Greek crisis is taste of things to come

So says City AM editor, Allister Heath in his latest column.

You see Greece is ultimately going to default. The alternative is for the hard-working taxpayers of Germany, France and other wealthy Eurozone countries (and possibly non-Eurozone) to be ransacked by their own politicians to prop up the profligacy of the Greek public aided and abetted by the politicians they voted for over decades.

Heath says:

The real problem is that the Greek public doesn’t really want to change and simply doesn’t accept economic reality – and that the EU has been too slow to learn the lessons of the crisis of 2008. One poll found that 47 per cent of Greeks reject the austerity plan and want new elections – and just 35 per cent back the measures. The Greek public is in denial: it doesn’t want to start living within its means – and yet ordinary hard-pressed taxpayers in other countries are being called upon to stave off Greece’s total collapse. There is no justice in that.

A default would be right, because not only are the Greek public unwilling to balance their budget, but the financial institutions who loaned money to the Greek government to continue its unsustainable way banked on Greece being bailed out.  That bet should fail.  The banks (mostly Greek, German and French) should bear losses as a result, but the inevitable will be more painful.

Is there an alternative? Well there was.  The Greek public could have voted for politicians who promised to balance the books, but they voted for politicians who promised Western European style socialist welfare, health and education systems paid for by borrowed money.   The fact that Greek politics is dominated by thieving socialists speaks volumes.  Of course ordinary Greek citizens think that they are not to blame, after all they couldn't have borrowed as the state did, or spend other people's money so flagrantly.  However, they did sit by and let it happen.   In a democracy (Greeks shouldn't need reminding of this), power is meant to reside in the people, and in this case they don't want the responsibility of their casual blindness to what the last few decades has been built on - borrowed money.

So Greece will default.  Its banks will collapse, it will leave the Eurozone, and the savings and incomes of its population will be wound back around 15-20 years.  There will be more riots on the street.  Foreign investment will flee and the Greek economy will be rebuilt on tourism and low value exports in a highly devalued currency.

Meanwhile, EU politicians will try to evade reality for a little longer, for fear their own banks will face collapse once more.  That shouldn't scare them, as long as depositors up to a certain level are protected, the banks should fail.  It will be an object lesson to the Europhiles that their federalist economic experiment is a failure.  Ironically, but unsurprisingly it will be under the watch of supposedly centre-right governments in Germany and France, though there should be no delusions that it would have been different had the left been in power in either country.

However, there is more to come.  Yet it is important to note how much of this crisis is NOT about the privately owned banking sector being profligate, but about government evading economic reality.

As Heath says:

the biggest error is the establishment’s inability to accept that increasingly, the biggest systemic risk will come from states, not private financial institutions. It is not just Greece, Portugal and Ireland – Belgium is in real trouble, while Spain and Italy are also in the frame. At some point, something will have to change in Japan, a country with an exploding national debt and a weak economy. America is also in terrible trouble, and not just because of short-term issues over debt ceilings.

During times of austerity and cutbacks the left thinks it has an advantage, as it typically promises to spend other people's money on the things that give comfort, like pensions, health, education and subsidised pseudo-employment.   Yet it is failing to capitalise on it, because enough of the public actually understand that governments cannot perpetually run budget deficits and accumulate debt.    Even 35% of Greeks support serious levels of austerity, not a majority, but a significant number are facing the truth.

The obvious biggest accumulation of problems is in the Eurozone, where even France has a longer term issue of sustainability with its finances.   The ramifications of a Greek default and break up of the Euro will be profound.  In the long run it will be good for Europe, but the casualties along the way will be high.  Those are casualties caused directly by the failure to face austerity and controls on government spending in the past.   The people who benefited from profligacy will, in many cases, not be facing the cost of it.

Yet Japan and the USA on top of this are more worrying.  Japan has been engaging rampant Keynesianism for well over a decade now, and failed miserably to restart its economy.  Given it is on the doorstep of China this is scandalous and shows just how featherbedded and corrupt the Japanese state became under the good years, with the Liberal Democratic Party so deeply entrenched with protectionist business (and indeed the Yakuza).   The USA at least has some facing reality, although that doesn't include the President.  Sadly the forthcoming Presidential election shows little sign that the Republican Party can lay old ghosts to rest in favour of a candidate who actually believes in the economy first.

No doubt some time will be bought for Greece with other people's money.  The bigger question is how long is the inevitable going to be delayed, for the longer it is, the more painful it will be - and very few politicians elected in liberal democracies like having to face up to spending less of other people's money.

Banks backs boondoggle blow out

Cut wasteful spending, implores ACT Leader Dr. Don Brash.

Build the underground rail loop, using taxpayers' money says ACT candidate John Banks according to the NZ Herald.

For every dollar of costs it generates benefits of 40c, says an independent Ministry of Transport/Treasury review of Auckland Council's wildly optimistic demand for taxpayer funding "business case", even taking into account so-called "wider economic benefit".

So why is Don Brash supporting him?

Does a party that supports smaller government and less government spending believe in pouring NZ$2.4 billion into a project that:

-  Will continuously require subsidies to be used and maintained because the people who would use it wouldn't pay the fares necessary for the trains to operate, let alone dig the hole and build the stations for the trains to use;

-  Is based on a substantial portion of new Auckland commuter trips being from as yet unbuilt high density housing built adjacent to railway stations, even though there is little evidence Aucklanders want housing more closely akin to London, Manhattan and Paris, than New Zealand;

- Will not cater for the majority of increased trips forecast, as buses are meant to cater for those;

- Will only remove 3,800 car trips a weekday from the roads, which over a thirty year period is over $100 per car per day if you consider the capital cost over that period including interest.   It would be cheaper to give all of those people a free daily commute sharing a door-to-door shuttle with six people in each one;

- Wont cater for the 89% of Aucklanders employed who do not work in central Auckland.

So does Don Brash have to give John Banks a slapdown, otherwise nothing will really have changed.

My birthday rant

I've been extremely busy, so have had little chance to rant.  So here are my two cents on the events that have provoked me:

Mladic the thug:  Few events were more shameful for Europe (and the United States and New Zealand as a member of the UN Security Council at the time), in my view, that the brutal neo-nazi style genocide inflicted in the Balkans in the 1990s.  It is astonishing that if a civilian kidnaps children and then massacres them en masse, that there is more horror than when a "general" is given endorsement by politicians to do the same, that there is craven appeasement to it all.   UN peacekeepers sat by and did nothing whilst Srebrenica - a town declared a "safe haven" (for whom!) by the UN Security Council, was "ethnically cleansed" by Mladic and his knuckle dragging fascists, all happily appeased by the Serbian Orthodox Church as well.  The role call of dishonour and shame at the time is long and disgraceful.  It took Slobodan Milosevic's attempt to do the same to Kosovo for serious action to be taken, by then thousands of men and boys had been slaughtered in a style reminiscent of the Nazi death squads that rounded up and annihilated Jews in Lithuania.   The other victims, the women and girls (don't think too long about the cutoff age because there really wasn't one) who were raped, not only as conquests by the semi-literate Serb brutes, but also to breed little half-Serbs as part of a deliberate "race" driven policy.   However, as blatant and disgusting as was the Serbian ethno-fascism, one shouldn't forget Croatia was led by men who were not much better.  Visit the Krajina region of Croatia today, and try to find the Serbs who still live there, after Croatia's military terrorised the Serb population and chased them from their homes and farms, families with roots there for generations.  It is a primary reason why Croatia should not be allowed to join the European Union - for it must fully face up to its past.

The arrest, trial and condemnation of Mladic should provide an opportunity to remind us all of this period in history and how easy it is to provoke poorly educated, semi-literate young men to perform atrocities with the endorsement of politicians and religious leaders.  It should also remind Muslims that the Western interventions in this case were to save Muslims (albeit moderate or even nominal ones).   It should also provoke at least some consideration from the self-styled "peace movement" about what should have been done, since the left was divided about humanitarian intervention in this case. 

Brash ACT:  Don Brash's takeover of ACT is a lifeline, and also notable among libertarian circles is Lindsay Perigo's employment related to ACT.  I'm cautiously optimistic.  The greatest weakness Don Brash faced in 2005 under National became those in National who sought to spin and populise messages in ways that backfired.  His willingness to address state activities that granted differential treatment of Maori was not portrayed well with "Iwi, Kiwi" which implied something it should not have.   However, Brash is both economically and socially liberal.  He has the intelligence and the ability to take ACT down a path of being consistently in favour of less government and being tough on crime that involves victims.  He is no libertarian, but if this is a chance to shake up the next National government and wean it off of the statist racists in the Maori Party, then it shouldn't be dismissed out of hand.  I'm going to be watching this space very closely.  It is clear I have always been affiliated with Libertarianz and remain so, but Brash's leadership could cause me to think carefully about who to vote for this year.  

Auckland rail boondoggle hog-tied:  The Ministry of Transport and Treasury have reviewed the Auckland underground rail loop business case and found it wanting. It is hardly surprising.  Auckland rail has been a faith-based initiative from the start, primarily because the enormous cost premium to move people by rail, compared to bus is not justified by the change in behaviour it provokes.   Auckland rail advocates think because it is attracting lots of passengers (all of whom pay less in fares than the cost of operating the service, let alone the cost of capital) it is a good thing, but scrutiny about where those users are coming from indicates some pretty clear home truths.

First, around half of all trips into central Auckland in the morning peak are by public transport today.  This mode share is high by the standards of any new world city, and most of them are travelling by bus.  Trying to increase this in the absence of any form of congestion pricing is difficult, as the current strategy is to take money from all motorists to subsidise a minority of trip.  The number of trips by public transport has increased by 50% in ten years.  However, 40% of that increase has been by rail, 33% by the Northern Busway alone (bear in mind this is one route that has cost around a tenth of the cost of the rail network which has 2.5 lines) and the remainder by conventional bus and ferry services.   Rail has been important, but for the money spent on it, has not delivered compared to the other modes.  

The notable figure is the 15% decline in car trips, which are partly a function of increased fuel prices.  This will have had an effect on reducing congestion, although not as much as the figure may suggest.

Given only 11% of employment in Auckland is in the CBD, this modeshift is minor in the scheme of transport in Auckland.  However, the officials and politicians involved are totally CBD focused.  In short, the impact of more trips to the CBD by bus and rail is very low on congestion.  

Furthermore, the scope for significant increases in public transport usage is limited, most new world cities would be thrilled to have this sort of CBD mode share.  

However, there is something else the rail enthusiasts ignore.  There is already a NZ$2 billion taxpayer funded commitment to electrify Auckland's rail network with projections of a doubling in rail patronage.  However, these forecasts are not realistic because, as the MoT/Treasury report states:

Much of the future patronage growth forecast for the rail network comes from areas where significant intensified residential land use in growth nodes has been assumed in the model. Future rail patronage growth, including from the electrified do minimum, is therefore likely to rely, in part, on the realization of these land use assumptions.

In other words, it will come only if Aucklanders choose to live in medium to high density housing near railway stations AND work in the CBD AND choose to commute by rail.  A bold assumption, that is not exactly plausible.  It is part of the planners' wet dream that Aucklanders are gagging to live in London, Paris or New York style apartment conditions near railway stations in the suburbs.  Yes, apartment living has appeal for some, by only typically for living near the city so one can walk.  Quite why people in Auckland would want to live in such housing in the suburbs is unclear.

In essence, a fortune is being spent upgrading Auckland's rail network based on patronage forecasts that are fanciful and difficult to believe.  If they prove to be correct, then the network will be constrained without an underground loop (although the constraint will only be in the morning and evening peak - a few billion dollars for a few hours a day).  If wrong, then not only will an inner city underground loop be a destruction of wealth, but so will the electrification.

What is most damning is this statement from the review:

Significant parts of the Business Case assessment were not compliant with the procedures outlined in the NZTA‘s EEM for calculating transport benefits.

In other words, Auckland Council gerrymandered its assessment to suit its own needs.   That isn't even counting the gross exaggeration of wider economic benefits on a scale not seen on comparable projects in other countries.

The Green Party of course went along with this, at the same time as it damned the government for supporting road projects that - analysed correctly - had negative benefit/cost ratios.   

In short, the underground rail loop in central Auckland is a boondoggle. A complete waste of money that ranks alongside the grandious highway projects the government is funding north of Puhoi and north of Wellington.   Those who damn one should damn the other and vice versa.   For the government to embrace negative BCR "roads of National significance" but not the railway, is partly hypocritical.  Partly, because roads are funded from road users, railways are NEVER funded from rail users.  However, for the Greens, the Auckland Council and the railevangelists to damn the roads, but bow down to the altar of the railway is at least as hypocritical.  It is time for the railevangelists to be honest - their belief in rail is no more than that - a non-evidence based feeling that trains are good, better than buses and that whatever it takes to build railways is justifiable.  One need only read the Auckland transport blog regularly to see the evangelical enthusiasm for spending other people's money on new rail lines all over the place.  None of it is linked to demand forecasting, willingness to pay or economic evaluation - it is just a rail enthusiasts build-fest. 

Oh and the same should apply to road building too.

Ireland shows some maturity

The Queen's visit to the Republic of Ireland is about time.  Yes, Ireland's history is peppered by bloody events instigated by British governments of the day, but much has moved on and it is appropriate to grow up and welcome the head of state of the UK - notwithstanding the silliness of having a hereditary monarch in that role.   The potato famine, instigated by Catholic-phobes from the UK, was a gross atrocity.   Certainly the state sanctioned religious discrimination against Catholics in Ireland was a disgrace (and in Northern Ireland state sanctioned discrimination didn't start to be addressed properly unti the 1960s).  

However, independent Ireland's history is not without disgrace.  It disgustingly decided on neutrality in World War 2, whilst the UK fought Nazism.   Ireland was saved from fascism by Allied men and women who fought it, many of whom died.   Whilst it provided unofficial help to the Allies (and to be fair was hardly economically or technically capable of fighting a war), it was a "free-rider".   For decades it funded and armed the IRA in its insurgency in Ulster and ably helped fight the British military presence in Ulster.   That's without noting its repulsive complicity with covering up the rape and brutal treatment of children under the care of Catholic sadists and pederasts. 

Of course much has changed in recent years.  "Peace" in Northern Ireland at least has acknowledged an end to the formal claim from Dublin of sovereignty over Ulster, and it remains true that the majority of residents of Northern Ireland are unlikely to want to be part of the virtually bankrupt Irish Republic.

With membership of the European Union, and end of the Troubles, the openness of the close relationship between people in both countries is palpable.  British citizens do not even need a passport to enter the Irish Republic and vice versa.  There is no border control between the Irish Republic and Northern Ireland.   Dublin by far the most popular air route from London's Stansted airport, second most popular from Gatwick and third from Heathrow.   The largest foreign born resident community in the UK are those born in Ireland.  The UK is Ireland's biggest trading partner.  The economies are closely intertwined.

Given that it only took the UK and (West) Germany a matter of less than a decade to advance relations from arch enemies to being Allies, especially given the level of destruction and death each had inflicted on the other (because of Germany), it is about time Ireland grew up.  Most people in Ireland have, as they have family, friends and business ties across the Irish Sea and across the nearly invisible border in the north of Ireland.  

UK and NZ roundup

So much has happened, and I've been so busy, I thought it would make the most sense to treat the political events in both countries as a series of vignettes:

UK

UK electoral referendum:  A stunning defeat for reform.  Those who supported AV (mostly on the left) will say it is because it didn't go far enough, those who opposed it (some who appallingly said it meant the end of "one man one vote") say the argument is over.   It is, for a while.  Making the House of Lords an elected chamber is still on the agenda, but there will be a few post-graduate politics theses to come from analysing why in the UK, when politicians are widely despised, at a time of economic stagnation, electoral reform is a dead duck, whereas in NZ, under not dissimilar conditions, it became a vent for frustration (ably hijacked by maverick politicians).

When you're in government, you disappoint us:  Liberal Democrat voters have for decades had the comfort of electing MPs and they doing nothing but criticise the government and the opposition.  Now they are in government, and can't dish out the loot its supporters yearn for, the voters have turned their backs in the 2011 local elections.   The local government elections in England, and Assembly elections in Wales and Scotland all saw the Liberal Democrats punished severely - because they are in government.  A third of Liberal Democrat councillors lost their seats and the number of councils controlled by the Liberal Democrats dropped from 19 to 10 (out of 279 councils to be fair).  Bear in mind this isn't ALL councils, and in half of those councils only one-third of seats are up for grabs.   Still it showed how voters connect local politics to central politics rather than concentrate on local issues.  It also showed how many Liberal Democrat voters are really socialists.

Scotland is for the socialist nationalists:  The Scottish Assembly elections saw the Liberal Democrats hammered from third to fourth place dropping from 17 to 5 seats in the Assembly.   The Conservatives also lost 5 seats from 20 to 15, but Labour also dropped from 44 to 37.  The winner was the Scottish National Party which has won an overall majority, the first time any party ever gained an overall majority in the Supplementary Member based Assembly since it was created under the Blair government.   The SNP's raison d'etre is Scottish independence, but that doesn't appear to have driven Scottish voters.  Rather they have rejected the Westminster based parties in favour of something different.  Cynically one can see the SNP as old Labour, as it promises ever increased spending and public sector growth, based on the inflated taxpayer based funding gained from Westminster.  Bear in mind also that SNP leader Alex Salmond once described Iceland and Ireland as models for Scotland to follow.  He doesn't like being reminded of that, or that two big Scottish banks were bailed out by Westminster as well.  Salmond wants a referendum on Scottish independence, but not for a few years - he knows he would lose one held now.    Meanwhile, the West Lothian question remains - the Scottish Assembly has many powers on issues like health and education, but Scottish MPs at Westminster can still vote on those matters for England.    I wouldn't mind if Scotland's silly socialism (which has contributed to a malaise and stagnation that is only too obvious) was self funded.

Wales is not for socialist nationalists:  By complete contrast, the winners in the Welsh Assembly were Labour and the Conservatives, both gaining seats at the expense of the Liberal Democrats and the nationalist Plaid Cymru. The Conservatives are now in second place in Wales.  The Welsh clearly don't have fantasies of being on their own.

A good election for the Conservatives and just good enough for Labour:   The Conservatives, bearing in mind that they lead the government, gained 81 council seats and gained control of 4 more councils.  Staggering given the publicity and the angst raised by public sector unions and the Labour Party about the modest spending cut programme.   Labour did gain 800 council seats and control of 26 more councils, but still the Conservatives have control of 157 councils over Labour's 57, the big change was around a 40% reduction in councils with no party having overall control.  Yet while Labour did ok in Wales, so did the Conservatives, and Labour was hit hard in Scotland.  Labour without Scotland is highly unlikely ever to govern, so Ed Miliband will be at best relieved it isn't worse, but not enough to really celebrate.  David Cameron will be very happy indeed.

Bye bye fascists:  The BNP had an appalling election, losing 11 of its 13 council seats, proving again that it is a party of incompetent malcontents who are limited entirely by their own personal failings in life.  However, it did come fifth in Wales, standing for the first time for the Welsh Assembly. Some votes no doubt went to the nationalist (but distinctly non-racist) English Democrats, which took 2 seats.  George Galloway's vile pro-communist/Islamist Respect Party lost both of its seats.  On the other side the Greens picked up 13 seats to go to 78 overall in England as the fourth biggest party.

NZ

ACT Mk 4: Mk. 1 of ACT was written up in Sir Roger Douglas's book "Unfinished Business".  It promised zero income tax in exchange for compulsory health insurance, pension plans and education accounts for those with children.  It would have meant a vast reform and improvement in outcomes, although not so much for individual freedom.  However, despite vast amounts spent on literature, it couldn't be sold effectively so along came ACT Mk. 2 - Richard Prebble had a book written called "I've Been Thinking" and offered flat tax, and less government.   That got him into Parliament initially as MP for Wellington Central, and gave ACT a reasonable run through till 2005.   Then came Rodney Hide and ACT Mk. 3, as he became MP for Epsom and ACT became even more diluted, although a smattering of social liberalism also appeared.   Now Dr. Don Brash is bailing him out, after a term of poor performance and being far too aligned with National's goals than ACT's one.   I'm wishing Dr. Brash success, as long as he doesn't bring on the populist old-Muldoonist John Banks along for the ride. For ACT to have any purpose it needs philosophical and policy consistency.  The party to abolish the deficit by cutting spending, the party for lower tax without offsetting tax increases, the party to advocate competition in public services and privatisation of government businesses, the party for less regulation and less government, including a belief in individual freedom.  A party that doesn't support any kind of state privilege for individual, members of groups or businesses.   Frankly, otherwise, ACT may as well wind up.

Nationalist socialist:  What more to say about Hone Harawira?  He treats taxpayers like a Mafia don treats protection money, he expresses his true feelings about Islamist terrorism and Western liberal democracy and capitalism, before backtracking to save some face.   His Mana Party (there was a radical Mana Maori Party for some years don't forget) is a party for race driven thugs who want to treat the state as their own gang to strong arm cash from taxpayers to pay for their families and their pet projects.   It is no wonder it is filled with hate-mongers like Matt McCarten, apologists for child abusers like John Minto, cheerleader for 9/11 Annette Sykes and refugees from the far too moderate Green Party, like Sue "Wow Mao" Bradford and Nandor Tanczos.   My great hope can be that it pulls enough votes from the Maori Party to get rid of the two seat overhang (these seats going to Labour, which is no net gain for Labour as they will be taken from list seats), takes enough votes from the Green Party to knock it a seat back as well.  Hone will probably win his seat alone, and will continue to provide an avenue for the racist, anti-semitic, pro-Marxist-Leninist, pro-violence for politics and anti-capitalist far left to vent its hatred of the human individual.

Bland vs bland:  Everything else is so tiresomely uninteresting as to be soporific.  The Key government does what National is good at, very little except spend other people's money.  Phil Goff proposes variations on this.  Quite why anyone could rouse themselves to get out of bed for either party is beyond me.