The Rankin File:

December Archive

#41:

Wednesday 24
December'97

Why we should have a protected car industry.

Abstract:

Moves by Commerce Minister John Luxton to accelerate the pace at which tariffs - in particular those affecting the car industry - are to be eliminated suggest that the Shipley Government may be lurching to the right. It is however too early to tell, as Luxton's proposals really represent the direction of the Bolger Government.
The tariffs should be retained because not only do they help to stabilise the New Zealand economy, but moderate tariffs generally help to stabilise the world economy from unruly capital flows. With the tariffs gone, it seems likely that efficient New Zealand plants will give way to less efficient protected car assembly producers in Australia, leading to less efficient global outcomes.
There are other hidden costs that arise from the removal of vehicle tariff protection. More cheaper vehicles place more pressure on our roads. And such an influx leads to the depreciation of the existing stock of vehicles, thereby raising rather than lowering the cost of vehicle use for typical car-owning households. Perhaps the greatest cost is the likely collapse of the efficient vehicle parts industry which will not be able to compete on export markets with foreign companies supplying to their local markets.
One result of the shift to pure free trade is that transnational firms such as Honda will encourage competition between its various globally located subsidiaries, and that a very high proportion of international trade will in fact be inter-company trade. The whole concept of a national economy is under threat.

#40:

Monday 22
December'97

"The Reforms": an Exercise in Cost-Raising.

Abstract:

The "reforms", including the "health reforms", constitute a massive cost-raising exercise, not a cost-cutting exercise. The situation can be understood through understanding an economy as a circular flow between consuming households and producing firms.
The circular flow can be expanded in a "productive" way when demand from households creates opportunities for new firms that are able to use the "factor inputs" provided by households - labour, capital and land - in more productive ways.
There are other ways that firms can enter the circular flow; ways where there is no increased benefit to consuming households but in which new producers make new claims on resources. Such producers are parasitic with reference to the pre-existing circular flow.
My interpretation of the reforms is that most of the beneficiaries belong to the "transaction sector"; they have done little to add to the total amount of consumables but very much to change the distribution of incomes. In this context, the expanding transaction sector must be interpreted as an additional element of cost, and, because every cost is also an income, the new incomes made possible by the reforms are a measure of those costs.
The parasitic model does generally conform with the post-reform experience. In the case of the health reforms, those participating in the management process have profited directly while opportunities have also been created to profit from frustrated households who are having to turn to the private health industry.

#39:

Tuesday 16
December'97

Should Our Roads be a Source of Profit?

Abstract:

The future funding of our roads has emerged as an important issue in 1997. The issues are: who owns our roads? who pays for them? who profits from them? These issues are further complicated by the fact that congested motorways are a quite different kind of economic good than are country roads and residential streets. The road system is first of all a set of public rights of way, an integral part of the public domain.
Charging motorway traffic and peak hour traffic addresses a number of social ills. It creates the conditions for less commuting, less of a commuter peak, more demand for public transport, more vehicle, cyclist and pedestrian safety, and less pollution.
We cannot wait for improved public transport before charging road users for the social costs they impose. Railways, for example, reach their full potential to provide social benefit only when the private costs of road transport are perceived to be too high by enough road users.
Despite the social costs arising from congested traffic, roads, as rights of way, as channels of communication, provide inestimable social benefits. The public domain should be allowed to generate an adequate income stream. Roads should be funded from taxation, which should be high enough to fund social dividends to the roads' owners. It is the citizenry as owners of the public domain, not road users, who should profit from our roads.

#38:

Thursday 11
December'97

Hara-Kiri in Kyoto?

Abstract:

The December 1997 international conference on global warming was hosted in Kyoto, Japan. The agenda was no less than to devise a protocol "to save the earth" as the BBC put it. A failure to save ourselves from ourselves in the face of known danger is hara-kiri if not Russian roulette.
The biggest obstacle to successful negotiations is the United States. The political strength of industries such as the automobile industry in which the USA no longer has a comparative advantage reinforces a general attitude of consumer selfishness. Business interests have formed the "Global Climate Coalition" as an effective lobby group that both denies global warming and claims that global warming is, for many, a good thing.
The problem is economic nationalism, or at least greed dressed up as nationalism. The solution is multilateral cooperation in which sovereign governments override sectional interests operating within their jurisdictions. The philosophical division is between mercantilist and cosmopolitan approaches to global economic management.
The American love affair with the automobile, combined with an entrenched mercantilism in American business attitudes, makes the achievement of an international code of social responsibility a particularly difficult task to achieve.

#37:

Monday 8
December'97

Accident Compensation Commission; an expensive failure.

Abstract:

Jenny Shipley introduced legislation last week to convert the Accident Compensation Commission (ACC) into an SOE (State Owned Enterprise) that may be subjected to competition from private sector insurers. It is another step towards the exposure of the ACC as an irrelevance as a social welfare institution.
The main problems with ACC are its expensive bureaucracy, and its provision of earnings related benefits. No other part of the welfare infrastructure pays higher benefits to the rich than to the poor. ACC benefits discriminate blatantly against all of those New Zealanders who are not in regular well-paid employment.
The ACC is an anachronism that reflects a flirtation with continental-style social insurance by the 1972-75 Labour Government. We should dispense with it, and pay a fair benefit that treats all accident victims the same. Such a benefit can easily be paid within a Universal Basic Income system.
We can encourage well-paid people to take out private insurance that will give them additional earnings-related benefits. Personal insurance is a private matter that should be divorced from social welfare.

#36:

Friday 5
December'97

Monetarism & Keynesianism: Fables from the Age of Science?

Abstract:

Monetarism is a pseudo-scientific ideology that not only claims inflation is the root cause of all economic evil, but also believes it has a simple solution. That solution doesn't work. Monetarist policies made inflation worse. Excerpts from the 1992 BBC Pandora's Box documentary "A Fable from the Age of Science", reveal just how poor monetarism in Thatcher's Britain was at bringing about lower inflation, let alone at achieving the objectives that low inflation was meant to support.
Professor Alan Budd, former economic adviser to the British Treasury, worries "that there may have been people making the actual policy decisions, or people behind them, or people behind them, who never believed for a moment that this was the correct way to bring down inflation. They did however see that this would be a very very good way to raise unemployment. And raising unemployment was an extremely desirable way of reducing the strength of the working classes" allowing "the capitalist to make high profits ever since".
New Zealand's experience was the same in the 1980s. "Anti-inflation" policies turned out to be pro-inflation, anti-tax and anti-labour. Monetarism turned out to be a Trojan Horse for unrepentant capitalist excess.

#35:

Wednesday 3
December'97

Children as a "Public Good".

Abstract:

The principal message to the government from the "Work, Families and the State" conference held in Palmerston North from 28-30 November was that "children are a public good who should be collectively supported".
Children are a public good, in the sense that, when they become adults, they produce collectively - through market and non-market employment - for the public welfare. As such, they support their parents generation collectively; they do not support their own parents individually. This is true no matter how much of their incomes people save privately for their own retirement.
In order for today's children to produce for all tomorrow, they and their caregiving families must be well supported by today's working age population.
Children are gifted to society by their parents. The state can be regarded as the beneficiary of children, not the parents who bring them into the world and nurture them. The state - the corporate embodiment of society - must invest in children on an ongoing basis, through a comprehensive social welfare system. Such investment is self-interest, not altruism. A gift of uneducated, unsocialised impoverished children is no gift at all.

#34:

Monday 1
December'97

Tests for MMP in 1998 and 1999

Abstract:

If Jim Bolger, Bill Birch and possibly Chris Fletcher retire in 1998, the by-elections will create an interesting dilemma for the National Party. Should National add to the risk of losing by endorsing senior list MPs as electorate MPs? Will the public accept a situation where the new MP is not a by-election candidate, but is instead a mid-ranked name on the 1996 party list? Will New Zealand First stand candidates against its Coalition partner in by-elections such as these?
The tactic of NZ First not standing candidates in strong National constituencies may presage arrangements for the 1999 general election. Winston Peters will probably have the bargaining leverage to force National to withdraw candidates in the seats NZ First needs to win. He can trade off the agreement to bring in three new NZ First Cabinet Ministers, at such a price. And he can threaten to force an election before the APEC meeting due to be held in Auckland late in 1999.
If the Government Parties - defined here as National, New Zealand First, Act and United -make the optimal electoral accommodations, and the Opposition Parties fail to make any such accommodations, then the 1999 result could prove to be significantly removed from proportionality. The possibility is that Alliance votes and Green votes will elect nobody, while New Zealand First, as a constituency party, will get a number of "overhang" MPs, leading to a Parliament larger than 120 members.

Previous Archive

{This archive of abstracts is: http://homepages.ihug.co.nz/~peter/KRankin/RankinFiles/rfarchive_dec97.html

Back to: Rankin File Archive

Go to Keith Rankin's page : http://www.oocities.org/Athens/Delphi/3142/KeithRankin.html

#41:	Wednesday 24 December'97	Why we should have a protected car industry.
	Abstract:	Moves by Commerce Minister John Luxton to accelerate the pace at which tariffs - in particular those affecting the car industry - are to be eliminated suggest that the Shipley Government may be lurching to the right. It is however too early to tell, as Luxton's proposals really represent the direction of the Bolger Government. The tariffs should be retained because not only do they help to stabilise the New Zealand economy, but moderate tariffs generally help to stabilise the world economy from unruly capital flows. With the tariffs gone, it seems likely that efficient New Zealand plants will give way to less efficient protected car assembly producers in Australia, leading to less efficient global outcomes. There are other hidden costs that arise from the removal of vehicle tariff protection. More cheaper vehicles place more pressure on our roads. And such an influx leads to the depreciation of the existing stock of vehicles, thereby raising rather than lowering the cost of vehicle use for typical car-owning households. Perhaps the greatest cost is the likely collapse of the efficient vehicle parts industry which will not be able to compete on export markets with foreign companies supplying to their local markets. One result of the shift to pure free trade is that transnational firms such as Honda will encourage competition between its various globally located subsidiaries, and that a very high proportion of international trade will in fact be inter-company trade. The whole concept of a national economy is under threat.

#40:	Monday 22 December'97	"The Reforms": an Exercise in Cost-Raising.
	Abstract:	The "reforms", including the "health reforms", constitute a massive cost-raising exercise, not a cost-cutting exercise. The situation can be understood through understanding an economy as a circular flow between consuming households and producing firms. The circular flow can be expanded in a "productive" way when demand from households creates opportunities for new firms that are able to use the "factor inputs" provided by households - labour, capital and land - in more productive ways. There are other ways that firms can enter the circular flow; ways where there is no increased benefit to consuming households but in which new producers make new claims on resources. Such producers are parasitic with reference to the pre-existing circular flow. My interpretation of the reforms is that most of the beneficiaries belong to the "transaction sector"; they have done little to add to the total amount of consumables but very much to change the distribution of incomes. In this context, the expanding transaction sector must be interpreted as an additional element of cost, and, because every cost is also an income, the new incomes made possible by the reforms are a measure of those costs. The parasitic model does generally conform with the post-reform experience. In the case of the health reforms, those participating in the management process have profited directly while opportunities have also been created to profit from frustrated households who are having to turn to the private health industry.

#39:	Tuesday 16 December'97	Should Our Roads be a Source of Profit?
	Abstract:	The future funding of our roads has emerged as an important issue in 1997. The issues are: who owns our roads? who pays for them? who profits from them? These issues are further complicated by the fact that congested motorways are a quite different kind of economic good than are country roads and residential streets. The road system is first of all a set of public rights of way, an integral part of the public domain. Charging motorway traffic and peak hour traffic addresses a number of social ills. It creates the conditions for less commuting, less of a commuter peak, more demand for public transport, more vehicle, cyclist and pedestrian safety, and less pollution. We cannot wait for improved public transport before charging road users for the social costs they impose. Railways, for example, reach their full potential to provide social benefit only when the private costs of road transport are perceived to be too high by enough road users. Despite the social costs arising from congested traffic, roads, as rights of way, as channels of communication, provide inestimable social benefits. The public domain should be allowed to generate an adequate income stream. Roads should be funded from taxation, which should be high enough to fund social dividends to the roads' owners. It is the citizenry as owners of the public domain, not road users, who should profit from our roads.

#38:	Thursday 11 December'97	Hara-Kiri in Kyoto?
	Abstract:	The December 1997 international conference on global warming was hosted in Kyoto, Japan. The agenda was no less than to devise a protocol "to save the earth" as the BBC put it. A failure to save ourselves from ourselves in the face of known danger is hara-kiri if not Russian roulette. The biggest obstacle to successful negotiations is the United States. The political strength of industries such as the automobile industry in which the USA no longer has a comparative advantage reinforces a general attitude of consumer selfishness. Business interests have formed the "Global Climate Coalition" as an effective lobby group that both denies global warming and claims that global warming is, for many, a good thing. The problem is economic nationalism, or at least greed dressed up as nationalism. The solution is multilateral cooperation in which sovereign governments override sectional interests operating within their jurisdictions. The philosophical division is between mercantilist and cosmopolitan approaches to global economic management. The American love affair with the automobile, combined with an entrenched mercantilism in American business attitudes, makes the achievement of an international code of social responsibility a particularly difficult task to achieve.

#37:	Monday 8 December'97	Accident Compensation Commission; an expensive failure.
	Abstract:	Jenny Shipley introduced legislation last week to convert the Accident Compensation Commission (ACC) into an SOE (State Owned Enterprise) that may be subjected to competition from private sector insurers. It is another step towards the exposure of the ACC as an irrelevance as a social welfare institution. The main problems with ACC are its expensive bureaucracy, and its provision of earnings related benefits. No other part of the welfare infrastructure pays higher benefits to the rich than to the poor. ACC benefits discriminate blatantly against all of those New Zealanders who are not in regular well-paid employment. The ACC is an anachronism that reflects a flirtation with continental-style social insurance by the 1972-75 Labour Government. We should dispense with it, and pay a fair benefit that treats all accident victims the same. Such a benefit can easily be paid within a Universal Basic Income system. We can encourage well-paid people to take out private insurance that will give them additional earnings-related benefits. Personal insurance is a private matter that should be divorced from social welfare.

#36:	Friday 5 December'97	Monetarism & Keynesianism: Fables from the Age of Science?
	Abstract:	Monetarism is a pseudo-scientific ideology that not only claims inflation is the root cause of all economic evil, but also believes it has a simple solution. That solution doesn't work. Monetarist policies made inflation worse. Excerpts from the 1992 BBC Pandora's Box documentary "A Fable from the Age of Science", reveal just how poor monetarism in Thatcher's Britain was at bringing about lower inflation, let alone at achieving the objectives that low inflation was meant to support. Professor Alan Budd, former economic adviser to the British Treasury, worries "that there may have been people making the actual policy decisions, or people behind them, or people behind them, who never believed for a moment that this was the correct way to bring down inflation. They did however see that this would be a very very good way to raise unemployment. And raising unemployment was an extremely desirable way of reducing the strength of the working classes" allowing "the capitalist to make high profits ever since". New Zealand's experience was the same in the 1980s. "Anti-inflation" policies turned out to be pro-inflation, anti-tax and anti-labour. Monetarism turned out to be a Trojan Horse for unrepentant capitalist excess.

#35:	Wednesday 3 December'97	Children as a "Public Good".
	Abstract:	The principal message to the government from the "Work, Families and the State" conference held in Palmerston North from 28-30 November was that "children are a public good who should be collectively supported". Children are a public good, in the sense that, when they become adults, they produce collectively - through market and non-market employment - for the public welfare. As such, they support their parents generation collectively; they do not support their own parents individually. This is true no matter how much of their incomes people save privately for their own retirement. In order for today's children to produce for all tomorrow, they and their caregiving families must be well supported by today's working age population. Children are gifted to society by their parents. The state can be regarded as the beneficiary of children, not the parents who bring them into the world and nurture them. The state - the corporate embodiment of society - must invest in children on an ongoing basis, through a comprehensive social welfare system. Such investment is self-interest, not altruism. A gift of uneducated, unsocialised impoverished children is no gift at all.

#34:	Monday 1 December'97	Tests for MMP in 1998 and 1999
	Abstract:	If Jim Bolger, Bill Birch and possibly Chris Fletcher retire in 1998, the by-elections will create an interesting dilemma for the National Party. Should National add to the risk of losing by endorsing senior list MPs as electorate MPs? Will the public accept a situation where the new MP is not a by-election candidate, but is instead a mid-ranked name on the 1996 party list? Will New Zealand First stand candidates against its Coalition partner in by-elections such as these? The tactic of NZ First not standing candidates in strong National constituencies may presage arrangements for the 1999 general election. Winston Peters will probably have the bargaining leverage to force National to withdraw candidates in the seats NZ First needs to win. He can trade off the agreement to bring in three new NZ First Cabinet Ministers, at such a price. And he can threaten to force an election before the APEC meeting due to be held in Auckland late in 1999. If the Government Parties - defined here as National, New Zealand First, Act and United -make the optimal electoral accommodations, and the Opposition Parties fail to make any such accommodations, then the 1999 result could prove to be significantly removed from proportionality. The possibility is that Alliance votes and Green votes will elect nobody, while New Zealand First, as a constituency party, will get a number of "overhang" MPs, leading to a Parliament larger than 120 members.