Month: August 2018

Victoria University of Wellington

Michael Reddell Wellington

The proposal to change the name of Victoria University (dropping “Victoria” and just leaving the institution as University of Wellington) probably doesn’t get much attention in the rest of the country.  But here it has excited quite a flurry of interest, with thousands signing petitions opposing to the planned change.  Graduates and staff seem to have been particularly vocal, amid reminders of the ancient conception of universities in which graduates are forever, in some sense, “members” of the university.

I graduated from Victoria, some decades ago.  I suppose I do still feel a vague warm fuzzy sense of association with the place, and have even done the odd lecture there over the years.   But even that association probably has more to do with a career spent at the Reserve Bank which has long had reasonably strong associations with Victoria.  I suppose I have fairly happy memories of my time as a students (low fees, universal student allowances and all that), but I was living at home and Victoria was never the centre of my life.  So, equally, I can’t summon a great deal of analytical or emotional energy to object to the latest plans of the corporate bureaucrats who now run the degree factory.

This proposal seems to be all about money.  Money isn’t unimportant, of course.  But the bureaucrats claim that simply changing the name of the institution will somehow boost the institution’s prestige, and in turn boost their international student numbers by up to 850 a year  (I don’t have the numbers at my fingertips, but that must be a fairly large percentage –  actually, on checking a 25 per cent increase).  Something doesn’t really ring true.

The university has published various papers in support of its proposal.  One is some market research conducted by people in various countries who might be of a stage to consider foreign study, as well as some interviews with international agents (presumably advising potential students).

The agents apparently noted that university name might matter a bit at the beginning of a search process but

Agents think as students do more research, name becomes less important as the students rely on university rankings and the agents to identify universities.

Which seems about as rational as one might expect.

The market research people also asked how much various factors matter in deciding where to study.  These were the top seven, all of which seem (again) strikingly sensible.  The name of the institution doesn’t –  as one might expect – matter very much at all.

vuw

There was also an interesting page about the name options that were market-tested

Three names tested well: National University of New Zealand, New Zealand National University, and University of New Zealand, Wellington. When presented in isolation students preferred National University of New Zealand or New Zealand National University. However, when presented with other factors (in the choice modelling task), University of New Zealand, Wellington produced the greatest increase in preference. We think this is because having the city name in a contextualised decision making task provided the students with more information to base their decision on.

The impact of the names on preference for Victoria differed by country, for example changing the name to New Zealand National University would increase preference by 6.2 percentage points amongst Chinese students but drop it 1.9 percentage points amongst American students.

Nothing like grandiose ambitions from the Vice-Chancellor: National University of New Zealand indeed!   From an establishment that trails far behind Auckland in the international rankings, and which would have no claim at all to a title “National” (although one can see why foreign students might be misled if such a title had been adopted).

The corporate bureaucrats are keen to stress that Victoria University of Wellington isn’t a very old name –  and indeed it isn’t (we had the University of New Zealand, with (mostly) various constituent colleges (thus Victoria University College) until about 60 years ago).   That in itself is hardly good grounds to scrap a well-established name (and, as their material also notes, this is apparently the third or fourth time they’ve tried to change the name).

As various observers have pointed out, there are many universities around the world with names that (in isolation) give you no clue about where they are located (unlike Victoria University of Wellington, or VUW). I just had a look at one list of global universities: by my count, 7 of the top 25 in that list had names that didn’t tell directly of specific location.  One could add the Sorbonne, Imperial College, Notre Dame, Brown, McMaster, and the list would run on without limit.     Perhaps the difference here, if there is one at all, is that Victoria University of Wellington is just not that good a university?   That wouldn’t change by trying to jettison a historical name.    If anything, if location-based titles really matter a fig, there is probably a stronger case to consider change for Wellington’s other university (Massey), except of course that it is a multi-campus operation.

But, to be honest, the thing that surprises me a little is how many Wellington liberals have come out to defend the name: empire, colonisation, and all the rest being more than a little out of fashion, and no name being more emblematic of the British Empire and its colonial foundations than Victoria.  Why, even the local newspaper has an editorial this morning calling for the name to be kept –  the same newspaper that only weeks ago was weighing in strongly supporting the Wellington City Council’s Maori strategy, prioritising Maori street names, jettisoning old names for civic features, jettisoning Guy Fawkes for  Matariki, and aiming for some sort of bilingual city by 2040 (a city with one of the smallest proportion of Maori in New Zealand).    The Dominion-Post is keen to preserve its social justice warrior credentials, so gratuitously compares Queen Victoria to Lenin and Stalin (eponymous cities in Russia now renamed), but still somewhat surprisingly it ends on a note of “Stick with Vic”.

There seems to be a huge amount of guilt, perhaps even shame, about our heritage among the Wellington (and no doubt non-Wellington) liberals. I’m a bit surprised our mayor and his deputy haven’t been out campaigning not just to drop “Victoria” from the university name, but to replace it with primarily a Maori name.  Perhaps University of Te Whanganui-a-Tara (the Maori name for Wellington harbour)? After all, the Duke of Wellington is hardly someone today’s liberals will admire.  Or calling for Mt Victoria to be renamed (or its scrubby companion on whose lower slopes I’m typing this, Mt Albert).  Not content with having relegated the city’s statue of Queen Victoria to the remote fringe of the inner city decades ago, some of them are probably keen to junk it altogether.  These days Victoria University includes what used to be the teachers’ college, and primary school teachers now seem to see it as their goal to make kids rather ashamed of their heritage (my 11 year old is doing colonisation at the moment, and we have long discussions in which I remind her that, for all its faults and failings (captured in her little hand-drawn poster above the dinner table marking “exploitation, murder and robbery”), New Zealand was –  and in many respects still is –  one of the finest countries in the world).  These days an increasing number of official government agencies aren’t even content to leave the country with its proper name, New Zealand, slipping in an “Aotearoa” whenever they can.

As I say, I’m a bit puzzled at the way the liberals have emerged to defend the Victoria name for the university.  I’m pleased they have, but even if somehow they win this time, I can’t imagine the success will last long.  Even if Professor Guilford himself is simply after more money, and an implausible increase in foreign student numbers, it surely won’t be long until the crusaders will be coming for any names associated with our colonial heritage, Victoria University of Wellington among them.

Two scattered things

Michael Reddell Uncategorized

There seemed something strangely apt about the power going out on a lecture about the current Treasury/government craze for “wellbeing”

(Having said which, I expected the lecture itself would be interesting and stimulating –  Arthur usually is even when, as often, I disagree with him.  I hope it is rescheduled.)

Out of the blue the other day, I received a copy of a new book by Simon Burnett, a New Zealand journalist resident in Germany, about an episode in recent New Zealand financial history that I’d almost entirely forgotten.

Blunder: How ANZ and ING squandered 800 million dollars in a Wall Street casino—and ignited a revolt of small-time investors

As the blurb puts it

Between 2003 and early 2008, fifteen thousand financially illiterate people in New Zealand were persuaded to invest their savings in packages of hyper-speculative securities. They were told that these were safe alternatives to bank deposits. The investments crashed. The shell-shocked investors, mostly elderly and risk-averse and in no position to recover from financial disaster, banded together, formed a national committee, set up regional groups, took the battle on to the streets, and won.
The securities, known as CDOs, were packed into two mutual funds (or unit trusts) managed by the New Zealand arm of the Dutch financial giant, ING. Its joint-venture partner and half owner, the Australia and New Zealand Banking Group (ANZ), was a major sales agent. When the CDOs tanked and the funds tanked with them, the ANZ and ING began a desperate cover up, blaming unforeseen circumstances. This was baloney and the investors knew it.

and

This is the story of the biggest, most sustained, investor revolt in New Zealand history, told not by a financial expert but by one of the ANZ/ING investors who himself took part in demonstrations. The author unravels the financial complexities that neither the ANZ nor ING apparently were aware of.
The scandal was regional, but the lesson is universal: it illustrates just what can happen when financial institutions do not check what they are investing in and pass on the risks to unsuspecting customers.
Financial commentator and economist Gareth Morgan wrote that, “For anyone investing their savings with the financial sector in New Zealand—especially with some of the biggest brands in the business—I commend this book to you as a good background on what you can expect if you do not do your homework.”

I haven’t read the book, but hope to.  Too few of the episodes in our economic and financial history are well-documented, and if this book makes some contribution to such a literature I welcome it.

Gareth Morgan has written the preface to the book.  There are plenty of things I disagree with Gareth about, notably financial regulation.  But he has been around, and his willingness to write the preface suggests there is something to the book, as a story, even if you don’t go as far as he does on policy.  Here is some of Gareth’s view.

And in New Zealand there is a sequel. In a flurry of belated regulatory responses to events here—not just the ANZ/ING debacle, but also the mass destruction through the finance company sector—a licensing regime is being brought down on financial advisers and a rewrite of the Securities Act is being attempted in order to rein in the malfeasance.
But industry’s capture of the regulator is so complete that the financial adviser
regulations are little more than window dressing. Not one of the offences committed by this sector during the GFC would have been prevented under the licensing requirements that are being implemented —indeed the worst offenders have been exempted most of the qualifying requirements the Code Committee for Financial Advisers has implemented.

There are no grounds whatsoever for the public to increase its confidence in this sector, no chance the new regulations will ensure it has a duty of care to it, and the book “Blunder II” will be required in a few years to outline why the malpractice has continued.

And were the FMA to ever investigate such an episode, we were reminded again this week that they can arbitrarily slap suppression orders on, stopping people talking about thet directly affects them and their customers –  even stop them talking to parliamentary committees.

I’m pretty ambivalent on Nicky Hager too, but here is some of his endorsement

“This is why Simon Burnett has done a great service in writing this book: explaining an important New Zealand story as part of the world-wide crisis, distilling the lessons and holding ING, ANZ and their senior staff to account. He has done a huge amount of work to piece the story together and to make it into an interesting, readable book. It is also pleasing that he tells the story of the ordinary investors who complained and fought and protested, in the face of misleading information and resistance from the respectable sounding companies involved, until they found out the truth and got some justice. The book is a fine piece of investigative journalism.”

The book looks to be well-documented, and from the bits I dipped into seems to read easily enough. I suspect I would probably part company from the author on any policy implications, but probably not on the ethics of what went on.

UPDATE: In a comment below the author notes:

At the moment, the book is exclusively on Amazon as an eBook. A paperback is scheduled for the end of August. Anyone who wants to can get a PDF copy from me free. Just email me at frozenfunds08@googlemail.com.

Confucius Institutes, the PRC, and all that

Michael Reddell China, Uncategorized

Last week there were screenings in Auckland and Wellington of Canadian journalist and filmmaker Doris Liu’s documentary “In the Name of Confucius” .  Each screening was followed by a Q&A session with the filmmaker herself, who has been on a bit of a roadshow promoting the film (which is funded by the Canada Media Fund) and its message (which has now also been screened at the British Parliament and at various parliaments in Australia).

From the promotional material

Culture. Language. Power.  On average, China opens one Confucius Institute per week in partnership with school boards and academic institutions around the world, with a goal of opening 1000 by 2020.  Yet, a growing number of schools are also starting cut ties with the program, alarmed by concerns ranging from human rights violations, financial incentives and censored content to national security and espionage.

In the Name of Confucius is a one-hour documentary about the Chinese government’s multi-billion dollar Confucius Institute (CI) program and the growing global controversy at academic institutions around the world as scholars, parents and others question the program’s political influence and purpose.

The Confucius Institute (CI) programme began in 2004, and there are now three of them in New Zealand (made possible as part of the 2008 China-New Zealand “Free Trade” Agreement), one each at Auckland, Victoria and Canterbury universities.  Given the substantial amounts of money involved –  the universities get to extensively leverage their brand with PRC money –  and the sensitivities of the PRC authorities on all manner of things (try the Rockhampton fish story for example), it was to the credit of Victoria University that they allowed their facilities to be used for the Wellington screening, even with the strange disclaimer that “This external event does not necessarily reflect the views, thoughts and opinions of the university”.    Perhaps naively, I’d associated universities with the contest of ideas, evidence etc, rather than with any single view held by “the university”.

(Reflecting an official PRC perspective, the film featured a clip of the head of Hanban –  the PRC government agency responsible for the CI programme –  stating that the CIs meant that it was “like foreign universities work for us”.)

The documentary centres on two main Canadian stories.  The first was the defection of a Mandarin language assistant (the main strand of what CIs do), Sonia Zhao, whose defection and subsequent human rights complaint (based on the then formal PRC prohibition of anyone with Falun Gong connections being a Mandarin language assistant) contributed to the closure of the Confucius Institute at McMaster University in Ontario.   Zhao herself had been a Falun Gong practitioner who, on her telling, had been unaware of the prohibition until presented with her draft contract, and was then fearful of imprisonment or other punishment in China.    She recounted the instructions the assistants received that –  in Canadian government classrooms –  they should avoid issues like Taiwan and Tibet, change the subject if possible, and otherwise parrot the Party line.

The second story was around the battle, ultimately successful, to convince the Toronto public schools system (apparently the third largest in North America) to end its association with the Confucius Institute/Confucius classroom programme.  It featured rather gruesome footage of little Canadian kids singing a song, drawn from CI resources provided by the PRC authorities for Toronto schools, in praise of Chairman Mao “leading his people forward” (no mention presumably of the tens of millions of deaths ascribed directly to government choices?).

The section focused on the Toronto debate featured footage of vociferous protests outside the meetings (on both sides, mostly from the ethnic Chinese community, with those in favour of the CI programme apparently organised by other PRC front organisations), some pretty arrogant bureaucrats (including one who had clearly enjoyed being “wined and dined” –  his words –  by Beijing), and some dramatic footage of the impassioned debate at meetings of the school district board of trustees.    There were the competing perspectives: one Chinese immigrant tried to claim that Tibet’s status was really just like Quebec’s.  That sparked a feisty response from one trustee about the possibilities for independence referenda in Tibet, to which the response was ‘oh, we don’t need referenda, because we know no one wants independence”.    And, on the other side, other ethnic Chinese noted that for all the CI claims to promote Chinese culture, it was the Communist Party which had set out to destroy so much of Chinese culture.     At the end there was an overwhelming vote (20 for, 2 against) to end the Toronto school district’s association with the Confucius programme.

The documentary was primarily about the Confucius Institute programme.  But it was also –  particularly through the lens of the Sonia Zhao story –  about the brutal and systematic PRC persecution of the Falun Gong.    The filmmaker –  herself a Chinese immigrant to Canada only about 10 years ago – has some involvement with Falun Gong herself, and indicated that she has family members back in the PRC who are active practitioners. One could only admire her courage in speaking out, although wondering about the risks she might be exposing her family still in the PRC to.

Here is an extract from a pamphlet Falun Gong people were distributing in central Wellington last week

falun gong

Or you could read an Australian (ABC) article.

This is the sort of regime that we allow to put its people into our schools.

Falun Gong isn’t, to put it mildly, my cup of tea.  But that isn’t the point.   States shouldn’t get to compel, or proscribe, religious/spiritual practices in this day and age (cuius regio, eius religio was from hundreds of years ago) and, when they nonetheless still choose to do so, we should not be actively aligning ourselves with such regimes (one could add regimes like Saudi Arabia to such a list), let alone allowing them to put (ideological “sound”, politically safe) people in our schools.   The PRC has now removed the explicit prohibition on Falun Gong people from the websites describing these Mandarin language assistant roles, but it makes no practical difference, given that the practice of Falun Gong is prohibited in the PRC and the government actively persecutes (and in some cases, it appears, murders) practitioners.

As it happens, and to her credit, the director of Victoria University’s Confucius Institute attending the screening of “In the name of Confucius” in Wellington.  Rebecca Needham was, until recently, a fairly senior MFAT official, including former New Zealand Consul-General to Guangzhou.  As I noted recently, in the weird conflation of roles and interests that swirls around Wellington over the PRC relationship, even though her current job (directly on the payroll of Victoria University) involves implementing a programme largely funded by the PRC, she is still shown on the MFAT website as one of the group of public sector experts on China (the only non public servant on the list).

When it came to the Q&A session, Needham made a couple of points:

  • to the extent that events were portrayed accurately in the film, they bore no resemblance to the way the Confucius Institute at Victoria (or others in NZ) were run, and
  • that the Victoria Confucius Institute was completely transparent and non-political.

Since I had met her once before, and she had then volunteered a willingness to talk and answer questions, I emailed her and asked whether she could be specific about any differences in how the New Zealand CIs were run, and whether there were any prohibitions on Falun Gong teaching assistants.

She invited me to come and talk it over, and we met in her office yesterday. Despite her offer to talk, she was clearly a bit uneasy about talking to me, and so I offered to keep her remarks off-the-record, and simply use them as background to my own descriptions etc.  In the course of the discussion, Tony Browne – former New Zealand Ambassador to China, chair of the Confucius Institute and senior consultant (unpaid) to Hanban (the PRC agency behind Confucius Institutes –  dropped in.  I’ve also written previously about the multiple hats Browne wears.

To recap, the main focus of the Confucius Institute, despite its location in a university, and use of the university brand, has almost nothing to do with the traditional role of a university.  They neither teach undergraduates, nor conduct research.  It is mostly a programme of (at PRC government expense) putting native Chinese speakers (typically young graduates from good Chinese universities) into our schools, to support Chinese language (and related) programmes. (There are also “cultural” programmes that look as though they should be better done, if at all, directly through the PRC embassy, not with a local university imprimatur).   A different cohort of these young people come out each year, and they are based in various towns and cities (in Victoria’s case, the North Island up to and including the Bay of Plenty), working in local schools alongside New Zealand registered teachers.  Apparently, no textbooks or the like are provided by Hanban, the Confucius Institutes, or the Mandarin Language Assistants themselves (presumably reducing the likelihood of kids in our schools singing songs celebrating Chairman Mao).

Apparently the hope of Hanban has been to localise Chinese language teaching over time (presumably, in turn, reducing the substantial cost the PRC taxpayer –  in a much poorer country than NZ –  bears).  Even if that is the hope, it isn’t the situation at present, whether in New Zealand or in other countries where CIs are operated.

The recruitment process for the Mandarin language assistants who come out here involves the New Zealand Confucius Institute staff making the final decisions (sensibly enough –  they need people who will fit in, living in perhaps a small New Zealand provincial town for some time). But they make those decisions from a list provided to them by PRC universities.    We can be pretty sure that all of those people –  after all, coming to pursue an official government agenda just by their presence – will have well-vetted. No Falun Gong will have survived the vetting process, but nor will anyone calling for (say) independence for Tibet, free and open elections in the PRC itself, respect for Taiwanese democracy, or freedom of religion or freedom of expression.   That is just the way the PRC is, and he who pays the piper calls the tune.  New Zealand staff needn’t concern themselves with this sort of pre-vetting.

Now, of course, these are young graduates.  Some might be politically passionate, but probably most aren’t –  more concerned with seeing the world, shopping, the opposite sex, developing their English, or whatever, all the while adopting the only safe PRC position (keeping your head down, and your speech tightly constrained).  So I’m not suggesting that when these people come into our classrooms they are generally consciously actively propagating some PRC agenda or worldview to our kids.  But it doesn’t change the fact that they are approved representatives of a heinous regime, and they (and the Victoria staff) have chosen to be complicit with that regime, no matter how often they repeat the line that “we just do language and culture”.     Are they helping some New Zealand kids in the process?  Yes, no doubt.  (And having myself spent time growing up in Kawerau, I was half-pleased to see that kids in places like Kawerau and –  still poorer –  Murapara are getting support in their Chinese language learning.)

But it doesn’t make the system right.  I suggested to the director that it really wasn’t much different than if, say, a cohort of Hitler Youth (which pretty much everyone had to join, whether a zealot or not) had beeen coming to the UK in the mid-late 1930s each summer to teach German language and culture, at the expense of the Nazi regime.  There is nothing wrong with learning German, or Chinese, but the people who work on those programmes (from university vice-chancellors down) make themselves complict in the evil.

If we want to encourage Chinese language learning in New Zealand, how much better if we spent our own money on it?   That is what we do when we want to improve science or maths or English or economics teaching.   It is what self-respecting people do, not mendicants.  We don’t (that I’m aware of) have a government-facilitated programme to bring in native French or German or Spanish speakers for our schools, but if that were regarded as a worthwhile part of secondary education I’d have no particular objection. But spend our own money, recruit people directly ourselves, and recruit them from places (in the Chinese case, eg Taiwan, Singapore, or even semi-free Hong Kong) where we can reasonably confident that a foreign government won’t have prescreened for political suitability and safety.  Particularly not a foreign government like that of the PRC.   (And this is all the more so for courses for our public servants, of the sort the CI conducts.)

You can read the Victoria University Confucius Institute material for yourself: there is plenty of it on their website.   You can also see that the talk about it being “just” language and culture (and doesn’t “culture” encompass “the way we do things” –  the PRC not being a model for most New Zealanders), they are quite open about the political nature of what is going on.  The handbooks for schools might mostly be branded as “Victoria University” products (Vic has many institutes and schools) and perhaps that helps marketing and recruitment in the provinces.  The Annual Reports are a bit different.   We find photos of a Vice-Premier, of a visiting Communist Party secretary.  We read that a counsellor from the PRC Embassy sits on the board of the Confucius Institute, and that one of the CI staff is involved in programmes “to raise China literacy in the public sector”  (we ask the PRC government to help “educate” us on China?   And the Nazi Party to educate us on Germany in the 30s?)   In fact, in the 2017 Annual Report there is a celebratory photo of Xi Jinping on page 2 –  clearly not embarrassed that this tyrant, just taking power for life and further clamping down on any freedoms in the PRC –  launched the Victoria CI in 2010.

The PRC doesn’t have any doubts about the point of the Confucius Institute programme.  But you have to wonder why New Zealand universities, government departments, and decent individuals are so willing to allow themselves to be used by such a dreadful regime.  Language learning generally is a good cause, but ends aren’t all the matter. Means matter too.

The presence of Confucius Institutes clearly isn’t the biggest issue that should be worrying people in the supine, even slavish, way our authorities approach the PRC.  Rather more important is when, for example, the Leader of the Opposition (who as a minister signed us up for a “fusion of civilisations” with this dreadful regime) can claim, apparently with a straight face

He also said he continued to back National MP Jian Yang who was forced to defend himself after confirming that he had taught ‘spies’ in China.     “Before me being or becoming the leader, he has asked and answered quite decisively the questions around all of this … he is a highly valued member of parliament,” Mr Bridges said.

(This of a man hardly heard from in the English language media since the allegations surfaced)

or a Defence Minister who was reported the other day, at a function to celebrate the People’s Liberation Army 91st anniversary, that New Zealand was a “strategic partner” of the PRC.

If you want to update on what sort of regime it is that we allow to put its people in our schools, that we solicit foreign aid from, and have our universities celebrate, I recommend that new Der Spiegel piece on the open-air concentration camp that the Chinese province of Xinjiang has become.  Or an update on the organ transplant abuse situation, that someone sent to me a few days ago.  Perhaps you are inclined to look the other way, or just ignore this issue, as I was until quite recently.  If so, at least I suggest you check out the calibre of some of the people involved in leading the fight against this practice.  Yes, governments need to have relationships with the PRC (stiff formal ones ideally), but we shouldn’t be beggars, and we shouldn’t give our good name to voluntary association with such a regime.

Women at the Reserve Bank

Michael Reddell Uncategorized

My post the other day, about the Treasury paper on “Women in economics”, was mostly about the apparent waste of (probably quite expensive) staff resources –  diverted from the real and substantive economic challenges Treasury should be addressing.  It seemed to be about virtue-signalling and feel-goodism more than focused analysis, made all the worse because the authors weren’t new graduates repeating an honours project (sometimes the basis for NZAE papers by young economists); indeed one of the authors is the chief economist of The Treasury, a deputy secretary no less.  Of course, that paper in itself was just a small example of what has gone wrong at The Treasury under its current leadership (facilitated by both the past and present government).  The Living Standards Framework, and the coming Wellbeing Budget, are the more prominent examples: a “well-meaning wafflefest” is the best that is likely to be said for that.   The quote is from Pattrick Smellie’s column today –  he seems slightly more optimistic than I am, noting the “intellectual grunt of The Treasury” (perhaps his memories of his time as Roger Douglas’s press secretary in the days when Treasury had intellectual grunt –  agree with them or not), but clearly a bit uneasy that it might all come to nothing much.

As I noted in comments to the previous post, I spent a couple of years working at The Treasury, and although it was getting on for a decade ago now, one of the things that struck me then –  recall, I was coming from the Reserve Bank – was the much higher proportion of women in economics, policy, and core management roles.  Frankly, I found it refreshing, and it was the only time in my working life when I sometimes went to economics/policy meetings at which there were more women than men.  I was struck then by the openness of The Treasury to part-time work, and to job-sharing arrangements, which seemed to make the place more attractive to women, especially those with young children (including several who had moved from the Reserve Bank to The Treasury).  The situation is also self-reinforcing –  when some (future) parents see flexible arrangements in an institution genuinely working for other people, it gives them more confidence it can work for them.  My own children were very young at the time, and my wife was considering going back to work, so they were issues that I paid attention to.

Perhaps it has all gone downhill again, even in these areas, in the last few years.  But I doubt it.   Which is partly why I struggle to take seriously Gabs Makhlouf, Tim Ng, and the rest of them whipping themselves about not meeting self-imposed quotas –  or indeed giving more attention to such issues, including in their Annual Report, than to lifting analytical excellence and the quality of their policy advice.   It just isn’t clear that they are addressing a real problem in The Treasury –  perhaps exemplified by them discovering that the institution had been using a tool that would have discouraged the use of words like “analysis” in job adverts, because they were somehow male-dominated words.

By contrast, I think there probably is a real situation that needs addressing at the Reserve Bank.  Here is how I described my assessment of the situation at the Bank in a comment on a post a few months ago

I agree that sex is not, and should not be, a relevant criterion in the selection of a Governor. But I also recognise that in a powerful public sector institution, with a high public profile and pervasive impact, in this era it isn’t necessarily inappropriate that questions should be asked to understand why, after 84 years there has never been a women appointed to a policy or operational senior management position (Governors, or heads of economics, financial markets, macrofinanancial stability, prudential regulation, or even notes and coins). For years, I defended those outcomes as mostly reflecting preferences (far more men end up doing macro and finance – and far more women do health and social economics etc), and I still think there is something to that story, but I’m no longer convinced it is enough of an explanation – substantively or politically. After all, Janet Yellen has just stepped down, and the RBA has two pretty impressive female Assistant Governors.

A commenter on my Treasury post drew my attention to an article from a couple of months ago, quoting the new Governor, that I hadn’t seen.   In it, Adrian Orr says

“I’m disappointed that it is as imbalanced as it is. We will be working actively. We are just going to have to be far more aggressive at getting the gender balance balanced,” Orr said in a recent interview with BusinessDesk.

Consistent with my comments in that quote just above

At the Reserve Bank, 36 percent of its 252 staff were women, although that dropped down to 20 percent of management roles – including managers and team leaders and senior positions of influence – and 26.2 percent of senior specialist roles. The Reserve Bank’s website shows just two of 13 senior managers are women: chief information officer Klarissa Plimmer and human resources head Lindsay Jenkin.

To its credit, the Bank is now being a bit more open with some of the data

In the year to June 30, 2017, the bank tried to hire six mid and senior management positions, attracting 101 external applicants, of which 19 were women. Of the four external hires, only one was female.

In particular, the data around applications for the position of Governor.    They initially refused to release this data, only relenting after the (surprisingly quick) intervention of the Ombudsman.

In the same vein, the hiring process that appointed Orr attracted 48 applicants, of which just six were women. Only two of those women made the final short list of 25.

But in a sense, the data on applicants for the position of Governor highlight that whatever is going on, isn’t a simple and straightforward story about (eg) institutional bias.

After all, anyone is free to apply, and in applying to be Governor you are backing yourself to be able to make a difference, including if you had heard that the Bank wasn’t (say) very welcoming to capable women.

And who got to make the decisions?  Well, the Minister of Finance was the final decisionmaker, and even he had to take the nomination to Cabinet (chaired by a woman).  But the real decision on the appointment of the Governor was made by the Reserve Bank’s Board.   And at the time, late last year, of the six Board members, three were women (including the deputy chair).  I only know one of the three, but none looks like the sort of person who would be pushed around by anyone, let alone consciously or unconsciously biased against female candidates.

Successful organisations mostly end up promoting from within.  It is a mark of the Reserve Bank’s failure as an organisation that 1982 was the last time an internal candidate was appointed as Governor and, perhaps even more so, that currently three of the four most senior positions (including Governor and Deputy Governor) are held by outsiders.  The failure of the Reserve Bank to have women in senior core functional positions (top advisers or senior managers) is, to a substantial extent, a failure of history, the failure to develop and maintain a culture and working arrangements that made it attractive for the very many female economics (and related) graduates the Bank has recruited over the years to stay.  Of course, most of all the graduates the Bank hires go on to do other things, but not one of the many female hires has stayed. I look around Wellington and see various women who once worked for the Bank in economics roles now holding relatively senior positions in other agencies.

The Bank itself has made this point.

The Reserve Bank admitted as much during a Parliamentary review of its 2017 annual report in February, with then acting governor Grant Spencer saying the bank hired a lot of women graduates, but struggled to retain women in senior and management roles

It is the single biggest difference between the Reserve Bank of New Zealand and the Reserve Bank of Australia: both of the two (impressive) female RBA Assistant Governors (in core areas –  economics and financial system) have spent the bulk of their careers at the RBA.  There has been nothing similar at the Reserve Bank of New Zealand.

To be sure, the Reserve Bank of New Zealand is a smaller organisation.  And no organisation can compel an individual to stay.  And I –  and probably most people –  am firmly opposed to so-called “positive discrimination”.  But our central bank should be the sort of place –  interesting work, reasonable prestige –  that plenty of able people (male and female) would want to stay at.

I wrote earlier about my observations of flexible working arrangements at The Treasury.  There was, in practice, nothing similar at the Reserve Bank; few or no examples of it working successfully, even if on paper the rules allowed it.  In my observation, it wasn’t that senior managers were in any active sense discriminating against women, but they just didn’t have a mindset that focused on creating an environment where women (in particular) who wanted to be parents as well as economists would find it most attractive to work.  That was still my observation, as part of the Economics Department management group, just a few years ago.  And, as a result, decades on the Bank seems to have not many more women in senior policy or analysis roles than it did when I started there 35 years ago.

Is the quality of the Bank’s work poorer as a result?  Probably not much, but probably a bit –  I seriously doubt there is a distinctive female perspective on macro or financial stability or bank regulation, but some of those very able women who didn’t stay might well have made a stronger contribution than at least some of the men who did.  We’ll never know.

There are probably aren’t any wise quick fixes.  As the pool of applicants for Governor suggests, there aren’t currently many women in New Zealand with a strong interest and/or the skills/experience for the very top roles in the Bank.  And, as the Treasury paper noted, the number of people doing economics to an advanced level at university is falling, and the proportion of women among them seems to be falling away a bit too.   Absent token appointments (which would be bad for everyone, except perhaps the appointee, and perhaps even her) fixing the Bank is likely to be the work of a decade or more –  most worthwhile things probably are.  But it still needs to be treated as a priority, for both substantive reasons, and because the Bank is a high profile and very powerful institution and questions will (and should) be asked.

What worries me a bit is that the Governor often shows signs of appearing to favour the quick win and the rather-too-glib answers, rather than digging more deeply into issues.  He has, after all, lots of turf battles to fight in the next few years, and a government that is all too keen on quotas.  In the article my reader linked to there was a private sector example of the sort of questionable responses to external pressures

ANZ Bank New Zealand has a policy that any short list for a position must be 50:50 gender split and the interview panel must also be equally split.

And yet, if honours graduates in economics are roughly one third female and two thirds male, a shortlist requirement of 50/50 male and female will (by construction) often not mean that only the best candidates are on the list.

And keep an eye out for appointments from the Governor in which he chooses to positively discriminate (while no doubt denying it).  I was a bit puzzled recently to see who the Bank had appointed an acting head of its Macro-financial Department (to fill in for a substantial period while the permanent head is on secondment leading the review of the RB Act).  The Macrofinancial Department is responsible for producing the Financial Stability Report, and for analysis and policy advice on macro-stability and macro-prudential issues. It also happens to include the Bank’s statistics unit (which doesn’t naturally fit in any of the core departments).  The acting head of the unit has no background at all in financial stability, regulatory policy or anything of the sort.  I gather she is quite well-regarded as manager of the statistics unit, but is hardly a natural fit for leading the entire policy-focused department.   Perhaps she really was the best available option, but when the Governor is out promising to be “aggressive” in rebalancing the statistics, it is inevitable (and sadly appropriate) that the question will have to be asked.

Change needs to come, but it needs to be done well and wisely.

 

What is “formulating monetary policy”?

Michael Reddell Reserve Bank Act reforms

Under clause 8 of the current Reserve Bank of New Zealand Act, the primary function of the Bank is “to formulate and implement monetary policy”.   All powers rest with the Governor personally.

I did a lot of work over the years on issues around monetary policy, both bigger picture stuff around goals and governance, and on the detailed implementation arrangements (the design of the OCR system itself, and various supporting liquidity management arrangements).  I sat on whatever internal advisory committees we had for the best part of 25 years.  I wrote this piece, for example, and this one.  So I know whereof I speak.  But I don’t recall anyone ever making much of the distinction between formulation and implementation, or getting a legal opinion on which of “formulate” or “implement” mattered in what particular context.  Why would we have?  All the powers rested with Governor, and there was no particularly need to clearly delineate formulation activities from implementation activities, either in the present, or in thinking about contigency planning.

In practice, and on a day to day basis, under the current system the two activities are fairly clearly divided: monetary policy formulation is, in effect, things up to including the OCR decision, while implementation involves the detailed management of market conditions to deliver something akin to the chosen level of the OCR.

But the broad parameters of an OCR system itself –  indeed, even the decision to have an OCR (we’ve only had one for 19 years) –  doesn’t fall neatly on either side of a line between “formulation” and “implementation”.  And then there is foreign exchange intervention for monetary policy purposes. Perhaps things have changed, but when I was there decisions that the preconditions for intervention were right (the “traffic light system”) were made by the Governor in the OCR Advisory Group context, while (rare) decisions to actually intervene were made by the Governor directly liaising with the Financial Markets operational department.

It doesn’t matter much at present, because all powers vest with the Governor, and how or whether he takes advice on individual bits of his monetary policy responsibilities is entirely up to him.

But in the Reserve Bank bill introduced last week splits those two functions apart.

Under the amended clause 8, it is intended that

The Bank, acting through the MPC, has the function of formulating a monetary policy….

and, in section 8(3)

The function of formulating monetary policy includes deciding the approach by which the operational objectives set out in a remit are intended to be achieved.

And in a new clause 9, we read

The Bank has the function of implementing monetary policy in accordance with this Act.

And later in bill, in the new clause 63B we read

The MPC must perform the function of formulating monetary policy in accordance with this Act

Neither “formulation” nor “implementation” is further defined in the Act at present, and I can’t see any attempt to add more specific definitions in the new bill, other than a circular definition which says that

formulating, in relation to monetary policy, has the meaning set out in section 8(3)

Which, to say the very least, isn’t very specific.

I have two concerns about this, which boil down to much the same point I was making in a post last week: this bill would results in a committee which is likely to be nothing more than figleaf, and which leaves all substantive power in the hands of the Governor (and his chosen management team).  That is likely to be even more so in the next serious recession, when the limits of conventional monetary policy (how far the OCR can be cut) are likely to be reached.  If that is the Minister’s intention, he should be honest enough to say so. If he is serious about building a stronger, more open institutions, not totally controlled by management, he needs to look again.

I suspect the intention of the wording of the bill is that OCR decisions (and only those decisions) should be made in, and by, the MPC.   That would be consistent with the explanatory note to the bill, which twice refers (loosely) to the goal being to institute an MPC “to make decisions on monetary policy”.

But the OCR itself is (rightly) not referred to in the Act.  And clause 8(3) only talks, very loosely, about “>deciding the approach by which the operational objectives set out in a remit are intended to be achieved”.   Couldn’t a Governor argue that not even the specific OCR decision is covered by that mandate?   The MPC might decide that it thought an inflation target should be achieved over, say, a two-year forecast horizon, but it isn’t clear why the Governor couldn’t insist that even specific OCR decisions were a matter for him alone, provided they weren’t inconsistent with the MPC’s “approach”.   That interpretation might be buttressed by the proposed wording around Monetary Policy Statements.  MPSs need the approval of the MPC, but the specific material an MPS has to cover is  (emphasis added)

specify the approach by which the MPC intends to achieve the operational objectives [and] state the MPC’s reasons for adopting that approach

I’m not suggesting such a departure is at all likely under the current Governor, but legislation should be written in a way that is robust, including to power-grabbers (either the Governor, or the MPC).   Specifically, it would be quite inappropriate for the Governor to be able to assert that OCR setting was purely his responsibility, and that MPC was only there to provide advice, even a decision, on the broad “approach” to achieving the remit goals.  It would make a mockery of the rhetoric around reform.
Similarly, I don’t think it should be acceptable for the Governor alone to decide to, say, scrap the OCR system itself (which would appear to be possible under the current legislative drafting) or to modify the system substantially in ways that led to much greater (or much reduced) volatility in key financial prices.  I’m not even convinced that choices around the policies the Bank adopts on what sort of collateral to take in its market operations, implementing monetary policy, should be matters for the Governor alone.  Such decisions have the potential to materially affect monetary conditions, and the achievement of the remit goals set for the MPC by the Minister of Finance.   At a bare minimum, the Governor should be required to consult with the MPC on such matters, and have regard to any comments or representations on such matters they wish to make.  Similarly, I don’t believe it should be acceptable for foreign exchange intervention decisions (the traffic lights) done for monetary policy purposes (or, indeed, the policy on such matters) to be made outside of the context of the MPC.

These issues might seem of second-order importance in normal times.  They have the potential to become hugely important in crisis periods, or in circumstances in which the limits of the OCR have been reached (recall that the Bank itself reckons the practical limit is only 250 basis point from here).  In those circumstances, if the MPC has power only over the OCR –  and perhaps not even secure statutory power there –  it will be all-but neutered; irrelevant to the real choices that the Bank management (and perhaps the government) is making.

Thus, for example, decisions to:

  • intervene heavily to drive down the exchange rate,
  • decisions to undertake substantial QE,
  • decisions to intervene to control yields on interest rate swaps

(all options touched on in the Bank’s recent article)

as well, potentially, as decisions around any limits on the volume of notes and coins, or on the conversion rates between settlement balances and notes and coins, would have potentially very large consequences for monetary conditions, and for the ability to meet the remit target

but I suspect the Governor would argue that they are all matters for him to decide, not choices for the MPC.

If the Governor successfully made such an argument, it would be unfortunate on at least two counts:

  • substantively, since the whole argument (made in the Explanatory Note, and in the Minister’s speech) is the benefits of diverse perspectives.  Such perspectives would be likely to be more valuable usual in an unconventional environment, which management had not previously experienced,
  • transparency.  The bill envisages requiring that some (pretty neutered) MPC minutes will have to be routinely published.  But if the important stuff of monetary policy is still being decided by the Governor –  not just him block-voting management in the committee – even what limited gains we might hope for around transparency and accountability will be foregone.

Of course, one way of looking at all this is to observe that if I’m right and the new legislation just cements in effective control by the Governor (through his management majority of the committee, and his likely clout with the board regarding the handful of externals) perhaps it doesn’t really matter very much.    Good people are likely to be reluctant to accept appointment, and that would simply be reinforced during a period when the OCR itself was neutered.

But, presumably the Minister doesn’t accept that interpretation (after all, he talks about the benefits of committees, diverse perspectives etc).  Nor, presumably, does the Opposition –  who talk up the risks to the independence of the Bank.  The legislation should be better-worded:

  • it should be explicit that the MPC has responsibility for decisions on the OCR or any official interest rate,
  • it should be explicit that the MPC has policy responsibility for matters to do with foreign exchange intervention done in support of monetary policy, and for policy parameters around domestic liquidity management,
  • it should be explicit that policy matters to do with, for example, QE should be matters for the MPC
  • operational decisions on matters within these mandates would be matter for the Governor, but accountable to the MPC,
  • and, at very least, the MPC should be free to make written representations on any other aspects of Bank responsibility which, in their view, are likely to affect their ability to deliver the remit objectives.

Consistent with that, of course, the MPC should have a clear majority of outsiders, and a clear majority of the members (preferably all) should be directly appointed by the Minister of Finance, without the involvement of the Bank’s (ill-qualified, illegitimate, and unaccountable) Board.