Jane Kelsey —The FIRE Economy: New Zealand’s Reckoning #book

The name of Kelsey’s book refers to an acronym for economies primarily based around “finance, insurance and real estate”.

### ODT Online Thu, 10 Sep 2015
Foretelling end of neoliberalism
By Carla Green
Legal scholar Jane Kelsey has described the “morbid symptoms” of neoliberalism’s impending downfall. The University of Auckland law professor was speaking during the presentation of her new book, The Fire Economy, in Dunedin this week.
Read more

Fire economy jkelsey [via Idealog.co.nz]Image via Idealog.co.nz

Bridget Williams Books (promotion + sales)

The FIRE Economy: New Zealand’s Reckoning
Jane Kelsey

The FIRE economy – built on finance, insurance and real estate – is now the world’s principal source of wealth creation. Its rise has transformed our political, economic and social landscapes, supported by a neoliberal regime that celebrates markets, profit and risk. From rising inequality and ballooning household debt to a global financial crisis and fiscal austerity, the neoliberal ‘orthodoxy’ has brought instability and empowered the few. Yet it remains remarkably resilient, even resurgent, in New Zealand and abroad.
In 1995 Jane Kelsey set out a groundbreaking account of the neoliberal revolution in The New Zealand Experiment. Now she marshals an exceptional range of evidence to show how this transfer of wealth and power has been systematically embedded over three decades.
Today organisations and commentators once at the vanguard of neoliberal reform, including the IMF and Financial Times journalist Martin Wolf, are warning the current model is unsustainable. A post-neoliberal era beckons. In The FIRE Economy Kelsey identifies the risks posed by FIRE and the barriers embedded neoliberalism presents to a progressive, post-neoliberal transformation – and urges us to act. This is a book New Zealand cannot afford to ignore.
BWB Link + Book Preview

Videos at YouTube (published by Scoop):

Jane Kelsey “The Fire Economy” Book Talk To The Fabians 5 August 2015 (pt 1)
Jane Kelsey “The Fire Economy” Book Talk To The Fabians 5 August 2015 (pt 2)
Jane Kelsey “The Fire Economy” Book Talk To The Fabians 5 August 2015 (pt 3)

[via Scoop.co.nz]

Fri, 17 Jul 2015, 4:30 pm
The FIRE Economy: New Zealand’s Reckoning – By Jane Kelsey
Opinion: Professor Jane Kelsey
Introduction – An Extract

fire_ad_460x120_v1 [via Scoop.co.nz]

The global economy imploded in 2008 and confirmed a stark reality. Entire nations and billions of people are captives of an unstable and amoral economic system powered by finance, insurance and real estate – FIRE. New Zealand included.
‘The FIRE economy’ is a metaphor for the fundamental shift in global capitalism since the 1970s. Finance has replaced industry as the driver of wealth creation in affluent countries – a transformation known as financialisation. Neoliberal ideology, rules and institutions acted first as the midwife and then as the guardian of this new economic order.
The Global Financial Crisis (GFC) showed the world’s richest countries, notably the US and the nations of Europe, that the globally integrated economy they had created, and from which they have prospered, could also bring them to their knees. Faith in the neoliberal ‘orthodoxy’ that shaped and sustained them seemed shattered. The fallout was fast and furious, and quickly spread to many other parts of the world.
A cursory look might suggest that little has really changed. Neoliberalism remains deeply embedded in most countries. The finance industry is resurgent and those who profit from it are unrepentant. Conservative parties with pro-market and pro-austerity mandates have been elected to govern some of the countries hardest hit.
Appearances are, however, deceptive. Confidence in the FIRE economy has faltered since the GFC and the hegemony of the neoliberal model is in decline. Core tenets of neoliberal ideology are being repudiated, even in institutions like the International Monetary Fund (IMF). Social inequality and poverty in and between countries are now recognised as symptoms of a sick system. Popular unrest in Europe has intensified, and new political parties from neo-Nazi fascists to the socialist left have gained ground. There are credible predictions of further crises.
The United Nations Conference for Trade and Development (UNCTAD) warned in its flagship Trade and Development report for 2014, six years after the GFC erupted, that the ‘world economy has not yet escaped the growth doldrums in which it has been marooned for the past four years, and there is a growing danger that this state of affairs is becoming accepted as the “new normal”’. That ‘new normal’ is not sustainable.
The world is entering a period of transformation equivalent to the epochal shift to Keynesian interventionism from the 1930s and the neoliberal revolution from the late 1970s. We are in the interregnum. The old orthodoxy is unstable and fragile; a new one has yet to be born. It remains to be seen how this plays out, how much resistance it will encounter, and whether alternative approaches can really break through the barriers designed to protect neoliberalism and the FIRE economy from just such a transformation.

Kiwi complacency
While the GFC has plunged rich countries like the US and England and later Spain and Greece into turmoil, New Zealand seems to be basking in the belief that it has survived the crisis pretty much unscathed. The standard Kiwi narrative treats it as a northern hemisphere affair, triggered by greedy American bankers and profligate European governments. The story goes something like this.
In today’s globalised world there was bound to be some collateral damage from other countries’ post-crisis recessions, but our financial system was shown to be basically sound (mainly because the Australian banks that own ours are sound). Governments on both sides of the Tasman responded promptly and effectively. Temporary interventions provided fiscal stimulus and bank guarantees steadied the ship, staving off a more serious recession. Stability was restored. Each country then resumed business as usual, regardless of their governments’ political hue. Helped by exports to China, future prospects looked positive, even rosy. Exuberant commentators went so far as to hail New Zealand as the ‘rock star’ economy of 2014. The strong centre-right vote at the 2014 election suggested confidence in the status quo or, at least, that the belief in TINA – there is no alternative – still prevails.
Before the 2008 election, as the GFC began to erupt, business journalist Bob Edlin observed how the country’s leaders seemed ‘curiously phlegmatic about global financial upheaval and its economic implications’. Their offerings ‘amounted to little more than tweaks of programmes that have brought us to where we are – a standstill’. No one was ‘peddling a cyclone-shelter or rebuilding programme’. Nothing has changed since then.

Couldn’t happen here?
This complacency is deeply disturbing. Neoliberalism has not served most New Zealanders well. Nor, in other than a hedonistic sense, has financialisation. Structural poverty and deep inequalities of wealth and income have transformed the social landscape. We have a shallow economy that depends on FIRE, farming, post-earthquake reconstruction and immigration. Periods of sustained economic growth in the 2000s have been fuelled by cheap credit. As a consequence, households, farmers and the country sit on a growing mountain of debt. Trading in property has become the main source of easy wealth, creating repeated incipient property bubbles. We have most of the preconditions that have been identified as triggers for a crisis.
A former Reserve Bank of Australia governor, Ian Macfarlane, is under no illusion there will be further crises. In 2008 he pointed to at least eight financial crises that impacted on Australia – and hence New Zealand – in the three decades before the GFC. Five were banking crises, and three involved excessive and risky lending in the property sector. Some affected New Zealand much more severely than the GFC. However, it was the depth and contagion of the latest crisis that Macfarlane says made it the most significant internationally and invalidated the model of the deregulated financial system.
New Zealand is much more at risk than Australia because successive Labour and National governments have located this country at the pure end of the neoliberal spectrum. For years it was known as the Wild West of financial markets. Adjustments during the 2000s were still premised on light-handed risk-tolerant regulation. Even since the GFC, governments and their advisers have continued to position New Zealand as an outlier, ignoring doubts in other countries and international institutions over the wisdom of letting financial markets rule.
Without some fundamental changes, New Zealand risks sleepwalking into a social, economic and political catastrophe. No one knows how or when that might happen. The tipping point could be another massive offshore crisis. Or it could be self-generated, as it was in Iceland and Ireland, if we fail to heed the warning signs. There is much to learn from Iceland’s successful post-crisis strategy of intervention, redistribution and capital controls, and from the tragedy of austerity economics in Greece, Spain and Ireland.

Time to act
Waiting for Armageddon is hardly a progressive strategy. It makes much more sense for New Zealanders to confront the country’s challenges now and begin to shape a socially progressive alternative than to battle over models in the midst of a crisis. While it is true New Zealand’s fate will inevitably be caught up in the unfolding of international events, Kiwis can influence how those global dynamics shape our future.
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Posted by Elizabeth Kerr

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75 responses to “Jane Kelsey —The FIRE Economy: New Zealand’s Reckoning #book

  1. Elizabeth

    Unreasonable amount of anxiety generating about Chinese investment in Silver Fern Farms, one of the main meat processors in New Zealand.

    ### ODT Online Thu, 10 Sep 2015
    Secrecy not helping SFF
    OPINION Overseas investment is an issue always guaranteed to be divisive in New Zealand as year after year it becomes a political football. In this region, Silver Fern Farms’ (SFF) supplier shareholders are anxiously awaiting news of whether their co operative has signed up to Chinese investment as the meat processor seeks to reduce its debt – probably at the behest of its bankers.
    Read more

    Other ODT stories:
    1.9.15 Call special meeting, group urges SFF
    25.7.15 SFF suspends share trading
    23.7.15 SFF predicts debt down to $150m-$180m by end of September

  2. The Fabians? I thought they had died out long ago but rust never sleeps!

  3. Elizabeth

    New Zealand Fabian Society at http://fabians.org.nz/

    The Fabian Society is an independent membership-based policy forum that aims to provide a forum for education and debate on progressive policy priorities by providing quality events, publications and research. Initially, we will focus on the fundamental requirement that New Zealand shapes a sustainable economic future for itself. Via a series of lectures and seminars, we will provide a forum for critiquing the prevailing economic orthodoxy and the advocacy of viable alternatives and reforms.

  4. photonz

    The problem with Jane Kelsey is she’s a doomsayer.

    She predicted calamity for New Zealand with the China FTA.

    Yet it turned out to be so successful, that export growth has been many times better than even the most wildly optimistic predictions (that she rubbished).

    You’d be hard pressed to find anyone in New Zealand whose predictions on the China FTA, were further from reality, than Jane Kelsey.

    She claimed on radio that with the Trans Pacific Partnership, there won’t be a single solitary thing that will be of any benefit to New Zealand – not a thing.

    Then failed to explain why our New Zealand manufacturers and exporters are so strongly behind the TPPA.

    Now she claims we are “sleepwalking into a social, economic and political catastrophe” and “Waiting for Armageddon”.

    Are these words of thoughtful reasoning, or of an extremist doomsayer?

    • Hype O'Thermia

      We’ve benefited from outsourcing jobs to China. All those Hillside workers, at last free to pursue other careers……..
      And such superb trouble-free products too!

      • photonz

        The problem with the Hillside tender, is that it wasn’t even a close second behind the accepted tender. It wasn’t even third or fourth, and they couldn’t complete the contract in the required time anyway.

        And I’m not sure why anyone is surprised. No one in their right mind would have a car factory in Dunedin, that only makes cars once every few years when they get a contract. So why is it practical for trains?

        Meanwhile, our exports to China skyrocket, and have created thousands of new jobs along the way.

  5. Simon

    photonz. you claim that the FTA between NZ and China has turned out to be so successful. Have you checked that out with any dairy farmers recently ?

    • photonz

      It took a decade to increase our exports to China by $1b.

      After the FTA, they increased by $8.5b in seven years.

      That would have taken 85 years at the old rate.

  6. Rob Hamlin

    “The problem with Jane Kelsey is she’s a doomsayer.”

    Yes, that is the official establishment line now.

    Wind back to 1938…

    The problem with Winston Churchill is he’s a doomsayer.

    Yes, that was the official establishment line then.

  7. Calvin Oaten

    photonz, your membership card of the of the national party supporter’s club is showing. The China FTA is two sided, don’t forget, and who benefits the most longer term is not much in doubt. When you are a commodity price taker as NZ is, all the FTAs and TPPAs will not be worth a ‘whole hill of beans’. Ask the ex Hillside workers. But hey! that’s not a concern of the our ‘neo-liberal’ Prime Minister. What’s needed is the re-instatement of the ‘Glass Steagall Act’ in the USA. The 1999 repeal of that set the financial ‘wolves’ loose and one of the most active ‘cubs’ was/is our John Key.

    • Douglas

      Calvin
      You got it in one!

    • photonz

      I’ve actually supported left goverments more times than I’ve supported the right (you do know the China FTA was negotiated by Labour?).

      You say there’s no doubt who will benefit from the China FTA in the long run.

      So do you know that unlike before the FTA, our exports to China have been worth MORE than our imports from China?

      Every year over quarter of a million jobs are lost in NZ. That’s 5000 a week, or 1000 every week day. The losses at Hillside, though devastating for those workers, are just 10% of the losses that happen EVERY day in NZ.

      However new jobs created over the three or so years have been over 100,000 more than those lost.

      The losses at Hillside are just 1/25th of 1% of a years job losses.

      Judging the whole picture by Hillside is like judging the year’s weather by taking a two hour sample.

  8. Calvin Oaten

    photonz. you say, “So do you know that unlike before the FTA, our exports to China have been worth MORE than our imports from China?”. More like ‘judging the year’s weather by taking a two hour sample’, Exactly!

    • photonz

      You don’t make any sense.

      In 2014 we exported over $2b MORE to China than we imported.

      Before the China FTA, we exported $3.5 billion LESS to China than we imported.

      You say the benefit is to China. A $5,500,000,000.00 dollars annual change in balance of payments to our benefit says you’re wrong.

      • Calvin Oaten

        photonz, are you factoring the export of the companies, land, forestries and jobs China owned as exports? Or simply NZ owned dairy, kiwifruit etc? Because if not then you make no sense. The ‘year’s weather from a two hour sample is your call not mine’. The $5.5 billion might not stand too much in another year, while the ownership is permanent, as is the production off those assets.

        • photonz

          I’ve never heard of the Chinese buying a farm and exporting it to China – have you? They are exports figures, so they don’t include things that obviously aren’t exports.

          And it’s nonsense that ownership of an asset and production off an asset is permanent. Hundreds of millions of dollars of NZ assets are bought and sold every day, by both foreigners and Kiwis.

          Those who are against foreign investment seldom think of the overall picture. All they can see is a blinkered vision of a few dollars of profit trickling offshore, while ignoring often twenty to forty times that benefit being regenerated in NZ in tax, paye, wages, gst, new jobs, etc, not to mention what the Kiwi seller has re-invested their new money into.

          So instead of having one operation where 100% of the money stays in NZ, if sold to a foreigner we typically end up with the same operation where 95% of the money stays here, AND often a new asset of similar value where 100% of the money stays here (because the seller re-invests the foreign investor’s buying price).

          So instead of losing 5%, the country effectively gains 95%. Yet all some people see is 5% of one operation going offshore (which it often doesn’t anyway because it’s often re-invested), and they ignore that massive benefit.

        • Calvin Oaten

          photonz, so you’ve never heard of the Chinese buying a farm and exporting it to China? That is a shallow comment if ever there was. The produce from that farm, orchard. dairy factory, forest etc, assuming that they are all owned by Chinese capital, then will be technically NZ exports.

          But the acid is, where do the proceeds finish up? Think about it and extrapolate that over time and we could see Chinese farm workers, factory, forestry and mill workers, employed as well. More importantly at Chinese wage rates, NZ workers will either have to come into line or simply look over the fence.

          Can’t happen here, I hear you say? Take a look at the fishing industry and the catching fleet crews, to believe what I’m saying.

          photonz, you are looking through a fog of political neo-liberalism dogma which is in danger of selling off our sovereignty via FTAs and the TPPA. I know that is Prof Jane Kelsey’s concern.

        • photonz

          Calvin – I don’t know how you manage to get out of bed in the morning if you really believe the situation in NZ is so dire.

          Billions of dollars of NZ assets are owned by non New Zealanders, and have been for decades, and the sky hasn’t fallen in.

          Similarly Kiwis own billions of dollars of overseas assets that return funds to NZ.

          If you are going to follow someone’s ideology, better to pick someone that turns out to be accurate, instead of someone whose predictions were further from reality than anyone else.

  9. Tom

    I see Dave has got the answer to the 10,000 jobs sorted. Bring in the refugees. That would be his FTA.

    {Link: http://www.odt.co.nz/news/dunedin/355472/mayor-calls-refugee-centre-dunedin Note Dunedin and the region cannot possibly support that number of people for employment at this time; this is just Dave trying to clip a ticket (Cargo Culltism) on the refugees’ way to utter destitution with a tincture of welfarism at NZ. -Eds}

  10. Calvin Oaten

    photonz; fair enough, if that’s your take then good luck to you. As a matter of interest, check out the latest warnings from the executive director of the BIS (bank of international settlements) to see if he generally agrees with your sentiments. I think Prof Jane Kelsey is more attuned to the global scene than you are here in little secluded NZ. I don’t know how many decades you have been on the planet, but would be willing to bet it is not as an aware person pre-1984 and the advent of the “free market” and deregulated financial constraints on the non banking institutions. This of course has been joined by those same banking institutions and we can see clearly the world is awash with credit which as soon as it is uplifted becomes debt held and obligated by some parties. Watch the commodities markets that you so fervently worship and see if and when they recover to recent heights. You might not think this but it is possible that it will be long enough to cause some serious cash flow/debt servicing problems. That is when the bailiffs come a-knocking. Then we’ll see the true value of hocking our’s and future generations’ future to the money moguls. Still, as long as you are happy and sure that we will all comfortably sail off into the sunset untrammeled and richer by the day with Mr Key in charge then good luck to you.

  11. photonz

    If she was more attuned than me, she’d make accurate predictions.

    Yet her predictions on the China FTA were so wildly inaccurate, that they were furthest from reality of any I saw, from anyone, anywhere.

    You say you’d bet I wasn’t an “aware person pre-1984”, if that were the case, it would be a foolish bet on a prediction that’s as wrong as Kelsey’s China FTA predictions, and I’d be pocketing your hard earned cash.

    Pre 84 I worked for a massively overstaffed, and insanely inefficient government department.

    In fact the country was on the verge of bankruptcy when Lange took over in 84 and wouldn’t have lasted a year under the old system (the one that so many now see through rose tinted glasses).

    • Calvin Oaten

      The system pre 1984 was the short lived “Muldoon” years of “Think Big”. That was never viable as we know. The problem was not solved simply by ‘Rogernomics’ slash and burn, but lack of good management. Spend and be damned of Muldoonism is synonymous with what the DCC has and is doing over the last decade and a half. The massive changes of the “free market” of Roger Douglas hasn’t been the panacea it was meant to be. Rather, it has seen the country lose most of its assets and the people paying the price. The transfer of wealth from the people cannot be argued, except by the beneficiaries of that transfer, which is very much the minority. photonz, if you worked in a massively overstaffed and inefficient government department then by extension, you were part of the problem. Selling our advantages in agricultural and pastoral products is tantamount to selling the “family silver’, which can only have a short-term benefit. The country needs to live within its income and simply get efficient, which it can do if encouraged. But the idea that this country can ride on the coat-tails of the huge nations and not risk being crushed in the process when it gets to the survival of the strongest is dangerous and foolhardy. That I think is where Prof Jane Kelsey sees it.

      • photonz

        The government sells and buys billions of dollars of assets every year.

        People get hysterical about the govt selling a billion dollars of power company in a privatisation sale, but don’t even blink when the govt super fund or ACC sells the same amount of assets, even if those assets were also power companies.

        I had shares in a power company that I sold years ago – and it certainly wasn’t tantamount to selling the family silver. That’s because when assets are sold, you get the proceeds, and they can be put towards paying down debt, or other assets. It’s no different for the government.

        And there’s other benefits. When Telecom was privatised, the public got huge efficiency gains. Instead of paying a fortune for toll calls, phone call prices plummeted.

        Instead of waiting months just to buy a new phone or get a new line put in, after privatisation it took just days.

        In early privatisation some assets were definitely sold too cheaply, but for others, like the Railways, we were lucky to get anything. The govt had to pay off about $1.5b in debt, just for the company to be worth 20% of that.

        Other assets cost us many times more to build than they were ever going to be worth. For example Clyde Dam cost over $2b to build, but at most it’s only ever been valued at a small fraction of that.

        • Calvin Oaten

          I hear what you say photonz, but maintain selling our strategic assets is counterproductive to a nation’s foundations. Because the ‘Public Service’ ran those services uneconomically doesn’t mean they can’t be. The ready queue of buyers once they went on the block proves that. The answer lies in “Management”! In my opinion the way was setting up the operations as State Owned Enterprises (SOEs) and appoint and charge management with the task of making them viable and lean. If private industry can do it then SOEs can, given the right management incentives. That way the nation – the people – still have a stake in their ventures with profits being shared by way of reduced or held costs. Because you see the old public service of your times doesn’t mean it can’t be changed. In the case of Rail, the first purchaser simply stripped the operation to the bone and carted all the wealth away to America, then Toll extracted most of what was left in cash and ran the system into the ground and simply walked away. Kiwi Rail has to either re-invest or shut up shop. A classic example of privatising. Why would overseas investors, be it in rail, electricity, dairy farms, factories, orchards , or whatever, have a different objective, other than to extract as much value as possible with the minimum input until it either keeps gushing rewards or it is run down and left. If there is no “soul” in the game what is left but profit?
          As an example of having poor management and direction without seeing the disaster it was, the owner,-the government- is totally at fault for not keeping their eye on the ball and preventing the escalation, and that was the ‘Solid Energy Corp’ debacle. Purely management ‘hubris’ and frankly dishonesty.
          If a nation loses control over its strategic assets then frankly, it’s lost its nationhood and becomes a vassal of the money men. What price the flag then? Ask John Key that!

        • photonz

          Calvin – I agree that SOEs can (and did) run reasonably well, as shown by the electricity companies.

          But railways is simply not a profitable business in NZ – there is arguably not a single country in the world with as many difficulties for railways as NZ (low population, steep terain, no land borders with other countries, gap between Nth and Sth Islands, and few bulk goods to carry).

          That’s why the government can put billions of taxpayer dollars in, and it will still make a loss.

          Interestingly, when NZ Railways was first privatised, staff was cut to around 10% of what it had previously been, but they carted MORE freight, with FASTER delivery times, MORE reliably, with a higher level of track maintenance and fewer derailments, than when it was publicly owned.
          Pretty much every aspect improved.

          Similarly Soild Energy was never going to survive when they’ve spent the last few years getting less for their coal than it cost them to get it out of the ground.

          Theoretically there’s no reason why governments shouldn’t be able to run SOEs well, except there tends to be a culture among staff that the govt doesn’t have to make a big profit, and they have deep pockets for pay rises, extra investment etc. So a culture of lower efficiency is pretty common.

          With private companies, if you don’t continually improve efficiency, you don’t survive. For example, it used to take over 350 worker hours to manufacture a car. Today it’s under 35.

          And an example of poor culture for govt workers – a family member works for govt and gets criticised by work colleagues for not taking her full allowance in overseas travel (even though she doesn’t need it) in case the budget is cut for next year. This is 2015, and this appalling culture is still common in government departments.

        • photonz

          Calvin, I’ve just realised we’re probably overlooking the obvious.

          The cultural difference between public and private sectors in getting value for money, can be perfectly summed up in just three words………South Dunedin Cycleway.

  12. Rob Hamlin

    photonz,

    As someone who has to phone the UK weekly and has done so since 1992, let me assure you that phone call prices most definitely did not plummet until Skype and other non-telco cartel means of communicating put in an appearance. This country has one of the most privatised and underegulated power and telco industries on the planet – and one of the most expensive, underperforming and least reliable services in both cases. Every time the wind blows the bloody lights go out – it’s their way of finding the rotten poles.

  13. Mike

    That’s likely changing – Chorus are putting new poles in all over as part of the fibre roll out – replacing the obviously spindly old ones.

  14. photonz

    Rob – the Encyclopedia of New Zealand would disagree with you. A quote from them – “Toll prices came down by 60% between 1987 and 1992.”

    And in 1984, even with lots of complaining, and even for other govt departments like Treasury, it was taking Telecom two months just to shift an existing phone point (no one else was allowed to do it).

    In 1987, it was costing $2 a minute in today’s money, just to make a call withing the same island ie between Auckland and Wellington.

    In the early 1980s, just a ten minute phone call home to Dunedin from the North Island where I was working, was costing me a whole day’s pay. It was absurdly expensive.

    Phone lines were so expensive, in 1987 there were still tens of thousands of party lines where two households shared a phone line (and could listen to each other’s calls).

    Also, you claim that we’ve got one of the most expensive electricity services in the world, yet this Herald article says we are in the middle of the pack – (which is pretty good considering we don’t use cheap but dirty generation like coal).
    • South Korea – 11.2c
    • US – 14.88c
    • UK – 25.90c
    • NZ – 27.17c
    • Australia – 29c
    • Japan – 32.98c
    • Italy – 35.25c

    See
    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10880034

  15. Rob Hamlin

    You are very selective in your quoting from that article photonz. It goes on to say:

    “The Electricity Authority figures show how power prices for ordinary New Zealanders have risen over the past three decades. The price was 16.56 a unit in 1979 when prices were among the cheapest in the developed world.”

    1979 was in the era of the ‘horrid’ ECNZ. How does that square with your argument?

    Also, I have no doubt that phone lines were expensive in 1987 and took weeks to connect. However, the prices remained absurdly high well into the Nineties, when Telecom were exporting profits of approaching a billion dollars a year. It was the Web, not Telstra, that eventually sorted them out. It took Chorus nearly 2 months (and nearly six hours of my time waiting on the call system) to connect me to the network from an existing address in Mosgiel in the year of our lord 2014 – How does that square?

    • photonz

      Rob – we were paying a fortune for power under an inefficient ECNZ – it’s just half the cost came via our tax rather than a direct bill.

      For example the cost of Clyde Dam – it cost the taxpayer over $2b but in reality is only worth.a fraction of that.

      Currently I’m paying 21c a Kw, but after a 20% early payment discount, that’s reduces to 16.8c Kw, which is almost identical to the 1979 price you quote of 16.56c.

      As for your two month wait. The difference is today that’s very unusual .Back then it was normal. My mother in law recently did the same thing next day with a five minute call.

      • Hype O'Thermia

        “For example the cost of Clyde Dam – it cost the taxpayer over $2b but in reality is only worth a fraction of that.”
        The government was determined, come what may, that the Clutha Dam be built, and failing the “be realistic you noddies” test so another one couldn’t be built further upstream, determination hardened – Clyde or bust, and busting wasn’t an option.
        Local knowledge was available but being non-academic was regarded as worthless. Those hills are loosely piled rocks and gravel. Building the road to Cromwell took $$$$$$$$$ more than planned. Stabilising the slip-slip-Splash! hillsides cost more $$$$$$$. Then someone pointed out, “I say chaps, we’ve built this thing over earthquake fault lines” so enough grout to fill 90% of New Zealand’s town halls was hurriedly whipped up and deposited in the identified fault areas to retro-stabilise it. Because the last thing you want with a highly contentious dam (see below) is a quake followed by Clyde’s piecemeal arrival at Balclutha.

        “When the National government of Robert Muldoon ignored local concerns and a legal decision against the granting of water rights, and passed the Clutha Development (Clyde Dam) Empowering Act in 1982, protesters made their feelings known by padlocking the doors of the Court of Appeal in Wellington and the High Court in Christchurch. They also stuck a notice on the door of each court that read ‘This Court is now obsolete, irrelevant, and just a nuisance. Accordingly it is CLOSED until such time as people no longer expect the law to protect their rights’. This was ‘signed’ by Muldoon and Social Credit leader Bruce Beetham, who had supported the legislation. It was one case where people clearly felt that the government had acted as if it was above the law.” http://www.teara.govt.nz/en/photograph/37024/protest-about-clyde-dam-legislation-1982

        • photonz

          Whether it’s Clyde Dam, or the cycleway, or the stadium, the public sector has a habit of spending vast sums of money on things with little regard of whether end result comes even close to being worth the money spent.

  16. Calvin Oaten

    photonz, “the cultural difference between the public and private sector can be summed up in three words.” “Other people’s money.” Or “management”.

    You say the first privatised owner of NZR carted MORE freight, with FASTER delivery times, MORE reliably, With LESS staff and overheads. I would dispute the track maintenance claim, as both the tracks and rolling stock were run down drastically with revenues being stripped and relaced with debt. When the debt became a difficult burden they sold it off to TOLL and disappeared into the night. TOLL carried on the extraction of value deepening the debt then walking away. KiwiRail is left to pick up the pieces, and it is not being helped by this government.

    If you want to get the truth about how much this government’s concern is for NZ’s sovereignty, I suggest you read Dene Mackenzie’s article on page 16 of today’s ODT, ‘Sad Irony in Govt’s SFF position’. Bill English’s comment says it all. This, rightly or wrongly, could be the death knell of our indigenous ‘meat industry’ if the government turns its back on it and lets control slip into foreign hands. When it’s gone, the farmer/producers will be manipulated purely for Chinese interests, while the profits will almost certain;y be directed towards the new controllers.

  17. Tom

    Calvin. You seem to have forgotten that our farmer friends have been the big voice against social welfare, subsidies, and collective bargaining. They are raging capitalists, and everything had to be user pays. Now all of a sudden, when things are not going their way, they have become socialists, and are looking for handouts. May I suggest that if they want to revert to handouts when it suits them, they change their allegiance and vote Labour next time.

  18. Calvin Oaten

    Tom, it’s not about subsidies or farmer welfare. It’s about NZ’s sovereignty and control of the profits. The farmer shareholders should be looking at their input and the management. If the Chinese company are to invest $250 million then you can guarantee that they will want their “pound of flesh”. It will be a creeping invasion.

  19. photonz

    Calvin, I was also a little surprised that when privatised, derailments went down as all I’d heard was continual claims from people that the track was run down (which I think it definitely was under the later years of Toll). I wasn’t surprised delivery reliability went up, as widespread pilfering was normal when it was govt run.

    However another surprise was the amount of increased freight carried. 8.5m tonnes at privatisation went up to a peak of 15m tonnes after just seven years of privatisation.

    You may think the billion plus of tax payer dollars the govt has put into railways is “not helping”. If over a billion isn’t helping, how many taxpayer dollars do you think they should throw down the toilet?

    As for SFF. Kiwi farmers who are part of Silver Ferns Farms suddenly have instant access to 8000 Chinese Supermarkets that are owned by its new partner, and you think that is a bad thing? And MORE jobs for Kiwis is a bad thing?

    Half of the income from my small business is from overseas, and almost all that is through joint deals with agents where they do the selling and take 50%. Without them, I simply wouldn’t have access to their clients, which is why less than 5% of my overseas sales are direct.

    So the SFF China deal is potentially hugely beneficial to SFF farmers.

  20. Calvin Oaten

    photonz, I hope your right. I would like to see where it stands in ten years.

    • photonz

      There was also a big outcry about the Chinese buying Crafar Farms. If you want to see how that is going, read

      “Train wreck remodelled as award-winner ” http://www.stuff.co.nz/business/farming/dairy/67648645/Train-wreck-remodelled-as-award-winner

      There’s been massive improvements in every aspect.

      Not every foreign investment is necessarily beneficial, but equally not all foreign investment is bad. But is is very obvious, that some foreign investments are hugely beneficial to NZ.

      Silver Fern Farms has been making losses in the tens of millions of dollars. Even with the big turnaround this year, what would have been a $40m profit got totally gobbled up by debt servicing.

      So SFF farmer shareholders are better off making 50% of a good profit, than 100% of nothing, or responsible for taking 100% of huge losses, as they have been the past few years.

      And it was interesting to see what SFF staff thought of the announcement of the deal – they gave it a standing ovation.

  21. Tom

    Silver Fern Farms would be better employing executive staff that can actually run the business profitably for its farmer shareholders. Instead of running cap in hand to the Chinese to bail them out of their incompetency. The executive will now be like kids with candy, with the big money from the bailout. First thing that they will do is give the directors a big rise, as a congratulatory pat on the back. How long will it last before they have to go back to the Chinese to buy the other 50% because of their continuing incompetency. The Chinese are no fools. They will sit quietly and watch, as the whole of Silver Ferns Farms slides into their ownership. Then wait and see how much the farmers will be paid for their lamb. Maybe that is why red seems to be the popular colour for the new flag.

  22. photonz

    SFF could have had the most competent managers in the world, and there wouldn’t have been a thing they could do to stop the international price of lamb plummeting to below the cost of producing it.

    And if the Chinese don’t pay a high enough price for lamb, there’s nothing to stop farmers switching to Alliance, or selling their lamb elsewhere.

  23. Tom

    If the managers weren’t able to handle such an issue as getting a viable price for lamb, when there is a shortage of protein in the world, how do you know that they have sold 50% of Silver Fern Farms at the best price available, that will benefit the farmers and NZ. Their incompetency is really starting to show. All the more reason why they should be replaced before selling out to the Chinese.

    • photonz

      So what do you suggest – the management holding a gun to their clients’ heads and making them pay more than they would pay for exactly the same product everywhere else on the world market?

  24. Tom

    If that is as good as you can come up with Photonz. God defend NZ . It looks like no one else is capable.

  25. photonz

    No – it’s just that I personally don’t have a paranoia issue with the “yellow peril”. Thousands of NZ companies have highly successful joint ventures with overseas companies, including from China.

    If you’re exporting, you’re selling into a global market. Who better to link up with than a company that partly owns over 8000 shops that can sell your product, in a market that’s difficult to break into.

  26. Mike

    I too do business in China, it’s not a market (or in my case a resource) that anyone should ignore – it’s 1/4 of the world’s population, and likely eventually 1/4 of the world’s markets – full of smart people that either you’re working with, or competing against.

    The real trick of course is to keep enough of our companies so that the profits keep coming back into our community – rule #1 should be to not go into debts you can’t afford to pay.

  27. Calvin Oaten

    I hear what photonz and Mike are saying. Could be the farmers’ saviour, or on the other hand it could be “back to the future!” I remember the “good old days” when the farmers were at the mercy and control of ‘Vestys’, Borthwicks’ and the rough and tumble of ‘The Smithfield Market’. We took what we were told for our stock and the ‘freezing workers got shafted. This gave rise to militancy on the labour front, and very modest returns for the producers. If it were not for the addition of wool then livestock farming was a beaten down game. Along came the Co-operatives and a breakout from the colonists. Things slowly started to look up and farming became a decent business. England cast us aside and joined the Common Market and we became competitive to survive. Independent meat processing started as the ‘Producer Boards’ gave up some of their ‘hegemony’ and out went the ‘stockingette clad bulk carcasses, and value enhanced processing became the norm. All good except for the vagaries of the market and the weather.
    Now we see the possibility of this all being captured once again, all in the grasp for a quick gain. great in principle, but inherently risky in time. We just don’t know what China’s real intentions are in the long term, and by the time we do find out it may well be too late. Face it, we have the grass, the climate and the knowhow in growing meat as a low cost producer. They don’t, but recognise the value here in NZ and they have a huge population craving protein. A marriage made in heaven they would think. But, they will need, and want control of their food lines and that is my concern. I sincerely hope I’m wrong, but photonz has got every confidence. Would that his grandchildren enjoy his confidence in the “open market”.

    • photonz

      Calvin – I think for many decades, it was the freezing workers shafting their employers. Huge money, for not much work, that could have been done (and now IS done) with a fraction of the workforce.

      The key with the SFF deal will to be make sure the prosperity of the NZ and Chinese shareholders are aligned.

      If they are not, Kiwi farmers can simply sell their products through other meat companies, and the Chinese will have a near worthless investment. Which is similar to SFF right now if it doesn’t get a large capital investment.

      How much is SFF worth now, when it makes losses most years, and nothing in good years?

      Actually we know that already. Shares are currently worth 35c, and with the Chinese investment, they’ll skyrocket to $2.84.

  28. Elizabeth

    +++++ALWAYS be very suspicious of gift horses with imperial colours
    (oh look, I value-added that)

  29. Elizabeth

    Benefits to New Zealand not great enough —ministers use discretion to reject bid.

    ### ODT Online Thu, 17 Sep 2015
    Ministers halt $88m Lochinver Station sale
    Government ministers Paula Bennett and Louise Upston have gone against a recommendation by the Overseas Investment Office and turned down a $88 million bid by Chinese billionaire Jiang Zhaobai’s flagship firm to buy the Lochinver Station. The Overseas Investment Office had recommended the Chinese-owned Pure 100 Farm Ltd be accepted in what Associate Finance Minister Paula Bennett described as a “finely balanced” decision. NZME
    Read more

  30. Mike

    BTW here’s a chart from the economist showing why China is an important market right now ….

    • Hype O'Thermia

      What’s the forecast for NZ’s poor and very poor, 2020? Will China have to protect itself from boat people, economic refugees from NZ, or are the Chinese plans on hold till they see what happens next NZ general election?

    • Elizabeth

      Link received – as reply from the anonymous sender.

      Aussie Property Market Collapse Looms As Chinese Flee Amid Capital Controls
      http://www.zerohedge.com/news/2015-09-15/aussie-property-market-collapse-looms-chinese-flee-amid-capital-controls

      • Mike

        it depends on what you mean by “collapse” – if property prices in Oz (or Auckland) return to levels akin to what would have happened if they had increased with regular inflation over the past decade that’s not a collapse, that’s just a bubble bursting and a return to sanity – sure some people will have gotten greedy and may be burned, and some banks may find people defaulting – but that’s the bank’s fault for loaning people money to buy an overvalued commodity, the banks should take those losses on themselves.

        Of course there will be a push to get the tax payers to help out the banks and past memories of record billion dollar profits will be quietly forgotten.

        • Calvin Oaten

          The problem with a property “collapse” or “burst bubble” (which is different?) is the collateral damage. The loss of wealth, even though most if not all was created ‘ex nihilo’ by the banks is that those same banks will see it as real. Banks being banks, will target any and all people in their sights, they take no prisoners. Bankruptcies will be rife, the poor suckers who hopped on the escalator, conned by the banks and real estate ‘spruikers’ into believing that they were buying a house when in fact all they were doing was signing up to pass over to the bank up to 80% of their joint incomes to the bank in return for being granted occupation plus paying for all overheads, rates, insurance, maintenance – for as long as they can. They will – unless they strike Lotto – never own the house, but most likely end up walking away penniless. This is the truth of the matter and it will have a catastrophic effect on several generations of New Zealanders. China is already in the throes of monetary tightening, all the more reason for being cautious before getting too euphoric about commercial deals. A notoriously corrupt country, which when under pressure could show a totally different persona. SFF directors had better have looked closely at the ‘whites of their eyes’ when they take all their farmer shareholders into bed with them.

        • photonz

          We don’t have the same rules as overseas, for example if you own more on your house than it’s worth you can’t just put the keys in an envelope and send “jingly mail” like they can in the States. If you walk away here, you STILL owe the money.

          Which means people are far less likely to give up their houses, which is why mortgagee sales here during the GFC were almost non-existent in comparison to the USA or Ireland etc.

          Auckland has become ridiculously expensive, which is why more and more people there will sell up, move to the regions and other cities, and be able to afford either mansions, or a second house. That will ease the pressure a little bit on Auckland, but push house prices up everywhere else. Just like the reaction to Auckland house prices a decade ago.

  31. Peter

    I guess you would also need some idea of what constitutes middle class in China and what constitutes spending power for our consumables. I take it many live in cramped high rise tenancy buildings which I would think limits their spending… except on food. Selling obesity foods for the Chinese might be the way to go!

    • Mike

      I think it’s a bit of both – people expect different living conditions that the west – and yes, “middle class” probably means less than here in $$ terms, but lots of commodities are also cheaper in China.

      There’s a real demographic issue in China caused by the 1-child policy – used to be that retirement meant that eldest son took over the family home and moved in with his family, grand parents stayed on and looked after the grandkids … with one child per family a newly married couple is faced with supporting 2 sets of grandparents, both of who expect to live with them and look after the one kid (or these days kids) …. you can see why moving to the big city, acting a bit more western/nuclear familyish and getting your own apartment might be tempting to today’s 20-somethings …. makes our baby-boomer retirement quandaries pale by comparison.

      The other thing is that there are a lot more men than women in the marriage market, a whole bunch of those apartments are young men buying real-estate to try and up their appeal.

  32. Calvin Oaten

    photonz, I like your solutions to Auckland’s property bubble. “We don’t have the same rules as overseas. Because they can’t post the keys back as in the US they are far less likely to give up their homes.” Yeh right! You’ve lost your job, the interest rate has risen, worse, the value has dropped dramatically and you’re ‘under water’, the bank’s threatening foreclosure, the market’s dead, who do you sell to and move to the regions as the solution? And that will ease the pressure on Auckland. photonz, I love your confidence in the system. We’ve not seen a real estate correction like the one coming since the ‘Great Depression’ and even then most folk didn’t own a house, and if they did, the odds are the mortgage was no more than two thirds the valuation of the property, not 80 to 100% as applies today. This will be huge, and will spread throughout the country (if not the western world), the wealth that will disappear will be generations in recovering.

  33. Hype O'Thermia

    People in that situation sell but still owe the bank because the selling price was less that their mortgage. They won’t owe as much, but they’ll still be paying off something they no longer own. Till they pay that off they won’t be able to save for another deposit, not even on the cheapest house in the cheapest town.

  34. Calvin Oaten

    Further to the matter of selling off our sovereignty to China, I note that China is looking down the barrel of no growth. That is a monumental shift from the runaway economy based on exports in recent times. Since 2008, China’s debt has ballooned from US$7trillion to today’s US$28trillion. That has been largely to expand capacity to manufacture goods for export. China had become ‘the maker’ and the west ‘the taker’. The west, no longer as consumers have the capacity to borrow and purchase, so that would bode ill for China’s immediate future prospects. Meantime, China has been on a binge of development, fueling a world commodity boom unlike that seen before. The result is more concrete was laid in the last decade than has been in the century before it with new uninhabited cities dotting the landscape, bridges, highways and railways to nowhere. Watch this space for a major contraction in world commerce with the potential fall out. Selling our assets to foreign interests might not be the panacea it seems. US$28trillion of debt will require an awful lot of accommodating once trade diminishes to the point of nil recovery. It’s called in a nice tone, a correction. In lesser terms a ‘Depression’. Either way it won’t be pretty.

  35. Elizabeth

    ### ODT Online Tue, 6 Oct 2015
    TPP deal ‘travesty of democracy’
    Source: NZ Herald
    The Trans-Pacific Partnership, agreed today by 12 countries after five years of intense talks, is a “travesty of democracy”, according to a law academic Jane Kelsey. The deal will affect 40% of world’s economy and the overall benefit of TPP to New Zealand is estimated to be at least $2.7 billion a year by 2030. Prime Minister John Key has welcomed the deal, which he says will give New Zealand exporters “much better access to a market of more than 800 million customers in 11 countries across Asia and the Pacific, and help Kiwi firms do business overseas.”
    Read more

    ODT: Trade deal: what we know
    ODT: Countries strike landmark deal

    90 days of scrutiny
    Under a rule set by the United States, any agreement cannot be signed until 90 days after negotiations end, to allow time for full consideration of its pros and cons. The same rule also says the agreement’s full text must be made available to the public after 30 days.

  36. Elizabeth

    Note Jane Kelsey’s comments towards the end of the article.

    ### ODT Online Thu, 5 Nov 2015
    Full TPP text released
    New Zealand has released the text of the Trans-Pacific Partnership on behalf of the twelve member countries in its capacity as Depositary of the agreement. Trade Minister Tim Groser welcomed the release. “New Zealand supported the release of the text as soon as the technical work to finalise the agreement was completed,” he said. “I am pleased that this has happened and that the public will be able to thoroughly review the full text of the TPP well before it will be signed by governments.” NZME
    Read more

    █ The full text can be found at http://www.tpp.mfat.govt.nz/text

  37. photonz

    I would think taking note of Jane Kelsey’s comments would be like taking note of an evangelist like Bishop Brian Tamaki beliefs against the reality of the science of evolution.

    Kelsey hates trade, and is continually fear-mongering by making nothing but extremist predictions.

    It’s unlikely you could find a single person in New Zealand whose predictions on the China FTA were more wrong than Jane Kelsey.

    It makes no sense to we give the most attention to the person who makes the wildest predictions, that with every new trade deal, have always proved to be further from reality than anyone else (like her laughably ridiculous statement that there won’t be a single solitary benefit to NZ from the TPPA).

    • Elizabeth

      Just now the point might be she and team did reasonably well at court.

      • photonz

        Wow – winning a court case that you should be allowed to see more of the document than you were given, when all the 6000 pages are now in public, is not a very big win, when you’ve got egg all over you face because you made ridiculous doomsday predictions (again), and were totally wrong (again).

        I wouldn’t go into a house auction letting everybody know my bottom line.

        So it would be utterly stupid to do that with international negotiations, when you’ve got people like Jane Kelsey who will fire up as much hysteria as she can to undermine every trade agreement.

        We could negotiate a trade agreement that is massively beneficial to New Zealanders, and Jane Kelsey would still try to undermine it,

        • Elizabeth

          photonz, with respect, I have no idea what you’re on about. If directing NZ’s economic future to the export of pretty much undifferentiated milk powder product to pretty much one populous nation was a long-term growth strategy for our country, I would be disappointed. As much as I would be disappointed, ecologically, with the cumulative adverse effects of intensive farming practices – I say that despite my farming base. More science and diversification needed.

          I value legal challenge for public good. My question might be did Kelsey & Co achieve this. In part.

  38. Rob Hamlin

    “We could negotiate a trade agreement that is massively beneficial to New Zealanders, and Jane Kelsey would still try to undermine it,”

    That’s an interesting comment Photons. By the use of ‘could’ are you admitting that this one isn’t? No – of course not – Silly me!!

  39. Gurglars

    There’s an old saying in gambling, that the player with the most money wins. That is only New Zealand when dealing with Samoa, Fiji et al. In negotiations with the US and China, unfortunately we will always lose unless we control our own destiny as some Scandinavian countries have done. Any free trade agreements are bound to be balance of payments negative unless we gain access to certain markets for our staples in areas we have an advantage. We have not gained such in the matters of dairy where we have a temporary advantage.

  40. Elizabeth

    Link received from Calvin Oaten
    Sat, 7 Nov 2015 at 10:55 a.m.

    Why free market capitalism needs a balance: democracy.

    ### economyandmarkets.com 6 Nov 2015
    This Is One of the Greatest Deceptions of Our Time
    By Harry S Dent Jr, Senior Editor, Economy & Markets
    Recently I’ve discussed how politicians don’t understand the economy. They don’t understand innovation – the fact that it comes out of challenge, and that without occasional crisis, the economy can’t rebalance and run as it should. So it’s no coincidence that the two great innovations of modern economics both emerged out of a different kind of crisis or challenge – a revolution, a challenging of the status quo.
    Read more

  41. Elizabeth

    ### NZ Herald Online 5:48 PM Wednesday Feb 3, 2016
    The Trans-Pacific Partnership agreement at a glance
    By Sophie Ryan
    The TPP has been hailed as the “biggest trade deal in a generation”. The TPP is a free trade agreement involving 12 nations connected by the Pacific Ocean. The agreement is designed to free up trade and investment between the countries. After years of controversy, mainly around the secrecy of the deal and the lack of public consultation, the document will be signed tomorrow at 11.30am. The countries involved are New Zealand, Australia, Canada, United States, Mexico, Japan, Malaysia, Brunei, Vietnam, Singapore, Peru and Chile. At the signing tomorrow those countries will be represented by trade ministers or, in some cases, foreign ministers. While it is a complex agreement, you should care about the deal because New Zealand is a small trading nation with a focus on exports. The deal will have an impact on our economy and relationships with international corporations and the other 11 countries.
    Read more

    Related Post and Comments:
    6.11.14 Public March against Trans-Pacific Partnership Agreement (TPPA)

  42. photonz

    The TPP will be signed tomorrow. And protesters will continue to bark loudly at shadows.

    And in a year or two or five or ten when they realise their world hasn’t collapsed, and NZ has actually benefited from the deal, a few of them might realise they behaved like a pack of hysterical lemmings – but probably not many.

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