TVNZ’s special programme on Tuesday (News Special: You, Me and the Economy; 25 November 2025) included (about two-thirds of the way into the programme) among a number of helpful and unhelpful suggestions, a call for New Zealanders to get onto the compound interest bandwagon, the magic formula of getting rich in the never-never through thrift. Jam tomorrow, never today; which seems to be our main narrative towards fixing the West’s economic woes.

The spokesperson for compound interest on the program sort-of acknowledged that ordinary compound interest (ie “conservative” compound interest) was hardly good enough; she pushed for an amplified “high growth” version of compound interest.

She was correct, if understated, on her point about conservative returns.

Ordinary Compound Interest

If we go back 100 years, to 1925, the equivalent of today’s minimum wage was $120 per year. If a person saved $120 then, and allowed it to compound (say in the form of a one-year bank term deposit) through to 2025, an average after-tax interest rate of 4.23 percent would have been required to make that ‘investment’ worth $7,540 today. $7,540 represents compounded CPI inflation over those 100 years. Thus, in principle, $120 (actually £60) would have had the same purchasing power as $7,540 today. In reality, the average term-deposit interest rate over the last century was well under 4.23 percent before tax, let alone after tax.

(We note that tax on interest is charged at a person’s marginal rate – commonly known as the secondary tax rate – and is nowadays withdrawn at source. For most of the last 100 years, tax on interest was more easily evaded, and it was paid separately, meaning that the compounding appeared to relate to before-tax interest income.)

In 1925, $120 per year supported, in many cases, low-income families. Imagine any family trying to live on an annual income of $7,540 today! The better way of evaluating past compound interest is to compare the compounded present value with today’s annual minimum wage, which is $48,800. For $120 in 1925 to compound to $48,800 in 2025, an average after-tax interest rate of 6.2% would have been required. That’s vastly in excess of what term deposit interest rates actually were, on average.

We should note that an average interest rate of seven percent would have compounded the $120 term-deposit to $104,000 today, and that an average interest rate of eight percent would have compounded the $120 term-deposit to $264,000 today. So, the magical exponential outcome of compound interest can occur, but only if the interest rate is sufficiently above inflation (ie above the compounded growth of prices); or, more pertinently, sufficiently above the compounded minimum-wage rate.

Other starting years

My calculations show that if the approximate minimum wage was invested in 1935, an after-tax average interest rate of 7.1% would have been required to achieve today’s minimum wage. (Wages were about twenty percent lower in 1935 than in 1925.)

In late 1970, I was earning seventy cents an hour milking cows every Sunday morning. That was about the minimum wage then. In 1980 I was in a well-paid IT job, earning $13,000 per year, which was more than double the before-tax minimum-wage-equivalent of the time. I have estimated annual minimum-wage equivalents for those years of $1,500 (for 1970) and $5,000 (for 1980).

For $1,500 in 1970 to compound to $48,800 in 2025, an average interest rate of 6.54% would have been required. For $5,000 in 1980 to compound to $48,800 in 2025, an average after-tax interest rate of 5.19% would have been required. (For the 1980 example, a before-tax annual average interest rate of about ten percent would have been required for such 1980 savers to have achieved three times today’s minimum wage.)

For a $30,000 term deposit in 2015 (again, set close to the minimum wage), an average after tax interest rate of five percent would have been required to compound that amount to today’s minimum wage.

Today’s one-year term deposit rate is 3.4% before tax, 2.4% after tax (applying a secondary tax rate of 30%). A $30,000 minimum-wage term deposit in 2015, compounded for ten years at today’s rate, would now be worth $38,000; well under today’s annual minimum wage (for a 40-hour per week job) which is nearly $49,000.

In the last 80 years, many people did make investment fortunes; but through property and other debt, not through saving.

Target Audience

We note that the target audience for this compound-interest narrative is young adults, because compound interest – like Mainland cheese – takes time. Most young adults in New Zealand today can only afford to save in this way if the money is taken from them ‘at source’ (eg through KiwiSaver), and then (if they are trying to live independent lives) they have to incur higher levels of debt than they otherwise would to be able to make those obligatory savings. Further, employer contributions to KiwiSaver are very much a part of the cost of labour, and are therefore factored in with employers offering lower wages than they otherwise would; after-tax employee remuneration is just a part – albeit a large part – of labour cost.

“High Growth” Compound Interest

The above simple mathematics show why the savings industry is trying to push products that simulate high-growth compound interest. In the years before 2008, and in the mid-2010s, these products rode the property bubble wave. Those ‘investments’ now appear rather naïve. But the industry of professional optimism always looks forward; it almost never looks back.

Today, amplified compound interest is (allegedly) being achieved through riding the world’s stock markets, with an emphasis on military stocks and ‘tech’ stocks (especially those of the ‘AI’ companies), and on cryptocurrencies. The ‘tech’ stocks (which the New Zealand Super Fund is highly exposed to) are one modern-day equivalent of mining-company shares; shares which historically have been amongst the most volatile. And crypto-currency mining is the virtual – and equally unsustainable – equivalent today of gold-mining as in the days of the Klondike, Ballarat, and Tuapeka gold-rushes. (Re gold rushes, 2025 is a global gold-rush year, though the years of the individual undercapitalised goldminer-made-good are in the past.)

Speculations on AI, Bitcoin, or African gold are no more routes to financial security or future abundance than is prosaic money-losing compound interest.

What are they thinking?

Compound interest without compounding economic growth.

We have to think about the compound interest narrative in two contexts, that of a static economy, and that of a perpetually growing economy.

The basic idea of a static economy is that there is no inflation nor economic growth. To keep it simple, imagine no population growth as well. And no taxes.

The mathematics of compound interest in this case are real. If you were able to save a sum of money and to wait for it to compound at two percent per year, you would more than double your money after fifty years, and increase it tenfold in less than 120 years. These gains to you and your entitled grandchildren would be fully funded by some other people and their impoverished grandchildren; every dollar of interest received is paid by someone else. It would be a zero-sum game for society; for every winner there would be a loser.

To propose compound interest like this sounds ludicrous, and it is. But, the whole object of monetary policy in New Zealand and like countries is to create a world in which the rate of interest is about two percent higher than the rate of inflation. That is precisely what I have described here. To achieve that goal, monetary policy ends up creating a structural recession, a perpetual state of zero economic growth; ‘green shoots’ only appear when the rate of interest is allowed to fall to at or below the rate of inflation.

In reality, compound interest has always been for the few, not the many. It’s an accounting trick that depends on the majority of the beneficiaries of compound interest never realising their apparent gains; never spending their paper bonanzas. Paper wealth can be converted to real wealth by just a few. Paper wealth – financial claims – can be inflated, infinitely, so long as it remains just that; paper wealth or its digital equivalent.

Compound interest with compounding economic growth.

The advocates of compound interest will respond by saying that compound interest depends additionally on economic growth, real economic growth.

In this story, there are two versions: either compound interest parasitically exploits economic growth, or it enables economic growth. Either way, the supposition is infinite exponential growth.

The simplest scenario here is of an economy with zero inflation, zero population growth, two-percent annual interest, and two-percent annual growth of real GDP. So, in this case, the two-percent compound interest simply represents the fruits of that economic growth; the only debtors would be firms, not households. In principle everyone could be doing it; the interest payable to every household would be paid by business growth.

There are two obvious problems. One is that real exponential growth cannot go on forever. If average real incomes today had been growing by two-percent per year since the early days of the Roman Empire, today we would on average have living standards 16 million trillion times greater than those of Jesus Christ and his Disciples.

The illusion (really delusion) of long-term sustained economic growth has been made possible by early-modern humans’ learning to extract energy in the form of fossil fuels, and to dump waste products into the environmental commons. Late-modern humans could have invested – financially and intellectually – in systems to maintain high living standards beyond the fossil fuel age; but haven’t. Our home planet, though forgiving in many respects, is finite.

The other obvious problem is that if too many households are saving rather than spending much of their incomes, then there would be insufficient demand for final goods during the long period of saving. This kind of saving behaviour breeches Say’s Law, which is the basis of the belief-system of classical-liberal supply-side economics – manifest today as neoliberalism. Say’s Law supposes that policymakers do not and should not concern themselves with matters of ‘upside demand’ – aka ‘stimulus’. Nor should they concern themselves with ‘downside demand’ – aka ‘counter-stimulus’ – yet that’s exactly what we got with the openly touted manufactured recession created by the Reserve Bank of New Zealand from 2021. (Refer Adrian Orr admits Reserve Bank is ‘deliberately engineering recession’, Stuff, 24 November 2022.)

The required economic growth would not continue, because there would be insufficient demand for the extra output; demand is created by the creation of and spending of claims, the prerogative of sovereign governments and of banks.

Saving must be balanced by investment; too much saving disincentivises investment spending, sometimes dramatically so. We can see that, the reason for today’s weak investment climate; so we depend on the Deus ex machina (or cargo cult) of exogenous foreign demand. Exports featured prominently as the principal narrative of You, Me and the Economy.

The other mantra word is ‘productivity’. Most cafes do not need more cost-saving devices to improve their productivity; rather, to improve their productivity, cafés need more customers.

See Our inability to understand the exponential function is our biggest weakness, YouTube, posted by Professor Albert Bartlett about a month ago. All exponential growth, in nature, ends; sometimes catastrophically.

Finally

Why don’t the people we believe to be experts tell us these things? Could it be that the experts we most see and hear are experts in the arts of storytelling and story-marketing; in this case, experts in the fantasy rather than in the reality of growth? (Refer Greta Thunberg’s radical climate change fairy tale is exactly the story we need, The Conversation, 28 September 2019.)

*******

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

In particular, Buchanan and Manning examine whether we are witnessing a fundamental change to global economics and consider:

• How since the Covid-19 pandemic arrived even neo-liberal state economies have embraced an expansionist government strategy and significant degrees of stimulus.
• It would appear that the excesses of small government, market driven economies have, at this time, run their course.
• But what will replace the earlier systems?
• From a political economy point of view, what can we expect to take shape as the Pandemic grinds on, even while we all have had a glimpse of what a post-Pandemic new normal may mean?

You can comment on this debate by clicking on one of these social media channels and interacting in the social media’s comment area. Here are the links:

• Facebook.com/selwyn.manning
• Youtube
• Twitter.com/Selwyn_Manning

If you miss the LIVE Episode, you can see it as video-on-demand, and earlier episodes too, by checking out EveningReport.nz or, subscribe to the Evening Report podcast here.

The MIL Network’s podcast A View from Afar was Nominated as a Top  Defence Security Podcast by Threat.Technology – a London-based cyber security news publication.

Threat.Technology placed A View from Afar at 9th in its 20 Best Defence Security Podcasts of 2021 category. You can follow A View from Afar via our affiliate syndicators.

Over the past two decades, the Asia-Pacific region has made remarkable progress in managing disaster risk. But countries can never let down their guard. The COVID-19 pandemic, with its epicentre now in Asia, and all its tragic consequences, has exposed the frailties of human societies in the face of powerful natural forces. As of mid-August 2021, Asian and Pacific countries had reported 65 million confirmed coronavirus cases and more than 1 million deaths. This is compounded by the extreme climate events which are affecting the entire world. Despite the varying contexts across geographic zones, the climate change connection is evident as floods swept across parts of China, India and Western Europe, while heatwaves and fires raged in parts of North America, Southern Europe and Asia.

The human and economic impacts of disasters, including biological ones, and climate change are documented in our 2021 Asia-Pacific Disaster Report. It demonstrates that climate change is increasing the risk of extreme events like heatwaves, heavy rain and flooding, drought, tropical cyclones and wildfires. Heatwaves and related biological hazards in particular are expected to increase in East and North-East Asia while South and South-West Asia will encounter intensifying floods and related diseases. However, over recent, decades fewer people have been dying as a result of other natural hazards such as cyclones or floods. This is partly a consequence of more robust early warning systems and of responsive protection but also because governments have started to appreciate the importance of dealing with disaster risk in an integrated fashion rather than just responding on a hazard-by-hazard basis.

Nevertheless, there is still much more to be done. As the COVID-19 pandemic has demonstrated, most countries are still ill-prepared for multiple overlapping crises – which often cascade, with one triggering another. Tropical cyclones, for example, can lead to floods, which lead to disease, which exacerbates poverty. In five hotspots around the region where people are at greatest risk, the human and economic devastation as these shocks intersect and interact highlights the dangers of the poor living in several of the region’s extensive river basins.

Disasters threaten not just human lives but also livelihoods. And they are likely to be even more costly in future as their impacts are exacerbated by climate change. Annual losses from both natural and biological hazards across Asia and the Pacific are estimated at around $780 billion. In a worst-case climate change scenario, the annual economic losses arising from these cascading risks could rise to $1.3 trillion – equivalent to 4.2 per cent of regional GDP.

Rather than regarding the human and economic costs as inevitable, countries would do far better to ensure that their populations and their infrastructure were more resilient. This would involve strengthening infrastructure such as bridges and roads, as well as schools and other buildings that provide shelter and support at times of crisis. Above all, governments should invest in more robust health infrastructure. This would need substantial resources. The annual cost of adaptation for natural and other biological hazards under the worst-case climate change scenario is estimated at $270 billion. Nevertheless, at only one-fifth of estimated annualized losses – or 0.85 per cent of the Asia-Pacific GDP, it’s affordable.

Where can additional funds come from? Some could come from normal fiscal revenues. Governments can also look to new, innovative sources of finance, such as climate resilience bonds, debt-for-resilience swaps and debt relief initiatives.

COVID-19 has demonstrated yet again how all disaster risks interconnect – how a public health crisis can rapidly trigger an economic disaster and societal upheaval. This is what is meant by “systemic risk,” and this is the kind of risk that policymakers now need to address if they are to protect their poorest people.

This does not simply mean responding rapidly with relief packages but anticipating emergencies and creating robust systems of social protection that will make vulnerable communities safer and more resilient. Fortunately, as the Report illustrates, new technology, often exploiting the ubiquity of mobile phones, is presenting more opportunities to connect people and communities with financial and other forms of support. To better identify, understand and interrupt the transmission mechanisms of COVID-19, countries have turned to “frontier technologies” such as artificial intelligence and the manipulation of big data. They have also used advanced modelling techniques for early detection, rapid diagnosis and containment.

Asia and the Pacific is an immense and diverse region. The disaster risks in the steppes of Central Asia are very different from those of the small island states in the Pacific. What all countries should have in common, however, are sound principles for managing disaster risks in a more coherent and systematic way – principles that are applied with political commitment and strong regional and subregional collaboration.

——————

Ms. Armida Salsiah Alisjahbana is the United Nations Under-Secretary-General and Executive Secretary of the United Nations Economic and Social Commission for Asia and Pacific (ESCAP)

It is true that New Zealand – and the rest of the world – now faces substantial inflation pressure. As the 2020s unfold, the biggest macroeconomic story – as in the 1920s after World War 1 – is likely to be about how we address these pressures in a context of even the experts having little understanding of the contemporary manifestation of the problem, or of how to address it.

Modern capitalism faces a ‘new’ cost structure that has evolved since the 1970s; and it faces supply complexities that are chaotically unravelling in the wake of the Covid19 pandemic.

The cost structure that has arisen mainly after the 1970s can best be summarised as Bullshit Jobs, the title of a 2018 book by economic anthropologist David Graeber. (The book was the Financial Times book of the year in 2018. Sadly, David Graeber died suddenly in 2020, age 59; not of Covid19. His final work, The Dawn of Everything: A New History of Humanity, is set for release this year.) These are mostly well-paid jobs that have bloated, in the wake of neoliberalism, in both the private and public sectors; jobs whose outputs, on balance, contribute almost nothing to human welfare but which represent a huge economic cost on those who produce the actual goods and services that contribute to our living standards. In economic analysis, most of these jobs come in the overlapping categories of ‘producer services’ and ‘transaction services’; thus the associated costs are called, by economists, transaction costs.

(This category of costs, which appeared in the literature around the 1970s, has been narrowed and downplayed by economists – in part because much of the work done by career economists falls into this category. The concept has been over-narrowly defined by economists; a better, broader, definition of transaction costs is the costs of paying people to perform producer and managerial services. Further, a big gap in economic theory relates to the forces – market forces or otherwise – that facilitate excessive growth in these employment sectors.)

We may use the term ‘bullshit services’, not to describe transaction and producer services as such, but to describe their excess; as a label to their bloat, that accelerated in the 1980s. The costs associated with bullshit services can be called ‘bullshit costs’. The most potent and effective anti-inflation policy would be to gradually eliminate bullshit costs, and to free up (and reskill) bullshit workers into spending their paid time productively.

Today’s cost problem manifests itself as ‘labour shortages’, and is compounded by politicians whose experience is almost entirely informed by concerns about ‘unemployment’; more generally, concerns about ‘labour surpluses’. At the moment we have found ourselves in a capitalist world of dire labour shortages combined with substantial levels of ‘structural unemployment’; meaning that these unemployed are not work-ready, they are not able or willing to meet the requirements of the non-bullshit component of the twentyfirst century labour market. The coming wave of inflationary pressure is purely a supply-side problem, yet we are about to treat this problem – once again – with a ‘one size fits all’ demand-side contractionary monetary policy.

Examples of ‘Bullshit Costs’

• Costs of Hard-Sell Marketing (of ‘pushing’); includes pushing in all manner of industries from selling military hardware to selling flavoured sugar.
• Speculative Finance; all employment in support of land-banking and other forms of enrichment that do not involve the provision of goods or services which households want to buy. Pure land-banking is a form of theft.
• Duplication; services in bureaucratic organisations which duplicate services in parallel organisations (such as District Health Boards).
• Positional Goods; goods and services which enable some people to increase their social status (their relative social standing), meaning that other people lose standing as a result.
• Defensive Goods; goods and services purchased to help bullshit workers to get to work, or to relieve their work stresses resulting from low morale arising from the meaninglessness of their work, or demanded by bullshit workers as compensation for their time poverty.
• ‘Decision Hygiene’ Management; this is the management of ‘noise’ or ‘randomness’ associated with the different personalities or moral compasses of different people in the same jobs. Decision hygiene management represents the roboticization of humans; arguably a bigger danger, in practice, than the humanisation of robots. (See, for example, A Conversation with Daniel Kahneman About ‘Noise’,Behavioural Scientist.)

We may note, also, that many people in non-bullshit jobs may have substantial (and often increasing) bullshit requirements imposed upon them by hierarchies of managers (meaning their line managers themselves have no autonomy); requirements that make these workers time-poor, and may thus compromise their ability to provide high quality services or goods to their customers. (Teachers, and many health-care workers, will understand this one.)

Workers supplying essential goods and services – and those supplying other consumer services and goods – have to support armies of bullshit workers as well as themselves and their families. Fortunately, we live in a high productivity society, which makes it possible for each actual worker in the market economy to support a number of faux workers.

From the point of view of formal economic analysis, bullshit employment is paid work (including self-employment) for which the ‘marginal social benefit’ equals zero. A closely related idea is that of the ‘marginal product of labour’ being zero.

What these concepts mean is, if someone stops doing bullshit work, total utility (think total ‘enjoyment’ arising from goods and services) does not diminish. In pre-industrial societies, most bullshit jobs were literally on the farm. Then, one of the most important processes of economic development involved people moving off farms (without reducing farm production) into urban centres where they added to the production of consumer goods and services that people wanted. One of the most important periods of such urbanisation in New Zealand was the late 1920s. And it is this process that has been the most important single driver of economic growth in China and India in recently past decades. (This is the Lewis Model of Economic Development, named for West Indian Nobel Laureate, Sir Artur Lewis.)

In terms of the present inflationary supply-chain problem being faced by countries like New Zealand, and in many ways being accentuated in New Zealand compared to our comparator countries in the Northern Hemisphere, the solution is to create incentives for labour to flow from bullshit employments and into the sectors of dire labour shortage. At the coalface of such a strategy is getting our young people to aspire to (and train for) real jobs instead of bullshit jobs.

Interest Rates and Inflation

Since the 1980s (and from the 1960s in elite academic circles), inflation has generally been treated as a ‘one size fits all’ monetary problem that can always be treated with a monetary cure (much as, in the 1970s, many thought of STDs as illnesses that could always be put right with a course of antibiotics).

The neoliberal monetarists of the 1980s were actually more cunning than they themselves realised. They applied their remedy to a 1970s’ inflation problem that was already in the process of self-correction; and they then took all the credit. While claiming to have solved the inflation problem, they, semi-inadvertently, created a decade of economic disorder (1985 to 1994).

They treated inflation with a 1980s’ constipatory monetary cure that came to be formalised as ‘raise interest rates to disinflate a country’s economy’. (The earlier discussion in the 1980s emphasised ‘money supply’, the quantity of money, over interest rates, the price of money. The image was that inflation was ‘always and everywhere’ a kind of monetary diarrhoea, that could be cured through the administration of anti-laxatives. I read, in the Guardian Weekly, one critic likening Margaret Thatcher’s monetary policy as like using a cork to prevent diarrhoea.)

What the policy really did was to raise business costs by pushing interest rates to absurdly high levels – levels much higher than the equilibrium price of loanable funds. The result was essentially the deindustrialisation of ‘the west’, and the rise of finance capitalism. In terms of the narrow object of the policy – disinflation – its initial impact was the exact opposite; in the first two to three years after application of such policies, inflation was substantially higher than it would otherwise have been, thanks to the cost-impact of rising interest rates.

After about three years, the real deflationary impact of these policies set in, creating nasty economic recessions and financial crises, especially in the late 1980s and early 1990s, and creating a perfect opportunity for China’s industrialisation to take hold. Technical deflation – falling prices – did not occur (except in Japan) because the policy included both cost-inflationary and demand-deflationary components.

The essence of the monetarist idea was that it didn’t really matter how inflationary events started; it was that any process of price inflation could always be countered by monetary deflation. What it meant was that economies would have – for a few years – two simultaneous problems; inflation and deflation. Economists of the time invented a world for this conjoint condition: ‘stagflation’, something that macroeconomists had hitherto though to be impossible. (A health equivalent would be simultaneous diarrhoea and constipation.)

At an academic level, the monetarist argument (and its ‘rational expectations’ successor) went like this. After an inflationary event (maybe a large oil price increase, or maybe groups of workers gaining a union-negotiated wage increase that went beyond what productivity increases could justify, or maybe a bout of deficit-financed public expenditure) there would be a ‘secondary inflation’. In fact, this secondary inflation is a normal process of economic readjustment, much like the ripples in a lake after a stone landing in it, or like the wake that trails a boat. But the monetarists argued that people in the marketplace would ‘expect’ that the ripples would not recede unless a ‘credible’ monetary policy was pursued; they even argued, sometimes, that such expectations would generate an accelerating ripple process of secondary inflation that could only be cured by a drastic and single-minded interventionist policy of high interest rates. (New Zealand’s ‘world-leading’ contribution to this policy framework – formalised in the 1989 Reserve Bank Act – continues to be noted in international textbooks on macroeconomics.) The purpose of monetarism was to suppress the ripples.

Of course, as we know, the deflationary aspect of the policy won out in the 1990s. Annual inflation above five percent disappeared, initially through disastrous recessions, from 1988 to 1993 in particular, and then as a result of the resulting entrenched inequality in western ‘liberal democracies’. We might note that the ripples of New Zealand’s mass unemployment in the early 1990s remain with us in a number of ways. I will note three. New Zealand’s ‘infrastructure deficit’ today is largely a result of a policy preference then to have huge numbers of young men idle and unemployed instead of building and maintaining public works. A second result of that political choice is that many of those hitherto working-class young men emigrated to Australia, arriving there just in time for Australia’s 1990/91 financial crisis. The inevitable result is that many of those men turned to crime in Australia; we are now seeing some of these back in New Zealand as ‘501 deportees’.

The third impact to note is the ongoing obsession of New Zealand’s political class with ‘prudent management of the public finances’. The view is that, under all conditions except the immediate aftermath of a financial crisis, government deficits are inflationary (either through setting off inflationary expectations, or through crowding out private businesses, raising their interest costs). While empirical evidence suggests that this is nonsense, and that the circumstances in which government deficits are inflationary are exceptional, we still retain the dogma that the public purse must be protected at all peacetime cost.

The drums are beating once again for policies to raise interest rates; refer Monetary Stimulus Reduced (RBNZ) and Interest rates and inflation – shifting sands, what next? (Radio NZ). Rising interest rates will only aggravate inflation pressures in the short term, and they will create new rounds of financial and social distress in the medium and long terms. They will not do anything to resolve current labour-shortages and supply-chain problems. And they will probably only add to house-price inflation, as finance moves out of productive businesses and further into lending to people holding secured assets. People expecting annual capital gains of over ten percent will not be deterred by mortgage interest rates of five percent or higher.

We only have to look at the period from 2004 to 2008. Rising interest rates then did huge damage to New Zealand’s core tradable sector (think manufacturing, including high tech, and primary production) and really inflated residential property values. Money went into housing and land-banking, as it went out of core production.

We need to be more observant of history, including unfashionable history, and less entranced by institutionalised dogma.

I note that annual inflation in New Zealand has just jumped to 3.3% (from 1.5%); that’s a quarterly rate of price increase of 1.3%, which some commentators may note is equivalent to an annual rate of 5.3%. (See Statistics’ NZ: Consumers price index: June 2021 quarter, and Monstrous Inflation Shock, in the New Zealand Herald.) Yes, the inflation we are concerned about has started. We need to treat this by addressing its cause: labour shortages and supply-chain mayhem. Higher interest rates – and higher interest rate expectations – are not the solution.

————-

Keith Rankin, trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

contact: keith at rankin.nz

If the world wants to beat back the COVID-19 pandemic and ensure no one is left behind in the recovery, two issues thrown into sharp relief by the pandemic need attention: digitalization and regional cooperation.

Ensuring the digital transformation reaches all in Asia Pacific is one of the greatest challenges we face

Even before COVID-19, the digital revolution was transforming how people and businesses work. As the pandemic unfolded, the accelerated adoption of digital technologies helped governments, education, private enterprise and people keep activities going amid social distancing, lockdowns and other containment measures. High-speed internet connectivity and financial technology hold immense promise for deepening financial inclusion, and keeping local economies alive, even in times of crisis. Yet many poor households, women and vulnerable groups have been unable to afford or access the benefits of digitalization.

Digital divides within and between countries in the region threaten to exacerbate existing gaps in economic and social development. We need more equitable access to digital technologies to drive innovation and create new business models.

Regional cooperation must refocus on the Sustainable Development Goals (SDGs)

Regional cooperation plays a critical role in managing the transition out of the current crisis, and a renewed focus on environmental and social dimensions of cooperation is essential. Working together can also help countries achieve digital transformation for all, including through joint efforts to develop and expand digital infrastructure, and legal and regulatory reforms that make these services more accessible.

The pandemic has exposed the inadequacy of the region’s health, education and social protection systems, making life even more difficult for the poorest and socially excluded, and deepening inequalities within communities and countries, particularly for women. The crisis has shown the value of building universal social protection systems for all members of society — from infancy to old age — which can be bolstered to provide additional relief in times of crisis. There have also been huge disparities in the ability of countries to insulate themselves from the pandemic and roll out vaccines. This is widening development gaps. A renewed focus on people, their well-being and capabilities is needed through regional cooperation.

In recovering from the COVID-19 pandemic, environmental sustainability needs to become much more central to economic, social and global value chain integration efforts. By building low-carbon economies, including through a new focus on industry and tourism sectors to generate green jobs, we can help create a more resilient region. While governments recognize the potential to pursue more environmentally sustainable development as part of recovery, much more needs to be done if we are to achieve the goals of the Paris Agreement on Climate Change and protect our planet’s natural capital and biodiversity.

Meeting the needs of people and planet

These issues, highlighted in a recent joint report by our three organizations, warrant greater emphasis as countries meet this week to review implementation of the SDGs at the United Nations High-level Political Forum. Policymakers have necessarily focused on containing the pandemic and meeting peoples’ immediate needs. Tangible action on the multiple interconnected dimensions of the SDGs poses difficult policy and fiscal choices. Regional collaboration around financing can help countries raise and expand resources to meet the SDGs. Key priorities include cooperation on tax, through common standards, and efforts to address tax havens and avoidance. In addition, countries in the region can work together to design incentives to align private investment with the SDGs and expand the use of sustainability-focused instruments that tap regional and global capital markets.

Another form of international cooperation is worth noting. Governments, multilateral organizations, development banks, philanthropic organizations and the private sector have joined forces in unprecedented efforts to fight the pandemic, such as through the COVID-19 Vaccines Global Access (COVAX) initiative. Science, technology and innovation enabled by such partnerships will continue to drive countries’ efforts to recover and build resilience.

Today, what begins as highly local can soon become a global phenomenon. A reinvigorated multilateralism can and must respond faster to take on new challenges and expand provision of public goods. Together, our organizations will seek to nurture such cooperation to achieve the SDGs.

—————–

Armida Salsiah Alisjahbana is the Executive Secretary, Economic and Social Commission for Asia and the Pacific

Kanni Wignaraja is the Assistant Secretary-General, United Nations Development Programme

Bambang Susantono is the Vice-President, Asian Development Bank

Both coverage in the Asian press and statements by neighbouring Asian governments reported in the media on the grabbing of exclusive power by the military in Myanmar reflects the traditional Asian adage that democracy should go hand in hand with economic and political stability.

Thus, sanctions and external funding of protest groups (usually urban elites and the young) are discouraged.

Myanmar is a member of the Association of South East Nations (ASEAN) regional grouping, which was instrumental in guiding Myanmar to transit from military rule to civilian rule a decade ago.

The ASEAN secretariat issuing a statement through its current chair Brunei reiterated that “domestic political stability is essential to a peaceful, stable and prosperous ASEAN Community”.

Sharon Seah, coordinator at the ASEAN Studies Centre at the National University of Singapore noted that the ASEAN statement this week WAs a slight deviation from the one that ASEAN made after the 2014 coup d’etat in Thailand.

“What is new in this iteration is the fact that the grouping recognises that collective goals can be undermined by a member state’s political ructions,” she noted.

Seah, in a commentary published by Singapore’s TODAYOnline news portal, points out that the current ASEAN statement “sounds familiar except that this time, ASEAN is far further along the process of regional integration and community-building, since the ASEAN Community blueprint was launched in 2015”.

Pax Americana ‘is over’
Further, she wrote, “Pax Americana, as Southeast Asia knows it, is over and the global world order has changed irrevocably”, thus external pressure (from outside the region) is not the way to go.

Interestingly, China’s media – both Xinhua news agency and Global Times – have described the latest coup in Myanmar as a “reshuffle of Cabinet”. Their logic may have some substance.

“Myanmar military announced a major cabinet reshuffle hours after a state of emergency was declared on Monday,” February 1, reported Xinhua from Yangon.

It referred to a military statement that “new union ministers were appointed for 11 ministries, while 24 deputy ministers were removed from their posts”.

It added that Union chief justice and judges of the Supreme Court, chief justices and judges of regional or state High Courts are allowed to remain in office as well as members of the Anti-Corruption Commission, chairman, vice-chairman and members of the Myanmar National Human Rights Commission.

The military used sections of the 2008 constitution, to which Aung San Suu Kyi’s National League for Democracy (NLD) had agreed to when they took part in the 2015 elections and won on a landslide.

This constitution allows the military to take over the government in the event of an emergency that threatens Myanmar’s sovereignty leading to “disintegrating [of] the Union (or) national solidarity”.

It is debatable if such a situation exists and this could be the subject of argument in coming months.

Nine years ago
Luv Puri, a member of UN Secretary-General’s good offices on Myanmar writing in Japan Times (as a private citizen) this week noted that nearly nine years ago, Aung San Suu Kyi reluctantly decided to participate in a byelection to the Parliament and after being elected she was resolute in her cautiousness as the Western leaders sought her advice on how to approach the then President Thein Sein’s government.

“She had earlier termed the whole process an instance of sham democracy,” recalls Puri, adding, “on February 1, 2021, she proved to be right as the military or Tatmadaw, as it is locally known, staged a coup in the wee hours”.

Puri noted that the military’s grouse is that at least 8.6 million irregularities were found in voter lists and the ruling NLD government and its appointed election commission failed to review the 2020 elections results, with the latter saying that there was no evidence to support the military’s claims.

The ruling NLD party won 396 out of 476 seats in the November 8 election, allowing the party to govern for another five years.

“The contesting positions are symptoms of a deeper institutional malaise.

“Constitutionally, three important ministries relating to national security, namely defence, home and border, are held by the military,” notes Puri.

“The military nominates 30 percent of the members of Parliament.

Existential battle ‘for political survival’
“In an environment in which the military is fighting an existential battle for political survival, after ruling the country directly or indirectly since the formation of the republic, a military coup was an imminent possibility.”

China and India, with Myanmar, sandwiched between them have reacted cautiously to the latest developments.

Myanmar is essential for the success of China’s BRI (Belt and Road Initiative) while for Indian Prime Minister Narendra Modi’s “Look East” project Myanmar is an important lynchpin.

India has a 1468 km border with Myanmar that runs along 3 north-east Indian states – Nagaland, Manipur and Mizoram – all of which face ethnic and religious tensions.

China has taken issue with Western media reports that it supported the military takeover in Myanmar.

Global Times reported that China’s foreign ministry spokesman Wang Wenbin has refuted such claims at a media briefing.

“Such allegations are not factual,” he said in Beijing. He has also added that China was puzzled by a leaked document from the UN Security Council that China is supposed to have vetoed.

“Any action taken by the Security Council should contribute to Myanmar’s political and social stability, help Myanmar realize peace and reconciliation, and avoid intensifying contradictions,” he told the media.

“For India, which had cultivated a careful balance, between nudging along the democratic process by supporting Ms Suu Kyi, and working with the military to ensure its strategic interests to the North East and deny China a monopoly on Myanmar’s infrastructure and resources, the developments are unwelcome,” noted India’s The Hindu in an editorial.

“The government will need to craft its response taking into consideration the new geopolitical realities of the U.S. and China as well as its own standing as a South Asian power.”

‘Share of uncertainties’
The Indian Express also expressed similar sentiments in an editorial noting that new developments “will create its share of uncertainties” for India.

“It must continue its engagement with Myanmar and leverage its influence with the Army to persuade it to step back,” added the Express.

While Myanmar’s expat populations in places like Bangkok, Tokyo and Sydney have demonstrated calling for international intervention, within Myanmar people have taken a different strategy to confront the military takeover.

Myanmar Times (MT), that is locally owned and published from Yangon, carried a number of reports on how this is shaping up. They reported about various aspects of civil disobedience campaigns initiated by trade unions, leading artists and the medical profession.

MT reported that a movement, which urged Myanmar citizens to not buy and use products affiliated with the Tatmadaw has gone viral since February 3.

The military has been linked to a large number of businesses in various sectors. They have been associated with food and beverage products, cigarettes, the entertainment industry, internet service providers, banks, financial enterprises, hospitals, oil companies, and wholesale markets and retail businesses, among others, the newspaper pointed out.

MT also reported that “Myanmar celebrities, who usually make headlines for their latest albums, haircuts and fashion choices, have used their social media profiles for an entirely different purpose this week”.

Singers change from cosmetics to disobedience
Since the military seized power on February 1, “Myanmar’s singers, actors and artists changed their topic of interest from cosmetics to disobedience to the rule of the junta” noted MT.

Among the celebrities are Paing Takhon who started his modelling career in 2014 and has amassed over 1 million followers on Facebook and filmmaker Daung with 1.8 million.

Meanwhile, the Confederation of Trade Unions Myanmar (CTUM) and Myanmar Industry Craft and Service-Trade Unions Federation (MICS)  announced that they had resigned and are no longer part of government, employers and workers’ groups.

The “Civil Disobedience Campaign” that was launched on February 2 is also joined by health-care workers in 40 townships, including doctors and nurses from 80 hospitals.

Meanwhile, Seah argues that this month’s events are a big setback for ASEAN community building and to help in any democratic retransformation, an ASEAN-led commission to investigate the military junta’s allegations of electoral fraud could be set up, headed by a mutually respected senior ASEAN personality trusted by all sides.

“For the commission’s findings to be accepted at the international level, support must come from ASEAN’s external stakeholders,” she argues.

“The selection of the commission members must be transparent from the get-go and may require consultations with key stakeholders both inside and outside Myanmar (while) ASEAN should secure the agreement of the military junta to dial down to a state of limited emergency, refrain from the use of force against civilians and allow the functioning of government with specified conditions between the NLD and the military”.

– IDN-InDepthNews, 04 February 2021

IDN is flagship agency of the non-profit International Press Syndicate. This article is published under the Creative Commons Attribution 4.0 International licence.

Article by AsiaPacificReport.nz