Rod Oram outlines the mind shifts necessary for NZ to succeed.
Will we get real? No. We are locked into a low-growth trajectory thanks to misdiagnosing our challenges, misjudging our opportunities and poor execution of our few good ideas.
These, though, are failures of character, not economics. We need a cultural revolution to help us build a business one. We need to overcome five crippling Kiwi characteristics:
H/t Lloyd Morrison
Yesterday’s Press Editorial welcomed the PM’s announcement on the beginning of National’s privitisation programme for our country’s assets with the words “John Key was able to demonstrate…the value of his background in the financial industry”. Excuse me? Did the Press miss the Global Financial Crisis, where “the over-paid heroes of Wall Street and the City worshipped the gods of globalisation, financialisation and speculation”? The quote is a teaser for the best of the five books I read over the summer break: “The Gods that Failed: How the Financial Elite Have Gambled Away our Futures” by Larry Elliott and Dan Atkinson. The first edition of the book was subtitled: “How Blind Faith in Markets Has Cost us our Future”. The second edition (published in 2009) has an extra chapter, which as one reviewer said could have been titled: We Told You So. The authors of this book are economics editors, Elliott with the Guardian and Atkinson, the Mail on Sunday.
The metaphor that drives the narrative is inspired by the twelve gods of ancient Greece that lived on Mount Olympus. Elliott & Atkinson have styled the super-financiers and the international organisations, (central banks, IMF, World Bank, WTO), the “New Olympians” and the twelve gods of the modern Mount Olympus: globalisation, communication, liberalisation, privatisation, competition, financialisation, speculation, recklessness, greed, arrogance, oligarchy & excess.
“Greek mythology provides plenty of raw material for a book about the failings of modern financial markets. There is the story of King Midas, who found the ability to turn all he touched into gold a curse. The tendency of markets to veer between the wild optimism of booms and the manic depression busts is akin to the life led by poor Persephone, condemned to live every six months of every year in Hades. But Pandora – a gift from the gods whose beauty belied her baleful influence on the lives of mortals – makes the best metaphor.”
As they said August 9 2007 was the moment the lid came off the modern version of Pandora’s box. And the rest is history, which is why I believe this book must be read, because unless we learn the lessons of history, we condemn ourselves to repeating it.
This book is well-researched and easy to read. It contains a chapter called ‘Last Tango on Wall Street” which has a very simple explanation of how the New Olympians (our Prime Minister’s background the Press values so highly) found ways to make money out of nothing – creating securitised financial products like “collateralised debt obligations” out of the subprime market and then hiding the risks behind AAA rated institutions. The New Olympians made personal fortunes with bonuses they never had to repay when it all turned to custard. And they were happy to see the taxpayers pick up the tab for their trillion dollar insanity.
I conclude with this quote: ‘Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation’. That was John Maynard Keynes in 1936. When will we ever learn?
My post on the CTU’s Job Survivor website provoked some interesting responses. It was gratifying to see that some (including those in business) don’t automatically go to the default position that for business to do well, workers’ rights must be curtailed.
So thank you – your responses inspired me to write more and I want to see more of this debate in New Zealand.
But where are the imaginative and creative business leaders in NZ when we need them?
I know they’re there, but I wish they would speak out. Some businesses tell me they are keeping their heads down on the government’s anti-worker policies, even although they don’t agree with them.
Others have already negotiated sensible arrangements with unions around access and the 90 day no rights period, saying they don’t want or need these kind of policies to be good at what they do.
New Zealand’s law extending the no rights period of 90 days to all workplaces has yet to take effect, but those without imagination are eyeing David Cameron’s proposal to extend UK’s no grievance period to two years. The justification from David Cameron sounds very familiar, with him claiming that increasing the no rights period means that “employers will take the risk of taking someone on” .
But in the UK, they have a 12 month no rights period already. Has it created more employment? Apparently not. PM David Cameron “hopes” that relaxed employment laws will help to boost the private sector and encourage firms to take on thousands of new workers. He’s also proposing that small firms will be exempt altogether from some employment laws, such as sick pay and workers who pursue a claim of unjustified dismissal in the UK Tribunal will have to stump up with 500 pounds.
And guess what? David Cameron’s having a Job Summit! Don’t he and John Key talk anymore?
I’m sympathetic to small business – I’ve been there, done that, and yes, it’s tough. I’ve also been an employer and I know it’s not always easy. From time to time, there is conflict. But I believe that workers’ rights, inconvenient as they can be, are a check on management, and a challenge to an employer to do their job better too. No employer should be afraid of them and in many ways, they protect them ads well.
Because the truth is that workers will always find a way to resist unfair work practices, because they are human beings, not commodities. Why would they sit quietly when they don’t earn enough to feed their families, are exposed to injury or unfairness from their employer?
In the end, most of us want the same thing. A fair society, decent work and a chance to get ahead. Most NZers don’t think this should happen at the expense of other people. We still believe in a fair go for all – we still reach out to our neighbours to give them a helping hand when they need it.
And surely few of us believe that greed is good.
So, wouldn’t it be great to see an outburst of ideas from those in NZ who believe we can build a better economy through ideas and innovation, rather than squashing what after all are pretty modest rights for workers in New Zealand.
Many have joined Labour’s conversation. They don’t want last century thinking. It failed to grow our economy then and it will fail now.
Every Xmas or long weekend since 2003, when Labour reintroduced minimum pay of time and a half for working on a public holiday the same old stories are wheeled out as news.
Today TVNZ is running the headline “Holiday law change leaves workers with less money”.
The story is based on the views of right-wing Auckland Councillor Cameron Brewer who says that more businesses are opting to keep their doors closed over Christmas and their staff home, and therefore “the legislation is actually forcing holidays on staff and cutting their pay.”
No it’s not. What’s happening is the workers are getting a paid public holiday off like many other New Zealanders. They’re not losing any pay at all. They may be missing out on a bit of half time extra pay, but for most restaurant and retail workers who are on near to minimum wage, the amount would be relatively small. Many people would rather spend the public holidays with their friends and families, as has been confirmed time and again when some bright politician has tried to liberate shop trading laws for Easter Sunday.
Brewer may be right that some restaurants are keeping their doors closed over the holiday period. That’s fine and it’s up to them if they want to take the risk of losing patronage to other restaurants. Many that do open are charging a surcharge, which continues to upset some people. It used to wind me up too, particularly in places where there was an obviously deliberate anti-Labour campaign with a sign saying “Don’t blame me for the surcharge, blame Helen Clark.”
But I’m surprised to find myself agreeing with Steve McKenzie from the Restaurant Association in his piece in the NZ Herald today on “why surcharges are not newsworthy.“
The Restaurant Association seem to have given up attacking the government – perhaps it’s because “their” government shows no sign of removing the time and a half for working public holidays, even although they’ve messed with other entitlements in the Holidays Act.
Paying extra pay for working a public holiday isn’t newsworthy either, so I wish we could just get over the fact that like most other comparable countries, we decided it was fair to pay people extra who have to work on public holidays.
Part one of this post showed that S&P placed NZ on negative watch because of the savings gap, the huge (mainly private) net international debt and our under-diversified export profile (and consequent vulnerability). It all adds up to lenders perceiving potentially greater risks and seeking compensation through higher interest rates.
How did the Government react to the news? Did it front the issues and explain its “plan”? Not in your life.
Alex Tarrant at interest.co.nz did a great job of covering John Key’s rather bizarre, meandering post-Cabinet press conference here. Interest.co.nz’s coverage if the political debate is here.
Mr Key manages to contradict himself three ways in two paragraphs:
“Nothing has changed from our point of view, in fact if anything, our position looks stronger from our point of view (really?)…
We accept that we’ve had to take the earthquake on our balance sheet, accept tax revenues have been a bit weaker this year than we had anticipated…(corporate was 22.4% below 2010 forecasts, gst 15.8% below!)”
So… nothing has changed, we are stronger, but we are weaker. Classic. He must have been eyeballing three different journos and guessing they wanted three different answers, so why not try to please all of them at once?
The coup de grace is his attempt to pass it all off as Ireland’s fault. True, the Irish are in a bit of a bog, but lets assume S & P can tell the difference between the land of the long white cloud and the emerald isle.
Back in the real world, one thing is for sure, S&P won’t be amused if Messrs Key and English try to talk their way out rather than addressing the fundamental issues: how about trying to grow savings, diversify and lift exports, and reduce private international debt? Who knows, they could even turn it into a plan?
National’s counter-spin on yesterday’s placement by Standard and Poor’s of New Zealand’s sovereign credit rating on negative watch shows increasing desperation, the latest of a torrent of bad economic news. I comment in two parts: the announcement and the counter-spin.
First the announcement’s overview:
The S&P Report’s rationale makes the drivers even clearer:
In other words: New Zealand does not save enough, it has too much private debt, and that debt was used to fund the wrong things (property speculation not real business investment). New Zealand’s exports are under-diversified and New Zealand will continue structural bleeding on our external accounts after the immediate recession.
The logical repsonse to these problems should be;
It obviously should NOT include:
Bill English and John Key declared S&P lifting their previous negative outlook as a” verdict’ on Budget 2009.
They should be straight-up enough to accept that S&P has now reversed its verdict.
After 18 months of National Government policies National can have only itself to blame.
In part II of this post we’ll check whther their rhetoric matches this reality.
Investing is all about taking the safest option, right? Well here is an interesting thought from the founder of Sun Microsystems, Vinod Khosla:
I like technologies that have a 90 per cent chance of failure, because a 10 per cent chance of making 100 times your money is better than an 80 per cent of doubling your money.
I wonder what ‘Red Alerters’ make of this quote? Can this idea be used to help form a green and sustainable economy?
Fran O’Sullivan has written a very strong opinion piece on SCF in the NZH here.
“The credibility problem that Feeley faces is that after four months investigating Hubbard’s smaller entities, he has still to make a decision on whether to file fraud charges against the SFO founder on that score.
When Feeley announced his initial Hubbard probe he went in with all guns blazing. But after several weeks of saying the SFO was close to making a decision, nothing has materialised.
Hubbard has major beefs with the process.
He has also taken issue with the way the statutory managers who have control of his own affairs as well as Aorangi Securities and other small entities are managing affairs. “It is like the way the Nazis treated the Jews; they grabbed all their assets under trumped-up charges. You have to wonder who the National Government will pick on next.”
There are too many layers of regulators, too may issues around the statutory management process, too many issues about the role of the Securities Commission, and frankly too great a contrast between the government’s handling of SCF and the plethora of other finance company failures, many with much more obvious concerns apparent to all.
One commentator to Fran’s piece says as follows:
“Just as intriguing. Why isn’t Feeley taking the same approach to Hanover, BridgeCorp, Hanover, Blue Chip, Hanover, Strategic, Capital & Merchant, and . Hanover? These are all prima-facie, far more obvious instances of self interested activity and related party dealings. Keep up the good work Fran.”
Or is there something else going on? Selective leaks from inside sources to settle old scores? A sad attempt to bury a frail old man while he is still alive?
Of course we cannot know everything about SCF. No-one does.
Only a full, independant judicial inquiry can answer these questions.
Two good posts yesterday from Cactus Kate here, and here, explaining why John Key’s response to NZ’s new foreign investment policy on land sales is nonsenisical. (Acks to Les for the heads up).
” So what Key is saying is that his policy is to avoid anything that does not keep land prices as high as they are even at the moment (forgetting the peaks of two years ago) to avoid negative equity situations. Same with residential housing as well we can assume because we wouldn’t want the market to move up and down would we?
Little wonder New Zealanders keep buying more land. There is absolutely no risk attached to it when the leading politician comes out with intentions such as that. Where is Key’s worry about negative equity when it comes to SME’s? Silence.”
We need an export led economy and an ownership society.
Just ask any sharemilker wanting to work their way into owning their own farm.
Little wonder a poll running on interest.co.nz is showing a healthy majority of support for the policy.
When this country is in recession and Kiwi families are doing it bloody tough, I cannot bear to stand by and see rich and powerful private interests – whom I will not name at this point and this post is not about SCF – rorting the rules and using their clubs and networks to finesse processes.
It makes Godzone look like “the coldest banana republic in the world”.
For goodness sake interests associated with the Natural Dairy Crafar farms bid (potentially with Nat links) reportedly gave $200,000 to the National Party while the Natural Dairy application was still before the OIO and while National has a ministerial policy review underway.
National should IMMEDIATELY reject that bid – otherwise what is left to separate this from complete corruption? Brown envelopes? Is David Garrett really the only sick or crooked puppy on the Govt benches?
Was it OK for the OIO-overseeing Minister of Finance to lease his (trust’s) house to the govt for a staggering ministerial rent, or accept hours of free TV for his “Plain English” ads? Isn’t it time we Kiwis stood up and demanded that the tories do sweat the small stuff like the rest of us? Isn’t it time John key held SOMEONE to account for SOMETHING rather than smile, wave and make excuses?
The Fendalton and Queen St methods are different from the Crafar one but they are even more dangerous and subversive: very polite circles of influence in the clubs and boardrooms - with massive flows of funds through anonymous trusts that violate the intent of the Electoral Finance Act. Prestigious law firms and lobbyists. This is up with the worst sort of influence peddling I saw in Washington D.C. - One dollar one vote: permanent plutocracy unless we fight back.
Beyond political donations, look at the ability of the rich and powerful to get their way while the poor and middle struggle: $2 billion a year of tax avoidance through LAQCs and trusts that National in government has refused to touch. Half the top 100 welathiest NZers are still not on the top tax rate!
This post is not about SCF, but researching that issue has opened my eyes to the complexity of the company and accounting structures in daily use around the markets. One prominent international investment broker told me he tells his clients never to invest in NZ other than through an ASIC-regulated (Australian) vehicle, because our market is a wild west.
Well what is the point of getting our savings rate up (and asking hard working families to go without consumtion) if the investment vehicles we need to get the money to our struggling firms are being milked and siphoned by fees and sweet deals to the cronies in the markets? Why would any sane Kiwi sweat 80 hours a week to build a real business here? Where will our kids choose to live?
We are talking the need for a full scale root and branch reform. For example, is the Trustee model not a fiction? Issuers want tame trustees; trustees want clients. How do you prevent a race to the bottom? I will wager now the FMA Bill will not do the job. We have BIG problems here folks.
It might have been cool to point the finger at Labour when the champers was flowing during the bubble hype days; but corporate influence peddling is about as attractive as a bucket of sick in the middle of a recession.
There is a real risk of systemic market failure in the NZ financial markets. They remind me of telecommunications markets in the 1990s – time for a big cleanup.
It is not right and not fair on the silent majority who play by the rules and who are getting absolutely screwed.
It will only get worse until we have a Govt with the guts to stand up to it. The smiling millionaire from Bankers Trust is hardly likely to do that!
Kiwis are asking a lot of serious questions about about the SCF debacle.
Down South, Cantabrians think their favourite financier was royally shafted by an at best uncaring or incompetent, and at worst cunniving and self-interested Government.
Elsewhere around Godzone, Kiwis are gobsmacked by the scale of the mess, how it could have been left to fester for so long, and the huge bill that they have been left to pick up.
All are left wondering how come “moral hazard” means hard up uninsured home owners cannot be covered, but senior debt holders in SCF can be paid out millions of interest, fees and profits. They want to know just who gained and who lost, how and how much.
For goodness sake the Government even widened the payout retrospectively to include non-residents and non-citizens! Kiwis want to know for whom, and at what cost, and why?
Make no mistake, this is the biggest bailout in NZ corporate history. It dwarfs, for example, Treaty settlements that were agonized over for years.
Others have contacted me to ask how come Hubbard was treated (they perceive) more harshly than other finance company heads that appear more self-interested.
Kiwis are fair minded. They want to know this kind of catastrophe can never happen again. They want reassurance their hard earned taxes have not been wasted through either incompetence or competing agendas.
As they are now paying the bill, they are entitled to real answers.
Tax changes: Part 1:
Soon after the election, the new Government tells us that:
• they are out of money, but
• they can nonetheless afford tax cuts.
About 30% of the resultant tax cuts go to the top 3% (yes, dear reader, 3%) of earners.
But to pay for it the hi-tech research and development tax credit is scrapped. Hi-tech, high growth, high wage, companies take a hit. A number of (especially Aussie based) companies that were planning to relocate to New Zealand stay put.
Hi-tech exports languish.
Loading ...Radio NZ reporting that Aussie banks are dropping their mortgage interest rates for a second time in a week to try and match Kiwibank. Can’t get link yet.
Doesn’t bode well for economic expectations but makes nonsense of Ralph Norris’ (NAB/BNZ) claim earlier this week that Kiwibank rates were too low.
About time Key gave Kiwibank the small capital boost it needs to move business lending rates down in a similar way.
I’m sick of the one way funnelling of cash west over the ditch.
Loading ... Loading ...Suspend payments into the “Cullen fund” – that’s the fund that helps pre-pay superannuation for when all the baby boomers retire in the next twenty years, and therefore makes national super sustainable.
Justify that decision on the basis that the global economic downturn means that the government is fresh out of cash, and would need to borrow.
Quietly overlook the fact that the share market was really low at the time and that that is precisely when smart people buy.
Forgo a huge profit opportunity for the “Cullen fund” as a result, leaving the future of national super uncertain, yet again.
Loading ...A fascinating piece (not on-line it seems) in the Dom Post on Monday from Conor English, Chief Executive of Federated Farmers, and brother to Finance Minister Bill English. He asks the question in terms of the New Zealand economy- “are we asleep at the wheel?”.
This sounds oddly reminiscient of what the Labour Party has been telling Bill English and John Key for some time, that there is no plan. Conor English notes the seismic changes in the world economy and raises the resulting need for us to innovate and to grow our capital markets. He says
We need to focus on the strategic issues that matter. Are we asleep at the wheel, like Wellington was when it forgot to extend its runway for long haul planes? Will we only wake up to realise the world has passed us by and a real opportunity lost? Lets not sleep. Lets find a solution so future generations can benefit from our Kiwi ingenuity.
An interesting article, raising interesting issues. Could also be interesting to be a fly on the wall at the next English family get-together.
I don’t agree with her emphasis but Fran O’Sullivan has highlighted a less obvious outcome of John Key’s employment relations reform.
Helen Kelly last year initiated contact between Tim Groser, the Nact Trade Minister, and Richard Trumka, President of the AFL-CIO, in an attempt (and in itself a risk on Kelly’s part) to get the US union support necessary for a free trade deal through congress and to push it up the Obama agenda.
Trumka, who is not a natural supporter of free trade, agreed to visit NZ and talk with unionists as well as politicians.
Kelly’s intervention was based on a fairly co-operative arrangement with the Key government, involving a large degree of trust. It resulted from some undertakings – especially relating to consultation.
Key broke his word, co-operation finished and Trumka was told that the positive working relationship no longer existed and he pulled the pin on the visit.
Nice one John. Just to be seen to give wage and salary earners a bit of a kicking at your party conference.
Qantas has been paying its New Zealand pilots up to 40% less than its Australian pilots, even although they wear the same uniform and fly the same routes.
Positions previously held by Qantas pilots are being lost to Jetconnect pilots as Qantas pay and conditions are much inferior here.
Despite being set up to undertake domestic flights within New Zealand, Jetconnect now operates 154 flights between Australia and New Zealand every week and is effectively an operating division of Qantas, says the Australian Council of Trade Unions (ACTU).
Its New Zealand pilots wear Qantas uniforms, have Qantas staff numbers, and fly Qantas aircraft with travel routes determined by Qantas.
The ACTU says that where workers are doing the same job as Australian workers and in actual fact replacing Australian workers, Australian work legislation should apply to them.
The gap between Australian and New Zealand wages has grown by more than $50 a week since November 2008. The government has no ideas or plan about how to address this gap, other than to further reduce workers rights.
New Zealand has become a desirable destination for Australian companies who want to pay workers less.
