Gordon Campbell on MP pay and the REAL p.c. danger zone

rich-people-politics-bannerThere has never been anything remotely credible about the way parliamentarians would paint themselves as the helpless victims of the Remuneration Authority when it came to the setting of their annual pay increases. Ditto for the Remuneration Authority which just had to do what a Remuneration Authority gotta do. So… top marks to the Ardern government, for putting a freeze for a year on MP salaries, pending a review of just how this money funnel should be constructed.

What might such a rejig look like? Given the pay levels they currently enjoy, backbenchers (on $163, 961) and the nearly 25% of other MPs holding positions (inside and and outside Cabinet) that attract even higher pay… the restraint is long overdue. Arguably, MPs are well placed to take at least a five year holiday from inflation adjustments at least. Obviously, a 2% inflation adjustment to someone on $162,000 delivers a whole lot more padding than it does for someone who gets their benefit/pension adjusted by the same percentage. If, in due time, Parliament does go looking for a new benchmark… some have argued that MPs pay should be tied to movements in public sector pay – which would be a little perverse, at a time when nurses and (in all probability) teachers will be receiving rather large pay increases. Or they could base the new formula on increases in the median pay figure.

True, the movements in median pay are probably the readiest way we have of assessing whether Parliament’s job performance really is lifting everyone’s boat. Reportedly, the median hourly wage grew by 2.9% this year, down from 3.4% the previous year. In one sense, that’s almost on song with the 3% recommendation that has triggered the freeze. Retroactively, it could also be used to justify a .5% reduction in MPs pay for the year gone by.

If this exercise is to mean anything of lasting value, the government may have to be brave enough to declare that the current pay (plus perks) packages for MPs have hit a ceiling beyond which evidence of significant hardship would be required before the pay needle is allowed to swing upwards, again. In other words, why not declare the freeze is semi-permanent? Certainly, the freeze shouldn’t be used mainly as a gambit to deny senior teachers – who once used to be paid the same as MPs but who are now paid less than half what first term MPs receive – a leverage point in their current pay negotiations.

PC thinking

Citizens, the scourge of political correctness is said to be stalking the hallways of our universities, leaving wealthy white men afraid to speak their minds. Don Brash, the silent conscience of the nation on race relations, has been moved to communicate – apparently via sign language – his concerns about where all this nonsense about hate speech and identity politics could be taking us.

In reality… we’ve always had a dominant form of identity politics in this country, and it is one that’s based almost entirely on the ingrained beliefs of white men of means. And woe betide anyone who dares to disturb their sense of what is politically correct:

We have been told by both the left and the right that “identity politics” are divisive. This is a maddening argument because the entire country is built on the oldest form of identity politics: the needs and concerns of rich, white men. If we are to progress, we are constantly told, we must not let ourselves get distracted by our differences but come together. Even if that means ignoring inconvenient things like systemic racism and sexism, in favour of the greater good.

Where the p.c. strictures of those rich white men really kick in – and where they do the utmost damage, well beyond the varsity lecture rooms – is when they dictate what’s deemed to be the only valid options for managing the economy. Want to shut down rational discourse entirely? Well, for example: call something a ‘tax’ and by definition it becomes evil, taboo, and not deserving of further consideration. National leader Simon Bridges cast that curse on RNZ yesterday morning, when he dismissed the Greens plan to increase the cost of dumping rubbish. He called it a tax.

Bingo, end of discussion. Want to make farmers pay the cost of cleaning up the pollution they cause, or talk of penalising them for how their activities are contributing to climate change? No way, because that could involve a levy, aka a tax! Ditto when it comes to asking foreigners to pay something for profiting from bottling and selling our natural water. Want to ensure that IRD treats the wealth gained from investments and property speculation with the same rigour as it treats the income derived from wages and salaries? C’mon, surely only a wild eyed, tax-and-spend radical would want Michael Cullen’s Taxation Review Authority to come back and recommend a meaningful capital gains tax.

Care to see a trade-off between the cost of petrol and road congestion? Don’t even talk about the potential trade-offs – just call it a regional fuel tax and that’ll shoot down any chance of rational discussion. IMO, such p.c. attitudes do more damage than asking people to use gender pronouns more sensitively.

Budget balancing

One reason why “tax” has become such a taboo word in New Zealand is because the trade-offs common in Scandinavia – where you pay the tax and you get a better public service in return – have been thoroughly debased over the past 30 years, by National and Labour governments alike. People now hear the word” tax” and regard it as synonymous with paying more and getting nothing back in return.

Similarly a “tax cut” gets treated as a free lunch, even though it diminishes the revenue available to fund publically used services. Believe me, asking for flexibility on who can use public restrooms (to help reduce the prejudice felt by the transgender population) is a mere walk in the park compared to the taboos against increasing taxes on wealth.

For an even better example of the political correctness I’m talking about….despite their obvious differences on social policy, National and the Ardern government speak a common language about what qualifies as ‘responsible’ economic management. This consensus has been enshrined in the so-called Budget Responsibility Rules aka BRR. Essentially, the BRR package consists of a set of centre-right elixirs that Labour and the Greens both signed up for last year, in order to try and ward off (think garlic, and vampires) political attacks on their credibility as ‘responsible’ economic managers.

In reality, the BRR package was a signal to the sharemarket gods that even our ostensibly left-wing parties have surrendered the battle over making any significant change to how the New Zealand economy gets to be run. (As a sop, we’re supposed to be excited that the Reserve Bank’s monetary decisions will now be made by a committee, rather than by the governor acting alone. Oh, and they’ll consider the employment implications. Promise.)

Officially then, it is not up for discussion anymore as to whether we should (a) borrow more at the current low interest rates to meet current and future social needs and (b) ensure Crown debt is kept down below an arbitrary 20% of GDP, and (c) reduce government spending to an ever-diminishing proportion of GDP.

Theoretically, those are all highly questionable ideas, but their desirability is no longer open to serious political debate. Oh, and in line with the same BRR-driven fundamentalism there’s also (d) to be no more questions about whether running a budget surplus should be treated as being a desirable end in itself. Just like it was under National.

Elsewhere in the developed world, the BRR package would be seen as a relic of discredited thinking from the early 1990s.Yet the Ardern government – allegedly, the most radical government we’ve had in 30 years – continues to let itself be constrained by this weird set of arbitrary principles. For a recent example, consider this exchange from her August 6 press conference:

Media: Couldn’t [it be argued] though, that the Government needs to relax its debt target to really address the infrastructure problems caused by the population boom, to improve productivity?

PM: I think, instead, you’d find the business community actually would say that their confidence in us is actually based on our ability to balance the books and deliver a strong economic agenda, and that means delivering a surplus and keeping debt in check. So I think that’s equally important.

That’s how political correctness works. A hidebound business sector – still clinging to the economic shibboleths of yesteryear – is quietly being allowed to dictate what is politically possible. It isn’t sensible, and it is hardly democratic.

As For The Global Evidence….

In the ten years since the Global Financial Crisis, plenty of evidence has emerged about how to run a modern economy – and the thinking reflected in our Budget Responsibility Rules has lost that debate, comprehensively. A recent summary of the findings, and the factors in play can be found here:

In similar vein a year ago, even Forbes business magazine denounced the thinking behind the budget-balancing fetish, and the austerity policies that went with it:

In a new paper presented at Jackson Hole last week, the economists Alan Auerbach and Yuriy Gorodnichenko showed that, contrary to popular belief, fiscal expansion after a major financial shock such as that in 2008 did not cause debt/GDP ratios to rise. In fact, the researchers found that debt could become more sustainable, not less, after fiscal stimulus. For a sample of developed countries, we find that government spending shocks do not lead to persistent increases in debt-to-GDP ratios or costs of borrowing, especially during periods of economic weakness. Indeed, fiscal stimulus in a weak economy can improve fiscal sustainability along the metrics we study.

Fiscal stimulus works. What a pity we did not allow ourselves to do it, much.

Why then, does the Ardern government continue to genuflect at this altar? Answer: because politically speaking, it feels it has to, or face being crucified in the media for its alleged ‘radicalism’. For the record, the current evidence should be of some small comfort to former Greens leader Russel Norman, who had suggested mildly – in the wake of the GFC – that New Zealand might also benefit from enacting a form of the “quantitative easing” stimulus practiced successfully by the Obama administration.

At the time, Norman was decried by the p.c. likes of John Key (and much of the mainstream media) for allegedly advocating “printing money” – and the whole episode was taken as evidence as to why those madcap Greens shouldn’t be let anywhere near the levers of the economy. In fact, and to repeat: it was the pro-austerity brigade that failed the GFC challenge, and it was the neo-Keynesians who advocated government intervention to stimulate the economy who have been entirely vindicated:

…the Obama administration’s modest stimulus package, while too small to fix the Great Recession entirely, did make things much better. Conversely, the European countries that subjected themselves to severe austerity regimens saw their employment and production collapse, just like Keynes would have predicted. Greece, in particular, has suffered economic disaster considerably worse than the Great Depression in terms of output and unemployment.

Luckily for New Zealand, we did accidentally benefit from a form of quantitative easing. It was provided (indirectly) by China, whose state injections of funds and other supports for the Chinese economy fuelled a level of demand that enabled New Zealand and Australia to weather the worst of the financial crisis, relatively unscathed. In the US, Obama’s decision to “print money” did not lead, as the neo-liberal doomsayers had predicted, to ‘currency debasement’ and runaway levels of inflation. Instead, inflation all but disappeared from the scene.

As indicated above, this victory of the neo-Keynesians and the defeat of the budget-balancing zealots is old news, everywhere else. Only in New Zealand does the occasional recognition of the failures of the neoliberal orthodoxy (conceded recently by former PM Jim Bolger) generate a few brief headlines. Yet the economic orthodoxy is so ingrained here that no real debate ensues. All too soon, things go back to business as usual.

Other puzzles

Ideally, the decade since the GFC should have inspired us to rethink basic principles. Not only did QE mitigate harm – rather than cause it – a few other presumed outcomes elsewhere in the economy haven’t eventuated, either. What for instance, has happened to inflation, and to wage growth? Long before now, the skills shortages and capacity constraints related to New Zealand’s respectable levels of annual growth (by OECD standards) should have pushed up wages significantly among those scarce and valued workers, and set off price inflation. Sure, the influx of migrants have eased the pressure, but that’s not a sufficient explanation.

Instead, wages have remained depressed until quite recent (and still relatively modest) increases, while inflation – imported or domestic – has been virtually non-existent. As CTU economist Bill Rosenberg recently pointed out, “The share of national income that working people receive has fallen since 2009, showing that real wages are falling behind productivity increases.” Here’s the basic situation :

Average hourly wages grew 3.1% in the year to June, more than the 2.3% growth last year, while the median (middle) hourly wage grew only 2.9%, which is less than the 3.4% growth last year.

“While this period includes a strong increase in the minimum wage on 1 April and the care and support pay equity settlement which took effect from July last year, it is clear that much more is needed to get wages moving upwards faster, particularly for low to middle income earners,” [Rosenberg] said.

So… if wages have been falling steadily as a share of national wealth for almost 10 years, and skills shortages and capacity constraints are not driving up wages… who and what has been responsible for this? If neither the wage demands of scarce skilled labour nor minimum wage increases nor the Family Care and Winter Energy packages nor pay equity settlements nor the largesse from Shane Jones’ Regional Development Fund nor a declining currency (now set to raise the cost of imports) are still insufficient to (a) prevent the predicted declines in economic activity or (b) cause significant upticks in he RBNZ inflation forecasts… then we should all be asking the reasons why.

Where is that debate on what the government can, and should, be doing to address the problems that the current economic orthodoxy caused, and yet can do little to explain. Maybe firms have been holding down wages artificially, simply because they can. Maybe firms have been taking profits and kicking them out to shareholders, because they can do so without attracting much in the way of a capital gains tax – and in the full knowledge that most of their r&d needs will be met directly by the government, or will qualify for a tax write-off.

If those are some of the reasons for our years of depressed wages and low productivity, we need to be asking what a reform-minded coalition government should be doing about it. Clearly though, the p.c. forces still in command of the nation’s boardrooms have no interest in fostering a genuine exploration of the economic policy alternatives. Instead this year, we’ve seen business throw a gigantic ( and almost entirely bogus) hissy fit over the coalition government’s mild changes to employment relations, which have been intended to empower workers to bargain a little bit more effectively over their wages. Business has treated this tweaking as a reversion to the 1970s at best, and as Stalinism at worst. Who knew that the captains of industry were such snowflakes?

Frankly, this impact of the p.c. thinking prevalent within our business elite… it as to be more worrying for all us, than any concern over whether Don Brash’s views on race relations might be lost to posterity.

Singer, Not The Song

In the days since Aretha Franklin’s death on August 16 – which means incidentally that the Queen of Soul and the King of Rock’n’Roll died on the same calendar date – there have been any number of excellent essays, Youtube playlists and tributes. Personally, it was re-assuring to read that a few other people had long puzzled over whether that explosive “What you want/you know I got it” line in “ Respect” involved a question (Was it ‘What you want?’ or ‘What you want!’) Among the more noteworthy stuff was this really good Spinoff article…

In it, Sam Brooks usefully pointed out how the talent of is commonly regarded as the outpouring of some god-given natural gift – and not treated as the product of the sort of conscious work and interpretive skill that we take for granted in say, a great instrumentalist. Vocalists work at it, too.

Franklin didn’t find her own voice all that easily. For years in the early to mid 1960s, CBS Records and legendary producer John Hammond famously tried to package her as a singer of jazz standards, in the Sarah Vaughn/Dinah Washington mode. After CBS dropped her and Atlantic Records hooked her up with the Fame studio in Muscle Shoals, those early Fame sessions didn’t go smoothly either, save for generating one great track in “I Never Loved a Man The Way That I Love You”. Again though, Aretha’s magnificent singing had risked being abandoned after struggles with an unusual composition finally woven together by Spooner Oldham, via an improvised keyboard fill. Aretha Franklin really and fully became “Aretha” only after those sessions (and the same musicians) got re-located to New York City.

Here is Aretha Franklin at the age of 14, in her father C.L. Franklin’s choir, doing an astounding version of the great hymn “Precious Lord” which she returned to many times during her career…

And here’s a personal favourite from her mid 1970s collaboration with Curtis Mayfield:

Here’s an invaluable clip of footage from those early 1967 sessions, including glimpses of Carolyn Franklin, Jerry Wexler, Spooner Oldham and Aretha’s malignant then-husband Ted White…

Finally and brilliantly, here’s an early, tentative and explorative demo version of the song that launched her career: