IN OPEN SEAS: Part II: Launched (1970-1986)

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Brian Easton (Journalist) Interviews Brian Easton (Economist)

Part I is IN OPEN SEAS: PART I: On the Seashore: (1943-1970) This was going to be published as a companion piece in Asymmetric Information but there have been no issues since August 2021

From Sussex University to Canterbury University?

It was very different economics department in 1970 from Sussex or from the one I had left seven years earlier, having shifted towards the mathematical economics paradigm. The jewel was Leslie Young, who had a terrific ability to identify the assumption – the equation – which gave the interesting outcome in a model. In most economics papers the writers have not got the foggiest idea of why they are getting their results. Tony Rayner headed econometrics where I did most of my teaching; the operations analysis group under Hans Dallenbach was also invaluable.

No non-mathematical economics?

There were residual appointments before HOD Bert Brownlie, who was appointed in 1965 after I left. I particularly valued Wolf Rosenberg, who was thoroughly trained in the 1940s but who also had that Central European gymnasium (high school) training. (One of his classmates was Albert Hirschman.) We had long conversations in which I would explain recent developments in economics. Wolfie, ever the gentleman, would patiently probe. Sometimes it would be the other way around with him presenting a traditional economics perspective. (We might disagree on ideological issues, although it was from Wolfie I really became conscious of the importance of full employment.) The dialogue was extremely valuable; if you cannot explain your economics to an intelligent, educated, informed person then you have not understood it yourself. (Later I would have similar discussions with Bryan Philpott and Jas McKenzie, although there was less divergence in our paradigms.)

What research did you do at Canterbury?

Lots. It was centred on distributional economics. When I got back I realised that it was a huge area waiting to be opened up. It proved much bigger than I expected, not only for ranging from welfare economics to statistics. I found myself having to use the standard tools from macroeconomics, growth economics and microeconomics. It was not easy. Where else in economics do you regularly meet bimodal and trimodal asymmetric distributions?

            Distributional economics offers a distinctive perspective on the economy as a whole. The standard economics approach is to assume distributional change does not matter. If it seems relevant – say, in housing analysis – the conventional wisdom about distributive matters is ad hoc without integrating the analysis.

            One eventual publication was Income Distribution in New Zealand, which brought together all the available data. I started off the research program with the conventional assumption that the income distribution was getting more unequal (there was much less data on wealth). It comes from a nineteenth-century vision that things are always getting worse under capitalism – a common conventional view today. But the data contradicted the assumption. Up to the early 1980s, the post-war income distribution was getting more equal on almost all measures. So I had to give a theoretical account of what had happened rather than just report the inequality change. (Chapter 50 of Not in Narrow Seas describes what has happened since.)

            The income distribution affects the political economy – the point of David Ricardo’s analysis. Very often the distributional impact of a policy change far exceeds the output change. The study of distributional issues opens one up to a holistic account of society and a more nuanced account of policy.

While you were at Canterbury you became the Listener economic columnist. How did that come about?

The first columnist was Conrad Blyth but he went on sabbatical to the OECD. I think they might have chosen me because I had submitted the occasional article and I was writing regularly in the New Zealand Monthly Review. I was also doing a lot of public interviews; broadcasting was much more decentralised in those days, and contributions from Christchurch were valued.

People say the columns (usually) read well. How come?

I don’t really know. It must be partly because I read omnivorously. Practice is important. I once took an economics assignment I had written to my tutor, Alan Danks, who said that I had got the economics broadly right but it was badly written. He added – you would not dare say this today – ‘Writing is a bit like making love; nobody can teach you, you learn with practice.’

            I find it hard to write without a clear notion of my audience. That is a bit different from the lecturer who has a captive audience who bloody well have to take notes.

            While I was at the Institute I tried having a guest contributor for every second column. It was not a success. Typically he or she could not meet the length requirement, did not meet the deadline and could not write for the Listener audience.

Why did you give up after writing columns for 37 years?

I was sacked.

Why?

The editor never told me. Today’s Listener is very different from the one I started writing for.

You’ve kept writing columns?

I write a longer column weekly for the Pundit website. Partly to clarify issues for myself, but also because a number of economists who valued the Listener column encouraged me to keep on.

            The columns I write mediate between the economics profession and the public, keeping them in touch with the informed debate. Sure, they are my views but usually they get checked out by other informed people including, sometimes, by those in government departments. Sometimes economists who have been in the heat of a policy battle have thanked me for a column even when I have criticised the resulting policy.

            There is a naive tendency for outsiders disagreeing with a policy to assume economists on the inside have failed in their analysis. Sure, they make mistakes but in my experience the cadres in the top departments are more competent than their university training – a consequence of the intense debates in which they participate. But announced policy does not always follow expert advice.

            Because economics is a discipline, an outside economist can often make a reasonable stab at the internal policy debate. I always assume on contentious policy issues that judgement is split 60/40 but you can’t predict which way. I try to get this across in what I write for the public. Perhaps I have been the insiders’ outsider, although readers might think I was the outsiders’ insider.

            Much of the business commentariat is vigorous and opinionated, but frequently uninformed in the best Mencken tradition – neat, plausible, and wrong. Listener features are often like that, One of the advantages of not writing for it any longer is that economists no longer complain to me about the poor-quality pseudo-economic features it occasionally publishes. (I was never consulted.)

Were your columns the reason that you were appointed to director of the NZIER in 1981?

Because of my research and my public contributions, I was already connecting with the Wellington economic community, including with some of the key appointment-board members. Bryan Philpott told me he wanted me move the Institute to the university, but for reasons that remain unclear, powerful figures in the economics department were not interested. Jas McKenzie hoped I would help balance the neoliberals in Treasury. Later I was told they were very opposed to my appointment; I did not know this at the time.

How did you find the Institute?

I went there on a misunderstanding. When I had been a research assistant there in the 1960s, it had a good funding base arising from business members’ contributions having been built up for a couple of years before it began operating. That had gone and I found myself under unexpected funding pressures.

            My vision, reflecting similar institutions overseas, was that there would be substantial public funding which would enable independent research programs. In fact, the funding was increasingly tied to contracts, so that while the Institute could do projects it was difficult to bring them together in a coherent way. Those pressures increased as public funding was withdrawn. The NZIER you see today is a consulting firm, very different from Blyth’s vision.

So the NZIER failed to do much research while you were director?

To the contrary, I am proud of what we achieved, as said my outgoing address: The Exchange Rate Since 1981, Performance and Policy (NZIER Discussion Paper 30), which brought together the research program over my time. Some of the research we published remains significant. We had a terrific team, including Alan Bollard and two women, Carol Propper and Nancy Devlin, who became senior economics professors in Britain. Its research performance and output when I was there was probably the highest in its history, although some may argue that Blyth achieved more and I greatly admire its achievements in industrial economics under Alan Bollard.

Then why did you leave?

When my five-year term ended, I declined the offered renewal. The financial pressures were wearing me down. The main reason was that a director has stewardship responsibilities and since it was clear that I was not acceptable to key public sector stakeholders, the steward stepped down.

            I had written a Listener column discussing economic interventions. It rejected Muldoon’s approach but went on to discuss when intervention made sense. A Treasury official told a friend that because of the column, the NZIER would get no general funding from Treasury. Not long after, we were cut out from a major contract despite the Minister of Finance directing we be involved. This happened before Labour took over in July 1984.

            Sometime after it did, the Reserve Bank advised us that it would end their base funding which gave us some research discretion. They made the decision while I was away and there was no consultation. After the Rogernome who led the charge departed, the RBNZ Governor apologised for the decision but said it could not be reversed. Another senior Bank economist told me that he had gone through the Bank’s papers (which I have never seen) and was appalled by what was going on.

            I hoped that when I left, the Treasury and the Bank would take a more benign approach to the NZIER and return to untagged funding, so avoiding transformation from research institute to consulting firm. They didn’t. That was one reason my immediate successor, David Mayes, familiar with the British approach, left after a few months. His successor, Alan Bollard, made a good attempt to hold the ship together but after he left, the NZIER ended up as a consultancy.

Were you not publicly criticising the Rogernomes’ policies at the time?

Not strongly, for the reason that they seemed to know something I did not. Otherwise the model which underlay their policies was incomplete. (I called it the ‘missing equation’.) I was reading the neoliberal economics literature widely, trying to identify what covered the lacunae. (I may well have read more than just about anyone else.) It would have been quite improper for me to have come out with a swingeing criticism of the Rogernomics model before I was certain the model was unsatisfactory.

            I made some cautious comments saying that there were alternatives, careful not to compromise the NZIER. But the Rogernomes required a total commitment and took no prisoners. In any case, I was persona non grata from the beginning.

            For balance, I add that they would probably argue that they saw no place in their ideal world for a research institute independent of consultancy income.

Did you ever find the ‘missing equation’?

What I concluded was that the Rogernomic model was incomplete. It assumed the New Zealand economy was very like the American economy, failing to appreciate the differences. For instance, America is the issuer of the international currency; the New Zealand dollar has no such standing. It was a very colonial – imitative – mind-set.

Weren’t there ideological differences too?

Oh yes. I try to be explicit about my ideology when I am writing. (Some appear to suspect me of a secret agenda, but I am wysiwyg.) My view is probably near the centre of traditional New Zealand thinking. But I won’t let ideology override my technical thinking.

            After I left the Institute there were two major points to be made: Rogernomics was technically deficient and it reflected a different ideological current through New Zealand’s history. I made the points.

The final part of this interview is IN OPEN SEAS: PART III: Paddling (1986- )

Presentation for New Zealand Productivity Commission Launch of Inquiry on Economic Resilience

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Thursday 24 November The Commission’s report on the seminar is here. It includes the my overheads which accompanied the presentation.

Introduction

I have been commissioned to prepare a report for the New Zealand Productivity Commission’s inquiry into economic resilience. The purpose of the report is threefold:

1.         to describe how New Zealand has attempted to improve economic resilience over its economic history,

2.         to outline how a sectoral and/or industry perspective might provide insights about the growth process, policy choices or path dependence, and

3.         to outline key learnings from the past that can be applied in future policy.

The report is only part drafted. This presentation describes the work so far with particular emphasis on its learnings.

The presentation is structured as follows:

1. Preliminary thoughts

2. Economic resilience to earthquakes and other natural disasters.

3. The Great Depression and the Second World War

4. Business Cycles

5. The 1966 Wool Price Collapse

6. Oil Price Shocks

7. Financial shocks

8. Economic resilience to pandemics.

9. Conclusions

The topic order is roughly chronological, but similar events from different eras may be gathered together.

1. Preliminary Thoughts

Thus far I have found no satisfactory definition of economic resilience. Among those available are:

“Macroeconomic resilience has two components: instantaneous resilience, which is the ability to limit the magnitude of immediate production losses for a given amount of asset losses, and dynamic resilience, which is the ability to reconstruct and recover.” (World Bank)

“Economic resilience becomes inclusive of three primary attributes: the ability to recover quickly from a shock, the ability to withstand a shock, and the ability to avoid the shock all together.” (Economic Development Association)

“Economic resilience is the ability of a local economy to retain function, employment and prosperity in the face of the perturbation caused by the shock of the loss of a particular type of local industry or employer.” (Simple English Wikipedia)

Their essence is that economies experience (unexpected and external) shocks to which they adapt or otherwise, and that policy can improve the ability to adapt.

There are many such shocks. For instance, approximately 14-15,000 earthquakes occur in and around New Zealand each year. Most of those earthquakes are too small to be noticed, but between 150 and 200 (up to four a week) are large enough to be felt. With a few exceptions – the big ones – the economy responds reasonably well. We don’t measure the number of other shocks but almost certainly they are as numerous, and generally the economy copes.

Rather than imposing a definition on the Productivity Commission, my research strategy has been to write a narrative about the significant shocks to the New Zealand economy over the last, roughly, century focusing on how the economy adapted and policy responded.

2. Economic Resilience to Earthquakes and Other Natural Disasters. 

Since the beginnings of European settlement there have been four large substantial earthquakes with nationwide impacts

            – the 1855 Wairarapa Earthquake (magnitude 8.2);

            – 1931 Napier Earthquakes (7.4, 7.3);

            – 2010-1 Canterbury Earthquakes (7.0, 6.1, 5.9, 6.0);

            – 2016 Culverden/Kaikoura Earthquake (7.8).

There have been no other natural disasters (slips, tsunamis and volcanoes) of similar impacts, although the 233CE Taupo eruption had an enormous impact on much of the North Island which affected the New Zealand economy six centuries later.

Currently the report summarises the policy resilience measures for Earthquakes and Other Natural Disasters as follows:

            – encouraging and regulating for more resilient structures;

            – redundancy in the connectivity systems;

            – insurance;

            – research;

            – public education.

It observes that policy responses can overreact.

3. The Great Depression and the Second World War

This section groups together three separate major shocks because they had intertwined policy responses:

            – The Great Depression;

            – The Second World War;

            – The Postwar Dollar Crisis.

The learnings from the review were

            – diversification of export destinations reduces the impact of a shock from an individual country.

            – diversification of export products reduces the impact of a shock to an individual product.

            – home supply displacing foreign supply – import substitution – is an alternative to external diversification (as well as a means of job creation).

            – stock management can be important.

(Note: little attention was given in the period to diversification of import sources.)

The full report adds a number of cautions and caveats to these learnings.

4. Business Cycles

Most of New Zealand’s business cycles are responses to external price shocks. Typically they are highly damped and one is aware of only one cycle per shock.

The learnings from the business cycle experience are that New Zealand has moved from responding rapidly to external macroeconomic shocks – ‘minibudgets’, ‘fancy footwork’ and ‘fine tuning’ – to a more cautious approach of ‘steady does it’ and ‘touching the tiller’. This partly reflects a change of attitude but it also has a recognition that implementation lags reduce the effectiveness of countercyclical interventions. More commonly, more is left to the economy adjusting through less intervened markets at the microeconomic level and automatic countercyclical responses at the macroeconomic level.

5. The 1966 Wool Price Collapse

I am still working on this section and the next. The wool price collapse was dramatic and arguably the biggest single shock that the New Zealand economy experienced since the arrival of Europeans. Unlike the usual external price shock which was temporary – there may have been a long-term secular change in the relative price level – the wool price collapse was structural (largely permanent).

The (currently tentative) learnings are combined with those in the next section which deals with the oil price shocks.

6. Oil Price Shocks

This section is still being drafted. It deals with two issues: the price shocks themselves and some supply crises which occurred during the resulting turbulence. A key issue is why did New Zealand handle the oil price shocks reasonably well and the wool price collapse badly.

(After the presentation I was asked where Britain joining the European Community in 1973 fitted in. I explained that New Zealand had expected Brentrance and had been preparing for it over the preceiding decade; it was not a shock.)

7. Financial Shocks

To be addressed.

8. Economic Resilience to Pandemics

To be addressed.

9. Conclusions

This is work in progress. At this stage I don’t see any overall conclusions which surprise me. The general ones might be:

            – The economy is subject to ongoing unexpected and external shocks.

            – Generally, the standard market responses deal well with small ones.

            – Institutional design can matter. Quality design is not easy. There is a danger of overreacting.

            – There is a need to maintain a capacity to think through the implications of new substantial shocks; that requires a research program which we have not always had.

The Travails of Big Jim

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Anderton: His Life and Times, by David Grant. (Te Herenga Waka Press)

Published in READINGROOM Book of the Week: Oh, Jim. On Jim Anderton, the best PM we never had (October 27 2022).

Despite the country being dominated by dreary politicians, two of the most charismatic of the last fifty years did not quite make it. David Grant describes the trajectory of Jim Anderton (1938-2018) who, despite the promise he showed in the 1970s, only became deputy prime minister and that for just three years from 1999 to 2002.

Winston Peters, from a rival political background but also who one left his home party, became DPM for almost five years. Throughout Grant’s book is the question why such talented politicians do not do better. (Peter Dunn is another who left his party and tried to start his own – repeatedly. He is likely to be remembered only for holding his seat for 33 years. Anderton did 24 years; Peters 36 years and he’s still counting. Tariana Turia also left Labour to form the Māori Party; her other memorable achievement was to found Whanau Ora. She spent 18 years in Parliament.)

Anderton, like Peters, grew up in deprived family circumstances (they also both went to teachers’ college and loved rugby). He proved to be a talented organiser, not only as an outstanding president of the Labour Party (1979-1984) but earlier in the Catholic Youth Movement, having converted to Catholicism in his mid-teens. It was there he honed his fierce commitment to social justice. (He did not adopt all Catholic tenets being pro-abortion and pro-divorce.)

Grant writes of him

“While being enmeshed in leftish ideology, and emotional with it since he was a very young man, he was also level-headed and pragmatic. He was never a cloth-cap socialist, as his right wing detractors, but a businessman with a social conscience. [I interpolate here, his father who adopted him was a storeman.] His early political inspiration came from Vatican II and Pope John XXIII’s belief in social justice, rather than from ideological collectivism. Politically, the most accurate description of him was as a social democrat.”

Anderton’s organising ability was a major contribution to Labour’s huge electoral success in 1984, and he also got himself elected to the red-ribbon Sydenham (later Wigram) seat in Christchurch. But he did not appreciate that whatever one’s record outside Parliament, a newbie is at the bottom of the pecking order in an institution notorious for its strange rituals, hierarchies and culture (something Gaurav Sharma has yet to learn). His lowly status was nicely symbolised by his office being located far from the Beehive and from the debating chamber in a wing called ‘Siberia’.

Anderton was faced with two challenges. First, while every MP may have a prime minister’s baton in his backpack, Jim’s baton rather stuck out. Second, already as party president he had clashed over economic policy with the ‘Rogernomes’ with their neoliberal policies, so very different from those of Labour traditions.

The clique of Rogernomes – David Lange, Geoffrey Palmer, Roger Douglas, Richard Prebble and David Caygill – commanded the heights of the new government. What were the rest of the caucus to do?

Some acquiesced. Anderton was greatly depressed that so many of those who, as party president, he had selected in 1981 and 1984, so easily surrendered. Some bided their time, perhaps working on non-economic policy areas where the Fourth Labour Government retains a creditable record. Most notable among the group were Helen Clark and Michael Cullen. Anderton chose to continue the public confrontation of his presidential years; trying to run Moscow from Siberia.

Could such an approach succeed? At this point a key character defect became evident. Anderton’s leadership style was to be out front, expecting the troops to follow. He made no attempt to build a coalition in caucus, merely assuming that because he was right, others would accept his leadership.

Because there was no security on a back door of Parliament Buildings, I saw a lot of Jim at this time, trying to explain to him that the traditional Labour economics which the party supported no longer worked; that Labour needed a modernising social democratic economics (a decade later Cullen would deliver one). A major weakness of the anti-Rogernomics coalition was that while they were excellent critics of Rogernomics, they had no modernising alternative.

I was also seeing a group of nine Labour MPs most of whom had been first elected in 1987, and who had been selected for their anti-Rogernomic ideals. Like Anderton in 1984 (and Sharma in 2022), they were struggling to come to terms with Parliament’s alien culture, particularly how to use it to oppose Rogernomics and its privatisation policies.

The obvious synergy was for Anderton and the nine to work together and absorb other dissidents. The group was reluctant to be led by Anderton; I recall raising this with Sonja Davies and her reply ‘Oh, Jim …’, as if that said enough. Anderton’s strategy could have been to offer to assist them without imposing upon them, but at the time he was as incapable of building a coalition as was Lange (who, by now deeply concerned about the direction of Rogernomics, had ignored the group’s offers to help).

Anderton became so isolated that he left the Labour caucus and formed NewLabour. Allow me the fantasy that had he stayed and built a coalition in caucus, Labour might have won the 1993 election with Anderton at number three or four in cabinet.

Instead, Anderton says that he never left Labour, the party left him. Other dissenters from Rogernomics joined him, including David Grant. Many were as strong-minded as he was, all saw themselves as more loyal to Labour’s traditions than the Rogernomes, even if there was little consensus as to what those traditions were. But Anderton’s NewLabour won only 5 percent of the vote in the 1990 general election and his Sydenham seat; he was a very conscientious local MP – in his younger days he had been a social worker.

Anderton had to broaden the coalition; this led to the formation of the Alliance Party which included the Democratic (Social Credit) Party, the Greens, the Liberal Party and Mana Motuhake. (Brian Tamaki take notice; alliance creation is damned difficult.) It won 18 percent of the vote but only two seats in the last Frontrunner election in 1993; in 1996 it won only 10 percent of the vote but 13 seats in the first MMP election. In 1997 the Greens left the coalition.

Every political party is seething with factions reflecting different ideologies, strategies and ambitions. One tension is between those who will compromise principles in order to get things done and those who would cleave to principles even at the price of never being in power. (Recently we saw similar ructions among the Greens, but the tension is found in all the parties.) The Alliance, combining five disparate parties and some very strong-minded people who were principled, ambitious or both, was even more chaotic. Anderton became more pragmatic about pursuing his principles in the long run, learning the art of coalition-building which would have been so valuable to him when in the Labour caucus. Even so, Grant reports that there were still occasions in which he led out front.

So in 1999 the Alliance was in a coalition with the Clark-led Labour Party to form a government with Anderton as deputy prime minister. His performance was very different from Sonja’s ‘Oh, Jim’. The enmities with Clark and Cullen from the Rogernomics period were forgotten as they reversed many of the neoliberal policies and introduced progressive and more socially sensitive alternatives.

This was a more mature, more compromising, less personally ambitious Jim Anderton. Both a dreadful personal tragedy and overcoming some health problems seem to have mellowed him. Perhaps he knew it was his last chance. Certainly, he had learned from his Alliance experience a lot about compromising.

Even so, the Alliance fragmented in 2002 while in government. Superficially, it was about policy towards Afghanistan but Grant reports the divisions were deeper and more fundamental, including those of personality and ambition as well as of policy and principle. Only Anderton and one supporter (Matt Robson) survived the election.

Anderton proved an able minister; a good minister has to lead from the front. Grant records a long list of Anderton’s policy achievements. Even so, some are missing. Here was one of the two I was involved with.

Reviewing alcohol taxation for the Alcohol Advisory Council, I identified an anomaly in the excise tax system which meant that a bottle of light spirits (21-percent-proof flavoured industrial alcohol) cost only an hour’s wages. A bottle was lethal enough for its drinker to kill themself; while I worked on the report, two young men did. Shortly after the results were submitted to the government, Anderton, as the minister with responsibility for drugs and alcohol, abolished the anomaly. Light spirits disappeared off the shelves. The head of ALAC, smiling, told me that was the fastest policy turn around they had ever experienced.

That was the Anderton the public servants who worked with him – the most informed judges of ministers – told me about. He would quickly grasp a policy issue, intelligently implementing it with political acumen; their complaint was that he did talk for far too long. Same thing when he became Minister of Agriculture and Forestry. He was a townie, but he is still remembered by the sector as one of the best ministers it had.

Grant’s final chapter asks who Jim Anderton was, concluding that he

… was a unique figure in New Zealand’s political history. His career traversed many changes, more than he was able to deal with. One could argue that he lost more than he won in terms of the highest political offices both nationally and locally. Yet after the capture of the Labour Party by an alien ideology, as he saw it, he bravely set out with like minds to preserve the doctrinal bastions on which the Labour Party has been founded and give the left a presence in an unforgiving climate. … While his most tangible success was the founding of Kiwbank, his legacy as a fighting humanitarian concerned primarily about the poor, marginalised and mentally ill will endure just as long.

The book – the third of Grant’s biographies of the ‘left’, following those on Norman Kirk and Ken Douglas – is not just about Jim Anderton but an account of the turmoil of the left. It is also a wider portrayal of the difficulties of operating in a party; the Green upheavals are but the most recent example. I can hear Jim saying, ‘I know all about it, son.’

What does the Budget mean for the health sector in the long term?

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Kaitiaki Nursing New Zealand May 25, 2022

It was surprising that Finance Minister Grant Robertson, in a pre-Budget speech, said that he thought the current health system was “incredibly inefficient”.

Of course there are some inefficiencies in health-care delivery, just as there are in private enterprise: mistakes happen, some treatments could have been managed better with hindsight, some are unnecessary (although they are more likely to happen when the patient pays the bill). But to say that health professionals are “incredibly” inefficient is not just rhetoric but insulting to them.

In the next sentence, the minister explains: ‘Over the past two decades, DHBs have learned to run annual deficit after annual deficit because they know the annual Budget process allows them to do this.’

What he is saying is that the “incredible inefficiency” is not “inefficient” at all (not in the normal meaning of the word anyway), but that the health system is underfunded. It does its best to meet the population’s health needs, but that requires it to spend more than the politicians allocate to it. So the DHBs have run deficits. Of course, the Minister of Finance cannot say that because the problem sheets home to politicians. (I know, I know — he is struggling with a myriad of financing demands but it would be better to explain the real problem, than try to shift the blame on to others.)

Uncomfortably, the analysis echoes that of of 30 years ago under the Richardson-Upton redisorganisation* of the health system. (In fairness, Grant Robertson was just 20 then, and such debates probably passed him by. Even so, it reminds us that the political system can be like the Bourbons, who forgot nothing and learned nothing.)

The 1990s upheaval was based on the premise that the public health system was highly (‘incredibly’?) inefficient, which could be remedied by imposing over it a new set of managers who might know nothing about health (one confused intensive care units with post-operative care units). It was claimed that their managerial skills – in retrospect they often seemed badly lacking – would reap substantial productivity gains. The often quoted promise was an improvement of up to 25 per cent, a claim described later by the first Minister of Crown Health Enterprises as a nonsense. Even so, Ruth Richardson, the then Minister of Finance, cut health funding before the redisorganisation started. Consequently, New Zealanders died earlier than was medically necessary.

So it was with apprehension that those with memories approached the health provisions in this Budget. Apparently the Bourbons lived on and the current health system was to be redisorganised to make incredible efficiency gains (‘incredible’ in the sense of ‘not credible’).

In fact the Budget increased funding to the public health sector; but the increase is not as dramatic as the minister claimed. Excluding COVID-19 funding, the increase for next year (ending June 2023) is 9.0 per cent, a little higher than the increases of the preceding three years of 8.9 per cent, 8.2 per cent and 7.8 per cent. Part of the increases have been about increasing remuneration rates for staff, but the volume of services seems to have increased too. In contrast, under National the increases were largely just keeping up with population pressures and costs. Increases above that are to be welcomed – even 0.1 per cent is an extra $25 million a year (or, as the Government is wont to count, $100 million over four years).

Before discussing where some of this money is to be spent, we need to explore how the redisorganisation fits in, since the secondary care system is where the bulk of the money goes and where the increases are going.

The centralisation of secondary health care (hospitals) has been a trend for the last 80 years since the first Labour government took over responsibility for it in 1938. Health New Zealand (HNZ) is the latest stage. Although we are not exactly sure what that means, it does involve a different funding regime.

In the early 1980s, central government funding of the (then) hospital boards was switched from an ad hoc system based largely on historical patterns to a ‘population-based’ formula. Before then, the system had favoured southern New Zealand and relatively underfunded population-booming Auckland.

The latest version of the formula, which includes factors such as the age distribution and the degree of deprivation as well as population, was introduced in the early 2000s. It was better than what had gone before, but it hasn’t worked and the consequential financial discipline has steadily become more easily evaded.

Rather than refine the population-based formula, the task of allocating the funds is charged to HNZ who will, no doubt, use a formula but will make ad hoc adjustments for its deficiencies. We can only guess how this will be done, but one consequence of the new system is that the details are likely to be even more opaque to the public since all the appointments to the system are to be made by the centre. I shan’t be surprised if at first the smarter city and district councils, and eventually all of them, set up units to monitor whether their regions are getting a ‘fair’ share of the funding.

I shall be astonished if, overall, Health NZ operates in surplus. A public health system functions by suppressing demand (in a private one the ability to pay does the suppression). Meanwhile the professional ethics of health-care workers requires them to respond to need, despite any financial constraints.

The Budget forecasts have the non-COVID health spend largely stagnating after next year. However there is a provision for additional new operating expenditure across the entire public service ($5 billion next year, rising thereafter); you can be sure that a goodly chunk of it will go into health spending.

The Budget-associated document, Wellbeing Budget 2022: A Secure Future, itemises about 40 new health programs — for new treatment initiatives, new and extended services, for local developments, for ethnic needs and for administration. I focus here on the professional development one.

The late George Salmond was concerned about the development of the health labour force even before he became director general of health in the 1980s. It is a bit of a no-brainer really, given the years required to train health professionals and the extent of their migration. In principle, the Ministry of Business Industry and Employment has responsibility for labour market development, but the task has been neglected. I suspect there is a bit of neoliberalism here – the belief that the market will fix the supply problem by itself.

One hopes that Health NZ, the main employer of our health professionals, will set up its own health labour force unit, but that will take time. In the interim, the 2022 Budget has an initiative to provide funding for health workforce training and development. There are two components:

  • $37 million over four years to cover about 1500 more training places for primary care work, including nursing, physiotherapy, pharmacists and optical services and 1000 places over four years for additional workforce (i.e. about $3900 a place a year);
  • $39 million over four years for hauora Māori workforce development, to cover about 1000 workforce training places and 800 workforce places, targeted to increase Māori working in prioritised areas of most need (i.e. about $5400 a place a year).

To what extent this $76 million addresses the serious staffing shortages can be debated. Until we have workforce development assessment, we shall not know, nor will we really know much about the programmes to address them. Sadly, it is going to take time; patients are going to suffer, as will the stressed staff serving them.

(* I avoid the term ‘reform’ because it suggests things will improve. The term ‘redisorganisation’ was proposed by the eminent health economist, Alan Maynard, after quoting Petronius Arbiter, from the novel Satyricon (about 60CE): ‘I was to learn later in life that we tend to meet any new situation by reorganizing, and what a wonderful method it can be for creating the illusion of progress while actually producing confusion, inefficiency, and demoralization.’)

David Ian Pool: The Father of Aotearoa New Zealand Demography: (22 November 1936 – 28 April 2022)

This entry was posted in Political Economy & History, Portraits on by .

Waikato Times May 21 2022

The University of Waikato made an inspired choice when it appointed Ian Pool to a chair in sociology in 1978. Strictly, he was not a sociologist. His masters degree had been in geography at the Auckland University College; his 1964 PhD in Demography was at the Australian National University under its Professor of Demography, New Zealander Mick Borrie. (While in Auckland he had worked with Bob Chapman, providing the quantitative input into the project on the evolving political-social structure of New Zealand.)

The decision meant that Waikato University is New Zealand’s premier academic centre for population studies. The Population Studies Centre which Ian founded evolved into the National Institute of Demographic and Economic Analysis (NIDEA), now called Te Ngira: Institute for Population Research.

Last year the university celebrated its forty years as a centre of demographic teaching and research with Ian rightly at the centre of a conference attended by a galaxy of his students, many of whom are now senior members of the demography profession throughout the world.

After Canberra, Ian went to work in at universities in Ghana, Canada and the United States, and also for a number of international agencies, with whom he continued to work throughout his professional life. He became an expert on population and demography especially in Africa – he was fluent in French. In his later years he extended such studies to other developing countries and was an invited lecturer at universities in Asia, Australia, Britain, Europe, Asia and North America.

However, his greatest scholarly contribution was to New Zealand population studies. It began with his doctorate which was the first significant analysis of Māori population changes using contemporary demographic techniques. The thesis was subsequently published, and then revised and updated as Te Iwi Māori: A New Zealand Population Past, Present and Future in 1991. This analysis of the Māori population was extended in Colonisation and Development in New Zealand between 1769 and 1900: the Seeds of Rangiatea.

His research on all aspects of New Zealand population was informed by his overseas experience but was astutely adapted to local circumstances. After all, the population experiences of Māori and non-Māori (in all their diversities) are quite different while sharing universal elements. His work placed New Zealand in a broader international context, for there was always an international dimension in his work. In the mid-1990s, Ian led a team of colleagues and students in New Zealand’s first major survey of fertility and reproductive behaviour, which was a part of an international series of surveys in ‘European’ countries. The result was The New Zealand Family from 1840: A Demographic History, written with his colleague Arunachalam Dharmalingam and with his wife Janet Sceats, also a demographer. They have two children, Felicity and Jonathan, and four mokupana.

Demography is a foundational part of the social sciences interacting with its other disciplines. It is no surprise that Ian did too, notably with the health sector, often in joint work with Janet. There is a lot of sociology in The New Zealand Family from 1840. Population has an important influence on the economy; Ian and his research played a crucial role in this writer’s economic history, Not in Narrow Seas. His legacy includes a manuscript completed just before his death which tells the story of the peopling and development of Aotearoa New Zealand from 1769 to 2020. It is being prepared for publication by his wife and former colleagues.

Over the years he accumulated numerous awards and accolades, including being elected as a Fellow of the New Zealand Royal Society in 1994, receiving a James Cook Fellowship from the RSNZ in 2004 and its Te Rangi Hiroa medal in 2009. He was made a Life Member of the Population Association of New Zealand in 2007 and a 2011 special issue of the New Zealand Population Review was a festschrift to him. After formally retiring as Professor of Demography in 2009, he was made an Emeritus Professor of the University of Waikato; he continued to work after retirement as long as his health would let him. In 2013 he was made a Companion of the New Zealand Order of Merit (CNZM) for services to demography. Ian participated vigorously in public life, especially on population-related subjects.

Māori, with whom he worked, liken the death of a great person to the falling of a totara. The bush below, which the tree has nurtured, grateful and inspired by the rangatira, is left uncovered. That well summarises the contribution of Ian Pool, the Father of Aotearoa New Zealand Demography.

Dick Bedford, Elizabeth Caffin, Len Cook, Geoff Hayes, Natalie Jackson, Tahu Kukutai and Janet Sceats assisted with the preparation of this obituary.

McCarthy, Woodhouse and The Proposed Redundancy Social Insurance Scheme

This entry was posted in Political Economy & History, Social Policy on by .

This is adapted from a section of book, ‘In Open Seas’, which I am writing. I have published this extract because there has been some ahistoric claims about the characteristics of New Zealand’s public income support system.

The 1972 Royal Commission on Social Security (the ‘McCarthy Commission’) pointed out that there was a case for extending the accident compensation scheme to those with sickness. Accident compensation had been proposed by the 1966 Royal Commission on Accident Compensation (the ‘Woodhouse Commission’) and was being implemented just as the McCarthy Commission on social security was published. As a result, New Zealand has two public income-support systems which do not interface well.

They come from two different traditions. The ‘Woodhouse’ system goes back to Bismarck who introduced to Germany in 1889 an earnings-related income-support scheme for when there was need, based on the individual’s contributions. It was introduced into New Zealand in the 1901 Workers Compensation Act and is the principle underpinning Accident Compensation and Kiwi Saver.

The second tradition, the ‘McCarthy’ system, is a non-contributor entitlement funded from general taxation which is universal for those who belong to the appropriate category of need. It began in New Zealand in 1898 with the Old Age Pension. There have been various extensions, most notably by the 1938 Social Security Act. (It applies also, although imperfectly, elsewhere, most notably in public education and health.)

(There is a third part of our public system which provides grudging relief to the ‘deserving’ poor who are not covered by the first two. This goes back to the English Poor Laws of the late sixteenth century. Our nineteenth-century British ancestors came out here to escape them but they followed. The McCarthy system was developed to avoid such ‘charitable aid’.)

The two systems do not always interface well. For instance, an injury from an accident results in compensation from ACC (Woodhouse); the same injury from sickness gets considerably less support from social security (McCarthy). However, the interface between Kiwisaver (Woodhouse) and New Zealand Superannuation (McCarthy) does better with the first sitting on top of the second. This might be called the ‘(Henry) Lang’ solution because the Secretary of the Treasury proposed it for retirement support in 1974, synthesising the two approaches.

Redundancy and unemployment support is even more shambolic. The worker might be entitled to the unemployment benefit (McCarthy) and there may be some earnings-related lump sum payments from the employer, which is a kind of Woodhouse scheme.

With the exception of Kiwisaver, the two schemes have co-existed for half a century virtually unchanged – the clumsy interface unaddressed.

It is now being partially addressed, with the government committed to introducing a Social Unemployment Insurance scheme. It is likely to have two main components. First, it would provide income protection for those who become redundant; second, it could provide a constructive path for redeployment.

Essentially unemployment insurance is income smoothing so that the redundant do not suffer an immediate and possibly catastrophic income collapse. Many workers have fixed commitments – like housing outlays – that cannot be changed the day after they are laid off. As far as a worker is concerned, the income smoothing from the new scheme will give her or him time to find a new job and to adjust to new circumstances. Unemployment insurance was not proposed by the McCarthy Commission which did not conceive there would be significant unemployment. Because it supported the introduction of a Woodhouse (contributory earnings-related scheme for short-term illness, there can be little doubt that had it thought unemployment a problem it would have also supported a contributory earnings-related unemployment (insurance) scheme.

However, there is a critical difference between whatever is proposed for the redundant and ACC, which pays a long-term benefit where the injury is permanent. Unemployment from redundancy is short term, so the coverage is short term – perhaps for six months.

Thus the proposed redundancy scheme is an element of the long standing Woodhouse approach which goes back to 1901 in New Zealand and earlier in Europe. Whether it will interface well with the existing McCarthy and private arrangements is yet to be seen. It is well to remember how badly the interface can be by the example of the superannuation scheme the Treasury promoted in 1998.

(I am attracted to a Lang-type scheme – like our retirement provision– in which there would be a base-tier entitlement of flat-rate social security benefit near the current rate of 30 percent of the median wage, say, and a contribution-based second tier which would be equal to 50 percent of recent earnings. Somebody on the median wage would get 80 percent of their earnings up to a maximum cap, just as they do for ACC.)

I have publicly published more on the above at

            ‘A Proposal for an Earnings-Related Redundancy Insurance Protection’

and

            ‘Unemployment Insurance’.

Cancer of the Larynx: One Patient’s Journey

This entry was posted in Health on by .

Prologue

This arises from an invitation by Head and Neck Cancer Support Aotearoa to set down my recent experiences. A writer always asks, who am I writing for? It would be pointless to write for those who have already had treatment; most will have had far more rugged experiences than I had. So I am writing for those who are beginning the journey and their support groups. I hope you are as lucky as I have been. If you are not, I hope this helps you prepare for some of the waypoints on your journey. Best of luck.

It also occurred to me that I might be helpful for people who are training to work in the area. Since the age of twelve my ambition has been to be a teacher. I took great pleasure in signing consents that trainees could attend my treatments and welcoming them when I met them. Even though I was the subject, I felt I was still contributing to the education effort.

There is a third group I am writing for. It is to say thankyou to those who were involved in my treatment journey. There would have been over fifty professionals involved, plus a network of friends who provided additional support. I didn’t catch all your names so I wont name anyone. Because I usually met you wearing masks, I am unlikely to recognise you on the street. Forgive me for not saying thankyou in person then.

Beginnings

It was probably around March 2021 that my voice began to deteriorate, becoming more croaky. I thought it was nodules and my main worry was that my friends had increasing difficulty hearing me; they make a significant contribution to the profitability of the hearing-aids industry.

When I had my annual checkup with my GP in July, he was more alert to other possibilities, and immediately recommended my seeing an ENT specialist (at which point I learned they called themselves ‘otolaryngologists’ – gee whiz, I have enough trouble spelling ENT).

An important aside: I have a really good GP. He was with me all the way; I kept him informed electronically and he gave supportive advice. I was so lucky. The family pharmacy of Team Easton also gave great support.

It turned out the local DHB (Capital Coast, but I call them ‘Wellington’) was understaffed in the ENT area so I had to go private for the consultation. However, I could not get a booking for four months – 16 November; I’ll come back to that date. (I have been told that a couple of the ENT specialists had recently retired.) My GP, much more concerned than I was, suggested that I go outside Wellington and identified a couple of centres with spare ENT capacity.

As it happened, I was visiting Nelson and booked in with one of their otolaryngologists. The consultation was Tuesday 3 August, just over a fortnight after seeing my GP. The investigation involved using an endoscope – a thin, flexible tube with a tiny camera and a light – which goes up a nostril and down into the throat and projects what it sees on a screen. (It was done in his office with a light local anaesthetic.) It identified a ‘papilloma’ on the larynx. He contacted Wellington hospital and recommended a biopsy as soon as possible. (For the uninitiated, as I was, a papilloma is a tumor – it was sometimes referred to as a ‘wart’ – and the larynx is the voicebox. I had to consult Dr Google quite a bit and I had a well-retired friend who had been an oncologist and still knows more than I ever shall.) A Wellington ENT registrar saw me on the Thursday (5 August). Much the same thing as in Nelson but with moving pictures on the screen.

The immediate response was that I was to have a biopsy under general anaesthetic on Monday 23 August – vroom, vroom. As it happened, the country went into lockdown over Covid Delta and the anaesthetic pre-assessment was done by phone on the Friday. The surgery was cancelled and then reinstated for Tuesday 24. Whew!

Surgery

I turned up at 8.30 on the Tuesday morning with the promise of being the first, to be followed by major surgery on someone else immediately after. The hospital suddenly decided we all had to be Covid tested and by the time that was done, the major surgery was under way so I spent the morning near naked in a side room reading a book. (My surgeon also seemed a bit surprised by the demand.)

(Covid forms a background to all the events I am reporting, but it is not necessary to detail it. I had the good fortune that measures dealing with it never got so intense that my support people could not come with me. They were great, particularly for going over things after to make sure my understandings were correct; I really should have taken more notes. The medical professionals seemed pleased that they were there.)

Then wheeled into the operating theatre. I don’t remember much except everyone wore masks and that the senior staff were distinguished by different kerchiefs covering their hair. I have never seen that in a TV show, but a jolly good idea.

I came out of the anaesthetic in the recovery room with a large Covid notice across from me which said ‘Be Kind’; hardly necessary for the staff were always that. I, of course, wanted to go home immediately, but they knew what they were doing and I waited around for a couple of hours; it took me a little time before I could concentrate enough to read. (Because I had been fasting since the previous evening, I was hungry and the hospital sandwiches even tasted all right.) Incidentally, all my things were next to me, and I learned that to pack them in future so what I really wanted – book and phone – were readily accessible.

Just before I was due to go, the surgeon popped her head around the curtain and asked me how it was. She said she removed a bit of the papilloma and it would go to a biopsy. She went on to say that she was a bit puzzled. I asked whether it was cancer – the first time I had articulated the possibility, even to myself. Her reply was a cancer would be very ‘unusual’. It was a good economical reply and I went home comfortable; ‘what, me worry?’ I don’t recall a major change in my voice after the biopsy.

I was to see the surgeon for a report back from the pathologists on the biopsy on Wednesday 7 September. At 8.30 the Tuesday morning before, I was rung and told I had to have an urgent full-body CAT scan (at a private hospital but paid for publicly).

Now I may be a bit of a medical naif but I knew a full body scan meant cancer and they were looking to see whether it had gone metastatic, that is into other parts of the body. Glug!

Fortunately, my GP sent me the scan report at 2.30 that afternoon and the good news was there was no evidence of metastasis, so I had only six hours to really worry. I was told later that the blood vessels which would have conveyed the cancer outriders are not very close to the larynx but, of course, had treatment been left they could have got into them and the rest of the body. Again, I was lucky.

That meant I would not need chemotherapy. I was so relieved, I did not think much about the cancer in situ and slept well that night. The following day, the Wednesday, I saw the surgeon.

She explained that I had a slow-growing carcinoma-sarcoma of the larynx, which was rare. In fact, she had never come across an instance in her career (and she was a very senior and experienced surgeon). I knew that meant she would have also looked up the international medical literature and found little; my subsequent Google search did not find much either. She then told me that a new surgeon had just arrived from England and she would consult him.

I had an MRI scan on Wednesday 15 September, but they did not find anything – good news!

The following day (16 September) I had a case conference with the two surgeons. I think the meeting was immediately after a regularly MDM (multi-disciplinary meeting) so it is likely my case had been discussed by a lot of doctors.

The second surgeon came from one of the few centres in England which had experience of my condition – it was a very rare one. (I saw somewhere it is one in ten million; does that mean I am only half a New Zealander?) My first surgeon explained that the new one had arrived so recently in New Zealand that, despite 20-odd years of experience, he was not yet New Zealand registered and would have to be ‘supervised’. So I had for the operation two senior surgeons, two anaesthetists and at least two registrars. I hope it was a good educational experience for some of them. I wouldn’t know, I was out to it.

Just before the actual surgery on the Tuesday 21 September (they were in a hurry, weren’t they?), the English surgeon talked to me about what was happening. I remember the surgeon reading the riot act; if things went wrong I could lose my entire voice box; we joked about Stephen Hawkins. He mentioned that he had talked to his mentor – the person who trained him – at the Royal Marsden in London, which is THE cancer centre of England. They were taking this all very seriously. (The anaesthetist also came into see me. Earlier I had had a blood test for him to check my innards; throughout the process there was regular assessing of my blood pressure, temperature and weight.)

Because it was a bigger operation, they required me to stay in recovery overnight; read another book.

I don’t know how much they took out, but I could hardly speak for a few days. I wrote down what I wanted to say, a sort of reverse of what happened to deaf Beethoven who people spoke to by writing. However, my conversation books will not be published; they are near incomprehensible. Fortunately my ability to speak began to return.

When they do this sort of operation, they take some samples from the margins of where they cut and the pathologists look to see that there is no cancer there. There was not. However, at the post-op review the English surgeon said a further biopsy had to be taken; he had warned me earlier. As best as I understand it, there was an ‘awkward corner’ they wanted to check. Apparently the cancer had not only got into the right side of the larynx but also into the ‘anterior commissure’ which ties the two sides together. I think the six-week delay was because they wanted the main operation to heal sufficiently.

The day-surgery, on 1 November, was much like the first biopsy (but this time the sole surgeon was my English one; his registration had come through). The pathology lab confirmed there was no evidence of any remaining cancer.

So all the surgery was over a fortnight before my initial, and now cancelled, booking to see the Wellington otolaryngologist on 16 November. Had we gone down this three-plus month slower road, the cancer may have got across to the left side of the larynx or into the blood stream. I’ll have more to say about this later.

Radiotherapy

However, there could be residual cancer smaller than the surgeon’s ‘knife’ – it is actually laser surgery these days – could locate. So I was shifted across to the care of a radiation oncologist. It was put to me that the surgeons pick up the rubbish and the radiation oncologists sweep the floor after them.

The basic idea is to pound any residual cancer cells to death with radiation. Because those cells are tiny, the radiation needs to have a very narrow bandwidth. That requires it to be high energy. A linear accelerator is used to get the radiation up to the required level. (The most famous accelerator is at the Large Hadron Collider near Geneva, which is very high energy because they are after very small particles.) Wellington Hospital has three (we did not see any Higgs bosons).

Apparently, the six weeks of therapeutic radiation exceeded the normal dose of radiation most people experience in a lifetime (providing they don’t get in the way of the Large Hadron Collider).

So off to see the radiation oncologist, who ordered six weeks of treatment – 28 sessions because it was across Christmas and two weekdays were public holidays. He also said that he had not met anything like this particular case before. I do like experts, like him and the two surgeons, who are so good they can be honest about the limitations of their knowledge. He also mentioned there was a possibility that the treatment could induce another cancer by upsetting a healthy cell. The chances of that were about 1 percent by the age of 100; I am 78; I said I would take the risk.

Before the radiotherapy I had to have a ‘mask’ made for me. The term is slightly misleading because it is a light plastic frame from the top of the head down to the shoulders with a network with plenty of holes for breathing and seeing. Its purpose is to hold the throat in exactly the same spot for each treatment. Radiotherapy is precision bombing, targeting the same very small area, near the Adam’s apple in my case, 28 times. (Chemotherapy is carpet bombing.) They gave me the mask as a souvenir when the treatment finished. It is mounted in my office.

The bombing only occurs for a short time. First, they check they have the target exactly right, rotate the gun to the right at about 2 o’clock for one dose, to the left at 10 o’clock for a second. I actually spent more time waiting my turn, observing others also waiting who were in much more dire straits than I was.

In fact it is all very routine except for the first session. They asked me what music I wanted to listen to. ‘Beethoven!’ But I found my beloved’s Sturm and Drang to strong and switched over to the sweet sunshine of Mozart. I’ll never hear him again without remembrance of the bombing runs.

In the first session I found the mask a bit tight. Put up hand. Loosen it by a couple of millimetres and the session went fine. The following morning I woke up with a kind of post-traumatic syndrome of the memory of the cramping – I am mildly claustrophobic. I felt awful and feared I would not be able to last the course. So I turned up on the second day expecting this would be the last if I made even that one. In fact, I had no difficulties. (One trick was to come in a black singlet to free up my shoulders and it was easier to manage the undressing. I did wear a jacket in public; I did not want everyone thinking that Fred Dagg was loose in the hospital.)

So it became a six-week routine. Wait. Go in. Cheerful welcome. Music on. Identification questions. Details up there on the computing screen. Lie on bed. Mask locked on. Radiologists leave the room (to minimise their exposure to the radiation). Focus, zap, zap. Come back. Take the mask off and within five minutes you are free till the next day. Once a week they weigh you. The radiologists were lovely. I’d be proud if any one of them was my grandchild.

This was a very high-tech operation, except when you got up from lying on the bed you use a rope to pull yourself forward (after cleaning your hands). Old ways can be best but, golly, an old hand told me what radiotherapy was like fifty years earlier. Glad the cancer waited.

The Cancer Society provided a daily driver who picked me up from home, delivered me to the hospital and the reverse afterwards. Thankyou. During the two-week Christmas break when the radiotherapy continued, friends who did the same could use the Society’s now empty car parks. (The Society, which also provided some useful non-technical pamphlets, is perhaps the best example of all the voluntary activity around the hospital. Would it have been as widespread if the neoliberals had had their way in the 1990s and turned hospitals into a profit-seeking businesses?)

The radiation oncologist (or a registrar when he was on holiday) saw me once a week to check I was OK. There were three auxiliaries for support: the nurse who was also available at the waiting station (there was always a registrar available too but I never had to use that service); the dietitian – to lose weight while you are under treatment is a signal you are not thriving; and the speech therapist, who made an even bigger contribution after the treatment, helping the voice to recover. One of her exercises was blowing through a straw into a milkshake – childish fun.

After about two weeks of radiotherapy they asked me to go onto eight tabs of Paracetamol a day (two every six hours). The effect was miraculous for I reverted to how I had felt before the radiotherapy began. (I was put on other drugs at various stages. I’ve not detailed them because different doctors may prescribe differently. I’ve mentioned Paracetamol because used properly it is such a safe pharmaceutical and yet my response was rather remarkable in the circumstances.)

However the bombing slowly wore me down. Apparently there are few sensory nerves in the voicebox to tell what is going on there, so I was not particularly aware of the frying of the larynx. But it was hard to remain cheerful, I was getting increasingly tired and sleeping through the day; I was writing less.

Aftermath

The precision bombing of the finest airforce will still cause collateral damage. Mine included sunburn around the neck, a loss of appetite, a loss of taste and a falloff of the strength of the voice till it became a whisper (unless all those hearing aids simultaneously failed).

Once the radiotherapy finished, there was a recovery, although not immediately. The sunburn worsened for about four days but it had almost gone a fortnight after. It is likely that some lower neck areas will be permanently bald and some of the skin there still feels baby-like. (I would not recommend linear accelerators for those with cosmetic ambitions.)

Two months after, my appetite was still down, which may be no bad thing for somebody with my BMI. I’ve noticed I am consuming a lot more milk-based products – may go with the baby-skin.

The taste has not fully recovered either. A particular disappointment is that I have not enjoyed a glass of wine since before Christmas. It still tastes like muddy water. A friend pointed out that while it is a miracle to change water into wine, I have performed the opposite. (If this continues much longer, a couple of vineyards may go bankrupt.)

The whispering voice was a great frustration. But two months on it has returned to where it was before the radiotherapy, so my friends tell me – you never hear your own voice properly. I take it that means the larynx is no longer fried.

However, chunks have been taken out of the cartilage. I am told that it may take until the end of the year for it to strengthen to its full capacity, but not necessarily to the level it was. One surgeon told me I would never be able to sing opera again (again? hadn’t in the past). I asked her about doing the Humming Chorus.

So nine months on after my GP went on alert, I am discharged and back to where I was. Except they are ‘confident’ they have got all the cancer. I asked whether the prognosis was ‘good’. They said ‘very good’. There will be ongoing monitoring – initially every three months.

This was quite a learning experience for me. Looking through my notes I observe how on occasions I got things wrong. Never seriously; just that sometimes I did not understand where the journey was going or how long it would take to get anywhere. Hope this helps others.

Coda

Thus far you have been with the writer and the teacher. Another of my professional dimensions is that I have long been involved in public policy including health economics. Here are a couple of lessons which the journey highlighted.

Those who most need Head and Neck Cancer Support Aotearoa have had a rougher journey than mine. But, like so much of New Zealand’s responses, it is providing ambulances at the foot of the cliff. They are needed – sometimes desperately – but we rarely lift our eyes to see the need for a fence at the top.

Dr Google (actually the Australian Cancer Society) tells us that risk factors for throat cancers include:

            smoking tobacco;

            excessive alcohol consumption;

            Epstein-Barr virus (EBV);

            Human Papillomavirus (HPV);

            poor diet;

            and a family history of cancer.

I have long worked in the areas of tobacco elimination, where we have made a lot of progress and alcohol moderation, which remains a problem among some groups. I know little about the Epstein-Barr virus which appears to be a kind of herpes. It is widespread and Dr Google says ‘you can help protect yourself by not kissing or sharing drinks, food, or personal items, like toothbrushes, with people who have EBV infection’. Cor! They are promising there will be a vaccine based on the mRNA approach which created the Covid vaccines, but don’t hold you breath; stick to your own toothbrush.

HPV can cause genital warts and warts in the throat as well as cervical cancer and other cancers of the genitals, head, neck, and throat. A HPV vaccine has recently become available. The evidence I have seen suggests big gains (reductions in the likelihood of cancer) from its use for both women and men.

The HPV vaccine rollout focuses on the young before they get it. There does not seem to be much public awareness and large sections of the target population have yet to be reached. We need to do better. If I have the mathematics right, the vaccination level is such that the virus wont get out of control if we confine ourselves to two-and-a-half sexual partners per lifetime.

But prevention is insufficient. There are other factors causing cancers. We do not know what caused mine – it may have been a stray cosmic ray having colliding with a cell. So we still need to think about early detection.

To repeat, I was lucky, because the health system got me early. Had I to wait those extra four months for the first private ENT consultancy or even longer for what the public system could provide, who knows where the cancer might have got to. Certainly, my treatment would have been a lot rougher.

I am tempted to propose that we set deadlines for how long one should be on a waiting list when there is a possibility of cancer. Exceed that time and there is an obligation for the public system to pay for a private consultancy. Apparently, the Irish have something like this already; they ship people around the EU to meet their deadlines. We used to have target deadlines for cancer and for various other illnesses but the DHBs failed to so often meet them, they were scrapped as meaningless.

Before you say such a policy may cost the earth – true – think about my case. Had the identification and treatment been delayed, the cost of the additional treatment may well have been horrendous both financially and personally.

Nor should we overlook my good luck to have an alert GP, to be visiting family in Nelson and to be able to afford the private consultation. There are many more vulnerable to cancer who have no such luck.

Sure, my particular condition is rare. It may become more common because of an aging population. The health system is already dealing with too many such conditions and not getting them early enough. The really good news from my experience is that when it fronts up, it does so superbly. Thankyou.

(This was also posted by Head and Neck Cancer Support Aotearoa.)

Jas McKenzie: Empirical Macroeconomist

This entry was posted in Macroeconomics & Money, Political Economy & History, Portraits on by .

Jasfest, 7 December 2021

I apologise for not presenting this short tribute to Jas. I have had a tumour removed from my larynx. The prognosis is good, but it will take some time for my voice to recover sufficiently to be able to make presentations.

I want to talk about Jas as a macroeconomist, but we – for I am very conscious of Jas looking over my shoulder – have a wider remit. Good macroeconomics is founded on good empirical analysis. Jas was a good empirical analyst.

It came from the thorough grounding that Jas got at Lincoln under Bryan Philpott; ag economists are generally into reality. When he shifted to Treasury, Jas was put on the land use desk. Alan Stuart, who took over the desk from Jas tells me that he developed detailed data sets. It impressed on Alan the absolute importance of sound data for policy formation.  

Shortly after Jas took over the desk, the New Zealand economy was hit by the 1966 wool price shock. That must have been quite an education. I have read some of the papers written at the time – not the Treasury ones. Economists were flailing around because the single commodity model which economists standard use does not work when there is a major change in the terms of trade – the relative price between products. Jas learnt his trade under fire.

His big opportunity in the Treasury came when Henry Lang asked him to come back from his teaching at Auckland to head what, I understand, was the first serious macroeconomic forecasting group. The story I was told – it was once standard Treasury myth – was that the junior Treasury officials in the macro-team had predicted a huge external deficit for the 1974/5 year, well over 10 percent of GNP, with the implication that Treasury would be involved in a major external borrowing program. As the forecast went up through the layers of the Treasury, each layer cut back the deficit by one fudge or another, each unaware that the layer below had already cut it back. By the time it got to the Treasury Secretary, New Zealand was predicted to run a small external surplus. In fact, the external deficit outturn proved to be well over 10 percent of GDP, just as the juniors had forecast.

We can guess that Henry was furious. He needed an able economist but also one who would not be bullied by those above. He went to Jas. Shrewd move, Henry.

Jas and I really got together when I became director of the NZIER in 1981 and he, now a deputy secretary, was the Treasury representative on my board. I think he liked the forecasting operation at the Institute. I was pouring what resources I could raise into research, which underpinned the forecasting exercise. After I left, I put the research together in Not In Stormy Seas.

Essentially the method, similar to the Treasury one at the time, was that each component of the income and expenditure sides of the national accounts was individually forecast. (We even tried to forecast the production side.) These were not mechanical autoregressive forecasts because the way that they were brought together made them structural ones. The components, although separately forecast, were interrelated and the relationships had to be made consistent.

Using my earlier example, anyone can fiddle the external deficit. But it is not just changing the numbers, say, for exports and imports. Pulling the import number down might impact on stocks, on the composition of consumption and investment and so on; somewhere else in the forecast accounts there would need to be a compensating change.

A major issue is the national savings balance. A reduction in the external deficit means that somewhere else in the economy there has been an increase in savings. Where?

So the macroeconomic team leadership needs to crosscheck these relationships. One becomes aware of what might be called the ‘sociology of forecasting’. The team usually has a slightly optimistic stance and they shift their forecasts in that direction. The crosschecks often expose them. You may find, for instance, that the household saving ratio has jumped to an  historic high, which almost certainly reflects an attempt to restrain the external deficit by implicitly assuming that consumers had voluntarily given up the imports that the forecast had suppressed.

So, leading a forecasting team a strong understanding of empirical realities – for, instance knowing the import composition of gross fixed capital formation which differs, not incidentally, by type – housing, plant, major construction works. It also requires a thorough understanding of macroeconomic theory at a much deeper level than Stage I aggregation and it requires a knowledge of the past. It also involves person skills. Jas had them all.

This is well illustrated by Jas’s involvement on the external Treasury forecasting panel in the 2000s which I was also on. Initially Jas was there as one of the Treasury officials, after having come back to work for them in the infantry – as he put it. When he retired he stayed on as one of the independent panel members.

The external panel arose following an embarrassing budget forecast  in the early 1990s. One purpose was to have an independent assessment of the forecast before publication, another might have been that if they made another embarrassing mistake, the officials could shift the blame a little onto the independent external panel.

The Treasury invited Victoria University to convene the panel. It consisted mainly of academics with macroeconomics – inadvertently demonstrating that there could be an enormous gap between teaching a subject and applying it. At one stage a senior academic had to have explained how GDP was constructed.

Jas really loved the job. He was one of those senior macro-forecasters crosschecking the numbers, but he was also aware that many of the younger Treasury officials had to be taught how to forecast – they certainly had not been taught it at university. I don’t recall him disagreeing with the forecasts so much as nudging them and exploring their implications.

Discussing the Treasury forecasting at that time belongs elsewhere. The forecast of the stock change was primitive, despite Jas reminding us that the inventory cycle was an integral part of the business cycle. We could never do a full savings balance because the panel was never presented with the public sector revenue flows. The forecasting seemed more mechanically autoregressive than in Jas’s day. Jas added a structural insight to the exercise.

Jas’s time on the panel ended when the panel convenor, who knew nothing about economics and even less about forecasting, decided to dispense with the experienced non-academics on the panel. Unfortunately it was just before the Global Financial Crisis so that there was no one left who had much historical memory.  History and structure – that is, theory informed by empirical analysis – need to be heavily drawn upon during a crisis.

In particular the more autoregressive, the more inertia in the forecasts or, as Jas said, the sociology of forecasting finds that forecasters under-predict both major expansions and major contractions. Thus the Treasury forecasts at the time of the GFC underestimated its severity (as did most other forecasts). I am not saying that had Jas been retained on the panel they would have strengthened their forecast contraction, but I am confident that he would have argued that more attention should have been given to the downside prediction (which would have been closer to the actual outcome), which would have sharpened the internal Treasury debate. (Some years later, a Treasury economist told me that had the Treasury had better forecasts at the time of the GFC, they would have given different advice to the incoming Key-English Government, adding that ‘they may not have taken it’. The implication was that had they been, economic management would have been less difficult in the middle years of the 2010s.)

This brief survey has focused on Jas as a macroeconomist. A rounder picture would have given much weight to his interests in international trade theory. However the theory is only marginally involved in empirical analysis (the quants look at future trade scenarios which are rarely subject to the test of comparisons with actual outturns).

Jas had developed his empirical skills in macroeconomic forecasting and (earlier) in agricultural economics. They were integral to his approach as an economist. I leave him with the last word. Whenever we were discussing – not at every lunch – the period which today we describe as the Rogernomics era he would say about the Treasury advocates, ‘I kept asking them for the evidence; they had none.’

Good and Faithful Servant: Jas McKenzie 1939-2020 is an obituary of Jas.

Review of Michael Cullen’s Autobiography

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New Zealand International Review

November/December 2021 Vol 46, No 6 p.26-7.

LABOUR SAVING: A Memoir by Michael Cullen (Allen and Unwin, Auckland, 432pp, $50)

In the 40 years since Muldoon’s reign, the predominant form of national political leadership has been a dual premiership in which, broadly, the prime minister manages the politics and the co-premier manages policy. The second is often, but not always, the minister of finance and may, or not, be the deputy prime minister. When the two are both able and working together they form a powerful partnership.

The prime minister may have particular policy interests. Jim Bolger was deeply involved in the Treaty settlement process. John Key’s were less obvious. Helen Clark’s included foreign policy, women’s issues and the arts, as well as, particularly at the beginning, maintaining a tight control over her ministers. The exception was Michael Cullen, with whom she had been a junior minister in the disintegrating fourth Labour government (1984–90).

How these partnerships function is hardly recorded. How often did they meet informally, telephone, write or email? Were there trusted emissaries? There are the odd insights. The David Lange–Roger Douglas breakdown told us a lot about when it does not work. We know Bolger and Bill Birch and their families regularly went tramping together. Otherwise there is a virtual silence. Even the autobiographies and biographies tell us more about marriage partnerships.

Alas Cullen’s Labour Saving is reticent too. The best that one can infer is that he and Clark had a very strong trusting partnership. There is no hint they ever disagreed, let alone how they worked it through. Otherwise the book is as invaluable, reflective and revealing as any (auto)biography we have had from a retired minister of finance.

It was written in difficult circumstances. In March 2020, learning he had small-cell lung cancer, which was to kill him seventeen months later at the age of 76, Cullen ceased the active public life he pursued after his retirement from Parliament in 2009. He then discovered he had nothing much to do, a lacuna compounded by the Covid lockdown which followed soon after. So the trained historian turned to writing an autobiography.

Unfortunately, he did not have easy access to his papers, which are in the Hocken Library. Not only did he have to rely on his memory and what was available on the web, he was also conscious that he had a limited time for the writing. That means there are some gaps, as well as lapses of memory. I wanted much more on his role in the restructuring of the

governance of the environment by the fourth Labour government — in opposition he had been Labour’s spokesman for the environment. It is a success which needs to be better recorded; one is also curious to know how much influence an able backbencher can have.

Subject to these limitations, the biography is revealing about Cullen’s personal life and health and the issues which Labour faced in opposition and government. It also reveals a much more agreeable person than was his razor-sharp public image.

At the centre of the book, as indicated by its title, is how Labour recovered from its neo-liberalism of the 1980s. He does not say this boastfully, but as one of the few economically literate members of caucus, Cullen played the key role.

It is there in his policies, but it is also in his appointments. He describes how as minister of finance he turned down a proposal for the new governor of the Reserve Bank because the candidate ‘made even Brash slightly moist’ and then similarly for a proposed secretary of the Treasury because he had been at the centre of the neo-liberal revolution. (Wellington watchers will know of numerous such incidents. It is, however, unusual for a politician to go so explicitly on record.)

Even more fundamentally, he devotes a couple of pages to setting out his political philosophy (his personal philosophy is hinted in various places throughout the book). He is a pragmatic, modernising social democrat with a strong commitment to sustainable development (and a ‘muddy Keynesian’). Later he describes his thirteen months as minister for Treaty settlements as one of the most satisfying things he did. He settled the massive and complicated Treelords Deal; after Parliament, he acted as a negotiator for some iwi.

It is rare for a politician to set out their political philosophy so explicitly. Jack Marshall did, and recently Chris Finlayson has, more briefly, in He Kupu Taurangi: Treaty Settlements and the Future of Aotearoa New Zealand. It is more usual for New Zealand politicians’ memoirs to fudge philosophy in platitudes.

Cullen implemented his social democratic ambitions, nicely illustrated by Kiwisaver, the achievement which was highlighted when his death was announced. It is certainly popular and more tangible for the New Zealand populace than social

democracy. I mentioned Cullen to a nurse of Asian ethnicity. She became effusive because her family had used their Kiwisaver funds to purchase their home. I said I had a small role in its development — and I mean ‘small’. She thanked me three times.

There is irony in the fuller story. In the 1970s Labour looked at European social democrats for policy directions, out of which came the earnings-related contributory New Zealand Superannuation Scheme of 1974 introduced by the third Labour government (1972–75); Muldoon repealed it in 1976. The chief driver was Roger Douglas (although it was the Central European social democrat Henry Lang who had the genius to add it on top of what is today called New Zealand Superannuation — the flat-rate, taxation-funded, universal retirement pension). Douglas never revived his scheme when he returned to office in the fourth Labour government. In his 1993 Unfinished Business he proposed instead a scheme reflecting neo-liberal values, which was thoroughly trashed in a nationwide 1998 referendum. Kiwisaver implemented the social democrat policy.

While Cullen deserves to be remembered for the scheme, it was not his greatest achievement. Labour was devastated by the neo-liberal coup of the 1980s. It struggled to recover itself; how was it to apply the principles upon which it was founded to a modern economy and society? More than anyone else, Cullen by deed and now by this book showed the way. The Ardern–Robertson government and the Labour movement must be deeply grateful.

FRIDAYS WITH JIM

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Conversations about our country with Jim Bolger: David Cohen (Massey University Press, Auckland, 287pp, $45.)

NZ International Review (September/October 2021) p.29-31

James Brendan Bolger presents a paradox. When he became prime minister, a Tom Scott cartoon presented him as a kind of Forrest Gump; in 2017 he outshone his other three panellists: Helen Clark, Geoffrey Palmer and Jenny Shipley. In 1990 and 1991 he presided over the most bitter attack on New Zealand’s welfare state; today he rejects neo-liberalism. He was in the Muldoon Cabinet which supported the 1981 Springbok Tour; among his proudest moments are working with a greatly admired Nelson Mandela. He left school at fifteen; for eighteen years he was chancellor of the University of Waikato.

Journalist David Cohen’s Friday conversations with Bolger — modelled on Mitch Albom’s Tuesdays with Morrie — offers some insights to the paradox, without entirely resolving it.

Part of the answer is that although Bolger was born in 1935 he grew up in a rural Taranaki, which the prosperity of the welfare state had not really yet reached. It was normal to leave school at fifteen, for a job (the family farm); after all, he had run a farm at twelve when the local farmer was away. Thus, he is a throwback to an earlier generation of politicians — before Muldoon’s one which was shaped by fighting in the war. Before that — the Savage–Fraser generation — politicians’ apprenticeships were in the school of hard knocks. Many worked their way up through a union as did Bolger, except his was Federated Farmers. Like some of his ‘uneducated’ predecessors, Peter Fraser, Norman Kirk and Keith Holyoake, he is an omnivorous reader.

In the 1990s, there was a sort of snobbery towards Gump — recall the description of him as ‘Spud’ — by those who had grown up in more affluent times and been lucky enough to have tertiary education and OE — Bolger got his in Washington when he was 63.

Being prime minister is a learning experience, although this is rarely explored in retrospective biographies — not in Cohen’s book. One arrives in office under-experienced — being leader of the Opposition is near irrelevant preparation — surrounded by public servants who initially prop one up and, if one has the character, grows into the job. Bolger did. That may explain Bolger’s role in his National government’s assault on the welfare state in 1990–91. Apparently, he was overseas when Cabinet made the key decisions. I have not seen explored his feelings about the ‘redesign of the welfare state’ — it would require a tougher interviewer than Cohen — but there are a number of indications that he would not have been so brutal.

There is a parallel here with David Lange who was gazumped by Roger Douglas. The difference is that Bolger wound Ruth Richardson back. Perhaps having Bill Birch as his lieutenant (and tramping partner) helped — although neither this book nor the recent biography Bill Birch: Minister of Everything by Brad Tattersfield discusses their relationship. (Allow me a frustration to observe that such biographies rarely report how the politician connects with close public servants and intimate political colleagues, yet that is often key to understanding their performance. But no matter how good those around are, the clay they are working with matters.)

Cohen’s book is tantalising when it draws attention to the religious dimension of Bolger’s life. I cannot recall another account of a politician which pays so much attention to the issue. The book records Bolger as a regular churchgoer — at the time of the mosque massacres, he was in Muslim Baku but arranged to be taken to a local Catholic church. The book also touches on the canard that a Catholic prime minister might be beholden to Rome. But it fails to mention that Bolger has been deeply influence by Catholic social justice philosophy, which is founded on the 1891 papal encyclical Rerum Novarum: The Condition of Workers, which supported private property, but not uncritically, and the ‘just wage’. (Allow another paradox: Ruth Richardson was brought up a Catholic, but the encyclical seems to have had less impact on her thinking.)

Of course, the environment he grew up in was critical. There were more Maori at his school than Pakeha and he has shown a particular interest in race relations, as well as leading the Treaty Settlement process. Yet there is a paradox here. In 1991 Rerum Novarum was celebrated by Centesimus Annus: The Centenary of Rerum Novarum. It was released about about the same time as the Employment Contracts Act (ECA) and provides a critique of how ‘anti-Catholic’ the legislation was. (The Catholic bishops thought so too, and circulated a pastoral letter at the time.) What Bolger really thinks of the ECA is not on record. He had been minister of labour under Muldoon and his bête noire was the freezing worker unions — a common position for a farmer. Militant unions have not always contributed to the sustainability of New Zealand’s union movement.

Bolger has strong views on racial issues, tolerance generally and the environment (climate change). But does one detect a shift in his interests towards international affairs? I recall little evidence of such an interest before he became premier, although he mentions that he followed events off shore as a child on the farm.

Every prime minister has to get involved, but Bolger’s interest has continued in retirement. Sometimes one often gets the impression of politicians’ set pieces being mechanical exercises based on anonymous public servants’ notes. Once they separate, the politician descends into platitudes. Bolger had, however, maintained his interest — including saying to Cohen that on some issues he has not yet reached a conclusion. The chapters on Armageddon (the nuclear question) and Washington are additions to the foreign affairs literature.

The paradox is us — we undervalued Bolger because he was not one of us. Ironically, retired he may be the most progressive premier since Norman Kirk. (Across the board — Helen Clark is ahead on women’s issues and international affairs. Bolger jokes that perhaps he should have been a Labour prime minister and Clark, who also came from a farm, a National one.)

Therein lies a deeper paradox. It is said that New Zealand history is written about the land of the long pink cloud. I struggled with the image while writing my Not in Narrow Seas: The Economic History of Aotearoa New Zealand. There is a stronger case that New Zealand is a green land in a blue sea. Among its premiers is a tradition of progressive farmers of a rightish disposition: Harry Atkinson, Bill Massey (probably, we lack a good biography), Gordon Coates and Keith Holyoake. James Brendan Bolger is one of them.

IN OPEN SEAS: Part I: On the Seashore: (1943-1970)

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Brian Easton (Journalist) Interviews Brian Easton (Economist)

Published in Asymmetric Information, Issue 71 August 2021.

You grew up in Christchurch?

In Somerfield, in the south of the city, in a state house the family bought. Dad was an electrician who in the middle of his life became a psychopaedic nurse. Mum was a clerical worker who became a librarian; they named the Hilmorton School library after her. But I went to Christchurch Boys’ High and was in an exceptionally strong science class which did very well in University Scholarship Exams.

And then to Canterbury University?

My mathematics was strong enough to go straight into the second year, skipping the Stage Is, so I finished my honours degree in three, rather than four, years.

How did you get into economics?

My honours class all wanted to do an extra course in our second year at university. I could not do statistics because it clashed with German Reading Knowledge (a language was compulsory for a science honours degree) so I enrolled in Economics I. I turned up at the enrolment desk. The professor, Alan Danks, palpably sighed – presumably something like ‘not another one; we already have 200 in the class’. I explained I had a clash between a Pure Maths III lecture and one of the Economics I lectures. He beamed ‘Pure Maths III; sit down, boy’. (I don’t know if he actually said ‘boy’ but you always felt he did.) He arranged special weekly tutorials with Graham Miller to cover the gap, and he put me in one of his own tutorial groups. In my last year at university he jumped me into third-year economics saying second-year economics would not challenge me enough. It may well have been Canterbury economics’ first knight’s move.

Frank Tay’s development economics course introduced me to one of my great economics interests. John Ward, across from Lincoln, gave a course of agricultural economics which was my introduction to applied economics, although there is a good chapter in Paul Samuelson’s wonderful text, Principles of Economics (4th ed) which has also has that memorable description of how milk is delivered to one’s house in the morning (or used to be), by anonymous market transactions not be a centralised planning system. It has shaped my thinking about the market for the rest of my life.

Samuelson is the twentieth-century economist I admire most after John Maynard Keynes. He could write. I studied Keynes’ The General Theory with one finger on the book and another on Alvin Hansen’s Guide to Keynes. Other economist included John Kenneth Galbraith and Joan Robinson – it is a pity her Economic Philosophy is so forgotten.

Why did you go into economics?

I was already involved in political activity and had gone to a student-run summer school – the ‘University of Curious Cove’ – in the 1961/2 summer vacation. One of the lecturers was Bill Sutch on the future of the New Zealand economy; he was inspiring but I thought I could do better – such is the arrogance of youth. Wolf Rosenberg spoke of the dangers of being an economist and the young man ignored his wisdom.

            Some decades later I realised that the reading I had been doing at high school, especially the Fabian literature, was a sound introduction into late nineteenth-century (i.e. emerging neoclassical) economics.

Who were the university teachers who had the greatest influence on you?

Karl Popper still presided over Canterbury science despite having left a couple of decades earlier. My most important teachers were Derek Lawden, Professor of Mathematics, and Danks.

            It took decades to appreciate how thoroughly Lawden trained me as a mathematical modeller, which is at the heart of formal economics thinking. Modelling is about approaching a system or problem holistically, rather than just a part of it. H.L Mencken said ‘there is always a well-known solution to every human problem – neat, plausible, and wrong’. (The fate of the political opposition, I suppose.) It arises because it ignores the whole picture. I once assumed everyone else was as fluent a modeller as I was, but they are not, not having benefited from Lawden. (Later in my career I also benefited greatly from working with Bryan Philpott and his suite of computable general equilibrium models.)

            People often make elementary mathematical mistakes. The short recession in the late 1990s was in part precipitated by the RBNZ using a mathematical equation which was dimensionally inconsistent.

            Danks was probably the best university teacher I had. We joked he never taught us anything. In the first half of the lecture he told us what he had said in the last one and the second half was devoted to what he was going to say in the next.

It must have been a pretty traditional economics?

It was, but I benefited from doing it. And Danks was pushing us towards the more mathematically based economics. His third-year textbook was William Baumol’s wonderful Economic Theory and Operations Analysis.

            Additionally, about a month into my Economics I year, I bought books by Gerard Debreu, Ken Arrow and Tjalling Koopmans – all Nobel laureates in economics. That was frontline stuff. I particularly loved Koopmans’ Three Essays on the State of Economic Science, which is a brilliant technical exposition written by a very humane person. I read Galbraith’s Affluent Economy about the same time.

            Danks laboriously expounded the standard condition of the equality of marginal utility among consumption commodities, at the same time as we were introduced to Lagrange multipliers in Applied Maths III. (Lagrangians, at the heart of optimisation, are, in effect, prices.) I thought that if two lectures of economics took two lines of mathematics, I could do the 200 lectures or so to graduate in economics in 200 odd equations. – the arrogance of youth again. Later I realised Alan gave a marvellous exposition with nuances that the mathematics missed.

            So I was on the cusp of the shift from the earlier neoclassical economic paradigm which was only marginally centred on mathematics to the new era of a more mathematical economics.

You abandoned mathematics for economics?

That is what it seemed at the time, but on reflection I realise I graduated as an applied mathematician and went on to apply those skills in economics. That is why Lawden was so important in my development.

What did you after graduation?

I became a research assistant at the recently established NZ Institute of Economic Research in Wellington and I did a BA economics at Victoria. The department was pretty plodding but there was the odd memorable teacher. John Young taught labour economics with a solid foundation in traditional neoclassical economics. Labour economics is the better subject for being mathematically restrained. John Zanetti gave a course on growth models which was an excellent introduction to the difference between models of the physical world and those of the social world, while Peter Lloyd’s international trade course taught me about geometrical presentations. I also valued George Hughes of philosophy – doing non-relevant courses can be can be invaluable. (Enjoyed doing English I too.)

It does not sound as though you learned much in your student years at VUW

I learned most was at the Institute. Conrad Blyth, back from Cambridge, introduced New Zealand to the new growth theories of Bob Solow and established macroeconomic forecasting (Quarterly Predictions) which, while not the first in New Zealand, was certainly the most sophisticated. I also learned a lot from interaction with the other senior economists, especially Peter Elkan, who was trained in three economics paradigms – European Institutional, Marxist and Cambridge. The Institute was highly research focused, enabling me to develop a more quantitative mode of thinking.

The Next Step Was OE?

I was applying for overseas scholarships. Danks, by now chairman of the UGC, told me I would be offered a scholarship to the London School of Economics. That would have been an interesting career move because they had some very good economists. However I missed out on that heartland of 1960s student unrest by taking an assistant lectureship at the University of Sussex.

Without being rude I am surprised that someone from so far away got the job.

They wanted a good mathematical economist and at the time they were scarce. In truth, they did not know how to use one.

So your time at Sussex was a failure?

To the contrary, it was terrific. I chose teaching at Sussex over the scholarship at LSE because Sussex prided itself on its multi-disciplinary approach to knowledge. And so I found myself in an economics department imbedded in a social science faculty with its Institute of Development Studies right next door. (Its director was Dudley Seers, who grew up in New Zealand and constructed our first national accounts.) Yes, I worked as an economist but I interacted with a host of scholars from other disciplines – even taught in some others. I have never met such a kaleidoscope of intellectual activity in a university; the closest was at Harvard, but that institution is too big to be so intense.

            The Sussex experience meant I am comfortable to call myself a ‘political economist’ in the nineteenth-century sense of an intellectual who engages across the spectrum of the social sciences. (Later, while working in social economics, I was called, almost sneeringly, a ‘social economist” – by colleagues who spent a lot more time in the pub.)

Who Particularly Influenced You?

Too many to mention. I got on really well with the senior professor of economics, Tibor Barna, who despite his eminence in input-output modelling and industrial economics, could be very eccentric in a way which provided shrewd insights.

             I also valued Janos Kornai – later a chairman of the Harvard economics department – who gave a series of lectures on planning modelling which was my introduction to general equilibrium economics and tied together much which I had taught myself. Once I asked what he thought of Marx. (He was based in Hungary which still had a Communist regime.) He said Marx did not have much to say in economics, but was important philosophically.

What about you and Marx?

Sussex’s senior professor of sociology was Tom Bottomore, one of the world’s most eminent Marxist scholars. I took a much valued course under him; it did not have much economics though. Karl Marx was one of the nineteenth century’s greatest intellectuals with whom one must engage. That said, Marx wrote he was not a Marxist; in which case neither am I.

So what are your politics?

Eclectic. In my youth I was greatly influenced by Fabianism, which is evolutionary rather than revolutionary socialism; Methodist rather than Marxist. I spent time with the VUW social anarchists group – they mainly talked convivially than did anything – where I learned to distrust power. I am more anti-centralisation than the majority of the New Zealand left and centrists – it is a scepticism which fits in well with my admiration of the market. But I do see a need for some centralisation, acknowledging that tension. My social justice philosophy follows John Rawls – one should judge a society by how it treats its worst off. I got there before I read him; he systematised my thinking.

Why did you return to New Zealand?

Home sickness really; air travel was terribly expensive for short sojourns. And we thought New Zealand was the best place in the world to bring up children. It may still be, providing you are middle class or, as I think of myself, professional working class.

The second part of this interview is IN OPEN SEAS: Part II: Launched (1970-1986). The third part is IN OPEN SEAS: PART III: Paddling (1986- )

IN PRAISE OF THE VIENNESE SCHOOL OF ECONOMICS

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The Marginal Revolutionaries: How Austrian Economists Fought the War of Ideas: Janek Wasserman (Yale University Press; 2019)

Asymmetric Information, Issue No. 70 / April 2021 p.7-8.

Mentioning to colleagues that I was reading a book on Austrian economists almost invariably led to strong responses – sometimes positive, more often negative. But, typically, their responses were to a caricature of what I was reading. As Janek Wasserman shows in his The Marginal Revolutionaries: How Austrian Economists Fought the War of Ideas the contributions of Austrians to economics have been diverse and significant.

I am going to be a little perverse and refer to these economists as the ‘Viennese School’ reserving, as I shall explain, the term ‘Austrian School’ to one of its later developments.

Over a century ago, Vienna was the capital of a large, ethnically diverse Central European empire. In 1900 it contained 1.7 million people, four times Wellington today and was relatively wealthy. (The Austro-Hungarian Empire’s population was then 47 million.) It was an exciting and stimulating city; Sigmund Freud, Gustav Klimt and Gustav Mahler come readily to mind. A little later some of the most important philosophers of the twentieth century lived there.

Economics was exciting and stimulating too. The Viennese School of Economics began with Carl Menger (1840-1921) who in 1871 published Principles of Economics, which argued that unlike the Classical economists’ belief that value inherently resides in a commodity, it resided in human wants. With Stanley Jevons, who published along similar lines in the same year, and Leon Walras, Menger inaugurated the neoclassical economics era. (A minor grumble is that the book hardly connects the Austrians with English economists. Alfred Marshall is insufficiently mentioned to appear in the index; Lionel Robins’ importing of Austrian ideas is given due weight.) Eugene von Bohm-Bawerk (1851-1914), best known for his work on capital theory, and Friedrich von Wieser (1851-1926), who made a number of innovations picked up later, were the other leaders of the first generation of the Vienna School.

The school was characterised by methodological individualism and was strongly anti-Marxist, partly because of its political stance – virtually all the school came from the elite bourgeoise –but also because Marx was a classical economist and his critics had moved past his theory of value. (Ironically, Vienna was also the home of Austro-Marxism, about which my sociology teacher, the eminent scholar Tom Bottomore, wrote that they revealed ‘the possibilities that are still to be found in a Marxist social science as an instrument of human liberation and a rational organising of human life’. Another significant Vienna economist who does not come under either rubric is Karl Polanyi (1886-1964). Many consider his The Great Transformation seminal; it obviously influences my Not in Narrow Seas.)

The second generation of the Vienna School was an astonishing constellation including Ludwig von Mises (1881-1973), Joseph Schumpeter (1883-1950), Fritz Machlup (1892-1983), Friedrich Hayek (1899-1992), Gottfried Haberler (1900-1995), Oskar Morgenstein (1902-1977), Paul Rosenstein-Rodan (1902–1985) and John von Neumann (1903-1954). Max Weber (1864 – 1920) was also involved.Their contributions were so diverse that they cannot be concisely summarised. Suffice to say that there was a commonmethodology underpinning their work and that despite the reputation of the first generation there was an empirical stream and not all eschewed mathematics (Menger was far less quantitative than either Jevons or Walras).

The school functioned around regular – apparently vigorous – seminars followed by a retreat to coffee shops – an integral part of Viennese culture – which, from the evidence of their drinking songs, could be quite jolly. While there were theoretical differences and personality clashes, the economists supported one another (including helping find one another jobs and funding – a practice which continued when they left Austria and the coffee shop culture ended).

For the Viennese School ended. In part it was because Vienna lost its empire in 1919 and hence the great affluence which came with it. This was compounded by an increasingly illiberal regime (including anti-Semitism) and by 1940 all had left Austria for America. The exception was Hayek who, despite some time at the University of Chicago, spent most of the latter part of his life in Europe, including at the University of Salzburg (which he described as a mistake because its economics department was small and its library facilities were inadequate) as well as LSE.

Generally, the Austrians integrated well into the American economic culture and it is their work there by which we know of them best. However, von Mises and Hayek abandoned analytic economics when they crossed the Atlantic and it is for them, particularly von Mises, that the term ‘Austrian School’ becomes useful. Hayek, in particular, had made sterling contributions to economics in Vienna, but the two became more interested in political philosophy and ideology. Hayek wrote The Road to Serfdom, published in 1944 and subsequently selling more than two million copies, established the right-wing Mount Pelerin Society and his intellectual impact on Thatcherism is well known.

The von Mises story is more complicated and more important. His arrival in America was not initially a great success but he steadily built up a following which led to the establishment of the Mises Institute in Alabama, while his thinking is very influential at the George Mason University in Virginia. It is such institutions and their followers who comprise the Austrian School with its ideology of a (capitalist) liberalism which does not see a significant role for government activity; a common diagnosis of perceived economic failure was ‘interventionism’. Ironically, today there are few Austrians, if any, who are members of the Austrian School.

The term ‘Austrian economics’ is often associated with Austerianism, the strategy of imposing austerity when facing economic and financial difficulties and thereby reducing the scale and scope of the state. Consider ‘wages and taxes should be lowered to spur recovery … Removing price and wages controls, stripping power from the unions, and reducing state expenditures would restore stability and encourage growth’.(p.133-4) It may sound like contemporary Austerianism, but it is from von Mises during the Great Depression. (The policy did not work that time either.)

Austrian School economics is considered ‘heterodox’ – although that does not mean it is wrong. However, in my judgement, its economics is dominated by its ideological underpinnings. That was not true for Viennese School economics, much of which has been incorporated into orthodox economics to the extent that today it is hardly recognised. As the book demonstrates, it is worth tracing its origins as a part of understanding where modern economics has come from.

As I read the book, my mind wandered to whether there could ever be a significant Wellington School of Economics (most New Zealand economists live there). The city is only a quarter of the size of fin de siècle Vienna. Two world class economists – the relevant proportion – if they stayed, would be below the critical mass. In any case, while Austrians are multilingual, their School’s natural competitors were German whose economic thinking at the time was overwhelmed by the German Historical School which was becoming sclerotic. On the other hand, English-speaking New Zealand economists tend to imitate their US brethren, even where US economic circumstances are very different: the New Zealand dollar is not the international currency; competition policy ought to be different for a smaller market.

I am also struck how we fail to seize opportunities. World leaders in the areas said a couple of research programs were innovative, but we dropped the ball. For instance, in the early 1980s they told me that Brian Philpott’s CGE modelling was pioneering. But he was never given the resources to sustain it, while his university chose not to appoint staff to support him and continue his work. It is true that the models were antipathetic to Rogernomics and, even more unforgivably, they predicted correctly it would fail. The dominant ideology was conservative and intolerant of innovation. In contrast the Vienna School did not challenge the Hapsburg order. A crucial factor to its success, reinforcing this conservative bias, was that the school was generously funded by the Rockefeller Foundation; the Austrian School in the US has been sustained by private donations from the right wing. So, no, there is not going to be a Wellington School of Economics, just a colonial outpost of the US. One can only dream.

Some Published Articles on Behavioural Economics by Brian Easton

This entry was posted in History of Ideas, Methodology, Philosophy, Retirement & Savings on by .


In the Abstract: Will Most Of Us Have an Impoverished Retirement? (June 6, 1998)

Richard Thaler’s Savings Principles (7 January 1999)

Two Styles Of Management (1 July 1999)

            This reviews

            Thaler, R.H. (1992) The Winner’s Curse: Paradoxes and Anomolies of Economic Life, Princeton University Press;

            Thaler, R.H. (1994) Quasi Rational Economics, Russell Sage Group, New York.

The Politics Of Retirement Incomes (1 July 1999)

The Ultimate Greeting: when Homo Economus Meets Homo Sapiens. (23 December, 2000.)

Lock into Savings ( 23 October 2004)

Look Back in Regret (5 May 2007)

Are Our Decisions Based on the Influence Of Irrelevant Factors? (12 May, 2012.)

Thinking Fast, Thinking Slow, Thinking Moral (19 May, 2013)

Are We Saving The Right Way For Retirement? (8 October, 2015)

What Are You Thinking, Stupid? (19 December, 2016)

Understanding Truthiness (2 January, 2017)

Past Rationality: The 2017 Nobel Award For Economics (24 October, 2017)

Commonsense Economics From Two Very Good Economists (7 August, 2020)

Are We Nudging Enough? (30 July, 2021)

How Rationally do Economic Actors Behave? (1 July, 2022)

Thinking Slow Or Thinking Fast? (4 August, 2023)

Economic Progress May Not Add To Wellbeing (December 2024)

Where Is the Health System Going?

This entry was posted in Governance, Health on by .

Presentation to the 2021 Conference of Theatre Managers & Educators, Dunedin 5-7 May.

Today I am going to discuss the governments plans for the health system. Let me begin with an admission about my perspective. Many New Zealanders are more centralist in their view of the governance of society than I am. I come from the tradition that sees local autonomy as a critical part of a democratic society, not to mention that it has benefits in terms of innovation, responsiveness and dealing with diversity. While sometimes it is necessary to have collective and central solutions to public policy problems, when I am thinking about their design or evaluation I never forget a decentralisation perspective.

It is necessary to say this here because the current redisorganisation of the health system is a shift towards centralisation. I am not inherently opposed to such a shift but, as we shall see, I am concerned that we may be over-centralising.

Summarising Yesterday’s Presentation

To begin with the lessons from yesterday. I concluded that we should not be surprised if there are pressures to centralise the system further, even at the cost of the loss of local, and even clinical, autonomy and innovation. The conclusion was underpinned by four general propositions.

The first was that there is an inherent tension between the centre which funds healthcare, together with the complex organisations it charges to implement its plans, and what goes on at the clinical and local level of professionals dealing with patients. The tension is unavoidable in a publically funded system, especially if it seeks equity.

Second, the complexity of the sprawling health system is substantial. It has been described as a ‘disorganisation’. Plans to redisorganise it need to be humble, aiming for incremental improvements rather than the ambitiously neat, plausible and wrong.

Third, one of the sources of the sprawl in the health system arises from its historical development from the nineteenth century system. Despite the spectacular changes in the following 150 years there are still fossilised remnants of the old system.

Fourth, the centre has made errors, but it generally does not acknowledge them. It is easy to blame the districts for everything. Mistakes are inevitable but failure to acknowledge that they can happen will corrupt a planned redisorganisation.

A Critique of the Proposals

What I am about to analyse is based on a (released) Cabinet paper. It sets out a sevenfold justification for the proposed changes.

Maori Issues

The first two justification are about Maori issues. One is constitutional, arguing that the ‘public health system does not meet the Crown’s obligations to Maori’. The second is that the ‘overall system performance’ (which the Cabinet paper emphasises is ‘high’) ‘conceals significant underperformance and inequity, particularly for Maori and Pacific peoples’ (although there is little attention to the Pasifika needs).

This is an issue that requires a lot more teasing out – but not here. The danger is that if we characterise the problem as ‘Maori’, with little thought about what is actually going on, we shall have an expensive failure. One is already nervous because those who have welcomed the change have so many different views on what the new authority will do.

Note that the paper admits that there is significant underperformance and inequity for others who are not Maori (or Pasifika). It is not obvious that the paper addresses their needs. By focusing on the Maori dimension, the system may fail to identify general problems and continue to leave others behind.

Funding Issues

Justification 7 is that ‘funding has not increased in line with increasing costs and rising demand’. However, the redisorganisation does not address the funding issue. The transition will add to costs; if the 1990s redisorganisation is any indication they may be very large. Nor should we be surprised if the new system is more costly to run. Additional layers of management can reduce the productivity of those in service delivery.

Moreover, if we deploy more health resources for Maori healthcare, as the Cabinet paper argues, and we also, in parallel, provide more resources to the other groups which the paper mentions as not being adequately covered, then there will be less for the rest. Are we willing to accept fewer resources for the rest, perhaps compromising their health and wellbeing or pushing them into the private sector?

So the funding issues are not going to go away. At least nobody is making the stupid claim of the 1990s redisorganisation, that this time it will generate substantial cost savings.

Population Health Issues

I have little trouble with justification 6 that the ‘system does not routinely take a population health approach’. Twice in the past three decades there have been attempts to deal with this and twice the approach has been castrated because of powerful lobbies which profit by ignoring population-based health promotion. It is only insiders who appreciate how, despite the gutting of the relevant institutions, our public health profession has responded magnificently faced with the covid pandemic, performing well beyond what we might expect, given how they have been treated in the past.

It is easy to reduce the focus of population health policies to the big ones of alcohol abuse, tobacco use and obesity. But, for instance, David Skegg has drawn attention to the failure to provide quality water; we also need to prepare for the next pandemic. A wider perspective will reduce the leverage of the lobbies who want to close down advocacy of policies which will decrease their profits.

(I squeeze in here a criticism of a too common canard – that better prevention will reduce treatment costs. It may not. For instance, banning smoking increases costs because people live longer – perhaps an extra ten to twenty years – and will be a charge on the future health system during their longer life. From a health and welfare perspective we may celebrate that outcome, but from an accounting perspective the ideal is the cigarette which explodes on the day the smoker retires.)

The Provider Capture Issue

Here is justification 5 almost in full: ‘… services are too often built around the interests of providers, and not around what consumers value and need. Improvements in service design and adoption of new technologies have been sluggish, resulting in little shift of services from hospital to community environments, despite this having been government policy for more than 20 years. Virtual consultations only became common during the height of the COVID-19 pandemic; and since the lowering of alert levels, have retrenched again.’

The last sentence is particulary odd, (‘Ve vill make you Zoom!’) The entire passage is probably a signal they have something deep in mind.

What may be going on in the cryptic bureaucratic obscurity is the view that health professionals use their political power to divert resources from high priority to their less important practices – especially from preventative and primary care to treatments. (What that has to do with zooming I have no idea.)

It is true that some treatments are not as efficient as their proponents argue, while there is a phenomenon called ‘Supplier Induced Demand’, when a professional proposes a course of treatment which the funder would not choose if they were fully informed. (Often the SID treatment is to the financial benefit of the promoter, which is why it is a greater problem in the private healthcare sector.)

However, that account is only partial. The main reason resources are used in some areas and not others is that the public demand prioritises urgent treatments. It insists, for instance, that inflamed appendices be dealt with immediately.

Perhaps a plodding economist or bureaucrat would do an analysis which showed there were more valuable treatments than the urgent ones and that the higher priorities are being neglected. Perhaps the public, given the information, would agree. But that would lead to the conclusion that there should be more resources.

It is too easy to use such bureaucratic jargon as in the passage in order to divert attention from its real content. The writers ought to provide a jargon-free account of what they actually mean – on Zoom?

System Complexity Issues.

Justification 3 is that ‘the system has become complex and unnecessarily fragmented, with unclear roles, responsibilities and boundaries’.

Yesterday I argued that complexity and fragmentation is inevitable. It may be useful to make the traditional distinction between surgeons and internal medicine. The patient arrives at hospital with a severly inflamed appendix and the surgeon cuts it out. The patient arrives at hospital with an internal ache; in the course of the diagnosis the medical team finds that they have a host of other problems, including perhaps excessive drinking and not getting on with the spouse. There is no simple remedy even if the clinicians were certain about what is going on.

Centralisation policies for the health system are usually based upon the surgical model, ignoring the complexity and the fragmentation that physicians face, thereby missing the problems identified in justifications 2 (underperformance for certain groups) and 5 (the failure to integrate primary and secondary care). That was what happened in the early 1990s redisorganisation; even the promises of productivity increases reflected a view of healthcare as a series of a surgical operations.

Do People Have a Say in the System?

As for justification 4: ‘the public do not have a consistent say in the operation of the system’, the kindest thing to say about the proposed redisorganisation is that it provides consistency across the public by reducing everyone’s say to zero. It was never great, but under the new system it is going to be less.

We have a Health and Disability Commissioner, who does an excellent job of remedying a failure by a health professional after you are dead. However, if the problem is one of various services not interfacing, the Commissioner is unlikely to be involved. A stiff letter to the head of the proposed Health New Zealand, which is to supervise the running of the hospitals will get no remedy.

The proposals hardly elaborate how consumers of healthcare (and their friends and family) will have a voice. (The exception may be Maori.) Voice is required at the personal level. Consider those in hospitals (or a rest homes) who fall between the cracks because no one seems to be in charge; a problem quickly fixed with goodwill and an effective advocate – if there is one. (I do not think clinicians should fear a well-designed complaint system, especially if it is built around a no-fault but ‘fix it’ culture.)

Voice at the local level matters too. The likelihood is that rural and provincial communities will feel disenfranchised under the new system. When the folk in Whangarei have a community complaint, they will have to picket in Auckland (or possibly Hamilton) – or even Wellington.

Recall, too that the one of the reasons for the separation out of the Counties-Manakua CHE (later DHB) in 1992 was that thought that the Auckland AHB was thought to be underplaying the needs of South Auckland; a similar local concern generated the Wairarapa CHE/DHB. For a locality a regional centre can be over-centralised.

I have long been doubtful about the effectiveness of elected representatives on the governing boards. Friends with the best intentions who got elected would leave after one term because they felt they had no effect. But they did grumble and they were a part of a system which gave people a feeling they had some say. Because they grumbled, elected representatives were killed off by parliament one night in 1991; this time they have been neutered – told not to comment.

What I do know is that the public has to have confidence in those whom it asks to take up its cases. Centralised appointments will not be trusted, especially in the regions. There are a number of ways representation can be organised. All should require some local input in the selection.

While I would like to say that the 1990s redisorganisation collapsed because of the severe technical deficiencies of the underlying theories and the resulting implementation failures, probably far more important was the popular uprising by the imposition of what seemed to be a foreign culture of commercialisation (or Americanisation) by Wellington.

Back to the Inherent Tension

The usual reason for more central control is the demands of public funding which pushes the balance away from the patient, the clinician and the local. Thus, the decades-long efforts to increase central control of the health system. The abolition of the District Health Boards follows a logical continuation from the limitations of the local Hospital Boards of the 1950s when the central government took over total reposnsibility for funding.

Yet, as the central government has got involved, the increasing fiscal burden has not been resolved. A solution has been to offload onto private healthcare but that adds to the inequity of the system. This redisorganisation will not resolve them. The danger is that other strengths of the current system will be lost.

Centralisers Make Mistakes

A major weakness of centralisers is their tendency to design systems on the assumption they never make mistakes. Had they been more realistic, the planned redisorganisation would have observed that some part of the various failures can be attributed to the failure of the centre (Wellington).

You almost certainly know of such failures in your locality, and I went through yesterday the sad story of the Canterbury DHB fracas. I know the centre has never given its side of the story – perhaps it does not want to admit failure. But even a clean version of their story would be used to show the centre’s failure.

It is likely that such things will happen again under the new regime. Despite its brilliant handling of the Covid Crisis, there is little confidence in the Ministry of Health as one of our better government agencies (at a time when there is much pessimism about the quality of the public service generally). I have wondered whether a covert purpose of the redisorganisation between the Ministry and the Health New Zealand is to improve the functioning of the ministry. If it happens, it will be welcome.

The failure to acknowledge that the centralisers will make errors – grievous errors – is why the designers think there is no need to build the public’s involvement into the new system. Voice is unnecessary if you never make mistakes,

If one never acknowledges mistakes, one never learns from them. There have not only been poor appointments to DHBs but some of the appointments to the ministry itself have also been of poor quality (also true for some ministers). The system also needs to be designed for when a minister, unsympathetic to the principles underlying the system, undermines them – as has happened. Should we design a system so heavily dependent upon those at the centre?

Of course mistakes are made at the local level. Good design which accepts they happen makes a decentralised system more robust.

Local Innovation and Experiment

Centrally organised systems are not very good at genuine innovation. DHBs offered the promise of local innovation and experiment which could then be applied elsewhere (for instance in primary-secondary integration). Experiments may have happened but usually the learnings did not percolate through the whole system. The shortage of funds inhibited them as Boards focused on urgency. (It is difficult to get GPs to address alcoholism if you are desperately removing appendixes.)

Some of the ‘experiments’ are interestingly subversive of the current centralisation proposals. I have a personal interest in pediatric endocrinology. Quite large provincial DHBs may have work for only one specialist; professionally that leaves them isolated. Who can the sole endocrinologist consult on a particularly tricky case? Who provides cover when he or she is on holiday?

One answer has been to build up a collegial network across a number of DHBs. Sounds sensible to me. It suggests that to work properly one needed centres of advance health care excellence – in effect a tertiary hospital associated with medical schools – together with a a remit to support a set of identified secondary providers.

The role of medical schools in the system is hardly touched on in the proposed redisorganisation, in part because universities are allergic to central direction. But the schools are repositories of a lot of knowledge, not only about hospital medicine, but about public health, care of the elderly and disabled and primary care.

You may wonder whether the proposed four regional offices for Health New Zealand are such centres. That is not the intention. Their purpose is funding and governance, not providing healthcare. They are more an echo of the later discarded Regional Health Authorities of the 1990s redisorganisation.

I have deliberately not gone through the new structure, instead focusing on its design principles. However the diagram provided says it all. At the top is the Minister and Ministry of Health, power descending from the top. Patrients do not appear.

My perspective is the other way up, with the patients at the top. That returns to my opening remarks. I do not deny the necessity of central structures, especially given that the centre is the source of funding. But I start with the people and those treating and supporting them and build the structure with their wellbeing at the centre of our vision – not the dollar.

Where Has the Health System Come From?

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Presentation to the 2021 Conference of Theatre Managers & Educators, Dunedin 5-7 May.

A few weeks ago, the government announced the next health sector redisorganisation. So I have scrapped the presentations I promised, in favour of an account of what is happening and where we might be going. Today’s presentation is centred on a history of New Zealand’s public health system; tomorrow’s on where we might be going.

Inherent Tensions in a Health System

I begin with an anecdote. About thirty years ago the government got into its head that if our hospitals were to be run like businesses there would be a major productivity boost. They promised 20 percent gains although they never happened. Part of the redisorganisation – I’ll explain why I use that word shortly – was to appoint businessmen and women to run what were then called Crown Health Enterprises (notice the weasel-word, ‘enterprise’) which evolved into what today we call District Health Boards.

The business-sourced chief executives knew little about healthcare. I was told of instances in which senior clinicians visited a CEO who showed much discomfort at their presence. One had twelve second-level managers reporting to him, only one of whom was a clinician.

Even so, chief executives sometimes had to front up to audiences of hospital clinicians. On one occasion, the CEO was saying how his task was to have everyone behind the organisation, metaphorically – perhaps actually – thumping one fist into the other hand. It was the sort of thing you might say to the staff if you were running a commercial company. Someone from the audience asked what exactly was the objective of the organisation. ‘It was’ he said – thumping fist in hand – ‘the bottom line’, but as he said it his voice trailed off.

For even this businessman could see that the clinicians did not give a fig for the organisation’s financial position. Fortunately it did not happen, but had someone in the room had a heart attack, we would have seen what the clinicians really cared about. Their priority would have been the patient’s health and survival; bugger the bottom line, or what it cost the system. Nor would they expected to be paid for an out-of-hours emergency; their professionalism meant ‘just do it’.

This bystander – heart intact, I add – saw the central tension of running a health system. On the one hand there is the complex, expensive organisation represented by the chief executive; on the other there is the clinician or clinical team attending to the intimate needs of a human being.

There is no ultimate resolution to this tension. With a bit of skill one can reduce it. Reconciliation of the tensions can never be perfect; there will always have to be compromises. That is why we call proposals to change the system a ‘redisorganisation’ – the organisation structure churns in the belief that this time they will get it right and there will be improvements in health delivery without significant increases in funding. But the change managers never recognise the inherent tension; redisorganisations usually fail.

That is what happened disastrously in the early 1990s. It was a classic example of the Mencken dictum: for every complex human problem, there is a solution that is neat, plausible and wrong.

The current redisorganisation has parallels with the 1990’s redisorganisation. Fortunately, it is not being run by people as ignorant of the health system. Thirty years ago, they did not even want to learn. By coincidence the eminent British economist, Alan Maynard, who warning against the notion of redisorganisation when he articulated it, was visiting the country but he, and other experts who were over here, were not consulted.

The Sweep of History

I begin by reviewing the sweep of history to give a background to the current proposals. What was happening 150 years ago may seem arcane to today’s clinicians but we can learn a lot from the past. (I draw on it tomorrow too.)

In fact the medical professions were barely scientific in the nineteenth century. Surgeons had operated for millennia (so had barbers) but the practice of bloodletting was only abandoned in the late 19th century. The problem of infection was first identified in the middle of the 19th century, when pain control (anaesthetics) also began to be addressed. The first miracle drug, aspirin, was introduced in 1899. X-rays were only discovered in 1895.

Settler hospitals were established early in the settlements. They were very different establishments from today’s for the affluent sick were treated in their homes. Hospitals were for the indigent with inadequate accommodation. A not uncommon reason was mental incapacity; not surprisingly asylums occur significantly in the history of the hospital sector.

Pamela Wood reports, ‘in the early years a significant proportion of cases [in hospitals] were from accidents; people with infectious diseases were not admitted and some doctors considered that the incurable, the old or the chronically ill should not be kept in hospitals. … Surgical patients in particular came to be seen as representing a specific danger to others through their suppurating wounds and as sick bodies vulnerable to the dirt of the buildings surrounding them.’

Medicine did not advance quickly in New Zealand. Two decades after Lister’s seminal paper in 1867, surgery at the Dunedin Hospital, one of the country’s most advance hospitals, was described as being ‘in the transition state between the days of septic surgery and the development of antiseptic surgery’. Contrast how quickly today’s medics have adopted learnings from the covid pandemic.

Healthcare was not a national responsibility. Hospitals were local, funded from local authority rates and private donations (with doctors providing free services – subsidised from their private practices; Phil Bagshaw’s Canterbury Charity Hospital Trust is an echo of that past). However, in 1861 Governor Grey announced that the central government would pay hospital costs for Maori and approved indigents. Four were established in Auckland, New Plymouth, Whanganui and Wellington. The Wellington one was known as the ‘Native Hospital.’ It did not succeed because Maori cultural practices meant a place of death was tapu. Perhaps there is a lesson here: The purpose behind the best facility will be undermined if it ignores cultural and personal concerns.

Inevitably, the central funding led to central regulation and in 1880 the government appointed its first inspector of hospitals.

However, initially, the main central government concern was population-based health issues, especially water and waste-water, the control of quality of food and drugs (milk could be a carrier of typhoid fever) and dealing with infectious diseases.

It was the threat of a major outbreak of the plague coming from China via Australia which led to the passing in 1900 of the Public Health Act. A separate Department of Health was established in 1912. In that year, central government annual per capita spending on health cost around three-quarters of a labourer’s daily wage. Local body rates contributed the equivalent of two days.

Following the pandemic of November 1918, which killed over 8550 New Zealanders; the Maori death rate was seven times the non-Maori rate – death rates were even higher in Samoa – there was an increase in staffing and a new Public Health Act in 1920.

So governments slowly got involved in the provision of personal health care, but by no means generously. During the influenza pandemic, the Minister of Health pointed out that the government was spening more on the health of animals than on that of humans.

Medicine was changing from a craft to one driven more by applied science. It did not happen overnight, and it has not stopped as new knowledge and new techniques continue to transform the health providing professions. A more recent development has been increasing specialisation, which means that health professionals often have to work in teams. [Added in presentation: I was struck listening to other conference contributions how surgery is a team activity today.]

After the Great War, hospitals became widely used throughout the population by ‘patients of all classes’, as their quality and safety improved and as they provided an increasing range of effective treatments.

Personal healthcare became increasingly important. With a wider range of treatments and more expensive ones, ability to pay became an issue – a trend exacerbated by the poverty of the Great Depression. By the 1930s the pressures were for improving personal access to the healthcare system. Inevitably, New Zealanders turned to their government.

Under the First Labour Government, state funding of healthcare steadily increased. Whereas the public’s central purse was spending 0.6 percent of GDP on its health budget in 1935, by 1944 it was 2.0 percent. Today it is about 7 percent. (Including private spending, the total health spend is about 9 percent of GDP.)

Perhaps the greatest failing of the Labour scheme was the assumption that the total amount of required medical care would be limited, a limit that was not great compared to the state’s capacity to pay. But the rate of technical change was underestimated. Many innovations improve health but are extremely expensive. Add the increasing requirements of patient care and population aging, the potential cost of health care becomes near unlimited – certainly well beyond the budget of the average patient or the Treasury funding all patients. The expense has been compounded by the shift from saving lives – that is, prolonging them – to improving the quality of lived lives.

This general historical overview allows us to trace the organisational structure of the health system. In the nineteenth century hospitals were small, not very technically advanced and local and isolated. Medicine was primitive but not wholly ineffective. Many ordinary people today are more knowledgeable and able to apply more effective treatments than a doctor of 150 years ago.

How things have changed! Today hospitals are huge and expensive, involving technologies that no single person can master. Medicine is much the same. Typically our hospitals are no longer isolated, not just multi-campus but able to connect for patient care with hospitals at the far end of the country and for knowledge anywhere in the world. We have long moved away from local public and private charitable funding. The local authority rate contribution was abolished in 1952 and charitable contributions are not great; virtually all the funding of the public health system comes from central government.

However, there remain fossils from the past. For instance, have we the right configuration of hospitals? Do they coordinate enough? And why the localised governance structure, especially elections to the board?

(I mention that the 1990s redisorganisation by the National Government abolished local electees to the governing board by overnight legislation, ostensibly because the consumers (patients) have no role in running a business, but also because non-government appointees would have resisted the changes being imposed from the top. The Clark-Cullen Labour Government reinstated local electees to be about half the members of the governing board. The Key-English Government left them there, but now the Ardern-Robertson Government, successor to Clark-Cullen, proposes to abolish them again. We talk more about this in the next presentation.)

I have focused on secondary care because that is the concern of those attending the conference. We should not forget primary care, including general practice and pharmacies, the historical trajectory of which has been much more embedded in the private sector and has never really integrated with secondary care – despite efforts to do so going back for at least half a century. Note how this partly reflects that, historically, primary and secondary care developed seperately.

Another critical dimension is population-based health services – sometimes confusingly called ‘public health care’. Recall they were initially a central government responsibility; integration of them into health boards began about a quarter of a century ago.

Moreover when we think of hospitals we should not forget of care of the elderly in rest homes or supported by outpatient services. There is a disability sector as well, not to mention the voluntary sector which is both a service provider and advocate. Add in Pharmac and a few others and you can understand why the system is a disorganisation.

Lessons From the Canterbury DHB Fracas

All this reminds that the health sector is inevitably disorganised. Tomorrow’s presentation is about the current redisorganisation proposals. Before going to them, I want to illustrate some of the difficulties by the kerfuffle which recently occurred at the Canterbury DHB.

The essence of the problem was a conflict over funding – and over control. It resulted in the destruction of the DHB’s widely admired senior leadership team which had been a champion of its region’s communities and clinicians.

There is a problem over any account because the centre’s case – the Wellington perspective – is hardly available and we have to rely on those who are critical of the centre. I mention this not only because scholarship requires drawing attention to imbalanced sources, but because if the proposed changes weaken local involvement, we would have even less informed idea of what was happening during a future occasion.

Apparently the dispute – an example of that tension between the centre and the clinical I began with – arose from the Canterbury DHB overspending relative to its revenue. This is a regular feature of the DHBs, and their predecessor Crown Health Enterprises, and evidence that the system of financial controls is not been working properly. It arises because the clinical imperatives of treating patients in need override the financial imperatives of staying within budget.

The Canterbury DHB deficit, however, was unusually large. It arises, so the locals tells us, because of inadequacies in the DHB funding formulae. I was originally going to spend some time going over this but since a new regime will be introduced following the current redisorganisation, that is not a priority today. I expect the new structure will enable a revision of the current (population-based) formula.

Except to say that it appears that the Canterbury DHB suffered badly form the funding system because of the Canterbury earthquakes of a decade ago which destroyed a lot of its capital works. The population-based funding formula assumes that all DHBs capital structures are equally well off – or badly off. Clearly in the case of the earthquake-shattered Canterbury DHB that has not been correct.

(It is also argued that the Mosque Massacres imposed heavily on the DHB. I’ve not seen precise numbers and there was some sharing with other DHBs. Even so, it raises the issue of whether the population-based funding formulae should have included a reserve for exceptional circumstances, in addition to that it needs to make greater allowance for differences in capital structures.)

The complexity of the situation is well illustrated by the Canterbury DHB’s new acute services block which opened two years late and whose construction was over budget. Apparently the Wellington centre is responsible for the building phase and therefore – in principle – for the substantial additional costs (which include the overruns, capital charges and depreciation). However, the additional costs are not charged to the centre but to the Canterburt DHB, which has already been paying for more costly service provision before the building was commissioned. That, anyway, is the local critics’ assessment; I have seen no alternative account from Wellington.

The Canterbury DHB senior leadership team said they had a plan to pull back the deficit. However, central government appointed powerful advocates above them to implement the Wellington agenda overriding the the previous Board and its executive team. Whether this was justified or not depends on your perspective, but it reminds us of the power of the centre to control constructive developments in localities.

I should add, at a more general level local autonomy allows for innovation and experiment. It has happened and it has improved some of the disjunctions in the health system. You may be disappointed that there is still not enough integration between primary and secondary care, but there has been a lot of progress over the last few decades. We may ask, however, to what extent the innovative successes of one locality have been quickly transmitted elsewhere. In treatment practices the answer may be generally ‘yes’ but one is less sure in organisational practices.

Conclusion

This has been a preparation for tomorrow’s presentation on the government’s proposals to redisorganise the health system. I summarise its main findings.

First, there is an inherent tension between the centre which funds healthcare together with the complex organisations it leads and what goes on at the clinical and local level of professionals dealing with patients. The tension is unavoidable.

Second, the complexity of the sprawling health system is substantial. Plans to redisorganise it need to be humble, aiming for incremental improvements rather than the ambitiously neat, plausible and wrong.

Third, one of the sources of the sprawl in the health system arises from its historical development from a nineteenth-century system in which hospitals were small, not very technically advanced and local and isolated, in which primary care developed separately from secondary care, and in which medicine was primitive but not wholly ineffective. Despite the spectacular changes in the following 150 years there are still fossilised remnants of the old ways.

Fourth, the centre has made errors, but it generally does not acknowledge them. It is easy to blame the districts for everything. Ignoring this will inevitably result in failures in a redisorganisation.

In summary we should not be surprised that there are pressures to centralise the system further, even at the cost of the loss of local, and even clinical, autonomy and less innovation. That is what tomorrow is about.

Centralising the Public Health System

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Centralising the Public Health System

The proposed health redisorganisation seeks to markedly centralise the health system. Is this grab for power justified; will it work?

The Cabinet paper’s justification of the proposed changes is sevenfold.

The first two are about Maori issues. One is constitutional, arguing that the ‘public health system does not meet the Crown’s obligations to Maori’. The second is that the ‘overall system performance’ (which it emphasises is high) ‘conceals significant underperformance and inequity, particularly for Maori and Pacific peoples’ (although there is little attention to the Pasifika needs). This is an issue that requires a lot more teasing out – but not here. The danger is that if we treat the problem as ‘Maori’ with little thought about what is actually going on, we shall have an expensive failure. One is already nervous because those who have welcomed the change have so many different views on what the new authority will do.

Justification 7 is that ‘funding has not increased in line with increasing costs and rising demand.’ True, but the redisorganisation does not address this. The transition will add to costs; if the 1990s mess is any indication they may be very large. Nor should we be surprised if the new system is costly to run.

I have little trouble with justification 6 that the ‘system does not routinely take a population health approach’. Twice in the past there have been attempts to deal with this and twice the approach has been castrated because of powerful lobbies which profit by our ignoring population-based health promotion.

I give justification 5 almost in full: ‘… services are too often built around the interests of providers, and not around what consumers value and need. Improvements in service design and adoption of new technologies have been sluggish, resulting in little shift of services from hospital to community environments, despite this having been government policy for more than 20 years. Virtual consultations only became common during the height of the COVID-19 pandemic; and since the lowering of alert levels, have retrenched again.’

It seems to be saying that the system still underplays primary healthcare (such as GPs) I agree. But the oddity of the last sentence may mean they have something else in mind. It’s a bit strange. (‘Ve vill make you Zoom.’)

Justification 3 is that ‘the system has become complex and unnecessarily fragmented, with unclear roles, responsibilities and boundaries’.

Perhaps complexity and fragmentation is inevitable. I am struck by the traditional distinction between surgeons and internal medicine. The patient arrives at hospital with an inflamed appendix and the surgeon chops it out. The patient arrives at hospital with an ache; in the course of the diagnosis the team finds that they have a host of problems including alcohol and not getting on with the spouse.

So it is easy to systematise health provision based on the surgical model and ignore complexity and the resulting fragmentation; thus the problems identified in justifications 2 (underperformance for certain groups) and 5 (the failure to integrate primary and secondary care).

The centralisation is likely to exacerbate this. It is like surgeons sitting in Wellington offices. DHBs offered the promise of local innovation and experiment which could then be applied elsewhere (for instance in primary-secondary integration). I have never been clear whether the experiments happened but, in any case, any findings were not percolated through the whole system. I suspect the shortage of funds inhibited them as Boards focused on urgency. (It is difficult to get GPs to address alcoholism if you are desperately removing appendices.)

As for justification 4: ‘the public do not have a consistent say in the operation of the system.’ The kindest thing to say about the proposal is that it provides consistency across the public by reducing its say to zero. It was never great, but under the new system when the folk in Whangarei have a community complaint, they will have to picket in Auckland (or possibly Hamilton) or even Wellington.

We have a Health and Disability Commissioner, who does an excellent job of remedying a failure by a health professional after you are dead. My concern is microsystems failure; we all know of instances with friends in hospital (or a rest home) who fell between the cracks because no one seemed to be in charge; a personal problem quickly fixed with an effective advocate and goodwill. A stiff letter to the head of the proposed Health New Zealand which is to run the hospitals will get no remedy.

The failure of the proposals to give consumers of healthcare (and their friends and family) a voice says there is something else going on. The usual reason for more central control is the demands of public funding.

The history of secondary care (hospital) is that it started off as a private system funded by fees, charity and doctors giving their services for free. (Phil Bagshaw’s Canterbury Charity Hospital Trust is an echo of that past.) Under the First Labour Government the central government began to take full responsibility, mainly for equity reasons. At the time, nobody expected the huge technical innovations which have prolonged life and the quality of life but which are increasingly expensive. So the central government got sucked in with an increasing fiscal burden which has not been resolved  – equity issues are important – by offloading as much as possible onto private healthcare

Thus[decades long efforts to increase central control of the health system. The abolition of the District Health Boards follows a logical continuation from the limitations of the local Hospital Boards of the 1950s.

A major weakness of centralisers is their tendency to design systems on the assumption they do not make mistakes. Had they been more realistic the planned redisorganisation would have observed that some part of the various failures, which irritate us all, can be attributed to the failure of the centre (Wellington).

You almost certainly know of such failures in your locality, but the most recent spectacular one has been at the Canterbury DHB where a first-class leadership team was unaccountably destroyed. Some of the factors driving the disaster seem to have been the failure of the centre’s funding of the earthquake-hit DHB, its responsibility for the new acute services block new building which suffered severe cost overruns (which were then dumped on the DHB) and the appointment of powerful advocates of the central government agenda to overcome the sustained resistance by the previous Board and its executive team to this agenda.

It is likely that such things will happen again under the new regime. Despite its brilliant handling of the Covid Crisis, there is little confidence that the Ministry of Health is one of our better government agencies (at a time when there is much pessimism about the quality of the public service generally). I have wondered whether a covert purpose of the redisorganisation between the Ministry and the Health New Zealand is to improve the functioning of the ministry. If it works, it will be welcome.

The failure to acknowledge that the centralisers will make errors – grievous errors – is why the designers think there is no need to build the public’s involvement into the new system. It is unnecessary if you never make mistakes,

If one never acknowledges mistakes one never learns from them. There have not only been poor appointments to DHBs but some of the appointments to the ministry itself (and of ministers) have also been poor quality. Not to mention that what happens when a minister takes over who is unsympathetic to the principles underlying the system and systematically undermines them, as has happened. Should we design a system so heavily dependent upon such people at the centre?

When mistakes happen, you wont even be able to picket your local DHB.

Book review: Brian Easton on Mary Holm

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New Zealand’s most distinguished economist reviews New Zealand’s premier financial agony aunt

Newsroom 29 April, 2021

Because economists are believed to know the mysteries of finance, I am often asked to give financial advice. I advise that I would never take the advice of an economist without paying for it; that it is never worth paying for an economist’s financial advice (leaving, incidentally, a logical problem which stumped Bertrand Russell. One version of the Russell paradox is a card; one side of it says “the message on the other side of this card is wrong”. Flip over and the other side says “the message on the other side of this card is right”. I have just given the advice not to take my advice; are you going to take it?

Giving financial advice is skilled and dangerous. After all the advisor could be sued if the advice goes wrong, although an awful number of unlicensed – and in my experience incompetent – advisers got away with it in the run up to the financial company crashes in 2008. There has been more protective legislation since – I am not licensed to give financial advice – which is, no doubt, why there is the 114 word disclaimer on the verso to the title page of Mary Holm’s latest book A Richer You: How to Make the Most of Your Money. Basically it says that neither she nor her publishers are responsible if you try to follow her advice and the investment comes unstuck.

Holm has been writing a weekly column offering financial advice in the Weekend Herald since 1998. This book is a selection of 184 of her interchanges. Essentially she is an agony aunt who discusses financial issues rather than relationship ones. Not that, as some of the book’s letters show, they can always be separated.                                                                                  

A good agony aunt usually provides prudent, informed, commonsense, not without humour and with a compassion for those at the other end of the interchange. Holm passes this test well; I especially liked her occasional reminding that it might be the time for her correspondent to spend something on themselves. Savings are a means of spreading out one’s consumption – of having the fun – over time, not of being dutifully miserable always. Admittedly, we do not know the future – including the adverse shocks we will experience and our how long we will live – so it is always wise to have a reserve for such uncertainties.

Readers may be misled by reading too casually the book’s title. It is not promising to make one rich, but rather a little richer. The vast majority of correspondents are not rich and never will be. But if they follow the tenor of Holm’s advice (not the actual advice itself of course – see disclaimer) they will be a little bit wealthier and a little bit more materially comfortable. On average of course; there is luck in the investment game including bad luck – sometimes very bad luck.

One of the weaknesses of financial agony aunt columns – but not so much of personal ones – is that there is not a lot about disasters. Apparently people who suffer disasters do not have enough savings to require further investment advice. Yet, a central lesson in investing is that while one can inch up the return, it is avoiding the crash (and fraud) which makes the greatest difference  in the long run.

The book’s big limitation is the absence of a discussion on leveraged investing – of borrowing to leverage your asset to get a bigger return. Often it works for a while – booms go on but the bust which follows is bigger and more painful. All financial investment is on the brink of a Ponzi scheme; those taking their money out are obtaining the cash from those joining. (The difference is that shares, say, do pay dividends.) I do not recall the book mentioning Ponzi or a Minsky bubble. I am sure that Holm knows about both, but her correspondents generally do not. Perhaps an economist should write to her, under a pseudonym pretending ignorance, asking if Charles Ponzi or Hyman Minsky have any relevance to today’s investor – they do, they do.

That may be the difference between an economist and a financial advisor. The former looks for context. For another example, why are real interest rates falling; will the fall be permanent? There are not simple answers but the prudent investor needs a context in order to plan a consumption flow over their lifetime.

Lower real interest rates increase the temptation to leverage invest. I am not uncomfortable about Holm’s response to a query about investing in bitcoin: ‘I’ve read about bitcoin but it’s not really my cup of tea. But you sound braver – or if you don’t mind me saying – perhaps madder’. She finishes her discussion with ‘Please – only with money you can afford to lose.’ I would have added ‘and please, please – don’t borrow (or sell your house) to invest in bitcoin.’

(As an aside, you will notice that the recent change removing the tax exemption on interest on rental housing is a restraint on leverage borrowing, whatever the case for or against the change.)

A Richer You is a well-presented book with large type and generous spacing between lines (leading) but reads as well as you’d expect from a  a newspaper columnist. Some of the material is quite technical and requires some prior knowledge – such as a background on how kiwisaver works. My presentational grumble is that all the columns should be dated. When they were written may matter. For instance, one column assumes that safe interest rates are 7 percent p.a. – clearly not a 2021 column, but the naive reader might think that level normal.

An instructive insight is that even financial advisers occasionally make mistakes. Holm admits to one. She was asked about a family who had various high-cost debts and gave perfectly sensible advice about consolidating it. Except, the following week she admitted that she had overlooked the fact that the family had a mortgage-free home, and it would be better to take out a lower interest mortgage and use it to pay off the rest of the debts. Even Homer nodded.

Destroying Public Service Broadcasting

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The recognition that there is a media problem is correct, but the chosen solution is likely to be disastrous.

Whether it intends or not, the government is embarked on a course to undermine Radio New Zealand. It wants to merge TVNZ and RNZ in order, it says, to strengthen the media. ‘Merge’ is a weasel word. Mergers involve one entity taking over the other. One does not expect RNZ to take over TVNZ. Even the Treasury warns they are two very different cultures.

The identified problems are twofold. First, the media advertising market – the main source of the commercial media’s revenue is in turmoil as social media have scooped up market share while using content taken from the traditional media. One would have thought the first step in a resolution would be to get the social media to pay for the traditional media’s stories that they use. Many countries are exploring ways to do this but it is a low priority for New Zealand and rarely mentioned.

How a redisorganisation contributes to resolving this funding problem is unclear unless it is to enable TVNZ to get its hands on RNZ’s public funding. (More below.)

Not incidentally, the claim is always made that a merger/takeover reduces costs by cutting overheads and the like. Experience shows it frequently adds to them. Never let facts get in the way of an enthusiastic merger proposal.

The other serious public problem is the convergence of media platforms. Like other outlets, RNZ has a website, podcasts and video presentations. No one envisaged this when TVNZ and RNZ were created back in the 1980s. The strategy of the previous Labour minister, Clare Curran, was ‘RNZ plus’ in which its video capacity would be strengthened. As sensible as it sounds, that does not resolve the TVNZ advertising problem.

Going back to the 1980s reminds us of the parallels of this redisorganisation with standard practices under Rogernomics, with the mushroom approach in which the public is stuck into a dark corner and covered with muck. Meanwhile, decisions are made without public involvement or honest consultation. It is happening again.

About a year ago the decision was made that the merger/takeover would proceed and the Ministry of Culture and Heritage outsourced the policy function to PwC, an accounting firm, to make a business case. (Note the term ‘business’. The framework is the commercialisation of RNZ – even had PwC much expertise in public policy, its advice will be trapped in a Rogernomic framework.)

Last March the government announced its next step. You, dear mushroom, suffering from delusions of a democrat, would have assumed that involved a public discussion on the PwC report. But the commercialisation momentum was under way. Deloittes, a new accounting firm as competent as PwC, has been commissioned to provide the business case (that word again).

The PwC report appears to recommend a hybrid in which the new organisation would depend upon both advertising revenue and public funds. (We don’t know why/how; see the endnote.) It ignores that this option was rejected in the 1980s when commercial radio was split off from public service radio. Just how fundamental the cultural difference is can be illustrated by Mike Hoskings who was a disappointment presenting Morning Report (with Geoff Robinson) but has been a jewel in the commercial ZB crown. The consultants probably did not know of the tensions between the TVNZ and the RNZ when they were both parts of the Broadcasting Corporation of New Zealand. Its exhausted chairman, Ian Cross, once argued for a government direction of how to split the broadcasting licence fee between them to reduce their financial warring.

Tensions would be worse today. The media market is much more competitive both for audiences and the advertising dollar. Even if there was a funding direction, it can be got around under current accounting practices by overcharging one branch for overheads to fund others. (The Department of Internal Affairs does this to Archives New Zealand and the National Library.)

The Deloittes development of the business case for the takeover/merger is being supervised by a ‘Strong Public Media Business Case Governance Group’ (count the weasle words). The board of seven are said to be experts in the media and public policy. Six of them are media experts – the balance of their experience is the commercial media. There is no expertise in public policy, especially one familiar with developments from Rogernomics. (The practice is to call anyone an ‘expert’ who is more knowledgeable than those who give the designation. In this case it is an indication of just how incompetent those driving the redisorganisation are.)

The chair of the seven is Tracey Martin with a reputation for ‘getting things done’. (Interesting that they did not go to Clare Curran.) Martin’s reputation is, actually, for doing what her advisers tell her; she was Minister of Internal Affairs and Oranga Tamariki (and Senior Citizens, although that never appeared much among her activities) and showed no leadership at all. That suggests that her job is to corral any of the other six who have doubts to endorse the Deloitte recommendations.

They are due in the middle of the year and are then to go to Cabinet. Minister Faafoi has said that ‘engaging with the public’ will be part of the new group’s job and went on that the Cabinet will make a decision without formally consulting the public or other political parties – how Rogernomic. So the fait accompli generates a bill, a select committee hearing (under Rogernomics they ignored any thoughtful submission which disagreed – we are still unwinding some of the messes the process left behind) and then the whiMPs – the government caucus MPs – will be whipped through the parliamentary lobbies to pass the bill. Sound familiar?

Any guarantees offered by the minister and ministry are worthless. Recall, that the Minister and the DIA promised to a select committee that they would maintain the integrity of Archives New Zealand and the National Library. A decade later the minister has retired and the officials gone. So has the integrity.

Following the implementation of the merger, TVNZ will steal the RNZ funding, which will force RNZ to seek commercial sources of funding – advertising on the website here, sponsorship there. Step by step public service broadcasting will be undermined. From Geoffrey Robinson to Mike Hoskings.

In the past we have had Ministers of the Crown committed to culture and heritage: Peter Fraser, Alan Highet, Jonathan Hunt, Doug Graham, Helen Clark, Chris Finlayson. Where are they today?

Given the disappointing – some would say disgraceful – cultural policy record of the current government – for example on Archives New Zealand, the National Library, the Public Lending Right – why should media policy expect any better?

Endnote: Dear Mushrooms,

An OIA request provided the PwC report with 50 pages – over half – completely redacted. The missing is all the analysis. We are told it has been omitted because it has not been finalised. Even so the minister announced that it recommended a mixed-funding case and was proceeding with it. We have no idea why. Sound familiar?

Remember that, as far as can be judged, no one on the (weasel words) consulting committee has the accounting or economic skills to assess the business case fully, and there appears to be no provision for public consultation until the decision is made. Sound familiar?

In the corner with you, Brian.

Introduction to Stout Research Centre Seminar

This entry was posted in Political Economy & History on by .

on Not In Narrow Seas: The Economic History of Aotearoa New Zealand 21 April, 2021

The most important thing I want to say today is to thank the Stout Centre for its contribution to Not In Narrow Seas. I had the privilege of a Stout Fellowship for a year which was crucial in the writing of the nineteenth-century chapters of the book. I can also thank the Stouties who contributed to the book and are gratefully mentioned individually in the book’s acknowledgments.

Despite my training in science, mathematics and statistics and in economics and other social sciences it was perhaps inevitable that, if I were spared, I would write a history of New Zealand. I had read history since childhood and written on various aspects of it – for instance there are over 300 items on my website, which probably amounts to another book of similar size to this one (although there is overlapping).

But I did not just want to write another history of New Zealand. I was aware of a major gap in almost all our histories, evident to anyone who had been trained in political economy. I put it this way in the book:

Many historians have told the New Zealand story before; but an economist uses a particular lens which, I would argue, helps us to see our nation’s history in a new way. Too often we take the hard economic core of our history for granted, or we give it merely fleeting attention. Sex is notably absent from the Victorian novel; the economy is almost as rare among recent novels and histories. To give an account of a society without paying attention to its economic underpinnings is about as sensible as telling a love story without sex. It can be done, of course, but certain vital facts of life are left out.

So I wanted to write a history in which the economy was an integral part of the whole story. Indeed I wanted an even broader perspective, indicated in the title of Not in Narrow Seas for the history strays from geology to poetry even if it is centred on the economy-society interaction.

You can get a sense of its ambition from the book’s ‘Epilogue’ which sets out 16 themes which are uncommon in other histories of New Zealand but are central to understanding where we came from, how we got here and where we are going. I wont go through them individually – each is elaborated in the epilogue and illustrated throughout the book – but the Stout Centre has kindly produced a handout of the 16 themes for distribution.

I am not saying that these themes do not occasionally appear in other histories of New Zealand, but I doubt that any other has been written which is as conscious of them.

As is perhaps appropriate given the title of the book, the epilogue begins with another poem by Allen Curnow:

And whatever islands may be

Under or over the sea,

It is something different, something

Nobody counted on.

—‘The Unhistoric Story’, Allen Curnow (1941)

(Incidentally, I love that reference to ‘under the sea’. Allen could not have known about the eighth continent, Zealandia, which was only identified while I was writing the book. Poets are sometimes farseeing.)

That poem captures the notion that scholars learn as they write. Setting down what you think does not just codify one’s thinking, but suggests new issues you had not counted on. So I thought I would draw your attention to an issue which is there in the book but is unresolved.

One is struck how the history of New Zealand is what might be called the ‘continuities of development’. Despite shocks there is a progression of change in which each generation is different and yet there is continuity from generation to generation.

The exception may be the shock of the Rogernomics revolution. Chapter 59, ‘The Aftermath of Rogernomics’, asks to what extent Rogernomics was a major disruption to the long term trends in the nation’s economic and social development, putting us on a completely different course. Instead of answering the question definitively, the chapter offers three accounts. Publishers’ readers of the book hated it, because they wanted THE answer. Mine is ‘I don’t know’.

Perhaps nobody today knows. Perhaps we will only know in decades hence. But the question is worth pondering over. The book should help.

AFTER PRESENTATIONS REMARKS

Thankyou to the three presenters. One of the objectives of my book – perhaps even the main one – was to set out a framework which would lead to a serious and informed open public discussion on some of the most important issues whch face Aotearoa/New Zealand, using the past to think about the present and even the future. Each of the presentations does this. I am thrilled that perhaps after years of somnolence the public discussion I hoped for is almost underway. Thankyou once more to the Stout, this time for contributing to that possibility.

Had we time, I would comment on each presentation, elaborating and responding. I promise I shall do so privately as soon as I can get the time, and publicly in such venues which may arise. But time is the essence. It will be best if we use the available time left to us to open up the public discussion to the floor.