Anything They Can Do …

This entry was posted in Listener, Social Policy on by .

Economic Reform is Possible Without Savaging the Welfare State

Listener: 2 September, 1995.

Keywords: Social Policy;

Prime Minister Paul Keating has an almost mythical reputation. As Treasurer (the Australian Minister of Finance) he presided over a major transformation of economic structure while the Australian economy continued to prosper. More recently he led his Labor Party into a “can’t win” election, and won it handsomely. While he is not popular because of his personal arrogance and an acerbic tongue, he can be proud of his government’s accomplishments.

A sartorial dresser, he is not really comfortable in a formal speech, but revels in bashing the opposition leader (currently John Howard) and his Liberal Party’s policies. Yet at his presentation to the 1995 Social Policy Conference in Sydney last July, I was more struck by his claim to have transformed the social infrastructure of Australia. Here is his own list of the achievements in social policy:

“- the introduction of Medicare;
– payments for low income families increased by at least 80 percent in real terms;
– an age pension set at the benchmark of at least 25 percent of average earnings;
– reforms to superannuation so that close to 90 percent of the workforce receive superannuation compared with less than 40 percent in 1983;
– the introduction of a Job Compact which means that everyone unemployed for 18 months or more will be offered a job;
– the establishment of the Child Support Scheme;
– a more than five-fold increase in child care places, with a commitment to meet demand for work-related child care by 2001;
– the extension of Child Care Assistance and the introduction of the Child Care Cash rebate;
– the recognition and protection of native title;
– more than 7 in 10 young people completing high school compared with only 3 in 10 in 1983;
– more than 50 percent increase in tertiary enrolments in tertiary education;
– the establishment of a national vocational education system;
– a comprehensive network of community care services for older people and people with disabilities through the Home and Community Care Program;
– the enactment of the Disability Discrimination Act making discrimination on the grounds of disability unlawful;
– the Government’s landmark Sex Discrimination Act outlawing discrimination on the basis of sex, marital status or pregnancy.”

Now the list needs to be taken with a grain of salt for at least four reasons: it applies to a twelve year period; some items New Zealand had already achieved in 1983; it does not mention retreats and cuts; and the speech was oriented for the next election. (Keating may have been planning an early election, but the result of the Queensland State election, in which a very popular premier squeaked in by a one seat margin, has probably put that plan off.)

Nevertheless, one cannot be but struck by the range of social innovation, in comparison to New Zealand’s record over the same period. Which of our recent prime ministers could make a similar claim?

What is intriguing about Keating’s claim is that the economic transformation he presided over is broadly similar to that which happened in New Zealand. Both economies have become much more open to the world economy, and make much more use of the market mechanism. But in the Australian case there has not had to be the same savaging of the welfare state.

Why then did we have to do so in New Zealand? We are frequently told that major reductions in the role of the welfare state are necessary for the economic reforms to work. Yet the Australian reforms worked without them. Over the last twelve years Australia has done much better than New Zealand on most economic indicators – inflation being the exception – despite its external situation deteriorating in comparison to here. Sometimes in occasional years, or on occasional indicators, New Zealand has done better, but the long run record is of the Australian economy outstripping the New Zealand one. The Australians conducted their transformation under a pragmatic management regime, while the New Zealand one was implemented in an extreme ideological manner. Ours has been much less successful.

So New Zealand had to cut back its welfare state because its economic reforms failed to deliver the benefits that were promised. Despite the recent economic boom, they have still failed to do so. In a way Roger Douglas made a faustian pact with the devil. “Throw away all Labour’s economic principles, and I will give you undreamed of prosperity.” But the devil has still to deliver his side of the bargain, and Labour had to increasingly abandon its social principles too, in a way that many Australian’s find astonishing.

There are those who conclude that in order to re-establish the welfare state, we need to go back to the past of a fortress New Zealand relying on a few privileged industries to generate foreign exchange. We cannot. The economy that sustained the traditional New Zealand welfare state has been destroyed by changes in the world economy.

Yet that does not mean we have to abandon welfare altogether, or cut it back to the mean minimalism of the American “residual” welfare state. That seems to be the model which dominates the thinking of most of our reformers. The experiences of Australia, and of continental Europe, tell us there is an alternative.

Parity and Bust: Dollar for Dollar Is Not a Good Deal

This entry was posted in Listener, Macroeconomics & Money on by .

Listener: 19 August, 1995.

Keywords: Macroeconomics & Money;

The proposal for “parity parties” when the New Zealand dollar equals the Australian dollar in market value is typical of the bizarre economic thinking by some in the financial sector. The last time parity was attained was in November 1967. Since then consumer prices have risen 12.8 times (i.e. 1180 percent) in New Zealand, while they have risen 8.1 times in Australia. While the consumer price index is not a perfect measure of inflation, the gap between our price levels remains substantial. An OECD study in 1990 found the New Zealand dollar could buy the same as 86 Australia cents. Allowing for the differential inflation rates since the figure is probably about 88 cents today.

This rate really matters because it reflects the average ability of New Zealand firms to export to Australia and to compete against Australian exports here. At parity between the exchange rates, the firms would carry a 12 plus percent cost disadvantage, and lose market share here and abroad.

That is already happening. The engineered fall in the exchange rate between late 1989 and 1991 has been reversed. The export boom it generated is beginning to fade. That is evident in the external deficit which measures how much we earn relative to how much we spend overseas. At the moment it is deteriorating rapidly, because we are buying increasingly more imports while exports are not keeping up. The latest figures show an overall external deficit for the year to March 1995 of $2.5 billion, or 2.9 percent of GDP. A year earlier the deficit was 1.6 percent.

A external deficit of 2.9 percent is not intolerable. The worry is that the deficit has swung around faster than most commentators expected. It seems likely to continue to deteriorate.

We have had low current account deficit for a number of years. There have been three key factors. In the early 1990s the terms of trade were about 10 higher percent than they were in the late 1980s. This better (relative) return to exports has been worth around an extra $2 billion a year. The external deficit would look sick if we had not had that export price boost.

Second, there has been strong growth in key markets, especially Australia. In my view, and that of many thoughtful commentators across the Tasman, their economy is over extended, and its growth rate will have to slow down. A major consequence is will be reduced markets for New Zealand exporters. When and how this slowdown will occur is a bit problematic, because Australia has to have a general election by May 1996. The economic advice would be to go early, so that the election was before the economy visibly deteriorates. However the Australian Labour Government is well behind in the opinion polls. The most likely scenario is that the elections will be left to about March, won by the Opposition, who will immediately slam the economic brakes on, and our exporters will be in trouble by about this time next year. Yet prime minister Keating, an extraordinary politician, may call an early election and win it. In which case the brakes go on earlier.

The third reason for the favourable balance of payments in the recent past is the economy has been so depressed that we have not been buying much overseas. With the economic pickup, imports are beginning to flood in. Imports of investment goods add to productive capacity, and may be funded by overseas lending. But expenditure on imported consumer goods and overseas tourism is picking up too, which overseas lenders may be less willing to finance.

For the current account deficit is offset by overseas borrowing, based on the willingness of overseas lenders to cover our excess expenditure. They appear to judge that a 3 percent of GDP deficit is tolerable, but if it were to blow out to 6 percent there could well be a balance of payments crisis. Lenders would be unwilling to keep pouring funds into New Zealand, interest rates would rise in a desperate attempt to attract them, and yet the exchange rate would fall dramatically.

Such crises blow up very quickly. Far too many financial commentators tell us what they would like to happen, rather than what is happening. Economic forecasters make small fudges, which cumulatively convert a growing deficit into something which is manageable. Then the hard statistical news comes in, and there is a flat panic.

After observing balance of payments crises over a number of years in a variety of countries, one is continually reminded of the irrationality of market behaviour. Experience should teach to expect the unexpected – key markets can swing sharply because of the irrational behaviour of those involved in them. The sharp upward revision in long term economic forecasts in the year after the 1993 election warns that they can be revised as quickly downward.

Admittedly when some financiers announced they were planning a parity party, enough market operators recognized the absurdity of the celebration, and trimmed the exchange rate back. By doing so they delayed the balance of payments crisis. If they follow that logic, the exchange rate should come down steadily, and we may avoid the crisis altogether. But that would be too rational to expect.

Muldoon in Fiction: Politicians and Intellectuals

This entry was posted in Literature and Culture, Political Economy & History on by .

This is a revised version of the paper presented to the Stout Research Centre Wednesday Seminar, 9 August, 1995. Other versions are ‘Piggy in the Middle’ Metro August 1996, p.82-7, and ‘Muldoon, Robert’ in R. Robinson & N. Wattie (eds) The Oxford Companion to New Zealand Literature, Auckland, p.384-5.

Keywords: Literature and Culture; Political Economy & History;

Bill Pearson’s 1952 Landfall essay “Fretful Sleepers: A Sketch of New Zealand Behaviour and its Implications for the Artist” argues:

“No people is easier for governing. Though `Hitler’ and `dictator’ are common as terms of abuse (usually applied to a foreman who puts production before sociability) there is a lurking respect for the dictator because he has all the authority and gets things done. When the Upper House went no one cared. It was only workers of the big unions, and the watersiders themselves, who were concerned at Mr Holland’s emergency regulations, and a few intellectuals. Fascism has long been a danger potential in New Zealand. Of course fascism does not just occur: it is a deliberate strategy used by money-makers threatened with social discontent. But in countries nominally democratic, fascists have first to prepare the ground. In New Zealand the ground is already prepared for these conditions: a docile sleepy electorate, veneration of war-heros, a willingness to persecute those who don’t conform, gullibility in the face of headlines and radio peptalks.” (p.3-4) [1]

Some of the instances in this passage, as well as others in the essay, have an archaic ring. Other parts have a contemporary ring – lurking respect for the dictator, the treatment of intellectuals, the docility of the electorate, the willingness to persecute those who do not conform, all have a contemporary familiarity – although it is difficult to judge whether these phenomena have increased or decreased over time.

There is perhaps in most societies a tendency towards fascism, or what might better be called the tyranny of the majority at the expense of the minority, reinforced by a positive regard for the despot who gets things done. That does not deny its significance to New Zealand. It may well be that in frontier societies such as New Zealand there is more respect for the practical and less for the intellectual – for things rather than ideas – than in the countries from which the majority of settlers came.

Pearson’s potential dictator at the time of writing was Sidney Holland. One can easily nominate earlier prime ministers who displayed a similar level of political tyranny when it suited them – Seddon,[2] Ward, Massey, Savage,[3] Fraser – although Pearson makes little reference to this repeated pattern. Each generation seems to create its own demonology, forgetting earlier ones.[4] So for the first thirty years of the post-war era the putative dictator was presented as Holland, especially as it proved difficult to hang the charge on the other long-running prime-minister, Keith Holyoake. James K. Baxter tried in his 1967 ballad “a death song to mr mouldybroke”, which excoriated the government for its involvement in the Vietnam War, even though Holyoake managed – brilliantly, I am told – to commit New Zealand to the absolute minimum necessary to satisfy the US.

And yet Baxter presages a new dictator, for “Mouldybroke” is a portmanteau of Muldoon and Holyoake, with Robert Muldoon already becoming prominent, for his fierce defence of American policies on, and promotion of, sending New Zealand soldiers to Vietnam. But almost certainly the New Zealand politician that C.K. (Karl) Stead had in mind when he portrayed Volkner (he has no first name) as a dictator in Smith’s Dream was Holland, prime minister during the 1951 waterfront dispute,[5] although Stead probably also intended references to some foreign dictators – Hitler, Mussolini, Franco. By the time Smith’s Dream was made into a film, the image of Muldoon as the New Zealand despot par excellence was so set in the new generation’s mind that Volkner becomes a thinly disguised Muldoon in the film. This led to an exchange between Stead and Muldoon, which Stead reports:

“[T]he only time I met Muldoon he told me he’d arranged for a private showing of the movie made from the novel … ‘because people were saying it was about me’. He was on an official visit to the university when he told me and, trying to be a good host, I said ‘You were only a cabinet minister, fairly junior, I think, when I was writing that book.’
(One imagines that Muldoon grimaced. Stead goes on…)
My wife said ‘Yes, you’ve just grown into the role.’ Muldoon hoisted his cheek and laughed his ‘we are not very amused’ laugh.” (pers. comm. 19.1.95.)

There is a truth in Kay Stead’s riposte, insofar as the intellectual community needed a successor to Holland, and Muldoon willing took over the chore.[6]

This image of Muldoon as dictator is one of the icons of literature in the 1970s and early 1980s. Arguably there are at least ten contemporary novels and four plays in which a Muldoon-like character appears. This includes Smith’s Dream, with its presaging a Muldoon-like figure, and giving Stead the claim to be prophet as poet, as it does for Baxter with his Mouldybroke.

(Many other poets incorporate reference to Muldoon including David Eggleton, Sam Hunt, Bill Manhire, and Ian Wedde. Perhaps Vincent O’Sullivan’s “Butcher” poems portray Muldoon as a common man, while his Pilate Tapes (1982) has the dictatorial politician at the heart of the sequence. I will come back to Kevin Ireland. There is a much longer tradition of political commentary by New Zealand poets – with Rex Fairburn and Denis Glover outstanding exponents.)

In contrast to frequent contemporary references to Muldoon, Holland and Norman Kirk appear in novels written over fifteen years after their regime: Holland in Stead’s Smith’s Dream and in All Visitors Ashore (1984), in Maurice Gee’s Plumb (1978) and Meg (1991), and Kevin Ireland’s (1995); Kirk in Michael Wall’s Museum Street (1991). In each case they appeared as “realistic” portrayals.

There is a Holyoake-like figure, “Mr” Sagwell, in O’Sullivan’s Miracle (1976), perhaps with a bit of Jack Marshall. Another appearance is Rt Hon. St John Swindells in Bill Maughan’s Good and Faithful Servants (1974), which includes many thinly disguised Wellington politicians and bureaucrats of the late 1960s (when Maughan was a Treasury official). However the “hero” of the novel is Sir Harry Drinkwater, “the youngest and fattest Turk of them all”.

Not all the appearances characterize tyrannical politicians. Jason Calder’s thriller The Man Who Shot Rob Muldoon (1976) needs a prime-ministerial target. Substituting “Wallace Rowling” in the title reduces the same impact, although this ex-prime minister is mentioned in the novel in references to an (actual) earlier assassination attempt.[8]

One curious appearance in fiction is a dog called Muldoon, in Gee’s Games of Choice (1976). The encounter with the “malevolent” dog, owned by Gunter whose father was a nazi, involves a blood-drawing bite, although it is reported the teeth were not sharp. There are enough references to politicians in the novel, to suggest the choice of names is no coincidence. “[A] last glimpse of Savage, smiling about good times” a few pages earlier resonates with the “hello” at the meeting of the dog.

Other Muldoon-like appearances include the kea boss, Highfeather, in Philip Temple’s Beak of the Moon, “the Prime Minister” in Bob Jones’s The Permit, and Kevin Grogan in Keith Ovenden’s Ratatui (1984).

Is Duggy Plumb of Gee’s Sole Survivor (1983) a Muldoon figure? Muldoon already appears as himself in the novel, perhaps indicating that Gee did not want to have Duggy Plumb equated with Muldoon. The political content of Sole Survivor, as in the case of Ovenden’s novel,[9] has been under valued. Raymond Sole and Duggy Plumb are the grandsons of George Plumb, patriarch and the focus of the eponymous first novel in the trilogy. We recall the biblical injunction that the sins of the father are visited upon the children, unto the third and fourth generations.[10] The political content of the novel becomes a story about what happens two generations after the first Labour government, contrasting the ultimately ineffective Sole with the effective but personally ambitious, rather than principle driven, Plumb. It is a parable of the Fourth Labour Government,[12] and places Gee in the pantheon of poets who are prophets.

It could be argued Muldoon’s economic policies were the third generation of the policies introduced by the first Labour government. However it is idle to argue over how much Muldoon there is in Duggy. The point is this: would Gee have written Duggy Plumb the way he had, if there had been no Muldoon-like politician in the 1970s – if Jack Marshall or Bill Rowling had been prime minister? The answer is surely not. Nevertheless Gee is too fine a novelist for one to conclude that Duggy Plumb is Muldoon.

A similar issue arises with Clean in Greg McGee’s Foreskin’s Lament (1980). Is he modelled on Muldoon? In this case Clean is not a politician, but has some of the ruthless characteristics and ambition associated with Muldoon. Although a later version was updated to include “The Tour” (of 1981), the original play, set in 1976, was written in 1980 before it began. Yet the play was influenced by the Muldoon regime. The characters in the play are those who elected Muldoon in 1975 (and surely supported The Tour five years later). At the very least the play portrays attitudes of New Zealand male which Pearson was concerned with thirty years earlier.

Roger Hall’s The Rose is a play about a New Zealand populous prime minister who has many Muldoon-like features (especially the economic speeches), and the problem of the individual in such an overbearing climate. However Hall instructs that “Leader”, is not to be played as Muldoon, seeking to portray the universal from an illustration of the particular.

Muldoon also appears briefly in Mervyn Thompson’s The Great New Zealand Truth Show (1981), based on editorial material culled from the Truth magazine:

… a fanfare. Enter a masked MULDOON.
EDITOR: Thank God for a Prime Minister with the courage and directness of ROB MULDOON! (Applause.) He puts his country and its people before personal comfort and political ambition. These qualities have been evident in his handling of the springbok tour issue in the face of violent opposition and media bias. As Rob himself says, only one paper came out in his favour on this issue:

This is not an entirely unbiased account, given Muldoon was writing a column for the publication, but it nicely captures the flavour of the Rob’s Mob support and rhetoric.

Muldoon as fiction may even be an international phenomenon. An Australian radio drama, A Country Practice had a corrupt local councillor with the name Muldoon. New Zealander Ray Harding, who took over the script in 1983, says that the character was already there. He thinks that while the name could have been coincidental, there were topical in jokes, including a low-life baby sitter was named “Betty Windsor”.

The burst of the political oriented writing which appears in the early eighties, tells us that something was happening about that time. The precipitating factor was surely Muldoon, perhaps magnified by the events surrounding The Tour.[12]

In a more fundamental way the rise of the political novel in the 1970s reflects a changing national perception of politics. From the late 1960s non-fiction works about politics begin to appear.[13] Contemporary political biography begins a little later with John Dunmore’s Norman Kirk: A Portrait (1972). In 1978 Spiro Zavos wrote a less flattering Portrait of Muldoon.

A major contributor to this politics literature was Muldoon himself. Indeed his The Rise and Fall of a Young Turk (1974) seems to be the first autobiography written by a practising New Zealand politician. John A Lee’s fictional Children of the Poor (1933) has autobiographical aspects, but in any case it was published anonymously and does not address his political career. His Simple on a Soapbox (1963) was written after he had retired from politics. The closest contender is Michael Bassett’s Third Labour Government (1976) based on a diary of his period in the government caucus between 1972 and 1975. A year later Muldoon published his second book Muldoon, followed by three further volumes: My Way (1981), The New Zealand Economy: A Personal View (1985), and Number 29 (1986). Other contemporary politicians who have since contributed to this genre include Roger Douglas, David Lange, Ross Meurant, Mike Moore, and Richard Prebble,[14] with more promised (although keeping promises is not a New Zealand politician’s forte).[15]

This outpouring of political writing, fiction and no-fiction, is a part of a literary renaissance which is occurring in New Zealand fiction about the time. There was, however, a special factor which generated a particular type of political literature, as television changed the relationship between politicians and the public. Before it you might meet him (or rarely her) in person, see them on the stump, read them in a newspaper, and hear them on a radio. But with television, love them or hate them – and it is usually the latter – politicians became guests in the living room. Probably the first New Zealand politician to master the art of television presentation was Muldoon.[16] This politics of the personality was reinforced by a weekly column in Truth, and an exuberant participation on talkback radio.

Perceptions of politics changed, a development well captured in a fundamental difference between John Mulgan’s Man Alone and Smith’s Dream. Mulgan sees politics as one of great social forces (which he later parallels with the environmental forces with which Johnson struggles), while Stead has the more personal element of the involvement of Volkner. (Pearson may be halfway between the two.) Politics became personalities, and Muldoon became the personal symbol of a certain type of politics. This is sometimes seen as a shift to presidential politics, but only one other of the four prime ministers since Muldoon was in this mould.

As we have seen from “Fretful Sleepers”, the intellectual community was waiting for someone it could portray as dictator. Until about a decade ago the community was dominated by those with leftish visions. The right thought they had no intellectual firepower. On two occasions I was at academic meetings at which cabinet ministers of the Muldoon government [17] expressed delight they had one friend in the audience implying, wrongly, that the academic community was universally hostile to them. Yet Holyoake’s three lieutenants, Marshall, Tom Shand, and Ralph Hanan, could claim to be as intellectual politicians relative to their times as any before or after. But it has not been until recently that politicians of the right have presented themselves this way.

Even more ironically, there is a sense in which Muldoon was an intellectual, interpreting that term broadly. He wrote five books, he cared deeply about the English language,[18] and he was a member of the parliamentary library committee right to the end of his term in parliament. However he presented himself as anti-intellectual, liking to abuse them in public. His followers – Rob’s Mob – loved him for it. In turn the intellectual community as vehemently portrayed Muldoon as a despot. As the Prime Minister in The Permit argued in a “masterly performance”

“.. the constitutional procedures were not in themselves sacrosanct and must change with changing times. The world moved at a much faster pace today than it had when the parliamentary procedures were formulated and if Governments were expected to behave efficiently then the machinery with which they worked must be modernised. And finally the Prime Minister left his opponent floundering when he said that the ultimate democratic safeguard remained intact. The public’s right to vote a Government out remained unchanged and in the final analysis that was the ultimate security.” (p.31)

This is what Lord Hailsham described as an elected dictatorship. The portrayal of Muldoon as the elected dictator appears in the fiction, the poetry, art, cartoons, and even the kitsch of the times. He became the man who the intellectuals loved to hate, and also the man about whom the crowd were equally fanatically enthusiasts. If Muldoon divided the nation, he divided it into the two groups in “Fretful Sleepers”: intellectuals, and anti-intellectuals.

I recall in the late 1980s one committed Labour supporter (they still existed then) bewailing the record of “her” government, and the betrayal of what she had fought for in campaign after campaign. She consoled herself with “at least we got rid of Muldoon”. She had reason to hold this view – Muldoon abused power, and was often an unpleasant person in public (not to mention on the television set in the living room). But were his successors so much better? Certainly they were pleasanter in public, and did not publicly attack intellectuals (although in private it may have been different matter).

But was not their management of the political process as dictatorial as Muldoon? This is not a central theme of an essay on recent political fiction. But because I do not want to leave the question as a rhetorical one, consider Roger Douglas’s “A lot of politicians, they talk about consensus. I mean really that’s just rubbish … So consensus has to be out, you have to have leadership.”[19] This is a prescription of an authoritarian politician, rather similar to the Prime Minister of Jones’s The Permit. One might well point to Douglas “get[ting] things done” more successfully than Muldoon ever dared. I do not want to pursue all the ramifications here, but it raises the issue of the intellectual community’s response to the post-Muldoon era.

One was to recall how unpleasant Muldoon was. Over time we forget such things, so the memory has to be refurbished, latterly by an extraordinary television program, resplendent with psycho-babble, Muldoon. Its function is partly explained by one of its writers, Louise Callan, was coauthored Douglas’s auto-biography Towards Prosperity (1987), and is described as assisting the writing of Douglas’s Unfinished Business (1993).[20] As the Labour party supporter understood, the first line of defence for Douglas remains that Muldoon was worse.

Second, the intellectual community now includes people of some significance with right wing perspectives – most notably Alan Duff, Roger Kerr, and Simon Upton. This is a new development, which combined with a willingness of the business sector to support such people has tipped the balance away from the total domination leftish intellectuals had had in the past.

In addition the Fourth Labour Government would have thought itself “intellectual”: fifteen of the first twenty cabinet ministers had degrees; five had, or have since, written books; four had held university positions. Whether they were really intellectuals depends on the meaning of the term. Thus far I have used the term as I think Pearson mainly intended it to be used, that is according to the Concise Oxford Dictionary (7th ed.) a “person possessing a good understanding or intelligence, enlightened person”. However if we use the narrower definition of Edward Said in his Reith lecture Representations of an Intellectual (1994), as “the intellectual’s role to represent a message or view not only to but for a public and to do so as an outsider, someone who cannot be coopted by government or corporation”,[21] the Labour government cannot possibly be intellectual.[22] As Noam Chomsky commented, “Edward Said helps us to understand who we are and what we must do if we aspire to be moral agents and not servants of power.”[23] If the Labour government included intellectuals in some sense, then arguably Muldoon was one in that sense too.

I am not the first to have grouped Muldoon and his successors. Kevin Ireland writes in his introduction to Tiberius at the Beehive (1990) “[t]he 1980s saw two intuitively gifted, gloriously larger-than-life New Zealanders go into political exile … The poems consider the Tiberius of old and the composite phantom who carried out his most recent imperial policies”.

Rereading “Fretful Sleepers” one is struck by how critical Pearson is of the intellectual community of the day, both in the description and in the prescription of an alternative. They are almost as pretentious as they are portrayed by the anti-intellectuals, whom Pearson also berates. One might want to argue (or hope) that their veniality is not as serious or as widespread today. More importantly in terms of Said’s definition of those whose role to represent a message or view as an outsider, the intellectual community has not done noticeably well in recent years. That is evident enough in the political fiction.

No longer able to represent the political process as a tyrannical prime minister, the two obviously political novels, Stead’s The End of the Century at the End of the World (1993) and Kidman’s True Stars,[24] look respectively at a politician and politician’s wife in the context of decaying ideals in a disintegrating (Labour) government. What is actually driving the decay is unclear. Perhaps we are returning to a vision of social forces providing a context over which a human has little influence. A return to Marx, or perhaps a Greek tragedy? The mood of both novels is that of my labour supporter friend – bewildered betrayal.

There is no obvious Fourth National Government novel, although Gee’s Crime Story (1994) might be thought of as a political novel without politicians following the privatization of so much state activity. It contrasts the social immorality of the financiers with that of the underclass, although as the denouement shows, Gee has personal moral concerns too. The technical problem is how to portray the phenomenon of rogernomics in fiction. Gee treats one aspect – corporate greed – successfully, but most writers have found the task beyond them. It was much easier to portray the society at the time of Muldoon by embedding political vice in one man.[25]

Owen Marshall’s A Many Coated Man (1995) is also a different kind of political novel, although it is written around a charismatic leader Aldous Slaven, who is clearly not intended to be Muldoon in any significant way. The public response to Slaven is recognizably that of Rob’s Mob and the anti-intellectual New Zealander that “Fretful Sleepers” portrays. The characterization of the tyrannical politicians via the populace who supports him (or her) is a promising, if technically difficult, means of continuing the political discourse in fiction.[27]

The most recent political novel is Natasha Templeton’s The Firebird (1995) written in the tradition of Russian novels, in which every significant character is beset by moral choice. While there are flashbacks, the novel’s present is the 1981 election and its aftermath, especially as it affects a cabinet minister and his wife. The prime minister is a Muldoon-like Howie Hall.[28] While the story provides some interesting accounts of what happened over this period there is not the venom that we have in earlier descriptions of Muldoon-like characters, even though Hall is a very unpleasant man. It would be easy to say that Templeton lacks the malice of earlier writers, but I suspect that having really been there – she is married to a minister in Muldoon’s cabinet – she chose to portray a more complex man than the caricature we found on the television screen.

The careful counter will have noticed that coming to the present day I have reported only nine novels with Muldoon-like characters, although I promised ten. The last is perhaps the most extraordinary case of them all. There is a sense that in Pearson’s Coal Flat’s (1963), Mr Tribe, the victualler’s representative from Wellington, is a Muldoon even though the man himself was not yet on the national scene when the novel was being written.

It seems possible that Pearson knew Muldoon briefly in the 1940s. That encounter influenced his account of Tribe as “a generalised perception of a boss’s man of working class origins, though it is mixed with a generalised sketch of the unsmiling uncultured respectable public man with a small skeleton in the cupboard.”

As Pearson relates:

“In autumn 1945 I was with my unit in the far south of Italy travelling north when I became separated from them through being ill for a few days. On the way to rejoining them I spent several days in a transit camp where I shared a tent with three men who had come to Italy in an earlier reinforcement and were about to return to New Zealand. One of these was a shortish stocky corporal with a thick neck and a big chin. They called him Rob and his surname was a name I hadn’t heard before but it struck me as comic. He was a thoughtful chap, who at first impressed me because his opinions weren’t the same as those of the ordinary soldiers. He had two mates, both a little older but quiet and reflective like himself. Whenever some general question came up that called for some kind of moral vote, they would say `what do you think Rob?’ and Rob would ponder for a while and then deliver his opinion, which was a considered opinion, not the kind of uninformed opinion one was used to from the ordinary soldier. I asked him what he intended to do when he got back home. He said he might go into politics. This excited me because I thought politics was an idealistic vocation, calling for a high mind and liberal aspirations. But he dashed my hopes when he said he would join the National Party. `Why the hell should those bloody wharfies be allowed to go on strike while I’ve been over here risking my life?’ And watching him closely I came to see that his basic prejudices and opinions were no better than those of the ordinary soldier, and I came to the conclusion that it was because he had no tertiary education and never had his preconceptions challenged, or had to examine them as a university student has to. My liking for him came to a sudden end the day before I was to travel north. Among the soldiers in the camp was an old friend I had known at Dunedin Training college and every afternoon he and I would hitch to a wine-bar in a nearby village, missing the daily identity parade which was the only requirement of us in the transit camp. When I came back from an afternoon at Gioia, Corporal Rob assailed me. `We know all about you Pearson, missing parade every day and getting on the piss at Gioia. somebody should put your weights up! [expose your behaviour to the authorities]’ I was shocked because in the army, now that the war in Europe and Japan was finished, a soldier taking a calculated risk in disregarding routine orders did not expect to be denounced by a fellow-soldier. (And in the morning one or two things happened to me that made me think he had put my weights up.)

“However though I never forgot that unpleasant corporal, I forgot his name, and when seven or eight years later I was writing Coal Flat and invented Mr Tribe, I suppose that in a general way I incorporated the popular right-wing radicalism of Rob in Mr Tribe, but it is clear from the physical descriptions I gave Mr Tribe I had a different figure in mind, and if I had thought of my tent-mate of 1945 I would have given Mr Tribe a different physical appearance.

“P.S. ‘Fretful Sleepers’ is partly based on my close contact with NZ troops between 1942 and 1946, not just [Corporal Rob] of course, but he would be included. …
…
“Mr Tribe I did not see as modelled on any individual I had met but as a sort of generalized construct of my own, embodying an attitude or a tendency. I saw Mr Tribe as representing broadly a move away from old-fashioned conservative probity and a prelude to Sid Holland.” ( pers.comms. 23.2.95 and 6.6.96. original’s emphasis.)

So there is a real sense that Muldoon, if that who Corporal Rob was, is a significant progenitor of “Fretful Sleepers”, moreso than Holland. In which case Pearson is the prophet long before Baxter or Stead – not that priority matters. It would be an extraordinary coincidence though if Corporal Rob were Muldoon, for it would imply the politician impacted on the New Zealand intellectual community from the early 1950s. But even if they are not the same person, the conclusion that Muldoon represented a genre would be reinforced.

With the passing of Muldoon, will there be a passing of the political despot? Already there are politicians who have been marked as Muldoon’s successor – no doubt there are more to come. One might argue that they are much less likely to become prime minister in the future. The Germans adopted MMP to prevent the rise of another Hitler. Moreover there are now examples of other styles of successful New Zealand premiers: Holyoake and Jim Bolger, since he deposed Ruth Richardson, have both been consensus, rather than populist, driven.

But even if the despot cannot practice so easily, the image is unlikely to easily disappear, especially as long as “Rob’s Mob” continues in some form, seeking a populist leader. There remains the division in New Zealand that “Fretful Sleepers” describes: of an anti-intellectual and intolerant public, and an intellectual community which is isolated and yet, as Pearson describes, having a “number of attitudes they have carried over from the community they feel emancipated from” (p.24). There is a superciliousness of many intellectuals towards their fellow men and women. Many will uncritically reject my suggestion that Muldoon had some of the characteristics of the intellectual in its broader sense. The sales of an astonishing 35,000 copies of The Young Turk suggests that “Rob’s Mob” were not all illiterate oafs. Perhaps there is a point of engagement with many of them. It remains to awaken New Zealanders from their fretful sleep.

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Acknowledgements
I am grateful for comments and assistance from Elizabeth Caffin, Maurice Gee, Barry Gustafson, Roger Hall, Ray Harding, Keith Jackson, Colin James, Lawrence Jones, Fiona Kidman, Malcolm McLean, Vincent Sullivan, Bill Pearson, Roger Robinson, Karl Stead, Jane Vial, and those who attended the seminar at the Stout Research Centre. I am especially grateful for Bill Pearson and Karl Stead allowing me to quote from their correspondence to me.

Added in 2004: Barry Gustafson looked at the possibility of Pearson and Muldoon meeting in Italy while writing Muldoon’s biography. He thinks not.

Appendix
Works which might be said to contain Robert Muldoon as a character:
B. Pearson, Coal Flat (Heinemann: 1963) – Mr Tribe.
C.K. Stead, Smith’s Dream (Longman Paul: 1971) – Volkner.
W. Maughan, Good and Faithful Servants (Cape Catley: 1974) – Sir Harry Drinkwater.
J. Calder, The Man Who Shot Rob Muldoon (Dunmore: 1976) – in person.
M. Gee, Games of Choice (Faber & Faber, 1976) – dog called Muldoon.
Scriptwriter of A Country Practice (Australian radio drama series, 1980s) – a local councillor called Muldoon.
P. Temple, Beak of the Moon (Collins: 1981) – Highfeather.
G. McGee, Foreskin’s Lament (Price Milburn with VUP:1981 – First played, 1980) – Clean.
M. Thompson, The Great New Zealand Truth Show – (published in Passing Through and Other Plays , Hazard Press:1992- first played 1991) – in person.
R. Hall, The Rose (Playmarket) – Leader.
M. Gee, Sole Survivor (Penguin: 1983) – in person, and Duggy Plumb.
K. Ovenden, Ratatui (Benton Ross: 1984) – Kevin Grogan.
B. Jones, The Permit (Collins: 1984) – The Prime Minister.
N. Templeton, The Firebird (Hodder & Stoughton: 1995) – Howie Hall.

Endnotes
[1] My version is from Fretful Sleepers and other Essays (Heinemann Educational Books, 1973), which reprints the essay republished with corrections in Landfall Country, ed Charles Brasch (Caxton Press, 1960).
[2] Keith Sinclair describes him as “bullying, rude and crude.” One cannot help wondering whether Sinclair had a contemporary example in mind when he wrote this.
[3] Stead says that he “once told John A Lee that Volkner had some of the characteristics of Savage. I meant, of course, not V’s right wing ideology, but his avuncular radio manner; but Lee was so pleased by this that he told other people that Volkner was a portrait of Savage as a dictator.” pers. comm. 19.1.1995.
[4] The first sequence in Bill Oliver’s Poor Richard (1982) ends “Poor Richard. William. Michael. Norman. Rob.”
[5] See L. Jones “From Fretful Sleepers to Juice Extractors: Versions of the 1951 Waterfront Dispute in New Zealand Writing, 1952-1986”, in Journal of New Zealand Literature, December 1994, p.135-159, for an account of the literary response to the Waterfront Dispute.
[6] Robert David Muldoon (1921-1993), member of parliament 1960-1992, prime minister 1976-1984.
[7] Muldoon also appeared in person as the narrator (?) in a version of The Rocky Horror Show in the mid 1980s. Who was sending up who?
[8] Possibly at the time the book was conceived the prime minister was Norman Kirk. Even so the title with “Norm Kirk” would not have had the same menace.
[9] Ratatui characterizes the Wellington Network, that collection of intricate personal and political relations which are integral to the political process in New Zealand. If Maughan humorously portrays the Network: Ovenden seriously describes it – he is, after all, a political scientist.
[10] Exodus 20:5, 34:7; Numbers 14:18; Deuteronomy 5:9.
[11] Roger Douglas is the son and grandson of Labour MPs.
[12] Marilyn Duckworth’s Disorderly Conduct (1984) and Fiona Kidman’s True Stars (1990) are Muldoon-less accounts of The Tour. So might be Stead’s All Visitors Ashore, with Holland as a proxy for Muldoon.
[13] Perhaps the first book was Bob Chapman, Keith Jackson, and Austin Mitchell’s New Zealand Politics in Action: The 1960 General Election (1963), primarily for an academic audience, with Ian Templeton’s and Keith Eunson’s Election ’69 (1969) the first popular book.
[14] Both Geoffrey Palmer and Simon Upton have written non-autobiographical books on political issues.
[15] Retired politicians who have written memoirs include Lee, Marshall, Ruth Richardson, and Hugh Templeton. Lee also wrote The Politician in, perhaps, the 1970s but not published until 1987.
[16] Were the Vietnam debates the public’s first major experience of the “real Muldoon”?
[17] Les Gander and George Gair.
[18] e.g. Muldoon, p.14.
[19] Analysis: Shrinking of the State, BBC News and Current Affairs, 13 July 1995, p.15-16. For a more detailed account of the Douglas philosophy see Roger O. Douglas, Unfinished Business (Auckland, 1993), p.215-238, and Easton, B.H. “How Did the Health Reforms Blitzkrieg Fail?” Political Science, Vol 46, No 2, December 1994, p.214-233.
[20] “… to Louise Callen, who wrote the book with me …” (p.vi)
[21] This summary comes from the book cover.
[22] One must report that Said also shifts between these two accounts of the intellectual’s role in his lectures.
[23] Also on the cover.
[24] True Stars might well be ‘woman alone’.
[25] It is perhaps instructive that the sequels to the Temple and Ovenden novels, Dark of the Moon (1993) and O.E. (1986) are less political novels in the sense we are considering here.
[26] Another honourable exception is Patricia Grace’s Potiki (1986), written at the end of the Muldoon era, which has little reference to malevolent individuals, but like Crime Story the pressures come from “fast money”. However it is local rather than national politics.
[27] Surely it is a coincidence that Howie (Peet) is also character in Crime Story? One might want to draw links between the prime minister in 1981 and the financier a decade later, but I think not.

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An Unstable World Economy?

This entry was posted in Listener, Macroeconomics & Money on by .

How Does the State of Major Economies Affect Us?

Listener: 5 August, 1995.

Keywords: Macroeconomics & Money;

The world economy is not in robust state. Some of leading commentators are muttering about the fragility of the Japanese economy and stagnation in the US one. There is usually one major economy which is worrying, but my concerns here are more about the fundamentals, most notably the very high world real interest rates.

In the 1980s world real interest rates rose by about 5 percentage points. Today the world economy is growing at 3 to 4 percent a year, facing real interest rates above that growth rate. In such circumstances the investment is not profitable, and gets deferred threatening long run stagnation.

A short term measure is to squeeze wages. In most countries real wages have not risen, or have fallen, over the last decade. It is possible for rapid technological change – perhaps like that in the information technology revolution – to support high interest rates for a period, but a high rate of innovation does not go on forever.

Eventually the financiers turn to property and financial speculation where capital gains can cover high interest rates in the short run. In the long run the gains reverse into losses and there is a financial crash, as occurred in 1987. Fortunately buying by Japanese investors underpinned the American financial markets so the bust was not as catastrophic as it could have been. This may well have been one of the great turning points in world history, for suppose there had been a major financial collapse in America, rather than the uncomfortable but limited fall that actually happened. Would the Berlin Wall have fallen? Would the second world of Russia and its empire have disintegrated so quickly?

It may well have been a closer run than it seemed even at the time. It was thought then that the Japanese financial markets were not totally sound, subject to a similar overvaluation of assets and excessive gearing of debt that American (and, to a far greater extent, Australasian) financial markets suffered in 1987. But because they retained confidence, supported by an accommodating Japanese Reserve Bank, Japanese financiers were able to buy stocks and shares in the US, steadying the collapse. It now seems that the Japanese financial markets were in a worse state than the American ones. Recently the Japanese monetary authorities have been trying to correct the imbalances by a steady squeeze, but their productive economy is suffering as a result too.

Suppose something were to go desperately wrong in Japan. Would the Americans be able to bale them out, returning the 1987 favour? The answer is only “perhaps”, for there is a serious structural problem which the US economy faces, and which causes high real interest rates. Since Reagan’s tax cuts of the 1980s, the US government has been running an unsustainable budget deficit. The largest economy in the world has had a savings deficit, and the scramble for the reduced volume of savings pushed up world interest rates. So severe has been this deficit, that the world’s largest creditor nation at the beginning of the Reagan era became, eight years later, the world’s largest debtor nation by its end.

As much as one may worry when a small economy such as New Zealand runs unsustainable budget deficits year after year, it is a couple of magnitudes worse if the largest economy in the world does this. The US is the banker to the world, with the US dollar as the currency of the world. In the short run that makes it easy for the US to run a huge deficit, for it can finance it by issuing its own currency. In the long run no one can be happy with a banker whose finances are in such disarray, unable to take measures to address them, except with promises to do so in a decade or so. If the Japanese financial markets crash, then the banker of the world is not well placed to bail the it out. It may not be able to.

This is all very speculative. I dont wake up each morning wondering whether the Tokyo financial markets went down over night, any more than a seismologist asks whether there was an earthquake there. But neither of us will be surprised if our worse fears happen, and are grateful they have not happened yet.

Nor need the collapse, if it does happen, occur in a predictable mechanical way. One possible scenario is hyper-inflation which reduces the value of the dollars that Reagan and his successors have unloaded on the world. Another is depression.

Whatever happens after a crash, New Zealand could suffer badly from any international fallout. That is one reason why I support the running of a budget surplus here. An internal surplus and reduced public debt gives us more room to move. But I am becoming increasingly worried about our large balance of payments deficit, which is being covered by overseas borrowing overseas. The private sector (you and me) is not saving enough. The external deficit presents a national danger even if the world economy remains stable. That danger belongs to another column.

Working with the Maori: Consultancy, Research, Friendship.

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

Seminar presentation at the NZIER, 2 August, 1995.

Keywords: Distributional Economics; Maori; Political Economy & History; Social Policy;

The seminar is the result of an invitation by the director of the NZIER, John Yeabsley, to describe some of my work with the Maori, especially in terms of the challenges I have experienced as a research economist and social statistician. The material presented here is primarily that which is on public record. Some confidential work is omitted. However while it is of interest and has been challenging, the work broadly covers the same areas as are in my public record. Some very small projects are also omitted.

Perhaps I should record my introduction to working with the Maori. It occurred in Wellington airport when I was returning from giving evidence to the Royal Commission on Broadcasting.[1] One of the issues I had been thinking through was the question of the ownership of the airwaves, because the Treasury evidence had automatically assumed they were the property of the Crown, and could privatize it. Professor Whatarangi Winiata, who was on the New Zealand Maori Council, was going the other way. I said to him – lightly at the time – that I thought the Maori had a good case for claiming the airwaves as their property under the Tiriti o Waitangi. This led to an invitation to assist the Maori with their broadcasting claim, described below.

Property Rights over Resources

The Maori have claimed a number of resources under article two of the Tiriti, which guarantees their rangatiratanga. Ultimately any claim will be settled by public policy, perhaps through the courts, preferably in an equitable and sustainable manner. To do this the principles which underlay the public policy need to be clarified. In practice this means identifying the property rights associated with the resource, and relating this to the provision of article two, especially “taonga katoa” – all treasures. As a result I have been consulted on the following resources:
– radio frequency spectrum (RFS)[2];
– geophysical resources[3];
– Te Oneroa-o-Tohe (Ninety Mile Beach)[4];
– fishing[4],[5];

For the economist land is rarely an issue, since it’s resource status is not disputed, although the history of its ownership may be – and often is. However the theory of property rights comes from land, although it is well developed beyond that today. So my work was in that foundation area of “law and economics” using, for instance, Richard Posner’s Economic Analysis of Law. However the tradition of law and economics tends to be mono-cultural – some would say imperialist. My task was to meld it with a different culture. This included close analysis of the Tiriti (to which I will return) and reference to traditional Maori economic practice, using especially Raymond Firth’s Economics of the New Zealand Maori. A key conclusion is that for economic purposes rangatiratanga is not the same notion as ownership. In some respects it subsumes the notion, in another respect ownership can include rights and powers the rangatira did not have (or had devolved). A similar situation applies in the English notion of the royal prerogatives over land. [2:12-15]

My first, and perhaps the most challenging, case was the Maori claim over the airwaves. The story is too tortuous to report here ending up in the Privy Council. My task was to give the Maori account of the economics (and related disciplines) in their claim. [2] One problem was that the Maori did not know about the radio frequency spectrum in 1840, but then neither did the British signatories or anyone else. The issue here is what did the Tiriti say about resources which were not identified at the time? As second problem was whether the RFS was a resource at all. (My answer is that if something could be privatised, then whatever was being privatised was a resource.) This led to one of those instances that need to be recorded somewhere.

It involved negotiations between the Crown and Maori Council representatives, at which I was present. A Crown official was arguing that some physicists did not think the RFS physically existed, the point being – as I understand them – the RFS is a mathematical construct rather than a physical reality. If this were true, it would be hard to claim rangatiratanga since the construct was created by mathematicians after the Tiriti was agreed. We tossed the notion around a little – other scientists disagree – and a little after the Council chief negotiator, introduced the Maori creation myth of Rangi and Papa, making the point that all things which were created by God (including the RFS) were in the dominion over which the Maori were given rangatiratanga. Again the issue was tossed around, and then we broke for a lunch, which began, as is the Maori custom, with a Christian karakia. So within not much more than a quarter of an hour we had moved from high science, to traditional Maori religion, to Christian practice, a contrast with the mono-cultural approach that an economist is typically involved with.

Sometimes the non-Maori pour scorn on the Maori for some of the apparently odd claims they make. But listening carefully, the situation can be as odd from the non-Maori side. Here is a case, again from the Maori claim over the broadcasting spectrum.

The Pakeha [a member of a parliamentary select committee] asked the Maori. “Do you claim all the airspace?”
“We claim rangatiratanga of all the space between Papa and Rangi.”
“Even that which the Russian sputniks go through?” [He was a national MP.]
“Yes. The Maori recognise no boundaries. Even for the realm of Tangaroa. Perhaps if the Maori had been negotiating the Law of the Sea, the outcome would have been different.”
The Pakeha looked at the Maori with amazement, concluding if I judge his expression right, that the Rangatira – despite his American PhD – was not quite with it. The claim over expanses over which the Maori had no statutory authority and no means of policing seemed ludicrous.
The very same week the New Zealand government signed an international declaration which prohibited drift net fishing in waters well outside our 320 kilometre limit, and far beyond that realm our navy could plausibly police. Yet no-one, Pakeha or Maori, concluded the agreement was ludicrous, or the Prime Minister who sponsored it – and who also has an American doctorate – was not quite with it.[6]

The detailed argument for the Maori claim for rangatiratanga over the RFS is set down in the Tribunal evidence. [2] At this point I note that the other resources listed above did not prove nearly as challenging to argue a case. However I should add that in a number of other cases of privatization, typically involving state assets created since 1840, the Maori asked me whether they might have a legal case for ownership under the second article. My usual conclusion was not. Rarely did a significant claim proceed (although almost certainly that was due to factors more than any advice I gave).

Maori Development

It was the Muriwhenua (the most northern iwi (1)) claim to Te Oneroa-O-Tohe, which led me into my having to think about Maori economic and social development via the question of compensation. Initially I was asked to elaborate the nature of property rights involved with the beach – a cinch in comparison to the airwaves – but the question of appropriate compensation for the loss of these rights arose.

Where an asset is of no commercial value, but of great significance to the Maori – perhaps wahi tapu – the remedy for a claim is relatively straight forward, although even here one may ask whether there should be some payment for the use of the asset before the return (and what is the appropriate compensation which may not be cash). However where the asset is of commercial value, any Maori loss of the use of that asset also meant a loss of income, which could have been reinvested to generate a substantial capital sum, often much more than the value of the asset itself, as the following calculation shows.

Consider an asset which was alienated 150 years ago. Suppose the true value of the asset had been reinvested at a real interest rate compounding at 3 percent per annum. Today the sum would be around 84 times the current value of the asset. (2) Merely returning of the asset would miss the true compensation by a factor of 83.

Crucial to this calculation is the real rate of return. In principle the return of financial assets can be calculated using historical data, although there are complications over the choice of investment portfolio and the treatment of taxation. However it is reasonable to assume that had the Maori the money they would have invested some of it in the education and health of their people, and we know this gives a substantially higher return than on financial assets. The calculation gets murkier when we allow that under such a scenario Maori mortality might have been lower, and the population larger, although the possibility of any earlier convergence with non-Maori fertility and hence a lower birth rate has to be allowed for. Very soon we are evaluating an extremely controversial counterfactual scenario with enormous ramifications.

I turned to a different approach. Certainly wherever possible improperly alienated assets should be returned to the Maori, or a cash (or other) compensation offered if that is not possible. If that was not sufficient, what other criteria might we use?

It is a matter of record that the Maori standard of living was not dissimilar to the European settler one in the middle of the nineteenth century. Today the Maori has a lower attainment on most socio-economic indicators – income, employment, human capital, health (see below). We might ask what measures are necessary to raise them to the national average, say, income. Full cash compensation is impracticable – some crude estimates I made suggest it would involve a lump sum of around $90 billion, more than total annual GDP. Instead I suggested there should be compensation by some sort of development strategy which would aim to take them to relevant socio-economic status variables similar to the non-Maori. Realistically, since it has taken 150 plus years to depress their standards substantially below that of the non-Maori (discussed below), it is likely to take another 150 plus years for them to attain parity.[7]

The content of the development plan called upon the extensive literature in economic development. A couple of points here. Most of my work has been in rural areas, where the literature is more immediately relevant, although increasingly the Maori are an urban people. One of the issues the Muriwhenua, and most other iwi face, is that their rohe (traditional iwi area) is no longer the place where the majority of their people live. I have not really addressed the issue of an urban development strategy yet. That is going to be quite a challenge.

Second, there is a tendency to over emphasize the return of the land in the remedy. This is understandable for a people who have sentimental attachments to it, and whose elders observed that the successful people in the rohe were farmers (some were farmers themselves). However the new economy is one where land is much less important, and where technology, human capital, and physical capital is key. I have been especially anxious that the Maori appreciate the significance of education, training, and health in their development strategies.

There is a point here, well established in the development literature, that development changes the power relations within the village or whatever. In regard to a human capital strategy it empowers the young relative to the old, and women relative to men Although older men may still remain the most powerful, other groups may gain a greater share of the power. Add in the differences between those in the rohe and those without, and there may be a complex tensions coming out of any settlement with the Crown. (Another complication is the treatment of Maori in the rohe who are not tangata whenua.)

Even if we confine our concern to the rohe of the iwi, the economic strategy has to be broader than land development, including research to improve the productivity of the farm land, and infrastructural investment. (The Far North has tended to miss out on both because it is on the regional margins of New Zealand. Iwi in Taranaki, East Cape, and the centre of the North Island could make a similar claim.) Other land uses may be more relevant – forestry, minerals, horticulture (rather than traditional pastoral farming), and tourism can all be important land uses, while fishing is also important. The Maori might also have a strategy which will tradeoff employment against output/profit.[7]

Sadly, the Muriwhenua claim is still some distance from the completion of hearings, and even further from any settlement, so that the question of development has not been addressed yet. To my mind there is some urgency and the Crown would do well to begin some measures -perhaps as a regional development initiative – immediately. (3) I am looking forward to the next stage in the work because it involves the task of evolving a practical development strategy, whereas till now my work has been largely textbook.

Of course the question of appropriate regional development is a development economics issue, complicated in New Zealand’s current state both by an unwillingness to intervene (even in a moderate manner), and the downward pressures on government spending. There is an understandable perception by the Maori that they have been major losers out of the economic reforms.

Other development I have been involved with has been more limited. It included advising an Arawa iwi, Ngati Rangiteaorere as to the development options on their Te Ngai farm had been returned to them.(5) I also worked for Auckland Casino Ltd, which included Maori in the consortium, on their unsuccessful claim to convert the Auckland Railway Station into a casino, although this was a fairly straight forward case of economic evidence in a property development.

There have also been various tasks which amount to valuation of the lost in a context where the property involved is fairly simple, although there may be complicated issues as well. In the case of the settlement between the Maori and the Railways Corporation I was involved in setting out the conceptual schema on which the resolution of the land claims was based.

Statistical Analysis

I am also a professional statistician, and some of my work for the Maori has used those skills as much as my economic ones. Three salient examples have been:

I appeared before both the Waitangi Tribunal and the High Court in the Maori grievance of the treatment of the Maori Electoral Enrolment Option. My work included a comparison of the Crown expenditure on this campaign in relative to other campaigns, an estimate of the numbers of Maori who were not on the electoral roll or were not identified as Maori on the roll, and a summary of the implications of the new system for Maori politics.[8]

The Waitangi Tribunal commissioned me to convert data available from the 1991 Population Census (the first census to ask iwi affiliation) to a Iwi Data Base, useful for investigating the socio-economic status of iwi or combinations of iwi.[9] Ultimately the data base could be used, say, to evaluate how different the Muriwhenua socio-economic attainment is from nation-wide and all-Maori attainments – a conclusion likely to be useful for assessing compensation and development strategies. One of the tasks of data base construction is the development of access protocols.

There is a particular ethical issue worth mentioning. Data bases have (or should have) strong privacy protections for individuals (and usually corporations) but not, for instance, regional communities. We may ask what is the appropriate treatment for disclosure of information about an iwi, which have some of the characteristics of individuals (of families, insofar as they typically are the descendants of some – often eponymous – ancestor) and corporations. This is something for the Maori to decide themselves, but until they do I have suggested access to iwi data in the data base be limited to the individual iwi, and to those whose access it approves.(6)

I would add that once we have got through these questions of kawa, we also have a very powerful means of investigating some general features of the Maori experience, since the current socio-economic status of any iwi is in part a reflection of its historical experience.

Another task involved Maori and smoking, which arose while I was using Census data to estimate longevity by whether one has ever been a smoker. This was possible because the 1976 and 1981 censuses asked questions on individual’s smoking behaviour.[10] The following tabulation summarizes the outcomes by all New Zealanders and by Maori.

LIFE EXPECTANCY: Years at Age 25
Never-Smoker

Male Female
TOTAL 60.2
MAORI 58.7 65.3

Smoker

Male Female
TOTAL 43.7 44.6
MAORI 35.4 41.5

Source: [10]

The tabulation indicates the devastating impact of smoking on Maori longevity – in part because they smoke more and are less likely to quit – cutting back their life expectation by about 23½ years at the age of 25, in contrast to the 13½ shortening for the whole population. The good news might be that Maori never-smokers live longer than the rest of the population, although this might be an artefact of sampling error. Given that much higher proportions of Maori smoke, the implication is that there are considerable gains to be made in Maori health from successful anti-smoking campaigns, something which in recent years the Maori have recognized and are beginning to undertake.

I might mention that an ongoing problem for a statistician is definition of Maori, through time and across data bases. Any melding must be done with the greatest caution.

Maori Socio-Economic Status

A lot of my work as a social economist has been about measuring socio-economic status variables, trying to identify their determinants, and evaluating policies which influence outcomes. Thus I have had a long interested in Maori socio-economic status both for its own sake, and to provide insights into the social processes which drive all socio-economic status. One has to be careful not to exploit the Maori data for selfish or purely academic reasons, independent of the interests of the Maori. So over the years I have been hesitant to put too great an effort into Maori statistical analysis, unless I have their support. On the other hand it would be unacceptable to do some of the population-wide work I have, without commenting on the particular circumstances of the Maori. It is a fine balance, so I have cautiously reported Maori socio-economic variables, especially income, in a number of wider studies,[11],[12][13][14] and indeed used them in some of my work for the Maori.[4],[10] A major problem is that often the number of Maori in a sample survey such as the Household Economic Survey and to the Household Labour Force Survey is usually too small to be statistically reliable.[15]

An example of the work is that in the seventies I suggested the “rule of three”, that there are proportionally three times as many Maori in deprivation as non-Maori.[11] However I can report on some measures there appears to be some relative gains over time, with age adjusted male incomes rising from 66.4 percent of the average in 1951 to 81.6 percent in 1986. [12],[14]. However there is evidence that Maori household incomes tended to fall in the late 1980s.[13]

Recently I was commissioned by Te Puni Kokiri to provide a report on Maori labour force status, using data from the Population Census. I had also some econometric work by Diane Craig of Statistics New Zealand. It was an invitation I accepted with alacrity. I took the task to be one of providing new insights, rather than repeating the conventional wisdom. The report is too complex to summarize here, but it involves a conceptual approach of some interest to economists.[16],[17]

What I found was that there were substantial differences in labour force behaviour between the Maori and non-Maori which I explained by social (including cultural) differences. Economists, especially under the leadership of the Gary Becker, have tended to ignore cultural explanations of economic phenomenon. I could have used the standard Chicago School explanation that the differences were the effect of discrimination (defined very narrowly by them). Instead I argued that the individual Maori is in a different social environment to the non-Maori. For instance evidence from overseas studies suggests that family and friends are a major means of successfully find work. If the social context is of a circle who are also unemployed, the chances of finding work are reduced, and likelihood of unemployment increased. (Another consequence of this work is that for cross-cultural comparisons it makes more sense to look at the variable Not-in-Employment as a proportion of the relevant population, rather than the unemployment rate, because disguised unemployment is partly a cultural dependent phenomenon.

My approach disturbed some economists, so committed are they to the Chicago School methodology. Yet curiously even the Chicago School would not insist on the same explanations for male and female labour force behaviour. Their different social situations mean that participation rates, for instance, are quite different, and address their policy needs in different policy way (e.g. early childhood education). What I was doing with the Maori was no more than hypothesizing Maori males (and females) are in a different social situation to non-Maori males (and females), just as males are in a different situation to females. (Indeed one of the investigatory approaches on the Maori used precisely the same method as would be done for females, except in this case the outcome is so routine that no one would think the commissioning worthwhile.)

That does not mean that racial discrimination is irrelevant. However this richer approach suggests new policy possibilities: should the Maori be running their own labour exchanges, or at the very least have the notion of finding work for your mates inculcated to them as deeply as it is to a middle class pakeha family. If there is racism, its most blatant form is surely the claim that Maori social and cultural differences are not relevant.

Historical Research.

Traditionally history was an integral part of economics. My work on the Maori has led to two (or three) useful historical developments.

First I have probably integrated the Maori up to the nineteenth century into our economic history as well as any other New Zealand economic historian.[15],[18] At least part of the insights came from the consulting work requiring me to think about nineteenth century the (Muriwhenua) Maori economy, and the pre-market Maori economy.

The second (two) insights came from having to think about the Tiriti o Waitangi, especially the interpretation of the rangatiratanga provisions in article two in relation to the kawanatanga provisions of article one. The first is that the Tiriti appears to be, and appears to be conceived to be, almost exactly a social contract in the tradition of Thomas Hobbes, John Locke and Jaques Rosseau.[19],[20],[21] Even since my last version of the paper, there has been more evidence which further supports its conclusion.(6)

The other finding is in a sense even more surprising. It is often stated that there are two versions of the treaty of Waitangi, and English language one and a Maori language one. The historical evidence is clear. There was only one version agreed at Waitangi, the Maori language one. What we call the English language version is an early draft of the Maori language Tiriti, and had no legal status – and only a little historical status – before 1855, when it was formally incorporated in law by the colonial government.

Both these items refer to events now over 150 years old, and their significance today is unclear, or what we wish to make of them. Perhaps the point to be made here is that being a good economist is not being a poor mathematician, nor an accountant with a little intellectual ambition. The profession has a tradition where history and political theory are an integral part.

Conclusion

I have been lucky to have had so much consulting work with the Maori. Most of it has been intellectually challenging, using a wide variety of economic ideas in innovative ways, and leading to research insights, many of which I have been able to publish.

I would add that perhaps the work has not always been financial rewarding as standard consultancy work. There is no economic theorem which says the justice of one’s case guarantees the means to finance the transaction costs to pursue it. I recall a Maori lawyer leaving by car at 4 o’clock in the morning for a tribunal hearing in the Hawkes Bay because the client iwi could afford neither air tickets or hotels, even though their grievance was outrageous. I do not want to suggest that all the work has been financially disastrous either, but there have been other compensations, even above those of helping some remediation of injustice.

In particular I have enjoyed enormously working with the Maori, often in locations I would not normally visit. It has been a pleasure to enjoy their hospitality and their friendship. This has been particularly important to one who grew up in Christchurch in the 1950s, with nary direct Maori experience, and who is still unable to speak their langauge, because – it would seem – a linguistic ineptness – for I have tried to learn. Even today when I go awkwardly onto a marae I am aware that I am a guest, but it is always a welcome one, in which my inadequacies over the kawa are tolerated to be overwhelmed by a kindness and generosity.

One day I should like to write a book about my work with the Maori. It will be to share with a wider audience the experiences and the insights the Maori and the work has given me to and to say thankyou to the Maori for the pleasure and privilege of working with them. This paper is perhaps a feeble memoir of some of the things I want to tell.

References
1. Throughout this paper “iwi” refers to “tribe” or “tribes”, and not to “people” or “nation”.
2. Assuming its price had increased at the same rate as the underlying rate of inflation.
3. There is a story attributed to John Kennedy of his coming across a gardener who had dug a hole to plant a tree in the White House lawns. When asked why he had not completed the job, he explained it was late in the day, and the tree would be planted tomorrow. In any case it would take the tree 150 years to grow to maturity. To which Kennedy is said to have replied “then you should then have planted it yesterday”.
4. The farm is just to the north of the Rotorua Airport, before the junction of the roads to Tauranga and Whakatane from Rotorua. The most visible indication of the change is the forest nursery on the flats to the immediate east of the road.
5. I tested the data base with the Nga Kohere-iwi, those who reported they had no iwi affiliation
6. It turns out that James Busby, the drafter of what is called the English version of the Treaty, was actively commenting on the “social compact” in his diary and letters.

Bibliography
[1] Evidence to the Royal Commission on Broadcasting and Related Communications, NZIER Working Paper 86/12, Wellington. (1986)
[2] A Pakeha Economist’s Perspective on the Maori Broadcasting Claim, commissioned by the New Zealand Maori Council, Wellington. (1989)
[3] A Pakeha Economist’s Perspective on the Maori Geothermal Claim, report to the Waitangi Tribunal (Wai 153), Wellington. (1993)
[4] Evidence of Brian Easton with Respect to Te Oneroa-o-Tohe, report to the Waitangi Tribunal, (Wai 45), Wellington. (1991)
[5] e.g. Property Rights and the Maori Fishing Deal, (although I have not had a major role in this extensive dispute). (1994)
[6] “The Green Maori”. Listener, May 14, 1990, p.96.
[7] Te Whakapakari Paapori, Ohanga o Muriwhenua: Towards a Development Plan for the Muriwhenua, report to the Waitangi Tribunal, June 1993.
[8] Evidence of Brian Easton to the Waitangi Tribunal on the Matter of the Maori Enrolment Option, report to the Waitangi Tribunal (Wai 413), paper A13, Wellington. (1994)
[9] A Data Base of Iwi, report (and disks) to the Waitangi Tribunal, Wellington, May 1995.
[10] “Smoking in New Zealand: A Census Investigation”, Australian Journal of Public Health, Vol 19, No 2, 1995, p.125-128.
Social Policy and the Welfare State in New Zealand, Allen & Unwin, Sydney, 1980 p.36-41.
[12] Income Distribution in New Zealand, NZIER Research Paper No 28, Wellington, 1981, Chapter 12.
[13] “The Economic Distributions”, in A. Bollard, R. Lattimore, & B. Silverstone (eds) A Study of Economic Reform: The Case of New Zealand, North Holland, 1996, p.120-121.
[14] In Stormy Seas: The Post-War New Zealand Economy, Otago University Press, Dunedin. Appendix 1: The Social Impact. (1997)
[15] Shirley, I., B.Easton, C.Briar, & S.Chatterjee , Unemployment in New Zealand, Dunmore Press, Palmerston north, 1990, p.126-127.
[16] The Maori in the Labour Force, A report commissioned by Te Puni Kokiri. (1994)
[17] “The Maori in the Labour Force”, in P.S.Morrison (ed) Labour, Employment, and Work in New Zealand: Proceedings of the Sixth Conference, Victoria University of Wellington, Wellington, 1995, p.206-213.
[18] Towards a Political Economy of New Zealand, (1994 Hocken Lecture), Hocken Library. Dunedin, 1995.
[19] “For Whom the Treaty Tolls”, Listener, February 5, 1990, p.116.
[20] Contract, Covenant, Compact: The Social Foundations of New Zealand, address to Spring Lecture Series of St Andrews Trust for the Study of Religion and Society, published in Socialist Politics, Issue 90/3,4. (1990)
[21] Contract, Covenant, Compact: The Social Foundations of New Zealand, revised version of address to St Andrews Trust for the Study of Religion and Society. (1994)

Properly Assessing Income Adequacy in New Zealand

This entry was posted in Distributional Economics on by .

New Zealand Economic Papers, August 1995, p.89-101.(1)

Kewords: Distributional Economics;

Abstract: This paper is a response to “Assessing Income Adequacy in New Zealand”, by Edith Brashares. Despite the paper’s claim to involve “empirical” assessment, her methods rely primarily on not very plausible assumptions. This paper reviews them, reaffirms the main New Zealand development of the assessment of income adequacy which the original paper all but ignored, and concludes with a brief discussion on the role of introspective analysis in economic science and social policy.

I. Introduction

Over at least the last two decades there have been systematic attempts to assess income adequacy in New Zealand. “Assessing Income Adequacy in New Zealand” (Brashares 1993) dismisses them – and misrepresents – in a single sentence “the approach … that adopts the benefit level as the standard is not included” (1993:186). Instead the paper returns to a procedure which was considered and superseded twenty years ago. This paper reviews the Brashares approaches, showing how subjective they are, and restates the alternative approach which replaced them. In the final section the methodological underpinnings of the two approaches are considered. The paper is primarily one of method, and the exact income adequacy line is not the main concern.

While the adequacy aspect of the paper is the focus it should be noted that the paper contributes to an established New Zealand research program of investigating the anatomy of the aggregate income distribution, especially of low income people (e.g. Bevin et al 1978; Department of Statistics 1990; Easton 1976, 1991b, 1994, 1995; Mowbray 1993; NZPC 1988, 1990; Snively 1986, 1987, 1988). An especially valuable aspect of the study is that it is an early attempt to assess the impact of housing assistance, as well as the greater level of detail.

The Brashares paper uses three general types of standards to determine income adequacy, which are discussed briefly below, plus the household equivalence scale used. All exhibit the same underlying methodology of arbitrary assumptions.

II. Food Standard Based Criteria

“The food share standard is based on the cost of food where these costs are converted by a multiplier, the inverse of the Engel coefficient, to total income levels.” (Brashares 1993:189). The chosen bundle of food is a “minimum”. The particular total comes from the FOCAS Information Service of the University of Otago, who regularly value a food plan of the Department of Health at local (Dunedin) prices.(2) The paper then adds an adjustment for “household consumption economies” by deducting 20 percent for the amount for two adults and two ten year old children.(3) The deduction quantum is derived from an American study.

The level was checked against the provision of food for the prison population. The text is obscure as to how this was done, but Brashares and Aynsley reports for the March quarter 1990, “the average cost of feeding a prisoner was $27.09 per week. Increasing this value by 25 percent to adjust for the significant economies an institution can reap,(4) this works out to $33.86 per week or roughly the same amount as the basic food plan.” (1990: Annex 4:2) There is no adjustment for food grown within the prison, for gifts of fruit to prisoners by visitors, and for prisoner purchases of food from their pocket money. In fact the basic food plan for males was $32.05 for an adult man and $29.47 for an adult woman, (5) an average of $31.93 weighted by the gender balance in prison. Ignoring any extras the prisoners had, they were still getting 6 percent more food than the basic food plan. (6)

Three multipliers were used – three, four, and five. The diophantine emphasis on integers is intriguing. It is clearly unnecessary, since the Royal Commission on Social Security recommended a $20.00 benefit level when the average weekly food costs for an adult was $3.93, (7) a non-integer ratio of 5.09. In any case food prices do not move precisely with overall consumer prices, so either the income adequacy line would have to be updated by the food price index (which would be odd), or if another index (e.g. the consumer price index) were used an integer in one year will be a non-integer in the next.

A further complication is how to apply the integer by gender. Most food plans have different levels for adult by gender (and some by age). If an average adult food plan is chosen, then different multipliers are being used for each gender. If there is an insistence on the same integer then men would have a higher income adequacy level than women.(8)

There is hardly any justification for the choice of integer in the paper. Brashares appears to favour “four”, saying that “three” may be too stringent (1993:190). But so might four, or whatever.

The method comes from Orshansky (1963, 1965). Her work is widely misunderstood. Previous to it, the discussion of the poor in America had been “centred about an ad hoc definition adopted in 1963. Under this definition a family of two persons or more with an income less than $3000 and one person alone with less than $1500 were considered poor” (1965:11). Orshansky was attempting to refine the measure. Even so she described her measures as “arbitrary” (1965:10), and “interim” (1965:12). Decades later Ruggles was to summarise her contribution as “[a]lthough Orshansky’s thresholds bore only a very approximate relationship to a `scientifically’ determined minimum level of subsistence, the fact they incorporate at least some adjustment for family size and composition made them an advance over much previous work” (1990:4).

Moreover Orshansky is not primarily using the measure to calculate the number of poor, but to identify the characteristics of the poor, the task to which the bulk of her 1965 paper is devoted. (9) Rereading her paper one is struck by the sensitivity, understanding, and intelligence of the author to the problems inherent in her method. In 1965 Orshansky’s work represented progress on what had gone before. That is not true a quarter of a century later.

In making these points I am not arguing that Brashares chose the wrong parameters. Stephens (1992) may have been more generous in his choice, but he is equally arbitrary because he is also making subjective assumptions without reference to the actual experiences of households.

The issue here is the methodology. That Brashares, Stephens, and others may argue over the parameters without any means of resolving the conflict is indicative of how pseudo-scientific the method is.

II. The Relative Income Standard

In this approach Brashares took as her standard 50 percent of the median disposable income. Again the figure of 50 percent (the inverse of an integer) is arbitrary, while the conceptually correct reference household is so problematic that Brashares uses two, that for a four person household and that for a three person one, again illustrating the subjectiveness of the approach.

III. Relative Earnings

Brashares misunderstands the Royal Commission on Social Security. Two benchmarks are used: the award rate for building and engineering labourers, and lower quartile male wages. In each case the benchmark proportion used by the Royal Commission was used (except that she uses the mean average wage rather than the lower quartile).

The Royal Commission did not intend these benchmark proportions to be used uncritically for two decades (1972:192), especially as they were advocating the introduction of a very different approach when data from the Household Survey became available. Moreover as Brashares finds the two benchmarks give quite different adequacy levels in 1990, differing by 11.4 percent, this being (roughly) the amount that average earnings have risen since 1971 relative to the labourer’s award. The Royal Commission’s choice of the two benchmarks was very dependent on the two levels being the same (1972:189).

Before turning to the household equivalence scale, it should be mentioned that Brashares almost expresses surprise that her various standards are close to one another. “Despite different methods, some of the standards are quite similar” (1993:193) and “[d]espite the different approaches the standards tended to cluster around the $12,500 p.a. and $15,000 p.a. levels for a family of four” (1993:186). This seems to be inconsistent with the argument that levels are based on arbitrary assumptions, although one wonders whether there is quite the clustering claimed for them. (10)

The paradox is resolved by distinguishing between “arbitrary” and “random”. The used parameters are subjective, but they were not randomly chosen, insofar as they are not independent of one another but chosen, probably unconsciously, to give a similar overall picture. Someone who felt more generous than Brashares could have carried out the same arbitrary methodology, but with parameters 25 percent higher, had levels in turn 25 percent higher, and professed the same surprise about the similarity of the levels.

IV. The Household Equivalence Index

In order to get from the family of four to other household composition, Brashares uses a household equivalence index, devised by Jensen (1978, 1988) She says – quite correctly – that the scale “is not generated from New Zealand expenditure data” (1993:187). Brashares and Aynsley is even more critical of the Jensen scale. “Surprisingly, his scale is not based on analysis of New Zealand expenditure data, but is more ad hoc in nature” (1990:24). The criticism applies equally to Brashares’ own work.

The pseudo-scientific nature of the approach is evident by going back to the original paper. Jensen writes down a mathematical function which requires two non-trivial parameters. The method sets the single adult household at .6 (i.e. relative to 1.0 for couples), and the two adult-four child household at 2, and solves to get the required parameters: one measures the economies of scale from living in a larger household, the other measures the relative weight in expenditure of a child compared to an adult. It could be said that the .6 comes from some empirical work, (11) but the 2 comes entirely from introspection as far as one can assess. Ten years later Jensen altered the scale, again with little reference to local evidence. (12)

There are a number of New Zealand Household Equivalence Scales which have a firmer empirical underpinning. It is useful to look at them in terms of the Jensen assumptions:

Parameters for Different Scales
Household Equivalence Scale

One Adult
Household		 Family
of Six
Jensen (1978) 0.60 2.00
Jensen (1988) 0.65 1.75
Easton (1973) (13) .64 1.83
Easton (1980b) (14) 0.53 2.07
Smith (1989) (15) 0.61 2.16

Parameter Estimates

Scale
Factor		 Child
Weight
Jensen (1978) .737 .781
Jensen (1988) .621 .730
Easton (1973) (13) .644 .778
Easton (1980b) (14) .916 .606
Smith (1989) (15) .713 .972

The effect of using the ad hoc Jensen scale rather than one of the more empirically based scales is to reduce the income adequacy level for large households relative to small ones. This has important fiscal implications since the social security benefit structure in New Zealand is based on a two adult household. Thus the Jensen scale justifies a lower child support than the empirical evidence suggests, keeping down spending on social security and also the replacement ratio (the benefit to earnings relativity) for families.

While the main point here is to emphasise the underlying methodology of introspection rather than any significant empirical basis, a double counting in the Brashares measurements should be mentioned. Earlier we noted she adjusted the food plan for a family of four for the economies of scale. She then applies the Jensen scale, which already has an economies of scale for food (among other things) built into it. If she had used single person households as the reference for the food plan, her deprivation levels would have been higher for the same integers.

To appreciate the total absurdity of the approach, consider what adjustments are necessary as user charges are increased. For simplicity consider if education was fully charged. How would that change the income adequacy measures, since evidently families now need more income because they pay school fees? There is no automatic mechanism in the determination of the Jensen household equivalence scale which would adjust for the change. Prima facie the measures would remain exactly the same. Brashares and Jensen could make a series of ad hoc adjustments to their parameters, but what principles would they use? At the end of the day their approaches involve a series of unstated and obscure assumptions, many of which are not value free.

The paper claims that Rutherford et al (1990) suggests that different equivalence scales will give broadly equivalent income distributions (p.187-8). My view of the same evidence is they do not, because the small differences shown in the tabulations can result in substantial differences in absolute numbers. Moreover the composition of those at any income level – say between households with children and those without – will be affected by the choice of scale. The referee, who raised this issue, noted that the paper cites Buhmann et al (1988) which demonstrates different scales leads to significant differences in the poverty profile across different types.

V The Royal Commission on Social Security

Superficially, the 1972 Royal Commission on Social Security might be seen to have carried out a procedure similar to that of Brashares. The Commission’s report looked at a number of income relativities – apparently a priori – selects a couple which seem relevant, and recommended a benefit level based on the designated earnings level. However this is a serious misrepresentation of the Commission.

Royal commissions take in evidence, sitting for hours listening to individuals and their representatives. Thus these commissioners were not a group of academics isolated in a Wellington building, but interacting, often on a daily basis, with people presenting submissions about their actual living circumstances. Twenty years on one can still capture the flavour of their situation by reading the evidence submitted to the Commission, and its record of proceedings. To appreciate the Royal Commission’s deliberations, we require a quite different conceptual framework from that provided by Brashares.

It is provided in the Commission’s report. In chapter 3 the Commission sets down the principle and aims of the social security system. The most famous is that in addition to enabling everyone to sustain life and health, the system should “ensure, within limitations which may be imposed by physical or other disabilities, that everyone is able to enjoy a standard of living much like the rest of the community, and thus is able to feel a sense of participation in and belonging to the community (1972:63, original’s italics). This principle was adopted as the focus of social policy until 1991 (Easton 1992). One of its effects was to shift the focus of poverty from absolute poverty, that is sustaining life and health, to relative poverty, enabling the participation in and belonging to one’s community.

The report than goes on to look at the economic framework of social security, followed by four chapters on “need and income maintenance”. They are still worth reading, showing a freshness of vision, understanding, and compassion, as well as a hard headed realism of what can be delivered. The word which comes to mind is “wise”.

The Royal Commission looked at a variety of ways of assessing income adequacy, including the Orshansky method which it described as “crude measurements and lacking scientific precision” (1972:112), although it hoped the method could be developed.

The technical problem the Commission faced was how to turn its participation and belonging criteria into a quantitative one. It accepted that “[v]alue and political judgements will still be needed to decide what level of basic benefit is `adequate’, but it was handicapped by the lack of an household expenditure survey” (1972:129). In the end it chose a level for the basic benefit for a married couple of $31 a week in September 1971 circumstances.

Because it saw that prosperity should be shared throughout the community (1972:106) the Commission needed reference points by which the level could be adjusted over time. Hence the use of a designated earnings level based on ruling rates paid to building and engineering labourers and the lower quartile level of adult male earnings mentioned in the Brashares paper. There is no reference to inflation perhaps because it had not been a major problem in the previous two decades, while there had been modest economic growth. Moreover the Commission noted there were effective wage fixing procedures which were indexing wages to price changes.

It is common to identify three types of procedures to derive measures of income adequacy: income relativities, expenditure patterns, and deprivation experiences. Despite its reference points, and an awareness that there had to be an appropriate relativity between earnings and benefits, (16) the Royal Commission favoured the expenditure side approach. But its logic was moving it towards the deprivation indicators one. It cannot claim to be pioneering in this respect, for the Commission had consulted Peter Townsend, whose later published Poverty in the United Kingdom (1979) is perhaps the most elaborate statement of this deprivation approach. In any case the Royal Commission was intrigued by the promised official Household Expenditure and Income Survey (HEIS). (17)

Sadly three factors limited the use of HEIS. First, its earliest year was 1973/74, but initially it was not in a very usable form. (18) Second, the data was initially not easily accessible especially at unit record level, although this no longer is true. Third, the effective use of the data requires substantial and ongoing resources which have never been forthcoming, especially from government agencies who in other affluent countries would be the main sources of funding. The perfunctory use of HEIS in the Brashares paper is a good indication of how little progress has been made over the two decades.

A number of other factors also led to a leaping over the expenditure based approach to one utilizing indicators of deprivation. There was a widespread suspicion that the Royal Commission had been too miserly with its recommended benefit level, and so there was attempts to assess the adequacy. More important in the long run was the research program that the Royal Commission implicitly suggested.

Perhaps the first major study was the Survey of Persons Aged 65 Years and Older (1975) by the Department of Social Welfare, although Peter Cuttance’s lesser known Poverty in Large Families in Hamilton (1974) could claim precedence in some respects. A later study with similar rigour to that in the Survey is the Christchurch Child Development Survey’s analysis of the situation of families with young children (Ferguson et al 1978, 1980a, 1980b).

The method involves looking at various behavioural features of the survey respondents. A typical question might be to ask the respondent to what extent they have to economize – going without meat, health care, or visiting – because of a lack of income. Their answers are aggregated and to give a pattern of income levels in relation to activities which inhibit the household’s ability to properly belong to and participate in society. At this point a judgement is made on the basis of the evidence which identifies an income adequacy level. There is almost certainly no way of avoiding judgement in assessing income adequacy. The advantage of this procedure is that it is not obscured behind some pseudo-scientific choice of integers, but is explicit and informed by the actual living conditions of the community.

Unfortunately such studies, involving proper samples of a total population, are no less – and probably more – expensive than interrogation of the HEIS data base. In recent years the data used for the approach depends on (typically) voluntary (and usually in no sense statistically random) surveys of a population of the poor. On a somewhat ad hoc basis – for often the questions are not clearly designed with this purpose in mind – one tries to assess to what extent these people’s income is insufficient so that they are not properly participating and belonging. Of course, as the Royal Commission insisted, such an assessment involves values and political judgements, but they should be explicit so that the reader can evaluate the adequacy of the income.(19)

Brashares and Aynsley criticise the approach. “The primary advantage of the deprivation approach is that material well-being is broadly defined. … The difficulty of the approach is this does not distinguish between consumption choices because of differences in tastes rather than resource limits. For example, the index may determine someone is deprived because he or she does not consume meat but this may reflect the choice to be a vegetarian” (1990:16). It is hard to see this as a compelling objection, since it takes no great skill to design a questionnaire which asks people to distinguish whether they forgo meat by choice or because they cannot afford it. Moreover the technique is looking for a household income average, not whether a particular household is deprived, and the various effects are likely to average out. However were this to be a powerful objection, one might wonder how a food plan plus multiplier based method would work. Would vegetarians have a proportionally lower clothing allowance because vegetables are cheaper than meat?

The various studies of low income households suggested that the social security level recommended by the Royal Commission of Social Security, adjusted for inflation, (20) was not very far from a reasonable measure of income adequacy if the goal was that of the Royal Commission’s enabling the household to participate in and belong to its community. Today this Royal Commission set benefit level for married couples, adjusted for changes in the price level, is called the Benefit Datum Level or BDL echoing, but yet distancing the concept from, the international acronym PDL for poverty datum level (or line).

The complexity of the story just related contrasts with Brashares curt dismissal of the adoption of the “benefit level” (rather than the BDL which need not be the current benefit level) as a measure of income adequacy (1993:186). Indeed she has got the story exactly the wrong way around. Because certain levels were judged to be a measure of adequate income, social security benefits were set at that level. The benefit cuts of April 1991, did not change the level of the BDL, even though they changed the levels of social security benefits.(21)

That does not mean we should not review the appropriateness of those levels. Apparently unbeknown to Brashares, there has been such work (reported in Easton 1986). Even so ignorance is not an excuse to lapse back to a procedure which was rejected two decades ago as inadequate without any technical improvements.

VI. A CONCLUSION ON METHODOLOGY

While more could be said about the contents of the paper. Within its limitations the paper does contribute to the mapping of the household income distribution. (22) However at this stage, some review of the underlying methodology is more important.

First note that insofar as there is any empirical content it comes from overseas. From which we might conclude there has been a deferential mentality by those who do the work, compounded by their using approaches which, while progressive some decades ago, have become outmoded. Meanwhile they ignore subsequent work in New Zealand. But behind this approach, be it done here or offshore, there is a deeper problem.

Suppose an audience of low income New Zealanders were told that a measure of income adequacy (a poverty level) had been developed which was dependent upon a priori theorisation and the use of ad hoc assumptions, but which had no reference at all to the conditions in which they lived. Their least strong reaction would be astonishment. Yet this is the approach of the paper. It constructs a deprivation index based without any reference to the living conditions of the deprived.

The original work in this paper was carried out in a department of state which, shortly after the work was completed, recommended substantial cuts to benefit levels. It matters little whether one of the new benefit levels was precisely one of those suggested by the original work (Easton 1991a). What is important is that the cuts were made in a policy context in which research could be carried out oblivious to the actual living circumstances of those who were to be affected. (23) Familiarity with the empirical research in New Zealand would have led to the correct prediction there would be a sharp rise in severe hardship, as the new benefit levels were often well below the adequate income to attain the Royal Commission of Social Security’s aims of the system. (24)

Yet the purpose of this response is not to plead for a different income adequacy level, nor for higher benefit levels. Certainly the author has views on these issues, some of which may surprise the reader. But they belong to another paper.

Rather this paper is a appeal for an approach by economists which recognises that the subject of the investigation and policy belong to the same subspecies of the animal kingdom as the researcher – sentient human beings. The reality of their life – their hopes and fears, laughter and tears – should be incorporated into any analysis. In the end the paper contributes little to enable the drawing of conclusions about targeting and adequacy issues because this was ignored, as well as the problems discussed in this critique.

Endnotes
1.The author is grateful for useful contributions from three referees and the editor.
2. Brashares incorrectly attributes the food plan to FOCAS itself (1993:189).
3. Footnote 12 of Brashares (1993) unfortunately gives the impression that the food plan is based on “porterhouse steak”. A more representative item would be stewing steak.
4. The significant economies an institution can reach, are valued at exactly the same proportion as those available to a family of four, a 20 percent deduction being equal to a 25 percent increase.
5. The actual food level used in the Brashares paper for an adult, obtained by dividing the adequacy standard for a single adult household by the appropriate integer, was $27.31 a week, or 11.1 percent less than the average adult level recommended in the basic food plan (and even lower than the prisoner’s nutritional level).
6. The situation was anecdotally supported by prisoners giving their 1993 Christmas dinners desserts to beneficiaries, whom they judged worse off.
7. See (1972:122) adjusted for food price inflation.
8. Table 35 of Brashares and Aynsley (1990 Annex I:46) used the adult male food plan for a single adult household, and an adult female food plan for solo parent families.
9. Similarly a main concern of Easton (1976) was to draw attention to the majority of the poor being in households with dependent children.
10. The levels are $9,216, $12,288, $12,479, $14,460, $15,045, $15,361, and $16,765.
11. Even here there is a circularity, since the .6 was the ratio set by the social security benefits, which is what the Jensen scale is meant to be assessing.
12. Jensen does refer to overseas household equivalence scales. However Easton (1973) provides a nice illustration of how relative prices in different countries lead to different economies of scale effects. The paper begins with a New York needs index, and applies New Zealand prices to the quanta. The index in New York prices has a quite different pattern to the one in New Zealand prices.
13. Based on quantities developed for social assistance in New York, using New Zealand prices.
14. Based on expenditure patterns from New Zealand households, calibrated on savings ratio.
15. I have only reported the Canadian Method Scales (with adult clothes included in necessities), since the utility method ones give problematic results.
16. Although this is not an urgent issue when unemployment is low, as it was in 1971.
17. For a review of the underlying theory of household behaviour in such studies see Easton (1991b).
18. E.g. the income side of the household account was very imprecise.
19. For a study which attempted to synthesize various surveys into an overall conclusion see Easton (1986).
20. I have agonized elsewhere to what extent the BDL should be adjusted for changes in real standards of living (e.g. Easton 1980a).
21. Similarly, when the link between the benefit for the aged (now New Zealand superannuation) and the standard social security benefit was broken, the BSl level was not revised, although it was renamed, from PDL, since sometimes people thought the “P” referred to “pensioner”.
22.One referee made the following comments about some aspects of the paper not addressed here, but which deserve to go on the public record for completeness.

“… it is not clear how [Brashares] derived the conclusion [there may have been grounds to lower some benefit levels] from her own data. She makes reference in these contexts to her results for income standards of $12,500 and $15,000 for a couple with two children, but she does not say which particular standard these correspond to. The closest are the 50% Median Income – Four Persons standard for which the income threshold is $12,479 and the Labourer Award standard for which the income threshold is $15,045 for a couple with two children (Table 1). But no breakdowns by household type are provided for the former standard (cf. Tables 4-7).

“In any case it is not clear precisely which numbers in her breakdown tables can or were used to draw her conclusions – we are not told. Comparisons of headcount ratios across household types?how was this information combined wit the benefit eligibility levels in table 3? I think Brashares is trying to make something of the fact that poverty rates are lower for various beneficiary types relative to non-recipient types, but this might indicate that in one sense the benefit system is actually very effective for those covered by it, though in another sense that the fact that other groups may be falling outside the social safety net can indicate an ineffective system. There is a literature ignored by Brashares which might provide a useful framework to assess these issues – the literature on benefit targeting, as developed by Beckerman and others.
23. That the work does not just reflect the author’s own perception is evident from her acknowledgement of the contribution of six (senior) Treasury colleagues.
24. For some, not necessarily scientific, reports of the consequences of the benefit cuts see Dalziel (1993), List et al (1992), NZCCSS (1992), People’s Select Committee (1992).

References
Bevin, P., A. Jack, & J.Jensen (1978) Income Maintenance and Taxation: Some Options for Reform, (NZPC, Wellington)
Brashares, E. (1993) “Assessing Income Adequacy in New Zealand”, New Zealand Economic Papers, 27(2), 185-207.
Brashares, E. & M. Aynsley (1990) Income Adequacy Standards for New Zealand, The Treasury, Wellington.
Buhmann, B., L. Rainwater, G. Schmaus, & T.M. Smeeding (1988) “Equivalence Scales, Well-being, Inequality and Poverty: Sensitivity Analysis Across 10 Countries Using the Luxembourg Income Study (LIS) Data Base”, Review of Income and Wealth, 34, 115-142.
Cuttance, P. (1974) Poverty Among Large Families in New Zealand, MSS Thesis, University of Waikato, Hamilton.
Dalziel, P. (1993) Taxing the Poor: Key Assumptions Behind the April 1991 Benefit Cuts: What are the Alternatives? Department of Economics, Lincoln University, Canterbury.
Department of Social Welfare (1965) Survey of Persons Aged 65 Years and Over, Government Printer, Wellington.
Department of Statistics (1990) The Fiscal Impact on Income Distribution 1987/88, Wellington.
Easton, B.H. (1973) A Needs Index, Economics Department, University of Canterbury.
Easton, B.H. (1976) “Poverty in New Zealand: Estimates and Reflections”, Political Science, Vol 28, No 2, December 1976. Reprinted in Easton, B.H. Income Distribution in New Zealand, NZIER Research Paper No 28, 1983, 264-279.
Easton, B.H. (1980) “Poverty in New Zealand”: Five Years After, Paper for the Conference N.Z. Sociological Association, 1980, Economics Department, University of Canterbury.
Easton, B.H. (1980) “Three New Zealand Household Equivalence Scales”, New Zealand Statistician.
Easton, B.H. (1986) Wages and the Poor, Allen & Unwin, Wellington.
Easton, B.H. (1991a) “Calculating the Benefit Level”, The Dominion, 25 May.
Easton B.H. (1991b) Updating the Economic Model of the Household, Paper to the Conference of the Social Policy Research Centre, University of NSW, Sydney, July 1991, Economic And Social Trust On New Zealand, Wellington.
Easton, B.H. (1992) “Economy Column”, The Listener, July 18, p.36.
Easton, B.H. (1994) Poverty in New Zealand: 1981-1993 – The Technical Report, Working Paper 94.96, Economic And Social Trust On New Zealand, Wellington.
Easton, B.H. (1995) “Poverty in New Zealand: 1981-1993”, New Zealand Sociology, forthcoming.
Ferguson, D.M. & L.J. Horwood (1978) The Adequacy of the Domestic Purposes Benefit for Women with Young Infants, Christchurch Child Development Study, Christchurch Clinical School, Christchurch.
Ferguson, D.M., L.J. Horwood & A.L. Beautrais (1980a) The Measurement of Family Material Wellbeing, Christchurch Child Development Study, Christchurch Clinical School, Christchurch.
Ferguson, D.M., L.J. Horwood & A.L. Beautrais (1980b) Living Standards in a Birth Cohort: The Correlates of Family Living Standards, Christchurch Child Development Study, Christchurch Clinical School, Christchurch.
Jensen, J. (1978) Minimum Income Level and Income Equivalence Scales, Department of Social Welfare, Wellington.
Jensen, J. (1988) Income Equivalences and the Estimation of Family Expenditures on Children, Department of Social Welfare, Wellington.
List, P., A. Hubbard, & G. Dolan (1992) Budgeting for Cuts: A Study of Poverty in Palmerston North after the April 1st Benefit Cuts, Methodist Social Services Centre, Palmerston North.
New Zealand Council for Christian Social Services (1992) Windows on Poverty, NZCCSS, Wellington.
New Zealand Planning Council (1988) For Richer or Poorer: Income and Wealth in New Zealand, Wellington.
New Zealand Planning Council (1990) Who Gets What? The Distribution of Income and Wealth in New Zealand, Wellington.
Orshansky, M. (1963) “Children of the Poor”, Social Security Bulletin, 26, 3-13.
Orshansky, M. (1965) “Counting the Poor: Another Look at the Poverty Profile”, Social Security Bulletin, 28, 3-29.
People’s Select Committee (1992) Neither Freedom or Choice, People’s Select Committee, Palmerston North.
Ruggles, P. (1990) Drawing the Line: Alternative Poverty Measures and Their Implications for Public Policy, The Urban Institute, Washington.
Royal Commission on Social Security (1972) Social Security in New Zealand, Government Printer, Wellington.
Rutherford, S., A. Khan, M. Rochford, & G. Hall (1990) Equivalent Income, Research Report Series Number 11, Research Section, New Zealand Department of Social Welfare, Wellington.
Smith, H. (1989) An Attempt to Derive New Zealand Equivalence Scales Using Unit-Record Data from the Household Expenditure and Income Survey, Working Paper 1989/5, Department of Statistics, Wellington.
Snively, S.L. (1986) Evaluating the Budget’s Distributive Influence on Household Incomes, Mimeo, Wellington.
Snively, S.L. (1987) The 1981/2 Government Budget and Household Income Distribution, New Zealand Planning Council, Wellington.
Snively, S.L. (1988) The Government Budget and Social Policy, Paper prepared for the Royal Commission on Social Policy, Wellington.
Stephens, R. (1992) “Budgeting with the Benefits Cuts”, in J. Boston & P. Dalziel (ed) The Decent Society: Essays in Response to National’s Economic and Social Policies, Oxford University Press, Auckland, 100-125.
Townsend, P. (1979) Poverty in the United Kingdom, Penguin, Harmondsworth.

What Recovery? Will the Economic Recovery Filter Down?

This entry was posted in Macroeconomics & Money on by .

Listener: 22 July 1995.

Keywords: Macroeconomics & Money;

The economic question I am most often asked is “What recovery?” For almost three years politicians and the commentators have been claiming there has been an economic recovery, but apparently the majority of the population do not believe them.

Partly it is a question of the meaning of “recovery”. Your columnist is partially to blame. In early 1992 he, among others, identified a recovery on the basis of an expansion in the manufacturing sector which had begun in late 1991. Then the term “recovery” had its orthodox economic meaning to describe the stage after the bottom of the business cycle, when the economy begins to “recover” from the downswing. The politicians seized upon the expression to mean that the decline of the rogernomics era was over, and that New Zealand was back on a sustainable growth path.

We have now experienced a very long economic expansion – for three, going on four, years. It is the second longest we have had in the post-war era, surpassed only to the 1959 to 1961 boom, and it may yet better. While it is by no means as long (or as strong) as the upswing out of the slump of the 1930s, there is a lesson in that comparison. A very depressed economy tends to have a long recovery (orthodox, non-politician sense) phase.

Economic activity was very depressed by late 1991, the policies of the incoming National government having collapsed the fragile economy they had taken over. However an oddity of the subsequent expansion (note I am not using the expression “recovery”) is that it has not been a consumption led one. Usually at some stage in the upswing, household and government spending begins to expand rapidly. But not this time.

When people ask “what recovery?”, they seem to be saying “I dont feel any better off”. The statistics support them. At the time of the 1993 election per capita household consumption was a fraction lower than it was at the time of the 1990 election. Consumption had peaked in early 1989, and fallen thereafter, so the populace was feeling pretty bruised in November 1990 (as Labour will tell you), and no less bruised in November 1993 (as National will tell you). Average household consumption only returned to the 1989 peak at the end of 1994.
Even that statistic is misleading as a measure of welfare. First, “government spending” is still falling in per capita terms. Replace the very abstract expression by environmental spending, education, health care, heritage assets, policing, roading, social support, and so on, we can easily see that public spending cuts can hurt people’s welfare. They do so in trivial ways too. Telephone any government agency and count the rings before it is answered.

A second reason is that the income tax cuts of 1988 favoured the rich, increasing the after-tax income of the top 10 percent by about a fifth. The tax cuts were funded by just about everyone else paying more tax, so they have had a cut in their consumption, which is not reflected in the average. We can understand the jubilation of the rich over the economic expansion for they certainly have had a major boost to their incomes in the last decade, although few others have. There are not many rich asking “what recovery?”.

The tensions of an expanding economy and stagnant consumption have been eased a little by strong household spending over the last year. Preliminary indications are that some of the additional spending has been out of savings. This would be unsustainable. Either there will be slower growth in spending, or something else will have to give.

Hints of this pressure come from Geoff Thompson, president of the National party, who has demanded the government bring forward its promised income tax cuts. No government can be elected by only the 10 to 20 percent benefiting from this recovery.

The other strong pressure is coming through from wages. The Employment Contracts Act (ECA) regime was ideal for holding wages during the depressed stage of the economic cycle. It is less able to contribute to wage restraint during a substantial expansion. Some would say that the structureless wage system of the ECA reinforces a wage explosion once the fuse is lit.

To change the metaphor, my impression is the wages dam is leaking in various places in the private sector, but it is not yet seriously breached. When it does everyone will blame the Governor of the Reserve Bank, since wage pressures will add to inflation. That would be wrong, for the issue is much more fundamental than monetary policy. For years workers have been told about “the” recovery. Now they want to share in it, to make it “our” recovery. The expectation that the Governor can put his fingers in all the holes in the dam is absurd.

Whether you think there has been a recovery in the economists’ meaning of the term, or the politicians’, we still face complex issues of economic management. Those who think there has been no recovery for them – the majority, according to the statistics – will say hear, hear!

Women in Economics

This entry was posted in History of Ideas, Methodology, Philosophy, Listener on by .

Listener: 24 June, 1995

Keywords: History of Ideas, Methodology & Philosophy;

Post-modernism is a term which has entered into intellectual discourse over the last quarter of a century. Initially it referred to architecture, went into the other arts and literature, and more recently sneaked into some of the social sciences. Because of its individualistic and anarchic nature there is no simple definition of post-modernism. Standard explanations drift between the incomprehensible and the illustrative. The most common thread is there is no absolute standard from which analysis and criticism can be made. There is no privileged frame of reference which provides a definitive account, independent of culture, race, class, era, or gender. Each commentator has an insight to offer, but no one account is inherently authoritative.

Consider the possibility of a post-modernist physics. It seems unlikely. Physicists may disagree on all sorts of issues, but they agree that there is a correct answer to the fundamental question of the universe. With persistence they will find the Theory of Everything. When they do all physicists will agree. In literature and the arts, even the notion of an absolute theory of everything seems a little odd today.

The social sciences are somewhere between. One can rank them on a scale of the degree to which they are influenced by post-modernism. On the soft left is social anthropology, near literature in recognizing that no culture is superior to another. On the hard right near physics, is economics.

For professional economics is built on the notion that there is a core of common theory on which everyone who is an economist agrees. Any disagreements there will eventually be resolved, as the empirical truth outs, and wrongheaded and faulty analysis is eliminated.

But are we sure that there is a central absolute truth in economics, rather than a variety of truths depending on where you stand? Many economists will be disturbed by Prue Hyman’s recently published Women and Economics. The book covers a number of policy areas – pay equity, housing, superannuation – but its key chapter is a survey of feminist critiques of orthodox economics. It should be read not because it is right, but because it challenges the notion that the existing orthodoxy is right, arguing that there may be a different but equally valid way of looking at the economy – from a feminist rather than orthodox (i.e. masculine) perspective. And if there are two different ways, there will be many different ways. Economics may be potentially post-modernist.

Such a conclusion will be resisted by many, perhaps the majority, of economists. Their preference will be to force the different perspectives into a single unified one – theirs. There was an extraordinary paper by a Treasury official, which determinedly demonstrated to the writer’s own satisfaction that the traditional Maori can be analysed using the economist’s notion of rational economic man. This is not an official Treasury position, and many of the writer’s colleagues would no doubt have blanched. But it well illustrates the resolve to root out heresy, to ensure everything can be explained by a narrow orthodoxy.

At some stage the economists’ theory needs to address why there are six times as many males as females in the economics profession. Let me in the interim offer a somewhat post-modernist explanation. Suppose there are a variety of ways at looking at an economy, but that the profession allows only one of these as acceptable. Anybody who comes from another perspective will find the orthodoxy uncomfortable, and is likely to turn to a discipline which is more congenial (or more tolerant of diversity). If women’s perspectives are ignored and demoted, women are not going to be attracted into economics to the same degree as males. It must be a terrible turnoff for the young woman student to have to study rational economic man, with nary a thought that he might be a she. Better go to sociology where there are more role models and where men earnestly grapple with feminist critiques.

Fortunately the academy is not totally bereft of woman economists. As well as Prue herself, an associate professor at Victoria, there are a handful who work in economics with an approach which is not bereft of a gender perspective. Some are publicly prominent: Susan St John, Toni Ashton, and Sholeh Maani at Auckland, Cath Wallace also at Victoria, Nancy Devlin at Otago. There are about as many who work quietly away. Last year’s unexpected death of Jan Whitwell was a lost both to macroeconomics and to women’s economics.

Insofar as the above explanation has a truth, the shortage of women in economics is both a criticism of the subject, and a weakness. It wont be remedied by appointing a few token women. Rather the subject has to be systematically reoriented, to be more tolerant to different perspectives, and more willing to incorporate diversity. A first step would be for every economist to read the chapter on feminist challenges to orthodoxy, and for Prue Hyman’s book to be compulsory reading in every graduate economics program.

The Post-war Welfare State

This entry was posted in Social Policy on by .

Revised version of Address in the University of Auckland Winter Lecture Series, 20 June 1995, published in Social Policy Journal of New Zealand, Issue 7, December 1996, p. 17-28.[1]

The modern welfare state developed in most rich countries in the post-war era. It was a response to three major trauma. First, there was the interwar depression, in which the brutality of unconstrained capitalism generated a response of a kinder, gentler way of organizing society. Second the war itself led to upheaval in many European countries. The welfare state was seen as a means of integrating the people back into the nations struggling with the chaos of their recent past, in order to generate a degree of social cohesiveness. Third, but by no means least, industrial society was sweeping away the old forms of community provision.

It is now two generations since the war, three since the depression, and the welfare state they generated is under considerable pressure to change. This article looks at the pressures, arguing that many of the contentions favouring reform are spurious. On the other hand, there is no doubt that some of the assumptions which implicitly underpinned the first fifty years of the post-war welfare state no longer hold. Identifying them, undermines the politics of nostalgia – of the belief we can go back to the old approach – which is probably the surest way to undermine the viability welfare state.

The Welfare State in Industrial Society

That welfare states replaced older ways of social protection is perhaps harder to understand in New Zealand because, excepting the Maori, there were no existing institutions, however antiquated, for the settlers in a new country. That is why New Zealand was early in the welfare state development, for there was no older social structure to fall back upon. New Zealand could not use the parish based provision of Britain, because it had no suitable parishes, while the commitment to a secular state – a state without an established church – meant that parishes could not be artificially created. In the nineteenth century European New Zealand even lacked sufficient of that fundamental unit of victorian virtue, the family. Most of the old and indigent at the end of the century had no children or, if they did, their children did not live near them. Thus New Zealand had to create means of community support in a system outside the family or the locality.

Although New Zealand was among the earliest of welfare states, elsewhere industrial society was undermining the traditional systems of the more established societies. They also began to develop state administered systems of support. This development reached a new level in the post-war era, as the turmoil of the 1930s and the 1940s exacerbated the long term trends towards social incoherence in industrial society.

Yet by the early 1990s there is a sense in which the welfare state is in retreat, or at least under severe pressure to modify. This is not just a statement about New Zealand. It applies to most. New Zealand’s may be under greater pressure because its economy has stagnated over the last decade while OECD GDP has grown on average around 20 percent. Even so their welfare states are under pressure too.

It would be easy to explain this pressure as a consequence of the transition from industrial to post-industrial society, but that is not particularly helpful because it does not explain which characteristics of one form of economic organization were once relevant but are no longer. With hindsight it is easy to describe how industrial society changed social conditions and old means of support, but the fundamental changes in social and structure between industrial and post-industrial society are less clear. Consequently there is little agreement as to what is the appropriate reform of the welfare state.

Some advocates of the reform of the welfare state tend to want to go back to the social structures of pre-industrial society, or have no account of social structure in their theories. An example of the first are those who want to make the idealized middle class Victorian family, perhaps with a Christian basis, as the foundation of our social policies, without any real consideration as to whether such families were as pervasive in the past as implicitly assume, whether those families functioned as ideally as is assumed, and why that family form has become less common.

On the other hand the radical right proposals for reforms, which attempt to look forward, barely involve any social structure at all. Their account – from a limited neo-classical economics perspective – is society as a collection of isolated individuals able to function in a social – and a moral – vacuum in which each looks after himself (or herself, on rare occasions when gender issues are acknowledged). In the New Right account of the world the affluence of post-industrial means there is no longer a widespread need for collective provision for health care, retirement, and education. Ironically the affluence which their approach assumes, is the result of compulsory collective structures which were central to industrial society, especially in its latter stages of greatest affluence.

There are other contradictions. There is not much in common between the past looking right of fundamentalist Christians and the radical right of structure-less libertarian secularism. This tension is very evident in the United States’ Republican Party. While its two wings may agree the present order of things is wrong, their solutions pull in quite different directions. The fundamentalists require the centralized imposition of a particular social structure, which they summarize in the expression “Christian family values”, while the libertarians want to withdraw the state from imposing any structures at all.

Yet as much as we may criticize these proposed reformers, there is a core of truth in their argument that there are some deep problems in the modern welfare state which are not being addressed by those who want to return to the institutions of a generation ago. Some defenders of the welfare state are even more out of touch than are its critics.

The perspective of this paper is somewhat different. The welfare state is seen as a response to deteriorating social coherence in industrial society, especially in regard to those aspects concerned with economic protection. There is no new coherence in any post-industrial society. In some respects there is less, for affluence has added to the heterogeneity of society, which is both an advantage insofar as it liberates personal differences, and a disadvantage insofar as it reduces social cohesion. The human demand for social coherence is such that we will continue to seek means of expressing it, probably in a modified welfare state. The evidence from the surveys is that the vast majority of New Zealanders desire a welfare state in some form, and are deeply bitter over the changes made in the last decade.[2]

Indeed one of the effects of MMP is that the desires of the polity will be better transmitted into the governance of the nation, in contrast to the way those desires have been ignored over the last decade. The transformation will not happen over night, not only because many of our current politicians bring attitudes from the old FPP era, but also because every political system works only imperfectly. Nevertheless the likelihood is that over the next decade the polity will demand and the politicians will supply a more, rather than less, extensive welfare state – but it will be a different one.

Patterns of Convergence

But that broad prediction leaves unstated what kind of welfare state. There is a growing international literature of comparative studies.[3] What strikes the reader is that there is both an overall pattern of welfare state provision, and many variations in the pattern between countries. As Einar Overbye has persuasively argued there is for some convergence of outcome of provision for the elderly, although not of delivery mechanisms. He suggests that there will be a tendency towards a two tier public or compulsory system, with a bottom tier of a tax-financed (usually income-tested) minimum, plus a second tier of contribution-based/earmarked taxes-based (usually defined-) benefit scheme providing earnings related benefits.[4] Thus there will be a combination of a minimum floor for those with marginal labour market experience, plus a second tier top up to reflect the inequalities in labour market experience (although often there will be an ceiling on the top up). Outside the state system there will be further non-comprehensive private and voluntary tiers (in which in Australasia home ownership will be important).

New Zealand is moving down this path for retirement provision, with the first tier firmly in place as New Zealand Superannuation. It has been more timid about the second tier, with the Todd report on retirement incomes arguing for voluntary provision in the second tier.[5] However Australia has moved towards a compulsory contribution based second tier, and one will not be surprised if New Zealand follows within the decade. If so it will only be catching up the pattern in most Western countries.

Two terms which may be unfamiliar: “contribution-defined” and “benefit-defined” may be used to describe the convergence. New Zealanders are very conversant with benefit-defined income maintenance schemes for the elderly for that is the basis of today’s New Zealand Superannuation. For a long time there has been a guaranteed retirement income related to the overall incomes of the community.

The notion of a contribution-defined scheme is less practically familiar. In it the amount the individual contributes is set, the contribution is invested, and the pension the individual receives after retirement is determined by the return on the investment, so there is no guaranteed benefit level. An example is the sort of scheme of which Roger Douglas is a proponent.[6] Its only certainty is the size of the contribution. The future benefit depends future returns on investment, rates of inflation, and longevity. Whatever the forecasts, the outcome may well be different. Contribution-defined schemes leave one’s income a hostage to events outside the individual’s control.

The experience of post-war welfare states has been to move away from income maintenance based solely on contribution-defined schemes to ones which are benefit-defined or where there is a mixture of the two.

Risk Management and Risk Shifting

Underlying the difference between benefit-defined and contribution-defined schemes is a fundamental question of welfare states – the allocation of risk between the individual and the community. In a contribution-defined retirement scheme any variations from the assumptions, for better or worse, end up as variations of the individual’s retirement income, for better or worse. Thus future uncertainty is the individual’s responsibility. In the case of the benefit-defined system the consequences of any variations in the assumptions of the funding underlying the scheme (be they explicit or implicit), are borne by the state. Ultimately the state funds by levies on its taxpayers, so the effect of a benefit-defined scheme is to shift the risk of a contribution-defined scheme from one generation, across all generations.

Historically this shifting of risk from the individual to the whole of society has been a central feature of the welfare state. Recently, especially in New Zealand but also elsewhere, there has been a tendency for the risk to be shifted back to the individual. Most obviously the stand-down period shifts the risk of unemployment to the unemployed, user charges shift the risk to the sick, tertiary student charges shift the risk to the student, and so on. Understanding risk shifting is central to explaining why the welfare state is in difficulties today.

Consider the drafting of the sheep, with the sheep rushing down a race, and someone switching a gate at its end to sort each sheep into one of two yards. Welfare states have a parallel element of this drafting in order to determine entitlements. Either you are elderly or not, you are sick or not, you are unemployed or not, you are a widow or not, and so on. This image is especially appropriate for New Zealand because more than most welfare states the benefit entitlements were based on membership of such categories.

One reason sheep drafting works is because the choice is relatively unambiguous – at least to the person making the decision. A second more subtle reason is the sheep’s inability to affect the decision. If the animals knew they were being selected for slaughter, days before the shrewder would go on a diet, appear thin to the drafter and go into the yard for further feeding rather than the one to the freezing works.

The technical term for altering circumstances to get such advantageous treatment is “moral hazard”. The term comes from insurance, as when someone learning they are sick takes out insurance to pay for the costs of the treatment, thus avoiding paying the costs themselves. Since moral hazard can be disastrous to the profitability of insurer, various measures are taken to minimize it.

Ambiguity and moral hazard are closely related. efficiently. neither was a major problem in the welfare state. When there is little unemployment it is not difficult to determine whether one can get a job; at earlier levels of medical technology it was not difficult to determine whether one needed treatment; a marriage certificate and a death certificate proved one was a widow.

Today, the selection process is much more complex. With high unemployment how to tell someone has assiduously looked for work and proved unemployable, or whether they are a shirker? Medical technology has moved from dealing with urgent limited – often life critical – events, to ones where there is much more judgement. (The expression “elective” surgery indicates that increasingly medical treatment has an element of choice.) And the widow is less common today than the solo mother where the father does not support the child.

Such ambiguities were not conceived as important by the creators of the post-war welfare state. Once they arise, there is the opportunity for the individual to adapt, or present, their circumstances to increase support from the state. The state can respond by introducing more and more complex rules, and administering them more and more assiduously. As it does so, the simplicity of the drafting yard gets undermined, and the cost of managing the system becomes increasingly expensive. It is easier to withdraw the entitlement, to the detriment of people with justified needs. Thus the risks of the social uncertainty get transferred from the state back to the individual, and the scope of the welfare state gets reduced.

The Welfare State and the Labour Market

Crucial to the effective functioning of the welfare state is the labour market. Until recently, the New Zealand welfare state was founded on full employment. New Zealand and Australia have traditionally been the two of the world’s welfare states which have delivered welfare most through the labour market.[7] When the fourth Labour government abandoned full employment as a primary economic objective, as it did formally in its 1987 election manifesto, it paved the way for the abandoning of the New Zealand welfare state as it had been traditionally organized.

What exactly constitutes full employment is not easy to describe. Our conventional account of the labour market has more relevance to an historical reality than the current one. It pictures employment as a male phenomenon of full time for an entire working life, ignoring the differences that arise from women’s work experience, from part-time and part-year work patterns, and the consequences of the constant demand for upskilling. The dynamics of the labour market experience is almost totally ignored, or simplified beyond recognition.

The full employment of New Zealand’s early post-war history is captured in the 1950s’ joke about the Minister of Labour knowing the name of every unemployed worker in the country – both of them. It had an element of truth, because often the total registered unemployed was often less than a hundred, and until the mid 1960s, usually less than two thousand. However there were unregistered unemployed in somewhat greater numbers – up to 3 percent of the labour force.[8] But unemployment was not such a threat these people needed to report. Shortly they would find a job.

Full employment underpinned the welfare state. It made drafting so much easier. Almost everyone who thought of applying for an unemployment benefit could be found a job. Households in need of additional income would have the main earner work more hours, or have the spouse go out to work.

Today such full employment no longer exists. Typically recorded unemployment rates are two and three times the level they were in the 1950s and 1960s. Even that ratio underestimates the qualitative magnitude of the change. In the first two decades after the war unemployment levels were typically in a comfort zone where the labour market was not stressful to the unemployed.

It belongs to another occasion to describe all the consequences of this changed state of the labour market – on firms, on households, on lives. Policy has not always responded. For example since in the past a person either had a job or could no get one, the treatment of any additional earnings of the unemployed could be clumsy. At not very high additional income, all the additional earnings were abated away. That situation still exists today, where beneficiaries still face effective marginal tax rates on some income of almost 100 percent. This reduces the incentive to an unemployed person to build up a work experience by part-time jobs, while easing oneself into a fuller work rate. Thus people on benefits get trapped into dependence. In effect the simple drafting gate used for full employment – either you were in or out of work – is too crude in today’s unemployment environment.

Under-full employment also means reduced output, and reduced government revenue. Yet the smaller economy is expected to carry a larger burden of dependency from the unemployed, including those who appear on sickness, invalids, domestic purposes, and superannuation benefits but are really unemployed because they would prefer to earn their living.

There is an irony here. The welfare state is presented as a mean of protection against adverse circumstances of the individual. Yet when the economy persistently experiences adverse circumstances, the welfare state is unable to function properly. Quality macroeconomic management is an integral part of the success of the welfare state. During the 1980s and the early 1990s New Zealand’s economic performance was poor, compared to other rich countries. That is why our welfare state is more tattered than its overseas’ equivalents.

The Cost of the Welfare State

This is not to argue the welfare state is unaffordable. This is a popular argument among those who want to abolish it, or reduce it in size to some minimalist role, like in their idealization of the United States. Frequently the minimalists cite data to suggest that the cost of the welfare state is rising, relative to total production and our capacity to pay. However this partly depends upon the exact measures that are used. Often their total cost of benefits includes income taxation paid on benefits, the surcharge on New Zealand Superannuation, while Family Support it treated as a benefit, rather than a negative income tax, all of which exaggerate the cost of the welfare state. A further complication is that many countries have public sector welfare programs which are administered via the private sector, and do not appear in the public sector statistics. New Zealand’s accident compensation system prior to ACC was such a scheme. When ACC was introduced in 1975, there was not the massive increase in public provided welfare, the statistics appeared to indicate. Finally an adjustment is necessary for the cyclical state of the economy. The costs of support are going to be higher during the economic trough, when there is less work available for the poor. Unless these adjustments are made comparing costs of welfare provision over time are misleading.

The relative cost of the welfare state is the number of dependents multiplied by the relative costs of the average resources provided to each dependent. The number of dependants are partly the result of factors over which the nation has little control, like sickness, invalidity, and demographics.

Even here the numbers need not be as frightening as they are sometimes presented. It is true that populations are getting older, with proportionally more aged 60 and over. In a quarter of a century New Zealand will have a proportion which is already typical in Western Europe.[9] Not only are these countries already coping with this population pressures, but the same proportions will be easer for us, because the age for potential retirement is rising.

The assumption of everyone being retired at the age of 60 is outmoded because work is not so physically demanding, and the elderly are able to acquire the new technological skills. It was absolutely right to plan the raising the age of entitlement to New Zealand state retirement benefit in steps to 65. That reduces the long run dependency ratio, and increases the potential workforce. One may not be surprised if the age of state entitlement is raised even higher – say to 67 – in the next decade or so.

Moreover part of the future rise in the age dependency ratio is because the proportion of the young is falling, which reduces the demands for public and private resources to support them, including increasing the number of adults in the paid workforce because they are not as involved in child caring.

However there are two components of the welfare state dependency ratio which are more problematic. One is that which arises from unemployment, which impacts directly by the cost of the unemployment benefit, and indirectly since the unemployed are not contributing to the government by taxation on earnings. Note however, that a rising dependency ratio means there are not enough workers, and so unemployment may fall.

A second source of rising dependency has been solo parents. This involves deep emotions, because of the sexual element, and because solo motherhood seems to threaten men. However, technically the rise of the cost of solo parenthood is the consequence of New Zealand underfunding two parent families with dependent children. The state support for a child in a one parent family is considerably higher than a two parent one, so family breakdown increases the burden to the state. If it had better supported two parent families, the cost of any change in the balance to one parent families would not have been so great. (Perhaps if New Zealand had funded two parent families more adequately, there would be less change in the balance, because financial stress leads to family break ups.)

More generally, and ironically, if the welfare state had adequately supported dependent children, it would not have the same worries about a rising dependency ratio, because the increases in funding the elderly would be offset by reductions in dependent children and non-working parents. Another irony is that children now become a greater burden on the state as they move from dependency on the family into tertiary education. There would not be the same tangle over tertiary student fees and support if had better supported them when they were younger. Some of the problems of rising welfare costs today, reflect demographic changes which expose the past underfunding of children.

Overall then, rises in the dependency ratio may be a tractable problem, unless society completely falls apart with permanent unemployment and family breakdown far in excess of what has been experienced in the postwar era thus far. If western economies cannot deal with unemployment, they venture into a territory so different from the post-war experience that it is hard to predict sensibly the long run outcome. The immediate worry, however, is the costs per dependent.

Costing Support

Defining what is meant by cost is complex. Simply looking at the direct cost to the public purse is not enough. Suppose all retirement income was funded by private investment rather than from general taxation. Paying that income would still be a burden on younger generations. Consider the thought experiment where all the retired died over night. Irrespective of whether they were state or privately funded, the material income of younger generations would rise the following morning.

Neither is the problem merely one of income adequacy, although deciding what is a reasonable minimum income is by no means simple. Once a satisfactory benefit level structure has been attained, the level rises with long run changes in average income, so the burden per dependent does not become more onerous over time. However there are other expenditures which are more pressing. The most notable are spending on education and health. For reasons of space the focus here is on health expenditure.

Once there seemed only a limited demand for medical resources. Subsequent advances in medical technology mean practically today there is an unlimited demand for medical care. How to constrain this demand to a practical level, consistent with our national productivity and our desires for other material goods and services?

One option would be to leave the decision to the private market. That suffers from at least two defects. First, reducing public intervention in medical markets can raise costs with little improvement in health, as the United States experience shows. Second, the private market still has to deal with the erratic incidence of illness. The usual solution, private medical insurance, is subject to the same problems of inefficiency, inequity, and expense because the funder is still a third party in the transaction between the doctor and patient just as occurs in a public system. So although private market delivery, and with it private responsibility, has a role in health care, the community is still faced with the same technical problems, whether it chooses a public or private delivery mechanism, or some balance between.

(Another problem is that because private systems favour adverse selection – picking the easy cases and clients – there has to remain a public system to cover the rest of the community, and it is very difficult to construct an efficient system in such circumstances. If moral hazard is the sheep avoiding drafting by their behaviour, adverse selection is the drafter selecting sheep in the drafter’s interest, even though society may have some other criteria for entitlement.)

It might be thought that a merit of private delivery is that it reduces tax levels, but even that is not obvious. Tax is a burden, but so is paying medical insurance, or paying user charges. It is not obvious that one is more weighty than another especially if, as the US experience suggests, in comparison to more socialized systems, private delivery can double the cost of care for no evident improvement in health outcomes.

More generally is it possible for an economy sustain tax levels a decent welfare state requires? For all the confidence expressed in the financial pages, there is little empirical evidence that high taxation is necessarily damaging to economic growth. (As it happens the greatest successes of the welfare state were in a period of much higher levels of taxation than today, and economic performance was superior too.) There are clearly more complex mechanisms than the crudities which are sometimes presented in the public debate.

The Future of the Welfare State

Despite the tendency to present the welfare state as though it was a decorative jewel on the body politic, to be sold off because of a diminished state of affluence, the welfare state is an integral part of the modern nation economy, softening the harshness of unconstrained capitalist state, and addressing the need to provide some coherence in an increasingly fragmented society. Indeed one might argue that the post-war era for the rich economies was the time of the welfare state, in all its various forms.

But are we still in an era of welfare states? Certainly there is a view that just as the economies of Eastern Europe have collapsed, we are seeing a crumbling of the traditional welfare state of the West, although the event is slower and less dramatic. New Zealanders could point to the undermining of the foundations of the system in the 1980s, followed by the destruction of key arrangements and institutions in the early 1990s. They might point to similar, but not as extensive, changes in welfare states overseas.

Discerning the tides of history is by no means easy for those in the boat. One is, however, struck by New Zealanders unwillingness to abandon the principles of the welfare state. The may reluctantly accept a need for change of the means, but there is no acceptance of an abandoning of the ends. Perhaps even more importantly, under MMP such popular preferences are more likely to be followed.

But what is a viable alternative? If those with the nostalgia for the welfare state of a couple of decades ago are not addressing the problems it faces today, the majority of the critics are not addressing the problems that it resolved. It is probably impossible to impose the sort of morality over a nation which those who want to return to “victorian values” promote. Equally the goal of social anomy the New Right wants to pursue seems implausible. Yet we cannot go back to where the nation was a generation ago. The best guess is that we will muddle on, radical solutions ruled out by the polity, and intelligent solutions ruled out by a lack of systematic analysis. At some stage in the future the welfare state will evolve into a new institution for regulating our social and economic life. But that seems likely to be generations away.

Endnotes
1. I am grateful to Einar Overbye and Susan St John for comments on an earlier version.
2. e.g. J. Vowles, & P. Aimer (1993) Voters’ Vengeance, Auckland University Press; and J. Vowles, P. Aimer, H. Catt, J. Lamare, & R. Miller (1995) Towards Consensus: The 1993 Election in New Zealand and the Transition to Proportional Representation, Auckland University Press.
3. e.g. F.G. Castles, (1985) The Working Class and Welfare, Allen & Unwin, Sydney, and (1993) “The Wage Earners’ State Revisited: Refurbishing the Established Model of Australian Social Protection, 1983-1993”, Australian Journal of Social Issues, Vol 29, no 2, p.120-145; G. Espinger-Andersen, (1990) Three Worlds of Capitalism, Polity, Oxford, and (ed) (1995) After the Golden Age: Welfare and Employment in Open Economies, UN, Copenhagen; D. Mitchell, (1992) Welfare States and Welfare Outcomes in the 1980s, Research School of Social Sciences, Australian National University; E. Overbye, (1995) “Convergence in Policy Outcomes: Social Security Schemes in Perspective”, Journal of Public Policy, Vol 15, No 2, p.147-174, and (1995) Different Countries on a Similar Path: Comparing Pension Policies in Scandinavia and Australia, Paper to the International Sociological Association Research Committee no 19 Seminar on Comparative Research on Welfare State Reforms, Pavia, Italy, September 1995.
4. Overbye op. cit.
5. Task Force on Private Provision for Retirement (1992) Private Provision for Retirement: The Options, Wellington. (Todd Report)
6. R.O. Douglas (1993) Unfinished Business Random House, Auckland.
7. Castles op. cit.
8. R. Braae & J.Gallacher (1983) “Labour Supply in New Zealand; 1976 to 1981” in B.H.Easton (Ed) Studies in the Labour Market, NZIER Research Paper No 29, Wellington, p.15-48.
9. T. Ashton, & S. St John (1993) Private Pensions in New Zealand: Can They Avert the Crisis? Institute of Policy Studies, Wellington.

Divided Issues: the Myth Of the Unified Maori.

This entry was posted in Maori on by .

Listener 10 June 1995.

Keywords: Maori

Our race relations are troubled by the Pakeha myth of the unified Maori. “Maori” did not exist before the arrival of the European. Since as far as they knew those that lived here were all the people in the world, they did not need a collective name for themselves. (Similarly “Earthling” arose with possibility of others out in space).

When the first Europeans asked, the locals described themselves as “maori”, the ordinary ones. That name has stuck. (They called the outsiders “Pakeha”, a word of obscure origin. In 1840 it had considerable dignity, for Reverend Williams translated the term (British) “subject” into “pakeha” in the Tiriti o Waitangi.)

That the locals called themselves Maori, does not mean they were united. Before the arrival of the European they were fragmented into waka, iwi and hapu, not always on friendly terms, perhaps not greatly different from the miscellany of realms that littered Central Europe at the time.

However the British, who came from a region with less sovereign diversity, expected a similar coherence here. Captain Hobson, in the country for a couple of days, refers to “the united chiefs of New Zealand ced[ing] … the whole country”. Busby, around since 1833, changed this in the final (English) draft to “chiefs of the Confederation of the United Tribes of New Zealand, and the separate and independent Chiefs who have not become members of the Confederation”.

Even so, the myth there is a united Maori remains unto this day. The humour of many recent cartoons depend upon contradictory statements by the Maori. The inconsistency arises because some Maori argue along one line, and others argue differently. This is not just their relishing vigorous debate on the marae. Maori society like Pakeha society, is deeply divided on many issues: conservatives against radicals, young and old, urban and rural, iwi and iwi …
The government fell into the myth with its fiscal envelope proposal, which implicitly assumed that there was a single Maori grievance. But it was addressing not one Maori grievance, but a myriad of waka, iwi, and hapu grievances, some of which involved counter claims between various Maori groups. There is no practical way a settlement as envisaged by the fiscal envelope could deal with them all. We face a long tortuous process of investigation into minutia before they are resolved. Some can never be, because of gaps in the historical record.

Perhaps a differently oriented fiscal envelope proposal could have settled some of the big grievances, as appears to have happened with the Tainui raupatu (confiscation) claim, but it will be decades before most iwi and hapu complaints will be fully addressed.

One of the odd features about a myth is that it can take on a reality. The fiscal envelope has probably done more to unite the Maori than almost any other measure. The radicals and the conservatives suddenly found themselves agreeing on the perfidy of the government, precipitating some radicals to embark on the occupations of disputed land.

More generally the myth of the unified Maori forces the Maori together, but the solidarity they find is an opposition to what they see as a Pakeha dominated government. (Yes, the Maori – and Pakeha – also lapse into the myth of the unified Pakeha. Ridiculous, you say. Look at all the differences among the Pakeha people. Exactly.)

However there is one area where the Maori seem to have a collective grievance. On virtually every socio-economic indicator – crime, education, health, housing, income, longevity, social deprivation, unemployment – those who describe themselves as of (part) Maori descent are markedly worse off on average than the nation as a whole.

To what extent this is a treaty grievance is debateable. But if at Waitangi the Maori had been told that the path that signing led down involved a markedly inferior socioeconomic position relative to the other inhabitants of the land, there would have been no signing.

Land alienation can cause a decline in relative socio-economic status. It appears that for a decade or two after 1840 the Maori had a standard of living not dissimilar to that of the European immigrant. But as economist Paul Dalziel observed, in the 81 years after 1840 there was a reduction of land holdings by over 90 percent. “Imagine for a moment that the asset bases of Fletcher Challenge of Electricorp were reduced nine-tenths, with no compensation for large amounts of asset stripping… The company performances would be decimated.”

Any cash compensation the government gives for the unjustified alienation of assets will be insufficient to compensate for the subsequent loss of socio-economic status. Instead programs which aim to reduce social deprivation are needed. While some may be specifically focused on the Maori, general ones on the whole deprived population can also be effective because their are so many Maori among them. Even if in a generation or two the specific Tiriti grievances are resolved, but the Maori social indicators have not substantially improved, there will remain a grievance, from a near united Maori people.

Minimum Wages and Market Forces

This entry was posted in Labour Studies, Listener on by .

Can Market Forces Principles Be Applied to the Labour Markets? 

 

Listener: 27 May, 1995 

 

Keywords: Labour Studies; 

 

Myth and Measurement: The New Economics of the Minimum Wage is already controversial in the United States. It is also likely to be so here. Written by David Card and Alan Krueger the study argues that minimum wages do not necessarily cause fewer jobs. The Princeton University professors of economics pursue their campaign with military precision: marshalling the evidence, launching new studies, and demolishing old ones. A couple of examples will give a flavour of the 422 page book. 

 

When in 1992 the state of New Jersey increased its minimum wage, the researchers found those restaurants which were forced to increase their wages had higher employment growth (yes, higher) than those already paying above the award. Second, the book also examines the traditional econometric way of using time series data and shows that the studies measuring the effect of minimum wages are methodologically faulty. If these faults are remedied, the studies conclude a rise in minimum wages does not reduce employment. 

 

Of course the writers are not arguing that an unlimited hike in any minimum wage does no damage. They are cautious about drawing any policy conclusions. Undoubtedly many will, arguing that the minimum wage should be increased in order to increase the income of the lowest paid, without – so the research seems to indicate – having any adverse employment effects. 

 

Already there has been a heated reaction to the publication. Over 90 percent of American economists believe the opposite to the research, and that minimum wages destroy jobs for the low paid. Card and Krueger are challenging a central tenet of American economics. (The New Zealand figure is under 70 percent.) For the nub of the matter is not a policy issue, but whether labour markets behave like conventional markets, such as those that determine the price of wool. 

 

Economists tend to be brought up with the principle that all markets operate in broadly similar ways. But there is another tradition which argues that labour markets work differently. The book provides further support. 

 

At issue is the extent to which each labour relationship is different, because people are different, and it is not possible to have a standardized human commodity, in the way that wool can be measured and standardized. This heterogeneity undermines the simple market theory. The difficulty with such “efficiency wage” theories, as they are sometimes known, is that they are far from elegant. It is easier to use the simple standard market model taught in elementary economics, even if that means making assumptions which are far from the reality of actual market experience. 

 

It is too early to predict the outcome of the dispute between the idealists and the realists. Given the ideal of the market has such a widespread hold in the economics profession, the realists cannot win overnight – or by one book, no matter how impressive it is. On the policy side there may be more movement. Krueger is now the US Department of Labour’s chief economist. The Clinton administration has proposals to increase the minimum wage, although a republican led congress is likely to stall them. The initiatives will be with the states. 

 

In New Zealand, a time series study by Tim Maloney of Auckland University is widely quoted as demonstrating that minimum wages have increased unemployment in New Zealand. However it is subject to the Card-Krueger criticisms. It will be interesting to see what happens when they are addressed. But there is another major weakness in the study. Not only does it find that increasing minimum wages reduces employment, but it also finds that increasing unemployment benefit levels (financed out of higher taxation) increases (yes, increases) employment. 

 

Any competent econometrician could have suppressed this benefit effect, but Maloney, who is one, instead left the anomalous outcome in his work. Full marks for integrity. 

 

The result is so bizarre that it is difficult to take any of the conclusions of the study seriously. What the research seems to say that hiking the minimum wage and increasing benefits at the same time can increase employment with a fairer income distribution. 

 

To introspect a moment. Notice my different reactions to the two findings. I am prepared to accept the possibility of Card and Krueger being correct, because of the widespread evidence and an underlying theory. However I am unhappy with the Maloney conclusion about the effect of benefits even though my political preferences would be very comfortable with such a finding. One swallow does not make a summer, nor one study a conclusion. It may be that Maloney’s benefit finding is correct, but we need a lot more evidence. 

 

<>It would be good if this sort of pragmatic combination of theory and empirical investigation (which the book beautifully illustrates) were the basis of the discussion here, and in the US, on wages and labour markets. I fear however, that the debate is likely to be dominated by ideologists who will insist that the empirical evidence be disregarded if it contradicts the ideal of their political prejudices.

Stratford-on-carbon

This entry was posted in Environment & Resources, Listener on by .

Are Trees the Answer to New Zealand’s Carbon Woes?

Listener: 13 May, 1995
 

Keywords: Environment & Resources; 
 

In order to write about the decision to require any power station built at Stratford to offset its carbon emissions into the air by growing trees, I need to make three confessions. First, I am a tanker greenie. We are unsure whether there is a serious greenhouse effect: the data is equivocal, the modelling subject to error. But we think ecologies are like oil tankers which take a long time to turn. If a possible hazard appears on the horizon it is prudent to take sensible precautions now, rather than ram into the rocks later. The greenhouse effect, which could raise ambient temperatures with unpredictable outcomes is such a possibility. It makes sense to take inexpensive measures now, before it is too late.
 

Second, I remain unclear whether we need another power station. The energy system has been so confused by structural changes that realistic future projections are far from obvious.
 

Third, I gave evidence to the Board of Inquiry on the power station, arguing that if there was to be a combined-cycle gas turbine station at Stratford it was both practical, and appropriate under the Resource Management Act (RMA), to require the offsetting of any carbon emissions (mainly carbon dioxide) into the atmosphere by a carbon sink, such as planting trees to hold an equivalent amount of carbon. The Board came to a similar conclusion, in a long thoughtful chapter presumably written by its chairman, eminent barrister David Williams. (As an aside, the finding has much wider implications than just to energy. The offset requirement is likely to be used in all sorts of imaginative ways to enable socially useful developments to go ahead without being a net detriment to the environment.)
 

In the case of the Stratford power station the Minister for the Environment has adopted the Board of Enquiry’s findings but allowing the possibility of other offsets than tree planting. The obvious alternative is Electricorp could reduce its use of the more carbon emitting Huntly power station.


Why dont the same provisions apply to Huntly, and other carbon emitters? There is no simple answer. In the case of Huntly, permission has been given for it to pollute away without any offset requirements. (I was involved in that inquiry too.) In other cases, such as car exhausts which make up two-fifths of total carbon emissions, there is no requirement. While all major emitters will eventually come under the provisions of the offset requirement, inconsistencies will remain, generating economic inefficiency and wasting resources.
 

A resolution to the confusion would be to shift from the site by site application of the offset provisions in the RMA, to national regulation. One approach would be to tax all carbon emissions. What form the tax would be has to be decided, since there are various possibilities, some of which are inefficient.
 

Electricorp commissioned some overseas consultants from the Tasman Institute to examine the impact of a carbon tax. The study has grave deficiencies, perhaps inevitably if you ask overseas experts to model an economy of which they are unfamiliar. However the most unfortunate feature of the study is that they chose a carbon tax which would assuredly give inefficient outcomes to the economy. The result can be derived from pure economic theory in less than a page, so it was quite unnecessary to do the modelling to get the conclusion.
 

To give one example of the ineptitude of the study’s proposed tax, consider levying all carbon emissions in New Zealand. Thus factories might close down because the additional costs. Instead we import the product from overseas, but because there are no taxes on their emissions the country could end up using imports that caused greater pollution. Carbon gases circulate in the whole of the world’s atmosphere, so both we and the world would be worse off from increased carbon emissions (while New Zealand job opportunities were exported overseas), under the sort of tax regime proposed by the Tasman Institute.
 

Obviously a shrewder tax regime would avoid that nonsense. Even so, until it is implemented we might suffer from exactly the same sort of inefficiency as a result of the offset requirements of the RMA, as we would from the Tasman Institute’s tax.
 

Another option, which seems to be favoured by the Minister, is transferrable permits, where polluters purchase a right to emit carbon into the air from those whose actions are creating carbon sinks. These have been used on a small scale overseas, in rather different circumstances. Their application to the carbon emissions for an entire country has yet to be explored, and may well prove impracticable. I will report on the technical papers as they become public.
 

So there is no easy resolution to limiting our carbon emissions, a matter further complicated by the international ramifications of what we do, and what the world does to us. The Stratford decision may be a major turning point in our contribution to the management of the global environment. At this stage no one is sure which way we are turning.

A Data Base Of Iwi

This entry was posted in Maori, Statistics on by .

Report for The Waitangi Tribunal (May 1995)

keywords: Maori; Statistics

The Data Base

Every individual living in New Zealand on the night of 5 March 1991, filled in a census form, which included a question about iwi membership.[1] Some 511,278 respondents (15.2 percent of the national total) gave a positive answer, of some form, to this question.[2] In addition 165,913 households (14.1 percent of the national total) were classified as Maori dwelling households with an iwi identification.

This computer program provides socioeconomic information about those respondents, and their households grouped together by iwi. (It does not hold unit data records.) The following is a description of the contents of the program, and the means of accession to the data. It should be emphasized that the access protocols are not simple, because as explained below, there are some restrictions on access. In addition there are numerous caveats which should be taken into consideration when obtaining and interpreting the data.

Some understanding of the data involved in the data base, may be obtained by examining Iwi Population and Dwellings (Department of Statistics,[3] 1993), hereafter called the SNZ Iwi Report (SNZIR). The report also includes copies of the census questionnaires and definitions. However this program holds the data in a much more flexible way.[4]

The Census and the Maori

The 1991 population census asked the following three questions in relation to each respondent’s Maori status.

Question 7: Which ethnic group do you belong to?
Possible answers included “New Zealand Maori” and “New Zealand European”. A respondent could tick more than one box if that was appropriate.

Question 8: Have you any New Zealand Maori ancestry?
Possible answers were “No”, “Don’t Know”, and “Yes”.

If the response was “Yes”, the respondents were asked

Question 9(a): What is the main iwi (tribe) you belong to? (please state one only)
In the case of being unable to state a tribe the respondent could answer “Don’t know” and “Don’t belong to any iwi (tribe)”.

and

Question 9(b): What other iwi (tribes) do you have strong ties with? (Please state no more than two iwi.)

This was the first recent census in which a question about iwi was asked.[5] As SNZIR reports there were some difficulties with question (p.12). An obvious one is that many Maori claim allegiance to belong to more than three iwi. For some iwi it was not possible to locate them geographically, and for others respondents gave a confederation, rather than iwi, name. While these issues should be addressed in the 1996 census, they warn that the figures should be used with caution. For instance SNZIR notes “the figures obtained for some iwi differ quite markedly from the numbers that are registered as beneficiaries of the iwi”.

The responses involve self categorization. Sometimes respondents miscategorize or misunderstand the question. sometimes they may recognize subtle distinctions which the user needs to be aware of. For instance, 111,330 who said they were of Maori descent said their ethnicity was solely European, including 39,204 who were nonetheless able to identify a iwi (or hapu) affiliation.[6] Note that in principle a person who was not of Maori descent could claim to be of Maori ethnicity, as in the case of a pakeha brought up in a Maori family.

As well as recording the ancestry of each respondent, the census assigns some households an iwi status according to the following rule. If the “occupier” is of Maori ancestry then the household is assigned according to the occupier’s iwi.[7] If the occupier is not of Maori ancestry, but the spouse is, then the household is assigned according to the spouse’s iwi. It is to be noted that if the occupier and the spouse are both of Maori ancestry, then the household is assigned only according to the occupier’s ancestry, ignoring the spouse iwi. One implication is that a household in a particular rohe will be assigned according to the occupier’s ancestry, even though the occupier is not tangata whenua, and the household has an active life with the local iwi through the spouse descent.

Data Accuracy

Note that not only there is an inherent inaccuracy arising for data derived form self response, but that Statistics New Zealand has a practice of rounding personal data to three in order to enhance confidentiality. For large numbers this rounding has little effect, but for small numbers the error may be significant. (For instance a cell containing one observation may be reported as containing three – or zero.)

More generally, even without the rounding, where small numbers are involved – as they are for many iwi – conclusions can be more subject to normal statistical error, and should be presented with caution.

Data Accessability

The Statistics Act 1975 has a number of provision which protect the confidentiality of the information in the Population Census (and other data Statistics New Zealand collects). The practices of Statistics New Zealand are systematically designed to effect those requirements. One can say with confidence that no individual or household would have information disclosed about them from their population and dwelling census records, except to a degree of aggregation which does not infringe their privacy.

While this resolution may be satisfactory for those without tribal origins, there is a complication in regard to tribes, since it could be argued that a tribe has some of the rights to protection of privacy to which an individual is entitled.[8] This is not the place to resolve such issues, and we have proceeded on the following basis.

First we observe that much of the data is already in the public domain via, for instance, in SNZIR. This data bases however makes the data very much more accessible. Thus one cannot simply say that since some of the data is in the public domain, then this data base should be also there. Instead the following rules have been set down for access:

1. Any iwi (or group of iwi) has access to the data base in regard to their relevant iwi. authorization of this access will come from the Director of Research of the Waitangi Tribunal, on request from an authorized representative of the iwi.

2. Any researcher can have access to any iwi data, with the agreement of the relevant iwi, as in rule 1.

3. In regard to a bona fide researcher wishing to have access to data from most, or many, iwi, where it is impracticable to obtain agreement from all those involved, the Director of Research will authorize access where:
The research approach is cross-sectional and does not depend upon identifying the precise characteristics of any specific iwi, or group of iwi; and where
Any report of the research will not identify characteristics of the iwi from the statistical base, except after agreement from the iwi involved.

4. The data by Territorial Local Authority is available on request from the Director of Research.

5. These rules apply to all researchers, including those acting on behalf of the Crown.

These rules should be sufficient to cover all the likely reasonable requests for data. They require no more of the researcher than normal research ethics demand: that the research should be sensitive to and respectful of the dignity and the mana of any subject, or in this case collective subject, that is being considered.

The Structure of the Data Base

The data base might be thought to be a large array or matrix, organized on a spreadsheet. In the case of this data base there are six separate arrays, as follows.

Main Iwi
1. MIWIPER: Individuals by their main iwi, by their personal characteristics.
2. MIWIHOU: Households by their main iwi, by household characteristics.

Any Iwi
3. AIWIPER: Individuals by any of their iwi, by their personal characteristics.
4. AIWIHOU: Households by any of their iwi, by household characteristics.

Territorial Local Authority
5. TLAPER: Individuals of Maori ancestry by their territorial local authority, by their personal characteristics.
6. TLAHOU: Households of Maori ancestry by their territorial local authority, by household characteristics.

In the case of the first four arrays, the horizontal rows represent the data for each of the 65 iwi and the 6 other categories (such as “don’t know my iwi”, plus the Maori and National totals. Information for individuals are by gender, so each iwi has two rows, one for males and one for females.

In the case of the last two arrays, the horizontal rows represent the 74 territorial local authorities (district and city councils) plus a small residual (including address not specified).

In the case of all six arrays the vertical rows represent the characteristics of those who reported iwi affiliation. The available information is reported in the next section.

Spreadsheets 1 and 2 allow the rows from the main affiliation to be aggregated together. Thus it is possible to add the people (or households) reporting their main affiliation with Ngati Iwi to those who report their main affiliation as Ngai Maori. This is not meaningful to do for the all affiliation (including main and subsidiary) since every member who claimed their main iwi to be Ngati Iwi, say, might also have put down Ngai Maori as a subsidiary affiliation, and vice versa. Adding together the “all” affiliations would involve double counting.

Spreadsheets 5 and 6 allow the rows from the main territorial local authority to be aggregated together. Thus ir is possible to add together all the people who live in the South Island (i.e. South Island TLAs).

The Available Characteristics

The characteristics available in the data base (i.e. in each column) are those asked in the Census plus in some cases summary variables (such as the average income). The details of the data are summarized in a manual prepared by Statistics New Zealand, and which reflect standard Census definitions and conventions (which are extractable from other reports such as SNZIR.) The broad characteristics they cover as follows:

Individual Characteristics
Regional Council of Usual Residence (not for Territorial Local Authority)
Age (there is also an average)
Birthplace
Ethnic Group
Religious Denomination
Marital Status
Total Income (there is also an average)
Type of Voluntary Work
Highest School Qualification
Tertiary Qualification
Employment Status and Work Status
Industry (Major Division)
Occupation

Household Characteristics
Dwelling Type
Dwelling Tenure
Rent per Week
Household Composition

Note the data is all that which the census asks. Some may not be of direct use for Maori purposes. For instance there are very few Maori born outside New Zealand.

Using the Data Base

The data base is currently held as a spreadsheet in the Waitangi Tribunal computer system, in a Microsoft Excel (for Windows) format. Access to the data base is by approval of the Director of Research of the Waitangi Tribunal.

The following instructions assume that the user can use Microsoft Excel. An example is given in italics.

Having got Excel operating, open up the required file which will be one of:

1. MIWIPER: Individuals by their main iwi, by their personal characteristics.
2. MIWIHOU: Households by their main iwi, by household characteristics.
3. AIWIPER: Individuals by any of their iwi, by their personal characteristics.
4. AIWIHOU: Households by any of their iwi, by household characteristics.
5. TLAPER: Individuals of Maori ancestry by their territorial local authority, by their personal characteristics.
6. TLAHOU: Households of Maori ancestry by their territorial local authority, by household characteristics.

The file should open up on spreadsheet “SELECT”. If not, go to Spreadsheet “SELECT”. (This spreadsheet is “protected” – that is the user cannot directly change it – except for B5 and the A column below A5.)

In B5 enter the collective name for the group of Iwi being considered. e.g. “Nga Kohore-Iwi”.

In Column B from B6 down are the iwi in alphabetical order,[9] or the Territorial Local Authority (TLA) in (roughly) north to south order. For individual information each iwi or council has two entries, one male and one female, which are shown in column C.

In column A, assign next to the selected iwi (or TLA) a “1”, for each gender where appropriate.[10]
e.g. in A138, A139, A140, A141, A144, A145, A148, A149 (which combine “Dont know my Iwi”, “Dont belong to any Iwi”, “Other/Not elsewhere specified”,[11] “Not Specified”).[12]

At this stage you may want to check A3, to see how many iwi are selected. In this case “4”.

Change to the “TABLES” spreadsheet (which is fully protected)

If satisfied, the tables can now be printed. (There is a print icon on the second row, and a print procedure in “File”.)

The “MAIN” spreadsheet (which is also fully protected) is the working spreadsheet, where the numbers for tables and the charts are calculated. Normally it can be ignored.

Each of the other spreadsheets is a chart, the contents of which are indicated by the spreadsheet name. Clicking to that chart, followed by a print instruction, will give a printout of the chart.

When closing the workbook do not save. This will make it easier for the next user, who will not have to clear the previous choices.

Summary

The data base presents a powerful means to enhance our knowledge and understanding of Maori social and economic characteristics by iwi and location. However the data is the data base is subject to various limitations, and must be interpreted with care. In addition it is the mana and dignity of those who are being investigated must be respected.

Endnotes
1. Throughout this report the term “iwi” will be used to mean “tribe”. It is nowhere used to mean “people” or “nation”.
2. Including 152,896 who were unable for one reason or another, to specify a main, or usually any, iwi.
3. In 1993 the Department of Statistics changed its name to Statistics New Zealand. Its Maori name is Te Tari Tatua.
4. Two other useful 1991 census publications by Statistics New Zealand are National Summary (1992) which gives data for the aggregate population as a whole, and New Zealand Maori Population and Dwellings (1992), which gives figures for the Maori in aggregate, but not by individual iwi.
5. In 1987 a more limited iwi question was asked in the “Attitudes and Values” Survey for the Royal Commission on Social Policy. The April Report, Vol I, pp.397-700. The question was asked earlier in the censuses from 1874 to 1901, see J. Lowe
6. On the other hand of the 146,118 who could not identify a iwi or hapu affiliation 42,009 said they were of solely Maori ethnicity.
7. The “occupier”, a technical term for census purposes, is defined as the “person who is in charge of the dwelling on Census night”. It may be the owner, the person in whose name the dwelling is rented, or some other responsible person. Where a private dwelling is owned or rented jointly by two or more persons only one of these is “the occupier”.
Little is known about how a married couple decide which of then is the “occupier”, although there is tendency for the husband to take that role. For flats and the like, the issue is even murkier. Thus any use of the household data, based on the occupier’s characteristics should be done so with caution. As explained further this applies especially to the iwi affiliation of a household.
8. While data about them is not collected in the Population and Dwellings Census, business enterprises (and other corporate bodies) have similar confidentiality protection over any data collected about them by Statistics New Zealand. Thus the iwi claiming confidentiality is not unique, in terms of a corporate entity.
The distinction might be made that while the business enterprise data is collected directly from the institution itself, the iwi data is collected from the members of the iwi. Thus the parallel is not exact. Nevertheless the point remains that the recognition of rights of confidentiality of a corporate body already exists.
9. The data base follows the convention that “te”, “ngati”, and “ngai” are not part of the iwi name for alphabetical purposes. Hence the first identified iwi is “Te Aitanga a Mahaki”, and the last specified iwi is “Ngati Whatua”.
10. Note that after the specified iwi are “other” grouped in to eight regions, plus 6 categories of unspecified iwi, the largest of which is “dont know my iwi”.
11. It is not entirely clear whether this group should be included. However the numbers are so small the decision is not vital.
12. In the case of the “all iwi”, in which the respondents identify up to three iwi of affiliation, only one iwi should be identified. The spreadsheet has been booby-trapped so that if more than one iwi is identified, it will immediately become apparent in the tables. (These spreadsheets are of the form AIWI*.XLW.)

Appendix: EXAMPLE

In the above illustration considered those of Maori ancestry who do not have, or know, an iwi affiliation. This avoids the protocol problems discussed in Chapter 1. Because this is primarily an exercise to show use, only salient features of the Nga Kohore-Iwi will be discussed here.

By way of background, the Nga Kohore-Iwi are likely to consist of a mixture of two main groups. Those who have become most absorbed into Pakeha society and those who have become marginalized from all society, are each likely to have lost their iwi affiliations. It may be that further investigation in each of the four categories of Nga Kohore-Iwi will show different balances between the groups.

While one tends to use the tables for interpretation, in practice it has been found easier to look at the charts in the first instance.[1] Here we go through each characteristic briefly, highlighting the main differences.

In total there were 146,124 New Zealanders of Maori descent who were unable to identify an iwi affiliation. This was 28.6 percent of all Maori, and 4.3 percent of all New Zealanders. Note that over one quarter of those of Maori descent do not know their iwi.

Table 01 Regionally, there are relatively fewer Nga Kohore-Iwi than iwi affiliated Maori in the Northern part of the North Island, including the Hawkes Bay, but excluding Auckland city. Thus there are proportionally fewer of Maori descendants who do not know their iwi in these regions. Conversely in the South Island and the lower part of the North Islet (excluding Wellington) there are proportionally more Kohore amongst the Maori.

Table 02 In age terms, the Maori average almost ten years younger than the average New Zealanders, and the Nga Kohore-Iwi are about a 1½ younger than the Maori average. In terms of those over the age of 15, to which most of the subsequent tables (from Table 06) refer, the gap is a little smaller. All Maori are 7½ years younger than average than all New Zealanders, with the Nga Kohore-Iwi just over a further year younger on average.

Table 03 Not unexpectedly birthplace has proved to be an unrevealing statistic about the Maori, with over 98 percent born in New Zealand, in comparison to 83 percent of all New Zealanders. The Nga Kohore-Iwi are slightly more likely to have been born outside New Zealand than all Maori. If so it is in Australia and the Pacific Islands.

Table 04[2] In terms of their ethnicity, while 56.7 percent of Maori describe themselves as solely Maori, and another 20.2 percent as of part Maori ethnicity, only 28.8 percent of Nga Kohore-Iwi describe themselves as solely Maori and 19 percent mention part Maori ethnicity. Almost half describe themselves as solely European/Pakeha.

Table 05 Religion provides one of the most curious findings. The proportion of all Maori and all New Zealanders who associate themselves with some religious affiliation is much the same – just under 30 percent. However almost 40 percent of the Nga Kohore-Iwi have no religious affiliation. The proportion of the Nga Kohore-Iwi who associate themselves with a Maori oriented church, such as Ratana and Ringatu, is less than the all Maori 9.7 percent, Nevertheless some 4.0 percent do. Also the Nga Kohore-Iwi are more likely to be Presbyterians than other Maori.[3]

Table 06 In regard to marital status the Maori is more likely to be never married, and the non-Maori more likely to be married and divorced, perhaps because of their younger age structure. Nevertheless among both all Maori and the Nga Kohore-Iwi, separation (and divorce on an age adjusted basis) is higher with lower remarriage.

Table 07 The Nga Kohore-Iwi (over the age of 15) have higher average incomes than the Maori, $16460 against $15310, but markedly lower the national average of $18,990.

Table 08 While all Maori and all New Zealanders do about the same amount of voluntary work, the Nga Kohore-Iwi are likely to do a little less. The differences in the pattern between Maori and Pakeha probably reflect the multi-purpose marae based work subsumed under “domestic service”.

Tables 09 & 10 The Nga Kohore-Iwi are slightly better educated than all Maori, but less so than the national average.

Table 11 The Nga Kohore-Iwi are typically about midway between all Maori and all New Zealanders in their employment status.[4]

Table 12 There is not a lot of different between the Nga Kohore-Iwi and all Maori in their industries of employment, except the former tend to be more predominant in wholesaling and retailing, and the latter in community services. Surprisingly the Nga Kohere-Iwi ares lightly more predominant in the agricultural sector than all Maori.

Table 13 Again the occupational differences are not so great, although The Nga Kohore-Iwi seem to have a slightly better status than all Maori, but still not as good as the non-Maori.

In summary, the Nga Kohore-Iwi seem to be those Maori who are more successful, on material measures, than other Maori, but not as much as non-Maori. There are two major anomalies which suggest the story may be more complex than simply success (or greater intermarriage). The Nga Kohore-Iwi are younger than the Maori, although we might have expected them to have an age structure more like the non-Maori. And they are more detached from a religious affiliation than either all Maori or the average non-Maori.

It would be easy to jump to some judgements about the Nga Kohore-Iwi, but the implications are that their situation involves some subtle processes. There may well be a case for further investigation of them.

Endnotes
1. Incidentally, the entire set of charts and tables took less than ten minutes to produce, from entering up the Excel system to closing it down, and the last coming off a 4ppm laser printer. Admittedly the user in this case knew precisely what he was selecting, but the point is that obtaining this information from a spreadsheet is not onerous.
2. Here an in later tabulations the column heads are sometimes foreshortened to the point that SNZIR needs to be consulted.
3. Incidentally, the data confirms the anecdote of great diversity in church affiliation by iwi.
4. Note this table has two charts.

Banking on Inflation

This entry was posted in Listener, Macroeconomics & Money on by .

Is the Reserve Bank Act Being Undermined by Incompetence? 

Listener: 29 April, 1995. 

Keywords: Macroeconomics & Money; 

Whenever a New Zealand team appears to be doing badly, the chooks call for the slaughter of its members. I refer not to the cricket team, although that well illustrates the phenomenon. Without a few world class players, like Glen Turner, Richard Hadlee, or an injury free Martin Crowe, no rejigging of the team, coaches, managers, and selectors, is going to convert some very ordinary players into world beaters. 

Alas the fallacy is being repeated in economic policy. A near hysterical headline in the business pages of a recent Evening Post announced the Reserve Bank was “losing battle with inflation,” going on to claim this would “cast[…] doubt on Don Brash’s future as Governor of the Bank.” 

The facts are some economists forecast “underlying” rate of inflation to exceed the 2 percent per annum level set down in the Policy Target Agreement (PTA) between the Governor and the Minister of Finance. The actual rate of inflation has already exceeded this level. However the PTA uses another measure, misleadingly called the “underlying rate”, which is also expected to go above the threshold later this year. 

There is a nice legal point here. What is the Minister of Finance to do? Mr Birch says he will ask for a report from the Board of the Reserve Bank. It is less clear what happens thereafter. No doubt the chooks will ask for the Governor’s head, and perhaps the Board’s, and possibly the Minister’s. The bloodthirsty are unlikely to be rewarded. 

The legal basis is the Reserve Bank Act (RBA), with two key elements. It clarifies the relationship between the Bank and the politicians, giving the Bank operational independence over monetary policy. The general policy goals are also set down in the law, while the specific details are in the PTA. The RBA states that the Bank should attain and maintain price stability, without defining the notion. The PTA sets a particular price measure and target range. I doubt that a court would find that necessarily defined “price stability”. Nor is it likely to incarcerate a Governor, or the Bank Board, if it found the law has been broken. 

Enacting something in law does not necessarily make it feasible. In the nineteenth century the legislature of one American state had a proposal to enact pi (a.k.a. “π” = 3.1416…), the ratio of the circumference to diameter of a circle, to be three-and-one-eighth. Fortunately the parliament was not so foolish to pass the bill. (The proponent gave up his plan to sell textbooks based on 25/8.) Pi is a part of the deep structure of the universe, which mere mortals (or even politicians and lawyers) cannot overrule. 

It would be almost as equally foolish to pass a law requiring the Reserve Bank to be ensure that the New Zealand cricket team will always win. But is the current law any less pious? It is easy for someone, who has never studied economics, listening to the fashions to assume that a Reserve Bank can, by controlling the monetary supply or something, affect the level of prices sufficiently to make the RBA meaningful. There is a crude monetarism which assumes this, but even monetarism’s founder, Milton Friedman, recognises the simple story that inflation is only a monetary phenomenon is nonsensical. However the ideologues who have dominated so much policy discussion in recent years are not going to take notice of Friedman when he contradicts them. 

After the RBA was passed in 1990, I asked the Treasury and the Reserve Bank for their papers advising on the principles. Any discussion on the extent a monetary authority could influence the price level was bound to interesting. However there was not a single sentence in the papers devoted to that issue. It is an extraordinary indictment on parliament that it was able to pass a law without any evidence whatsoever that the law could be put into effect. 

At first inflation fell, as it was falling in much of the rich world. This was seen to be evidence that RBA was working. Now the inflationary pressures are in the opposite direction. The chooks ignore that the RBA is based on poor economic analysis, and assume the law is being undermined by incompetence. I wish economics was so easy. 

So you ask me whether monetary policy can influence the price level sufficiently (and quickly enough) to make the RBA meaningful. The answer is yes, but only with high real interest rates, a high real exchange rate, at a price of economic stagnation and rising unemployment. So if we panic, with headless chooks asking for the head of the Governor, we face the real possibility of a monetary stance which will precipitate a severe depression. 

<>Annual inflation seems set to rise above 2 percent however it is measured. It will not herald the end of the world as we know it. If we think rationally about what is happening. and why it is happening, rather than ideologically or hysterically, it may even lead to better economic management.

Smoking in New Zealand: a Census Investigation

This entry was posted in Health, Maori, Statistics on by .
Australian Journal of Public Health, Vol 19, No 2, April 1995, p.125-129.
    

Abstract: New Zealand may well be unique in that in the 1976 and the 1981 Census of Population and Dwellings each person over the age of 15 was asked about their cigarette smoking habits. The data is available on the basis of age and ethnicity, enabling an examination of the prevalence of ever-smoking by cohort born some 80 years before the censuses was taken, at the end of the last century. Thus the impact of ever-smoking on mortality can be calculated.  Ever regularly smoking reduced the life expectation of males by 11.7 years and females by 15.6 years. The corresponding reductions for Maori were 19.3 years and 23.8 years. The effect of smoking on health has been of epidemic proportions, notably for the Maori.
 Keywords: Health; Maori; Statistics;
   

 

 

The New Zealand Population Census
Every five years the Department of Statistics (now Statistics New Zealand) surveys every person (and dwelling) in New Zealand on a particular Tuesday night (usually) in March. A wide range of objective questions are asked, including age, gender, ethnicity, and other socio-economic characteristics. Respondents self-categorize.
            In 1976 and 1981 census asked the following question:
“Cigarette Smoking: Tick the box which best describes your current cigarette smoking
G Never smoked cigarettes at all, or never smoked them regularly.
G Do not smoke cigarettes now, but used to smoke them regularly (1 or more a day).
G Currently smoke cigarettes regularly (1 or more a day).”
            (In addition respondents were asked to “specify number smoked yesterday …cigarettes (if none write `0′).” An evaluation indicated “the data elicited on number of cigarettes smoked was extremely unreliable. The level of under-reporting of cigarettes smoked per day for the total population was estimated to be 26 percent in 1976, and 28 percent in 1981.” (1,2)  However Statistics New Zealand is satisfied with the information relating to cigarette use.)
            While it might be assumed that there would be a reasonably accurate recall on this question, some respondents may misrepresent their smoking experience. The group most likely to under-report are teenagers. (This study, however, focuses on the over 25s.) Unfortunately the question treats those who smoke, and have only smoked, cigars and pipe tobacco as non-smokers of cigarettes. (Chewing tobacco and snuff is uncommon in New Zealand.) Sales of loose tobacco exceeded manufactured cigarettes (by weight) until 1955 (3). But loose tobacco is used for roll-your-owns as well as pipes, and many pipe smokers may also have used cigarettes on a regular basis at some stage.
 

Maori
New Zealand’s indigenous people (tangata whenua) are the Maori, who are of Polynesian origin. The 1976 and 1981 Censuses defined a Maori as anyone who reported being at least one half Maori descent. In 1976 6.7 percent of the population over 15 were Maori by this definition, and in 1981 it was 7.3 percent. The Maori population is a somewhat younger than the whole population. Since their numbers in older age groups are small, statistics derived from the earlier cohorts are less reliable.
            As we shall see Maori smoking behaviour is different to the population as a whole. There was no smoking of tobacco or other substances by the Maori before the arrival of the European at the end of the eighteenth century, but they took up the habit with alacrity. One observer commented that in the early 1840s “smoking is universal among New Zealanders [Maori] of both sexes” (4). At the turn of the century Maori women are frequently depicted smoking pipes, although smoking among European (pakeha) women was uncommon. Today rates among Maori remain high. (5)
 

Method: The Prevalence of Smoking in the 1976 Population
Table 1 shows the prevalence of cigarette smoking by gender and birth date in 1976 for the whole population. The data is given for those who have “ever-smoked”, and also the “quit rate” (quit rate = (ever-smoked – now-smoke)/(ever-smoke))  Table 2 is the parallel data for the Maori. (The data for 1981 is available from the author.)
            It is not useful to compare the levels in the various cohorts, since smoking has a higher rate of mortality. Differences in levels may reflect the greater death rate of smokers and ex-smokers. We can look at differences between social groups of the same age. In the population as a whole men were more likely to have smoked at any age than women, except for the 1956/61 cohort who were between 15 and 20 years old at the time of the 1976 census. Except for women under 25 in 1976, the quit rates are higher for men than women, although in every age cohort except adolescents there were more men than women still smoking.
            Surprisingly, given popular perception, older living Maori males are less likely to have smoked than all males, although we shall see this is a mortality effect. Maori male quit rates are also lower than all men (and all women), so the proportion of Maori men smoking in 1976 was higher than for the whole population, which probably generates the impression of the widespread Maori prevalence of smoking.
            Proportionally more Maori women have been smoking than all women. For Maori women under the age of 45 in 1976, the prevalence of ever-smoking is similar to Maori men. Their quit rates are the lowest of the four groups, so those under 50 in 1976 were more likely to be smoking than other groups.
 

Method: The Smoking Mortality Differential
One of the reasons why the ever-smoker proportion falls off for older people is because smokers experience earlier mortality than non-smokers. The existence of the same question in the 1976 and 1981 population censuses makes it possible to estimate the (census) survivorship differential.
            (Suppose the population in a cohort is x in year t, and x’ in year t+5. Suppose that the rate of out-migration in the five year period is m, and the survivorship rate is S. In which case the remaining population is x(1-m)S = x’. Hence S =  x’/(x(1-m)). Suppose there are two population groups with the same migration rate, but initial populations x and y, final populations x’ and y’, and survivorship rates S and T. Then S/T = (x’/x)/(y’/y), which gives the survivorship differential.)
            This requires the following assumptions: there is no change in reportage between the two censuses; the smoking habits of migrants are the same as the population in the same age group; never-smokers do not take up smoking in the quinquennium, which is why differential survivorship rates were not calculated for those under the age of 25.)
            The resulting survivorship differential is shown in Table 3. The percentage should be interpreted as follows. Suppose it is 10 percent. If the survivorship rate for never-smokers in a particular age group over the next five years is 99,000 per 100,000 then the mortality rate for ever-smokers is 90,000 per 100,000 (i.e 99/1.1).
            The differentials in the rates are not implausible, tending to show rising rates with age for men. Women seem to suffer higher mortality rates at younger and middle ages, with a lower rate later perhaps because of the early deaths.
            The rates reflect a mix of complicated smoking behaviour – since different cohorts smoked at different intensities, and for different lengths of time – and from the way the smoking related diseases affect individuals. There is an erraticness in the rates which may reflect these, measurement error, or a departure from the assumptions.
 

Method: The Prevalence of Ever-Smoking By Cohort
We use the differential ratios to infer back the relative death rate of ever-smokers and never-smokers, and hence estimate the prevalence of smoking of each generation, including the dead as well as the alive. This requires the further assumption that the age specific differential survivorship rates which applied between 1976 and 1981, applied for earlier years as well. The estimates are shown in Table 4.
            Around 80 percent of All Men born before 1926 went through a regular cigarette smoking phase. There is a drop off among those younger, so the prevalence for those born after the Second World War was below 60 percent. We can but conjecture why there was the change in trend, but cigarettes were distributed as a part of a soldier’s rations. A very high proportion of those born before 1926 would have had service experience which few born after 1926 would have experienced.
            The pattern for All Women is that ever-smoking was low for those born at the turn of the century, consistent with anecdote. However the prevalence rose among those who would have been “flappers” in the 1920s. For the generation born in the 1920s the prevalence was about 50 percent, a level which continued on, at least, until for those born in the early 1950s.
            The ever-smoking prevalence among Maori Men has been consistently in the 75 percent to 80 percent for the whole period. The lower prevalence we observed in the actual data of the 1976 census reflected higher mortality. The prevalence among Maori Women has been rising – from 65 percent at the turn of the century to above the male Maori rate for those born in the early 1950s. Whatever the forces which have reduced the prevalence of ever-smoking in the population as a whole, they have not been as effective on the Maori, a gloomy conclusion reinforced by the lower reported quit rates for the Maori.
            For the non-Maori (mainly European or “Pakeha”) New Zealander, the census data, adjusted for differential mortality, confirms the impression from history, especially the prevalence of smoking among women increased markedly in the inter-war period; the differential prevalence between men and women has been falling; and this has been due to reduced prevalence among men, with little change for women.
 

Discussion: The Effect of Ever-Smoking on Life Expectancy
The effect of ever-smoking upon life expectancy can be calculated by adjusting the official estimates of average survivorship for the 1975-77 period (6), to obtain actual survivorship rates for each cohort.

 Table 5: LIFE EXPECTANCY: Years at Age 25

<> <> <>  <>Never Smoker <>Ever Smoker
Table 5 shows that the average life expectancy for a 25 year old who never smoked would be 55.4 years for a male and 60.2 years for a female. On the other hand the expectancies for an ever-smoker are 43.7 years and 44.6 years respectively. The smoking experience of ever-smokers (and any other factors which are associated with ever-smoking) is to reduce male life expectancy for a 25 year old male by 11.7 years and a female by 15.6 years.
            The Maori differences are even more startling. Table 5 shows that the average life expectancy for a 25 year old Maori who never smoked would be 58.7 years for a male and 65.3 years for a female. On the other hand the life expectancies for an ever-smoker are 39.4 years and 41.5 years respectively. The smoking experience of ever-smokers (and any other factors which are associated with ever-smoking) is to reduce life expectancy for a 25 year old male by 19.3 years and a female by 23.8 years.
            Whether the never-smoking Maori is in fact more robust than the non-Maori counterpart, or whether this is the consequences of a measurement error and/or the unreality of the assumption of constant ever-smoking mortality effects by cohort can only be speculated. (Implicitly the calculations assume that the ever-smoking intensities and life experience are the same through generations.) It should be noted however that this conclusion differs from Smith & Pearce (7), insofar it seems to suggest that almost all of the Maori mortality differential can be explained by their higher smoking rates. The effect arises from more smoking and, apparently, their smoking more intensively (as evidenced by their lower quit rates).
            We can estimate the aggregate differential mortality effects of ever-smoking by asking what would have been the population size if there had been no smoking at all. This is done by applying the never-smoking survivorship rates to the whole population. The calculation involves the additional assumption that smoking, including mortality from smoking, does not affect the birth rate, and there are no smoking induced deaths from passive smoking, or for those under the of age 25.
            Table 6 shows that the total population over the age of 25 of males would be 22.1 percent larger if there had ben no smoking, and 13.9 percent larger by females. The Maori figures are, not unexpectedly, bigger: the population would be 28.7 percent larger for Maori males and 28.3 percent for Maori females. We also looked at the impact on the age group from 45 to 64, from whence much of social leadership is drawn. While the total population would have been 23 percent larger, the Maori population would have been 52 percent larger. Thus the Maori leadership age groups have suffered severely, in a period of major social transformation.
            Mortality rates of 181 per 1000 (i.e. 221/1221) of all males over 25 and 122 per 1000 of females, smoking takes on epidemic proportions. By comparison the notorious influenza epidemic of 1918 had a mortality rate of 5.5 per thousand (for the whole population) for Europeans, and 42.3 per thousand of Maori (8). As devastating as the influenza was, smoking has been much more insidious albeit the deaths are over a longer period.
            It should be noted that all these figures apply for the period from 1976 to 1981, and reflect the smoking behaviour which preceded that. Insofar as there has been a reduction in smoking in the 1980s, and that quitting (and reducing) smoking reduces mortality, the population impact would not be as severe today.
 

Discussion: Potential Research Extensions
The smoking question was not asked in the 1986 or 1991 Population Censuses although, following active lobbying by the anti-tobacco lobby, a smoking question may be asked again in the 1996 census (without the question of the number of cigarettes being smoked).  If it is, it may be possible to estimate differential survivorship rates from smoking behaviour more accurately, and identify trends over time.
            It would also allow investigation of what has happened to the post-1951 birth cohorts. There is survey data since 1981 on smoking prevalence, which shows further declines in smoking in New Zealand (3). However it is not usually on the same basis as the census question so it is difficult to blend the data.
            Using the existing data, the analysis could be extended to other socio-economic groups (e.g. income, occupation, labour force status, other ethnicities, location), including those too small to be picked up by a sample survey. It might also be worth improving the differential survivorship rates, by using a finer level of data and statistical smoothing techniques.
            A useful adjunct would be a supplementary survey of pipe smokers, to learn whether they were ever regular cigarette smokers.
 

Discussion: Policy Implications
The census data had a major effect on tobacco policy in New Zealand, when it gave the anti-tobacco lobbies some idea of the magnitude of the phenomenon. Almost everyone recounting the successes of the movement in the last two decades mentions the census as a major stimulant in the campaign (9).
            Because the aggregate levels were so important, detailed analysis was not carried out at the time. This paper is perhaps a pioneer in the microanalysis of the census data. But it describes a situation almost two decades ago. While of historical interest it perhaps has little to say for current policy issues, except it confirms the build up of today’s tobacco related health problems that the smoking then was promising.
            The case for a reintroducing the question in the 1996 New Zealand Population Census is that the entire enumeration of the population is that it provided detailed information on small groups in the community, which samples are unable to provide data. Such groups are increasingly focuses for the anti-smoking campaign.
            Thus the New Zealand anti-tobacco lobbies have had a strong case for their campaign to re-include the question in the 1996 census. Lobbies elsewhere in the world have an even stronger case for pursuing the inclusion of a similar question in their next national censuses.
            In the interim we may be sure that this data confirms the picture of the smoking in the past having a major mortality effect, especially on Maori women.
Acknowledgements
The author is grateful for helpful comments on earlier versions of this paper from Robert Bowie, Neil Pearce, and Eru Pomare (Wellington Medical School), Brian Cox (Otago Medical School), Murray Laugesen (Public Health Commission), Ian Poole (Population Studies Centre, Waikato University), Sarah Thomson (New Zealand Cancer Society), Statistics New Zealand (the Department of Statistics), and two referees.
 

References
1. Statistics New Zealand. 1996 Census of Population and Dwellings: Preliminary Views on Content. Wellington, 1993:94-95.
2. Jackson R, and Beaglehole R. Secular Trends in Underreporting of Cigarette Consumption. Am J Epidemiol, 1985, 122:341-344.
3. Departments of Statistics and Health. Tobacco Statistics. Wellington, 1992:12-13.
4. `Journal’ of a surgeon Henry Weeks, reported in Rutherford J. and Skinner W.H. The Establishment of the New Plymouth Settlement. New Plymouth, 1940:93-94.
5. Reid P. and Robert R. Te-Taonga-mai-Tawhiti (the-gift-from-a-distant-place). Auckland: Niho Taniwha.
6. Department of Statistics. Demographic Trends 1992, Wellington, 1993:85-6.
7. Smith A.H, & N.E. Pearce, Determinants of Difference in Mortality Between New Zealand Maoris and Non-Maoris Aged 15-64, NZ Med J, Feb 22, 1984, Vol 97, No 750, p.101-8.
8. Rice, G. Black November: The 1918 Influenza Epidemic in New Zealand. Wellington, 1988:141-145.
9.Thomson, S. Stubbing Out the Social Cigarette. M.A. thesis, University of Auckland, 1992.
 

TABLES TO COME
 

Table 1: 1976 PREVALENCE OF ALL SMOKING: Living Population (Percentage)
 Source: 1976 Population Census

Cohort Men Men Men Women Women Women
Quinquennium
March Years		 Ever
Smoke		 Smkoe
Now		 Quit
Rate		 Ever
Smoke		 Smkoe
Now		 Quit
Rate
Before 1896 61.3 20.4 66.8 13.3 05.6 58.0
1897-1901 69.9 26.9 61.5 21.3 10.7 49.7
1902-1906 72.6 30.7 57.7 26.9 14.4 46.3
1907-1911 74.5 34.7 53.3 34.8 20.2 42.0
1912-1916 74.4 38.3 48.5 40.7 26.0 36.2
1917-1921 75.1 40.6 46.0 45.2 30.6 32.3
1922-1926 75.6 44.0 41.8 47.8 34.1 28.6
1927-1931 71.8 45.0 37.3 45.8 35.8 26.2
1932-1936 67.0 43.8 34.7 47.4 35.3 25.5
1937-1941 63.4 43.3 31.8 46.9 35.0 25.3
1942-1946 62.0 44.0 28.9 50.7 37.8 25.4
1947-1951 57.3 42.5 25.8 50.3 37.8 24.9
1952-1956 52.2 41.8 20.0 49.3 38.9 21.0
1957-1961 35.3 29.8 15.8 36.2 30.4 16.1

  

 

Table 2: 1976 PREVALENCE OF MAORI SMOKING: Living Population (Percentage)
 Source: 1976 Population Census
   

 

Table 3: DIFFERENTIAL CENSUS SURVIVORSHIP: NON-SMOKERS OVER EVER-SMOKERS
 

Source: Based on 1976 to 1981 Censuses
 

Table 4 PREVALENCE OF EVER-SMOKING: Entire Cohort
 Source: (based on 1976 Population Census, and differential survivorship rates)
   

 

Table 6: INCREASED POPULATION IF THERE WAS NO EVER-SMOKING (Percentage above Actual 1981 Population)

Chasing the Business Cycle

This entry was posted in Listener, Macroeconomics & Money on by .

Is the Business Cycle a Necessity or Nuisance? 

 

Listener: 15 April, 1995. 

 

Keywords: Macroeconomics & Money; 

 

A recent editorial in the London Economist mused on the death of the business cycle. Economists have been able to track cycles of upswings and downswings for over two centuries. The fluctuations are not a precise sinusoid. Each business cycle is unique, but all show regularities in the underlying mechanics. Typically the cycle is about a growing trend, so the upswing is stronger than the downswing, and each cycle ends at a higher level of economic activity. 

 

While some economists see the cycle as an unnecessary nuisance, others see it as an integral part of the growth process. For at least fifty years some of the former group have been claiming that business cycle have been abolished by good (i.e. their recommended) management. Cycleless the economy would grow indefinitely. 

 

For fifty years such predictions have been voided by the world economy going into a cyclical downswing. Ironically the claims of the death of the cycle tend to be at their strongest, just as the boom peaks. The Economist editorial is concerned that there is then a tendency to relax economic management, which exacerbates the downswing. This loosening applies to governments, to business and, of course, to economic commentators. 

 

It would be foolish, although characteristic, to claim that New Zealand has magically abolished the business cycle, while much better managed economies have failed to do so. It is true that the fluctuations of the late 1980s were not as pronounced as in the past. This was partly because the world economy was in a long boom, partly because we were so struggling with stagnation and restructuring that oscillations were less evident. However since mid 1991 the New Zealand economies has been in one of its longest upswings, as is apparent from manufacturer’s capacity utilization index. The Institute of Economic Research, who compile the figure, will be announcing the April figure soon. We should not be surprised if the new level is lower than the December one. 

 

Indeed more thoughtful analysts worry about high capacity utilization, which is associated with inflationary pressures – hence the Reserve Bank trying to restrain economic growth by raising interest rates and holding them at high levels. But as The Economist perceptively observes “many economists now put their trust in monetary policy to arrange a `soft landing’ rather than a crash. But monetary policy is blunt: there are long and changing delays between alterations in interest rates and any effect on economic activity; even then the size of the impact is uncertain.” The editorial argues for other measures including fiscal policy. Although not directly addressing New Zealand, it would support the current budget surplus. 

 

While inflationary pressures are an important part of the top of the cycle, in the past the New Zealand downswing has been more hostage to a balance of payments crisis. Imports surge relative to exports, draining the economy of spending, while the government has to take measures to protect the current account. This is the prospect which faces Australia, with the expectation of a harsh budget next month. It would be surprising if New Zealand escaped the same fate. 

 

In the past the crisis has often been precipitated by a collapse in overseas prices for pastoral exports. Today these are a smaller part of the totality of export effort. Even so part of the strength of the upswing has been from their improvement. But suppose there is some price weakening, while the Australian economy slows down. Our manufactured exports would also slow down, and there would be less tourists from across the Tasman. Meanwhile imports would continue to boom. 

A not widely noticed discussion in the latest Reserve Bank Economic Forecasts observes that our import penetration ratio has risen from around 23 percent in 1984 to 29 percent in 1991, and is expected to go above 35 percent next year. The exact figures do not matter as much as the evident truth that imports as a share of spending are rising rapidly, so that exports as a share of production have to rise to pay for them. 

 

Unfortunately the monetary policies restraining inflation are exacerbating the threat of a balance of payments crisis. High interest rates push up our exchange rate, making imports cheaper and more attractive to purchase. Meanwhile the return on exports is depressed, making it harder to pay for the imports. Thus measures to ease inflationary pressures encourage importing, discourage exporting, and heighten the threat of an external collapse. 

 

This seems a far cry from the sort of economics prospects recently presented to the public. These assume a soft landing scenario, with the economy in a long run growth situation similar to the rich economies. They could be right, but one would have more confidence in the forecasts if the commentators were to stop assuming the death of the business cycle, and to explain why they think this time the end of the upswing will be different. As Mark Twain said after reading his obituary, the reports of the death are greatly exaggerated. 

 

A Modest Politician

This entry was posted in Listener, Political Economy & History on by .
Is Modesty the Best Policy for a Politician? 

 

Listener: 1 April, 1995. 

 

Keywords: Political Economy & History; 

 

“It is not true that only the unfeeling cynic, the vain, the brash, and the vulgar can succeed in politics.” 

 

Shortly after the Berlin Wall fell in 1989, followed by Czechoslovakia‘s “velvet revolution”, the tenants of a Prague apartment received a note from its janitor, apologizing that he would no longer be working for them, but had just been appointed Minister of Foreign Affairs. Like many other dissidents against the communist government he had felt unable to contribute to it intellectually, and undertook manual work in order to earn a living. One of his fellow dissidents, playwright Václav Havel, even spent time in prison. This week Havel visits New Zealand as the president of the Czech Republic. 

 

One of Havel‘s recurring themes has been that of morality in a political regime, an issue which other Czech writers have explored. Ostensibly they write about sexual mores, but often the story is about the way a politically repressive regime corrupts personal relations. One of their most prominent writers, Ivan Klíma, attended the Wellington Arts Festival last year, including reading from his novel Judge on Trial, which has this theme. (When Klíma was reactivating PEN, the writer’s collective, he was interrogated by the security police. A main concern was Havel should not become president of Czech PEN. Within three months the he was president of the entire state.) 

 

These morality questions have not gone away, even if the regimes which posed them have. These days Havel is in a tussle with his prime minister, Václav Klaus, an economist, who was also a dissident against the communists, when he worked for the Czechoslovak Academy of Sciences. 

 

Thus far the Czech economy has adjusted to market liberalization better than any other east of the old iron curtain. (The official unemployment rate is around 4 percent.) The reasons include that it was one of the strongest before the revolution, and there was little government debt so that its fiscal position is strong. Moreover the economically weaker part of Czechoslovakia separated off into the Slovak Republic. However Klaus would claim that it is also due to the correctness of his policies. 

 

Like other economists, Klaus was appalled by the communist’s infringement of orthodox Western economics, and attracted by the rigor and austerity of the version we associate with Mrs Thatcher. I have not read enough about him to be able to judge whether he goes as far as Thatcher’s view that society does not exist, but there is little doubt that he is in deep conflict with Havel who is an ecologically minded social democrat, stressing the virtues of civil society. It is easy to condemn Klaus, drawing attention to the way his crash through philosophy (“speed is more important than accuracy”) appears to have led to corruption and illegality in market transactions. Even so Klaus, like Thatcher, is driven by a morality, albeit a different one to Havel. (We should also remind ourselves that other east-central economies with less hard nosed economic policies are also riven by corruption and illegality.) 

 

The office of the Czech president is not managerially powerful, which seems to suit Havel because of his vision of moral leadership being key. At this point we get into murky issues of the extent to which political leadership is moral. Klaus is clearly irritated when Havel takes the high ground. How is a politician to respond to the following? 

 

“If your heart is in the right place and if you have good taste, not only will you past muster in politics, you are destined for it. If you are modest and do not lust after power, not only are you not unsuitable for politics, you belong there. The sine qua non of the politician is not the ability to lie; he need only be sensitive and know when, to whom, what and how to say what he has to say. It is not true that a person of principle does not belong in politics; it is enough for his principles to be leavened with patience, deliberation, a sense of proportion, and an understanding of other. It is not true that only the unfeeling cynic, the vain, the brash, and the vulgar can succeed in politics; all such people, it is true are drawn to politics, but in the end decorum and good taste account for more.” 

 

While every politician would want to associate her or himself with Havel‘s ideal, each knows we judge them all as cynical, brash, and vulgar. Certainly that is how they seem to behave. 

 

One is left with a feeling that the idealism is impracticable in a profession where modesty and humility does not win power. Yet that high ground is important. Under the communist regime each person was faced with the uncomfortable choice of dissent or compliance. It would have been easy after the velvet revolution for those who were the genuine dissidents, and suffered greatly and made great sacrifices, to declare vengeance upon those who complied with, and benefited from, the repressive regime. Fortunately Havel has supported a strategy of reconciliation and forgiveness. He is Europe‘s Nelson Mandela. 

As Good As Gould

This entry was posted in Listener, Macroeconomics & Money on by .

Inflation Fighters Need To Define Their Target 

Listener: 4 March 1995 

Keywords: Macroeconomics & Money; 

The debate about whether inflation is the appropriate target of monetary policy is bedeviled by there being no rigorous definition of inflation. When most prices are increasing at 20 percent a year, there is no trouble at saying that there is inflation. But when some prices are increasing at 2 percent, some at 4 percent, and some are declining, the issue of whether the economy is inflating is much more equivocal. A price change index can be defined to be the rate of inflation for practical purposes, but that is not the same thing as a rigorous definition. If one practical purpose differs from another, the index becomes less relevant. 

But what if it is in the interests of the economy for some prices to move sharply relative to others. At the moment, the Reserve Bank is of the view that interest rates should rise faster than other prices. The Reserve Bank then refers to two different measures of (consumer) inflation, one of which includes interest rates and the other excludes it, adding to the community confusion. There is none if we recall there is no rigorous definition of inflation. 

But it may be necessary to change other important price relatives. That was the message of Bryan Gould in a recent article in The New Zealand Herald. It argued that our current anti-inflationary policy prohibited a major depreciation of the exchange rate, which was necessary for sustainable economic growth. 

Bryan Gould perhaps needs some introduction. He is currently the Vice-chancellor at Waikato University, but before that he was a leading British Labour politician. This may not seem promising credentials for the senior academic of a university, but born in New Zealand, Gould was a Rhodes Scholar, obtained an outstanding degree at Oxford, and is author or co-author of four books. 

One, Monetarism or Prosperity?, is an economics book well within the traditions of the orthodox British economics debate. Written in 1980 it is a criticism of the monetarist economic doctrines which were just being implemented by Margaret Thatcher. It argues that for much of the post-war era the British economy was managed in the interests of its financial sector, at the expense of the real (productive) economy. In particular the maintenance of a high exchange rate for financial stability meant that the British manufacturing sector was disadvantaged when competing against the rest of the world. Since manufacturing’s ability to export and compete against imports is central to the performance of the real economy, British economic growth suffered. 

This thesis was not very relevant to the New Zealand economy in 1962 when Gould left. Then 90 percent of exports were pastoral products. But he would recognize the parallels when he returned. The economy has markedly diversified in the 30 years, and today the manufacturing sector is our largest exporter. The statistics are often presented to make agriculture seem bigger, by ignoring the importance of post-farmgate processing. For the Gould argument the sectoral balance hardly matters. What matters is that today exporting and import competing are more price responsive in the short run. Consider the logs which get processed overseas when the exchange rate is high.. 

Since the book was written over a decade ago, subsequent events might be used as a test of the rightness of its propositions, especially its forecasts of dire consequences if Thatcher’s policies were pursued. Looking up the record I was surprised to find that from 1979 to 1994 (i.e. under the monetarist regime Gould’s book was criticizing), Britain grew on average 1.8 percent a year, while the OECD rich countries averaged 2.5 percent. I had expected Britain to grow about the same, and was going to explain this by the advantages of North Sea oil. Certainly in the mid-1980s Britain grew faster. When the black gold ran out so did Mrs Thatcher’s luck. But even ignoring the advantages of the oil, the poor British growth record is consistent with the book’s theory. 

We can but conjecture what would have been the economic growth rate if Britain had devalued as Gould recommended. Some monetarists argue that inflation would have been higher, but there would have been no growth boost. This is probably the position of the Reserve Bank, for they argue this for New Zealand. 

Yet the Bank’s own data shows quite clearly that it is possible for the relativity between the exchange rate and consumer prices to diverge for long periods. Moreover when it did, the economy performed exactly as the Gould book predicted. When the exchange rate was relatively overvalued, as in the mid-to-late 1980s, the economy stagnated. When it was undervalued and falling, as in the period before, New Zealand had a growth boom. 

Unfortunately the various responses I saw to Gould’s Herald article failed to deal with his analysis except by denying that relative prices mattered to economic performance (interest rates excepted, of course). Perhaps any justification of current policies depends on the pretence there is a rigorous definition of inflation. 

A Quiet Revolutionary: Eru Woodbine Pomare: 1942-1995

This entry was posted in Health, Maori on by .

He Worked for the Health of all New Zealanders
Listener: 18 February, 1995.

Keywords: Health; Maori;

Eru Pomare, who died suddenly in January, had an impressive whakapapa. A great-great grandmother, Kahe Te Rau O Te Rangi, was one of the few women to sign the Treaty of Waitangi; another, Maora Pani, saw a Captain Cook arrive; his grandfather, Sir Maui Pomare, a doctor and MP, was central to the first Maori health revolution at the turn of the century, which saw a dying race recover in vigour and numbers; his grandmother, Lady Miria Woodbine Pomare, who had a major influence on his life, deserved her own entry in The Book of New Zealand Women, the entry being written by her most eminent grandchild.

Yet the man’s mana came more from achievement. Lineage did not make him the Dean of the Wellington Medical School. Such schools are dominated by barons – they call them professors – who require the highest competency of their dean, the king who handles the conflicts within the realm and its complex relations with myriads of other academic and medical institutions.

While Eru Pomare had the required distinguished record of research and the subtle skills of management of resources and people for a medical deanship, he is likely to be remembered best for his contribution to the second revolution in Maori health of the last decade.

When one goes into a hospital for treatment of bowel cancer, one of his specialities, the doctor will treat the physiological conditions in a manner pretty much independent of the patient’s ethnicity. Subsequent care will have to recognize the individual’s personal and social characteristics. But the main factor in personal treatment is physiological.

However, once the focus moves to preventative health measures, social conditions can be vital. This is well illustrated by the first Maori health revolution when Maui Pomare and Te Ati Awa kinsman, Te Rangi Hiroa (Peter Buck), changed Maori life styles. Buck’s biographer, economist John Condliffe, describes him explaining the need to put the latrines outside the fences of the pa. They had been moved inside when the fighting had become fearsome. What persuaded the elders was Buck quoting an ancient waiata in which a rangatira went outside the pa one night to the latrine. Here, the kaumatua marvelled, was one of learning in the pakeha world of medicine, but who knew Maori ways too.

The issue remains today. Some recent research on smoking of mine confirms that smoking shortens life expectation, but also suggests that it has been much more devastating on the Maori than we had thought. It is not just more Maori smoke, and smoke more: they die earlier as a result. Smoking rates have been coming down, but more among the Pakeha. The successful promotion strategies missed out the Maori, because the pakeha dominated campaigns did not connect. So the Maori are taking up the anti-smoking crusade themselves, as they are with other health issues such as alcohol abuse.

Sometimes the issue is very specific to the Maori. Regular marae attenders notice the improvement of the quality of the food in recent years. It remains abundant, but initiatives by the Maori Women’s Welfare League means these days marae food conforms to good dietary practice. Of course our schools have taught cooking for years, but how many of the lessons connected with the particular requirements of marae food?

In these, and many other areas of healthy life style, the guidance of Eru Pomare was key. The standard text on Maori smoking, Te-Taonga-mai-Tawhiti, acknowledges “Professor Eru Pomare needs a special mention for his support, patience, and belief that it could be done.”

I liked the word “patience”. As one of his colleagues commented “he suffered fools with remarkable and enviable grace.” There was a quiet dignity to the man. Those who worked with him, even on government committees on which he served and chaired, recall him first as friend.

Focusing on his contribution to Maori health does not mean that he was uninterested in the non-Maori. If today you are more careful to add fibre to your diet to reduce bowel cancer, or cover up to reduce the risk of melanoma, you are probably responding to a campaign in which Eru Pomare was intimately involved. The skin cancer campaign is revealing in that it is not a Maori problem, is it? The man worked for all New Zealanders.

That was evident at his tangi at the Takapuwahia Marae in Porirua, where the world of the Maori and medicine came together. It poured down at a service. There were too many to fit into the large wharenui. If they had not been warmed by the aroha, the multitude outside would have got pneumonia.

The Maori say that when a great rangatira dies, Rangi of the skies weeps. The tangi broke the drought. But it was too high a price to pay for a man who at 52 had given so much, and had so much more to give.

The Fallacy Of the Equity Vs Efficiency Tradeoff.

This entry was posted in Distributional Economics, History of Ideas, Methodology, Philosophy, Social Policy on by .

This is an elaboration of a note I prepared in February 1995.

Keywords: History of Ideas, Methodology & Philosophy; Social Policy;

It is much easier to claim there is an equity-efficiency tradeoff, than to demonstrate that there is not, since the terms being used may have a meanings different from conventional usage, so the critic is reduced to chasing ill defined chameleon like ideas.

The following standard economic analysis explains how the term efficiency in a tradeoff must have a different meaning from that which is standard in economics. In order to make this clear, the word efficiency is put in italics whenever it is referring to the context of something which can be traded off against equity.

The analysis is based on a standard tradeoff diagram shown as Figure 1. On the vertical axis is measured “equity” and on the horizontal axis efficiency.

On the diagram we can show all the possible arrangements of the equity and efficiency outputs that are possible for a given set of resources. Rather than mark them all – they are obviously likely to form a dense set, we show where they are located. This consists of the area bound by the axes OE and OA, and the convex curve ABCDE. This is called the production possibility set.

FIGURE: The Efficiency-Equity Tradeoff

The curve ABCDE is called the “production possibility frontier”. In particular B is the point at which the maximum amount of equity that can be obtained for the given amount of efficiency B1. The amount of equity is B2. ( Similarly B is also the maximum amount of efficiency (an amount of B1), which can be obtained for a given amount of equity B2.)

The generally downward sloping frontier (i.e running from the North West to the South East) means that along the production possibility frontier an increase in one output can only be obtained by a decrease in the other. Thus as the production pattern moves from C to D, the amount of equity falls from C2 to D2, while the amount of efficiency increases from C1 to D1. This is what economists mean by the “tradeoff” between the two outputs.

But consider the point P (C2,D1) within the production possibility frontier. That point is an inefficient application of the resources, since an alternative arrangement can obtain more equity (up to C2) or more efficiency (up to D2), or some combination of the two. Thus there is an increase in efficiency (roman rather than italics) by moving from an interior point to the frontier. Here we are using “efficiency” in the standard economics meaning – an improvement in efficiency gives more output for the same amount of resources.

It should be evident that efficiency, as represented by the horizontal axis, has quite a different meaning from efficiency, as represented by the shift from an interior point onto the frontier. If there is any doubt about this consider the shift from P to B. Economic efficiency increases (because there is a movement from an interior to frontier point – which is however, unlikely, to be a Pareto efficient move) but efficiency decreases from C1 to B1. This is only paradoxical if we think the two terms have the same meaning.

What is the meaning of efficiency is something that those who claim there is a tradeoff have to explain, but rarely do. However in a longer paper I show that the term efficiency is frequently used to mean the situation with a particular (pro-rich) set of equity assumptions.(1) If that is intended to apply in a tradeoff analysis, then the notion of a tradeoff becomes even more nonsensical. An equity assumption is built into the efficiency notion, while the analysis purports to treat equity as conceptually independent from efficiency.

(1) B.H. Easton, “Notes Towards the Distributional Consequences of Policy Changes”, Social Policy and Inequality in Australia and New Zealand, Social Welfare Research Centre Reports and Proceedings, No 78, September 1989. p.171-194. This will be put up on the website in due course.