Keith Johnson - NZ Labour - WCC Southern Ward

Keith Johnson - NZ Labour - WCC Southern Ward

Public Sector Cut-backs, Income Redistribution - and the Gone-tomorrow Elite Transnationals (GETS)

KIBBLEWHITE CURVE FINDS LITTLE SUPPORT

Picking up again on my last article, I want to explore further whether and why on the one hand Wagner’s Law may be drooping and on the other the Kuznetz Curve may be limping on its leftward limb. In other words, is increasing public expenditure as a share of GDP still the mark of an advancing economy, and is it still inevitable that levels of inequality decline as societies increase in overall wealth?

In my last article I also made fleeting reference to the presentation that was recently made to the NZ Public Service Association by by David Hall of the Public Services International Research Unit (PSIRU) at the University of Greenwich, UK.

While I found the Hall presentation strangely surreal in some respects in barking for public enterprise (it reminded me of the work of PSIRU’s possible intellectual ancestor, the Ljubljana ‘International Center for Public Enterprises’ in the former Yugoslavia), it did provide a few correctives to the official line being spun by the NZ Treasury.

In particular, there was one graph that showed trends in Central Government Spending as a percentage of GDP that bears repeating (see graph below). And Hall also provides a table for the same measure for a range of OECD countries in 2008 and 2009 that I have augmented with data for 1960 and 1982 from Saunders and Klau (see table underneath).



So getting back to the recent presentation by NZ Treasury official Dr Andrew Kibblewhite, there is pretty weak evidence of either an inexorable tendency for public expenditure to increase at a higher rate than GDP or a tipping point at maturity beyond which expenditure tails down.

In fact the figures indicate that, for the eight countries for which direct comparisons can be made, the share of public expenditure in GDP in 2009 was lower than it was in 1982 in four countries (Canada, Denmark, Germany, and Norway) and higher in the other half of the sample (France, Switzerland, United Kingdom and USA).

WINDENING INCOME AND WEALTH INEQUALITIES

On the other hand, there is plenty of evidence that income and wealth inequalities are widening in Western Countries.

See for example:

1. The UNU-WIDER ‘World Income Inequality Database’ (WIID)
2. The Credit Suisse Research Institute “Global Wealth Report ‘(October 8, 2010).

And some previous blog posts of mine, for example:

1. ‘Adam Smith and the Inequity of Nations’, Dec 11, 2010
2. ‘Giving Our Future a Fair Go’, Mar 31, 2010.

As the diagrams at the bottom of this article illustrate, the richest 20 percent of the world’s population receive 83 percent of its income, the top 8 percent control 79.3 percent of the world’s wealth and the gap between the rich and the poor is a particular worry in the USA.

Looking across the OECD, the 2008 Report ‘Growing Unequal: Income Distribution and Poverty in the OECD Countries’ comments that:

‘With a few exceptions, the disparity between the low- and high-paid has increased rapidly since the early 1990s. Usually, this was because the high-paid did particularly well, not only relative to low earners but also to middle-earners.’

And taken overall, ‘market income inequality’ which includes wages, rent receipts and financial receipts is widening much more quickly than ‘total net income’ inequality which includes income redistribution measures (see figure below).


And the Global Economic Crisis is making things worse. As Robert H. Frank has commented with respect to the USA:

‘The share of total income going to the top 1 percent of earners, which stood at 8.9 percent in 1976, rose to 23.5 percent by 2007, but during the same period, the average inflation-adjusted hourly wage declined by more than 7 percent.

‘During the immediate post-war decades, when income distribution was relatively stable, the toil burden for meeting the rent of that median-price home actually declined slightly, from 42.5 hours a month in 1950 to 41.5 in 1970.

‘But once inequality began rising sharply, the toil burden began rising in tandem. By 2000, the median worker had to work 67.4 hours a month to put his or her family into the median home.

And it is estimated that almost half of currently buoyant job creation taking place in the USA relates to lowly paid MacJobs in the retail, hospitality and home health care sectors that barely cover the cost of fundamentals like housing, utilities, food, health care, transportation and, in the case of working parents, child care.

INEXORABLE RISE OF THE GETS

So what’s going on?

The explanation for the continued rise in inequality – almost regardless of the level of public expenditure – appears to be the increasing dominance of the Gone-tomorrow Elite Transnationals (GETs) under globalization. The GETs class includes bankers, financiers and other undesirables but it also includes more popular and possibly more worthy professionals like international film makers, recording artists and successful sports stars.

As their name suggests, they are happy more or less anywhere that they can access good hotels, good restaurants and fine houses in scenic spots – and sometimes they don’t even have to catch a plane to shift some financial muscle abroad through speculation and comment.

Often they are wanderers who follow the breaks, and observers who don’t get involved.
In each country there is a smallish but very powerful enclave economy of GETs that thrive in the Tradable Sector - and that, in turn, either benefit from or ignore the grunts who work in the Non-Tradable Sectors of each economy like the public service, domestic industries and personal services.

In tandem with associated property and business interests, these Indigenous Elite and Expat GETs are getting steadily better off as a class in comparison to the locals who share their city spaces.

Now if this is starting to sound a bit like socialist rhetoric of the envy variety, I hasten to add that I have spent some of my life as a GET.

In particular, I spent 7 years living in Manila, Philippines working for the Asian Development Bank and living in the archetypical ‘gated communities’ of Forbes (Taglish: ‘Forbess’) Park and Dasmarinas Village in Makati. In fact, I remember being tempted by an invitation to join the Manila Polo Club at one point, though I pulled back eventually fearing it was too swanky.

So if it is a moral issue, I am not well qualified to arbitrate on it.

But as an economist, who is something of a pragmatist like Adam Smith himself, I do worry that the continued selfishness and fickleness of the GETs is in danger of toppling over our societies.

Particularly, where GETs have undue influence on national politics through the media and direct infiltration (as in the case of our New Zealand Prime Minister John Key who is a former Merrill Lynch head of Asian foreign currency dealing in Singapore and who sacked dozens later for his firm in London, where he was known as the ‘Smiling Assassin’).

It is hardly surprising then that consumption-based value added taxes like GST are the favoured tax mode and that attempts to introduce land taxes, capital gains taxes and wealth taxes are robustly rebuffed – even though as I have commented on a previous occasion it is extremely unlikely that, for example, Peter Jackson the film impresario actually pays his full income tax obligation on the $38 million or so per year that he earns.

Or that the GETs and their allies resent income redistribution measures and feel that many of the features of a Welfare State are irrelevant to them – and returning to our theme, that they seek to restrain public expenditure.

Of course, things are infinitely worse in countries like Ireland which have been brought to their knees by the Global Economic Crisis and its GET progenitors. Here Paul Krugman has drawn an analogy between the financial and fiscal loads being born by the ordinary Irish to the problems faced by the Irish peasantry in the 18th century.

But while Jonathan Swift could mock the Anglo-Irish Protestant Ascendancy landlords about ‘eating the Irish’ at least the aristocrats lived among their retainers. Nowadays, the new rulers of Irish destiny are more likely to be dining on pate de foie gras in Frankfurt – and the devil take Limerick.

So are there any answers?

Well perhaps it is time, for starters, to think about tax systems that recoup the full social costs of enclave communities and that have a truly international dimension – with New Zealand starting by collaborating with Australia on initiatives of this type.

While I am happy enough, for example, that Canadian international songstress Shania Twain and her husband Mutt were able to buy a 33-year lease on 61,000 acres of pristine South Island wilderness for $17.5m, I think that they should contribute a little more to New Zealand than a new public hiking trail. After all, they bought the place in part because they value the relative peace, stability and ‘gatedness’ of New Zealand.

And an international tax on financial transactions is worth considering, as is a universal surcharge on First and Business Class travel – perhaps linked to the achievement of environmental objectives.

After all, as H.G. Wells divined, in the absence of new thinking on appropriate policy solutions, the elegant and leisured Eloi / GETs of the future, who are nevertheless ‘hampered by their lack of curiosity or discipline’, may eventually face revolt and even the threat of cannibalism from the brutish, downtrodden Morlocks who inhabit the lower strata of the economy.

Odds Bodkin - Christchurch Earthquake hits home!

A WONDERFUL FAMILY OUTCOME AMID THE DEVASTATION IN CHRISTCHURCH

[from Dan Hutchinson Reporter covering the Christchurch Earthquake for Southland Times, Stuff, Nelson Mail, Dominion Post, Marlborough Express, 15:41 23/02/2011]

LATEST: Rescuers have pulled a woman out of a collapsed building after she spent more than 24 hours trapped under her desk.

Ann Bodkin has been rescued from the rubble of the Pyne Gould Corporation building more than 24 hours after a devastating earthquake caused it to collapse.

She was pulled from the ruins about 2.25 this afternoon and taken to a waiting ambulance.

Her husband Graham Richardson, who had maintained an anxious vigil near the scene, said she did not appear to be seriously injured.

Earlier, Mr Richardson said he had spent an "unbearable'' night not knowing where his wife was.

Ms Bodkin works at the Education Review Office on the third floor and had dived under her desk when the quake struck.

Her sister Sally Bodkin-Allen, from Invercargill, said "it just seems like a miracle ... it must be a very strong desk and she must have got under it very quickly."

For all our wild joy in recovering Jane’s sister Ann, we somberly remember those who are still waiting for news – and those who may have already lost their friends and loved ones.

While we rejoice in our own good fortune we feel a deep community, understanding and sympathy with those who continue to suffer.

Ode to a Qianlong Urn & the rise of the Easternized Occidental Girl?

THE ECONOMY OF SAMENESS

Who wants to stand out when the other peons in the Global Village may mock your differences at the market place? And for so long it has been the richer churls of the western fields that have swaggered into the village square and set the trends.

Now it seems that the formerly impoverished but more industrious peasants of the eastern margins are bringing in bigger and better bundles to trade. Are fashions about to change?

The economy of sameness is something that we all deal with on a day-to-day basis. It is natural to want the approbation that comes from conformity with ideal types and trends. And quite apart from having been a feature of ancient empires, it has obviously been wonderfully accelerated and accentuated by globalization.

Back in 1976, I worked for a spell with a US engineering company in an office in South Wacker Drive with a window overlooking a bridge that must have been close to the original Route 66 crossing of the Chicago River. Although the building was multi-storey, our floor was near enough to the ground to catch the noise of the cars as they crossed the bridge and hit the bascule plates.

Between coffees and donuts, this meant that I had good reason to reflect on the cars that crossed the bridge – and figure out that they all looked basically the same. The cult of sameness has continued to spread.

But two recent articles in the UK Independent set me thinking further about whether sameness evolves along a single trajectory – or whether it can sometimes flip.

Taking Yasmin Alibhai-Brown first, she asks ‘Why are Asian women aspiring to Western ideals of beauty?’, quoting Cambridge academic Priyamvada Gopal who says:

"There is an explicit correlation between the emergence of so-called 'international looks' and the opening up of the economy to multinational corporations from the west. Two Indian women won world beauty titles in the Nineties - Aishwarya Rai and Sushmita Sen. Their arrival on the pageant stage symbolized the arrival of India on the world stage as an economic power to be reckoned with.

It's what some scholars call the 'economy of sameness' yoking all cultures to the same idea of beauty which is linked to assimilating all countries into the same economic model".

But Yasmin also splices in a quote from Livia Wang who is an Anglo-Chinese teenager. Livia takes a more independent line:

"There was definitely a time when students dyed their hair and wore blue contact lenses, but as China opens up economically, I feel the richer classes are returning to more traditional ideas of beauty – maybe pre-communist imperial times. China is quite proud - they have their own movie and pop stars they look up to. So no I don't think the anxieties of western women are being imported."

Well, I’m with Livia on this one – particularly after the recent sale of a Qianlong period Chinese vase in London for £43 million pounds ($69 million). If you have any further doubts read Stephen King’s most recent article below. And if you want to make some money down the track, start to think oriental!

STEPHEN KING: WHO NEEDS WHO NEEDS WHO?

[by Stephen King, UK Independent, Monday, 22 November 2010]

In some areas of our lives, globalisation is more or less complete. On Friday, for example, I discovered that my birthday had become a major global event. I received unsolicited e-birthday cards from hotels in Qatar and Singapore, and from the Virgin Flying Club. It was all rather anonymous and depressing. In other areas, however, globalisation is in danger of crumbling.

As Ben Bernanke, the chairman of the US Federal Reserve, noted on Friday, "international policy coordination is especially difficult now because of the two-speed nature of the global recovery".

Mr Bernanke is absolutely right. Western nations look at the recent success of the emerging world with a mixture of admiration, envy and anger: admiration, because China, India and other nations have pulled millions out of poverty; envy, because while the global policy stimulus has been very effective in the emerging world, high levels of debt have made it a lot less effective in the developed world; and anger because, for many Western policymakers, Mr Bernanke included, the policies pursued by emerging nations – notably the deliberate undervaluation of exchange rates – are a major threat to sustainable global economic recovery.

To emphasise the point, Mr Bernanke invoked the spectre of the 1930s. "In the period prior to the Great Depression, the United States and France ran large current account surpluses, accompanied by large inflows of gold... Neither country allowed the higher gold reserves to feed through to their domestic money supplies and price levels, with the result that the real exchange rate in each country remained persistently undervalued... These policies created deflationary pressures in deficit countries...which helped bring on the Great Depression".

Today, the equivalents of the US and France are China, Russia and Saudi Arabia – all of which run large current account surpluses, providing the global offset to America's current account deficit.

Like the US and France in the 1920s and early-1930s, they're not terribly keen on either a rise in their exchange rates or, instead, a pick-up in domestic money-supply growth and inflation. And, as with the 1930s, the world's deficit nations are struggling with deflation. Last week, the US published its lowest core inflation rate in over 50 years.

To be fair, Mr Bernanke emphasised that he had no intention of forecasting a return to the conditions last seen in the 1930s. Instead, he wanted to argue that, until and unless the world's surplus nations allowed their currencies to rise, the global economic recovery would remain lopsided, unbalanced and very vulnerable. Eventually, he argued, the two-speed world would become a one-speed world. And he clearly believed that a one-speed world would be stuck in first gear.

It's at this point that I begin to have my doubts. For all the warnings about the inability to sustain "two-speed" growth, a "two-speed" global economy has been the reality for decades.

Since the 1950s, East Asia has sustained a per capita economic expansion faster than on any other occasion in human history. Throughout the last decade, the emerging world as a whole has grown at least three times faster than the developed world. And it is this strong, persistent and seemingly resilient expansion that makes me wonder about one of Mr Bernanke's key conclusions.

In his words, "...a strong expansion in the emerging market economies will ultimately depend on a recovery in the more advanced economies..." Does this still hold true? Not obviously. Two important themes have begun to emerge in recent years.

First, strong emerging-market growth is beginning to undermine growth in the developed world. China's hunger for raw materials – now increasingly being mimicked in other parts of the emerging world – has left commodity prices high despite the depths of the recession in the West. In the "bad" old days, this would have left the West facing significantly higher inflation but, today, the risk lies more with lower output.

Even in the UK, where inflation is too high relative to target, there has been no wage response. Adjusted for inflation, wage growth has been pitifully weak, hindering the pace of both debt repayment and the economic recovery. The level of economic activity remains depressed by past standards.

Second, the underlying drivers of global economic growth are increasingly coming from the emerging world. It's easy enough to caricature China and other nations as being entirely dependent on exports – a view that Mr Bernanke is happy enough to support.

Yet the data reveal a very different picture. Of the 3.2 per cent increase in world consumer spending recorded in 1998, all but 0.3 percentage points came from the developed world.

This year, a very different story emerges. Of the 2.4 per cent overall increase in global consumer spending, more than half comes from the emerging world.
The picture on investment is even starker.

Global growth in capital spending has more than doubled since the late 1990s. At the height of the technology boom, capital spending rose at a 6 per cent annual rate, two-thirds of which came from the developed world. This year, capital spending will deliver a 10 per cent gain. Four-fifths of this rise will come from the emerging world.

We are witnessing a true revolution in global economic affairs. The engine of economic expansion is no longer to be found in the debt-ridden West. Instead, the emerging nations find themselves in the driving seat of global growth. And as their economies increase in size, so they will increasingly trade with each other. Why, for example, would a Brazilian company set its sights on selling to US consumers when Asian domestic demand is expanding so incredibly quickly?

If, though, demand in the emerging world is growing so quickly, why do these countries run current account surpluses? Why do they appear to be saving rather than spending?

The answer relates to supply and demand. Although consumption and capital spending are both rising very quickly, they are not rising quite as quickly as output.
China and other emerging nations are producing more than they are consuming and, hence, running current account surpluses. But does that mean they are dependent on US and other Western consumers?

Not necessarily. It's easier, in fact, to turn the argument on its head. Whether they like it or not, Western consumers are increasingly dependent on the low-cost production and ample credit provided by the emerging nations.

But this sense of dependency doesn't play well in the West. Whether it's Nobel peace prizes, exchange-rate policies or broader economic rebalancing, the West's voice is falling on deaf ears, partly because the leaders in the emerging world are particularly attuned to the stench of hypocrisy.

In the late-1990s, following the Thai baht crisis, the West lectured Asian and other emerging economies over their profligate ways and demanded a period of hair-shirt austerity. With the roles now reversed, the West seems not to have the stomach for the medicine that it once prescribed for everybody else.

Stephen King is managing director of economics at HSBC

Myanmar - Two Lost Decades and the Resource Curse

BRAVE LADY

I was absolutely delighted that Aung San Suu Kyi was released from house arrest on the thirteenth of November. It is a wonderful but fragile happening that amplifies hope for Myanmar in the long run - but her long incarceration and proven vulnerability to re-arrest underscore the ability of the Myanmar Government to behave badly.

As for the lady’s personal courage in seeking wider liberty for her fellow citizens, I imagine that de Tocqueville would be awed by her constancy and shamed by his sexism, even though it is hard to disagree with his general sentiments:

“Men who take up liberty for its material rewards, then, have never kept it for long.... What in all times has attracted some men so strongly to liberty has been itself alone, its own peculiar charm, independent of the benefits it brings; the pleasure of being able to speak, act, and breathe without constraint, under no other rule but that of God and Law.”

Much more mundanely, the episode has set me thinking about my own very brief involvement in the political economy of Myanmar, and how I can even start to consider her level of self-sacrifice.

Let’s take the last first.

We were born within 13 months of each other, and some parallels and overlaps are evident in our academic interests and involvement in international development issues - and in the way that our careers and family lives evolved up to our early forties. But things diverged sharply in 1988, the year that we both returned home to cope with the severe illnesses of our mothers.

She returned to Rangoon in April 1988 and on the 8th of August there was a mass uprising in Burma. Her first public speech on the 26th April called for democratic reform in front of a crowd of half a million people. However, the protests were brutally suppressed by the military and thousands of protesters were killed. In July 1989, she was placed under house arrest for the first time.

In May 1990, Suu Kyi's National League for Democracy wins a landslide election victory but the junta refuses to recognize the results. Despite being awarded the Nobel Peace Prize in 1991, she was not released from house arrest until 1995 and was unable to travel to see her dying husband in 1999 in fear of risking exile.

In September 2000, she was placed under house arrest again after she defied travel restrictions in an attempt to visit the city of Mandalay. Released conditionally again in May 2002, she was imprisoned following violent clashes between her supporters and the government. In September 2003, she was allowed home under house arrest but this became essentially indefinite.

So 22 years passed in which for the most part, she was a prisoner living largely without companionship and communication in a crumbling colonial villa – with, so the story goes, snakes nesting under the staircase. I can only marvel yet again at her fortitude - and at my own relative good fortune in being able to continue to explore the world and build loving relationships during those two decades.

THE MYANMAR STRATEGY STUDY

In July 1997 Burma was admitted to the South East Asian regional grouping ASEAN, and pressure developed within the Asian Development Bank to attempt another rapprochement with the Burmese Junta – particularly as India - one of the Bank’s major shareholders and power-brokers was in the process of developing closer economic relations with Myanmar.

At some point in the later part of 1987, I caught the shuttle bus (almost certainly during, immediately preceding or immediately following a typhoon) from the ADB’s satellite office in Makati (which housed the Economics and Development Resource Center where I normally worked) to travel across downtown Manila for an appointment at the ADB’s HQ in Roxas Boulevard.

The meeting was with Rick Tan, an affable Filipino who was a senior manager in the Country Department. Rick explained that he had cast around for someone to head up work for Bank’s new ‘Myanmar Strategy Study’ and that my name had come up in lights. I was flattered.

But Rick was also a wily operator in the Bank’s bureaucracy and he had chosen craftily. I had the ideal mix of brashness, vanity, skills and dedication to hard work. Nor, as I later found out, could he persuade anyone else in the Country Department to enrol for what was widely regarded as an arduous and potentially pointless exercise.

So it wasn’t long before I pitched up at Rangoon (Yangon) Airport with my lugubrious colleague and friend Steve Whitmer. A local official and a driver had been sent to pick us up and I soon asked whether my counterpart was going to work with us on the Myanmar Strategy Study.

‘We’ve heard nothing about that’, said our host, ‘We were told that you were coming to inspect progress on the Concrete Pipe Factory’. Rick had of course wisely neglected to inform the Burmese Government of the real purpose of our mission.

Not surprisingly, we had to work hard to get meetings and although I was proud for a while of the research and its recommendations, the work came to nothing. Even before the August 1988 Uprising, the Government was becoming ever more difficult to deal with. The homilies about the need for partnership, evolution and participation in the liberalization of the economy and society met stony-faced rejection or wry smiles.

Still I see faint references on the Internet that there had been an attempt to develop a strategy for ADB lending around 1987, with the note that this marked the end of policy dialogue. However, there is an eight page Economic Update that was issued in 2001 that may have drawn on some of the material. Some of it sounds very much like me:

‘This report draws on official data that are of variable quality and are sometimes incomplete. To help better inform those who make policy and other decisions, there is an urgent need to upgrade Myanmar’s statistical system’.

As for the main messages, they are pretty basic:

‘There is a pressing need to increase the flow of public resources to basic health and education services and other areas where developmental needs are not being met.

Investment has remained stagnant for more than a decade at only 13% of annual national production - this is less than a third of the investment levels the rest of South East Asia has managed over the past three decades.

Taxation is amongst the lowest in the world, preventing the government from investing in essential services and infrastructure development. Only three people out of every 20 have access to electricity and the country's road network is totally inadequate. Only one person in 200 has a telephone and most rural areas lack even a single phone link to the outside world.

Government expenditure on education and health is low - amongst the lowest in the world says the bank, while the country's state economic enterprises are inefficient and a drain on the economy’.

Above and between the lines, the ADB unmasked a country that was suffering from massive economic mismanagement, international indebtedness, political instability and social stagnation after decades of military rule - necessitating extensive economic reform and international financial and technical assistance.

Based on a household income and expenditure survey, and using a national poverty
line, the Central Statistical Organization had calculated that 22.9 percent of the population was below the poverty line in 1997. This suggested that by 2001 there were approximately 11.7 million people in Myanmar who lacked basic subsistence.

A variety of social and health indicators also gave cause for concern. In 1999, expected life expectancy for urban males was 61 years. In 1997, the incidence of malnutrition in children under five years of age was reported to be 31 percent and the under five mortality rate was 77.77 per 1000 live births.

Estimates made by international organizations painted an even worse picture. Tuberculosis was still seen as a serious threat to health in Myanmar and malaria control remained a key concern. While there were no official estimates of the prevalence of HIV/AIDs, informal sources suggest that it has reached epidemic proportions’.

Revealingly, when the Economic Update was tabled at a Mekong Secretariat meeting in 2002, the Burmese military intelligence chief Lt General Khin Nyunt was pleased tell a fairy story to fellow Ministers from neighbouring countries. He claimed that the economy had been growing at over 8% a year over the last five years - and had done so without international assistance. He also predicted the economy would continue to grow at 6% per annum over the next five years.

Things have probably not changed that much since 2002 – especially for ordinary people – and have probably worsened in the aftermath of Typhoon Nargis.

Economics Professor Sean Turnell at Sydney’s Macquarie University in Australia, who has been following Burma’s economic situation, earlier was reported early in 2010 as confirming that the Burmese economy has been dragged to abysmal depths by the ruling junta’s mismanagement.

‘Burma, once known as the ‘Rice Bowl’ of Southeast Asia, since 1962, when dictator General Newin assumed power in a military coup, has been facing economic deterioration forcing the United Nations to categorize it among the Least Developed Countries (LDC)’.

OLIGARCHY AND THE ‘RESOURCE CURSE’

Why on earth then doesn’t the Burmese Government do more for its people?

Well, it is a convenient assumption of most western economists that governments are concerned about the welfare of their citizens – but one that is very open to debate in the case of countries like Myanmar.

I caught a whiff of the way the Government thinks in one of my interviews with officials. When I raised the possibility of funding social development by collaborating with foreign investors (under the right conditions) in the export of natural resources, the spokesman quickly put me right about where the preferences and trade-offs lay.

‘We know that everyone wants our resources and that natural resources will be in ever increasing need internationally. We will keep the resources in situ under our control until until demand increases and then we will be able to sell in a rising market'.

Well quite apart from issues of resource substitution and discovery, the statement makes little sense if you accept a pressing responsibility to provide physical infrastructure and social services to today’s citizens and their children – and to generate surpluses for investment in other forms of productive activity that will grow the economy.

The real issue is that the Government is fraudulently farming the economy and the population for the benefit of the members of the military clique and the associated business oligarchy.

Yuki Akimoto puts this into a wider perspective in her 2006 report for the Open Society Institute. ‘Preparing for Burma’s Economic Transition’:

‘Natural-resource-rich countries like Burma are more likely than resource-poor countries to experience flat economic growth, endure greater poverty, incur unwieldy debt, develop authoritarian and repressive governments, and suffer armed conflict.

Receiving significant revenues in payment for natural resources can free a country’s government from the need to collect taxes from its citizens; this severs a vital bond between the citizen taxpayer and the government and dampens the government’s incentives to implement sound economic, social, and fiscal policies in a transparent and accountable manner.

In many countries, revenues from extraction of natural resources actually trigger a decline in living standards and exacerbate social problems. Revenues generated by exploitation of Burma’s natural resources are helping to sustain the country’s military dictatorship, contributing to human rights abuses and conflict, and failing to alleviate the poverty and poor governance most Burmese suffer.

Natural resource extraction in Burma has produced long-term damage to the environment; contributed to a decline in agricultural productivity; aggravated corruption of the government and civil society; exacerbated the illegal drug trade, the exploitation of sex workers, and the spread of HIV/AIDS; and funded warring factions’.

So given impending world-wide shortages of natural resources, it is worth reflecting that, rather than Myanmar evolving into an open economy and a liberal democracy, many more countries may fall prey to military juntas and business oligarchies. Not such an unreal prospect as income differentials rise and it becomes impossible to deliver even in the illusion of rising living standards to the mass of people.

But there again, why stand on a podium in a military uniform half the day with the other members of an obnoxious clique when you can simply juice the rising commodities markets by buying and selling futures?

Keith Johnson - Campaign Statement

‘If Politics is the Art of the Possible, Economics is the Science of Sound Choices’ – or so says Labour candidate for Wellington’s Southern Ward, Keith Johnson.

Keith believes that the real issues are restraining new spending, getting better value for money and allocating more back to the community. As an economist, he is offering to put future spending decisions under the microscope.

As an example, Keith cites the Mayor’s recent attempt (without analysis or public consultation) to persuade the Chinese Government to loan us a pair of Pandas, at an annual cost to ratepayers exceeding $4 million per year.

Keith’s campaign banner is Caring about Costs – Caring about Community’. He wants to end rate increases for householders, end rates re-balancing from the commercial to the residential sectors, get a grip on wasteful spending and ensure that more money comes back to support local services and community activities.

Wellington residential rates will rise by at least 5.6 percent next year. This will add $100 to $150 to each household’s rates bill. Already there is talk of an emerging $200 million shortfall in the Council’s finances and a further $87 million will have to be found to cover WCC's contribution to solving the local Leaky Buildings problem.

While about 85 percent of the Council’s budget is focussed on funding basic services, a 15 percent ‘dividend’ has been available that could be spent on pet projects and making Wellington ‘party central’. In harder times, Keith suggests that it is ‘time for a cup of tea’ on splashing out.

Keith also points out that WCC has just re-balanced the rates burden from the commercial sector to the household sector and argues that if more is taken from residential ratepayers in the suburbs, more should flow back to local communities (including providing all-weather sports grounds).

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