Makhlouf on disruptive change

In his critical assessment of economic policy and policymaking in New Zealand, that I linked to the other day, leading business figure (and economist) Kerry McDonald singled out the public service as one of his areas of concern.

There are some excellent Public Service organisations and people but, it is notable for its numerous, costly failures.

….

There is a common, fundamental cause of these: it is the failure of top level management to lead effectively, starting with, in my view the SSC. It should lead the Public Service, but hasn’t done so effectively for a long time.

….

Top level public servants now have substantial power and authority, but are not properly held to account for their performance and are more often than not reappointed, when the appropriate action would be dismissal. Many are promoted for their technical ability

I’m not sure I agree with the final line of those comments – more technical leadership at or near the top of the public service would surely be welcome –  but the gist of the concern seems right to me.

Gabs Makhlouf was recently reappointed, for a further three years, as Secretary to the Treasury.

In the little I’ve had to do with him, he seems like a pleasant enough person, but I’ve had my doubts about Gabs since, sbortly after arriving in New Zealand, as an operational Deputy Chief Executive at Treasury he declared in one Treasury meeting that one of the big mistakes New Zealand had made over its history was to underinvest in rail, one of the legacies of the British Empire.  Ah, we thought, at least he is only on the operational side of things.  A few months later he was, in fact, Secretary to the Treasury, and hence the government’s leading economic policy adviser.  Of course, no one expects one individual in an organization responsible for as many issues as Treasury to be, personally, the chief adviser (in that respect it is a very different role from that of the Governor of the Reserve Bank who is the policy decisionmaker) but the chief executive sets the tone.

Makhlouf gives quite a lot of on-the-record speeches.  In many countries –  his own UK among them – permanent heads of the Treasury wouldn’t often be seen or heard in public. But here, and in Australia, it is different.  On the one hand, it is good to be exposed to Treasury’s thinking.  On the other, the Treasury works primarily to the Minister of Finance and so it wouldn’t be proper, effective, or expected for the Secretary to depart far from the government of the day’s script.  Free and frank advice is important, but is best delivered direct to the Minister.

I’ve generally been quite unimpressed with Makhlouf’s speeches.  I’m not sure if he writes them himself or gets staff to write them, but either way the quality of the content is his responsibility.  I wrote last year about his rather unconvincing, unsupported, comments on immigration in one speech, and his similarly unpersuasive efforts on innovation.

This year, Makhlouf has given several on-the-record speeches already.  There have been two in the last week or so.  The first, to GOVIS, an annual government IT conference, was given last week, headed Turn and Face the Strange: Policy, Technology and the Modernisation of Government.  I guess the audience probably wasn’t the most demanding he will ever face; they’ll have been pleased to have a Secretary to the Treasury address them.  But the theme of the conference this year was apparently “Disruption”, and Makhlouf embraced the theme with rather breathless enthusiasm, building one rather trite set of lines upon another.

Disruption is pervasive.

We see it expressed in almost every facet of life – the economy, the environment, our neighbourhoods – even the way we raise our children.

I suppose if I include the Wellington City Council imposing its Island Bay cycle-way, we’ve seen disruption in our neighbourhood, but other than that I was a bit mystified.

Apparently

Even in the last decade New Zealand society has changed dramatically.

Really.  Must have missed it.  Is society, in other than its more superficial dimensions, really so different than it was in 2006?  Perhaps a little sobered that incomes have grown less than most expected –  was that less “disruption”, and considerably less productivity growth?   –  but “changed dramatically”?    Really?

Ah, but there are the phones

The fact that there are now more mobile devices than people in the world is remarkable.

The fact that more people own a mobile device than a toothbrush is perhaps even more remarkable.

Well maybe.  I only own one of each, but many people have one phone for work and one phone for home, and perhaps an Ipad too.  Means quite a few chargers, and passwords, and it offers a certain convenience value.  But “disruptive change”?

He reverts to the personal, still apparently talking about the last decade.

The kinds of families we have has changed, our age structure, our aspirations have shifted, and critically our expectations of government and public services has shifted.

And

We don’t need to hold a book to read it anymore.

Perhaps, but most people still do.

We don’t need to post a letter to write to someone overseas anymore.

Or even our parents in another part of New Zealand

We don’t need to queue to renew our passports anymore.

Don’t recall doing that –  I thought I posted it.

Disruption is rapidly becoming the new normal, a way of life even.

By its very nature it challenges the status quo.

The level of vacuity is what I might have expected from a breathless 25 year old consultant, not from the head of one of oldest, and most important, government departments.

Of course, no one is denying that change happens –  it has, and will no doubt continue to.  But actually, contrary to Makhlouf’s claim that

There’s probably nothing new an economist can tell you about technology and disruption and the impact they’re having on how we live and work.

I’d have thought that is exactly what a good economic adviser should be able to do.  For example, he could reflect on the research that leads some to suggest that the biggest gains have already happened.  I’m not close enough to that literature to have a strong view myself, but some pretty expert people do take the argument seriously.  And the sharp decline in global productivity growth in the last decade must surely raise some important questions, amid the breathlessness.

Ah, but apparently this isn’t a time for reflection

We can’t spend our time thinking about change when people are actively and loudly demanding it.

Actually, I’d really hope a Treasury that was doing its job well would insist on exactly the sort of calm considered reflection if some breathless sector agency came along championing some bright new change initiative.  Haven’t we seen many of them before?  Haven’t many of them been costly disasters?  How do we build processes and institutions to minimize the risk of yet more disasters, and blunders of our governments.

Disruption is creating an environment where public services can be co-created, and in some instances, even co-delivered.

You mean that government has never previously worked with private sector providers to deliver services?  Integrated schools are 40 years old.  Government-funding for private doctors dates back to 1938.  And so on.

I could go on.

Developing, designing and delivering policy needs to be based on information and evidence not assumptions and assertions. Disruption can enable that information and that evidence.

No argument with the first sentence –  though I keep asking about the evidence behind New Zealand’s continued large scale immigration policy –  but it is hardly a new proposition.  Can technological innovations help generate new insights?  Well, yes, of course, but was it not ever thus?

There is almost nothing –  actually I think nothing at all –  about government failures, including government IT project failures.  Nothing much about the inevitable tensions that technology creates –  ever more intrusions into private lives –  and barely a mention that fundamentals of how humans behave and interact don’t change much at all.

In some ways, none of the specifics in this speech matter very much. I highlight them mostly because I think this speech, while unimportant in itself, illustrates something of what is missing at the top of our public service –  an apparent lack of depth, and perspective, and rigour, and the insights that come from having a strong institution that brings rigour, and institutional memory, to advising political masters, and informing the public debate.

But even on the specifics, I don’t find Makhlouf remotely convincing. My oldest child turned 13 this week, which prompted a few reflective comparisons on his life, and mine as a thirteen year old in 1975. The differences seem pretty superficial –  we had hymn books in 1975, and now the songs in church are on a screen, the Social Studies projects in Powerpoint are perhaps more prettily illustrated than mine (illustrated with pictures cut out of National Geographics, or Weetbix cards) but I’n not convinced the learning is really much better.  School reports come electronically –  but whereas I still have the handwritten ones from 40 years ago, I had to print one out today to be sure it will be around in years to come.  My wife keeps saying “don’t forget the Internet” –  which is certainly great for immediacy, but check out just how much information there was in a 1975 issue of TIME magazine (my father subscribed for me).  And books –  Makhlouf may read his online, but my house has many more books than my parents’ one did (and Dad’s study always seemed to have books toppling off the shelves).  I’m probably an old fogey, raising young fogeys, but I’m not really convinced by the “disruptive change” story.

But the public servants seem to believe it. One of the presentations at GOVIS was billed thus

The vision for the future of government services is to centre it around the customer and not agencies. To this end, the birth of a child life event project will deliver the first iteration of a customer-centric federated service that will enable New Zealanders to access the services they need for their baby. They will also be able to complete all their requirements around the birth of a child with government & non-government organisations from anywhere, using any device at any time of the day. Service will be delivered to the customer using digital identity founded on building a long-term relationship with government.

Not sure what services we needed from government for our baby.  Two parents, love, food, shelter etc go most of the way I’d have thought,  and mostly those are what families provide.  Those needs haven’t changed much in millennia.  Perhaps the most important is two committed parents, and if anything the state has spent decades undermining that, not reinforcing it.

Yes, this has been a bit of a rant.  But I really do think that taxpayers and citizens deserve evidence of something deeper and more robust from the head of our premier economic advisory agency.  And this week Makhlouf gave another speech, on rather more important directly-economic issues, and the content (or relative lack of it) in that speech disturbed me even more. But that is a topic for another day, probably tomorrow.

PS:         I would recommend use of a search engine to The Treasury.  In his speech to GOVIS, Makhlouf noted this was the first time anyone from Treasury had spoke to the conference in its 25 year history.   Actually, I was invited to give the opening address to the conference in 2010, to spread the Treasury message as to why public service agencies couldn’t expect much more money for the next decade.  To my surprise, the slides are still on the web – I was interested how some of my perspectives have changed –  and when I entered “GOVIS, Treasury, speaker” into Google, it was the sixth link that came up,  A disruptive technology perhaps, but it has been around for a few years now.

 

 

 

 

10 thoughts on “Makhlouf on disruptive change

  1. Michael,

    I read your blog posts from time to time. They often contain interesting perspectives, analysis and insights. Many of the themes on which you comment are certainly highly relevant and warrant fresh and more disciplined thinking than has tended to be the case over recent years – including New Zealand’s consistently poor per capita GDP growth, the questionable performance of the RBNZ in its monetary policy responsibilities, the unsatisfactory governance arrangements in the RBNZ, immigration policy, etc.

    However, what I find disappointing in your posts is:

    – the one-tracked emphasis on immigration, as if it is the predominant cause of our relatively poor economic growth per capita, when in fact, our uninspiring economic performance is multi-causal – and I have seen nothing in your commentary to persuade me that immigration is a predominant factor (whereas I don’t dispute that it is one of the factors that has contributed to the Auckland house price bubble);

    – the relatively unbalanced approach in your posts on immigration, where you appear to dismiss the potential economic benefits of immigration (including potentially greater scale and scope economies arising from a higher population, reduction of labour market pressures in certain market segments (eg nursing, builders, etc), longer term trade linkages that could arise from some of the business immigration, etc);

    – the rather arbitrary target you have suggested for permanent residency per annum (as opposed to something that better aligns to the skill shortages we face, in which case a recalibration of the skills criteria and a cap based on the business cycle might be a more intelligent approach);

    – the tendency to ignore or downplay the social benefits derived from immigration – we are a far more vibrant and interesting society than we were 40 years ago as a result of the different cultures we now have in our country – immigration policy is not solely an economic issue;

    – the tendency to be so readily dismissive and critical (as with your comments on the Treasury Secretary), as opposed to being constructive and balanced (which would make your blog more likely to be influential in triggering the kinds of discussion you seek to promote than does a constant stream of criticism and dismissive arrogance);

    – the lack of in-depth proposals for policies that might actually contribute to a raising of our trend growth rate.

    I could go on, but I won’t. You are, of course, entitled to write on any topics and in any style of your choosing. I commend you for the effort you have put in to date. However, if you want to actually have influence on public debate, and to make a difference, then I feel that a less combative, critical and dismissive tone would help, as would a more balanced discussion of the issues and a more in-depth development of policy proposals. It is easy to be critical in life. It is much more challenging to be constructive and to offer meaningful, well thought through and balanced analysis and policy proposals.

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    • Interesting comments thanks Geof, and we’ve exchanged thoughts on these topics previously and I don’t suppose we’ll agree. In terms of general policy prescriptions, as I noted to a commenter the other day, mine generally align quite well with those of a typical centre-right market oriented economist (most of the 2025 Taskforce report recs had my support, but as I continued to think about the issues I concluded that they weren’t enough.) I hammer the immigration point quite a lot for two reasons: the first is the real reluctance of the establishment to produce the economic evidence for their unusual – outlier – large structural policy intervention, and because in the specific context of NZ – including its distance and location – it increasingly seems likely that it is the largest single factor accounting for our long-term underperformance.

      People who hold high office – whether politicians or officials – surely should expect critical scrutiny for their decisions and views. In my considered judgement, capable as Makhlouf might be in many roles, and amiable as he seens individually, the quality of the content of his speeches suggests a serious weakness relative to what citizens should expect from the head of The Treasury. I have no personal animus towards him in the slightest, and have often used the blog to praise some of the other stuff the institution does, including its approach to OIA issues. But the speeches reflect poor quality analysis, In the same way, the Prime Minister seems a perfectly amiable person – and was the few times I met him – but his policy inaction, and glee club rhetoric, deserves critique and scrutiny.

      Liked by 1 person

  2. I generally agree that technological changes of the last 20 years or so are completely oversold, especially in relation to the technological changes of the 50-100 years previous (railroads, central heating, etc). However, I can’t help but note the irony of you bemoaning that nothing has changed from your blog. In 1976, you would not have been able to communicate with as many people as you do, for free, multiple times a week. I don’t think it’s fair to completely dismiss the fact that I — just some guy really — can access and respond to your ideas from anywhere, with neither of us paying much of anything in time or money for the privilege of doing so.

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  3. People may be surprised at just how far you reach. Places like Kiwiblog, whale Property.com are other blogs where I have seen you quoted or referenced. since coming here I am seeing a lot more people confirming what you say in relation to GDP, productivity and so on.
    For someone with just a basic education (and lots of life) to instinctively know that what you say has been occurring leaves me wondering why the educated and the clever cannot understand. I guess its down to life and being around long enough to be able to make comparisons from past to present.
    I like analysis and there is an old saying that I think come from Deming. If we can measure it we can fix it. i.e. measure, quantify, analyze.

    Today on Stuff there was another family struggling. These stories are almost daily. This family had combined work hours of 55 hours a week, 2 kids and lived in Invercargil. They were struggling to make ends meet. Their expenses were $200 more than thier earnings. At Kiwiblog they were slated however the most telling part of the story which DPF highlighted was the amounts they were entitled to from various benefits etc.

    It illustrates very effectively the low wages and the state prop ups that in any sensible society would never be necessary.
    There is very good reason to challenge our poor performance. Much more challenge is needed in all area’s with the biggest challenge to get politicians to change the way they attempt to solve problems of lack of wealth in our community.

    Start at the RBNZ and its failed charter.

    http://www.kiwiblog.co.nz/2016/06/another_story_that_doesnt_reveal_full_state_support.html

    Keep on keeping up with this.
    Sometime the penny will drop and we might get a better Minister of Finance who understands this stuff.

    Liked by 1 person

  4. Michael I cant speak for you own experiences and/or the relative impact of the last ten years vis a vis other periods but I do think the rise of computing power is having a disruptive impact – good and bad. My personal experience is that of the tablet and facebook which has connected me with friends and ideas far more accesibly than was the case in the past.

    Airbnb is disrupting the hotel market and whatsapp the market for international calls for example.

    I was recently at a conference where it was discussed – favourably – the impact of consumer cards used by Walmart who could track consumer spending in such a way that they could further ‘negotiate efficiencies’ from their suppliers. To me it seemed more like further enabling monopolistic behaviours. Admittedly such behaviours were always there but the technology has helped turbo charge them.

    Arguably the recent zero hours contracts controversy also came from employers ability through improved algorithms to target labour scheduling more ‘efficiently’.

    I accept that often these changes are not yet fully in the general public’s mind but there is alot going on that will be transformative/disruptive depending on which side of the winners/losers spectrum you are.

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  5. All interesting points. I guess I:d have expected a rather more balanced, perhaps slightly skeptical, assessment – informed by all sorts of past promise and performance gaps – than what we got.

    Re AirBnB, without knowing too many details, I wonder what proportion of its market share gains are due to tax considerations – esp in the US, around hotel taxes etc?

    And just to throw in some history, the rise of the tram was pretty transformative in its day.

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  6. In terms of the next 40 years, I think CRISPR will have a big impact. I’m halfway through Robin Hanson’s ‘Age of Em’ and while extremely interesting, I’m not convinced we need to worry about becoming ’ems’.

    I think the biggest change in the past 40 years has been the dramatically greater availability and lower cost of data, media and books. My children watch much better TV than I ever did (in fact so dire was television growing up that I used to read the newspaper when I got home from school, rather than watch “The Littlest Hobo’). Through Spotify I’ve been able to go back and listen to music I would never have risked buying, like comparing the Ella Fitzgerald and Miles David interpretations of ‘Porgy and Bess’. When I think that CDs used to cost $30-35 in the early 1990s, I shudder. I also feel ‘in touch’ with like minded individuals worldwide which I can’t say I felt much growing up in Taranaki. If I didn’t have this connection, I might think think I was going crazy!

    In terms of negative changes I think the biggest ones have been the over-expansion of motor vehicles and the concomitant noise and stress. And the decline in physical fitness of the average person.

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  7. I told you I was an old fogey raising young fogeys – two of my children come home and read the (hard-copy) Herald. (Dad won’t let them watch much TV – although they now have a penchant for re-runs of Hogans’ Heroes, from the 60s!)

    Of course, my argument isn’t that there is no change, or even improvement. I think of my ancestors leaving England 1850, knowing that most likely they’d never see their families again. They wrote letters of course, Progressively, transport costs came down, telephony became a possibility etc etc. But even in 70s I recall my father had tenants who (British) couldn’t make up their minds whether they wanted to be here or the UK, and flitted back and forth (at considerable impairment to their economic well-being).

    Presumably even the fact that our English is still very very similar to British, Aus, Canadian, US English is a reflection of technology – incl radio and TV. So far, we haven’t seen them grow apart in the way the Romance languages did

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