Monday, July 14, 2008

Productivity - What should we do

There is a very good graph on a blog named Misty Window which captures the essence of New Zealand's economic malaise.
Essentially what it says is that we work like bastards and achieve very little for it.
Sadly we have been doing this for rather a long time. One cannot help recalling that the definition of insanity is "repeatedly doing the same thing while expecting a different result". By this definition New Zealanders are insanely hard workers.

That is not a good thing.

There are a number of nations worth highlighting in comparison with New Zealand on this table. France - earns more and works far less; Ireland earns much more and works a bit less; Australia earns more for slightly less effort; and Greece which earns about the same as us for bugger all effort. Can we learn anything from these comparisons? I think we can.

First of all we have to recognise that the scorn UK-US academics show for their continental cousins way of doing things is far from deserved. The ultra-market philosophies inflicted on us during the 1980-90s have not delivered the productivity gains promised of them.

In fact they delivered to New Zealand precisely what they delivered to all the other nations that adopted them: a new kleptocracy of rich bastards who took off with the best state assets, milked them for all they were worth and flicked them on. Some ended up in the hands of Australians ( eg all our main trading banks who now effectively fleece the country on a daily basis) and the rest (which were always hopeless) ended back in the hands of the Government again ( NZ Rail, oops I mean Kiwi Rail, and Air New Zealand).

That is not to say I am a wild fan of Muldoonery but in my view the ideological stance of the ACT Party and the Business Roundtable is simply unsupported by the evidence. It's like the Pope believing "just say 'no'" is a reasonable policy for combating AIDS in Africa. Their ideology is based on ideological assertion not evidence.

So what do we need to do improve productivity?

Well the first answer is for Government to recognise that we are a very small country and that solutions from the EU or America can't be translated to a nation with a population the same size as that administered by Birmingham City Council. That means recognising that there will be market failure in New Zealand and that the market model may not be the most administratively efficient means of delivering services. For example there was a time when disputes between the transmission arm arm of the Electricity Department and the generation arm were solved in the tea room. Now they involve two State Owned Enterprises and a truckload of expensive Q.Cs in front of the Court of Appeal. Where is the efficiency in that?

Then we need to get to grips with our education system. Our productivity is low because the average New Zealander is employed in a dumb job doing things which are dumb and they are paid accordingly.

If one held a class warfare view of the world one would argue that it's all the bosses fault. Our productivity is poor because our bosses are poor managers. This is true. They are poor managers but the more important question is why are they poor managers? The answer is because for a lot of them bullying workers is about as far as they have got in terms of management sophistication. The Business Roundtable and the National Party compound this error by suggesting that bullying workers more through unfair employmenmt contracts will achieve greater productivity. Hello? You tried that already and it didn't work.

The real problem is managers come from the workforce. There is no class warfare in the workplace because there is a lot of mobility in New Zealand. One day you're a manager. One day you're staff. But the problem is the workforce is poorly educated. And they are poorly educated because our education system is simply not very good. Its run by teachers who tend to go into a defensive circle like a flock of sheep as soon as something new comes along. Most are happy doing what they have always done and very unhappy being told that has to change. That said we have to face the fact that the PPTA and the NZEI have proved themselves tougher at facing down ideologues in the past than anyone might have given them credit for. The reason is simple, its a tough job and nobody else wants to do it.

To improve education we have to change the debate:

1. We have suffered a vicious circle in the teaching profession. Conditions have got steadily worse, pay relativity has got steadily worse and the teaching unions have become more and more entrenched in defending their members against reforms. The result is a profession in steady decline. And with each passing year this is inflicted on another cohort of school entrants and leavers. There is only one solution. A unilateral move by Government to improve the conditions of teachers. This includes huge reductions in administrative workload, realistic solutions to school discipline problems, better resourcing and of course better pay. If people see teachers have a good job there will be more competition for the work and more outrage at poor performers who hang on doing the same old.

2. We also need to change the role of the teacher from one that is inherently confrontational to one that becomes a form of subversion. One way to do that is recognise that teaching should not be limited to "the teacher". Everyone should be taught how to teach because it is the same thing as teaching everyone how to learn. Teaching is a core business management function. Learning is a core corporate activity. Every child should be taught to teach as part of the core curriculum. Not only does this teach a great many skills in presentation and organisation it also breaks down the divisions between the teacher and the learner. It is pretty hard to sit and snicker at the back of the class when you know it will be you the rest of the class will be snickering at if you do a bad job. Teaching should be recognised as a personal talent as well as a body of knowledge so that while everyone understands how it works only those who are particularly good at it take it up professionally.

The next issue in terms of addressing productivity we need to examine is the role of Government. This applies to Education but also well beyond it.

3. We have created the ridiculous situation whereby we have a bureacracy that pumps out vast amounts of glossy verbiage on developing strategies for things like teaching critical thinking when absolutely none has been applied to the glossy strategies in the first place. The level of waffle coming out of Wellington has reached epic proportions and this is based on the very female habit of refusing to criticise manifestly stupid ideas because the act of criticism will be interpreted politically rather than as improving the riguor of the output. Thus every stupid and manifestly obvious idea is 'nurtured' because it was collected on a whiteboard during some group-think session somewhere. There is a need for at least one independent organisation within Government to provide a quality check on the integrity, evidential basis, and consistency of the policy documents emerging from Wellington. These documents create a huge headache for the rest of the country and they are not as good as they should be.

4. Our systems of local governance don't work. One of the biggest problems is the funding of local government. At the moment local government funds itself by restricting access to land thereby creating land value inflation (which is highly productivity depleting as it attracts otherwise useful resources) so it can charge higher rates and making up vast numbers of complex conformance rules so it can charge more for compliance costs. Local government is fundamentally incentivised to fuck the country up.

What is needed is a complete overhaul of the government structure so that local government is incentivised to develop the country sustainably. This isn't the same as sustainable management (enshrined in the RMA) but very much anthropocentric capitalist development which creates value for future generations a la Brundtland. We probably need to return to some from of Provincial structure which essentially gives each provincial government the scope and incentives to develop their regions.

This might,for example, mean that provincial government gets two thirds of its local income tax take while central government gets the remainder, GST, witholding, excises, environmental and similar taxes as well as a uniform rate. Naturally this would also mean the budgetary devolution of some central Government functions such as education, social welfare, health and policing to Provincial control. In effect each Province would become a mini state funded and equipped to maximise its own potential. Suddenly local government would stop being a brake and become a powerful accelerator of national development. It would also become a politically central part of New Zealand life encouraging greater participation in public life and more critical thinking of local issues.

5. Further to the previous point the Inland Revenue Department also needs to be re-focused on the regions. The IRD has developed an apalling culture of state leechism which fails to recognise its deadweight costs on the economy . It needs to be re-oriented to a role of regional development and given more incentives to be more responsive and responsible to local tax payers.

6. Wellington's role needs to be rethought. Instead of trying to think for the regions it should restrict itself to setting national standards, international standardisation and harmonisation, international negotiation and national level operations. It also needs to seriously think about developing a few real industries such as film and software.

Then there are broader issues which also involve the private sector which we need to consider.

7. Our financial system is skewed to all the wrong things. Because of the way assets are counted in banks reserves mortgages have twice the value of other securities. The result is banks only lend for mortgages while assets such as shares are regarded as monopoly money. With luck the current credit crunch might finally convince the world financial standards setters that a package of dumb mortgages is a lot less safe than shares in Standard and Poors A+ stock and lead to a revision of these rules.

But for too long our financial institutions have regarded New Zealand equities as rubbish while investing in dodgy overseas ventures like Enron. At the same time our rules surrounding the issuing of equities and prospectuses are respectively unduly restrictive and far too slack. Disclosure is poor and the sophistication of investors, frankly pathetic. It would be nice to see some sort of promise of action surrounding the domino collapse of second order finance houses in New Zealand at present. Unfortunately this depression-era echo is being swept under the carpet by the same people who brought us the 1987 Stock market crash, hiding behind the same disgusting protections that for some reason we afford con men in pin stripe suits.

Then there are some sensitive issues that cut to the heart of this country.

8. Sady, and there is no way to gloss over this, Maori are a fuck-up. Too many are in jail. Too many are drunks and smoke too much (tobacco, dak and P). Too many hit their kids. Too many crash cars. Not that any of my Maori friends or neighbours have done these things but statistically it's a fact. There are too many fucked up Maori. And its not because they are poor, as some people think. Its because they are Maori. Their rock:Tikanga is their strength but it's also pulling them under:

  • The first is that there are some elements of Maori culture which are just plain dumb, and more Maori need to speak up about them and say so. The main one is there is simply too much fear embedded in it: fear of violence (ask any Maori taxi driver); fear of standing out at school; fear of losing face; fear of the new. The antidote to fear is drink and the result of drinking is idiots courage. Maori need to address their fear of fear.
  • The other one is the culture of getting away with it. The French have this too but they combine it with charm rather than violence. Too many Maori try to get away with things rather than be honest. Those that do this typically rob other Maori. They rob them of their wealth; and they rob them of their mana. Sometimes they rob themselves of their own mokopuna. There is also an intellectual level of "getting away with it" where some hide behind a cultural smokescreen. Instead of sheltering this under the skirts of kinship Maori need to reclaim their mana by being honest about Maori who embarass them and renounce the backsliders.
  • Finally Maori have to recognise that in the 21st Century the feudal structures of the Marae, the sacred role of elders etc, are rituals and nothing more. Young people must question and women must speak out. The suffocating silence that hangs over so much that is Maori must lift like a mist to expose everyone to scrutiny. Maori have naturally sharp tongues and none of them should be stilled.

These can only be addressed by Maori leaders. What can Pakeha do?

  • Well first of all they can stop ripping them off and give back the land they stole. Progress on the Waitangi process has been slowed through a cynical strategy of devaluation and those in Government who are perpetuating it should be exposed for the racists they are.
  • Then they can stop processes of systematic oppression through Police recruitment policies and education.
  • And finally Pakeha need to stop sneering and start learning Maori language and tikanga as a matter of national pride. Maori is the defining culture of our country and it should be more embedded in our hearts than it is.

Finally we need to get about tough on outlaws. A very large proportion of the crime is carried out by a very small proportion of the population. Surveys of those at the recieving end of different levels of the justice system show that each fears the next level of state sanction. But once someone has been to prison once the fear of going back is reduced markedly. For some not being in prison has been a reason to commit crimes up to and including murder. While the UN may not sanction execution I personally think hanging is less of a punishment than keeping some people alive.

8. Finally we need to institute a prison of last resort. This is the prison you only come out of in an urn. Why? Because there is a small but significant population of New Zealanders who simply have no fear of our prison system. They operate from it, through it and within it. These people have a corrosive effect on other prisoners, their families, their friends and everyone they come in contact with. They are walking evidence there is a viable alternative to remorse and that you can get away with it in New Zealand. They are the evidence that discipline means nothing. The prison of last resort is the cure. A place where people who have simply proven that they cannot be trusted ever again can be sent to live to die. A place very hard to visit and a place with no cell-phone coverage. My pick for its location is Pitt Island, East of the Chathams.

So that's my solution to our productivity problem: education; eliminating state bullshit; local incentivisation;reforming financial markets; responding honestly to Maori issues; and re-establishing a sense of consequence for anti-social lifestyles.

Well, its more policies than the National Party have announced so far anyway!

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