This is what the 1% argument is about in the US...

From Sydney Morning Herald -

Mitt Romney, one of the richest men to run for president, says he "probably" pays an effective federal income tax rate of about 15 per cent - little more than most American workers struggling to make ends meet in the toughest economic conditions for 70 years.
...
Capital gains in the US are taxed generally at 15 per cent; likewise earnings from investments, such as dividends. Individuals earning up to $US34,500 a year fall in the 15 per cent federal income tax bracket, then pay 25 per cent to $US83,000. The top income tax rate is 35 per cent. (Americans also pay state and municipal taxes.)

Unlike investment earnings, wages are subject to Social Security and Medicare payroll taxes.

Tax breaks reduce the effective rate for most people. According to the Tax Policy Centre, in Washington, the average US household would pay 9.3 per cent in federal income tax in 2011 - but 19.7 per cent in all federal taxes once imposts were included.

Even this old bugger can see the point here.

Harking back to the 1% debate in this country, the difference in income taxation depends not on the type of income but on the ability to employ a good tax accountant.

On being occupied, and the process of occupation...

There was a time, within my lifetime, that "occupied" had meanings ranging from "being used" as in a house or toilet, to "doing something" deriving from the idea of "occupation". The active meaning of the latter has now transmogrified to include the first, so that the idea of "occupation Wall St" and its international derivatives has made a profession of inhabiting a space to prevent its use by others. Perhaps on reflection that idea is not as new as it has been presented. F'rinstance it was a regular family occurance for one member (usually my mother) to complain about the toilet being used as a reading room; a practice that went as far as the old man installing a small bookshelf on the wall behind the toilet so that books were not left on the floor.

So that history has somewhat coloured my attitude to those who have occupied Wall St, or closer to home, Aotea Square. Add to that a strong feeling that it was the wrong people making the wrong protest about the wrong thing and you might begin to understand why the ol probligo has been fairly quiet on the occupy front. OK, and to take the point from a recent post me old mate Al put up, I will explain why.

The wrong people? It is usual in recent times for protest to be led by the young, the idealist, those who want to improve this world for their own benefit. There is nothing wrong with that really, but I do think that the protest should be led by those who have put their faith in a system in expectation that they would gain due benefit for their participation and have been sadly let down as a consequence of their trust.

The wrong protest? The right protest would be against those whose actions led to the loss. The bankers are in part to blame, no question! But I do not believe them to be the reason, though they are part of the cause. The politicians are no more to blame than the bankers. Politicians respond to the same kind of pressures as bankers; to give people what they want. I don't think that individuals are at fault either. So to protest about the "profits made by the bankers" is a waste of time in my book. And that leads to the last...

The wrong thing? The fault really starts with the fundamental nature of our society; the basis of which is measuring societal success in terms of profligance, material and monetary wealth rather than ethic, virtue and contribution.

To which end comes a book review that is very a propos the general theme. Debt (written by David Graebe) is a book which I shall be reading as soon as I can lay my hands on a copy through the local library.

Debt's striking synchronicity with OWS should not overshadow the fact that it's also a formidable piece of anthropological scholarship. The book spans the concept's evolution from the great Axial Age civilizations—adapting Karl Jaspers's label to describe the period between 800 BCE and 600 CE in Greece, India, and China—into the age of global conquest, and finally though its bizarre mutations over the past forty years. As Graeber shows, debt could not have taken the form that it did during the Axial Age without the appearance of currency, but it was also far from being only, or even principally, an economic matter. Debt was originally a moral and cosmological notion, about our debt to the gods (in India), to our parents (in China), or to the cosmos (in Greece, and sometimes in India).

I need to put the idea of debt into the context of my opening argument. Bear in mind here that I am using "debt" in both sides of the transaction; it is an obligation, it is the act of being obliged to another, of owing.

The change that has taken place is from a communal debt to creator, to cosmos, to the principle of personal debt. The measurement of personal debt I suspect does precede currency by some great margin. As evidence of that I can point to Maori who, before European contact, had a strong sense of personal indebtedness which could lead to either death or enslavement as payment of those debts. There was no monetary measurement of either cause nor settlement; cause could include losing mana (societal position) to the "debtor" requiring utu (revenge for the loss and reinstatement) as payment.

In the barter economy, survival would have depended upon ethic and virtue (like simple honesty) in dealings between individuals. Hence an agreement to provide in return for a provision (work for work, work for material object) could also operate without the need for currency.

I suspect that currency was put in place primarily so that those in power - the mafia of the time - could easily obtain a portion of the value of each individual's global indebtedness. That value in return was used to obtain the services necessary to maintain the power to collect; the coertion that libertarians like to hate.

To return to the review -

The guiding principle of Graeber's sweeping global history is that debt must not remain the exclusive property of economic historians, and moreover, that anthropologists are better equipped to take on the issue. The foundational myth on which economics rests, and which Graeber relishes debunking, is the "touchingly utopian" idea that money emerged directly out of primitive barter systems and had only to do with interest-maximizing exchange. Arguing against this from an anthropological perspective, Graeber claims that debt is the basis of society, and as such is inherently ineliminable. He illustrates this point through the example of debt to one's parents: to seek to cancel that debt would be impossible. Graeber describes a system of gift-giving in traditional societies that takes place over time, and involves gifts of slightly more or less value than the ones that preceded them, thus ensuring that everyone is always slightly in debt or in credit to everyone else. This sort of debt, he says, is nothing less than the continual creation of society. It is not so much that we owe something to society, but that society "just is our debts."

But there is also a foundation principle that has not changed in all of that time; from the time of the Axis Wars. It is a principle that I would dearly like to see whether Graebe has picked up on; it is the main reason for wanting to read his book. It is the action that society took against people who did not comply with the "accepted debt" under which they lived. In times past (and I base this on the Ancient Greeks in particular) the consequence of not complying with societal expectations was to be excluded from the protection of that society. That would mean living in what was essentially enemy territory, making and getting as best one could; truth be told it was an effective death sentence.

That prompted the idea that the process of indebtedness has changed indeed, and changed most rapidly over the past 300 years. The bridge at that time between cottage industry to industrialisation saw changes to society, and not least to the processes of economics. That change continues. It is evidenced by the recent (the last 40 years) change toward the "technology based" society.

The debt to society no longer exists. Debt has evolved to the extent that it is now expressed solely in currency terms. Debt is now owed to others, in return for complying with societal expectations.

From the review, it seems that I will not at all agree with Graebe's conclusion, no matter how much I might agree with his rationale.

[Graebe] believes that ... at a moment when capitalism seems unsustainable, the great hope for the future is to turn back to traditional human economies of mutual, loving indebtedness. For Graeber, capitalism is as much a fantasy as any utopian option: "We could no more have a universal world market," he writes, "than we could have a system in which everyone who wasn't a capitalist was somehow able to become a respectable, regularly paid wage laborer with access to adequate dental care. A world like that has never existed and never could exist. What's more, the moment that even the prospect that this might happen begins to materialize, the whole system starts to come apart."

One of the problems of history is that there is no winding back the clock. I do not think that a graceful return to (for example) an agrarian society is any more possible than the Russians or the Chinese have tried to make it. It may come about if there is a cataclysmic close to industrialisation - the kind of cataclysm that made the dinosaurs extinct be it physical disaster or disease.

I think that what I am struggling with is the separation of "capitalism" as an economic process from the underlying engine that "requires" continual growth. To that extent I know that I already disagree with Graebe but I acknowledge that the disagreement could be based upon differing ideas of what "capitalism" is.

If there is an evolutionary step to come from the current and future economic crises it is going to have to start with a re-evaluation of the relationship between society, capital, and the idea of indebtedness. In particular, the idea that societal expectations can be met by possession of material wealth will have to change; the idea that societal wealth can be represented by increasing personal indebtedness will have to change; the idea that there is a free lunch for some may have to go as well.

On the subject of strange things and ...

...an idle moment at the office desk found this interesting juxtaposition.


Chance? Or intended?

In the wake of the jonkey...

From Spiegel, by way of ALDaily comes thoughts on the state of politics and, directly from that, of democracy as a political form.

Habermas is an 82 y-o "philosopher" who has some considerable standing in Europe in particular and his name has passed my way on occasion in the past as well.

Jürgen Habermas, 82, wants to get the word out. He's sitting on stage at the Goethe Institute in Paris. Next to him sits a good-natured professor who asks six or seven questions in just under two hours -- answers that take fewer than 15 minutes are not Habermas' style.

Usually he says clever things like: "In this crisis, functional and systematic imperatives collide" -- referring to sovereign debts and the pressure of the markets.

Sometimes he shakes his head in consternation and says: "It's simply unacceptable, simply unacceptable" -- referring to the EU diktat and Greece's loss of national sovereignty.

...

In the past, there were enemies; today, there are markets -- that's how the historical situation could be described that Habermas sees before him. He is standing in an overcrowded, overheated auditorium of the Université Paris Descartes, two days before the evening at the Goethe Institute, and he is speaking to students who look like they would rather establish capitalism in Brussels or Beijing than spend the night in an Occupy movement tent.

...

Habermas accepts all this without complaint. He steps up to the lectern and explains the mistakes that were made in constructing the EU. He speaks of a lack of political union and of "embedded capitalism," a term he uses to describe a market economy controlled by politics. He makes the amorphous entity Brussels tangible in its contradictions, and points to the fact that the decisions of the European Council, which permeate our everyday life, basically have no legal, legitimate basis. He also speaks, though, of the opportunity that lies in the Lisbon Treaty of creating a union that is more democratic and politically effective. This can also emerge from the crisis, says Habermas. He is, after all, an optimist.

...

He rails against "political defeatism" and begins the process of building a positive vision for Europe from the rubble of his analysis. He sketches the nation-state as a place in which the rights of the citizens are best protected, and how this notion could be implemented on a European level.

He says that states have no rights, "only people have rights," and then he takes the final step and brings the peoples of Europe and the citizens of Europe into position -- they are the actual historical actors in his eyes, not the states, not the governments. It is the citizens who, in the current manner that politics are done, have been reduced to spectators.

His vision is as follows: "The citizens of each individual country, who until now have had to accept how responsibilities have been reassigned across sovereign borders, could as European citizens bring their democratic influence to bear on the governments that are currently acting within a constitutional gray area."

(emphasis is mine)

That is based upon a premise that government as a process has changed; that it no longer serves "the people" (as in the catch-cry of old); that the process of government has become the means of perpetuating the careers of the "representatives". There is a strong parallel here with the "statism" cry of the libertarians. There are parallels to the "anti-socialism" of the Republicans.

(Confirmation Bias warning here!)

Very near the top of google (on the very first page) in response to "politic opinion europe economy" comes this -

On the other hand the economic policies exercised by the EU as a whole, with anachronistic, counter-productive, centralized protectionist policies, with an increasingly aging population and with the accumulation of excessive debts at private and public level; left the continent in a position of witnessing too little growth based on too much debt - an unsustainable cycle. The European leadership seeks to address the cancer of debt in all of Europe, both eurozone and EU, by means of issuing more debt. This is in practice what the EFSF is, the "stability bonds" and the ECB monetizing debts will be. There can be no end to the cost once new debt is issued to pay for the old one. Only sustainable growth, emancipated from cumbersome bureaucratic techniques can fix the problems EU is facing.

In another more recent post he concludes -

All this is caused by the denial of the powers of the European (and local) establishment, to accept that the crisis is fundamentally caused by quasi-bankrupt banks and by a single currency that should have never been created, but was produced to satisfy the arrogance of its architects, who thought that they could design an economic project to achieve political ends.

That does beg the question - fairly severely - of the cause of the "quasi-bankruptcy" of European banks. Was it the result of the same lending policies as led to the demise of Lehmanns and the need to rescue several other American banks as well as BOS in Britain? Was it the result of the prospect of default on sovereign debt by PIIGS? He is right in that current policies are aimed more at perpetuation rather than cure.

And at this point I can tie back directly to the Jonkey and his government's policies for the next three years. First contrast between NZ and Europe is that not one of the European governments is proposing the sale of government owned assets. Is this because they do not exist? Someone could help me with that one please.

More to Habermas' point, none of the governments in the PIIGS grouping has said anything at all about the real problems. I like Protos-stavrou's comment on the CAP in Europe - About 40% of the total expenditure of the Europe group is subsidy for a sector that produces 2% of GDP. I mean to say, that definitely comes under the "Say WHAT!!??!!" heading.

It also raises the point made by Whanga-Ray (returning here to the Jonkey) that one of the easier targets for the new government will be universal superannuation. That is likely, but it is also a problem for the Jonkey. The logical solution is to defer the qualification age to, say, 67. There is one major difficulty - that was Labour's policy and has already been put down by Jonkey as not an option. There are some quite attractive alternatives within that major strategy - such as paying less super for earlier take-up, more for later take-up. Will Jonkey sugar the pill? I doubt it.

Whenever the Gnats have talked of reducing government expenditure they have always taken the direct route; first to go are the budget items which will lose the least votes, the items which have received the greatest criticism in the past and so the likes of adult education bites the dust; next in line are those who vote for "them", and so we have the reductions in day-care subsidies, changes to the DPB and Unemployment benefits; then...

There is no question that the Jonkey is almost solely responsible for the ressurrection of Winnie the Pooh. His reported comments (directly attributed to the tea-pot tape and reported by W-t-P himself) that NZ First's supporters were "dying out" have created a multitude of Erinnyes that will be richly deserved for the next three years. To make matters worse for the Jonkey, every step he takes toward monkeying with the rate of superannuation is going to create severe pains in the back seats.

And that comes back to Habermas -

Jürgen Habermas is angry. He's really angry. He is nothing short of furious -- because he takes it all personally.

He leans forward. He leans backward. He arranges his fidgety hands to illustrate his tirades before allowing them to fall back to his lap. He bangs on the table and yells: "Enough already!" He simply has no desire to see Europe consigned to the dustbin of world history.

"I'm speaking here as a citizen," he says. "I would rather be sitting back home at my desk, believe me. But this is too important. Everyone has to understand that we have critical decisions facing us. That's why I'm so involved in this debate. The European project can no longer continue in elite modus."

Enough already! Europe is his project. It is the project of his generation.

...

And then he's really angry again: "I condemn the political parties. Our politicians have long been incapable of aspiring to anything whatsoever other than being re-elected. They have no political substance whatsoever, no convictions."

Hear!Hear!!

And, I guess, that leads down a path toward the "Occupy..." protests of the past few months. The WSJ I think has a recent op-ed talking about "blind campaign donations" of past and the next Presidential election in the US. As I pointed out in my last post, DHC laments the connect between Maori Party and iwi corporations. That is a trend that started decades ago in NZ with the Round Table and similar political "ginger groups" with the last major infiltration coming from the Brethren Church. Forget the "open market" arguments, they are as relevant as climate change in this context.

This from Wiley Post says it all...

Elections 2011 - Fit the Third

Wednesday -

RNZ on Morning Report as I was avoiding the rush traffic between here and there included a “debate” between the leaders of the “minor parties”. Quote of the 20minute duration; Dunny himself with “Tureia is right up to the point where ideology steps in.”.


Thursday -

SMH this morning is trumpeting the fact that the UN has rated Australia only 0.1 points (on a 0 – 1 scale) behind Norway.

After reading through the whole article, one finds (in the very last para) that the top five are Norway, Australia, Netherlands, US, and NZ.

Say what? NZ is in there at number five? That just can not be true!!! After all, NZers are leaving in droves, herds even, for the much greener pastures of Australia in particular. It is (we are told on the hustings) the problem of the economy. This is why we have to lift our wage rates to compete. That is why our productivity is stuffed. We are so far behind Australia that it is not funny!!!

Well, that deserves a “Yeah, right!!” of the first water.

There is a dose of realism that needs to be taken with the sugar. NZ has vulnerabilities internally, and most especially externally.

The internal exposures stem primarily from size; we are the very small branch office in a very large global multi-corporate organisation; we are the very small leaf at the far end of a long branch of an oak tree. The internal threats is one thing that we should be concentrating on over the next three weeks. Decisions made now are going to shape what this country looks like in three and probably fifteen years as well. My greatest fear is that none of the relatively sane parties has the guts and the intelligence to go beyond the application of ideology to the solution of pressing problems.

There is one instance where I think this combination of belly driven common sense is becoming apparent and that is in the form of Papandreou and his proposal to take the Greek economic woes to the electorate. No, seriously; I mean, stop laughing like that!

This article from The Age gives a pretty fair run-down on the choices; the consequences. That it might be “unspeakable” a distinct possibility is exactly why I think Papandreou has taken this course.

If the electorate chooses to turn down the bail-out offered by the EU it will so do in the knowledge (I would hope) of the consequences. That, I submit, is exactly what Papandreou wants. If the electorate is not going to stand behind him and support the economic rebuilding that is needed then why bother making the start. I can well imagine that his political career would end the next day. This is essentially the thesis of Thomas’ “return to the drachma” article.

There are many who paint – with Rolf Harris like speed – terrifying portraits of the result of Greek default on its international loans. It would, we are told, lead to the failure of the Euro, the collapse of most of Europe’s banks and financial institutions.

So, I want to stand back for a moment and look at that. If Greece were to refuse to comply with the conditions imposed by the EU what would really happen?

There is already in place an agreement to write off 50% of Greece’s borrowing. That is being soaked by the banks and financial institutions. The other 50% will largely fall on the same funds sources. But, and no one I have read says this, there is also agreement to bail Greece out to the tune of a very large sum indeed. That, in addition, is being expressed in a way that implies the presence of a very large “AND” that would follow; the agreement to provide further funding down the track with Greece’s continuing compliance with EU restraints. What happens to those agreements and promises should Greece refuse? They immediately become void.

Germany and France, in particular, have promised the greatest part of that funding; most in the form of guarantees but with the provision of immediate cash as well. Hands up those who remember the NZ deposit guarantee scheme that was implemented with almost indecent haste (let’s face it, the response was essential) a couple years back. That is where the Euro zone nations should be putting their efforts if Greece fails to meet their demands.

And, I think, Papandreou would be among the first to say, “Good on yer, mate. Take care of home first.”.

I follows on from that to back at home here where a small number of young and enthusiastic improvers of the universe have joined in the fun and games (that started in Wall St NY) of occupying places. In Auckland they chose Aotea Sq, in Dunedin the Octagon. Their main beef is the power and greed of the major banks. Watching those same major banks taking a bit of a pasting on the fallout from Greece might have them smiling. Hearing that the EU is bailing out those same banks will no doubt add a great deal of fuel to the fire.

I can but wonder how many of those yaeiou will pause for a moment to reflect on the problems that Greece would be facing.

TPPs and all that again...

My previous post (June 18) has been echoed several times since, not by (known) reference by other commenters but by actual events. Readers might like to return and refresh their memories, but essentially I spoke of three factors –
. The US approach to “Free Trade” agreements;
. The role of Minister Tim Groser;
. The desire of US negotiators to make NZ’s Pharmac a key obstacle to achieving a FTA between NZ and US.

I have been slowly catching up with events since early June. Hey!! I is getting older and the enthusiasm and energy resources are very limited; most at this stage directed toward photography rather than current events. Then there was a very enjoyable week that recharged most of the batteries – the ones with remaining functional cells anyway… Hoosoever!

It started – in part – with this article in Granny Herald on June 15

And in reference to United States concerns over the state drug-buying agency Pharmac, which the US sees as anti-competitive, Mr Groser said the New Zealand was not about to negotiate away its public health system.
He said Pharmac was not perfect "and we are always open to suggestions of change, but we are not about to adopt a health system, via a trade negotiation, that allocates resources according to capacity to pay."

Come forward to 4 July and the wording has already started to morph –

Trade Minister Tim Groser has heaped praise on the Government's drug-buying agency, Pharmac, but still refuses to rule out possible changes to the agency as part of future free trade deals.
…
Green Party co-leader Russel Norman said the free trade agreement between Australia and the US had crippled Australia's Pharmaceutical Benefit Scheme, its equivalent of Pharmac.
"They didn't abolish it or its fundamentals ... but they made changes to the way it operates."
The overall effect, he said, was higher costs that were either passed on to consumers or picked up by the Government.

The question is not “What was the effect?”, but “Why was it changed?” The answer has to be that the Aus government decided it was more important to have an FTA with the US and to disregard any cost that might be incurred as a consequence of the changes. Rather than just take Russel Norman’s word for it, a quick hunt around the SMH turns up this op-ed piece from last March –

Last year the Rudd government proudly announced it had cut a new and tougher deal with the drug companies, represented by Medicines Australia, which would save the taxpayer $1.9 billion over five years.

…
…a health economist at the University of Sydney, associate professor Philip Clarke, and his colleague Edmund Fitzgerald, argue the deal still leaves our off-patent and generic drug prices much higher than they are in most developed countries. They quote the example of statins, the cholesterol-lowering drugs, where the patents of the various types have expired or soon will. Statins account for about 16 per cent of the total cost of the pharmaceutical benefits scheme.
They surveyed the wholesale price of Simvastatin 40mg in 10 developed countries and found our price was the highest: 50 per cent more than the next highest country and more than four times greater than the average price.
The lowest price was in New Zealand, which stages competitive tenders between the drug companies. Its price is just a fraction of our wholesale price of $1 a tablet. And even in the US, chains such as Kmart Pharmacy sell that statin for $15 for 90 tablets.
Clarke and Fitzgerald estimate that, compared with prices in England and Canada, the Rudd government's deal with the industry lobby will cost taxpayers and consumers $1.7 billion more over its five-year term. And that's just for the statin group of drugs.

It bears repeating; given the results that Pharmac are achieving why should NZ “fix” something that is working? That question is especially a propos when the drug barons are pushing the US on the other side of the table.
And, from that too, comes the biggest of all –
Will Groser, and eventually the Jonkey himself, be able to put political reality before ideology?

Experience tells me not. The poodle, sorry Jonkey had his tummy well and truly scritched last week in his visit to the Oval Room. Now watch him return home and find all of the things that are "wrong" with Pharmac.

What is "Right" in politics?

There is a strange flavour to NZ politics, and it is one which could cause considerable confusion to those from outside looking in and it certainly makes (in the ol probligo’s case at the very least) looking outward over the border difficult as well.

Using the American categorisation as a guide, one would get the impression that the right wing – the far right of the Republicans as example – would be pushing for less government and greater freedoms both personal and market.

If I bring that to NZ and look at what is going on at present – remembering that NZ is only 4 months out from a general election – it is something of a shock to find the youngest (ignore the grey hairs and balding pate) and brightest of the far right from ACT promoting consumer protection legislation.

The incredulity rises when some of the content of that proposed law comes to light in the news –

Mr Boscawen today said he would introduce a Consumer Law Reform Bill to Parliament before the middle of the year, which he hoped would be passed before the year's end.
The bill, the result of a recently completed review of consumer law, will amend and consolidate several pieces of legislation, one of which - the Sale of Goods Act - is more than a century old.
Consumer protections contained in four acts which are to be repealed will be incorporated into the Fair Trading Act along with some enhancements, Mr Boscawen said.
"The Bill will also strengthen the enforcement powers of Government agencies, allowing faster and more effective action to remove unsafe products from the market."
Under the changes, unsafe good notices and compulsory recalls may be issued "where reasonably foreseeable use of misuse of a product will may or cause injury".
An example of the type of goods being targeted is laser pointers - which police reported have been used in 108 "attacks" on planes, ships and cars over a two-year period.

In those six short paras we find government protection of the consumer, increased powers of enforcement for government agencies, and government limitation of the products that NZ consumers are allowed to purchase.

One of the current batch of Ministers (ad-Ministers?) for whom the ol probligo can easily express a fair measure of respect is the Minister for Trade Tim Groser. He is a List MP (the ones everyone wants to be rid of…) and in my book is certainly worth his salt as Minister. He is very much hands-on in the Trans Pacific Partnership (TPP) negotiations, that belated and largely benighted attempt by the US to re-establish its influence and contact with our part of the world. As such it also gives a marvellous cameo of the political differences between lion and mouse. (Remember “The Mouse That Roared” anyone?)

Trade Minister Tim Groser took a swipe at the protected United States dairy industry last night saying it was time they stopped "looking in the rear vision mirror."

He said the US "must have a trade policy that is more than purely defensive."
Mr Groser made his comments in a speech in Wellington on the Trans Pacific Partnership agreement being negotiated at present among nine countries including the United States.

He also said New Zealand would ditch the TPP if there was any "sniff" that it was turning into an anti-China vehicle.

He had said so recently at a think-tank in Washington, and so had his Australian counterpart Craig Emerson.

To have the minor players making their stance very clear in this way must be anathema to the likes of Kurt Campbell and Janet Napolitano, both of whom found reasons for being late to the opening of the current round back in February.

Mr Groser said the TPP negotiations would not be completed by the time President Barack Obama hosted Apec in Honolulu in November but "solid progress" would be made.

The degree of progress would depend on what happened in Washington on the US' existing trade agenda, specifically whether Congress approved the free trade agreements already negotiated with Korea, Panama, and Colombia.

"The political oil" to facilitate their passing were the payments known as Trade Adjustment Assistance to affected sectors.

"No TAA, no deal.."

Americans reading this might recognise the “political oil” as euphemism for their term “pork”; but I confess that to be a stray shot.

The point here is coming back to a phrase that I heard some years back as a justification for any and most of the less digestible actions taken by the US on the international scene – “in America’s interests”.

The TPP is where “American interests” meets the real world of a strong-willed and somewhat sceptical southwest Pacific. There is no question that NZ and Aus stand together in the TPP negotiations and I doubt very much that stance would be altered in any way if either government were to change.

It should be well known to readers that Australia (as a “reward” for its services in Iraq and Afghanistan) already has a FTA with the US. NZ already has a FTA with China on which the ink has barely dried. The Australian FTA I have discussed in the past, expressing reservations on the long-term benefit ever compensating for the short term advantages taken by the US. That Australia is taking the opportunity of the TPP to voice opinions that run contrary to those of their partner in the FTA speaks some volumes about the medium to long term benefit of their (previously much-vaunted) FTA. And that too is where the ol probligo pulls up. It is (or has been in the past) a matter of FTA dogma that the agreement will run to the favour of the stronger party; and accepted wisdom says that is the US.

What the US is finding in trying to negotiate their TPP (and it was the idea of the US, not the Pacific) is that the minnows have grown some fairly sharp teeth. The composition and structure of those teeth has come from the influence over a long period of years from the US itself, and its various international allies (children?) such as World Bank, IMF, and OECD. A goodly dose of true capitalism in the mix has been of immense benefit as well, no question or debate.

A very primary example, one that is to the forefront in this country is a statement made in the past week or three to the effect that the US did not recognise the validity of centralised pharmaceutical purchasing organisations; that these organisations are considered anti-competitive; and their existence could represent a barrier to progress in negotiations. The diplomatic wording is very careful and somewhat guarded but there can be no doubt that some very heavy barons in the background are pulling one or three strings in the US administration. Essentially the only candidate that fits the statements is NZ’s government operated Pharmac. This is the organisation that handles licensing of medicines for use in NZ, and negotiates the purchase of those drugs for the whole of the public health system.

The criticism centres upon a “lack of transparency” and equally on the inability of the drug companies “to make submissions” to Pharmac – the “closed shop” accusation. Like so many of these things, there is another side to the impression. “Lack of transparency” implies a level of secrecy, something that a losing tenderer would want to penetrate to find out the prices being accepted for specific or even classes of product.

The “closed shop” is a well resourced and independent scientific and medical analysis system, empowered by the government to freely choose the source oand types of medications being used in this country. Locking out the salesmen (which seems to be at the heart of the outrage) not only maintains that independence from direct and indirect influence (called “corruption” in some quarters), it also allows for the hopefully objective appraisal of needs against supply cost. That in itself is a whole topic worthy of future thought.

The incongruity of the US objections is that Pharmac is very closely modelled on an American predecessor - MedicAid.

On the economics of the caring society...

This past week saw the release of the government's Budget Policy Statement; this is the first step toward the Budget for 2011 and sets out "where we are at present" and "things the government wants to do". That the statement carried "bad news" is not an understatement. A deficit was forecast for the current year. The bad news is that it is in fact considerably more then forecast, and greatly more than the previous years' actual deficit. Brian Gaynor has a summary here which gives a reasonable run-down of the salient points.

Finance Minister Bill English announced on Tuesday that the Crown's operating deficit before gains and losses (obegal) is now forecast to be $11.1 billion, or 5.5 per cent of gross domestic product, for the June 2011 year. This compares with the previous deficit forecast of $8.6 billion or 4.2 per cent of GDP.

The 5.5 per cent of GDP deficit compares with a similar deficit of 6.1 per cent for the 30 OECD countries but a number of points are worth noting:

New Zealand's projected deficit is not too far off the four "pigs", which are forecast to have the following budget deficits to GDP next year: Portugal 5.0 per cent, Ireland 9.5 per cent, Spain 6.3 per cent and Greece 7.6 per cent.

As he points out, things have not been that bad...

New Zealand had a great record throughout most of the 1990s and 2000s with 15 consecutive budget surpluses between 1993 and last year. Norway was the only OECD nation to have a better performance over the same period.

But as the saying goes, all good things must (will) come to an end. And so it is.

Gaynor lists the causes of "the end" thus -

The Crown's fiscal position has deteriorated since 2008 because of a number of initiatives including KiwiSaver, Working for Families, the indexation of benefit and this year's income tax cuts.

There have also been a number of one-off items, including the Canterbury earthquake and the leaky homes scheme, while tax revenue growth has slowed because of the weaker economy.

There are essentially two elements that give rise to the deterioration of NZ's financial position over the next 40 years. They parallel the difficulties being experienced in the PIGS economies; the increasing cost of age pensions and health care. There is a common factor in the two; the "aging population". Gaynor again -

The Treasury's long-term Crown revenue and expenditure figures are based on a number of assumptions, the most important of which are population demographics. Its main assumptions are:

The total number of individuals aged 65 and over will rise from 549,900 this year to 1.3483 million in 2050. As a percentage of the population, this age group will increase from 12.6 per cent to 24.5 per cent over the same period.

The number of individuals aged 90 and over will go from just 22,400 this year to 155,100 in 2050. This age group is expected to represent 2.8 per cent of the country's population in 2050 compared with 0.5 per cent at present.

Yep, include the ol' probligo in that demographic for sure.

The first expenditure line, which is New Zealand Superannuation, demonstrates the dramatic impact of the ageing population on Crown finances. NZ Superannuation is projected to cost $71.1 billion in 2050 compared with just $8.3 billion last year.

Most retirees claim that they are entitled to full Government superannuation because they paid taxes throughout their working lives but the big question is whether the country can afford this.

There will have to be a dramatic increase in the country's economic performance, and the Crown's taxation revenue, if the current superannuation scheme is to be maintained for all those aged 65 and over.

The next major expenditure item is health, which is projected to blow out from just $13.1 billion last year to a massive $95.1 billion in 2050.

...

The basic problem is that total government expenditure on superannuation and health is projected to escalate from just $21.4 billion last year to $166.2 billion in 2050, yet the working age population - those in the 25 to 64 age group - will only increase from 2.268 million to a projected 2.612 million over the same period.

In other words, each working person will have to pay annual tax of $63,600 in 2050 just to pay for superannuation and health, compared with tax of only $9400 this year to pay for the same two items.

And that is where I drop out of the demographic. It is not as if this is a "new" problem. It was foreseen when I first started work; it was the number one reason why I started contributing to personal superannuation savings almost immediately. But let's leave that debate there because there are some very sore points within.

It is at that point that dear old Garth George chips in. Now, to explain, George is one of those media commentators who would fit very nicely with the lifestyle and attitudes of the likes of TF Stern. Not that I expect TF will pass this way, let alone comment. Unlike TF, George is a sad, angry, and probably (I am guessing) lonely old codger.

Garth George picks up on that last (quite true) comment from Gaynor and uses it to beat his anti-abortion drum.

However, when it comes to the argument that the major problem with national super is the population increase in the number of people aged 65 and older, I want to vomit.

I wonder if it occurs to any of these doomsayers - invariably comfortably well-off folk in middle age and younger - that between April 24, 1974, and the end of last year, more than 409,000 potential New Zealanders have been slaughtered in the womb by state-paid abortionists - at the cost of tens of millions of taxpayer dollars.

I do not need to quote any further from his tirade.

I wonder if it has occurred to George that if those 409,000 "potential New Zealanders" were alive in 20 years time (when the last of them might have been starting work) there would likely be 200,000 more in the unemployment lines; 60,000 on permanent benefits as permanently hospitalised adults, or enjoying the free board and lodging of HMTK (I doubt that ER will be still going in 30 years...); the rest having departed for greener pastures in Australia and further afield.

To make matters worse, he completely ignores the fact that adding 400,000 to the total population used for the Treasury numbers (quoted by Gaynor) reduces the taxation load from $63K to $55K. That assumes that all of those 400,000 people will be in full employment; an unlikely prospect.

As I said, Garth George is a sad, angry old man. He is also well past his use-by date.

Education 102...

"The modern world has removed all barriers to education; there are no longer the class and craft divisions; there is an almost infinite increase in the complexity and depth of the knowledge required to “survive”.The removal of those barriers has created challenges which are still not resolved; they are not unique to NZ; they are the foundation of this debate; they are the “who gets what, why, and how much” of education in this modern world."


As a first illustration of the complexity of the debate, those challenges can not be simply resolved. What ever approach is taken, the words "Bill of Rights Act" spring immediately to mind.

Very simplistically, as soon as "Bill of Rights" gets injected the answer to the "who" becomes obvious. It has to be "ALL" people have the right to education.

And now I have to confess to one of the probligo's worst kept secrets - I have an issue with that "Right", as it applies to education. The personal issue is largely irrational, and is largely based on ignorance.

When we start considering the "who" of education the balance (in my mind at least) has to pick up the Right on one side and Benefit on the other. I have mentioned several times the family we had living next door whose third son was very severely disabled both physically and mentally. As was his Right, he was mainstreamed at school until his death at the age of 14. There is no question in my mind that the benefit gained would have been minimal., To be honest with myself I must lie alongside of that, the fact that I (at the very least) have no objective measure for the judgement. That personal issue aside, the "who" gets benefit of education has to be universal.

The same approach can be taken to the "...what, why, and how much...". The effect of the Bill of Rights (indirectly) is that all should have - at the very least - access to the same level and standard of education. That right applies (my issue above) to all, irrespective of ability, and prospective and expected benefit. I want to stress that "benefit" in this context is in two parts. There is the personal benefit with the prospect of higher future earnings as reward for the skills attained and applied. There is the benefit to society from having continuing qualified people where required and with skills appropriate to the time.

At that point too we start running into the same qualifications that I applied above; there has to be objective and supportable measures to support judgement of ability and benefit. That is a topic of its own to which I shall return. It will be important at that time to remember these contexts as well as others that arise.

For the moment, the universality of access to education leads to another decision point. There is a second balance that must be met. It is the balance between benefit and cost. The benefit side of that we will meet again as I said in the previous paragraphs. The decision that needs to be made is where the cost of education shifts from society to individual.

As a matter of tradition, that change occurred at the end of secondary education and the start of tertiary education. To state that as a matter of "fact" is somewhat misleading as it has become a bit of a moveable feast. Time was when the social funding of universities was comparatively minimal, with correspondingly high fees. Access to university qualification was by means of personal wealth or scholarship. A second level, "poor mans" tertiary qualification was provided through the technical colleges. They provided a bridge for professional qualifications and advanced technical qualifications. The third level, the trade qualification was provided by employers through bonded apprenticeships, combining on the job training with block courses from the technical colleges.

Summarising those -

• Degree and professional qualifications - Personally funded, at facilities provided from societal funding.



• Professional qualifications and advanced trade qualifications - Personally funded and/or employer sponsored, at facilities provided from societal funding.



• Basic trade qualifications - Training provided by certificated employers at no cost to employee. Bonded employees (hence low wage offset to employer).

In more recent times, the bridge between secondary and tertiary education has been changing particularly in terms of the sharing of the cost between society and individual.

For a time in the 1960's the share was shifted very much in favour of the student, the cost being borne in large part by society. The consequence was the appearance of what became known as "the professional student"; people who attended university for a good number of years emerging eventually with qualifications of little use, or in some notable cases after effective expulsion, none at all.

Societal reaction to that "over funding" resulted in the balance being moved in the opposite direction; increasing the personal liability for funding through increased tuition fees. As this shift progressed, other means of encouraging higher education were sought resulting in the introduction of student loans; the subsequent societal monkeying with the basic premise of "user pays"; further shifts in the balance between personal and social cost; pressure for "living allowances" to counter the loss of traditional seasonal employment for students...

The picture that the reader should be getting by now is of a complex rather than simple model of education provision. That was exactly my intention as many of the perceived problems with education these days are in fact consequences rather than causes.

Illustrating that point is relatively simple.

Society's measure of "potential benefit" has been imposed through testing of scholastic achievement at various stages along the path from fundamentals to eventual qualification. The potential of each individual has been (in theory at least) assessed at three critical points -

• At the end of primary education. This to ensure that pupils (in theory at least) entering the secondary level had the fundamentals of reading, writing and arithmetic, a reasonable level of general knowledge, and the ability to learn.



• At the end of compulsory education. This is set at age 15, which corresponds (roughly) with the 5th form year. School Certificate was seen to have the fundamental flaw of having half those sitting the examination fail. Actual examination results were scaled in order to achieve this consequence. There was a second failing in the process in that the examination was not compulsory. As a result, a significant number of students were leaving school without any assessment of their ability.
  
  Those successful in that School Certificate examination "earned the right" to a subsequent year of free secondary education at the end of which came another, similar, examination of attainment; again with the 50% fail cut-off. This time the examination was for University Entrance; success giving a student the right to undertake a university education. At the same level, and after a further year of study there were public scholarships awarded to the highest achievers.



• The third critical qualification comes at the completion of tertiary education; at whichever level that might have been undertaken.

The other side of "potential benefit", the trade-off, is the expectations of the student. Whether "free" education or expensive, there is the need for the system to provide the quality that should, that must, be expected by the student (or his parents).

The qualification must be valid evidence of knowledge and ability. There must be acceptance of the quality of the qualification when presented to an employer. The validity and applicability of the qualification to employment should - in theory at least - have an impact on the value of that person as an employee. That is the relatively simple mechanism by which the student gains benefit from the endeavour of attaining the qualification.

That, as I see it, is the general cycle of economic benefit that comes from an effective education system.

• Society provides a basic education to all free and as of right.


• Society gains the benefit of having people with skills that are appropriate and of value.


• People with skills and qualifications command a higher price than those without.

That economic cycle is relatively simplistic as it ignores external (to society) pressures and pricing. So if one wishes to add complexity at this level, one can examine the pricing pressures resulting from the usual supply and demand mechanisms for skills and/or qualification. This is evidenced in a wide range of different problems faced within NZ at the moment; the general shortage of junior doctors with incomes in Australia and elsewhere considerably higher than in NZ; the difficulty of persuading those doctors who do remain in NZ to shift out of the major centres (where incomes are higher) into provincial and rural centres; the difficulty of obtaining qualified senior medical staff to provide public health services at a cost acceptable to society. It is not just a case of restricted supply. The barriers are necessarily high. The cost of obtaining suitable qualifications is likewise necessarily high. The return offered from outside is higher than can be sustained internally.

At this point I should not have to specifically point out the underlying over-simplification of Karl du Fresne's rant about the current negotiation of teachers salaries.

There is something fundamentally wrong with the system when a central Auckland college has to advertise a position for six months before getting an applicant. What is even worse is when the only applicant turns out to not have adequate knowledge to provide the level of teaching required. This is not to argue that society should yield totally to the wage demands of teaching unions. What is essential is that society is aware of the connection between the economic returns to graduates and the value of the education that they provide to society.

At the same level, there is something fundamentally wrong with society when a measurable portion of the population can regard education as a waste of time and effort. For this group, holding qualification at any level provides no benefit; employment levels are low to begin with, in some instances unemployment can be as high as 30%; incomes are never far from minimum wage irrespective of qualification; there are proven instances where higher income can be obtained from unemployment benefits than from paid employment. What that indicates more than anything else is that the demand for that occupation or class of employee is swamped by the available supply.

But to return to the topic of teachers after that little wander into the wilderness -

The current qualification requirements for teachers are that they be degree qualified; in the case of secondary teachers two university degrees are of benefit, one in Education and the other in the specialty that person wishes to teach.

The present societal attitudes to graduate qualification - this returns to the balance between public and private funding of university qualifications - has resulted in the situation where all graduates start their working life with a government mortgage on their income. The size of that mortgage varies; the highest are in medicine and dentistry, the lower in commerce and some science disciplines.

If we consider at the same time the difference in return paid in NZ compared with Australia for example - a difference sometimes stated as being in excess of 100% - the obvious and inevitable consequence of the current policies is a goodly number of NZ graduates exporting themselves, leaving behind shortages of well qualified people in critical professional occulations and the accumulated mortgage held by society on their prospective income.

"Lose - lose" as they say.

And remember, as you mull that point over, some of those graduates being exported are well qualified potential teachers that NZ needs in its secondary schools. Their first year's income under NZ teaching scales (for two degrees) would be no more than some $45,000.

I work with senior clerks, no qualifications other than experiance, doing fairly routine office work, with no responsibility for controlling 30 or so unruly teenagers, who are paid as much as that.

All of which takes us full cycle on du Fresnes' rant against teachers and the negotiation of their payscales.

On economic growth...

With the G20 or whatever the most recent international economic talk-fest is being called in Toronto this past few days - along with the obligatory silly-shirt day - thoughts are filtering through the ol probligo's neurones carrying tags like "growth", "recession" and the like.

And I keep coming back to the same brick wall.

How can there be continuing "economic growth"? What is the basis for the measure of "economic growth"?

NZ has a record of our economy growing at an annual rate of 1.8%. Over the same period, China's economy has grown at a rate of some 9.5% p.a. I have to presume that these measures exclude the impact of inflation, currency changes, and the other "influences" that impact upon monetary measures.

Y'see, if the NZ economy has "grown" by 1.8%, does this mean we have spent and consumed that much more (very likely) or produced and made that much more (less likely).

Underlying that question is an even more fundamental bother. Is there a limit to the true value of the global economy. If there is, then the fight to increase "growth" has to be considered as a change in balance; more to one meaning less to another.

The immediate suspicion is that is only part of the answer. It is as likely that the limits are in the measurement of "wealth" and "total resource".

Thoughts?

On taking quotations out of context -

How many times have these words of Adam Smith been quoted in support of the neo-capitilist ideals of disaffected Americans -

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love."

Me old mates at ALD tagged a commentary at New Statesman that picks up this point and correctly places it in the context of his earlier "The Theory of Moral Sentiments".

Read the article for the detail. I recommend it.

What does deserve quotation is another (equally out of context) relating to the "political economy" from Adam Smith -

..."first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; and second, to supply the state or commonwealth with a revenue sufficient for the public services".

Next thing will be members of the American right quoting the likes of Karl Marx's economic theories in support of their neo-neo-capitalism. The driver behind such a move might well come from this thoughtful article from Der Spiegel -

Greece is only the beginning. The world's leading economies have long lived beyond their means, and the financial crisis caused government debt to swell dramatically. Now the bill is coming due, but not all countries will be able to pay it.
...
A Huge Bubble

The world was saved, temporarily at least, but since then it has accumulated more debt than ever before in peacetime. The national deficits of the 30 members of the Organization for Economic Cooperation and Development (OECD) have grown almost sevenfold since 2007, to about $3.4 trillion today. Their total debt burden has also grown dramatically, to a record-setting $43 trillion. In the euro zone, national deficits have even grown 12-fold in the same time period, with the euro-zone countries accumulating $7.7 trillion in debt.

The current government debt bubble is the last of all possible bubbles. Either governments manage to slowly let out the air, or the bubble will burst. If that happens, the world will truly be on the brink of disaster.

When Greece faces a possible bankruptcy, the euro-zone countries and the IMF come to its aid. But what happens if the entire euro group bites off more than it can chew? What if the United States can no longer service its debt because, say, China is no longer willing to buy American treasury bonds? And what if Japan, which is running into more and more problems, falters in its attempts to pay for its now-chronic deficits?

The conditions that prevail in Greece exist in many countries, which is why governments around the world are paying such close attention to how -- and if -- the Europeans gain control over the crisis.

Now that is frighteningly close to some of the ol' probligo's worst fears. Galahs like MK should, but won't, listen.

Time to go play Gorillaz...

How a Stern response works - 1

Probligo, There is no simple answer; however, the numbers you show include all the free passes given to illegal aliens [1] and moochers living off those who actually do pay their fair share[2]. That having been said, another reason for high costs have to do with greedy lawyers making a fat living off civil court cases filed simply to make money rather than to correct some fault which may or may not have caused injury to their client. Regardless of the outcome, doctors have to protect against such suits, hospitals raise their prices and so on and so on [3].

Having watched our government screw up almost everything they get their hands on, what is to keep them from destroying the health care system far below any standard we now have? Nothing! [4]


This isn't about government providing health care so much as it has to do with government taking control of health care which in turn turns citizens into subjects. Subjects are much easier to control when you have their health controlled.[5]

Aside from the cost of doing business, there's another detail, that of Agency, the right of individuals to act on their own without having to bow and scrape to anyone.[6] Our system, as inefficient as it is, mostly due to government intervention I might add, does work to supply the best medical service anywhere in the world [7] as proven by the fact that world leaders come to the USA for treatment when the going gets ugly [8].

No, you can have your government health care doled out [9] and may you always enjoy good health; I'd have preferred the socialists we have here to have moved to a country which would more suit their desires and to have left the best form of government alone [10].

[1] Valid point number one. Do those illegals have green cards, TF? Alternatively, you have agreed that you would not find carrying a photo-id as being an insult to your freedoms (despite the fact that two of your most notorious enemies in Hitler's Germany and Soviet Russia had the same government controls). Why should the health system not ask "green card, please". Or perhaps you could have your number tattooed on your forearm! That would be even better, never leave it at home!

There is the first grouch here as well. It is the practice of using politically correct generalisations such as " all the free passes", "illegal aliens" and " those who actually do pay their fair share".

Now I do understand the category you think of as "illegal aliens". It is a very extensive group that ranges from Mexican wetbacks who pick fruit in California all the way through to ET himself. But in truth, what proportion of the total population would they represent. Here in NZ (yes, people do try very hard to immigrate here illegally) they might number in their hundreds. A "clean out" of illegal Polynesians(in the late 1970's), most Samoans and Tongans, in what became known as "The Dawn Raids" resulted in about 800 people being sent home and about 2000 being granted permanent residence eventually; in the main justified by the fact that they were employed in jobs no one else wanted.

Perhaps, just for me, you could explain your concept of "their fair share"? Is that just a politically correct code name for "only for themselves"? or perhaps "no more than I absolutely have to"? Or is it more a convenient way of dropping out of an unsupportable position?

[2] I have already dealt with the politically correct generalisation here. Still, valid point number two. NZ has its share of "free-loaders and moochers" too. It is probably as big a problem here as it is in the US.

Our current government (it is Conservative to the extent of being "right of centre) is arguing that that number includes women whose men have walked out (to Australia) to avoid paying family support, those teenage girls who get pregnant and whose families refuse to support them, and other instances of one parent families. There are some 40,000 on the DPB at present, about 1% of the total population.

Do you include unemployed in that total? Yep, they are freeloaders too.

How is about youngsters no longer covered by their parents insurance, but who are not able to afford their own insurance?

How about those aged over 55 whose insurers have told them "you are too much of a risk - insurance declined".

When did you last look at an insurance proposal form? Ever seen that question "Have you ever had a proposal or policy of insurance declined or cancelled? If yes, please provide full details." You automatically write or tick off "No" and pass on to the next. How much do you really know of insurance law? The principle of a "fiducial relationship"? The duty you have of full and relevant disclosure, and the consequences if the insurer gets the slightest whiff that you "forgot" something relevant.

[3]Valid point three. How to overcome the litigious nature of American life? Why does anyone in the US become a doctor? I certainly would not want to... By all means expect professional standards of health care.

But what you are getting is truly what you want - an unregulated society. After all, if locksmiths do not need to be registered, why should you expect doctors to be the same? It impinges on their God-given right to work as and how they please. Caveat emptor prevails. Pick the wrong one and you might be able to get yourself rich. Sue someone just because he cut your fingernails instead of curing your in-grown toenail. Who cares?

[4] You mean you are happy with the way things are? I'll repeat my previous question, TF. What will you do when you can no longer afford your health insurance? Go on Medicaid?

If it is broken, what have your political champions ever done to try and fix it? Anything? Ever? Why did their solutions not work?

[5] Political claptrap number three. If a Democrat government ever changed the system so it applied only to members of their party, what would be your solution? Mine would be armed insurrection.

[6] Political claptrap number four. I had heart surgery two years back. In what way did I have to "bow and scrape" in order to have that (life-saving to me) done? It was two spits better than my private insurance that refused to fix it "because it is a pre-existing condition". OK, I could have sued them, but there is no way I could afford to... That would have cost more than the surgery.

[7] ...providing US citizens with the 46th highest life expectancy in the world. If that is what the best can do, give me our second-rate health system any day.

[8] Yep, state leaders from places such as Israel, Iraq, Zimbabwe and Russia. Name one world leader from the EU, or any of the members of OECD, who has gone to the US for health care. There are none. They use the health system in their own country.

[9] Political claptrap five. Doled out? No. Sufficient resources to meet demand? Yes.

[10] Political claptrap six. You have the government and system that you deserve.

What is becoming apparent, TF, is that for reasons you can not explain - other than the fact that he is a Democrat - you do not agree with what Obama is doing. It becomes a matter of opposing simply because he is "one of them" and not "one of us". The important thing is to sling around as much shit as you can in the hope - vain hope I believe - that more of it will stick to others than does to yourself.

Your simplistic response that "the money does not matter - I leave that to my wife and my accountant" is clear evidence of that.

Holiday occupations... Animal Spirits 1

I made mention (if I recollect in a comment to ATOW) that the Christmas break was going to include the absorption of "Animal Spirits", a comparatively short summary of "human psychology and the economy and why it matters for global capitalism", written by George Akerlof and Robert Schiller.

The title originally comes from "spiritus animalis" which in its old (mediaeval) useage meant "of the mind" or "animating force"; the fundamental life force of man. In its modern use it has attached to economics - blame Keynes for that - as a reference to a restless or inconsistent element in the economy.

A & S summarise those animal spirits as -

Confidence. A&S use that specific term as it directly and intentionally connects with Keynes' "multiplier effect". I personally think that given some of the twists used by A&S to mould "confidence" to their extension of Keynes' useage it might have been better to use "belief" rather than "confidence". The essence is the propensity for humans to follow a persistent line of thought irrespective of its truth and irrespective of positive (optimistic or growth) or negative (pessimistic or recession) trend.

Fairness. In NZ the last statutory attempts (by Auntie Helen) at resolving relationships between employers and employees required of both sides that they engage in negotiations in "good faith". As a legal codification it agrees fairly well with A&S's thoughts on the setting of wages. Essentially it leads to the discussion of the relationship between unemployment, wage levels, and inflation.

Corruption. Actually A&S include "and anti-social behaviour". I do not think that is neccessary; it is a redundancy. That it is very quickly reduced to the single word might indicate that they thought so as well. I occurs to me that the meaning of "corruption" can also be extended. There is the neo-classic meaning of "bad dealings" connecting to the "antisocial" idea. There is a second, older, and perhaps even a more appropriate meaning as well; in terms of "corruption of the flesh". Those with older heads will make the direct connection to death, but there is also the "corruptions" that are self-inflicted - the moral corruptions of the flesh.

Money illusion. This is an interesting one. It is the ability of humans to relate "value" to monetary numeration, but at the same time being unable to comprehend the impacts of inflation and deflation on the value of the monetary unit. So, the quantum of $1 million can be understood, but the impact of monetary inflation (or deflation) at 3% per annum for 5 years on that sum is not. (As it happens, that would make the "value" of the monetary unit reduce by about 17% or prices would have increased by some 20% over the five years).

Stories. The one word term is used by A&S as a shorthand for "sense of reality, who we are and what we are doing". Personally I think it is a very powerful and concise term and especially since it links with the first of "belief". Also in that context it gives rise to an extension into many other (than economics) facets of human existence that warrant further examination; at the very least by this old and somewhat rejuvenated probligo brain.

Interesting things discussed along the way -

The multiplier effect originally proposed by Keynes became the "Hick's multiplier" and as a result of the latter's (further) analysis became attached almost exclusively to monetary and GDP effects within the economy rather than Keynes' intended "confidence multiplier".

Samuelson thought that Keynes (in some instances) went too far and in others not far enough. That the two were "opposed" is not as significant as how much they were actually in agreement.

The classical Adam Smith view of the invisible hand creates a useful mechanism for examining the fundamentals. However it is only useful in the explanation of those fundamentals. Samuelson I recall wound his way through this minefield by using the "reasonable man acting in a reasonable manner" as an essential of the prim misses required to reach a delusion. That any man acts reasonably at all times may be so, but reason is not always perfectly logical. "Reason" is not part of the definition; instead "reasonable" is the mean of human behaviour.

The main discussion in the book centres on the reasons why "conservative" economics does not accurately predict either the occurence or the progress of "bubbles"; primarily because the impact of the spiritus animalis on the real economy is ignored.

All in all it is a thought-provoking read. Worth the effort and providing a somewhat different light on recent macro-economic events.



UPDATE - to add after-thoughts under the heading of "corruption"; to add the closing paragraph.

On entitlement mentality...

I started writing last Saturday in response to a recent post by TF, in which he used (in the usual derogatory context) the tag-term “entitlement mentality”. I got myself horrendously bogged down with the balance between my line of thought and the kind of connotations the term has and to which I was objecting.



Then, last night was one of those few tv programmes that I really enjoy. A child psychologist, Nigel Latta, is in the middle of a series of programmes on the subject of “child-rearing” or parenting.



OK, ok I can hearing the scoffing already. No, the probligo has not lost his tree. It is a very interesting take on children, parenting and how best to achieve kids with the right attitudes. It is also, at the very least in terms of the debate at hand very a propos.



A brief wander through the chatboards and “reviews” that google brings to the surface in response to “latta parenting” will show everything from the “liberal” pain and outrage (at topics like poo in the bath or breastpumps) to the outright and unreserved approval of mums of real kids.



The tv series is based on a “stage” presentation that Latta started back in 2007 and it has been doing the rounds since then.



The clue to all of this has to be in the name – “The Politically Incorrect Parenting Show”.



This taken from a Listener interview back in 2007 –

It’s time to poke a stick at our child-centred world, says Dunedin-based clinical psychologist, author and father of two boys Nigel Latta. And he does so, unashamedly, in a performance he calls the Politically Incorrect Parenting Show.

What is politically incorrect parenting? It came about because I think we’ve got incredibly precious about children and we stress and worry more than any other generation of parents. We worry about them walking to school, climbing trees, if we read them enough bedtime stories, if we read out all the plaques at the museum … none of it makes a difference.

Isn’t that just the natural order of things for a parent – to worry? If you’re constantly stressed and worried about whether you are doing a good job, you’re not going to do a good job. You’re far better off enjoying your kids, and then when you stop enjoying them, tell them to go away and play. Like our parents did. Our parents raised us on some pretty straightforward guidelines: we’re adults; you’re children. We play with adults; you play with children. Self-esteem hadn’t been invented when we were children. Our parents could just get on with being parents.

Are parents these days too busy trying to be their kid’s best pal? It’s okay to not be their little mate and it’s okay if they hate you. We got a letter last night posted under our door from our seven-year-old, saying how much he hated us.

How creative of him. Did you give him a prize? Why did he hate you? He was sent to bed early for being rude. He’s still learning that sometimes in life it’s best to zip one’s mouth rather than keep arguing for a position that’s already lost.

Are you New Zealand’s answer to Supernanny? If anyone described me as Supernanny, I’d shoot myself in the head. She’s possibly the most annoying woman in the world. I really like the British series Little Angels because it shows parents fixing things.

On one hand you say there’s this enormous anxiety about positive parenting and that we are very child-centred. But on the other, New Zealand has one of the worst records for child abuse in the OECD. The people who get anxious about positive parenting generally are concerned, and the people who beat their kids don’t engage in things like the debate around Section 59 and they often come from generations of crap parenting. They actually don’t care about hurting their children. So, this idea that we can appeal to them is ridiculous.

Not even through television ad campaigns – “Violence is not okay”? It’s just absolute bollocks. It’s lunacy. There are lots of things we could do in this country to reduce the number of kids who die or are hurt, but the problem is that the country is run by politicians and people who are good at advocating to politicians. The good clinicians, the people who can solve the problem, are crap at working the system and they never have very much money.

People say parenting’s the hardest job in the world, even for those least marginalised. Absolutely. I’ve been incredibly lucky, I had fantastic parents and grew up in a stable home and yet there are still times when I feel like chucking my boys out the window. I’d walk into the fire for them, but some days my fingers itch for the want to throw them out the nearest window.

Have you ever hit your kids? Hit, smack – absolutely. In fact, I’m the only person in New Zealand who started smacking because of Sue Bradford.

But aren’t the big people supposed to be in control and not hit or bellow? It’s not the fact that you bellow at your kids, it’s your lifetime average. Everybody bellows when they lose the plot and the reason you yell is that it makes you feel better. But as a long-term strategy, it’s not the best. I think that a lot of people, if they give their kid a smack on the bum, or yell, think, “Oh, I’m a terrible person.” Well, not necessarily.

If you give a shit about your kids and you love them, they know that.

Yes, his language is as direct as that :).



It goes further. He promotes concepts which, while I did not appreciate their importance as a child, I certainly agree with now. Concepts such as “risk”, “consequence”, “self reliance”, independence”, “respect”, “authority” and “effort” come to the fore.



But, how does this tie with TF’s “entitlement mentality”? Well that comes out of the programme last night. Latta was running through the idea of “self”, “self-image” and such-like concepts from the modern school of parenting.

He made the point using birthday parties as a f’rinstance. “When we were kids…”; the person having the birthday got the presents, got the first piece of cake. These days, everyone else gets the presents, everyone has their own personal cake that they can have the first piece of… Parents compete for “the bestest birthday party in the neighbourhood”, aided in their endeavours by advertising usually aimed at the kids if not actively promoted by them. You know the kind of thing, “But muumm, Daisy down the road had…”. The current one on tv promotes the “popularity steaks” with everyone wanting to be your friend because your parents are taking you and all of those “friends” to the local burger house (think here of arches).



The point Latta made was that Generation Y is being – has been – raised with that entitlement mentality to the fore. “I am GOOD. I WANT. I GET!” is the mantra for the selfish moderns. I work with a young fella who has this attitude in spades, and who has a passion for technology. In the past year he has owned, tried, displayed with pride, probably three different and increasingly expensive cellphones; sorry – what would be the generic term for a “Blackberry” or “iPod”? There is total pride in his purchase. There is pride in how much it cost!! On the other hand I have a basic cellphone, solely for communication, and only because SWMBO gave it me as a birthday present five years ago. It cost perhaps $100. It has no camera. It has no internet connection. It is a telephone. I have to use it every six months or so or the service provider will cancel the connection and I will lose the prepaid value on the phone.



The entitlement mentality is reinforced by the advertising industry. “THIS is what you want!! GO GET IT!!” It gets worse. You don’t even need the money. “Hey! Something you want? HERE is the money!” Don’t worry about paying it back. That is not the point. The point is “You want; you get!”



So, when people like TF start to complain (I resist the temptation to use “right whinge”) about “entitlement mentality” I start to get hot. I know what they mean, and I understand all of the connotations that their political beliefs impose on the term.



However, so many people completely miss the truth. What he is complaining of is not something that is restricted to the poor, or to those on welfare, alone. It is endemic in our society. It is the basis, the fundamental, the foundation of the consumer economy. It is a state of mind that requires a person have not this or that, but this and that. It totally pervades our society. It is the attitude that makes us see four wheels with motive power and safety equipment not as a simple mode of transport but as a symbol of our personality. How many people go out and buy a “replacement” for a perfectly good, still serviceable appliance simply because there is a new one advertised on the tv which has a different colour, a new motor, or which is merely more in keeping with the current fashion?



Returning to the thoughts TF proposes on entitlement mentality, there is a question that has to be asked.



How many of those who by the implications he puts on the term, those on welfare, the dodgers, the bludgers, the lazy and the unproductive are in fact responsible for the credit squeeze and the bad loans and all of the other ills of the financial and banking systems? I would suggest very few indeed.



The far greatest part of the bad debt is probably owed by teenage children who are entitled to credit cards paid by their forty-something parents; by twenty-somethings who are entitled to add a new car, an expensive home theatre system and their OE to their student loan; by thirty somethings who marry and are entitled to spend far more than necessary on their wedding because they must make the social statement “I am rich!”; by forty-somethings who are entitled to the expensive house, the two cars, the RV, the sports car, and the boat…



Not just the people who fall into the right wing paradigm…