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Saturday, October 8, 2011

New Zealand Going Under

America has finally woken up. (funny way to start a blog on New Zealand).  As of early October, 2011 she is talking about bringing back manufacturing from overseas and providing jobs for Americans.  This has nothing to do with virtue amongst the American Corporatocracy.  They haven't finally started to think about the good of the country that spawned and nurtures them.  They haven't suddenly put the good of their fellow citizens above their own highly inflated salaries and bonuses*.  No, the reason is far more prosaic although I'm sure they will try to claim the moral high ground.  The truth is that the Chinese Yuan is beginning to rise with much more 'up' inevitable in the near future and the wages of Chinese workers are rising, by latest reports, at about 15% per year.  American firms see the writing on the wall.

*Their latest ploy is to join with a small country overseas and, while staying in America physically, pay taxes overseas. Have a look at one of Elizabeth Warren's Youtubes to see a full description.

By the by, did you ever wonder what happened to that fabulous dream we had a few decades ago that we would all soon be working 30 hour weeks with 5 week annual vacations plus all the other holidays throughout the year.  What happened to the story that with automation, fabulous goods would become less and less expensive and we would all be living in the lap of luxury.  Well to some extent it came true.  Look at this fabulous invention, for instance, thanks  to Steve Jobs, that you are using to read this blog.  Look how the price has come down from it's first inception.  However, the futurists, as they usually do, forgot one part of the puzzle.  You have to have a job in order to buy things.  In a perverse way, some of us have lots of free time.  We are on welfare.  As long as our needs are modest and we have somewhere to live, all our time is our own.  If we can earn a little money under the radar we are 'sweet'.  Not a pretty picture.  But this is supposed to be a blog about New Zealand.

New Zealand is just as prone to corporate greed and government short sightedness as any country in the world.  We are always decrying our low productivity, complaining about the lack of jobs and even more so, about the lack of worthwhile jobs.  Our diaspora is somewhere around a million of our best and brightest and most enterprising people.  We wonder why our young and not so young people search for a better life overseas.  Lets look at how we are operating New Zealand Inc. and how we could operate.

Our Lumber Industry
New Zealand has the basis of a great lumber industry.  We have slightly more land than the UK and a population of 4.3 million (UK - 62m) so we have lots of land on which to plant trees............ and we have   lots of trees planted.  Our main species is the Monterrey Pine, Pinus radiata and with our fabulous growing conditions, the cycle is from 17 to 25 years.  You should see the growth rings on  our pine logs.  They are typically  a cm or two wide.  We plant them, prune them (lifts) to ensure clear, value added wood and replant as soon as the trees are cut.

 Then we send raw logs overseas!!!  Our lumber mills have closed in droves.  In the mean time, Canada is undergoing a boom in value added timber products.  Question:-Where does she sell her ply wood, milled timber and even fully made up struts?   Answer:-  To the same markets where we send our raw logs!!!   How come Canada can get it right and we can't.

Mean time, our lumber mill workers are either packing super market shelves or leaving for Australia and points North.  A skilled lumber mill worker will have a productivity, measured as the value of what he produces divided by the hours he works.  Lets call his productivity 'X'.  When he changes jobs and starts to pack super market shelves, his productivity will drop to 0.1X.  If he goes on welfare his productivity is minus 0.1X.  No wonder our productivity stats are low.  We are trashing all the high productivity  jobs.  No wonder our tax take is down.

Could this trashing of one of our primary industries be due to the nature of our much vaunted free trade agreement.  Note that when China felt herself in danger of not having enough Rare Earth Metals, her free trade agreement didn't stop her from curtailing their sale*.

* If you think this is an exaggeration, let's send a trade delegation to China to buy their REM concentrate.  We will refine it here and sell, either the refined metals or the electronic equipment made from these Rare Earth Metals. Since we have the inside track, overseas companies will be pushing and shoving to set up here in New Zealand.  Any idea what China will say when we invoke the Free Trade Agreement in order to buy her REM concentrate. I'm sure she will put it very politely.

We have just had a disastrous earthquake.  This could be and element of our salvation with respect to the lumber industry.  Let's put a major research effort into the building of wooden buildings from composite wood-epoxy beams which laugh at earthquakes.  Then let's export made up beams and other wooden building materials to other earthquake areas.  Let's not export the technology.  That is a short term gain for a long term loss.

Our Fishing Industry
Our fishing industry is another example.  We allow foreign fishing boats to fish our waters.  They must land their fish in New Zealand (at least we got that right)**.  Recently there has been a great bro ha ha (sp?) about the terrible conditions of Indonesian fishermen on Korean boats that are doing our fishing for us.  As usual we are looking at the right hand while the left hand does the trick.  Why do we allow foreign fishing boats anywhere near our fish stocks.  Does anyone think that these Korean paragons of virtue will treat our fishing stocks better than they treat their Indonesian fishermen***.  In the mean time, our people are out of work.  Out of work, on welfare, not paying taxes, not shopping at local businesses (who therefore pay less taxes) and ultimately looking for work overseas.  Once again, the same story as with our lumber industry.  People out of work, negatively productive, fleeing New Zealand, breaking up families and not paying taxes.  No wonder we have to borrow money.  We have to borrow to make up for the lost tax take and to pay welfare to the out-of-work Kiwis.

*Incidentally, much of our fishing industry is owned and operated by Iwi (Maori Tribes).  Here we have the unedifying sight of Maori bosses putting their own people out of work so that they can get higher salaries and bonuses and so that the Iwi can make larger profits. The bosses then get mana by passing on a dribble of this larges to their members.  Maori were given large concessions to fish our marine waters.  They sell these concessions to companies who aggregate them into worthwhile bundles and sell them on to foreign fishing companies.  One of the reasons for giving these concessions to the Maori was so that they would employ Maori in the fishing industry.

** I got that one wrong.  It has now been revealed that much of our fish is processed overseas.

***This same boat was later found to have dumped a hold full of our fish in order to have room for a more valuable catch she made.
12 June 2017  I just learned that one of our salmon farm businesses, King Salmon is Malaysian owned by a company with very a very questionable record on human rights and sustainable fisheries practices.

Fisheries policy - let's change tacks.
Whale Poo

Rolling Stock Manufacture
We are going back into rail and Electrified rail at that. GREAT MOVE.  We have seen what is rolling down the turnpike at our stalled car (Kiwi Inc.) and have made a very sensible decision.  Then we go and buy our rolling stock overseas despite having a local industry that is perfectly capable of manufacturing them!!!  Are we nuts*.  See:

* Incidentally, a news item on National Radio sometime in Sept 2012, following the closure of yet another industry, suggested that for every  job lost in a primary industry, another 4 ancillary jobs are lost.  I have no idea if the 4:1 ratio is in the ball park but the principle is sound.  Imagine how many jobs would be created, just by producing our own rolling stock in New Zealand, not to mention all the other industries mentioned (and not mentioned) in this blog.

Sale of our Land
We are at the beginning of a boom in agricultural markets overseas as other countries continue to grow their GDP, Increase their middle class,* trash their environment mine their water and send their soils downstream to the sea.  The way the world population is growing and, far more important, the way they are increasing their "standard of living", the future for an agricultural country is bright.  Then we sell our farm land to overseas interests!!!

In Asia.  On the contrary, much of the western world is trashing their middle class.

No argument about selling land to someone who wants to come here as a permanent resident, buy and operate a dairy farm, join the local volunteer fire brigade, send his kids to our schools and be part of the community.  Why, though, do we sell blocks of land to vertically integrated overseas companies that will take the profits overseas.  If they were bringing some vital technology here there might be some justification but to the contrary, In so many branches of agriculture and especially in dairy, we are the experts in the field.

The worst example of this is the recent sale of the Crafer farms.  These are a block of 10 or 12 dairy farms that the receivers peddled overseas.  They insisted on selling them as a block which pretty well eliminates individual Kiwi share milkers who want to become dairy farmers from purchasing them.  Instead they sold them to a Chinese dairy business.  Are we nuts!!!

The government has argued that this selling of our farms (and our houses) to overseas concerns does not raise the price.  The liquidators of the Crafer farms obviously thought otherwise.  If they thought they could have got more money by selling them individually to  local farmers they would have done so.  After all, they work on commission. 

Sat, June 3, 2017.  I just read in today's press that our major parking company in Christchurch is a Hong Kong company.  This is beyond a joke.

Energy Policy
I'm not going to type  all this again.  We show very little imagination or creativity.  Have a look at these links:

1.  The government, with very little expense, could make the uptake of solar electric much more financially feasible.  Panel prices are coming down and correct government action could set us well on the way to energy independence. Absolutely no subsidies needed.

2.  Having solar panels is financially identical to having a pension  right now,  long before we retire.  There is a good argument for allowing access to our KiwiSaver to finance them

3.  Much nonsense has been talked about the unsuitability of renewable energy because of its intermittent nature.  This totally ignores such coming innovations such as demand balancing, electric cars, new types of batteries and smart grids. It further ignores the function of the grid to pass power from places with wind to places without and areas where the sun is shining to areas where it is not.

4.  We mustn't fall into the German trap.  Their uptake of solar electric has been fantastic but there are fish hooks.  There is a better way.

5.  Same as "4"

6.  The steady replacement of our fossil fuel powered domestic fleet with Electrics has many benefits.  The function of government is to set the stage, not to actually do anything.  Again, no subsidies needed.

7.  Wind farms are been shot down all over the country.  Some of the concerns may be justified, Most are pure nimbiism.  The government should sort out this mess.

8.  Get real guys.  Wind energy is clean, competitive in price and highly compatible with our Hydro rich energy mix.  Let's get on with it.

Our policy on Climate Change
We could be far more innovative here as well.  We must be completely selfish here and look after New Zealand.  We can't do anything of significance about world climate change ourselves.  If we stopped all our emissions of greenhouse gasses, it would have no effect on the world output.  We could:

a) set an example as we have often done in the past,
b) guard our clean green image,
c) future proof New Zealand against a likely collapse of the ecology and economy of our major trading partners and
d) reduce our financial obligation under Kyoto

Note that our lumber industry should get carbon credits, not a carbon charge.  The trees we grow are taking Carbon dioxide out of the air and because our forests are young and growing (not mature forests in which net CO2 uptake is zero) they take up a lot of carbon.  Very close to 50% of the dry weight of wood is carbon.  In-so-far as part of this wood is built into long lasting furniture and buildings it is a long term sequestration of  carbon.  Then instead of using the highly polluting lignite coal to manufacture urea, we could equally well be using all the wood waste.  This would bring more carbon credits to the lumbering industry and the ability to sell green urea.  We could even burn this wood in such a way to leave charcoal and enrich our soils, especially in the far north with it.
Urea from wood waste 
The value of Charcoal in the soil.

Carbon Tax
Our Cap and Trade policy to control our carbon emissions is designed to make the banks rich**, most of them not even Kiwi owned. Australia has just introduced a carbon tax system and the banks are lining up, rubbing their hands together vying for the business.   If much of the commentary is correct, Cap and Trade will not even be effective.   Jim Hansen has proposed a far better system called Tax and Dividend which has every chance of being effective and will protect the citizens of any country that adopts it, from the temporary increase in the price of just about everything which will be caused by switching to renewables.  Best of all, from the point of view of the political party that proposes it, it would be a real vote catcher.
Jim Hansen's climate change solution

Why are our political parties so reluctant to propose Hansen's Tax and Dividend instead of cap and trade.

**By the by, if we do insist on making the banks rich, with whatever carbon tax system we put in place or, for that matter, if we insist on the disastrous policy of selling our family silver,,,,, give both jobs to KiwiBank.  Are we really that intent on making Ausi banks rich.  Does someone (Everyone??) in government own shares in Ausi banks???  Give the job to KiwiBank who would then increase her capitalization and her ability to make loans and her revenues  would stay in New Zealand to the benefit of all. 

Our Agriculture
We could be producing green urea (sounds like an oxymoron, doesn't it?). Instead we are proposing to use our lignite which is the dirtiest form of coal.  Even worse, the company that is proposing to do this is an SOE for heaven sake!!!  A government company.  Note that Urea only contains the nutrient, Nitrogen but we could also be producing high quality whole (with all the nutrients) fertilizer for our farms at a very low cost.  We could also have truly green dairy farms. 

Selling off our SOE's (state owned enterprises)
The government is now talking about selling off 49% of our State Owned Enterprises to make up for the money we are borrowing.   This is like a trucking company selling off it's trucks to make the end-of-year books look better. I have a "problem or two" with this.  It is unbelievable that she is selling off assets which are reported to return dividends of 20% (I don't believe this either) instead of borrowing money at 4%.

1) We, the citizens of New Zealand, already own these companies.  The SOE's are the property of every Kiwi.  They don't belong to the government except in the sense than every member of parliament owns just as much of them as every other Kiwi. Selling us our own SOE's is like stealing empty bottles from behind a convenience store and trying to sell them back to the owner.  (at the age of 9, I tried this, was caught and this was the end of my career in crime).  Where in the legislation does it allow these very temporary directors of Kiwi Inc. to sell off the family silver.

2).  All Kiwi's will have to pay more taxes because  of the reduced dividends coming in from these SOE's

3) Who will buy them.  Clearly Kiwi's who have some spare cash.  They will then get the dividends*.  The rich Kiwis who have bought shares will have some income to make up for the increased taxes.  Poor Kiwis will be simply out of pocket.  The bottom line.....  Money coming out of the pocket of poor Kiwis into the pockets of rich Kiwis. A typical  money-merry-go-round that we have, in the past, associated with America, not with New Zealand.

*incidentally, it is very clever on the part of government.  They sell us our own property, we get the dividends and then we pay tax at our marginal tax rate on these dividends.  The government gets a third of the dividend back even though they no longer own the shares.  Very cute.

4)  As soon as the buyers of these shares need money or when the shares have gained some value, they will sell them.  Who will buy them.  Who has lots of American dollars because of their low wages.  You guessed it.  And they don't necessarily buy up our SOE's directly.  There are front companies and front companies for front companies and......  you get the picture.  Same result.  We end up with 49% of our strategic assets owned overseas.  We end up being tenants in our own country.

5.  Apparently, shareholders which own 25% or more of a company have quite a few rights in controlling a company.  I am not familiar with the inns and outs of this situation but it would appear that owning 51% of a company does not give the control that is implied by the Key government.

And finally KiwiSaver.  It has the potential to be the most important innovation in our history (OK, that may be a little exaggerated --- but only a little).  KiwiSaver is Kiwis investing in their own economy, the dividends coming back to Kiwis to be spent in Kiwi businesses which pay taxes to the Kiwi government etc.    The benefits are far more extensive than sketched above. See:
KiwiSaver - Good for new Zealand

But it is a terrible investment....... and not to put too fine a point on it - a scam.  The poorness of the investment is obvious when you see the bribes that the government had to offer to get people to invest in it.  To provide these bribes, the government has to a)borrow more money,  b)lower services or  c)hike taxes.  The present government has done all three.  Sure, the present world economic situation has a lot to do with our economic woes but KiwiSaver bribes are a contributing factor.  Money is simply taken out of Kiwi Pockets in order to bribe other Kiwis to save.  Government debt is increased while private debt is decreased.  A zero sum game as far as our overall New Zealand debt is concerned.  No wonder our credit rating has gone down from AAA to AA.  It would be so easy to fix it.  (See the above link).  Simply stop all the government and employer contributions (another scam) and let us invest before taxes.  Go all the way and tax our real (above inflation) dividends rather than our nominal dividends.  This way KiwiSaver becomes a viable investment in its own right.

Why should the rules around KiwiSaver be different from the rules around other investments??(that is a retorical question).  Because we are asked to put a large proportion of our disposable income into an investment fund for all of our working life for the good of New Zealand.  This is not an investment such as we would make when we buy shares or a rental house and should not be treated the same way by the government.  It is not an investment that we can cash up when we decide to.  Surly we deserve a fair return on this sort of investment.  And imagine the money coming into the economy as Kiwis retire and have a decent pension fund.  Instead of being a burden, retiring Kiwis become a positive asset to the economy.

New Zealand is a great innovator.  We lead the world in so many ways but we could do so much more.

1 comment:

Anonymous said...

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