Ecuador’s New Deal: Reforming and Regulating the Financial Sector

Please hit the link. This should become the NZ Labour Party financial sector policy.
Ecuador’s New Deal: Reforming and Regulating the Financial Sector

The need for democracy

Instead of the mantra; “Discipline, discipline, discipline”, unions, parties and other political organisations of the left should march to the beat of; “Discussion, debate and democracy”.

 True united action by an organisation of people fighting for their rights can only be guaranteed by real agreement and understanding that what is decided is the best way for the organisation to further its aims. Such agreement and understanding cannot be assumed, or imposed from above. Discussion, debate and democratic decision-making are needed to ensure “buy in”.

Democracy is not an expensive overhead. It is essential to build progressive mass movements. It is the way an organisation establishes and maintains its links with the people it represents. Without the infusion of energy and enthusiasm from new members and the wider and wider politicisation of the mass of the people with a new vision of the future, left organisations ossify.

Without democratic participation, inspiration and enthusiasm are extinguished as the organisation degenerates into a bureaucratic nightmare; such organisations can wither and die.

Real strength comes from the support and participation of the mass of the people for and in the implementation of progressive policies. This is what must be fought for. Who is going to join, or build, an emancipating political movement that does not give its members the right to decide what that organisation does?

What is needed is a form of organisation where the leaders advise and the members decide.

 

Discipline or Debate? Centralism or Democracy?

Calls for "discipline" when a political party is caught up in a fractious debate about policy or organisational matters almost always come from the incumbent leadership. This is understandable as the leadership is charged with maintaining the proper functioning of the organisation. However, it clear that "discipline" means that opposing views (to those of the incumbent leadership) are conveniently left unexpressed in any meaningful way since the internal means of communication are largely monopolised by the ruling group.
So the conundrum exists: the public expression of differing views is seen as 'bad' for the party BUT the suppression of such views can only lead to pent up frustration that could eventually burst out in some destructive manner (and be even worse for the party).
The debate about centralism versus democracy, discipline or debate, is as old as democracy itself. The Social Democratic parties in Europe in the 19th and early 20th centuries were much exercised by this question.
The bureaucratisation of left parties was taken to its extreme by the Russian Social Democratic Party in its reincarnation as the Communist Party of the Soviet Union. Under Stalin, dissent meant death.
The original ethos of the RSDP was one of real democratic centralism: ie debate was tolerated and actually encouraged, decisions were made democratically about courses of action, and then discipline (centralism) kicked in during the carrying out of the action. However, except in times of extremis like during a civil war, on-going debate was not stamped out.
The fact is that the minority might be right and their input needs to be valued, not discounted as 'wrong'. If the action embarked upon goes badly, they might be just the people the party needs to get out of the doo doo.
Members should NOT have to eschew their strongly held views just because another view prevails at a certain time. It is the minority's duty to stand firm and defend their position until it is proven to them that they were wrong, or it is proven to be right (or a position in between two extremes is adopted).
Bureaucratic centralism is the worst and most destructive means of operating a progressive organisation. The Labour Party in NZ is now moving away from such ways of operating; that was the intent of the changes adopted at last weekend's conference. The sooner the dead-hand of bureaucracy (the enemy within) is lifted from our backs the sooner we can stand up proud and strong to fight the enemy without - those whose market-driven motives are wrecking the world economically, socially and environmentally. 

Historic Labour Conference Empowers Members

Labour Party members could not have come away from last weekend's Conference anything but elated and energised. Despite the best efforts of the 'dark forces' within the Labour Party caucus - those that ignored the clear wishes of the membership and installed a leader of their own choosing a year ago - party members passed the most democratic reforms the Labour Party has seen in its 96 years of existence.
Party members and union affiliates will now have the majority say in who will be the party leader. MPs will be bound to implement policy that is in line with the Party policy platform (still being developed).
This is a revolutionary development in a Party that has been written off by many as moribund and unable to shake-off the damage done by the betrayal of Labour values by the 1984-90 neo-liberal controlled Labour Government.
Last weekend's conference was historic - the conference that took the party back!
The sham caucus vote taken today under the pretext of clearing the leadership-contest decks will only inflame membership passions further - a blatant attempt to subvert the leadership confirmation/contest due next February.
 

A Storm in a T-blog?

A Labour stalwart is feeling quite confused and put-upon after querying (in an internal email newsletter) the breakfast speech made on 11 July by Labour Finance spokesperson, David Parker.  Parker’s speech revealed an apparent contradiction between the Labour stand against asset sales and the Labour overseas investment policy that allows for the sale of electricity generators. An explanation seemed warranted.
The fact that our Labour stalwart was alerted to the Parker speech by a newspaper column and blog post by a favourite bogey of many Labour MPs, Chris Trotter, did not help his/her case (or standing in the party).

The question posed by the T-man and referred in the internal email newsletter was this:

“Speaking to a group of corporate head-hunters on 11 July, Mr Parker spelled out the details of Labour’s policy on foreign investment. Concerned to prevent 'infrastructure assets with monopoly characteristics' from being sold to offshore buyers, Labour, in the run-up to last year’s election, drew up a 'closed list' – to keep a 'bright line' between 'what is to be sold and what is not.' Among the infrastructure that was not to be sold was any: electricity line, water storage or irrigation networks; no seaports or airports; and no public hospitals, schools, railway lines or roads.

"Not included in Labour’s 'closed list' were telecommunications networks and – amazingly – 'electricity generators'.
"According to Labour’s policy: 'While the electricity market is on the cusp of becoming uncompetitive and exhibits monopoly-like characteristics, generation assets are diverse in nature, location and ownership.'
"What this means is that although Labour went into the last general election on a policy of 'No Asset Sales'; and in spite of the fact that its campaign advertising showed a vast banner, displaying that very message, being draped over a hydro-electricity generating dam; the party was unwilling to include electricity generators on the list of state-owned infrastructure that 'ought to be run in the New Zealand interest' – and never be sold to foreigners.
"Am I alone in thinking that Labour’s foreign investment policy fatally compromises its current campaign against asset sales? If the generation of electricity is an activity which properly belongs to the market, and if New Zealand’s electricity generation assets are 'diverse in nature, location and ownership' and, therefore, able to be purchased by foreign interests, then I’m at a loss to know why the Labour Party is opposed to their partial privatisation.”

For Mr T. this is evidence that the Labour leadership (and caucus) is moving to the right and that a Shearer-led Labour Party could emulate the stalking-horse Rogernomics strategies of the Lange-led Labour Party of the 1980s.

Our Labour stalwart received a reply from David Parker’s office that managed to evade the central point of confusion and merely stated:

“The comments you refer to were not about this issue, but refer to the rest our policy to tighten up on controls on overseas investment in privately owned rural land and monopoly infrastructure.”

The key point that everybody seems to be missing is that Contact Energy, one of the four major electricity generators, is already totally in private ownership. In case anybody missed it, this happened under National in 1999. Here is the potted history from the Contact Energy website (written in 2007 I assume):

“The New Zealand electricity industry has undergone significant reform in the last 20 years. First, the Electricity Corporation of New Zealand (ECNZ) was established in 1987 as a state owned enterprise to operate as a commercial, profit-making organisation. ECNZ was the sole provider of electricity in New Zealand, including generation, transmission and retail. Electricity was distributed through local electricity supply authorities.
"Then, in 1994, Transpower was separated from ECNZ and created as a state owned enterprise. In 1996, ECNZ was split into two more state owned enterprises - ECNZ and Contact Energy - and a wholesale electricity market was established. Another major reform was the privatisation of Contact Energy in 1999.
"The last significant reform was the separation of the lines and energy businesses of the former Electricity Supply Companies and the split of ECNZ into three competing state owned enterprises: Meridian Energy Limited, Genesis Power Limited and Mighty River Power Limited. These reforms were designed to introduce a more dynamic and competitive environment into the generation, distribution and retailing of electricity.”

So where does that leave us with the Parker speech and the somewhat long-bowalley conclusions drawn by Chris Trotter?
The Labour asset-sales policy is “no sales” of existing state-owned assets. The foreign investment policy is no foreign ownership of monopoly infrastructure.
The electricity generator Contact is already privately owned, so it would be subject to Labour’s foreign investment rules. These are designed to put limits on foreign ownership, not private ownership. Contact is not a monopoly, therefore overseas investment is possible under Labour's policy. There is really no contradiction here.
The question that could be asked is; should energy generation be deemed too important to the economy and the environment to allow any form of private ownership of it, whether that be locally-based or foreign (is there a difference in a globalised world?)?
The re-nationalisation of all privatised energy generation infrastructure and the removal of the clumsy and artificial market mechanisms currently in place in the sector is a move that would have wide support amongst New Zealanders.
This is not (yet) Labour policy.
It is up to Labour members and affiliates to push for such a policy if they want to see it enacted by a Labour-led government.
The current democratic reforms of the Labour Party organisational structure and policy-setting mechanisms will make adoption and fulfilment of policies like this more likely.

Strong unions can be good for business

Strong unions have a definite place in making a better world. Not only do unions play a vital role in collectively bargaining for decent wage rates and conditions for workers, but they can be a vehicle for improving business performance. One of the most successful restaurant and hotel workers union is Local 6 in New York. This union was founded in 1938 and organises 23,000 restaurant and hotel workers. The union has created, with the Hotel Association, a hotel workers’ health plan that is a model for what a health care system should be – effective, humane and efficient. A healthy, efficient workforce is the result.
What business-owners can gain from a professional relationship with a strongly organised union is also shown in the New York hotels. Those that are non-union suffer from the continual, unmediated conflicts that plague all-too many New Zealand workplaces as well. The union-sites in New York are, in contrast, relatively conflict-free. In the hotel industry petty corruption and favouritism is rife. Organised workers have rights and these are respected by all when the union is known to be strong enough to enforce them. Demoralising disrespect of workers, and corruption, are ferreted out to the benefit of company and employees alike.
As a veteran waiter at one New York hotel put it: “The union takes jobs and turns them into professions. It makes better managers out of management. The good ones get better – the bad ones don’t survive.”
What’s more, the fact that all the good hotels have to pay the union-negotiated wage rates means that hotels are competing on an even playing field when it comes to labour costs – the union takes wages out of the equation. This means that the productivity benefits from better paid more contented workers are shared by all hotels. It also means that rapacious, profit-gouging REITs (real estate investment trusts) cannot wreak the havoc in the hotel industry that they do in other “less regulated” markets.
Thirty years of failed neoliberal policies have empowered the very-rich classes at the expense of the rest of us. It is time to try a new way to run our businesses, and our world.  

Equality is the new “big idea”

“Equality is better for everyone” is the “big idea” that has been sweeping through policy and political circles since the 2009 publication of the book The Spirit Level. The authors, Kate Pickett and Richard Wilkinson, are British health researchers who discovered that all the social and health measures they investigated are significantly better for everyone in societies that are the most equal.
Anti-social behaviour, crime, poor health, mental illness, lower life expectancy, child abuse, high imprisonment rates, high rates of infectious diseases; all these markers of a “broken society” and the “broken economy” are the results of the growth of inequality. Screeds of evidence from dozens of countries, particularly comparisons between the most equal rich countries (Japan, Sweden, Finland, Norway, Denmark) and those that are least equal (USA, UK, Australia, New Zealand), show that people are happier, healthier and live longer in the countries with greater equality.
Not only that, but greater equality means less cultural pressure for the rampant and wasteful consumerism that is likely to push economic activity beyond the environmental limits of our ailing planet earth.
So better wages make better businesses; a more equal society is a healthier society; and the environmental threat we all face can be better tackled when we realise we are all (equally) on the same space-ship together.

Better Wages are Better

Thirty years of pro-business, ‘neo-liberal’ economic policies have not created the gains in wealth and prosperity that were promised. Instead a financial meltdown of the scale not seen since the 1930s Great Depression has crippled the world (and New Zealand’s) economy for the last five years.
Even the institutions that led the free-market, deregulation crusade have had to admit that things are not what they were cracked up to be. The IMF, for example, now says that sluggish productivity growth and increasing income inequality is a result of multi-national companies taking advantage of deregulated trade and globalisation in a race-to-the bottom; chasing lower wage rates.
The loss of higher value-added production since the opening of the economy in the 1980s has been documented in New Zealand. So has the growing income inequality. The real average wage fell from a high point of $29.97 an hour (in June 2011 dollar terms) in March 1982, to $26.27 an hour in June 2011 – a drop of 14%. Wage and salary earners’ share of the economic income cake was slashed by a quarter between the early 1980s and 2002, from 60% down to 46%. In 2010 this share was still 15% down on the early 80s despite some improvement over the 2000s. Of the OECD countries, only Turkey and Mexico track lower.
The CTU Economic Bulletin (Oct.2011, from which these figures are taken, concludes that there would be “wider benefits across the whole economy as well as better social outcomes from a commitment to a high wage, high skill, high value society. The integration of innovation, higher wages and more investment in skills and technology are a sound underpinning for development that is sustainable both economically and socially. This is a stark contrast to the low wage pathway that competes on the basis of cost alone.”
This is not just trade union rhetoric. Increasingly, academic research is bearing out these conclusions. The International Labour Organisation, which is part of the United Nations, has recently published research showing that wage-led growth is the way to a sustainable recovery from the current economic depression. 

ILO says wage rises are compatible with better profits
The ILO research calls into question the prevailing wisdom derived from Milton Friedman’s theory that there is a natural rate of unemployment, below which inflation will rise. The Friedman theory justifies monetarist interest rate manipulation to keep the economy from growing fast enough to create full employment. When there is full employment, wages naturally tend to rise and profits supposedly fall.
Two Dutch economists, writing in the ILO International Journal of Labour Research, show that rising inequality due to the global wage squeeze in the 1980s and 1990s is at the root of the current economic crisis. Credit inflation replaced wage inflation and led to the huge increases in household and corporate debt that crashed the financial system in 2007-8.
When alternative policies are adopted to strengthen the bargaining position of wage earners, wages rise and society becomes more egalitarian. In the simplistic, zero-sum world of the Philips curve that has dominated economic thinking since the 1980s, profit rates automatically go down as wages go up. This is the direct effect. More than offsetting this, though, are indirect results that will increase profits as wages go up.
First there are the gains in labour productivity that come from higher wages and more contented workers. In a co-operative industrial relations system, workers will share their tacit knowledge about how best to do things to make production and services run smoothly. They will more readily contribute their learned-on-the-job knowledge in an atmosphere where they feel secure and unthreatened by possible job losses as a result of helping to raise productivity.  Workers and firms will invest more in training and up-skilling when employment protection is stricter and average job tenure is long. The resulting higher labour productivity increases the profit rate.
Secondly, as wages increase, demand for goods increases. Firms are able to run at fuller capacity to meet the demand, utilising more (or all) of their productive capital investment to generate profits. New investment spurred on by greater demand and higher profits will lead to improved technologies and even greater labour productivity, and again, higher profits.
The authors conclude that profitability need not fall, and indeed can rise (counter-intuitive though this may seem), as the wage share rises and distribution becomes more egalitarian. The resulting society is better for everyone.

Defending public services

First Published in SFWU magazine Our Voice

Water and electricity provision; road, rail, air and sea transport; hospitals and schools; facilities for sports, leisure and cultural activities; communications networks; police stations, courts and prisons; council and parliament buildings – these are all what is called “public infrastructure”.

These facilities and services are crucial for the well-being and proper functioning of a civilised society and they have mainly been provided by the state in the past.

However, since the 1980s, much of the public infrastructure has been privatised around the world. A global infrastructure market has emerged through which huge private trans-national companies (TNCs) can make massive profits – companies like Macquarie Bank and Goldman Sachs.

In April, the SFWU hosted a visit from Dexter Whitfield, a UK expert on the privatisation of public assets. He has written about, and fights against, the latest version of privatisation that goes under the name of “Public-Private Partnership” (PPP). A PPP can also go under other names like “Private Finance Initiative” (PFI) and “Strategic Service-delivery Partnership” (SSP).

While he was here, Dexter spoke to trade unionists in Auckland, Hamilton and Wellington. His talks were based on his latest book called Global Auction of Public Assets.

PPPs are the latest way finance companies and private equity and pension funds are investing in public infrastructure. The private sector provides finance and management; it designs, builds and operates projects like roads and hospitals. They expect a very healthy return on these investments of 15%-plus profit.

Dexter says the excuse governments make is that the private sector can do things more efficiently and cheaper than the state (i.e. the government). But when you add in the profit margin it is clear that money that could be spent on hospitals and schools is instead going to line the pockets of the super-rich.

It’s not even true that the private sector more often build projects on time and in budget. Dexter’s research shows their record is no better than the public sector. And when private sector projects fail, the public sector has to pick up the tab. He has identified $US500 billion worth of PPP failures internationally.

Helen Clark’s Labour Government had to buy back Air New Zealand and Tranz Rail because the private sector operators were going broke and we could not allow our national air and rail transport infrastructure to collapse.

But this National Government is going to use a PPP model to build the new men’s prison in South Auckland. It is talking about doing the same for school buildings and other public infrastructure here in New Zealand.

Dexter talks about the crazy situation in the UK where a school built and operated under a PPP closed down because no one would go to it, and yet the 35-year contract still has to be paid out to the private investor.

He points out that tax-cutting, low-spending governments can never properly fund infrastructure development. Those promoting PPPs manipulate the figures to make the private option look better and cheaper.

PPPs are funded by raising money against the security of future income streams from service users who, Dexter says, “are saddled with ever-increasing tolls and charges”. The illusion is created that the financing is privately provided when it is only a loan against future spending from taxes and service charges.

Private companies also pick up lucrative consultant contracts to provide analysis and planning of provisions of public needs: analysis that inevitably maximises private profits and minimises private risk. PriceWaterHouseCooper is a good example of these consulting firms.

Workers in the public sector suffer as private contracting replaces secure employment. Pay and conditions come under attack, Dexter says.

Worst of all is the creation of a market in the buying in selling of the public infrastructure loans and shares, in which Dexter says schools and hospitals are sold like commodities to infrastructure and private equity funds and companies.

Infratil is one such company that operates here in New Zealand. It owns the majority of the public-transport bus services in Auckland and Wellington. It owns Wellington Airport and it also recently purchased the chain of Shell service stations. As a private company it can be bought and sold. The Act-National super-city plans for Auckland will open up the Port of Auckland, Auckland Airport and probably Auckland’s water and waste-water services to private investment and ownership.

Dexter argues that vital public needs should be provided for transparently and democratically. There is a public sector alternative to private-profit-making methods of infrastructure development. Public provision needs to be publicly planned, designed, built, financed and operated.

Our union should insist that a public or in-house option is put up whenever a contract comes up for renewal in the public sector, for example for cleaning services in a school or hospital.

He urges unions and other civil and community organisations to mobilise the widespread opposition to PPPs and privatisation.

Dexter works for a non-profit organisation that contracts its services to trade unions and community groups who are fighting against the PPP form of privatisation of public infrastructure. Its website has more information at www.european-services-strategy.org.uk/outsourcing-library .

Seats a Supercity Smokescreen

The furore about Maori seats on the new Auckland 'supercity' council, while a vital issue in its own right, has served to create a smokescreen around many other equally or even more important issues.
The prime one is the make-up, size and election of councillors overall. If a system of councillors elected from wards based on electorates or areas of even larger size, plus a number of at large councillors elected across the whole supercity is instituted this will lock in a regime of the business and wealthy elite who will rule a third of the country from a virtually unchallengeable position.
The politics of local bodies is well-known with the richer suburbs always turning out in greater numbers than those in the poorer areas. This was recognised with all the councils facing abolition having an existing system of election of councillors by ward and no at large councillors.
The supercity, if it goes ahead in the form that seems likely, will turn the clock back decades with its inherently undemocratic consititution.
This is the issue on which we should be concentrating our political fire. This, and the issue of privatising of the present council-owned assets like the shares in the airport and the port itself, were the main concerns expressed at the public meetings I attended when the supercity was first mooted. These issues have been subsumed under the Maori seats controversy.
In the end the council can decided to incude Maori seats under the existing local-body legislation. The wider questions of the make-up of the council and the sucurity of publicly-owned assets is the one we need to urgently address now.

Long live the commons!

Tariana Turia believes that Labour’s seabedandforeshore legislation was the "the single biggest land nationalisation statute enacted in New Zealand history". Would that the last Labour government had travelled the nationalisation road even further. Re-nationalisation of ACC, Air New Zealand and the railways could have fruitfully been complemented with full government ownership and/or regulation of the vital telecommunication and energy industries.

But the seabedandforeshore legislation was no nationalisation measure. It was the enshrinement of that which already existed; namely it retained the seabedandforeshore, the beaches and the coastal waters of AotearoaNewZealand, as part of the commons of this country. Our town and city open spaces, the National Parks and marine parks, the rivers, the lakes, our coastal waters and our beaches belong to nobody; that is they belong to us all. The seabedandforeshore legislation passed by the New Zealand parliament ensured that particular part of the commons remained in common ownership. Repeal of that law will be huge step towards the private ownership and commercial exploitation of our beaches and coastal waters.

Maori claim customary rights over the seabedandforeshore. Despite all the declamations and protests about “confiscation”, Labour’s controversial legislation preserved customary rights to the seabedandforeshore. East Coast Maori have already had theirs recognised under the law. What will happen to these rights if the law is repealed?

Despite all the assurances that Maori do not seek private property rights over the seabedandforeshore, the Maori Party and the Ministerial Review Committee that has just reported to the government clearly take the term “customary rights” to mean property rights i.e. privatisation: Or, in lieu of that, massive compensation payments.

Corporate Maoridom cannot wait to get its hands on this potentially lucrative asset. The ramifications of a private-ownership precedent in this arena of the remaining commons will quickly become clear. Other corporate interests will soon get in on the act. The example of the destruction of the New Zealand fishing industry, now largely in those very same hands, provides a stark example. Ask the workers made redundant at Sealords in Nelson as jobs are transferred to cheap-labour, off-shore factory ships what they think of tribal capitalism. Money is no respecter of good intentions. It knows no tribal boundaries.

Long live the public ownership (“nationalisation”, if you will) of the essential economic, social and recreational assets of AotearoaNewZealand!

Skyla - born earlier today

Skyla - 9lb 8ozs of joy (or trouble) - born 9.15am, March 13, 2009.
First child of my eldest daughter Carissa - 2nd grandchild of Len (proud grandfather).