Are the youth of today disenchanted with democracy?

Stuff reported last week that young New Zealanders were “losing faith in democracy”, based on a journal article showing that only 29.3 percent of Kiwis born in the 1980s say it is “essential” to live in a democracy.

The story adds:

This is a dramatic drop off from those in older cohorts – almost half of those born in the 1970s believe it is essential, while almost two thirds of those born in the 1930s say as much.

Now, I’m not sure we should take this at face value. It’s not as if large numbers of young New Zealanders show a desire to live in a dictatorship, or with a “strongman” leader in charge (unless I’ve been missing some quite major shifts). I suspect the fact they don’t think it is “essential” reflects not a strong desire for totalitarianism but instead a gradual degradation and diminution of a sense that traditional politics is how you achieve change.

We already know that young people are disengaging with traditional forms of democracy, especially voting. I suspect this is partly because politics seems simultaneously uninspiring – the narrowing of debate and quasi-consensus around middle of the road policies in the last 30 years must increase the sense that voting changes little – and also out of date, in the sense that standard, once-every-three-years political voting hardly offers the responsiveness and transparency that the internet generation gets elsewhere in its life.

For those on lower incomes, inequality must be part of the story too, in the sense that those who feel economically excluded from society are more likely to feel powerless and less likely to be engaged.

Of course, this doesn’t mean that young people are apathetic. They want to see change, and they are pursuing it outside of conventional parliamentary politics, in NGOs and social enterprises. But parliamentary politics does matter – it is where power ultimately resides, and decisions are made – and in that sense, this survey is another reason to think harder about how to reform politics, and reconnect people with it.

If we fail in that task, I don’t think that authoritarianism will be the result; it’s just that we’ll continue to see power shift towards those who do vote (the well off and elderly), and we’ll become an increasingly unrepresentative democracy. Which would also be pretty bad.

The New Zealand Initiative on local government and democracy

The New Zealand Initiative think tank yesterday launched The Local Manifesto, calling for more responsibility to be devolved to – and greater freedom for – local councils.

It’s a call I broadly agree with, especially since the think tank points out that local councils are currently too much beholden to central government and not answerable enough to their citizens.

I welcome the recommendation for councils to use more citizen juries, as the city of Melbourne did to get community support for a $5 billion infrastructure plan. (Instead of raising local taxes, the jury recommended lifting developer contributions, selling non-core assets, and increased borrowing.)

Ditto the use of non-binding referenda. They can be problematic, presenting citizens with an overly simplistic choice and, as Christchurch Mayor Lianne Dalziel argued at the report launch last night, overly influenced by “paid advertising”. But the report points out that Whanganui did them well between 2005-10, giving citizens the chance to say which level of rates they preferred (not just a binary choice) and getting significant community engagement.

At the launch, Dalziel also backed participatory budgeting, a process in which citizens directly determine council spending, saying, “Participatory budgeting is one component of what we intend to implement in Christchurch.” I couldn’t find any mention of participatory budgeting in the report itself, but I certainly think it should be on the agenda. It gives people control over meaningful decisions, and forces them to make important trade-offs – more spending on roads means less for parks, and so on – much more than referenda do.

I wasn’t so sure about some of the other recommendations, however. The initiative thinks local councils should be able to opt out of national standards, for instance on water quality, if they think the cost too great. But if a national standard is the absolute minimum, and is backed up by evidence, that doesn’t make much sense. No local area should be able to say, “We know, based on the evidence, that lowering the water below this quality leads to more people falling ill, but we are going to do it anyway.” Arguably what we need instead is more performance-based regulation: central government setting a standard that must be reached, but letting councils decide how to do that.

The report’s advocacy of democracy is slightly undermined by its (admittedly lukewarm) enthusiasm for council-controlled organisations, which may have their advantages but are definitely removing important decisions from citizens’ control.

Finally, the report doesn’t fully grapple with the crucial issue of co-governance with iwi. If iwi are to have what is guaranteed to them under the Treaty of Waitangi – control over key resources – we are going to have to have a massive ramping up of co-governance. That surely is a core part of any genuinely democratic devolution of power – so while I welcome much of the thinking behind this report, some of the implications of its broad thrust remain unexamined.

Labour’s Ready to Work plan: good idea, not sure about the details

At their party conference yesterday, Labour announced a plan, labelled Ready to Work, to give long-term unemployed young people the chance of six months’ work on environmental and community projects.

It’s a good idea, in essence. This kind of work offer helps keep people out of the despondency that unemployment can engender, and helps them acquire work skills and routines. Evaluations of a similar UK scheme, the Future Jobs Fund, were very positive, estimating that it generated a net benefit of several thousand pounds per participant, partly through avoiding long-term downward spirals of worklessness, poor health, low self-esteem, etc.

National’s attacks on the policy haven’t made much sense. Steven Joyce claims it will compete with businesses, but in fact it’s explicitly aimed at the government and NGO sectors. So the policy seems broadly fine.

The problem, as ever, is in the details. Six months is probably the right length of time, and the policy targets young people – one of the specific groups that such policies work well for – who have been unemployed for six months or so, which again is about right.

However, one minor problem is that the jobs appear to be fulltime in that six month period, which won’t leave participants time to look for the other jobs they will need once their time is up. Better designed schemes offer only part-time (20 or 30 hour) jobs to avoid that problem.

A bigger issue is that the jobs planned seem to be all in environmental areas (though there’s some vague mention of “community” projects), whereas successful overseas schemes have asked local councils and NGOs to put up bids to take participants into jobs across all the different policy areas.

This creates more competition between providers, raising the chance of the jobs being meaningful not make-work, and increases the odds of a participant finding a job in an area they are interested in.

This matters because, although Labour has been vague on this, it seems as if the scheme will be compulsory, in effect:

Asked if it would be compulsory for those young unemployed to take up job offers under the scheme, [Andrew] Little said the plan was to do everything possible to encourage them into work, including getting mentors to get them out of bed in the morning if necessary. There were sanctions already in place for those who refused work, and they would apply.

I think this is a bad idea, because that’s working for the dole, effectively, a policy widely avoided by governments of different stripes – and which has been disastrous where it was implemented, by David Cameron’s UK government. And the chance of people enjoying such jobs – and getting something useful out of them – are much reduced if they are enforced.

These concerns, however, could all be fixed in implementation, or between now and the election. In general this seems like a sound – and evidence-based – policy.

New project: a book on government renewal

Having spent much of the last few years researching and writing about income inequality, I have a new project that I’m very excited about: a book about the renewal of government – what it does and how it does it – in the face of the major problems of the twenty-first century.

The big, interconnected issues confronting us, like inequality, climate change and technological disruption, are unlikely to be solved just by individual action or leaving things to the market. But the idea that government can do things well has been forcefully challenged in recent decades.

So what does the evidence – from politics, economics, psychology and other areas – tell us about what government is good at, and where it should and should not act? And how can government be reformed and genuinely democratised, so that it’s as open, transparent and fit for the twenty-first century as we need it to be, and is genuinely able to articulate the common good?

At the heart of this work are questions about our nature as social beings, what exactly it is that we want government to do, and the way that individuals, society and the environment are affected by the balance between state and market. There is also a question about cooperation and competition, and which of those twin engines of human behaviour offers us the best chance of forging a twenty-first century that works for everyone. Those are the kinds of issues I’ll be tackling.

As I set out on this project, I’d like to thank the Gama Foundation, for the support that is allowing me to spend time researching, thinking and writing, and my publishers, Bridget Williams Books, for their role in shaping and guiding this work.

Saudi sheep: cavalier ethics and excessive private interests

The Saudi sheep scandal, as laid bare yesterday by the auditor general’s report, shows up two major flaws in New Zealand politics: a growing disregard of ethics, and the privileging of private over public interests.

On ethics, much turns on the question of what is a bribe, and what isn’t. By definition, a bribe is a payment that allows you to get some kind of unfair advantage over others, an advantage outside the normal rules of the system. In other words, you are not paying the person who receives the bribe for any normal, legitimate service – there is no proper exchange.

At the heart of this matter are the payments authoried by Murray McCully to the Saudi businessman Hamood Al-Khalaf. McCully has dressed up his actions in the scandal, has tried to avoid accusations of bribery, by claiming that the payments he made were in exchange for a genuine service. The auditor general’s report seems to accept that conclusion, but then immediately undermines it by saying:

It is not clear on what basis the amounts paid to the Saudi Arabian investor’s company under the contract were arrived at. A key objective of the Saudi Arabia Food Security Partnership was to remove a perceived obstacle to a free trade agreement with the Gulf Cooperation Council…

In my view, settlement of a grievance was provided under the guise of a contract for services. The Saudi Arabia Food Security Partnership was the result of a need to resolve a diplomatic issue and, in the view of Ministers, to settle a Saudi Arabian investor’s grievance. The situation was complicated by views about live sheep exports. The contract does not outline those different policy objectives or the complexities. Importantly, the contract does not specifically reflect the settlement component relating to the grievance.

In other words, there is no evidence that payment was to settle a genuine legal dispute, or obtain other genuine services from Al Khalaf. So it does look rather like a bribe – a payment made to get New Zealand top of the queue for a trade deal with the Gulf states.

Unfortunately, this fits into a wider pattern of lax New Zealand approaches to corruption. Transparency International has pointed to a growing problem as New Zealand businesses increasingly operate in countries where bribery is the norm. We are sleepwalking into a situation that could badly compromise our integrity and our reputation for being a free and open country – something that is enormously important as a trading advantage, quite apart from the moral issues.

On my second point, about public and private interests, it is fascinating to note that the whole idea of payments to Al-Khalaf came about because he felt his business interests were harmed by New Zealand political decisions, specifically, the decision to ban live sheep exports.

Now, his business interests may have been harmed. But so what? Of course, governments shouldn’t go out of their way to hurt business interests, and a stable environment for business is, all other things being equal, useful to have.

But one individual’s private interest cannot trump the public interest, which was clearly in favour of banning exports on ethical grounds. And there is no such thing as a right to further profits. If you are expecting to make money from a business venture, you have to take the risk that public action may render that impossible.

That is an unpleasant thing, of course, and all countries should have a strong safety net to help out entrepreneurs when things go wrong. But we cannot elevate the concerns about individuals losing future profits over the general public interest. To do so would be an affront to democracy, and would make it nigh on impossible for governments to operate properly.

The New Zealand Initiative’s new report on inequality

The New Zealand Initiative has just released a report on inequality, following one on poverty earlier this year. I’ve already commented briefly on the report in the media; below are some more detailed comments.

While I welcome any contribution to the debate on inequality, this one is, unfortunately, a little selective in the evidence it deals with, and mistaken in some of its key conclusions. It also fails to deal with important issues such as discrimination, politics and power. These failings greatly reduce its value in the ongoing discussions around inequality.

In the Stuff story on the report, one of the report’s writers, Jenesa Jeram, says: “Income and wealth gaps are red herrings for what is really hurting those on the bottom rungs of the ladder. It is the cost of housing that is exacerbating inequality, so we need housing solutions,” she said.

This seems to me incorrect. Yes, housing costs are a big problem, particularly for lower earners. But one fifth of the population (on one standard measure) is in relative poverty even before housing costs are taken into account. And that poverty occurs in a wider context of how income is distributed and redistributed, of incomes barely increasing over 30 years for the poorest while doubling for the richest. To dismiss such widespread poverty and inequality as “a red herring” seems seriously mistaken.

Perhaps the most fundamental omission in the report, however, is its failure to deal in any significant way with the long-running consequences of widened inequality. It makes much play of the fact that the big increase in inequality happened in the 1980s and 1990s, and this seems to be a justification for downplaying the whole issue.

Nowhere do the report’s authors thoroughly address the point that, even if a big shift happened 20 years ago, it can have incredibly damaging long-running consequences. Inequality has strong and internationally accepted impacts on things like social mobility, trust, health and social cohesion. A continuing high level of inequality implies that those things will continue to be damaged – a point that seems entirely to escape the authors.

(It doesn’t help that they wrongly think that works making such connections, such as The Spirit Level, have been “debunked” by peer review. In fact, most of the dissenting authors they cite have never, to my knowledge, published anything on The Spirit Level in a peer-reviewed journal, and the main peer review of the book, by Birmingham University’s Karen Rowlingson, broadly supported its conclusions.)

The authors are also selective about which research, and which parts of specific research, they cite. For instance, they cite Helen Roberts’s research when it shows New Zealand CEO salaries to be below international levels, but they don’t quote the overarching conclusion of her research, which is that high CEO salaries are very much the result of their “rigging” the system by influencing boards. That finding, of course, would have sat uneasily with the report’s claim that many inequalities are justified on merit.

When it comes to perceptions of inequality, the report cites work by Peter Skilling on attitudes towards specific inequality-reducing policies; but when it comes to discussing people’s knowledge of wealth inequality, they cite international research showing people overestimate wealth inequality, but entirely omit Skilling’s finding that people drastically underestimate it! Again, this would have inconvenienced their argument.

Similarly, the authors cite one piece of research, by Hyslop and Mare, arguing that changes in household structure (such as there being more sole parents) explain half of the increase in inequality in New Zealand, but they don’t notice the conclusion of a more recent paper by Stillman et al finding that increases in poverty 1983-2003 “are not explained by either changes in the characteristics of households over time or changes in household employment patterns” and that “the structural reforms undertaken in the 1980s led to permanent changes in the distribution of resources across households in New Zealand.”

Despite having an entire section on income mobility, the report rather bafflingly fails to mention one of the key bits of work in this area, Miles Corak’s research showing that low social mobility is a direct result of high income inequality. Since Corak is one of the key people in this field, and visited New Zealand recently, it is surprising that his work could escape the notice of anyone writing about inequality.

Some of the other, broader omissions are also striking. For instance, the courts have, in recent decisions (especially the Bartlett case), been unequivocal in finding that many women are poorly paid simply because they are women. Discrimination is a huge cause of income and therefore wealth inequality. But nowhere is this discussed.

Similarly, economic power is absent. The report fails to note recent research from the IMF showing a clear correlation (and plausible causation) between reduced union coverage and increased shares of income going to the richest 10th. The IMF found this effect to be stronger in New Zealand than in any other country they surveyed. And it is not hard to see why: weaker unions lead to reduced bargaining power for ordinary workers, which in turn makes it more likely that senior management will take a larger share of company income. Yet there is no discussion of this: it is as if power does not exist.

Another baffling omission concerns politics. The report does not seem to consider why inequality might have been flat or falling through the 2000s, but MSD’s Household Incomes Report (which the authors cite elsewhere) is clear: it was thanks to policies such as Working for Families and a higher minimum wage. By failing to discuss this, the report gives the impression that inequality somehow stopped rising of its own accord.

The report’s problems are epitomised by their handling of the thought of the political philosopher John Rawls. The report quotes his thinking (at some length) on just and unjust outcomes, and then argues that Rawls was concerned with absolute poverty, not inequality, and that his philosophy is about ensuring that institutions don’t impede upward mobility or meritocracy.

Both points are essentially incorrect. Rawls’s famous ‘different principle’ is explicitly about inequalities between rich and poor, and when they are justified (when they work to the advantage of the least well off, is his basic answer).

More fundamentally, Rawls’s beliefs about the meritocracy are exactly the opposite of those the authors espouse. They may not be aware of it, but in A Theory of Justice, Rawls goes on to argue that, even once social and economic barriers to success are removed, people’s rewards should not be based on “desert” or merit, because we do not deserve the talents we have inherited, not even our capacity for hard work, which is itself inherited or shaped by our environment.

Rawls, in fact, argues that people’s talents should be seen as “a common asset” and their benefits (in increased salaries and the like) should be shared as widely as possible (consistent with the difference principle). That his views should be so contrary to what the authors are trying to argue is perhaps symptomatic of the problems that their report encounters throughout.

The current welfare system: a failure of employment, a failure of wellbeing

I’ve just been reading a master’s thesis based around surveying and interviewing people who’ve recently come off benefits, and its conclusions are pretty bleak.

It shows that, even on its own merits, the government’s much-touted drive to get people off benefits is a failure, as the majority of people who do so don’t end up in full-time work. More importantly, the obsession with getting people into work – ignoring how bad that work might be, the damage done by a punitive welfare system, and the need to support everyone, in paid work or not – means that people’s interests aren’t actually at the heart of the process.

The situation is so ludicrous that one of the people interviewed was recommended for a bee-keeping position despite being more than eight months pregnant. In the words of the thesis’s author, VUW student Alicia Sudden, “wellbeing is being left out of the current welfare system.”

What Sudden did in her Master of Development Studies thesis, titled ‘Putting wellbeing back into welfare: Exploring social development in Aotearoa New Zealand from beneficiaries’ perspectives’, was to survey 234 people about what has happened to them since they came off the benefit, and do detailed follow-up interviews with six of them. This shows what has actually happened to their lives – something the current government doesn’t monitor.

As Sudden says, “These individuals are claimed to be markers of a successful system; however, the current lack of follow-up leaves this assumption unsubstantiated.”

For a start, the interview subjects report enormous stigma around being on a benefit, thanks to the repeated message that requiring the benefit is due to laziness and choice. Yet most of them had gone onto the benefit to have or look after a child or for health reasons. Most had been on the benefit for less than two years.

Sudden also challenges the idea that there is something wrong with depending on the state, noting the argument that “all citizens rely on the state in some way, whether it be for access to water, roadways or other taken-for-granted parts of modern life. Therefore in a moral sense there is nothing wrong with being reliant on the state.”

Indeed, as one of her interviewees, Rebecca, pointed out, we might all need the safety net to be there at some point:

I realised being home and being on the benefit or being really poor and not having support really for all of us are potentially only a few steps away if you happen to get into the wrong course in life… I worked very hard through my life not to ever be in a difficult position, but it still happened… You think you’re safe, but you might not be depending on what happens in life. And then the [2011 Christchurch] earthquakes… we realised you think you are really safe and stable but things can change, and then they all mount up and all of a sudden you are in this really vulnerable place.

Yet as the thesis points out, New Zealand has an increasingly punitive welfare system based around the idea that the main way to improve people’s lives is to punish them until they do what the state wants. “While assistance with benefit-to-work transitions has long been one of the primary functions of the welfare system, this is no longer done through training or upskilling. Instead, transitions to work are currently pursued through punitive measures including sanctions, surveillance and increased obligations.”

In addition, life on the benefit can be miserable – over 80% of respondents said they were dissatisfied with their situation while on it. The basic unemployment benefit is just $210 a week – barely enough to survive on, let alone lead a decent life. People’s case managers constantly shift, making it difficult and stressful to deal with WINZ, and one respondent said of WINZ reception staff: “I have never met ruder people in my life.” The paperwork required for the benefit was described by one respondent, Rebecca, as “exhausting” and “very confusing”.

Despite all this, what got them off benefits was not generally the unpleasantness but “their own desire and/or as a way to improve wellbeing for themselves and their family.” Sudden’s findings suggest that “the current financial hardship forced on benefit recipients … only works to make the period of time on the benefit more difficult.”

Sudden found the low wellbeing of her research participants, during their time on the benefit, to be “incredibly disconcerting”. She adds: “It is incredibly troubling that the mechanism which theoretically provides an economic safety net for New Zealand citizens is not only failing to support them, but could even be attempting to not catch those in need in order to pursue shallow indicators of fiscal savings.”

What’s more, the efforts to get people back into work aren’t even working very well. Sudden’s survey (admittedly not a statistically complete one, but in line with other research) shows that, after coming off a benefit, just 37% of her respondents were in solid, full-time work, and 17% were studying. Twenty-two per cent were in the growing world of precarious work – part-time, casual, shifting jobs with no guarantee of hours, pay or stability. Twenty-one per cent were back on benefits, and the remainder had no formal income source.

As Sudden notes, “This result significantly calls into question the use of off-the-benefit figures as indicators of successful off-the-benefit transitions [and] highlights that off-the-benefit figures are hiding the longer term costs to the welfare system of those who go back on the benefit.”

This follows earlier research showing, for instance, that only 29% of all those who transitioned from the benefit into work in 2001-02 had remained employed and off the benefit for a full two years.

As Sudden says, “Based on the data from survey respondents, which align with other New Zealand literature, it is clear that off-the-benefit figures do not correlate with benefit-to-work figures. This in itself breaks down the primary measure of success of welfare used by the current government.”

These findings, though worrying, aren’t surprising. We don’t live in a perfect world where people can just waltz into jobs. Many people have poor health, caring responsibilities and low skill levels, and are competing with hundreds of other people for every job. As Sudden notes, “[interviewees] Rebecca, Sarah, and Nicole all said the jobs they applied for had 100s of applicants, making their search for work extremely difficult.”

Sometimes the jobs suggested are farcical. As mentioned above, at one point Stephanie was told by WINZ she should apply for a bee-keeping position when she was eight and a half months pregnant.

Even if you get a job, life can be unpleasant, especially for those on 90-day trial periods. Stephanie’s experience was especially gruelling:

I begged for six months for the job… when I did finally get the job, I had to work split shifts so that I could fit around everyone else… So at the start they had me sign on to the WINZ scheme that subsidises wages… It was supposed to be permanent. So I was thinking, ‘yay I don’t have to move! Yay cheap rent’. But that didn’t turn out. Two weeks before the end of the three months, they started making excuses as to why I shouldn’t stay – that I wasn’t up to scratch because I didn’t meet the standard that someone who had worked there for 12 years had, after two and a half months. They’ve written me a reference that my customer service skills and my knowledge of the job were 110 percent sort of thing, but I think it was all just a bit of a scam on their part. And WINZ knows about them and they are continuing to do it.

She adds: “I loved that job, I love working in customer service… I suffer from depression anyway, but losing my job the way I did and a few other circumstances, it’s the worst patch I’ve ever gone through.”

Unsurprisingly, those in casual employment had a high rate of dissatisfaction, at 37.5%. Research cited by Sudden shows that, contrary to the idea that every job is a good job, being in low-paid precarious work can be extremely bad for your health.

Nor is the welfare system adapted to this new world of precarious work. Rebecca noted:

I had a debt [to WINZ] because it was so hard and confusing to keep track of what I’d earnt. And, just the way the system worked, I wouldn’t know exactly how much I would be earning. They want you to estimate what you think you will earn per week. But that was impossible for me to do because of the nature of what I was doing. And I think that kind of casual work is so common now, and I have this really strong feeling that the benefit wasn’t keeping up with the reality of how most people in lower incomes work, which is casually, and often don’t know from week to week how much they are going to earn next week.

This shows, Sudden argues, that the New Zealand labour market “can no longer be assumed to provide the stability or financial support needed by individuals and families, or sufficient opportunities for employment.”

Finding employment was, Sudden accepts, “in many ways a positive factor in their [respondents’] lives. However, there was also high rates of financial hardship and insecurity that had adverse impacts on wellbeing. This is particularly problematic given that employment is touted as the only life course benefit recipients … should take.… Between the harsh reality of the current labour market and the employment-oriented residual welfare system, the wellbeing of citizens appears to be increasingly left out of social policies.”

This grated with Sudden’s respondents, one of whom, Nicole, drew a contrast with the welfare state the current prime minister grew up with:

It is really hard to sit back and see our government, unfortunately, not actually be there for Kiwi families… There are some things I actually do agree with John Key. But the majority, I think – where the fuck have you come from? His mother was a sole parent, and he talks about how he has turned out fine, but his mother got all the benefits, which were a lot better than what even I got as a teenager… That’s how his mother survived, being on the benefit and having all the rights in the world. The same as Paula Bennett. And now they are cutting all those things off from us.

Through its sanctions and punishments, and its failure to support people’s wellbeing while on a benefit or give them proper training to get into work, the welfare system is failing people, Sudden concludes. “Rather than an entity of the state that aims to prevent poverty and progress social development, the welfare system itself is enabling poverty and making positive individual development and wellbeing increasingly difficult to obtain. The burden of support left by the welfare system is instead passed on to individuals, their families, private organisations and NGOs, and the increasingly harsh and unaccommodating labour market.”

Sudden calls for a welfare system – a wellbeing system, perhaps we should say – that treat its users with dignity. “Such a system would be able to provide a supportive space that aided individual’s employment or training aspirations, rather than contributing to the downward spiral of poverty.”

The system needs to be less punitive and “more people focused or more focused on building relationships”. She suggests ensuring that people have one WINZ case manager consistently, and that more be done to ease benefit-to-work transitions, especially for the growing number of people in precarious work.

Whatever happens – and those reforms and more are undoubtedly needed to the system – I hope Sudden’s thesis gets widely read. It documents one of the most worrying parts of New Zealand society: the treatment of beneficiaries, both rhetorically and in their day to day dealings with WINZ. They deserve better, and we all deserve a system that really prioritises our wellbeing.

The sad end to my near five-year OIA battle with Corrections

I am not a New Zealand record holder in many areas of life, but I now believe I hold one title, at least as far as the public record goes: the instigator of the longest, most drawn-out complaint to the Ombudsman about government’s abuse of the Official Information Act.

A few weeks ago, I received a final opinion on a complaint that I lodged in September 2011. Nearly five years elapsed between instigation and completion. Whatever else has happened in this ludicrous affair, one thing is obvious: no result that takes five years can ever be satisfactory. The Ombudsman’s office is colossally under-funded and cannot deal with complaints at anything approaching an appropriate speed.

As to the substance of the complaint, it concerned the Department of Corrections’ decision to use a public-private partnership (PPP) to build the new prison at Wiri. Under a PPP, a private company designs, builds and operates a public facility for several decades.

There are many reasons to object to this method of providing new prisons.* One is that the final cost of the facility has often become greatly inflated, through the negotiation process, from the original cost of building it the normal way when government just tenders the construction part. This puts a big question mark over claims that PPPs provide value for money. I know this because I often wrote about them when I worked as a journalist in the UK.

Accordingly I asked in mid-2011, under the OIA, for Corrections to release to me the initial ‘business case’ for building the prison the normal way. They refused; I complained to the Ombudsman.

I won’t go into all the ins and outs of the next five years, except to say that the usual pattern was that I would hear nothing for months, presumably because the Ombudsman was so over-worked; they would apologise and ask Corrections to release more information; the department would do so, but it would not go any further to answering my request; I would point this out to the Ombudsman; and then the cycle would repeat.

In the end, the Ombudsman forced Corrections to release a lot more information, but found in their favour on the key point, that they were right to refuse to say how much the prison would have cost as a straightforward building contract.

Corrections’ defence was that releasing that information would “prejudice or disadvantage the Department in future procurement negotiations in relation to upgrading existing prisons or building new capacity.” This is because, in future negotiations, “there was a real possibility that a tenderer, with knowledge of the component parts of the Departments’ estimates of costs … would pitch its tendered costings close to the Department’s.”

I think this is quite wrong, and hugely dangerous to the public interest. Surely the point about competition is that if any firm pitches its costs high in order to extract more profit, it will be undercut by another. If that doesn’t happen, there’s no genuine competition, only cartel-like behaviour, and other procurement methods have to be used. More importantly, the public’s right to know whether money is being wasted should trump all these concerns.

All this information is made available in other countries, like the UK, so it’s clearly not necessary to keep it private. The Ombudsman noted that I didn’t provide evidence that this is what happens in the UK, but – amazingly enough – after five years of this, and at a time when I have other projects occupying my energies, I wasn’t going to try to find reports based on files I no longer have and articles behind the paywall of a magazine for which I no longer work.

In any case, that’s the sort of work the Ombudsman’s office should be doing, if it were properly funded. And that fact – the lack of resources for a crucially important public office – is what really stands out from this sorry affair.

*Other reasons to be concerned about PPPs are as follows. Private companies pay more to borrow and have to make profits, so inherently have higher costs than the government does. Drawing up the contracts for such a complex deal costs a fortune – the procurement costs on Wiri alone were $21 million, a feast for the lawyers and other consultants. Even then not all eventualities can be predicted. But once the prison is up and running, the existence of a contract makes it very difficult, or expensive, for the government to change how it wants to run the facility. In the UK, for instance, PPP schools have closed owing to falling rolls but the government has had to keep paying for them, because that’s what the contract stipulated.

New pre-tax income stats out

Data on pre-tax incomes for New Zealand in 2013 have just been uploaded to the World Wealth and Income Database. So what do they show?

In 2013, the richest 10% got about 30% of pre-tax income, and within that the richest 1% got 7.7%. In both cases that’s about the same as in 2008, or indeed 2000. That’s in line with other things I’ve written about recently. You have to go back to the mid-80s, when the richest tenth got around 25% and the 1% got 4.9%, to see when the increase occurred.

Of course, these figures – crucially – leave out capital gains, which to my mind are income and which probably go disproportionately to the rich (as they do in other countries). And pre-tax income doesn’t directly tell you about living standards, since post-tax incomes, after taxes and benefits are taken into account, are what really matter. New Zealand’s (developed) world record increase in inequality, mid-80s to mid-2000s, was in large measure spurred by cuts to taxes and benefits.

So you don’t want to make too many generalisations from these figures. But they certainly don’t show that the rich are grabbing an ever-larger slice of the pie, for pre-tax income at least. For the real verdict, on post-tax incomes, we’ll have to wait for the next Household Incomes Report.

The data also bear out the point sometimes made by the NZ Initiative’s Eric Crampton, that our inequality is nothing like as bad as America’s. There, the richest tenth get nearly half of all income, and their 1% get 18%.

I don’t think that in any way makes our problems less real, or that it allows us to ignore the cumulative impacts of at least twenty years of large income and wealth imbalances. But it does show that things could be worse.

Technical note: the data on the WWID are essentially the same ones I’ve written about in other posts, but the WWID team makes adjustments to them to standardise across countries, etc, so their appearance there constitutes a ‘new’ publication of data in the long-term series going back to 1921 and across many nations.

The day I played cricket with Nigel Farage

The news last night that Nigel Farage had resigned as leader of UKIP, having helped lead Britain out of the European Union, made me cast my mind back to the time we were briefly united through that most British of mediums, cricket, and he made a rather unpleasant impression on me.

About a decade ago, I was living in London and playing for a social team made up largely of journalists. One summer we went on a weekend tour to Yorkshire, the key fixture of which was a game in a village called Thixendale. It was a picture-postcard sort of place, nestled in amongst the dales, tiny, with a few streets, a pub and a very beautiful cricket ground, fringed with trees. It was, unusually for the UK, a hot summer, and I remember everything there as painted in the colours of green and gold, especially the bare, hazy hills.

The Thixendale cricket team was organised, as I recall, by Farage and his fellow UKIP member of the European Parliament, Godfrey Bloom. Bloom was a Yorkshire gent of the good old-fashioned sexist type, and had recently made headlines by somehow getting himself onto the women’s rights committee of the European Parliament and promptly declaring that one of the key issues for women was that they didn’t “clean behind the fridge enough”.

Farage himself didn’t play much part in the cricket match, but he did turn up wearing, all of things, a pith helmet. For those who don’t know, pith helmets are the solid white hats once worn by British explorers and colonialists in hot climates. It was an extraordinary sight, as if Farage had stepped right out of the last days of the British Raj in India. At any rate he soon went to sleep underneath said helmet.

His son, however, was playing for his team as a bowler, wearing a shirt with the crest of Dulwich College, the elite high school he attended. Farage senior had himself been a pupil there in the 80s, where, according to recent reports, he displayed at an early age “racist and neo-fascist views” and sang Hitler Youth songs.

Bloom, meanwhile, distinguished himself by shouting condescending remarks from the sidelines. His team had a woman playing for them who had previously been a British hockey representative, I think, and as she dispatched one of my deliveries to the cover fence I recall Bloom shouting out, “Good shot … for a girlie.”

Did I, at the time, have any inkling that Farage in particular would one day help lead Britain out of Europe and into its current state of leaderless chaos? Of course not. But some of the key themes of his campaign could have been deduced from that day, in particular the nostalgia for the age when Britain really was ‘great’ – which is to say white, male-dominated, colonialist, and secure in its imperial place in the world.

As many people have already pointed out, much of the Brexit vote came from people who’ve been left behind by globalisation. It’s no surprise that they’re angry; I would be too if the industries in my area had been destroyed and there appeared to be no plan for how my region or class would ever recover, beyond some investment in training and a vague exhortation to work harder so as to compete with the millions of skilled workers coming out of India and China.

The European Union isn’t to blame for any of that, but when people are, quite reasonably, very angry, they’ll look for easy targets; and so they were open to Farage’s seductive, comforting message that everything would be right again if Britain ‘took back control’ – that the country could somehow wind back time and keep out all those nasty foreigners.

I have no idea what’s going to happen next, or where the UK will end up. But it does need to find a better vision for controlling the forces of globalisation, including some new thinking about the role of government in shaping the economy. Otherwise it will continue to fall prey to people like Farage, whose only vision is a basically backwards-looking one, a picture of Britain as it perhaps once was but never should have been, and cannot be again.