The Dim-Post

June 30, 2015

Greece, morality and technical challenges

Filed under: Uncategorized — danylmc @ 10:28 am

What happened? Roughly:

  • The two main political parties in Greece (PASOK and New Democracy, center left and center right, respectively) spent many years transforming the Greek economy into a unique ‘low tax high public spending’ model, in which there was a generous social welfare state but no tax revenue to pay for it. (Shipping, for example, which is where most of Greece’s very wealthy earn their money, was exempt from taxation).
  • So it was funded through borrowing, mostly from French and German banks. The left-wing government won entry to the EU currency union by defrauding the European Union, partly through paying Goldman Sachs to convert part of its debt into derivatives, which it didn’t have to declare to EU officials.
  • Eurozone membership allowed Greece to borrow money at extremely low rates, so the center-right government went on an insane borrowing binge for four years before the global financial crisis.
  • In the wake of the GFC it became apparent that Greece had been misreporting its economic statistics for years, that its public debt levels were unsustainable and that it was in threat of default. The Greek economy went into a deep recession.
  • Now, normally when countries go into recession they devalue their currency. Greece couldn’t do that though because it was a member of the European Currency Union. And normally when you’re in a currency union you’re also in a political union – like the United States – and wealthy members of the union simply transfer money to poorer regions. But there was zero political will in Germany and France to just transfer money to Greece, for obvious reasons.
  •  Enter the ‘Troika’. The International Monetary Fund, the European Central Bank and the European Commission undertook a series of loans to bailout the Greek government and prevent it from defaulting on its debts (which were, remember, mostly to German and French banks). The Troika made the loans contingent on a radical restructuring of the Greek economy.
  • These were the famous ‘austerity measures’. Lower government spending. Wide-scale privatization of state assets. New taxes. The austerity measures would cause some temporary pain, the Troika admitted, but according to all of their forecasts they would lead to a rapid recovery as bond markets rewarded the Greek government for making such tough choices, and business confidence soared.
  • The austerity measures were implemented, slowly, against a backdrop of massive protests, public strikes and rising political support for far-right fascist political parties. The recession worsened. Unemployment increased. More and more businesses went bankrupt.
  • The deepening recession put the Greek government in danger of default again. They went back to the Troika who agreed on another bailout loan on the conditions of even harsher austerity, the first round obviously not having been implemented properly, but the second guaranteed to lead to a recovery and robust growth.
  • The second package was passed through the Greek Parliament, amidst a backdrop of rioting and looting in central Athens. The second round of austerity measures were implemented: the economy continued to collapse. A UK economist described the outcome in 2012:

Since the beginning of 2008, Greek real GDP has fallen by more than 17pc. On my forecasts, by the end of next year, the total fall will be more like 25pc. Unsurprisingly, employment has also fallen sharply, by about 500,000, in a total workforce of about 5 million. The unemployment rate is now more than 20pc. . . . A 25pc drop is roughly what was experienced in the US in the Great Depression of the 1930s. The scale of the austerity measures already enacted makes you wince. In 2010 and 2011, Greece implemented fiscal cutbacks worth almost 17pc of GDP. But because this caused GDP to wilt, each euro of fiscal tightening reduced the deficit by only 50 cents. . . . Attempts to cut back on the debt by austerity alone will deliver misery alone.

  • The social consequences have been devastating. The suicide rate has soared. Youth unemployment is at 65%. HIV rates are up 200%. 20% of the shops in Athens are empty and the city is filled with homeless. 400,000 people in Athens eat at soup kitchens every day; about ten percent of the cities population.
  • The two centrist political parties were voted out of office, replaced at the beginning of the year with Syriza, a radical left-wing party. Because the government is unable to meet its debt repayments Syriza went to negotiate a third rescue package with the Troika, who after careful consideration decided that the Greek economy needs more austerity.
  • Syriza campaigned on an anti-austerity platform, so they’re putting the new austerity offer to a referendum, something that has deeply offended the Troika. A ‘no’ vote seems likely to trigger Greece’s exit from the euro. No one knows what will happen then. One bank estimated the cost to the Eurozone at about a trillion dollars. (Greece is defaulting on a $1.6 billion debt repayment to the European Central Bank).

So there’s plenty of blame to go around here. The politicians who ran Greece from 2000-2009 shouldn’t have borrowed all that money that they couldn’t pay back. The banks shouldn’t have loaned it to them. The EU should have anticiptaed the problem that lack of currency control would cause troubled countries.

But the real blame seems, to me, to be with the Troika. A bunch of the world’s most brilliant economists have contrived to take a moderate sovereign debt crisis and used their expertise to wreck a developed economy, inflict extraordinary misery on millions of people and initiate the break-up of the Eurozone, triggering a global market panic.

Keynes used to say ‘The economy is not a morality play. It is a series of technical challenges.’ Unfortunately, Europe’s economists turned out to be the worst people imaginable at solving this challenge.

June 24, 2015

Defying gravity

Filed under: Uncategorized — danylmc @ 2:15 pm

No Right Turn documents John Key’s assurance that cutting the $1000 KiwiSaver subsidy ‘will not make a blind bit of difference to the number of people who join KiwiSaver’ and the revelation that KiwiSaver enrollments have dropped by 50% since the announcement was made. Another triumph for our Prime Minister’s much-celebrated business genius.

It ties into something I’ve been mulling over in the past few days: the current political climate feels a bit weird to me. The last two weeks have seen Key’s credibility take a succession of hits. Pretty much every statement out of his mouth is almost instantly disproved, or revealed as a lie, or is just simply risible. Refugee numbers. The explanation that Nick Smith’s development properties in Auckland were ‘conceptual’ and that their legal position with local iwi was solid. Yesterday in question time the Greens revealed that Murray McCully had invited the Saudi businessman at the center of the Sheepgate scandal to sue the New Zealand government as a pretext for McCully to pay him a bribe, and Key explained that he stood behind McCully because it was all Labour’s fault, as would be revealed in the redacted Cabinet papers that Labour then attempted to release, but National blocked.

It feels like everything these guys touch right now is a disaster. Blaming Labour for all of their many blunders is pretty much all they do. It’s doomed, last-term government end-of-days stuff, like Labour’s coalition government at the end of their third term, with all the allegations about Winston Peters and Taito Phillip Field, and Clark’s endless wretched evasions over same. And yet, none of the current blunders and cover-ups have any cut-through. Key and his government are still super-popular.

Yes, I understand that some of this is beltway stuff and Labour looks unattractive to many voters and all the rest of it. But it’s weird that none of this sticks.

June 21, 2015

Colin Craig and the failure of founder-funded political parties

Filed under: Uncategorized — danylmc @ 10:12 am

Back before the election I was a bit worried that the Conservatives and Internet/Mana were harbingers of a worrying new trend in politics – the overt interference of the super-rich in our democracy, as they realised that buying influence through donations and lobbying were less effective than just establishing their own parties.

It hasn’t played out like that. Both parties are now effectively dead for similar (underlying) reasons. The founders of both parties were also the primary funders and that meant they they got to do pretty much whatever they wanted – just like they did with their private businesses – because they were paying for everything.

In a business it doesn’t matter much if the CEO is a jerk. Selfish, grand-standing malevolent behaviour is routine, but no one outside the company cares. There’s minimal public interest in the private lives or conduct of business leaders. And in a political party if a leader misbehaves then there is public interest, but you can dump them and get a new leader. In a founder-funded political party there is (a) intense public interest, as Internet/Mana found out with Kim Dotcom’s ‘fuck John Key’ rallies and tendency to make provocative public statements then refuse to answer media queries, and (b) no party without the founder-funder, as the Conservatives are about to discover.

June 15, 2015

Just lookit all that prudent sensible economic credibility

Filed under: Uncategorized — danylmc @ 1:20 pm

Via a Matt Nippert story (based on OIAs from Phil Twyford), which got a bit overlooked when it came out a week ago:

Housing New Zealand paid an investment banker $1.6 million to help it sell state houses, official documents show.

Low-profile Auckland banker Andrew Body gave advice to the Minister of Housing and secured lucrative contracts to implement the policy while also advising potential buyers of state housing stock – a dual role attacked by the Labour Party as a conflict of interest.

Housing New Zealand (HNZ) and Mr Body say correct procedures were followed, and conflicts were declared where required.

Mr Body was appointed in 2010 by then-Minister of Housing Phil Heatley to the housing shareholders advisory group, then later to an advisory panel to help form government policy on social housing.

And today we’ve learned:

Figures compiled by Labour showed that 443 state houses were sold in 2014, at an average of 13.3 per cent below the Government Valuation.

Labour claims Housing NZ has “lost” at least $13 million on the sales, with the total proceeds from sales where valuations were available raising $71.8m, compared to the $84.9m the houses were valued at.

Five state houses sold in 2014 raised more than $1m, including a $1.36m sale of a property in Devonport, about 5 per cent less than the property’s GV.

So Housing New Zealand is paying consultants millions of dollars to help it sell houses for less than the government valuation in the middle of a property boom to buyers advised by the same consultants. Meanwhile the quality of the homes still under care by the state are so poor their occupants are literally dying. This is just about the worst thing I’ve ever heard.


Filed under: Uncategorized — danylmc @ 8:47 am

It’s no secret the Labour Party has problems. The factions. The leaks. The bitter internal rivalries. Happily a group of centrist Labour members have decided to rescue the party from these woes by forming a think-tank called ‘Progress’, and if you want to learn more you can read this account leaked to Matthew Hooton of Progress’s founders having an argument with Labour Deputy Annette King (paid).

On one hand: every other demographic within Labour has its own voice in the form of a formal advocacy group, so why shouldn’t the centrists get one? On the other hand: because they’d almost certainly use that voice to conduct a sustained PR campaign against their own party membership, releasing populist policies designed to wedge the members and the public.

More broadly, I have two basic problems with the idea that Labour should be a centrist Blairite ‘third-way’ party. First: the left’s great intellectual struggle over the past eight years has been about how to reposition ourselves after the catastrophic failure of Blairist third-way centrism. The deregulated free markets that were supposed to fund generous social welfare states worsened inequality, even when functioning, and then they crashed and needed to be bailed out. The centrist argument boils down to ‘Let’s go back to that system that failed!’ It is not intellectually serious.

Secondly, we already have a Blairite centrist third way party in New Zealand. It’s the National Party. If you take Labour and nudge it slightly along the political spectrum while taking away the identity politics and token environmentalism you have a smaller less popular version of John Key’s National.

‘But that’s the point!’ Progress would probably say. ‘National is popular! If Labour wants to be in government it should be more like National. Then it will be popular too.’ But popularity in politics doesn’t work like that. It’s complementary. The trick is to make National unpopular. People just aren’t going to switch their vote to a less credible version of the thing they already like.

I do wonder why more of these people don’t forget about their quixotic mission to change Labour, and just support National? I don’t mean that in a glib way. National are pro-business and ‘aspirational’ but they’re doing loads of social democratic stuff like free doctor’s visits for kids and increasing benefits to poor families, plus they really hate identity politics and the environment. That is basically the centrist manifesto. Shane Jones is the patron saint of these folk and he’s crossed the aisle. Why not follow him?

June 9, 2015


Filed under: Uncategorized — danylmc @ 7:25 pm

The executive summary of the Dirty Politics scandal goes something like ‘A cabal of some of the most awful people in the country engaged in unethical and borderline illegal activity for political and financial reasons, and the mainstream media helped them do it in exchange for exclusive content.’ There was some contrition from a few individuals in the media after it all came out, but no real soul-searching, and most of the activity just continued on, same as before.

Today it got a bit weirder, and more awful. Over the weekend TV3’s The Nation – which is produced by Mediaworks – screened a story containing yet more allegations of criminal activity by Cameron Slater. Slater promised Lisa Owen that there would be ‘consequences’, and today a sort of vassal blog site which I will not link to, run by a pair of Slater’s lickspittles published private photographs of a senior MediaWorks journalist.

Which was horrible but, frankly, wouldn’t have mattered that much because, as I’ve said before, no one reads any of this idiocy. But the New Zealand Herald ran a story about the publication of the photos amplifying the malice behind the original publication a hundred-thousand-fold.

The story has been on-and-off the site all afternoon, and right now its off, or at least not searchable. I hope there was some soul-searching at the Herald and a decision to take it down and keep it that way, because the judgement here seems suicidally dumb. Do media organisations not see how helping this little coven of seat-sniffers attack other journalists might work out really badly for them one day? Slater et al do hate, and want to destroy all journalists not totally loyal to their masters, so helping them do that and facilitate their ‘punishment’ of journalists for publishing stories they don’t approve of is not in your interest no matter how many clicks it buys you. Even now they’re probably calling up MediaWorks and offering them dirt so they can ‘get payback’. Maybe ethics are too much to ask for in this day and age, but can’t we get some basic survival instincts?

Update: The Herald has been in touch to advise that they didn’t publish any of the images in their story so I’ve changed the post to reflect that.

June 5, 2015

Quote of the day, how many times have we seen this? edition

Filed under: Uncategorized — danylmc @ 2:05 pm

From the Guardian account of UK Labour’s election defeat:

Labour believed they could dominate two full days of the campaign with the non-dom proposal, but the Conservative campaign director, Lynton Crosby, countered with a trademark “dead cat” strategy – a tactic best summarised by Boris Johnson as follows: “There is one thing that is absolutely certain about throwing a dead cat on the dining room table – and I don’t mean that people will be outraged, alarmed, disgusted. That is true, but irrelevant. The key point, says my Australian friend, is that everyone will shout, ‘Jeez, mate, there’s a dead cat on the table!’ In other words, they will be talking about the dead cat – the thing you want them to talk about – and they will not be talking about the issue that has been causing you so much grief.”

This time, the dead cat was supplied by the defence secretary Michael Fallon. The day after Labour’s non-dom announcement, Fallon launched a deliberately excessive attack on Miliband, suggesting he would betray the country by surrendering the Trident nuclear deterrent in order to reach a deal with the Scottish National party: “Miliband stabbed his own brother in the back to become Labour leader. Now he is willing to stab the United Kingdom in the back to become prime minister.” Miliband’s team seethed at the tactic, though several confessed a lingering admiration for its effectiveness.

June 2, 2015

Public choice theory and mental health care

Filed under: Uncategorized — danylmc @ 10:33 am

Via the Herald:

Private investors will soon be given the opportunity to invest in mental health services, Government confirmed this morning.

Finance Minister Bill English and Health Minister Jonathan Coleman have announced plans for New Zealand’s first social bond, which will focus on the mental health sector.

The Labour Party described the new policy as an untested experiment which used New Zealand’s most vulnerable people as “guinea pigs”.

Social bonds allow Government to contract out services and funding to non-government or private organisations, with agreed targets and timeframes.

If the targets are met, Government pays back the investors, and also pays a return on their investment. The return depended on the level of results, up to an agreed maximum.

“Where we succeed, there are opportunities to help people fulfil their potential, a chance to break inter-generational cycles of dependency and, in the long term, potential savings for taxpayers.

“So social bonds are a consistent fit with our wider social investment approach which aims to better understand both the drivers and risks of social dysfunction and where we can have the greatest impact in improving people’s lives.”

The thinking behind this policy comes from a branch of economics called public choice theory; it’s still influential on the right and the logic goes like this: What if all those social workers and doctors and carers and psychiatric nurses in the state-funded mental health sector are all rational, selfish individuals? They have no incentive to actually help their patients recover from their illnesses and re-enter the workforce, because their income is reliant on the mentally ill remaining ill and requiring ongoing care! If they cure all their patients then they’re out of a job! Why not then, turn to the limitless ingenuity of the market and instead of leaving the care of the mentally ill to a bunch of corrupt, fat-cat doctors and social workers, incentivise our wealth-creating business leaders and executives to simply cure severe schizophrenics and manic-depressives, somehow, so they can re-enter the workforce as happy productive citizens!

The flaw, as usual, is the assumption that everyone thinks like economists and that people become mental health workers for the enormous profits, rather than motives of, say, compassion or humanity. And again, as usual, there’s magical thinking around the role of the market and our business class. Sure, businesses that win tenders for these services could work hard and find a way to cure all their clients, but what they’re more likely to do is hire lobbyists and lawyers, find a way to game the system and make a lot of money while inflicting misery on a bunch of very vulnerable people.

May 31, 2015

First thoughts on the Green co-leadership race

Filed under: Uncategorized — danylmc @ 8:17 am
  • Yay!
  • James Shaw won. I think/hope he’ll be very good. Although, being a political leader is an odd, demanding job. It changes people. You never know how new leaders will do until they’ve done it for a while.
  • But beating Kevin Hague is a promising sign. Hague was a very tough, smart, well organised, experienced opponent. We didn’t realise just how formidable he was until the three-month long campaign was well under-way. James was seen as a risky newcomer, and the only way he stood a chance against Hague was to take some risks but never make a mistake. And it’s very easy for candidates to make mistakes when they’re giving daily speeches, engaging on social media and trying to get their name out in the mainstream media. James did everything right. I really hope he keeps doing that.
  • There was also an element of luck. Part of Kevin Hague’s pitch was that he had parliamentary experience but James didn’t. Kevin was ‘ready to go on day one’. Then, in the crucial final weeks the Saudi sheep story broke. It was James’s portfolio. He was ‘strong in the House’ and got good media coverage so the key attack line against him disintegrated.
  • Although, the ability to identify opportunities and seize them is also a useful quality in a leader. So, again, promising.
  • I’m also happy to see that one of the key platforms of James’s campaign – that he performed well in the general election and got loads of people to vote for his party – was successful. I think one of the reasons that the left is struggling, both here and in other anglo-countries is that there isn’t enough emphasis on campaign skills and public popularity. Power within left-wing political parties is too often won by appealing to factions or affiliates – like unions – instead of the ability to connect with the public. A lot of senior Labour and Green MPs do very poorly in electoral terms but continue to rise through the ranks. So I’m very happy that – in the Green Party at least – the members have sent a signal that if they ever want to be leader, MPs need to go out and win votes.
  • I’ll try not to write about Green Party issues too much from now on. I don’t want to be re-posting their press releases, or become one of those guys who helps write a speech and then jumps on their blog to lavish praise on it.

May 27, 2015

The Secret Agrihub in the middle of the Arabian Desert

Filed under: Uncategorized — danylmc @ 3:35 pm

This is a weird little story slowly evolving into a major scandal. It’s complicated, but worth it. Most of the reporting has come from Heather du Plessis-Allan and Matthew Hooton:

  • Back in 2003 New Zealand stopping exporting live sheep to Saudi Arabia
  • According to Hooton (his stories are paywalled at the NBR), a very wealthy and influential Saudi businessman named Hmood Al Khalaf, who had a business importing sheep contacted National when they were in opposition, and John Key and David Carter privately assured him that exports would resume when National came to power.
  • When National won the election in 2008, Al Khalaf supposedly invested tens of millions of dollars in New Zealand farmland and a ship that could transport sheep to Saudi Arabia. But National didn’t change the law.
  • So Al Khalaf hired Mai Chen to prepare a lawsuit against the government, claiming for ‘between $20 million and $30 million. He also, allegedly, used his influence in Saudi Arabia to block a free trade deal between New Zealand and the Gulf States.
  • Here’s where it gets good.
  • McCully has just admitted that he didn’t take any legal advice on the strength of Al Khalaf’s claim. Instead he arranged for MFAT and New Zealand Trade and Enterprise to ‘invest’ $11.5 million dollars in a ‘bold and courageous’ Agrihub in the middle of the Arabian desert on property owned by Al Khalaf. You can view recent satellite photos of the ‘Agrihub’ on google maps, here.
  • We also bought a number of Suffolk Ewes – bred for cold conditions – off a company part owned by Al Khalaf and flew them to Saudi Arabia in an air-conditioned Singapore Air plane. They now allegedly reside at the Agrihub, where daytime temperatures average 50 degrees Celsius.
  • The Agrihub is (a) designed to be a regional showcase for New Zealand farming techniques and technologies and (b) is not accessible because it is on private property in the middle of the desert.
  • It sounds a lot like we just gave this guy $11 million dollars, doesn’t it?
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