Aotearoa New Zealand makes up a small portion of the world’s population, yet the country is being hit by a relatively bigger share of cyber attacks.

Chances are, you’re familiar with the term ‘distributed denial of service (DDoS) attack’. Not because your organisation has been subjected to one, but instead, the recent numerous, high profile attacks on local and global businesses have captured your attention.

With cyber attacks ramping up across the globe and Aotearoa New Zealand an attractive target, every business—no matter the size—must put protections in place.

What’s a DDoS attack?

Designed to disrupt the normal function of a server, DDoS attacks harness compromised computers and hardware like Internet of Things (IoT) devices to flood the target or its surrounding infrastructure with traffic. This influx can slow down or overwhelm a website or service, denying access to genuine traffic.

DDoS attacks are on the rise across the world, with attackers using different styles of malicious activity to take down websites and even using them as an attempt to extort money. Businesses from all industries were victims of ransom DDoS (RDDoS) attacks in 2021, and Q4 saw a 29% YoY and 177% QoQ increase.

New Zealand is a prime target

Only three active undersea submarine cables connect Aotearoa New Zealand to the outside world. In comparison to the rest of the world, this relatively small number makes it easier for the country’s networks to be overwhelmed.

In fact, the National Cyber Security Centre (NCSC) reported an increase in criminal or financially motivated actors with a significant national impact or potential to cause serious harm in its 2020-21 threat report (27% compared to 14% the year prior).

A spate of high profile, local businesses experienced repeated DDoS attacks over the last 18 months—from Vocus to one coordinated attack on NZ Post, MetService, Kiwibank, ANZ and Inland Revenue.

However, it is critical to note that organisations of any size can fall victim to a DDoS or RDDoS attack. No business is immune, and the impacts can be significant.

How can businesses prevent these types of attacks?

Most organisations in Aotearoa New Zealand are still trying to protect themselves using traditional security measures that are no match for a burgeoning tide of bots, ready to be mobilised against them in a few strokes of a keyboard.

While this might sound daunting, implementing good cyber security protections against DDoS attacks does not need to be.

1. Speak with your network provider to understand what DDoS mitigation services they offer and how much traffic they can mitigate before your organisation is affected. This is an added service for some providers, while others might charge surge pricing in the unlucky instance that your website is bombarded with traffic during a DDoS attack.
2. Ramp up your front-line protection. Engage a provider with specially designed network equipment or a cloud-based protection service to mitigate your business from incoming threats. Here, it’s essential to consider the potential risk to your company and consider the scalability, flexibility, reliability and network size of potential providers. For example, large-scale attacks have the potential to take out on-site network infrastructure, while cloud-based solutions can scale when mitigating attacks.

3. Create a DDoS attack incident response plan. The overwhelming nature of a DDoS attack can take out multiple systems and services, not just your website. And in the moment, it’s easy for panic to set in. Be proactive, create a dedicated DDoS incident response plan, and conduct exercises to ensure its effectiveness.

4. Regularly patch your systems, software and hardware. Developers regularly release updates to decrease or eliminate vulnerabilities in software. Applying these patches to operating systems, applications, and all network-connected devices in real-time is the simplest way to mitigate a cyber security attack. There’s a reason why patching is CERT NZ’s top critical control to protect organisations from being breached—don’t leave your business wide open.

One could be forgiven for thinking that the last few members of the Flat Earth Society had infiltrated the New Zealand Initiative, which is a pity because not all the Initiative’s ideas are bad.

I disagree with their slavish adherence to the notion that the neo-liberal trickle-down economic view still has some merit. The results after nearly forty years of it surely tell us all we need to know about its validity.

Inequality not seen for a couple of centuries and a transfer of wealth to those at the top of the economic heap not seen in a similar timeframe are the outcomes.

As Winston famously said (Churchill not Peters) “No matter how beautiful the strategy, you should occasionally look at the results “.

The Initiative’s Bryce Wilkinson was right (NZ Herald May 29th) to suggest that the higher welfare payments announced in the Budget, without programmes to try to deal with the long term issues that cause many to be on a benefit, are not the best investment of taxpayer dollars.

Not all government spending should be measured by a ‘return on investment’ business model however. Mr Wilkinson demonstrates that with his comments on spending on police, justice, and defence.

But it’s a pity he didn’t restrict all his commentary to those issues.

Unfortunately he couldn’t help himself from diving off, in the last few paragraphs, into flat earth notions.

Having written, somewhat sarcastically, “And is not Central Bank credit creation a fine thing”, he then advances the proposition that the Reserve Bank is not creating credit at all but is borrowing from the banking system (the commercial banks).

Not so, according to Reserve Bank Deputy Governor Christian Hawkesby, who, when asked on TVNZ’s Seven Sharp programme on April 30^th last year where the bank was getting the money the buy government bonds on the secondary market, quite openly said “We’re creating electronic money to buy government bonds”. “Through this process we create money.” “Twenty years ago this would have been considered unconventional monetary policy”. “Now, with Covid-19, effectively every developed country around the world is undertaking this sort of practice”.

This was confirmed by the Bank’s Chief Economist Yuong Ha in the NZ Herald on August 14^{th –} “We create money … which is what central banks do, and have always done, but we then exchange it for assets [government bonds] and those sit on our balance sheet.”

No suggestion there of borrowing – from anybody.

For those who are unaware, the Bank is currently creating up to $100 billion in electronic money – no small bikkies in any economist’s language.

So who is right, Mr Wilkinson or the Reserve Bank?

My money is on the Bank, and on the other central banks around the world whose literature confirms that Hawkesby, Ha, (and me) are correct.

To then go on and suggest that “if the government defaulted on those (fictitious) borrowings the banks would be bankrupted and borrowers would be much poorer” is way off even the flat earth scale.

He appears to believe that the commercial banks lend money people deposit with them.

Given that the text books used to teach economics in our universities still contain that long ago disproved fallacy I guess he could be forgiven for believing it.

Were his suggestion correct, it would be interesting to know how he thinks the banks decide whose accounts to take the money out of to lend to borrowers.

The Bank of England quite clearly states in its publication ‘ Money creation in the modern economy’ that banks create the (digital) money they lend. It is not money people have deposited with them.

That view is echoed by the German Central Bank, the Bank of Canada, rating agency Standard and Poor’s, and our own Reserve Bank, to name just a few.

So if the Reserve Bank creates the money with which it is purchasing government bonds (IOU’s), and that is what the Bank says it does, then to whom is that government debt (the IOU’s) owed?

Jim Bolger, the former Prime Minister Mr Wilkinson alludes to, was a down-to-earth farmer, not a fancy economist. He knows B…S… when he sees it.

He had it right when he said on Radio NZ on July 15th last year. “…..billions of dollars here in New Zealand that were just created by the Reserve Bank. We have to decide whether to follow traditional economics and pay that off over the next 20 years by austerity politics or we actually say we owe it to nobody – we created it, the Reserve Bank has created it, and we write most of it off.”

Bulls-eye farmer Jim!

Mr Wilkinson contends that fiscal prudence remains a virtue. I agree that spending willy-nilly is certainly not to be recommended.

Taxpayers expect their money to be going into desperately needed investment in hospitals, schools, public housing and infrastructure.

Is he really suggesting that money taken from taxpayers should be used by the government to pay back the debt it owes to itself, which its own bank purchased using money created out of nothing, rather than being spent on services that benefit the community?

Flat Earthers, along with the rest of us, would surely agree that would be silly.

As lockdowns ease in countries across Asia and the Pacific in the wake of the COVID-19 pandemic, one thing is clear—a return to business as usual is unimaginable in a region that was already off track to meet the Sustainable Development Goals (SDGs). The virtual High-Level Political Forum on Sustainable Development recently convened governments and stakeholders across the globe to focus on the imperative to build back better while keeping an eye on the Global Goals.

Asia was the first to be hit by COVID-19 and feel its devastating social and economic impacts. Efforts to respond to the pandemic have revealed how many people in our societies live precariously close to poverty and hunger, without access to essential services. Between 90 million and 400 million people in Asia and the Pacific may be pushed back into poverty, living on less than $3.20 a day. Many countries are taking bold actions to minimize the loss of life and economic costs, estimated in May by ADB at $1.7 trillion to $2.5 trillion in the region alone.

Mission orientation and mobilizing fiscal and social support that realize the SDGs

As attention shifts from the immediate health and human effects of the pandemic to addressing its social and economic effects, governments and societies face unprecedented policy, regulatory and fiscal choices. The SDGs— a commitment to eradicate poverty and achieve sustainable development, globally, by 2030—can serve as a beacon in these turbulent times.

Our new joint report Fast-tracking the SDGs: Driving Asia Pacific Transformations, highlights six entry points for achieving the SDGs in the face of the pandemic. These include strengthening human well-being and capabilities, shifting towards sustainable and just economies, building sustainable food systems, achieving energy decarbonization and universal access to energy, promoting sustainable urban and peri-urban development, and securing the global environmental commons.

Each of these entry points has been disrupted by the pandemic. Yet, these disruptions may create opportunities for new approaches to deliver on SDG targets that reflect the ambitions of the 2030 Agenda.

What will it take to align systems and institutions with the SDGs as they build forward?

The pandemic has exposed fragility and systemic gaps in many key systems. However, there are many workable strategies that countries have used, both before and after COVID-19, to accelerate progress related to development goals and strengthen resilience. Countries have taken steps to extend universal health care systems, strengthen social protection systems, including cash transfer and food distribution systems for vulnerable households. Accurate and regular data have been key to such efforts. Innovating to help the most disadvantaged access financing and small and medium-sized enterprise (SME) credits have also been vital. Several countries have taken comprehensive approaches to various forms of discrimination, particularly related to gender and gender-based violence. Partnerships, including with the private sector and financing institutions, have played a critical role in fostering creative solutions. These experiences provide grounds for optimism.

Policy revolutions to manage complexity

Responses to the COVID-19 crisis must be centered on the well-being of people, empowering them and advancing equality. Driving change in the people-environment nexus to protect the health of people and natural resources is key to a future that does not repeat the crisis we are in today.

We need a revolution in policy mind-set and practice. Inclusive and accountable governance systems, adaptive institutions with resilience to future shocks, universal social protection and health insurance and stronger digital infrastructure are part of the transformations needed. All are driven by a low carbon and environmentally sustainable infrastructure and energy transition.

Several countries in Asia and the Pacific are developing ambitious new strategies for green recovery and inclusive approaches to development. The Republic of Korea recently announced a New Deal based on two central pillars: digitization and decarbonization. Many countries in the Pacific, already proponents of ambitious clean energy targets and climate action, are focusing on “blue recovery,” seizing the opportunity to promote more sustainable approaches to fisheries management. India recently announced operating the largest solar power plant in the region. China is creating more jobs in the renewable energy sector than in fossil fuel industries. Many countries in our region are expanding social protection systems as part of COVID-19 recovery to go beyond a temporary patch and include the marginalized, such as informal sector workers.

Institutions such as the United Nations and ADB have mobilized to support a shared response to the crisis. Now it is vital that we enable countries to secure the support they need to go beyond, to achieve the SDGs.

Authors:

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

Kanni Wignaraja, United Nations Assistant Secretary-General and Director of the Regional Bureau for Asia and the Pacific, United Nations Development Programme (UNDP)

Bambang Susantono, Vice-President for Knowledge Management and Sustainable Development, Asian Development Bank (ADB)

The return of the endangered kokako to Sanctuary Mountain Maungatautari after 30 years shows that people can reverse environmental loss when they put their minds to it, says fundraising expert and environmental author Tony Lindsay.

Kokako have been extinct in the area since the 1980s.

The forest-covered mountain, near Cambridge in Waikato, is now a mainland ecological island, protected by the world’s longest predator-proof fence.

Over the past two weeks, six kokako have been released into the forest, with another 34 to come.

The project is being funded by the $70,000 the Maungatautiri Ecological Island Trust Board has raised with the support of Vega.works, the supporter engagement software platform developed by Mr Lindsay’s company to help clubs and charities raise money.

A social entrepreneur with a long history of raising money for charities, Mr Lindsay had conservation groups like Maungatautiri in mind when he led the creation of the Vega.works platform.

“Vega.works is intensely proud to be associated with the successful reintroduction of kokako to Maungatautari,” he said.

“Conservation, restoration and accepting our responsibilities as kaitiaki of the natural world are issues close to my heart. It’s vital that groups like Maungatautiri can successfully raise money to do the work they need to do. Without sanctuaries like Maungatautari, many New Zealanders and most tourists would never get to see our unique and wonderful flora and fauna.”

Kokako are wattlebirds, and are closely related to the now-extinct huia, and the near-threatened saddleback.

In Maori mythology, kokako were the birds that brought water to the demi-god Maui as he battled the sun.

The songs of the North Island kokako (the South Island kokako if thought extinct), was once common, but their numbers have dwindled in the face of habitat loss and predation from introduced animals, like rats and stoats.

They disappeared from Maungatautari in the early 1980s, but with the 3400-hectare native conifer/broadleaf/podocarps forest now safe behind a 47 kilometre-long predator-proof fence, trustees decided it was time to bring them back.

The birds being relocated to Maungatautari are from Pureora Forest, west of Lake Taupo. Ten will be released this year, with the rest released over the next three years.

 “If you are ever in a position to hear the haunting song of the Kokako on a misty morning, you are transported back to an ancient Aotearoa/New Zealand and you will never forget the experience,” Mr Lindsay said.

“This beautiful bird will now sing over the Waikato from the security of Maungatautari. What an achievement for everyone who worked hard to make it happen.”

Mr Lindsay says that more money is needed to support the project, and urges anyone who can spare even a dollar or two to go to the Maungatautiri or Vega websites to make a donation.

“Maungatautari Ecological Island Trust  is an extraordinary credit to its founders and to all the people of the Waikato,” Mr Lindsay said.

“It is a globally recognised taonga, and I urge everyone to support it.”

Saddlebacks were reintroduced to Maungatautiri in 2012 from Tiritiri Matangi, in the Hauraki Gulf, and are now breeding well.

*Maungatautari  featured in the  book Paradise Saved – The Remarkable Story of New Zealand’s Wildlife Sanctuaries and How They Are Stemming the Tide of Extinction, of which Mr Lindsay was a co-author.

For more information on Maungatautari see www.sanctuarymountain.co.nz. For more on Vega see www.vega.works. For more on Paradise Saved see www.randomhouse.co.nz/books/dave-butler/paradise-saved-9781869796860.aspx#sthash.2RcRO5Wc.dpuf

Editor’s Note: Emir Hodzic is a social activist specialising in the area of transitional justice. He originally settled in New Zealand under the UN refugee programme and has since worked in New York City, and, in his native Balkan region including Bosnia. This is Emir’s first piece for EveningReport.

—

New Zealand wasn’t the only target of French state-backed terrorism three decades ago. Nor was the Rainbow Warrior when this peaceful environmental campaign ship was bombed by secret agents under our noses.

The attack on the Greenpeace campaign flagship on 10 July 1985 was part of a Pacific-wide strategy to crush pro-independence and nuclear-free movements in both New Caledonia and French Polynesia during the 1980s.

This was not widely understood in New Zealand at the time or reported on by local media.

Opération Satanique, as the “satanic” Rainbow Warrior sabotage plan was aptly named, got the green light because of political rivalry between then socialist President François Mitterrand and right-wing Prime Minister Jacques Chirac that pushed them into cynical point-scoring against each other.  

Although misleading and laughable as early Australian or New Zealand press reports were about who was thought to be responsible for the bombing in Auckland Harbour – focusing on mercenaries, or the French Foreign Legion based in New Caledonia and so on – there was certainly a connection with the neocolonial mind-set of the time.

New Caledonia then had the largest military garrison in the Pacific, about 6000 French Pacific Regiment and other troops, larger than the New Zealand armed forces, with about one soldier or paramilitary officer for every 24 citizens in the territory – the nearest Pacific neighbour to Auckland, less than a three hour flight away.

A small Pacific fleet included the nuclear submarine Rubis, reputed to have picked up one unit of the French secret service agents involved in Operation Satanic off the yacht Ouvea, scuttling her in the Coral Sea, and then spirited them to safety in Tahiti.

Rights violations

A long line of human rights violations and oppressive acts were carried out against Kanak activists seeking independence starting with a political stand-off in 1984, a year before the Rainbow Warrior bombing.

Parties favouring independence came together that year under an umbrella known as the Front de Libération Nationale Kanak et Socialiste (FLNKS) and began agitating for independence from France with a series of blockades and political demonstrations over the next four years.  

The struggle echoed the current Melanesian activism in West Papua today with advocates seeking political justice and independence from Indonesian colonial rule.

The Greenpeace tragedy was one of several happening in the Pacific at the time, and this was really overshadowed by the Rongelap evacuation when the Rainbow Warrior crew ferried some 320 islanders, plagued by ill-health from the US atmospheric mega-nuclear tests in the 1950s, from their home in the Marshall Islands to a new islet, Mejato, on Kwajalein Atoll.

Bloody incidents

Over the next few years, after the start of the Kanak uprising, New Caledonia suffered a series of bloody incidents because of hard-line French neo-colonial policies:

• The Hiènghene massacre on 5 December 1984 when 10 unarmed Kanak political advocates were ambushed by heavily armed mixed-race French settlers on their way home to their village after a political meeting. (Charismatic Kanak independence leader Jean-Marie Tjibaou lost two brothers in that ambush when almost all the menfolk of the village of Tiendanite were gunned down in one deadly night.)

• The assassination of Kanak independence leader Eloï Machoro and his deputy, Marcel Nonaro, by French special forces snipers at dawn on 12 January 1985 during a siege of farmhouse at Dogny, near la Foa.

• The infamous cave siege of the island of Ouvea when French forces used a “news media” helicopter as a ruse to attack 19 young militant Kanaks holding gendarmes hostage, killing most of them and allegedly torturing wounded captives to death. The 11th Shock Unit carried out this attack – the same unit (known then as the Service Action squad) to carry out Operation Satanic against the Rainbow Warrior.

• The human rights violations involved in this attack were exposed in the 2012 docu-drama movie Rebellion by director Mathieu Kassovitz, based on a book by a hostage negotiator who believed he could have achieved a peaceful resolution.

• France had its problems in Vanuatu too. Founding Prime Minister Father Walter Lini’s government expelled ambassador Henri Crepin-Leblond shortly before the election on 30 November 1987, accusing Paris of funding the opposition Union of Moderate Parties – a claim denied by the French.

• There were also riots in French Polynesia when young Tahitians set the capital ablaze with demands of an end to nuclear testing and to colonial rule. But these came a decade later in September 1995 after mounting tensions.

• Two years later, in December 1997, a French Polynesian journalist known for his liberal views Les Nouvelles de Tahiti editor Jean-Pascal Couraud, known as “JPK”, disappeared and he was believed assassinated by local presidential special ops militia.

Social scars

The social scars from these events affected France’s standing in the Pacific for many years. While relations have dramatically improved since then, it still rankles with both many New Zealanders and Greenpeace campaigners that Paris has never given a full state apology.

Then it seemed highly unlikely that in less than two decades nuclear testing would be finally abandoned in the South Pacific (1996), and Tahiti’s leading nuclear-free and pro-independence politician, Oscar Manutahi Temaru, would emerge as French Polynesia’s new president four times (from 2004) and usher in a refreshing “new order” with a commitment to pan-Pacific relations.

Although Tahitian independence is nominally off the agenda for the moment, far-reaching changes in the Pacific region are inevitable.

Watch a Pacific Media Centre video interview with David Robie here:

Rainbow Warrior’s bombing : 30 years later, French can’t forget

Not French anymore, but not totally a Kiwi

Sophie’s life has dramatically changed for the better since her family realised the health system was not going to pay for the hearing aids and remote microphones she needed and they mortgaged their home to purchase them.

The National Foundation for the Deaf is launching a GiveALittle Page today to raise funds for a minimum of 50 pairs of hearing aids and remote microphones for children living with Auditory Processing Disorder.

Before her family did that, Sophie was a solitary figure observing life from the side line whereas now, she is going from strength to strength. She raises her hand to answer questions at school and doesn’t need to constantly look around to try and figure out what is happening around her. She is no longer exhausted by the stress of trying to understand the classroom environment and has become a popular girl in her class, often leading the play. Sophie is now on the path to being a successful student as she is able to hold her own educationally with her peers.

Sophie, aged 6 years is one of a number of children in New Zealand with hearing loss caused by an Auditory Processing Disorder (APD) which affects their ability to hear, learn and have a happy and carefree life that every child deserves.

Imagine if you will, the children whose families are not in the situation of being able to mortgage their homes to purchase the hearing aids and remote microphones they need? Sadly, there are hundreds of children that can’t get the support they need through the New Zealand health system. They are caught in the politics and we say enough.

The National Foundation for the Deaf is so concerned about the lack of support for these children and families that it has set up a Give A Little page. The National Foundation for the Deaf CEO Louise Carroll says “It’s a tragedy and an indictment when a national charity needs to step in to fundraise for hearing aids and remote microphones for children with any type of hearing loss.” We are fundraising to support 50 kids in New Zealand that come from families that cannot afford to buy the hearing equipment they desperately need.

Give at:

https://givealittle.co.nz/org/thenationalfoundationforthedeaf

For more information on APD – www.soundskills.co.nz

For family support information – Hear for Families:  apdleoniewilsonkilby@gmail.com;

FB: Hear for Families – APD Support Group

• That an estimated 5.75 trillion pieces of plastic enter the world’s oceans each year.
• New Zealanders use approximately 1 billion plastic bags each year.
• The average plastic bag is only used for 12 minutes before it is discarded.
• Several countries have already banned or restricted plastic bag use – these include Rwanda and Bangladesh.
• Golden Bay managed to go plastic bag free in 2005 but relapsed in 2008.

By Lori Wallach, Director of Public Citizen’s Global Trade Watch.

Today, the House employed yet another procedural gimmick to punt the Fast Track problem back to the Senate, where its fate remains at best unclear as Americans’ concerns that more of the same trade policy would kill more jobs and push down our wages remain unaddressed.

That two years of effort by a vast corporate coalition, the White House and Republican leaders – and weeks of procedural gimmicks and deals swapped for yes votes – has resulted in this continuing standoff and no Fast Track enacted spotlights the dim prospects not only for adoption of Fast Track but also for the Trans-Pacific Partnership (TPP).

Because Republican House members would not support the Trade Adjustment Assistance (TAA) part of the Senate-passed Fast Track package last week, the Republican leadership today had to resort to a Fast Track-only vote. But what exactly that achieves is unclear.

Senate Democrats, including those needed to move the stand-alone Fast Track bill, are demanding that the TAA be reinserted into the Fast Track bill or be passed by both chambers before agreeing to support Fast Track.  In addition, key Democratic senators are insisting on the fulfillment by Senate Republican Leader Mitch McConnell of a promised vote to reauthorize the Export-Import bank – which was the condition for the deciding bloc of Senate Democrats to support cloture on Fast Track in the first instance in May.

Meanwhile, House Republican lawmakers remain strongly opposed to TAA and Export-Import Bank reauthorization. As House Democratic Leader Nancy Pelosi stated today, there is no clear path for enactment of TAA. Yet yesterday, White House spokesman Josh Earnest said that President Obama requires both Fast Track and TAA to come to his desk.

For more, see the New York Times.

 A respondent to my last week’s posting said:

How’s the Greek challenge to austerity working out again? I do believe they are being told to pull their heads in and get on with austerity.

Very true. But so far the Greek new new-left Syriza government is holding its nerve. Even if it ends up failing in its mission to end catastrophe politics in Europe, it does represent a beacon of hope for new left‑wing politics. That’s why the European political establishment is fighting so hard to keep Europe on its present slow suicide track by not making concessions to Greece’s government led by Alexis Tsipras.

The Economic Unreality

One of the big ironies is that Europe is behaving so much like it did in the late 1920s, except that then it was Germany playing the role now played by Greece. Germany’s debts then were those imposed by the Treaty of Versailles in 1919. These debts could only be paid if Germany’s vengeful post-treaty creditors (the victorious powers after World War 1) allowed Germany to run a trade surplus. Trade was the only way that Germany could earn the ‘gold standard hard currency’ required to pay those debts. Yet Germany’s creditors were themselves trying to run trade surpluses. They were indulging in ‘vendor finance’ which is just a fancy way of saying they were trying their very best to lend to Germany, not to be repaid.

I simplify. The creditor powers were trying to get their private sectors to lend to Germany’s private sector, with the expectation that the German government would tax its private sector heavily, and pay its reparations to the governments of France, United Kingdom and United States. The unintended aim was to make Germany’s private sector the biggest debtor in the global economy, with the private sectors of France, UK and USA becoming the biggest creditors in the global capitalist economy.

It’s the same in Europe today. The southern governments are being required to repay northern-based institutional creditors in ‘hard currency’ (Euros in this case). The only way this can possibly happen, given the determination of northern European and other creditor economies to run trade surpluses, is through huge lending to the southern private sector, enabling a boom in debt-fuelled spending in the south which would in turn enable the southern governments to collect more taxes.

It’s a fantasy of course, like the subprime housing loans of the mid-2000s. The Greek private sector today is in no better shape to acquire gazillions of Euros worth of imports on credit than the German private sector was able to owe gold marks in 1928.

The Economic Theory (it’s quite simple really)

Because the Eurozone is a fixed currency zone (as was greater Europe under the gold standard). It means that trade imbalances need to be reconciled through a process of internal devaluation and revaluation. This is another way of saying that northern European countries must, through higher inflation, run substantial trade deficits so that southern European countries can run the trade surpluses that enable them as countries (public and private sectors) to service their debts to the north.

The Euro problem results from a one-way flow of goods from the north to the south in the 2000s’ decade. The solution is a decade-long rebalancing one-way flow of goods from the south to the north. If interest is to be paid, the latter south to north flow must exceed the former north to south flow.

The basic theory of internal devaluations and revaluations says that the creditor bloc should have higher than normal inflation and the debtor bloc should have lower than normal inflation. That is understood (and has been understood ever since David Hume enunciated the ‘price-specie-flow-mechanism’ in the 1750s) as the normal means to achieve a one-way trade flow. Hume (and Ricardian economists subsequently) believed that this process was self-regulating. The drain of money from debtor countries like Greece would automatically create deflation. And the flow of money into creditor countries like Germany would automatically induce the required inflation. For this to work in Europe today we would probably need the inflation rate in Germany to be 10 percentage points higher than in Greece; eg 7% inflation in Germany and 3% deflation in Greece. Pigs will fly before the Germans will accept 7% annual inflation as part of the cure.

An Alternative Mechanism

Policymakers in dominant economies cannot create inflation when inflation is needed and is known to be needed. So an alternative to Hume’s mechanism is needed. Japan has tried valiantly to create inflation, but cannot.

In Germany’s case the authorities wouldn’t create inflation, even if they could. Germany is at core a mercantilist nation – a mercantilism aggravated by a semi-mythological national trauma over inflation – that understands economic success as the indefinite accumulation of trade surpluses. To be good world economic citizen, Germany needs to become like modern Japan, only more so. Japan today does run trade deficits, and does have the highest public debt to GDP ratio in the world, and has had zero interest rates for two decades.

There are other ways the objective of trade rebalancing could be achieved. One would involve protectionism, which, by the way, was not the cause of the Great Depression and was part of its cure.

A better approach would be to adopt Social Credit style national dividends in the northern European creditor nations, funded by quantitative easing rather than by taxes, combined with the introduction in those northern countries of a 25 hour work week. That would turn the northerners into net consumers rather than net producers. (The word ‘net’ is important here; this is a green solution.) The already highly indebted northern governments would be taking on the deficits that the northern private sectors would not consider taking on. Northern Europe needs public debt at Japanese levels in order to balance the huge private surpluses endemic in the rich world.

The Politics

The real austerity agenda is one of privatisation. In a superficial sense, Greece’s government can pay a chunk of its debt if it sells all its assets to northern private interests. But, in making Greek resources plunder for foreign capitalists, the underlying trade imbalances would be accentuated by even greater imbalances in financial income – interest and profit outflows – that would add to the unspent private cash reserves in the north and have to be recycled as even more debt.

The other part of the political agenda is that the northern financial interests want compliant governments in the other southern countries. Compliant left-wing governments – the one’s that prioritise the reduction of government debt while confining their leftishness to identity politics – are just fine to these interests. They are desperate that Syriza-style anti-austerity live-with-debt politics does not spread to the likes of Spain and Italy and France. That kind of effective political economy would reveal the nakedness of the austerity Empress.

New Zealand’s Labour Party is still, in the main, of the compliant deficit-phobic left rather than of the brave and intellectually edgy new new-Left. New Zealand has one of the most indebted private sectors and one of the less indebted government sectors. Yet so much of what Labour is about is that we cannot afford this and we cannot afford that. Even the Governor of the Reserve Bank knows that we need more debt, not less. That’s why interest rates were cut on Thursday and will be cut again; to reduce the price of debt so that we get money moving again.

The Economic Reality

Your debt represents my employment. My spending represents your income. Your austerity represents my unemployment. My forced austerity represents your insolvency.

Greek government deficits (the additions to the debt) averaged over 10% of GDP since austerity was imposed. In the 10 years before the financial crisis they averaged 5% of GDP. Spain had public debt of only 36% in 2008, much less than Germany’s 64%. Since austerity Spain has reached 98%. Austerity, supposedly about compromising living standards in order to repay debt, has both shattered living standards and substantially increased the rate of accumulation of public debt. Counter-austerity, on the other hand, can raise Greek living standards making it possible for Greeks to pay more taxes, and can raise the GDP denominator, making the debt more serviceable.

The economic argument about European debt is simple, when looked at in a systemic way. Syriza addresses the systemic issues, and wins the argument. In a significant act of defiance, Greece reopened its public television network this week, two years after it was shut down as a failed public economy measure. Let public enterprise blossom.

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THE HOUSING DEBATE in New Zealand is befuddled by the language used, and by people with propertied interests who are happy to maintain such confusion.

Every now and again, however, we see unwitting exposure of the multiple meanings given to popular words. In one NZ Herald article (Rising numbers of Aucklanders heading for regions, 4 June 2015), ‘Auckland timber sales representative Mike Towns invested in nine properties in Hawkes Bay. Returns “are not so strong from an investment point of view, but they’re good from a rental return point of view”.’

The media uses the word ‘invest’ very loosely. Mr Towns was buying properties with the intent of gaining returns in the form of yield; namely rent from tenants. The Herald reporter says he “invested”. Yet Mr Towns himself said that his transaction was not undertaken from “an investment” point of view. He clearly understands property investment as the pursuit of capital gain. This concept of investment reflects the reality that an investment house need not be occupied; it’s a financial security rather than a dwelling. A tenanted house, on the other hand, clearly is a dwelling; it’s somebody’s home.

Shamubeel Eaqub, on Sunday Mornings on Radio NZ (Renters: society’s second-class citizens) reaffirmed this point by noting that letting properties is an ‘incidental’ component of housing investment. (From the point of view of an economist such as Eaqub, housing investment is building new houses. There are three distinct meanings out there for the word ‘investment’.)

Government spokespeople have also inadvertently noted that investment houses may or may not be tenanted. When discussing the proposed ‘warrant of fitness’ for rented houses, they note that if landlords’ costs are raised it will mean that some houses may be withdrawn from the rental market, to the detriment of the tenant community. They don’t say what will happen to these houses if they are withdrawn, but we are left to presume that they will be untenanted – essentially empty. (See my comments in Running on Empty, North and South, 16 April 2015.)

The neglected issue of housing supply is what I will call the ‘housing stock participation rate’. I use this expression as a deliberate analogue of the well-known ‘labour force participation rate’. Housing is employed fulltime when it is occupied by a family (or other) group appropriate to the size of the house. Housing is employed part-time when it is underoccupied; eg one person living in a large house. Housing is unemployed when it is between occupiers, maybe undergoing refurbishment (analogous to retraining). And houses are ‘not in the housing force’ if they are not available to be lived in.

We need to know whether the housing stock participation rate is falling, and housing supply is therefore shrinking. From a policy or analysis point of view, it is incidental whether the dwellers of a house are owner-occupiers, paying tenants or house-sitters. What matters is the size of the housing force, a subset of the total housing stock. Further, we know that building more houses will increase the housing stock. But this alone will not necessarily increase the number of houses that are available to be lived in.

We need a proper ‘Housing Force Survey’ that is analogous to Statistics NZ’s Household Labour Force Survey (HLFS). We may be surprised at the extent of multiple house ownership by non-landlords.

Housing policy should have four components: (1) seeking to maximise the ‘housing stock participation rate’; (2) ensuring that all dwellings meet minimum standards (with a possible exemption for owner-occupied properties without children); (3) ensuring that the housing stock increases with population growth; and (4) ensuring that housing density is greatest closest to places of employment and to transport hubs. We have a toolkit of taxes and subsidies that can provide the appropriate incentives.

Many ‘investment’ properties appear not to be in the housing force, just as ‘discouraged workers’ are not in the labour force. Our policy priority is to ensure that every investment house is also a healthy home.

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IN PRINCIPLE, CITIZENSHIP IS UNIVERSAL, inclusive and binary. A person is either a citizen or a non-citizen; no half measures. In a formal sense, Citizenship (big ‘C’) of a nation is linked to birth or having gained Citizenship as a consequence of having previously gained permanent residence. Effective citizenship – or social citizenship – is a broader fuzzier concept that represents a mixture of membership rights and obligations. Yet it is still a binary concept; a tax-resident is an effective citizen, and a visiting tourist is not.

In practice however, certain groups of people are second-class citizens. On National Radio recently I heard about how immigrants especially value paid work that reflects the skills and experiences they bring with them to New Zealand. And that, where there are systematic barriers to gaining such employment, their ability to identify as New Zealanders is severely compromised.

Another divide is that of property ownership. And in New Zealand, property ownership that confers effective citizenship is assumed, narrowly, to mean ‘ownership (outright or by mortgage) of the house that you live in’. Thus, to be a grade-one effective citizen of New Zealand you need to belong to a household that draws an income from paid employment, and you need to live in a house that you own.

A more inclusive definition of effective citizenship would require the following: tax residency, making a contribution (eg through present or past work, paid or unpaid, or participation in education), and property ownership.

Property Ownership

I agree with Margaret Thatcher that property ownership is a desirable thing. She wanted to build in the United Kingdom ‘a property-owning democracy’ (see her 1975 leader’s speech). But it’s what we mean by property ownership that matters. To Thatcher it meant ‘private property’. In the long-cultivated mythology of New Zealand, it means home-owner-occupation. Both of these concepts of property are too narrow.

To me, to be an effective citizen, you need access to income derived from two sources: one relating to your present or past contribution, and one relating to your equity in property. I have written elsewhere that all tax‑residents do have a share in public equity, and almost every tax-resident in New Zealand does in fact draw an income from that equity (albeit income disguised by present norms of public sector accounting). This means that property ownership is implicit within the concept of tax-residency, and therefore all tax-residents who participate constructively in their communities are therefore effective citizens.

However, some will still feel more worthy as citizens if they own (and draw income from) private assets. Money in the bank – or Kiwi saver for that matter – is a form of private asset. However, our sense of worthiness really relates to ‘real assets’ rather than financial assets. For most that essentially means ‘real estate’ – land, a house, an apartment – though I would add ownership of commercial buildings and company shares as real assets.

Public policy to facilitate private ownership of real property is I think a good thing. But such policy should not accentuate home-owner-occupation over ownership of properties that someone else lives (or works) in, or over business equity.

Every owner of land or buildings is a landlord

There is government help available for first home buyers. For example, money can be withdrawn from Kiwi Saver to use for a deposit. But the condition is that the buyer must then live in that house. It is in fact more responsible to your family and your society to buy a property that you can afford, and to live near to where you work. Increasingly, and especially in Auckland, you cannot afford to buy the property that would be best for you to live in. Society is not well served if young families are forced to live on the outskirts of big cities, and parents have to undertake long expensive commutes to work. It is far more sensible to buy a rental house that you can afford (maybe in a different city), and to live (and create a home) in a rental house conveniently located to your work and/or the community you have roots in.

We need to look at housing the way our System of National Accounts does. It treats all owners of residential property as landlords. And all occupiers as tenants. Thus, it is incidental whether you are your own tenant or someone else’s tenant. And, it is incidental whether you are your own landlord or someone else’s landlord. There will be only two types of real estate: tenanted (including owner‑occupied) or untenanted (meaning empty). The condition of government assistance to first home buyers would be that the property becomes somebody’s home; not necessarily the owner’s home.

Tax rules would need to be reformed.

There’s a widespread myth that ‘investment’ properties are subject to more favourable tax consideration. The problem is that tax rules differentiate between ‘owner-occupied’ and ‘investment’ properties (each having some advantages) when they should differentiate between tenanted and untenanted properties.

At present landlords who receive rent from themselves – rent that is included in a country’s GDP – do not have to pay tax on that rental income. However, they cannot claim mortgage interest and repairs as a deductible cost, which ‘investors’ can. There are arbitrary advantages and disadvantages at present, according to whether a property is ‘investor’ or ‘owner-occupied’. 

If we treat all occupied houses as ‘tenanted’, then all rental income received would be subject to tax; albeit with two offsets. The first offset would be costs such as mortgage interest and repairs. The second offset would be rent paid. Thus a person receiving less rent for their house than what they pay for their (rented) home would not be subject to any tax on their rental income. 

We might note here that retired mortgage-free owner-occupiers would not like this change to tax rules. Here it is helpful to have a universal pension scheme as we do. New Zealand Superannuation payments need to be set on the basis that every recipient pays rent, even if it’s to themselves. Thus for retired people with mortgage-free homes, New Zealand Superannuation can be understood in part as a means through which they pay tax on their (implicit) rental incomes.

Effective citizenship and housing

While effective citizenship is a broad and inclusive concept, we often feel more like true citizens (and feel accepted as true citizens) if we possess equity in private property. We can do much to make it easier for younger people to gain private property equity by recognising that all property owners are landlords and that all property dwellers are tenants. Thus we should make it as easy for first-time property buyers to buy properties that will be tenanted by someone else as to buy properties they themselves will live in.

The dream would be that not only can we all aspire to be landlords, but that all landlords can be good landlords providing good quality housing for whoever lives in our houses, be it our own family or another. Further, all rules around taxation of housing income should discriminate only against owners of untenanted (ie empty) properties.

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Chris Trotter, in his interesting May 14 reflection on The Virtues of Inflation, notes the benefits of inflation to debtors, and its costs to creditors. Inflation is one of those ‘use it or lose it’ mechanisms through which hoarders of financial assets may be disabused. The problem with inflation, however, is that when it is a mechanism to get society out from the economic custard, inflation is notoriously difficult to induce.

Hyperinflation is Different

It’s not a good idea to mention the virtues of inflation and the legendary German inflation of 1923 in the one article. The fanatically anti-inflation creditor lobby always like to wheel out this as an historical example of what could happen, even in New Zealand, if we get a bit loose in our monetary habits. And they overstate its importance in German history. The deflation of the Great Depression (resulting from what we now call austerity, fiscal consolidation or internal devaluation) was far more significant in bringing the Nazis to power than was the Weimar hyperinflation. Further, the causes of that hyperinflationary event were very much rooted in the post-WW1 financial environment.

Those who lent or otherwise hoarded all of their unspent Papiermarks – Germany’s currency from 1914 to 1924 – may have been “wiped out”, though many of the German middle class had substantial foreign exchange and property assets. This was a period of floating exchange rates when anyone could buy or sell foreign currencies, and hardly anybody had a clue as to what were or were not appropriate exchange rates. A military occupation of Germany’s Ruhr industrial heartland by the post‑Versailles creditor French government led to a workers’ strike. So yes, much money was chasing few goods, and the foreign exchange speculators pounced. The Papiermark became worthless. Nevertheless, by the late 1920s, underpinned by a new currency and the American Dawes Plan, there was a substantial economic resurgence and a surprisingly prosperous middle class in Germany. It was this middle class that supported the Brüning government’s disastrous deflationary fiscal policies from 1930 to 1932.

Inflation is not, as Milton Friedman claimed, “always and everywhere a monetary phenomenon” that can potentially lead to hyperinflation. Friedman attempted to define “inflation” as a continuous monetary process of rising prices, thereby making his proposition a truism. In individual countries inflation indeed can be a monetary phenomenon. Monetary inflations take place when there are two types of money, and only one type is believed to hold true value; commonplace in South America in the late twentieth century. In the post-WW1 world, the $US was the accepted measure of true value, as it is in 2015. Monetary inflations represented the sustained depreciation of a country’s currency. That was what happened in Germany in 1923, in association with the Ruhr occupation.

Global Inflation – The Great Inflation

When thinking about systemic economic issues, it’s always necessary to start with the global economy. The global economy experienced a period from 1967 to 1982 that’s sometimes known as ‘the Great Inflation’. Thus the two most significant global economic events in the twentieth century were the Great Depression and the Great Inflation. And sure, it was the Great Inflation in New Zealand that substantially facilitated Chris Trotter’s father’s debt servicing.

This global inflation was not a monetary event. It was not initiated by some politicians or central banks deciding it would be a good idea to run loose monetary policies. Monetary expansion was an accommodating process, never autonomous. 

The Great Inflation can best be understood as two separate but adjacent events; essentially 1967 to 1974, and 1974 to 1982.

The first was a ‘demand-pull’ event, in which spending (‘aggregate demand’) outstripped global economic capacity. An important part of the event was the US government spending associated with the Vietnam War, and with the Cold War more generally (including the space programme which can be understood as part of the Cold War). The other component was the ‘class war’, in which in the later 1960s the working classes were starting to ‘win’. The inflationary problem was that the capitalist class was unable to be vanquished. Capital was able to respond by raising prices, because in these high‑spending times there was no competitive resistance to raising prices. (To classical monetarists, the Federal Reserve Bank should have engineered a monetary deflation to offset this ‘demand-pull’ global effect.)

In New Zealand this wage effect was largely a result of wages being held to the rate of inflation for a decade and a half of economic growth (1953-67), followed by an attempt by the Arbitration Court to deny a wage increase in 1968, a year when inflation hit five percent. As a result the wage-indexing system collapsed and an era of free-wage bargaining began just as international inflationary pressures were rising. Further, equal pay for women in 1972 initially pushed up labour costs; these costs were easily recovered in 1973 and 1974.

In late 1973, the world oil price shocks began, again in part because, prior to then, oil prices had been much lower than they would have been in a well-functioning market. The 1974 oil price hikes ushered in – rather than caused – a period of global cost-plus inflation from 1974 to 1982. With a second set of exogenous events hitting the world economy before the first set of disturbances had settled, it looked to many as if the whole shebang was a single event. This opportunity was exploited mercilessly by the Friedmanites. The political case for monetarist policies was premised on the failure of Keynesian‑informed policies to sufficiently quickly arrest the prior round of inflation; inflation that probably would have settled soon enough on its own accord.

This next period of inflation – cost-push inflation – came to be known by the unlovely name of ‘stagflation’. The stagflation was substantially aggravated by the high cost interest rate policies that were imposed in the name of inflation fighting. While these policies brought much money into the financial sector, the new combative environment brought further requirements for business services: advertising, good accountants and lawyers. The financial and business services sectors – a cost to everyone else just as wages are a cost – became the new lords of the marketplace.

To understand cost-push inflation, one important metaphor is that of low-hanging fruit. Cost inflation happens when the low hanging fruit of cheap oil and easily-farmed land give way to the next less accessible tier. If, in addition, substantial new financial costs are present and increasing, then a new kind of double-digit inflation (nothing like hyperinflation) takes place. Monetarists believe that their taut alchemy can offset such rising costs, thereby making it look as if costs are not rising. But their methods were to raise interest rates, adding directly to debt-servicing costs, and adding substantially to the opportunity costs of running businesses and rewarding shareholders.

Offsetting these higher costs, however, was the global recession (1980-82) created by these policies. Indeed monetarism works, in a manner of speaking, by creating conditions in which workers must compete aggressively with each other, thereby reducing labour costs. In the early 1970s labour was winning the class war. Politicians like Richard Nixon and Robert Muldoon supported the high-wage but not too high-wage economy. The monetarists despised these men deeply. By the mid-1980s the brutal fightback of ‘capital’ had clearly been successful. (There had been some resistance in Australia, facilitated by Bob Hawke, but little elsewhere.) The very inflation that had persevered because of these policies was used as the reason for them. 

The Great Inflation in New Zealand had one last gasp, in 1985. Inflation rates accelerated markedly after, early in 1985, Roger Douglas deregulated the financial markets and imposed a super-high interest rate monetary policy. As late as November 1984, months after Muldoon’s defeat, forecasts of post-freeze inflation remained quite modest. (There had been a wage-price freeze from mid-1982 to early 1984.) The massive cost increases associated with the explosive growth of finance and business services created a surge of domestic inflation. The tradable sector of the New Zealand economy was walloped. Douglas was happy to give the public sector an initial boost, knowing that he could blame any inflation that took place on the post-price‑freeze environment. (There was a later surge in domestic inflation in 1987 that was mostly, but by no means only, due to the imposition of Goods and Services Tax.) Rising exchange rates – from an artificial low arising from the July 1984 devaluation – substantially offset the huge domestic inflation that Douglas’ policies wrought.

Later that decade, inflation quiesced as unemployment soared; the inevitable consequence of a monetarist putsch. The 1989 Reserve Bank Act probably had no effect whatsoever on inflation. The Great Inflation, including its New Zealand mid-1980s Indian summer, was already over. The policies that it justified in turn created the 1990s’ Great Inequality. Further, the generation born between 1935 and 1950 benefitted most from both the inflation itself and the policies committed in its name.

Looking ahead: Inflation or Negative Interest Rates?

As in the 1930s, some inflation in the 2010s would be a good thing, as Chris Trotter suggests, as indeed do central bankers the world over. They tried to create inflation in the 1930s too, but without success.

The key to a benign debt-rebalancing environment today is not unachievable inflation, but is a phenomenon historically associated with inflation; namely, negative real interest rates. As we had before the monetarist putsches of the 1970s and 1980s, we have negative real interest rates in parts of the capitalist world today. Further, the zero interest rate environment ushered in by central banks today (as a pro-inflationary policy) actually is furthering a deflationary competitive environment, with falling financial costs adding to the deflationary soup.

We are entering new territory – new to economic historians as well as economists – in which deflation and negative interest rates may be set to become the norm. This can lead to some equalisation and rebalancing as long as deposit interest rates become more negative than inflation. Financial interests of course will oppose negative interest rate policies, such as those monetary policies in Switzerland, Denmark and Sweden today. Before the 1970s, stagflation was believed to be virtually impossible. In the 2020s we may need a new word; a word for deflation combined with actual negative interest rates. Switzerland presently has inflation at minus 1.1 percent, and interest rates at minus 0.75 percent. And the world economy is approaching the peak of its cycle, when interest rates are usually at their highest. 

The Great Inflation of the 1970s remains an enigma of world economic history. The central bankers and Treasury economists don’t really have a clue about what really happened then. They are equally clueless about what’s coming.

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Analysis by Keith Rankin – This analysis was also published on TheDailyBlog.co.nz.

The musings of Labour leader Andrew Little over the universality of New Zealand Superannuation have created an opportunity for politicians in New Zealand to get to grips with the underlying contrast between universal and selective welfare.

While I use the expression ‘selective welfare’ here, in line with literature I am recently acquainted with, we can think of it as meaning means-tested and/or otherwise targeted income or social wage support. (Social wage means things like subsidised or fully government-funded education, healthcare and housing.)  Selective welfare is based essentially on the principle of ‘vertical equity’, treating people differently on the basis of bureaucratically assessed need. Universal welfare, on the other hand, is essentially based on the horizontal equity principle – where all resident adults are substantial if not equal beneficiaries of societies’ welfare structures.

New Zealand is an interesting case, in that, from 1984, its philosophical underpinning switched from universal to selective welfare. Yet it was always substantially selective, and significant universal elements do remain. Further, as I noted in Benefit Increase? The truth about the 2015 Budget (23 May), a costless stroke of the fiscal accountant’s pen can reframe what we have right now into an essentially universal system. It is this reframing of what we already have that can save the Labour Party in New Zealand, should it want to be saved.

Working Class Welfare

Before I elaborate, I would like to recommend, to Andrew Little, Francis Castles’ 1985 book-essay ‘The Working Class and Welfare in Australia and New Zealand‘. Castles is a specialist in welfare history, is very familiar with Australian, New Zealand and European models of welfare provision, and is also steeped in Labour politics. He describes the emergence of welfare and welfare politics in these countries as “Australasian exceptionalism”; the Australasian working-class roots of the selective welfare state.

He argues that the welfare state concept was pioneered in New Zealand and Australia in the 1890s and 1900s, as a workers’ welfare state. The unionised working class was always a strong political force in Australia – especially southern Australia – and became an important political force in New Zealand during the time of the Liberal Government (1890-1912). Both through Protectionist-Labour and Liberal-Labour politics, the selective welfare state was born, and the needs most acknowledged were those relating to workers’ families in work and in retirement. Other key attribute of worker-welfare were the family-wage – reflected in the famous Harvester judgement in Australia in 1907 – and a system of wage arbitration which would ensure an appropriate income balance between ‘labour’ and ‘capital’. The following two decades (1910-1930) were seen as consolidating rather than advancing these structures.

In New Zealand the Age Benefit (1898), Widows Benefit (1911), and Family Benefit (1926) were all highly selective means-tested payments. Workers in both countries did not want their benefits as workers –high wages by world standards – to not be compromised by paying benefits to people who did not strictly need them. (They also favoured substantial immigration restrictions in order to protect their high-wage labour markets.)

Castles links developments in New Zealand towards an alternative universal approach to the post-depression environment, the happenstance of a Labour government in New Zealand at that time, and the wider support constituency (mortgaged rural and provincial self-employed) that Labour in New Zealand relied upon, compared to Labor in Australia. So New Zealand Labour departed from selective principles in 1938 with Universal Superannuation, with free education, with a strong push for free healthcare (especially in maternity and in hospitals), and in the Family Benefit in 1946. These reforms did not gain much traction in Australia, even with Labor governments in the 1940s.

So the global origins of the selective welfare state lie with the Australian and New Zealand working classes at the end of the nineteenth century. That would seem to be why Labour is ambivalent about shifting away from selectivist principles, and why statements about the unfairness of paying superannuation to people with other income easily roll off the tongues of Labour politicians. Further, it was the Clark-Cullen Labour government that really entrenched the overtly selectivist and increasingly conditional approach. The leaders of that government clearly believed that ‘Workers’ represented a superior class of citizen to others who were low on the socio-economic pecking order.

Little, however, is more conflicted than Clark was. He sees both points of view; hence his willingness to accept that some form of Universal Basic Income is the way of a future in which work as we knew it in the twentieth century only exists for a privileged few. We are now in the century of the ‘Precariat’.

Universal Welfare

From a fiscal accountancy point of view, New Zealand is fortunate in having a simple income tax scale, and an established (from 1988) benchmark tax rate of 33 percent (33 cents in the dollar).

To convert our present substantially selective welfare system to a substantially universal welfare system, we simply recognise that, from a universal point of view, we have a flat-rate of income tax of 33 percent. This means that everybody earning over $70,000 can be presently understood to be a fiscal beneficiary (to the tune of $175 per week, or just over $9,000 per year). Workers earning less receive lower, but for the most part substantial, fiscal benefits. A worker on $48,000 per annum gains a annual ‘Fiscal benefit’ of $8,420.

Today, most adults on zero taxable income receive Work and Income Benefits, and fiscal top-ups (known as Family Tax Credits) that recognise their children. Most adults earning between $0 and $50,000 gain a mix of Work and Income Benefits, Family Tax Credits, and Fiscal Benefits. Indeed the only New Zealand resident adults who today gain zero benefits are individuals fully supported by other family members (such as homemakers supported entirely by their partners, and students supported by parents and/or loans). 

Once we understand that almost all of us are beneficiaries, and that benefits are by definition something good, then we have a majority community of interest willing to defend the welfare system (which includes welfare delivered through tax credits and tax concessions). Indeed that’s why it’s politically dangerous today to meddle with superannuation and free hospital admissions. In a system based on universal principles, the majority of us happily identify ourselves as beneficiaries. On the other hand, when we understand welfare as a system of selective redistribution to a ‘loser’ minority, we lose touch with the universal reality that we are all beneficiaries. 

On New Zealand Superannuation, the 33 percent flat tax approach reveals that people over 65 who earn more than $70,000 may receive in fact two universal benefits: about $9,000 fiscal benefit and about $10,000 ‘New Zealand Superannuation after tax.

If we move to paying everybody over 65 an annual benefit (ie tax-free publicly-sourced income) of $14,000 (with top-ups as at present for people living alone), then persons aged 65 earning $100,000 per year should only gain an extra $5,000, given that they already receive unconditional universal fiscal benefits of $9,000. Yes, Andrew Little is correct. Elderly fulltime workers do double-dip at present.

If a future Little-led government was to pursue the simple accountancy change that I am suggesting, the present system would easily morph into that of a Universal Basic Income of $175, supplemented for over-65s by a Universal Superannuation of $100 per week, and funded by a 33 percent income tax. (These dollar values of course would need to be adjusted for inflation; more strictly for ‘nominal economic growth’. And of course all existing needs-based benefits would remain; thus the first $175 per week of a beneficiary’s income would be universal, the remainder a selective top-up).

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