Category: Economy

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Bananazelandia.

There is a small island country in which, in spite of their avowedly private market-oriented ideology, government leaders have directly involved themselves in negotiations with foreign film makers in order to keep production of a film series on the islands. The foreign studio bosses threaten to take their production elsewhere; the famous director–a local boy made good– fumes and blames union organisers for raising production costs (in a film that is mostly based on computer animation and special effects rather than humans acting, in a country where the local currency is less than 80 cents of the US dollar). Although the film production is no long-term investment and will not bring employment stability or trickle down benefits beyond those connected to its production and its purported positive impact on tourism (supposedly because foreign tourists will come to the islands to see a movie set called “Hobbitown” in which gnomes abound), the government agrees to offer the foreign studio bosses NZ$100 million in tax and marketing breaks and to change local employment law so that actors are classified as contractors rather than employees while working on feature films (should the law apply to all actors this could well extend to TV, stage and radio actors working on local productions as well).

Although the film industry is currently an significant source of revenue for the country and has spawned a considerable technological base associated with it, it does not add to the long-term national development growth of the island state. Compared to core national industry, it is much like a diamond in a coal mine–a source of pride and joy but not a basis for long-term prosperity.

All of which is to say: foreign corporate masters involved in an industry that does not add long-term value to a nation’s economy have managed to get the island country’s leaders to bow before them in order to secure short term economic gain for a small local industry with limited direct ancilliary impact and a more hypothetical than concete follow-on revenue generation effect. To do so, not only was money offered to appease the foreign masters. The basic law of the land was changed at their behest as well.

Since the country has been engaged in a long-term debate about changing its national flag and its status relative to its colonial master, perhaps it is time to also consider changing its name.

Bananazelandia. Say it with a Spanish, French or Portuguese accent and it just rolls off the tongue.

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Unions are to capitalism what opposition parties are to government.

In the debates about the proposed labour law reforms there appears to be fundamental misunderstanding or ignorance by National and ACT of the purpose of unions in capitalism. The latter are seen by NACT as at best a source of inefficiency and profit loss; at worst parasitic wealth destroyers. They appear to misunderstand that capitalism left to its own devices, with no collective counter-weight provided to workers, is akin to a political regime without opposition parties. That is, it is inherently an authoritarian status quo in which owners rule and workers obey. Thus, if we hold it self-evident that democracy is a better form of regime than dictatorship precisely because it allows for the existence of a freely organised competitive political opposition that can contest power and times compete for it, then we must also recognise that capitalism needs unions in order to be representative and fair to the society at large. The trade off between democracy and capitalism is exactly that: a diminished rate of exploitation in direct proportion to the measure of voice exercised by workers in pursuit of a fair share for all.

That is why unions were organised in the first place: to bring a subordinate group vehicle of voice and redress to the economic system. Whatever their very evident flaws (Leninist organisation, iron law of oligarchy bureaucratic rationales), unions provide a democratic counter-weight to unfettered capitalist exploitation. Just as it is preferable not to have a closed, unaccountable (or at least vertically unaccountable) oligarchical elite run the affairs of state, so too is it undesirable, from a democratic perspective, to have a closed, vertically unaccountable economic elite determine the social relations of production. If one believes in democratic capitalism, one must believe in a central partnership role for unions within it.

This is true whether labour-based or capitalist-oriented parties are in power, since in capitalist societies the material welfare of all is dependent on the investment decisions of capitalists. But capitalists need workers to realise their investment, and workers need to be productive for profits to occur. There is consequently a structural bias in favour of providing the working conditions and larger social context in which profitable production can occur over the long term. For that to happen workers need to accept the system as given, which is a function of them perceiving a partnership stake in it. That means a modicum of voice and representation. Democratic capitalists consequently understand the need to exchange super-exploitation and authoritarian control of the workplace for increased working class representation in both politics and production. In turn workers (and their political representatives) accept the capitalist foundations of society and the dominant role of capitalists within it (in other words, they forego a move towards socialism). This exchange is at the heart of democratic capitalism. Although negotiating the margins of the democratic capitalist social contract can occur depending on the nature of the government in power, “touching the essential” aspects of it is not.

Authoritarian capitalism offers many short term advantages to business, but it does not guarantee long term gains. Unmitigated authoritarian exploitation, be it in the workplace, politics or both, breeds resentment. Born of a lack of consent to the dominant system, resentment can be manifest in everything from petty acts of social defiance to industrial sabotage to revolution. Short term acquiescence may be bought with material rewards, but the long-term picture remains clouded so long as workers do not buy in to the system as given and instead resent their subordinate status in it. Absent mass consent and given the inevitability of working class resentment, the resort to the “weapons of the weak” negatively impinges on profit, if for no other reason then that the costs of repression grow larger the longer authoritarian control is maintained. After all, you cannot repress the same amount of people in the same measure over time.  Since capitalists abhor uncertainty and seek stable rates of secure return, a peaceful, consent based socio-economic and political order is preferable to an imposed one. That gives economic utility to democratic capitalism.

In fact, where democratic capitalist systems work best (hegemonically, as it were), many if not most workers strive to become capitalists themselves (small businesspersons, at a minimum). They see themselves on a continuum of upward mobility based on workplace fair play and merit. Socialism is not their preferred option. The proof is in the mythos: is this not the Kiwi, Ozzie and American dream?

Here is where NACTs reforms and the demands of the employer class says much about their true orientation. They claim belief in freedom of choice and the benefits of market competition as the great levelers of social ambition. If that were true, then they would welcome workers to freely organise without legal constraint or negative repercussion because true market competition and workers freedom of choice would improve overall economic (labour) market efficiency. After all, according to their own logic, the market works best when all have equality of opportunity, and it clears best when all actors enter into the market exchange exercising their full potential as free agents involved in the mutual supply and demand of goods and services. So if workers exercising their free choice want unions, then more the better from a market perspective. Why put constraints on that freedom?

Yet in practice NACT seeks to place constraints on working class collective choice and voice so as to better exercise owner/manager prerogatives in the workplace. They are, in other words, hypocrites who do not really believe in the power of the free market or closet authoritarians out of ignorance (unlikely) or by design. Or both. No amount of political spinning can disguise that fact.

What is more, NACT does not appear to comprehend, from a cynical perspective, that allowing for unionisation, including union workplace access, while reducing limitations on the right to strike and collectively bargain across economic sectors can actually serve very usefully as an alienation device in which workers are led to believe that they are real partners in production in a system in which the fruits (surplus value) of their labour are appropriated by others (in a variant of Lenin’s “democracy as capitalism’s best possible political shell” argument). Although unfettered collective action has the potential to open the door to worker challenges to control of production, the reality is that in democratic capitalism private ownership is reified from birth to grave and most workers live with the dream of being bourgeois in culture and consumption if not employment. So whether cynically or sincerely committed to workplace democracy, enlightened capitalists understand the long-term political utility of union representation in democratic society. NACT and its business supporters appear to be anything but enlightened.

As I mentioned in my previous post on the matter (“The Blues Go Black”), the proposed reforms owe their inspiration to the Pinochet Labour Code. The question is whether NACT have the same view of unions as Pinochet and “Pepe” Pinera did, and if so, why do they make any pretense as to being democratic? Could it be that what we are seeing in NZ is the first attempts to turn the economic bases of the democratic social contract into something akin to unchecked elite imposition under manipulated electoral conditions?

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WTF??!!–or is it simply a matter of money talking?

Little does it matter, apparently, that the bastion of Wahhabist extremism and medieval authoritarian gender/sexual  weirdness has never fully repudiated the 9/11 attacks and offered nothing outside of its borders to combat that scourge even though most of the 9/11 perpetrators were Saudi (if anyone can name a Saudi combat deployment anywhere outside of Saudi Arabia or the US overflight zone in Yemen, you are welcome to correct me). Never mind that its pressure influences US policy vis a vis both Israel and Iran. Never mind that its human rights record is abysmal. Never mind that the Saudi as well as other oil-rich Arab children of the elite get to use NZ as a convenient educational stopping and gathering point on their way to arranged marriages and the material comforts borne of the exploitation of  others.

The National government believes that it is all good.

For National, the issue here is that there is serious money to be made off of these Arab aristocrats, and NZ’s claims to moral authority in defense  of universal human rights need to take a back seat to monetary self-interest even though the NZ’ers who will have to directly interact on a daily basis with the Saudi students have not been consulted as to the advisability of increasing their numbers. To say nothing of what other countries, even when considering the hypocrisy that is the mainstay of diplomatic rhetoric, will think of this abject bend-over act to a country that pretty much represents the antithesis of so-called NZ values.

Security vetting, anyone?

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Cannibalising society for the money proxy

This talk of not being jealous about tax cuts, and the unstated supposition that the rich are just better reminded me about a couple of posts I wrote a year or so ago about the “money proxy”: the idea of wealth as an easy quantifier for a person’s value. I’ve rehashed the argument here because I think it’s particularly apposite given the forthcoming budget. Paraphrasing myself:

Money is both the means by which we judge a person’s worth (in the human sense) and the resource needed to enjoy the comfort and dignity to which human beings are entitled by simple virtue of their being human beings. Because the same thing is used as both a means and an end, there is inevitable conflict: by denying people access to sufficient food, healthcare, accomodation, etc. on the grounds that they cannot afford to buy it for themselves, a society tacitly says: you are not worth it because you do not have enough money.

Previously, I had argued that while there’s considerable shared ground between National and Labour (both want economic growth, believe in the state’s role in providing some public services, etc.) the predominant difference between the two in economic terms is in the reflexive positions to which they repair when hard choices need to be made. National believes in supporting ambition, Labour in mitigating harm:

The former sees achievement as the highest goal, and failure as a necessary collateral effect of attempted achievement. They grade a society by its upper bound, by how much success its leading members achieve. In this regard, the ideology emphasises ambition, celebrating that qualities as the most beneficial to society while disregarding the worst consequences of its failure – destitution, disease, starvation, etc. The caricature of an ambitionist, if I may coin the term, sees the world as humanity’s oyster, and humanity in positive terms – as potentially successful and satisfied and healthy and secure, and considers that anyone who does not achieve these things has simply not tried hard enough, or for long enough, or lacks the innate characteristics needed to achieve those things and is therefore not entitled to them. Entitlement accrues to a person on the grounds of their success. In symbolic terms, the way to appeal to these people is in terms of opportunity, advantage, individuality, and the idea of just desserts for effort rendered.
On the other hand, the caricatured mitigationist (to coin the opposite term) grades society on its lower bound, by the extent to which the least successful members of the society are allowed to suffer by the more successful. They see the world as a dangerous, inhospitable place in which the default state is abject meanness, and humanity in negative terms of limiting those inhospitable forces, keeping out the cold and the hunger and the disease, while anything else is a bonus. Entitlement accrues to a person on the grounds of their humanity alone. The way to appeal to these people symbolically is in terms of compassion, brotherhood, sacrifice, cooperative achievement and that principle that none should suffer needlessly.

Emphasis added to identify the key symbolic points of the rhetoric around this budget, and highlight the fact that things are playing out exactly as you would expect. These battle lines were drawn long ago, and for all National’s “compassionate conservative” rebranding, there’s really nothing new in their focus here. They faced a clear choice between ambition and harm-mitigation, and chose according to their political identity. They simply don’t have a problem with the money proxy: it’s a measure as good as any other, and a nice clean “objective” one, because it’s determined by a market.

But I do. Following the first excerpt, I wrote:

This, to me, is not acceptable. If we cannot divorce the value of a person’s dignity, comfort and wellbeing from the monetary cost of sustaining it, what’s the purpose of society?

It’s bad in principle that people are treated (to a greater or lesser extent) as non-people by virtue of their material circumstances. And furthermore, I think it’s a bad decision in plain pragmatic utilitarian terms to attempt to swim against the economic tide and support ambition at the cost of significant harm:

Push comes to shove at times like this, when things are tight. When many people are deprived them, the human necessities of health, comfort and dignity can more readily be achieved by an idea of the common good than by the burning desire of ambition. […] In good times it’s easy to emphasise the greater good because a reasonable minimum standard can be expected to exist or be trivially provided for the few who need it. None need suffer except by a relative standard. In hard times, however, when raw success is less achievable, mitigating harm at the temporary expense of ambition becomes more valuable by its easy achievement.

So what we have with the budget, judging by the pre-release hype, is simply a return to form for the National party, and it should be countered by a return to form by the Labour party as well. National are retreating from the middle ground which won them the election and repairing to their reflexive, reptilian-brain adherence to the money proxy as an iron law of society. Labour must reclaim this ground; not that it ever really ceded it, rather permitting an occupation which is now beginning to withdraw.

The underlying calculation is a tradeoff of societal harm against economic growth. Another way of putting it, in more resonant terms, is: how much of society are we prepared to cannibalise, and for what gains, accruing to whom? This is the question around which Labour should orient its response. The words “many” and “few” will fit neatly into it.

L

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Its all Greek to me.

There is a political rhythm to the Greek economic crisis. We spent a long weekend on Santorini dodging strikes–Tuesday was the transport workers, Wednesday was the wharfies, Saturday was the May Day demonstrations. Next Wednesday there is a general strike. Our timing has so far been impeccable. We took a ferry last Thursday, so missed the wharfie action that paralyzed Pireus and left a bunch of cruise ship passengers stranded. We returned on Sunday evening so missed the May Day demonstrations that disrupted the Metro rail. We fly to Samos this upcoming Thursday, so will miss the general strike as well. Fingers crossed that nothing happens next Monday, when we fly back. Given recent strike patterns, Monday is due for one so our luck may run out (not that getting stuck on Samos is a bad thing). But we are getting the hang of the flow of things and look forward to seeing how the general strike goes. Although the foreign press has focused on some violence, the reality is that it is only small groups of anarchists who are clashing with the police, and most of them are teenage students. The unions and other civil associations are led by grey haired folk who may have been prone to street action two or three decades ago, but who now are just trying to protect their collective livelihoods (although two banks were attacked by petrol bombs last night, the usual anarchist and Marxist-Leninist suspects are being blamed).

What is interesting about the unfolding of the Greek economic crisis is how ignorant most foreign observers are about its root causes. Most focus on inefficiency and waste in the public sector and the supposedly indolent Greek way of life, which even if true has its causes in something other than the Greek psyche (as some allege). Let me explain.

In the 1950s a strain of developmentalist thought emerged called modernisation theory that claimed that the problem of Latin America and the Mediterranean Rim was a lack of Anglo-Saxon Protestant values resultant from the mix of rigidly hierarchical religious cultures (Catholic, Muslim or Orthodox) and warm climates. The general drift of this “theory” was encapsulated in the so-called Iberian or Mediterranean Ethos: a culture of indulgence, indolence, patronage, clientalism and fatalism structurally rooted in a benign climate that allowed for easy shelter and food production. If only the Greeks, Italians, Spaniards and Portuguese (which actually is not on the Med) had to live in cold climates where survival depended on industry and resourcefulness–then they would have developed the “proper” entrepreneurial values that would have allowed them to develop along the “proper” lines of the Anglo-Saxon world. In other words, backwardness is a function of culture and climate.

Leaving aside the fact that there are plenty of temperate climate locations where entrepreneurial spirits have flourished, and plenty of cold climates where it has not, or the fact that lumping together whole regions in a culturalist explanation is ignorant at best and racist at worst, or that the notion of one universally ‘proper” form of development is both, this discredited canard ignored the structures of economic and political power (many overtly shaped by foreign intervention) that emerged in these regions and which were not reducible to either climate, religion, or civic culture.

By the 1970s modernisation theory was shown to be profoundly flawed. On a scale of over-determinism (when not cultural supremecism), it is up there along with the “warm water port” theory of imperialism. Yet, in recent years, and specifically with relation to the Greek crisis, it has been resurrected in revamped fashion as an explanation for developmental failure. Inspired by neo-liberal thought, the neo-modernisation thesis is that countries with “too much” state involvement in the economy are prone to political nepotism, rent-seeking, corruption and inefficiency. That makes for a lazy, supplicant, and favour-seeking society. The key to development lies in reducing the role of the public sector so that private enterpise can flourish. The private sector is seen as THE panacea for developmental retardation, and elites in places like Germany believe that the Greeks need to accept this.

While there may be some truth to the need for private sector leadership,  the root causes of the current Greek crisis are, again, not as simple as the overbearing role of the state, nor is the solution simply a matter of reducing it.

As I mentioned in the previous post, Greece has an underdeveloped private sector. But–and this is a very big but– the weakness of  the Greek private sector preceded rather than followed the advent of the modern Greek state, and the private sector never attempted to become the motor force for the entire society. If one considers the nature of internecine conflict in Greece dating back two  milenia (for the historically disinclined, please think about Athens and Sparta, or better yet, the Peloponnesian Wars), one realises how parochial local, sectoral and island interests can be.  That worldview continues today. Greek private industry, such as it is, has little concern about contributing to the public good. 

In light of Greek capitalist myopia and parochialism, the recipe for social peace has rested on the public sector being used as a means of absorbing excess labour (along with emigration). The labour market and welfare systems are two-tiered: there are few protections for workers in the private sector outside of employer generosity or union strength, while the public sector adheres to ILO standards. Tax-evasion is a national sport, but the problem is not with individuals but with politically-connected corporations and agricultural interests as well as religious organisations who do not pay anywhere close to their due share of the tax burden but who do put serious money into the main political parties and individual politicians in order to protect their profits (since the money spent on politics is infinitesimal when compared to the valuated tax assessment of their worth). In order to conceal the results of this long-standing practice, successive governments, be they centre-right or centre-left, cook the Treasury books and leave it for their successors to sort out, in what has become an elaborate wink and nod shell game played between themselves and their foreign creditors.

Greeks are by and large a nation of small property owners. Owning a home is, like in NZ, their core objective. The private sector is dominated by small and micro-enterprises run by owner-operators (often familial in nature) who eek out small margins catering to immediate needs (think dairies, dry cleaners. locksmiths and the like). The state does not direct investment capital towards these people, not does it particularly focus investment in large corporations either. What large-scale investment exists comes from foreign-connected sectors such as shipping, and much of the profit generated by the handful of such firms goes off-shore.

To this can be added a large black market fueled by unchecked migration across Greece’s incredibly porous borders. One in ten inhabitants in Greece are foreign born and the majority are undocumented.  This cash economy circulates outside the confines of the state (remember my anecdote about the gypsy street fair in the last post), yet is vital to filling the demand for basic necessities as well as for labour in the agricultural and service (including tourism) industries. Relatively little of the economic activity generated by these non-citizens provides revenue for the state, and with little immigration enforcement available (and largely impossible to regularise in the near term), that situation will only get worse as the official economy shrinks under the austerity regime now being imposed.

Thus the historical source of income stability (at least since the end of the colonel’s dictatorship in 1973) are public service jobs. But without an efficient tax system owing to the political cronyism of the major economic players, public budgets require external financing, which has led to more than two decades of deficit spending happily financed by foreign financial speculators trading in risk derivatives. The idea behind this play, which I accept, is that while firms may go bankrupt nations do not. Compounded interest ensures the investor’s profitability even if the principle is lost in a default (as Argentina showed in 2001-02). So the bottom line is that the system now under siege worked for everyone–the Greek elite enjoyed its privileges, the Greek population remained relatively content and peaceful even if economically underdeveloped by modernisation theory standards, and foreign financiers made money off Greek debt.

The trouble is that with the creation of the Eurozone currency system controlled by one central bank, countries such as Greece were placed in a financial straitjacket that eliminated the autonomy and cushion provided by independent national currencies.  It cannot devalue or overvalue its currency based on market conditions (as for example, Singapore does regularly), and thus is locked into a monetary (supply and demand) framework over which it has not control. Hence, should it default on its debt to its European backers, one major option would be to defect from the Eurozone and re-establish its national currency. There will be pain involved but it would allow Greece to reorganise its finances in more independent, if austere terms. It has enough investment to ensure that even with defection it will not sink (consider that tourism constitutes 20 percent of the Greek economy and its limited niche export markets could actually be favoured by such a move). That in turn might encourage others, particularly the other members of the so-called “Club Med,” to follow suit, which could well spell the end of the Eurozone (especially when considering that a Tory victory in the UK will mean an end  of talk of its ever joining and that Turkish incorporation into the EU could set the stage for an even bigger Greek-type scenario). Thus the Greek bail-out is not so much about Greece as it is about protecting the Eurozone as a currency market.

Which means that the strikes are going to continue, at an increased pace and on a potentially broader scale. In the face of elite indifference to their plight, it is the only means of defense for most Greeks. They have just been told that the public sector will take a 25 percent wage cut on top of a ten percent cut six months ago, then have wages frozen for three years. Imagine if that happened in NZ. Do you think that even the placid Kiwi public worker would take that lying down when s/he had no part in the deficit debacle? The retirement age will also rise while pension benefits will be cut. Although most people appear to accept the former, the latter is a major source of aggravation because as I mentioned before, there is little to no private sector pension plans. Prices of public utilities are set to rise and there is talk of privatising the bulk of the health system (which already is a two-tier system in which private health providers are used by the wealthy). All of which is to say that the burden of sacrifice will be shouldered by those who had nothing to do with creating the crisis in the first place. In fact, although improvements in tax enforcement are mentioned, that remains to be seen, and nowhere has it been mentioned that politicians will take a wage cut or corporations will be required to offer non-wage employment benefits in order to off-set cutbacks in public benefit programs while encouraging labour migration to the private sector. 

Which makes me think that the recently announced IMF/ECB Greek rescue package is more cosmetic than substantive and could well provoke a public backlash that could provoke renewed military interest in internal security. That, indeed, would be a disaster.

Note: As always, my observations on Greece are indebted to the insight of my partner as much as my own. I will take blame for any errors.

PS: I have been thinking of writing a post about our brushes with petty crime and come curious Greek mores, but do not want to turn this into a travelogue.  I shall try to integrate any such thoughts into a larger discussion of more serious subjects.

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Current events

I was reluctant to post while I had the chance on ANZAC day, since there was such a good debate going on, and now I’ve (temporarily) run out of time again. So just a few quick observations.

  • Phil Goff’s one-two punch on the top tax rate and Auckland governance is solid, and both are good orthodox Labour positions for him to take. But it’s more of the same: lacking verve and failing to get cut-through as a consequence. I mean to post on the positioning of the taxation pledge at some stage, but in case I don’t get to: this is a good opportunity for Goff to demonstrate compromise as well as differentiate himself, by coupling a reimplementation of the top rate with an increase of the threshold.
  • Even without Sunday’s tragic helicopter crash, Goff’s timing was poor in making these two announcements before ANZAC Day. I guess you take the opportunities you can get, but delaying things by a week would have been more useful in my view.
  • As an aside, my mum knew the three late airmen vaguely through Search and Rescue, and confirms the universal sentiment that they were of the very best sort. I’m pleasantly surprised that the crash hasn’t turned into a witchhunt about why we’re still using Vietnam-era hardware; as true as the sentiment might be, we can all do without people thundering “if we’re going to have a military, we owe it to our troops to have it decently-outfitted” under circumstances such as these. Such is the power of ANZAC day, I suppose.
  • On a related point, the discipline with which the military, government, police and media have adopted the Air Force’s framing terminology in this event is remarkable. All four groups are talking about “the Air Force family” and exploiting the metaphor for all it’s worth. Those words are used almost every time one of these people stands in front of a microphone, and in addition the three deceased are “brothers”; Mark Sainsbury reported live last night from the family’s “lounge”, the squad room at Ohakea air base; all four have referred to the Iroquois as being like “your grandfather’s axe” — the reference being that, although it’s very old, when the handle is worn it gets replaced, and when the head is worn it gets replaced, so while it’s his axe in spirit, it actually contains no parts of the original tool and is as good as new in function. On the one hand, this is compelling symbolic stuff: nobody who deviates from this framing can really be said to be showing the proper sort of respect and deference; on the other hand, it’s a bit creepy for everyone to be falling into lockstep behind Defence HQ communications. There are ways of saying these things without using the exact same words, and the constant repetition spooks me. Maybe I’m just sensitive. [Edit: There was a clean sweep for “Air Force family” or something similar in speeches supporting the Prime Minister’s parliamentary motion of condolence. No shock there, I suppose.]
  • On a somewhat lighter note, Councillor Tony Jack has picked the wrong district council to put a motion banning macrons in council materials. This is the Kāpiti Coast District Council, who moved to put the macrons into Paekākāriki and ÅŒtaki only a month ago. Jack’s motion was voted down, at which point he predictably declared that PC had gone mad. Bless. Of course, the Stuff article doesn’t contain the macrons, so I guess he wins as far as that goes.
  • Tim Watkin at Pundit continues to write excellent sense and ask smart questions about race relations in Aotearoa New Zealand. I think the emphasis in Tim’s piece is just right — there is a legitimate claim to indigeneity for non-Māori, but it’s not so obvious as Trevor Mallard’s “I was born in Wainuiomata”, and there’s a lot to work out before such definitions can be settled upoin comfortably. I’m all for having this discussion. I particularly like the ornithological allegory drawn by commenter “william blake” — we are all PÅ«keko!
  • Also on a lighter note, a (very) atheist friend whose six year-old daughter has chosen to go to Bible study classes recently asked him if, because Jesus had risen from the dead, that meant he was a zombie. It apparently took every ounce of his parental commitment to letting his girl make up her own mind to explain the origins of zombie stories, how myths come about, etc. rather than just saying, yes, Jesus is a zombie. Good on him — not sure I would have had the fortitude.
  • Speaking of things biblical, and of belonging, Joanna Newsom has a new album out, and here’s the first single — about tilling one’s own bit of the Garden of Eden:

Ok, so not so brief after all. Discuss. I’ll dive back in as I can. You can treat this as an open thread as well: post what you want to talk about.

L

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They have to want it as much as you do.*

I spoke with an old Pentagon friend today (a person with whom I shared strategic planning duties in a specific area of concern, and who went on to far greater things than me), relating to him my early observations about Greece in crisis. I mentioned that the Greeks, who have a public sector that dwarfs the private sector, in which the public sector average wage is far above that of the private sector, have a huge sense of collective entitlement and natural rights. For example, university students (as public entitles) are currently demonstrating daily against proposed cuts in their free lunch and bus pass benefits, but not at the university. Instead, they disrupt downtown traffic. Tomorrow the seafarers, bus drivers and railway workers go on a 12 hour strike to protest wage freezes or labour market infringement  (the train and bus workers are public servants facing wage freezes and the seafarers are striking to protest non-EU ships being allowed berthing rights in Greek ports. Their combined walkout will paralyze the transportation network for 8 hours ). 

But media coverage of the issues is somewhat odd. Rather than look inward, the popular press is full of anti-German rants because the Germans will determine the conditions of the Greek debt bailout (which only delays the inevitable default), and the conditions imposed by the Germans (as majority holders of Greek debt) are considered to be the reasons why Greek workers will not get their entitled, perfunctory raises.  All the while  life goes on–the cafes and supermarkets are full, people crowd the trains, there are few demonstrations outside downtown. People do not appear to connect the impending default to their lifestyle.

Usually wages are tied to productivity, which means that if the public service is well paid it is also efficient (such as in Singapore). But in Greece it is not. From what I have observed and what my Greek interlocutors have told me, nothing gets done or it is waste of time to demand action. For example, on Saturday an illegal gypsy market spung up on the street outside our apartment building. It closed the street to vehicular traffic and vendors camped out on the apartment footsteps. The neighbours shut the front entrance doorway, which is usually propped open, out of fear of robbery. I asked my landlord if that was commonplace and she said that yes, although illegal the gyspy market had run for years because neighbours had zero success in complaining and bribes may have been paid for the authorities to look the other way (which indeed they did–I saw not a single cop during the entire afternoon the market was running).  In other words, Greek public service is as much a hindrance as a help to civil society, hence the proliferation of grey and black market activity. The curious thing is that this situation is tolerated by both of the dominant Greek parties, respectively left and right centre as they may be, because public sector employment and benefits is a common source of patronage and clientilism. Neither one wants to upset that apple cart (even if the latter is foreign debt-bought and effectively owned). 

Mind you, not that all Greek public services stink. When compared to the Auckland raillway system, for example, the Athenian Metro is stellar. There are few delays on the six inter city lines, complete integration with buses and suburban rail lines, and close integration with ferry and airport schedules. The only visible problem, from my non-expert viewpoint, is that there appears to be way too many people (or too little, depending on the station) doing nothing in pursuit of this goal. Then again, I tried the Henderson-Auckland (before and after Britomart) route for years, before and after it was privatised,  and the public-controlled Athens Metro system has it beat by a country mile.

Not that the Greek private sector is a beacon of innovation and entrepeneurship. To the contrary, it is mostly low skilled small holdings with no growth or technological ambition (think butchers, cosmetic vendors and locksmiths), and the political-economic elite (they are the same, crossing familial ties in many instances) in this rigid two party system have no interest in promoting the sort of capitalist ambition that would erode their joint lock on power. Cuba is similar in this regard, because in both cases oligarchic control supplants popular innovation as the motor of progress and majority consent is bought with public sector employment (not that I am drawing a direct line between the two regimes as a whole).

Which is to say, Greek economic backwardness is cultural, contrived and perpetuated by the Greek status quo. The elite see no need to change because deficit spending is a double edged sword, as many US banks found out to their dismay. Deficit-laden countries intimately locked into the European financial system such as Greece will not be allowed to collapse  becuase if they do the financial run is on given that Spain, Portugal and Ireland are all in the same predicament–too much debt, too little ability to pay within IMF/ECB guidlelines.  Hence, Greece may default, but it will not be allowed to financially collapse if for no other reasons than that the repercussions would be catastrophic on the European banking system itself.

Which is where my fomer Pentagon friend comes in. I noted to him that the problem with EU expansion is that the leading EU economies, France and Germany, viewed EU monetary expansion into Southern and Eastern Europe as a development project in which the lagging peripheral economies would be modernised by virtue of their connection with the European core (first via labour-intensive investment, then by value added industrial growth). The Euro giants emulated the US when it engaged Latin America in the 1960s and 1970s under the rubric of modernisation theory: just expose the backward masses to a little capitalist entrepenurialism and all will eventually be right.

Err…wrong.  As my friend noted, the locals have to want the change as much as we/you (external agents) do. And that is a cultural issue more than anything else. 

Developmentalist views such as that of the EU and US ignore the cultural component of investment climates. National preferences are different, cultural mores vary, and collective notions of rights and entitlements are not transferable across borders. The Germans and French may have thought that lending money to Greece to fund the Olympics would promote its modernisation, but like the Yanks in Latin America, they failed to understand that Greek culture–what it means to be Greek–supercedes any IMF/European Central Bank prescriptions. Hosting the Olympics was temporary; to be Greek is forever, and that is not reducible to a current deficit repayment schedule. To the contrary. It is reducible to notions of rights and entitlements crafted over milleniua and mytholoigised as such. That bottom line is not within an IMF  or European Central Bank purview.

Which is why my friend Ray’s point is well taken: an external actor can only help as much as the locals want to help themselves. There is no point in offering assistance and prescriptions if the locals do not see the need to change. Absent a local consensus on the need for change (which can be influenced by externally driven media manipulation but which ultimately has to resonate in the hearts  of the citiznery) better then  for external actors to cut bait than to engage in futile hope that the local conditions will change.

In fact, the opposite may be true: the less a country is propped up by external actors and the more it is forced to look inside itself for solutions, then the more it may eventually address the root causes of its backwardness, decline or stagnation (New Zealand could well be a case in point). In any event, only after internal failure is acknowledged that external assistance will make a difference in Greece or elsewhere, and that difference is not material but attitudinal.

 According to my buddy, that fact is as true for Greece as it is for Somalia, Irag and Afghanistan, and in the latter instances, the stakes are arguably much greater. I disagree with his summary assessment as it applies to Afghanistan (as I believe that there is more at stake than local self-realisation), but cannot help but recognise the truth in his words. At the end of the day in this age, no matter the degree of previous exploitation and subserviance, the root problem of backwardness lies within. Or to put it in my friend’s terms, “if the locals do not want to do it, it aint gonna happen.”

There is truth in that view and no amount of good intentioned external help will resolve the fundamental issue.

*Update: For a jaded by humorous view of Greek politics check this out.

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Niwa Knobs.

 

***THIS POST HAS BEEN UPDATED ON APRIL 17 TO ACCOUNT FOR NEW INFORMATION RECEIVED***

Niwa has announced that a contract to upgrade the research vessel RV Tangaroa has been let to a Singaporean company rather than a NZ-based consortium. The EPMU and Labour Party have criticised the move, citing the fact that local jobs were at stake and a chance to up-skill NZ workers was lost. And of course, the flow-on effects of employing NZ workers is obvious, because they will spend their  wages a bit on beer but more on nappies, mortgages, rent and DIY projects. All that is true and reason enough to oppose the Niwa deal, but there is much more to the story. That is because the bottom line boils down to what I shall call a dirty money savings. Here is how it works.

The Niwa chief knob, John Morgan, refused to state what the bids were, but other sources have noted that at $9 million the NZ contractor bid was more than double the $4 million Singaporean bid. Sounds like he got his maths right. Mr. Morgan then went on to say that the Singaporean contractor had a lot of experience and 3000 staff  dedicated to the task as well as many resources to do the upgrade, which he claimed was a complex operation that involved cutting holes in the hull of the ship in order to install a dynamic positioning system (DPS) that holds the ship steady and precise over an undersea target in variable conditions (how he thinks that 3000 people will work on that one job is another question,  as is the complexity of cutting holes in a boat, but I am just quoting from the NZPA article on the decision).

He defended the decision as a cost-savings bonus for the NZ taxpayer, and the Minister for Research, Science and Technology the vainglorious “Dr” Wayne Mapp (Ph.D.s in Law are not usually addressed as Dr.) pontificated that although he was not involved in the decision he supported it because the NZ consortium was not dependent on that contract (presumably that resource-rich Singaporean outfit was) and, quote, “after all we have an FTA with Singapore.” File that one under “another Mapp moronity.”

Here is why the deal is dirty. Unskilled and semi-skilled Singaporean shipyard workers (e.g. stevedores, drivers, loaders, builders and roustabouts)  are paid between SG$10-15 dollars per day. Non-engineer skilled workers (divers, torchmen, pipefitters) may earn double or triple that. They are mostly foreign workers on temporary visas (mainly from Bangladesh, mainland China and India) who cannot bring their families with them and who are housed in containers and squalid dormitories with occupancies of 20-50 men per room and one toilet amongst them (women are not allowed on the docks). They are not allowed to independently organise or collectively bargain. They work 12 hour days and suffer extremely high rates of industrial accidents–over 50 workers died in 2009 from injuries received on the job, and dozens if not hundreds more were crippled by accidents. In the vast majority of cases, seriously injured foreign workers who are unable to return to work are left dependent for months on private charity until their claims for compensation are resolved or are deported once they leave hospital (and often repatriated in any event).

Mr. Morgan is reported as saying that the Singaporean bid, at $30/hour (it is not clear if he is speaking of US, NZ or Singaporean dollars), was half the NZ $60/hour labour costs. But whatever the currency, $30/hour would only apply to supervisory and managerial staff who would not be doing the physical labour involved in installing the DPS system (which would be done by the foreign workers mentioned above). That means that his claims of labour costs savings on which the decision partially rested is either a willful misprepresentation of  the true Singaporean figures or, worse yet, a sign that Niwa did not undertake due dilligence in ascertaining the veracity of the $30/hour figure. In other words, if the latter is true then Niwa got fleeced by the Singaporean contractor, who then pocketed the difference between its real labour costs and the $30/hour figure. If the former is true, the Mr. Morgan needs to be held to account for his miserepresentation.

There is a bigger picture to consider. Singapore is an authoritarian state in which political  party competition and elections are rigged, freedom of speech is restricted and foreign workers are  not covered by the same labour laws as Singaporean citizens. Instruments for foreign worker redress, compensation and mediation are virtually non-existent. The Singaporean lifestyle, so admired by John Key and other acolytes of the Singaporean regime, is based on the gross exploitation of these foreign workers who, after all, build the buildings Singaporeans live and work in, provide the food, transport and maid services they are accustomed to, construct their highways and polish their cars, and staff the hundreds of foreign MNCs the use the country as an operational hub. Foreign workers comprise a quarter of Singapore’s nearly 5 million population, so the economic debt owed to them is great.

That is why the decision is about dirty money savings. Forget the job-related issues in NZ. Niwa’s decision is based on its knowingly countenancing the human rights abuse of a vulnerable group of people in a foreign country. It violates ILO standards, it violates NZ labour law, and it violates nominal notions of decency in doing so. Mrs. Morgan and Mapp may argue that Niwa is saving the NZ taxpayer money, and that it is not responsible for the behavior of foreign contractors, but in doing business with the Singaporean firm it could well wind up with blood on its hands. Put succinctly: the money Niwa saves on the deal comes directly from the sweat and blood of these foreign workers.

None of this would matter if NZ was an authoritarian state unconcerned about human rights and fair labour standards. The problem is, NZ spends a lot of time in international fora banging on about exactly such things. However, this appears to be more a case of  “do as I say, not as I do” because NZ in recent years has seen fit to cozy up to regimes like those of  Singapore, China and a host of Middle Eastern autocracies, in which the very concepts of universal rights and fair labour standards are not only disputed, but rejected out of hand on “cultural difference” grounds. Well, that may be the case because as Lew so nicely put it a while back, “NZ foreign policy is trade,”  but NZ does not have to contribute to the perpetuation of exploitation in foreign cultural contexts, especially if its reputation depends on its rhetorical championing of human rights. That is a matter of choice, and the choice in this instance is clear.

There is such a thing a trading fairly and doing business in an ethical way in which the bottom line is not just about money, but about human decency as well.  A restrained rate of profit or reduced savings on cost are often a better guarantee of long term investment than short term profit maximisation or miserliness,  and an interest in foreign worker conditions can contribute to the betterment of international business practices. But the choice here has been to save costs rather than stand on principle and improve by example. For a country that prides itself on its international status based upon fairness principles, decisions like this one give the lie to the cheap talk in international confabs.

All of which is to say–shame on both of you, Misters Mapp and Morgan. But then again, we would not expect otherwise.

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Unfettered free trade is like having unprotected sex with strangers.

Like a sexual addict, New Zealand has a dark obsession with free trade. The obsession may speak to a larger issue rather than the value of trade per se. That issue may be the pathology of NZ political-economic elites fantasising about trade benefits rather than the real benefits to their constituents.

 Whatever the case, the number of free trade agreements (FTAs) NZ has negotiated is high for a small democracy (9–bilaterals with the PRC, Australia,  Malaysia, Thailand,  Singapore and South Korea, multilaterals with the Transpacific Partnership (P4) with Brunei, Chile and Singapore, and with ASEAN/Australia, as well as a regional agreement with the Gulf Cooperation Council (GCC) grouping several Arabian peninsular states). It has negotiations underway with India and Hong Kong  (bilaterally), on the Anti-Counterfeiting Trade Agreement (ACTA),  and with Australia, the US, Vietnam and Peru on joining the P4 in an expanded TPP. Further FTA negotiations with ASEAN and other partners are ongoing. NZ is an ardent champion of the virtues of free (unprotected) trade and open commercial borders in international fora such as the WTO.  In other words, if this were a sex survey, New Zealand is  promiscuous in its  approach to free trade.

To further the analogy, the pursuit of free trade under the National government is the macroeconomic equivalent of cruising for sex. It focuses on the immediate satisfaction of new market penetration and commodity exchange rather than on the potentially negative consequences of the liaison. Phrased politely as foreign market opening and reciprocal investment, the thrust of NZ’s FTAs gives much less regard to the “after-entry” (or “morning after”) consequences of sequentially engaging multiple partners with different strategic objectives born of varying cultural backgrounds, governance, resource bases and historical legacies. There is, in a word, a lack of prophylaxis when it comes to NZ’s approach to free trade.

FTAs are essentially tariff reduction, currency, investment and border control agreements. They are commonly referred to as “market opening” pacts. The focus is on the conditions and terms of entry. Although consensual, oftentimes these are largely determined by the interests of larger, dominant partners, particularly in bilateral agreements. But multilateral FTAs are like group sex–there is more room for individual manuever within the general rules of engagement, but the group dynamic may force the weaker partners to submit to advances that they may normally prefer to avoid (to bring things back to the subject, such as on issues like unorganised child or wimin’s labour, or open pit mining in conservation zones).

In either event, less concern  is placed in the rush to secure new FTAs on the environmental, labor market, gender, immigration, indigenous and security implications of trade opening. These are considered to be secondary consequences that are best dealt with based upon local market conditions.  It is the terms of the initial engagement that matters, not the morning-after effects.

This is what makes the indiscriminate New Zealand approach to free trade all the more alarming. Of  its new partners, many are authoritarian and most are bigger in size, with larger and more variegated economies of scale. The terms of NZ’s engagement with such partners, while legally equal, often leave it in a subordinate position where it is forced to accept practices that are unacceptable or contrary to community standards at home. In fact, if the analogy holds, then many of the NZ’s trade partners should have name suppression, if only becauseof their authoritarianism and systematic abuse of human rights at home.

Nor is NZs penetration of foreign markets pain-free. As Fonterra has learned, after-entry issues in foreign markets such as product quality control are not inconsequential. In fact, as far as the brand is concerned, the after-entry consequences of rapid market opening can often be devastating.

It is not just the brand that can be damaged by the rush to market opening.  Scholars have already begun to point to the negative consequences for the environment, indigenious groups, and labour rights when FTAs are negotiated without regard to after-entry consequences. I am currently working on a book chapter that highlights the security implications of the above-mentioned expanded TPP, to include its criminal and military-strategic and intelligence flow-on effects. 

For NZ, the longer term situation is not good. For example, even though NZ has opened its borders to increased aviation and martime-borne tourism, it has not increased the number of MAF or Customs dog-handlers to handle the increased volumes of tourist traffic in places such as Rotorua, Tauranga and Opua (all of the environmental security and drugs searchers have to be driven from Auckland) even though the volume of imported commercial goods has increased exponentiallyas well. This leaves gaping holes in bio-security as well as in narcotics interdiction in commercial ports of entry (think of an increase of thousands of containers worth of commercial goods entering NZ per year without the ability to scrutinise even a quarter of them). Nor have Police, Immigration or Customs resources been increased with an eye towards countering organized crime using newly opened trade borders as conduits for a bit of market penetration of their own (note recent reports of Chinese students serving as drug couriers–the PRC is the main source of the precursor chemicals for the manufacture of P). In addition, lax financial regulations and corporate registration laws contribute to making NZ an increasingly attractive destination  for money laundering ventures and business fronts originating in Asia. Again, no thought has apprently been given to these types of issues when FTAs are negotiated. 

In spite of the clear dangers of unprotected free trade, here defined as FTAs without negotiated after-entry provisos, the National government, Labour, and most minor parties believe in the mantra that the rising tide of free trade raises all economic boats. But, to continue the physical analogy, such an unprotected surge of free trade also brings with it potentially unhealthy (some might say deviant)  after-entry consequences when it comes to the socio-economic fabric of NZ society. That is why prophylaxis is necessary at the point of negotiations, not later.

John Key and Tim Groser may think of themselves as “players” on the world trading scene,  but they may be cruising for commercial love in all the wrong places, at least in terms of their choice of partners and neglect of morning- after effects.  Ill-conceived and lacking in consideration of longer-term impact beyond short-term aggregate growth, such an approach downplays overall societal welfare in favour of commerical and political elite satisfaction.  That may be exciting for the latter, but like victims of a night on the town gone wrong, it has the potential to leave the NZ political economy battered, brusied, postrate, supine and hopeless in the face of the manipulations of trade partners who seemed nice at first and promised many things, but whose subsequent behaviour proved less noble.

PS: remember, this post is about the potential negative effects of free trade. I realise that the cruising/unprotected sex analogy is a bit over the top, but I could not resist given how postively orgasmic the Key government waxes about free trade (sorry!).

PPS: In Wellington now. Went from 26 degrees and 99% humidity in AK to horizontal drizzle and wind at 15 degrees. Not quite dressed for it coming from my SE Asian redoubt. Looking forward to meeting Lew and (hopefully) seeing Anita again.