaching 100% of GDP, but rather running low budget deficits with a reformed economy - like Germany.

Greek government kept getting elected, by Greek voters, to give them their pork, at little cost to them.  Ridiculously generous pensions, a public sector where nobody could legally be fired under the constitution, a bloated armed forces that had not changed since the Cold War (nor since Bulgaria became an EU Member State rather than the front line of the Red Army), and a tax system that was a bit of a joke, saw Greece slip slide its way to bankruptcy, as banks in France, Germany and to a lesser extent Britain and elsewhere, lent to the Greek government believing all was well - because it was the Euro.  A currency those banks believed would be government guaranteed.

They didn't factor on a Eurozone government going under.

Greece is to all intents and purposes, bankrupt.  Its austerity programme of cutting spending and increasing taxes only slices off some of the overspending.  It cuts the budget deficit NOT the debt.  Think of it as you being on the brink of being personally bankrupt and you've managed to cut your spending to be only 5% higher than your income rather than 10%.  You still need to borrow.

So who is to blame?  Well, quite a few.  Greek voters, Greek politicians, Eurozone governments, the European Commission and Greece's creditors all carry some blame.
Greek voters
If you believe in liberal representative democracy, then Greek voters are to blame.  They voted for politicians who gave them public spending that was unaffordable.   They didn't support politicians who believed in containing the size of government or even increasing taxes to pay for their socialist state.   They benefited from the loans taken out in their name, they happily evaded taxes, but they didn't evade taking advantage of the money spent by their government.   Now they are unhappy about facing reality - the reality that they have been living beyond their means, or at least, supporting governments that have been doing so.   For so many they need only look in the mirror to find who to blame.

Greek governments

Many Greek voters and citizens obviously did not support the government, and were not public servants or major users of the profligate Greek state.  They can rightfully blame Greek politicians for lying.  Lying to join the Eurozone, lying about the state of the books and engaging in massive reality evasion at elections.   It is telling how so few Greeks are pointing fingers at past Prime Ministers and Finance Ministers for their combined failure to confront the public finances, and most of all in colluding with the state sector to lie - and I do mean lie - about the budget deficit to join the Euro.   That big lie is now costing lives and livelihoods.   Greek citizens should be baying for the blood of these lowlifes - lowlifes who now live off the back of generous political pensions.   Greek politicians didn't just evade reality, they denied it and covered it up - for shame.

Eurozone governments

Greek governments would not have been facilitated down this path had Eurozone governments not allowed it to happen.   They could have shown greater due diligence with Euro membership, but the Euro is a political project, driven by France, accepted by Germany, to bring European economies together.  It is not an economics project, but one driven by hubris, pushed by people sharing a democratic socialist vision of the EU being a fortress of common laws, taxes and generous business and personal welfare states.   They wanted it to be central to EU membership, and France itself has almost always failed to meet the Eurozone membership test itself, of a budget deficit no greater than 3% of GDP.   They supported lending to Greece, supported Greece's fiscal profligacy (given their own) and engaged in their own wilful blindness of both Greece and their own failures to meet their own disciplines.   Reality ignored

European Commission

The EC got Greece hooked on the corporate and state welfare of its subsidy programmes and cohesion fund.  It supported Greece's growth of the state and addiction to the European project as part of its political culture.  The EC is adept at covering up its own embarrassments and at pretending things are what they are not.  The EC wont admit failure, wont admit the inherent immorality of its project of transferring wealth from the earned to the unearned, and of power from Member States to the unelected Council and Commission.   The European Central Bank is, of course, central to this.

Greek creditors

The banks that loaned to Greece believed they were lending to a watertight debtor.  They believed German, French, Dutch and other Eurozone taxpayers would cough up, if anything went wrong.  They facilitated Greece's overspending and expected to make money out of making taxpayers pay up - whether they be Greek, or other Europeans.  They pretended governments couldn't go bankrupt, the "bailout" deal is based on them swallowing a 50% write off of the debt borrowed to date.

What now?

The bailout is doomed, quite simply because Greece is still overspending, its economy is on its knees and the banks that have loaned to Greece will be forced to face a larger than 50% cut in their loans.   It isn't enough and can't be enough.  France and Germany are pretending they can fool the markets into having confidence, through the construction of complicated derivative lending instruments, akin to those blamed for hiding risk before the financial crisis of 2008.   
However, the collapse will come from the referendum on the bailout.

If Greek voters choose yes, they face short and medium term pain, in the form of a vastly smaller state and longer term pain, by being hooked to the Euro.   They could take a bitter pill of reducing their failed democratic socialist state and become a reformed, free market economy that is competitive, following the reforms of its northern neighbours (e.g Bulgaria).   However, I wouldn't count on it.

If they choose no, as it widely expected, then Greece will default.  It will be unable to borrow, the government will effectively shut down many activities, and is likely to be forced out of the Eurozone, meaning it will have to either create its own junk currency, or operate in Euros independent of the European Central Bank.  The price of that will be severe in the short term.  Any Greek resident who isn't moving their money into a foreign bank in Euros is gambling, because Greek banks will collapse.  Greece will face an Argentine style default so will have no budget deficits after that, but then it could reawake and be revitalised.

The Greece experiment in profligate democratic socialism will have been dumped - and eyes will be on the Italian, Portuguese, Spanish, Belgian and French varieties.

Oh and despite the vapid plaintiff words of some protestors, most of the blame for all of this lies not with the private sector but the political classes, and ultimately, the majority of voters.

The Eurozone crisis is not a crisis of capitalism - it is the dying gasps of a grand project of democratic socialism, and the first - weakest - branch of that tree is about to fall off.

01 November 2011

I want to vote ACT

but I'm unconvinced.

Rodney Hide's record the past three years has been bitterly disappointing.  I am glad I didn't vote ACT in 2008, for I'd be, in part, to blame for the gargantuan planners' wet dream called Auckland Council.  

However, ACT has purged Rodney Hide and installed Don Brash, a man for whom I have immense respect, a man who almost single-handedly rescued National from near oblivion to near victory in 2005 - a mission that failed because of the National Party and some ill-advised campaigning.

The candidates are largely a fairly impressive lot.  Brash and Isaac top the bill rightfully, but there are two issues.

Firstly is John Banks.  How he got admitted to be a candidate is beyond me.  Peter Cresswell says much of what I think of him.  It's not that he's a bad man, he is certainly interesting, but he is not a lover of individual freedom.   Indeed, his profligacy as Mayor (remember how he once opposed the grand plans for Auckland's rail network then supported them?) is not what you'd want from someone seeking to keep the National Party's spending in check.  Actually, as a man who held Rob Muldoon as a figure of respect, you'd already be wondering why he could ever be trusted to help reduce the size of the state, and that's ignoring his vocal and solid opposition to the Homosexual Law Reform Bill in the 1980s.  

Now it wouldn't be so bad if he was an electorate candidate in Whangarei, and lower down the list, but he isn't.  He is ACT's lifeline.  ACT is betting on him winning Epsom to stay in power, so ACT will owe John Banks everything.  Now I'd like to think the people of North Shore might choose Don Brash instead, but Banks is still number three on the list.   In other words, he is hard to hide from.

Choosing Brash as leader appears to be in part a purge of gutlessness and the remnants of pro-state conservatism, but why include John Banks?  Nobody can pretend he has a profound belief in smaller government and individual liberty.  Similarly, what delusion can ACT have that Banks is some sort of high profile "celebrity" candidate, in the mould that Hone Harawira, Jim Anderton, Winston Peters and Richard Prebble have been for minor parties before?
Let's say I swallow Banks and look at policy.  How does that look?  Let me rank the policies out of 5.  1 being virtually worthless. There are 18 policy areas, possible score of 90.

Defence - Positively allowing nuclear powered ships, and strengthening the armed forces, including rebuilding relationships with the US and Australia.  4 out of 5.

Economy - Cut spending to 29% of GDP (the level Labour left the country at in 2005), cap spending increases to inflation and GDP, cut regulation and privatise.  Hardly bold.  Nothing on flat tax. 2 out of 5.

Education - Increase school autonomy, increase state funding of independent schools, increase school choice in assessment systems, more scholarships for underprivileged children.  Less ambitious than National's 1987 manifesto.  1 out of 5

ETS - Remove agriculture from ETS and suspend the rest till majority of trading partners have caught up.  A quite respectable approach.  4 out of 5

Environment - Push road pricing, market pricing of water, support mineral exploration and "acknowledge" the role of voluntary groups.   With RMA elsewhere, this largely looks positive.  4 out of 5

Health - Encourage competition, target subsidies on the poor, reduce taxes so people can buy health insurance, review occupational licensing and reduce bureaucracy.  Promising, but a bit vague.  3 out of 5.

Immigration - Lower administrative barriers to entry, favour productive workers, ensure it is no drain on the welfare state.  Reasonably positive, although somewhat vague.  3 out of 5

Law and order - Review procedures around self-defence, consider re-introducing Sentencing Council, sanctions for prisoners who reject opportunities for rehab/education, "broken windows" approach, victims to receive reparation payments.  Nothing on victimless crimes or National's authoritarian approach to drugs.  1 out of 5.

Local government - Pressure local government to focus on core role, reduce restrictive land use planning.  Less policy than before.  Such an opportunity to reform!  1 out of 5

One law for all - Allow more choice in education and health (yet not really mentioned much in either policy), accelerate Treaty compensation process, remove RMA requirement to consult by race, no Maori seats, no local authority Maori seats and no statutory boards.  It goes much of the way there, but could be clearer. 4 out of 5

Primary industries - Reduce spending, dump ETS, streamline RMA.  It could be worse, but could include property rights as well.  3 out of 5

Regulation and red tape - Continue Productivity Commission, pass Regulatory Reform Bill, reform RMA.  Could have been a long list, but it is aiming the right direction 3 out of 5

RMA - Separate planning and approval functions from councils, limit consents fees, widen powers to order costs against objectors, increase rights to compensation from planning decisions, removing "intrinsic values" from consideration.  Nothing on property rights, but otherwise it is a positive step forward. 2 out of 5.

Spending cap - Pass Spending Cap (People's veto) Bill, promote culture change and innovative policies.  Not a lot to say about this.  A step forward, but not nearly enough. 3 out of 5.

State owned assets - continue a rational evidence based debate about the government's role?  Well yes, but you can do better than that.  Much better.  You say so in economic policy, so I will say a 3 out of 5.

Tertiary education - Remove fee caps, introduce market interest rates for student loans, open trade courses to competition, lower taxes so students can pay back loans quicker.  A useful step forward, but not more so 3 out of 5.

Transport - Invest in projects with higher benefits than costs, embrace better pricing, streamline the RMA for building infrastructure, push government to invest in any modes.   RMA streamlining shouldn't interfere with property rights, and the government should be investing less. What about the private sector?  Disappointing 2 out of 5.

Welfare - Youth minimum wage, tougher approach to welfare, reform Working for Families, and more detail.  Definitely the best thought out policy of the lot.  A generous 4 out of 5

50 out of 90.   Is that enough?

I wish I could say yes, but there are three things missing.

Property rights

Where are they? Where is putting property rights at the centre of the RMA?  This should be central to any liberal party.  They are alluded to, indirectly, but why just that?

Tax

Nothing specific about taxation, about reducing it, about flattening it.  Yes, spending caps are all very well, but there isn't even a focus on deficit elimination and then lowering taxes.  That is disappointing.

Victimless crime

I don't expect legalisation of drugs, but I do expect something to be mentioned.  I do expect a review of criminal laws to consider how there might be a reduction in regulation overall and interference in people's private lives. 

It's a shame.  I wanted to vote for ACT,  I really did.  I like Don Brash a lot.  He could make a very positive difference to a government,  but what I've seen so far is very very disappointing.  Can it be saved?

30 October 2011

Farewell Roger Kerr - one of New Zealand's intellectual giants

I am genuinely saddened at the news of the premature passing of Roger Kerr, news we all knew would come in due course. I only met him a couple of times, and we talked about – unsurprisingly – a free market approach to transport.  He came on a march FOR capitalism, remembered my name and we had a great chat about a wide range of issues. He always was softly spoken, gentle, intelligent and played the ball, not the man.   For those unfamiliar with him, he was one of the architects of the free market reforms of the 1980s and 1990s, as a public servant and then as Executive Director of the Business Roundtable.  A role that saw him receiving nasty brickbats.

I can confirm what Lindsay Mitchell said of him:

He was very experienced and accomplished. I was out of my league. But neither the audience nor myself was made to feel as though Roger was superior, above us, imbued with some god-given truth. Roger knew that persuasion meant honest and non-personal debate. In fact I think he was Mr non-Nasty. A rarity in the emotional arena of philosophical ideas.

Roger made time for people. He was humble and magnanimous. He could never have met the low standards of politicians and political debate in the house.

Cactus Kate’s comments about the strength of his writing are also true. He was one of the best writers to synthesise free market economics and public policy in a coherent, intelligent and eminently readable way:

What he leaves behind for us younger members of the VRWC is literally a lifetime of wonderfully written literature, speeches, opinion and research….It is not often in life you get to meet someone so academically smart who doesn't sit in an ivory tower on the taxpayer tit.

David Farrar has pointed out how Roger could have easily gone overseas and earned much much more money, but his interest was in New Zealand and in making New Zealand a happier, wealthier, more prosperous and free country:

Roger had a great love of New Zealand. I have no doubt he could have earnt much more money if he had not devoted the last 25 years to establishing and growing the Business Roundtable. While of course his views were controversial and often unpopular, Roger was only motivated by a genuine desire and belief that they would make New Zealand a better place.

Roger was genuinely a man who was easy to respect, whose mind was that of a giant, and who didn’t let the insults and hatred spun by some on the far left affect how he communicated. He wasn’t baited by the intellectual midgets who couldn’t respond to him with their minds, so responded to him with threats.

He lived a life of remarkable achievement, got to see his ideas implemented in many ways, and saw the fruits of it. However, there was always so much more to do. It was shown in that he blogged up to the end with a post from the 28th. He is a tremendous loss from New Zealand public life. His contribution has been immense, the likes of which puts the political circus of the election look so shallow and frankly inept.

The only wonder I have is why this man did not become Sir Roger Kerr. Given some of those who gain such a title, he is undoubtedly one of those who deserved it so much – although his own modesty and personality was hardly one of a man who demanded or expected such a thing.  He CNZM was so late,  no doubt because both National and Labour politicians were either too gutless or churlish to recognise someone who was out of their league. 


However, one of the more poignant tributes come from Lindsay Perigo's interview with him earlier this year.  His introduction is written here.  




I wish his wife (former ACT President and now candidate, Catherine Isaac) , family and loved ones sincere commiserations. His legacy is one to be proud of, and his memory, influence and contribution will long be part of New Zealand’s history.

29 October 2011

Told you so - Kiwirail's bullshit asset valuation is written down

The NZ Herald has reported that Kiwirail has proposed writing down its asset value of NZ$13 billion by NZ$6 billion, and splitting the firm into a property company (with a NZ$5 billion value for the rail corridor and land), which is essentially the old New Zealand Railways Corporation and the operating business (with a NZ$1 billion value).


The NZ$12 billion book value of rail on the Treasury accounts is a nonsense, equating it to all other SOEs combined (e.g. 3 power companies, Transpower, NZ Post) which all make profits. Most of the value is based on a replacement cost if it was built today, which of course would never be done. I'd argue it is probably worth 4% of that at best.

That was based on a presentation by David Heatley from the NZ Institute for the Study of Competition and Regulation called"The Future of Rail in New Zealand".

I would still argue Kiwirail is grossly overvalued.  Its business and related assets are not worth NZ$1 billion, indeed they are probably about a third of that.  The value of the land is more significant, but I would question the NZ$5 billion for that, especially given the Surface Transport Costs and Charges study valued the land in 2001 as being worth NZ$462 million.   Property prices haven't inflated over 1000%.   Indeed there may be more value in the scrap of the track.

The key point is that The Treasury was being seriously disingenuous accepting that ridiculous over valuation of Kiwirail in the first place.   To consider an infrastructure business as being valued on a replacement cost basis is ludicrous, for it would see all of the electricity SOEs valued on the basis that you would - once again - build a Clyde Dam, for example.

The real asset value of Kiwirail is the optimal value that can be gained for the business either as a going concern, or if it was split and sold for the sum of its parts.   As much as there is much romanticism about it (and I carry a fair bit myself, as I have loved trains since I was a child, and have many fond memories of riding on them), that shouldn't be allowed to distort objective appreciation of what Kiwirail is as a business.

I believe it has a future, providing a core freight service on higher density lines, and given the fortune poured into the black hole of commuter rail in Auckland (and not so much in Wellington), it may as well be used for that until those assets need replacement.  However, it is telling that, at a time of high fuel prices, and with RUC rates having recently been increased, the railway still struggles.   The reasons why are partially explained by Heatley's presentation, and are in part because there simply isn't enough freight with enough frequency being moved in New Zealand on the routes serviced by railways, to make most of the lines sustainable in the long run.

Could it be that a further writedown will be on the cards, and is the reason it hasn't happened that much yet is to protect debt related to Kiwirail?

18 October 2011

What do we want, more Nanny, we're the 0.99%

The 99%.  It's laughable and ridiculous.  The New Zealand mob is claiming it represents 99%, which obviously means it should set up a political party and then sweep to power in the November elections.  After all, with the MMP electoral system, it would mean they would have power, could pass all the laws they want, raise the taxes they want.  

Except of course, they aren't 99%, not even 9%, but quite possibly 0.99%.

More seriously, what are they about? It is very easy to dismiss them as the usual leftwing mob who demand government does more violence to the property and people of whom they don't approve.   However, there is one point - opposition to bank bailouts.

Government should not prop up business.  There shouldn't be subsidies for any businesses or protection from competition.   Corporatism should be fought.  Banks that make foolish loans that they can't recover should not have their risky behaviour bailed out by taxpayers.  That includes loans to governments.  Shareholders, bondholders and ultimately depositors should bear those losses.

Yet the "occupy" mobs think all banks are bad, they oppose capitalism and demand other people's money to pay for all the things they like.  Yet they use mobile phones invented and built by capitalists, on telecommunications networks invented by capitalists, wears clothes sold by capitalists, drinks coffee and eats food produced and sold by capitalists.   They think capitalism is bad, yet they can't conceive of what it is like to eliminate capitalism - which after all, is simply the freedom to establish your own business trading goods or services, to make a profit (or loss) and hire who you wish to supply labour.   The alternatives have tended to at best result in sclerotic stagnation, or at worst created rivers of blood.

By contrast they embrace government, the institution with the monopoly of legitimised violence.  They want new taxes, they want to take money by force from people who they think have too much.  Yet on a global average, virtually everyone in everyone developed country meets that definition.  The average GDP per capita (PPP) is US$11,000 per annum.  Every country in the European Union, every OECD country (including Turkey and Mexico), even Botswana is above that level.  By rights surely at least half of the people in those countries should have more tax taken from them, to pay for?

Public health care monopolies, education monopolies, state welfare and state make work programmes.  

They want more Nanny State and they think people who earn higher incomes will keep doing so, just to pay for what they want.  Even if they don't think that, they want to confiscate wealth and give it to the state, as a trusted party to "look after everyone".

So childlike.


Bottom line? These protesters want MORE taxes, an enlarged welfare state, a bigger Government, State jobs and death to bankers – and a bath. Marx would have been proud of them. I give them a fortnight at most. The Police have already removed the portaloos and it can’t be long before Starbucks and Pizza Express get fed up with toilets blocked by Lentil casserole and organic dysentery. As much as I hoped people had woken up from the stupor of a decade of Labour benefit addiction, the OccupyLSX protest is nothing more than a cold turkey sweat of the terminal welfare junkies.

Meet the new boss, same as the old boss.

He also points out how intellectually inept the mob are, because they somehow think that public debt is the responsibility of capitalists:

No one has EVER forced me to buy shares. Contrast if you will, the £100,000 of PUBLIC debt carried by EVERY family in the UK, thanks to Politicians and the Central Banks raiding our currency, yet no one has demanded to occupy Parliament or the Bank of England. Germans are protesting outside the European Central Bank in Frankfurt, thousands of them who know EXACTLY where the criminals are. Us? Sitting on the steps of St Pauls Catherdral and being kettled once again by the laughing Policeman.

There are good reasons to be angry.  Angry at politicians who ran budget deficits endlessly to bribe voters with their children's and grandchildren's money, without their consent.  Angry at politicians who required banks to lend to the feckless and who ran the fiat currency system that provided an ongoing supply of credit to banks, expecting them to lend, and then who promised to save the banks when they loaned out too much.   Angry at politicians who were never straight about the ponzi schemes they created of public debt, pension and health promises.


Yet they should also be angry at themselves.  How many of them would vote for any politician who pointed out the overspending?  How many of them would vote for politicians who would let banking be free, who would let banks be very tight and conservative on credit? 

You see in a liberal democracy people are to blame for the governments they elect.  In the UK, US, EU, New Zealand, all over, the majority voted for governments that favoured some businesses over others, that spent more than they gathered in taxes, that protected some with the money of others, and which refused to say "no" when people kept wanting more and more without paying for it.

No.  They are hooked on being protected from reality, being protected from the consequences of their own decisions.  They want the government to give them jobs, give them health monopolies (anything else is like "America where people die bleeding on the streets because they don't have their credit card handy to pay the ambulance" (bullshit)), teach their kids what they should learn, give them homes, tell them what to eat, look after their families, wipe their bums.

They offer at best confused anger over a situation they don't understand.  At worst, they are a mob who want what other people have out of pure envy, and are hopelessly addicted to government fixing their problems.

In Rome they were violent criminals, hopefully this time the mobs will quietly dissipate under the contradictions of their own incredulity about economics.

11 October 2011

Abolish child poverty by not having kids you can't afford

An Institute for Fiscal Studies report in the UK has said that government changes to welfare policy will result in it failing to meet targets to eliminate child poverty by 2020.

There is an absurd “legally binding target” to eliminate child poverty by 2020 in the UK. That in itself is a gross misuse of the law. Laws should not be passed to demand that government ensure certain social outcomes arise (there is a similar stupid law requiring the government to reduce CO2 emissions, who gets penalised if the government fails?).

Child poverty in 2021 is largely preventable now. There is no need for any children under 10 to be raised in poverty by 2021. This is my strategy for eliminating child poverty for the under 10s by 2012.

If you can’t afford to raise children then:

1. Contraception is free (taxpayer funded), use it;
2. If it fails, there is a waiting list of financially secure people ready to adopt;
3. First trimester abortions are available for free on the NHS;

So don’t have children you can’t afford.

Some people have children they can afford but circumstances change. That is not preventable, although if taxation were lower, more could afford to take out insurance to cover such situations.

Child poverty is first and foremost the responsibility of the people who brought the child into the world in the first place. Parents have the responsibility to consider how to bring up their kids, how to pay for them, how to provide them what they need.

Nothing would be more important than for government to make this, seemingly obvious point, clear.

In addition, don’t allow anyone to immigrate with children if they also cannot afford to keep them.

One way to do that would be to painlessly phase out the child benefit. Declare that one year from now, no one will get child benefit for any future children. 

Child poverty is not a disease you catch, it is not the responsibility of everyone who doesn’t have children and those who have them, who can afford them.

It wont be eradicated by governments, political parties and “charities” calling for taxpayers to be fleeced to constantly pay for people to raise children they should not have had in the first place.

Depending on government to fix a social problem is deluded and misguided. The best way government can help is to get out of the way. Make the first £10,000 EVERYONE earns be free of income tax and national insurance as a start, and stop paying people to breed.  Raise the income tax free threshold according to GDP growth every year

06 October 2011

Steve Jobs - he lived!

So much can and is being said about Steve Jobs. Creator, businessman, salesman, innovator, capitalist. He turned computing, music, telecommunications, publishing and media all on their heads.

The likes of him does not come from the death worshipping stone age cult infested cultures that rule Iran, Afghanistan (still), Iraq (now), Saudi Arabia or Pakistan. They don’t come from the conformist, respect authority for the sake of it, what is yours is everyone’s and what is everyone’s is yours, culture that rules China. They don’t come from the “it’s my right to have what you have”, “equality above everything”, “demonise success and wealth” culture of the trade union movements. They don’t come from the technology scaremongering, armageddon chasing, state violence worshipping, new age fascists and forked tongue demagogues of the environmental movement. They don’t come from the envy dripping, reality evasive, faux “pride” and control obsessed culture embodied by the European Union and its acolytes. They don’t come from the lawless, “might is right”, “the ends justify the means”, lying, hedonistic, crass culture of nihilism seen in Russia. They don’t come from the superstition laden, misogynistic, tribal, faux nationalistic culture of willful blindness to atrocity that infests sub-Saharan African politics.

When the news is dominated by politicians who blithely borrow, tax, spend and print money that they never earned, from wealth that has nothing to do with them, with bureaucrats and commentators, keen to tell others how to live, what to do, and to control the judgments, the passions and thoughts of others. When culture is flooded with mediocrities preaching nihilistic hedonism, and generating mass market pablum that resembles other mass market pablum. When business and marketing is so utterly full of those who worship surveys, cliches, short termism, image over substance and platitudes over invention. Steve Jobs was a breath of fresh air. When he would launch something new, people would watch, because it WAS new - it WAS innovative, and it wasn't because he was looking after the "greater good", it was because he wanted Apple to sell something people would want because it was great. It so happened that millions agreed. Firms worldwide would love a Steve Jobs. A manager, who understands the detail of the products, but also design and what people would want. However, such people wont come from production line education systems or cultures of conformity or aversion to risk.

They come from a culture where individuals can be themselves, where diverse pursuits that many may seem odd, most don’t understand, can provide fertile grounds for minds, imagination, creativity and risk taking. Where those who do take risks to produce, create and sell can keep (most) of the fruits of their endeavours, and bear the consequences when they get it wrong. Where success is lauded and admired, because people see in those who climb to the top, a piece of them, of what it is to be great, to live life pursuing your dreams, your ambitions, your ideas and your passions. They aren’t there to grab their share, to chop down the tall poppy, or to demand that people exist and work for a “greater good”, for the greater good is in all individuals pursuing their dreams, and in free people interacting, sharing, relating and standing on the shoulders of the giants who make their lives that much better.

In a world where so many are obsessed with intricacies of trivia of nobodies, where so many are obsessed with what others think of them, where so many are out to force others to give them what they haven’t earned or created, and demand rights to the fruits of the minds and labour of others, Steve Jobs was none of that.
He wasn’t the nihilist who saw humanity as a problem, he wasn’t the second-hander who claimed what others had done for his own, he wasn’t living for the sake of other people, was not seeking to control the lives of others, to tell them what to do, or to tell people how to be. He was himself, he led companies that created what he thought were good products, and let them speak for themselves.

He was a man who lived his life for his own purposes, for his own dreams, and was a stunning success. The pecuniary reward he got was a tiny fraction of what he generated for Apple shareholders, Apple employees, sub-contractors and Apple customers, and indeed its competitors who have aped him, and now generate further wealth and happiness for millions.

The legacy of what he did for Apple, what he created for millions, pales in comparison to the example he created for the most fundamental thing of all – he lived.

04 October 2011

Infrastructure for Britain - an agenda for growth

One of the themes that all party conferences have suggested so far is that the government can help the economy by spending money on infrastructure.  Certainly the Conservatives believe they are doing that.  However, there are only two major ways government can help out in this sector, and the main reasons are because it is such a hindrance more often than not.

Firstly, it can get the hell out of the way of the private sector provision of infrastructure, by not negating its private property rights or stopping it from engaging in large, profitable projects.  The key areas the private sector gets involved in are energy, airports and telecommunications, but it should also be set free to put money into roads and railways (good luck with that, by the way). 

The second way is for it to invest in the infrastructure that it happens to own and run for now, but transition that infrastructure to commercial then private ownership.  What this means is roads and railways, but could arguably even stretch into health and education (though these are so far removed from being commercial as of yet, I'll ignore that for now).

Energy

In energy, the key intervention is the effective "tax" on electricity bills imposed by electricity retailers to pay for the compulsory "sustainable" generation of electricity, at prices far in excess of efficient forms of generation. The motive behind this policy was to chase the ghost of climate change (every new Chinese coal fired power station more than destroys the reduction in CO2 by this measure) and to pursue the illusion of industrial policy.  The latter is more effectively pursued by lowering corporation tax to a level competitive with all of Europe (15%), the former shouldn't be pursued at all.   The "sustainability" agenda is costing British businesses and households, it makes electricity more expensive in the UK than it need be, and diverts investment in power generation from economically efficient (and largely environmentally friendly) sources to more ephemeral, expensive and lower capacity ones.   Modern gas and coal fired power stations produce virtually no deterioration in local air quality.  It is time to truly deregulate the energy sector.

Little need be said about the other intervention in energy, which is the absurd "windfall" tax on oil and gas exploration.  Politics winning out over economics, and jobs.  Why would Britain ever want to deter oil and gas exploration while existing North Sea fields are in decline?

Telecommunications

The key intervention here is the heavy handed regulation of OfCom which regulates, bizarrely, a mobile phone market that is vibrant with competition, and continues to intervene in the supply of telecommunications infrastructure to an extent that hinders facilities based competition.  Why should there not be competing broadband networks being developed to homes?  Why should BT's investment be forced to be shared with others?  The legacy of the twisted copper network should be all that remains as a mandatory, regulated priced shared facility - because that was the deal with privatisation.   Beyond that, the role for Ofcom is difficult to see in this sector.  It is time for a bottom up review of whether heavy handed telecommunications regulation still makes sense.

Airports

No infrastructure sector is suffering from a blindness of economic analysis or vision than this one.  With all three major parties effectively stifling growth of airports around London, you would have to assume they all think that it is time that British Airways and Virgin Atlantic simply never grew again, and that the future for air travel from Britain is based on people flying to the growing hubs of Charles de Gaulle, Schiphol, Frankfurt and Munich airports, and to fly on Air France/KLM and Lufthansa, or better yet fly from regional airports to hubs in Doha, Abu Dhabi and Dubai, on airlines owned by authoritarian misogynistic oil-rich plutarchies.   For that is the future guaranteed by the Conservatives and the Liberal Democrats.

Heathrow, Gatwick and Stansted could all be expanded, today, with private money.  For a government willing to run roughshod over NIMBYs in building its own taxpayer funded totem - HS2 - to kowtow to NIMBYs in rural Essex, west London and west Sussex is hypocritical and economic lunacy.   The arguments against it on climate change grounds are again nonsensical in the context of new airports springing up in China, and the expansion of Heathrow's competing hubs in continental Europe.  Why should European (and Middle Eastern) airlines gain such capacity, but British ones not? 

Stansted is the easiest to expand, the land is held by BAA, the transport links to it are good, and it would facilitate a transfer of some low-cost airline traffic from Gatwick.  There is no sound reason to continue to restrict capacity there. 

Gatwick suffers from 32 year old planning decision to not build a second runway before 2019.  Given the lead times for such projects, it should be made clear that this will be supported.  Gatwick is a mini hub for BA and Virgin Atlantic, and is useful for leisure routes short and long haul, that are less suited to Heathrow, as well as servicing the southeast.

However, it is Heathrow where the need is greatest.  Unless the government were to treat a new Thames Estuary Airport as a grand project (which would have to be part funded by property development at the current Heathrow site and a tax on the property value gains for those on Heathrow flight paths), Heathrow is Britain's international hub airport.  Transit traffic does benefit Britain, enormously, because it makes routes to destinations that would otherwise be marginal, profitable, by feeding in passengers from North America and Europe. A third runway would alleviate the chronic delays in both takeoffs and landings that waste fuel, time and increase pollution.   However, most of all it would allow Britain's premium airlines to grow, to add more routes, more frequencies and compete with Air France/KLM, the Lufthansa group, Emirates, Etihad, Qatar Airways, United Airlines and others.  It would generate employment not only from construction, but in airlines and the airport itself, but more importantly by lowering the cost of travel and freight for British based businesses and residents.

Let's not continue the lie that high speed rail, which wouldn't be finished for 15 years, would make any meaningful difference, given 96% of flights at Heathrow are not on routes serviceable by domestic rail services.  Let's also admit that the business case for Crossrail was partly based on providing better connections between Heathrow and the City, Canary Wharf and east London.

Railways

The one sector where private investment is almost certainly unlikely to be seen on any great scale, is in rail infrastructure.  With the network not well priced, it should be getting run on a commercial basis so that the franchisees of the future pay demand based prices for scarce slots.  Expansion of the West Coast Main Line should be funded not by taxpayers, but by Network Rail borrowing against future revenues.  High speed rail should be considered on the same basis, but it wont be - because it would never be built.  The government is taking steps to correct the excessive subsidies in this sector, but it should be considered, along with reforms of the roads sector, for commercialisation.
Roads

There will be a handful of opportunities for the private sector to develop new toll roads (e.g. another Dartford Crossing), and it should be set free not only to respond to government proposals,  but to generate its own.  If a company wants to build a new London south circular, why shouldn't it feel free to plan a route, buy land, build and toll it - for example.
However, there needs to be a more fundamental change.  In France, Spain, Italy, Portugal, Japan, Taiwan and China, major highways are frequently privately owned.  In the UK, the motorway network should be sold, and local authorities required to put local roads into commercial structures.   Roads should be funded through borrowing, paid back through tolls, or (for now) fuel tax revenue.  Given motorists pay five times as much in motoring taxes as they get in government spending, arguments about the private sector ripping off motorists are derisive.  Then let the privately owned networks contract directly with motorists, who could choose to pay tolls or pay fuel tax, and watch there be enough funding for road maintenance and improvements - whilst introducing road pricing in a non-intrusive, cost-effective and low risk way. 

Furthermore, there needs to be a culture change that rejects the failed 13 year policy of allowing road projects to be cancelled, and the land acquired for them sold - which has destroyed opportunities for improved corridors in London.   The answer to traffic congestion is not to stop improving roads for fear it will generate traffic, but to improve pricing (toll new capacity).  In that light, Transport for London should start developing a strategy on capacity of London's arterial road network, instead of considering the network as static.

Conclusion

Sadly, this government has shown little real interest in being revolutionary on infrastructure.  Energy and telecommunications policies are largely a continuity of the previous administration.  Airports policy is anti-growth and says the government has little real interest in the growth of that sector, other than for regional airports being served by foreign carriers.   Railways policy has some promise, but is overshadowed by the ridiculous totem of HS2 - a project to provide massive subsidies to business people based in London travelling to the north, which wont deliver most of what is promised.  Roads policy shows a little promise, but needs radical governance reform, which is seen by the almost Soviet-era handling of maintenance.
It is time to get government out of the way of infrastructure investors, and to stop crowding them out.  Furthermore, it is likely to destroy wealth through projects such as HS2 and the fascination with inefficient energy generation sources.  It should allow more airport capacity around London, it should move rail investment onto a longer term, commercial basis, and should shift the road network onto a commercial basis as well.  Now is the time to be brave.