Russia

One of the great things about growing kids is the questions they ask.  Yesterday afternoon as we were talking about various countries’ economic performances my 15 year old, who is doing year 12 economics and is intensely interested in international affairs (and knows to distinguish between GDP and per capita GDP), asked me if I thought Russia could ever be the richest country in the world (per capita was what he meant).

I’d never thought about it before. On five seconds of thought, my answer was along the lines that I couldn’t see why not, in principle.  No single country or even region has had a monopoly, over the centuries, on the status of being richest and most advanced.  And, for what it is worth, Russia has abundant natural resources, had a strong tradition of maths and science, and as a cold country it is one of those where modelling suggests that global warming may well be economically beneficial.

But it prompted me to go and look at some data.  From the latest IMF World Economic Outlook tables.  Here is where Russia currently sits in terms of GDP per capita.

russia 1

Of all the countries and territories in the IMF database, Russia sits just outside the upper quartile.  But the group of countries it sits among is substantially made up of EU and/or OECD countries (Estonia, Portugal, Poland, Hungary, Greece, Latvia, Turkey, Croatia, Romania and Chile).   Economists often think of Chile as some sort of poster-child of good economic management, and I’ve been intrigued by Uruguay’s strong performance in the last couple of decades, but both are still materially poorer than Russia.   And Russia –  70 years of Communist rule, a deeply destructive war, rarely any stable sense of property rights or the rule of law, and a raft of sanctions in more recent years sits at about 75 per cent of the average per capita income of New Zealand.   100 years ago, on the eve of World War One, the end of the first great age of globalisation, (the Maddison database records that) Russia had GDP per capita not half that of Argentina, Chile, or Uruguay, and about 30 per cent of that of New Zealand, Australia, Canada, the US, and the UK.

The Russian story is flattered to some extent by fairly long working hours (average annual working hours per worker are about 10 per cent higher than those in New Zealand) and by a shorter life expectancy (even than much poorer China).  But here is a similar chart for labour productivity (real GDP per hour worked) from the Conference Board database.

russia 2.png

Russia sits slightly further down the rankings, but (broadly speaking) among the same group of countries.

To the extent geography matters, Russia has more neighbouring countries than any country in the world and its economic outcomes look better than most of the neighbours (North Korea at one extreme and Norway at the other).  And if one compares Russia’s GDP per capita with that of either Western Europe (source and origin of the Industrial Revolution) or with the Anglo offshoot countries (US, Canada, Australia and New Zealand), which once led the world league tables, Russia’s relative performance now seems to be at least as good –  probably better –  than at any time in the last few hundred years.  It is hardly a stellar economic performer but –  against all the (mostly self-imposed) obstacles – the last century has been one of continued catch-up and convergence.

Of course, the bigger story is probably one of missed opportunities.  Look, by contrast, at what Singapore, Taiwan, and South Korea have managed –  even Malaysia, now appearing on both those charts above –  and it leaves open the possibility of what Russia might have been, perhaps (but probably not) might still be.

Banking without interest

In this morning’s Dominion-Post their personal finance columnist Janine Starks has an introductory article about Islamic approaches to finance.  The key, specific, dimension is the prohibition on interest.

That prohibition, in one form or another, was once common across Judaism, Islam, and Christianity.  It is one of the few aspects of teaching where the Christian church has, pretty much universally, changed its teaching, and personally I’m not convinced the change was well-grounded.  I’ve therefore long been intrigued by experiments with interest-free approaches to finance –  some of which manage it in form not in substance, but others are the real deal.  Once upon a time, having an innocuous New Zealand passport and some interest in the issue, I even participated in an IMF mission to Iran to advise them on the possibilities for a market-based monetary policy consonant with interest-free principles.

This morning’s article reminded me of a couple of posts I had written in the early days of this blog, starting from Islamic banking but focused primarily on the notion of mortgage products that did not involve an interest rate. The first was here and included these extracts

I’ve long been intrigued by the ideas and practice of interest-free finance.  My own Christian tradition for centuries banned, or regarded with intense disfavour, lending at interest.  That drew first on Old Testament provisions, which prohibited Israelites from lending to fellow Israelites in need at interest (while allowing loans at interest to outsiders).  The stance was reinforced by perspectives from Aristotle, rediscovered in the Middle Ages, arguing for the inherent sterility of money.  Prohibitions on lending at interest were eventually removed but  it remains a powerful vision for some (for me).   Within the Christian community, outfits like the Kingdom Resources Trust in Christchurch try to put it into practice.

The injunctions against interest are apparently much stronger and more pervasive in the Koran. In his recent book, Beggar Thy Neighbour, Charles Geisst reports that “of all the prohibitions against undesirable activities in the Koran, usury is mentioned the most.  Interest, or riba, is considered usury and no distinction is made between them”.   This was a distinctly counter-cultural stance, as compound interest had apparently been common among Arabs before the coming of Islam.

If interest is prohibited, profit-sharing arrangements –  equity finance, in effect – are not frowned on at all.  They have a element of uncertain return – economic risk –  for which some reward is appropriate. Predominantly-Muslim countries, and individual Muslims. have grappled with how to apply the prohibitions on interest in today’s world.  The large Muslim minority in the UK and the large financial sector with global connections has led to considerable interest there.  In his pre-crisis heyday, Gordon Brown wanted London to become the global centre of Islamic banking.

and

An alternative type of product might be an equity-based housing finance product.  In conventional housing finance markets, the purchaser puts up some equity, and a lender provides the balance.  The lender receives an interest-rate and is exposed to the (hopefully small) risk that the borrower defaults and that the house can’t be sold for enough to cover all the outstanding debt.  Any increases in the value of the house – whether changes in market prices generally, or as a result of improvements/extensions – accrue to the owner.

But it would be technically quite feasible to envisage a model in which the person wanting a house to live in, and the financier, became equity partners in a joint business venture to own the house.  You, the, resident would presumably pay rent to the joint venture, some portion of which would be passed to the equity finance partner, and when the house was eventually sold gains and losses would be shared, proportionately, between you and the equity partner.  You have risk, the equity financier has risk, and no one is paying or receiving interest –  in form or in substance.  It would be simple enough, technically, to structure the contract to allow the resident’s equity share to rise over time (instead of “principal repayments”, one uses the funds for equity repurchases from the JV partner).

I’m not sure if such contracts exist anywhere in the Islamic world.  In the West, without the theological concerns about interest, there is good reason why they don’t exist.

If I’m a young person in the West buying a first house, a bank might lend me 90 per cent of the value of the house.  Most mortgages are table mortgages and are repaid gradually, so that in time the owner’s equity share is large, heading for 100 per cent.  All the Bank cares about after that is my ability to service the debt.  And that depends largely on avoiding prolonged periods of unemployment.  If house prices fall that poses a risk –  banks can call in a mortgage if the value of the collateral drops below the value of the mortgage –  but it typically only crystallises if the flow debt service isn’t being met, and if house prices fall so far that not all the debt can be repaid when the house is sold up.   Within limits – quite wide limits – banks don’t care about or monitor the maintenance you do on your house.  If you don’t do the maintenance, mostly it is your loss.  And they don’t care at all about changes in market rentals in your neighbourhood, or for your specific type of house.  Conventional mortgages are simple, easy, and cheap to monitor.

But equity-sharing contracts would be enormously costly to monitor and manage, especially in a country with such a variegated housing stock (rather than lots of high-rise uniform apartments).  If you are only an equity partner in a house, your incentive to do maintenance is attenuated –  and likely to weaken especially in periods of personal financial stress.  So a financier providing a large equity stake would probably want to pre-specify maintenance obligations and standards (and would then need to monitor compliance).  You’d need to negotiate all alterations and extensions.  Rental rates vary, as do market values.  Perhaps a real rental yield could be pre-specified in the initial contract, but any arrangement for the resident to gradually buy out the outside equity partner requires an agreement on market value at the time of the transaction.  Transactions costs rapidly start to mount.  They might work within a relatively closed community – say, a local church community where effective monitoring costs might be reduced, or a small mosque-based credit union  –  but it is difficult to see them being effective, and economic, more generally.

In their recent book House of Debt, the US academics Atif Mian and Amir Sufi, argued that equity-sharing contracts should become the norm for housing finance.  They argue that such contracts would materially reduce the risk of financial crises, and that the main reason such contracts aren’t common is because of the tax system and the role of US government agencies.  I’m very sceptical of both claims, and would post the note I wrote on why –  but it would take 20 working days to get OIA clearance.  This post is quite long enough, but if anyone is interested I can explain my scepticism in a later post.

The follow-up post was here.  It is hard to excerpt so I won’t try.

In the last few weeks there has been (understandably I guess) a lot of rhetoric about common values etc etc, but actually there are really important –  and mutually inconsistent – belief systems in our world, or even our country.  As I noted in something else I was writing earlier this week

In fact, the notion of (serious) shared values falls down quickly in the presence of anyone –  secularist, Christian, Muslim –  who takes their faith seriously, as a source of authority and rule for life.  In some of these areas, serious Muslims and serious Christians have more in common with each other than either do with aggressive secular liberals. In others, not –  after all, most of the aggressive secular liberals have grown up in societies still suffused with the legacy of 1500 years of Christianity, and the way it shaped art, literature, government, individual rights and so on.

The approach to interest, and finance more generally, is one of those differences.

 

Updating the Governor’s OCR view

In the wake of the Reserve Bank’s Monetary Policy Statement in February I wrote

As for the overall tone of the monetary policy conclusions to the statement, count me sceptical.  …for the Governor to suggest that the risks now are really even balanced, even at some relatively near-term horizon, seems to suggest he is falling into the same trap that beguiled the Bank for much of the last decade; the belief that somewhere, just around the corner, inflation pressures are finally going to build sufficiently that they will need to raise the OCR. We’ve come through a cyclical recovery, the reconstruction after a series of highly-destructive earthquakes, strong terms of trade, and a huge unexpected population surge, and none of it has been enough to really support higher interest rates. The OCR now is lower than it was at the end of the last recession, and still core inflation struggles to get anywhere 2 per cent. There is no lift in imported inflation, no significant new surges in domestic demand in view, and as the Bank notes business investment is pretty subdued. Instead actual GDP growth has been easing, population growth is easing, employment growth is easing, confidence is pretty subdued, the heat in the housing market (for now at least) is easing. Oh, and several of the major components of the world economy – China and the euro-area – are weakening, and the Australian economy (important to New Zealand through a host of channels) also appears to be easing, centred in one of the most cyclically-variable parts of the economy, construction. …

From a starting point with inflation still below target midpoint after all these years, it would seem much more reasonable to suppose that if there is an OCR adjustment in the next year or so, it is (much) more likely to be a cut than an increase.

The Governor appears now to have come round to that view.   If his re-think is overdue, it is welcome nonetheless.

I don’t take issue with much about his statement. but two lines did catch my eye.  The first was this one (emphasis added)

This weaker [global] outlook has prompted central banks to ease their expected monetary policy stances, placing upward pressure on the New Zealand dollar.

Perhaps that is correct –  although in the data the effect looks small –  but it is quite a dangerous line to walk down.  Either an easier stance of policy was warranted here on the New Zealand fundamemtals (including our exposure to the world economy) or it wasn’t (it was).   The exchange rate should be largely irrelevant to that choice, and reintroducing it like this risks some sort of MCI mentality taking hold.  He’ll remember those bad old days.

And the second, of course, was this claim

As capacity pressures build, consumer price inflation is expected to rise to around the mid-point of our target range at 2 percent.

To which one can really only say two things, a) yeah right, and b) isn’t this the same story the Bank has been telling for almost the entire decade?  Of course, as the former chief economist used to point out, in one sense they had to believe it –  if it wasn’t something they could say hand on heart then they should have adjusted policy already.  But if they really believe capacity pressures are going to intensify from here, they must now be in a pretty small minority.

Even though the data suggest that the Bank should have an easing bias in place (and perhaps should already have had a lower OCR in place), I was a little surprised that having walked past the opportunity in February, the Governor chose to act now.  After all, this is the last OCR decision that he will take as the Bank’s sole decisionmaker on monetary policy.  On Monday, the new statutory Monetary Policy Committee will take over responsibility.  Even though I’ve been consistently running the line that the Governor will, in effect, control all the appointments to the MPC and will effectively control the overall votes, I’d assumed he’d want to observe the proprieties and at least pretend that the new voters might make a difference –  might see things differently from him.

On paper, the Governor’s statement that

the more likely direction of our next OCR move is down.

doesn’t mean much. I’m sure he made this decision with two of the likely new MPC members (Deputy Governor Bascand and the very new Assistant Governor Hawkesby), but the new MPC will have four other members, most probably the new (as yet unannounced) chief economist, and three externals.  Most likely the externals (in particular) won’t want to rock the boat –  they’ll have been selected partly for that quality – but they might quite reasonably see the data differently than the Governor.  That could get a little awkward.   Perhaps the Governor ran risks whichever tack he took, but he could easily have explicitly noted the regime change and could then have eschewed any sort of bias statement (leaving the rest of the statement pretty much as it was).

(Presumably the Minister of Finance will finally announce the MPC members today or Friday.  When he does, I would be delighted to revise my view that they’ll have been selected for their inoffensiveness, if such a revision is warranted.  But I’m not holding my breath.)

And what of inflation?   As readers will know I have been tantalised by the implied inflation expectations derived from the indexed and nominal government bond markets.  Here is the latest update of that chart, the last observation being yesterday’s.

breakevens mar 19

Implied inflation expectations (for the average over the next 10 years) –  implied by people with money at stake, or the opportunity to stake it to clear out anomalies – have been nowhere near target for almost five years now.  In the last few months they have been dropping away again and now are barely 1 per cent.   The Reserve Bank never references this series, but they really should, even if only to make the case for why they think there is no meaningful information in it.

Perhaps you are thinking this is just a global phenomenon.  After all, nominal bond yields have been falling pretty much everywhere.  But here are the 10 year inflation breakevens for the US

us breakevens mar 19

Not only have the breakevens rebounded (risen) in recent weeks, but they remain near the Fed’s target inflation rate (also 2 per cent).

With core inflation still below target after all these years, market-based expectations measures low and weakening, with increasing unease about the world economy (including the economies of our two largest trading partners), with most of forces that impelled the (productivity-less) growth in recent years having exhausted themselves, and with weak business survey measures, the case for a lower OCR already looks pretty strong.

What, realistically, would be the worst that could happen if the Bank had cut and the cut turned out to be unnecessary?  Unemployment would be a bit lower, even if temporarily, and core inflation might rise to the height of, say,  2,2 or even 2.4 per cent.  Perhaps not desirable outcomes in their own right –  the focus is supposed to be 2 per cent — but after all these years undershooting the target hardly likely to destabilise public or market confidence in the Bank’s conduct of monetary policy and delivery of medium-term price stability.

UPDATE:  The Minister of Finance has announced the appointments to the MPC this morning.  My initial reaction is that there is no need to revise my judgement about the structure and likely dynamics of the MPC.  It is quite disconcerting that one (internal) member has been appointed for only a one year term, which will place that person even more than usually under the heavy influence of the Governor.  The Minister would have been better to have started the committee with 3 internals and 2 externals and made the final external appointment when the new permanent Chief Economist is finally appointed.

Destroying the economy in one fell swoop

When I got to page 7 in this morning’s Dominion-Post I wasn’t sure at first that my eyes weren’t deceiving me.    I read it again, and even then wondered if what I was reading was a typo.  But these people seemed to be deadly serious.

open letter

Their demand is there in bold: that the government take steps to reduce (net) greenhouse gas emissions to zero by 2025.  Their demand doesn’t appear to be conditional on other countries doing anything.  It is simply flagellation –  but not self-flagellation (in which these individuals themselves commit to reducing all direct and indirect emissions associated with their own consumption and production to zero by 2025)  but a brutal whipping delivered to everyone.   Not even our government, evincing no concern for productivity or for lifting the performance of the underperforming New Zealand economy, would be that stupid or (electorally) suicidal.  (In fact, that left me half-wondering if this was really intended as a piece of political theatre –  get together a group advocating something so recklessly stupid and costly that the government’s own proposed net-zero by 2050 target will seem moderate and reasonable.   But many of the names of the petition –  a couple of hundred visible in the advert, and another 2000 or so who’ve signed –  appear to be “true believer” types.  And all their rhetoric suggests they are in deadly earnest.)

It all comes complete with the typical zealot’s demand –  “this is no time for party politics” (further down the advert) –  as if their propositions (and time frames) were so self-evidently (or by revelation) true, that no further debate should be countenanced.  End of story.   And yet, perhaps not surprisingly, of the key figures in this organisation one is the former leader of the Green Party and another is a former Greens Regional Councillor (I didn’t recognise the other names, but it wouldn’t surprise me if a quick search revealed other strong Green Party ties).  Green Party politics is just fine it seems, but not anyone else’s?

It is now March 2019.  That means these crusaders claim to seriously believe that in just six (and a bit) years we should reduce all (net) emissions to zero.  Sure, the trees that are already growing will offset a bit, and a few more trees will be planted in the coming years (but any tree planted today is still going to be rather small in 2025).    The offsets (the LULUCF bit) just don’t make that much difference (as this MFE chart illustrates).

emissions

They seem to be calling for probably a 70-75 per cent reduction in gross emissions (animal, energy or whatever) in a mere six years.  Being true believers I presume they will also be wanting international air (and sea) travel emissions –  which aren’t included  in the official framework but are just as polluting  –  radically slashed in six years.

I noticed in their advert a comment that “Solutions DO exist”, so out of curiosity I looked up their website.    Here is the Deeper Thinking section.  From the introduction

We will not accept action on climate change that further increases inequality, takes away democracy [but it was “no time for party politics”?], destroys our natural ecosystems, or compromises human rights. Some scientists think they can geo-engineer the planet by blocking the sun or changing the chemistry of the oceans. That is not our vision. In fact, this kind of change will make it even more difficult to reduce emissions.

We need a change of values that puts the everyday rights and needs of people before the profits of corporations. A change that values Nature, and respects its limits. A change that truly honours Te Tiriti o Waitangi, by which we mean recognizing the holistic world views of tangata whenua, their perspective of being intrinsically connected to the earth, the role of mana whenua in discussions and decision making, and the importance of environmental integrity to the health and wellbeing of communities who sustain themselves from it.

Make of that what you will.

There was a promise that one day (before 2025?) their website will have some more concrete material on “better alternatives”, but it isn’t there yet.  In fairness, they do finally mention economics.

Climate change is about economics. That is why it is hard. It is not possible to address climate change without changing our economic system. Resources and the ability to absorb pollution are limited. We cannot keep growing the economy without growing environmental damage. Much has been written over the last 40 years about the economics of ‘enough’ rather than ‘more’ which can give us a better way of life with less damage to the climate, the water, and each other. Aiming at human wellbeing rather than industrial growth, accepting the limits of nature and natural resources and valuing things other than just money is the basis.

Take that third sentence.  It would probably be better, and more honestly, reframed as “it is not possible to cut gross emissions by 70 per cent in six years, especially when half your emissions are from animals, without destroying New Zealand’s economy, severely undermining material living standards and [see the first block of their text], and (most likely) materially increasing inequality”.  But, perhaps, the signatories would feel better.

So what would this involve?  Well, first it would almost destroy our tourism industry (and our export education industry), which relies on air travel, and where there are as yet no commercially viable replacements for emitting fuels.   Then it would destroy our pastoral industries –  animals emit and, whatever the technological innovations, will still substantially be doing so six years from now.

I presume the signatories have dreamy visions about electric cars, trucks, and trains.  But, as of now, almost the entire stock is powered by petrol or diesel.  What do they propose?  Confiscation of all existing vehicles, with or without compensation?   And while it is fine to talk up the possibilities of wind (and the dreadful visual pollution it entails) or solar, we’ve yet to see anywhere the sort of (economic) large-scale battery storage deployed in ways that suggest a quick replacement of the full fleet is in any way sensible, or economic.   Many of us –  old fogies like me, but more importantly poor people – don’t want to buy new vehicles, which are very expensive (petrol or electric).

Presumably much of the building and construction industry is also a gonna –  a lot of emissions involved in producing cement.   That will be a bit of an issue in a country with one of the fastest population growth rates in the advanced world.   Perhaps raupo cottages are an alternative?

One is rather left wondering how New Zealanders earn their way in the world –  literally, profitable activities competing on world markets –  in this vision.  It wouldn’t “just” be a matter of sustaining growth –  a concept that seems distasteful (at best) to these people –  but of sustaining even the material living standards we have now, which lag well behind those in leading advanced economies (and thus constraining all sorts of personal and government choices).  Run through a list of New Zealand exports, and there won’t be that much left (a bit of wine, some fruit, a few services (ones that don’t rely on consultants jetting in to other countries, and……?).  I guess the exchange rate would plummet, but –  given the constraint of zero net emissions –  it is hard to see what viable new outward-oriented business would be likely to spring up here, so far from the rest of the world (and distance means, among other things, emissions).

The current government has talked of a commitment to a net-zero by 2050 target (although after their consultation process we have yet to see the final form of that commtment).  I wrote last year about the potential economic consequences of adopting such a goal, drawing mainly on the NZIER work commissioned for the consultation process by the Ministry for the Environment themselves.

The Minister for Climate Change has made the public claim that his net-zero target (by 2050 –  which would give us six times as long to adjust) would be a “massive economic boost“.    But that isn’t what the NZIER modelling showed.  This quote is from the government’s own consultative document

The analysis by NZIER suggests that GDP will continue to grow but will be in the range of 10 per cent to 22 per cent less in 2050, compared with taking no further action on climate change.

As I noted at the time

Those are breathtakingly large numbers (future GDP gains) for a government to simply propose walking away from. 

The hair-shirt the government proposed to compel all to wear was going to be astonishingly costly.

And then there were the (in)equality implications.  Recall that this was for a net-zero target by 2025 (still 31 years away, not six).

In my previous post, I quoted the MfE text

Our modelling suggests the households that are in the lowest 20 per cent bracket for income may be more than twice as affected, on a relative basis, than those households with an average income.

Which is quite bad enough. But it is all the more stark when you see the chart in the NZIER report, drawn from some work done for them by Infometrics  (in this chart they are looking only at the additional estimated losses from moving from the 50 per cent target to a net-zero target).

emissions distribution

Specifically, people in the bottom two income quintiles will be hit six times as hard as people in the top quintile.    Like MfE in the consultation document, NZIER rush to the client’s defence and suggest that redistribution policies could alleviate this.   You wouldn’t thought that sort of advocacy was their role –  having been commissioned to do modelling –  but more importantly, they should know as well as anyone that when governments adopt policies to materially shrink the economy, it is even harder than usual to persuade voters in the upper quintiles to agree to give up even more to mitigate the losses the worst off are exposed to.   Redistribution tends to win more favour when everyone is getting better off.

But, never mind, I guess, the signatories will feel better, and it is –  so they tell us –  no time for party politics.  Just destroy material living standards with one fell swoop, no doubt hoping –  with the best of intentions no doubt – that something will turn up.

(Of course, if they were at all serious about doing all this, in a way that hurt New Zealanders least, among their policy prescriptions would be a sharp and permanent cut in immigration numbers.  I made that case to the Productivity Commisson inquiry.   But since the Green Party also likes to position itself as the equal-top most pro-immigration political party, one can only assume –  again –  that the point of the exercise, in practice (whatever their best intentions) is to maximise the pain of the sort of adjustment they propose.  Flagellation in other words.)

Reading our censorship act

I’ve been reading the Films, Videos, and Publications Classification Act 1993.  Fortunately, it isn’t a long act (by the standards of our Parliament), having a mere 177 clauses.

I dipped into it initially wanting to better understand what David Shanks, the unelected bureaucrat operating under the title “Chief Censor”, had been up to in deeming the Brenton Tarrant “manifesto” “objectionable”, and banning the rest of us from ever (re)reading it.   Regular readers will know my longstanding concerns about unelected unaccountable bureaucrats exercising substantial policy power.    At least in this legislation there is provision for substantive appeals to a review board, and for appeals to the courts on matters of law.   That is more accountability/potential for restraint than exists around the choices of, notably, the Governor of the Reserve Bank.

I’ll come back to the Tarrant case shortly. But as I read the Act –  and here I should stress that my personal stance would not favour the abolition of all censorship – it became increasingly apparent what an odd act it is.   There doesn’t seem to be a proper purpose statement, of the sort common in more recent legislation.  But perhaps the key point is found early on when Parliament attempts to define “objectionable”.

OFLC 1

Which might look like a solid start, except that I turned to the Interpretation section of the Act (section 2), and between “public display” and “public place” (both of which were defined) there was no definition of “public good”.     So the basic and overarching standard against which publications etc are to be assessed, and may be banned, simply isn’t defined, and appears to be solely matter for one unelected bureaucrat and – by dint of rights of appeal –  the Film and Literature Board of Review, and perhaps eventually some judges (aka, committtees of ex-lawyers) to decide.  On a whim and some personal preference?

Being a conservative Christian, I happen to believe that the availability of publications promoting pre-marital sex, homosexual sex, adulterous sex and so on is “likely to be injurious to the public good”.  I quite get that most of modern New Zealand society disagrees and I don’t attempt to push the point.  But it seems just weird that the standard is so (un)defined by Parliament, just deferring the decision ultimately to some unaccountable people and their particular whims and preferences.   It is not even like the US, where the Supreme Court has to at least make up some grounding for its more controversial rulings in the specific provisions of the constitution.

And it just got odder as I moved on to section 4

OFLC 2

According to Parliament, the “public good”, and what might risk being injurious to it, is a matter for “expert judgment”.    What was Parliament thinking, other than passing the buck and abdicating its own responsibility?

And what expertise then is required to be appointed as Chief Censor?  Well, none really.  Section 80 of the Act deals with that appointment, and all you really need is a Minister of Internal Affairs to nominate you, and the concurrence of the Minister of Women’s Affairs (why?) and the Minister of Justice.   The relevant sub-section notes that

In considering whether or not to recommend to the Governor-General the appointment, under subsection (1), of any person, the Minister shall have regard not only to the person’s personal attributes but also to the person’s knowledge of or experience in the different aspects of matters likely to come before the Classification Office.

Nothing about political philosophy, nothing about the theology of the body, nothing about the family, not about history, nothing about the political or judicial traditions that have underpinned our society for centuries.  Nothing really that gives an appointee any real expertise in determining “the public good” –  and in fact, given that Chief Censors have tended to come from the Wellington bubble, probably less well-equipped to assess “the public good” (as citizens might define it) than the first 100 names in the phone book.

What of Mr Shanks specifically, the incumbent (and relatively new) Chief Censor?  His background is almost entirely as a lawyer for government departments, and then as HR and corporate manager for one in particular (MSD).  There is nothing there that suggests any particular ‘knowledge or expertise’ in the substantive matters his office deals with (sex, violence, horror….or terrorism), let alone any background or expertise that gives us any reason to suppose he could “expertly” (or otherwise adequately) define “the public good” for the rest of us.  Almost his entire career has been built around enabling ministers to do their thing.  Nothing in his background suggests any interest in, or passionate commitment to, an open and accountable free society.

And, in fairness, perhaps much of what the office does, doesn’t really require that set of big picture set of skills.  But something like the Tarrant “manifesto” clearly does.   Nonetheless, Mr Shanks –  the public service lawyer – has decided it is “objectionable”, in terms of the Act, and “likely to be injurious to be the public good”.

Having made his determination a whole series of offence provisions (Part 8 of the Act) cut in.  There seem to be two broad categories.  The first relate to “distribution”  where distribution is defined thus

OFLC 3

Then we get the key bit of section 123 –  complete with the odious concept of “strict liability offences”

OFLC 4

Breach that and the penalties are draconian.

oflc 5

(Another case where fines have got out of whack with imprisonment: for most people 14 years of your life is worth a lot more than $200000).

What about possession?  On that point, there does seem to be a distinction based on knowledge or intent.   Inadvertently or unknowingly having an objectionable publication doesn’t carry stiff penalties

OFLC 6

But knowing possession does

oflc 7.png

Since “the public good” isn’t defined by statute law, and we’d had no similar “manifestos” relating to events in New Zealand history, if Mr Shanks and his inspectors start coming after people who had the document before Saturday, everyone could reasonably argue they had no “reasonable cause to believe” the document was “objectionable”, in terms of the statute.  None of us can read the mind of the government lawyer, Mr Shanks.

But to get back to the Shanks decision, what is remarkable about his statement on Saturday is that it contains no reference to, or discussion of, the “public good” statutory test at all. In most of it, he simply runs his personal views of the document, perhaps views he was encouraged to by Police (and perhaps ministers?). Perhaps befitting his (lack of) background in such things, there is no discussion at all as to how the public good might well be served by people being able to read, understand (and disagree, rubbish, or even agree with some or all of the text – some of which is reported to have been substantially factual) and then debate – in an informed way – a document that appears to reflect the thinking behind one of the most heinous crimes in New Zealand history, an event that is near-certain to be grist to the mill of all sorts of political debates for decades to come.

I can (at a pinch) see how one might reflect on that point and still reach the conclusion Shanks did, but there is no sign in his statement that he has even considered the issue.  Let alone of “expert judgment” at work –  after all, what expertise does he have?   Where is the evidence that any “expert” judgement was involved, let alone any “experts” other than those on the staff of government agencies?

Now it is true that, buried further down in section 3, there is specific reference to terrorism.  The Act notes that “particular weight” should be given to “the extent and degree to which, and the manner in which” the publication “promotes or encourages criminal acts or acts of terrorism”.   I’m sceptical that is what the document did, but even if to some extent it does, “the public good” appears to be the overarching test.  It just cannot make sense –  after an event of such defining horror as the Christchurch attacks –  for the substantial document the (alleged) shooter wrote to explain himself to be kept from public view forever.   Not even made available with specific deletions, but the whole document is simply banned.

But, of course, there is an ability to apply for exemptions (although you have to pay even to apply), but the release seemed to suggest that Mr Shanks might allow exemptions for some in the media (at least the bits he counts as “safe”) and parts of academe (and MPs might well be able to argue they needed it for their official duties), while forbidding it to the general public; the people who actually vote and set the ultimate direction for the country, including how we respond to these attacks.   Would you trust the Police and intelligence agencies to tell you what to take from the attack and attacker?  I wouldn’t (in general and in principle, let alone in these specific circumstances).  Would you trust a government that does nothing to damp down the inflammatory rhetoric of senior MPs from its support partners?  I wouldn’t.  Let alone a government 10 years hence that might want to use the event for its own purposes (viz Simon Bridges this morning calling for more personal privacy to sacrificed to the state).

And in many respect Mr Shanks’s ban is pretty futile anyway, as he more or less acknowledges in his statement

Those engaged in further reporting on the Christchurch attack may be tempted to consider the use of quotes from the publication that have already been used in other media reports.

“That use of excerpts in media reports may not in itself amount to a breach of the FVPCA, but ethical considerations will certainly apply,” said Shanks.

If I read that rightly, it isn’t illegal to quote from the document, just to possess it. Overseas people can and will possess it. They will, and should, debate, argue about it, agree and disagree with it, and (presumably) mostly deplore the actions associated with it.  But that in turn leads to the bizarre conclusion, that the people whose polity is most directly affected can only count being able to debate the document to the extent that (a) they can copy bits of it (or analyses of it) from overseas sources/publications, or (b) presumably, to the extent that having once read it they have a retentive memory.   That latter might be one thing now, it is quite another 10 or 20 years hence, as generations grow up who barely remember the events of the last ten days themselves.

It is simply a bad decision, made by someone who looks ill-equipped to have made it, probably under considerable influence from the Police (perhaps of the government), with no opportunity for a wider range of perspectives to have been heard.  It doesn’t seem to have been a decision Mr Shanks was compelled by law to have made; rather he exercised his huge personal discretion in ways that will damage our democracy and confidence in it if it is not quickly reversed.    What is perhaps chilling is that there has been not a word from the government ministers or MPs –  let alone the Prime Minister –  or the political Opposition (who seem mostly focused at present on keeping in lock step with the government, when they do well and when they are falling down).    Sure, Shanks is independent, but there would have been nothing improper in MPs, ministers, or senior Opposition figures making clear that they thought a wrong and counterproductive decision had been made.  Instead, it looks as though they are simply ready to go along.  It will look a lot as if the “establishment” is keen on having debate, if at all, only on its terms.   That is never a good basis for anything, and particularly not for confidence in the workings of a free and open society.

As many people have pointed out, by Shanks’s logic all manner of historical documents –  that are freely available –  would in fact be banned.   It serves the public good to be able to better understand Hitler or Mao or the Unabomber or the IRA, the PLO, or the Irgun Gang.  It won’t serve public confidence, or the public good more generally, to attempt to maintain some half-cocked ban on the Tarrant “manifesto”, in a world in which writings about it –  and quotes from it –  will be readily available in mainstream publications, serious and otherwise, internationally.  In addition to more serious risks, it will also bring Mr Shanks and his office into disrepute.

I’ve lodged an OIA request for the relevant documents.

OIA OFLC

In the meantime, I hope someone is able to seek a formal review of the decision. Weirdly, under the law, it appears that only Tarrant (‘owner, maker, publisher”) is free to seek a review.  Anyone else requires the explicit permission of the Secretary of Internal Affairs and there is no presumption that such leave would be granted, by someone who works for the government.

Ministers in Turkey

A couple of days ago I wrote about the trip to Turkey Winston Peters was planning, presumably undertaken with the explicit approval of the Prime Minister (and he was accompanied by a Labour Party Cabinet minister).

There were conflicting narratives from the Foreign Minister and his boss about this trip.  From the Foreign Minister’s own press release we learned

“Our current intention is then to travel onwards to Turkey, at the request of the Turkish Government, to attend a special ministerial meeting of the Organisation of Islamic Cooperation being held in Istanbul.

“This important event will allow New Zealand to join with our partners in standing against terrorism and speaking up for values such as understanding and religious tolerance.

The Prime Minister meanwhile suggested that Mr Peters would be “setting the record straight” with the odious Turkish president.  There was Erdogan’s use of video of the Christchurch shootings in his election rally, his false claims about Gallipoli (the claim the landings were all about being anti-Muslim) and his inflammatory rhetoric around New Zealanders and Australians.    She herself had been reluctant to say anything, unlike the Australian Prime Minister.

We learned this morning about the Foreign Minister’s effort.   First, there was Mr Erdogan

Peters said, however, that he didn’t discuss Erdogan’s use of the footage with Turkey’s foreign minister or president though it was widely expected that he’d raise the issue.

Erdogan later on Friday again showed an excerpt of the video at an election rally in the central city of Konya.

“I did not see any sound, peaceful purposes in raising it,” Peters said, adding that they had received “very assuring information” from the Turkish presidency.

Very assuring……..not.    It looks a lot as though he was played –  again –  by Erdogan, who seems to be using the whole affair to help his election campaign.     But I guess MFAT trains Foreign Ministers to abandon all sense of national self-respect etc.

And then there was the meeting of the foreign ministers of the Organisation for Islamic Cooperation (OIC).    You can read the statement made by Mr Peters to that meeting.  I guess views will differ on the specific content, but the overall tone struck me as strangely obsequious.  Which frankly seems weird just on its own merits (what does the New Zealand government owe to other countries in this matter?).   And doubly inappropriate at a meeting summoned by the odious autocrat who governs Turkey

There wasn’t much reference in the Peters statement to that “religious tolerance” he talked about earlier in the week in his press release.   But then it isn’t New Zealand that has a problem with religious tolerance: in this country, you can join or leave any religion you like, theistic or otherwise.  Leading secularists could abandon their faith and embrace Islam –  or Christianity or Judaism or whatever –  and few would pay much attention for long.  Or vice versa.

Not so for most of the countries represented at the OIC meeting, a meeting which Winston Peters seemed to go out of his way to thank them for attending –  almost as if they were doing the New Zealand government a favour by holding it.

The Peters press release earlier in the week talked of how he would “join our partners”  to speak up for “values such as….religious tolerance”.    So what did the communique have to say?  There is lots of pretty tendentious rhetoric, some boring listing of various official visits to New Zealand, and then we get to the substance. On religious tolerance

Calls upon all States to respect the freedom of religion of all Muslims; not restrict the fundamental human rights and freedoms of Muslims

This is an organisation of countries, not clerics, and not a few of these countries have substantial minorities of people of other religions.   And yet, the call is only for freedom of religion for Muslims.

After ploughing through lots more clauses, we also find this near the end

Requests the OIC Contact Group on Peace and Dialogue to engage, as a matter of priority, to focus its efforts and take action to combat religious discrimination, Islamophobia, intolerance and hatred towards Muslims,

Even with two New Zealand Cabinet ministers invited to attend their meeting, they still couldn’t bring themselves to even a passing reference to religious freedom for anyone else, even in their own countries, let alone New Zealand.

Of course, for most of them it would have been deeply hypocritical for them to have done so.  Here was the Pew Research graphic I used in the post the other day.

apostasy

These countries –  most or all of them members of the OIC –  have apostasy laws in place, making it an offence to leave Islam, let alone to embrace another faith.

Of them, this article from the (UK) Independent reports that

Thirteen countries, all of a Muslim majority, punish apostasy (the renunciation of a particular religion), or blasphemy with death.

The annual Freedom of Thought report by the International Humanist and Ethical Union, found that 13 countries impose capital punishment upon people simply for their beliefs, or lack of them.

Afghanistan, Iran, Malaysia, Maldives, Mauritania, Nigeria, Pakistan, Qatar, Saudi Arabia, Somalia, Sudan, United Arab Emirates and Yemen are the relevant countries.

Not that often enforced these days perhaps, but the law nonetheless.    All countries that will have been represented in this Organisation for Islamic Cooperation meeting, attended by Winston Peters and Jenny Salesa.

My concern here isn’t primarily with the OIC countries themselves.  Their governments –  very few democratic, few even allowing genuinely open political debate and scrutiny –  make their choices and New Zealand can’t change those.

My concern is with our own government.  I could suggest that they’ve been played by Erdogan and OIC, except that that might suggest they didn’t know what they were doing. I suspect they knew exactly what they were doing, and went ahead nonetheless.

We can be proud of our religious freedom and tolerance – hard-won –  and our government (Prime Minister, Foreign Minister on down) shouldn’t sully that good name by associating on such issues with a group of regimes that (mostly) have little or no regard for genuine religious freedom, and show no intention of granting it to their own people, or even to non-citizens living in their countries.

It is shameful, (presumably in some warped conception) opportunistic, and disrespectful of the values and practices of almost everyone who lives in this country.

People have been queuing up to laud the Prime Minister this week.  Some of it is probably due, much of it probably not, but on this significant foreign policy aspect of her government’s response she has allowed a pretty awful standard to prevail.

 

UPDATE: Not on the specific point of this post, but a chilling action by a government official nonetheless.  As people were pointing out, Mein Kampf is legal, the writings of Mao are legal (as they should be), but New Zealanders are now not supposed to see –  or cite – a document backgrounding perhaps the worst crime in New Zealand history.

 

Kudos to the Governor

I have been critical of the Reserve Bank Governor for not yet having given an on-the-record speech about either of his main functions, monetary policy or financial regulation/supervision.  Next week marks a year since he took up the job, and 1 April is the day he loses exclusive control of monetary policy to the new MPC, which he will nonetheless chair (and effectively control).

But this invitation just turned up.  It seems to be an open invitation, so anyone interested should feel free to sign up.  I’ll certainly be there and will no doubt write about what he has to say.

orr speech

It is also commendable that the invitation indicates that the Bank will be releasing video of the Governor’s speech (and any Q&A?)  This is a well overdue step forward –  especially as this Governor is quite open about freely departing substantially from his written texts –  and, if adopted consistently, will bring the Bank into line with how things have long been done at the Reserve Bank of Australia.

Presumably, by next Friday the Minister of Finance will finally have announced the other members of the new Monetary Policy Committee.