Ha-Joon Chang uses the term ‘Private Sector Bureaucrat’ to describe executives like Mark Weldon. Who is obviously a smart guy. He did graduate work at Columbia, worked for McKinsey, was successful at the NZX. But he’s not an inventor or an engineer or industrialist or innovator; he hasn’t created his own company. He runs organisations other people have built, delivering products or services other people thought up – just like senior civil servants do in the public sector. And that isn’t to denigrate civil servants or executives in public companies; running big, complex organisations in either the public or private sector is hard!
!But there’s this weird culture around executives in the private sector. It’s not enough for them to think of themselves as very senior bureaucrats. Bureaucrats suck! So they’re thought leaders! Wealth creators! Visionaries! And, sure, a tiny number of them are; guys like Rod Drury and can accurately be described in those terms. But mostly they’re Weldons. Smart people who can manage organisations but have never had a visionary thought in their lives, which is why his plan for TV3 consisted of sacking all the expensive news staff and focusing on celebrity gossip and reality TV. Any random person you picked off the street could have come up with the exact same idea, and if they’d executed it with less destructive hubris than Weldon it could have worked. The executive as visionary wealth creator is a mentality that leads to guys like Weldon running around their companies firing everyone and destroying shareholder value because in their eyes, they are the value.
There have been a few pieces talking about the politics behind the housing bubble, like this by Jesse Mulligan at The Spinoff. And it’s true that there’s a strong political driver: younger people who don’t own houses don’t vote very much, and older voters who do own houses do, so of course the policy settings favour the latter.
Also, I don’t think the property bubble of the last sixteen years is reversible; even if the dreaded land tax were introduced and reduced prices by 17% that would really just take Auckland prices back a few months. Unless there’s something fraudulent/crazy happening on the demand side (like the financialisation of mortgages and mortgage derivatives in the US in the 2000s) the best that can happen to prices is a plateau with a large proportion of younger people locked out in perpetuity.
What are the long term consequences of this? There’s a phrase in Marxist-Leninism: ‘heighten the contradictions’, which encourages socialists to maximise the flaws inherent in capitalism (in simpler terms: make life worse for the workers) to hasten the revolution. Left-wing parties in democratic societies tend not to do this. But there’s a related idea on the right which I’ve always thought of as the opposite of heightening the contradictions. ‘The ownership society’. It’s most closely associated with Thatcher and George W Bush but the basic idea has been taken up by most right-wing governments in the last fifty years: expanding home ownership and share market investment to the middle classes. Align their interests with those of organised capital. Make capitalism work for them. Lessen the contradiction.
That’s gotten abandoned somewhere along the way, with the majority of younger people locked out of the housing market to maximise the wealth of older investors. Who capitalism ‘works for’ is now largely a generational thing. Which is, presumably, why an aging socialist is doing so well in the US democratic primaries, and why Millennials in general are so much more left-wing than Gen Xers.
This isn’t a problem for Key since he doesn’t seem to have any ideological commitment to capitalism, or any other ideology than doing whatever is most advantageous to him in the immediate short term. But the heightened contradictions for subsequent generations is an interesting challenge for National, and maybe something for the left to feel optimistic about as Key floats towards a seemingly inevitable fourth term in government.
Mike Hosking is in the Herald advocating for a National Party policy; also the sun is in the sky. Anyway, I liked this bit:
This is hopefully where another of the Government’s ideas will come into force in the ensuing years. Super teachers and super principals is a stroke of genus.
‘Stroke of genus’ would be such a great name for Hosk’s memoir.
I’ve disabled comments on the site for a while. Which is a shame, because they’re one of my favourite things about the blog. But they were just getting too stupid. I’ll turn them back on in a while and hopefully the break will have reset things a bit.
Via Matt Nippert at the Herald:
John Key’s personal lawyer cited a conversation with the Prime Minister when lobbying a Minister about a potential crackdown on the lucrative foreign trust industry.
Ken Whitney, the executive director of boutique trust specialist Antipodes, wrote to then-Minister for Revenue Todd McClay on December 3, 2014, over concerns Inland Revenue were sizing up the sector.
“We are concerned that there appears to be a sudden change of view by the IRD in respect of their previous support for the industry. I have spoken to the Prime Minister about this and he advised that the Government has no plans to change the status of the foreign trust regime,” Mr Whitney wrote in an email.
“The PM asked me to contact you to arrange a meeting at your convenience with a small group of industry leaders who are keen to engage to explain how the regime works and the benefits to NZ of an industry which has been painstakingly built up over the last 25 years or so.”
New Zealand’s trust regime recently made international headlines with the leak of the Panama Papers revealing the abuse of trust structures internationally by those seeking to launder money or avoiding tax.
If Key was a normal Minister there would be intense pressure on the PM to stand him down. Obviously he’s not, so we’ll go through a period of National loyalists and beltway types doing exaggerated eyerolling. ‘Of course the Prime Minister’s personal lawyer is a lobbyist for the offshore trust industry and used his influence to protect his highly unethical industry that provides no benefit to New Zealand. What’s wrong with that? That’s how politics works, dummies. Duh!’
Which, okay, that is how politics works here nowadays, but it doesn’t have to be, and voters have options for venting their displeasure. The story was broken by the Greens but the most likely beneficiary is going to be New Zealand First. Peters’ whole brand is ‘Winston will keep them honest.’ National believes there aren’t any consequences to their actions because Labour is dying, but all of this glib, corrupt buffoonery are locking them into a fourth term trying to run the country with Winston Peters.
The housing market is going insaner than usual, and every time this happens there’s a flurry of stories about how kids today can still get on the property market if they do it tough and give up on the lattes.
There are almost always problematic gaps in these stories: something about young people who have advanced degrees but no student loans, or who saved their entire salary for a deposit, sans rent and food but ‘did it all themselves’ don’t seem quite right to me. But the broader point is that having a tiny number of individuals making extraordinary sacrifices to enter the housing market is still a huge departure from historical norms. Previously most people bought houses, because most people could. But prices are currently at an historical high relative to incomes. The fact that young people buying houses in Auckland is such a singular event that it is newsworthy is a signifier of the problem in of itself.
There’s no continuous data series that lets you track house prices back to the 60s, so here’s two merged together: average individual incomes and then median household incomes. Houses are twice as expensive relative to income as they were in the early 1980s. Couples on two incomes find it harder to service a mortgage than single income earners did then! (And don’t get me started on the high interest rates in the 80s, that were part of an inflationary cycle that reduced the value of those mortgages dramatically, while my mortgage is still there after four years of the Reserve Bank undershooting its inflation bound.)
Via The Herald:
The Government is considering a land tax on offshore purchases of residential property.
Prime Minister John Key said the tax could be introduced if new data showed offshore buyers were pushing up New Zealand’s house prices. It would be the most effective response because it could be adjusted for conditions, he said.
The tax would capture New Zealanders living overseas, though expats could possibly get an exemption for three years.
A tax working group recommended a land tax in 2009, but it was not adopted at the time. The working group wanted the tax to apply to all property owners, not just offshore buyers. It estimated that a 1 per cent tax on the value of land would lead to an immediate fall in land value of 17 per cent, making housing more affordable.
A land tax huh? Very 19th century. It sometimes feels to me like Key and English realise they’ve done a pretty shitty job at modernising our economy so they’ve set up freebie policies for the subsequent left-wing government. There’s the capital gains tax on property sales within two years, which can be kicked up to ten years, and now it looks like there will be a land tax for foreign owners, which can easily be adapted to a land tax on undeveloped properties in urban areas (land banks), or even single owner occupier properties in suburbs like, say, Remuera, to encourage the development of apartment buildings.
Yesterday we walked the new track along the hilltop between Pukerua Bay and Paekakariki. It’s really beautiful: easily one of the best walks in the Wellington region. It’s also harder than most of the other popular Wellington tracks. Someone died just ahead of us on the trail, and several miserable-looking people walking the opposite direction from us stopped us to demand if there were any more uphill bits to come. There were a number of crying kids sitting on stairs half-way up cliff-sides being hectored by exasperated parents. (On the other end of the spectrum, some god-like looking shirtless dude ran past us and he wasn’t even breathing hard or sweating.)
It took us two hours, and I am moderately unfit. There are loads of good picnic spots. As we came out at about 4PM a group of people were just entering to do the walk as the sun went down, which would be awesome, although you wouldn’t want to get stuck up there when it got dark.
As everyone on the left never tires of pointing out, we had thirty years of neo-liberalism in New Zealand. But we don’t seem to have an abundance of capitalism. On the contrary:
Oravida is exporting millions of litres of New Zealand water to China, and the Green Party says it is wrong that they are paying practically nothing for it, while potentially making hundreds of millions of dollars.
Oravida pays about $500 a year to draw up to 400,000 litres of water a day from the Otakiri Aquifer in Bay of Plenty.
This will allow the company to take up to 146 million litres a year from the aquifer until 2026.
An Environment Bay of Plenty spokesperson said Oravida had paid a total $1503 for the consents since 1992, and last year paid $526 dollars in compliance costs.
Oravida managing director Julia Xu has been quoted in media reports saying that the company sells its water in China for $1.60 a litre. If it sold all 146 million litres of water at that price, it would make sales of $233 million a year.
We have endless crackdowns on benefit fraudsters to make sure they’re not scamming a few extra dollars from the state, and at the same time we’re literally giving away almost a quarter of a billion dollars a year in commodities to a company with close links to the National government. Tell me more about what a business genius Key is, and how fiscal and dour and prudent and sensible Bill English is while they hemorrhage valuable resources away for nothing.
If there’s a gap in the political spectrum anywhere in New Zealand its here. You could start a political party that stands for what the National Party pretends to stand for – markets, individual freedom, democracy, equal opportunity – and its manifesto would be to do the exact opposite of everything Key, English, Joyce and McCully have done in the past eight years.
Via Wikipedia: Jonathon Keats, experimental philosopher:
In 2006 Keats undertook several new projects, including two collaborations with other species: In rural Georgia, he gave fifty Leyland cypress trees the opportunity to make art by providing them with easels. In Chico, California, he choreographed a ballet forhoneybees by selectively planting flowers on the Chico State University farm, reverse engineering honeybee communication to suggest dance arrangements inside hives. Keats also turned to himself as the subject of a lifelong thought experiment, undertaken through the act of living. To make the experiment scientifically rigorous, he established a scientific control in the form of a high-density carbon graphite block precisely calibrated to match the carbon weight of his own body. The block was placed on display under abell jar at the Exploratorium in San Francisco. And at Modernism Gallery in San Francisco, he applied string theory to real estate development, enlisting the legal framework of air rights to buy and sell properties in the extra dimensions of space theorized by physics. To encourage speculation, the artist created blueprints for a four-dimensional tesseract house that purchasers might use as a vacation home. One hundred and seventy-two lots on six Bay Area properties were bought on the first day of sales.
In Chico, California, Keats opened the world’s first porn theater for house plants, projecting video footage of pollination onto the foliage of ninety rhododendrons.
There is much, much through the link.