A while ago, after the post I wrote prompted by my return visit to Zambia, a reader suggested I might like to read Cobalt Blue: How the Blood of the Congo Powers Our Lives. The relevant bit of the Democratic Republic of Congo (DRC) is right next to Zambia, and the two countries share the geological Copperbelt, rich in copper (biggest export for both countries) and cobalt. There is now huge demand for cobalt as a component in lithium-ion batteries, and more than half the world’s fast-growing output currently comes from the DRC. It is no secret now (various reports in recent years) that, shall we say, labour conditions in cobalt-mining in the DRC are not the best. The focus of attention is around so-called artisanal mining, in which rocks with cobalt ore are gathered, broken, washed etc by hand (large scale industrial mining isn’t in focus at all). Wages (or earnings) are low, safety standards usually barely existent, injury and death rates apparently quite high,

The author of the book, Siddarth Kara is a professor in human trafficking and modern slavery at Nottingham University in the UK, and the book is based on several trips to the Katanga region of the DRC, with observations and interviews (often in some secrecy, and now with anonymity, given the very real risks that interviewees in particular often seemed to be running in talking to him.). Much in the book is pretty harrowing.

The author’s focus seems to be on big international companies that are keen to shield themselves from reputational risks and loudly proclaim their commitment that (for example) no child labour is being used in the mining of the cobalt that is so necessary to the batteries that power their products (be it phones, EVs, lawnmowers, or whatever). It is pretty demonstrably clear that any such claims are simply false, and are knowably false (any company board or executive that claims a child-labour free supply chain is almost certainly either consciously lying or consciously choosing not to look any more closely). The amounts of cobalt obtained from rocks collected, broken etc by “artisanal” labour are not marginal, peripheral or incidental. They seem to be a significant chunk of total Congolese production. As the book explains, it is often more economic to get some of the higher grade cobalt-rich rocks this way (lots are very near the surface) than through more traditional industrial processes. The conventional mining and processing companies are typically the buyers for these rocks.

If Kara is harsh, and probably fairly so, on the companies producing products that use cobalt, there are glimpses of recognition in the book that the responsibility runs more widely. He’d really like to be able to tell a relentless tale of the unremitting evils of global capitalism, destroying Congo since the first Portugese explorers arrived in the 15th century, on through the simply-evil phase of Leopold’s turn-of-the -20th-century Heart of Darkness immensely lucrative private estate. Colonialism and all that.

But he does recognise that a whole variety of interests are at work, and that successive Congolese governments and their factotums have scarcely shown (or show today) much sign of unremitting dedication to advancing the interests of the Congolese people. And while Patrice Lumumba is his hero, heroes who were killed before their own record in government was really able to be tested are handy rhetorical devices but not much more.

The DRC is staggeringly rich in natural resources. And yet (perhaps partly because of it?) it is one of the worst failures of modern post-colonial Africa. Here is real GDP per capita for the sub-Saharan African countries, from the IMF’s latest WEO database.

Africa is the world’s poorest and least productive continent, but there are poor performers, really bad performers, and then countries like the DRC – 4th lowest per capita incomes anywhere in sub-Saharan Africa. As it happens, the three poorest countries happen to border the DRC, but so do Angola, the Republic of Congo, Zambia, and Tanzania which are in the top half of countries in the chart.

Some will want to blame empire and colonialism for Africa’s overall performance, but it was a widespread story across Africa, and simply cannot credibly explain why the DRC has done so poorly. Independence came 63 years ago now, and actually – evil as earlier Leopold regime was – in the late 1950s what is now the DRC had fairly high rates of literacy and average GDP per capita is estimated to have been not much lower than Zambia or Zimbabwe or Kenya. South Korea wasn’t that much richer. Then.

For that longer-run of data we can turn to the Maddison Project database.

Barely two-thirds of the real GDP per capita of 1960. Only five countries seem to have gone backwards over that period, and not even Haiti has done as badly as the DRC. To the extent such long-term comparisons across countries make sense, real GDP per capita in the DRC now is about a fifth that of New Zealand 150 years ago.

It isn’t all bad. Life expectancy is about 50 per cent greater than it was for the hugely increased population

But the material living standards for ordinary people have gone backwards over 60+ years.

And this is a dimension that got not a mention in Kara’s book. I’m not really criticising him for not writing a different book – his real focus is companies in the West – but consider that the countries ranked 2-5 in cobalt production last year were Indonesia, Russia, Australia and Canada. You don’t hear alarming stories about artisanal cobalt mining in those countries – even in neighbouring, much richer, Zambia artisanal mining seems to be mostly for gemstones – not first and foremost because such activities would be regulated out of existence, but because they are priced out of existence. Workers in Australia or Canada have much more remunerative options than grubbing for cobalt-bearing rocks at, for many in the DRC, something like US$1 a day (a bit more if you take risk of tunnelling underground in tunnels with few/no supports for veins of cobalt). In the DRC they seem to not have such options. That is what long-term mismanagement, misgovernment, and productivity failure means (in extremis). Given the chaos and failure around them people do what they have to do, for themselves and for their children, even when that means children having to drop out of school very early, even when injury, illness, sexual assault, even death are foreseeable and realistic risks.

I’m not sure what Cobalt Red’s author would propose in response to the situation uncovered in his book. There are suggestions that the artisanal mining be properly regulated, regular wages paid, safety standard and equipment put in place and provided. Which sounds all well and good, but this is the deeply corrupt PRC where most often the financial interests of those around those in power, or able to pay them off, are really what matter. Kids are taken out of primary school mostly not because parents don’t want them to have schooling but because state revenue is used for other things (personal enrichment) – often never reaching the state coffers – rather than more-conventional basics. Rules already in place are blatantly circumvented, for just a few dollars. When your country has been gotten into such a deep mess by its own leaders, it is very hard to dig yourself out again, and quite impossible for other countries to do it for them (even more so, when as the DRC is, the rivalry between the West and China is very much in play, Chinese companies doing most of the cobalt processing). Heart-wrenchingly sad as it for ordinary people of the DRC.

I’m not one of those who ever runs the line about people being “lucky” to be born in particular places or times. Cultures are built and sustained, not just magicked into existence. We are heirs to what our ancestors built or adapted. But reading the book is a helpful occasional reminder that for all the faults, failings and frustrations of New Zealand, we shouldn’t take lightly, or dismiss readily, the cultures and cultural disciplines that still put us in top quartile of countries in terms of GDP per capita, that mean we can be pretty confident that losing parties will turn over the keys of office when they lose elections, that public officials mostly can’t be bought, and so on.

There are plenty of egregious examples of public sector waste (think lavish welcomes and farewells for senior public servants) or lack of discipline combined with questionable – well, really poor – process (think this morning’s post about the sly but huge increase in approved Reserve Bank spending).

But my core interests are macro in nature. There have been a series of posts in the last couple of weeks about aspects of the inflation and monetary policy story in the last few years, including yesterday’s on the external economy backdrop which should, if anything, have made New Zealand better placed than some to have kept core inflation near target (and that without even mentioning our lack of exposure to last year’s extreme European gas price shock).

It occurred to me that it might also be interesting to look at how fiscal balances and public debt levels had changed across the group of advanced countries (with their own monetary policies) that I’ve been using for comparison in these posts. I was less interested in the specific pressures put on monetary policy, since I’ve already written a couple of pieces dealing with the spin the Governor is (yet again) engaging in, trying to downplay fiscal impulse measures (developed for monetary policy purposes) in favour of ones that seem to have no macroeconomic foundation at all. I’ve asked the Bank for all/any analysis research in support of what looks to be a highly questionable alternative view, but am not holding my breath (if there were anything much they’d either have referred to it in the MPS, or they might even have been keen to send it to me by return of email to allay my doubts). So my focus was on fiscal developments in their own right.

Sometimes when one heads off to OECD databases to download lots of cross-country comparative data I already more or less knows the story and just want the hard numbers to illustrate it. Other times I’m taken by surprise. This trawl was one of those surprising ones, and not in a good way at all.

But first the good news. This is my preferred (since all-encompassing) measure of net debt. The OECD doesn’t have data on quite all the countries (and Norway data isn’t up to date, but at last read was about -350 per cent of GDP). These are the OECD’s mid-year estimates for 2023

We have lower debt than the median country. Many people (including me, but certainly not everyone) count this as a pretty good thing. But a debt stock is an accumulation of choices by successive governments over a long time. And I was more interested in looking at how things had changed over the Covid period, so since 2019. After all, every government faced some big spending in 2020, and when economies were temporarily closed down tax takes fell too.

So here is how net general government financial liabilities is estimated to have changed from 2019 to 2023 for this same group of countries.

And this is where the surprises started.

The median country in this chart – Sweden – saw basically no change in net debt to GDP over this period. New Zealand, on the other hand had the third largest increase. Australia had a slightly larger increase, but interestingly that was concentrated in the actual Covid period: from 2021 to 2023 net debt in Australia is expected to have risen by 1.5 percentage points while in New Zealand is estimated to have risen by 7.5 percentage points. Of course, for highly-indebted countries the unexpected surge of inflation typically lowers net debt to GDP – helping the US notably among these countries – although in the UK’s case having a large proportion of inflation-indexed debt on issue prevented that happening (as it was designed to do).

The OECD forecasts include 2024 as well, so we can see how they think net public debts levels will have changed across these countries from 2021 (the end of the big Covid spends) to 2024, which they base more or less on policy as at the time the forecasts are done (so mid 2023). Here’s that chart

No comment needed really.

That’s debt, but what about flow measures? Deficits and the like.

Here, we can’t look at the operating balance measures we in New Zealand usually focus on. And all the measures are for “general government” (all layers) rather than just central government (although of course in New Zealand central government absolutely dominates the numbers). There are two sensible metrics to look at:

• the primary balance (ie excluding financing costs) as a per cent of GDP, and
• net lending (so saving minus investment) as a per cent of GDP

Both are available either cyclically-adjusted or plain, and the OECD also identify idiosyncratic one-offs to go beyond the cyclically-adjusted measures to something more like structural balances.  Covid was a common shock, and there are very few identified one-offs for the years focused on here.

The primary balance is a deficit measure pure and simple.  Excluding finance costs makes sense for these purposes not because they aren’t real costs, but because a country with higher inflation will tend over time to have higher interest rates and much of those higher nominal interest rates aren’t a real burden, but just maintain the real purchasing power of the debt.  At present, 6 per cent inflation and 4 per cent bond rates gives you negative real financing costs, but still a significant line item of expenditure on interest.  The other reason for excluding them is that a basic maxim in public finance is that if you are running a primary balance or material surplus, your debt won’t be escalating as a share of GDP (precise definition depends on the relationship between the interest rate and the GDP growth rate).  Countries don’t need to run headline surpluses to see debt ratios stabilising or falling, but sustained primary deficits (especially in cyclically-adjusted terms) are typically a bit of concern –  the sort of thing the IMF might focus on in struggling countries.

Anyway, here are the OECD’s primary balance estimates for 2023 (Norway, as so often at present, runs off the scale)

So that would be the third largest primary deficit this year or any of these advanced economies. Japan is….well….Japan when it comes to public debt and deficits. Poland is dealing with a big influx of Ukrainians and a huge increase in defence spending, and then there is New Zealand. By far the largest primary deficit of any of the countries we are more prone to comparing ourselves to (Anglos and other north Europeans), in an economy where this calendar year the output gap will be about zero (in other words the deficit isn’t exaggerated by a deeply below-capacity economy). I did check the cyclically-adjusted picture and it looks very much the same, altho the Czech Republic just sneaks past us.

And while the median country in this grouping has seen its primary balance deteriorate (into small deficit – see above) over the Covid period since 2019, New Zealand has had the third largest widening (again, cyclically-adjusted numbers are similar, although we are second worst on that measure)

Adjusting the New Zealand numbers for the OECD’s series of estimated one-offs (mostly around the earthquakes) produces this time series chart.

From which I take two points:

• We have never (outside Covid peak itself) run primary deficits anywhere near as large as those run last year and (estimated) this year.
• In almost every year in the history of the chart we have a stronger (cyclically adjusted) primary balance than the median advanced country in this grouping.  Not only were our primary deficits materially larger in 2020 and 2021 (the Covid outlays years), they are still materially larger now.

The other set of measures is for net lending.  I haven’t used these data often here, but they are totally standard framework for analysing macro (im)balances (the Reserve Bank even had a nice chart of these sectoral balances, for firms, households, and general government in the latest MPS.  It is a measure of savings less investment, saving (in the public sector context) typically arising with operating surpluses.  It is set within a national accounts framework, unlike the primary balance (which is more of a pure fiscal thing, since OECD primary balances typically include capital spending).

Here are the OECD’s numbers for 2023

We are fifth from right here, with a rather large gap between government saving and the government deficit, but even that position flatters us because the saving numbers take finance costs into account, and (as discussed above) in the presence of high inflation the numbers for highly-indebted countries (think US and UK) show as worse than they really are. Simply paying out interest equal to the inflation rate is not a real burden (or hence real dis-saving), they just maintain the real purchasing power of the bondholders without worsening the real position of the government. (If you want to know more about this issue in a New Zealand context Google work Grant Scobie did at The Treasury.) Since economies are getting back towards balance this year, the cyclically-adjusted picture isn’t much different for New Zealand.

And here is the change since just prior to Covid

Third from the right when even the median country’s position has deteriorated – and remember almost all of these countries have been grappling with high inflation – is probably not the ideal place for New Zealand to be.

I could, but won’t, show you the time series chart for this measure cyclically-adjusted and with adjustment for earthquake one-offs. I won’t because the picture is so similar to the time series comparative chart for the cyclically-adjusted primary balance. We used to be better than the median, our government sector used to be net lender most years, while now we are a net borrower and quite a bit more so than the median of these advanced countries.

As I suggested towards the start of this post, I was genuinely surprised by these numbers for the last few years. I knew, of course, that New Zealand’s position had deteriorated, and have banged on here about the lack of any robust economic case for running operating deficits last year and this while the economy was overheated or (this year) getting back to balance, and the Reserve Bank was belatedly grappling with the inflation challenge. But if you’d asked me, I guess I’d have assumed that other countries had probably had similar deteriorations. Mostly, they haven’t.

None of this – except the initial debt charts – are materially influenced by the costs of Covid – lockdown support etc- themselves. Those costs were borne, and often were very heavy, in 2020 and 2021, while my charts have focused on the changes in balances from 2019 (pre Covid) to 2023 (post big Covid expenditures and with fully employed economies). They are pure political choices.

I can see an arguable case for a country that had rapid productivity growth and rapid population growth to be a net borrower (investment in anticipation of future income gains). But other than the central European countries, rapid productivity growth has been scarce among advanced countries, and although our population growth rate is now rapid again, so are those of Australia and Canada, neither of which is running anything like our net lending deficit.

And in a fully employed economy (as ours is this year) there is just no good case at all for running any sort of operating deficit (the New Zealand specific measure), let alone a material primary deficit.

In flow terms, our public finances now – fully employed economy, and terms of trade which have still been high by historical standards – just aren’t what they once were (under governments of either stripe) until quite recently. And the numbers are still flattered by that boost an unexpected surge of inflation gives to the public accounts – but which you never hear either government or Opposition parties engage with – in that public sector wages (with a considerable element of central control) tend to be slow to adjust. The government recently more or less forced secondary teachers to accept a material real wage cut. They are trying to do the same now with senior doctors. And it is probably the case, in a bigger way, for any moderately well paid public servant who hasn’t changed jobs in the last three years. None of those cuts is likely to prove sustainable (when private sector real wages are flat or rising) longer term if we care at all about the capability and quality of the services we expect governments to provide. Pressures like that really should, but won’t (given the way these things are done), be reflected in next month’s PREFU as part of the big fiscal challenge facing whoever takes office after the election.

There are lots of numbers and concepts in this post. Apologies for that but it is largely unavoidable in trying to do meaningful cross-country comparison. The bottom-line, through all the charts and numbers, is that first sentence of the previous paragraph.

Reading the hardcopy Herald over lunch I spotted an article under the heading “Ministry boss apologises over spend-up”, referring to Mr Leauanae, the chief executive of the Ministry of Culture and Heritage (MCH) as regards the events surrounding his farewell from his previous role as head of the Ministry of Pacific Peoples (MPP) and his welcome to MCH. This was the key bit

“on my watch”? He seemed to be trying to minimise what PSC had found had actually happened (written up in my post yesterday) and suggest that he himself hadn’t done much, but had after all just been the CE (so, in some sense, formally responsible but not really to blame). It was as if his wayward former underlings had done stuff that didn’t relate to him at all. What the PSC report actually described was Leauanae having accepted $7500 of taxpayer gifts himself at the farewell and then accepting $4000+ of travel for family members and friends for his welcome to MPP. (In addition of course to the rest of the extravagant $40000 spent in total on his farewell, as he moved from one small Wellington government department to another.)

As I noted on Twitter, one of the things the PSC report carefully never directly stated was quite when (a) the gifts were returned, and b) when the travel was reimbursed. It would have been easy for either the PSC report or Mr Leauanae to have given us specific dates, but they (obviously deliberately) chose not to. I have now lodged a couple of OIA requests to find out. Was it the day after the relevant events (say) or only after PSC started digging into the matter? The difference is likely to be quite important. If the former, one might take a more charitable view.

But the comments reported in the Herald prompted me to read the statement from Peter Hughes again more carefully. The lines Hughes will have been keen to see reported were

I thank Mr Leauanae for putting the matter right at the first opportunity.”

The “first opportunity” might suggest the day of the events or perhaps the day after. After all, as the full PSC reports note (carefully, without either evidence or further comment)

He advised it was always his intention to pay for his family and personal guests’ travel costs.

So on a casual reading you might have assumed it was all an oversight and was put right within a day or two.

But, from the Commissioner’s own statement, that can’t have been the case.

Perhaps the gifts really were returned very promptly (eg the night of the farewell function or at worst the day after), although the report/statement carefully does not give dates or times. (There is also that strange comment that he returned both the gifts and the money spent on them, which leaves questions as to whether the gifts had been able to be returned to the vendors for full refunds or not).

But that clearly wasn’t the case with the travel, because the second paragraph above says that it was the PSC review which uncovered the fact of this spending on Mr Leauanae’s family and friend’s travel, and that it was only in light of the review finding that he reimbursed MPP. And we know from the documents PSC released that they did not formally decide to look into the spending regarding the welcome to MCH until 19 June. That was eight months after the personal benefit to Mr Leauanae. That doesn’t seem even close to putting things right at the “first opportunity”, casts further doubt on Leauanae’s claim that he had always intended to pay for the travel himself, and strongly suggests someone with no strong sense of what is right and wrong when public money is being spent. Someone who still sits in a highly paid job as head of a New Zealand government department.

Peter Hughes was obviously somewhat constrained by the facts, but he consciously chose not to explicitly point out this timing, but to spin a story that would lead quick readers to think Leauanae had fixed things up straight away, not many months later only after the inquirers from his boss came calling.

Nothing in this story reflects at all well on Leauanae, and it really should be staggering that he goes on as a government department CE with, as far as the report suggests, no adverse consequences (he just repaid things when he finally got caught). Of course, it isn’t just the personal benefit, but the modelling and leadership (or lack of it) that will have led his former MPP underlings to think the lavish expenditure was ever acceptable, and the undisciplined processes etc reported last night in the Newshub story after they got hundreds of pages of documents from MPP. What gets you dismissed, or strongly encouraged to resign, when you hold a New Zealand government department CE role? Clearly not this record.

I’m also a bit surprised no one seems to have asked relevant ministers whether they have any confidence in Leauanae. In one of the weird bits of our legislation, they can’t sack him themselves, no matter (apparently) what he did, but the position of a CE would surely be untenable if the Prime Minister and the Minister of Culture and Heritage (as it happens the Deputy PM) indicated that they had no confidence in Leauanae. The PM has been reported as saying that the expenditure was unacceptable, but what of it? What is he going to do about it? He is, after all, the Prime Minister, and it is hard to believe that the Opposition parties will be leaping to the defence of Mr Leauanae.

Of course, it is always possible Hipkins and Sepuloni do still have confidence in Leauanae, even after what is already revealed about him (personal entitlement, weak and undisciplined financial management and people leadership etc). If so, that would be sadly telling. But you might have thought media outlets would at least ask whether they still have confidence in him, and if so why.

Yesterday the news broke of the extravagant spending at the Ministry for Pacific Peoples (MPP), and to a lesser extent at the Ministry of Culture and Heritage, centred on the transfer from one division to another of the core public service of MPP’s then chief executive Laulu Mac Leauanae. In the spirit of the unified public service (all that stuff that Peter Hughes and Chris Hipkins touted), shifting from running one smallish unimportant department to running another one seems about on par with someone moving from one modest division of an indebted private company to another.

As the Herald reports MPP has already been a bit of an example of the extravagance with the public purse over recent year. A quadrupling in staff numbers for an agency with no clear or legitimate purposes….

In this example, staggering amounts ($40000) were spent on a farewell (for a person who’d worked for the Ministry for only five years), including extravagant personal gifts to the outgoing chief executive. Probably there was a case for a morning tea in the office (a cake and a few sausage rolls etc) or a drink after work for staff and a handful of outsiders. But it is hard to see a case for having spent more than a couple of thousand dollars in total. And impossible to see any case for (anything more than token) taxpayer-funded personal gifts…..the more so when the outgoing CE was just transferring to another wing of the same organisation.

And thousands of dollars spent by MCH on a welcome? What happened to simply turning up – at your new division of the same (government) enterprise – and starting work, with perhaps a staff morning tea or all-staff meeting at some early getting-to-know-you point? MCH has under 200 staff. Supermarket sausage rolls come quite cheaply. Four Governors started at the Reserve Bank in my decades there, and I don’t recall anything more extravagant for any of them (and in the earlier years the Reserve Bank was not a notably austere organisation).

You can read the Public Service Commission’s report and statement here. But what isn’t said there is at least as interesting as what is.

Starting with, how did PSC come to be so asleep on watch?

The farewell (and welcome) occurred in October. But this is the introduction to the PSC report

So either PSC didn’t even know about the event(s) – which frankly seems unlikely, unless they are even more slack than it seems – or no one there stopped to wonder just how much public money was being spent….until someone in the public asked. It is also pretty remarkable that MPP – by then under an acting CE – never thought of mentioning the OIA request to PSC until after the response had already gone to the respondent. As regards the costs of a farewell for one of the Public Service Commissioner’s CEs. And even when in mid January PSC decided to look into the farewell spending, it wasn’t for another five months that they thought to look at what had gone on as regards the welcome.

And that Herald extract above leaves one wondering just how much of all this we might have heard of the waste if it had not been for the written parliamentary question. Perhaps that is unfair, but the Commission’s approach was on display in a letter sent by the Deputy Public Service Commissioner on 17 January to the acting CE of MPP.

In that letter she states

my expectation is that the entire review process will be completed by mid to late February 2023. The final report will be published on the Commission’s website, but it will not identify any individuals by name and your agency will have the opportunity to comment on the draft report before it is finalised.

Not sure how she envisaged a report on a farewell for a CE naming no names but…. And it is August now.

Perhaps more concerning was this later in the letter

Which feels a lot like an attempt by PSC to stymie uses of key instruments of scrutiny and democracy (OIAs and PQs). It isn’t clear what OIA grounds they might have tried to withhold using……but with the OIA that rarely seems to stop agencies…..and PQs are questions from MPs to ministers, not matters that should be within the ambit of the PSC. The same text is in a letter dated 19 June from Peter Hughes to the MCH chief executive.

The PSC report has no reflections at all on PSC’s role or approach (or on any briefings they might have provided to their minister – at the time all this kicked off that was Chris Hipkins). In addition to the matters already touched on there was nothing at all about their own approach to agency oversight or to key appointments, that meant a culture developed in one or two of their agencies where spending of this sort happened. But of course to have done so might have been embarrassing for them, including because they had just promoted the CE, lauding him as a “sophisticated organisational leader” and not missing the opportunity to mention that expensive senior management course he’d recently done at Oxford. And yet his MPP senior management team not only thought it was okay to spend up big on his farewell (transfer) but (as the report documents) did so with no decent systems or budgets. The values and priorities of top leaders are well known by those beneath them. Nothing about this report suggests this CE preached or lived any sort of public sector frugality. But, never mind, he got the promotion……and holds the bigger job to this day.

Quite a lot else is glided over too. This is from the Peter Hughes statement

But neither here nor in the report are there any relevant dates. Mr Leauanae should simply never have accepted government departments paying for travel for his family members (tickets don’t just turn up), so reimbursing the cost when found out just doesn’t cut it.

Hard to see that sort of lackadaisical attitude being acceptable in anyone, at any level of the organisation. but……he was CE, displaying no sign of appropriate leadership at all. At best careless, at worst entitled (and note that the PSC report cites no evidence for his claim that “he always intended” to cover those expenses himself). And when did these refunds happen? A few days after the event, or only after PSC started digging? If it were the former it is highly likely PSC would have said so. Hughes refers to “the first opportunity” but the report itself does not.

And what of the gifts?

Many of the same questions arise? Surely on the day of the farewell, any public service leader should have expressed immediate extreme discomfort and returned all the gifts the same day? But there is no sign of any of that, and no indication that anything was returned before PSC started digging.

One could go on to note the sort of expenditure Hughes and the PSC seem to have no problem with. Recall that the welcome was to a transferring CE in a New Zealand public service department. As I said, a few sausage rolls and a welcome speech might seem reasonable. But not to PSC, which deemed all of this “moderate and conservative”

Sausage rolls and cup of coffee just don’t present the same challenges (or sheer waste). There was also this weird claim that somehow lavish expenditure was appropriate because

“In addition, the incoming Secretary was a Matai or chief, community leader as well as a public service leader.”

What he is or does in his private life is really neither here nor there (or shouldn’t be). You could be a hereditary peer, a billionaire, a generous philanthropist or whatever, and the fact remains that public money is being spent on a transfer of a public servant from one small agency to another.

In the end, the report seems to be largely a whitewash, at best slapping Mr Leauanae over the hands not even with a wet bus ticket but with a feather. He was found out, paid the money back after the event, and goes on to hold a CE position, in which if he ever utters words along the lines that public money should be used sparingly, rules adhered to in spirit as well as letter, staff probably scoff and go “one rule for you, and Peter Hughes’s favourites, another for the rest of us”.

But why should we be surprised? The twin cultures of entitlement and corruption, all accompanied by public sector bloat, are creeping ever onward. It is rare that any culprit ever pays a price – another Hughes CE took hospitality from an agency lobbying him to exercise discretion in their favour, and he went on to get a knighthood – and by their indifference we have to conclude that the government itself is unbothered.

As for the Opposition parties, they do part of their job in bringing some of this stuff to light and making a fuss now. But is there any sign of a robust open commitment to specific and much higher standards when their turn in government eventually comes? A CE who did what Mr Leauanae did (and allowed to happen) simply should not be still holding a government department CE job. That he is says that the standard now is not even “don’t get caught”. What standard is that for either other public servants? What sort of accountability to citizens and taxpayers?

In the years after the financial crises of 2008/09 one often read plaintive cries of “and who went to prison?”, and angry claims that the system was rigged. I can’t say that I was ever much moved by such lines. We simply don’t – or shouldn’t – generally imprison people for being bad at the business they are in, whether it is banking or baking, even if the businesses themselves were big, and the people concerned had employers who’d previously paid them lots (and lots) of money.

There has been a plethora of books about aspects of that crisis period. Glancing along my bookshelves just now I counted 100 or more, most of which I’ve read. Some were very analytical, some were lively descriptions of some aspect or other of that period, some country-specific, some more general, some were more about policy and policy institutions, some more about bankers and financial markets, but not one of them disconcerted me (and that is putting it very mildly) in the way that Rigged, a new book by BBC economics correspondent Andrew Verity did. (Amazon Australia shows the publication date as 1 August 2023, but I ordered it and it arrived a few days ago). It is a simply astonishing story, which shows a whole set of authorities (notably the British ones) in a very very bad light.

The context is the so-called “LIBOR crisis”. For readers who followed that story over the last decade, much of what follows won’t be new, especially if you’ve been in the UK. But I hadn’t really, because it seemed to be mostly a moral/political panic, in the “why aren’t evil bankers in prison?” vein. And, to be honest, from what little I had read of the story, I knew that I’d observed stuff in the little New Zealand markets in my years in the Reserve Bank’s Financial Markets Department that, if you were concerned about this sort of thing, was arguably more egregious.

LIBOR is (or was) the “London Interbank Offer Rate” (there was also LIBID – “bid” – although I don’t think it gets a mention in the book). It was a major set of benchmark short term interest rates, in various currencies, off which many other contracts are priced. LIBOR rates were set each morning – under the auspices of the British Bankers’ Association (BBA) – when cash dealers in each of 16 banks would indicate (for each currency and term)

“At what rate could you borrow [unsecured] funds, were you to do so [in the London market] by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11 am?”

The submissions would be ranked, with the top and bottom four excluded and the remaining eight averaged. Individual banks’ experiences could be expected to differ a bit (although not by much in normal times), and for any individual dealer answering the question there might be a (tightly-bunched) range of possibilities. It was an estimate, informed usually by data in fairly liquid markets, with the exclusion and averaging rules dealing with outliers and, thus, typically expected to result in a reasonable central estimate. Very short-term rates would typically be very close to the relevant central bank’s policy rate. Within each bank, there was often a bit of jockeying: other dealers might have positions that would benefit a little from that day’s LIBOR rate being just a bit higher or a bit lower, but since the cash dealer had to lodge a response at which his (they were almost all male at the time) bank could borrow, any leeway was apparently very slight, perhaps one basis point, occasionally two.

And so it had gone on for a couple of decades. Regulators knew how the system worked, the adminstrators (BBA) knew how the system worked, as did participants in the markets.

But then the financial crisis began to build in the second half of 2007 (the crisis period is often dated from 9 August that year, the Northern Rock crisis became public in early September 2007). Short-term interbank funding markets were no longer as liquid as they had been and material gaps started to open up between where banks would lend to each other unsecured and the central bank policy rates (either for fully collateralised lending or risk-free deposits at the central bank itself). And there were swirling differences in market and media perceptions of which banks might be a bit less sound than others.

You might have hoped that each bank’s dealer would simply continue to submit each day his best estimate of what his bank could borrow at unsecured and let things fall where they may. But that didn’t happen. Instead it became something of a “dirty secret” (except not very secret at all since people in banks and markets knew it, as did the key regulatory bodies, and there were even stories in the major financial newspapers) that the published LIBOR rates no longer represented a best estimate of what individual banks (or the sector as a whole) could borrow from each other at. Verity focuses in on Barclays, where the cash dealer seems to have tried quite vigorously to follow the rules, which resulted in Barclays posting rates above those of the rest of the panel of banks, which (submissions being visible to others) in turn prompted concerns “if they are having to pay that much they must be in more trouble”, and even a sell-off in the share price. And so the pressure came on the dealer from above to bring his submissions more into line with those of the other banks. He, rather grudgingly (documenting his concerns and uttering them to anyone who would listen), went along. Regulators and central banks on both sides of the Atlantic were aware of what was going on, and if anything seem to have been more sympathetic to Barclays than (say) concerned that posted rates (used as benchmark pricing across the system) no longer reflected real borrowing costs.

As the financial crisis intensified so did the problems (some quite practical, in that at times the markets had frozen so badly that really no bank could borrow unsecured from others, so in truth there probably should have been no LIBOR rate at all). The gaps between unsecured interbank rates (both “true” rates and published LIBOR rates) and policy rates was high and widening, at times when central banks – in the UK, but in most other countries – were cutting policy rates deeply to try to lean against the collapse in demand and economic activity. Market rates often weren’t coming down much (in some cases they were rising) and politicians and their advisers were often getting increasingly uneasy.

And so the pressure – and this is extremely well-documented in the book – came on banks to put in lower LIBOR submissions. Doing so wouldn’t change actual borrowing rates – either interbank or the retail rates that the wholesale rates influenced – but I guess it was going to get better headlines, and it might make it “look” like things (policy responses) were “working”. In the UK case (the focus of the book), this involved not just very senior figures at the Bank of England, but them channelling pressure from The Treasury and Downing St itself (people named include very senior and otherwise respected figures, including a current Deputy Governor of the Bank of England, and someone who was until last year the permanent head of The Treasury in the UK). Very senior bankers were left in no doubt that the authorities wanted the LIBOR rates marked down, and they complied, ordering their underlings (the cash dealers and their immediate bosses) to bring LIBOR submissions more into line. The differences here were not a matter of a basis point or two, but often 50 basis points or more. Relative to the LIBOR rules, anyone with a contract in which they received the LIBOR rate was, in effect, being bilked out of a lot of money (vice versa if you were paying LIBOR). One could, of course, argue, that central banks were actively trying to lower short-term rates generally by a lot, but…….acceptable instruments don’t generally include pressuring bankers to write down numbers that simply don’t reflect reality. If central banks really wanted market rates even lower, they had tools available to make that happen directly.

The more pragmatic and less idealistic of you may here be drumming your fingers and going “needs must”, and in a crisis what needs to be done gets done. I wouldn’t agree with you – institutions are supposed to be built for resilience under stress, not for fair weather events only – but if that was the end of the story, it would have been quickly lost to history.

But it wasn’t the end of the story.

As the crisis faded, in some circles the narrative that someone “needed to pay” took hold. At least in the UK, as I read the book, there wasn’t much interest in pursuing anything around LIBOR, until the Americans got involved. You might reasonably wonder what the activities of British officials in Britain and British employees of British banks in Britain, as regards a benchmark rate owned and administered by a British entity (the BBA) had to do with the US, and its Department of Justice and CFTC. They seem like good questions, but such is the world as it is, and the trans-national overreach of the US on matter financial. As Verity tells it, Obama’s nominee for head of the CFTC had had close ties to Wall St and wasn’t going to get confirmed by the Democrat-controlled Senate unless he was going to take a credible stance as an avenging angel of wrath.

My interest is less in the US side of things than in the UK, where (thanks to leaks in particular) the book is astonishingly well-documented. Anyway, the US started pursuing banks abroad (Barclays in particular in this book), in what seems like a bizarre process in which they relied on the banks themselves to search their own documents, and then negotiated (large) administrative fines, which saved the banks and their CEOs and chairs, all while throwing under the bus a few fairly junior employees who’d initially been more or less compelled to talk to the US authorities, thinking of themselves as expert witnesses etc, only to find themselves personally in the gun,

These employees became alert to the prospect of spending much of the rest of their lives in a US prison, (having regard to the very low acquittal rate in US courts) for things they were quite sure they had never done, except as normal, accepted commercial practice, well known to central banks and regulatory agencies on both sides of the Atlantic, typically either authorised or instructed by senior managers within their own banks. And so several became convinced their only option was to get themselves charged in the UK, preferably engaging in a plea deal that might involve, to all intents and purposes, lying to conform with the preferred narrative of the UK authorities, to get to stay in the UK and not destroy themselves and their families financially. Others preferred to defend themselves in the UK, several were charged in the US (before US courts finally overturned the very basis on which they had been charged).

And, to be quite clear here, none of all this regulatory and legal action involved anything that had gone on during the financial crisis (when not only had authorities, notably the Bank of England, been aware of how the system worked, they had actually been part of engineering LIBOR submissions a long way from actual market rates). Instead, the bounds of interest were very carefully drawn to cover only the period prior to the crisis beginning to unfold. The focus was on how these dealers had lodged their LIBOR submissions in normal times, as many many like them had done for a couple of decades. The focus was on other people in each bank suggesting to the dealer that their positions might benefit from a slightly higher or slightly lower LIBOR (the basis point or two mentioned above, in reaching a necessarily imprecise estimate).

And what was the offence? Well, there was none in statutory law. None.

Instead, the authorities wheeled out an old common law offence “conspiracy to defraud”, which – at least as Verity tells it – was so little regarded by the UK commercial barristers prior to the crisis that there had been a push to remove it. Under these provisions/precedents, there was no need to show that anyone had lost, or to quantify any losses. And yet the political rhetoric was all about egregious rip-offs, suffering customers, and rigged markets. Judges ruled – without allowing appeal – that it was enough that someone in a bank had suggested to the bank’s cash dealer that his/her positions might benefit from a slightly lower/higher LIBOR and the dealer to say something like he’d see what he could do. There was – according to English justice- a conspiracy to defraud – all recorded in emails and trading room recorded phone calls. The same judges then refused to allow testimony from expert witnesses as to how markets actually worked (in one case regarding EURIBOR submissions, the UK judge refused to allow testimony from the people who had written the code of conduct around the operation of EURIBOR).

Here, some scale and perspective is worth noting. As I noted above, LIBOR worked with a panel of 16 banks, with the four highest and four lowest for any particular currency/term on the day excluded. If perhaps a dealer in one bank had shaded his bank’s estimates 1 basis point in one direction (remember that plausible range was typically not much more than a couple of basis points), then even assuming there was not some other bank with exactly the opposite interest, the chance of affecting LIBOR at all was low, and the magnitude of any plausible effect tiny. There are hard numbers at places in the book.

By contrast, the activities during the financial crisis period, done in full awareness and often with the encouragement of the authorities and of specific named very senior bankers, never saw judicial scrutiny.

And so eight bankers – cash dealers – went to prison in the UK, serving non-trivial custodial sentences, for offences that no one thought were offences until the “avenging angel” mood took hold in the wake of the crisis. And when I say “no one” here I mean not just the dealers, but their bosses, their bosses’ bosses (the chief executives of the banks were the board of the BBA which administered LIBOR), and the central banks and regulatory authorities on both sides of the Atlantic, but particularly (and at very senior levels) the Bank of England. Not one Bank of England official rang the police (or SFO) at any point to express concern at the normal commercial way they knew the market worked, and those senior people are on record during the crisis encouraging/abetting/ (perhaps) instructing, bankers to deviate from the LIBOR rules, including passing on the political pressure from Downing St (which was no part of any central banker’s mandate).

And yet, as Verity records, in 2015 at the height of the hysteria – and amid the criminal trials – the then Governor of the Bank of England delivered a major speech in which he would “publicly demand that the government should change its sentencing guidelines to raise the maximum jail term for “rogue traders” from seven to ten years”. This was (is) the same central bank that (Verity records) “George Osborne had urged the central bank to come clean about its role in Libor, [but] the Bank of England had decided against that. Freedom of Information requests would be consistently rejected in the succeeding years”.

Your reaction might be to wonder why anyone would be particularly sympathetic to well paid (not very senior) bank traders. Because it was an egregious abuse of justice: sound process and integrity matter whether it is a scruffy teenager or a nicely-dressed multi-millionaire trader facing the system. Any of us could one day be in gunsights of the state. I mean, if one were going to (in effect) create retrospective offences and start prosecuting bankers for them mightn’t one prosecute those in charge (all the way up) who were actively aware of how things worked, authorised and rewarded people, and at times directly instructed behaviour that was egregiously distortive (in terms of LIBOR rules/practices (rather than, as in at least one case a ‘whistleblower’), and consider expert testimony from people with responsibility for overseeing the relevant markets etc.

The conduct of three lots of people in this whole affair warrant scrutiny:

• the politicians.   How did Cabinet ministers stand by and allow these prosecutions and imprisonments when (if nothing else) they knew the people who managed and instructed those charged walked free, with no criminal or civil consequences whatever?   And how did former PMs and Cabinet ministers (Gordon Brown, Alistair Darling –  Chancellor during the crisis) never speak up and out, not just about their own roles but the disproportion of sending low level people to prison while their bosses walked free?  It is the sort of act of omission that leads people to simply despise politicians,
• the senior bankers.  Many despise them already, but really……..you keep your job and your bank or walk way with tens of millions in retirement packages etc, while seeing former staff – who acted on your instruction and authorisation – sent to prison, people against whom charges were laid only because you did your own searches of your own bank records, saved yourself, and tossed some staff to the criminal authorities.  Just despicable.   Who ordered Peter Johnson (cash dealer at Barclays) to mark down his submissions, despite Johnson’s explicit written dissent?  Why, the very top tier of Barclays’ management.
• the central bankers (and the like).  I expect better from central bank and Treasury officials.  Not necessarily excellence or at times even basic competence, but integrity and decency.   I’ve met and dealt with some of the individuals named (I recall now sitting in the Bank of England’s chief economists’ seminar in May 2008, in the early days of the crisis, listening to Sir John Gieve, deputy governor responsible for financial stability – altho, curiously, not named in the book) so perhaps it shocks me more.   Perhaps one can defend the approaches senior BoE or HMT (or even Downing St) officials took during the crisis, but they actively aided (and seem to have pressured banks to facilitate) the distortion of LIBOR.  I’m not suggesting any of them should have been prosecuted, but how (a) does the Bank of England justify not revealing in full its own part and knowledge during the period, all while Mark Carney as Governor was baying for the blood of traders, and b) how come that, even in retirement, not one of these people spoke out and suggested that it was simply wrong to be sending these people to prison.   None of them appears to have been willing to speak to Verity, none has spoken in public, and we are left guess whether just possibly one or two might have said quietly “I say old chap, are we really sure about this?” (if so, to no apparent effect).  It reflects very poorly on all involved, some of the most senior (and otherwise) respected figures in British economic and financial policy.  One could see it – perhaps unfairly but it isn’t obvious what other interpretation makes sense – as circling the wagons in their own defence, and that of their peers who ran the banks.  Never mind the juniors, we can destroy their lives and marriages and send them to prison.   (These the same people whose own policy misjudgments –  viz recent inflation (Andrew Bailey gets a couple of minor mentions in the book) – result in few/no consequences beyond gilded retirements and knighthoods or peerages.)

From the sound of the book, the English prosecutorial and judicial systems have quite a bit to answer for as well, but….I’ll leave that to the lawyers.

The whole thing smacks of a witchhunt: someone must pay, these individuals their bosses have helpfullly pointed us to are someones, so they will do (and it wouldn’t do to pursue the bosses or else, perhaps, confidence in the system might be eroded –  which if true should have at very least raised questions as to whether the whole grossly-slanted chain of prosecutions, where eg juries were never allowed to know what regulators had known in advance, was being pursued for any reason other than the a politically-driven effort at distraction).

It is hard to tell if I’ve done a 325 page book justice.  All I can do is to encourage people to read it.  Yes, it is about technical stuff, but Verity does an impressive job of explanation and translation, and his story is supported with copious direct quotations, most of which would never have come to public light if a big dump of documents and recording had not been leaked to him.  I’m going to leave you with the Amazon review comments of Sarah Tighe, herself a lawyer, ex-wife of one of those sent to prison (there is a recent extended interview with him here)

I went looking for reviews of the book, and couldn’t yet find any yet. But interest in the issue seems to be rising again in the UK (here is a recent parliamentary speech from a senior backbencher).

One fears that even if the individuals eventually have their convictions overturned (and how do you compensate someone for a life destroyed?) that officialdom in particular will never have to answer the hard questions it seems it (collectively and as accountable individuals) should.

PS Someone who isn’t named in the book, but the division he ran is, is the Reserve Bank’s Deputy Governor whose CV includes this

Now that was probably a fourth [UPDATE: or perhaps 5th¹] tier position in the Bank of England, and he took this specific position up just after the worst, so he wouldn’t have been in any sort of direct decision-making role. But one is left wondering how he feels about those sent to prison while he’d been a fairly senior part of a system and institution that was encouraging banks actively to manipulate LIBOR submissions/rates. It should matter in someone who is (a) on the MPC, b) is head of financial stability here, and c) must be one of the favourites to himself be the next Governor of the Reserve Bank. There is that old line “the standard you walk by is the standard you accept”. No one should accept – or walk by – the standards of officialdom on display in this book.

1. See references to Hawkesby in footnotes to the organisation chart on page 60 of this later BoE report

It was the Monday a few days before Christmas 1992 when a colleague wandered into my office and asked if, by any chance, I was interested in a couple of years in Zambia. My colleague had just returned from a few years at the IMF in Washington and had been rung the previous day by a former colleague of his desperately looking for someone who was interested in being resident economic adviser to the Zambian central bank, all at short notice, as the incumbent was due to leave shortly, and the reform programme (and IMF programme) was in trouble, with inflation through the roof. If I recall correctly, they’d had someone lined up, who had a baby, but news of a cholera outbreak had come through a few days previously. The job was going vacant again.

My knowledge of central Africa was sufficiently sketchy that, in those pre-internet days, I had to wander down to Bennetts bookshop on Lambton Quay and buy a Lonely Planet guide to Africa to (a) securely locate Zambia on a map and (b) find anything at all about it. I rang the guy who was just about to finish up (an RBA secondee I knew), and if some of his stories were sobering – consumer good scarcity so real that he told me that afternoon they’d released the staff because some or other essential had finally appeared in shops – the job itself sounded challenging and potentially rewarding, with a new Governor with no background in central banking or macro but with a serious commitment to overhauling and lifting the performance of the institution. Within 24 hours I had a (very remunerative) offer on the table.

The Reserve Bank subscribed to the hard copy Financial Times and a couple of days later an issue with a Zambia supplement landed on my desk

What wasn’t to appeal? Idealism even in the FT headline. Zambia was, if I recall correctly, only the second African country to have restored multi-party elections and to have changed governments.

I was young and single and had more or less done what the Bank had asked me to do when they’d prevailed on me to take my then-current job a year earlier. The slaying the inflation beast phase in New Zealand looked to be more or less over. The Bank knew I was looking round, although their ideas of a next role were a bit less unorthodox than heading off to somewhere like Zambia. A little reluctantly, they agreed to the secondment.

Inflation in Zambia was 181 per cent in the year to December 1992 and, if anything, rising (monthly inflation rates were about 10-12 per cent), and with all the donor goodwill in the world (and there was a lot of it towards the Chiluba government, just 12 months into the new era) things had to change. Making sense of what was going on wasn’t helped by the (literal) inability of the central bank to produce a balance sheet (there had been a serious computer system failure months earlier.

It was a wild, exciting and often frustrating, time to be there. As a place to live – and despite the mostly great climate – there was a little to commend it, but professionally that first chaotic year pushed one to the limit. In some respects, it was the best job I ever had, with that sense of being able to make a real difference, and see the people around me growing and developing capability.

As the blame for any really serious bouts of inflation rests with politicians, so ultimately does the credit for beating it (not only wasn’t our central bank formally independent, but when the governing party has 80 per cent of the seats in Parliament changing legislation wouldn’t have been much of an obstacle anyway). And if the roots of really serious inflation are always fiscal, so are the solutions. Zambia’s was the “cash budget”: the Minister agreed that money would not be spent that was not first in the government’s accounts at the central bank (whether from taxes, donor grants, or domestic borrowing), and each morning we and Ministry of Finance officials would pore over the numbers to get a sense of what payments could go through.

When it was made to work – and it was harder than it sounds, with threats and political tensions almost by the day – we presided over a liquidity squeeze on a scale rarely seen. Flicking through old diaries yesterday I found reference to Treasury bill auction yields at times averaging 600 per cent or more. The exchange rate, which had relentlessly trended down for many years, stopped falling and even began appreciating in nominal terms – it was to be a savage appreciation in real terms. I don’t have monthly data to hand (yes, even then Zambia – unlike modern New Zealand – had a monthly CPI) but if I recall correctly we even had a couple of negative inflation months. It wasn’t a new dawn of price stability – annual inflation settled in a range around 30-40 per cent – but the looming threat of hyperinflation has been beaten.

It was hardly a new dawn of prosperity. As in most places, difficult structural reforms have short-term real economic costs, and driving out entrenched inflation is rarely costless either. We didn’t have timely national accounts data then, so this chart caught my eye when I put it together a few weeks ago: notice the almost 20 per cent fall in real GDP per capita in a single year from 1993 to 1994. We knew it was tough – aside from anything else, exporting firms were not slow telling us – but the numbers are still sobering. Cold turkey treatments aren’t easy. In the space of a few months, we went from having the IMF doubting the seriousness of the authorities (and in fact outright lies were at times told by the authorities to the IMF to keep the programme on course) to having them concerned we had “got religion” and were overdoing things.

The Governor, Dominic Mulaisho, was probably the most inspiring person I ever worked for. As I said earlier, he’d had no background in central banking or macro, had only been appointed in 1992, and had had a history as a senior official in various leading government agencies in the post-independence period. He was also a published novelist, educated in Catholic mission schools before university in (then) Southern Rhodesia, and was, I think, always disappointed that my own command of Shakespeare and English poetry didn’t match his. He could be endlessly frustrating – I found diary reference to a 7 hour Monetary Policy Committee meeting one Saturday, an MPC that then was just about data presentations and lifting the quality of economic analysis and debate – but had an absolute commitment to better days for his country, and for the institution, and a stubborn integrity that finally cost him his job a couple of weeks before my term ended in 1995 (we were trying to close down a Zambian multi-national banking group that was evidently insolvent, but which had powerful friends). As just one indication of what he was up against, the night before I left the country he invited me round to his house and over drinks told me the story of travelling abroad with the then Minister of Finance who took him aside and (so my diary records) said “Governor, my aim is to get rich and to get rich quick. Your job is to help me do that, not to obstruct me. Why don’t you help me?” (both men are now dead).

The prompt for this post is that I have spent the last couple of weeks back in Zambia. Times have changed. Several of the young grads I worked with then now hold some of the most senior positions in the central bank (and the chief economist from those days is now the Minister of Finance). Zambia isn’t without its continuing macroeconomic challenges. Debt-fuelled splurges over the last decade ended in a default on the foreign debt in 2020.

And if there seems to be lots of donor and international agency goodwill towards the new government (and many of the great and good have visited Lusaka this year, including Janet Yellen, Kamala Harris, and the IMF Managing Director), hopes of a substantial debt writedown are currently stalled.

You can see the investment the debt helped finance in the data

Investment rates of 40 per cent of GDP are high by anyone’s standards.

But it was also visible as I walked and was driven around Lusaka over the last couple of weeks. You can see the new public infrastructure and the new private investment (shiny new office complexes, and the proliferation of small malls in the middle income parts of the city), even if the old main street, Cairo Road where the central bank is, was much the same as ever. It is visibly a different, and less raw, place than it had been 30 years ago. And you find something of that in the numbers too: in a country with a very rapid population growth rate, real GDP per capita is estimated to have risen 60 per cent since 2000.

The group I was working with asked a lot of questions about the contrasts and my experiences 30 years previously. As I reflected on it, one that struck me was the nature of the region. In 1993 when I first went, Zambia itself was a little more than year on from a democratic transition. Lusaka had hosted the ANC in exile and if they’d mostly returned home, the transition to democracy in South Africa was still a hopeful prospect rather than an accomplished fact (Chris Hani was assassinated just a few weeks later). The Angolan civil war still raged, the Mozambique conflict had ended only a year earlier, Namibia had become independent as recently as 1990, in Malawi the brutal Hastings Banda still ruled, and the genocide in Rwanda was only a year away. The DRC was, well, the DRC. (By contrast, Harare was a haven of functionality, before the chaos descended in Zimbabwe). These days, if democratic transitions aren’t common outside Zambia, peace and relative stability reigns, and there is a sense of relative normality about much of the region. Various countries have managed some material real income growth. And the best hotel in Lusaka – that I lived in for a year, and stayed in again last month – is now owned by, of all entities, the Angolan sovereign wealth fund.

But then there is the longer-term context. Back in the 1990s we used to tell the story (including to the numerous international visitors who passed through) that at independence in 1964 Zambia had been a bit richer (per capita income) than Taiwan and South Korea (one of the richest countries in Africa, at a time when South Korea and Taiwan were already in the early stages of their growth trajectory). I put this chart on Twitter a few weeks ago

And here is the Zambian version alone

Almost 60 years on, real GDP per capita is barely higher now than it was at Independence.

It is a great country, with friendly people, abounding in physical resources (land area alone is equal to France and Germany combined) and still a major copper producer. If you have never been to the Victoria Falls you really should one day. And there are many countries in Africa worse off than Zambia (and much richer South Africa has also seen next to no real per capita GDP growth since the mid 70s). There is a lot I like about the place, but……the challenges before them to achieve and sustain big improvements in material living standards for their people are huge.

(Among the things to like, I picked up Covid while I was in Zambia. Unlike New Zealand, a colleague could wander down the street to the nearby chemist and buy me a cold and flu remedy that really worked – no bans on pharmacy sales of pseudoephidrene products there.)