Scoop Election 08: edited by Gordon Campbell

Gordon Campbell on big, bad government spending

July 11th, 2008


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On Wednesday, the ANZ economist Cameron Bagrie provided some economic data that – co-incidentally, I’m sure – sought to back up the centre right argument that government spending is chronically mis-directed. Bagrie took care to point out that he wasn’t saying a thing about what the levels of government spending should be. No, the ANZ research was all about the spread of the spend.

Basically, the ANZ report claimed to show an ever-increasing share of government spending is going on administration, rather than on ‘front line’ activities. That always sounds like a potent argument. We can all think of areas of waste, make work, and ineptitude – and we all assume that it would be dealt to, rationally. The trouble is, whenever costs get cut, the carving is done along ideological lines – and the good gets swept away with the bad, or the bad not at all. More ‘back room’ activities then get added, to serve the new ideological mindset. Anyhoo, according to the ANZ, teachers, nurses and the like are losing out on the resources they need, and why ? Because galloping amounts of cash are being lavished on bureaucrats, with their well known urge to monitor and regulate for no good reason!

Bagrie’s major supportive fact for this suspicion ? “Growth in total departmental outputs has averaged close to 7 per cent a year since 1997, while front-line spending has averaged 5 per cent a year.” Theoretical billions may have been lost. Obviously though, it matters a lot in this kind of exercise just what you choose to put in which column. To achieve his outcome, Bagrie has put a lot of things that some people might think of as social goods, into the bureaucratic ‘bads’ column.

Such as ? Well spending on education services for children with special needs has gone into the bad, ‘back office’ bureaucracy column. Bagrie himself casts the spending on arts, culture, heritage and recreation in a negative light, as ‘non-productive’ – which probably says as much about why Cameron Bagrie became a bank economist, as it does about the state of the nation.

Trevor Mallard has pointed out a few more of the assumptions in the ANZ research : “Defence spending, Police, Corrections, and the Courts spending is ‘ [defined as ] back – office, as are school property costs….Work and Income frontline services, Child Youth and Family frontline services and IRD call centre staff,. This type of spending alone accounts for more than $6 billion, or 60 per cent of all the departmental output spending which Mr Bagrie says is ‘back-office.’” Perhaps not surprisingly, Bagrie sees some of these bad trends as picking up pace from 2001 onwards.

Only an ideologue could regard the majority of the above spending as dispensable, or capable of re-direction to the frontlines. In most respects, special needs education is the frontlines. I’d like to pick up another of Bagrie’s examples. Social welfare, he seems to believe, is a further case of bureaucracy run riot :

For example, spending on welfare benefits had increased by an average of 3 per cent a year, but back-office departmental spending by 7.5 per cent.

One sure way of fixing that troublesome ratio of course would be to raise the benefit levels, but I doubt that’s what the ANZ has in mind. In fact, the expanding ratio could have a simpler and quite positive explanation. Namely, that with the economy booming, the people who could be easily moved off the welfare rolls have already gone into work, leaving the hard core – who, almost by definition. will be more expensive to administer, Mainly because the physical and mental healthcare that such people need to become more work ready is likely to cost a packet.

In other words, the ratios identified are not so much consistent with bureaucratic featherbedding, but with a hard nosed ( and going by the welfare statistics, successful) programme to get more people into able bodied condition, and into work. Its called investing in long term outcomes. The private sector in New Zealand – and their bank economists – are notoriously bad at it.

Yeah, I know. I should have more faith. Given time, I’m sure National will be able to devise a neutron bomb that kills only bureaucrats, tax collectors and regulation-writers, thereby freeing the good and the uncomplaining for more productive toil on current rations. I’m not opposed to efficiency. In fact, just to throw in my own five cents on how government spending could be improved….in April, MFAT got a circa $600 million funding boost to be spread over the next few years.

Maybe, some of that money could be spent on providing credit card facilities at the NZ Embassy in Washington DC, and at the NZ Embassy in Berlin. That’s right. Neither of our flagship diplomatic posts in the heart of the United States and Europe have the ability to take payments for services rendered, with a credit card. You have to bring a bundle of cash in a sock, or a money order. Amazing.

So, instead of spending more money on cocktail parties, art collections, and the rest of the diplomatic circuit paraphernalia….could Winston Peters seek to ensure that MFAT equips our major embassies overseas with the same capacity to do business that we can reasonably expect to find down at the corner dairy? That would be cool. It could be the one thing that Cameron Bagrie and I might agree on.

Marketing Mr Key

As the Salon website indicates, the Rob Walker book Buying In – The Secret Dialogue Between What We Buy and Who We Are, has some interesting applications to the world of politics. Walker’s entry point was the marketing of the energy drink, Red Bull. To quote, from Laura Miller’s article :

“ Walker noted that instead of attempting to assert the brand’s identity to a mass market, the manufacturer pursued a strategy of what he calls “murketing,” sponsoring low-key events geared to distinct niches; ask any of these groups what Red Bull is and you’re likely to hear a different answer. By refusing to define Red Bull, advertisers allowed each slice of its overall market to interpret the beverage for itself. “

Instead of Red Bull, think in our country, about John Key. Similarly, National has not marketed its policies or its leader in a direct fashion to the voting public. Key has instead been encouraged to address his message to niche audiences who have carried the debate forwards, by adding spin according to their own aspirations. By ‘murketing ‘ Key in this value-added way rather than by marketing him, National has been able to turn the “ Who Is John Key, Really ?” question to its advantage, by allowing all kinds of different people to project onto him their own desires and blueprint for change. The blurrier the Key template the better. In this process, even the criticism helps by making Key’s identity the focal point, and crowding out policy.

This week Key’s doppleganger – I’m talking about David Cameron, the leader of the resurgent Conservatives in Britain – gave a speech in Glasgow that one can expect to hear from Key in coming months, albeit with a few local variations. Cameron’s basic message at Glasgow was one of responsibility and choice – that if bad things happen to you ( poverty, unemployment etc) there is a 90 % chance that this was because of choices made by you, and not due to the outcome of social forces acting upon you. As the Times put it :

Mr. Cameron pointedly called for an end of moral neutrality, asking whether it was right to talk of people being “at risk” of poverty, obesity or social exclusion. “It’s as if these things are purely external events like a plague or bad weather,” he said.
The message is old and has been unfashionable – pull up your bootstraps, get on your bike and woe betide anyone who steps out of line – but it is coming fast and furious from both ends of the political spectrum. There remain distinctions: The Tory message is more of “the feckless should sort out their own problems,” while Labour’s is a slightly more threatening “we will sort you out.”

Which is pretty much where the debate rests in New Zealand right now, as well. The election choice on welfare is likely to be one between benign neglect and benign authoritarianism. And if David Cameron is a very important role model for the centre right in New Zealand in this election, he has also (unwittingly, I’m sure ) been something of a role model for the centre left as well. Earlier this year you may recall, a group of Labour and Green MPs donned hoodies as a gesture of solidarity with youth and youth culture.

The catalyst for this idea was almost certainly David Cameron, and the famous ‘hug a hoodie’ speech he made in July 2006.

Back then, Cameron had this finely honed ‘compassionate conservative’ message to convey, one that was intended to outflank a Labour government that had proven itself impotent at fixing the law and order problems associated with poverty :

‘The hoodie is a response to a problem, not a problem in itself. We – the people in suits – often see hoodies as aggressive, the uniform of a rebel army of young gangsters.

‘But hoodies are more defensive than offensive. They’re a way to stay invisible in the street. In a dangerous environment the best thing to do is keep your head down, blend in. For some the hoodie represents all that’s wrong about youth culture in Britain today. For me, adult society’s response to the hoodie shows how far we are from finding the long-term answers to put things right.’

In a piece of karmic black comedy, the Cameron aide who crafted that speech got beaten up last week on a London street by some young guys who were wearing…. hoodies. Earlier this year, National MPs boycotted Hoodie Day at Parliament. Now that Cameron has reverted to the tough-love message he was preaching in Glasgow, we can expect to hear a whole lot more Cameron-speak out here, during the coming months.

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    1. 12 Responses to “Gordon Campbell on big, bad government spending”

    2. By davebrown on Jul 11, 2008 | Reply

      Looking for the backroom at the ANZ

      The real ‘backroom’ boys of the ANZ have allegedly managed to divert $500 million of savings of front line investors into the pockets of giant Dutch finance group ING, according to a recent article on the Stuff website. While National (and Labour) are preoccupied on unmasking waste in state spending, the financiers are laughing all the way to the bank.

      “Funds manager and insurance group ING New Zealand has increased its annual net profit 300% to $36 million, from the previous year, while thousands of investors still wait for more than $500m placed with ING to be unfrozen.”

      It seems these frontline savers have gone to the Ombudsman to try to find the backroom where their funds are frozen, without much success.

      Where is the SFO when we need it?

      http://www.stuff.co.nz/thepress/4605431a6430.html

    3. By Iain Parker on Jul 11, 2008 | Reply

      The Remunerations Authority, formerly Higher Salaries Commission, sets salaries of the State Service Sector. The CEO’s of Government departments get many times what the elected MP’s do. The reason given, the Government must pay sufficient enough to compete with the corporate sector. So when the corporate sector is at the height of a manipulated bubble, the State Service Sector will follow. A point often pushed by the very powerful State Sector Union. The effects of Capatalism and Socialism combine here to play into the hands of the central banks, to cause inflation, because every new dollar that comes into circulation, that is then deposited into a commercial bank is expanded 10x or more then loaned out at interest as “created credit” under current”Capital Adequacy Requirements” the debt based monetary system, the excess liquidity it creates, is at the core of inflation, the State Service Sector is being run at a “strategic deficit” by those who truly control the hiring and firing process to favour the cetral banks, more than it is the average punter in this and many other nations.
      Cheers
      Iain

    4. By Christopher on Jul 12, 2008 | Reply

      That was easy for you Mr Campbell; the innane ‘musings’ of a bank economist such as Mr Bagrie is the stuff of a high school project, let alone a ‘B’ grade undergraduate.

    5. By Ron on Jul 12, 2008 | Reply

      Under the Labour led government core public sector spending has soared for little gain in service levels – however the extra spending has enriched the property developers building the state sector palaces to house the inept hoards. Outside the core public sector it’s worse. Health spending has doubled under this administration yet outputs have barely moved. Game over for the socialists!

    6. By Ross on Jul 12, 2008 | Reply

      Regarding the comments about John Key, the international man of mystery – I agree that he and the National Party are deliberately holding back from presenting their vision to the NZ public. Its been a very successful strategy up to now. The trick will be when they introduce major policy like their level of tax cuts. One suspects they will release as little as possible or everything at once, so confusion will reign.

    7. By ross david on Jul 14, 2008 | Reply

      “Instead of Red Bull, think in our country, about John Key.”

      Actually, I’d much rather think about Helen Clark. She does, unlike Mr Key, control the levers of power. What is going to be the rate of return (if any) on its billion-dollar-plus “investment” in KiwiRail? Mr Key does not have access to the answer but Ms Clark, as PM, should. Why can’t she tell us what the answer is? Or is she happy to consign future generations of NZers to subsidise this purchase?

      Why can’t Ms Clark inform us when the election will be? And why can’t she tell us what Labour intends to do over the next three years? Labour has had the last 9 years to think of policy.I think voters should know what Labour will do if it retains power. I hope this will be the focus of Gordon Campbell’s next piece. It is long overdue.

    8. By M Juma on Jul 15, 2008 | Reply

      There are a lot of questions to be asked. I think the purchase of the railways is a sound one. Yes It will make a loss for a few years but after 50 years of under investment or no investment what the hell do you expect? Healthy profits from day one – I dont think so!

      And as for Nationals plan for the future, its a future i’d rather without. Call me cynical but I think one of the ONLY reasons why National is up in the poll is because people are tired of Labour, and not necessary want National to get in. Tax cuts? Yeah they help, of course. But I would rather see and end to rising fuel costs, rising food and energy costs thank you very much, not $16/week.

      I’ve said this before and i’ll say it again. Its not the money in the hand that counts in your purchasing power. Tax cuts arent necessarly going to to solve the problem. And as for the election date. I suspect Nov 1 or Nov 18. Oct 18 is too early for Helen, she would want to cling on to a few more weeks in power.

    9. By Jum on Jul 16, 2008 | Reply

      Having watched Key on Breakfast this morning (being given patsy questions by Greg) I see the mask of ‘nice’ slipping and the ‘smiling assassin’ finally emerging.

      I have never thought he was a stupid man.

      But I have always thought he was a dangerous man concerning the future of equality between business, workers and Government. His ambition for New Zealand will never include all New Zealanders that are needed to make our country great.

      His weapons are manipulated unemployment, reversal of anything good about the RMA in safeguarding our particular patch of Earth and the reversal of the Employment Contracts Act.

      Like foreign owned banks he is not the friend of New Zealand. Loyalty-wise he looks more to Merrill Lynching than to NZers.

      On Breakfast, this morning, I also saw the man behind Don Brash. Having read Brash’s printed sob session with the papers, I realise that the overall strategy for National for the 2005 election (with the Brethren et al) was devised and orchestrated by Key.

      A very clever man indeed. But a socially responsible, trustworthy and inclusive leader for New Zealand? I doubt it.

    10. By Carey on Jul 21, 2008 | Reply

      Left or Right??? The NZ voting public are stuck between a rock and a hard place. Although it isn’t just the politicians that we struggle to evaluate. In this instance I refer to the media being the rock and the hard place is reality.

      So which way are you going to vote Mr Campbell???

      I think as well as the need for politicians to state what they stand for, the same should be said of the media.

    11. By stuart munro on Sep 18, 2008 | Reply

      As you say, the report does little to break down the real causes of fiscal drag.

      But: “Namely, that with the economy booming, the people who could be easily moved off the welfare rolls have already gone into work,”

      This would be the same economy presently described as having been in a recession for the last three quarters. This ‘economic boom’ certainly never reached me or anyone else I know. The few of us who are still in NZ are grateful to have escaped the latest round of redundancy.This is not to say that following the advice of the ANZ would not deepen the recession, but let’s get real here, New Zealand is consistently underperforming, and it is substantially because of an illconsidered and thoroughly unrewarding passion for US inspired free market monetarism.
      But it wasn’t free market monetarism that made the US wealthy in the first place, and in an economy as small as NZ’s, the Goodbye Porkpie strategy, selling bits off, only prolongs the decline.

    12. By dan on Nov 1, 2008 | Reply

      John Key worked for the Federal Reserve. Anyone who votes for him is ignorant of how the world works or a greedy capitalist.

    13. By Ms M on Nov 3, 2008 | Reply

      Dan, when Key was a member of the New York Federal Reserve’s Foreign Exchange Committee in 2000, the committee supported the Commodity Futures Modernization Act of 2000, which when passed, barred the regulation of the OTC (Over The Counter) swap/derivatives market.

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