Sunday, 11 October 2015

Cut the crap and give me my country back

(Shout-out to my friend Steve King, who wrote the protest song I’ve nicked the post title from.)

So last week, our beloved leaders signed up to the TPPA (Trans-Pacific Partnership Agreement). They were always going to, of course. Since this National Government was first elected in 2008 there have been three clear, consistent patterns to their behaviour. One is dismissing objections to their decisions, as with child poverty, charter school outcomes, river pollution from intensive dairy farming, and the revelations that the GCSB has spied on New Zealanders. Another is favouring business in any way they can, as in asset sales, tax cuts, 90-day “trial period” no-fault firings, and the various formerly protected parcels of land and seabed now opened to mining. And the third is undermining democracy, as with Environment Canterbury, students’ associations, tertiary education governing bodies, and the number of times they’ve used Parliamentary urgency – i.e. skipping the pesky “public submission” part of the legislative process – for controversial but non-urgent Bills.

All three of these patterns are perfectly embodied in the TPPA. Dismissing objections: the text of the TPPA has been kept strictly secret, which means nobody can object to anything specific (but Trade Minister Tim Groser gets to call us all “ignorant” and “fools” for not knowing what we have been expressly prevented from knowing). Favouring business: what we do know about the TPPA is that it’s about removing tariffs and price controls imposed by governments, while extending intellectual property rights. Undermining democracy: the TPPA will allow corporations to sue governments for imposing laws or regulations that hurt their profits.

It turns out that, despite all Groser’s prior reassurances, New Zealand actually gets a pretty crap deal out of the TPPA. The best we get is a small tariff reduction on dairy – dairy being the one great super-product that two successive governments have bet New Zealand’s future on, the thing we’re destroying our rivers and lying to the world about it for. All the rest is what Idiot/Savant over at No Right Turn calls “margin of error stuff”. Danyl McLauchlan at The DimPost notes that “the TPP will deliver the equivalent of a couple of months of growth in ten years time.” And yet we went ahead and signed it anyway, because it’s better than not being in a secretive trade partnership that could sue the crap out of us, right guys? Right, guys? What this tells me is that the cynical view of National’s motives is wrong. They’re not amoral manipulators just out to score cash for their CEO cronies; if they were, they would have turned this down. It’s much worse than that. They’re true believers with an ideology. No matter the evidence, no matter what actually happens, the way forward is always to boost business and remove impediments to it. No other option is on the table.

This week, TPPA supporters have been chaffing its opponents about the absence of “baby-killing” clauses in the agreement. That’s a pretty low bar to clear, really. I’m given to understand that some kind of exception was drawn so that tobacco companies can’t sue governments for anti-smoking campaigns – which is well and good, but why can’t we see what the agreement actually says? This is a partnership between nations, not a one-off transaction between two private individuals or even two “private” corporations. What everybody’s worried about is the Investor/State Dispute clauses, the prospect of our government being sued because its laws hold back some corporation’s profits. It’s not just that that makes a nonsense of having regulations in the first place, since you only need to stop people from doing stuff if there’s some kind of profit motive tempting them to do it. It’s that, to enforce the lawsuits, the TPPA must somehow bind governments into obeying it.

That would mean that even if an undisputed majority of New Zealanders voted for some environmental or human rights protection, our elected representatives would have to clear it with their corporate masters first. Now it’s not quite as hopeless as it sounds. New Zealand has what is called Parliamentary sovereignty, which means that no overseas governing body can overrule Parliament. Even if we do lock ourselves into this agreement, a new, braver Parliament can always vote to overturn it and default on any lawsuits. The problem of course is that we would then face trade sanctions from other TPPA signatories. Whether that would be worse than what the TPPA imposes on us anyway is an open question. But first we need the brave Parliament. Looking at the two biggest political parties in this country right now, I’m not hopeful.

How did we get into this mess? It’s no mystery what’s motivating the corporates, but I thought Barack Obama and former New Zealand Prime Minister Helen Clark were both relatively enlightened people, as heads of states go, and they’re not just assenting to the TPPA but pushing it. For that matter, what is the ideology behind National’s come-what-may support of it? Tim Groser and John Key are both Members of Parliament. What are they doing tying their own hands? Actually, I’ve got a pretty good idea. The Western world nowadays works on the tacit assumption that businesses get done what needs to be done, whereas government (especially democratic government) is mostly only good for getting in the way except when you need police to get those people, with their drugs and their single mothers, off your lawn. This assumption has filtered down from economists.

The economic theory taught in most universities today is classical economics, which uses simple maths to prove that free trade is nearly always the quickest way to the best outcome. Unfortunately as well as the maths the theory depends on some dodgy assumptions about what makes people tick and what constitutes the best outcome. Economists generally are bad at designing empirical tests for their ideas. As a science, economics is about where medical research was two hundred years ago:

Conventional medicine in [the late eighteenth century] was obsessed with theory, and was hugely proud of basing its practice on a “rational” understanding of anatomy and the workings of the body. Medical doctors in the eighteenth century sneeringly accused homeopaths of “mere empiricism”, an over-reliance on observations of people getting better. Now the tables are turned: today the medical profession is frequently happy to accept ignorance of the details of mechanism, as long as data shows that treatments are effective (we aim to abandon the ones that aren’t), whereas homeopaths rely exclusively on their exotic theories...
Ben Goldacre, Bad Science p. 32

Even then, doctors weren’t completely oblivious to what happens inside human bodies, and I wouldn’t say economists are clueless as to the workings of wealth in society. I freely concede that trade is what they call “positive-sum”, which is to say that the trading partners’ total combined wealth is greater after the trade than before it. To think of it as “zero-sum”, where one partner’s gain is another’s loss, would be ignorant, and that’s why economists (and politicians like Tim Groser with them) tend to smirk at leftists and ignore us. They assume we just don’t get the maths. In some cases this is true, and the Left’s tendency to dismiss these criticisms rather than answer them is, I think, one major reason why we’ve lacked traction since the Reagan-Thatcher ascendancy.

So here’s a partial answer to that criticism: it’s not enough to be positive-sum. Suppose three partners broker a trade deal which ends up with two of them gaining $1 each and the third one gaining $100. That’s positive-sum – the net gain is $102 – but that’s small comfort for the first two partners. An economist might dismiss their concerns as irrational resentment, since they have after all made a gain, if a small one; but the third person now has a great deal more market power than they do, and that doesn’t bode well. The third person might, for instance, pay much more for certain goods or services than the other two can afford, thus pushing the price up out of the latter’s reach. This economic powerlessness is the position of an ordinary worker in a capitalist society, and it’s pretty much New Zealand’s position in an international trade partnership.

Economic inequality has been shown to have worse effects on public health than poverty as such, and it occurs to me that this might help explain why. If everyone’s poor, pharmaceutical companies and similar providers have to sell their products cheap or they’ll get no custom. If there’s a rich elite, and if the goods are expensive to produce, you can see how it might prove more profitable to sell lower quantities for a higher price. That has the unavoidable side-effect of removing the treatment from most people’s reach. (Now I’m just a blogger and this paragraph is speculative, and I would hope people would do some rigorous empirical studies before accepting it as fact; but it’s about as much justification for one’s conclusions as you ever hear in an economics lecture.)

I’m not against trade per se and as such. Analyses of the statistics of war have found evidence that countries who trade with each other are less likely to fight. If you can buy somebody’s stuff off them, you don’t need to try to kill them for it. International organizations, of any kind, also reduce the chances of war between their members. (You know what else does? Democracy.) And I don’t endorse the words or actions of those who oppose the TPPA for racist or xenophobic reasons. I have spent much more of the last week than I would have liked trying to argue down “Jewish world domination” conspiracy theories in an anti-TPPA Facebook group. I think the idea of a partnership between the nations of the Pacific is an excellent one – if, and only if, it is democratically run by the people of those nations.

Democracy doesn’t even have to mean governments. It means decisions should be made by the people most affected by them. Another part of the Left’s problem, speaking as someone who was six years old when the neoliberals took over in 1984, is that when you say “We think this and this and this should be held in trust by the State,” people under the age of forty or so look at how trustworthy the State has been all our lives and go “Um, how about no.” How about democratically-run businesses, where the executives are elected by the workers? How about local communities putting environmental assets in trust, so companies have to pay to exploit them? How about free content-sharing on the internet, and internet service providers pay content creators by popularity? Yes, you’d need the State somewhere in the background clearing its throat loudly when people break rules, but the State itself wouldn’t have to run things. Of course the key point, as you’ll have gathered from the above, is that these are ideas to try out and see if they work, not things to push ahead with as ideologically necessary.

Sadly, as New Zealand hasn’t got a Bernie Sanders or a Jeremy Corbyn, I guess these ideas will remain just ideas. Perhaps America and the UK will swing left again in the next few years and a select group of New Zealand politicians will suddenly realize they were social democrats all along. That’s how it usually seems to go. We’re followers, not leaders. And right now we’re following the Pied Piper down a very deep hole.


  1. Excellent article. These fools that think lower price is the goal... wonder if they ever celebrated when the prices crumbled on the stock market.

  2. Sorry your comment got spambinned at first, Allan. I'm guessing Blogspot red-flags the phrase "stock market".

  3. I think you're actually conceding too much in your bit on the economics of trade. The math behind free trade being good (David Ricardo' "Comparative Advantage" schtick), like the general math of classical and neoclassical economics, as you say depends on certain assumptions. And it so happens that those assumptions do not actually hold.
    One important assumption was largely true in Ricardo's day, but clearly isn't now: Ricardo assumed that capital stayed in a country, that trade was just in goods. So, trade would be good for a country because, basically, the local money had to invest locally and result in the production of something locally, so the only question was whether to generalize inefficiently or to specialize in what one did best and trade to get the other stuff. In modern times, that assumption is so thoroughly false that even the "free trade" deals are more about international investment than trade. As a result, it's perfectly possible for free trade to allow nothing much to get produced locally, and the local money to be invested elsewhere, where for instance wages are lower. Under these circumstances trade can quite readily ruin a country and need not be win-win at all.
    The second important assumption is very common in economics and never holds at all in the real world: Time does not exist. Ricardian comparative advantage free trade theory rules out changes over time and, more specifically, strategic decision-making to bring about desired states of affairs. This theory was invoked regularly in England to inveigh against the idea of the United States ever trying to promote local manufactures rather than selling grain and cotton and wood and stuff; it was clearly an insane idea which would turn them into beggars because obviously England had the comparative advantage in manufacturing. The early United States went protectionist anyway, built up local manufacture behind trade barriers, and got better at it. The same is true for nearly any country with a diversified economy.
    Contrariwise, with the existence of capital mobility, the existence of time allows free trade and investment to gradually change the regulatory environment, putting pressure on individual countries to reduce business' production costs (such as wages and regulations) lest they move production elsewhere. I might claim one of the major reasons a government like New Zealand's felt they needed to sign a bad deal like this one is that trade and investment are already so free that if they don't sign it, corporations could still just relocate elsewhere and sell into New Zealand. Thus, arguably the current bad free trade deal is made possible by the leverage given to business by the previous bad free trade deals. This "race to the bottom" thesis has been widely rubbished among those who benefit from it, but the fact remains that the freer the trade, the lower median wages seem to get, the weaker the unions, and so on.

    In short, comparative advantage was always mostly a chimera, but with free capital mobility it's simply wrong on its own terms--and Ricardo himself would very likely have pointed out that his thesis did not apply to our current circumstances.