Gordon Campbell on funding the IMF, while under-funding core agencies at home

So New Zealand has pledged up to $4 billion in repayable loans to the International Monetary Fund as our contribution to a stabilization fund to help resolve the European debt crisis, and according to Finance Minister Bill English, New Zealand would have to borrow to meet those pledges to the IMF, if called upon.

Such pledges would be to finance the kind of austerity packages that the IMF has been peddling to Spain, and which – yesterday – Spain chose to reject.

New Zealand and other nations are being called on because the size of the potential bailout for Spain alone (the figure being touted is in the realm of 1.1 trillion euros) threatens to completely drain the IMF’s available resources. For now, Spain is resisting the terms of the IMF’s bailout package because it involves not only massive cuts to spending programmes, but a sales tax increase and wide ranging labour market reform as well – and this combo would so politically unpalatable as to paralyse the functioning parts of the Spanish economy. In short, the austerity remedy would kill the patient, and turn Spain into Greece.

…..The greatest fear remains that Spain will require a bailout totaling some 1.1 trillion euros — effectively wiping out funds made available by the IMF and other world banks. Tuesday’s statement on growth follows calls by the IMF on Monday advocating job-creation as the best way to beat spiraling debts and tumbling economies. According to the international lender, European governments need to change labor practices, including provisions to make it easier to hire and fire workers.

Spain’s response is not a sign of mere obstinacy – it is a sign that the tide is running out on the belief that the policies of austerity alone will be anything other than self-defeating. Even the G20 has just advocated stimulus policies of growth, over policies of austerity alone. For good reason:

There is no easy option for Greece, given its problems. Difficult reforms are vital. But how can an austerity plan — which has seen recession turn into depression, youth unemployment soar to more than 50 per cent, the economy shrink by six per cent in the last year alone and the national debt grow further — be seen as a success? As even the credit rating agencies now recognise, as Standard and Poor’s puts it, that “austerity alone risks becoming self-defeating”.

Later today, if and when the pro-bailout parties in Greece can cobble together a ruling coalition, the first phone call the Greek Prime Minister should be making is to French President Francois Hollande in Paris, not to German Chancellor Angela Merkel. Greece needs a champion to argue the case to the Germans for softening the terms of its own austerity package and only Hollande has the clout, and the personal motivation to do so. Because austerity if left unchecked, will do everyone in eventually. First they may have come for the Greeks, but in the end they will come for everybody in a trading bloc where the fortunes of all are linked by the webs of trade, and the single currency.

Hollande has a firm mandate to press for a different stance from the Germans. The same day that the Greeks voted, Hollande and his Socialists won a sweeping victory in the lower House in France, to the extent where they can pass legislation without the help of the Greens. It has become a pattern. Politicians who pledge allegiance to an endless diet of austerity are losing elections, and European voters are becoming more and more alienated from the actions of those who claim to govern on their behalf. More to the point, the current prescription – which appears to consist of European bureaucrats going from country to country shoring up banks that look wobbly while still professing faith and allegiance to the policies of austerity – has plainly failed. Worse, it is compounding the crisis, by fostering instability.

As even the conservative US commentator George Friedman has pointed out, Germany has moved from the untenable threat of expelling countries from the Eurozone to the untenable promise of underwriting them. As he points out, rather than see the problem as being essentially one of unbalanced trade, Germany has defined it as one of undisciplined social spending and entitlement programmes supported by irresponsible borrowing – and then prescribed stiff measures to discipline the wayward. It should instead be looking in the mirror. Out of control borrowing by and on behalf of its elites is indeed part of Europe’s debt problems, and has been fuelled by the same bankers now taking bailout funds and preaching austerity for everyone else. But it has also been created by the politics of European trade. And the lasting solution will require a different pattern of trade within the Eurozone whereby the world’s second largest exporter deals more equitably with its neighbours.

Such a fundamental re-alignment may however, need to wait for the re-capitalisation of the banks currently at risk to be carried out. Then fresh, government-driven policies of stimulus and job creation will be required to kickstart demand in a Eurozone where consumer spending and investment has (understandably) fallen into a terrified funk. So far of course, the policy makers have been far more motivated to take the first step of propping up the banks in trouble, rather than in following through to protect those people most at risk:

Put all of this together and you get a picture of a European policy elite always ready to spring into action to defend the banks, but otherwise completely unwilling to admit that its policies are failing the people the economy is supposed to serve.

Privacy Commission, needs a handout
Money for Spain? Evidently not a problem for the government. It will borrow the cash if that proves necessary. But money for the kind of watchdog agencies – the Privacy Commissioner, the Ombudsman’s Office – that protect ordinary citizens from the excesses of government and commerce? Not so much. In that respect, the recent report of the justice and electoral committee on the Privacy Commissioner makes for quietly desperate reading. Note the recurring pattern in these paragraphs (emphases added):

Workload and budget
We heard that the commissioner has been operating on a flat, minimal budget for the last seven years, which it has found challenging. Its work has to adapt rapidly to emerging trends and technologies, and demand for it is increasing. We were pleased to hear that, in spite of budgetary constraints and growing demand, the commissioner has improved its productivity and service quality. We also note that the commissioner is concerned that it has not been allocated funding for the additional work that will arise from the implementation of the Privacy (Information Sharing) Bill.

Media inquiries
We understand that over the last five years, media inquiries have doubled, and telephone and email inquiries have increased by 50 percent. From 1 July 2011 to 10 May 2012, the commissioner received 252 media inquiries. There is no minister responsible for privacy issues, so the commissioner is the only legitimate source for media information on matters pertaining to privacy. The commissioner told us that, in spite of its best efforts, the office can no longer cope with the growing volume of media inquiries, and increasingly is providing minimal responses. The commissioner expects the number of inquiries to continue to increase, as privacy accidents are increasing because of the large databases of personal information held by public agencies. We think it is important that the commissioner be adequately funded, and we also consider that some ministerial responsibility for privacy issues would be worthwhile.

Online privacy
The commissioner is concerned at evidence that employers in the United States are increasingly requesting access to, or passwords for, prospective employees’ social media accounts. Although there is no evidence this is happening in New Zealand yet, we heard that the commissioner would like the resources to conduct proper research into this matter. We share the commissioner’s concern and think that research would be beneficial. We were pleased to hear that information kits for teachers on protecting online privacy were distributed to secondary schools several years ago, and that the commissioner has recently received funding from UNESCO for a similar initiative for primary schools. We think that helping teachers provide this information to students is an important role for the commissioner, and that it should be sufficiently funded to do so.

And so on. As the No Right Turn website (which first drew attention to this situation has pointed out) the cutbacks to these core democracy-defending organizations now extends even to the Electoral Commission. The same parliamentary select committee’s report on the Electoral Commission points out that the Commission has apparently been required to finance the MMP Review itself – without any extra funds being allocated for that purpose by the government ( emphasis below added):

We understand that the Commission is funding the MMP review and other reviews out of its reserves, and as a result it projects a funding shortfall of approximately $10 million in the 2014/15 financial year. We heard that the additional funding required for the 2014 election has not yet been allocated, and the Commission is concerned because it cannot therefore make the planning assumptions needed to organise the election. The commission said that it needs its own funding appropriation so that it can be certain of its funding much sooner in the electoral cycle, and so it can conduct its own funding negotiations; negotiating via the Ministry of Justice it must compete for funding with police, justice, and the courts…

Remember when we were being told that no front line services would be affected by government cuts in funding? Now it seems our election process – the core of our democracy – is being bled.