Showing posts with label Capitalism. Show all posts
Showing posts with label Capitalism. Show all posts

03 September 2021

Three Waters Reform: The left opposed water reform in the 90s, why trust them now?


You might have noticed the childlike cartoons the Government has chosen to communicate to you about one of the most radical infrastructure policy reforms proposed for over twenty years – the Three Waters Reforms. Those cartoons might have put you off, but they shouldn’t. For all of the fluff government is involved in, one of the most important activities it unfortunately is responsible for is the supply of reticulated water and the collection of wastewater and stormwater. Forget Covid19, because if the water systems fail you really ARE in for a public health crisis. Millions of people worldwide don’t have access to clean drinking water and don’t have safe sewage collection and disposal, and it costs lives. This is important, too important to have those who use and pay for it talked down to like primary school children, and too important for you to ignore.  Bear with me, this is complicated...

What’s the problem?

The current system of managing water infrastructure is, in many parts of the country, a failure. Who could miss the regular reports out of Wellington, the capital, which has systematically failed to put enough ratepayers’ money into the water and sewage systems? Stories of drinking water from Hawke’s Bay to Otago being infected or tainted. So the case for reform is overwhelming. The Government’s own papers indicate 40,000 people lived under temporary or permanent “boil water” notices for their reticulated supply in the year 2018-2019. Four people died and over a third of the population in Havelock North became ill because Hastings District Council didn’t effectively manage the town’s water supply. An earlier study indicated 35,000 people get ill annually because of the quality of drinking water.

The Government’s own report estimates there is at least a $120 billion gap in capital spending on water infrastructure. Another stat is it is estimated that 21% of water is lost in reticulation – 1 in 5 litres of water that Councils collect to reticulate to homes and businesses is wasted in the distribution. That is frankly outrageous.  Local authorities are often reminding us all to look after the environment and not to waste water, but their own ineptitude results in enormous waste.  It is notable that there are limited statistics about the state of stormwater infrastructure, because local authorities just don't know. If your home or business has ever flooded due to rainfall, then you might care, because stormwater infrastructure is what helps protect your property.

Why has this happened?

The Government claims the problem is a matter of:

· Lack of economies of scale: 67 local authority entities supply water infrastructure (there are small private operations as well) without the capacity and capability to address issues. Career paths for those in the sector are limited with multiple small entities and small scale capital spending generates insufficient competition in the contracting sector to put price pressure on those costs. It claims water entities need customer bases in the high hundreds of thousands to be viable.  There is definitely merit in this.

· Unaffordability of needed investment: Under the current approach, the money ratepayers would need to be forced to spend to remedy historic underspending is enormous. Government estimates increases of 300-1500% in spending are needed over the next thirty years compared to current levels. This is quite credible, indicating a desperate need for both new capital and for ways to obtain efficiencies to reduce these costs over time.  However, it would be dishonest to pretend that those who use water shouldn't pay for this, albeit over many years. 

· Poor incentives and lack of effective oversight:  This is where the Government lays bear what’s REALLY wrong. It is that the model of “democratic control” of the provision of water services, and the “power of general competence” of local government in overseeing that control is a failure.  It is worth remembering that "democratic control" is a touchstone of leftwing political philosophy.  

To quote from the Government’s own report:

Local authority service providers operate in a political environment, in which investment decisions are made by elected representatives who have a duty to consider broader community interests (for example, other investment priorities and affordability of rates increases) and a constrained financial environment, in which the main funding and financing  mechanisms are via ratepayers and council borrowing. These factors combine to limit the level of three waters investment.


In short, local politicians prefer spending rates money on other stuff and prefer not to raise rates to pay for water infrastructure. It talks of misaligned incentives, which is surely a euphemism for politicians care most about being elected, second most about getting attention for shiny stuff they made ratepayers pay for, third most about other stuff they can get credit for in three years. How many local politicians campaign on fixing the pipes, especially when such work can literally take years to complete, is largely only visible as a disruption and the end result is… continuity of what you had before?

These failures are a legacy of opposition to water reform in the 1990s

Electricity, gas, telecommunications, aviation, ports, road transport, public transport, all were subject to significant reforms in the 1980s or 1990s, but water was largely left alone. With the sole exception of Auckland, with the creation of Watercare Services in 1991, all other water provision was left in the hands of territorial authorities. Water is a legacy of the Muldoon era and beyond, with the exception of some local authorities consolidating and in some cases implementing water metering, not a lot happened.

Some Aucklanders might remember the Water Pressure Group, led by the late, conspiracy theorist, Penny Bright.  One of the cause célèbre of the hard left was opposition to the commercialisation of water in Auckland seen in the creation of Watercare Services, which supplies water and wastewater (not stormwater) services in the city. The New Labour Party, later the Alliance (when it included the Greens) were loudly opposed to what they saw as the bogey of privatisation (which never happened).  As the Alliance was on the ascendancy, after the 1993 General Election, National pursued little in reform of the water sector, and as Labour went back to the left under Helen Clark, the idea of reforming water was parked.  After MMP, there was no majority for any serious reforms in the sector, and from 1999-2008 the Clark Government proceeded, with support from the Alliance and the Greens (who had now left the Alliance) to pass the Local Government Act 2002 to grant local government a "power of general competence".  In short, the left trusted local government to get on with the job. Of course the Key/English Government from 2008 until 2017 did nothing either to reverse it.

The power of general competence and community empowerment have been a failure

The implementation of the power of general competence was to usher in a new era.  Then Local Government Minister Sandra Lee said "It is both a reaffirmation of the place that local government has within our democracy, and of the rights of local people in their communities to exercise controls over their aspirations, their decisions, and the democracy that affects them."   

So communities were "empowered" which of course is code for empowering local politicians. Sandra Lee even made it clear that water privatisation was to be prevented. "We are not going to agree to allow councils to sell what is not a commodity--the access to clean water--but a fundamental human right."  I'm not sure how the people who died in Havelock North had their "fundamental human right" protected, and how asserting that right works if the Council has let the local infrastructure fall into disrepair.  Indeed then Associate Local Government Minister Judith Tizard later claimed credit for having including "cultural wellbeing" in the objectives of local government.  Not much culture if you're sick because the Council supplied water is contaminated.

Backed wholeheartedly by the Greens, the reforms were to usher in a new era of “local democratic accountability” with more powers to deliver what “the community wants”. Indeed, it is the heart of the mantra of the economic left that justice is achieved by more “democratic control” of resources. Well we’ve seen how democratic control of water has been going, and the results are in – it's been a failure.

 What needs to be fixed?

Users, in many cases, don’t pay for what they use. With the cost of water infrastructure for many hidden in rates bill, there are no incentives to manage water use, and those who need water face rationing alongside those who waste the resource. Furthermore, those who benefit from stormwater infrastructure don't necessarily pay rates reflecting the protection of property value they obtain from it (nor do insurance costs reflect that adequately).

Local authorities get paid rates regardless of how much water is used or wasted. So they have poor incentives to stop wasting 21% of the water collected and distributed, to plug leaks so that they can sell the water they collect. 

Local authorities aren't required to spend money on water infrastructure so they may levy water rates, or pay for water from general rates, but they have a "power of general competence" and they are accountable to you every three years at the ballot box.  They spend money how they like, and your power to change that is tiny.

Politicians are no better able to decide how best to spend money on water infrastructure than they are on electricity (which they don’t) or telecommunications (which they don’t) or on farms. Bear in mind local politicians are primarily responsible for housing shortages because they are the controllers of permission to build housing and to allow land to be used for housing. Expect them to make similar quality decisions around provision of essential infrastructure.

Imagine if your local power company spent the money raised from your power bill on a convention centre. The reason that, by and large, electricity and telecommunications infrastructure work is because you pay for its use and the providers spend the money on maintaining and providing the service. It’s capitalism working, because those companies borrow money based on future earnings and invest in the network to continue providing reliable service.

Given that the Ardern Government is the most leftwing government in New Zealand in nearly 40 years, you might think that with reality confronting ideology, they might actually think that this is a failure due to their own philosophy not working empirically. You see if the Douglas/Richardson reforms had NOT progressed, you’d be seeing the same malinvestment in electricity (which was beset with blackouts in the 70s and 80s before reforms), and telecommunications (which famously, before the mobile phone era, saw it take weeks to get a phone line installed).

What is proposed?


It’s curious that the Government has relied somewhat on Scotland as a source of advice for how to implement water, especially when its own report indicated much better performance in England (see above)– which DID famously reform water by privatising the lot in the 1980s. It notes that privatisation of water in England  improved productivity by 2.1% per annum over 24 years (64% all up) after adjusting for quality of service improvements. Achieving a net saving of 64% in cost over such a period has to be tempting.

That is, of course, the right answer.

It isn’t proposing that, because you see, the Ardern Government is in many ways, continuity Alliance,

It is proposing:

· A water regulator to set standards for water quality, with powers to direct water providers to act to meet its directives;

· Consolidating 67 entities into 4;

· The new entities will be owned by local government

· Two boards will govern the new entities. A professional independent board, akin to boards supplying other infrastructure (a semi corporate board) and a regional representative board, which is to be split 50/50 between local government and Iwi.

· The Regional Representative Board will appoint members to the independent selection panel to select the Board, which will then select the board. In effect local authorities and Iwi will indirectly appoint the board.

· Setting of charges must be done transparently, with no changes to how people are charged in “the initial years”. The new entities will have powers to borrow.

· Protections against privatisation, mostly by local government and Iwi having to have a 75% majority in favour of it.

· The entities be statutorily required to uphold “the principles” of Te Tiriti, with the board needing to have competence in Te Tiriti, Tikanga, Matauranga and Te Ao Maori;

· The entities must direct water users funds towards the capacity and capabilities of mana whenua to support delivery of water services

· To throw taxpayers’ money at the entities to lure in local government to agree.

So it is resisting commercialising the delivery of water, preferring to largely aggregate water into entities similar to what governs water in some parts of the country already. They will be, in effect, very large Non-Commercial Council Controlled Organisations with co-governance with Iwi.


What other options were considered?

Well not commercialisation or privatisation.

The report indicates that three other options were considered:

· Local government led reform: This of course would be consistent with the Government’s philosophy, but has no merit because there are few incentives to make it work.

· A National Water Fund, akin to how land transport funding operates. Except there are no fees charged for water use nationally, and it wouldn’t really fix anything other than enable consumers in places which have well managed water systems to subsidise those in areas that don’t.

· Regulatory reform only, in other words introducing a regulator without structural reform. This would not achieve efficiencies and achieve only limited accountability.

So privatisation wasn’t considered, but the Government should be transparent as to why – which is ideology and politics. Why wasn’t commercialisation considered, by creating genuine arms-length council owned water companies, similar to Watercare services? Why not vest those companies in shares held by ratepayers (noting that it is property owners that primarily benefit from stormwater infrastructure, which protects their property from damage) or even just citizens and permanent residents as consumers? After all, the success in England in holding companies to account for quality of service, levels of investment and addressing systemic underinvestment is considerable. Why does the Ardern Government acknowledge that success then steer down another path? It seems like it is purely ideological.

What's good about the proposals?

Large entities will be able to be more professional, achieve significant capacity building and attain economies of scale. There is no doubt that there are far too many local water entities. Having borrowing powers and the ability to levy charges on consumers is also critical, but these powers largely exist now within local government.  Regulatory oversight ought to result in better outcomes than just leaving it to local government and iwi to manage, and more money will ease the pain, but that's transferring a burden from ratepayers and water consumers to general taxpayers, with no sense of the distributional impacts of that.  

What's wrong about the proposals?

The new entities wont be companies, wont be required to make a return on capital or to pay tax, meaning it will be less transparent as to whether they are operating as efficiently as they could be, or maximising the utility of their assets. As a much larger version of the current model, there isn’t so much incentive to treat those who consume water and use wastewater and stormwater services as customers. Having a customer, provider relationship more directly would provide much more input into consumer preferences than by having an advisory board.  What's fundamentally wrong with considering water similar to electricity?

Local government will still own the entities, although this ownership effectively diluted because governance is now shared with iwi, who own none of the infrastructure, nor are accountable to ratepayers.

There are probably too few entities proposed and Watercare Services, which has fewer problems compared to many other water entities, will be required to be decommercialised and merged with Northland water provision, which may mean Aucklanders cross subsidising water infrastructure in Northland. There is no need to dis-establish Watercare Services and no options given as to the number or geography of the proposed entities. Local authorities that are successful ought not to be forced to be subsumed by entities of those that are not, noting that the three waters are NOT an integrated network like energy, telecommunications and roads. There is little need for disjointed networks to be managed together, except to achieve economies of scale and professional capacity for competency.

Governance remains highly political. With local government half responsible for appointing the panel that then selects the board, the incentives are there to offer positions to those they know and trust, in short local authority nepotism. With four entities, headquartered and dominated by Auckland, Hamilton, Wellington and Christchurch, expect the local authorities of those cities to take charge.

The introduction of iwi governance is a vast increase in power for iwi over core infrastructure that has no precedent in other industries, and which assumes that Maori as both consumers or voters is insufficient in protecting and promoting their interests, although it might certainly promote iwi interests. The iwi role will be to share oversight with local government, which already has a growing mandatory iwi co-governance role in any case. Iwi have the same incentives as local government in appointing people to select a board to govern water. The outcomes expected from this are extremely vague such as enabling mana whenua to express kaitiakitanga, but what will this achieve in terms of outcomes such as water quality, quality of investment and accountability? Embedding Te Mana o Te Wai is harmless enough, but this is hardly unique, because Te Mana o Te Wai is universal to humanity. More fundamentally, the Government is effectively proposing a transfer of 50% of the power around the water sector to iwi, with neither the responsibility of ownership, or accountability to consumers or the owners of that infrastructure. It is a significant uplift from current obligations around consultation with Iwi, to hand over an equal share of governance, with no indication of outcomes or what it means for other sectors such as electricity, gas or telecommunications. It is a form of privatisation of governance, to iwi. I

Now there IS a valuable point in “iwi/Māori have roles within the current three waters service delivery system that will need to be acknowledged. They are suppliers and/or recipients of water services (particularly to rural marae, papakāinga, and rural communities).” As suppliers, they should be subject to the same oversight as other suppliers, but as recipients they are little different from anyone else. They receive a mix of good and poor service, but it is unclear why their role as consumers is more special than anyone else. Sure, water is a taonga, but it is to all humanity. It’s ludicrous to claim that it is more special to iwi than it is to any other.

However, this is more fundamentally about the Government’s interest in what is, in effect, creeping constitutional reform, by redefining the Te Tiriti partnership of Crown and Iwi, into one that goes beyond meaningful consultation and engagement, to sharing powers over assets that do not belong to iwi (the three Waters are about infrastructure, not lakes, rivers and streams after all). There IS a role for consulting iwi about the use of property they own or control, but to privatise half of the control over ratepayer owned infrastructure, to iwi deserves to be justified in terms of outcomes, when the reforms themselves are based on addressing serious problems with the status quo. Should this really be used as an opportunity to facilitate more iwi control?

What should happen?

Reforms are badly needed, primarily because many local authorities have proven themselves utterly inept in managing and funding water infrastructure. However, the Government is proposing to consolidate existing water entities, including successful ones, into four entities which largely resemble Council Controlled Organisations and share governance with iwi. Yes, having professional large water utility entities will be a step forward, but continuing to have significant local authority governance, which has proven to fail, and using the reforms to implement iwi co-governance, with no sense as to what improvements to outcomes this could deliver, is missing an opportunity.

Government should be bold, it should transfer the water assets of local government into a handful of specialist water companies, and issue shares in them all to all property owners connected to their networks and float the companies on the share market (and as a sop to fear over foreign takeover, you could even cap foreign ownership at 49%). Let the water companies meter or flat fee property owners for their services, and force councils to drop rates proportionately and NOT increase them by more than inflation. Given their quasi-monopoly status, central government should oversee the water companies in terms of drinking water quality, but by having popular share ownership concerns over water companies gouging consumers can be ameliorated.  If the Government did this, I'd accept the value of an independent regulator, to monitor and report on performance.

 It’s time to take the three waters out of the hands of politicians and put it in the hands of consumers as shareholders, and run it like a business. You have no more reason to trust this Labour Government with water reform than you would Jim Anderton, who opposed competition and privatisation of telecommunications, electricity, aviation etc etc.

We've seen the results of having a utility sector entirely at the behest of democratic accountability to the community under local government. It's been a failure.  The water sector needs reforming, it needs bold moves resembling what happened and succeeded in England in the 1980s. Shame the Government is willfully ignorant and unwilling to even consider that model as an option.

The Government claims significant benefits from their reforms, over thirty years. This may well be credible, but is based on many assumptions around efficiency savings seen in Scotland with consolidation, and that these efficiencies wont be lost in a strange new co-governance model.  However, since the Government didn't even look at the option of following England  - even without privatising the companies - we wont know if it chose the best option, as the options analysis has clearly been politically cauterised, by people whose political ideology has so demonstrably failed in this instance.

Why would anyone trust them to get this right now?  

Local authorities are currently consulting on whether communities support the Three Waters Reforms, and many oppose it, not least because local government never likes losing power and influence.  You should let them know that you oppose the proposals, but not because it takes powers away from local communities (whatever that is), but because it puts power in the hands of people who are NOT primarily interested in delivering efficient, high quality services to consumers.

So tell your territorial authority AND tell your local MP what you think of these reforms.  Be grateful also that electricity and telecommunications aren't being run by your local authority.  Imagine the blackouts.

05 October 2012

Why does the role of the state matter now?

The global financial crisis is seen by the left as the prima-facie case against free market capitalism.   Just under 20 years after Marxism-Leninism was shown up, on live TV, for what it was, a cold ruthless oppressive heartless nightmare, those who quietly had to admit that communism didn't work were ready to gloat.  

The collapse of investment banks demonstrated what happens when a handful of men are driven by a ruthless desire to make money using other people's money, with little regard for the risks or the consequences.  That was and is the line taken by the left.  The British Labour Party, with barely a hint of contrition, blames the banks - not the fact that it was in power responsible for the biggest bank of the mall, the one that all the others are dependent on, and nay encouraged to use for unlimited credit.

The first stage of the financial crisis saw banks face collapse over poor investment.  In a free market economy a bank that does that would be allowed to fail, but the leftwing response (indeed the conservative rightwing response if one looks at the United States) was to bail them out.  The left now claim that this is what free market capitalism is about.  Really?  Is there any sector where free market capitalists argue for state bailouts?  No.  

They who meme that capitalism is about privatising profits whilst socialising losses are talking utter nonsense.  For this would not happen in a true free market economy.  Indeed, in a true free market economy there would have been a couple of key differences from what happened.

One is the often repeated rules set up in the late 1990s by the Clinton Administration requiring lenders to loan to a segment of people who would otherwise be bad credit risks.   That in itself meant people who shouldn't have had credit to buy homes got it.  An explicitly redistributive measure that backfired.

However, the more intrusive role of the state is the central role it plays in creating money and issuing credit to banks.  The state creates money from nothing and distributes it by lending it to banks at a centrally set interest rate which they then lend onto borrowers at a profit.  That isn't free market capitalism, as a core component of capitalism - the means of exchange - is state created and its value managed by growing its supply (created managed inflation).

In such an environment, the state boosts the economy by ever increasing the money supply, with more credit being issued, supporting positive and negative investments, until at some point, the bubble in prices in investments, whether they be shares or property, bursts.  In Ireland, the state, which offered an explicit 100% guarantee of deposits, shifted the burden onto taxpayers.  In Iceland, the state let them all fail.  

The so-called deregulated free market financial sector was nothing of the sort.  It could operate largely as it wished in developing financial instruments with the public and businesses and each other, but it did not with the blood supply from the state of credit issued from nothing.  

Free market banking is not banks that issue state issued credit which is turned on and off like a tap.  

What we have had is mixed model banking, and we have it again now.

The second part of the global financial crisis has come directly from statism.  Banks have finally figured out that sovereign debt in countries that run perpetual budget deficits, and don't even have the instrument of printing fiat money to pay for it, is not safe.  Greece, Portugal, Spain, Italy and increasingly France, Belgium and Slovenia, are all facing up to reality.  The economics of every single one of those states has been ever increasing spending, ever increasing state employment, ever increasing regulation of business and every increasing debt.

The model of the socialist state, that borrows and spends between elections, passing on the burden to the future generation, has been found wanting.  It is a model that the UK has also embraced with aplomb under Gordon Brown and in the US, not just by Barack Obama, but also G.W. Bush and Bill Clinton.  

The level at which people will tolerate taxation is below the level that the left have sold the state to them.  It is that gap that needs bridging across the Western world.  With few exceptions, this is the model that has been swallowed and which virtually all states are now trying to adapt to buy time - yet they are not dealing with the fundamentals.

The US Presidential election is a facsimile of that debate.  Barack Obama believes the answer is to raise taxes to bridge the gap, albeit slowly and to continue with using debasement of the currency, through money printing (quantitative easing) to boost the economy and hopefully ensure GDP grows faster than debt.

Mitt Romney believes in cutting spending, albeit slowly, and although he would also debase the currency he is willing to investigate the merits of a shift to a commodity based currency, rather than currency based on nothing but confidence.  

In New Zealand, this debate is what should be led by Libertarianz/ACT/ the new liberal party.

A belief that the state should hold ever decreasing amounts of public debt, that it should not spend more than it takes in revenue.  That it should encourage independence not dependence, that it should encourage people looking after themselves, their families and each other, not to claim the unearned money of others by force.  That it should promote the benevolence of civil society, community and fellowship, not the sneering, mob rule of people lobbying departments, councils, community boards for new laws, new money, new taxes, engaging in endless rent seeking paid for by force by someone else.

The global financial crisis was not due to free market capitalism, its solutions were not remotely anything to do with capitalism, and today the seeds are being sown for the next financial crisis.   The seeds are quantitative easing, which has been a resounding success in keeping the Japanese economy stagnant for 15 years.

The anti-capitalists seen in leftwing parties and the Occupy movement had a point.  The model that failed four years ago was a massive transfer from all of us to the owners and employees of banks that undertook malinvestments.  

Yet it isn't capitalism that failed, and those who oppose it don't have an alternative, just anger and a desire for more government.

We do have an alternative.  

13 June 2012

Calls in the UK to stick up for capitalism

For too long those of us who have stood up for free market capitalism have tended to wonder why it seemd quite lonely.   With the exception of a handful of think tanks, the voices in favour of less government and more freedom have been few and far between.  Most of the media seems to be inhabited by the "what is the government going to do about it" school of questioning regarding any issue or situation that comes along, precious few ask "when will the government get out of the way".

So it is gratifying that in the UK, at least, two voices have come out in the past day in favour of capitalism and less government.

The first comes from Sir Terry Leahy, former Chief Executive of the largest supermarket chain - Tesco.  He is no libertarian and he wasn't advocating stripping back the state like I would, but writing in City AM he said:

"As a believer in the free market, and someone who trusts people, in my eyes taxes are still too high.  Insufficient incentives exist in the UK to encourage investment, hard work and job creation.  The ambition to steadily cut corporation tax is laudable.  This, though, should be part of a much wider programme of tax reduction, which does not imperil plans to cut the deficit or spook the markets, but gives employees, employers and investors more money to do with as they wish."

More of their own money of course.

"what is needed in the UK: a rebirth of capitalism. Business cannot sit idly by and expect politicians to do this alone.  If we have the courage of our convictions, business people need to get stuck into the debate, taking this message not just to the media but elsewhere, including schools.  Every student should be taught about wealth creation and entrepreneurship."

Quite.  Business people have for far too long stood by and let politicians on the left push anti-business and anti-capitalist agendas.  The chimera of "corporate social responsibility" has been used to shroud the idea that fundamentally business and capitalism is "bad", and that it needs to compensate society for what it does.  Utter nonsense.  More recently the idea of "green business" and "triple bottom line accounting", have been spawned by those pandering to the ecological-left, in the hope that it will chase away threats of more taxes and regulation, when all it does is surrender the intellectual argument to them.  There is no harm in seeking to be more energy efficient, to gloat about how environmentally friendly you are and the like, but to surrender the intellectual argument that in fact - your business creates wealth, makes people better off, satisfies consumers and employs people - all through voluntary exchange - something government fails to do, is a disaster.

It parallels the businesses who embrace corporatism, who think "government relations" is about seeing what favours can be granted to their sector, whether it be reduced competition, more subsidies, regulation of competitors, taxing of competitors - rather than encouraging government to get out of the way, except when it is about protecting property rights and contract enforcement.

For Leahy to say this is welcome, but the other promoter of capitalism is more bewildering, although one might hope encouraging.

It's the Chancellor of the Exchequer George Osborne.  He said businesses need to fight back against anti-business sentiment that "dominates current political discourse".  He was quoted by City AM saying "If you are not out there, engaged in those arguments, then you are going to leave the field open to those people who want to fill that space, and who argue that companies... have got to pay more tax".   He wants businesses to retaliate against "the politics that says it's perfectly acceptable for the state to take half of all national income".

Naturally I agree, but isn't this his job too?

Shouldn't he be arguing in favour of not just simplifying planning law, but by scrapping it in favour of private property rights?

Shouldn't he be actively cutting all areas of state spending, not ringfencing the Soviet style NHS with half-hearted reforms that incentivise more contracting out, not ringfencing aid to developing countries?

Shouldn't he be abandoning the "Green Investment Bank" boondoggle, not waste money on an unprofitable (and uneconomic) high speed railway, abandon green taxes on electricity generation and be winding back and abolishing the legion of regulators for so many sectors?

Shouldn't he be leading the charge against the ban on new airport runway construction by the private companies that own London's three biggest airports?

In other words, shouldn't he be the government's chief advocate of capitalism, less government and freer markets (let the Liberal Democrats argue the contrary)?

The morality and the empirical evidence of what capitalism has enabled should be getting shouted from the rooftops, especially when the UK media is dominated not by Rupert Murdoch and News Corp, but the state owned BBC - itself almost entirely funded by the forcible extracted extortion system known as the TV licence.

04 February 2012

French court punishes Google Maps - for being free

One of the many misrepresentations and distortions of libertarians is the belief that we all want to reduce everything to money, and for life and the world to be a collection of financial transactions.  It is a core part of the post-modernist leftwing critique of capitalism and free market liberalism, yet it is one that has no basis whatsoever in libertarian or capitalist philosophy, politics or even discourse.  Indeed it is Marxism that puts materialism about everything else.  It is seen in the incessant collectivisation of people into classes, based on incomes or wealth.  It was seen in the Soviet Union's ruthless pursuit of construction and production regardless of the cost to individual freedom or the environment.  Almost every policy proposal from the left of the political spectrum involves spending more money or taking money from people to spend on what they want.  For anti-capitalists the problem is invariably around there being "not enough money" for those they approve of and "too much money" owned or earned by those they don't.  The Khmer Rouge abolished money, but by then it had completely enslaved almost the entire population of Cambodia (after executing many) and people were all meant to work for the love of each other (ignoring they had guns pointed at them, literally, the whole time, and were all on the brink of starvation).

Yet I know many in the left will claim wide support for charity, and quite a few people in charitable endeavours and who provide assistance, time and money for needy people don't do so for money.  They do so out of genuine human benevolence for other people.  They want to see people lifted out of poverty, they want to see children getting education, they want people to be cured of diseases.   You see it is part of human nature to have some compassion for others.  However, if you consider mainstream political discourse, the left would claim that it represents a charitable view of the world, compared to that of the "right" which is all about people being individuals who care nothing for others.

Objectivists don't hold to that view, for we believe that human benevolence is a rational pursuit of one's values.  The most universal example is with families and close relationships.  Given humans raise children, an activity that involves dedicating a significant amount of time, effort and money to providing for others, demonstrates that it is inherent to give a damn about others.  Wider families and friendships see that happening informally, all the time.  Human beings are mostly social, they enjoy the company of others and get pleasure from sharing, interacting and giving and getting from each other, voluntarily.

Libertarians reject the characterisation of capitalists and free-market advocates as wanting to atomise humanity, and have people who "don't care about the poor", or who always want people to exchange goods, services or indeed any form of interaction for money or some form of predatory gratification.   Libertarians embrace one core principle -  voluntary adult human interaction.  Human beings should feel free to interact with each other as they see mutually fit, which can mean asking for help, or giving help.  If people refuse, then that should be respected.  For without the voluntary element, one is no longer being kind or benevolent, but is submission to force - a concept that is incompatible with benevolence.

So why have I gone on about this diatribe? Well companies often do not expect money for goods and services.  They may offer free samples for promotion, or they may simply regard the provision of common goods, services or even space as complementary to what they do.  Shopping malls are large privately owned common areas where people can spend considerable time with seating, warmth and bathroom facilities, for nothing.  Google Maps is a service that is available for free online, and offers a basic level of mapping to anyone wishing to access it.

However it has come afoul of French competition law, which apparently treats a company offering a service for free as being negative.  Competition law exists as a response to arguments that dominant businesses in a market can act in a way that prevents competition and is harmful to consumers.  Setting aside that libertarians reject this argument, what is going on in France is not about consumers.  It is about protectionism.

The French Commercial Court has decided that Google Maps offers "unfair competition" to a French cartography firm called Bottin Cartographes, and is fining Google US$600,000 for daring to offer Google Maps for free.

What has Google Maps done wrong?  Has it stolen any intellectual property? No. What it is offering is the product of its own efforts, purchased, produced and accumulated through voluntary interaction.

Is it harming consumers?  No. Quite the opposite, they are getting a useful resource for free.  They are benefiting from a large company offering a service they need not pay for.

The problem for the French is that Google Maps is undermining another business, a French business (this sort of economic nationalism is of course, racism practiced by socialists).  A business that rather than change what it does, focusing on value added or targeting specific markets, declares it has some high profile customers (Louis Vuitton), as if that makes it special.   So it should be protected from another business that offers its own maps for free.

This, is the French model of "compassionate "capitalism, unlike what they call "Anglo-Saxon" capitalism.   It is sometimes pointed out by socialists who see France as some sort of halfway model between free market capitalism and socialism, but this court case reveals it for what it really is.

French competition law is not about consumers.  They lose out.  Indeed France has long been one of the last EU Member States to open up its traditional monopolies to any form of legal competition at all, such as electricity, postal services and bus services.  That ignores the rampant protectionism of the agricultural sector, because French consumers can't be trusted to pay more for French produce (as they are expected to do).  So in France, this "socialist capitalism" actually means the ordinary citizen loses out, no free service.

French "capitalism" is about protecting old established businesses.  It is about entrenching a corporatist view that says it is more important that an existing business keeps doing what it is doing, making money from consumers that have little choice, and keeps people employed in that old business. 

It ignores the fact that if consumers had a choice, they may spend their money on something else, on something they want that isn't free, on a business that does have to compete for their money and which employs people.  A business (and employees) that suffer because of the protectionism of Bottin Cartographes.  It ignores that someone may set up a business or grow a business because a free map facilitates something innovative or affordable that was not when one had to buy a map from Bottin Cartographes.  Finally, it ignores that the people working for Bottin Cartographes might actually be innovative enough to diversify, specialise and generate more value by being different.

So in France, the country that rejects free market capitalism, when something is offered for no money it is offensive to the law.   It is offensive to me too.

The people of France may now get Google Maps blocked, sadly.  Whereas I think the right response to Bottin Cartographes is to boycott it.  Let this stinking little protectionism business, which uses courts rather than good products people want to pay for, not get money from those of us who do have a choice. 

Why should anyone, regardless of whether they are free market capitalists, or anti-capitalists want the law to step in and stop a business giving away its goods and services for nothing?  After all, it is not you paying for it, and you do not have to take what is offered?

29 November 2011

Where to from here for those of us who believe in freedom?

ACT, Libertarianz, Freedom Party, Liberal Party, whatever name there is for the future of those at the libertarian/freedom oriented end of the political spectrum is not important right now. What is important is that those of us who share some fairly core values and principles agree to sit down and talk. The options that have been taken up till now have been somewhat spent. ACT has long been the pragmatic option, but until 2008 was never part of government. In government, many (including myself) believe it under-delivered, and certainly the strategy taken by the leadership the past few months has been an abject failure. I wont repeat my previous views on this, but needless to say ACT as a liberal force for more freedom and less government cannot limp along simply led by John Banks to the next election.  I suspect even he realises that the status quo isn't sustainable.

To be fair to Libertarianz, every election since the 2002 administrative debacle has been an improvement, both in campaigning style and result. Yet without getting virtually any media attention or having enough money to buy advertising, it struggles to get heard. Even when it had its peak in 1999, it was due to Lindsay Perigo’s leadership and presence on a nationwide radio station. Yet this end of the political spectrum has been sadly filled with the sorts of chasms and arguments that are not entirely dissimilar from that of the far left. It occasionally has been a little like the Trotskyites vs. the Stalinists vs. the Maoists. ACT has blamed Libertarianz for being too purist, Libertarianz has blamed ACT for being soft sellouts and others have said that Christians have felt excluded, along with non-objectivists, or even those who are conservatives in their personal life and have conservative values, but don't believe the state should impose them.  Bear in mind I’m an objectivist libertarian and Libertarianz member who has voted Libertarianz four times and ACT twice since MMP came along.

The bare faced truth that needs to be admitted is that there is a difference between seeking to win Parliamentary representation and influence, and to be a lobby group that seeks to influence more widely than that. Those on the left, including the environmentalists are expert in doing this, having set up a number of moderate to high profile lobby groups that focus on specific issues. Those of us who want less government, need to do more organising, less in-fighting and recognise the difference between running a successful political party, lobbying on issues and being movements of populism or philosophy. 

I agree with Peter Cresswell that those of us who are freedom lovers need to start talking. So I suggest there be a conference of some sort in that light.

The default invitees being senior members of ACT and Libertarianz, and others specifically invited by people from both parties (who may come from National or elsewhere inside or outside politics). It should be a session to think, not necessarily to decide what to do, but to spend time to chew the fat and provide the catalyst to do more thinking, before acting.  It shouldn't be a session to grandstand or for publicity seekers, but a serious closed conference.   It wont be to make final decisions, but to make substantive progress on what to do next.  It should form the basis to produce proposals for discussions with existing party members, and to reach a conclusion within a year.

The agenda should be as follows:

- Introductions ;

- What sort of objectives should exist for a political party of freedom;
o Principles and values; 
o Political goals 

- Understanding philosophy (where do our principles and values come from ((intention to understand, not debate, how different people came to the freedom/liberal/libertarian end of the spectrum));

- Key policies and issues (identifying policies that unite us, and those that divide us. Not looking for detailed discussion about tax rates, but to establish common ground and to understand clearly the issues that cause some of us problems and finding a way to address, discuss them);

- What’s right about ACT and Libertarianz, and what is wrong;

- What a successful party of freedom would look like, campaign like, and focus on;

- What to avoid (Open, frank and honest discussion about what a future party should avoid);

- Options (revitalising ACT, strengthening Libertarianz, starting from scratch, rebranding and merging) with the objective of narrowing down preferences to two;and

- Next steps (widening discussion with respective parties, another meeting to create concrete proposals). 

This should happen next year, around mid-year (so people will want to stay inside). It should be good willed, good natured and well disciplined. It shouldn’t just be a meeting of suits, or a meeting of loud mouthed angry ranters, but a meeting of good people, with good intentions, who have by and large, shared values, but haven’t been talking from first principles and objectives with each other.  Bear in mind also that what may finally come could be a two pronged strategy - one involving a political party, another involving a think tank/lobby group (or two?).

The most important thing of all, for everyone, will be to listen. 

In advance of that, those of us in ACT, Libertarianz, and indeed freedom oriented members of National, ALCP (and others if they find themselves in a less conventional political home) should sit down and talk amongst ourselves, and with each other.  It is time to rise above the morass of noise, detail and personality clashes.  Nothing should be in or out, but it should be obvious that unless there is a consistent belief in there being less government and more freedom, then we will get nowhere. 

It’s time to not be too solipsistic and realise that this election less than 1.5% of the public voted for parties that expressly espouse less government. Many of us have been doing this for some years, but we also have eager, hard working and enthusiastic young people who reject the mainstream view that the answer to any problem is automatically that the government should do more. Let’s do it for them, do it for us, do it for the country we want New Zealand to be - I believe that at the very least it means free, prosperous, optimistic, where people are judged not by their ancestry, sex or background, but by their deeds and words. A country where being a tall poppy is not something to sneer at, but something to celebrate and aspire to. 

The conservative right has got its act together, and has built a highly credible platform that could cross the 5% threshold in 2014. 

We must do the same, but better.

Who’s with me?

P.S.  The reports that John Banks is talking to the Conservative Party to consider some sort of relationship, simply exemplifies the fact that ACT is finished.  LET Banks take whatever is left of ACT with him, let him go.  He'll never win Epsom under that banner.   I'd don't need to say the three word phrase that starts with "told", but I am SO glad I did not vote ACT to be represented by Banks.   It isn't schadenfreude at all, it's just frustration when this whole debacle is res ipsa loquitur.

06 August 2010

The joy of capitalist "exploitation"

"The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all"

So said economist Joan Robinson writing about underemployment in South-East Asia at the time.

(hat tip: The Economist Leader, 31 July 2010).

14 January 2010

Chinese government wants cyber order

Having mulled over how to respond to Google's threat to withdraw from China, the New China News Agency (Xinhua) has responded with a technique well honed since 1949. It evades the truth.

"China's internet is open" it says. So what is the Golden Shield Project about then? Given my blog is now blocked in China, this is demonstrably a lie.

"China has tried creating a favorable environment for Internet". No China has sought to allow the internet to be used for business, but to use it to spy on dissidents and to block discussion, debate and free speech that goes contrary to what the Communist Party of China wants people to see.

Finally it makes it out to not be a big deal at all saying "Google sent a short statement to Xinhua Wednesday, saying, "We are proud of our achievements in China. Currently we are reviewing the decision and hope for a resolution."" This minimises the whole issue, makes it look like it is only a minor point.

Most notably the report says next to nothing about why Google has suggested it withdraw, citing a "dispute" with the government.

However, a darker response came from an official spokesman quoted by the New York Times. Wang Chen, the information director for the State Council (cabinet) said:

"Internet media must always make nurturing positive, progressive mainstream opinion an important duty" as he called for internet companies to "scrutinise" information that may threaten national stability and for online public opinion to be "guided".

Wang Chen thinks he knows better than your average Chinese internet user what opinion is worth considering and what information they should see. Big Brother state is alive and well in China.

The People's Daily (the official paper of the Communist Party) is saying more:

Spinning that this is all about pornography, not free speech per se it reports "all countries should "take active and effective measures to strengthen management of the Internet and make sure their problems do not affect other countries' cyber order." Cyber order?

Then it plays the "people will be victims card" "Chinese Internet users are the real victims if Google quits China. I think Google is just playing cat and mouse, and trying to use netizens' anger or disappointment as leverage" and the government doesn't care "It will not make any difference to the government if Google quits China; however, Google will suffer a huge economic loss by leaving the Chinese market".

Meanwhile its headline talks of linking the internet with telecommunications and broadcasting networks (hardly news), no doubt with the intent of showing China forging ahead with technology and development, to attract foreign corporate interest.

Of course, business analysts are unsurprisingly wondering if Microsoft and Yahoo will reap rewards from this. Neither have shown any great concern for allowing free speech in China, and Microsoft in particular is more focused on getting the Chinese government to combat software piracy. Yahoo in China is predominantly Chinese owned now, so it's sold out, literally.

My big question is how many business people, starry eyed by the size and scope of the Chinese market have sold out free speech, property rights and individual freedoms to make some cash. How many have been disappointed that the enforceability of contracts in the People's Republic of China has more to do with connections, the size of the company you are contracting with, its relationship with the layers of government and the Communist Party? How many have wondered why theft of intellectual property is rampant, as the Communist Party has long regarded theft as a legitimate tool, like the USSR did? How many have found corruption to be rampant and have participated in it?

In other words, how many of those who seek to enjoy the fruits of capitalism spend so little energy and time in supporting the basic concepts that make it work? As such, is it any wonder that they then become victims as governments and citizens turn on businesses, assuming that capitalism unfettered doesn't mean laws against fraud or theft?

For Google, free speech and the ability to enforce laws against trespass (hacking) have proven to be critical to what it does. Maybe it is about time that other businesses in China (and indeed in all countries) paid attention too.

27 October 2009

London's capitalist paper

I've quoted a few times from City AM. It is London's less well known morning free paper. It focuses on business and finance, so for many will have little appeal. For me it is the one paper in the UK that consistently, without fail, supports free markets and opposes government intervention to prop up failure.

So I recommend looking at the editorials by Allister Heath at least, even if you are uninterested in shares, banking and markets generally. For the philosophy expressed is a positive one. Indeed, Heath wrote last week just this:

"unlike others, we have refused to go down the road of demagogic class warfare and the politics of envy. City A.M is the only newspaper that stands up for City workers and believes in their values. We support a real free-market economy and oppose bailouts as well as crippling tax hikes; first and foremost, we are the paper for London’s capitalist classes. "

Now that's something work looking at for me. So read City AM, and to start how about this little piece on the financial crisis.

It's not libertarian, but it does seek to embrace the creation of wealth and decry those who destroy it. That in itself is a good thing.

22 March 2009

State gangsterism

Matt McCarten is at it again in the NZ Herald, slagging off capitalism this time in the form of the tobacco industry. Now I don't have any interest in that industry. I personally loathe the smell of tobacco smoke, and would be happy if smoking faded away into history. I've known people I loved whose lives were undoubtedly shortened by smoking.

He sees the industry as a sign capitalism has failed, now nobody has bothered to tell Matt that the proportion of people smoking in the most anti-Western capitalist countries - that prohibit Western tobacco companies - According to Wikipedia 26.3% of men and 21.5% of women in the US smoke, 29.7% and 27.5% in New Zealand. Yet in Cuba 43.4% of men and 28.3% of women smoke, in Iran 29.6% of men smoke (but for obvious reasons only 5.5% of women), in North Korea (no report quoted) most men smoke (women don't), in Belarus (the last bastion of totalitarianism in the former USSR) 63.5% of men smoke and 21.1% of women smoke.

Capitalism? No - it is cultural.

However, you can see Matt's point of view explained in one sentence:

"I've never heard a convincing argument as to the benefit of smoking"

No? Well I have one - it gives a lot of people pleasure. However he misses the point - it doesn't matter whether or not YOU see a benefit - it is called freedom of choice. I don't know the benefit of bungie jumping, or the benefit of genital piercing, or the benefit of eating rotten cabbage or coprophagia (if you don't know don't look it up online), or belonging to a student union.

The point is Matt that just because YOU don't see a benefit in something that you find distasteful and risky, doesn't mean you should decide.

Now the tobacco industry is certainly far more having the moral high ground. It obfuscated and denied overwhelming scientific evidence that sustained use of its products causes respiratory diseases and exacerbates cardio-vascular disease. Of course it did - why wouldn't it? It continues to sell and push its products in developing countries, obfuscating these facts, with its defence that it is about market share. That, is partly the truth, but it also wants more customers.

So I have little time for these peddlers of truth evasion. It was right for the tobacco industry to be held to account for death caused by its products when it openly advertised them as being healthy or ignored proven health issues with the products. I am not talking about nonsense like "Corporate Social Responsibility" as the only appropriate response is laws on fraud and negligence to cover the failure of the tobacco industry to be honest about the nature of its products. Sadly most countries don't have a capitalism legal system to allow this discipline to be placed on them.

However he gets it wrong when he argues against free choice, because, in fact, it is about that. The health risks of smoking are widely known in modern Western society, you know about it as a child. People take up smoking aware of this, and people stop smoking as well. Yes the tax on tobacco is an appalling way to pay for the state health sector costs. A better way would be for those who smoke to be able to buy health care that takes into account their lifestyle risk factors, in fact as should everyone. You smoke, you eat fatty sugary foods, you sit around all day, you pay a fortune or don't qualify.

Matt wouldn't like people being accountable for their choices though - because he believes smokers don't choose - he believes individuals are vulnerable little lambs that his all embracing nanny state should protect and provide for.

So when he says "I like to think it has dawned on most people that unfettered capitalism is just a form of gangsterism and is past its use-by date." Where has he seen this? Where are private property rights fully protected? Where is free banking? Where is the state only providing defence and law and order? Oh yes, the crony capitalist mixed economies dominated by state control of the money supply, and a significant part of GDP, are "unfettered".

He says "You only have to look at what has happened in the United States to realise that even they now accept that doing business without morality is unsustainable."

Indeed, but what about the gangsterism that is government?

What business would survive based on charging its customers whether or not they used its services, and charging them prices based on how much money the customers earned in the past year?

What business would promise health care, but would remove offering services or procedures at various locations with no notice, even though you paid into the "scheme" all your life? That same scheme means you faced waiting lists when you needed procedures deemed "non urgent", even though you were in a lot of pain at the time. That's called state health care.

What business would promise you a retirement income, and after taking more of your income every year as you get old, give your inheritance absolutely nothing if you die the day before you're due to collect, and would vary what is paid out based on political fiat? That same system means that the average Maori man (who dies at age 65) never receives a cent of National Superannuation.

Yes I know what gangsterism is Matt.