Despite the mega-commentary about the Israel-Iran war, and especially the United States’ participation in that war, almost nothing is being debated about how the war is being funded.

I’ll make some comments about Iran later. But we need to focus on the United States, which is by far the most profligate party to this war. And Israel is being funded, like a charismatic and entitled teenage brat, by its (American) sugar daddy.

Most of us should have noticed that, with the exception of new tariffs which are not a significant source of United States government revenue, there has been no move to raise taxes. (The President has clearly invoked the use of tariffs as means of leverage through extortion; though he doesn’t properly appreciate that these taxes are paid by American residents.) Nor has any explicit ‘war loan’ or ‘war bond’ been floated in Wall Street.

The United States is ‘printing money’ to fund the war. This expression is both pejorative and a misnomer. Because printing money is an unmentionable, it’s hardly ever mentioned! Though it should be, because it’s an important financial mechanism, and it is not as sinful as it’s made to sound.

‘Printing money’ is not a literal expression; actually printed (or photocopied) money, counterfeit money, is illegal. Printing money, a figurative moniker, is in fact the day-to-day business of banking, with billions of dollars printed every day (and a near-similar number of dollars unprinted). The technology of printing money is that of double-entry-bookkeeping. Money is a social technology, as is double-entry bookkeeping.

What matters most to us is the role of the central bank – the Reserve Bank – in creating new money. And in particular the relationship between the Reserve Bank and its privileged customers, most of which are governments’ Treasuries and commercial banks. Even more particularly, we are interested in the most highly privileged relationship of all, that between the United States Federal Treasury and the United States Federal Reserve Bank. This exceptional relationship arises because the United States Dollar is the world’s reserve currency.

The War

Here are two quotes from Al Jazeera’s This is America: War on Iran: Cost of weapons and shift in the nature of warfare, 1 April 2026

Richard Gaisford: “It’s a significant contribution being made to the US economy by the defence industries. The last figures we have were for 2024, and that showed that it generated [?] something near one trillion dollars …”.

This comment reflects a wide belief that money is made by economic activity, and that the United States makes money by making, among other things, military hardware and software. The reality, of course, is that the money is made first, and is then used to purchase such hardware and software.

Interviewer: ‘Who has got the means to keep fighting at those levels the longest?’ Kenneth Katzman (a former senior analyst on Iran at the US Congressional Research Service): “The US Dollar is the main reserve currency of the globe, which means that the United States basically has the capability to manufacture money. Your viewers may not understand the mechanics of it, but basically the United States can print money.” (Actually, not only the United States.)

He goes on to address the military asymmetry between Iran and the United States: “The United States is a 28-trillion-dollar economy; Iran is a 400-billion-dollar economy”. Here he is talking about each country’s capacity to produce goods and services; not its capacity to manufacture money. Any amount of money can be made by any country’s banking-government nexus, and at trivial cost.

The interviewer (New Zealand’s Anna Burns Francis), and the other panellist did not respond to that seemingly provocative comment about printing money; there was no further discussion about how the war is being financed, only about how much it is costing. Discussion about the mechanics (and constraints) of printing money would go against the grain that most of us are fed. The public is not supposed to know – and generally does not know – that money is itself costless and can be manufactured, at will, in smaller or larger quantities.

Kenneth Katzman’s comments are not controversial; they are a statement of fact that no economist would disagree with. All countries’ banking systems (of which the central government is a component) have the capacity to print money; indeed, the New Zealand system (and other countries’ systems) necessarily did so in 2020.

The United States has fewer constraints on printing money than do other countries, but not zero constraints.

We note that money, like all financial and financialised assets, is not wealth; it is claims on wealth. So, the affordability of money – in practice – is measured by the ability of the economy to meet those claims, in the event that those claims are presented. (Indeed, the world can afford an octillion dollars’ worth of financial claims if it can be 100% certain that those claims will not be exercised; will not be spent on goods or services. The current world is awash with massive private holdings of financialised assets which, for the most part will not be spent on anything other than other financial assets. In technical language, such money has a very low ‘velocity’.)

We note also that newly printed United States’ dollars permeate into New Zealand through exports, including New Zealand made supplies to America’s war industry; to the United States’ military/industrial complex, which includes the space industry.

How does a country fund a war by printing money?

There are two key issues: rationing, and responsiveness.

The liberal critique against governments’ printing money is a general claim that governments are untrustworthy and spendthrift. In the eighteenth century when the liberal critique emerged, one principal concern was government adventurism in the form of warfare. This classical liberal critique presents one consequence of such government largesse as inflation (extra spending coming up against finite resources), and also presents any instance of general price increases as a consequence of government largesse. When governments consume relatively more resources, then – through the catalyst of inflation – private households and businesses consume relatively less.

The classical liberal critique emphasises this rationing issue, known as crowding out; in doing so, that critique presumes that private spending on goods and services is, per se, more efficient than public sector spending and redistributive transfers. There are two parts to this rationing argument: first, private parties are deemed to better assess (compared to bureaucrats and politicians) which items of spending translate to greater utility (ie happiness); second that relatively more private spending can be classified as ‘investing’, meaning spending for future rather than for present happiness. (Neither of these two propositions is generally true.)

The second issue, less emphasised by classical liberals, is responsiveness or ‘supply elasticity’. Classical liberals tend to assume that spending enabled by printed money does not elicit new production; ie does not bring-about a supply response. While this is true by definition for a hyper-taut economy, for the most part, economies are not hyper-taut and are indeed responsive to additional spending.

In the present case of the United States, the Israel-Iran War – on the pro-Israel side – is being funded substantially by new money printed for the United States government by the United States federal banking system; in the public accounts, this shows up directly as a huge increase in the United States’ fiscal deficit.

While prices are rising faster in the United States than before, this increase in general prices would appear to be substantially due to the supply-side cost-impact of the war itself, and not by increased aggregate demand inside the United States and the countries the United States imports goods and services from.

The United States domestic economy is not as supply-elastic as it might have been, given what ICE is doing to that country’s labour force. Nevertheless, the United States’ economy has been sufficiently depressed that it is now able to increase output without much difficulty. Hence, extra United States’s government spending has not in itself caused consumer prices in the United States to rise. The present chokehold on imports – a result of the war – is however causing CPI-inflation in the United States and the rest of the world. Prior domestic underemployment is one reason why money-printing may not be inflationary.

The second component of a country’s economic responsiveness to wads of newly printed money is that much production can be outsourced to the rest of the world. Thus, United States’ imports increase, the United States’ current account deficit increases, and the rest of the underemployed world gets to benefit from this as an economic stimulus. So, if the New Zealand banking-government nexus refuses to print money as a form of stimulus, the present Trump-printed money does create an alternative stimulus in New Zealand.

Certainly, New Zealand has very high visible and hidden unemployment, so (at present) is easily able to respond to the Trump stimulus. On that basis, New Zealand’s economic growth this year may not be as slow as is widely anticipated; though domestic confidence – in itself, a form of stimulus – may be countering the stimulus coming from the United States. In New Zealand too, any rise in CPI-inflation will be almost entirely due to the global supply chokeholds, and not to the American president’s money printing largesse.

Essentially, the United States is funding its war through its twin deficits: the United States fiscal deficit, and the United States current account deficit. The war is being funded through increased utilisation of underemployed resources throughout the world. In New Zealand’s case, we can see this easily and directly, by observing New Zealand’s increased exports to the United States.

How easily can other countries print money?

Technically, it’s as easy to print money in New Zealand as it is for the United States. However, the New Zealand dollar is not a global reserve currency, so a flood of new New Zealand dollars into the global economy is likely to generate financial risk; or at least perceptions of financial risk. ‘Investors’ – that is, financial traders – out there most likely would be more cautious about holding large quantities of New Zealand dollars (or $NZ assets) than they would be about holding large quantities of United States dollars. That caution generates an exchange rate risk; a risk that would be communicated to financial-asset-holders by the New York based rating agencies such as Standard and Poors.

When the exchange-rate risk is not widely seen as a matter of concern, New Zealand benefits mainly through its routinely-high current account deficit; that is, just the same way as the United States is able to benefit from printing money and enjoying the economic bounty of the world.

If the exchange rate risk becomes a concern however, the world would discount New Zealand dollar assets, and New Zealand would experience high levels of domestic inflation; that is, higher inflation than most other countries. The resulting low New Zealand dollar would confer a ‘competitive advantage’ on New Zealand; the current account deficit would close, exports increase, and reduced imports would create an increased demand for New Zealand- made goods and services.

The issue then becomes how responsive (ie supply elastic) the New Zealand economy is. If the domestic economy is able to respond to these new circumstances (which is the more common experience of other countries), then New Zealand would recover and soon prosper. The alternative is that New Zealand would go into an inflationary tailspin; that is, if its productive system is so hamstrung that it cannot respond to the stimulus of a low dollar exchange rate. One bad sign is over-dependence (as distinct from over-reliance) on imports. A dependent economy cannot switch away from imports. A country which relies on imports by choice, because imports are easily funded by exports, can usually pivot – if required to do so – towards more ‘tradable production’.

So, New Zealand can print money too, though printing in the proportion that the United States does certainly would be unadvisable. However, if a country overprints money, the normal situation is that the extra money just sits there in the banking system. (The brief real estate boom of 2021/22 has been widely attributed to excessive printed money stimulating a process of real estate speculation; though the unique circumstances of that few months – including labour and capital pandemic lockdowns – have not been properly researched. The government could easily have borrowed and then parked that money, but chose not to.)

Generally, the rest of the world is accommodating when some countries print more money (though not when all countries print too much money). The world has been very responsive to the United States for the entirety of post-WW2 history; it was American spending of new money that drove the economic growth of the capitalist world for 80 years.

The present US money printing to fund a globally-significant regional-war can be expected, sooner or later, to encounter an inflationary wall of its own making. The consequences of this war are to make the world economy much less responsive (ie are breaking the world’s economy) just as the American military-industrial complex – indeed the world’s expanding military-industrial complexes – are placing so many extra demands on the world’s economic environments.

War funding under pressure

Countries’ invaded or otherwise attacked on the perception that they are ‘easy meat’ tend to be much more capable of defending themselves than is widely understood. Their monetary systems are not integrated into the orthodox channels of the wider capitalist system; but their domestic monies work to keep domestic economies fully employed while on a war-footing. Yes, Iran will be printing money, and Iranians will be facing substantial visible and suppressed inflation. For Iran, that monetary process is a necessary part of its own defence. Money printing facilitates both necessary rationing in favour of the public sector, and also necessarily pushes the production system to its limits.

War times, historically, have shown that our economic systems are generally much more responsive than we presume them to be. Surprisingly often, the bullies neither win nor even achieve a limited range of objectives. Syria may be coming right today, despite rather than because of the nation which set off that 2010s’ war; a war which cruelly sandwiched the Syrian people between foreign bullies and a consequently more oppressive domestic tyranny.

We note that, when the United Kingdom was under threat during the first years of World War Two, it was able to import much on credit – especially from the United States, which was then a neutral country. China has played a large role in facilitating the United States’ more recent wars, through its current account surpluses. This time China will be helping to fund Iran’s war; as well as accommodating the United States through its ongoing – almost infamous – trade relationship with that country.

Indeed, when the Israel-US-Iran War is eventually over, it will be China’s version of the Marshall Plan which will revive the degraded world economy; part of that revival will be to write-off war debts, just as the United States – through plenty of printed money – eventually accommodated Germany’s reparations bill after World War One, and the West’s war debts after World War Two.

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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.

One of the United States’ navy ships heading towards the Persian Gulf is the USS Tripoli. (USS = United States Ship.) How the heck did it get that name? (Will the next two United States’ naval ships be called the USS Abbottabad and the USS Santo Domingo?)

The answer will be a surprise to many. The American Revolution which began in 1776 was completed in 1783, with the British capitulation to the American patriotic forces. So, the history of the United States as an independent sovereign state goes back to 1783. The British and Americans fought again from 1812 to 1815, during the Napoleonic Wars (what I suggest is better called either World War Zero or Great World War One, and my favoured dates are 1798 to 1815, with Waterloo being the final battle; Great World War One contextualises 1914 to 1945 as Great World War Two). Wikipedia describes the outcome of the War of 1812 as ‘inconclusive’.

We may note that Encounter Bay, in South Australia, is named after a World War Zero encounter between British and French naval ships – Investigator and Géographe. The encounter was in 1802. The name Tripoli dates from another encounter (a much more violent encounter) within World War Zero, in this case a war between Libya (then known as Ottoman Tripolitania) and the United States. That encounter, a war within a war, was the First Barbary War (1801-1805).

The genesis of the Barbary Wars (see this famous picture of the USS Philadelphia in Tripoli Harbour, depicting the saving-from-capture of that ship in February 1804) was an earlier war. The American-Algerian War of 1785 to 1795was the first foreign military adventure of the United States since its independence in 1783. Wikipedia lists the ‘result’ of this war as an ‘Algerian victory’. It will be a surprise to many people that America’s first foreign war was so soon after independence, and in the Mediterranean rather than somewhere close to home; independent America has a long history of violence in the ‘Middle East’. It will be no surprise that, in 1795, the United States lost that war.

The context of the 1785-1795 war was that Great Britain, piqued by the loss of its American colonies, refused the United States the ‘protection’ of the British Navy.

We note here that imperial nations traditionally extracted ‘tribute’ from both their subjugated territories, and other populated territories which might otherwise be candidates for subjugation. Further, smaller maritime states traditionally extracted rent from passing ships.

These ‘clipping-the-ticket’ relationships still exist, of course. Egypt, for example, extracts monopoly rents from its possession of the Suez Canal; as does Panama re the Panama Canal. As would New Zealand if South American merchant ships were to transit through Cook Strait on their way to Australia. Indeed, as international airports charge landing fees. Further, the extraction of imperial tribute has become apparent once again, as the American president tries to use import taxes – tariffs – and bilateral ‘deals’ as ways of ‘making lots of money’; as a way of leveraging imperial power. This is extortion through protection money, in the very worst sense of that concept of power.

In the 1780s, and before, Britain and Algeria ‘scratched each other’s backs’. Britain let Algeria – literally a ‘pirate state’ – do its thing, so long as it did not charge rents from ships under the protection of the British Empire. Thus, after 1783, American ships ceased to benefit from British protection. The conflict ended in 1795, with the United States agreeing to pay rents to Algeria, and – by implication – to other ‘pirate kingdoms’ on the North African Barbary Coast.

The Barbary Wars began when newly elected president – Thomas Jefferson – refused to pay rents to Tripolitania, aka Libya. As a result, Tripolitania declared war on the United States. The United States sent a number of frigates, including the USS Philadelphia.

To this day, the United States commemorates the 1804 burning of the USS Philadelphia by Stephen Decatur as a heroic rescue, an act of derring do which Lord Nelson reputedly claimed was “the most bold and daring act of the Age”. It was this action which led to the naming of three United States naval ships, including the current ship, as ‘Tripoli’. Decatur went on to become a hero, once again, in the 1812 to 1815 war with Britain. And many American towns came to be named after him. (We may note that, in another ‘heroic’ action in World War Zero, in 1812, the Russian military burned the city of Moscow in order to save it from Napoleon’s invading army. One significant aftermath was a literary novel: War and Peace.)

This war was not an American victory; importantly for the United States, it was not the ignominious defeat that it might otherwise have been. The United States – or at least mercenaries in the pay of the United States – did win the subsequent 1805 Battle of Derna, which the USS Tripoli officially commemorates.

The First Barbary War ended inconclusively in 1805, with a deal. Wikipedia says: “In agreeing to pay a ransom of $60,000 (equivalent to $1.3 million in 2025) for the American prisoners, the Jefferson administration drew a distinction between paying tribute and paying ransom.” Jefferson agreed to pay a ransom. We should note that the Second Barbary War of 1815, also involving Decatur, lasted just two days, and was an American victory (under President Madison).

Another reason for the naming of the USS Tripoli, which is essentially the same reason.

In 2011, the United States (as NATO), under President Obama, fought in another war against Libya. This was a successful war of ‘regime change’, this time through air power rather than sea power; though few would say that the replacement regimes have improved either the stability of Libya or of the Eastern Mediterranean. This war of ‘decapitation’ of Libya was Obama’s dress rehearsal for an even more ambitious attempt to do the same in Syria. The subsequent Syrian Civil War was another distressing failure of United States’ foreign bellicosity. At least Obama asked Congress, and as a result he was unable to escalate; Obama was thwarted in his further attempts to become a decapitating conqueror (noting Abbottabad as well as Tripoli). Much of Syria descended into anarchy, until Russia intervened.

The USS Tripoli was commissioned in 2012, as much in commemoration of recent American adventurism as it was in commemoration of that country’s earliest acts of violence in a land far far away.

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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.

A minute after my radio-alarm went off this morning, I was ‘privileged’ to hear this deeply scary interview with the Deputy Prime Minister: Deputy PM Seymour on NZ, Iran and fuel relief, RNZ 24 March 2026. For most of the interview David Seymour outlines why Ruthanasia politics is essential for New Zealand, even as a global existential crisis may be unfolding. While he didn’t use the word ‘Ruthanasia’, he may as well have.

(Ruthenasia was supposed to have been a policy to deliver relatively ‘more money’ to younger New Zealanders; that is, such policies of fiscal austerity are commonly conducted in the name of intergenerational equity, though that notion – as represented by the ‘financial literacy’ community – is a logical fallacy of the first order. Money, a set of claims on wealth, a social technology, is regarded by austerians such as Ruth Richardson and David Seymour as a form of intrinsic wealth. Seymour claimed that “the previous government maxed out the credit card”; New Zealand is about 105th out of 190 countries for government debt. Turkmenistan, Brunei and Kuwait are the top performers by Seymour’s criterion (with Afghanistan, Haiti and Russia also in the top 10); Sudan and Japan are the worst. According to Trading Economics, New Zealand now has a projected 47% government debt to GDP ratio, up from 39% in 2023. Truth is becoming an increasingly scarce commodity.)

NATO and the Greater Evil

The real problem though, contained in this interview, is in the presenter’s introduction, and also in the quasi-acceptance of the alarming content of that introduction.

In the recording, Nato Secretary General Mark Rutte claims that New Zealand has signed up to a 22-country Nato-led initiative “to implement his vision [referring to the President of the United States] of making sure the Strait of Hormuz is free, is opening up as soon as possible”.

First, we should note that the Strait of Hormuz is presently open to all neutral countries; it is not open to those countries waging a war of aggression on Iran (a country along with Oman which has, by virtue of geography, sovereignty over that narrow Strait). (Much as Egypt has sovereignty over the Suez Canal.) Although there is some ambiguity regarding countries (such as New Zealand) which condemn Iran but choose to not-condemn Israel or the USA.

What New Zealand should do, if it really wants trade access to the Persian Gulf, is to condemn – equally – all the belligerents in this war. Beyond that, the paucity of ships passing through the Strait is an insurance matter; a matter that can be most easily resolved by the aggressors stopping the present war rather than (literally and figuratively) inflaming it. Does New Zealand want to be safe, and to have safe access to the Gulf States, or does it want to be egregiously stupid?

Regional Wars too easily become World Wars

At present there are two ‘regional’ wars of global significance in ‘play’. We note that in World War Two there was something similar. In November 1941 there was an all-out European war in which Germany was fighting the Soviet Union on one front and fighting the United Kingdom on the other. And there was a war in the western Pacific in which Japan was fighting China and Indo-China; kind of a world war in that most of Indo-China was ‘colonies’ of the European powers France, Netherlands, and the United Kingdom.

Then, in December 1941, Japan attacked the United States’ fleet in Hawaii (noting that Hawaii was not a part of the United States then). Three days later, Japan sank two British battleships – Prince of Wales, and Repulse – in the South China Sea, effectively declaring war on the United Kingdom. And then, another day later, German Chancellor Adolf Hitler declared war on the United States – his biggest strategic mistake. Two regional geopolitical wars had become a world war.

Goliath 2.0; a modern-day unsophisticate and anti-intellectual, and his band of orcs

In 2026, the two wars are between Nato and Russia, with most of the action taking place in the territory of the Nato proxy-state, Ukraine. The second war is between Israel and Iran, with Israel being helped out by its much larger proxy with its Goliath president. Much of the violence is taking place in other countries; countries either sandwiched between Israel and Iran or coveted by Israel as part of its Greater Israel project.

What is now connecting these two wars – both being fought in parts of central Eurasia – the war in Europe and the war in the ‘Middle East’? First is that Ukraine became involved, earlier this year, as a military ally of Israel. Second is that Nato, one of the combatants in the Ukraine War, is now trying to join in the Middle East War as a formal ally of Israel and its subservient Goliath. And little New Zealand is showing all the signs that it is trying to become a formal ally of Nato, a willing participant of both regional wars; awestruck by Goliath and his band of merry orcs.

When two globally significant regional wars combine today to become a single war, we have World War Three. Why, on Earth, would New Zealand want to be a part of that? Why would we want to be a party to both ecocide and economic suicide? And why would we want to become a target in a nuclear war? Is that egregiously stupid?

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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.

The New Zealand Government’s response to Israel-US attacks on Iran has revealed a chasm. On one side are those who argue; that New Zealand must stay aligned with its 20th century allies right or wrong.

On the other side are those who insist; that the long fought for reputation, of a nation that stood for an international order based on law, justice and multilateralism, should be the guiding principles in good times and bad.

New Zealand has inched toward such societal rifts before; the Springbok Rugby tour of New Zealand in 1981; shortly followed by a generational shift and geo-political quake that came in the form of New Zealand’s anti-nuclear movement and subsequent enduring legislation. The United Nations security council endorsed response in Afghanistan to attacks on the United States shook the foundations of the Labour-Alliance coalition Government in 2001-02. And the fraudulently justified US-led invasion of Iraq triggered hundreds of thousands of New Zealanders to protest in the streets. (The Helen Clark Labour-led Government of the time refused to officially be included among the US-led coalition forces that invaded Iraq.)

In recent times, old loyalties and biases have been challenged with the genocidal disproportional response by Israel against Hamas and generally Palestinian woman, children, and the elderly whose only offence was to exist in the path of the military machine.

And now, the US Donald Trump Administration’s alliance with Israel has unilaterally justified its attacks on Iran – the murder of its supreme leader and the assassination of over 40 individuals in its operational chain of command – as a legal pre-emptive response to a perceived first-strike-plan by Iran. This, while negotiations were underway to address regional security concerns.

This is the backdrop to New Zealand Government’s response where Prime Minister Christopher Luxon and Foreign Minister Winston Peters wrote on Sunday March 1:

“In this context, we acknowledge that the actions taken overnight by the US and Israel were designed to prevent Iran from continuing to threaten international peace and security.

“We condemn in the strongest terms Iran’s indiscriminate retaliatory attacks on Qatar, the United Arab Emirates, Saudi Arabia, Kuwait, Bahrain, and Jordan. We cannot risk further regional escalation, and civilian life must be protected.” (Ref. https://www.beehive.govt.nz/release/nz-government-statement-iran )

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LISTEN: To Radio New Zealand’s The Panel, where host Wallace Chapman is joined by panellists Sue Bradford and Phil O’Reilly. First up, is an extended conversation on the US and Israel attack on Iran. Columnist and Iranian New Zealander, Donna Miles-Mojab, delivers her take on the conflict and what it means for the regime. Then, I (Selwyn Manning) give an analysis on New Zealand’s stance and the legality of the attack.

It’s well worth a listen, as the fault line of New Zealand debate is clear.

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For those who are prepared to abandon the process of law and justice on international affairs, the New Zealand Government’s statement offered clarity; that their government would stand at the side of traditional security ‘friends’ as they commit to fight against another ‘evil’ empire.

For others, the statement was another example of mediocrity from a coalition that lacks a morality within its own argument – an apparent abandonment of principles such as international law and multilateralism – frameworks that have served small significant nations like New Zealand well.

The argument follows; that New Zealand’s coalition government has jeopardised the national interest, the hard won identity respected by those nations that still hold true to multilateralism and principle.

Here’s a please explain moment:

New Zealand is a small nation, but it is a significant actor in international affairs. Once, it could be relied upon – especially on matters of principle – to articulate a strong position on breaches of international law and justice. We have held positions at the United Nations security council, have been a driven advocate among general assembly nations and a persuasive arbiter among multilateral groups such as CANZ (Canada, Australia, New Zealand) that tag-team diplomacy at the United Nations and elsewhere.

New Zealand was once a staunch advocate (and remains a member state) of the International Criminal Court. And, in matters of trade, New Zealand sought to develop common ground rather than difference – tools that have been beneficial to others in times past when conflict has raged and red-mist would otherwise have dominated attempts at a diplomatic solution.

Today’s New Zealand is a myriad of conflicting arguments; its current coalition government argues that Iran’s regime is evil so therefore the powerful must bomb it to peace.

But the fact that the Iran regime is not a paragon of virtue – either domestically or regionally – does not diminish the fact that the United States’ and Israel’s governments decided to attack – decisions that allegedly and arguably breach international law.

International law: In a rudimentary sense; it comes down to whether Israel in the first instance was legally obliged to commit a preemptive strike on Iran, murdering its supreme leader and taking out over 40 of those who were in its chain of command.

Was there an imminent threat to Israel? At this juncture, it appears not.

Were diplomatic efforts underway to address regional security concerns, through US diplomatic efforts? Yes… up until Thursday February 26.

When Opposition Is Beyond Political

Back to New Zealand: New Zealand’s Prime Minister Christopher Luxon, on matters of geopolitics and global security, often appears to operate more like a CEO rather than the chair of a nation’s cabinet.

Widespread reports of the Prime Minister’s lack of coherency on this matter is reasonably consistent with a manager waiting to be guided by a governor, or board chair by way of policy, on the required pathway ahead.

The problem for Christopher Luxon is; he has no such external nor internal guidance. In geopolitics and matters of global security, policy alone does not help. Natural leadership qualities do.

Throughout his prime ministership, Luxon has displayed a tendency to outsource foreign affairs leadership responsibilities to his junior coalition partner, New Zealand First leader Winston Peters. Or, when that doesn’t work, he leans toward Australia and/or the United States to provide direction on big picture issues.

But for many New Zealanders, New Zealand can’t have it both ways; either it (the coalition government) sides with the ‘might-is-right’ Trump-led approach to chaotic global affairs, or it sides with the multitude of countries that still hold on to principles of justice and international law.

Where will New Zealand as a society tilt? It will likely be up to New Zealand voters, later in 2026, to finally decide which way this country tracks over the next few years.

US President Trump’s vanity and sense of global imperialism has become more expansive and performative this year.

These are times when countries like New Zealand, lacking persuasive moral leadership, can easily lose their souls, and, in the process of being risk averse, risk abandoning their own sovereignty, national interest, and identity.

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Over the last few days, there has been plenty of media chatter in relation to the government’s proposal to pass a law enabling police to forcibly shift street dwellers from Auckland’s CBD. (Refer ‘Move On’ orders penalise those with the least, Scoop 22 Feb 2026.)

While Labour likes to express outrage, neither Labour nor National have given as much as a hint as to a solution they would commit to implementing. National sees street vagrants in much the same way as the Israeli government sees Palestinians; in both cases, they just want the ‘problem people’ to go away.

New Zealand, like most countries, has a long history of vagrancy, and of mean-spirited laws to deal with it. New Zealand, however, in 1938 introduced a universal welfare state; a political contract which gained broad bipartisan support until 1984. Over the 1938 to 1984 period the vagrancy problem was minimal. I remember being shocked at seeing beggars in Ireland in 1976; that was depression-era optics, which I thought had long passed in the developed world.

The most recent time I ventured out of Australasia was in 2019, on a trip to Canada, Scotland, and London. I remember remarking that Vancouver seemed to have fewer homeless people than Auckland. The next day I changed my mind; I discovered that the problem in Vancouver was more on the edge of the CBD, whereas in Auckland it had already become normalised around Queen Street and the city’s main library. I note this point, because the problem cannot be blamed on the Covid19 pandemic, and it was a problem that neither Labour’s Jacinda Ardern nor Phil Goff were willing to prioritise during their terms in office (as Prime Minister, and as Mayor).

(In Scotland, while Aberdeen did have a problem, it was less obvious than in Auckland; and even less obvious in Edinburgh. In London, I stayed in Stepney Green, a social housing area close to Whitechapel, and did not particularly sense a ‘street dweller problem’ there; nor in closer-to-the-City and now-gentrified Spitalfields.)

The current chatter focuses on homelessness, while only noticing in passing that many street occupiers are also beggars; meaning that, at its core, the problem is one of income insecurity.

Hardly anyone has connected the dots between begging and the regression of social security in New Zealand. The universal welfare state has lost its way since 1984. My sense is that many of today’s vagrants are not receiving any social security money; and that that may be in large part because it is too difficult – and humiliating – for them to deal with a Kafkaesque system that calls beneficiaries ‘jobseekers’, and is forever looking for ways to not support vulnerable people into constructive engagement. While the general public would regard vagrants as being unemployed, Statistics New Zealand does not even count them as unemployed. Our governmental systems are oriented around the ‘labour force’, and are largely blind to working-age people ‘not in the labour force’.

It is not my role here to analyse the way that our untweaked version of capitalism creates vagrancy. Rather, it is to note that our vagrants need these three things: an amount of unconditional income, a place better than the street where they can sleep and wash, and something fulfilling – maybe, even, productive – to do.

While, for the rest of this essay I’ll focus on the former, I’ll just mention the latter briefly. Minimum wage laws put most of these people out of the reach of the formal labour market. That leaves them two choices for something societally connected to do; voluntary work, or petit-entrepreneurship (aka non-criminal hustling). (Two other options, both disconnected from mainstream society, are: ‘hanging out’ in ways that intimidate, or participating in underworld crime.)

A Very Basic Universal Income (VBUI)

As our income-tax scale stands at present, a Very Basic Universal Income of $150 – payable to every tax-resident aged over 18 – could be mostly funded by abandoning the 10.5% and 17.5% tax rates. All annual personal income below $78,100 would be subject to a 30% tax rate.

Non-beneficiaries earning less than $53,500 would gain, because their VBUI would be more than their extra tax. (For these people in fulltime work, the gain would be small; $12 per week for a minimum wage worker working 40 hours per week; $16 per week gain for a minimum wage worker working 37½ hours per week.)

In technical economists’ language, the VBUI would be called a ‘refundable tax credit’, or maybe a ‘demogrant’.

People earning more than $53,500 per year – and beneficiaries – would have an unchanged net income situation. (For beneficiaries, the first $150 of their benefits would become universal; an accounting change only, from a costing point-of-view.)

People on benefits would have the first $150 per week of their benefit recategorised. People losing their jobs would continue to receive their VBUI, unconditionally. People not in the labour force would have their VBUI payments made directly, and there would be an opt-out mechanism; not an opt-in.

The biggest gains come to non-beneficiaries aged over 18 defined in the official statistics as either ‘underemployed’, ‘part-time’, or ‘not in the labour force’. The most important gains are that the $150pw VBUI constitutes an unconditional safety-bridge for those in danger of becoming redundant, or of having their hours reduced to part-time; and that it thus acts as an ‘automatic stabiliser’, meaning that people who lose their incomes can still maintain some of their usual spending.

The VBUI also means that people who gain work, or who gain extra work, still get to keep all of their Very Basic Universal Income. There is no income or poverty trap (as there is now), whereby gains in income from a new source lead to reductions in income from existing sources.

And it also substantially reduces the cost of administering social security, if people who lose their jobs automatically retain a very basic income to help tide them over losses in market income. The only information needed about non-beneficiaries in New Zealand would be their date and place of birth, their bank account number, and their immigration status. People receiving no publicly-sourced income other than a VBUI would at no stage be required to provide the authorities with any further information; they would pay tax at the going rate to the IRD based on market income connected to their IRD number.

Very Basic Universal Income is an ‘opt-out’ mechanism, which means that everyone receives it unless they have specifically asked to not receive it. And, even then, opt-outs should be managed as ‘temporary’. (All people legally allowed to earn income in New Zealand would have at least an IRD or NHI [Health NZ] number; ‘bank accounts’ at Kiwibank could be opened by Inland Revenue or Health New Zealand for people without other known access to banking facilities.)

In addition to reduced administration costs, there are several other ways that a miserly government could recoup its not-very-onerous outlays on VBUI. The two most obvious ways would be to raise the company tax rate from 28% to 30%, and to reduce the income threshold for the 39% tax down from $180,000 per year. A centre-right government which has done all these things – all very much consistent with centre-right philosophy – might then aspire to removing the 33% tax rate. That would leave a two-step tax scale: 30% and 39%.

We note that the introduction of a VBUI would, in itself, mean only one change to the existing benefit structure. That one change would be the accounting formality to categorise the first $150 per week of a benefit as a universal income, as a ‘duty-of-care’ income integrated into both the tax system and the benefit system.

A VBUI is not generous, and it’s not a Universal Basic Income (UBI). But it does act as an income that acknowledges both human rights and economic efficiency. Once the mechanism and mindset are in place – noting that the ‘mindset’ issue is analogous with that associated with the introduction of proportional-representation voting in New Zealand in the 1990s – then it becomes comparatively easy to tweak the numbers. In time, the VBUI might become a BUI, a Basic Universal Income; more like $250pw than $150pw. We need to start at a low amount, to sooth the apprehensions of the professional naysayers; those unimaginative people too ready to block social and economic progress.

A Teenage Basic Universal Income (TBUI) for adolescents

Late in 1979, Robert Muldoon raised the universal family benefit to $6 per week – a benefit (which commenced in 1946) payable on behalf of all children without any means testing. If we adjust that $6 by the CPI changes we get an equivalent of $42 today. Or if we adjust by GDP per capita – a better measure than the CPI, a measure which allows for economic growth – that $6 in late 1979 becomes $70 today.

My proposal is to pay a TBUI of either $42 or $70, to all New Zealanders aged from 14 to 17. For many of these teenage recipients, the amount would be paid directly to the recipient, and deducted from the Family Tax Credit payment presently paid to their caregivers.

I have calculated that recipients of a $42 (or even $45) TBUI should face a special flat tax rate of no more than 20% of their market income. And recipients of a $70 TBUI should face a special flat tax rate of no more than 23% of their market income. I favour fourteen- and fifteen-year-olds – all still legally at school – to receive the $42; and sixteen- and seventeen-year-olds to receive the $70 and pay a bit more tax.

The TBUI acknowledges that a significant minority of New Zealand’s vagrant population is in the 14 to under-18 age range. They would receive payments in the same way as older vagrants; if necessary, through an account opened for them by the IRD or Health NZ.

Call it ‘pocket money’, if you like. All New Zealand residents would receive this from when they turn 14, unless they opt-out. Fourteen is the age, in New Zealand, when children may be legally left-alone, unsupervised. Thus, it is the first age to directly signal that a young person should have a degree of independence, of economic autonomy.

Finally

All of the payments I have suggested are very basic and somewhat stingy. What matters is that they are unconditional, and confer a sense of citizenship onto our most vulnerable adults and semi-adults. There are no poverty traps; no impediments to recipients from ‘bettering themselves’, from being aspirational. Universal Incomes are not withheld when persons’ circumstances improve.

I personally would prefer less parsimonious payments; deficit-funded payments which would give an underdone economy a necessary bit of stimulus, realising that the arising increase in collective prosperity itself recoups such fiscal deficits. (The 1938 introduction of Universal Superannuation and other reforms turned out to have a fiscal cost significantly less than the projected costs. Refer Elizabeth Hanson’s 1980 book: The Politics of Social Security…) I note that we live in austere times; without really knowing the reason for these fiscal blindspots. Nevertheless, I am suggesting that, even with Scrooge in charge, we can do much better than we do today.

Further, with these universal incomes in place, everyone will know that everyone else will know that all of our vagrant population is in receipt of at least some income. (Refer Steven Pinker’s 2025 book: When Everyone Knows That Everyone Knows…) As it is, some of the beggars on the streets may be receiving substantial benefits, while others are receiving absolutely nothing; today we, in the public, are unable to tell any individual vagrant’s actual level of need.

There are solutions to these ‘all-rhetoric no-solution’ difficulties. It just takes the political will to see past our blindspots. Some form of rights-based universal income guarantee is a necessary but not a sufficient solution to the compounding vagrancy problem; and to other problems too, especially those problems affecting young people. (Note: Youth facing more psychological distress…, RNZ, 25 Feb 2026.)

Note on the Politics of Achievement

When Michael Joseph Savage in 1938 proposed (and then legislated for) a universal welfare state – with special emphasis on an initially very basic Universal Superannuation – he converted what could have been a political losing hand in that election year into New Zealand’s greatest ever electoral victory. There were many on the left and on the right of Savage’s parliamentary caucus – political people without political nous – who seemed to be eager to snatch defeat from the jaws of victory. Fortuitously, Savage was not one of them. By not being one of them, by not losing courage, he became the New Zealander of the twentieth century. Savage didn’t solve every problem. But he did make a difference, for the better; and was loved for that. While a modest man himself, his political leadership for New Zealand was far from austere.

Do our current lot of politicians even want to win in November? My advice to both National and Labour is to pursue the politics of success, and not the politics of nihilism.

(In this regard we might note that the Labour Opposition in 1931 suffered an ignominious election defeat, despite the appalling economic catastrophe which was then taking place. Labour went on to win in 1935, by promising a universal welfare state. It came close to electoral embarrassment in 1938; it came close to failing to deliver on its 1935 promise.)

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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.

For this, the sixth series of A View from Afar, political scientist and former Pentagon analyst Paul Buchanan and Selwyn Manning deep-dive into geopolitical issues and trends to unpick relevancy from a world experiencing rapid and significant change.

And, in this episode, the topic will be: How to Define A Way Forward When the World is in Chaos.

Since the re-election of the US President Donald Trump, Paul has been doing a lot of work… a lot of reading… and a huge amount of thinking.

Today we hear from Paul about:

1. The US Trump Administration’s “Authoritarianism at home, Imperialism abroad” currency.
2. How to deconstruct the entire “spheres of Influence” nonsense.
3. About United States fears of the rise of the Global South in a poly-centric world.
4. And Paul and I will lean-forward and consider; what to expect in the medium and longterm.

If listeners enjoy interaction in a LIVE recording environment, you can comment and question the hosts while they record this podcast. And, when you do so, the hosts can include your comments and questions in future programmes.

With this in mind, Paul and Selwyn especially encourage you to join them via YouTube, as on YouTube live interaction is especially efficient.

You can join the podcast here (and remember to subscribe and get notifications too by clicking the bell):

OK, let us know what you think about this discussion. Let the debate begin!

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SIGNIFICANT QUOTE PAUL G. BUCHANAN: “The sad fact, though, is that the US is the center of our earthly geopolitical universe, serving as the first rock to drop in the global pond whose ripple effects are extensive, negative, and washing up in unexpected and unforeseen ways. That rock, in fact, is a black hole sucking the remnants of the rule based order into oblivion, or if not oblivion, irrelevance in a new age of power politics (might makes right, etc.). It is a dark force from which things as they exist cannot return.”

You can follow this podcast via the following podcast platforms:

On 14 January, Al Jazeera produced an episode of ‘Inside Story’, their daily current affairs feature programme: Why is the US Fed chair criminal probe causing global alarm? The context is the conflict between the Federal Reserve Chairman Jerome Powell, versus the man who appointed him to that role, President Donald Trump. In the sense of this conflict, Powell is the archetypal technocrat (the spokesperson for his craft guild), and Trump is playing the role of the democrat (the spokesperson for the American people).

(We note that, in New Zealand, something similar but different is happening; effectively a conflict – for a tiny slice of the historical narrative – between former Reserve Bank Governor Adrian Orr and the current Minister of Finance, Nicola Willis. It may be said that power is held by those who control the money, and by those who control the narrative.)

The format of Inside Story is that of three remotely-located expert or otherwise-interested interviewees, interviewed by a news-anchor studio interviewer. (Former Newshub newsreader Tom McRae serves as one such interviewer.)

For this episode, the interviewer was Adrian Finighan. The interviewees were: an American political commentator, Eric Ham; a London-based commentator representing the finance industry, Justin Urquhart-Stewart; and a celebrity Irish monetary economist, David McWilliams. (McWilliams was speaking in New Zealand last October; claims have been made that he is the “Attenborough” of economics.)

It is to McWilliams that I particularly wish to focus my comments; so, below, I have transcribed his contributions to the panel discussion. (I will confine my comments re McWilliams to his contributions to the Al Jazeera programme, and not to his writings or other presentations.) But first I have transcribed opening words from Finighan, Ham, and Urquhart-Stewart. There are also comments from Jerome Powell, reporter Fintan Monaghan, and German Chancellor Friedrich Merz. (To maintain focus the transcriptions have been slightly condensed; the original interview is available, see above.)

Finighan, Ham, and Urquhart-Stewart

Finighan: “A criminal investigation into the Chair of the Fed, Jerome Powell … could have implications well beyond the US … a swift and sharp response from central banks around the world, a joint statement expressing solidarity with Powell.”

Powell: “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President … [through] political pressure or intimidation.”

The general tone here is that Powell – the chairman of a committee – is the good guy, and Trump the bad guy. In this sense the discussion falls into the trope that if there’s a bad guy [ie Trump], then the bad guy’s adversary must be a good guy. Note how Powell presents himself as the ‘man of the people’, even though in reality he is anything but.

Of course, it goes without saying that a narrowly focussed criminal law investigation is not an appropriate forum for discussing democracy and monetary policy. And there is no doubt that President Trump is intimidating, and has a tendency for ad hominem flights of fancy. We should note, for clarification, that the criminal charges referred to relate to the expansion of a building, and not to misconduct in the setting of interest rates.

Reporter, Fintan Monaghan: “The two [President and Chairman] have been at odds over the setting of interest rates for most of the past year. Trump wants cuts. That might give the economy a short-term boost by bringing down the cost of borrowing money, but Powell has resisted because it could cause inflation. … Heads of major central banks around the world, including the ECB’s Christine Lagarde, have voiced support for Powell and the independence of the Fed. Central Banks have traditionally operated separately from the central government. That keeps long-term decisions about the health of the economy separate from short-term political [aka democratic] interests.”

Friedrich Merz: “I hope there will remain a broad consensus that central banks must remain independent because independent central banks are a guarantee that a currency can remain stable in the long term.”

We may note these themes are emphasised by those who we might call ‘monetary policy hawks’; and most central bankers are monetary policy hawks in that they emphasise the notion of raising interest rates as the sine qua non [without which not] of anti-inflation purgative emulsions.

To claim that Reserve Banks have traditionally operated separately from the central government, indicates that some commentators have a very short sense of history. Most central banks operated as a long-arm of government for most of their histories (and most are less than 100 years old; the RBNZ has existed since 1934). The American Fed is usually regarded as having been independent since 1951, though it’s always been a political organisation with politically appointed leaders. Most Reserve Banks have a single shareholder; the Government. During Abenomics, Japan’s central bank was fundamentally a part of Shinzo Abe’s macroeconomic program. As was New Zealand’s Reserve Bank in, say, the late 1930s, when it played a crucial role in implementing the economic policies which launched New Zealand into the position of a global exemplar for a modern egalitarian economy.

We note also that central bankers generally favour the cynical word ‘political’ over the much happier word ‘democratic’. And we note that Friedrich Merz may be confused. He appears to be referring to a national or imperial ‘currency’ such as the Euro, whereas monetary policy at its highest calling seeks to protect the internal value of money; not its external value. (The internal value relates to inflation and deflation; external value relates to currencies’ exchange rates.)

Eric Ham [author and political commentator]: “… that very independence which has actually fuelled United States’s monetary growth.”

Justin Urquhart-Stewart [chairman of an investment platform]: “There is one vital word that central bankers have to give out and that is confidence … this is the first time that I’ve seen central bankers getting together almost as a ‘trade-union’ … [in response to] political interference.’

Ham, like most political commentators, is all-at-sea when trying to comment on monetary matters. I presume that he meant to say ‘economic growth’ rather than ‘monetary growth’. Certainly the wizards of money – ie the Lords of Finance [in the 1930s, the Bankers Who Broke the World] – believe, or claim to believe, that central bank independence fuels long-run economic growth.

Yet, I have a sneaky suspicion that Ham meant what he said. In the mercantilist worldview, a worldview upheld by President Trump, ‘monetary growth’ and ‘economic growth’ are tantamount to the same thing. New Zealand’s Prime Minister, Christopher Luxon, is also a businessman who believes that making hard-won money represents the economic purpose of human life.

In the golden age of mercantilism, from around 1500 to 1800, money was understood to have been legitimately made by mining, exporting, or stealing. (Queen Elizabeth the First was the monarch best known for having resorted to the latter; she boosted the Royal navy for that purpose.) In this view, only mining represents a legitimate addition to the global money supply. Kings and Queens however sometimes resorted to a fourth method, ‘debasement’; modern monetary bankers are still fighting that battle of yore, with ‘public debt’ representing their principal concept of debased money.

On the ‘other side of the coin’ from monetary philosophers – or is it the ‘other side of the ledger’ – there were accountant bankers. One of their clever tricks was double-entry bookkeeping. Another closely related trick was fractional banking. These (along with a clearing-mechanism developed from medieval Italian banking) became the central technologies of modern banking practice. (Many of the earliest bankers were goldsmiths, who on-lent other people’s gold and silver deposits – albeit by issuing receipts, the forerunners of paper money – without telling the depositors. When in trouble, these fractional moneylenders required a fast horse, and contacts who could smuggle them out of the country! The final piece of the modern-banking puzzle was limited-liability status, facilitating an appropriate amount of risk-taking. These are the initially-disreputable technologies that lubricate capitalism and give it its dynamism. Bankers were not alchemists trying to make money independent of the economies it serves.)

Re Urquhart-Stewart, he emphasised the role of confidence – ie belief – in monetary policy. A word widely used by monetary economists is ‘expectations’. Thus, the role that twentyfirst century monetary authorities have assumed is to manage public expectations, even if they have to resort to some kind of poker trick to do so. An important part of this is to maintain a druid-like sense of authority; to tell a good collegial story – not necessarily an accurate story – in order to give themselves an arcane aura of credibility. Democratically-elected politicians – among others – are required to believe their story.

This may be the first time that Urquhart-Stewart has been aware of central bankers getting together as a union or college or guild; but their recent “joint statement” is by no means their first rodeo. Central bankers of the world – like staunch cowboys – regularly get together at a place called Jackson Hole in Wyoming, USA. (And the lords of finance of the late 1920s – the preeminent central bankers of the United Kingdom, United States, France and Germany – were all in regular contact with each other.) On this note, New Zealand’s own Reserve Bank governor, Anna Breman, was one of Urquhart-Stewart’s unionists; and, for her efforts, she had her fingernails clipped by Nicola Willis. (In the recent state of New Zealand’s political cycle, Willis and Luxon have been more in Trump’s camp than in Powell’s, expressing frustration with an unnecessarily slow process of lowering interest rates. This runs counter to their position in the summer of 2023/24; then the new government’s first act in Parliament was to raise the monetary policy bias in favour of generally higher interest rates.)

In the earlier days of central banking, central bankers were more likely to have been well-connected bankers. Nowadays they are more likely to have been economists, specialising in monetary economics and finance. The division between these two cultures goes back at least as far as to the disputations in the 1840s and 1850s between the economists’ Currency School, and the bankers’ Banking School. While the Banking School may have had the better of the argument, as demonstrated by the ongoing development of monetary practice, the Currency School won the culture war.

Before I go on to reveal economist David McWilliams’ substantial contribution to the Al Jazeera programme, we should note that the setting of interest rates through monetary policy is a fundamentally interventionist overriding of the market determination of a price; it represents an exception to the sanctity of the price-mechanism which is fundamental to economics. Neoliberal anti-interventionists tend to show strong support for interest rate intervention; just not intervention by kings or queens or presidents or ministers of finance; they favour intervention by someone they have confidence in. It is part of a wider belief on the part of economic liberals that it is good for our health that money (unlike sugar) should always be scarce; and that the technocratic authorities, if they must err, should err on the side of money being too scarce.

David McWilliams’ ‘Testimony’

I transcribe McWilliams several contributions to the Inside Story programme:

Contribution One: “I’m speaking to you as a former central bank economist … authoritarian leaders from Nero to Lenin, from Hitler to Henry VIII have always tried to interfere with who prints the money, who gets the money and at what price. … This issue is about who gets to set the growth rate of the American economy. Is it the Federal Reserve or is it the President? … Typically, it is the Federal Reserve that gets to set the growth rate, consistent with a low rate of inflation, is going to be X, and were going to drive our monetary policy and our rate of interest according to that. Politicians are always wanting to put their foot down on the accelerator, more growth, more election success, more people feeling good in the very short term. Central bankers push their foot down on the brakes … because we are worried about the rate of inflation. … The central bankers get [their extraordinary power] because they are concerned about the long-term rate of inflation. Politicians are not concerned about the rate of inflation, and as a consequence they want things to accelerate quicker. … The rate of inflation, which affects poor people more than rich people, will go up. The long-term rate of interest, which affects your mortgage rate, will go up. I think, for the world in general, the idea that the people who actually manage and preserve the integrity of the US dollar are no longer concerned about the integrity of the dollar and much more concerned about short-term politics; that will scare people, not just in the High Street, but also in financial markets.”

Re “printing money”, it’s an intentionally pejorative label for money creation through banking based on double-entry book-keeping. Before ‘printing’, there was ‘minting’, which has been the necessary historical privilege of all kings; not just Nero and Henry VIII. McWilliams conflates printing with minting. When money was principally coins, it was the ‘head’ of the king on the coin that gave the public confidence in that coin; the minted coins represented the liability of the kings to the public. It’s not the place here to comment on the monetary policies of Lenin and Hitler. But, re Henry VIII, I recommend the book Gresham’s Law, by John Guy. Thomas Gresham served as banker to four of the Tudor monarchs, in the middle decades of the sixteenth century. Securing additional public debt for Henry VIII – ie, additional to the minted coinage – could be a difficult and hair-raising experience; actually tantamount to smuggling.

McWilliams posits that the technocratic monetary Tzar, Powell, has – and should have – the power to “set the growth rate of the American economy”. This assertion is problematic in that it is neither accurate nor democratic. Attributing the GDP of the United States to one man does a huge disservice to the other 330 million Americans, and grants Powell more concentrated power than Nero ever had. McWilliams doesn’t mention the word ‘productivity’ once, which is unusual for a media economist; it is more common to hear that long-term growth is determined by productivity than by central banks.

McWilliams goes on to say that elected politicians want economic growth rates higher than what monetary economists think they should want, effectively claiming that democracy is inherently inflationary, that inflation is the greatest of all economic sins, and that “politicians are not concerned about inflation”.

The whole discussion reveals overemphasis on a false conflict or dissonance between ‘long-term’ and ‘short-term’. In reality the long-term is no more than a sequence of short terms. We, all of us, all the time, live in the short-term.

His incorrect argument that inflation adversely affects poor people more than rich people is patently false, made most obvious by the facts that higher interest rates clearly favour the receivers of interest, and that past inflation has played a major role in establishing the wealth of today’s rich. We should note that active ‘inflation-fighting’ does not necessarily mean that prices become lower than they would otherwise be; central bank inflation-fighting is a costly process that contributes to the cost-of-living. If we are constantly inflation-fighting in the short-term, and the long-term is a succession of short-terms, then the cost of inflation-fighting becomes a ubiquitous presence in our lives.

Basically, his argument is that if we [ie people like himself] don’t put interest rates up [in the short-term] then interest rates will go up [in the long term]. We need to raise interest rates in order to lower interest rates, he claims. This illogical argument is essentially that inflation necessarily connects low interest today with high interest tomorrow (and vice versa); that interest rates act like an unlubricated seesaw in which one end is labelled ‘short-term’ and the other end is labelled ‘long-term’.

In his last two sentences above, McWilliams claims that a political appointee to replace Powell – compared to a career appointee – would undermine the “integrity of the US dollar”. There is a sense that the US dollar should be the master of the world economy, not its servant. By the way, all appointments by politicians are political; democracy is political.

Contribution Two: “Central backers are charged with – dully obsessed with – the rate of inflation. The rate of inflation is in effect the value of your take-home pay. … The second thing is of course ‘distribution effects’, who pays most. What you find is that, when the rate of inflation goes up, poor people pay more than rich people. Because a higher percentage of a poor person’s income is going to be going on basics … everybody is affected badly, but the poor are affected worse. And then the final point is that for anyone who has a mortgage … inflation means that interest rates will go up. Donald Trump is so keen to reduce interest rates because he is an endemic debtor. There’s always a split in the world between those people who are creditors, who lend money, and debtors, those people who borrow money. As a general rule those people who borrow money want the cost of borrowing to be as low as possible. And if you’ve spent your lifetime defaulting, borrowing, defaulting again, then your DNA will be biassed towards lower not higher interest rates. But who rewards the saver if the rate of interest is artificially low?”

Central bankers, but not McWilliams, make a virtue of themselves being dull technocrats.

The rate of inflation is not the value of your-take home pay. Inflation is an increase in prices, not a level of prices. Inflation, meaning a decrease in what a dollar will buy, strictly affects all prices, including wages; and including luxuries as well as necessities. What McWilliams is arguing is that inflation, though itself not about relative prices, nevertheless has a biased impact on relative prices. Relative prices are in fact caused by market forces; changes in the demand for and supply of different commodities and factors of production. Certainly, changes in interest rates represent a change in relative prices, because the rate of interest (comparable to the wage rate) is the price of a factor of production. If inflation is the only thing that’s going on, a four percent increase in prices will be matched simultaneously by a four percent increase in wages, so the value of your take-home pay is unchanged. All inflation does is reduce what a person’s money-in-the-bank will buy, and make it easier for a person to repay debts. It’s true that markets will respond to inflation by raising the money cost of future debt. Do markets really need help from the monetary druids who claim that interest rates should be raised in an interventionist manner, not only in response to inflation but also ahead of what they claim is expected inflation.

The line from people like McWilliams is that debt is akin to a form of sin, whereas squirrelling money away at four percent annual interest is a virtue. This is religious metaphysics, not science. How many people who have made a lot of money did so simply from squirreling away their wages? Not many. Rich people, except those who simply inherited from daddy, incurred debt to become rich. Rich nations incurred debt – private and public debt – to become rich. Debt has played and continues to play an absolutely fundamental role in economic and civilisational development.

Even in nature the squirrels are not rewarded. They earn no interest on their nuts, and they are subject to a ‘use it or lose it regime’. Nuts which are saved for too long become inedible, or simply go missing. Yes, savers should be rewarded when capital is scarce and people with unspent income need to be induced to take investment risks. In the twentyfirst century, however, the world has been awash with private stashes of idle money; central bankers should not be using public policy to serve the interests of the owners of these stashes.

Contribution Three: “Is the institution stronger than the personalities? I think what we are talking about is a power grab, and we know there’s nobody more powerful in society than the person who controls the money. Money is the glue that gels society together. It is an awesome weapon on the part of governments, which is why I suspect central banks have been independent for so long. We’ve largely seen a revolution of the central banks in the 1970s; by the 1990s with the exception of the UK most were independent.  … This is about power and the exercising of power; and I would say that money is a far more powerful tool than ideology, than even warfare, than certainly all sorts of other weapons in the hands of presidents. So, what we are seeing here is a man who doesn’t really understand – or isn’t bound by – the rules of the game, so he’s tearing up the rules as we go along. This is a particularly acute tearing-up. Why? Because he’s actually affecting financial markets, corporate interests, Wall Street’s interests, so there may well be a massive pushback. But to answer your question, if there is a patsy at the helm of the Fed it will undermine the credibility of the United States dollar at a time when the dollar is under credible threat. The United States is no longer the overwhelmingly dominant economy in the world; it is technically number one, but it is being gradually dragged back downwards by China and in the long term by other countries as they grow. So, I think President Trump doesn’t understand the exorbitant privilege that the United States has as [having] the reserve currency of the world. There is nothing more powerful than that you can print money for free as the reserve currency, and people have to give you real stuff to buy that currency that you print for free. How amazing a deal is this? And for the Americans to self-sabotage from the White House seems to be the politics of idiocy.”

Here McWilliams reveals the power agenda of the monetary church. Money should be controlled by the church, themselves; not by the people through their elected or unelected representatives. Henry VIII struggled with the Rome-based Catholic Church in the 1530s. Henry won. What we see today, in McWilliams’ words, is the new church in another power struggle; a struggle – possibly a struggle to the death – that the new faith is probably winning. Who should we trust; the king or the church? The “rules of the game”, by the way, were set by the monetary economists – the currency school – of the nineteenth century. Those rules went quiet in the 1930s, but they started to reassert themselves in the 1970s; in the mid-1980s in New Zealand.

McWilliams does understand the power of double-entry bookkeeping as applied to banks – the power to “print money for free”. And he is correct that Trumponomics – Trumpian mercantilism – is an unwitting policy to self-sabotage the United States’ economy. But to transfer power to a college of druids is not the answer, either. Rather, lay people should all be better educated about money; but not so-educated by these monetary Jesuits. Henry VIII was taught statecraft by Cardinal Wolsey. He overthrew Wolsey – his mentor and his tormentor – but was unable to seek, let alone find, a better counsellor; Henry lost his way. Today we have democracy; a civilisation-project that is still immature, a project whose survival cannot be guaranteed. For all Trump’s faults, he is nevertheless more sensitive to ‘the people’ than are the technocrats who, while really serving the church of sacred money, claim to “serve the public”.

Contribution Four: “I would like your viewers to just remind themselves that the key word here is ‘trust’; what keeps money sacred, almost has an alchemic value, is trust. I trust it, you trust it, we trust each other. Now if you chip away at that trust, which is ephemeral, entirely in our heads, you begin to chip away at the very foundations of the system that we all have in, that system remains stable. So once you put the trust in the currency in the hands of somebody who is untrustworthy you begin to open all sorts of dilemmas about what’s the value of money, who prints it, will it buy what it says it buys, and can I save it. These are massive, massive issues.”

I can say here that ‘sunlight is the best disinfectant’, that delegating our credulity to a college of wizards and metaphysicians is not our best way forward. What David McWilliams (and the people he speaks for) says here, while more Hogwarts than hogwash, perhaps belongs in the Age of Aquarius; like Christian Hawkesby’s ‘North Star’ (refer Reserve Bank cuts OCR 25 basis points, RNZ Morning Report, 29 May 2025). That, of course does not redeem President Trump.

In an important sense, McWilliams is correct. Money is free; freer than a piece of paper. But it’s always an accounting liability; a liability incurred by whoever’s signature or head is on it. Neither kings nor bankers have an incentive to overcook the money supply. It’s their heads that are on the line. The secrets are to always have enough money in circulation; and that it is better to err on the side of too much than too little. Value can seemingly be created from nothing; that’s always been so. But money, and any other form of promise, is not itself ‘value’; rather money is a set of claims on value. The alchemy perception is that a piece of paper with a signature – or a metallic disc with a king’s head etched on it, or a deposit entry in a bank account – may have intrinsic value, may in itself be wealth. But no, such things are only promises. If promises are to be kept, then sabotage – including self-sabotage – should be avoided.

(As an aside, it has often been believed that a destructive weapon of war was to flood a country’s economy with credible counterfeit money. The Germans allegedly tried it in the United Kingdom in World War Two, but to no avail. The Japanese also tried it in the Philippines; I have actually seen a case of counterfeit money recovered from a Japanese crashed aircraft in Mindanao, Philippines. Fascinating!)

Conclusion

The monetarists’ essential argument is that if the policy objective is to have future lower interest rates you have to have higher interest rates now. That is, the preventative for high interest rates is high interest rates! (By ‘monetarists’, I refer to the monetary bankers and the growing numbers of ‘finance-experts’ of the new Currency School, distinct from the now-scarce practical banker-accountants of the old Banking School.)

Mysticism about money is rife, and ripe, especially within the guardian church. The Church of Money is a part of the New Technocracy that is surreptitiously overwhelming the institutions of democracy.

Re John Maynard Keynes, on the short-term versus the long-term. Keynes said: “In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again”; meaning that actual life is always lived in the short-term, and that the distinction between the short-term and the long-term is essentially vacuous.

The monetarists’ view is normative; that in the event of an economic stagnation or decline, those who had already built ‘nest eggs’ (portfolios of financial claims) should have priority access to diminished goods and services; priority over the workers and capitalists who would be producing those goods and services. That is, priority access to a diminished ‘economic pie’ should be given to rich old gentlemen and gentlewomen, with the greatest priority to be given to those with the biggest portfolios regardless of how those nest eggs were obtained. This is not a policy to benefit the poor.

Further, the implementation of neoliberal monetary policies – today’s Currency School or Currency Church, which favours intervention on the side of less money and dear money – substantially increases the likelihood of national and global economic decline, in the short-term and in the long-term. Just as a car with insufficient lubricating oil will not go well. Such a car may complete a short run, albeit inefficiently; but it will not complete a long run.

*******

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.

RNZ news item, 12pm 9 Dec 2025: “Finance Minister Nicola Willis has challenged one of her predecessors Ruth Richardson to debate her on how to best manage the country’s finances. Our political reporter Anneke Smith has more: ‘The taxpayers union is poised to launch a pressure campaign targeting Nicola Willis in a campaign to convince the finance minister to cut spending and reduce debt. Ms Willis says it’s clear the campaign is being driven by Ms Richardson, chair of the Taxpayers Union; and she has a clear message for her, “Come and debate me face to face, come out of the shadows, I will argue toe for toe on the prescription that our government is following. I reject your approach, and instead of lurking in the shadows with secretly-funded ads in the paper, come and debate me right here in Parliament.” Ruth Richardson says that the Taxpayers Union is simply doing its job by challenging the government to address its finances. “We are seeking to hold the feet of the Minister of Finance to this fiscal fire. Her Treasury are shouting ‘Fire! Fire! we have a structural deficit, this cannot go on, it needs to be addressed.” Ms Richardson laughed when RNZ asked her if she would debate Ms Willis, saying it was up to the Minister of Finance to front government decisions.'”

The narratives on the classical right and the fuzzy right

Where are the libertarian right and the fuzzy right coming from? There must be more to their visions than ‘balancing the books’; in Victorian times, families might balance their books by selling their children.

What are the narratives which these actors are speaking to? Who are the defunct economists whose ideas are driving them? There are actually three narratives of the liberal conservative right. Present Minister of Finance Nicola Willis represents the fuzzy fudgy right. Ruth Richardson represents one purist branch of the classical right; the other is represented by former United Kingdom Prime Minister Liz Truss.

Note this oft-quoted (and, here, slightly massaged) passage from John Maynard Keynes’ General Theory (published 1936): Practical [wo]men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Keynes used the word ‘practical’ with irony. One intellectual ancestor who Ms Richardson may not be aware of was the prolific Mrs Marcet, (b.1769 London, d.1858 London) who was praised by Jean-Baptiste Say as “the only woman who had written on political economy and shown herself superior even to men”.

We note the context that the present recession (in terms of total fall of per capita GDP, and duration of fall) is now understood to be the second-worst in New Zealand since the Great Depression (1930 to 1935 in New Zealand). The worst since 1935 is unquestionably that which peaked in the early 1990s, and was very much associated with the fiscal governance of Ruth Richardson. We should note that a structural recession, also known as a balance-sheet recession, is an extended period of near-zero growth which typically follows an initial fall of economic output and income.

Dramatis personae

Four defunct economists feature in this story about Richardson, Willis, and Truss; all four associated with the first two decades of the nineteenth century: Jean-Baptiste Say, James Mill, David Ricardo, and Thomas Robert Malthus. In the chronologies relevant to most people alive today, these four men are all very much defunct (and pre-democratic in outlook), though their ideas are increasingly driving western economic policy today. They are the founding fathers of the classical school of economics. (Mrs [Jane] Marcet was the midwife.)

Today there is a curious kind of intellectual Benjamin Button process going on, with the most important post- industrial revolution contributions to economic policymaking (those of Alfred Marshall, 1890, and Keynes, 1936) having been unpeeled, with the most recently written (Keynes) having been unpeeled first. Intellectually, economics – or at least the loudest economic narrative – is moving backwards in time.

The unpeeling process has further to go. The mercantilist economics of DJT precedes the classical political economy which became fully formed in the 1810s’ decade; and it precede the partial demolition of mercantilist economics undertaken by Adam Smith in 1776 (The Wealth of Nations). And it precedes the scientific revolution most associated with the name of Isaac Newton. The heyday of mercantilist ‘thought’ was the first half of the seventeenth century. (The most mercantilist of organisations in history were the Dutch East India Company, which ‘discovered’ New Zealand in 1642 [and subsequently named it, along with New Holland to New Zealand’s west], and the Dutch West India Company, which founded New York in 1624; these companies’ narratives give the best possible insight into the strategic thought of the current United States president, a man of New York, and his acolytes.)

The paradigm of classical economics was formed from 1798 to 1823, mainly in England; formed during the peak years of the Industrial Revolution, but almost completely without reference to (and with minimal application to) the dramatic economic events (also mostly in England) of that quarter-century.

Aggregate spending as a driver of economic growth

The central issue in New Zealand’s economic politics today is about whether (and how) aggregate spending is a driver of economic growth. The Richardson supply-side version, which denies that aggregate spending has any role, falls directly in line with the doctrine of the godfather of classical economics, James Mill, and his mentee David Ricardo. The Truss version, however, follows Malthus in his later dispute with Ricardo, and represents what has been popularly known since the 1970s as trickle-down economics. Conservative and centrist western policymakers today mostly follow a fuzzy fudge version of classical economics, where they selectively allow for increased aggregate spending to facilitate economic growth while disavowing the role of central government as an autonomous spender.

The first principle of classical economics is called Say’s law (of markets); though it could have been called Mill’s Law, and its ongoing presence in liberal-conservative economic narrative is more due to Mill’s role in overseeing the classical economics’ project than to Say after whom the ‘law’ is named.

Say, in looking for an argument to show that a general glut (the term then used for a recession) is impossible, noted that aggregate income must be equal to aggregate output, and believed that all income must be spent (on that output) in one way or another. He understood an apparent glut (ie unsold goods) to be a simple mismatch between what goods people produced and what other goods they wanted to buy. In other words, Say argued that an apparent excess of output was equally matched by a less visible shortage somewhere else. (In subsequent neoclassical economics, most associated with the name of Alfred Marshall, it was the price mechanism of markets which would resolve such an apparent glut, by providing the information required to ‘signal’ to firms what they should be producing.)

In the days of Say and Mill, it was true that producers blindly supplied goods to the marketplace. Today’s world is very different, as most of us do understand. Today, the norm is to produce goods and services for the market; in other words, today’s producers directly and indirectly respond to market forces. Today, when people buy more, firms respond by producing more. The connection between prior spending and output has become so obvious; yet few push back when economic policymakers and liberal conservative commentators repudiate that connection by constantly promoting the supply-side mantra of ‘increasing productivity’. (In reality, firms most increase their productivity when they have more customers, not when they reduce their costs. Henry Ford raised rather than cut his employees’ wages!)

Say’s law is easily repudiated; just look at any basic Economic Principles textbook. We see that some income is saved rather than spent, and that some previously saved income is spent; there is no necessity that the two will cancel out. As a result, much spending is (necessarily) a result of lending, and there is no simple relationship between saving and lending. It turns out that banks and governments act as pumps and sumps. If they don’t pump enough, then there will be a ‘general glut’, a recession; there will not be enough spending to buy everything that people would like to produce, and maybe not enough to buy all that they have produced. Falling prices (deflation), a possible consequence of insufficient spending, acts as a further deterrent to spending; that’s what happened during the doom-loop we now know as the Great Depression. (Irving Fisher described a debt-deflation spiral; when debtors stopped spending in order to repay debts, there became too little aggregate spending, meaning that prices and incomes fell and debts increased relative to incomes.)

Ricardian economics – named after its most precise theorist, David Ricardo – includes Say’s law of markets as a core axiom. Another core axiom was Malthus’s theory of population; first published in 1798. The central idea was that wages could never permanently rise above the level of absolute subsistence, because whenever wages did increase to higher levels then fertility would increase leading soon enough to competition in the labour market sufficient to beat wages back down to subsistence levels.

A third premise was that profits fall as rents increase; rents would inexorably increase as rising populations forced capitalist tenant farmers to rent lands of decreasing quality, meaning that the better lands would command higher landlords’ rents. (Famers, the quintessential capitalists in the Ricardian system, could slow down this profit decline by increasing their productivity.) The argument depended on competition between tenant farmers, comparable to competition between wage workers.

The end result of classical economic growth would be a dismal stationary state in which only landlords (the one-percenters of ancien régime times) would have access to discretionary income. The sociology which accompanied that perspective on agricultural capitalism was that the early capitalists would seek to acquire land and become one-percenter landlords; in the classical system, farmers had displaced merchants as the archetypal capitalists.

(David Ricardo was a particularly successful specimen of capitalist, though neither farmer nor merchant; he was a financial capitalist and speculator, who made sufficient money to acquire for himself the Gatcombe Park estate, now the country residence of Princess Anne. War times generally provided better opportunities than peace times for speculators to make fortunes; the backdrop to classical economics was the Napoleonic Wars – effectively World War Zero – which featured the most glorious years of the British Navy.)

Malthus’ contribution to classical economics went well beyond his renowned theory of population; the theory which begat the concept of the tragedy of the commons. That tragedy is playing itself out today, through both escalating military conflicts and the barely restrained use of fossil fuels; nobody is making the news today by advocating ‘green warfare’.

Malthus became the first dissenter, among classical political economists, to Say’s law. He argued that general gluts were perfectly possible, and that aggregate spending did need to be topped-up under certain circumstances. Malthus favoured policies such as debt-relief and tax-relief to landlords, so that they could buy more luxury goods, thereby helping to keep servants and the like employed and fed.

None of the classical thinkers came close to understanding that, in a mature industrial economic system which focusses on the mass production of consumable commodities (later known as ‘wage goods’), wage workers would need to have a sufficient share of overall income to be able to buy the mass-produced goods which they made. They should have. The John the Baptist (ie precursor) of classical economics – Adam Smith – made a detailed description of a 1770s’ pin factory; Smith had more to say about mass production than did the founders of the classical school.

Malthus, by favouring a stimulus which directly favoured the rich, became the founding father of trickle-down, the variant of liberal conservative economics favoured by Liz Truss.

In the meantime, namely the 1970s and 1980s, new classical economists (including Robert Barro, a sometimes visitor to New Zealand in the 1980s and 1990s; who I and colleagues lunched with on one occasion in Auckland in the 1990s) rediscovered a more technical version of Say’s Law, and called itRicardian Equivalence in honour of David Ricardo.

The pure classical school to which Ruth Richardson adheres uses the Ricardian Equivalence argument to claim that, at best, extra government spending makes no difference to the rate of economic growth. She is of the school of Mill and Ricardo that supply always creates its own demand, and that – exempting a few essentials such as national defence and the law courts – government spending simply crowds out allegedly-superior private spending.

The fuzzy Willis fudge

While Prime Minister Luxon inclines towards the ‘making-money’ mercantilist economics of DJT – mining, exporting, and acquisition of resources through one-sided deal-making and military threats; Luxon clearly emphasises exporting – his Finance Minister Nicola Willis is much more in tune with Treasury’s liberal conservative macroeconomics.

While essentially schooled in the new classical macroeconomics of the 1980s, and increasingly sceptical of the market-corrective economics of Marshall and his disciple Arthur Pigou, Willis adopts an ambiguous attitude towards the general proposition that more spending generates higher levels of GDP (gross domestic product) than would otherwise occur.

This Treasury view values foreigner-spending; and business-investment spending, believing that firms should invest liberally in cost-cutting techniques even if consumer markets are weak and getting weaker. Generally, the Treasury view substantially underplays the ways that working-class consumer spending and government spending can revive a stagnating economy.

But Treasury points to monetary policy as a source of stimulus. In the old days monetary policy as a stimulus meant a stimulus to new business borrowing and the funding of consumer durables through hire-purchase. Nowadays, this ‘price effect’ of monetary policy is understated. Rather, the story we hear is that ‘mortgagors will spend more when they refix their home loans at lower rates’, and that new spending by relieved mortgagors on middle-class goods will prove to be a critical factor inducing economic revival. This is called an ‘income effect’; traditionally neoclassical economics has downplayed income effects while upplaying price effects. The change we see today represents part of the disavowal of neoclassical economics, and the Benjamin Button style return to its predecessor, classical economics.

The supposition is that rational mortgaged homeowners will spend more when their mortgage liabilities decrease (including when the equity in their homes is decreasing as a result of ‘softening’ house prices), because their disposable incomes have increased. Yet that same rationalist logic is almost never applied to governments. We should be hearing Nicola Willis saying, now that interest rates are much lower the government can and should borrow and spend much more. But we are not hearing that. It worked in the late 1930s – increased government spending was very popular with households and businesses, and annual economic growth reached double-digit percentages – but is not even being considered today.

Despite what Ruth Richardson says, Nicola Willis is an austere money-woman.

Richardson is obsessed with the fiscal deficit. But the deficit is the result of our present recession, not the cause of it. (Look at the section on automatic stabilisers in the economics textbook.) Ricardian equivalence, if it truthfully applies under any circumstances, certainly does not apply to an economy in the midst of a recession. Arguably monetary policy is enough to get an economy out of a normal recession (a ‘gumboot recession’?), but spending by government (or some other ‘countercyclical players’) is the only known method of getting an economy out of a structural recession. (The only known method, that is, other than waiting for an export recovery. We’ve had our export recovery since 2024; so far it has not been enough, and is unlikely to bring the New Zealand economy back to its counterfactual growth path.)

The political problem is that you cannot simultaneously repudiate Keynesian economics and implement it. Unless you fudge it, of course!

The Debate?

Will Richardson and Willis have a media debate this week? I’m guessing not. If it does happen, will Ruth Richardson talk about the merits of Ricardian Equivalence? Probably not; but if she is to be honest, she must tell us that it is the concept at the core of her macroeconomic belief system.

At least Willis is a pragmatist, of sorts. Richardson and Truss are classical dogmatists, standing on opposite sides of the Ricardo-Malthus controversy.

(If the money-women have time to swot-up on their defunct economists, a debate could probably be hosted at short notice by the New Zealand Society for the History of Macroeconomic Thought. Thursday-week at the site of Unitec’s Penman House; “feet to the fire” not compulsory, bring your own umbrella and hose. We could invite, from London, Liz Truss; and a descendant of Charles Dickens who could reflect on the political economy of high-density housing. Complimentary screening of Christmas Carol the musical if a power source can be arranged.)

By the way, the way to remove the fiscal deficit is to invest in economic growth. Governments, like businesses, have to spend money to make money. Say’s Law is old hat. What is your real agenda, Ruth?

*******

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.

The failing nation-states of Western Europe are not peacemakers. They are warmongers, the ‘Coalition of the Willing’ – the Coalition of Sanctimony and Hypocrisy. They are trying to frame the current geopolitical struggle between a unipolar versus a multipolar world order as a struggle of the ‘Democratic’ Axis of Good against a strengthening ‘Autocratic’ Coalition of Evil located through most of Eurasia.

Germany’s new Chancellor, Friedrich Merz, says “whatever it takes“. Twice this year the coalition of sanctimony has derailed opportunities to end the Russia-Ukraine War through the re-creation of a neutral Ukraine. (The present war is already nearly as long-lasting as World War One.) The re-creation of a neutral Ukraine is the only available off-ramp to end this war.

The anti-peace phalanx that pretends to be pro-peace – headed by Merz, Keir Starmer, Ursula von de Leyen, and Mark Rutter (and formerly including Joe Biden and Boris Johnson) – represents the expression of a clear and open geopolitical strategy of eastwards expansion, both further into the Slavic Heartland (refer to Mackinder’s Democratic Ideals and Reality, free on Google Books, published early in 1919 though mostly written late in 1918) and in Southwest Asia (aka the ‘Middle East’). (France’s Emmanuel Macron is more ambivalent than these others, and is expected to fade from the presentCoalition as his political career comes to an end, and as France becomes consumed by domestic problems.)

Considered to be the academic founder of the discipline of geopolitics, Mackinder – born in Lincolnshire, England – was then the Conservative MP for a Scottish constituency. In late 1918 – a critical pivot moment in world history – he held his seat in the House of Commons, with a comfortable majority in Britain’s immediate-post-war election. Mackinder saw the necessity of establishing a group of smallish neutral nation-states between the two potentially resurgent “Going Concerns” of defeated Germany and defeated Russia (Russia, then in a post-war civil war, and in the process of becoming the ‘Bolshevik’ Soviet Union). In line with Mackinder’s analysis, the World War reignited in the late-1930s partly as a result of those smaller states eschewing neutrality in favour of various mostly-failed attempts to form security alliances with former antagonists, and/or with Britain and France.

On the matter of Mackinder’s relevance to the 2020s’ world, note this quote re Heartland: Three Essays on Geopolitics, by Halford John Mackinder: “Heartland is a fascinating introduction to a pioneer of geopolitics. Halford Mackinder’s trailblazing ideas have influenced international politics to this day. His concept that world domination depends on the control of the global ‘pivot area’ or ‘heartland’ – the centre of the large land mass of Europe and Asia – has informed the political tactics and wars in the Middle East and Eastern Europe through the decades. His theories have influenced politicians and political scientists for generations, most notably Zbigniew Brzezinski, adviser to a long line of U.S. presidents. In our times, the importance of Mackinder’s heartland theory for the United States’ fight to enforce global hegemony, Russia’s struggle to stay independent and relevant on a world stage, and China’s plans to establish a trade route between East and West, make Heartland essential reading for understanding our world.”

Ukraine and Israel as Western bridgeheads into the Eastern heartlands

In geopolitical context, both Ukraine and Israel can be seen as Western bridgeheads into the ‘Near East’ and ‘Middle East’ heartlands; bridgeheads against the west-resistant poles of Russia and Iran. Ultimately these geopolitical gambits seek as an end-goal the ‘containment’ of China; China being understood as the single biggest threat to the unipolar Western – essentially Christian, labelled ‘Democratic’ – world-order fantasy which prevailed especially in Washington in the 1990s. (In the Cold War, this geopolitical contest was presented as the battle of the Free against Communism.)

Since the demise of Joe Biden (dubbed ‘Genocide Joe’ by some, and not without reason), there has been a bifurcation of the western project.

The United States is most focussed on its Middle Eastern agenda (which, as in Obama times, very much includes geopolitical designs on Syria), so has doubled-down as Israel’s main sponsor of regional terror. Nevertheless, the self-appointed European coalition of sanctimony has been fully and consistently behind “Daddy’s” geopolitical interest in promoting Israel’s asymmetric war of aggression; and still is, despite some attempts to appear to be distancing itself from the Palestinian theatre of conflict. (On ‘Daddy’, see “Daddy” diplomacy: The politics of obsequiousness, Hugh Piper, Lowy Institute, 24 July 2025.)

Israel’s barbarism could only be tolerated by any group of countries if those countries had a ‘higher’ political purpose; namely opposition to a geopolitical adversary shared with Israel – an adversary which dares to resist western power. Any coalition facilitating Israel’s anti-human agenda (of erasing “human animals”, aka Amalek) has fully given up any claim to be considered The Good. In line with geopolitical realism, there are no Good Guys.

The European Coalition of Sanctimony quickly formed when peace threatened to break-out in Ukraine following the 28 February 2025 meeting in the White House. Their aim is to locate German soldiers in Ukraine; an insensitive act which to Russians would be as provocative as 1914 and 1941. If a post-war Ukraine is to have genuine peacekeepers, they cannot be belligerents; such peacekeepers would have to be there under the auspices of the United Nations, and only from countries which are verifiably neutral with respect to Eurasian geopolitics (India would probably qualify; so would South Africa, Brazil, Mexico, Indonesia, Vietnam, Philippines, Ethiopia, Egypt, Nigeria – and of course Fiji with its tradition of peacekeeping.)

The Coalition is, it claims, fighting for the ‘rules-based-order’ in one conflict while pushing-back against international law in the other (genocidal) conflict. A coalition of hypocrisy, indeed.

In the end, international rules are meaningless in a battle framed as Good versus Evil. Evil, by definition, does not follow the rules. So, if Good is to wage an unyielding war against Evil, why would Good handicap itself by following rules that Evil cannot be expected to follow? Laws can be applied to a real war – of A versus B – but not to a war when one or both sides claim to be Good combating Evil? For the sanctimonious, defeating the posited Evil is more important than following the rules.

These West European interests are pulling back from their unconditional support for Israel so that they can focus on their belligerence towards Russia. While they don’t admit the contradiction in their embarrassing support for one aggressor (Israel) and their adamant opposition to another (Russia), Israel’s war in Palestine has removed any possibility that the coalition can seriously claim the moral high ground.

In Aotearoa New Zealand – the little-West located in the far southeast – we need to show more empathy towards Asia, which has been invaded and abused many times by The West, and less towards West Europe which was last invaded by Asia in the fifth century (by Atilla the Hun). New Zealand (eg under Jim Bolger) once considered itself to be an Asian country. Now, New Zealand’s political class is at risk of reinterpreting the continent Asia – sixty percent of the world’s humanity – as a monolithic antagonist. Can the lands to the south of Asia – literally, Australasia – be trusted by Asia?

In geopolitical terms, the West are the aggressors – and the peace blockers – in both of the present faultlines.

The Central Issue: Unipolar versus Multipolar ‘World Order’

Realist scholars of geopolitics – including the conservative John Mearsheimer and the progressive development economist Jeffrey Sachs – are clear about the nature of and the openness of the western geopolitical project. They see the eastwards expansion of the west, cloaked in its narrative of sanctimony, as somewhat problematic.

A unipolar world order is not necessarily an overt dictatorship over every human on the planet. Rather, it is a system in which one central polity – potentially one man or woman, but more likely a technocracy of truth-guardians – has an effective global veto over the contest of ideas, should it choose to use that veto. In a multipolar world order, such vetoes may operate regionally, though there could be no ‘one-veto-to-rule-them-all’.

The first thing that people across the world should consider, is whether the one-empire world is a better aspiration than a multi-empire world; noting that empires come in both overt and covert forms, and that empires can vary from the somewhat benign (ie fraternal) to the severely malign. (Mackinder’s principal principle was that of ‘fraternity’.) Is a single benign empire best? The issues here are twofold: how easily can a benign empire become malign; and how can we be sure that a benign hegemon is really as benign as portrays itself? (We may note the more benign optics of Aldous Huxley’s Brave New World compared to the chilling repression underpinning George Orwell’s 1984.)

The West’s illusion of being non-violent in achieving its objectives is a result of it using violence only as a last resort; the West favours heavy-handed diplomacy, known in earlier imperial times as gunboat diplomacy. Importantly – as we have seen in Palestine and Iraq, and as we saw especially in World War Two, Korea and Vietnam – the West will always resort to extreme violence if it feels it has no other choice. The West will always bring out its ‘big bazookas’ if it feels sufficiently threatened or sufficiently punitive.

The coalition of sanctimony, through Mark Rutter, let slip the truth that the President of the USA is ‘Daddy’. Another ingratiating word that I’ve noted, for example in Berlin Briefing podcasts, is ‘uncle’; a word that this year cost the Prime Minister of Thailand her job (see Thailand’s PM suspended over probe into leaked ‘uncle’ phone call with Cambodian official, Euronews 1 July 2025).

Daddy! says it all. The coalition wants a military presence in Ukraine. Please Daddy! Don’t stop the war in a way that obliges Ukraine to become a neutral country (eg in the way that Austria was obliged after World War Two).

Mackinder claimed: “Who rules East Europe commands the Heartland; who rules the Heartland commands the World-Island [Eurasia-Africa]; who rules the World-Island commands the world.” (Not unlike the Muldoon political stratagem which contributed to New Zealand choosing to adopt MMP. “Who rules the Cabinet rules the Caucus. Who rules the Caucus rules the Parliament. Who rules the Parliament rules the Country.”)

Mackinder, in his later writing, emphasised the lands between the Black Sea and the Baltic Sea as the Heartland. The World Wars of the twentieth century can be seen as grabs by Germany for Ukraine, the heart of the Heartland. Which country is it today which – using ‘whatever resources it takes’ – most wants to gain effective control of all of Eastern Europe, including former Soviet republics. Who rules the European Union rules Europe. Who rules Nato rules the West. The United States’ role in Nato is diminishing. Who, who once played a back seat in Nato, is now muscling into the front row?

Let’s play Dominoes, noting that geopolitical advance is performed using various ways and means, soft power and economic power as well as hard power. From a European viewpoint, the final important dominos would be Georgia (an especially interesting prize, given the ambiguous statuses of Abkhazia as a seaside playground for Russia’s richest and South Ossetia), and maybe Belarus.

Further south, after Syria and Iran are neutralised by Israel and the United States (noting the events of 1953), there are – as dominoes for American imperialism – Turkmenistan, Uzbekistan, and Kyrgyzstan. Russia, with Belarus and Kazakhstan, would then be encircled. The geopolitical West then would be literally on China’s border; adjacent to China’s sensitive Xinjiang province (aka East Turkestan). It was Zbigniew Brzezinski’s published dream; to contain China, to effectively veto China as a ‘player’. Something like this was Brzezinski’s open conspiracy.

Conspiracy Theories

Yesterday we heard this (Donald Trump says China, North Korea and Russia ‘conspiring against’ US, BBC News, 3 Sep 2025) from the American president. Yes, he was probably baiting the media. But we have been told that only feeble-minded people believe in conspiracies. Are conspiracy theories only lulu-lala when they are espoused by anti-ruling-class people? Is it OK to laugh-off other people’s conspiracy theories while quite earnestly promoting one’s own?

I heard this just the other day on Berlin Briefing, Why military service is back on the table in Germany(14 August 2025; 28’20”); the 2029 hypothesis which is gaining all the hallmarks of a Euro-conspiracy theory. Young soldier: “For example, 2029, the date that is put there out in the room from all Nato allies…”. Nina Haase: “Hang on there, to explain what that means, the date 2029 is the date when most military experts seem to agree that Russia will be in a position theoretically to test Nato’s Article Five, so to test an attack on one of Nato’s countries to see just how Nato will react, whether the other countries will come to help, because that’s what Article Five means, an attack on one is an attack on all.”

A good reference for the 2029 story is Germany’s Army Is Rebuilding. What Could Go Wrong?, Politico, Jessica Bateman, 29 August 2025, ‘”We are now moving from a war of choice to a war of necessity,” he [Carsten Breuer, the Bundeswehr’s highest serving general] explained. From security analysis he believes Russia will be capable of attacking NATO territory by 2029, with the caveat that this depends on the outcome in Ukraine and whether the war exhausts the Kremlin’. Remember Iraq’s ‘weapons of mass-destruction’!

Nobody ever says why Russia would want to attack a Nato country in 2029 or any other year; allegations-of-evil by western soothsayers notwithstanding. Russia has never aspired to possess Western Europe, and its hegemony over Eastern Europe from 1945 to 1989 was entirely in the context of the finality of World War in Europe. The coalition of hypocrisy simply asserts this conspiracy theory as a justification for the militarisation of a near-bankrupt Old Europe, to deploy Donald Rumsfeld’s2003 putdown.

Western Europe is undergoing an Economic Implosion

France, Germany, and the United Kingdom are all now in economic crisis; in fiscal crisis. Their spending cuts led to revenue constriction, meaning that less government spending has led to bigger (not smaller, as the neoliberals presume) budget deficits. With France it’s especially political, given the present fiscal crisis, the looming presidential election there in 2027, and the lack of unifying candidates to replace Macron in that role. (Marine Le Pen, who has become a potential unifier of the non-Centre has been barred from running.) The United Kingdom government is imploding too, and for similar reasons (though Nigel Farage, continuing to espouse fiscal conservatism, remains a less likely unifier). Many people in Britain think that the Labour Government cannot survive even half of its five-year term, despite Labour’s huge majority in the House.

In Germany, there is some pressure on the right for the CDU to dump its SPD coalition partner in favour of finding common ground with the populist-right AFD. But ‘Putin’ has become the number one political issue in federal Germany, and the AFD are – at least in Merz’s eyes – ‘pro-Putin’.

In principle, Merz could revive Germany’s economy – and enhance his own political fortune – by practicing Hitlernomics; reindustrialisation through a government-spending initiative to invest in rearmament. Whatever it takes. Hitler’s popularity in the 1930s increased because he got Germans working again. But Merz has agreed to buy Germany’s weapons from the United States, so that the arm-twisting United States can make more money and less war.

Most European countries are facing radical demographic change. To fight wars, they will need to exploit immigrant labour. Of course that happened in World War Two, too. One thing we hardly ever heard about, re WW2, was Germany’s reliance on and exploitation of ‘immigrant’ slave labour. Many of the victims of the Royal Air Force in wartime Germany were in fact slaves from the places the RAF was supposedly trying to save.

It all leaves the polities of the countries which make up the coalition morally, intellectually and financially bankrupt.

The Rise of the Conservative Left

The nuanced political chatter in Europe now is about the rise of the ‘conservative left’. And, indeed, it appears that the ‘populist right’ is moving leftwards on economic policy. In practice, that will mean a return to something like Keynesian economics. To a degree this is what is keeping Giorgia Meloni popular in Italy, while the handwringers and conservatives to her north are tanking in the polls.

In New Zealand, there is one authentic party of the conservative left; New Zealand First.

The three policy-axes which determine elections are: economic (progressive [left; fiscal pragmatism] versus neoliberal [right; fiscal conservatism]); cultural [multiculturalism versus dominant-culturalism]; and geopolitical [conciliation versus belligerence re foreign states].

In Europe and elsewhere, the Left (Die Linke in Germany) is ‘progressive’ on fiscal policy, ‘progressive’ on identity politics (including open to immigration), and pro-peace. The Right (AFD in Germany) is becoming ‘progressive’ on fiscal policy, is conservative on identity politics (including immigration), and pro-peace in Europe. Two-out-of-three (potential points of agreement) ain’t bad; especially as left-identity politics is slowly giving way to ‘bread-and-butter’ issues.

So the left-Left and the right-Left may be able to ally to form future coalitions which will oust the “Saatchi and Saatchi” (to quote the late Jim Anderton, as in ‘the difference between National and Labour is the same as the difference between Saatchi and Saatchi‘) centrist legacy parties of the hitherto mainstream political class. (We note that ‘coalitions of opposites’ are not unknown to history; for example, the alliance between the West and the Soviet Union in World War Two.)

The legacy parties, though divided on cultural/identity issues (as are the new parties), are firmly neoliberal (ie fiscally conservative, claiming the virtue of balanced budgets), supportive of Ukraine, and facilitating Israel’s genocidal erasure of Palestine’s indigenous population. The legacy parties can only survive if their opposition remains divided. With the rise of the conservative left – the right-Left – such division can no longer be guaranteed.

Prediction

My sense is that, on or before 2030, there is a one-in-five chance (20%) that there will be a nuclear exchange between the world’s ‘great powers’. That ‘Third World War’ will have been caused by the last-gasp resistance – on the part of the West – to the new reality of a multipolar world order. If such a ‘last gasp of the West’ exchange does take place, my prediction is that there is a 50% chance of a mass extinction event on a scale at least as great as that of 65 million years ago. That’s a 10% chance of a mass extinction event.

Nevertheless ‘nine-out-of-ten’ (or ‘four-out-of-five’) ain’t’ bad, meaning it’s more likely than not that the world does eventually settle down. I am predicting a 50% chance that the politics of Europe will decisively shift towards the ‘conservative left’ in this half-decade (or in the 2030s, towards the radical centre, parties like TOP in New Zealand); and that there will be enough common ground between the old-left and the growing conservative left to make it possible for the two-lefts to form coalitions against the withering centre; against the diminishing hurrah of today’s elite political class. Something like this did indeed happen in the 1930s; then the creation of a coalition against fascism pushed the old conservative politics to one side.

Summary

The world is facing a dangerous moment. Sanctimony and hypocrisy are not the answers. Fraternity, trustfulness, dialogue, neutrality, sympathy; they are the qualities we need to embrace and project.

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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.

People of a certain age will be aware that the 1962 Cuba Missile Crisis was, for the world as a whole, the most dangerous moment of the Cold War. The 1962 ‘Battle of Cuba’ was a ‘cold battle’ in the same sense that the Cold War was a ‘cold war’. (Only one actual shot was fired, by Cuba.) Nevertheless, it is appropriate to ask, “who won”?

In military events hot or cold – it is surprisingly difficult to answer such a question. But it’s actually quite easy in this case.

The cold Battle of Cuba was about three countries, and three charismatic leaders: Nikita Khrushchev (Soviet Union), John F Kennedy (United States), and Fidel Castro (Cuba). Following the disastrous American invasion of Cuba in 1961, Cuba had taken on the role of a Soviet Union ‘client state’ – hence a military proxy – of the Soviet Union. (Prior to the Bay of Pigs assault, Cuba, while a revolutionary country, was not a communist country; though at least one prominent revolutionary, the Argentinian doctor Che Guevara, was certainly of the communist faith and took every opportunity to convert Cuba into a polity that followed the Book of Marx. The actions of the United States facilitated Castro’s eventual conversion.)

The situation that Khrushchev faced in late 1961 was that NATO had an installation of American nuclear-armed missiles in Turkey (now Türkiye). While Turkey had a common border with the Soviet Union – Azerbaijan, Armenia and Georgia – the missiles were essentially facing north across the Black Sea, into Ukraine and Russia. This was a clear and open – though not widely publicised in ‘the west’ – security threat to the Soviet Union.

Taking advantage of the political fallout between Cuba and the United States, Khrushchev – in an act of bravado, indeed brinkmanship – negotiated with Castro to install nuclear-capable missiles in Cuba, one of the few genuine security threats that the United States has ever faced.

The world trembled at the prospect of imminent (and possibly all-out) nuclear war. Castro looked forward to a hot battle which he was sure Khrushchev and Castro would together win. But Castro was doomed to disappointment. Khrushchev dismantled his missiles in Cuba, and Kennedy dismantled his missiles in Turkey.

So, compare, say, October 1963 with October 1961. The only real difference was that in 1961 there were American missiles in Turkey pointing in the direction of Moscow, and in 1963 there were not. Game, set, and match to Khrushchev. (And of course, the whole world was the winner, in that not a nuclear missile was fired in anger. Though the Cubans did shoot down an American reconnaissance aircraft.)

That’s not the narrative which the western world has taken on board though. In the West, it’s interpreted as a Soviet Union backdown, in the face of relentless diplomatic pressure from the Kennedy brothers (with Robert Kennedy playing a key negotiating role). Certainly, the world was on tenterhooks; brinkmanship can go disastrously wrong.

There are some analogies with the current Ukraine crisis. Though the Ukraine War is certainly a hot war.

Brinkmanship failed in 2021 and 2022. Nevertheless, Volodymyr Zelenskyy does pose as a good analogue to Fidel Castro (though not as an incipient communist!).

Donald Trump’s brinkmanship re China and the European Union

Trump’s war is a ‘trade war’, Winston Peters’ rejection of the ‘war analogy’ notwithstanding. This is a war that uses the language of war. Two longstanding mercantilist economic nations (China, European Union) and one mercantilist leader are slugging it out to see who can export more goods and services to the world; the prize being a mix of gold and virtual-gold, the proceeds of unbalanced trade.

(Historically the United States has also been a mercantilist nation, going right back to its origins as a ‘victim’ of British mercantilism in the eighteenth century. The United States has always been uneasy about its post World-War-Two role as global consumer-of-last-resort and its historical instincts towards mercantilism; an instinct that contributed substantially to the global Great Depression of 1930 to 1935. ‘Mercantilism’ is often confused by economists with ‘protectionism’, and indeed the American Smoot-Hawley tariffs of 1930 were a mix of both.)

My reading of Donald Trump is that he is a mercantilist, but not a protectionist; that he’s not really a tariff-lover, just as Khrushchev was not really a missile lover. Instinctively, China and especially the European Union are protectionist as a way of supporting their ingrained mercantilism. But a country that is ‘great again’ – in this ‘making money’ context – can prevail in a trade war without tariffs. Indeed, that’s exactly why the United Kingdom moved sharply towards tree trade in the 1840s and 1850s. England had not lost its mercantilist spots. But at the heart of an English Empire within a British Empire, London had the power to win a ‘free trade’ trade war. It was the other would-be powers – the new kids on the global block; the USA, Germany’s Second Reich, and later Japan and Russia – which turned to tariff protection in order to stymie the United Kingdom.

Trump’s super-tariffs against China and the European Union – trade weapons, economic ‘missiles’ – are designed to get those two economic nations to remove their various trade barriers that existed in 2024. Once they do that, then Trump may remove his tariff threats.

Trump is playing brinkmanship in the way of Khrushchev. Xi Jinping is Kennedy; so, in a way, is Ursula von der Leyen. Canada, in a sense, is Cuba. (Though Mark Carney may not like to think of himself as Castro!)

If Trump gets his way, the United States’ economy in 2026 will be as free as it was in 2024. The Chinese and European Union economies will have significantly fewer tariff and non-tariff import barriers than in 2024. Significantly fewer ‘trade weapons’ poised to ‘rip off’ the United States! Canada will be much the same in 2026 as in 2024, albeit with a newfound sense of national identity.

Implications for the Wider World, and the Global Monetary System

The wider world will probably not be better off with a mercantilist war, albeit a free-trade war. When hippopotamuses start dancing …!

We already see how free trade in ‘big guns’ is creating military instability in Africa and South Asia. And we must expect to see the United States’ special role as the fulcrum of the world’s monetary system dissipate if the United States significantly reduces its trade deficits; requiring some other deficit countries to take up that challenge. Canada? Australia? India? United Kingdom? A new anti-mercantilist British Empire? I don’t think so. Türkiye? Saudi Arabia? Brazil? Maybe not. Japan? Maybe. Russia? If the Ukraine war ends, Russia will struggle to import more than it exports; though I am sure that Donald Trump would like to see the United States exporting lots of stuff to Russia.

The International Monetary Fund? Maybe, but only if it changes some of its narratives. The challenge here will be for it to reform itself in line with John Maynard Keynes’ proposals at and after Bretton Woods, the 1944 conference which set itself the task of establishing the post-war global monetary order. Keynes envisaged a World Reserve Bank; though he didn’t envisage monetary policy – with New Zealand in 1989 acknowledged as the world’s lead ‘reformer’ – falling into the hands of the ‘monetarists’ and their false narratives about inflation.

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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.

‘Rational Expectations’ is a problematic theory in economics. Here I want to focus more away from economics; and more on the meanings of ‘rationality’ in decision-making, than on the problematic ambiguity of the word ‘expect’ (and its derivatives such as ‘expectations’). ‘Expectation’ here means what we believe ‘will’ happen, not ‘should’ happen; a rational expectation is a prediction, an unbiased average of possibilities, formed through a (usually implicit) calculation of possible benefits and costs – utilities and disutilities, to be technical – and their associated probabilities.

A rational decision is one that uses all freely available information in unbiased ways – plus some researched information, bearing in mind the cost of information gathering – to reach an optimal conclusion, or to decide on a course of action that can be ‘expected’ to lead to an optimal outcome to the decision-maker.

All living beings are rational to a point, in that they contain an automatic intelligence (AutoI) which exhibits programmed rationality. For most beings, AutoI is fully pre-programmed, so is not ‘intelligence’ as we would normally understand it; for others, that programming is subject to continuous reprogramming through a process of ‘learning’, true intelligence. In addition, beings of at least one species – humans – have a ‘manual override‘ intelligence (ManualI), which is our consciousness or awareness.

AutoI is an imperfect, though subversive, process of quasi-rational decision-making. Brains make calculations about optimal behaviour all the time; calculations of which we are not aware. (Richard Dawkins – eg in The Selfish Gene – would argue that these calculations serve the interest of the genotype rather than the individual phenotype.) For humans at least, full rationality means the capacity to use ManualI to override the amoral limitations of AutoI.

Rational decision-making, through learning, may be called ‘intelligence’. Though intelligence has another meaning: ‘information’, as in the ‘Central Intelligence Agency’ (CIA). It is perfectly possible to use unintelligent (stupid?) processes to gather and interpret intelligence!

Even when rational processes are used, many good decisions will, with hindsight, have inferior outcomes; or many good forecasts will prove partly or fully incorrect. It’s mostly bad luck, but also partly because intelligence is rarely completely unbiased, and partly because the cost of gaining extra information can be too high.

Expected Value, aka Expected Outcome

There is a simple rationality formula – familiar to students of statistics and of finance – which can yield a number called an ‘expected value’. In this expectations’ formula, a high positive number represents a good decision and a higher positive number represents a better decision. A negative number represents a bad (ie adverse) expected outcome, although sometimes all available expected outcomes are ‘bad’, meaning that the better course of action is the ‘lesser evil’. A positive number indicates an expected benefit, though not a necessary benefit. Negative possible outcomes represent ‘downside risk’, whereas positive possible outcomes represent ‘upside risk’.

(It is important to note that, in many contexts, a negative number does not denote something bad. A negative number may indicate ‘left’, as in the left-side of a Bell Curve; or ‘south’ or ‘west’ as in latitude and longitude. In accounting, a ‘deficit’ by no means indicates something bad, though President Trump and many others are confused on that point [see Could US tariffs cause lasting damage to the global economy? Al Jazeera 7 April 2025, where he says “to me a deficit is a loss”]; and we note that the substitution of the term ‘third world’ for ‘global south’ suggests an inferiority of southern latitudes. In double-entry bookkeeping, items must add to zero; one side of any balance sheet has negative values by necessity. A deficit, in some contexts, represents a ‘shortfall’ which is probably ‘bad’; but also a ‘longfall’ – or ‘surplus’ – is often bad, just think of the games of lawn bowls and pétanque.)

A simple example of rational decision-making is to decide between doing either something or nothing; for example, when contemplating asking someone out on a date. The expected outcome of doing nothing – not asking – has a value of zero. But, if you ask the person for the date, and you evaluate the chance of a ‘yes’ as 0.2, the utility of a ‘yes’ as +10, and the disutility of a ‘no’ as -1, then the expected value calculates to 1.2; so, the rational decision is to ask (the calculation is 10×0.2–1×0.8). This example is interesting, because the more probable outcome is a ‘no’, and a ‘no’ would make you less happy than if you had not asked the question; nevertheless, the rational decision here is to ‘take the risk’. (‘Risk averse’ persons might have rated the consequence of ‘rejection’ as a -4 rather than a -1; they would calculate an expected value of -1.2, so would choose to not ask for the date.)

Political Decision-Making when Catastrophic Outcomes are Possible

A rational calculation allocates values and probabilities to each identified possible outcome. A favourable outcome is represented by a positive number, a neutral outcome has a zero value, and an adverse outcome has a negative value.

A basic favourable outcome may be designated a value of one; an outcome twice-as-good has a value of two. An outcome an ‘order-of-magnitude’ better has a utility or happiness value of ten. The same applies to adverse outcomes; the equivalent disutility scores are minus-one, minus-two, and minus-ten.

An aeroplane crash might incur a score of minus fifty to society and minus ten million to an individual. The probability of dying in such a crash, for an individual, getting on a plane is probably about one in 100 million. If it was less than one-in-a-million, hardly anybody would get on a plane. (The chance of winning NZ Lotto first division is about one-in four-million.)

We should be thinking like this when we think about war. What kind of risk would we be willing to take? A problem is that the people who provoke wars do not themselves expect to be fatal victims.

A catastrophic outcome could range from minus 100 (say a small war) to minus infinity. An outcome which meant the total eradication of all life on Earth would come close to minus infinity. However, because of the mathematics of infinity (∞), any outcome of minus infinity with a non-zero probability yields an expectation of minus infinity. So for the following example, I will use minus one billion (-1b) as the disutility score for such a total catastrophe. A catastrophe that leads ‘only’ to human extinction might have a value of minus ten million (-10m). A holocaust the size of the 1943 RAF firebombing of Hamburg might have a catastrophe-value of minus one thousand (-1,000). A catastrophe the size of the 1932-1945 Bloodlands of Eastern Europe (which included 14,000 murders including the Holocaust, and much additional non-fatal suffering) might have an overall catastrophe-value of minus a hundred thousand (-100,000).

(Could we imagine an outcome of plus infinity: +∞? Maybe not, though certain evangelical Christians – extreme dispensationalists – pray for Armageddon; “dispensationalism views the progression of history in stages that begin in the Garden of Eden and ends in the paradise of the New Heavens and New Earth“. Thus, what might be minus infinity to most of us could be plus infinity for a few. There is an analogy of ‘wrap-around-mathematics’ in geospace; a longitude of +180° is the same as a longitude of -180°. And, in another example, some people believe that there is little difference between extreme-far-right politics and extreme-far-left politics. On this topic of extremes, the mainstream media should avoid the mindless repetition of hyperbole – as in a comment recently heard that President Trump’s tariffs may amount to an “economic nuclear winter“.)

My Example – the Ukraine War

In an example with some relevance to today, we might consider the NATO-backed ‘defence of Ukraine’. I could assign a modestly favourable outcome of +1 with a 50% probability, a very favourable outcome +10 with a 10% probability, and a catastrophic -1,000,000 with a 1% probability. (All other possibilities I will treat here as neutral, although my sense is that they are mostly adverse.) I calculate an expected value of minus 9,998.5; practically, minus 10,000; this is an average of all the identified possibilities, a catastrophic risk rather than a prediction of a major catastrophe.

This decision to persevere with the NATO-backed ‘defence of Ukraine’ is only rational if the only alternative decision – to abandon the NATO- backed ‘defence of Ukraine’ – comes up with an even lower expected value. (These two alternative decisions would be characterised by New Zealand’s former Ambassador to the United Kingdom – Phil Goff – as ‘standing up for Good in the face of Evil’ versus ‘appeasement of Putin’.) It seems to me that catastrophe becomes much less probable, in my example, with the ‘appeasement’ option than with the ‘defence’ option. (In the case that Goff was commenting on, his implication was that the 1938 ‘appeasement’ of Adolf Hitler by Neville Chamberlain led to either an increase in the probability of catastrophic war, or an increase in the size of catastrophe that might ensue.)

Morality Fallacy

One view of morality is the identification of some Other as Evil, and that any subsequent calling out of that (Evil) Other must therefore be Good. Further, in this view of morality, the claim is that, if and when hostilities break out between Good and Evil, then Good must fight to the ‘bitter end’ at ‘any cost’. (When we see Evil fighting to the bitter end – as per the examples of Germany and Japan in World War Two – we tend to think that’s stupid; but Good fighting to the bitter end is seen as righteous.)

Of course, this kind of morality is quite wrong. The idea that one must never surrender to Evil is a moral fallacy, based on the false (binary) idea that one side (generally ‘our side’) of a dispute or conflict has the entire ‘moral-high-ground’ and the other side has the entire ‘moral-low-ground’. Further, a victory to ‘Evil’ is surely less catastrophic than annihilation; a victory to Evil may be a lesser evil. Choosing annihilation can never be a Good choice.

Most conflict is nothing like Good versus Evil, though many participants on both (or all) sides believe that their side is Good. Most extended conflict is Bad versus Bad, Bad versus Stupid, or Stupid versus Stupid; although there are differing degrees of Bad and Stupid. Further, in the rare case when a conflict can objectively be described as Good versus Evil, it can never be good to disregard cost.

Morality in Practice

True morality requires a broadening of the concepts of ‘self’ and ‘self-interest’.

The important issues are benefits and costs to whom (or to what), and the matter of present benefits/costs versus future benefits/costs. In a sense, morality is a matter of ‘who’, ‘where’ and ‘when’. Is it beneficial if something favourable happens ‘here’ but not ‘there’? ‘Now’, but not ‘then’? To ‘me’ or ‘us’, but not to ‘you’ or to ‘them’.

Human ManualI is very good at inclusive morality; AutoI is not.

It is natural, and not wrong, to prioritise one’s own group; and to prioritise the present over the future. The issue is the extent that we ‘discount’ benefits to those that are not ‘us’, and future benefits vis-à-vis present benefits. And costs, which we may regard as negative benefits. A very high level of discounting is near complete indifference towards others, or towards to future. An even higher level of discounting is to see harm to others as being beneficial to us; anti-altruism, being cruel to be cruel.

Then there is the ‘straw man’ morality much emphasised by classical liberals. ‘Libertarians’ claim that certain people with a collectivist mindset believe in an extreme form of altruism, where benefits to others take priority over benefits to self; such an ethos may be called a ‘culture of sacrifice’, benefitting by not-benefitting. While this does happen occasionally, what is more common is for people to emphasise public over private benefits; this is the sound moral principle that libertarians really disapprove of.

Thus, an important part of our ‘rational calculus’ is the private versus public balance; the extent to which we might recognise, and account for, ‘public benefits’ in addition to ‘private benefits’.

So, when we complete our matrix of probabilities and beneficial values, what weight do we give to the benefits that will be enjoyed by people other than ourselves, to other people in both their private and public capacities. Should we care if another group experiences genocide? Do we gloat? Should we empathise, or – more accurately – sympathise, and incorporate others into a more broadly-defined ‘community of self’?

If we have a war against a neighbouring country, should we care about how it affects other more distant countries through ‘collateral damage’? Should we care about a possible catastrophe if it can be postponed until the end of the life-expectancy of our generation? Should we care about the prosperity of life forms other than our own? Should we care about the well-being of our environments? Should we care more about our ‘natural resources’ – such as ‘land’ – than we care about other people who might be competing for the use of those same resources? If we have knowledge that will allow us to make improvements to the lives of others so that they catch up to our own living standards, should we make that knowledge public and useful? Should we account for the well-being of people who live under the rule of rulers who we have cast as ‘Evil’ (such as the burghers of Hamburg in 1943)?

One important morality concept is that of ‘reciprocation’. If we accept that others have the right to think of us in ways that compare with how we think of them, then we must value their lives much as we value our own lives. If I live in Auckland, should I value the life of a person who lives in New Delhi nearly as much as I value the life of someone who lives in Wellington? I should if I expect persons in Mumbai to value my life nearly as much as they value the lives of people in New Delhi.

Reciprocal morality can easily fail when someone belongs to a group which has apparent power over another group. We may cease to care whether the other group suffers our wrath, if we perceive that the ‘lesser’ group has no power to inflict their wrath onto our group. We may feel that we have immunity, and impunity. They should care about us, but we need not care about them.

It is through our ManualI – our manual override, our consciousness, our awareness – that we have the opportunity to make rational valuations which incorporate morality. Our AutoI, while rational in its own terms, is also amoral. We can behave in amoral self-interested ways – even immoral ways – without being aware of it. Our automatic benefit-cost analyses drive much of our behaviour, without our awareness; we cannot easily question what drives our Auto-Intelligence.

Our AutoI systems may – in evolutionary terms – select for degrees of ignorance, stupidity, blindness as ways of succeeding, of coping. AutoI protects us from having to face-up to the downsides of our actions and our beliefs; especially downsides experienced more by others than by ourselves. And they tell us that we are Good, and that some others are Bad.

Pavlovian Narratives

We come to believe in other people’s narratives through habit or conditioning. AutoI itself has a cost-cutting capacity that allows speedy decision-making; it adopts reasoning shortcuts, in the context that shortcuts save costs. We build careers – indeed our careers as experts in something – by largely accepting other people’s narratives as truths that should not be questioned and that should be passed on. We enjoy belonging to ‘belief communities’; and we are ‘pain-minimisers’ at least as much as we are ‘pleasure-maximisers’; it may be ‘painful’ to be excluded from a community. We too-easily appease unsound public-policy decisions without even knowing that we are appeasing. We turn-off the bad news rather than confronting it.

Our beliefs are subject to Pavlovian conditioning. And one of the most painful experiences any human being can suffer is to have beliefs cancelled as ‘stupid’. So we unknowingly – through AutoI – program our auto-intelligences to protect our beliefs from adverse exposure; and, if such protection fails, to denounce those who challenge our belief-narratives.

One form of cost-cutting-rationality is ‘follow-the-leader’. It’s a form of ‘conclusion free-riding’. We choose to believe things if we perceive that many others believe those things. An important form of ‘follow-the-leader’ is to simply take our cues from authority figures, saving ourselves the trouble of ‘manual’ self-reasoning.

With AI – Artificial Intelligence – we delegate even more of our decision-making away from our moral centres, our consciousnesses, our manual overrides. We allow automatic and artificial intelligence to perform ever more of our mental labour. It’s more a matter of people becoming robot-like than being replaced by robots.

Pavlovian rationalisation is heavily compromised by unconscious bias. Beliefs that arise from uncritical ‘follow-the-leader’ strategies are unsound. They lead us to make suboptimal decisions.

Why War?

Many people, including people in positions of influence, make decisions that are sub-rational, in the sense that they allow auto-biases to prevail over reflective ‘manual’ decision-making. There are biases in received information, and further biases in the way we interpret/process information.

Unhelpful, biased and simplistic narratives lead us into wars. And, because wars end in the future, we forever discount the problem of finishing wars.

When we go to war, how much do we think about third parties? In the old days when an attacker might lay-siege to a castle, it was very much ‘us’ versus ‘you’. But today is the time of nuclear weapons, other potential weapons of mass destruction, of civilian-targeting, and drone warfare. Proper consideration of third-parties – including non-human parties – becomes paramount. A Keir Starmer might feel cross towards a Vladimir Putin; but should that be allowed to have a significant adverse impact on the people of, say, Sri Lanka; let alone the people of Lancashire or Kazan?

Proper reflective and conscious consideration of the costs and benefits of our actions which impact on others should be undertaken. Smaller losses are better than bigger losses, and the world doesn’t end if the other guy believes he has ‘won’. Such considerations, which minimise bias, do allow for a degree of weighting in favour of the protagonists’ communities. But our group should never be indifferent to the wellbeing of other groups – including but not only the antagonist group(s) – and should forever understand that if we expect our opponents to not commit crimes, then we should not commit crimes either.

War escalates conflicts rather than resolves them. And it exacerbates other public ‘bads’ such as disease, famine, and climate change. War comes about because of lazy unchecked narratives, and unreasoned loyalty to those narratives.

Further Issues about Rational Expectations:

Poor People

It is widely believed by middle-class people that people in the precariat (lower-working-class) and the underclass should not gamble; as in buying lottery tickets and playing the ‘pokies’. But ‘lower-class people’ generally exhibit quite rational behaviour. In this case, rare but big wins make a real difference to people’s lives, whereas regular small losses make little difference to people already in poverty or in poverty-traps.

The expected return on gambling is usually negative, though the actual value of a big-win cannot simply be measured in dollar-terms. $100,000 means a much greater benefit to a poor person than to a rich person. Further, the expected value of non-gambling for someone stuck in a poverty-trap is also negative. It is rational to choose the least-negative option when all options are adverse.

Policy Credibility

Here I have commented about the rationality of decision-making, and how rational decisions are made in a reflective, conscious, moral, and humane way. However, there is also an issue around the meaning of ‘expectations’. While the more technically correct meaning of expectation is a person’s belief in what will happen, the word ‘expectation’ is also used to express a person’s belief in what should happen.

(An expectation can be either what someone will do, or should do. Consider: ‘Russia will keep fighting’ and ‘Russia should stop fighting’. To ‘keep fighting’ and to ‘stop fighting’ are both valid expectations; though only the first is a rational expectation from the viewpoint of, say, Keir Starmer; the second is an ‘exhortation’.)

The phrase ‘rational expectations’ is used most widely in the macroeconomics of interest rates and inflation. The job of Reserve Banks (‘central banks’) in the post-1989 world is to condition people (in a Pavlovian sense) into believing that an engineered increase in interest rates will lead to a fall in the inflation rate. This is called ‘credibility’. The idea is that if enough people believe a proposition to be true, then it will become true, and hence the conditioned belief becomes a rational belief. If people come to believe that the rate of inflation this year will be less than it was last year – however they came to that belief – then it should dowse their price-raising ardour; it becomes a contrived ‘self-fulfilling prophecy’.

War

The same reasoning may be applied to warfare. If, by one side (especially ‘our’ side) talking-tough (and waving an incendiary stick), people on both sides believe that the other side will dowse its asset-razing ardour (due to fear or ‘loss of morale’), then the belief that a war is more-likely-to-end may in itself lead to a cessation of hostilities. While unconvincing, because humans are averse to humiliation, it’s an appeal to ‘our’ AutoI (automatic intelligence) over our less credulous ManualI (manual override, our reflective intelligence). It’s the ‘credible’ ‘tough-man’ (or iron-lady) narrative. In this sense, Winston Churchill was a credible wartime leader.

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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.

While World War Two (WW2) always was a set of intersecting conflicts – with Japan fighting a war of imperialism in East Asia and the Western Pacific – the war in Europe has been cast as the ultimate battle of ‘Good’ versus ‘Evil’. Hence the narrative of the Good War. Further, it has been personalised, with Adolf Hitler becoming the personalisation of Evil and Winston Churchill the personalisation of Good.

It always was nonsense. Wars are fought over territories and hegemony, between various peoples (nationalities), empires, religions, ideologies etc.; in the vast majority of cases between Bad and Bad, albeit various shades of bad (although the Hitler’s Nazis and Joseph Stalin’s Communists were close to having been equally Bad). The Bad versus Good narrative remains compelling to the human mind, however. Once you can find a compelling Evil – without or within, over there or over here – then our brains want to tell us that whoever opposes that ‘bad’ must be ‘good’. (In the old days, the ‘good’ said: ‘God was on our side’. Typically, their opponents thought something similar.)

Winston Churchill was neither a Good leader nor a competent leader. He didn’t start WW2, though there is an argument that the United Kingdom did. Nevertheless, Churchill, as a charismatic rhetorician and narcissist, had some sway over political discourse in Britain for half a century. (His important career began in 1904, when he became a party-hopping backbencher. He resigned from his second stint as Prime Minister in 1955; he was an MP for 61 years, and PM for 9 years.) That’s why there are so many more cited quotations from him than from any other British back-bench MP in the late 1930s.

Churchill, as a war-leader, was an ultra-imperialist who fought imperialist wars under the cover of World Wars One and Two. He was responsible for numerous atrocities, including appeasements of Stalin that were more problematic than Neville Chamberlain’s appeasement of Hitler in 1938. In his speeches in 1938 and 1939, Churchill may have been alluding to Eastern Europe, but he was thinking about Italy and its threat to British ‘assets’ in and around the Mediterranean Sea.

WW2: Germany versus Soviet Russia, with the United Kingdom as stoker and as kingmaker

World War Two was round two of the Germany versus Russia conflict; this time as ‘Nazi’ Germany against ‘Communist’ Russia, the Third Reich versus the Soviet Union. The centrality of the Germany versus Russia conflict – indeed a conflict between them for the territories of Ukraine and the oilfields to the southeast of Ukraine – becomes more apparent when WW1 and WW2 are seen as one. World War One clearly started as a conflict between Germany and Russia; albeit triggered as a conflict between proxies, Austria and Serbia. And World War Two ended with the defeat of Germany by Soviet Russia; and after the entry of Russia into the Pacific War (which henceforth became the Cold War between Soviet Russia and the United States of America).

Technically, WW2 became a world war (rather than a regional war) when the United Kingdom and France (and their empires) ‘declared war’ on Germany on 1 Sep 1939. The trigger issue was the possibility of Germany invading Poland. But what mischief was the United Kingdom upto with distant Poland? Why did a British ghost-war go horribly wrong? And why did open warfare between the two principal belligerents in Europe – Berlin and Moscow – not commence until June 1941?

My reading of British and French ‘diplomacy’ between March and August 1939 is that these notional allies, United Kingdom in particular, wanted there to be a major regional showdown between Berlin and Moscow; both powers would be substantially weakened as a result, thereby enhancing British and French control of the Mediterranean and the ‘Middle East’.

The British and the French ‘tried’ to do a deal with Stalin, in March 1939, with respect to protecting Poland from German aggression. (On 15 March 1939, Germany annexed the Czech part of Czechoslovakia.) They revealed their military weakness (especially Britain’s), or at least the paucity of the military contribution they were willing to make towards the security of Poland.

Britain and France subsequently went on to sign a treaty guarantee with Poland; a guarantee that both would declare war against Germany if Poland was attacked by Germany. Stalin already knew that the United Kingdom would not back-up such a declaration with any action to defend Poland.

The reason for the guarantee appears to have been to deter Poland from negotiating a peace deal with Germany. Further, Britain was maintaining diplomatic communication with Germany until August 1939. The inference would appear to be that Britain was trying to start a ‘nothing-war’ between itself and Germany, while stoking a ‘something war’ between Germany and Soviet Russia. Britain had no intention of doing anything in Poland, and was expecting that France would provide a substantial defensive barrier between Germany and Great Britain; this was all in the context that Britain and France would be helping their own security by nudging Germany into ‘pushing’ East (as was always Germany’s apparent plan) rather than ‘West’.

However, Britain and France were nonplussed by the non-aggression pact – the Molotov-Ribbentrop Pact – signed between Moscow and Berlin in the last week of August 1939. Further, there was a secret sub-pact. Moscow and Berlin would carve up Poland, and which effectively – and subsequently – meant the Soviet annexation of Lithuania, Latvia and Estonia. Germany invaded Poland on 1 September 1939, activating that secret deal. Despite having nineteenth-century precedents for a pragmatic backing out from a signed-up deal, the United Kingdom and France – at least notionally – honoured their guarantee and declared war on Germany.

For France, this meant further shoring-up of its border with Germany, and – virtue signalling –making a small and brief incursion into Germany (the Saar Offensive). For Britain it meant further rearmament, but really to build up its navy to shore up its imperial interests, and building up its Air Force to defend itself from possible German attack. And it sent an army into France, as a show of support for France, more to be seen to be doing something than to actually be doing anything.

But the clear sense is that Britain still expected Germany to negotiate peace with Britain while consolidating its annexations of the Czech lands and Poland. The ‘phoney war’ proceeded, though it was far from phoney to the people of Poland and other Eastern European countries. The United Kingdom was launched into war proper in May 1940, with the lightning conquest of France by Germany, a conquest made possible by Germany’s temporary truce with the Soviet Union. (Though that was preceded, by a month, by Germany’s invasion of Norway; a matter for Britain’s navy rather than army.)

Adolf Hitler abandoned the Molotov-Ribbentrop Pact in June 1941, embarking Nazi Germany on a full-scale invasion of the Soviet Union, his main plan all along. He had secured his western border in 1940; though his plans were somewhat scuppered by a need to attend to the military failings of Mussolini’s Italian forces in the Eastern Mediterranean, hence the war in Greece which involved New Zealand.

The Bloodlands and their toll of political murder: 1932-1945

The atrocities of the Nazis took place during a world war; those of Stalin were mostly during peace-time. Timothy Snyder, in his 2010 book Bloodlands, “conservatively” estimates that fourteen million civilians and prisoners-of-war were politically murdered in a set of contiguous territories – between Germany and Russia-proper – by either the Moscow-based Soviet Communist regime or the Berlin-based National Socialist regime. This includes ‘The Holocaust’, or at least most of it.

As real estate, Snyder defines the Bloodlands as the pre-WW2 territories of Ukraine and Belarus (within the Soviet Union), Poland, the Baltic States (Lithuania, Latvia, and Estonia), and the part of Russia close to Leningrad (now St Petersburg). The murders included in his tally were inflicted by deliberate starvation, guns, and gas. The cases of starvation were not due to famine in the conventional sense of that term. In the Ukrainian ‘famine’ of 1932/33, the food grown on Ukrainian farms – among the most productive lands in Europe – was confiscated and exported to Russian cities and to other countries in return for foreign currency. In the Siege of Leningrad – 1941 to 1944 – the German military prevented food from entering the city.

The worst-affected areas of the Bloodlands are today in western Ukraine and western Belarus. This land was in Eastern Poland before World War Two, and therefore in the Soviet-annexed territories of pre-war Poland. These lands were annexed or occupied by the Soviet Union in 1939, Germany in 1941, and the Soviet Union again in 1944. Each annexation saw its own round of political mass murder.

The murders of citizens of Poland and the Soviet Union took place on a vastly larger scale than any comparable atrocities committed on West Europeans; including the Holocaust, for which the vast majority of victims were Jews resident in Eastern Europe (not Germany; not the West). Snyder summarises the Bloodlands murder toll as:

• 3.3 million deliberately starved mostly in Ukraine in the 1932/33 Holodomor
• 0.7 million murdered in the Great Terror of 1937/38
• 0.2 million murdered in occupied Poland in 1939-1941 (disproportionately highly educated people; many killed by the notorious Einsatzgruppen, Nazi loyalists with PhD degrees)
• 4.2 million Soviet citizens starved by German occupiers in 1941-1944
• 5.4 million Jews (mostly Polish or Soviet citizens) shot or gassed by Germans in 1941-1944
• 0.7 million citizens (mostly Belarussians or Poles) shot by Germans in reprisals in 1941-1944

To what extent would have these (or equivalent numbers of) deaths have happened anyway, regardless of how the war actually started in Poland? Stalin’s victims, mostly already dead, represented about 40 percent of these fourteen million. The majority of Stalin’s victims were killed in the Ukrainian Holodomor which peaked in 1932 and 1933; or in the Great Terror of 1937 and 1938, which targeted the ‘kulak’ class of peasants and former peasants, ethnic Poles, and Russia’s political class (including many Bolshevik allies of the paranoid Stalin; communists who had come to be seen as potential threats to him).

Before September 1939, Hitler’s attempts at political murder were puny at best, when compared to Stalin’s ‘peace-time’ terror campaigns. Stalin murdered Soviet citizens. So, to a large extent did Hitler; Hitler killed comparatively few Germans, before or during the war.

Those who died in the Bloodlands after August 1939 might have experienced different fates had the war not been started then and there. Certainly, in 1940, a group of Hitler’s scientists – led by a leading agronomist – devised the ‘Hunger Plan’, which, if implemented in full, would have led to the murder of thirty of forty million Soviet citizens, to be replaced by German Aryan settlers. (While Hitler used ‘capitalist’ and ‘communist’ Jews as convenient scapegoats, Nazi racism should be understood as pro-Aryan rather than specifically anti-Jewish.) This was probably a racist and supremacist Nazi fantasy, unlikely to be able to be realised in full, and which was not prevented by the declaration of war by the United Kingdom against Germany in 1939.

It’s hard to see that the eventual victory of the Soviet Union over Germany in 1945 made the world a better, freer or more democratic place than it otherwise would have been; with fewer deaths and sufferings after 1939 than there actually were. Would a German victory over the Soviet Union have led to a less inhumane outcome for many millions of people, in the Bloodlands and elsewhere? We’ll never know, but it’s possible. It seems unlikely that the extremes of German National Socialism could have lasted for as long as the extremes of Soviet and Maoist Communism. And we know that most oppressive regimes do come to an end eventually; just as Hitler thought the Third Reich was forever (or for 1,000 years), so did Stalin and his successors believe of the Soviet Union.

World War Two morphed into the Cold War

Mostly, the Cold War – between the United States and the Soviet Union, and their proxies and alleged proxies – was ‘fought’ between the First World and the Second World; but its many victims were mostly in the ‘Third World’, now called the ‘Global South’. The way the Pacific War morphed into the Cold War is glaringly obvious, with the nuclear attack on Japan by the United States representing the end of the one war and the beginning of the next. (And note The bombing of Hamburg foreshadowed the horrors of Hiroshima.)

The Cold War began in Europe too, when the ‘victorious’ western ‘powers’, most particularly the United States, ‘suggested’ that the Russian ‘liberators’ of Eastern Europe were planning to overrun Western Europe as well (and turn the conquered into ‘communists’). The result was a tensely divided Europe until 1990, unnecessarily so; many European lives were blighted by politico-military suppression for 45 years. Further, that east-west divide has reappeared; just look at the results of the recent general election in Germany.

Finally, the costs ain’t over yet

Just as the World War came in two episodes, so too is the Cold War now in its second episode. (In the case of the World War, the second episode was explicitly ideological; communism versus fascism. In the Cold War, it was the first episode that was explicitly ideological; communism versus liberal capitalism.) Further, with signs that the United States might be withdrawing early, the second Cold War (CW2?) is looking like becoming, at its core, the Fourth Reich (aka the European Union) versus Russia (the new Russian Empire?), and with the territories of contention once again being Ukraine and the Black Sea.

The World War could have ended in 1918 or 1919 after the Great War (later known as World War One) – understood then to be the ‘War to End All Wars’ – if the ‘great powers’ had learned the appropriate lessons. Sadly, the ‘powers-that-were’ and the ‘powers-that-would-be’ learned, if anything, the wrong lessons. World War Two was not a Good War; it was grubbier and crueller than probably all its predecessors, and all sides – including the Anglo-side – contributed to that grubbiness and cruelty.

Imperialism was very much the problem, not the solution. The ‘rules-based-world-order’, devised in 1919 by the then-victorious powers – shonky new-nation national-borders and all – proved to be just another variation of great-power imperialism. We live in a world today of powers (some more ‘super’ than others), their proxies, and nations in the Global South saddled with borders which ensure forever conflicts.

We live in a world in which the Global West sees itself as morally and culturally superior, even though manifestly it isn’t. And we live in a world in which the Global East – in its various ethnic and cultural shades – rejects the supremacist assumptions and liberal presumptions of the West. And we live in a world in which those powers gamble with global war, just as the British gambled in 1939. And we live in a world in which the militaries contribute vastly to very real climate change, partly from military emissions of greenhouse gasses, partly because the immediate (eg 2020s) security concerns of the world outweigh concerns about the climate future (eg 2040s) concerns, and partly because we behave as if the goals to prevent or adapt to global warming are unwinnable.

There is a lot happening in the world at the moment, including tensions within Europe that would lead few people to be confident that – in 2050 – the present political architecture of Europe would still exist. Germany coveted Ukraine in the first half of the twentieth century. Indeed, Germany occupied Ukraine in 1918 and in the middle years of World War Two. Will the second quarter of the twenty-first century once again see German control of Ukraine? I wouldn’t bet against it. I see a stronger belligerence today in Germany towards having influence in Ukraine than I see in any other western country.

The biggest threat to peace is war; not Russia, not China, not Germany, not the United States of America, not Iran, not the hapless United Kingdom. Wars are a problem, not a solution.

The worst things happen during wars, or as a result of wars. There is one important exception. As we have seen, the Soviet Union – a Marxian ‘scientific utopia’ – destroyed many of its own people in the 1930s, in ‘peacetime’, and while the liberal world was looking the other way. Something similar, maybe worse, happened in China in the 1960s.

The lessons to learn are: avoid war, and the drum-beating that precedes it. And avoid technocratic utopian groupthink; avoid ideologies masquerading as science. The Nazi Hunger Plan was devised by an agronomist, Herbert Backe. War leads to such ideologies; and such ideologies lead to war.

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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.

Former ambassador Phil Goff is the latest (so far) and (probably) the least of many ‘statesmen’ who have invoked Munich and the ‘resolute’ Winston Churchill (a backbench MP in 1938) in the cause of good-war mongering. (Refer Winston Peters sacks Phil Goff as UK High Commissioner RNZ 6 March 2025, and What Was Actually Wrong With What Phil Goff Said?, Giles Dexter, RNZ and Scoop, 7 March 2025.)

The Munich narrative is central to the ‘Good War’ morality trope, through which democracies (especially the United States) justified wars of aggression; what used to be called ‘gunboat-diplomacy’ in the British days of empire. It’s the now-commonplace narrative that frames any putative war to be fought by a ‘liberal democracy’ against an ‘autocracy’ (ie fought by us against them) as a contest between Good and Evil; and if we don’t “stand up to” Evil – anywhere and everywhere – then Evil goes on to ‘win’, and subsequently to dominate and exact tribute as a regional or global hegemon.

The corollary of the Munich narrative is that Good should never give up, even if Evil is winning on the battlefield; Good neither surrenders to Evil nor negotiates with Evil. Not ‘at any cost’. The logical conclusion of this is that, if that’s what it requires for Good to prevail, life on Planet Earth could be forfeit; better Dead than Red or Black. Earth’s tombstone, left for a future intergalactic explorer to discover, might read: “At Least ‘Atila the Hun’ [substitute any Eurasian ‘Devil’] Did Not Win”. Peter Hitchen (see below, p.27) notes: “one day, this dangerous fable of the glorious anti-fascist war against evil may destroy us all [through our rulers’ vanity]”.

Phil Goff is an example of persons who know just enough fragments of popular history to think they can use a historical argument to substantiate their rhetoric. A little knowledge is a dangerous thing, meaning that superficial knowledge may be more problematic than ignorance. On the Munich question, Phil Goff is in good company. Peter Hitchens, in The Phoney Victory (p8, p20), cites the former Prince of Wales (now King) as making the same mistaken views about World War Two and the Ukraine-Russia War, as moral crusades.

(Meanwhile, as well as trying to cut disability benefits as a result of boxing itself into a corner, Keir Starmer UK government – unlike the political leadership of Canada and the European Union – is doing everything it can to appease Donald Trump on international trade and other matters.)

For readers’ interest, Stevan and Hugh Eldred-Grigg have written a New Zealand take on World War Two that does not follow the ‘Good War’ trope: Phoney Wars: New Zealand Society during the Second World War, Otago University Press 2017.

Were Neville Chamberlain’s actions at the September 1938 Munich Conference wrong?

No, neither with foresight nor hindsight. If Britain and/or France had signed a pact with Czechoslovakia similar to the one they signed with Poland in 1939, they would have been committed to declaring at most a phoney war. Neither had the capacity to wage war on Germany nor to come to Czechoslovakia’s aid. At best, British hostilities against Germany in 1938 would have been as ineffective as they were in Archangel, Russia, in 1918.

Popular sentiment was absent in 1938 in the United Kingdom towards war with Germany. That situation had changed by March 1939 after Germany fully annexed Bohemia and Moravia, the territories that make up twenty-first century Czechia. Due in part to changed popular sentiment, the British and French responded differently when Poland was similarly threatened in 1939. The western ‘powers’ declared war on Germany following the first attack on Poland, but did almost nothing to fight Germany or to protect Poland during what became known as the ‘Phoney War’. (The phoney war ended with the German conquest of France in May 1940.)

The 1939 declaration of war was arguably more duplicitous than the 1938 declaration of peace. Poland’s half-century-long tragedy – far worse than anyone today, except for a few professional and amateur historians, realise – began to unfold. (France briefly invaded Germany’s Saarland in 1939, southeast of Luxembourg, before withdrawing. Nowhere near Poland.) The war in 1939 in Poland, remote to the United Kingdom, was far from ‘phoney’.

Examples of invoking or evoking ‘appeasement’ and /or ‘Munich’ and/or Churchill on behalf of ‘democracy’:

Peter Hitchens gives these post-WW2 examples (pp.13-17):

• President Harry S Truman, in December 1950, re the continuation of the Korean War
• Anthony Eden, 1956, to justify the Suez War (which first brought Israel into an external war of aggression)
• President Lyndon Johnson in July 1965, justifying the escalation of the Vietnam War
• US Secretary of State George Shultz in February 1984, re conflict in Nicaragua
• US Deputy Secretary of State, Lawrence Eagleburger, in August 1989, before the US invasion of Panama
• George Bush (senior) in June 1990, re the first war against Iraq (noting that the initial response to the immanent invasion of Kuwait was not unlike Churchill’s lesser-known response in 1938, to the German reoccupation of the Rhineland [“more talks”])
• Bill Clinton’s 1999 comparison of Slobodan Milosevic to Hitler, in the context of the probable secession of Kosovo from Milosevic’s Serbia
• UK Prime Minister Tony Blair, in 2003, justifying the second invasion of Iraq
• President Trump’s aids in June 2017, referring to Barack Obama’s Cuba initiative

Winston Churchill’s worst Appeasement, and Atrocities

The worst act of appeasement that I can think of was Winston Churchill’s kowtowing to Joseph Stain at Yalta (Crimea) in the second week of February 1945 (ref Hitchens p.6 and Wikipedia citing Leo McKinstry, “Attlee and Churchill: Allies in War, Adversaries in Peace”, Atlantic Books, 2019, Ch 22). According to McKinstry “When Churchill arrived at Yalta on 4 February 1945, the first question that Stalin put to him was: ‘Why haven’t you bombed Dresden?’.”

Ten days later, Churchill did indeed firebomb Dresden, immolating 25,000 people – mostly civilians and refugees. Stalin (metaphorically) said “jump”, Churchill said “how high?”. And Churchill delivered.

Dresden was far from Churchill’s only actual or intended atrocity. Operation Gomorrah, on Hamburg at the end of July 1943, was a worse 24-hour atrocity than Dresden. The malevolent intent of that ‘raid’ lies in the biblical name given to the operation. While it was largely a test-run and forerunner for later bombings – including a forerunner of the firebombing of Tokyo exactly 80 years ago – it killed more than 35,000 mostly civilians “in their homes”.

(As a single event the firebombing of Tokyo on the night of 9 March 1945 – Operation Meetinghouse – caused easily more deaths [100,000] than Dresden, Hamburg, Hiroshima [70,000] or Nagasaki [35,000]. In the mainstream media, I saw no 80th-anniversary commemoration stories of this ‘worst-ever in the history of the world’ attack on civilians. Now is a timely time for us to be reminded about this kind of aerial megadeath.)

The third Churchill atrocity to mention was the Bengal famine of 1943, which killed three million people. Encyclopedia Britannica says that “the 1942 halt in rice imports to India did not cause the famine, and the 1943 crop yield was actually sufficient to feed the people of Bengal. It was ultimately special wartime factors that caused this difficult situation to become a disastrous famine. Fearing Japanese invasion, British authorities stockpiled food to feed defending troops, and they exported considerable quantities to British forces in the Middle East”. Churchill’s atrocities have been justified on the basis that the casualties were to them while saving some of our lives. But the people of Bengal were, at least notionally part of us, citizens and civilians of the British Empire.

In Wikipedia: “Madhusree Mukerjee makes a stark accusation: “The War Cabinet’s shipping assignments made in August 1943, shortly after Amery had pleaded for famine relief, show Australian wheat flour travelling to Ceylon, the Middle East, and Southern Africa – everywhere in the Indian Ocean but to India.” Indeed, Bengal was required to export rice to Ceylon to support British naval operations there. Of Churchill’s major atrocities, this was the only one to be mentioned in Netflix’s recent over-the-top account Churchill at War.

The Netflix ‘docuseries’ does at least mention Churchill being sidelined by the Americans in late 1943 and 1944. Churchill was sidelined from the top table of war-command largely on the basis of his penchant for atrocities and his unwillingness to confront Germany head-on (an unwillingness that could have been interpreted as ‘appeasement’, and probably was understood as such by the Americans). Churchill indulged in a number of side-wars, including a successful invasion of Madagascar in 1942; an invasion that put paid forever to the 1940 German fantasy of resettling Eastern European Jews there.

The Americans took much longer than Churchill to become convinced about the merits of holocaust-scale bombing than did the British. It would seem that the British burning of Hamburg – which was bombed because it was there, easily accessible from Britain – left quite a bad taste upon some American commanders, and indeed upon President Roosevelt himself. (We note that the atrocious American incendiary bombings of Japan in March 1945 were undertaken after Harry Truman became Vice President, and in the context that Roosevelt was seriously ill, and died soon after the February Yalta ‘Peace’ Conference.)

Churchill’s final atrocity to mention here never actually happened, except to create an environmental disaster on a Scottish Island (Gruinard, Britain’s mysterious WW2 ‘island of death’ Myles Burke, BBC, 22 April 2024). It partly explains some of Churchill’s reticence towards the D-Day invasion of Occupied France. Churchill had another plan, which he seems to have kept secret from his Allies: biological warfare, Anthrax.

“The plan was to infect linseed cakes with Anthrax spores and drop them by plane into cattle pastures around Germany. … The proposed plan would have decimated Germany’s meat supply, and triggered a nationwide anthrax contamination, resulting in an enormous [civilian] death toll. … The secret trials carried on until 1943, when the military deemed them a success, and scientists packed up and returned to Porton Down. As a result, five million linseed cakes laced with Anthrax were produced but the plan was ultimately abandoned as the Allies’ Normandy invasion progressed, leading the cakes to be destroyed after the war.” The test programme on Gruinard was cynically called ‘Operation Vegetarian’. “Gruinard was not the only site where the UK conducted secret biological warfare tests, but it was the first. The consequences of what happened there stand as a grim testament to both the dangers of biological warfare and humanity’s capacity for destruction.”

Have Bill Clinton and subsequent US presidents drawn inspiration from Brezinski’s 1997 essay as a clarion call for world domination?

Zbigniew Brezinski’s call for US world hegemony seems not much different to what Richard Evans claims was Hitler’s aim: “Hitler’s obvious drive for European and eventually world conquest.” (Zbigniew Brzezinski, “A Geostrategy for Eurasia,” Foreign Affairs, 76:5, September/October 1997; review of Peter Hitchens’s Eurosceptic take on the Second World War, by Richard J Evans, New Statesman, 26 Sep 2018.)

Evans’ claim about Hitler is obvious hyperbole; Germany never could have had the capacity to “conquer” the world. (Think of the socio-geographic limits to the Roman Empire.) But the Nazi imperial vision for Germany was to create a mega-state in Central Eurasia that would have hegemony over the rest of the world. Is there any country in the twentieth or twenty-first century which has sought such ‘unipolarity’; sought to be the world’s one-and-only superpower, which expects other countries to say “how high?” whenever it says “jump”?

Perhaps there is? Did Brezinski – Henry Kissinger’s 1970s’ foreign policy rival – spell it out in 1997?

Finally

‘Appeasement’ is like ‘Antisemitism’; the powers-that-be only have to say either word to silence commonsense debate about peace and war and genocide. As Hitchens points out (p.27): “We have mythologised the experience so completely that [politicians] only have to say the word ‘appeasement’ to silence opponents and bring legislators and journalists to their side, on any wild adventure.” Phil Goff is a hapless victim of what Joseph Mali and Shlomo Sand have called “mythistory”.

Wars since the 1930s are no more ‘moral’ than were wars before that time. (Indeed, if we wish to personalise it, WW2 at its core was a war between Hitler and Stalin; neither men are commonly described as ‘moral’.) In fact, recent wars are less moral. WW2 became the first major war in which civilians were actively targeted as a predominant military gambit. This approach to war is now becoming entrenched, with drones replacing soldiers, and civilians evermore in the firing line.

We should not be coerced into supporting wars on the basis of narratives by powerful know-not-much persons or cliques dropping words like ‘appeasement’, ‘Munich’, ‘Churchill’ or ‘Hitler’. Wars are very costly, but the costs are not usually paid – at least in the short term – by those elites who promote them from far away.

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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.

This story, Germany to ease government debt limits in major step aimed at boosting economy, defense spending,AP, 6 March 2015, reflects my comments in Germany’s Election 2025. (And note Reforming the debt brake: Now or never! Landesbank Baden-Württemberg, 28 Feb 2025. And Germany’s election victor must ditch its debt rules—immediately, The Economist 24 Feb 2025. These are gung-ho stories.)

The plan in Germany is to use the ‘lame-duck’ Parliament that was voted out on 23 February 2025 to alter that country’s constitution. To do this, a two-thirds majority is required in Parliament, and the Chancellor-elect (Friedrich Merz) believes he will not be able to get such a majority in the new parliament, which convenes at the end of March.

To achieve this change in Germany’s constitution, the provisional coalition (CDU/CSU/SPD) will need the support of either the Green Party (in the new parliament) or the ‘liberal’ (ie like New Zealand’s ACT) Free Democratic Party (who will not feature in the new parliament). Hitherto – before 2025 – the CDU, the FDP, and the SPD, were the main supporters of the debt brake. They understood it – in 2009, when it was added to the Constitution – as a means of hobbling any future government which might oppose fiscal austerity; as a means of baking-in, for all foreseeable time, their particular macroeconomic philosophy.

(New Zealand, though with a less formal constitution, has the 1989 Reserve Bank Act and the 1994 Fiscal Responsibility Act effectively baked in. And for similar reasons; to make it extremely difficult for a future government to undertake reforms similar to the very popular macroeconomic policies that were implemented, and successful, in the late 1930s.)

Germany has less than two weeks to break its self-imposed shackle. If they miss that deadline, if they have to use the new parliament, they will have to do something like what Adolf Hitler did in 1933 with the Enabling Act. The irony is that the parties expected to vote against the emergency measure will be the parties – strong in Eastern Germany – who, if in power, would benefit most from a general release of the debt brake.

For the Green Party it will be a case of ‘Which side are you on?’; the Establishment or the Anti-Establishment? This vote may be ‘make or break’ for the German Greens. Historically, the Greens have been opposed to the use of the debt brake to hobble progressive domestic policies. Will they now favour a piece of unprincipled political manoeuvring so that Germany can put itself in a position to make war on Russia or in support of Israel?

A Case for Comparison: New Zealand’s ‘Constitutional Crisis’ of 1984

Robert Muldoon was New Zealand’s caretaker Prime Minister in the week of so after his political defeat in the 14 July 1984 election. The constitutional crisis unfolded the following Monday.

Before and during the election campaign, the Labour Party’s ‘Finance Minister in Waiting’ Roger Douglas had indicated a desire to devalue the New Zealand Dollar by around twenty percent. This set up a ‘one-way-bet’ within the monied community; sell New Zealand dollars for another currency, wait for the election, then buy-back New Zealand dollars. At best there would be windfall capital-gains of 20%; at worst there would be no losses.

So, in the weeks leading up to the election, a financial crisis took place on account of the dramatic rundown of foreign exchange reserves. After the election, Douglas and Prime Minister elect David Lange wanted Robert Muldoon to immediately devalue the New Zealand dollar by twenty percent. Muldoon was reluctant to grant the one-way-speculators their maximum windfall profits; he favoured a much smaller five-percent devaluation.

This reluctance was presented as a constitutional crisis, because the ‘lame duck’ Prime Minister (and Finance Minister) disagreed with the incoming administration. Though eventually Muldoon conceded. Subsequently, the foreign exchange crisis has always been dubbed a constitutional crisis – a crisis of democracy – because the outvoted ‘lame-duck’ government was reluctant to give way to the government-elect. On the matter of the best policy, Muldoon was correct; a 5% devaluation would have been optimal. But nobody seemed to care about that; the barely contested narrative was that in a proper democracy the incoming parliament is always right, even when it’s wrong!

On this basis, what Friedrich Merz is planning to do should be a political scandal. But it probably won’t be. In the end, its all about who’s pushing the narratives, and whose interest it is to buy into which narrative.

Friedrich Merz’s double narrative

In Merz’s first narrative, public debt is bad, so bad that it must be curtailed through a country’s constitution. In his second narrative, Russia is worse; and the United States has become an unreliable ally. Merz still wants to have it both ways. He wants Germany (and the European Union) to continue to be self-hobbled on social spending, including those automatic stabilisers that prevent recessions turning into depressions. He wants to have access to unlimited public debt only for a limited purpose; freedom to wage war, to pursue military spending (despite his country not being under military threat). Mainly as a concession to his putative coalition partner, Merz will agree to use public debt (beyond that presently allowed for) to provide some improvements in public capital infrastructure. He continues to promulgate both an anti-public-debt narrative and an anti-Russia narrative. He wants to perpetuate a forever stalemate in the Russia-Ukraine war, and to promote a baseless domino theory narrative about Russia’s global military ambitions. Germany borders neither Russia nor Ukraine.

Certainly, there is an argument for Germany to have a defence force in balance with the totality of the public sphere, especially in a liberal democracy which sets its own foreign policy. In that context, any German government should be able to persuade the entire parliament (not just two-thirds) to proceed by removing the debt brake without privileging military spending. The recently elected German government should be able to do this with the Bundestag-elect. But in the present context, the constitutionally dubious proposal is not about self-defence, but in about the pursuit of a geopolitical narrative which posits an urgent need for Western Europe to escalate the Russia-Ukraine War.

Historical Military Conflicts between Russia and Foreign Powers since Tsar Peter the Great

While Russia expanded eastwards in much the same way as the United States expanded westward, there has never been anything like evidence that Russia would like to become a global hegemon. As such, Russia has never attacked German territory with expansion in mind. Russia did ‘liberate’ Eastern Europe at the end of World War Two, and continued to control most of Eastern Europe (including a portion of Germany). But that was the end of a vicious conflict in which Germany coveted much of Russia’s territory. Russia (or Soviet Union as the Russian Empire was then) never sought to extend its living space into Germany, though it did inadvertently in 1945 (in the former East Prussia, the Kaliningrad enclave today).

World War One started on 1 August 1914, when Germany declared war on Russia. And the Soviet Union’s ‘Great Patriotic War’ began when Germany invaded the Soviet Union on 22 June 1941.

Other great power military invasions of the Russian Empire included that by Sweden in the 1700s (Sweden was a ‘great power’ then), repelled by Tsar Peter the Great. Then there was Napoleon’s invasion by France in 1812, the subject of Tolstoy’s novel War and Peace. Then there was the conflict in the 1850s in Crimea, involving United Kingdom and France and Florence Nightingale (Crimean War); and an abortive invasion by United Kingdom and United States on the incipient Soviet Union in August 1918 (at Archangel and at Vladivostok). (In addition, Russia fought Japan in Manchuria in 1905; Japan opened hostilities. Both Russia and Japan were emulating the prior European powers’ aggression towards China.)

The Domino Theory as applied to Russia

We should mention the Soviet Invasion of its neighbour, Afghanistan, in 1979. This serves as an analogue for the present Russia-Ukraine war. It this stage we should note several things: that Afghanistan was the neighbour of the Soviet Union, the Soviet Union had genuine concerns about western-power game-playing in Afghanistan, that Afghanistan was not intended by Soviet Russia as the first domino of a global military campaign, and that the world is still dealing with the unforeseen consequences of post-1976 foreign-power-meddling in Afghanistan. The 1989 outcome, a withdrawal of the Soviet Union from Afghanistan, should not be seen as a credible template for an end to the present war. (‘Game playing’, for the West, is a semi-formal process, representing an application of game theory, a branch of economics.)

Despite the historical record being one of Western European aggression towards Russia – and not vice versa – the present conflict in Ukraine is being increasingly framed (without evidence) as Russia waging a ‘domino war’, meaning that once the Ukrainian domino is knocked over, there will be no halting Russia’s alleged ambitions to control the western world. (Indeed, in the White House rhetorical fracas on 28 February, the comment by Ukraine’s Volodymyr Zelenskyy that set off Donald Trump was the suggestion that Trump might “think differently” when Russia had secured territory on the Atlantic coast of Europe.)

In three years, Russia has not had sufficient military power to fully appropriate the Oblast of Donetsk, in Ukraine. Under what conceivable scenario might the Putin military machine have the capacity or competence to threaten Germany or indeed any part of the European Union?

This is not the first time of course that the domino theory has been applied to Russia. Many of us will remember how North Vietnam was portrayed as a ‘Communist’ stooge – a Soviet Union proxy – and that if the Communists won in Vietnam they would be all around the Pacific Rim next.

1885 and all that

Going further back into history, there was the Russian Scare, which peaked in New Zealand in 1885. New Zealand’s major cities still have the gun emplacements constructed in 1885, to protect the colony from the Russians! Near the albatross colony at Taiaroa Head, Otago, there is a disappearing gun that’s still in pristine condition. And the similar gun at Auckland’s North Head is also a major tourist attraction.

(New Zealand references include the ‘fake news’ article: War with Russia. A Calamity for Auckland. Hostile Visit of Russian Ironclad. Seizure of Gold and Hostages, Daily Southern Cross, 19 February 1873. And: The Russians are here! New Zealand Geographic 2015; The Russians are coming! NZ History; The Enemy that never was: the New Zealand ‘Russian scare’ of 1870-1885, 1976, by Glynn Barratt.)

It’s worth noting that the 1880s was in New Zealand a period of fiscal austerity – the global Long Depression, and in New Zealand – in which defence spending was being pushed despite what was, for all practical purposes, a public sector debt brake.

What was happening in and around 1885 was conflict in Afghanistan between the United Kingdom and the Russian Empire; conflict in which the United Kingdom was portraying Russia as a domino-style aggressor. (Refer the Panjdeh Incident. This period in British military history was sometimes known as the Great Game, and it includes the Crimean War.)

The Russians never came. (Though 101 years later a Russian ship was sunk through misadventure in New Zealand waters.)

Who’s Threatening Who in the Former Soviet Union?

Russia has always seen Ukraine as being part of Greater Russia. Indeed, Kyiv was Russia’s foundation city. In 2022, Russia’s Plan A was to do to Ukraine exactly what the United States did to Iraq in 2003; use military force to bring about regime change through conquest. Aggression, indeed. That war was apparently within the ‘international rules’; or was an ‘acceptable’ departure from those rules. (And, as of now, civilian casualties in Ukraine have been fewer than those of Iraq in the Iraq War.)

Russia’s Plan B has been to redraw the former provincial boundary between Russia and Ukraine, as Russia did in Georgia in 2008 with the effective incorporation of South Ossetia into Russia. (In 2008, there was no subsequent domino invasion of the wider world, and the West was not as invested in Georgia as it came to be in Ukraine.) These border disputes reflect that the former Soviet Union provincial boundaries might not have been optimised for a world in which former republics have become nation states.

From 1999, the United States has overseen the process in which a new state, Kosovo, has been created through a split that Serbia was forced to accept; it was a commonsense rationalisation arising from the breakup of the former Yugoslavia, despite the supposed sanctity of international borders.

None of these issues warranted escalation into a world war. Nor does the present Ukraine dispute. Nor did the Third Balkan War (1914); a war that did (but needn’t have) become World War One.

The irony is that Plan B, the plan Russia is following, is the lesser plan; a partial military conquest is always lesser than a full conquest such as the 2003 Iraq War. And a second irony is that, if hostilities do not end this or next month, then Russia (which seems to have settled for some form of Plan B) may end up achieving its original Plan A goal.

War is a nasty business. There should always be alternatives to war, so that conflicting security concerns can be understood and managed peacefully. It requires international ‘players’ seeking mutual optimisation rather than ‘victory’ for one party over another.

What has been the game of the United States and its European proxies?

Three Well-Informed Realists

John Mearsheimer is an American international relations scholar and practitioner who distinguishes between the ‘liberals’ and the ‘realists’ in places like Washington. He’s firmly in the realist camp. And he’s able to evaluate the debates between the two groups. This short clip on YouTube is an interview with John Anderson, former Deputy Prime Minister of Australia (under John Howard). He traces how, from the time of Bill Clinton’s presidency, the liberal foreign policy hawks have always pushed for the ongoing eastward expansion of Nato after the fall of the Soviet Union in 1991. And how realists (including former senior European political leaders Nicolas Sarkozy and Angela Merkel) opposed this, especially the push to get Nato into Ukraine and Georgia; but were outmanoeuvred by the ‘liberals’. Journalist Peter Hitchens echoes this realist view, also in an interview with Anderson, noting how democracies will get into wars on the basis of overhyped narratives, and on account of those same narratives find it almost impossible to get out of these wars.

Jeffrey Sachs is an esteemed Harvard and Columbia University development economist, who’s been a consultant on global economic development and has been a first-hand witness to much geopolitical policymaking over the last four decades. You can see and hear Sachs in this long clip; in an address/discussion to the European Parliament in late February 2025. He connects the 1990s’ United States expansionist project to the philosophy of Zbigniew Brzezinski, for example outlined here in A Geostrategy for Eurasia, Foreign Affairs 1997; though noting that American unipolar hegemony builds on British Empire principles that go back to Lord Palmerston in the 1850s, and to the early twentieth century theories of Halford Mackinder. Brzezinski was an important figure, United States’ rival foreign policy guru to the pragmatic realist Henry Kissinger in the 1970s. It was under Brzezinski’s period in power as National Security Adviser, in the late 1970s under Jimmy Carter, that the Cold War – dampened in the early 1970s under Richard Nixon’s presidency – reheated; and that the United States started meddling in Afghanistan.

Peter Turchin is the Russian-born American cliodynamicist (scholar of long period history with the use of long-period statistics) who wrote in End Times (2023) and a number of other important books in the last quarter-century. He has substantial insights into the political and business dynamics of the United States, and of Russia along with its historical satellites such as Belarus and Ukraine. Turchin sees – for the 1990s – the United States, Russia, and Ukraine as true plutocracies (or ‘oligarchies’), subject to the power and foibles of the very rich. For the United States, that influence has waxed and waned throughout its history, but has always been there. Russia, Turchin observes, ceased to be a plutocracy after what was effectively a coup in the late 1990s on the part of the former military/bureaucratic establishment. Belarus never got started as an oligarchy. But Ukraine continues as a true plutocracy, and the United States liberal establishment invested heavily into ensuring that Ukraine would remain so. He says in End Times “By 2014, American ‘proconsuls’, such as veteran diplomat Victoria Nuland, had acquired a large degree of power over the Ukrainian plutocrats.” On this basis, it would seem to be true that the American Lobby in Ukraine operated much as the Israel Lobby operates in the United States. (And we sort-of know the stories of the Bidens’ interest [Joe and Hunter] in Ukraine.)

Conclusion

Germany is dowsing the embers of a twice-vibrant democracy. A war that might have been a small regional war threatens to become a world war, as big liberal-mercantilist (money-focused ‘economically conservative’ and ‘socially liberal’ political classes who are indifferent to unselected genocides and mass-suffering-events) economic powers such as Germany (and the United Kingdom) become less democratic and more bellicose. If we treasure our democratic principles, we should at least take notice.

The Russia-Ukraine War is a mucky border conflict between two countries with a long and intertwined shared history, and with more than enough ‘stirring of the pot’ from outside to convert a regional security dispute into an existential global security threat. It can be settled with a deal that reflects the military situation, rather than by democratically compromised sabre-rattling from Western Europe. After a fluid war in 1950 followed by an extended bloody stalemate – and a change of government in Washington – the 1953 Korean War cease-fire enabled the Republic of Korea (South Korea) to become an economic superpower. An independent capitalist Republic of Ukraine (or, if necessary, West Ukraine) might do the same.

(In that context, we note that Korea’s Volodymyr Zelenskyy, Syngman Rhee, “refused to sign the armistice agreement that ended the [hostilities], wishing to have the peninsula reunited by force”. Syngman Rhee’s country was saved, though not by him.)

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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.

The above chart traces the vote-share of Germany’s establishment political parties: the right-wing CDU/CSU and the now-centre-right SPD (essentially the Christian Democrats, just like National in New Zealand) and the Social Democrats (just like Labour). And it compares Germany with England to show a similar process there.

An increasingly stale political centre has consolidated power in both Germany and the United Kingdom, despite record low vote-shares for these establishment parties. In Germany, the ‘major party’ combined vote has fallen to 45% (nearly as low as that in last year’s election in France, for the Centre and the traditional Right). In the United Kingdom, the establishment (Labour, Conservative) vote has fallen to 60%; though, given a much lower turnout in the United Kingdom than Germany, 60% there represents a similar level of support to that of the equivalent parties in Germany.

With these outcomes being at-best borderline-democratic (JD Vance had a point about the shutting-out of alternative voices), neither country is scheduled to have another election until 2029. And the ‘left’ establishment parties – in office in both countries in March 2025 – are as right-wing as their centre-right predecessor governments of Merkel and Sunak.

We note that, for Germany, elections before 1991 are for West Germany only. And, for the United Kingdom, my aim has been to focus on England, where Celtic nationalist parties have not played a role; thus until 1979, the British data is for the United Kingdom, whereas from 1983 the data is for England only. We also note that Germany shows few signs of promoting the literally colourful characters who play such an important part in contemporary British politics.

The waxing and waning of the postwar German mainstream

Postwar German politics began in 1949, with its new MMP voting system; proportional voting featuring two disqualification mechanisms, a five percent party-vote threshold, and the failure to gain a local electorate using the simple-plurality (FPP) criterion. (In Germany, in the 1950s, the latter disqualification rule was tightened; three electorate seats were required, rather than one.)

The rise in the two-party vote from 1949 to 1972 represented the consolidation of the major-party system, essentially in line with the post-war German economic miracle. From 1949 to 1969, the government was CDU-led. The SPD led the government from 1969 to 1982 (though with fewer votes than the CDU/CSU). All subsequent governments have been CDU-led, except for the relatively short-lived administrations of Gerhard Schröder (c.2000) and Olaf Scholz.

The fall in establishment-party vote-share reflects the rise of the Green Party in Germany, which itself reflects the waning of the economic miracle.

The 1990s’ political stability reflects the reunification era, the political dominance of Helmut Kohl; and the fact that, due to reunification, German politics suspended its characteristic debt-phobia.

The 2000s and 2010s represents the Angela Merkel era. The 2009 result reflects the Global Financial Crisis. The 2005 vote reflects the early Eurozone period, in which investment within the European Union was diverted into the development of the southern EU countries (and to Ireland). In particular, the 2000s saw the rise of The Left Party, which was shunned by the Establishment parties; this was the beginning of the German ‘firewall’, which meant that ‘grand coalitions’ were favoured over the inclusion of ‘outsider’ parties into government. In that time, the Green Party became a centrist party; inside rather than outside ‘the tent’.

In 2014 the debt-phobic way Germany ‘resolved’ the Euro crisis was popular in Germany, though ‘austerity’ ushered in the deflationary bias that has characterised subsequent fiscal policy in the European Union. (The adverse effect of deflationary fiscal policy was the use of a zero-interest-rate monetary policy by the European Central Bank; so the adverse consequences of the austerity policies played out more slowly than they might have.)

Since the initial ‘triumph’ of austerity in 2014, we have seen a substantial and ongoing decline in the vote for the establishment parties. However, these parties managed to consolidate power despite haemorrhaging votes. The new 2025 Government will be a substantially right-wing government made up of German-National (CDU 28.5%) and German-Labour (SPD 16.4%); this represents easily the worst vote ever for the ‘left’ SPD and easily the second-worst vote ever for the ‘winning’ CDU/CSU.

And, in the United Kingdom, the vote for Labour in 2024 was easily the worst vote of any ‘winning’ party in any election since 1945 (and possible since the time of Walpole in the 1720s).

Democracy anyone?

Postscript UK

In the UK, the highest percentage vote for a political party in the postwar era was 48.8% for Clement Attlee’s Labour Party, seeking a third term in office (in a very-early election which Attlee was tricked into calling). Labour was defeated, despite its record-high poll! Winston Churchill’s Conservatives got 48.0% of the vote; but, crucially, more seats. Attlee’s government was the least stale government in the United Kingdom’s post-war history; Attlee, in the UK, had a popularity and significance comparable to that of Michael Joseph Savage in New Zealand.

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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.