Reserve Bank whimsy

I was meeting someone in town this morning. I was a bit early and the person I was meeting was a bit late so I found myself standing for some 20 minutes across the road from the Reserve Bank.   As I did, I became a bit curious about these four guys.

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In the entire time I watched them, this is all the activity there was (the chap with his hand on the cone).

Most of the Bank’s building is apparently still closed as a result of the asbestos scare, although the ground floor museum has now reopened.  But it isn’t at all clear what these guys were doing.  Access to the turning circle is now controlled (remotely) by those metal bollards, and although there will probably be billions of dollars of notes in the vaults, electronic security systems –  and big thick steel doors and walls – will be guarding that.  They weren’t acting as a guide to members of the public –  various people walked up the main steps into the museum while I watched and none interacted with the security men.  They seemed to be just standing there.  And when I walked past again 45 minutes later, they were still there….just standing.  Is the Bank a bit overfunded, or is it just the average productivity in New Zealand is so low that labour intensive operations (accomplishing what?) are still affordable?

I’ve commented here on the new Governor’s enthusiasm for all manner of green causes.  But he seems to be doing his bit personally, or maybe just saving a few dollars for the staff cafeteria.  Someone pointed out to me that the Bank now has a dinky little vegetable garden right on the corner of Bowen St and The Terrace.  I guess the space is too small for a tree?

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On a slightly more serious note, readers will recall that a few weeks ago the Governor was billed as giving a speech on transparency, to the annual meeting of the (largely) taxpayer-funded lobby group Transparency International, to be introduced by the State Services Commissioner (who has responsibilities for open government)……..and yet the speech was to be totally non-transparent (no text published).    Potential attendees were told that the Governor was to be thanked by the head of the Department of Prime Minister and Cabinet, Andrew Kibblewhite, who is shortly to take up the job of Secretary for Justice, with responsibilities for the Official Information Act.

As it happens, the newsletter of Transparency International dropped into my inbox the other day.  It featured a report of the Orr address.

Guest Speaker: Adrian Orr

Guest speaker, Governor of the Reserve Bank of New Zealand (RBNZ), Adrian Orr, was introduced by Adrienne Meikle, CEO of the Commerce Commission. Noting that people referred to her as “the other Adrienne” she augmented her introduction with comments about the key priorities of the Commission.

The RBNZ Governor provided a most insightful, off-the-record address with ideas to stimulate thinking about the relevance of transparency, accountability and integrity for more-effective governance.

The vote of thanks was delivered by Lyn McMorran, Executive Director of the Financial Services Federation, who has contributed an account of Adrian’s presentation below.

Perhaps Peter Hughes and Andrew Kibblewhite were just too busy in the end, or did they get cold feet about being associated with such a travesty –  the secret speech on transparency by a public official, to a (publically funded) transparency and governance lobby group?

Senior officials, in roles that are closely followed by markets etc, really shouldn’t be doing “most insightful” off-the record addresses.  If the speaker can’t be bothered writing a full text he or she can do as the Reserve Bank of Australia does and make an audio or video record available.

As it happens, Ms McMorran has given us a summary of this “off-the-record” address.  Here is an extract (emphasis in the original)

He said, however, that often constructs within society work against us doing the right thing. In terms of transparency he said that what gets measured gets managed. Too often what is measured are things that are short term and that managers are often being incentivised for the start line not the finish line.

It is, therefore, crucial to get the horizon right – determine what outcomes we want over time – horizons that matter.

Another excellent point Governor Orr made was about the principal/agent phenomenon where a manager owns the capital but is highly divorced from the managers and the managers of managers to whom they outsource this capital and it is hard for the person at the top to know how ethical all the layers are within their organisation.

Same old themes –  especially the bit about time horizons, where the Governor seems still to be convinced that he knows better than citizens and markets what timeframes are relevant for what sorts of institutions/issues.

Under the Official Information Act I also asked the Bank for the speech or –  if no full record existed –  a summary of what was said (memories are official information too).  For completeness, here is the summary I received.

Governor Orr did not use any notes for his speech but drew upon:

An outline of the speech from Governor Orr’s recollection, is as follows:

  1. Thanks for the invite.
  2. Congratulations on your work to raise transparency as a means of ensuring integrity in peoples/firms/governments behaviour.
  3. Property rights sit at the basis of a sound functioning economy.
  4. Macro stability is also very useful (monetary and fiscal policy).
  5. Microeconomic incentives to invest productively are also necessary (human and physical capital investment).
  6. 3-5 (above) are endogenous inputs to economic growth (see Conway and Orr, RBNZ Bulletin 2000).
  7. Transparency assists 3-5 occur – as it reduces the likelihood of some forms of ‘market failure’ – myopia, asymmetric information, time inconsistency in policy, and principal-agent issues.
  8. Even if people don’t aim to create bad outcomes, market failure can lead to sub-optimal outcomes.  Likewise, market intervention can suffer the same issues.  Hence, commitment and transparency can reduce these risks.
  9. Applause and thanks.

There were no questions as there wasn’t time.

I remain less interested in the specific substance of the speech than in the principle of openness.  Private fee-paying audiences shouldn’t have better access to the Governor’s views or insights than the wider market or public audience.

 

The Prime Minister: kindness, policy, and specific abuse

In the Canvas magazine supplement to Saturday’s Herald there was a brief interview with the Prime Minister that encapsulated well for me why she might be well-suited to being, say, Governor-General or some other empathetic public role, but also why she is unsuited to be Prime Minister.   The interview was reproduced from a new edition of a book called 200 Women. 

Asked what really matters to her, the Prime Minister responds “empathy and kindness”, and going on to note “because that’s what drives social change”.   I don’t want to downplay the value of either admirable quality, in an individual.  But they are manifestly insufficient in someone who puts themselves forward as a leader – of a local community, let alone of a nation.

The Prime Minister attempts to illustrate her point

“if you break some of the social challenges we face down to individual people, New Zealanders have a huge amount of empathy at that level. I’ve always viewed the world this way –  rather than seeing political problems as these large-scale statistical issues and as differences between peoples”.

We don’t want political leaders who can’t identify with individual need, opportunity and so on.  And yet, when one is dealing with five million people –  and government policy choices affecting many or all of them  –  you need to be able to stand back and think about things differently, to analyse issues systematically, to recognise (for good and ill) the force or incentives, to think about the longer-term as well as the short term, and so on.   And even to recognise that values and interests can, and often will, be in conflict –  in many areas hers aren’t Family First’s or the oil and gas industry’s  (or mine for that matter).  Politics is partly about navigating those differences, seeking reconciliation where possible, but also about making hard choices and trade-offs.

She goes on, apparently pretending none of this is real.

There are so many issues we end up divided on, which, if you distilled them down to a simple concept, you will find we are in fact united on.   Take the issue of child poverty; sometimes you’ll hear arguments like, “Well, this is an issue of parental responsibility, is it our role to be involved?”.  There’s a perception that, at some point, someone has neglected their duty of care.  But, actually, at the heart of the discussion is a child who –  whatever perception you might have of them –  is blameless, who is just a subject of their circumstances,

So while I might argue back that you can’t talk about parental blame as long as we have a low-wage economy in which people are working yet not earning enough to survive –  at its heart we’re talking about the same child.  If you take a view of kindness towards that child, then this starts to change the way you might think about solving the problem. You strip away some of the blame and get back to the simple values that every child should have a good start in life and that every child should have what they need to thrive.

But this is just vapid stuff, which doesn’t help make any serious or hard policy choices at all.  It suggests a near-total absence of any sort of analytical framework for thinking about the economy or society, about the limits of the state (or the family), as well as some sort of bizarre ahistorical perspective on things –  at the time when real incomes are higher than they have ever been in New Zealand’s history (and global real incomes are higher than in all of human history) apparently no parent can be expected to take responsibility for anything because people don’t earn enough to “survive”.   What an insult to our ancestors.

She goes on.  Asked about what she would change if she could she responds

If I could distill it down, there are things among this enormous programme of work that I’d like to walk away from politics feeling we had changed.  These are finally having agreement that child poverty is something which shouldn’t exist in a country like ours and that we all benefit if we rid ourselves of it.  And climate change.

Not even actually eliminating child poverty –  whatever that means (in absolute terms we are long past that point, in relative terms almost by construction we can’t get there) –  just getting head-nodding agreement that “child poverty shouldn’t exist”.  Nor, in some ideal world, would many many other bad outcomes –  sickness, disease and so on.  And note that last phrase, which just hangs.  Nothing of substance follows it, nothing about the hard choices, conflicting values, economic costs and benefits.   This isn’t leadership, it is feelgood-ism.  It brings to mind the Disney lyrics

When you wish upon a star
Makes no difference who you are
Anything your heart desires will come to you
If your heart is in your dream
No request is too extreme
When you wish upon a star
As dreamers do
Fate is kind
She brings to those who love
The sweet fulfillment of their secret longing

But it isn’t the way government, and policymaking, works…..or should work if the desirable change has any prospect of being achieved.  That involves hard and disciplined work, tough choices, looking beyond the superficial, and so on.   It involves leadership in more dimensions – probably more important dimensions – than just “kindness”,   including courage, responsibility, persuasion and so on.

So just to take the child poverty issue for a moment, whatever you might want to do about income redistribution right now, it might mean recognising that much bigger medium-term differences can be made –  and opportunities created –  by doing something serious about New Zealand’s lamentable productivity record (by contrast, reports of the Prime Minister’s first meeting with her Business Advisory Council suggests neither she nor they have any concept of what the issues might be, or even how to think about them).

And whatever might be done about immediate social housing issues (“for the kids”), much bigger and enduring differences –  for this generation and the next – can be made by fixing the land use restrictions that have given us some of the worst house price to income ratios in the world.  You might even think –  as I do –  that children are almost always better off growing up with two biological parents who are committed to each other for life, and think about whether well-intentioned (“kind”) policy choices in decades past might have contributed to some of the problems we see today.

In a sense that “well-intentioned” comment applies in all these areas, and many more.  Many policy choices made by successive governments were made by people who thought they were being “kind” (eg working in the best interests of others) –  no doubt there were a few that were just self-interested by design from the start, but they will be few –  but as a decisionmaking criterion it just doesn’t get you very far.   Bad (policy) choices can be just as readily made by “kind” people.  The Prime Minister may well be a “kind” person –  I’ve never heard anyone say a bad word about her personally, which is admirable –  but it won’t help much to be the sort of effective leader New Zealand needs.

But if “kindness” is the criterion the Prime Minister wants to inject into all decisionmaking  – I’m still puzzling over how it is going to help her deal, say, with Chinese expansionism and interference in New Zealand (though perhaps it could help spark the odd genuine and open expression of concern about human rights abuses) –  there was an odd juxtaposition in Saturday’s Herald that left me wondering about just how seriously I should take even her talk of the priority of “kindness”.

The interview I’ve quoted from above was no doubt given some time ago, and presumably the Prime Minister didn’t control when it appeared in the Herald. But in that issue of the Herald was a truly awful, in-depth, story about a young man whose life may well have been destroyed by the organs of the state, for which if anyone is responsible (and accountable) it is the Prime Minister of the day.   It was this detailed account by Jared Savage, introduced this way.

EXCLUSIVE: A teenage boy wrongly accused of rape went to prison protesting his innocence. A year later, the so-called victim recanted the allegations. But the confession didn’t come to light for another 10 years. Jared Savage investigates.

But that intro barely even begins to capture the full horror of what seems to have gone on.

His constant claims of innocence counted against his rehabilitation and undermined his chances of parole. So he served every day of his 4 ½ year sentence.

But his prison time was far from over. He spent most of the next seven years bouncing in and out of prison for tripping up on the strict release conditions accompanying his status as a sex offender.

Simply saying hello to a child was enough for him to be locked up again.

“Release conditions” for something he didn’t do in the first place.    And which it was known years ago that he didn’t do.  And yet it was little more than good fortune that his conviction was finally overturned by the Court of Appeal.

I found it an incredibly harrowing read.  No doubt the young man concerned is no angel –  few of those to whom miscarriages of justice occur are –  and, as a victim of earlier abuse himself, his ability to function fully effectively in society might have been pretty compromised anyway.  But that isn’t the point.  When the state acts to take away someone’s liberty, when it imposes restrictions even beyond the end of a sentence, when it tars someone with the label “sex offender”, it needs to make utterly sure that it gets things right.  And since that level of confidence is impossible this side of eternity, when mistakes are made –  sometimes, as in this case, utterly egregious mistakes –  the agents of the state (the government) needs to be at the forefront of a generous pro-active approach to making atonement.  Nothing can restore than 10 years that young man has lost, perhaps there is slim chance now that his life can successfully be put on a high-functioning path, but that only reinforces how fundamental it should be for those in charge – our Prime Minister for example –  to take the lead in the apology, atonement, compensation and reconciliation processes.  Government agencies failed this man, but they failed us too.  These aren’t our values as New Zealanders –  locking up a young man for 10 year for a crime he didn’t commit, holding against him his refusal to give up and confess to a crime he simply didn’t commit, and so on.

At the end of the article we read

Phil Hamlin [the lawyer who took up the case] is now looking into whether Patrick is eligible for compensation for wrongful conviction, and, ironically, a separate claim against the state for abuse in CYF care.

Because of his youth and the relatively minor nature of the indecent assault Patrick admitted to, Hamlin said his client would not have gone to prison.

So most of his youth was spent in prison because of Mark’s now discredited rape allegations.

“I think it’s extraordinary it’s taken so long to be sorted out,” said Hamlin.

“The consequences have been huge. It’s wrecked his life.”

As for Patrick, he doesn’t really care about any compensation money.

“All I just want is for people to believe me. Then I can move on.”

Which is fine in its way, but where is the pro-activity of the state, the leadership of the Prime Minister and the Minister of Justice?  Someone who has been put through a dreadful ordeal of the sort this young man experienced shouldn’t have to go on bended knee now to the Crown.  If anything, senior government ministers should be going on bended knee to him (and his representatives), asking what they can do to make atonement for the specific and longrunning abuses of this young man by the New Zealand government and its agents.

And yet what have we heard from the Prime Minister or the Minister of Justice?  Nothing.

(For that matter, what have we heard from the opposition party leaders –  National’s leader and deputy having previously been Associate Minister of Justice and Minister of Courts, and Minister of Social Development and Minister of Police.  Nothing.)

Does no one say anything because the victim of this injustice is not some safe, blameless individual (as conventional politics would describe it)?  I don’t know, but the silence –  several days on now (and I’m not sure when that Court of Appeal ruling came down) –  is shameful.

This is one of those very specific episodes where “kindness” –  above and beyond the minimalist provisions of the law –  might begin to make a real difference in one person’s life, and in demonstrating to citizens (and public servants and government agencies) the sorts of egregious abuses we simply won’t stand for, no matter who they committed on.  Story always beats no-story.  Here she can really make a difference, and be seen to walk the talk.

I was interested to see Herald journalist Matt Nippert tweet about this story

I really hope he is right.