Same sex marraiges in California

On November 4, 2008, California voters approved Proposition 8—which eliminated the
right of same‐sex couples to marry—by a 52 to 48 percent margin.

This report takes a hard look at why Proposition 8, which eliminated the right of same-sex couples in California to marry, succeeded, and explore possible strategies for future campaigns. link text

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Bollard speech Part 2 video

Reserve Bank Govenor Dr Allan Bollard talks about global economic crisis at jobs summit (Part 2)



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Bollard speech Part 1 video

Reserve Bank Govenor Dr Allan Bollard talks about global economic crisis at jobs summit (Part 1)



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Bollard speech to Job Summit

Business is being much more cautious. There is no doubting the size of the shock that is at work in the global economy

Some are saying we are witnessing the biggest destruction of wealth we have ever seen.

A lot of public attention has been focused on the losses flowing out of the sub-prime crisis and flow-on disruption to the financial sector – the IMF estimate these will eventually amount to about $US 2.2 trillion. Some estimate the losses to be even bigger.

But this pales when put against the loss in wealth coming from declining equity and house prices, which already amount to many multiples of the direct losses coming out of the financial sector.

This destruction of wealth is having an inevitable impact on growth. The IMF’s January update estimates a cumulative loss of output relative to potential of about 5% of GDP – around $US 3 trillion.

In response to this shock we are also seeing massive government policy moves. There have been huge coordinated cuts in monetary policy, and a rise in government spending bigger than in any other previous crisis except World War II.

Comparisons of the present world recession to previous recessions, and even to the Great Depression of the 1930s, are rife. To be clear, the state of the global economy and the outlook are very serious, but we are nowhere near Depression-level economic condition.

In world growth terms we are somewhat below the early 1980s recession – that is, significantly worse than the growth troughs in the early 1990s and early 2000s. Unemployment rates will certainly continue to rise, but peak well short of the levels reached in the Depression. Then, unemployment rates rose well above 20 percent in many cases.

Global growth slowed very sharply at the end of last year, surprising governments and forecasters around the world. This is the sharpest contraction we have seen, as the financial crisis hit heavily into economic activity.

In trading partner terms, output contracted in the second half of 2008, and by much more than was experienced during the Asian Crisis or other previous downturns.
Our latest forecast is for trading partner growth to fall in the current quarter by nearly as much as it did in the December quarter. Taken together, this six month period will be the poorest period for the global economy in many decades.

In the medium term the world must adjust to a new global balance. In broad terms this means that Western Anglo economies are going to have to save more, reduce household deficits, build exports and improve their external balances.

Emerging market economies have seen a big challenge to their strategies of low currency – export-led growth with large reserve build-ups, and they will need to increase domestic consumption growth.

There are short-term pressures that will make this rebalancing even more difficult, particularly the build-up of government fiscal deficits. Some important factors count in New Zealand’s favour.

The economy grew strongly in the 10 years to 2007 - inflation was largely in 1 to 3% target band; giving rise to low unemployment, and a strong fiscal position. However, we had a housing boom over 2003-06 and very low household savings.

We have good institutions. We score highly on measures of ease of doing business, and measures of corruption/transparency. We have flexible labour markets and a a macro framework (notwithstanding the domestic debate we have experienced over recent years) that’s assessed as world best practice.

New Zealand’s freely floating exchange rate is an important buffer against the current, internationally sourced, shock. The downturn in international commodity prices, as well as international investor risk aversion and the contraction of liquidity in the global financial system, have led the value of the New Zealand dollar to fall against all the major currencies.

Not only does currency depreciation cushion the incomes of sectors exporting goods and services priced in foreign currency, it also acts powerfully and in the right direction to encourage the reduction of national debt and re-balancing of sectoral demand that is needed in New Zealand, as a deficit-running country. As a small, open economy with flexible product and labour markets, we should be better positioned than many others to re-orient production and income generation in response.

Also, our established track record for transparency in our regulatory institutions, sound management of the public accounts, and forward-looking monetary policy are well-regarded internationally.

Finally, our banking sector remains sound. The parts of the US and European capital markets that have been most damaged are investment banking, hedge funds, private equity, sovereign wealth funds, and stock, bond and derivatives markets. New Zealand’s direct exposure to these parts of the international capital markets, and to complex derivatives or structured credit products, is very light.

Our banking system is well-capitalised, plain vanilla, and mortgage lending is generally on good credit quality. The large Australian banking groups, of which the major New Zealand banks are a part, are now among the largest and highest-credit-quality banks in the world. Australian parents of the big 4 banks are some of the best-rated in the world (4 of the remaining 13 AAs and in the top 20 biggest).
Some of our trading partners GDP are forecast to fall around 5% in the current recession (but ours by rather less).

The shock varies a lot but is worse in countries with infected financial systems, steep housing falls and export-focused manufacturing sectors. However, the economy does have a number of imbalances that cannot go on forever and as a result there are challenges ahead.

Many of these stem from the very rapid increases in debt across household, farm and corporate sector that occurred over the past few years, financed from offshore.
House and farm prices are still at elevated levels, and the economy has a heavy dependence on bank-intermediated debt.

In aggregate we have built up a large external debt that does constrain some of our policy options going forward. This was illustrated only a few weeks ago when the rating agency Standard & Poors highlighted the constraints on fiscal policy.
While the New Zealand economy entered recession earlier than many countries, partly because of last year’s drought, to date it has been quite mild by both international and historical standards.

If the Treasury’s December Economic and Fiscal Update downside scenario were to eventuate we would be doing relatively well. This sees unemployment rise to around 7%, very unpleasant but not bad by international or historical standards.

Based on more recent data we think there are downside risks to the this picture over the short term and it is likely the economy did step down another notch in the December quarter. Bank lending as shown in these annual percent change credit growth data has slowed recently. This has been apparent for some time as far as households go, reflecting the end of the housing boom in 2007, and precautionary decisions by households.

The slowdown in business lending has been much more recent, while lending to agriculture is actually expanding. It would be wrong to attribute this recent slowing to credit supply. There has also been a fall-off in demand, despite falling interest rates.

Business is being much more cautious. They have scaled back their investment and employment plans. This is natural given some of the huge uncertainties that are present. However, we should also be watchful for the opportunities, and mindful of the risks of defeatism.

Within the Western world, New Zealand’s economy and financial system are relatively well-placed to weather the adjustment. Our challenge will be to remain well-positioned to take advantage of the economic recovery when it arrives – possibly suddenly and strongly, which has been New Zealand’s experience in the past. Households and firms should not pull down the shutters, and banks should continue to lend on sound business propositions.

We are in the middle of a major international shock that is spreading from financial institutions to economic recession. New Zealand does not have the banking or fiscal distortion that some major economics have. We have already put in place monetary and fiscal policies that, while they can’t insulate us, are ensuring the recession is felt much less than otherwise.

But a major shock exposes vulnerabilities: in our case the household dis-saving/current account imbalances/offshore bank funding vulnerabilities.
Australia and New Zealand have shown some resilience, but the international situation is now affecting us through credit and trade channels. Households have reacted conservatively, already increasing precautionary saving by reducing spending.
Businesses are impacted in different ways. Most are operating with caution, but have not put up the shutters. The RBNZ for its part will ensure that monetary policy is appropriately stimulatory, that there is appropriate domestic liquidity available to banks, that we remain ready further to changing financial circumstances, that our actions are co-ordinated with other government moves to promote stability for New Zealand.

The banks also have a key role in assisting the New Zealand economy. They face a big challenge operating at his time of fragile international markets, and it is completely appropriate that they should now be very conservative. However, they have profited from good times in this economy, and we expect them to be there for the tough times too.

That means they need to:

Keep seeking international funding (as has happened in Australia) and parent support
Use the support mechanisms put in place by the New Zealand government
Keep passing on wholesale interest rate cuts
Keep lending on sensible proposals
Avoid onerous conditions on lending that have the same effect as a credit crunch.
This summit is the opportunity for banks to restate their commitment to New Zealand’s economic health.

But governments and banks can only do so much. We now want to hear what ideas and actions you might have to offer.

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The importance of economics education for New Zealand

An interesting article by NZ Business Roundtable executive director Roger Kerr

Professor Greg Mankiw of Harvard University is a highly regarded American economist.

He has served as chairman of the President’s Council of Economic Advisers. He has a popular blog.

Recently he has been expressing scepticism about the US administration’s trillion dollar spending package.

Mankiw is also known for his well-regarded introductory economics textbook.

In chapter two he includes a table of propositions to which most economists subscribe, based on various polls of the profession.

Below is a selection, together with the percentage of economists who agree, and some related comments in brackets.

1. A ceiling on rents reduces the quantity and quality of housing available. (93%)

(New Zealand does not have rent controls, but state housing and so-called tenant protection regulation have a similar effect on the supply of private rental housing.)

2. Tariffs and import quotas usually reduce general economic welfare. (93%)

(There are theoretical exceptions to the case for free trade but, as another eminent economist Jagdish Bhagwati has written, “Basically, in the world of practical policy, the subtle qualifications do not really amount to a can of beans. If you want to bring prosperity to people, free trade is the way to do it.”

With only low tariffs now and the free trade agreement with China, New Zealand is close to becoming a free trade economy like Hong Kong and Singapore.)

3. Flexible and floating exchange rates offer an effective monetary arrangement. (90%)

(This was not widely recognised until the early 1970s when the Bretton Woods system of fixed exchange rates broke down. New Zealand’s floating exchange rate regime has served us well in responding to the present financial crisis and recession.)

4. Fiscal policy (eg tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)

(This point is less relevant to New Zealand than to a large economy like the United States because much of the spending would go on imports. Also the Keynesian mechanism only works if workers do not realise that higher inflation results from the stimulus and reduces their real wages and thereby the costs to employers of employing them.)

5. The United States should not restrict employers form outsourcing work to foreign countries. (90%).

(Nor should New Zealand: we benefit from globalisation. Fisher and Paykel Appliances is one company that has gone down this path. While Dunedin may have lost out in the process, the company should not have been subsidised by ratepayers in the first place and the move has assisted it to survive.)

6. The United States should eliminate agricultural subsidies. (85%)

(Bravo! This illustrates the point that many subsidies and regulations benefit private interests rather than the public interest. Just because another country has a particular policy doesn’t mean New Zealand should follow suit.)

7. Local and state governments should eliminate subsidies to professional sports franchises. (85%)

(The Auckland Regional Council, which recently lost $1.8 million on the David Beckham fiasco, should take note.)

8. If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. 85%)

(This is the rule in the Public Finance Act, which now incorporates the Fiscal Responsibility Act.)

9. Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)

(This calls into question programmes such as state housing. In the case of dysfunctional families, however, there may be a case for provision-in-kind – eg the equivalent of a food stamps programme.)

10. A minimum wage increases unemployment among young and unskilled workers. (79%)

(Regrettably, the Maori Party has not grasped the point that raising the minimum wage is likely to hit Maori disproportionately. The Council of Trade Unions has suggested to today’s Jobs Summit that the minimum wage should continue to be increased “to boost demand”. If that made sense, why not double or treble it? It doesn’t: in the absence of higher output from greater productivity, a higher wage for one person is a lower income for someone else. Aggregate spending power is unchanged.)

Economists broadly agree on many other things as well, such as the case against government ownership of businesses. The empirical evidence that, on average and over time, the performance of privately owned businesses is superior to state-owned businesses is overwhelming.

Of course, there is seldom complete agreement among economists just as there is rarely complete agreement in other scientific fields, but the degree of consensus on many issues provides a sound basis for much public policy.

As Mankiw writes: “If we could get the American public to endorse all these propositions, I am sure their leaders would quickly follow, and public policy would be much improved. That is why economics education is so important.”

The same could be said about public understanding of economics in New Zealand.

* This piece by Roger Kerr first appeared in the Otago Daily Times, February 27, 2009. Roger Kerr (rkerr@nzbr.org.nz) is the executive director of the New Zealand Business Roundtable.

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US lessons for NZ?

Nobel Prize-Winning Economist Joseph Stiglitz: Obama Has Confused Saving the Banks with Saving the Bankers

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DemocracyNow get reaction to President Obama’s speech from Nobel economics laureate and former World Bank chief economist, Joseph Stiglitz. Stiglitz says the Obama administration has failed to address the structural and regulatory flaws at the heart of the financial crisis that stand in the way of economic recovery. Stiglitz also talks about why he thinks Obama’s strategy on Afghanistan is wrong and that Obama’s plan to keep a “residual force” in Iraq will be “very expensive.” On health care, Stiglitz says a single-payer system is “the only alternative.”

AMY GOODMAN: To talk more about President Obama’s speech, I’m joined in the firehouse studio by Nobel Prize-winning economist Joseph Stiglitz, professor at Columbia University, former chief economist at the World Bank, and co-author of The Three Trillion Dollar War: The True Cost of the Iraq Conflict.


Welcome to Democracy Now!


JOSEPH STIGLITZ: Nice to be here.


AMY GOODMAN: Your first assessment of the speech last night?


JOSEPH STIGLITZ: Oh, I thought it was a brilliant speech. I thought he did an excellent job of wending his way through the fine line of trying to say—give confidence about where we’re going, and yet the reality of our economy—country facing a very severe economic downturn. I thought he was good in also giving a vision and saying while we’re doing the short run, here are three very fundamental long-run problems that we have to deal.


The critical question that many Americans are obviously concerned about is the question of what do we do with the banks. And on that, he again was very clear that he recognized the anger that Americans have about the way the banks have taken our taxpayer money and misspent it, but he didn’t give a clear view of what he was going to do.


AMY GOODMAN: Let’s go to the clip last night. During his speech, President Obama acknowledged more bailouts of the nation’s banks would be needed, but didn’t directly say, as Joe Stiglitz was saying, whether the government would move to nationalize Citigroup and Bank of America.


PRESIDENT BARACK OBAMA: We will act with the full force of the federal government to ensure that the major banks that Americans depend on have enough confidence and enough money to lend even in more difficult times. And when we learn that a major bank has serious problems, we will hold accountable those responsible; force the necessary adjustments; provide the support to clean up their balance sheets; and assure the continuity of a strong, viable institution that can serve our people and our economy.


Now, I understand that on any given day Wall Street may be more comforted by an approach that gives bank bailouts with no strings attached and that holds nobody accountable for their reckless decisions. But such an approach won’t solve the problem. And our goal is to quicken the day when we restart lending to the American people and American business and end this crisis once and for all. And I intend to hold these banks fully accountable for the assistance they receive, and this time they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer.



AMY GOODMAN: President Obama on Tuesday night. Joe Stiglitz, is he holding the banks accountable?


JOSEPH STIGLITZ: Well, so far, it hasn’t happened. I think the more fundamental issues are the following. He says what we need is to get lending restarted. If he had taken the $700 billion that we gave, levered it ten-to-one, created some new institution guaranteed—provide partial guarantees going for, that would have generated $7 trillion of new lending. So, if he hadn’t looked at the past, tried to bail out the banks, bail out the shareholders, bail out the other—the bankers’ retirement fund, we would have easily been able to generate the lending that he says we need.


So the question isn’t just whether we hold them accountable; the question is: what do we get in return for the money that we’re giving them? At the end of his speech, he spent a lot of time talking about the deficit. And yet, if we don’t do things right—and we haven’t been doing them right—the deficit will be much larger. You know, whether you spend money well in the stimulus bill or whether you’re spending money well in the bank recapitalization, it’s important in everything that we do that we get the bang for the buck. And the fact is, the bank recovery bill, the way we’ve been spending the money on the bank recovery, has not been giving bang for the buck. We haven’t gotten anything out.


What we got in terms of preferred shares, relative to what we gave them, a congressional oversight panel calculated, was only sixty-seven cents on the dollar. And the preferred shares that we got have diminished in value since then. So we got cheated, to put it bluntly. What we don’t know is that—whether we will continue to get cheated. And that’s really at the core of much of what we’re talking about. Are we going to continue to get cheated?


Now, why that’s so important is, one way of thinking about this—end of the speech, he starts talking about a need of reforms in Social Security, put it—you know, there’s a deficit in Social Security. Well, a few years ago, when President Bush came to the American people and said there was a hole in Social Security, the size of the hole was $560 billion approximately. That meant that if we spent that amount of money, we would have guaranteed the—put on sound financial basis our Social Security system. We wouldn’t have to talk about all these issues. We would have provided security for retirement for hundreds of millions of Americans over the next seventy-five years. That’s less money than we spent in the bailouts of the banks, for which we have not been able to see any outcome. So it’s that kind of tradeoff that seems to me that we ought to begin to talk about.


AMY GOODMAN: So, you say Obama, too, has confused saving the banks with saving the bankers.


JOSEPH STIGLITZ: Exactly.


AMY GOODMAN: Should they all have been fired?


JOSEPH STIGLITZ: Well, I think one has to look at it on a bank-by-bank basis. Clearly, the banks that have not been managed very well, we need to not only fire them, we have to change their incentive structure. And it’s not just the level of pay; it’s the form of the pay. Their incentive structures encourage excessive risk taking, shortsighted behavior. And in a way, it’s a vindication of economic theory. They behaved in the irresponsible way that their incentive structures would have led them to behave.


AMY GOODMAN: Explain that.


JOSEPH STIGLITZ: Well, if you get an incentive structure where you say you get huge pay if things go well, but you don’t pay any consequences if things go badly, and you’re going to look at it only in terms of the profits that you make this year, not the losses that you make next year and the year after, then of course you’re going to try to get a gamble, because if you gamble and you win, you walk off with the money; if you lose, somebody else picks up the losses.


So what happened was, the banks gambled. They gambled very big. They had big profits for four years. But in the fifth year, the losses were greater than all the profits that they had in the first four years. But meanwhile, they walk off with the bonuses based on the four-year performance, and then, the fifth year, they don’t—I mean, it was quite remarkable, they didn’t even—they even got big bonuses for the record losses. Then that’s what, of course, has gotten Americans angry, so that the bonuses were described as incentive pay. But that was all a charade.


But the basic thing is, you know, our bankers are—many of them, not all of them—are, you might say, ethically challenged. But even were not they ethically challenged, the fact is they had incentive structures that led them to behave in the way they did.


AMY GOODMAN: Should the banks be nationalized?


JOSEPH STIGLITZ: Many of the banks clearly should be put into, you might say, conservatorship. Americans don’t like to use the word “nationalization.” We do it all the time. We do it every week.


AMY GOODMAN: Explain.


JOSEPH STIGLITZ: Well, if banks don’t have enough capital so that they can meet the commitments they’ve made to the depositors, at the end of every week the FDIC looks at the balance sheet, and it says, “You don’t have enough capital. You’re not allowed to continue.” And then what they do is they either find some other bank to take it over and fill in the hole, or they take it into government control—it sounds terrible, to take it into government control—and then sell it.


And that’s what other countries have done when they faced this kind of problem—the countries that have done it well. One of the important lessons is this is the kind of thing can be done well, could be done badly. And the countries that have done badly have wound up paying to restructure the bank 20, 30, 40 percent, even 50 percent of GDP. We’re on our way to that kind of debacle. But that shows you how bad things can be, how costly it can be, if you don’t do it well.


AMY GOODMAN: We’re talking to Joe Stiglitz. He won the Nobel Prize in Economics in 2001, professor at Columbia University, former chief economist at the World Bank. We’ll be back with him in a minute.


[break]


AMY GOODMAN: Joe Stiglitz, our guest, he’s the Nobel Prize-winning economist from Columbia University and co-author of The Three Trillion Dollar War: The True Cost of the Iraq Conflict.


So, you’re saying small and big banks are being treated differently.


JOSEPH STIGLITZ: Very much so. The small banks were shut down. The big banks—Citibank, Bank of America—we’re giving huge bailouts.


Most interesting case is actually AIG, not even a bank, and we poured in $150 billion. Originally, they said they only needed $20 billion. And then, every few hours, every few days, the losses got bigger, [inaudible] another $60 billion. Now, that fact, the fact that we keep getting bad news and have to pour money in, should make us really worried. The question is, why did we bail out AIG? What they said is, the reason we bailed it out is if we didn’t bail it out, there would be consequences somewhere else. They didn’t tell us where.


It would make much more sense if we looked at where the consequences were and deal with the problems as they turn out. Just for instance, some of the, quote, “insurance policy derivatives” were not in the United States. The people that would have problems may be gamblers, may be other institutions abroad. Do American taxpayers want to be bailing out institutions abroad? That’s a question we ought to be debating. There may be pension funds that may be hurt. Well, some of the pension funds may be able to withstand it; other pension funds will need to have assistance. But let’s get the money going to where we think it ought to go, rather than this trickle-down approach that we’ve been using with AIG.


AMY GOODMAN: Very quickly, which countries do you think did things well, and which didn’t?


JOSEPH STIGLITZ: Well, Sweden and Norway did things very well back in the end of the ’80s, beginning of the ’90s.


The UK, I think, has been doing it much better than the United States. Its problems are bigger— we have to realize that—because its banking sector was a more important part of the economy, and one of the banks actually had liabilities greater than the GDP of the UK. So it’s going to be facing a very difficult time. But the fact of the matter is, the way Gordon Brown did it, replacing the heads of the banks—it was real sense of accountability there. Government got control and shares commensurate with the money that it was paying in—it wasn’t a giveaway—and now trying to make sure that they start lending, forward-looking. So it’s clearly—they have a much clearer concept of what is needed.


AMY GOODMAN: Why is Obama saving these bankers?


JOSEPH STIGLITZ: Well, we could all guess about the politics. We know one of the problems about American politics is the role of campaign contributions, and that’s plagued every one of our major problems. Under the Bush administration, we couldn’t deal with a large number problems, like the oil industry, like the pharmaceutical, the healthcare, because of the influence of campaign contributions. Now, my view is, one of the problems is that whether it’s because of that or not, it lends an aura of suspicion. The fact that there was so much campaign contributions from the financial sector at least raises the concern.


Now, there is one other legitimate concern, that Wall Street has done a very good job of fear mongering. They say, “If you don’t save us, the whole system will go down.” But, you know, when these banks that I talked about before, when they go down, there’s not even a ripple. The fact is, you change ownership. It happens on airlines all the time. An airline goes bankrupt, a new ownership, financial reorganization—not a big deal. What they’ve succeeded in doing is instilling a sense of fear, so that it’s a kind of paralysis that hangs over what we’re doing. And you could understand a politician. He’s been told if you do one thing, the whole system—the sky is falling, it’s going to fall. That induces political leaders to try to do the smallest incremental step, and that’s what got Japan in trouble.


AMY GOODMAN: And your thoughts on Geithner and Summers? Can they handle this? What do you think of them as the economics team?


JOSEPH STIGLITZ: Well, the question is, are they willing to take the bold measures that are necessary? Everybody keeps saying we need to take bold measures, inaction is not a possibility. That’s not the issue on the table. Action will be taken. The question is, which action? Is the action pouring more money into the banks without any effect on lending, increasing the deficit, which the President talked about, or the actions which could be taken, starting on new banks, looking forward rather than looking to the past, significant financial restructuring?


Are we going to bail out the shareholders, bail out the bankers, rather than focusing on saving the systemically important parts of these institutions? There are some important parts of these institutions that we’ll have to save. The question is, are you going to go do it like with a bludgeon, throw money at it, or are you going to try to do it more surgically and save the parts that need to be saved? And one of the things that went wrong is when we went—let Lehman Brothers go. It caused this enormous trauma. And that’s increased the fear about—but that’s an example of doing things wrong. We didn’t ask the question. There was a systemically important part of Lehman Brothers.


AMY GOODMAN: Which was?


JOSEPH STIGLITZ: Which were the commercial paper that was part of the money market funds that were—people were using like banks, like part of our basic payment mechanism. We could have saved that part and let the gambling part of Lehman Brothers, which is not part of the payment mechanism, go down. And because we took this blunt approach, we failed. And what the financial markets are doing are saying, “You have to save everything, if you’re going to save anything.” And that’s just wrong.


AMY GOODMAN: Tomorrow, President Obama is going to announce plans to cut the deficit in half. Do you think that’s the right way to go?


JOSEPH STIGLITZ: What we have to remember is we are in for almost like—most likely a long and extended downturn. Now, we will eventually recover. That’s not a question. But in 2011, 2012, will we be in a sharp recovery or in a more slow recovery?


One of the lessons from Japan was that in 1997, when they were in the beginning of their recovery, they increased taxes because they wanted to get rid of their deficit, and the economy sank down back into a downturn.


The way to look at it is the following. Right now, in 2009, 2010, we’re talking about, per year, something like a stimulus bill of $350 billion per year. To cut the deficit in half, with a deficit as we go into—without the stimulus is one-and-a-half trillion dollars, so we’re talking about pulling out $600, $700, $750 billion. That’s the reverse of an expenditure, taking out the stimulus and cutting back expenditures by another $600 billion—we’re talking about a turnaround of a trillion dollars. Do you really believe that by 2010, by 2011, 2012, our economic recovery will be so strong that it can withstand that kind of taking out of expenditure? I don’t think so. And so, if you went ahead and did that, we will go back into a downturn.


AMY GOODMAN: Joe Stiglitz, you co-wrote The Three Trillion Dollar War: The True Cost of the Iraq Conflict. Talk about the effect of war on the economic crisis. And now we’re not only talking about Iraq. But your thoughts on increasing the number of troops, intensifying the war in Afghanistan?


JOSEPH STIGLITZ: Well, first, let me say, one of—the President did have two things that I really welcome. And several of the suggestions that we made in our book, he has adopted. For instance, in the past, under the Bush administration, the war was totally funded by—or almost totally funded by emergency appropriations. It was as if every year was a surprise. And he said he’s going to put that on the books so that we can evaluate it, make sure their money is going in the best possible way.


A second thing in our book that was, you know, really—was really, I found, very moving was the way we treat our veterans is terrible. And he said, you know, they fought for us; we have to fully fund the Veterans Administration. So those were really important moves in the right direction.


But on the other side, the move into Afghanistan is going to be very expensive. Things are not going very well. Our European—those who—NATO partners are getting disillusioned with the war. I talked to a lot of the people in Europe, and they really feel this is a quagmire, we’re going into another quagmire. And one of the things that we do talk about in our book is that if you keep a residual force in Iraq, it’s going to be very expensive. That’s the experience that Britain has had. They’ve kept a relatively few troops, and the result of that is the savings that they had hoped weren’t materialized. So that goes back to the part that he talked about at the end of his speech: the deficit. If you’re going to be spending all this money in Afghanistan and in Iraq, that deficit is just going to be that much greater.


AMY GOODMAN: So you think Obama is wrong on Afghanistan?


JOSEPH STIGLITZ: I think so.


AMY GOODMAN: Have you told him? Have you been talking to him?


JOSEPH STIGLITZ: Not on that issue.


AMY GOODMAN: You’ve been talking to him, though?


JOSEPH STIGLITZ: During the primary and the period afterwards in some discussions about what to do with the banks. There were discussions. The—


AMY GOODMAN: Meaning you talked to him—


JOSEPH STIGLITZ: Yeah.


AMY GOODMAN: —on the telephone.


JOSEPH STIGLITZ: Yeah.


AMY GOODMAN: I wanted to get your response—after President Obama spoke, the Louisiana Governor Bobby Jindal gave the Republican Party’s official response. He blasted President Obama’s stimulus bill as an irresponsible piece of legislation.


GOV. BOBBY JINDAL: Democratic leaders in Washington, they place their hope in the federal government. We place our hope in you, the American people. In the end, it comes down to an honest and fundamental disagreement about the proper role of government. We oppose the national Democratic view that says the way to strengthen our country is to increase dependence on government. We believe the way to strengthen our country is to restrain spending in Washington, to empower individuals and small businesses to grow our economy and to create jobs.



AMY GOODMAN: Louisiana Governor Jindal. Your response, Joe Stiglitz?


JOSEPH STIGLITZ: I wish he had taken an economics course. The fact is that when the economy is weak, as it is, you need to stimulate aggregate demand. If you don’t do that, the economy gets weaker. And what’s good about most of Obama’s plan is that it’s creating assets. So, while the liabilities go up—we’re going to have to borrow—we also are creating assets. If we had spent a few billion dollars under the beginning of the Bush administration on the levees in New Orleans, we would not have had to spend so much money in the cleanup, in dealing with the devastation that it brought. That would have been money that would have had an enormous return. $5 billion would have saved $150 billion. And so, that’s an example where there are certain kinds of investments—investments in technology, investments in people—that the private sector can’t do and the government can do in ways that give us a very high return.


AMY GOODMAN: Joe Stiglitz, very briefly, the whole issue of globalization—we’re in the tenth anniversary of the mass protests in Seattle, the Battle of Seattle. What about the questions raised in corporate-led globalization?


JOSEPH STIGLITZ: Well, I think two very important issues. One of them is the model that was behind much of the impetus for that globalization was a model based on free unfettered markets. And we know that model, deregulation, has failed. That was the kind of thinking that led into the problems the United States is in today.


The second point is that while we talk about free and open markets, what the United States has been doing has destroyed a level playing field and will have profound implications for the evolution of globalization going forward.


AMY GOODMAN: And for developing countries?


JOSEPH STIGLITZ: And for developing countries, it’s having a devastating effect. I mean, just a couple days ago, the other American banks were complaining about the huge subsidies that were given to Citibank. They say, “How can we compete when the government is subsidizing Citibank to that extent?” Now, if you think these other American banks that have gotten massive subsidies are complaining, you can imagine the kind of feelings that people have in developing countries that say, “We can’t afford those mega-subsidies. How can we compete against Washington being able to write a check any time anything goes wrong?”

AMY GOODMAN: And healthcare? He’s called for universal healthcare, but he does not call for single-payer healthcare.

JOSEPH STIGLITZ: I think that there are some fundamental problems in the efficiency of our healthcare system. And what we’ve seen is that the private healthcare insurers do not know how to deliver an efficient way.

AMY GOODMAN: Do you support single-payer healthcare?

JOSEPH STIGLITZ: I think I’ve reluctantly come to the view that it’s the only alternative. You know, we’ve tried a lot of other things. And we’ve been—you know, I was in the Clinton administration, and we debated a lot of alternatives, and I’ve watched things as they’ve emerged and, you know, evolved over the last twelve, sixteen years, and I think there’s a growing consensus that the private market exclusion is not going to work.

AMY GOODMAN: Joe Stiglitz, I want to thank you for being with us, the Nobel Prize-winning economist, professor at Columbia University, co-author of The Three Trillion Dollar War: The True Cost of the Iraq Conflict.

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Housing market looks better from a distance

I couldn't believe this article in the Herald today. We are in a housing bubble which has only begun to burst and they

say "price drops pale compared with the rises we have enjoyed over 10 years". That’s true, but don’t “relax”. To be accurate, the bubble started around 2002 where house prices in NZ left their 30 year trend and ballooned by 100% due in part to easy credit. Barfoot & Thompson would argue stabilization, they aren’t exactly unbiased. In reality we are at least a decade ahead of trend and that’s how long you may have to hold your investment property in order to sell it at the price you bought it for (if you bought at the peak). You can watch the housing bubble deflate at link text on the statistics page – its updated quarterly.

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Royal referendum

Royal equality has come a step closer in Denmark after Parliament has passed a law on changes to the constitution regarding succession to the throne.

The bill was passed by all parties in parliament save the Unity List, which abstained in the vote.

It is now up to the electorate in a referendum on June 7, to decide whether princes and princesses are to be equal in succession to the monarchy.

Under constitutional rules, the law must now be accepted by a majority of voters and at least 40 percent of eligible voters. Denmark normally has turnouts of between 70 and 80 percent, which may also benefit the European parliamentary elections, which are to take place simultaneously.

The changes in the law mean that a monarch’s first-born will succeed to the throne irrespective of gender. Although the proposal has already been passed by parliament once, its constitutional implications have meant that it must be passed twice by Parliament, each side of an election.

Tuesday’s second passing through the Danish Parliament came as neighbouring Sweden’s Crown Princess Victoria, who is assured succession to the Swedish throne, announced her engagement to her former fitness trainer Daniel Westling. The Swedish royal family chose to make their announcement on Youtube (in Swedish).

Neither Denmark’s new law – if it passes referendum – nor Sweden’s laws of succession are completely equality-minded. While the wife of a king is given the title of queen, the husband of a queen does not become a king.

Daniel Westling is to be titled Prince Daniel of Västergotland.

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Tyranny of the majority or minority?

Tariana Turia is crying foul over the Wanganui District Council decision against the insertion of the letter 'h' in the city name.

The Te Tai Hauauru Member of Parliament says, “It is a classic example of the tyranny of the majority over a minority in this so-called democracy – and we have known what that has been like all of our lives”.

While Maori certainly have claims to having been victimised in the past, are we to bow to every whim and wish of every minority faction? This is hardly a case of Maori being victimised. It is simple democracy in action. It would appear to me that Mrs Turia suffers from a "victim mentality". Every minority (we are all part of some minority) seems to wield the "tyranny of the majority" stick whenever decisions don't go their way.

Democracy is simply the will of the majority. If it isn't based on this concept then surely the opposite must apply, the "tyranny of the minority". Either we are ruled by what the majority of people want or by what the minority of people want. I may not always agree with the majority but that is a reality one must accept in a modern world. We can't make everyone happy.

In a 2006 Wanganui referendum, 72% of those who voted wanted the name to remain as it was. Surprisingly, at a recent Council vote on the issue, there were seven against the change and five in favour. One can only assume that the five who voted for the change had no interest in the democratic process of referendums or the will of the people of Wanganui.

Mrs Turia say, “It is very clear to me that we need leadership that doesn’t mind making the hard decisions. That is what leadership is all about”.

In argument to that I would say that the people of Wanganui (or New Zealand) no longer want dictatorial leadership. They want leadership that gives people options and leadership that is prepared to listen to what the majority of those who voted for them want.

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How low can you go?

Infometrics article first published in the Dom Post 22/5/09 about interest rates and how they affect the economy.

My mate Pete is building a house. He is a talented builder and property developer, but the recent change in the market has left him needing to complete and sell his current project this year. He works every hour that the inclement Wellington weather allows, and practically sleeps with his drill clasped in his calloused hand. Pete dances a little jig every time Alan Bollard drops interest rates. He has a floating mortgage, and every little fall gives him precious extra time or money to finish up the house and get it sold or rented.

After years of being synonymous with the Grim Reaper, Dr Bollard is enjoying a reincarnation as Santa Claus. Every time Dr Bollard is on tele now, mortgage rates fall. But Pete isn’t really sure why Dr Bollard has gone from zero to hero. Why is he so busy lowering rates now, when they were so high before?

Alan Bollard runs the Reserve Bank, which is where banks settle up their transactions each day. Like all central banks, the Reserve Bank acts as a 'banker of bankers', lending banks cash when they are short and overseeing the financial industry. As a result of the problems caused by inflation in the 1970’s, nowadays Reserve Banks tend to be independent from Government and focused on controlling inflation. The method our Reserve Bank uses to control inflation has varied since the 1980’s. Currently the Reserve Bank uses the Official Cash Rate (OCR) – this is the short term interest rate they offer to banks for overnight loans and deposits.

Changes in the OCR should (in theory) flow through to bank floating deposit and loan rates. Banks won't offer on-call deposit rates higher than the OCR because they can borrow cash from the Reserve Bank at around that rate. Theoretically, banks could also offer floating rate loans at the OCR rate plus a margin to cover their costs and risks.

Lower short term interest rates have a knock-on effect right through the economy, which is where Pete starts getting interested. When borrowing costs fall, it allows Pete to spend more on materials and labour. It also becomes easier for people and businesses to borrow more to spend and invest, although Pete, like many of us, is wary of borrowing more at the moment. Lower interest rates mean fewer overseas investors are interested in putting their money here, and our exchange rate falls. Our dollar has fallen over the last year, which is great if you are exporting, but not so hot if you have a penchant for imported German power tools like Pete.

This is all a good kick-start for the New Zealand economy in tough times. When times are good - too good – Dr Bollard puts interest rates up with the opposite effect. These interest rate changes flow through the economy, stoking or cooling the pace of growth with the intention of keeping prices reasonably stable.

This formula has served us pretty well for the past two decades, providing reasonably stable, low inflation growth. But around the world monetary policy isn’t working as well as it used to do. Since 1987 every time that economic strife has struck, central banks have lowered interest rates, allowing consumers to take on more debt, enabling economies to spend their way out of the crisis. This has created what we economists call a moral hazard – borrowers and the financial industry got saved by low interest rates every time they got in trouble, so they kept taking bigger risks. Now, very rightly, borrowers are unwilling to take on more debt, and lenders are wary of bad loans. There are only so many houses Pete can buy and do up at once, and he doesn’t want any more debt right now. Debt levels are now so high and interest rates so low that central banks can’t save the day. This is the problem the US and the UK face now, which is why they have turned to printing money.

But the problem isn’t simply the level of debt, it’s what we’ve used the money for. We used cheap debt to bid up the prices of our own houses, which has proven to be a poor investment for NZ Inc. Partly this outcome is a result of the tax benefits that housing enjoys. These incentives have encouraged productive, energetic people like Pete to focus their skills on building houses rather than doing other stuff, like creating something for export. It just so happens he’s a pretty good web designer too.

Falling interest rates work for Pete right now. Hopefully the low OCR will actually get passed on to floating mortgage rates, and buy him some more time to finish his house. In the mean time let’s hope a capital gains tax (at least on second homes) is being seriously considered in the Beehive. This would dampen our housing obsession and focus the ingenuity of people like Pete on more sustainable ways of growing our economy.
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Electoral Finance Act Issues Paper released

An Issues Paper that aims to generate public discussion and ideas about how to address issues around electoral finance reform has been released, Justice Minister Simon Power said today.

Hon Simon Power
Minister of Justice

22 May 2009 Media Statement

An Issues Paper that aims to generate public discussion and ideas about how to address issues around electoral finance reform has been released, Justice Minister Simon Power said today.

"The Issues Paper allows the public to have a say on what kind of electoral finance system New Zealand should have, and is designed to ask questions rather than provide answers," Mr Power said.

"There are a lot of good ideas out there and the Government wants to hear those ideas before making any decisions."

The review of electoral finance legislation is being carried out in three stages. Each stage provides an opportunity for the public to have a say.

The first stage is the Issues Paper. Views received on the Issues Paper will be incorporated in a Proposal Document that will set out Government proposals for new legislation. This will be released in August this year.

The final stage will be the parliamentary process, and there will be a further opportunity for the public to provide feedback at the Select Committee phase.

"The Government wants to engage all parliamentary parties and the public in order to achieve the type of broad consensus that has historically been the hallmark of electoral law reform," Mr Power said.

"We acknowledge that there may be differences in opinion, but we will be listening carefully to the views of parliamentary parties and the public."

Consultation on the Issues Paper closes on 19 June 2009.

The Issues Paper and further information about the consultation process can be found at www.justice.govtnz/electoralfinancereform.

Background information on the Issues Paper follows.


Information On The Issues Paper

What is the purpose of the Issues Paper?
The purpose of the Issues Paper is to generate public discussion on broad issues and gather ideas for ways to address these issues. The Issues Paper is not Government policy and is designed to ask questions, not provide answers.

The closing date for submissions is 19 June 2009.

How was the Issues Paper developed?

In April 2009, the Government published a Scope Paper which set out six broad topics to be addressed as part of the Review. The Government consulted with parliamentary parties on the scope of the Review.

The Issues Paper is structured along the same lines as the Scope Paper but discusses each question in greater depth. Parliamentary parties were consulted in the development of the Issues Paper.

What does the Issues Paper cover?

• Chapter 1 – Principles addresses the principles that guide the regulation of electoral campaigning and political party funding. These principles help to guide what the rules will achieve.

• Chapter 2 – Constituency Candidate and Political Party Funding discusses how constituency candidates and political parties could be funded, including private donations and other sources of funding.


• Chapter 3 – Campaign Spending discusses possible rules for spending by constituency candidates and political parties during election campaigns.

• Chapter 4 – Advertising addresses rules for campaign advertising by constituency candidates and political parties, including broadcasting.


• Chapter 5 – Parallel Campaigning discusses issues associated with campaigning by individuals or groups who are not standing for election.

• Chapter 6 – Monitoring and Compliance discusses rules for constituency candidates and political parties to declare the funding they receive and money that they spend on campaigning.

Each chapter includes a summary of the current law, discusses relevant issues and seeks feedback.

ENDS

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Swiss voters favour complimentary medicine

Zurich, May 17, SPA -- Swiss voters came out in favour of basic health insurance covering complementary medicine and for the inclusion of a computer chip carrying

personal data in new passports in referendums today, according to Reuters.

Alternative treatments like homeopathy, psychotherapy and traditional Chinese medicine will in future be offered alongside conventional treatments as part of regular health insurance after 67 percent of those voting backed their use. Such treatments were excluded from basic Swiss health provision in 2005.

The vote to include biometric data like fingerprints on a chip in passports was less clear-cut, with 50.1 percent in favour, though the narrowly positive outcome will allow Switzerland to fulfil its data obligations under the Schengen agreement.

Sunday's 'yes' vote is seen as further backing for the agreement, which allows freedom of movement between member states and came into force in Switzerland in 2008.
A 'no' vote would have forced the government to ask the European Union for more time to fulfil the criteria and work on a compromise solution to be put to Swiss voters at a later date.

Switzerland, made up of 26 cantons, has a long history of direct rule, with referendums taking place typically around three or four times a year at federal, cantonal and local level. They can be forced by citizens' or cantonal government
petition and are also needed for changes to the constitution or to join cross-border organisations and communities.
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Power firms gouge $4 billion

Dominion Post article regarding Commerce Commission finding.

By VERNON SMALL - The Dominion Post

Power generators gouged more than $4 billion from consumers by using their market dominance to overcharge, especially in dry years when hydro lake levels were low, according to a report due to be released tomorrow.

The study, by market watchdog the Commerce Commission, is not expected to conclude their actions were illegal, so no prosecutions are likely.

However, it will find that the big four electricity generators state-owned Meridian Energy, Genesis and Mighty River Power and privately-owned Contact Energy effectively used their market power to maximise profits, including withholding power at peak times.

That saw New Zealanders pay an average $1000 each more for power over a six-year period.

It will pose a major dilemma for the Government and Energy Minister Gerry Brownlee, who will face pressure to ensure the companies are prevented from exercising their power in future, despite the finding that there was no illegality.

That could lead to the first major overhaul of the market model, first set up under National in the 1990s.

Mr Brownlee has commissioned his own separate review into the price of electricity, the security of supply, the electricity market and overlapping roles in the industry.

Industry sources said the generators strongly rejected the methodology of the commission's report, and will attack its processes and findings. It considers theoretical pricing in a perfect market, "and this is not a perfect market," one source said.

Meridian is likely to be in the forefront of opposition, because the report implies hydro-generators were best placed to gain from playing the system.

Meridian spokesman Alan Seay yesterday said the company had not yet seen the report. "I would not be comfortable commenting till we have had the opportunity to study it in detail."

The Commerce Commission is expected to stand by its conclusions.

The report includes analysis by a leading expert on energy markets, Professor Frank Wolak, of Stanford University. It is understood he calculated companies' prices against what they should have charged and concluded they had overcharged by at least $4 billion.

He used data from 2001 to 2007, and found the worst cases of over-pricing occurred during winter power crises in 2001, 2003, and 2006.

In a draft of his work, delivered to a power conference in March but later removed from the internet, he concluded the generators offered higher prices in half-hourly bids to the spot market when they had "a higher unilateral ability to exercise market power".

Those higher prices flowed through to higher retail prices.

Power prices rose by 72 per cent between 2000 and 2008 while inflation went up only 29 per cent.
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Parliamentary convention ignored in the name of speed

NZH article by John Armstrong highlighting dubious activities in Parliament regarding the supercity legislation.

The Labour Party is absolutely correct. With the connivance of Act, the National minority Government is riding roughshod over parliamentary convention by dictating that a junior minister with portfolio responsibilities for local government chair the special select committee dealing with one of the two Auckland Super City bills.

When National's decision to rush the first enabling bill into law under urgency last week and without prior select committee consideration is also taken into account, the Government's decision to place Associate Local Government Minister John Carter in charge of the select committee's scrutiny of the second bill is a further disturbing development.

Select committees are supposed to be creatures of Parliament, not toadies of the Executive.

That is the case even though there are no rules preventing ministers outside the Cabinet such as Carter from sitting on select committees even if the Cabinet Manual effectively excludes Cabinet ministers from doing so.

There is plenty of precedent. Dover Samuels sat on the primary production committee during Labour's term in office, for example. In the current Parliament, Internal Affairs Minister Richard Worth is on the justice and electoral committee, while Carter himself is a member of the primary production committee.

But that is about as far as their involvement should go.

It would be unconscionable for one of those ministers as a member of the Executive to chair one of those standing committees. That would draw the Executive too closely into Parliament's role of scrutinising how ministers spend the money that Parliament votes for the running of their portfolios.

Likewise, it would be intolerable to have a minister chairing a select committee inquiry into some failing on the part of another minister.

National would argue that Carter is not setting a precedent in chairing a special select committee which is dealing solely with a legislative or policy matter.

Peter Dunne, another minister outside the Cabinet, chairs the special committee charged with coming up with a revised emissions trading scheme. However, his appointment reflected the Government's confidence in him as an effectively independent MP to arbitrate between the different factions on the committee.

Climate change has nothing to with his two portfolios of Revenue and Associate Health. He is therefore not open to charges of having a potential conflict of interest, whereas Carter's ministerial responsibilities are directly relevant to his role as chairman and thus further stretch the boundaries in terms of precedent.

Normally local government legislation of the Auckland nature would be handled by Parliament's local government and environment committee, which is chaired by National's Chris Auchinvole.

Diverting the bill to a special committee and giving the job of "minder" to Carter instead is being done in the expectation this highly experienced, down-to-earth and level-headed politician will ensure the committee's proceedings do not turn into a political circus.

The Government's timetable for abolishing the plethora of local authorities in Auckland and replacing them with a more rationalised structure of a mayor and single council is extremely tight. It cannot afford delays if the new structure is to be in place for the 2010 local body elections.

Carter's appointment is thus motivated by short-term political expediency and should not be interpreted as some longer-term constitutional conspiracy to bolster the Executive and weaken Parliament. However, that is the effective outcome.

In National's defence, the independence of select committees is more a mirage than reality. In most cases, government MPs make up the majority. Membership is determined by their party's hierarchy. Knowing they hold their positions at the leadership's pleasure, those MPs consequently act as obedient ciphers for the Executive.

Adding to the charade of independence is that Cabinet ministers are expected to actively liaise with the chairs or senior government members of select committees that have their legislation before them.

Cabinet ministers are expected to be aware of progress and to personally identify any intervention or other action necessary to advance legislation.

Despite that, there have been indications of albeit slow, but discernible progress in Parliament's select committees acting more independently of the Executive since the introduction of MMP. The treatment of the two Auckland bills is a serious step backwards.

However, the Government is terrified that the local authority restructuring will get bogged down if it takes its foot off the legislative accelerator - and with reason, given past experience of consultation with Auckland's fractious, warring councils.

In its hurry, however, the Government is copping a public backlash. Its handling of the report of the Royal Commission on Auckland Governance has somehow managed to unite disparate groups who oppose the restructuring for different reasons, for example whether there should be a quota of Maori seats.

National argues that sending the second bill to the special select committee provides ample opportunity for the public to have a say.

In going down this track, however, the Government has displayed a large degree of political ineptness.

Putting Carter in the chair sends a pretty awful message to people or organisations making submissions opposing or questioning aspects of the Super City restructuring that they are wasting their time.

It would be difficult to come up with another means of making it so easy for opponents to attack the restructuring, especially in the heat of the Mt Albert byelection.

Along with the Waterview Connection, the Super City proposal is a millstone around the neck of Melissa Lee, National's candidate, one she will not be able to shake off this side of voting day.

Labour, in contrast, has been able to milk criticism of the Super City proposal for all its worth even though in principle it too backs the concept of a single council running Auckland.

Labour was also guilty of abuse of parliamentary procedure with its filibuster on the first piece of legislation setting up a Transition Agency to forge a unitary council. Forcing parliamentary votes on hundreds of trivial amendments simply to extend the sitting into the weekend was hardly a constructive use of MPs' time and taxpayers' money.

However, the filibuster did the job brilliantly for Labour in highlighting National's refusal to consult Aucklanders on the local authority restructuring.

National has recognised this failing and organised a series of public meetings in the Auckland area co-chaired by Carter to try to reduce the political temperature and reassure people about what National is doing. The stakes are large. Lose Auckland and you lose the next election.

Labour's Trevor Mallard has been praising Carter as National's new Mr Fix-it deserving of a place on National's front-bench. If Carter extracts his party from this mess, he will deserve such promotion.

It looks more likely, however, that he and his colleagues will have to grit their teeth and soldier on regardless.

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Swiss to vote on tighter gun controls

Campaigners said Monday they have collected enough signatures to force a referendum in Switzerland on whether to confine army weapons to military compounds.

Service in the country's militia army is compulsory for men, and conscripts have to take their guns home between call-ups.

"Almost every day a person commits suicide with a firearm in Switzerland," said Josef Lang, a parliament member for the Green Party who is campaigning for the proposal alongside the Social Democrats, rights groups and others.

The referendum, a date for which has yet to be set, would also ask voters to decide whether to set up a countrywide firearms register and forbid citizens from buying particularly dangerous guns, such as pump-action rifles or automatic weapons, for personal use.

It goes far beyond a 2007 law that requires military ammunition to be stored on base _ a move that was seen by many as the first step to dismantling the guns-at-home tradition.

Anita Fetz, a lawmaker for the Social Democrat Party, said a register would lead to more security and was worth the cost, which opponents claim would be immense. "Every single car and every cow in Switzerland are registered. Of course that costs something," she said.

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NZ Institute update

David Skilling from the NZ Institute talks about the economic future for NZ



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John Key on job summit, unemployment & business bailouts

Video of John Key on the breakfast programme



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Coming Soon: Capitalism 3.0

Dani Rodrik, Professor of Political Economy at Harvard University writes a good article on the future of Capitalism.

Capitalism is in the throes of its most severe crisis in many decades. A combination of deep recession, global economic dislocations, and effective nationalization of large swathes of the financial sector in the world’s advanced economies has deeply unsettled the balance between markets and states. Where the new balance will be struck is anybody’s guess.

Those who predict capitalism’s demise have to contend with one important historical fact: capitalism has an almost unlimited capacity to reinvent itself. Indeed, its malleability is the reason it has overcome periodic crises over the centuries and outlived critics from Karl Marx on. The real question is not whether capitalism can survive – it can – but whether world leaders will demonstrate the leadership needed to take it to its next phase as we emerge from our current predicament.

Capitalism has no equal when it comes to unleashing the collective economic energies of human societies. That is why all prosperous societies are capitalistic in the broad sense of the term: they are organized around private property and allow markets to play a large role in allocating resources and determining economic rewards. The catch is that neither property rights nor markets can function on their own. They require other social institutions to support them.

So property rights rely on courts and legal enforcement, and markets depend on regulators to rein in abuse and fix market failures. At the political level, capitalism requires compensation and transfer mechanisms to render its outcomes acceptable. As the current crisis has demonstrated yet again, capitalism needs stabilizing arrangements such as a lender of last resort and counter-cyclical fiscal policy. In other words, capitalism is not self-creating, self-sustaining, self-regulating, or self-stabilizing.

The history of capitalism has been a process of learning and re-learning these lessons. Adam Smith’s idealized market society required little more than a “night-watchman state.” All that governments needed to do to ensure the division of labor was to enforce property rights, keep the peace, and collect a few taxes to pay for a limited range of public goods.

Through the early part of the twentieth century, capitalism was governed by a narrow vision of the public institutions needed to uphold it. In practice, the state’s reach often went beyond this conception (as, say, in the case of Bismarck’s introduction of old-age pensions in Germany in 1889). But governments continued to see their economic roles in restricted terms.

This began to change as societies became more democratic and labor unions and other groups mobilized against capitalism’s perceived abuses. Anti-trust policies were spearheaded in the Unites States. The usefulness of activist monetary and fiscal policies became widely accepted in the aftermath of the Great Depression.

The share of public spending in national income rose rapidly in today’s industrialized countries, from below 10% on average at the end of the nineteenth century to more than 20% just before World War II. And, in the wake of WWII, most countries erected elaborate social-welfare states in which the public sector expanded to more than 40% of national income on average.

This “mixed-economy” model was the crowning achievement of the twentieth century. The new balance that it established between state and market set the stage for an unprecedented period of social cohesion, stability, and prosperity in the advanced economies that lasted until the mid-1970’s.

This model became frayed from the 1980’s on, and now appears to have broken down. The reason can be expressed in one word: globalization.

The postwar mixed economy was built for and operated at the level of nation-states, and required keeping the international economy at bay. The Bretton Woods-GATT regime entailed a “shallow” form of international economic integration that implied controls on international capital flows, which Keynes and his contemporaries had viewed as crucial for domestic economic management. Countries were required to undertake only limited trade liberalization, with plenty of exceptions for socially sensitive sectors (agriculture, textiles, services). This left them free to build their own versions of national capitalism, as long as they obeyed a few simple international rules.

The current crisis shows how far we have come from that model. Financial globalization, in particular, played havoc with the old rules. When Chinese-style capitalism met American-style capitalism, with few safety valves in place, it gave rise to an explosive mix. There were no protective mechanisms to prevent a global liquidity glut from developing, and then, in combination with US regulatory failings, from producing a spectacular housing boom and crash. Nor were there any international roadblocks to prevent the crisis from spreading from its epicenter.

The lesson is not that capitalism is dead. It is that we need to reinvent it for a new century in which the forces of economic globalization are much more powerful than before. Just as Smith’s minimal capitalism was transformed into Keynes’ mixed economy, we need to contemplate a transition from the national version of the mixed economy to its global counterpart.

This means imagining a better balance between markets and their supporting institutions at the global level . Sometimes, this will require extending institutions outward from nation states and strengthening global governance. At other times, it will mean preventing markets from expanding beyond the reach of institutions that must remain national. The right approach will differ across country groupings and among issue areas.

Designing the next capitalism will not be easy. But we do have history on our side: capitalism’s saving grace is that it is almost infinitely malleable.
END
Dani Rodrik, Professor of Political Economy at Harvard University’s John F. Kennedy School of Government, is the first recipient of the Social Science Research Council’s Albert O. Hirschman Prize. His latest book is One Economics, Many Recipes: Globalization, Institutions, and Economic Growth.

Copyright: Project Syndicate, 2009.
www.project-syndicate.org

Reprinting material from this website without written consent from Project Syndicate is a violation of international copyright law. To secure permission, please contact distribution@project-syndicate.org.
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International Week of Democracy 2008 - Aarau, October 1-4

IRI Europe is co-hosting the first global theme week on modern direct democracy to take place in Aarau/Switzerland on October 1-4. This international conference will

focus on global experiences and transnational potentials and among other issues deal with the challenges to participative and direct democracy in Europe after the Irish "No" to the new EU Treaty.

In recent years, many states around the world introduced direct-democratic procedures; in Europe, there has been a massive increase in the use of popular rights since 1989, and within the framework of the European Union, consideration is being given to the first ever implementation of a transnational instrument of direct democracy – the European Citizens’ Initiative.

Since 1990, initiative and referendum procedures have been introduced in nearly all the countries of Latin America; in Asia, too, citizens are now able to take part in decisions on substantive political issues in more and more countries.

As a result, there is a growing focus, not only within politics, but also in the fields of administration, academia, the media and civil society, on the qualitative aspects of modern democracy and questions are being asked about the legal potential and limits of modern direct democracy.

The autumn 2008 “International Week of Democracy”, hosted by the newly formed Aarau Center for Democracy at the University of Zürich, together with IRI, the specialist European think-tank on citizens’ rights at the University of Marburg, and its partners, offers a global platform for an exchange of experience and expertise for practitioners and specialists from politics, administration, civil society and academia.

The event in the capital of the Canton of Aargau has a number of goals

1. to launch a public debate on the potential and the limits of direct democracy within the process of European integration (public event on October 2)
2. to present the latest and most significant research findings on citizens’ rights within the international context (academic forum organised by ZDA on October 3)
3. to prepare a global inventory of the procedures and praxis of citizens’ rights (global seminar on October 1 and 2)

One of the highlights during the International Week of Democracy will be a public event on October 2 at which the issue of the (in)compatibility of direct democracy and European integration in the context of the current debate after the Irish ‘No’ to the EU’s Lisbon Reform Treaty will be opened up for discussion.

At the heart of all the events will be the question of the compatibility of citizens’ rights and globalisation in general, and of direct democracy and European integration in particular: What, for example, is the development potential for participatory forms of democracy in so-called ‘transition’ countries? What role should be played by political education and research?

Another first for the Aarau International Week of Democracy will be the exploration by pro-democracy organisations from around the world of the possibility of creating a global network – within the framework of a “World Democracy Forum” – designed to facilitate an improved exchange of information and practical experience on direct democracy.

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Referendum abuse in Venezuela

From The Economist link text showing how the President has abused government funds to get the "yes" result he wanted.

The president has won a referendum to abolish term limits. But the coming economic storm may make this a hollow victory

WHEN Hugo Chávez first proposed abolishing a clause in the constitution he himself had sponsored which limits the president to two consecutive terms Venezuelans rebuffed the idea. That was in a referendum in December 2007. But Mr Chávez, who claims to be leading a socialist revolution, is not a man to take “no” for an answer. Describing the opposition victory as “shit”, he vowed to reverse it. On February 15th, after a blitzkrieg campaign involving the brazen use of state resources, the president finally got the answer he wanted. Some 55% of a high turnout of voters said “yes” to a referendum question so convoluted as to be barely intelligible. The constitution will now be amended to permit elected officials at all levels to stand for the same post as often as they like. So Mr Chávez will no longer automatically have to leave office in January 2013, after 14 years in power. But will Venezuelans want to elect him again?

Paradoxically, the opinion polls that accurately forecast the result also showed a slim majority against the indefinite re-election of the president. The explanation is that Mr Chávez once again turned the vote into a plebiscite on himself, says Luis Vicente León of Datanálisis, a leading pollster. Thanks to his rapport with many poorer Venezuelans and to oil-financed social programmes, Mr Chávez remains popular. But Mr León adds that there was “an explicit threat” in the president’s message to the electorate: “without Chávez there will be war”. In belligerent speeches, he accused his opponents of seeking violence, ordered the police to disperse student demonstrations with tear-gas and said anyone who did not vote for him was guilty of treason. That seemed to apply especially to the more than 3m Venezuelans on the government payroll. On one occasion he held up a list on television and said he would be checking who voted and who did not.

“Yes” propaganda in the streets, on public buildings and on radio and television overwhelmed the opposition’s flat and leaderless campaign. But some consolation for the opposition was that for the first time it won over 5m votes. In a presidential election in December 2006 Mr Chávez won by a margin of 25 percentage points. Both the referendum and local elections last November showed that the gap between the two sides in a politically polarised country is now just nine points.

Mr Chávez’s support may fall further along with the economy. Unless the oil price rises, Venezuela will earn only $21.6 billion from oil this year, down from $92.9 billion last year, according to VenEconomy, a business newsletter. Oil is just about the only thing the country now exports. This would represent the sharpest decline in export earnings Venezuela has ever experienced. Oil income accounts for around half of government revenues. The fiscal deficit this year may reach 9% of GDP.

“Crisis? Show me where the crisis is!” Mr Chávez scoffed recently, boasting that Venezuela was well-equipped to weather the storm. He has saved an unspecified amount of past oil revenues and the Central Bank still has reserves of $29 billion (the government snaffled $12 billion from the bank last month). But the bravado is based partly on the hope that the oil price will rise next year, and the conviction that Venezuela’s private banks will be happy to finance this year’s deficit, albeit at a price. They may well do so. According to one banker, the banks have a “gigantic appetite” for government paper because other lending is even more unattractive. The government caps interest rates, but inflation is running at over 30%.

Even so, spending cuts look inevitable. In victory Mr Chávez warned supporters that 2009 would be a year of “consolidation”. Already the wave of nationalisations that began shortly after the last presidential election has come to a halt. The state has dropped plans to buy Banco de Venezuela, a subsidiary of Spain’s Grupo Santander, for $1.2 billion, for example.

Only when things improved in 2010 would the revolution move forward, the president said. But it will survive: if anyone has to suffer, it will not be the poor but “the oligarchy,” he insisted. The government may seek a partial rapprochement, for pragmatic reasons, with private business, but seemingly not with the opposition mayors and governors elected in November, who have faced government harassment. For example, the city hall in Caracas, the capital, has been occupied for weeks by chavista squatters backed by armed police sent by the interior ministry. The government calls this a “labour dispute” and says Antonio Ledezma, the new mayor, must sort it out for himself. The opposition hopes to secure a legislative majority at a parliamentary election next year. But Mr Chávez will certainly never go down without a fight.

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Local Government - The Way Ahead

Speech by Hon Rodney Hide, Minister of Local Government. Good afternoon. I have to say, ladies and gentlemen, that I don't regard myself the Minister of Local Government - I consider myself the Minister for Ratepayers.

I don't represent councils.

I represent the people whose hard work and savings pay the rates.
And provide councils with their income.

That sums up the way I approach to my job.

When ACT went into its support agreement with National after the election, I took on my two ministerial portfolios - Local Government and Regulatory Reform ...

Because these are important areas that affect people and their communities in so many ways.

I also took them on because these areas in real need of change.
Here are my aims.

First, I want to keep rate rises down and encourage you to focus on core activities.

On the necessities, not the luxuries.

There can be no doubt that, overwhelmingly, ratepayers right across the country support this goal.

No one wants to pay more rates than they have to.

And there can also be no doubt that rates have been rising way beyond the rate of inflation for a good many years.

As have other charges and fees.

So I will be pushing for councils to accept that rates rises should be capped at the rate of inflation, or less.

Sure, councils for good reason may need to increase rates faster than inflation.

But they should get the consent of ratepayers for such increases.

After all, it's their money.

And it's a good test for a planned spend-up to get the agreement of those who are paying for it.

We all know the perilous state of the economy.

We must be a lot more careful with money than we were in the past.

That includes councils - although there've been calls from ratepayers and ratepayers groups for many years to cut back the big rates rises.

And to get back to basics, to what should be the core roles of councils ...

Providing public services such as rubbish removal, road maintenance, parks, libraries, and light handed-regulatory controls.

We all have wish lists - but councils must make better judgements about what they decide to support and spend money on.

They should not be running banks, investing in hotels, or paying for some superstar to visit.

Councils need to ask themselves each time a spending proposal comes up - "Is this a core service for local government to provide - and can our ratepayers afford it?"

When I look at the expanding breadth of activities that councils engage in, the answer must surely be, "Businesses should be doing this - not the council."

Even if it is a job appropriate for local government, the answer may still be "No, our ratepayers can't afford it."

So there are two fiscal tests we should be applying to councils.

Here's my second aim.

Ratepayers want greater transparency and accountability in local government.

Right now, council processes are murky and confusing.

I want to change that.

Ratepayers want to know who is responsible for council decisions - and who to hold to account.

For good decisions, we need good governance.

Good governance requires transparency and accountability.

I believe we can and should do better.

My third aim is to cut the red tape that's strangling businesses, and driving ordinary people homeowners crazy.

I want to see fewer of the absurd compliance demands in the regulatory area.

I want to see the burden that is placed by central government on local government reduced.

I want to see respect for private property rights

I want the freedom of individual New Zealanders enhanced.

When I went on the TV show Close Up late last year, I asked viewers to write to me about the problems they'd been having with their councils.

I got literally a sackful of mail.

Once it was known I wanted change in the local government sector, people wrote to me en masse.

I've had around 1100 people letters so far, and more come in each day.

But that's just the tip of the iceberg in terms of the extent of the problems people are having with councils.

I accept that much of the overbearing regulations and petty restrictions imposed by councils come from government legislation such as the RMA and the Building Act.

And that's why we're making changes to both.

The first raft of changes to the RMA was announced earlier this month.

There will be more work on the RMA and related issues.

Next, we're looking at the Building Act.

I'm working with Building and Construction Minister Maurice Williamson on these improvements.

But that's not all.

The practice of central government imposing more and more obligations on councils, which leads to more costs being passed onto ratepayers and the wider public, must stop.

I understand that just to put a Para Pool in your background for the kids will take months to get the paperwork done, and can cost thousands of dollars.

That's just for the council consent alone - which can cost up to fifty per cent as much as the pool itself.

Families can't afford a Para Pool because of the council costs and even if they can do so, they may not get the consent through in time for a swim till next summer.

That's ridiculous.

Some of these situations impact directly on just a few people.

Others affect many.

But the cumulative effect of getting rid of them will be substantial.

Like smoothing out a whole series of small potholes in a road.

Much of the problem lies with poor legislation.

But councils have also become very risk-averse and over zealous.

Earlier this week I visited a fantastic New Zealand business that is being driven to its knees by local council demands.

It's one of many in that situation.

The company is called Access Automation, based in the Hutt Valley.

Simply trying to carrying out their everyday business is now a nightmare.

They constantly have to battle councils just to carry out their business.

They make cable cars to give people access up steep hill sides and cliff faces, which we have a lot of in Wellington.

It's a clever, innovative, and successful company.

But it only has eleven workers.

That makes it a typical New Zealand company.

There's not a lot of fat.

Over the last four years, the council rules and regulations about what it can and cannot do have got tighter and tighter.

The company is now at risk - and so are the jobs of those eleven people.

Two and a half managers now spend 80 per cent of their time filling out council documentation simply to get resource consents.

No matter what is provided, the council wants more.

More reports, more analysis, more information, more data, more forms to be filled in.

Blah blah blah.

It's taking nine months to get a resource consent to put in a cable car ...

... so that an elderly lady can get to her house easily up a steep cliff from the street.

Things have got much worse over the past four years - as the council throws more and more absurd barriers in their way.

They get contradictory advice from council staff, departments don't talk to each other, and they often have to deal with different people from the ones they dealt with last week.

The guys at Access Automation are being ground down.

The company's at risk, the jobs are at risk, but imagine the combined effect of the same thing happening to thousands of similar companies around New Zealand.

They've had enough. They want change. And they're not alone - as I said earlier, my mail bag confirms that.

So do my emails, and conversations from people who come up to me all the time at airports and events around New Zealand.

It's my belief that we can and we must do better in local government.

That means greater transparency and accountability.

Getting our costs down.

Greater respect for taxpayers and ratepayers, and their rights.

Ending the petty red tape that's tying us up in knots.

We need to make it easier for New Zealanders to go about their business and everyday lives ... not harder.

Together we can do it.

Thank you.

ENDS

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