The root of the problem

Written By: - Date published: 1:45 pm, May 21st, 2009 - 58 comments
Categories: economy - Tags:

I reckon New Zealand’s a bit of an economic miracle really. Small country, new country without centuries of infrastructure, middle of nowhere, good only at making dead animals and animal products. Yet we’ve got one of the highest living standards in the world. Not that you would know it from our ‘business leaders’. Always whining the country hasn’t made them rich enough. But maybe we can do better. I’ve worked out the problem.

It’s our business ‘leaders’.

Yesterday, we were ranked dead last in quality of fund management, because our financial institutions aren’t transparent and too inclined to screw their investors.

Same day we ranked 12th in a ‘stress test’ of how well countries are placed to handle recessions. We ranked 7th in our government’s ability to react well. 11th in society’s robustness and adaptability. Our businesses dragged us down – 11th in business, 30th in economic outlook.

Our glorious business leaders spent the last 10 years of record growth pocketing huge profits and whinging for tax cuts. They should have been investing in our economic future. We’re meant to buy this myth that these are the smartest men in the room. Most of them can’t understand something as simple as climate change or that booms don’t last forever. They’re anti-intellectual, greedy, and shallow.

And they’ve got no ideas.

Look at the jobs summit. John Key gets a couple of hundred supposed business geniuses together to solve the recession. The only actual ideas that come out of it: a half-assed version of the unions’ four day week and a cycleway. (Whatever happened to those 40-50 other ideas Key promised were being worked on?)

After the stunning success of the jobs summit, two ‘business leaders’ are holding an entreprenuers’ summit today. Meant to solve the parts of the recession that the jobs summit didn’t. If you want to listen to 15 minutes of drivel, listen to them explain their ideas on 9 to noon yesterday.

The low quality of our managers drag this country down from big company to small. Because of Rob Fyfe, Air New Zealand is suffering loss of brand and customers over a pay rise for 240 staff that’s worth less than Rob Fyfe himself got last year. You’ve got Lane Walker Rudkin where managerial incompetence has led to the business laying off close to 200 workers and cheating them out of their redundancy. Meanwhile the CEO of Lines Company is threatening to lock-out 40 staff because they want a 2% pay rise totalling $26,000. Dude got a $30,000 increase on his $300,000 salary last year.

Of course, the worst businesses are the foreign parasites, the banks. They treat our country like a Chinese bear’s gall bladder. They milk us all they can without actually making us collapse. Billions a year sucked out of our economy in return for inferior quality bank services.

So what do we do about it? Buggered if I know… tax cuts?

58 comments on “The root of the problem”

  1. Pat 1

    Attention The Standard: Looks like the crap filter has been turned off again.

  2. I actually think this is a very good post. If you disagree Pat, please say why you do so.

    It is a point that is not often made, that perhaps it is the business leaders who are dragging us down because they’re so “short-term oriented”.

    That seems like the real definition of right-wing, to be honest: short-termism.

    • felix 2.1

      Pat can’t do that, neither can the others. They don’t like Zetitic because the way he/she writes challenges the reader to respond directly to the substance.

      They don’t like this so they’ve settled on a strategy of dismissing everything he/she writes out of hand.

      Sad and transparent, yep, but there you have it.

  3. Bill 3

    As for bosses like any noxious weed strangling the environment. Cut them down, pull them out by the roots and burn. Spread the ashes liberally to aid healthy growth of newly planted beneficial seeds.

    Only speaking figuratively of course…

  4. Luke H 4

    So what do we do about it? Buggered if I know tax cuts?

    http://www.radionz.co.nz/news/stories/2009/05/20/1245b04fc5e7

    “The report also says there is no tax incentive for long-term investing.”

    So, er, yes, it looks like tax cuts would be a good idea.

  5. Kevin Welsh 5

    I’m with Zetitic on this one. Although it would be easy to argue that his post is a over simplification, the general guts of it is spot on.

    The managerial class in this society is not above criticism yet the backlash from any sort of criticism gets you labelled as a luddite greenie or a communist.

    The examples given in this post are perfect examples of what is wrong in the country, but in saying that, it is not indicative of all employers. I have worked at my current job now for five years because the people I work for reward hard work and are interested in more than how many hours I put in.

    • Bill 5.1

      You having a workplace affair there Kevin? (“..the people I work for….are interested in more than how many hours I put in.” )

  6. Zaphod Beeblebrox 6

    You don’t get to be CEO of a large company by taking risks. That is what people who start up companies do. When they become profitable they get bought out by large companies who have no original ideas. Its not actually that good for your economy to have a small number of dominant companies.

    • Pascal's bookie 6.1

      Exactly. And as kevin says, the backlash always comes against anyone suggesting that the private sector has a bureaucracy with all the problems that come with that.

      Righties get all het up about taxpayers getting shafted by civil servants, but capture of companies by management scarcely gets a mention, in fact it gets praised as near best practice, because somehow in the prvate sector, bureaucrats acting in their own best interest is somehow supposed to be best for shareholders.

  7. Relic 7

    Well, it is “deja vu all over again’ really, yes businesses large and small squandered the dough during the Clark years as they did during the Employment Contracts Act Bolger/Shipley years. Workers fightback ability on the ropes in the 90s, and what did most tinpot bosses do with this rare chance? in these here parts (Far North) they built more baches and bought more toys.

  8. Ben R 8

    “Billions a year sucked out of our economy in return for inferior quality bank services.”

    Do you have some evidence of this? How are our bank services inferior?

    • Zetetic 8.1

      You think our banks are good Ben R? You’re the only one.

      Creating a housing bubble by piling cheap credit into the market. 0% deposit. Running their mortgage rates just a touch above OCR screwing monetary policy.

      Now, keeping interest rates higher than they need to be.

      Creaming huge profits both ways.

      Internet banking that’s crap compared to other countries. Just getting smart cards now. Visa Electron has been around 10 years overseas.

      • chris 8.1.1

        Ok this is just retarded. We have a very advanced banking system becuase we’re a first world country the size of Sydney. So we don’t have smart cards, who gives a fuck? We’ve had eftpos longer than anyone because the banks trial things here then launch. Man lay off the marxist bullshit for a second.

  9. tsmithfield 9

    Zetitic “They should have been investing in our economic future.”

    They do. Its called paying taxes, providing jobs, and spending in the local economy.

  10. You forgot to mention that NZ is on the 20th place in the list of 52 police states and that the UN has condemned NZ for introducing tasers and that they have added10 more advises to the list of 8 on how to not become a torturing police state.

  11. help! purgatory

  12. Ron 12

    Please find below Info about progress on Cycleway, other ideas from Jobs Summit, Melissa lee’s qualifications to be an MP, the rest of NACT’s tax relef package, outcomes from the “consultation” process on the Super City, National’s response plan for the recession, information provided to Prime MNinister on CR’s appointment, Bennett’s plan for imporved services, NACT’s plan to deal with fall out from reduced public service:

    Thank you

  13. exbrethren 13

    Add to that Peter Talley threatening to close down his Motueka factory if the Tasman DC dares trying to upgrade the water supply and charge him.

    Sealord threatening to cut yet more jobs unless workers take reductions in their pay and conditions.

    The bleating of certain commentators would be that well people have to tighten their belts in such bad times. This is horseshit in these cases as both companies are still highly profitable and are just cheating their workforce whilst creaming off more for the CEOs and shareholders.

    These people are crooked.

  14. Tom Semmens 14

    What we have to grasp is we have no tradition of entrepreneurship in this country, and our tax and bankruptcy laws show we have no real inclination to create one. I also heard the painful pap from the puffed up “entrepreneurial leadership team” on Natrad. It was cliché ridden rubbish from people who got lucky once by being in the right place at the right time and who clearly are still trying to work out how they got there. Let’s face it – we had a semi-command economy until 1984, when we replaced it with a new elite of financiers and kleptocrats.

    We don’t have a “business class” if by that term you mean a class of people who are prepared to take risks and create wealth with innovative new products and ideas. What we have is old boy’s managerialist elite, who seek rentier incomes by any means so they can ticket clip natural monopolies with little or no risk or innovation – and they are not even very good at that most of the time. It is a decadent and corrupt “business” model more akin to some backward South American dictatorship than an advanced first world liberal democracy (this similarity of decadence is probably the origin of the also similar extremist right wing political views held by business elites here and in places like Chile and Argentina).

    New Zealand SME’s are often criticised for lacking ambition and vision, but the bottom line is the average self-employed Joe on struggle street (i.e. a REAL entrepreneur) knows in his heart he can’t trust the two-bit oligarchs and rentiers not to knobble him through monopoly behaviour. He wants to get enough money to get out before governments ruling in the interests of a parasite class change the business environment in a way to wreck him. Get a house, a boat, a bach and a BMW then flick the business with a sigh of relief that you had made it. Retire early at 55 with five rental properties to keep you going and you’ve achieved the Kiwi dream. Oh and why rental property (apart frrom the tax reasons)? Because who in their right mind in this country would trust our financial class with their money? Everyone knows they’ll rip you off in a trice with poorly regulated finance companies, dodgy insider trading and unethical practices. Better to keep your money where it is literally safe as houses.

    It is a limited dream, but limited dream for good reason. Reasons like a lack of cheap venture capital. Like a lack of Research and Development tax breaks and funding. Reasons like an obsession with rigid neo-liberal dogma that hold tax cuts are the way to do anything and everything. Reasons like a tax system engineered by the acolytes of the oligarchy to ensure that it wildly rewards unearned capital gains and rentier income whilst punishing those who create wealth.

    • SPC 14.1

      And the irony is that the farming sector – the most internationally competitive industry we have is as dependent (for a return on their lifes work) on the untaxed capital gain on the rising value of their (land) property business as the landlord of the city who battery farms tenants.

      Only now with Fonterra and with Fast Forward or such is there a prospect of this industry developing via R and D higher profits/incomes for returns independent of land value.

      • RedLogix 14.1.1

        Tom,

        A nice perceptive comment. Absolutely agree with your comments about property investment. Any other form of investment in this country runs far too high a risk that you will loose all your money. By contrast, a house and a piece of land is always there, and no matter what goes wrong, you stand a chance of making a recovery.

        I own a number of rentals. I would much prefer to put my money into a more productive vehicle, but unless you an insider, or have privileged access to market information… you will be screwed over. Mum and Dad investors are suckers to be pumped and dumped.

        If you want to gamble with your cash here in NZ, the TAB is a better bet.

        • chris 14.1.1.1

          Yes tom fantastic comment. entrepreneurship and entrepreneurial thinking are the future. NZ’s boys club corporatism will be the death of us.

  15. serpico 15

    The ‘stress test’ is about to rise with the Don Brash inquiry.Oh my.Now the root of the problem is?

    • Zetetic 15.1

      Nah. Key has ruled out an inquiry. I say have the thing. Smoke out the National leakers.

      • Pascal's bookie 15.1.1

        “Key has ruled out an inquiry.”

        Coverup!

        I/S covers Brash here, this morning:

        http://norightturn.blogspot.com/2009/05/don-brash-versus-laws-of-evidence.html

        stuff updates here:

        http://www.stuff.co.nz/national/politics/2429823/Brash-welcomes-email-investigation

        Mr Broad said continued questioning of the police role could undermine public trust and confidence in the force.

        He ordered a full review of the case, including the recent release of the highly edited file, to be conducted by Auckland assistant commissioner Steve Shortland, with an independent adviser working alongside him.

        The adviser, likely to be a Queen’s Counsel, would be appointed after consultation with Dr Brash.

        So donny darko brooding away wants his enemies outed, whoever they is.

        I think he’s talked himself into believing it was Labour, can’t let it go and will keep muttering away about corruption in the police until he gets some answers he likes. The police can’t have that, so they are going to investigate their investigation. Labour, meanwhile, is quite happy for the unredacted police file to be released.

        Parliamentary Nat’s are quiet mostly. Key is all:

        Speaking to reporters this afternoon Mr Key said he understood Dr Brash’s concerns but a commission in inquiry was a very expensive option that would divert police resources from fighting crime.

        Police had found “gaping holes” in security of the former leader of the opposition.

        “The issue is not that the police want to reach a successful conclusion, it’s that they’ve been unable to provide a successful conclusion,” Mr Key said.

        Speaking before being made aware of Mr Broad’s announcement, Mr Key suggested Dr Brash take his “serious allegations” against police to the Independent Police Conduct Authority.

        I/S looks smart, Brash looks paranoid and bitter, the police look pissed off, Key’s got tranzrail eyes.

  16. Luke H 16

    “They should have been investing in our economic future.’

    Telecom wanted* to do that but it was making too much money, so the government demanded that Telecom let Orcon and all of the other competitors get their grubby hands on Telecom’s infrastructure.

    Way to promote investment in infrastructure, Labour.

    * Note: the reason Telecom wanted to invest that money was because they could make a profit. Socialists love to take away the possibilities for making a profit and then blame ‘market failure’ when nobody wants to build railway lines or lay fibre-optic cables.

    • Daveo 16.1

      Good old Telecom, the company that made big money deunionising and deskilling its workforce, then hired out their labour to competive contractors to permanently screw wages down. Then, after all that, abused its market dominance to shut out competition and screw the country’s broadband infrastructure. Yeah, great example Luke. It’s clearly all the socialists’ fault.

  17. inpassing 17

    Well said that blogger – Zetitic!

    At worst, comparatively, the piece fits snugly into a once fashionable provocation theme. (recall PM Shipley if you will, always bashing ears that one..! )

    At best, it hollers wake-up!

  18. Clarke 18

    I think Tom’s got it pretty much right.

    There are plenty of fantastic Kiwi entrepreneurs who are adept at building great businesses. I’ve met them in London, New York, Silicon Valley, Sydney, Singapore …. and only occasionally at home. Most people with the drive and big ambitions want to play on the world stage, and some of them do so in spectacular style.

    But you’ll also find that when they come back to NZ, it’s inevitably for lifestyle reasons – to give the kids a better place to grow up, to make sure they spend time with ailing parents, to escape the rat-race. Many of these people simply aren’t interested in working huge hours to build another empire … they’ve been there, done that, and don’t have anything left to prove.

    If you’re putting lifestyle ahead of income, then New Zealand is the best country on earth. And if you’re hell-bent on building a huge company and changing the world, then in most cases you’ll be overseas.

    The people who loudly proclaim we need to have bigger and better businesses have lost sight of the main goal – we’re here because of the truly fantastic lifestyle, and the company is just a means to an end. And lowering company taxes (or some other piece of right-wing nonsense) won’t make a blind bit of difference to that.

    • Zetetic 18.1

      Yeah those wonderful entrepreneurs. What was their big idea when 100 of them got together for a day? Make New Zealand a ‘no-moan zone’.

      If you gave a room full of 12 year olds an hour and the best idea they came up with was ‘Make NZ a no moan zone’ you would have to conclude they were a bunch of morons.

      • chris 18.1.1

        Got a better idea? Nationalise the country perhaps? Honestly it’s people like you that make me embarrased to be a labour supporter. You’re so naieve about how the corporate and innovative world works that you demonise it automatically rather than realising that it is thanks to this world that we have our living standards and our public services. Don’t bite the hand that feeds too hard or it will slap you.

        Oh and i’m not apologising for a crappy summit, but it is entrepreneurs who create wealth.

        • Clarke 18.1.1.1

          Really? Like those “financial entrepreneurs” with their “innovative products” at Lehmann Brothers?

          • chris 18.1.1.1.1

            well no because they wern’t entrepreneurs creating new businesses and licensing innovative products and actually creating wealth. they worked for a bank. i’m sure you can see the difference?

  19. Lew 19

    And the lead idea out of this entrepreneurship summit? A cottage industry of possum-skin gloves (audio).

    The moment of zen for me is right at the start, where Greg Howard gushes about how good it is to be around `people who think like me’ – that is, those who don’t dismiss ideas as obviously idiotic; people I would call `uncritical to a fault’.

    Now, don’t get me wrong – I think it’s a wonderful idea if it will work, but I see no evidence that it will, or consideration given to the possibility it might not. The business model, as far as I can see, runs like so:

    1. Government bans 1080 to ensure there are plenty of possums and place a $5 bounty on each one.
    2. Entrepreneurs train and employ unemployed rural Māori to trap possums.
    3. ???? (a)
    4. Turn possum skins into gloves.
    5. ???? (b)
    6. Profit! ($500 million of it, apparently)

    The reason I use the double-underpants-gnome business model here is that there are (at least) two vulnerable points in the model, which even I can see. They are the supply point for raw material and the demand point for finished product. As follows:

    a. Possums, being wild, are not in steady permanent supply. Local populations of possums in easily-accessible locations will quickly be hunted out and populations of possums in less-viable locations will become the quarry. Eventually possum numbers will diminish to the point where the business model is no longer viable because there are too few possums, or because they’re in locations which are too marginal. Or, and this is a worse possibility, possum cartels will emerge, cultivating and maintaining populations of possums within a location so as to maintain a steady supply of skins. The NZ bush will be entirely dependent on trappers (that is, entirely dependent on the market) for control of possums, and that means when the market fails, the bush dies – to a worse extent than currently since 1080 does a pretty good job of getting rid of possums. There’s also the consideration that only possum skins of a certain weight, colour or whatever according to seasonal and regional variations will be harvested. I assume the bloke has already figured this out, though, since he already sells these products.

    b. A high-value, niche product of this sort doesn’t sell itself, and frankly, if there was that much demand for alternative fibres, would we not have seen some of it already? All in all, I can’t help but think it’s a bit too easy to talk about $100-500 million.

    I can see one entrepreneurial aspect of this scheme, though – Greg Howard has convinced a bunch of canny Atlases to back a call which will massively expand his business model (and his company’s products) above all their own, and win a swag of free publicity into the bargain. Well done that man.

    L

    (Edit: I’ve given the impression I’m totally down on this idea – I’m not. This could be very good for some people in some regions of the country, and especially for rural unemployed Māori, and in that regard I think it’s great. I just don’t think it’s a recession-beater. It’s a cottage industry. We already have thousands of those.)

    • Zetetic 19.1

      Lew’s right.

      Last time we tried to seriously control possum numbers/have a major possum fur industry with bounties possum farming was exactly what happened.

      Then the market for high-end fur basically disappeared. I haven’t read that people are back into wearing the fur of dead animals.

      Most people don’t view possums as pests like we do.

  20. vto 20

    ” We’re meant to buy this myth that these are the smartest men in the room. Most of them can’t understand something as simple as climate change or that booms don’t last forever. They’re anti-intellectual, greedy, and shallow.”

    Wrong on every count

    pathetic

  21. bobo 21

    The best our so called entrepreneurs can come up with is a “no moan zone ” poster?? is it an in house joke?

    • Zetetic 21.1

      Sounds like a bloody joke.

      But no that was one of their top of ideas. They think if we’re a nation of moaners. If we stop we’ll be like Australia. By which I guess they mean we’ll have mineral wealth and better weather.

  22. jason rika 22

    hey Ben R. Check out westpac. Lost 10 million in transaction cock-up. Pretty good example of incompetent bank if you ask me.

    • vto 22.1

      really jason? how much you lost in the last year due to being too smacked? Compared to your income? Shall we compareo?

    • Bill 22.2

      If only the law is changed so that recipients don’t have to disappear overseas….49 more wespac fuck-ups and $500 000 000 hits the money-go-round!

    • Clarke 22.3

      Yeah, those Westpac types got it completely around the wrong way – taxpayers are meant to shower banks with unearned money, not the other way round!

      Note to Westpac: bailouts run *from* taxpayers *to* banks. Must try harder.

  23. gingercrush 23

    There are already people collecting possum fur and they’ve been doing it for a while. My own father did it last season and will be doing it again this year. In regards to the fur. They’re not fussy whatsoever. No longer do you need to skin up the possums you just pluck the fur. It is already used in the making of clothing. Already there exists companies that pay people. There was a country calendar episode a while back that directly looked at this issue. Making gloves could I guess potentially work though it likely would flood the market. Meaning those people who already have jobs getting possum furs and those companies that are already making that fur into clothing and other goods will see their prices lower.

  24. gingercrush 24

    The funniest thing is I suggested possums a few months back here on this blog.

  25. Swampy 25

    You forgot to mention the electricity companies (mostly state owned).

  26. Nick 26

    Hell, this is the funniest line of comments I have read for a long while, cant fault Zetitic and just great to read the possum story…if it was’nt so sad you would laugh too loudly. Shows the acolytes of the right for what they are, complete pillocks….

    • Clarke 26.1

      You’re right, Nick … although Zetetic has had to work pretty hard on this – after all, it’s New Zealand’s A Team of Entrepreneurship we’re talking about here! It’s pretty difficult coming up with insightful criticism of such a group of high achievers – it’s not like making fun of a bunch of clueless muppets at all. That would be much easier.

  27. Tim Ellis 27

    What an extraordinary post, and even more extraordinary comments.

    If senior businessmen are so stupid, and anti-intellectual, and don’t have the capacity to think in the long-term, then why doesn’t everybody do it? If it’s such an easy step, then how is it that all of the people complaining about the stupidity of senior executive management (none of whom appear to have any experience of senior executive management), don’t take the leap themselves?

    There is a very high proportion of industry that is owned and managed by the State. Is this a better model? Can anybody produce evidence that SOEs perform more effectively, produce better quality products and services than their privately-owned counterparts, treat their staff with more respect, deliver better returns to shareholders, and have a greater regard for the needs of consumers?

  28. randal 28

    actually we are damm lucky to have any industry at all
    without the first labour government and their aggressive policy of import substitution there would be nothing here at all except the sheepocracy
    erkkkkk!

  29. Clarke 29

    Tim Ellis:

    f it’s such an easy step, then how is it that all of the people complaining about the stupidity of senior executive management (none of whom appear to have any experience of senior executive management), don’t take the leap themselves?

    Many of us have – and still do – run companies, employ people, and occupy senior management positions. Many of us have very direct experience of executive management – and it should be a salutary lesson that not every company director supports a right-wing government that is undermining the very qualities that make this such a fantastic country.

    As a company director and as someone who has occupied very senior positions in public companies here and overseas, I care much more about the equality of my society than the size of executive bonus cheques. I care much more about the very real world of child poverty and families that have to make decisions between paying the electricity bill and putting food on the table than any notional discussions about GDP growth or productivity statistics.

    As a company director I am appalled by the cynical looting of the country. I do not approve of the current government that condones $4 billion of electricity overcharging by stating that the offending monopolies don’t have to pay it back. I am deeply offended by the very idea that $4 billion has been taken out of the pockets of New Zealanders – money that could have put food on the table, and bought winter clothes, and paid mortgages – and used it to enrich (in the case of Contact) predominantly overseas shareholders.

    I dislike intensely the idea that the OECD productivity figures are about to improve in New Zealand, solely because we are making more people unemployed.

    The way I run my company and employ my staff and work in my industry bears no resemblance to the caricatures you’re providing. I am not a member of the Business Roundtable, and amongst a very wide range of business contacts stretching over some decades I have never met a single person who is.

    I do not want a personal tax cut – I want a fairer New Zealand.

    So you can take your comments about our alleged lack of “experience of senior executive management” and – in the vernacular – blow it out your ass.

    • chris 29.1

      Great comment, if only people here could realise that not all business people want to give sir rog head this blog would be a better place.

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