Friday, December 7, 2007

Bali is bullshit - let consumers drive the change

It is almost impossible not to be cynical about the UN climate change conference currently underway in Bali. Some 10,000 delegates creating 430,000 tonnes of emissions have descended on the resort island to be involved in discussions on a post-Kyoto regime for managing climate change. So far there is no sign that this vast taxpayer funded junket to some fine beaches will produce anything other than yet more hot air.

According to some perspectives (Der Spiegel) the US is now "isolated" because of the UNFCCCs Annex I nations it alone has not ratified the deal reached in Kyoto this time ten years ago. Such a headline is reminiscent of The (London) Times reporting back in the 19th Century "Fog in Channel, Continent cut off". Excluding the European Union, Russia and their satellites Annex 1 only includes four nations: Japan, Canada, Australia and New Zealand. It does not include China, India, South East Asia, North Asia or South America.

And when it comes down to emissions controls only two nations basically matter: the United States and China, for between them they both control half of the world's CO2 emissions. Add in India with 10%, Taiwan, Korea, Japan, Malaysia, Singapore, Thailand, the Philippines, Australia, Chile, Mexico etc and one rapidly comes to 75%. In other words while Europe has made the most noise about it, climate change is not a European issue at all. Its an Asia-Pacific one. It should not be the European Union that dominates the climate change debate but ASEAN.

The big problem is the fallacy of "developing nation" status. Singapore may have a PPP-adjusted income per capita greater than Australia and a population greater than New Zealand's but it clings on to the post-war mantra that it is a "developing nation". Hong Kong, Korea and Taiwan are in exactly the same mindset. China, which is now on track to have the largest economy in the world and by some measures has a lower poverty rate (8%) than the United States (12%) similarly claims it is "developing".

These nations argue that they should be allowed to develop to European levels of wealth before having to assume European responsibilities. But compared to some European nations they already have. And when is enough enough? Do the nations have to be the richest in the world before they stop being "developing" nations or just in the top 50? The fact is all nations are developing nations, its just some are developing faster than others.

Some New Zealanders with their eyes fixated on Europe (especially the brits) like to imagine that little old New Zealand can "lead the world" in some way on climate change. At present the Government is certainly leading ASEAN in its efforts to single-handedly incorporate carbon costs into its economy. No other ASEAN nation is planning to incorporate carbon costs into every facet of its economy as New Zealand. Even Australia - the hero nation of Bali - has no interest in exposing its agricultural sector, its forestry sector or its motorists to the cost of carbon, and for good reason.

The reason is that the "cost of carbon" at the moment really means the price of European Union ETS units. That is because there is no other serious level of demand for carbon units, because no other jurisdiction has a legal obligation to buy them. Sure, some people will buy carbon credits to make themselves look good, but no-one will put them in jail if they don't have carbon credits to cover their obligations. Thus the world price for carbon is the European price and the European price is determined entirely by how the European Union allocates its obligations.

New Zealand will be the only nation in ASEAN which has essentially tied its economy to the European Union - with none of the benefits this usually implies. Now the big question is will the rest of ASEAN look at this with eyes weeping with admiration or will the predominant emotion be one of mirth? Will our sucking up to Europe really cause the scales to fall from Singaporese eyes? will they strike their foreheads realising their failure to address climate change or will they be laughing down their sleeves?

For the fact is that the Kyoto Protocol was not the saviour of the world. It was a nasty little European treaty designed to effect a transfer of wealth from the United States to the former Soviet Union. Oddly enough the US declined. There is no reason why containing emissions should be fixated on a single year (1990) other than it happens to suit some nations (Britain and Germany) and harm others (New Zealand in particular). There has been no emissions reduction observable from the cap-and-trade mechanism of the Kyoto Protocol and, thanks to the US not signing and the over-supply of AAUs to Russia and the Ukraine, there won't ever be any either.

And worse the omissions of the Protocol have led directly to the devastation of rain forests for biofuel plantation crops. Because "developing" nations are not included in the provisions and Annex 1 nations gain a benefit from importing biofuels without a carbon liability developing nations have seen an opportunity. Result: deforestation one of the single largest climate change impacts (22%) has accelerated. Delegates to the Bali conference who want to observe this first hand could do so out of the air-miles they accumulate by making a side trip to Sumatra to watch deforestation as it occurs.

To be brutally honest I think that Kyoto has done more harm to the planet than good. It has brought out the worst motivations in negotiators as each has strived for some advantage over others in the negotiating process. The result has been unfair and distortionary. Certainly in New Zealand Kyoto-inspired climate change policies have led to more deforestation than pre-Kyoto policies which simply provided a tax credit for planting forests.

To my mind the nations of the world could do far better to develop climate programmes unilaterally. Britain should not be able to sell the benefit of switching from coal to nuclear and natural gas any more than New Zealand should be able to sell the benefit of growing trees. Rather than focus on the delta over short periods the world needs to focus on carbon intensity over long periods. It is ludicrous that Germany should be seen as a climate change hero for increasing its electricity from renewables to 36% by 2020 and New Zealand treated as leper because it can't improve on getting 66% of its energy from renewables as easily. Equally New Zealand's emissions from livestock management is world leading but we can't improve it that quickly compared to other nations.

Ultimately the only real way carbon costs can be incorporated into the global economy is when consumers accept them. Instead of making carbon costs a negative they should be a brand distinction. The United Nations via the International Standards Organisation should simply create a labelling scheme for all goods based on average carbon intensity. To use the brand a firm would simply have to submit to a standard audit process. Goods or services would get Three Blue Marbles for Excellent (top 1%), Two for Good (top 16%) and one for Average (middle 66%). This would mean the bottom 17% would be under constant competitive pressure to improve their performance. Standards would be re-assessed every four years.

To date all Kyoto achieved was to let "developing" nations off the hook. That and provide a lot of free lunches to a lot of diplomats. The time for free lunches is over. All nations are "developing" and all nations have a responsibility to maintaining the life sustaining properties of our planet but diplomats have simply been doing what diplomats do best: eating and drinking up large; talking in blandishments and stalling. The time for such bullshit is over. Its time for the market to what it does best. Sell things and compete.

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Thursday, November 29, 2007

Altogether now - blame Hel-elen!

Some years ago now Southpark had an episode where, because things kept going wrong at home the town/school authorities decided they needed a scapegoat. They picked Canada. There was a long song and dance routine which proposed "blame Can-a-da" as the answer to all woes. In typical fashion Southpark then depicted a major war by the United States against its long-suffering northern neighbour.

Comedy, I thought, until I took a gander at the Australian Labor Party's campaign website recently {}. Basically it was a case of "Blame How-a-ward!" for just about anything! Mortage making your eyes water? "Blame How-a-ward!". Groceries getting expensive? "Blame How-a-ward!" Cost too much to fill the car "Blame How-a-ward!" What about the drought ? Yup, you got it! "Blame How-a-ward!"

Now, I have long admired Australian politicians. I loved Hawke's blokey, matey sentimental nonsense. I liked the snake-like Keating as he spat vitriol and collected French clocks like a snob. Maybe they were more amusing at a distance. But John Howard has always reminded me of a turd. There was something dank and unpleasant just in the look of the man and his politically nasty and adroit manner didn't seem to reflect any of the qualities one admires of Australians.

But pinning the blame for outrageous land prices, a global shortfall in wheat production and the investment policies of OPEC nations on John Howard personally, just seems to be a tad unfair. And of course it is - but that's the point. Those clever Australian Labor Party strategists have borrowed from military thinking and realised that a good offence is better than good defence.

On the face of it John Howard had nothing to fear. He had delivered a thundering economy and tax cuts. New Zealanders, sick of paying huge taxes for dwindling services, are packing their bags to become a part of it in unprecedented numbers {}. But Howard was still exposed. His labour relations policy made the average "Aussie battler" nervous and Australians (like almost everyone else in the world outside of Texas) felt being embroiled in Iraq had been something of a Mistake.

So Labor played on fear and irritation. Fear of what might happen (Peter Costello and even more anti-labour legislation) and irritation with the niggling things that even in the "Lucky Country" anger people: sky high mortgages; and the rising cost of living. And they bombarded the public with it like a tennis ball machine on overdrive. Because it is very glib and easy to blame people and very tiresome and difficult for them to explain why they are not to blame. In a two second soundbite "Blame How-a-ward!" is easy. Explaining high global food prices is impossible.

Given this object lesson in winning elections right next door it is hard to see how National can muck it up here in 2008. Its easy! Altogether now "Blame Hel-elen!". And Helen has even more to be defensive about than John Howard. First there are the common ones:

Housing (much more) unaffordable ? "Blame Hel-elen!"
Grocery prices rising too fast? "Blame Hel-elen!"
Gas costs (artificially) too much ? "Blame Hel-elen!"

Then you can get into the kiwi ones.

Murderers let loose on the streets? "Blame Hel-elen!"
Doctors leaving in droves? "Blame Hel-elen!"
Mothers turfed out of hospitals? "Blame Hel-elen!"
Parents convicted for spanking kids? "Blame Hel-elen!"
Schools closing/short of cash? "Blame Hel-elen!"
Call that a tax cut? "Blame Hel-elen!"
No progress on Maori greivances?"Blame Hel-elen!"
Anti business legislation?"Blame Hel-elen!"

Man, the avalanche of blame waiting to be let loose on the Prime Minister's head is simply awesome. Some of it may even be deserved! But whether it is, or isn't, won't make any difference. The main point is that it will be easy to fire accusations and very hard to deflect them.

Now the Prime Minister isn't stupid. She knows what's coming. She can read. So what will she do? My guess is more Madagascar Monkey raids. Thats where you whip in and throw poo at the leader of the opposition when he isn't expecting it. The objective is to make him appear an untrustworthy slimeball.

It worked well against Don Brash who, if Nicky Hager is correct, was basically shown to be one. Certainly his extra-marital affair and the sudden amnesia over contact with a bunch of radically sexist fundamentalists made it look that way. But in my view Brash was an easy target. Everything he did alienated women. The essential swinging female vote that Bill Clinton charmed so well, found very little in Don-errrr-Brash, to like. John Key is another story. He's younger, he's better looking, he's a family man, and he's rich. Women like that.

Key's biggest failing however is that, like his deputy Bill English, he can occassionally be a goofus. The Coldplay disaster is poo that sticks. Being caught on tape claiming to lead the Labour Party was even worse than English's brilliant concession of defeat when he told Parliament before the last election Labour wouldn't get a fourth term instead of a third. To look confident National cannot afford to look so stupid. Labour will almost certainly use every stupid thing the National caucus ever said in 2008 and it won't need a bigger pile of poo than the one National MPs have been providing it to date.

What Key has to do is make like Kevin Rudd and play the steadfastly smiling conductor to a choir singing "Blame Hel-elen!" while telling everyone that the solutions are very simple and making sure he doesn't get drawn into any details. The more Labour throws shit the more it will end up looking grubby and unpleasant. Come to think of it, it sounds almost exactly like the way David Lange won office in 1984!

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Friday, November 23, 2007

Bah Humbug 2007!

The various city Santa parades have been and gone but the holly and plastic snow has yet to appear in retailers windows. Cheesy reindeer and red-suited Santa window displays are nowhere to be seen. The sound of sleighbells or christmas crooning is still not to be heard in the streets. New Zealand is in the grip of a Grinch and the only obvious emotions on people's faces are fatigue and irritation.

The fact is New Zealanders can't afford Christmas. Credit card debt now stands at a record $4.9 billion as of October 2007 while the base lending rates are around 13%. True the slumping US dollar means that consumer durables have never been so cheap but retail outlets have been fighting a vicious credit driven market share war for these customers all year. Retailers have wrung the stone dry and consumers have nothing left to give.

With the resourceful hypocrisy of advertisers everywhere I suspect 2007 will be a 'spiritual' christmas. Marketers will have to lay off the hard sell and push for the small and meaningful, with as much reference to stories of poor people giving as possible. Soulful songs and even religious overtones are the go for 2007. The Hard beat, hard sell jingle bells of previous years will spark nothing but resentment and avoidance in retail outlets this season.

But the curious thing is the anti-merchandise sentiment seems to be equally strong among both rich and poor at the moment. People are sick of stuff. They are sick of being told to buy and they are sick of the clutter buying things brings with it. Having gorged on credit for so long people are gradually losing their appetite for meaningless merchandise as it becomes less affordable.

An amusing parallel arises here. This was precisely the situation in the Roman Empire which led to the widespread adoption of St Paul's Christianity. Tired of sex, violence and excess, the Romans - and especially the Greeks - found the humble sanctity of the Christian message a refreshing change.

But the big question is whether this anti-material kick will last or is simply symptomatic of an economic down-turn. My suspicion is that it will last and is not just due to a slow-down. Is a cultural transition.

For despite reaping record farm profits due to the global grain shortage New Zealand is facing a slow-down. You cannot run interest rates over 12.5% without a crunch coming sooner or later. Meanwhile The global housing pop is beginning reducing demand for property. Personally I would not be too surprised to see a reversal of the holiday home market over the next few years and foreign owners liquidate their unused New Zealand assets when they fail to meet the rosy growth projections their purchase was predicated on.

Baby-boomers provide the west with its cultural lead. In the 80s they went mad on champagne and dodgy bonds. In the 90s it was tech stocks and in the 00s it was housing. Most boomers have done pretty well for themselves - certainly better than other generations have or may expect to do. Now as the housing bubble begins to pop I suspect boomers are bedding themselves in for an economic winter. During this period I suspect they will start to get all spiritual on us - from the comfort of their tidy nesteggs of course.

But New Zealand is not a particularly christian nation. In the past five years those professing to be Christian has slipped from 60% to 55% with only the Catholics growing their flock. But if one scratches the surface of this the story becomes a bit different. New Zealanders have never been particularly good at accepting spiritual authorities and have a tendency to go their own way. From the fundamentalist cheese of the self-proclaimed Bishop Brian Tamaki to Christian rationalist chalk of Lloyd Geering it would be hard to discern much in common with these different brands of christianity other than their reference back to events between Nazareth and Bethlehem 2,000-odd years ago. All invoke christian motifs but variation in philosophy between Christians in New Zealand is far greater than in European nations with long established churches.

No, if New Zealand has any common set of beliefs, they turn around environmentalism. More than 80% of New Zealanders say they are concerned about the impact of humankind on the environment. As with christianity these beliefs vary enormously from the practical business-like values of farmers to the theoretical idealism of suburban politicians but there is at least a common view that the environment must be preserved, and that we are not doing a particularly good job of that.

Perhaps then, what I am predicting is the rise of more low-key "green Christmas". This will emphasise charity - particularly to third world causes, and enjoying New Zealand's outdoors. The essense will be simplicity, freedom, family and nature. There will be a greater role for businesses and religious organisations which can refine their message and deliver goods and services which meet these needs. I suspect the simple and natural will end up being humungously expensive as the middle class inevitably engages in its tragic little competitions but at least those who genuinely are poorly off will not feel too far out of place.

My only real question is, when will councils stop being so up-tight about letting people have fires on the beach? Its one of the great symbols of New Zealand freedom and yet everywhere you go the miserable sods have outlawed it!

The Government may have nothing to do with such restrictions but it is the sense of being enmeshed in red tape which is another pressure that is Grinching out New Zealanders at the moment. The Government, led by self-styled Queen Jadis, is presiding over the beginning of an economic winter and is doing so by locking down everything that moves. Recent surveys show the public is chafing against these restrictions and wants to return to a world without overpaid public servants telling them what to do every time they turn around.

People, rich and poor, are tired of being told what to do. And the problem for the Labour Party is they can't help doing it. As a reforming party Labour sees it as its mission to transform New Zealand into something it has shaped. The tendency of Ministesr to leap in and try and micro-manage is just another example of this in-built sense of mission. When money is abundant (as it has been or as it was pre-1987) most people are too busy getting rich to worry about the nonsense being spouted in Wellington. But as the interest chocker-chain tightens people start looking for someone to bite - and that will be whoever holds the lead.

For National in 2008 the answer will be simple. Sell simplicity, freedom, family and nature and they can't go wrong. Don't get enmeshed in deep policy, just keep telling everyone things should be simpler and smile a lot. Be seen in nature and talk about respecting it. Talk about simple freedoms everyone can relate to and talk about family. Following such a campaign should make getting elected a walk in the park. It will probably all be lies but these are the things people want to hear right now.

The end of the golden weather for New Zealand is definitely in sight. Thus we need to think about strategies for what is likely to be a long cool autumn.

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Friday, November 16, 2007

Dead Real

Without any doubt the most watched reality television programme in New Zealand today is "Sensing Murder", the Ninox Television version of the Danish Nordisk Films series "Sensing Murder".

The programme sets a group of pre-qualified psychics against unsolved New Zealand murder cases. In most cases the psychics are given nothing more to work with than a picture of the victim which in a good many cases they don't even look at until they have already stated the victims name, age at death, description and some aspects of their character.

The most important person in the whole series is forensic psychologist Nigel Latta who witnessed the whole process as an independent observer and has posted his views on his Goldfish Wisdom website. While the format of the programme (with its over-the-top music and eerie graphics) might otherwise suggest a load of drivel this additional level of scrutiny endows the programme with a serious level of credibility.

In one of the most recent programmes Nigel said something which I completely agree with. He said "this is not soft stuff, this is hard science" and drew a parallel with the mysterious nature of quantum entanglement.

For some comparing the showmanship of stage psychics with replicable physical phenomena will sound like a complete travesty. The former is not a controlled experiment, is not repeatable and the only theoretical framework sounds like fairies at the bottom of the garden. By contrast entanglement is so predictable that it is beginning to leave the science lab and enter the province of engineering.

But this is where the real problem is not with fairies vs reality but the limits of the philosophy of science. The fundamental problem with science is that unlike life it demands repeatability. Life simply isn't repeatable. You can send the same lovers to the same place in the same weather with the same picnic basket and one day they will have a fabulous time and another come home bitching. You cannot, as the Greek Philosopher Heraclitus observed, step into the same river twice. Science works by pinning down all the variables and trying to determine the correlations between those left free. It "interrogates nature" or in the case of some parts of biology to do with vivasection frankly tortures the information out of nature. The problem is, not surprisingly, what if nature doesn't want to be interrogated?

To my mind it must always come back to two things. Phenomena and theory. As Thomas Kuhn pointed out in "The Structure of Scientific Revolutions" science has tended to be governed by a basic doctrine. The doctrine seeks out reinforcing evidence and discounts equivocal or dissenting evidence. But gradually over time the evidence of phenomena outside the doctrine builds until a revolution occurs and a new theory/doctrine is promoted. There is no recognition of psychic phenomena in the doctrine of classic science. All evidence is dismissed as "unscientific" in line with Kuhn's predictions.

However there are some scientists who believe there are real phenomena which current scientific doctrine dismisses which should be more properly investigated. Rupert Sheldrake has long contended that biological systems demonstrate a capacity for adaption and learning which exceeds any conventional explanation. He has proposed "seven experiments which would change the world" which rely heavily on the proposition that many phenomena defy statistical prediction of outcomes.

And it is to statistics that the science of psychic phenomena must ultimately turn. What is the probablity that an individual given a photograph face down can correctly determine the name, age at death, and characteristics of a murder victim. The problem is that such a question dissappears into the fuzz of confidence intervals and sample sizes. But one's naive response is that when an experiment is repeated over and over again and the phenomena does indeed defy statistical prediction one must be forced to recognise that the phenomena is real and should be accounted for.

One theory which possibly provides some answers is string theory. String theory proposes that the universe composed in ten or eleven dimensions and in this way mathematically solves the long standing disjunction in physics between quantum mechanics and general relativity. But the idea that the Universe really does have more dimensions than we percieve with our stongest five senses is in some ways unnerving. Fortunately some writers have taken the time to provide insights into how higher dimensions may "look". Edwin Abbott Abbott wrote Flatland in 1884 as a combination of social satire and explanation of higher dimensions. In it he describes a world of two dimensional shapes who percieve only area. When one of these encounters a three dimensional being, a sphere, it appears only as a circle that grows and then shrinks. Exploring this concept further mathematician Ian Stewart has published Flatterland in which the descendants of Edwin Abbotts fictional two-dimensional family explore the world of modern physics, eventually ending up with String Theory.

All of this suggests to me that "Sensing Murder" should be taken seriously. For many this will come as a challenge. As one of my colleagues said regarding the show "I don't want it to be true, I was quite happy thinking that when you come to the end of your life, that's it, all over".

I used to share this view as well. Let's face it the idea of anything else is rather scary. But the fact is that what happens doesn't depend on what we hope or fear will happen. What happens depends on the rules of the universe and we don't know what they all are yet.

One possibility I have toyed with is that consciousness is actually a dimension. From a diagram in Flatterland this would show a dimensional line of consciousness transcending the four dimensions of space-time. In other words consciousness can be independent of space-time. This would allow for prophesy as well as intersections with past consciousnesses. This would mean the sensing murder psychics are tapping into the past rather than dealing with the present.

However it is important to listen to the psychics themselves, and here those who "see dead people" tend to be remarkably consistent. All speak of encountering 'spirit', all speak of experiences of 'the other side' and many have encountered reincarnation. Another who has written of this is Tenzin Palmo (born Dianne Perry) who's mother was a spiritualist. Her experience led her quite logically to Buddhism and she is now an Abbess.

I have been fortunate in my life that I was not raised in any particular religion, although I was raised in a Christian country. I have no preconceived notions on whether we survive death or not and what happens afterwards or not. I have experienced foreknowledge of events which I cannot explain but I have never encountered ghosties, spirits or anything else except in dreams. To my mind the most important thing is not to reject the experiences of others out of personal fear. I do not want to die and am scared of dying but I am not frightened of not being. At the same time if death means a step to a new level of existence where one begins as helpless as a baby and slowly discovers that the universe is even vaster and more magnificent than it already seems I am not frightened of that either. Perhaps I should be.

But one thing I utterly reject as any consequence of the "Sensing Murder" phenomenon is the suggestion that we should abandon rationality and seek out the weird and the strange. One of the most interesting tales of that journey is "The Mothman Prophesies" . The story is ultimately banal but the incidentals are interesting. The author suggests that the more people became embroiled in their own belief the more the phenomena reflected their belief. That may be a description of psychosis but personally I also believe that in fact it reflects something about our universe and that is that it may in fact be even stranger than we can imagine.

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Tuesday, November 13, 2007

Democracy anxiety

Yesterday the New Zealand Herald took the unusual step of warning its 200,000 customers that democracy in New Zealand is at risk. The principle threat is the Electoral Finance Bill which attempts to curtail third-party spending in favour of parties or issues 12 months prior to an election. Every credible independent authority from the Human Rights Commission to the Law Society have described the Bill as an assault on New Zealanders freedom of expression.
Combined with the Prime Minister's new found interest in applying anti-terrorism legislation (originally enacted to comply with UN conventions) domestically and one begins to get the uncomfortable feeling that despite having little ideologically in common with the US Republican Administration our Labour Government is not above the same dubious law-making in order to tighten its grip on power.

The fundamental problem in my view is the weakness of our constitutional guardian – the Governor-General. In every political structure there is an office, whose duty is, in theory, to protect the constitution from the executive. Even in Soviet Russia the chairman of the supreme soviet was, in theory, the guardian of the constitution even as general secretary Stalin was sending potential rivals to the Gulags. In Nazi Germany Hitler was elected President after Hindenburg's death – even though as Chancellor he'd made it impossible for anyone to stand against him. In New Zealand the Governor-General is technically appointed by the British Queen but is effectively elected by the Parliament. The Governor-General has the power to dissolve Parliament and is the ultimate commander of the military. In practice, however, all Governors-General in our history have been rubber stamps who have done what they have been told to do by the Prime Minister.

But should the "push" of a Prime Minister: who has developed a heightened sense of paranoia, wrapped herself in the flag and spent heavily on the military, increased the 'anti-terror' role of the Police, and clamped down on political opponents; come to shove against a compliant Governor-General, I have no doubt that the Governor-General would cave in an instant. Helen Clark may think that this description of herself is ridiculous but all rulers have a tendency to only look in mirrors that flatter them, not mirrors that cast harsh shadows. And it is the shadows of any regime that matter.

What New Zealand needs, in my view, is two things. First it needs a constitutional law which describes the nature of democracy at all levels in New Zealand. This law begins with the Bill of Rights but must further stipulate how elections are carried out, the legitimacy of MPs holding office, the nature of the freedom of expression including libel laws, the nature of open Government and the status of commissioners particularly of IRD, Police, Statistics and of the defence force. Like the American constitution it must be high level statements of principle against which other laws can be tested. Any change to this constitution must require a three-quarters super-majority.

Second it needs a constitutional court, superior to Parliament, which rules on matters of constitutional law under reference from lesser courts or the head of state. The Court would consist of seven judges, including three foreign judges of suitable standing from a Commonwealth nation. Appointment to the Court would be until age 70 and be elected by the Parliament.
None of this necessarily requires the establishment of a republic. In theory the Governor General could continue to remain the head of state. What it adds is an extra layer of protection to our democracy which is simply not there at present. Should we, in future, become a Republic, the Constitutional Court would provide a means to guarantee that any President could not follow in the footsteps of General Musharraf and 'suspend' the constitution.

We are, in New Zealand, highly fortunate that democratic principles run relatively deep in Government, the Police and the military. While the Police may be somewhat 'robust' with those they see as quasi-criminal political agitators, even in the depths of the Springbok Tour (1981) they drew back from the kind of political intervention so common in other nations. Despite that democracy is rarely killed in a single coup de grace. It is the "death by a thousand cuts" that New Zealanders must rightly fear. Establishing an authority whose task is to defend our freedoms is an essential next step in our constitutional development.

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Friday, November 9, 2007

2008 is coming. Hide under your blankets!

2008 is shaping up to be a very scary year.

So far this week we have had two fairly momentous warnings. George Soros warning that the US economy is headed for a serious "correction" and a recent article on Salon suggesting that an attack on Iran is gaining support in Washington.

Most people, even those in the Pentagon, know that an attack on Iran is quite simply nuts. Unfortunately Vice President Dick Cheney doesn't. And what bothers me about that was a weird site I ran across the other day called "Satanspurerapture" which suggests that next year Osama's crew will attack Philadelphia with the Ebola virus.

Now I have no idea whether Osama has access to Ebola or not but what bothers me is some of the odd bits from the 911 Commission's findings. Most of the conspiracy theories are fanciful but the behaviour of the FBI before and after the attacks is curious. The question that hangs in the air is were the attacks let through to provide a casus belli? The comparison to the Pearl Harbour attack, which many believe Roosevelt, having cut off Japan's oil and secretly ordered his carriers out of harms way, seemed to have anticipated is valid. In short are there agents provocateur out there who will sex up the justification to attack Iran?

Soros is pointing out the obvious that the American economy is seriously unwell. Already there are many sites like this predicting a crunch in US credit. But if the US economy sags seriously Reserve Bank Governor Alan Bollard's reassurance that New Zealand's economy is 'resilient' could come back to haunt him.

The problem with such anxieties, of course, is that we have no ability to influence our environment. We are completely at the mercy of events. So we have no choice but to hope for the best and plan for the worst.

That means expecting transport costs to go bananas as oil prices go mad. Watch out for coastal property to slump as offshore owners cash up to repatriate assets. Get rid of debt as fast as you can because if things turn 1987ish you can bet the banks will get very picky with mortgage holders. Secure contracts as far out as you can. And buy silver or Palladium as a hedge.

Oh, and make sure you have some comfy blankets to hide under in case things turn really nasty.

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Tuesday, November 6, 2007

The good the bad and the ugly

In my last post I drew attention to international statistics at gapminder which demonstrate how the distinction beween third world and first world has blurred in terms of indicators such as life expectancy and family size.

On the face of it this is all good news. Unfortunately there is a "but". And the "but" is the cost of all of this growth on the natural environment. According to the UNEP's Geo-4 report every environmental indicator is going the wrong way. Humanity may be growing happier but humanity is a plague on the landscape of the earth.

The problem with being part of a plague (say of locusts) is that while it is easy to decry the unsustainable nature of locusts in general it is very difficult, as a locust, to not be open to rather obvious accusations of rank hypocrisy. One cannot say the problem is all those other locusts. The problem is me, locust #3,213,343,675.

The unfortunate fact is that we cannot change. Its the tragedy of the commons. I am not prepared to make my children go hungry for the greater good. When it comes to my children, to hell with the greater good! And every other locust on the planet thinks the same.

The basic problem is that we have largely solved two major afflictions that have curbed locust numbers in the past. One is disease. The other is war. And of course both together produce that greatest killer of them all - famine. Never in history have we ever lived when there wasn't a serious risk of our nation being enslaved and destroyed by war. Never in history have we known as much as we do today about the nature of disease. And so, not surprisingly, our numbers have grown and grown and grown.

In theory, of course, once we have enough they will fall again. Already in many nations (although not New Zealand) we are seeing birthrates of less than two per woman. That is below replacement level. However while large nations like India are curbing their birthrates they are still above replacement level. And in poorer and muslim nations birthrates are up over three per woman. But a decline in population back to 2-3 billion is going to take a very long time and there is almost certainly going to be some disruption along the way.

And that disruption will almost certainly involve wars - although there may not be so many battles. For the existence of weapons of mass destruction and massively destructive and expensive battlefield weapons (like the Daisy Cutter bomb) makes the very idea of battles a losing proposition. For the next millennia or so the probability is conflict will essentially be a contest between police and underground movements. Thus wars will involve relatively few casualties unless they erupt into all out nuclear exchanges (eg Iran v Israel v USA v Pakistan v India v Russia v China) and then billions will be toast.

Another source of disruption will be disease. China and New Zealand have both doubled their population per square kilometre in the past 45 years (my lifetime). In New Zealand's case its gone from 7 people to 14 per square kilometre. But in China's case its gone from 70 people per square kilometre to 140. While in Hong Kong and Macau its 6,600 people per square kilometre. You can't pack that many people in so close together and not get disease outbreaks. To date they haven't been particularly significant but the risk grows with every passing year.

What is the solution? Abandon capitalism? Frankly Ayn Rand had it right. Capitalism is just the natural pursuit of self-interest. Abandon self-interest ? I will if you (planet earth) will - so that isn't going to happen. Frankly, I don't think there is a greater solution other than the ingenuity, savagery and humanity that is humankind.

site of interest: James Martin 21st Century School, Oxford University

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Friday, October 26, 2007

Why the third world isn't

It doesn't happen very often but sometimes in my trolling through the Internet I come across something which totally changes my perspective of the world.

The video clip below is from a lecture by a Swedish lecturer on international health statistics. The lecture (which is 24 minutes long) explains how far the world has come in terms of health outcomes in the past thirty years. Its well work watching.

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Thursday, October 18, 2007

The wide wide Tasman Sea

They call it "the lucky country" but to my mind there is nothing particularly lucky about our neighbouring continent, Australia. For the past 60,000 years the only people who saw any value in it at all were the various indigenous 'aboriginals' (not a name they gave themselves). The Asians, who sailed by, just saw a big, ugly, flat desert full of nothing. A great place to live if you like flies, sand, and eating lizards. So they left it alone, preferring the fecund tropics further north.

It was the white fullahs (many of whom arrived in chains with very limited life expectancies) who called it the "lucky country". For a start there was all this land. Land as far as you could ..well, and even further. Once you'd wiped out all the natives you could become lord of all you surveyed! And then they discovered things. Once you'd wiped out all the pesky roos, crocs and emus you could farm real animals. Real animals like cows and sheep. You could grow wine! and man, talk about the minerals! No flippin' end of them. How lucky could you be?

Well, you could be New Zealand. In fact New Zealand has more available quality land because it has better water supply. It has huge quantities of minerals, the world's fourth largest maritime territory, natural renewable energy out the wazoo, and no small amount of fossil fuel either. New Zealand is two-thirds the size of Japan, another ring of fire island chain, and larger than England. On that basis it could probably easily support 60 million people. I doubt that Australia could support another 20 million.

For my contention is that Australia isn't lucky at all. Not inherently lucky, anyway. What makes Australia "lucky" is the attitude of the Australians. The Australians have never been shy of being proud of their nation. They have never been shy of dreaming big dreams and then making them happen. Nor have the Australians been scared of telling other nations where to get off.

You could argue that New Zealand's anti-nuclear position was an up-yours to the Americans. But it was a fairly pathetic bit of rudeness by a small child to a kindly visiting uncle. New Zealand is geographically fortunate (lucky again) that it doesn't have to think about defence very seriously because the only nation which can threaten it is Australia. So New Zealanders should get over themselves and recognise when it comes to serious bullies, like the French, we fold like the chicken shits we are. Only one case of terrorism in it its history and where are Alain Marfart and Dominique Prieur today? Not in a kiwi jail that is for sure.

But New Zealand is not a lucky nation. If Australia is the twinkle eyed charming youth, New Zealand is a buck-toothed, thick spectacled, little girl. Why aren't we lucky? Because we don't think like we are. We listen with big eyes to every opinion every passer-by cares to have of us. If they don't like us we rush to our room sobbing. "So what do you think of New Zealand?" is the question every tourist hears again, and again and again and again. We are so insecure we take every report about us incredibly seriously. Then we tie ourselves up in knots in nervous anxiety about what to do about it.

No where is the difference between our two nations more evident than when it comes to climate change and the environment. To Australians the environment is something you make money with. To New Zealanders its something you idolise way beyond its economic value. The Australians set reasonable climate change goals and then manage their way to achieving them. Oh yes, they may not have signed up to Kyoto but they will still meet their targets. Meanwhile New Zealand lets itself get talked into silly targets and then its officials spend years going round in circles not managing them. The only way we will meet our Kyoto obligations is by buying hot air.

Both nations face the European protectionist threat behind "food miles". But only New Zealand is planning to cripple itself with its all gases emissions trading scheme to show Mother England (who is talking up the market while she has hot air to sell) that its doing good on climate change. Not that Mother England's farmers and consumers give a toss about whether we have an emissions trading scheme or not. A more ignorant bunch of self-servers you would be unlikely to meet.

By contrast Australia doesn't give a monkey's about European protectionists. America and China are the powers in the Pacific and as far as Australia is concerned its only what they think that matters. Californian movie stars may worry about Green credentials but the rest of California? Certainly Japan, China, Singapore, Hong Kong and Korea seem to be rather more sanguine about climate change than Britain is. Australia knows its future is in Asia and it is busily digging up vast tracts of its mineral wealth to sell there now so it can be wealthy and happy.

New Zealand doesn't want that. It wants to think of "future generations". It wants to be "pure". It wants to be well regarded by Brits and Germans - peoples who, to be blunt, do not have very good histories of thinking about anyone other than themselves. So we forego being rich in order to be 'sustainable'.

How long is it since you heard New Zealand Prime Minister Helen Clark talk about 'returning to the top half of the OECD'? Frankly it should be a doddle. The only problem is the New Zealand government which has absolutely no understanding of commercial realities and couldn't develop a kennel into a dog-house. So she's changed tack. Now we are going to lead the world in sustainability. That means punishing the private sector - something the government can do without even thinking about (and usually does). So that officials can travel to all sorts of exotic locations for 'talks' we will be purer than the driven snow.

To be brutally honest New Zealand doesn't need to have a problem with climate change. All we need to do is plant 2,500km2 in pinus radiata (10mT CO2e) and the problem goes away. It's a lot of work but not impossible. The Department of Conservation (which has inexplicably done nothing to assist the nation with climate change over the past 15 years) has land mostly growing rabbits for such a task.

People talk about looking after the interests of our children. I have four children. And what I wish is that I was a lot richer so that I could assist them more as they grow up so that they could be freer. The same applies to nations. Not developing now just means there is more for the kids to do later. That means they are more beholden to foreigners and less able to make their own decisions.

The question is do we want to be a nation of bellhops for foreigners who come to look at our pristine scenery or do we want to be something more? I say, its time we got over our hangups and removed the red-tape we tie ourselves up in so that we can become seriously rich. Because in the end a growing, powerful economy is the only security we can bequeath.

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Friday, October 12, 2007

Local Government and Mandate

"I don't know you, I don't know anything about your company and I don't know anything about your product. Now, what was it you were you trying to sell me?"So wrote David Ogilvy in his famous ad for advertising back in the 1960s.

These days there would be few companies that did not appreciate the importance of advertising and corporate communication. The role is simply too important as a generator of sales. Even central government does a good job in informing the public about what its thinking about, what it is planning to do, and how the public can get involved.

But when it comes to local government which is currently pleading with the New Zealand public to give it some kind of mandate, the communication and control function is almost non-existent.
Ask anyone on the street what are the main issues confronting their local council and the probability is they couldn't tell you. They don't know what local government does, they don't know who made what decisions, and they don't really care.

Should they? Of course they should! Local Government collects millions in rates and spends it on roading, water, rubbish collection and civic amenities. Under the outrageously restrictive terms of the Resource Management Act and Building Act they practically own the land we live on, and we have to go cap in hand to them to allow us to spend our own money on our own properties – and pay them hefty fees for the privilege.

And more important the lack of of electoral representation fundamentally undermines the mandate of local government. Although this would not stop local Government if we had a half-way decent democracy there would be some form of law/court or commission which would insist that certain actions can only be carried out when an organisation has a clear mandate to carry them out. For any real democracy that would not be a threat but for local government at this juncture it certainly would be.

Because at the moment more often than not what happens is that local government gets captured by developers or interest groups who use ratepayer money to further agendas the voting public has no idea about and wouldn't approve of, if they did.

So why don't we vote? Because we don't know what Councillors and mayors are accountable for and we don't know what they have or haven't achieved. We have no idea who the candidates are, what their records are or whether their platforms have anything to do with what their role would be.Why not?

First, because news about Council decisions is restricted by Councils carrying out so much business in committee. Second, there is no such thing as an opposition when it comes to local body decision-making. And thirdly our local bodies are the wrong size.

In my view the French have the best appreciation of petty politics. Two thirds of the funds spent in local body politics in France are spent by communes. A commune is about 1,200 households. It is, in essence, a neighbourhood. As such everyone knows everyone else. Thus: "If that fat bastard Bertrand things I am paying my rates so he can swan off on a 'fact-finding' trip overseas, he has another think coming". Everyone in the neighbourhood knows what is happening, they know and care where the money is going and where it's being spent. That is the very essence of accountability.

People understood the Boroughs. They could see the benefit of collective action at a neighbourhood level. Borough dealt with pot-holes, intersections, play-areas, libaries and all the little resources a community wants to provide itself with in a way that remote District Councils never can and never will.

Of course petty politics is essentially petty. Above that you need a more substantial organisation. The logical step is Provincial Council embracing all the District Council functions in a Province. This would look after major road links, water, catchments, parks and reserves etc. It would also need some heavy duty representation including one delegate from each Borough, and a serious sized directly elected council. In Germany the State Governments actually nominate delegates on to the upper house of parliament but that is another story.

Provincial Government would be in a far better position to further the economic, social and environmental aspirations of our provinces than a hotch-potch of district and city councils loosely linked by an over-developed catchment authority (Regional Council). It would be better understood by the media and voters alike and by dint of having more power would stimulate more interest in local body elections.

Until we get local government that conforms to our natural heirarchy of collective interest: neighbourhood; province; and nation, local government will continue to irritate its constituents with interventions based on an inadequate mandate.

The simple fact is the combination of the local government reforms of the 80s and the Resource Management Act of the 1991 have failed to deliver a local government structure that New Zealanders have any confidence in. Unpleasant as it may be, it must be changed, and preferably sooner rather than later.

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Tuesday, October 9, 2007

The Emissions Trading Rort

The Emissions Trading Scheme being proposed by the Ministry of Economic Development will not reduce New Zealand's emissions but will result in New Zealanders paying a lot of money to dubious business-people overseas.

New Zealand is coming under intense consumer pressure to be seen to 'do something' about climate change. As our traditional customers for high value foods express disquiet about the long distances our exports must travel before arriving in their markets exporters seek methods to reassure them. The Government's response is an Emissions Trading System which frankly looks as if it has been designed by officials to benefit officials rather than do the country any good.

The New Zealand's Emissions Trading Scheme is to be "world leading". It will be world leading because it will embrace forestry (2008), liquid fuels (2009), and agriculture (2013). By contrast the European Emissions Trading Scheme (which has been in operation for two years) started only with large industry and electricity generators. In general New Zealand's examples of "world leading" developments in public administration have, to date, left rather a lot to be desired. This has not however dampened the enthusiasm of officials who are insulated from the effects of their miscalculations. Instead they are rewarded with trips to far off conferences to present papers on "lessons learned" – at taxpayer expense.

Like all markets the Emissions Trading System will be about demand and supply. Unlike fish or Securities, there is no innate demand for Carbon units. The only reason for any demand for carbon units is that those lucky firms designated by the Government will have to purchase them and/or face a range of chastisements from the Government. With the relish our Scottish heritage has for such things the officials have recycled chastisements from the Inland Revenue Department ranging from stinging fines to the incarceration of the Directors of uncooperative companies.

Each company designated as having an obligation to purchase carbon credits will be assigned a shopping list based on the level of emissions above those made in 1990. In some cases where emissions are less than the 1990 levels they will be assigned a credit. This means that the oil companies, electricity companies and agriculture which have all had significant increases in emissions face a large obligation to purchase carbon credits.

So who will supply them? Some, such as municipal waste processors who have installed methane capture technology, will have a few. But on the domestic market it is hoped, by officials, that the vast bulk of the supply will come from forestry.

The problem is there is an enormous spanner in the works. Under the Land Use and Land Use Change (luluCF) provisions of the Kyoto Protocol harvested wood is deemed to be released to the atmosphere the instant it is felled. Those logs you see being hauled around the country and stacked up in ports for shipping to other nations? Well, under Kyoto they don't exist. Some might say that's because the developed world didn't want to have to account for the huge amount of embodied carbon it imports from the developing world (but I couldn't possibly comment). For foresters, however, this has dramatic implications.

It means that under the Emissions Trading Scheme they will have credits to sell for each year's carbon sequestration from 2008. However when they harvest the forest they will have a carbon liability for every tonne of carbon sequestered since the forest started growing. To give you some idea of numbers a Pinus Radiata forest absorbs 40 tonnes per hectare (more or less) per year. But on harvest "releases" 800 tonnes a hectare. In other words unless the forest you enter into the scheme was planted in 2008 every forester must, under this scheme, eventually end up with a net loss (present value of cashflow excluded).

Under such rules it is very hard to see any incentive for foresters to enter the scheme. Moreover the Government has announced a $50 million afforestation package designed to stimulate planting in those forests that don't enter the scheme. In short there is a disincentive to participate and an incentive to not participate. Despite this Officials speculate New Zealand forestry carbon credits will be sold with a "New Zealand Pure" brand premium on international markets.

So if forestry isn't going to provide the bulk of the carbon credits who will? Officials leave open two additional sources, both from overseas.

Under the Kyoto Protocol every nation has so many "Assigned Amount Units" which is the level of CO2 equivalent each nation emitted in the reference year (typically 1990). Some nations, notably the Russian Federation and the Ukraine, today emit considerably less CO2 than they did in 1990. These extra Assigned Amount Units (colloquially termed 'hot air') may be sold (for real money) to other Kyoto signatories who need to balance the difference between their 1990 allocation and their current emissions. It is widely thought this is the only way Japan will meet its Kyoto targets. Officials have left open the possibility that obliged companies in New Zealand may buy foreign AAUs and convert then to New Zealand Units under the Emissions Trading System.

At present it is impossible to tell how much these units will sell for as none have been traded. The Russians and Ukrainians have a difficult balancing act in that their AAUs only have value under the Kyoto Protocol. If there is no continuation of the Protocol past 2012 their AAUs could be valueless. They also have so many AAUs that they could easily swamp their own market and devalue their asset. It is likely that during this commitment period (2008-2012) they will trickle AAUs on to the market keeping the pressure on in order to maintain prices until the very last moment.

Another provision under the Kyoto Protocol is the Clean Development Mechanism. Under the Clean Development Mechanism firms which invest in projects which reduce emissions over 1990 Business-as-Usual can have those reductions registered by the United Nations. These Certified Emissions Reductions can then be traded and will be able to be bought into the New Zealand market so long as they meet the market balance dates (end of the Calendar year). The price of CERs (or their derivatives) depends largely on how far long the certification process they are. In general projects tend to over-claim reductions in their initial phases ( attracting a discounted price) before they finally become certified (when they achieve a general market price).

Naturally the price of AAUs and CERs will depend on the market for them. Unfortunately the rules of many markets cited by New Zealand officials are unknown because they haven't been developed yet. It is notable that none of them will be as comprehensive (read "bold") as the New Zealand ETS. The exception is the European ETS which excludes Russian and Ukrainian AAUs altogether (because, one suspects, this would discount the value of British and German "hot air") and only allows firms to meet 10% of their obligation with CERs. Currently the UN has registered 80 million CER ( about what the New Zealand oil firms would need for the 2008-12 period) but has 2 billion worth of (high risk) projects registered for the 2008-12 commitment period.

The price for CERs on the European exchange will depend very much on the supply and demand for them. In March 2006 prices on the European ETS collapsed because it was discovered that the supply of credits was greater than the supply of debits so there was no scarcity. Previous to that the price was around 40 Euro. Today the price is around 17 Euro. Officials "think" the New Zealand price will be lower than that. Even so at 17 Euro New Zealanders would face an increase of about 10 cents a litre for diesel and 8 cents a litre for petrol. This money would be paid to those people selling the CER credits.

What does all of this mean?

One possibility Officials 'wink' about is the possibility that New Zealand will become a carbon laundering nation. That is selling "Pure NZ" forestry carbon credits, while covering itself with cheap Chinese CERs or Russian AAUs. Unfortunately such naivete does not wash with the Europeans who are more likely to blast us for such cheap tricks than participate in such a back-handed game.

One thing is certain and that is New Zealand consumers will end up footing the bill. All energy will cost more and farmers will end up spending a significant proportion of their income covering their carbon emissions. There is no guarantee that forestry will rebound from the deforestation that pre-Kyoto jitters and high land values have prompted.

But at least the officials will have a good story to tell in the far off capitals of the world on the conference circuit.

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Monday, October 8, 2007

Coulda Shoulda Woulda

Watch the various Rugby commentators squeal with outrage as the All Blacks plummet from their smug pedastal, toppled once again by the pesky French.

It was 1999 all over again and those of us for whom Rugby is not a religion could not help but derive a little satisfaction that this over-hyped, over-sold, sport's bone-crunching collision with the up-right face of reality.

For the fact is that the All Blacks were not running rings around the French. At no stage did that game look like a walk-over stymied by biased refereeing. The fact was the French were:
a. not cowered by the All Blacks
b. ready to play a hard forward game to meet the All Black onslaught
c. not giving up possession with stupid blunders
d. fresh when our boys were exhausted

All of this points to some pretty stupid strategic decision-making. The French had reserves with punch at the end of the match, just like they did in 1999. The All Blacks looked tired, lumbering and hesitant. Again. The French had weathered their forward assault and after that the All Blacks were out of ideas. The dazzling, non-stop set-plays which won the Cup in 1987 were no-where to be seen.

The fact is the Southern hemisphere teams spend far too much time in front of the Super-14 mirror. They pout, they ponce, they sign the deals. In the Northern hemisphere they just focus on the World Cup and then they win it. We don't see their best teams because they only send out reconnaissance teams between Cups. That gives them loads of information and denies us any.

And while the games commentators (all of whom profit from the All Black mystique) may call for the sacking of Graham Henry and want inquiries, the real problem is indemic in the sport as an industry. For the fact is rugby is selling machismo not performance. Look at the ads. Chest beating, hairy-chested nonsense. Me tough All Black, you wimpy froggy. Well, serves you bloody right.

What our national game really needs is a serious kick up the arse from a major sponsor or two. One who says ' you're a pack of bloody losers, come back when you have something to show for it other than your high opinion of yourselves.' Then we might see the humility, the hunger, the intelligence, the imagination and the tenacity which made us proud in 1987.

In Rugby as in war, winning requires:
1. A team that has practised and practised and practised together for years
2. More new tricks and manoevers than the opposition can deal with
3. In-depth tactics for the whole duration of the match, not just the beginning.
4. Excellent intelligence on the opposition's strengths, weaknesses and probable approach

Rugby deserves this lesson in humility. If it doesn't learn it this time, it sure will, in front of a home crowd in 2011. And that will be even more painful.

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Tuesday, September 11, 2007

Reserve Blues

The finance and expenditure select committee is looking into whether or not there are better ways to manage our economy than via the Reserve Bank. According to Brian Fallow BERL say the Reserve bank isn't helping, Bruce Sheppard says our interest rates are comparable with Indonesia's (a dubious level of sovereign risk) but VUW says nothing's broke so don't fix it.

Personally I wonder if our Reserve Bank isn't the creation of academic purists. According to its own website (policy targets and section 8 of its Act) the bank's policy target is primarily to ensure price stability. By comparison the US Federal Reserve "goals of monetary policy are spelled out in the Federal Reserve Act, which specifies that the Board of Governors and the Federal Open Market Committee should seek "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." These outcomes are sought via price stability, but in New Zealand price stability itself is the goal." [Ref 1Mb PDF]

The idea of price stability is attractive, especially if you don't have any. Inflation in history has eroded the savings of the middle classes resulting in dangerous political instability. If a dollar today is only worth ten cents tomorrow then planning one's life starts to get pretty damn hairy. Ask any Argentine. Thus one can see the attraction of ensuring that a dollar today is worth a dollar tomorrow and preferably forever more.

But the problem is that in the real world prices aren't stable because supply and demand aren't stable. When this affects things like toothpicks this doesn't matter a hell of a lot. If the price of toothpicks goes up then some people will stop buying them and more people will make toothpicks and the price will stabilise again. The problem really kicks in when we talk about prices of things that are somewhat more fundamental. These are things like the price of energy, the price of labour, and the price of land.

This is partly because such prices are what economists call "inelastic", i.e if the price goes up the demand doesn't necessarily drop away all that much, but also because they are unavoidable. It is impossible to do business of any kind without somewhere to work, people to do the work and applied energy to help them do the work with. Another highly inelastic price is the price of Government, i.e that income we forgo for the social system we construct around us.

The Reserve Bank Act defines a bunch of prices that it keeps an eye on. These are measured by the Statistics Department and are called the consumer price index. Among them are common or garden things which people buy, including energy and the charges Government makes. What is not directly included is the price of land. Land is not included because it is assumed including the price of land would become recursive because as the price of land increased the inflation rate would increase so the price of land would increase. Personally the lack of a land price index is a source of great irritation to me but that is by-the-by.

But there is another effect that economists have not traditionally handled very well and that is the changing affect of technology on national wealth. For example $2000 today can buy me the same computing power that $2 million would have bought me 20 years ago. If demand was constant this would be strongly deflationary but demand isn't constant. It expands as the opportunities in the marketplace expand. Today there is a popular market for mobile phones that 20 years ago were limited to very few people. In other words we can buy more things today than we could 20 or 40 years ago. Despite this a pound of butter has pretty much remained at a fairly constant price vis-a-vis incomes since Shakespeares time. This increasing availability of goods and services is a genuine increase in wealth.

Monetarists believe that money supply is the source of all inflation. Structuralists believe that some inflation is built into growth and distinguish between ordinary inflation and hyper-inflation. In the latter case the Government tries to extracate itself from fiscal problems by printing more money. This was certainly the policy of the Weimar Republic during the 1920s.

The problem with all "isms" (except for pragmatism) is that they try to fit the facts to the circumstances and then justify themselves. The advantage of the objectives of the US Federal Reserve objectives is that they state outcomes not methods. The NZ Reserve Bank can argue that it has done its best to achieve price stability but that does not mean it has done its best to achieve those other important aspects of economic stability defined in the Federal Reserve's Act of "maximum employment, stable prices and moderate long-term interest rates".

In particular one has to look at the relationship between land prices and money supply. Fundamentally land prices drive the demand for money at the deepest level for the fundamental transaction that every entity must meet its need to pay the rent. The value of land is derived partly from the income it can itself generate (eg by growing things on it) but also depending on the value others believe a plot of land may have as a (largely) appreciating asset. Obviously the value of land in the former instance will depend on the income generated in similar adjoining land wheras in the latter case it will depend on the size of the available market for that land. That is the more people who may want to bid for it the more valuable it becomes.

In New Zealand we currently face a number of inflationary pressures. The price of energy is increasing and this time (unlike the early 80s) the oil companies aren't going to do us all a favour by over-investing in capacity so that their profits are slashed for the next 20 years. The cost of Government is escalating. It was the second largest source of inflationary pressure after energy in the past year. The price of labour is increasing because we are reaching almost full employment and people can pick and choose among employers. And the price of land is increasing because local government has been constraining supply of urban land, central government has allowed more people (both resident and non-resident) to buy New Zealand land, and (to a far lesser extent) the returns from farming land have improved lately. All of this increases demand for money.

If the demand for money increases naturally only two things can happen. Either the supply remains the same and the price (interest rates) goes up. Or the supply increases and the price remains the same and potentially the dollar devalues versus other currencies. Effectively the Reserve Bank is setting the exchange rate by restricting the money supply. Currently the Reserve Bank is choosing the former option over the latter in the name of price stability.

But lets take a look at where these price increases stem from. In the case of energy they are imported. We simply have to wear these costs. This is the kind of inflation the world got in the 70s where oil prices skyrocketed by productivity remained static so we ended up with stagflation.

In the case of land, they are also largely imported as we invite foreigners to speculate on New Zealand land values. That leaves labour inflation and consumer demand led inflation as more people queue up to bust their credit limits. Against that we have increased export receipts for primary products and reduced prices for manufacturered goods from China. However what a lot of people are really doing is exchanging their land revaluations due to land price inflation into consumer inflation as they buy more crap that will be useless in ten years time on the house. By maintaining the value of the dollar the Reserve Bank is effectively acting as guarantor to foreign land speculators who are inflating the value of our land so we can buy more crap.

So what do we really need? To achieve an optimum investment environment business needs low land prices, low Government costs and low interest rates. This would allow business to obtain a better return on capital from productive investment than in an environment with high land prices, high Government costs and high interest rates.

This means that the Reserve Bank instead of restricting money supply by increasing prices should gradually increase money supply. This would devalue the dollar, warn off foreign land speculators who would become edgy about their investments under a depreciating currency, increase the cost of imports (including energy) increase inflation, boost the value of the sharemarket, and in the long term incentivise business to invest in productive capital. This is actually what the US Federal Reserve started doing a couple of years ago.

The only problem is there is a political cost to such manouvres. That is a strong currency and inflated land values make people feel richer, even if it is actually making them poorer in the long term. Thus the only way this can be accomplished politically is by reducing the surplus and giving back some of the tax. By putting more money in people's pockets they may feel happier about declining purchasing power.

This would of course make it more difficult for the Government to become saver of last resort as it has under the Cullen regime. Dr Cullen has effectively built up the Government to become a massive saver/investor through fiscal surpluses unheard of outside of oil rich nations. Personally I have always had some problem with the Government effectively becoming the biggest investor on the stockmarket by a country mile. It smacks of state capitalism. I would much rather see more private investment and entrepreneurship. In my view the best superannuation plan is to live in a rich country which is booming rather than clinging on to an outsized pension in a poor country in decline because in the latter case you know, one way or another, the Government of the day will steal it off you again, while in the former case the Government can afford to be magnanimous.

So are there any proposals I would have for the Reserve Bank? Merely to increase its objectives beyond price stability to include goals such of those of the Federal Reserve which include consideration of providing an optimum investment climate (moderate interest rates) and a degree of equity ( maximum employment).

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Friday, September 7, 2007

The Gallery Bleats

Like excited school-children the press gallery has rushed off to APEC and begun filing stories about grown-up things like the war in Iraq and climate change.

Already we've had these bizarre reports based on the premise that just because the US President says nuclear power is a valid response to climate change then we should forget our anti-nuclear stance and adopt it too.

I suppose when you live in a cupboard in parliament writing stories about corridor gossip and MP's hijinks that might seem like weighty journalism. But anyone who has spent any time looking at New Zealand's energy situation or climate change problems its obviously pure shit.

Nobody in their right mind is proposing nuclear power for New Zealand because there are far too many cheaper and easier alternatives. You only have to look at a Lonely Planet Guide Book for five minutes to see that in this country geothermal energy is a far safer way of heating up water to spin a turbine than burning radioactive chemicals.

But of course what its really all about is drawing the distinction between the United States and Australia with New Zealand into starker relief. For the US and Australia nuclear power is a very sensible alternative to their current practice of burning tonnes of coal to generate electricity. It is far cleaner and far safer. It even emits less (yes less) radioactivity.

The same goes for the Iraq situation. The US is the biggest military power in the world by a factor of about five. Australia is the biggest military power in this region by about the same factor. New Zealand simply doesn't register. We are a wart on the backside of the flea on an elephant when it comes to strategic importance.

None of this however gets reported. What makes the news is that Helen is out of step with America and Australia - as if that is in any way unusual.

Sadly our press gallery have once again demonstrated that they have an apalling lack of understanding of the world and the editors that put them there are obviously even less informed. So much for mainstream media.

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Thursday, September 6, 2007

If Space-Time is Money

Its long been said that time is money. The question is how much money? Because when you think about the value of a person-hour in any society is a crucial determinant of how that society will live.

If the value of time is low the pace of life will be slower. People will be more relaxed about how quickly they get from A to B, the need for a higher velocity of money (ie the number of transactions per day that each person makes) will be reduced.

A low value of time means the differential between economic activity and non-economic activity is also reduced. People will be better disposed towards volunteer work, playing with children and recreational activities rather than trying to fill their days with transactions. Playing fields and religious activities will have greater prevelance over shopping and selling.

So how do we determine the value of time?

The traditional approach is to ask people how much they would be prepared to pay to save X amount of time. You average all this out and you get a dollar value.

But I wonder if the value of time isn't directly connected to the value of space, i.e land. The higher the value the more economic activity one needs in order to occupy it. Of course the value of land depends largely on the number of other bidders in the market willing to occupy it. Thus the argument becomes cyclic. The land is more valuable because more economic activity occurs on it and the more economic activity occurs the more the land is worth. This explains why cities form economic vortexes which pull in people from the surrounding countryside.

Following this analogy the differential in the value of land between the town and the country will establish the rate of suction from the country to the city as people are attracted to the city to make their fortunes basing their decisions on earning capacity in the city and anticipated costs of the country.

Is it possible for Governments to intervene in this space-time-value equation? The answer is yes but largely only through making the physical connections between places faster, safer and more efficient. In Roman or Persian times this meant building roads between market-places. These days it also includes airports, telecommunications regulation etc.

But the real question is what is the optimum value of time from a human perspective? Have we passed that point and are now running like mice in a wheel trying to keep up with ourselves? Can we ever go back?

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Thursday, June 28, 2007

Opportunity or Protection

It comes down to this: do New Zealanders want Government to provide opportunities or do they want it to provide protection? This is the question that underpins all others as the Government asks "where are we going in 10,25 or 50 years?"
For over the past 12 months Government has been asking itself about transport policy, energy policy, climate change policy, and road safety. Each has had exhaustive consultative documents, chock-full of high-level information making just reading them a major under-taking. Put together, however, the issues of energy and transportation largely define what sort of nation we can potentially become in the 21st century.
Taking a step back to look at such major issues, rather than scurrying around the three-year political cycle like mice on an exercise wheel, is always a useful endeavour and the Government should be commended for encouraging all sectors to undertake this kind of review. It does not happen often enough. But it is one thing to encourage thinking and yet another to encourage public debate. For despite the effort put into obtaining a mass of views few of these exercises have demonstrated a process which results in a debate. The suspicion becomes that like so many consultative efforts those consulting already have a view of what they are going to do anyway.
CONSENSUS. And while nobody can argue with the need for leadership, the more these issues are discussed the clearer it becomes that there is a great need for a broad political consensus on development. Such a consensus cannot be achieved by a few officials doing sums in Wellington. It requires a better understanding of the deeper economic and political drivers at work in this country.
For officials should know (by now) that politics trump analysis every time. By its nature analysis is based on assumptions but if these are out of step with the electorate the analysis will not survive one electoral cycle let alone a dozen. To project into the future not only do we need to look at the physical realities of changing technologies and international economics we also need to look at the political tides which underpin the assumptions on which our analysis is based.
Thus, it is not sufficient to blame our failure to build new energy or transport infrastructure over the past decade and a half on the vagaries of the Resource Management Act 1991. The Resource Management Act did not come from nowhere. It may place emphasis on subjective objections but it is not in itself the source of those objections. Those objections come from a deeper well in the psyches of this generation of New Zealanders.
How do we know this? Well, mostly by contrast. Although similar Australian culture is far more comfortable with the notion of progress (its even written into their national anthem) and – from its economic indicators - achieves it as well. And while our retiring middle class may aspire to some kind of Peter Mayle lifestyle "en Provence", in fact, France is as much a nation of superhighways, aerospace industry and nuclear power as it is one of 4-day working weeks, lavender fields and curious cheeses. The French, like the Japanese, treasure their traditions and countryside but keep pressing the accelerator of progress flat to the floor.
In these cases, plus others like Ireland or Finland, there is a clear distinction in the popular mind between national pride in nature, and national pride in development. This is the difference between foreign notions of sustainable development – where the emphasis is still very much on development – and the RMA’s emphasis on sustainable management, where the focus nationwide is on conservation.
CONFLICT. As such the RMA merely reflects New Zealand’s inner conflict. We want to take pride in our natural environment. Under the Act five nesting dotterils can hold up a multi-million highway while five hundred nesting dotterils being disturbed by dogs and small children next to a holiday camping ground are ignored. The Act is about protection not development. But like it or not development, like growth, is key to maintaining our lifestyle.
It all comes down to our balance of payments, i.e the value we buy from the world and the value the world buys from us. The more we consume without producing commensurate exports the more we ultimately end up borrowing from the rest of the world to pay for it all. While Government or public international debt is now at a very low level compared to GDP, our private international debt is at shockingly high levels. As of December 2006 New Zealanders net international liabilities were $143 billion against a GDP of $125 billion. Worse the high levels of international private debt have mostly been to borrow for the privilege of owning property ($142 billion) that we used to own previously (without as much foreign borrowing), or to buy consumer goods from overseas ($4 billion outstanding on credit cards as at December 2006) which are depreciating through technological acceleration at an ever increasing rate.
BUDGET. If this continues it cannot end well. Ultimately it can only lead to greater foreign ownership of our country and increasing impoverishment of our people. The Government’s budget 2007 is, aimed at addressing these issues. First it is attempting to improve New Zealanders savings rate (reducing the need for offshore borrowing) through the Kiwisaver scheme, and it is investing in improving New Zealand’s productivity by investing in much needed infrastructure. If there is any quibble with such measures it is only that they are long overdue.
But what the Budget can’t do is get through to New Zealanders that the fundamental problem at the heart of our culture is that we think we can get rich without building anything. This is based on reminiscences of the 1960s when New Zealand was among the world’s most wealthy nations on a per capita income basis and its environment was apparently unsullied. We were rich and "clean and green" without even trying.
But take away the rose-tinted spectacles and it soon becomes apparent New Zealand was only relatively wealthy because the rest of the world was only just recovering from the most destructive period of warfare in human history. And our environment, while unsullied by Giardia or Didymo, was still being cleared of bush and swamp and being regularly doused in huge quantities of organochlorides. Even after Rachel Carson’s "Silent Spring" there remains a national conspiracy not to mention anything that might sully our national image.
MYTH. Much of the national self-image founded at this time is pure myth. In fact the 1950s and 60s were a period of rapid expansion for New Zealand, both in terms of infrastructure and industry. And it was this period of expansion and development which funded the childhoods of the baby-boomer generation as they grew up. However like all self-obsessed teenage generations the boomers were oblivious to this and found fault with their "development-crazed" forebears eventually galvanising the nation with the "Save Manapouri Campaign". This was the most popular expression of conservation over development during the 1960s – incidentally delivering Labour the 1972 election after 12 years of Holyoake’s National government.
Thirty-five years later, older and wiser, and the baby-boomer generation has begun to recognise the importance of generating wealth. But to maintain its integrity with its political origins this has become "economic transformation". This vague term effectively means generating more value while reducing our impact on the environment. It’s about all the clichés of "working smarter not harder", being "sustainable" and all those good things which nobody can argue with, but which are embraced more enthusiastically by officials in Government than they are by industry.
This notion of economic transformation is what is underpinning the National Energy Strategy and the transport strategy revision. And while it is good to look ahead it is difficult to have too much faith because to date, our officials haven’t done the economic "vision thing" particularly well. Indeed New Zealand’s development seems to have been driven forward while looking in the rear view mirror as other nations zoomed past.
STRATEGY. During the 1980s Japan demonstrated that a nation with a relatively coordinated, research-driven, export-oriented, economic policy and a huge pool of domestic savings could readily compete with open, consumer-oriented economies such as those in the United States and Europe. New Zealand spent the 1980’s and early 1990’s engrossed in extracting itself from the debt and energy intensive, political-economy of "Muldoonery" (as The Economist termed it) through the somewhat naïve Rogernomics-era of state amateur auto-neurosurgery and corporate kleptocracy when merchant bankers bought their own fiefdoms from the state.
As Japan’s economy faltered in the 1990s (essentially drowning in money), smaller nations such as South Korea, Singapore, Taiwan, Ireland, Finland and to a lesser extent Malaysia, Thailand, Denmark and Israel, followed the Japanese formula and found (after tweaks to attract foreign multinational direct investment) it worked very well for them too. While these nations developed industries New Zealand’s high growth in the late 1990s came from importing 800,000 new citizens, mostly from Hong Kong and Asia. Of course we weren’t ready for was their demand for roads to drive on or energy for their homes and businesses, so Auckland has experienced on-going transport and power failures. Would we have done better if a 20-year energy strategy or a 40-year transport policy had been written in 1990? It’s impossible to say.
FARMING. Where we have been deliberately successful is in expanding our agricultural marketing into Asia. Demand for food, and in particular quality food, has kept our agricultural prices relatively high. Nevertheless this is a far cry from the low-carbon high-knowledge economy sought in "economic transformation". Agriculture is inherently energy and transport intensive whether the goods being exported are low or high margin. And while the British may rail about "food miles", their once crucial market is being eclipsed by the stampede to provide goods and services to Asia, and in particular, China.
For today the Chinese "Dragon" economy (which has been bootstrapping itself since the mid-1970s at the astonishing rate of over 8% per annum) has become dominant everywhere and there is now every indication that China’s economic power will eclipse that of the United States by the middle of this century. India’s growth too, though not as spectacular indicates that this mega-economy too is going to catch up with the first world sometime this century.
For the average New Zealander the emergence of these mega-economies has simply meant huge reductions in the price of clothing and consumer durables. Only now are we beginning to see the slow collapse of domestic manufacturing as the Asian ‘black hole" sucks in enterprises which until recently could afford to employ New Zealanders. Eventually this too will include information based industries as Chinese and Indian engineers and artists bring their formidable talents to bear in cyberspace.
This brings us back to the question of New Zealand’s best long-term strategy and what that means for investments in energy and transport today. For either it will be transport and energy intensive or it won’t be. And the questions we have to ask ourselves are what futures are we excluding today because we have developed a kind of national consensus against them?
NUKES. Whaling and nuclear energy are easy examples of this cultural decision-making. New Zealanders have very little general interest in resuming whaling or exploring nuclear energy options. We have reached a reasonably strong nation-wide consensus that we just aren’t "that sort of nation". Of course, these are relatively trivial examples economically speaking. Whale meat is hardly a burgeoning market (even in Japan it reminds people of wartime rationing) and nuclear power is uncompetitive against our other energy options anyway. But there are less obvious examples of futures foregone because "we aren’t that sort of nation".
Minerals are a perfect example of this. Where Australia is mining its mineral wealth as fast as Chinese buyers can write cheques New Zealand’s minerals remain largely buried under our "iconic" landscapes. GNS Science has conservatively estimated that New Zealand has at least NZ$86 billion worth of metallic mineral resources in known and undiscovered deposits. Moreover, some of our non-metallic minerals are valuable, niche materials such as zeolite, perlite and diatomite. They can earn valuable export revenue and some can be used as the base for developing innovative materials such as sophisticated ceramics. It would be possible to build roads and ports to extract them. With the right legislative and investment climate, the minerals sector had the potential to grow from 12,000 to 20,000 regional jobs and from $1 billion to $2 billion in annual turnover GNS estimated in 2000.
THAT SORT OF NATION. The problem: most of these minerals are in our National Parks and we don’t want to dig them up. Why not? It doesn’t stop the Australians. It is because as a nation we have developed a view about mining, particularly in National Parks, which means that we just don’t do it. We aren’t "that sort of nation".
What about genetic engineering? The Royal Commission on Genetic Engineering did a sterling job in examining the potential risks, rewards and cultural issues involved in employing the technology. Its findings exploded myths and provided valuable insights into the future of agriculture, forestry and medicine. And yet despite the millions it spent in patient analysis its views were totally eclipsed by a tiny minority spouting the same Luddite phrases the Commission had dismissed. The hysteria over "corngate" only added to the impression that GE is a political non-starter. Once again political passion trounced informed debate.
Currently there is limited political or economic interest in minerals or GE. But consider coal. New Zealand has about 700 years worth of coal, mostly in Southland. Coal is one of the cheapest potential sources of energy there is in New Zealand for both electricity, and from about 2030, transport and has to be considered a serious energy option. It is also very dirty. One of the big questions in the National Energy Strategy is, "is New Zealand a nation that ‘does coal’"? Or do we, like the billions of dollars worth of minerals, buried under our national parks, just leave it in the ground? Are we "that kind of nation"?
The National Energy Strategy process certainly asked the question. But in the context of the political environment it is hard to interpret it as anything other than rhetorical. For it seems clear that the current "consensus" is that New Zealand is not a nation that "does coal".
WHO SAYS? But let’s look more closely at where this "consensus" comes from. In almost every case it starts with a small and determined group with strong views. This group of activists carries out newsworthy actions in order to draw attention to its concerns and generally simplifies complex issues down to easily remembered slogans. The activists begin a symbiotic relationship with the media who are naturally drawn to the drama of the conflict. Thus journalists end up reporting the protests of activists and then balancing these against the pronouncements of "the establishment". The public is then invited to adopt a middle position between the activists and the establishment. Through repetition this process hauls the rest of the community along to the activists point of view. Over time it tends to mean that the so-called consensus view in New Zealand is only slightly more conservative than that of activist groups.
Is this the kind of process that will deliver an energy and transport strategy which will allow New Zealand to maintain a sustainable economic position as the mega-economies of China and India come to dominance? Is it the kind of process that will deliver a country with improving terms of trade?
WHO LEADS? Because if we aren’t going to "do coal" what are we going to do? Natural gas? Arguably less sustainable than coal. Hydro? Not consentable. Geothermal? Not consentable either. Bioenergy? Currently uneconomic except as a by-product. Wind doesn’t count because it isn’t reliable. Tidal? Still experimental. Nevertheless demand is growing, and from 2020 may grow very quickly indeed. We seriously need a consensus on what kind of environment we want and how much energy we need because we cannot rely on Greenpeace to manage our energy needs over the next few decades for us.
Then there is transport. Even as we move to spend huge catch-up sums on transport costs escalate and Green Party pressure increases for more public transport systems and less roads.
The public has bought the need for better public transport but remains sceptical about the "less roads" part of the equation. It is easy to see why people like the idea of public transport. Most New Zealanders travel. When they do, they see public transport systems that meet their needs and remove the stress of driving in a foreign city. Because fares rarely meet the full cost of P.T systems tourists find them inexpensive and convenient and think how nice it would be to have one back home.
The difference is between being a tourist and living abroad. In most places long term residents want a car. Back in New Zealand 90% of the population don’t use public transport, nor do they intend to. Even in Wellington with the highest PT share in the country the commuter share is only 23% - leaving 77% to other modes. And commuting is declining in its share of total trips. Do we want to spend 50% of our transport funds on 10% of the trips? This is where the public (sometimes shamefacedly) votes with their wallets for the car, but votes in opinion polls for public transport and then sit in their cars cursing the congestion!
CONFIDENCE. The problem with all of these issues of consensus is a general fear of foreign opinion. We fear the British may think less of us for not being committed to climate change and boycott our cheese. We fear the Germans may not maintain their myth of New Zealand as a South Pacific paradise and stop visiting. The only people we don’t mind annoying are the Americans and Australians – even as we emigrate to their nations in ever increasing numbers to seek fame and fortune! Despite this back home we nervously ask tourists their opinion of our country and flinch at every criticism. By contrast the Australians and the French can’t imagine why tourists wouldn’t come.
Thus we have a cultural conundrum. New Zealanders seek reassurance from the good opinion of other nationals. The media rely on activists for material. Business and Government need the approval of the populace to get consents. The populace is concerned about its own welfare but is happy to waste the money of business and Government. Politicians need the populace and the media to be elected. All of this puts activists in the box seat to set the national consensus and waste the money of business and government – hence "scope change" in transport and project frustration in energy.
OPPORTUNITY. The fundamental failure of communication is that New Zealanders appear to be alienated from notions of development and opportunity. They generally see development as something that enriches a few by taking away those natural or cultural benefits that they previously got for nothing. This leads to "dog-in-the-mangerism". The tendency to use planning law to extract maximum benefit from those who would develop.
Law changes that simply make development easier will not alter this fundamental alienation. What is needed is not only better law but a greater sense of national opportunity. A sense that opportunity is not restricted to newcomers or robber barons but one that is in our air, as it is in the United States.
And ultimately this comes down to our philosophy of government. Since its establishment government in New Zealand has swung between philosophies that stress government-for-protection and government-for-opportunity. Under a protection oriented government regulation increases and the wings of the powerful are clipped. Under an opportunity oriented government regulation is relaxed and to date, a favoured few make fortunes. Neither is associated with any one political party. The 1984 Labour government saw itself as a government-of-opportunity while the 1978 Muldoon government was a government-of-protection.
Politically protection is welcomed at first, but as its coils strangle opportunity it quickly wears out its welcome – just as it did in 1984. Long-term New Zealanders need a greater sense of opportunity and less need for protection. This is essential because no amount of protective legislation will maintain our balance of payments in a world dominated by the mega-economies of China and India. And if we don’t become a nation of entrepreneurs and opportunists we will end up a nation of wreckers, living beyond our means, and forlornly trying to lure investors on to the hidden shoals of our planning laws.
CYCLICAL. There are already signs today that the tide of political mood is turning. Just as the public appetite for opportunity replaced protection in 1984, and protection replaced opportunity in 1996, so now the era of protection-led government is coming to the end of its 12-year electoral cycle. This does not have to mean a change of ruling coalition as Jim Bolger demonstrated in 1996. It does however mean that the electorate is beginning to feel more frustrated than protected by protection-oriented legislation and is seeking to remove the self-restraints to opportunity.
It is probable that this transition will create a new form of consensus although it is difficult to know what form it will take. The anti-nuclear consensus has survived numerous changes in government and the activist-media symbiosis is unlikely to dry up quickly. Environmental protection is no five-minute wonder.
However whoever wins the 2008 election will need to be very mindful that the public seeks change and it will need to be more than cosmetic. It is unlikely that a series of strategies and plans that don’t recognise this transition will survive much past 2008, let alone until 2050.

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