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Oram v Callaghan: which way should science be going? [re-post]

Tuesday, August 31st, 2010

Originally posted on 16 March 2010




Rod Oram has a column in the latest Sunday Star-Times (not online) that discusses reforms to science funding. There’s some good points in the article (and a few others I don’t agree with so much), but the main thing that struck me was when he discussed the scientific and commercialisation work that the Crown Research Institute (CRI) Industrial Research Ltd had done on superconductors:

But it will take many years to develop the product lines into sizable businesses – and the chance of New Zealand being home to much of that is minimal. We have virtually no experience, scale or markets in these areas of science, technology and manufacturing.

From a commercial perspective it was completely the wrong science to pursue. We must focus instead on the life and environmental fields where we have the scale and the leadership to attract international collaborators.

Sounds sensible. But here’s Paul Callaghan, probably New Zealand’s most high-profile scientist, in his 2009 book Wool to Weta. Transforming New Zealand’s Culture & Economy:

Given our capability in physical sciences and engineering, I think we could generate many more start-ups of the Rakon/Navman variety, and if a fraction of them succeed we may do far better than via the biotechnology route favoured by government. (p. 15)

. . . I am not advocating spending less on biotech research. But I am suggesting that we shouldn’t apply blinkers, that we do have a track record of producing great businesses out of physical sciences and engineering and that we have the potential to a great deal more. (p. 17)

. . . We should discard the myth that because we are good at farming, our best high-technology future lies necessarily in biotechnology. (p. 20)

I have a great deal of admiration for both Oram and Callaghan. I think they are two of New Zealand’s most insightful writers on science and innovation issues. Yet on this crucial issue of where we should be focussing our research capability, they fundamentally disagree.

Who is right? I do not know. But I do think this is an important issue, and it’s striking that this disagreement hasn’t really come to light before now. What that says to me is that (while successive governments have set out ‘official’ views) there hasn’t really been any robust public discussion about where New Zealand should be putting its science dollar.

One other thing: Oram suggests that we need “politicians and bureaucrats to give up micro-management and second-guessing and learn how to trust the scientists, their managers and directors to make good science and business decisions.”

Again, sounds good. But if you give the money to Industrial Research Ltd and leave them to make decisions, they aren’t going to invest in the life and environmental fields, are they? That’s where other CRIs are focussed, not IRL.

Key decisions about the appropriate allocation of science funding between different areas have already been made via the creation and funding of the eight CRIs. In fact, arguably the Jordan taskforce’s recommendations, favoured by Oram, would ‘lock in’ the current allocation for longer.

Which is fine. Unless, like (apparently) Oram, you think that we’re focusing too much of our energies in some areas and not enough in others.

If so, then maybe we need a more contestable free-for-all without any ‘ring-fenced’ pots (which Callaghan seems to favour), and trust the [sic] “bureaucrats” who allocate it to make right decisions. But isn’t that exactly the opposite direction from what the Jordan taskforce, apparently uncontroversially, is recommending?

In any case, that won’t really resolve the Oram-Callaghan debate. Anytime the system makes the ‘wrong’ decision, it will still be easy to blame the ‘politicians’ or the ‘bureaucrats’, when in reality maybe it’s just that if you want things to go in a particular direction, then you have to set the basic operating framework with that direction in mind.

To me, that suggests that we need to have a well-informed public discussion about where we ought to be focusing our efforts, and why. If so, it will need to start by acknowledging that there are smart people with good arguments on both sides of the debate, and no easy answers.

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Posted in Progressive Path to Prosperity | 6 Comments »

Outlook: a lost decade?

Tuesday, August 31st, 2010

Phil Romans // CC 2.0


We seem to be in the midst of something that’s been recurring every few months in this post-Global Financial Crisis world: financial markets and financial commentators around the world are sniffing the wind and asking themselves whether the sky is going to fall again. Last time it was around the Greek bailout; this one seems to be triggered by jitters in the US economy and the focussing of attention on Jackson Hole, Wyoming, where central bankers meet each year.

It will probably come to nothing — or at least nothing dramatic. But there does seem to be a slowly rising tide of anxiety, as the natural resilience of the market economy continues to fail to spring to life.

The economists I tend to read regularly — Paul Krugman, Joseph Stiglitz, Brad DeLong, Nouriel Roubini, Martin Wolf — are pessimistic, but then they always have been. That’s the ‘camp’ they (and, I guess, I) are in. Maybe they’re wrong: maybe the private sectors of the world will spontaneously recover, as more neoclassical writers seem to think, and the main threats are overly-indebted governments and suddenly-reemergent inflation (Krugman & co see deflation as a more evident threat).

We should hope the optimists are right, but we would be unwise to discount the pessimists. Events so far have done more to bear out their fears than their opponents’ hopes.

But amongst the pessimists (realists?), there are also two views — or rather, most of the pessimists feel that things could still go either of two ways. The first is a ‘double-dip recession’, where rather than recovering properly the economy sinks back into decline again, possibly worse than last time. That’s the more commonly discussed prospect, and the one that is haunting Jackson Hole this week.

The second is a ‘lost decade’ (or longer). The model here is Japan, which after decades as a ‘miracle economy’ suddenly ground to a halt in the early 1990s after a financial crisis, to be plagued by years of sluggish growth, and deflation or virtually-nil inflation, from which it has still not completely recovered. Krugman, in particular, has carefully studied the Japanese experience and the range of largely-unsuccessful efforts by the government there to lift their economy out of the mire.

To me, the ‘lost decade’ is in many ways the more worrying scenario. A ‘double-dip’ would be terrible, but it would also galvanise policy-makers and impel action. With a ‘lost decade’ we might be like the proverbial frog in the gradually-heating pot: adjusting our expectations to the changing environment and ‘defining prosperity down’ as Krugman puts it. We can already see indications of this both in US and New Zealand as higher levels of unemployment get accepted as normal by the government and media alike. (A kind of structural and social divide between the ‘kind of’ people who get hit by unemployment and the ‘kind of’ people who decide the news agenda helps with this.)

So what would this mean for New Zealand, and how would it affect the agenda for progressive politics? It is possible that, even if Europe and the US were afflicted by a ‘lost decade’, Australia and New Zealand might escape by hitching our wagon to China and other Asian economies. But this is a precarious hope, and, in any case, it is beginning to look as if China will not be as immune to the global doldrums as had earlier been thought.

For progressives in particular, the implications are dispiriting. The Key-English-Hide government has miraculously solved our Crown debt predicament (with enough left over for lashings of tax cuts for everybody, and an extra scoop for the very rich) through two feats of accounting wizardry. Firstly, they have taken a ‘holiday’ from saving for our future through the New Zealand Superannuation Fund. And secondly, they have assumed downwards the amount of money that future governments will spend in future Budgets — which means the projected growth-path for health, education and other public services over the next decade looks very meagre indeed.

In both cases, Key-English-Hide were robbing from our future in order to make our present look rosier. But the trick for the next progressive government will be to undo these shortsighted decisions — restore contributions to the Super Fund and restore real per capita growth in public services — without causing Crown debt to blow out in the process. That may not be too hard if economic growth exceeds Treasury’s current forecasts, but under a ‘lost decade’ scenario it might instead come in lower than Treasury thinks.

Of course, the first priority for a progressive government in that situation would be to do everything it can to strengthen our economic performance, while taking active steps to assist the unemployed. But if the whole world has gone the way of Japan, then there will be a limit to how much domestic economic policy can do.

We would probably need to look at options for boosting revenue, but we would need to move cautiously. The international tide would likely be in favour of public austerity, with most other countries facing much worse public debt situations than ours. (Thanks, Michael Cullen!) But that could foster a climate of antipathy towards new revenue and spending measures both amongst supposedly ‘informed’ people at home and amongst ratings agencies abroad — even when those measures balanced each other out fully.

It’s not a pretty picture, but nor is it an inescapable one. Leading progressive economists are convinced that determined action by governments and central banks can avoid a ‘lost decade’ — if the will is there. But that will not be decided in New Zealand. Our progressive movement will need to hope for the best, prepare for the worst, and send our best wishes and support to our counterparts in the leading economies.

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Posted in Progressive Fiscal Policy, Progressive Path to Prosperity | 34 Comments »

Is the Left guilty of the “Politics of Evasion”? [re-post]

Monday, August 30th, 2010

Originally posted on 25 February 2010 (the first week of Policy Progress).

http://www.flickr.com/photos/35952250@N02/ / CC BY 2.0

The left in Europe has been guilty of what can be described as the “politics of evasion”: it has failed to confront the fundamental causes of its vulnerability, loss of trust and élan in past years . . .

If social democrats are to recover their ability to set the political agenda in an era of insecurity, complexity and constant change . . . we have to face up to hard truths and, if necessary, shatter the cosy and comfortable consensus that surrounds the deliberations of so many fora which social democratic parties inhabit.

So states the summary document of the Amsterdam process, a two-year project aimed at no less than the “ideological renewal of European Social Democracy” and a “new revisionism for the 21st century”.

It’s a collaboration between two European progressive think-tanks, the Wiardi Beckman Stichting (the “scientific bureau” of the Dutch Labour Party) and the UK-based Policy Network.

Their initial publication, the Policy Network’s Challenging the politics of evasion: the only way to renew European social democracy, continues this take-no-prisoners rhetoric.

The writers seem at first glance equally critical of the “third way” revisionists (“embarrassed by the various accommodations made in the mid-1990s with the perceived realities of international capitalism and globalisation”) and of traditionalists (accused of “complacency” in their demand for “a return to the eternal verities and truths that the revisionists allegedly lost”).

This impression is probably incorrect, however. The Policy Network is pretty closely associated with the Blairite wing of the UK Labour Party. Peter Mandelson is its president, and two of the three authors of Evasion, Patrick Diamond and Roger Liddle, have previously worked with or for both Mandelson and Tony Blair. The Policy Network is also the secretariat for the Progressive Governance Network, which has been bringing together progressive leaders from around the world (including New Zealand) for over a decade, so it is hardly on the fringes of recent trends in the movement.

As the report continues, it becomes apparent that what it is proposing is a refurbishment of the existing “revisionist” approach, amending some misjudgments and correcting some overreaches. Below are the five dimensions of their “way forward”, with some of my impressions of what they are proposing in each.

Greater clarity about the politics of globalisation: comprehensive reform of global economic governance; active measures to promote responsible business behaviour; and going beyond the ‘enabling state’-as-training-scheme to a “new era of industrial activism” — while stressing that none of this means that the “big state is back”.

Coming to terms with the centre-right response to the financial crisis: where conservatives capture traditional social democratic territory, such as the need for active government during the global recession, progressives should ’stand their ground’ rather than moving further left in response.

Understanding the weight of anxiety about moral and social decline: although rhetoric such as ‘broken Britain’ is exaggerated, progressives should acknowledge the unease it reflects by rediscovering traditional narratives about what makes a good citizen and the politics of virtue, perhaps drawing upon the work of US moral philosopher Michael Sandel.

Confronting confusion about the politics of redistribution and fairness: by framing welfare rights and responsibilities in a way that aligns with what UK Labour minister John Denham has called the “fairness code” of the general population, taking into account desert, opportunity, and the avoidance of material hardship.

A bold plan for the future that captures the imagination of social democracy’s natural allies, new and old: a coalition of modernising institutions, working with sister organisations and thinktanks throughout Europe, drawing on the experience of the US Democratic Leadership Council that helped to elect Bill Clinton.

Apart from perhaps the first of these, it’s not clear that this amounts to much change at the policy level (as opposed to strategy and messaging), but it does represent an attempt to articulate a clear and comprehensive post-crisis progressive programme.

It will be interesting to see where the Amsterdam process takes these initial broad-brush propositions.

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Coming up this week

Monday, August 30th, 2010

My Tuesday column this week is on economic prospects and what they mean for progressives. And I’ve got a couple of really interesting guest-posts coming through in the next few days, so will aim to publish one of those on Thursday.

Also – we’ve reached what I think is a noteworthy milestone: six months of Policy Progress!

To mark this, I thought it would be a nice idea to re-post one of my earlier blog posts (or guest-posts), which newer readers might not have seen, each day this week. I’ve a few candidates in mind, but am also open to suggestions!

PS If you’re in Auckland, get along to this tonight!

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Weekend reading, 27 August 2010

Friday, August 27th, 2010

A version of this list of recommendations also comes out earlier in the day as part of the weekly Policy Progress e-newsletter.

Martin Wolf – What is the role of the state?
I haven’t linked to anything by Wolf, the Financial Times’ chief economics commentator, for awhile now, so I thought it was worth highlighting this post in which he tackles ‘the biggest question in political economy’. A sample:

In the 1970s, the view that democracy would collapse under the weight of its excessive promises seemed to me disturbingly true. I am no longer convinced of this: as Adam Smith said, “There is a great deal of ruin in a nation”. Moreover, the capacity for learning by democracies is greater than I had realised. The conservative movements of the 1980s were part of that learning. But they went too far in their confidence in market arrangements and their indifference to the social and political consequences of inequality.

Erik Olin Wright (in interview with Edward Lewis) – Envisaging Real Utopias
Erik Olin Wright is a leading leftist sociologist and analyst of social classes. In his newly released new book Envisioning Real Utopias he changes gears from his more theoretical work to a ‘manifesto’ of radical yet achievable proposals for change. The link is to an interview with Wright where he sets out his aims for this latest work. Here’s his response to the argument that his more pragmatic ‘utopias’ undermine hopes for more radical possibilities:

. . . there really is no credible argument as far as I know that proposals I discuss—basic income, participatory budgets, worker cooperatives, solidarity funds, etc. – make more radical transformations less likely. So, even if one acknowledges that the state and markets are intrinsically objectionable, I don’t see how the probability of their eventual elimination is reduced by the kinds of proposals I advance. Second, under any foreseeable historical conditions the complete dissolution of state power and the complete disappearance of markets are utopian fantasies, not viable destinations. We can aspire to deepening democracy and extending its scope and thus subordinating more fully the state to social power, but this is not the same as the disappearance of the state. And we can struggle for egalitarian conditions of social justice in which the inegalitarian effects of markets are largely neutralized. But this is not the same as creating a comprehensively planned economy with no role for markets. Finally, I am not so sure that the state and the market are intrinsically objectionable; what are objectionable are their effects on power and inequality. The objections would largely disappear if state power is effectively subordinated to social power, and if the space for market relations is delimited by genuinely democratic processes and the inequality effects markets neutralized.

See also the New Left Review article Compass Points which summarises the overall themes of the book.

Clare Curran - #OpenLabourNZ – how to participate in the live event
This weekend, as Colin James has mentioned, Labour is trying something rather new: an ‘open source’ approach to policy development about (appropriately) open government. OpenLabourNZ is the brainchild of Clare Curran, another one of Labour’s illustrious Class of ‘08 and prime mover behind the Red Alert group-blog. In this post she sets out the agenda for the day and how you can participate remotely or in person, and links to a bunch of earlier resources. If you’re in Wellington, head along for at least part of the day. It’s so open, even David (Kiwiblog) Farrar is on one of the panels!

Also:
Patrick Dunleavy – Every key ‘Westminster model’ country now has a hung Parliament, following Australia’s ‘dead heat’ election
Eddie (The Standard) - Work on privatisation under way
David Clark – An Eye to Our Future
No Right Turn - The rest of the proposal and Those who enforce the law should also be subject to it

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The Great Game…again [part two]

Friday, August 27th, 2010

In Part 1 Bill Verrall looked at the rise of extremist groups in Pakistan and the fact that most were funded and equipped by the USA with the support of Pakistan. Today he looks at the internal politics of the USA which lay behind the foreign policy changes in the 1980s and 1990s which lead to the complete dominance of Neo-Conservative policy in US foreign relations. This domination resulted in the creation of groups such as the Taliban.

In many respects these ‘freedom fighters’, Lashkar-e-Taiba, Harkat-ul-Jihad-al-Islami and a myriad of other groups, were the illegitimate children of a group of very conservative American leaders who had struggled during the Ford and Carter presidencies to establish a truly conservative American world view. Given that their world view was not the prevalent view of that time this group became known as “Team B”. Team B included some very powerful people but more importantly as time progressed, through its proselytizing, it was able to involve others and eventually this lead directly to the dominant “neo conservative” (neo-con) philosophy of the 20th century.

At its inception the group included University of Chicago professor and RAND corporation theorist Albert Wohlstetter, Harvard Professor of Czarist history Richard Pipes, Lt General Daniel Graham, Dr Thomas Wolfe of RAND, General John Vogt, Ambassador Fay Kohler, Paul Nitz, Ambassador Seymour Weiss, Maj General Jasper Welsh of the USAF, and Paul Wolfowitz. Their common belief was that the Soviet Union was hugely powerful and growing in power at such a rate as to be able to physically threaten the USA. In line with that fundamental belief the group despised the concept of Détente and sought to destroy it, and with it, the Strategic Arms Limitations Treaties. The group did not believe that a nuclear war was unwinnable and sought to reignite the strategic arms race. It also sought to weaken Russia in any way possible and at any cost. It is a testament to the perseverance and power of this group that nearly all of its goals were achieved.

Initially Team B’s most powerful acolyte came to be Zbigniew Brzezinski. Brzezinski used his position as National Security Advisor to undermine Secretary of State Cyrus Vance and to turn the initially moderate foreign policy of President Jimmy Carter into a virulently anti-Russian policy. When Ronald Regan assumed the presidency in 1981 the beliefs of Team B began their rapid rise in ascendancy, to point where through the 1990s and into the first decade of the 21st century these policies became de rigueur across all political spectrums in the USA.

Interesting though the story of the rise and rise of Team B and the Neo Cons is, it is the effect of this policy shift and its direct causal relationship with today’s terrorist groups that is immediately relevant to this discussion.

Under Brzezinski, Team B worked to isolate the USSR in every way possible way. Their greatest success was in preventing Russia from negotiating a peaceful solution to the Afghan crisis of 1979-80. By preventing a diplomatic solution to the crisis they were able to instill such a degree of panic in the Soviet Politburo that eventually the Soviet leadership ordered Soviet troops to invade Afghanistan. Prior to the invasion the Soviet’s own intelligence agencies had reported that such a war would be unwinnable and would be an economic, military and political disaster for the Soviet Union. Brzezinski publicly acknowledged the role the USA played in drawing the Russians into Afghanistan. Brzezinski is quoted as saying “We didn’t push the Russians to intervene, but we knowingly increased the probability that they would”. He is also quoted as telling President Carter “Now we can give the USSR its Vietnam war”.

His motivation was the knowledge that once the Soviets became embroiled in Afghanistan then America would then be able to support the Islamic opposition and ensure that the Soviets suffered a military defeat without America being overtly involved.

As a tactic it was brilliant. The Soviet invasion was a disaster. As Brzezinski had foreseen, when he referred to making Afghanistan the Soviet Vietnam, the Soviets became beleaguered in a country ideally suited to guerrilla warfare.

There will always be debate as to the extent America “led” Russia (The USSR) into Afghanistan. What there is no doubt about is the jubilation in the American camp as it foresaw Russia walking into what they dubbed “their Vietnam”. America immediately set about funding the Islamic groups that sprung up to fight the Russian Bear. Whilst the Taliban has come to be the most well known of these groups it was not alone. A host of groups were formed during the 80s and 90s and despite amalgamations, splits, mergers and disintegrations most of these group still exist in some form today.

Lashkar-e-Taiba and Harkat-ul-Jihad-al-Islami are but two such groups. Today they are have a greater degree of independence from the Pakistan army and Pakistan government then they did at the time of their inception.

For many years now there has been real doubt that the Army or the intelligence services could regain control of these groups. The most recent attack on an ISI post in Lahore clearly shows the extent to which the client-patron relationship no longer exists. The USA cannot ignore these groups. They have the ability to destroy US armed intervention in Afghanistan just as they did the Soviet intervention. The USA is therefore attempting to split the groups into two factions, one of which will support it in its war in Afghanistan. (It is interesting to note that one of the possible allied groups is a major portion of the Taliban which only a decade ago was recognised as the scourge of freedom, democracy, modernity and women’s rights.) At the same time as the USA pursues its policy of divide and rule, the Pakistan government and army are forced into a struggle they had long sought to avoid, namely a struggle to reassert their authority over the extremist groups they had previously either actively supported or complicity encouraged.

Thus the the current fighting (pre flood) in the Swat Valley, Waziristan and Baluchistan is a far from simple affair. Just which groups of Islamist are being attacked is not publicly recognised. How other groups are responding to this is not known. The extent to which any army victory is merely window dressing as either the insurgents retreat and regroup in good order, or as they retreat at the request of the ISI or army so that the current flow of US money and arms can continue, it is currently very difficult to ascertain.

The only thing certain is that Brzezinski’s and the Neo Cons’ policy of radicalizing Islamic groups in the 1980s and 1990s has certainly come home to roost.

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Bill Verrall graduated from Canterbury with a Master in History and Political Science in 1972. He then pursued a career in Education. His last 20 years were as Principal of Fiordland College in Te Anau. He resigned in 2008. He currently spends his time attempting to outthink trout on the waters of Fiordland, reading, and working as a summer ranger for the Department of Conservation.

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The Great Game…again

Thursday, August 26th, 2010

Part 1 of 2. Bill Verrall looks at the history of two of the radical groups that have been blamed for some of the recent bombings and violence in Pakistan.  He shows that the history of these groups reveals a complex web of international intrigue and that the enemies of these groups were once their strongest supporters. He asks to what extent these groups can now be pacified so the USA can implement its new foreign policy in Afghanistan.

In recent times Pakistani insurgents have attacked the Hotel Marriott in Islamabad, the Indian capital Mumbai, the Sri Lankan cricket team and more recently a police training academy in Lahore, Pakistan. It is unclear exactly which group, or groups, is responsible for these attacks. Although arrests may be made and prosecutions bought to bare it is highly unlikely that the people behind these attacks will ever be held responsible because of the symbiotic relationship these groups have with the Pakistan government.

Two groups that are considered to be leading contenders for a number of these bombings are Lashkar-e-Taiba and Harkat-ul-Jihad-al-Islami.

The history of both of these organizations is enlightening. Harkat-ul-Jihad-al-Islami was founded in the early 1980s along with a raft of other extremist groups. The instigation for this sudden upsurge of extremism was the Soviet invasion of Afghanistan. At that time all these groups were loosely referred to as mujahideen freedom fighters. They were funded and supported by the USA through a compliant Pakistan government. Behind this funding of an obviously violent and religiously motivated extremist group lay America’s greater fear, namely that of a resurgent USSR, with a supposed policy of world domination. During this period of time the USA considered the USSR to be a major threat to its own plans and its own freedom. The deliberate propagation of these extremist groups therefore made complete sense to a government which saw them as the ideal weapons with which to fight the USSR and to wear it down in a war of attrition which the US was confident the USSR could not win. The USA also saw that this was a war in which they would not have to participate directly and which they only had to support with money and arms. To the USA the USSR decision to invade Afghanistan was an opportunity simply too good to resist.

America set about funding, equipping and training resistance groups that would fight the invading Soviets. The vast majority of these groups had a strong Islamic basis. The American leadership saw the growth of radical Islam as the idea proxy vehicle through which they could weaken the USSR. They were in this respect absolutely correct.  For reasons of public acceptability the Islamic groups were termed ‘Mujahideen freedom fighters’ and along with many of the very conservative, traditional, ethnic and tribal leadership groups they fought the soviets to a virtual standstill.  This aspect of American foreign policy was extremely successful.  Harkat-ul-Jihad-al-Islami (HuJI) was but one of a number of groups spawned at this time as a result of America’s unwavering concern about the Soviets supposed strength and plans for world domination.  American funds and intelligence from the Pakistan military and intelligence services were the foundations upon which these groups grew. Harkat-ul-Jihad-al-Islami was thus spawned by the neoconservative policies of the 1970s and 80s. It was funded and armed so that it would undertake terrorist type activities against the Soviet Union. It was encouraged in its fundamentalist ideology because it was this ideology that its creators saw as being necessary to encourage poor, uneducated, provincial Pashtuns to fling themselves into a war against the second greatest military and industrial power on earth.

Lashkar-e-Taiba has an equally interesting history. Lashkar-e-Taiba is the child of the Pakistani Intelligence services. The LeT is the military wing of the Inter-Services Intelligence ISI.  It was formed by the ISI in order to precipitate a war in Kashmir.  Kashmir is a frontier province between India and Pakistan. Its short history is troubled by rivalry between these two powers. An initial conflict at the time of partition resulted in Kashmir also being partitioned with India receiving the lion’s share.

In 1999 the Pakistan army used its protégés the Lashkar-e-Taiba to launch a surprise attack in Kashmir. Kashmir is so remote and inhospitable that in a longstanding agreement both India and Pakistan withdrew their troops during the extreme depths of winter. Thus the Pakistan irregulars had spectacular early successes against no opposition and occupied a significant section of Indian Kashmir. However, India responded by sending its crack regiments supported by artillery and airpower back into the region and Pakistan’s forces were forced to retreat. Lashkar-e-Taiba has remained an off-shoot of the ISI to this day.  Lashkar-e-Taiba is the group many analysts believe to be responsible for the attack in Mumbai on Nov 26 2008 and the attacks in 2009 against the Sri Lankan cricket team.

Although Lashkar-e-Taiba and Harkat-ul-Jihad-al-Islami are but two of a large number of such groups, they typify the degree to which these organizations were fostered by large “patron” states. They also typify the fact that the USA and Pakistan have to a large degree lost control of their earlier puppets and are now engaged in counterinsurgency incursions and open warfare against their once pliant clients. Pakistan remains the key to a successful outcome for Barak Obama’s foreign Policy in Afghanistan. The current situation in The Swat valley, Waziristan and more particularly Baluchistan and the general boarder area shows the extent to which past actions by both the American and Pakistani governments have ironically created the greatest difficulties these two states currently face in achieving their goals.

Tomorrow - Part 2 looks at the internal politics of the USA which resulted in the creation of groups such as the Taliban.

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Bill Verrall graduated from Canterbury with a Master in History and Political Science in 1972. He then pursued a career in Education. His last 20 years were as Principal of Fiordland College in Te Anau. He resigned in 2008. He currently spends his time attempting to outthink trout on the waters of Fiordland, reading, and working as a summer ranger for the Department of Conservation.

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Commentary round-up

Wednesday, August 25th, 2010

A regular feature spotlighting new writing (and audio) from top commentators Rod Oram, Colin James and Brian Easton.

The most recent Listener article online from Brian Easton is China or Bust: “The Chinese economy is trying to drag the rest of the world out of this great recession. But isn’t it vulnerable to a financial crisis, too?”

Easton has also released a very timely paper entitled Taxing Harmful Drinking:

This paper argues that the harm from the consumption of alcohol can be reduced by targeting the minimum of price of alcohol, but by using an excise drawback rather than setting a minimum price of alcohol.  By doing so the profits from the price hike goes to the public exchequer rather than the industry.

This means “those purchasing cheaper absolute alcohol will pay more excise duty on their absolute alcohol than those who are purchasing more expensive liquor”. Sounds a bit regressive to me (though Easton pre-emptively dismisses that as a “cheap shot”).

In Business as usual is not coming back (Otago Daily Times), Colin James declares:

There is no way back to the way things were. Too much has changed — in fact, was changing underneath well before the financial crash.

Those changes are technological — digital technology has accelerated globalisation in all its forms and is altering social interaction — geo-economic — China’s rise and the North Atlantic countries’ subsidence into debt — and geopolitical — rearrangement of international institutions to reflect the transit of economic power and consequential strategic rebalancing.

These huge changes are reshaping our society and economy and that in turn is changing the underlying factors in policymaking.

In this context, he is generous towards National’s efforts to adapt, but also praises Labour:

Labour is edging towards a restatement of economic approach to reflect some of the post-crash writing by the likes of Joseph Stiglitz, Dani Rodrik and Robert Skidelsky. Thanks to the energetic Clare Curran who this coming Saturday is running a day-long workshop on open government and its policy implications, Labour is getting a grasp of the implications of the digital technology age.

(Rodrik was also name-checked in the New Zealand Institute report I reviewed in this week’s column.)

James’s column for the Fairfax papers is The small and the big and the Bill of Rights, which argues that Rodney Hide is a more serious figure than he’s given credit for, especially when it comes to regulatory and local government reform, where his changes ”amount to small-c constitutional change”; and that the Bill of Rights “has had much more influence on Parliament and the courts than expected in 1990″.

Rod Oram’s Star-Times column is Super city debate overlooks wealth. It draws on the ideas of Philip McCann (who I’ve discussed before and will come back to soon) and argues:

To help it connect with the world, New Zealand must have a truly international city.

Auckland is the only candidate. But Auckland will always be too small to achieve that on its own. Even when, 20 years from now, its population is 2 million, overseas competitors will continue to dwarf it. Sydney’s population is already as big as New Zealand’s.

So we need a radical rethink, one that engages all of urban New Zealand in the quest to build a truly international, but distinctly Kiwi, urban offering to the world. We are, after all, one of the most urbanised nations on the planet.

Oram also talks to Nine to Noon about how four of our major companies (Telecom, Kiwibank, Graeme Hart’s Pactiv and Fletcher Building) are performing, with an emphasis on their strategies (and a digression on broadbank policy).

If you’ve read other insightful pieces of commentary this week, particularly from a progressive perspective, let us know about it in the comments thread below.

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Pick ICT and niche manufacturing as winners, says NZ Institute

Tuesday, August 24th, 2010

The New Zealand Institute is probably the only really serious thinktank we have in New Zealand (as opposed to the handful of right-wing advocacy groups that style themselves as such). Its current focus is on how the New Zealand economy can be more prosperous and effective, which is also a topic that I’ve been looking at here at Policy Progress in the ‘Progressive Path to Prosperity’ workstream.

So, when the Institute last week released its report A goal is not a strategy: Focusing efforts to improve New Zealand’s prosperity, I was keen to take a look, especially since I knew its director Rick Boven would be speaking at the Fabians seminar What Will Fix New Zealand’s Economy? (held last night).

I’m glad I did. It’s a useful report, with some interesting facts and figures scattered throughout, and a proposal that I think is definite worthy of debate.

But I’m also a bit frustrated. There’s some important gaps and a lot of the really crunchy issues and difficulty decisions have been pushed out to the next report in this series.

In essence, what A goal is not a strategy is advocating is that New Zealand make a definitive choice to back information and communications technology (ICT) and niche manufacturing as the crucial sectors that we need to grow.

This, of course, is ‘picking winners’ and for a generation we’ve been told by ’serious’ people that doing that was economic lunacy. But the policy cycle seems to have swung around again, and a lot of heavy-hitters now seem to be open to at least a cautious version of the ‘picking winners’ approach.

I don’t have a problem with that. And the report makes a good argument that the more even-handed open-to-all-players approach has resulted in ‘insufficient aspiration and lack of a sufficient focus’:

Aspiration is missing partly because there is not yet sufficient agreement that ICT and niche manufacturing should be the priority sectors. As yet there is no consensus that agriculture and natural resource development will be insufficient, nor that New Zealand can build a prosperous economy based on innovation and exporting value-added goods and services.  (p. 33)

The other thing I like about this report is its insistence that an economic strategy has to have some real consequences if it’s to make a difference:

A strategy is a reallocation of resources to achieve a valued goal. If the goal is important and the strategy is sound then the reallocation should be material; sufficient to change the outcome. A few tens of millions of dollars is not material. Competing small countries are committing hundreds of millions of dollars to efforts they regard as strategically important. (p. 3)

Their critique of the failings of government efforts to support cluster development (p. 46) illustrates this point well. An evaluation of New Zealand Trade and Enterprise (NZTE) programme four years on found it to be “too small, too thinly spread and its objectives and outcomes were insufficiently defined to support true cluster development”. So was the response to put more money in and tighten its focus? No, the programme was abandoned as it was felt “that regions were in a better position to prioritise and make decisions that suit their needs which may include cluster funding.” (There may be another side to this story, but on the face of it that seems an illogical response to those findings.)

But I have some misgivings, too. Firstly, it’s not clear to me that picking “ICT and niche manufacturing” really narrows things down that much. It represents a clear choice not to rely on agriculture as our engine of growth (while preserving our existing strength there). But there isn’t really a definition of what that does and doesn’t include, and why.

Nor is it conclusively demonstrated that things like, for instance, the previous government’s focus on the development of the food and beverage sector were a misjudgment. The report makes much of the low productivity rate of the agriculture sector overall, but surely this masks quite a range (as with manufacturing) and there are high-tech high-productivity pockets in agriculture and affiliated industries.

Secondly, while some of this is yet to be unpacked, it reads like what the report is advocating is pouring an awful lot of money into business assistance. Maybe that is what we need to do, but I’d like to have seen a bit or evidence about that sort of thing being a good spend.

Personally, I’m still cautious that throwing contestable grants (or loans) at individual business who meet the right tests and are in the right industry is the most important thing we need to do. I’m inclined to feel that more cross-cutting issues like our low rate of savings and (related) the capital shallowness of New Zealand business are more the sort of things we need to address, and that implies rather different policy levers. (These issues are touched on in the report, but aren’t its main focus.)

One of the general problems that the report does have a bit of a focus on is our weak management capability, and I’d tend to agree that this seems to be a problem. But I’m a bit perturbed by the lack of evidence of our weakness that they’ve actually assembled here. I think the report does a good job reconciling some of the areas where we are reported to be strong — we score well on measures of entrepeneurship and on ease of starting a business — with our overall weakness: we end up with a lot of SMEs satisfying people’s desire for independence but not really building up the kind of skilled entrepreneurship that’s needed to break through into successful exporting.

But there really isn’t anything beyond assertion to show that we really do have weaker levels of management capability than our competitors. The MED report Management Matters is cited but its findings aren’t really presented.

That means that report doesn’t really offer us any insights about why or in what ways our management capability is weak, and what structural factors might be responsible and need addressing. That gap results in some rather out-of-left-field solutions: is ensuring one of our ten MBA providers offers a “full-time world class” programme focused on international entrepreneurship really a transformative difference??

This all leads the report to the conclusion that supporting success at ‘internationalisation’ in ICT and niche manufacturing should be New Zealand’s economic strategy priority. But exactly what ‘internationalisation’ entails isn’t spelled out and “[t]he specific actions, resource reallocations, and policies required to lift internationalisation performance remain to be identified and agreed” (p. 51).

I guess we have to accept that this report is one step in a wider work programme, and only takes us so far. And despite the limitations I’ve outlined, I think it does provide a good conversation-starter for a debate on which winners to pick and how best to help them. But we need to have that debate, and argue back and forth about the evidence — we can’t take it that the New Zealand Institute has made a settled case for anything, as yet.


Postscript: I drafted this post before going to the Fabians seminar last night. I took the opportunity at that event to ask Rick Boven whether the significant sums he envisaged this emerging strategy as requiring were actually to be spent primarily on business assistance programmes, as the report seemed to suggest (and as I mentioned above). Surprisingly, he said no — he felt the priority spend was on various innovation-friendly tax-breaks in areas such as depreciation.

I thought that was pretty interesting as in some ways it chimes in more with my mention of cross-cutting obstacles (above) than with needing to pick winning sectors (although the tax-breaks could be restricted to certain sectors). It’s also an idea that’s entirely absent from the report except in a ‘case study’ on South Korea (pp. 40-41). That case study felt somewhat superfluous when I first read it, but it may turn out to be an important pointer to the New Zealand Institute’s further work in this area.

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Coming up this week

Monday, August 23rd, 2010

I’m back with a column tomorrow, after turning over the Tuesday slot to Peter Harris’s must-read post on superannuation last week. I’ll be writing about the New Zealand Institute’s new report A goal is not a strategy: Focusing efforts to improve New Zealand’s prosperity.

But before you read that, head on down to Connolly Hall at 5.30pm this evening if you live in Wellington and hear Institute director Rick Boven give his perspective on the report, as part of the NZ Fabian society’s seminar What Will Fix New Zealand’s Economy? Ganesh Nana from BERL will also be speaking.

You can read the details (and register your attendance) here. And here’s a map to help you find the place:


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Then, later this week, we’ll have a duo of guest-posts on an area we haven’t really explored much at Policy Progress to date, namely international relations. So keep an eye out for that, too!

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