Category: Economy

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Politics has made monsters of us all!

Its a rant, no denying it.

I tried, I really tried.

Firstly I ignored all the reports coming out of Dunedin in the wake of Winstonfest 2016 that it will turn into a cat fight between Ron Mark (long serving but foul mouthed NZ First 2IC) and political mercenary Shane Jones over who will succeed Winston when he finally steps down (whenever that actually is) in one of the more interesting cases of “get your hands off my man!) We have seen in a while.

I turned the other cheek to Colin Craig’s sleazy behaviors being exposed in the press. If his chances of being an MP were slim to none before they are effectively nil now as it looks like his fellow party members (Christine; she of the extravagant spending while a civil servant, Rankin) are more than willing to publicly twist the knives in his back; also the man writes love notes with about as much passion and enthusiasm as a politically conservative Christian businessman running for office, oh wait…

But it got harder after John (I for one welcome our new reptilian overlords) Key blamed kiwi workers being lazy and drug addled as the reason for National having the immigration policies it does. Key (no pun intended) point: importing low skill workers under the guise of student and other visas allows employers to drive down wages and places anyone not willing to work for the same pay and conditions in employment limbo*. This is the equivalent to shooting someone in the foot and then complaining that they can’t walk.

By Wednesday it was getting much more difficult to tune out the noise when the government announced that it was spending 24 million dollars on housing in Auckland when the average house price was now “one meellion dollars” (which as many commentators gleefully pointed out) meant that there would be just another 24 houses up for grabs; Winston Peters decided that hypocrisy was the better part of valor (by taking someone’s money and then accusing them of being a front for the National Party); the Auditor General cleared the Niue hotel deal (but did admit that their hands were tied and their range of investigation limited); the Chiefs found themselves unable to say sorry to the one person they really needed to say sorry to (showing how much our sporting culture remains a bastion of macho BS); the blather about Helen Clark at the UN continued despite it being made clear she is not the preferred candidate (get over it, she is not going to be Sec Gen); Andrew Little called for Nick Smith to resign (about as useful as firing the captain of the Titanic after it hit the iceberg) and our beloved PM now saying NZ and OZ are still BFF’s (despite OZ deporting back all those its deems no longer BFF and treating kiwis living there like second class citizens). I had to laugh though when the Stuff article reporting this had to include an explanation of what a BFF was.

But what finally sent me over the top was watching parliament go into melt down over the housing situation with question time being cancelled and the government fumbling the ball as the process was hijacked by the opposition. Of course it’s not one of those overseas style parliamentary melt downs like they have in Taiwan or the Philippines with legislators throwing chairs, starting bonfires in the middle of the chamber or fist fighting in the aisles (although I would have tuned into parliament TV if such things were scheduled) but just some filibustering which will peter out sooner or later.

The reason why this particular event, in a week of hard core political gibberish sent me over the top was that it perfectly encapsulates the reason why we are in the situation in the first place.

The Housing Hernia continues to grow and the chances of all this shouting and filibustering (or for that matter any wet-paper bills) actually producing a solution are zero. We have been there and we have passed the point where this process is manageable by some quick fixes or legislative tweaks and we are now heading into territory marked more by backbiting, squabbling, lots of weasel words and no actual action on the matters at hand.

You would almost think that campaigning for the 2017 election had started but this is really just a small hint of what the 2017 election will be like. If you thought that vapid hot topics and political push button issues were going to have our politicians shouting, parading and grandstanding like no tomorrow now then you ain’t seen nothing yet!

And this is the state we are in today: political ineptitude and inaction; corruption and tabloid sleaze; empty political gestures over any genuine action; political infighting; low quality political journalism as a substitute for discourse (I get the irony of writing that) and issues which need genuine attention not more political verbiage.

The summation of the situation came to me last week, as I and several co-workers were in a taxi crawling out of Auckland’s CBD towards the airport, knowing that we had given ourselves over an hour to get to the airport but still not sure if we would make it, by the taxi driver who summed up Auckland’s transport problems in one succinct sentence.

“Auckland’s roads were built when Auckland had about 800,000 people living in it, today its about 1.4 million people and by 2020 it’s expected to have 2.2 million people but all attempts to fix the roads or improve transportation have been blocked or failed.”

Even if those numbers are out somewhat the metaphor remains painfully correct and applicable to NZ at large.

In areas like immigration, housing, the environment and all the rest we are now in a state where what we had is no longer able to cope with what we have got and the people responsible for sorting these problems out (those we elect to run this country for us) remain either unwilling (in the case of National clearly captured by those who are making coin of our current misfortune) or unable (in the case of Labour being too busy sucking up to potential voters and their mortgages to ever rock the boat) or putting their own personal gain over the general welfare of the country (Winston, Peter Dunne and the rest of the gumboots) to do anything about it.

So with that in mind I am no longer able to refrain from comment (I really wanted to keep on with research on Asia for upcoming posts and not get sidetracked). I assume that this week is a combination of moon, tide, weather, biorhythms, the stock market and all sorts of other factors which have produced the political crapfest this week has been so far, and its only Thursday!

And it’s the tone of events which is the most ugly, like other countries the problems are piling up and those supposed to be in charge are turning out to be incompetent middle managers at best and corrupt clowns at worst (I favor the latter).

All of this points to the 2017 election being a real watershed election as these issues won’t go away between now and then and will surely continue to worsen while the clowns continue to bicker over ticket prices to the circus while the tent burns.

I won’t play the doom scenario card too much but we live in interesting times to say the least and calls for action continue to grow. Our current political model is not working very well but will we get any viable alternatives?

Come campaign time I expect all of these little hot potatoes to remain hot and a lot of promises to be made to fix them to an electorate which will be in an ugly mood and in no mind to hear political and economic catamites parading around shouting dogma as solutions to rising waters. Dirty politics will be front and center and media manipulation will be all over the place.

The outcome? Polarization and a parliament less and less able to address the issues (under a minority Green/Labour government with Winston staying neutral) or worse Winston backing our dear leader Key followed by further economic shenanigans from his minions for another three years (imagine the housing hernia in three years time!) or the unthinkable and a Green/NZ First/Labour hate triangle of rivalries and poison looks until its inevitable implosion.

But we kiwi voters are not blameless in this, we tolerate this state of affairs and we continue to vote for the same ugly faces, their ugly messages and their ugly acts. We are as stained and muddled as those filthy beasts in Parliament. Politics has made monsters of us all!

*- The fact that Barry Soper in the Herald felt that such a position had some merit shows how pernicious such BS attitudes are as well as highlighting how out of touch Soper is to the reality of situation (but then I never really liked his reporting anyway).

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It’s not a Housing Crisis it’s a Housing Hernia: And both John Key and Andrew Little have one!

Yes I am flogging this dead horse again except that its an all new flog, we are flogging a different part of the horse and the horse might just not be dead yet!

Well it had to happen and last week it did, the first difference of opinion between Labour and the Greens happened since their cosy little MOU in May. And what was the disagreement over? Not surprisingly it was housing!

But we are not calling it a housing crisis anymore, that term is too controversial, too running down the road with your head on fire, so instead we are now calling it the Housing Hernia.

I had a hernia once. I got it after five hours shaking my behind on a sweaty dance floor and then walking, dripping in sweat, out into the chill of a Singaporean pre-dawn. It was not a smart move. First I got a hacking cough, then it got worse, finally it got nasty. The cough became painful, very painful every time I sneezed, which was a lot. I had contracted tropical pneumonia.

Overnight I was transformed into a low budget Michael Jackson impersonator by the fact that every time I sneezed I grabbed my crotch and screamed. This entertained my friends and co-workers no end at first but since I couldn’t do the dance moves or sing Billie Jean it soon became tiresome.

Sensing a serious problem I made haste to my local Singaporean doctor, a hardworking gentleman who served the massive HDB (Housing Development Board) block next to where I lived. He was quick, he was efficient and after hearing my plight and testing for himself by pressing the affected area (eliciting a strangled scream from me) he pronounced me the proud father of a hernia.

“A hernia, you mean like what rugby players get?” I asked (forgetting that Singaporeans don’t play rugby and my own experiences of who might get a hernia was severely limited). “Yes” he said in that voice doctors have for patients who ask stupid questions. “So what do I do?” I asked. The doctor looked at me and said “you can have surgery to treat it or leave it as it is and risk a rupture” in the same way a waiter might give the options for desert (lemon tart or chocolate cake? The correct answer is cake!). Needless to say I chose surgery!

So off I went to see the specialist, who has two plastic gold lions outside his office (a common sight outside offices in Singapore) which denoted the wealth and taste of the occupant inside. Thankfully he was a skilled doctor and thanks to the magic of health insurance (the only expats in Singapore without it are the stupid ones) I was booked in and ready to have the little bugger removed.

I won’t bore you with the gory details but suffice it to say the operating room looked like an extremely clean, white tiled, mechanics bay (complete with a rack of shiny, stainless steel tools which looked like they could pull the wheel nuts off a F1 racer in 2.6 seconds) AND that the anesthetist was late because, and I swear I am not making this up, he was playing golf!

So I lay on the wheeled stretcher, listening to the heart monitor, attached to my thumb, beeping and made a game of trying to slow my heart rate down, which correspondingly made the beeping decrease but every time I looked at the “tool rack” on the wall the beeping suddenly shot back up.

Finally all and sundry were present, I was given a shot in the arm, and asked to count to 10. I made it to five.

When I woke up I was on a stretcher in the hall and there was a pain where the hernia had been residing along with a big bandage. I hobbled out of the hospital, helped by my wife, into a taxi and home to recover.

It took a week of walking round painfully but after that the pain was gone, I had a scar to show where the doctor had cut me open and put in a plastic mesh over the hernia (which prevented it from popping out/rupturing) and its never bothered me since despite continuing to do martial arts and all manner of things which might have “ruptured” me, had I not done something about it.

Now the point of this story is to illustrate that “hernia” is a much better term to describe the housing situation in New Zealand (with its slow building (pun intended) series of issues which lead to said hernia); that the process of dealing with the wee beastie at no point required me to behave as if my head was on fire and that if left unchecked will most likely lead to a “rupture”.

In New Zealand the housing hernia is at what we might call the “Michael Jackson” stage of the process with sudden painful outbursts before all, temporarily, returns to “normal” and the growing realization that something is seriously wrong.

In deciding what to do with it appears that the Greens, or perhaps just Metiria Turei in an unscripted outburst, have opted for surgery in the form of cutting house prices to around $350, 000, while Labour, justifiably upset at being caught on the hoof by the statement but still in denial about the issue, have decided to continue with pretending that they might have a chance at appearing on Stars in Their Eyes (fat chance once you see this guy).

But as Jo Moir points out in the media, the split between the two parties clearly reflects each’s voter/generational differences with the Greens supported more by younger renters and Labour by older home owners. Of course such splits are not total but it does seem to reflect the basic demographics of the situation.

And she is not the only one to pick up on this, as media commentator Johnny Moore, found out recently when he wrote a piece attacking (at least partially in jest) the NZ Baby Boomers for making their own lives comfortable at the expense of future generations.

The response was predictable and somewhat correct in that he was eviscerated for creating a generational generalization which while overly broad in its sweep by blaming the Me Generation, also missed the fact that it’s not just boomers who are buying up houses in Godzone or that the problem is also due to political inaction by successive governments. None the less he got the parameters of the problem right.

But the best articulation of the hernia goes to Pencilsword with his masterful cartoon which is the most succinct articulation of the divide growing in NZ, I highly recommend his work.

And gap is what the issue is and if the numbers in Pencilsword’s cartoon are even remotely correct then we have the making of a generational split in NZ that may never be bridged unless something very drastic is done, like reducing house prices to an average of $350,000.

Because, as he so cleverly puts it, if you don’t own a home you have to rent and rents go up at the same market rates as house prices go up (so their owners can service their massive mortgages) yet wages ARE NOT going up or keeping pace with the rapid rise of house prices so if you rent your ability to pay rent is reduced until you either have to move to somewhere cheaper (say a garage, a car or Australia) or you get a nice large pay rise like MPs get (because we all get those don’t we?).

And this is why, despite the not adhering to the terms of the MOU by just letting fly to the media without warning Labour in advance, the Greens (or just Metiria Turei) have thrown the problem into sharp light by proposing a solution which while painful is probably necessary to prevent the likely rupture if NZ keeps on ignoring the problem and then shrieking and reeling in pain every time the housing market painfully shoots up another $3000.

For the homeowners in NZ (some of whom are Me Generation boomers) they just want this issue to go away, and the media for a long while has been compliant (possibly because they are also of said generation) by not bringing it up.

But for the renters (some of whom are Generation X (like myself) and Y’s) the problem is not going to go away, it’s getting more and more painful as rent gobbles more and more of ones pay packet at the expense of everything else and nary without a decent pay rise on the horizon (unless you move to Australia).

I note that in Christchurch where I live, rents have recently stabilized by new housing coming on stream but rents are still high and those that I know who own more than one home have reported grumbling by tenants at the high rents to the point of even asking for a reduction.

So the schizophrenic standoff continues with John Key and National, and now Andrew Little and Labour, in denial while bedazzling their white socks and glove while the upsetting, and painful solution is being discussed by the Greens (who knows what Winston thinks of this matter?).

And again the hernia analogy works here, yes getting the problem fixed before the rupture occurs, by correcting market prices, is going to hurt for some people, but there are ways to bring things down without setting ones hair on fire and the result if left is very very obvious because ALL bubbles burst/overheated markets correct in time and when house prices are jumping at $3000 a week I think we can all agree that the market is booming but it’s not going to last.

The beggar at this banquet of home ownership is anyone who can’t afford the massive sums, let alone the deposit, for a house in one of New Zealand’s major cities or towns and who is going to get continually squeezed by rising rents until something has to give.

And the rupture, if/when, it comes will be broadly along generational lines, as declining levels of home ownership do mostly align with the ages of people, resulting in a generational explosion of non-home ownership, frustration and rage at being denied a shot at the Kiwi Dream (the Quarter Acre Pavalova Paradise) and political behaviors which while not Trumpian in their levels could lead to something/someone in office for which they will be later blamed for (ironically) while the true guilty parties will have either passed on or be living comfortably retired in their mortgage free homes.

Of course the simple argument is that Labour (and the Greens) are just representing their respective electorates and that Andrew Little can’t afford to take any action which might leave the Labour faithful with a house worth less than their mortgage but if that’s the case then Andrew Little better get used to Labours current polling because they will have to squabble with the ever popular John Key and National for the declining share of voters who have their own home while the Greens and NZ First continue to gain as they speak for the increasing numbers of those who can’t make the mortgage nut.

So if this little split between Labour and the Greens is real then its more than just the Honeymoon being over, kiss goodbye the champagne and lingerie for good as this difference is unlikely to go away with just some whispered sweet nothings and a box of chocolates. To heal this divide is going to require one party or the other to give some serious ground and there is no indication that either side will be doing that. So as Moir notes someone will be “sleeping on the couch for the foreseeable future”.

But if this is politics, policy or pragmatism it’s rapidly becoming irrelevant and the housing hernia will continue to cause pain in New Zealand until the market “ruptures” or pigs need clearance to land at airports.

Finally I add this little bit of piece of gossip as it came to me from two unrelated sources and while probably in the realm of speculative fiction is not beyond the pale of possibility.

Said rumor being that the reason why National is thinking about an early election next year (July 2017 instead of November 2017) is because they know the market is going to crash soon and want to be out of power so that Labour gets the blame much like Obama got blamed for GFC which was happily brewed up while GW was on watch (but who is going to let facts get in the way of a good ol session of political point scoring).

I am not quite sold on this, yet, as it requires National to have foreknowledge of the coming crash and be willing to give up all the perks of being in government for the minor political points accrued from Nyah Nyahing Labor while it struggles with the housing hernia blowing an O-ring and writhing around in pain like its head is on fire.

But what could change my mind about this is if our ever smiling PM was to be considering dropping out of politics for whatever reason as then Nationals chances of making a fourth term are slim to zero as none of the haggard, bloated visages in cabinet  is going to have the same mojo as Key when it comes to leading the party, winning over the populace or avoiding the deluge of knives aimed at their back.

In such a situation then I would fully expect National to cut their losses by running through as much of their political program as possible between now and polling day before taking the hit and leaving Labour with the inevitable mess and them free to play the blame game.

John Key made his money as a market speculator and the housing market has all the hallmarks of a speculators market (rising bubble prices, external third parties, owning more than one house etc) so if anyone in cabinet has an inkling of what’s coming it will be him and its clear he wants to leave a legacy (see the flag debacle) so all the more better to get out before the proverbial explodes all over the fan and leaves whoever is in government with a mess than won’t wash out. He can then at least claim it was Andrew Little’s fault and criticize government inaction from the opposition benches.

There is a reason why NZ got state housing in the 30s and it was due to similar circumstances like we are getting today (low home ownership and predatory landlords) so there is a historical precedent for dealing with this. If not State Houses then something for modern times which has the same effect of getting people into homes (I wont even get into why home ownership is important for a modern state/democracy today but there is a wealth of work on the death of the middle class and the goal of neo-liberal markets to sweep away any obstacles to all wealth being consolidated in the hands of a greedy few for anyone with time to read up on it).

So to end, back to my hernia story. It was clear that at some point I would have to make a decision and take action, leaving it off in the hope of it going away would only prolong the agony and the odds of it magically remaining in equilibrium and not rupturing were very low.

So the choice is really between action now under painful but controlled circumstances or emergency surgery later BUT with much more pain and a nasty generational scar that won’t heal over. The latest Labour/Greens spat may heal over until the election but the Michael Jackson impersonations won’t soon go away and Generation Rent might sound like a good musical story but I wouldn’t want to be in it.

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A culture of tax evasion.

I do not understand what the fuss is all about when it comes to John Key and the revelations in the so-called “Panama Papers.” So what if he and other Kiwi high rollers shield their incomes and assets from the IRD in assorted trusts, funds, investments and even shell companies? Isn’t it an axiom of capitalism that, as Donald Trump has openly stated, you try to avoid as much tax payment as possible? Forget all this nonsense about “paying one’s fair share of taxes.” Only rubes and idealists do that. Everyone else tries to minimise their tax exposure and the rich pricks just do so on a grander and more elaborate scale.

I say this because the entire NZ economy is riddled with tax avoidance. One of the things that struck me after I moved to NZ is the amount of cash transactions that are done with the explicit intention of avoiding tax. Almost every single tradesperson I have dealt with in the course of my time here has proposed a cash transaction that avoids GST, but more importantly, avoids traceable electronic or paper (cheque) financial transfers. And the offers of non-GST cash transactions are done without shame or concern; it is just part of doing business for many people and everyone knows it and acts accordingly based on their own circumstances.

If what I have seen in the small business trade and service sector is any indication, then it is reasonable to expect that such attitudes percolate upwards into larger corporate structures and repositories of wealth. Since these are too big to hide in a cash-only parallel market, the next best thing is to engage in tax evasion and income-hiding schemes whose complexity is based upon the ability of the tax authorities to uncover them. The move to off-shore trusts and the like is simply a matter of keeping one or two steps ahead of the law and three steps ahead of enforcement mechanisms. If those in government choose to structure the financial regulatory regime in such a way that it keeps the holders of wealth five to ten steps ahead of the tax authorities then, well, you get what you vote for.

The difference between the approach of NZ high and low rollers when it comes to tax evasion is in scale, not kind.

This is one reason why I believe that the Transparency International rankings that have NZ listed among the top three least corrupt nations on earth are rubbish.  Add to that the nepotism, cronyism, shoulder-tapping, sinecure swapping and insider trading of everything from personal and professional favours to board directorships to stock shares, and the picture of NZ is far less rosy and far more, let us say, “pragmatic.”  I am particularly critical of the TI indexes because not only are they mostly based on reputational analysis (mostly offered by those who stand to gain from gaming the system), but because I participated in a TI survey of NZ’s intelligence and defense forces and saw my scores (and those of some others) pretty much discarded in favour of higher scores offered by insiders that led to an overall TI assessment that NZ has the highest standard of professional integrity amongst the defense and intelligence services in the Asia-Pacific.

Even so, I am one of those who are a bit idealistic when it comes to taxes. I understand the concept of public goods and therefore comprehend the rationale behind taxation. In NZ I pay tax more readily at a higher rate than I did in the US because, among other things, I am not paying to support a huge war machine that in turn serves the interests of a taxpayer subsidised military-industrial complex. As a small business owner I feel the burden of taxation more heavily and immediately than the corporate moguls that run the nation’s largest firms and whose bottom lines rest on minimising two things: their tax liabilities and their labour force wage bills. Yet I try to believe that I am contributing my small bit towards maintaining a high standard of public education, health and welfare that will lead to future generations of productive and happy citizens (although my experience with NZ academia suggests seriously diminishing returns in that sector, and I have serious doubts that overall heath, education and welfare outcomes are on the rise rather than in decline as a result of nearly a decade of National government public policies).

In spite of these misgivings, I remain a residual idealist and want to believe that my contributions, when taken collectively with those of others, matter for the present and future well-being of NZ. But I do not expect others to share the same hopelessly naive view of how the systems works, and I therefore do not begrudge them trying to dodge the taxman as much as possible. Because in a country where market-reifying ideologies reign supreme in virtually every facet of life, only a fool like me would think that paying taxes is anything but state-imposed theft levied on the productive in order to buy the acquiescence of the parasitical. I know this to be true because National, ACT and certain elements in Labour tell me so, and who am I to argue with those who dominate our economic, political and social narrative?

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Media Link: Political Risk and Sustainable Enterprise.

I was invited by the nice folk at sustainnews.co.nz to contribute a short essay related to sustainable economics from my perspective as a geopolitical and strategic analysis consultant. The essay wound up  making the connection between political risk and sustainable enterprise, and more importantly, the relationship between sustainable enterprise and democracy. You are welcome to view it here.

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Trading with the Mullahs

I was a replacement panelist invited by the New Zealand Institute of International Affairs to join a discussion in Wellington on the Iranian nuclear agreement. It was a a pleasant event that addressed the pros and cons of the deal. I was impressed with some of the speakers, particularly Dr. Parsi from Lund University (speaking via Skype). I was less impressed with the Israeli discussant and the statements (not question) by an official from the Iranian embassy who was in the audience.  All in all, it was an engaging affair and I encourage the Institute to continue with such public outreach efforts.

I spoke a bit about how the deal can be viewed on two analytic levels: as a First Image (interstate) issue and as a Second Image (domestic sources of foreign policy) matter. I mentioned that a way to conceptualise the agreement is as part of a “nested game” (to use a game theoretic term): the deal is part of a series of interlocked interactions (or “games’) that can be seen much as those iconic Russian dolls are (one inside the other) or as building blocks towards a larger whole. I noted that the core of the agreement was to exchange trade for recognition and security–in other words, Iran gets more trade and recognition of its legitimate interests and stature as a regional power by putting the brakes on its nuclear weapons development program with an eye to cancelling the weapons program altogether should the agreement prove beneficial for all sides. They main lever is another trade-off: dropping of international sanctions against Iran in exchange for a rigorous international (IAEA-managed) inspections regime.

For those who are not familiar with the agreement, it is not a bilateral US-Iran affair although they are the major players in it. Instead, the treaty was negotiated by the P5+ 1 parties and Iran, the P5+1 being the permanent UN Security Council members (the US, UK, France, China and Russia) plus Germany. For those interested in the details of the deal, the official US government position is outlined here (which includes the text of the full Agreement itself). A US translation of the Iranian interpretation can be found here. The fact that the P5 agreed to the deal is remarkable given their history of disagreement and subterfuge on matters of international security.

There was an interesting sidebar about “breakout time” introduced by the Israeli, who waxed hysterical about the apocalyptic implications of the deal. Dr Parsi noted that “breakout” refers to the time needed to enrich uranium to weapons grade, in response to the Israeli claim that the deal gave the Iranians a breakout potential of one year. Prior to the deal, that enrichment breakout threshold was two weeks. The point is that “breakout” time refers to the time needed to begin enriching uranium to weapons grade rather than the time needed to build a bomb.

Dr. Parsi noted that “breaking out” on enrichment is not the same as putting nukes on missiles. I said nothing at the time but here I actually know a bit without being a nuclear scientist ( I studied nuclear strategy under one of the original strategists behind the nuclear bombing of Japan and so-called MAD theory. He grappled with the moral dilemmas involved in front of me and my student cohort at the University of Chicago (home of the Manhattan Project) and later changed his mind with regard to MAD). The notion that Iran can start enriching uranium or reprocessing plutonium to weapons grade in a short period of time and then quickly build a missile launched nuclear warhead is simply mistaken.

From a technical viewpoint beyond the specifics of Iran’s enrichment and reprocessing programs, the problem of weaponising nuclear material is simple. Unlike the multi-ton “dumb” bombs that were dropped on Hiroshima or Nagasaki using concentrated high explosives as triggers focused on the nuclear material, the bulk of testing then and now consists of reducing the nuclear payload to a size that can be carried in the nose cone of an (increasingly small and light) intermediate range or intercontinental missile (IRBM or ICBM). The smaller the size of the delivery vehicle, the better its chances of avoiding surface to air or air to air interception. Given that requirement and the need for accuracy, nuclear payloads share very tight space with guidance systems. All of which is to say that given the weight constraints on a high velocity long range projectile, the “bomb” has to be miniaturised for maximum bang for the buck. Doing so requires downsizing the trigger mechanism from focused high explosives to something else. Laser triggers are one option. There are others.  All of them are off limits to the Iranians irrespective of the deal. So not only is the fear of “breakthrough” unfounded and exaggerated for political purposes, but the real concern regarding mounting nukes on missiles is subject to  both contractual and non-contractual enforcement.

My general view is that the agreement is worth doing. Other speakers and I commented on the downside, which mostly involves the reaction of Israel and the Sunni Arab oligarchies as well as domestic opponents in Iran and the US. I noted that there are disloyal hardliners in both the US and Iran that have potential veto power over the deal in the future should governments change, and that it was imperative for the soft liners or pragmatists to accrue tangible benefits from the deal in order to resist the sabotage efforts of hardliners who have vested interests in keeping tensions alive between the two countries. I made the point that Iran is more akin to Cuba than North Korea, and can be brought into the community of nations so long as it was recognised as a regional power with legitimate interests.

Speaker’s times were very limited (7 minutes each), so I was unable to fully address what I had intended to say. So let me do so here.

The lifting of sanctions on Iran as part of the quid pro quo at the heart of the deal opens a window of trade opportunity for New Zealand exporters and importers (more so the former than the latter). Coincidentally,  Foreign Minster Murray McCully has announced that in a few weeks he will be leading a trade mission over to Iran to discuss those opportunities. This is in advance of the implementation of the accord (which goes into effect at the start of next year) and is, as far as I can tell, the first official Western government led trade mission to Iran in the wake of the signing of the agreement.

But let us be clear on what that mission needs to entail. Although Iran’s human rights record needs to be mentioned, however pro forma by McCully, to his Iranian counterparts, the point that must be emphasised is that New Zealand’s opening of trade relations with Iran is absolutely, explicitly contingent upon Iran adhering to its part of the bargain. Should Iran in any way shape or form renege on the letter or the spirit of the agreement and the inspections regime that it authorises, then McCully needs to make clear that New Zealand will terminate or at least suspend until Iran complies all imports and exports to the Persian giant.

I say this because under McCully and Tim Groser MFAT has turned into the Ministry for Trade with Anyone for Trade’s sake. Human rights and non-proliferation are not part of the Groser/McCully negotiating agenda. But in this instance both need to be and the latter has to be. The profit margins of New Zealand exporters and importers and the tax revenues derived thereof must not and cannot supersede New Zealand’s commitment to upholding the terms of this non-proliferation agreement in the event of violations. Those involve re-imposing sanctions, and the bottom line of private interests must not come before the commitment to non-proliferation, especially given New Zealand’s long held diplomatic stance on the matter.

McCully also needs to explain to New Zealand importers and exporters that any contracts they let in Iran are contingent and externally enforceable. That is, they are contingent on Iranian compliance with the inspections regime and the overall thrust of the Agreement (which is to reduce the prospect of weaponising its nuclear program); and they are subject to outright cancellation or suspension by the New Zealand government under penalty of law in the event Iran reneges or violates its side of the bargain. There are opportunity costs and risks involved, and these need to be outlined to interested parties in advance of the mission.

From announcements so far, it does not appear that the National government is interested in making such demands of the Iranians or its market partners. Instead, it appears that it is opportunistically jumping to the head of the cue of potential trade partners and will let the private sector lead the charge into trading with Iran. That is curious because McCully speaks of “not getting offside” with the P5+1, but the very fact that he mentions the possibility of “getting offside” indicates that he and his MFAT minions are considering the costs and benefits of doing so.

The Iran deal hinges on two things: verification and enforcement. There are instruments in place to verify that Iran is upholding its part of the deal. The sanctions will begin to be lifted on January 1, 2016. But it is enforcement of the terms that is the most uncertain aspect of the Agreement. If New Zealand does not explicitly tie its renewed trade with Iran to the latter’s compliance with the terms and be prepared to halt trade with Iran in the event that it does not comply, then it will begin the slippery slope of undermining the deal. For a Security Council member that depends more on reputation than power for its influence, and which has a past record of leadership on non-proliferation, that is a hypocritical and ultimately vulnerable position to be in.

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The housing problem isn’t a housing problem; it’s a regional development problem

I have noted with growing despair the xenophobia which is becoming a political commonplace this election cycle. On the left it’s about house prices.* But this post is not about racism; it’s about development.

The national median house price is $415,000, a figure skewed substantially upwards by the extraordinary cost of housing in Auckland. But you can buy a three bedroom house in Taumarunui for $26,000, or for $67,000 in Tokoroa. These are extreme examples, but for considerably less than half the median price you can buy a charming colonial villa in Tapanui ($149,500). For a little more than half the median you can buy a newly-renovated house on an acre in central Gisborne ($225,000). Similar houses are available for not very much more money in larger regional centres like Dunedin and New Plymouth, and that’s without considering many apartments, townhouses and more modest types of dwelling.

There are houses out there: there just aren’t jobs to go with them.

The chart above shows income and employment growth by region, and this is why the houses are so cheap. The growth is just not there. (From the Ministry of Business, Innovation and Employment Regional Economic Activity Report 2013).

Opportunity
It’s not just jobs, though; there’s more to life than work. People need confidence in their opportunities in a new place before they will, as Jolisa Gracewood says, buy shares in that community by owning or renting a house there and settling down. They need schools and hospitals and civic institutions and a sense of belonging, they need certainty about their community’s future, and their future within it.

The community likewise needs needs certainty in its new arrivals. A gold rush or an oil boom might provide jobs and cash, but it doesn’t provide certainty for either group. Certainty — and opportunity — comes from deep and sustained development. The fly-in/fly-out mining towns in Australia are a good example, and while that industry has been instrumental in maintaining Australia’s robust economy, its direct value to the regions has been limited — trickling down, lifting all boats — without the adoption of targeted development initiatives such as Royalties for Regions, which seek to return a share of the proceeds of industry to local communities.

As Eric Crampton said about the census income growth figures, increases in average wages across much of the South Island have been coupled with decreases in population, as people on low incomes move in search of better-paying work. Rob Salmond agreed, saying:

The regions with the supposedly highest median income growth also had some of the worst records in population growth, while the areas whose populations grew the fastest had relatively little change in median incomes.

Returning to the MBIE chart above, notice the regions in the top-right quadrant: the West Coast, Waikato and Taranaki. These are distinguished by two characteristic sectors: dairy, and mining, each of which provides a relatively small number of well-paid jobs within a narrow sector, skewing up the income levels but not necessarily changing the overall development picture very much. As crucial as the dairy industry, in particular, is and will continue to be to New Zealand’s economy, a complete solution to development it sure ain’t. Which is why you can buy an enormous Moorish-inspired villa for $220,000 in the middle of gas and dairy country.

Diversification and specialisation
The object of a regional development policy must be to promote structural change, to create industries and communities that are sustainable in their own right — neither transient nor exhaustible, and which attract people whose commitment is likewise neither transient nor exhaustible. These jobs need to go beyond the traditional churn industries like tourism, hospitality and service; though, of course, these jobs will be needed, they should be incidental to development, not its purpose. They need to be high-value and export-led — unlike, for example, our timber industry, and our wool industry. One of our key advantages here is our reputation for being clean and green — demand for premium food, the safety and quality of which can be assured, and including organic and sustainably-produced, is likely to grow strongly and we seem ill-prepared to meet this opportunity, as just one example. Another example is the potential of Māori business, which is as yet terribly underutilised.

In New Zealand we talk a lot about the roles of government in distributing wealth, and in ensuring public access to health, education and other scarce resources. These levers are well-recognised and there is at least a moderate degree of bipartisan agreement on their use. This is not the case with regional and economic development strategies, where there are deep practical and ideological divisions between the parties. I can see why the noninterventionist technocratic right parties like ACT and National are reluctant to consider — or even recognise the viability of — the sort of robust, hands-on regional development strategy that will sustainable economic and community growth in regional areas and persuade the frustrated and overcommitted residents of our major cities to risk a change. It will require considerably more input than building roads, granting mining permits and water rights to permit the extraction of value directly from the land. It will require a lot more than public-private partnerships and white-elephant monorails through virgin rainforest. It very likely will require PPPs, roads, and mining rights, though, meaning the left will have to reconsider some of its positions as well. It will require thorough investment in infrastructure, especially transport infrastructure, and purposeful community-building, possibly funded by a deeper cut from mineral royalties, a localised share of revenues from key industries, or loans from the government. It will probably require considerable autonomy devolved to the communities affected, and the strengthening — rather than the weakening, as is currently happening — of local government. It needs to be a little bit New Deal and a little bit Think Big.

Diversity is resilience, and our economy is very narrowly based. That must change. Different regions have their own strengths — environmental and historical, in terms of personnel and capability — and this represents an opportunity to improve the national economy holistically, by strengthening each of its component parts, rather than by building one economic muscle until it threatens to throw everything else out of balance. In many cases these nascent strengths will need considerable augmentation, and some will need to be developed almost from scratch. That requires significant and sustained investment in research and development — contributions to which the National government cut during the time when it was most crucial; when talent needed to be incentivised to stay here, and when industry needed to prepare to take advantage of the recovery, when it arrived. Public-sector research agencies can be beneficial in quite unpredictable ways, and when it comes to blue-sky research, patience can pay off enormously. If you’re reading this over Wi-Fi, you can thank the Australian government’s scientific agency, the CSIRO.

People and places
One obvious and direct means by which the government can influence regional development is by decentralising — by relocating government departments or agencies to regional centres. At a minimum, governments could decline opportunities to actively dismantle regional industries — such as Invermay — for the sake of short-term cost savings or change for its own sake.

It is clear that having a critical mass of mobile public servants all located within a kilometre of each other can increase efficiency and cross-pollination in government and business. Some significant new businesses — such as Xero and Vend — clearly benefit from strong cohabitation and the development of their own start-up cultures. On the other hand, in the past decade telecommuting has become plausible for a large proportion of people whose work is predominantly reading, writing and talking on the phone, and the major reasons it is not more widely used are to do with middle-managers wishing to retain some measure of direct control over their staff, which they label “team culture”.

There are costs and benefits to decentralisation, but it is hard to shake the sense that government, and the public service, are growing increasingly remote from the people whose interests they ostensibly serve. The gap between the experience of living in Auckland or Wellington and living in the rest of the country is vast already, and is likely to grow. Over the long term, as regional development improves, mobility will increase, as the economic and cultural risk of moving to or from a major centre will decrease, and this seems likely to yield an even greater cross-pollination benefit than that sacrificed by decentralisation.

Political laziness from the left
The reason the housing markets in Auckland and Wellington are refusing to cool is because people — both internal and external migrants — want to live where there is opportunity, and Auckland and Wellington is where the opportunity is. Blaming foreigners for the continually-rising house prices in Auckland is counterproductive. It’s lazy populism for the opposition to monger fear on these grounds, and it’s clear why the government is perfectly willing to let them do so: first because it cuts against the left’s political brand, and second, because it frees them from responsibility for what has proven a poor regional growth strategy during their time in government.

Labour and the Greens have taken strong and well-articulated positions in favour of regional development and smart growth but they’ve also gifted the government an opportunity to reframe what is essentially an economic development debate as being about housing and migration, when the former is a symptom and the latter is all but irrelevant. As a consequence the whole discussion gets sucked into an unwinnable partisan slagging-match. This isn’t so much a failure of policy, but a failure of political emphasis. It should be relatively easy to correct: they mainly need to stop complaining about the yellow peril, and start talking about the future of a country where wealth and innovation is spread beyond its main centres.

Although I disagreed with his dismissive attitude towards the marriage equality debate, it seems likely that the once and future member for Napier, Stuart Nash, will be an important member of the Labour caucus in future. Late last year he argued persuasively that the regions are crucial not only for the economic wellbeing of the country, but for the wellbeing of that party, and so for the wider left. As he says:

If any party only holds seats in Akld, Wgtn, Chch and Dunedin, then they don’t have a particularly wide mandate to govern because they haven’t got MPs in caucus putting forward the views of the vast majority of geographic NZ.

To an extent it is understandable that this hasn’t happened yet. Development is hard. It takes a long time and a lot of money, and in a political context where governments change no less often than once per decade, it requires an uncommon degree of accord between increasingly diverse political movements. With the Greens now forming a substantial and apparently-permanent adjunct to Labour on the left, and the emergence of new climate-sceptic and anti-environmentalist sentiments within National and its allies, this is a big ask. But it needs to be done nonetheless. The regions aren’t going to develop themselves; they haven’t got the wealth or the people to do so, because it’s all tied up in tastefully-renovated villas on the North Shore and in Thorndon.

Downsouthing
This is not an entirely theoretical discussion for me. All going to plan, at some point later this year my family and I will move from the Kāpiti Coast to Dunedin. My wife is going to the University of Otago to work on the postgrad study she’s been wanting to do for 10 years. We’d have done it years ago if we could — every time we’ve been to Dunedin, we’ve said we’d move there in a heartbeat if only there was work. Mostly what’s changed now is that I can bring my work with me.

The reason we live out here is because out here is where we could afford to buy a house on one modest Wellington income. The idea was always to move into town at some point, but that has gotten more distant, not closer, over the past five years with Wellington’s housing market proving largely impervious to the recession. So off we go.

We anticipate significant benefits. My wife will be able to do something meaningful with her life other than raise our kids full-time or working as a rest home carer, worthy though both those tasks are. Commuting into Wellington would cost dozens of hours and hundreds of dollars a week, and at some point both of us would inevitably end up far from our young kids when they needed us. But not least among the advantages is the regional arbitrage of continuing to bring in something like a modest Wellington income while living in a place where houses are, very conservatively, $100,000 cheaper.

But there’s the thing: unless you’re privileged enough to work in a field where you can telecommute (and bosses who’ll let you), or unless you work in a literal field, moving from Auckland or Wellington to pretty much anywhere else in the country is a big risk. (In Christchurch, the case is much more complex.) You can move, but for many people, the opportunity is just not there, and the risk of giving up what you have is very great.

The government that raises those opportunities will find favour with those who want to move, those in the regions whose economies and communities are boosted by new growth, and those in the main centres who wish to stay, or must stay, who will have richer opportunities for doing do.

L

* On the right it’s more about asylum seekers (National) and internal threats to the colourblind state (ACT). The only party that seems clean of this is United Future, for which Peter Dunne should be congratulated.

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National Lite

It’s been almost a year since I wrote anything here. Things have been complicated. Anyway, this will — I hope, and circumstances permitting — begin a return to participation. All thanks due to Pablo for holding things together.


Answer: Nobody. That’s the problem.

Today was budget day. The carnage in Australia with Joe Hockey’s first budget two days ago was worse than even the Abbott government’s enemies had predicted, with deep cuts to education, welfare, superannuation, science funding and many other fields, including the imposition of a $7 surcharge for GP visits. The contrast here could not be more stark: a return to surplus not immediately thrust into lowering taxes, modest cuts in some areas, increased entitlements in others, particularly in support for young families, and notably the extension of free GP visits to children under 13 years of age.

I’m no big-city economist so I’ll stick mainly to the political aspects. But it basically looks like Bill English’s sixth budget — somewhat like the preceding five, but to a greater extent — does a little good and almost no evil, and that basically ruins the opposition’s game plan, which relies on Bill English and John Key being terrible ogres that eat babies, rather than supporting their parents with leave entitlements. When the man touted as the Labour party’s most left-wing leader in a generation is reduced to complaining that John Key has stolen his party’s policy — as if that is supposed to be a bad thing — things are pretty dire. The opposition’s increasing desperation over the past six years, continuously prognosticating doom over the horizon, simply looks ridiculous when the doom never arrives. The government has snookered the New Zealand left by simply doing what it said it would do, and as Pablo argued persuasively at the start of the year, that makes clear how lacking the New Zealand left is in its strategic vision. They — Labour especially — are relying on the government to do their heavy ideological lifting, and when the government declines to be explicitly evil, the opposition is left with nothing to say.

When your enemies move to occupy your ideological ground, it is an opportunity to extend that ground, replacing what they claim from you with more advantageous ground deeper within your ideological territory. The trouble for Labour is that National has moved towards them, and Labour are still trying to fight them for the same ground rather than staking out more ground of their own. Six years after the “Labour lite” campaign that saw them ousted in the first place, they haven’t learned. Today’s budget has been tagged Labour lite by commentators including Bryce Edwards and Labour’s own Rob Salmond.

Due to assiduous work by National, and a conspicuous lack of it by Labour, “Labour lite” is now more or less indistinguishable from “Labour”, and Labour has offered no sort of “Labour heavy”; full-cream Labour, deep-red Labour, or whatever other metaphor you like. Because of this lack of difference, the electoral decision comes down to competence: of these two groups of mendacious grey technocrats, which is the least likely to inadvertently screw things up, or intentionally, as Jan Logie puts it, f&%k people over? That’s an easy answer: Labour demonstrates its lack of general competence every single day. If it’s not clear by now that they’re simply not as good at being the Nats as the Nats are, when will it ever be?

It’s too late, now, to change this ahead of the election. The die is cast. Labour has — again — decided to rely on political meta-strategy like syllogising failures of judgement or conduct by individual MPs out to the wider government, and it might have worked had they any sort of foundation to build upon. But they don’t. Far from full-cream Labour, Labour itself is Labour lite. Light-blue, even; 98% Ideology-free. If they’re going to play the National-lite game, they at least need to get good at it.

L

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Evaluating export growth.

Much has been made of the fact that since the entrance into effect of the bilateral Free Trade Agreement (FTA) with China in 2008, New Zealand exports to China totaled NZ$33.7 billion in the six years since then compared to NZ$9.9 billion in the period 2002-08. In 2007/08 before the FTA went into effect exports to China totaled NZ$2.5 billion, and in 2012/12 they were worth NZ$7.7 billion. That is more than 200 percent growth in six years, or more than 45 percent per year (Hat Tip: Kiwiblog)

Needless to say, pro-trade cheer leaders think that this is a great thing. And perhaps it is. But before we get too excited and proclaim the absolute benefits of this bilateral, a few questions need answering.

First, what is the volume and worth of imports from China during the same period? In other words, what is the state of the bilateral trade balance?

Second, has the FTA led to export commodity diversification or concentration?

Third, has the increase in bilateral exports led to an increase in employment in the export sectors affected?

Fourth, has there been a trickle down effect evident in the expansion of auxiliary industries and tax revenues derived from them and the export sectors involved?

Then there are subsidiary questions:

Has overall NZ GDP per capita and income distribution increased as a result?

Have occupational health and safety standards improved in the export sectors associated with the FTA?

These questions are important because they illuminate more precisely who has and has not benefitted from the FTA.

I invite readers to do a little research on these questions, using the government’s own sources as well as academic studies. The findings may come as a surprise, as oftentimes macro-statistics mask the meso- and micro-impacts underneath the “big picture.”

Not all is what it seems.

 

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Whose Team New Zealand?

As much as anybody I enjoy sports and competition, so much so that I enjoy watching top level competition in sports that I am unfamiliar with. I have therefore enjoyed watching the America’s Cup racing, not so much because of the nationality of the teams but because of the boat design, speed, tactics and seamanship involved. In fact, I am poorly placed to get worked up on patriotic grounds because as readers of my earlier post on liminality may remember, I have allegiances to several countries and divided loyalties as a result. Moreover, I believe patriotism to be the last (and best) refuge of political scoundrels so I endeavour to resist its emotional pull wherever I happen to be living.

In this America’s Cup series I am cheering for Team New Zealand because I know that it means a lot to New Zealand and very little to the US. Other than rugby, Kiwis tend to adopt a “David versus Goliath” approach to international team sports. They are not alone in this small country syndrome, as I have pointed out previously with regard to Uruguay and team sports other than soccer. But in New Zealand that syndrome extends beyond sports, including into the international political and economic arenas.

With regard to the America’s Cup, here in NZ there is live blow by blow coverage of every meter of every race, whereas in the US it is not being covered live anywhere except on boutique cable boating channels. Here it is front page news in every newspaper and news broadcast. In the US it barely rates a header in the sports section of big city newspapers, including that of the race venue San Francisco. Heck, in Texas high school football (the helmeted version) gets more coverage on a weekend than the America’s Cup has had in a year!

In the US most people do not give a darn that Larry Ellison indulges a billionaire fancy with a crew that includes only one American. Here people want to name their first born sons after Dean Barker. They also want that turncoat, traitorous preferably ex-kiwi Russell Coutts strung from the lanyard because he dared to work for the competition. In other words, Kiwis are heavily invested in the outcome whereas in the US they are not.

Or are Kiwis that heavily invested? From what I gather from video coverage of people watching the race live on television on the Auckland waterfront, there is hardly a brown face in the mix. The same goes for those Kiwis who have traveled to the America’s Cup Village in San Francisco. Pure pakeha pulsation throughout.

So where are the non-Pakeha kiwis when it comes to this race? Are they just not into sailing? If so, why not? Why is something that is so heavily promoted by the media and advertisers as a nationalistic rallying point having so little impact on non-Pakeha communities?

I ask because the New Zealand taxpayers have put $38 million into Team Emirates for this race series (both Labour and National support the expenditure). So whether or not they are emotionally invested in the racing, Kiwis are financially invested in it. The public expenditure was justified on grounds that the economic benefits to NZ of a future Cup defense in the event of a win would justify the investment (since winners get to name the venue for the next race). The narrow investment now is said to bring greater and broader future returns.

Besides the fact that no public consultation preceded the allocation of taxpayer money to Team Emirates, the issue of benefits is thorny. Even if Auckland benefits from hosting a future defense of the Cup (and that would mostly go temporarily to hoteliers, restaurants, bars and other service sector providers), what about the rest of the country? Other than Auckland based niche industries like boat-building and sail-making and a few high-end tourist locations and ventures, is it true that the country as a whole will benefit from the tax revenues generated by increased economic activity in Auckland? Do we really expect to believe that places like Ruatoki and Twizel will see direct benefit from an America’s Cup defense in Auckland?

It should be noted that Team Oracle USA received no public funds for its Cup defense, and that the redevelopment of the Embarcadero in San Francisco was a majority private venture that has not yielded the economic dividends to the city that were originally tabled by way of justification for holding the race there. So the “future benefits” argument is contentious at best, especially if drawn over the long-term. Yet spending public money on the challenge is seen as in the long-term NZ national interest.

Put another way, why is it that NZ taxpayers coughed up money for a yacht race campaign that not all New Zealanders care about and which relatively few New Zealanders will benefit from in the form of future uncertain economic returns in the event of a successful challenge this year? Since hosting the Cup defense will undoubtably include allocations of more taxpayer dollars to infrastructure and venue development, is this an appropriate use of public money? Given that the food in schools program receives just $10 million a year, could it not be argued that government priorities are a bit out of whack when it comes to long-term investment in the nation’s future?

Leftist conspiracy types will claim that the government subsidy for a small appeal elitist sport is designed to benefit its rich and upper middle class business supporters, nothing more. I would hope not, but then again I come back to the question of who in New Zealand is truly supporting the Cup challenge. Is the America’s Cup for the few or for the many? In the US it is for the few by the few, but here in NZ the issue appears a bit more complicated.

Anyway, I could be entirely wrong in my read and certainly do not have a good handle on the extent of support for the America’s Cup outside of what I have seen and heard in the media. Readers are welcome to ponder and comment on the issue.

Better to do that than to get started on the subject of host venue race time limits being enforced in low wind conditions on a day when a overwhelming match-winning victory by the challengers was in sight!

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The Asiafication of New Zealand production.

Reports that New Zealanders are working longer hours with more responsibilities and little if any overtime pay, are less unionized and more casualized (part time) than any time before in the country’s modern history suggests that not only has the national model of accumulation changed. It suggests that the labor market and labor process have fundamentally changed as well. The trend towards increased exploitation of human labor as an input commodity, added to an increasing lack of employer concern for the social costs imposed on workers by super-explotation and the long-term nurturing of employees as productive assets, is reminiscent of something that Marx wrote about a long time ago: the Asiatic mode of production.

I have written about the Asiatic mode of production before on this site, differentiating it from Oriental despotism and referring to my observations about Singapore when I lived there in recent years. The core of the model centers on an abundance of cheap and easily replaced human labor. This labor is used instead of machines or other labor saving devices because it costs less in terms of initial investment and long-term maintenance, although it is less efficient in terms of productive output generated by individual laborers. The labor market is dominated by employer “flexibility” in hiring and firing and setting wages, working terms and conditions. Workers are treated as expendable commodities, not as assets. In Singapore this was done via the importation of foreign labor from the sub-continent and Southeast Asia (not to be confused with the foreign “talent,” mostly Anglo-Saxon, that is imported to staff corporate upper management in the island state).

In New Zealand it is accomplished by maintaining unemployment rates at sufficiently high levels so as to have a labor surplus in semi-skilled and unskilled, middle to lower income, mostly youth and entry-level  positions. Creation of lower minimum wage sub-categories (such as the youth wage) and lowering wage requirements for casual or part time work reduces labor input costs. Dropping of social welfare benefits forces people into the job market out of necessity rather than choice, adding to the numbers of the unemployed seeking work. Loosening of the regulatory environment in which most workers work gives them less legal grounds for grievance across a range of issues, from workplace safety to wages.

The combination of factors allow for the easy replacement of semi-skilled and unskilled labor (and in some instances, skilled workers such as academics), which increases the employment uncertainty and precariousness of the work force. That makes employees malleable to employer demands for more wage restraint, more task assignments, more productive output per employee and hence more working hours with little extra pay or benefits. For employees in a labor market characterized by work scarcity, loose regulations and employment precariousness, increasingly onerous jobs are not easy to give up (tragically, Pike River comes to mind). On the other hand, for employers it is a take it or leave it proposition. If workers want better pay or conditions, they can look elsewhere.

The deliberate undermining of collective bargaining by successive National governments (which the Fifth Labour government did not fully restore) and the decreasing role of unions in the labor process plays into this scenario. Less means of collective defense in the face of of the labor market shifts described above leads to atomization of the work force into a mass of uncoordinated and stratified individual opportunity seekers. As the opportunistic ethos takes hold and replaces the collective solidarity ties of previous generations, it reinforces the Asiafication trend.

An important aspect of the trend is immigration demographics. Since New Zealand is labor poor it must import foreign workers in order to grow. The historical use of unskilled Pacifika labor in New Zealand is well known. But what is interesting in recent years is the turn to Asian sources for all types of labor, most of it semi-skilled and skilled. Regardless of specific provenance, Asian immigrants are much less familiar with Western labor market rights and responsibilities and in fact are eminently susceptible to the labor process conditions outlined in the Asiafication model. Moreover, where working class benefits have accrued in Asia, much of that has been done via strong collective action (such as in South Korea) and/or via paternalistic state policies (such as in Singapore). In New Zealand neither of those factors have obtained in recent decades.

The increasingly non-Western immigration demographic appears to be easing the consolidation of the Asiafication trend. New Asian immigrants, schooled in authoritarian modes of production at home, arrive in New Zealand eager to work, relatively ignorant of their rights and less inclined to complain about employment terms and working conditions. To these can be added immigrants from Central Asia and the Middle East, who also have come from mostly authoritarian and highly stratified societies where workers know their place in the social hierarchy and where the concept of collective and individual rights is narrowly construed.

This mass of new arrivals, to include the first generation born and raised in New Zealand, add highly motivated opportunity seekers into the labor market mix. Although some may be refused work because of racism or difficulty with language, the larger trend is to increase competition for the relatively scare available jobs and in doing so lower the overall wage bill. That leads to more income inequality between workers as producers of value and the managerial consumers of their commodified labor.

Another way of looking at the issue is in terms of consent. Over the years Western workers have seen their material threshold of consent, which is the general expectation of fair treatment in the workplace and fair remuneration for providing their labor services, institutionalized in labor law and labor market practices. It includes access to collective representation and bargaining and state enforcement of workplace health, safety and other basic standards for working conditions and pay. What the Asiafication process does is lower worker’s expectations of “fair” treatment in the labor process, which in turn lowers their overall material threshold of consent. Reinforced by institutional and structural shifts that are reproduced over time, this further subordinates the salaried classes to the logics of capital as defined by investors and asset owners.

Asiafication also shows workers their “proper” place. After years of contesting capitalist domination of the political and economic system via party competition reinforced by union collective action in an effort to level the socio-economic playing field, Asiafication helps restore the overt social hierarchies that underpin the capitalist class system and which were camouflaged by design in democratic welfare states.

For employers (as sellers of cheapened labor, value added products), the result of Asiafication is lower price outputs across the board (be it in services, manufacturing or primary good-derived exports). That makes them competitive in the global market of production, service and exchange.

The result for workers is a vicious circle in the social division of labor as well as in production: a labor market created by an economic and political decision-making elite who see modern variants of the Asiatic mode of production as the wave of the future and something to emulate (however hard that is to do under democratic conditions), coupled with an increasingly non-Western immigration demographic that is historically familiar with the “flexible” labor market dynamics inherent in that model and its contemporary applications and which does not necessarily see the Asiatic mode of production, including intense social stratification and opportunistic individualism, as a bad thing. Under such conditions the race to the bottom begins in earnest.

It should also be noted that the Asiafication of New Zealand production facilitates the increasingly Asian focus of New Zealand trade and investment strategy. The push to increase investment in and trade with Asian and other non-Western countries has its domestic complement in the alterations to local labor market conditions. Asian investors who otherwise might be put off by Western labor market standards and regulations can now see something more familiar in the New Zealand labor market, which is becoming more akin to what they are used to in their home countries. That eases the way for the inward flow of non-Western capital into New Zealand’s productive apparatus, something that contractually reinforces local commitment to the Asiaification model.

I am not a labor economist or sociologist, much less an expert on immigration. I am sure that there are exceptions to the trend. The knowledge economy may still be around and centers of productive excellence perhaps abound. It is clear that the welfare state labor market model is kaput. It is equally clear that there are significant variations in Asian and other non-Western labor market standards that argue against making gross generalizations. Even so, there is a discernible trend at play when it comes to New Zealand’s labor market, and that trend derives from or at least resembles modern variants of the labor market typology associated with the larger structural model known as the Asiatic mode of production.

It also seems to me that there is something amiss about a purported liberal democracy that so energetically pursues a model of accumulation that at its core is dependent on a highly exploitative labor process in which material short-term gains for employers is emphasized over the long-term employment security and welfare of workers. After all, the rewards of the former accrue to the few, even if there is some trickle down to the masses. But the long-term stability of democratic society depends on having relatively contented working and middle classes who invest in their jobs not only for immediate gain (or relief), but to help secure the next generation’s material well-being. If that is no longer feasible due to the conditions of production, then something will have to give.

Absent an authoritarian regression along the lines seen in certain Asian political economic models (which would have to include major changes in the basic socialization mechanisms of the citizenry, be they new immigrants or not), it seems to me that the Asiafication of New Zealand production will become untenable over the long-run. Long term disenchantment with economic exploitation turns opportunity seekers into the politically disillusioned, and it is the politically disillusioned who, however apathetic at first, eventually agitate the most for substantive change. Under competitive electoral conditions that means that the politically disillusioned become a potential support base for reform-mongerers and the parties that best represent them.

In summary, I believe that the current Asiafication of New Zealand production is a short-term, market elite-driven solution to a perceived problem of competitiveness that is not sustainable even with the changing national demographic based on non-Western immigration trends. I believe so because I do not think that the elites of New Zealand are prepared or inclined to engage in the authoritarian measures required to impose a new social division of labor consonant with modern variants of the Asiatic mode of production. Absent the will or the way to add Orientalism to the equation, there will be an inevitable political backlash to the Asiafication model that will see its undoing in favor of a labor market that is less exploitative and more attuned to long-term social gains rather than short term business profit.

It will be a good day when that happens. I just hope that it happens in my life time.