• Big Rocket Man?

    As with any informed discussion, facts are important in the political debate.  But, all too often, the facts are submerged by the spin put on them by the politicians – and what we hear in the end is the story about the facts, rather than the facts themselves.

    A classic instance is the meeting organised to take place in Singapore next month between President Trump and President Kim Jong Un of North Korea.  To hear the way Donald Trump tells it, the meeting is a triumph for his brand of “diplomacy” – his insults and threats of nuclear attack and trade embargos have, we are told, forced a reluctant North Korean dictator to the negotiating table where he will make a number of concessions.  Trump is able to parade as both a tough leader, “putting America first”, and as a peace-maker.

    But it is worth pausing for a moment to consider the narrative that Kim Jong Un has no doubt put before his own domestic audience – and an attentive international audience as well.

    My focus on developing a nuclear capability has paid off big-time, he will say.   The strategy has meant that the leader of the most powerful country in the world has asked to meet me and seek a deal. I am able to meet him as an equal – I also head a nuclear-armed state.  And he will need me to help him, so that he can tell his people at home that the meeting was a success – there will be no more patronising insults.  “Little rocket man” has become “big rocket man!”

    And Kim can go further.  Now that I have established this elevated status for my country, he can say, I have been able to show how magnanimous and far-sighted I am.  Now that we have nuclear weapons and delivery systems that mean that our rockets can reach America, I do not need further nuclear tests and rocket trials, so I will happily offer a “concession” to this effect; I already have all the capability I need to make sure that no one pushes us around.

    I am happy to give assurances not only to the Americans, but also to the Japanese and other countries who are nervous about our ability to attack them that we have no intention of doing so.  And I can demonstrate our peaceful intentions by making new overtures to our brothers in South Korea, as I have done, crossing the border and bringing an end to the state of war between us, showing Koreans in both the North and the South that we are one people and that I am the one person with the strength and vision to unite them.

    Not only do I know that this vision of the future commend itself to Koreans, but it also has the support of our backers and sponsors in China (who are much more important to us than are the Americans) and who will continue to help us to lift living standards and improve civil liberties at home.  We do not need democracy to show that my popularity at home has grown in leaps and bounds in response to the initiatives I have taken.

    It is not a bad story, is it?  It provides a persuasive alternative to the American account of what has happened and will happen.  Like the Trumpian story, it is of course designed to identify the teller as the hero, and to place him centre-stage and to show him in a good light; but, tellingly, it has the additional virtue of corresponding quite closely with the facts and that is no doubt how it will be seen around the world.  Donald Trump, eat your heart out.

    Bryan Gould

    13 May 2018


  • Another Commonwealth Gold Medal

    The Prime Minister’s first trip overseas in her new capacity has undoubtedly been a great success – for her personally, for New Zealand and even – perhaps – for the Commonwealth itself.

    The charm, freshness and intelligence which produced a largely unexpected election victory at home have all now been recognised on the international stage and have drawn forth a range of favourable responses from international leaders who have clearly been intrigued not only by a fresh face but by someone they had not expected to see – a young woman leader – not only attractive, but having the temerity to be pregnant into the bargain – and with surprising self-confidence and sure-footedness on her first foray abroad.

    The image she presented is entirely one that New Zealand wishes to present – the image of a country that dares to be different and to break new ground and that is keen to find new and better ways of doing things.

    The response and the special attention she received,  from the Queen herself and from other senior Commonwealth and European leaders – Prince Charles, Emmanuel Macron, Angela Merkel, Justin Trudeau, Theresa May – were not just a feather in her cap, but a plus for New Zealand as well.  And that plus could turn out to be of considerable value.

    She has helped to breathe new life into the Commonwealth – so that an international association of amazing scope and variety, whose potential has never been properly recognised, can start to play a full and valuable role – and, if that should lead to a new trade agreement extending across so many countries at different stages of development, that could bring huge benefits not only to us but to a significant proportion of the world’s population.

    Not everyone, of course, will welcome the Prime Minister’s success.  While most Kiwis will be quick to acknowledge the favourable impression she has made, her political opponents at home are clearly a good deal less enthusiastic.  As the good news stories and images filled our screens, their angst is almost visible and audible.

    There, before their very eyes, they could see the next election slipping away from them and, with Simon Bridges struggling to make an impression, not least with his own supporters, we are constantly offered evidence of how desperate they are to prick the bubble of this latest version of Jacindamania – one that has now reached international proportions.

    So, stepping up to the plate are those who are being pressed into service to say something – anything – that might take away some of the gloss.  The problem for such nay-sayers is that they are obviously struggling to find something sensible, let alone anything of substance, to say.

    So, the headlines tell us that Jacinda is “just like Trump” and that Jacinda’s partner, Clarke Gayford, is open to criticism because he travelled with her (so much for gender equality) and commits the crime of spelling his first name with an “e”.  Anyone who bothers to read beyond the headlines in an effort to find any substance to support them is doomed to disappointment; one suspects that the headline is all there is and that it is in any case the real point of the exercise, intended simply to plant the impression in the reader’s mind that those not ready to join the Jacinda fan club at least have some company.

    It may be that the Prime Minister’s return to home territory will alleviate the panic that has beset her opponents and that we will then return to politics as usual and a greater preparedness to give credit where it is due.  In the meantime, as we celebrate another win for the Black Ferns to follow up on their Commonwealth Games Gold Medal, let us also enjoy the success achieved by another of our most promising and well-performing young women, as she carried our flag into the international arena and came home with a gold medal.

    Bryan Gould

    24 April 2018



  • The Dogs of War

    In 1954, Sir Winston Churchill famously advised an American audience that “to jaw-jaw is always better than to war-war”.

    Churchill was of course someone who knew about “war-war”.  His political career had encompassed both world wars and he had been a great leader of Britain in the Second World War; no one knew better than he did the price that is paid when countries go to war.

    He also knew how major conflicts could start unexpectedly.  He would have remembered that it was the 1914 assassination in Sarajevo of Archduke Franz Ferdinand that precipitated Austria-Hungary’s declaration of war against Serbia – and that in turn caused the Central Powers (including Germany and Austria-Hungary) and Serbia’s allies to declare war on each other, thereby launching World War One.

    If he had been alive today, Churchill would no doubt have been alarmed at the similarities between that episode and the stand-off that recently occurred between Russia and the West over Syria.  In this latter case, there was the same build-up of tension between great powers, and a precipitating event – this time, the use of chemical weapons by Assad’s regime against civilians in Douma – prompting a warlike response from the US, the UK and France; all the ingredients were there to set in train yet another major conflict.

    There was of course no shortage of hotheads who were keen to see military force used by the Western allies and who were quick to dismiss any thought that diplomacy might have had a role to play.  It is understandable that the West felt that they could not allow such a criminal act by Assad against his own people to go unchallenged; but it is still regrettable that their first recourse was to arms, rather than an attempt to persuade the United Nations to authorise a sanction that was appropriately condemnatory but less risky.

    Sadly, of course, the United Nations had revealed itself to be impotent in such a circumstance, by virtue of Russia’s willingness to use its veto in the Security Council to preclude any sanction that would harm the interests of its Syrian ally.  It might nevertheless have been useful to force Russia to own up to its willingness to support an ally that had made itself an international outcast through its use of chemical weapons against a civilian population.

    In all of this, our own Prime Minister – new as she is to the international scene and to issues of war and peace – showed amazing maturity and good judgment in recognising both the need to take a stand against chemical warfare but also the desirability of turning first to diplomacy as a solution.  “Shoot first, talk later” is a good policy for small boys in the playground, but it is a dangerous course in the real (and nuclear) world.

    It is also the favoured option of those simple-minded commentators who see themselves as hard-headed realists, “telling it like it is” and debunking the illusions of the “idealists” (those, that is, who would prefer not to go to war).   Warmongers like these should be asked about Vietnam, Iraq and Afghanistan and whether those wars validate the view that military force always guarantees the best outcomes.

    War invariably creates more problems than it solves, and that is to say nothing of the suffering and loss endured by those who actually have to wage it on the ground.  Churchill himself, the architect of the ill-fated Gallipoli adventure, would be the first to acknowledge that it is easy to launch military attacks from the behind a desk, when the main brunt is borne by others, and the outcomes are far from certain.


    The gravest risk facing mankind is that there is never any shortage of those ready to “let slip the dogs of war.”   Diplomacy and working through international agencies may be less thrilling to armchair warriors but that is where we should be putting our efforts.

    The United Nations was created by the victors in the Second World War as a means of reducing the chances of a further world war.  It is far from perfect, but we have avoided the worst for nearly three-quarters of a century.  We would do better to address its frailties rather than give up on it.

    Bryan Gould

    22 April 2018

  • The President As Hero

    Donald Trump is, as we all know by now, a simple soul.  The real world may present him with all kinds of intractable problems, but there is always room in the Trumpian world for the President as hero, riding to the rescue and calling “Hi ho Silver!” or, in his case, “Increased tariffs on imports!”

    This is not to say that President Trump has not identified a real problem – it is the proposed solution that is a little less than convincing.  As the President looks at the American economy, he is right to ask why the United States, with all of its industrial power, is a less efficient producer of steel and aluminium than many other countries who can supply the America market at prices significantly lower than those charged by domestic producers.

    He is also right to recognise that this state of affairs is both a consequence and a cause of the de-industrialisation that has destroyed so many American jobs in what has now become known as the “rust belt” – a region that delivered so many votes to Trump in the 2016 election.

    But, instead of facing facts, and listening to expert opinion on what needs to be done by way of increased investment, better skill training and a macro-economic environment that is better able to encourage innovation and efficiency, President Trump has gone straight for the apparent and simplistic solution.  If foreign suppliers can undercut American producers, he reasons, it is nothing to do with American shortcomings but is attributable to unfair practices by dastardly foreigners, and the problem must be faced by raising the prices that they unfairly charge, whether they like it or not.

    The problem is that, not surprisingly, they do not like it, and they are all too likely to retaliate.  So, in addition to coming up with a “solution” that simply entrenches the real problem – the relative inefficiency and therefore uncompetitiveness of American industry and their propensity to charge more than the going rate – President Trump has launched a trade war that will hurt not only the American economy but the global economy as well.

    Protection for domestic industries is of course a remedy to which many economies have quite properly had recourse – particularly when, as in the case of post-war Japan, they are trying to build or re-build their industrial strength. (Not all countries are as naïve as New Zealand in ignoring economic realities and unilaterally throwing open its borders to all comers, without securing any corresponding benefits in return so that they have nothing left to offer when it comes to multilateral trade deals.)

    But it would be stretching credulity to a considerable degree to treat the US as a developing economy that needs protection if it is to survive as an industrial power.  Even the President’s own advisers and Republican political supporters are aghast at what he has now so proudly announced as an instance of putting “America first”.  They can see that his supposed solution is in reality no more than an admission of failure, and that it will in reality make matters worse, as America’s trading partners have recourse to retaliatory measures as an expression of their displeasure.

    President Trump, however, is so deluded and so persuaded by his comic-book version of how a “President as hero” should behave that he avers that “trade wars are good and are easily won.”  The reality is that, as even a cursory survey of history would reveal, trade wars are not only bitter and destructive but also, in the end, dangerous, and can be a precursor to wars of a rather more militaristic kind.

    At the very least, a trade war developing off the back of this Trumpian “solution” could be damagingly inimical to the interests of a small open economy such as New Zealand.  “Free trade” may not always be what it seems – particularly when it takes the form of a TPP – but we have more to lose than most if trade barriers are re-erected.  We should always be alert to the price we are asked to pay for apparently “free” access to overseas markets (like China), but we should be under no illusion that we could be badly hurt by this latest outburst of simple-mindedness from the White House.

    Let us hope that, for once, the Republican party will recognise its responsibilities and keep their wayward toddler under better control, and unable to throw his toys out of his playpen.

    Bryan Gould

    9 March 2018



  • New Zealand Must Grow Up In Trade Matters

    New Zealand’s involvement with the rest of the world, in trading and economic terms more generally, has always been atypical.  For the first century or more of European settlement, the country developed as an economic appendage of Britain.  Virtually all of our trade took place with Britain; they took almost all of our primary production, in return for which we offered preferential access for British manufactured goods.

    But that cosy pattern, which meant that we did not have to worry too much about trade agreements and markets, was disrupted dramatically by two major developments in the 1970s and 1980s.  First, Britain joined what was then the Common Market, and was accordingly obliged to play its part in reducing what was popularly called the “butter mountain” by buying expensive and otherwise unsaleable food in preference to our own more efficient production.  Secondly, and just as importantly (though with much less fanfare and public concern), Margaret Thatcher and Ronald Reagan agreed to remove exchange controls – a move which suddenly meant that the owners of capital could roam the world, looking for the best investment opportunities (which often meant the lowest labour costs or the most accommodating regimes concerning tax, labour laws, and health and safety requirements).

    New Zealand suddenly found itself not only bereft of markets for its main exports but also a target for multinational corporations looking for safe investments and easy profits.  Much of our recent history in, and attitudes towards, international trade and economics is attributable to these two shocks to our system.

    As luck would have it, these changes in the international context took place at the same time as a domestic economic revolution was under way.  “Rogernomics” not only swept away subsidies and elevated the unfettered market to an unchallengeable status at home; it took the same “free market” ideology into the international sphere.  The counterpart to the “free market” domestically was “free trade” internationally.

    So, we took with us, as we looked for markets to replace those we had lost, a commitment to aggressively dismantling tariffs – and, in order to show our ideological commitment to the principles of free trade and free markets, for which we were receiving plaudits from right-wing commentators around the world, we proceeded to remove unilaterally our own tariffs and protections for our own industries without bothering in many cases to get anything in return.  This naïvete – there is no other word for it – was to cost us dearly.

    It colours still our attitude to free trade.  In the absence of the managed trade we enjoyed as an economic colony of Britain, and unable to find a suitable replacement for that cosy arrangement, we became obsessed with the need to reach trade agreements with all and sundry.  The signing of each new deal was represented as a return to nirvana; the emphasis was always on the boost each new deal would supposedly mean to our exports and economic growth, with virtually no account taken of what free access to our market for powerful competitors would mean for domestic production.

    The excessive value we placed on new markets led us to count our chickens before they were hatched and to treat as achieved realities what might only be distant prospects.  “Free trade” agreements were sold to the general public by listing, long before they had materialised, the supposedly long lists of manifold benefits to our exporters that would be delivered. The recent TPP negotiations, for example, were constantly justified by the confident and repeated expectation that a TPP agreement would provide us with tariff-free access to the US market for dairy produce.

    Such a prize would certainly have been worth a good deal, but our naïve optimism on this score should surely never have survived the repeatedly stated determination of the American dairy industry to resist any such concession.  As it happens, that mirage has been swept away in case, at least for the time being, by Donal Trump’s decision to have nothing to do with a TPP.

    None of this means that we should turn our backs on free trade.  The case for free trade in principle is as strong as ever.  As Adam Smith and David Ricardo argued, it is free trade that allows each economy to concentrate on what it does best, that encourages weaker and smaller economies to trade successfully with stronger ones, that means that there is a constant stimulus to greater efficiency and innovation, and that develops economic bonds between countries which support the general comity of nations.

    But, as always, arguments in principle need to be tempered by what is known or foreseen as to practical realities and consequences.  Free trade between a stronger and a weaker economy can all too often mean that the stronger simply reinforces its advantage while the weaker slips further behind.  All depends on the stage of development of the economies concerned.

    Most of the world’s economies have at some stage in their development recognised that some protection for their own domestic industries is needed.  Japan is a case in point.  In the course of re-building Japanese industry following their disastrous defeat in the Second World War, Japan did not hesitate to use tariffs and other non-tariff protections (such as an under-valued yen) to give their industry the chance to build its strength.  It was only once they could be sure that Japanese industry was big and strong enough to be internationally competitive that they became enthusiasts for and practitioners of free trade.

    In New Zealand, however, we have blithely ignored such reasoning.  We have rejected any notion that we might not be a fully developed and internationally competitive economy and have wilfully saddled ourselves over long periods with an over-valued currency.  If we insist on committing to free trade for ideological reasons, we should at least have enough sense to give some weight to the foreseeable and adverse practical consequences.

    Our naïvete in these matters has become even more evident when we have attempted to negotiate trade agreements, and have discovered that our premature and unilateral disarmament in matters of protection has meant that we have literally nothing to offer in return for the improved access to other markets that we seek.  Trade partners that already have free access to our market see no need to offer us concessions in return for concessions we have already granted to them.

    Nor does it stop there.  With the development of the global economy – the direct consequence of the free movement of capital engineered by the Thatcher/Reagan ending of exchange controls – we have discovered that our economic relations with other economies are not limited simply to matters of trade.  In such a global economy, the price we are asked to pay for trade (and, more particularly, investment) can extend well into the domestic policies we wish to apply.

    A good illustration of this point was the demand made by Warner Bros that, if we wanted them to make films in New Zealand, we would have to change our labour laws, so that the people they employed were not to be regarded as employees with all the rights and protections provided under our law to employees, including the right to belong to a union, but should be treated instead as independent contractors, negotiating individually with the US film company.  To the great shame of our then government, the law was changed to suit Warner Bros.

    We can see the same demonstration of the imbalance of power between our government and foreign corporations displayed on a much wider canvas.  There was much celebration when a free trade agreement with China was signed, and there is no doubt that improved access to the Chinese market is of considerable benefit to our exporters.

    But we have been very slow – and reluctant – to recognise that our economic relationship with China looks somewhat different when seen from China rather than from New Zealand.  For the Chinese, quite self-consciously on the way to becoming a global super-power, merely being able to buy our production is not enough.  A true super-power, they feel, must be able to guarantee access to the products it needs.  It should not have to rely on doing trade deals, or bidding in auctions – what is needed is not the power to buy a product produced by someone else, but the power to own and control the means and process of production itself.

    So, the Chinese interest in us is not that they want to be able to line up and compete with other customers to negotiate purchase arrangements for our dairy products.  Rather, they want to acquire and control the production itself.  Hence, we see the Chinese interest in purchases of dairy farms, the construction or purchase of dairy factories and the marketing by Chinese agents of dairy products made in New Zealand directly into the Chinese market.  Their purpose is not to develop a trading partner, but, in effect, to incorporate the New Zealand economy (and particularly the dairy industry) into the Chinese economy.

    It is not just the Chinese government that has this goal in mind.  Chinese companies doing business abroad invariably act as arms or agents of the Chinese government.  Virtually all business deals with Chinese companies will be, in effect, made with the Chinese state.  None of this means that we should avoid doing business with China but it does mean that we should be aware of what really is at stake.

    A further example of how extensive are the obligations we undertake when we negotiate what may appear to be a simple trade deal is the Trans Pacific Partnership.  That Agreement has long masqueraded as a “free trade” deal but, under it, foreign companies can insist, to the point of forcing our government to change the law in New Zealand, that they should have a “level playing field”, by which is meant that we must ensure that their profitability and successful operation is not adversely affected by any legislation we pass.

    So, for example, an attempt to restrict the sale of cigarettes or to make the business less profitable could land our government in court, before a specially constituted tribunal.  The government would be similarly open to attack if it used its power to negotiate agreements with foreign suppliers that would reduce their profitability.  So, Pharmac’s ability to use its monopsonistic purchasing power to hold down the cost of imported pharmaceuticals could be litigated by foreign pharmaceutical companies before those same tribunals.

    The current government claims to have restricted the range of these provisions in the TPP so that they are not such a threat to our sovereignty and democracy, but only time and practical experience will tell us if that is so.  Even setting aside the specific provisions of a TPP, however, there is no doubt that – for a small economy – getting into bed with powerful foreign corporations is fraught with danger, and almost inevitably raises the possibility of a loss of our power to decide important matters for ourselves.  Those corporations almost invariably want more than the goods themselves; they want to guarantee that they have the rights and protections that are properly available only by decision of our government.

    Without selling ourselves unnecessarily short, it is surely prudent to recognise that – in making trade deals with larger entities – we are a minnow getting into a global tankful of sharks.  If we are to survive and prosper, we need to be much more hard-headed and understand exactly what we are up against.  We need a much tougher approach than we have seen so far if we are to avoid being bought and sold by those who see us as fair game.  If we are not careful, by the time we wake up, it will be too late, and – for the sake of “free trade”, we will have sold our unique productive capacity and assets to foreign owners and with them the power to ensure that the benefits they produce come to New Zealand, rather than to those foreign owners.

    Bryan Gould

    22 February 2018