Time to halt privatisation of high country

Although about a fifth of the South Island high country is owned by Government and leased out to runholders, this is changing. Since 1992 the Government has allowed the privatisation of leasehold land. Called “tenure review” it involves an unusual deal and the government loses. The runholders because of their input into the farm claim the improvements belong to them. They end up getting part of the farm for a song. No I am wrong – they sometimes make money on the deal by a strange mechanism. And then they flip it on, making millions in the process. The less valuable land is kept for conservation. There is something strange about the land valuation process.

So why on earth does the public purse lose? To retire the pastoral rights, the Crown paid runholders $36 million (or $656/hectare). That is ridiculous. It is all explained by Dr Brower in April 2107 here and the Environment Court at that stage made a case for stopping freeholding of land in the McKenzie Basin.

The picture above from Stuff shows this week’s protest by Greenpeace about a farm near Twizel where the farmer wants to run 15,000 cows. Many local farmers and even Fonterra joined Greenpeace in opposing this dairy conversion.

All the figures and stories are given in her post and she ends by saying “The best, easiest, and cheapest thing New Zealand could do for the land and water of the South Island is to stop high country tenure review. Better late than never.”

As Charlie Mitchell from Stuff points out, the best land stays in pastoral use and the deal is skewed towards the wrong side. “You might assume that ownership rights to valuable land would be worth more than occupation rights to less valuable land. But the Crown believes the opposite, so it has purposely lost money through these deals.”

More recently we saw the headline “Flipped. From zero to $17.5 million.” This involved a lakeside property on Lake Hawea. Previously under tenure review the farmer had been paid $2.2 million by the crown and had paid nothing in return. Then he onsold it for $17.5million. Flipped from zero to $17.5 million by Charlie Mitchell. An earlier article is one on McKenzie country

Of course after privatisation the owner can subdivide so by April 2017 what used to be about 120 leaseholds is nearly 4000 parcels of freehold land.

The Minister of Lands Hon Eugenie Sage has her work cut out to change this situation.

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Economic reality strikes – growth is ending

Of late the Opposition has been pointing out that business confidence is declining. NZIER had released a survey saying business confidence is at a seven year low. The Government has been quick to dismiss it as a political bias by business – as something they always opine when a Labour Government comes in. And the Asian stockmarkets are currently looking wobbly. RNZ’s long term economic commentator Patrick O’Meara talked of softer demands, slower growth, lower investment intentions. He talked of the looming US-China trade war has attributed that to the fact that on Saturday Trump’s tariffs on Chinese goods begin. It may also affect markets in Europe, Canada and Mexico.

The trend started well before Trump appeared.
But because of declining net energy, worrying trends happened decades before Trump’s tariffs kicked in. Let me explain declining net energy. Whereas in the mid 20th century if you spent one unit of energy to extract oil, you would get 100 units of energy back, nowadays because it takes more energy to extract fossil fuels from deep sea wells and from fracking, the energy left for the economy is progressively declining. Since net energy available is closely correlated with economic growth we would expect economic growth to decline. Moreover productivity will decline. Productivity is an economic measure of output per unit of input and input includes energy.

Is it time for Nafeez Ahmed to be taken seriously?

British investigative journalist Nafeez Ahmed has written a great article explaining the gradual decline of both economic growth and productivity in the UK economy. He concludes, “In other words, trying to keep the growth machine growing when the machine itself is running out of steam is precisely the problem — the challenge is to move into a new economic model entirely.”

He quotes from a piece of research for the government by Professor Tim Jackson giving graphs of declining economic growth and productivity. Jackson says, “In 1996, the trend rate of growth in the global GDP was 5.5%. By 2016 it was little more than 2.5%”. From 1971-2016 productivity growth dropped from over 3% to just 1%.  We must have similar graphs in New Zealand.

Economist Michael Reddell says on his website “Over the last five years there has been only about 1.5 per cent productivity growth in total.”

Ahmed himself is well ahead of others in the way he puts together and explains the connection between many serious global issues –fossil fuel depletion, climate change, finance, geopolitics, terrorism, food security, political instability.

Trump is just a symptom

Trump’ regime is picked to promote business as usual
Ahmed wrote on Inauguration Day 2017  that “Trump is not the problem. Trump is merely one symptom of a deeper systemic crisis. His emergence signals a fundamental and accelerating shift within a global geopolitical and domestic American political order which is breaking down.” He talked of the elephant in the room being the global net energy decline that drives all this.

Less than a month later he penned  a chilling analysis of Trump’s regime.   Half of them are now gone, having resigned or been fired by Trump.  He grouped them under five headings – money monsters, fossil fuel freaks, black ops brigade, Ku Klux Klan and the guru gang  – saying that was the perfect combination required to keep the old model working. Business as Usual must proceed. Drill baby drill.  Increase funding for the military. If things look bad financially try riskier and riskier financial instruments.

Never before has there been such an environmental crisis where our emissions are making our habitat more and more inhospitable with floods, fires, droughts and the accompanying food insecurity. Never before have we seen governments like ours desperate to solve child poverty throwing money at them. We have even got a superannuitants winter energy payment. Yet homelessness and poverty continue.

The tragedy is that while the current government has its heart in the right place – to end poverty and preserve our environment – it is hamstrung. It is damned if it does and damned if it doesn’t. Political instability is becoming inevitable. Will New Zealanders after the hope of Jacinda Ardern be doomed to see in a Trump like government within five years? Nigel Farage is coming to our country soon. If we don’t find a new economic model that is not dependent on growth, we will come nowhere near a just, sustainable economy. That is the tragedy.

 

 

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Homeless are entitled to at least $217 a week just by being born

Anthony is a homeless guy who sits near Countdown in Waikanae and often sleeps in the Akatarawas in his tent.

His situation is dire — he has no home, he says, which means his benefit from WINZ has been cut off.

So is the gap between the landed and the landless really getting to this sorry state?

Fewer homeowners, but some own much more.

There are now fewer homeowners as a percentage of the population. But more people own more than one home.

The authors of A Stocktake of New Zealand’s Housing wrote in Feb 2018, “Home ownership rates have fallen to a 60-year low and could fall further.

“These falls have been alongside rapid house price inflation in many parts of New Zealand and, with this, deteriorating affordability. We are quickly becoming a society divided by the ownership of housing and its related wealth and recent housing and tax policy settings appear to have exacerbated this division.”

Successive governments have turned down official recommendations for land and capital gains taxes.”

Monopolists should pay rentals

So what is Anthony really owed by society? If we believe all land belongs to everybody, then anyone who monopolises a piece of land should pay a rental to society. This should be divided up amongst central and local government and individuals.

The increase in house prices is almost all unearned and belongs to the public.
‘Landowners’ exclude everyone else from benefitting from their piece of land whether it be in Queenstown, Mt Victoria or Masterton. Currently land owners pay only one sort of tax for their land – rates. A typical rates bill would come nowhere near the 5% of the land value. It is more like 1-2%.

When I ‘own’ a piece of land in Mt Eden and the government and local government pay for infrastructure around me. This puts up the value of my land.

Over time my property may go up by $1million. All the rise has been in land value. If I sell my property I get unearned capital gain that rightly belongs to people like Anthony and to governments.

The annual rise in the value of the housing stock between 2012 and 2017 averaged $100 billion. With half going to government, this leaves $50b distributed to 4.4 million New Zealanders. Or $11,300 a year for everyone. This is just from the land rents. This is Anthony’s fundamental right. Just by being alive he should get his share in the land rents. He shouldn’t have to beg at WINZ.

Add the rents from minerals, fish, trees, power stations, electromagnetic spectrum and when all added together it should make a respectable basic income.

The only qualification for getting it is being born!

 

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Interview on the Big Shift

Half hour interview with Karl Fitzgerald of Prosper Australia on the Big Shift. https://www.mixcloud.com/RenegadeEconomists/

I was surprised when I played it today how animated I sounded. Now I need to finish promoting this book and get on with writing the next one, probably entitled Emergency with a subtitle about the need to have a climate currency and how it could be applied.

The notes are on Karl’s site

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To get the next economic system we need to find the assumptions of this one

Banks Peninsula fires after drought Feb 2017

Many are asking if we have to sit around waiting for the current system to collapse. If we have only 3 years to turn around the emissions pattern as the UN has said, we had better get on with designing the next system.

The current system assumes:

  1. There will be only one currency for a country.
  2. The majority of the country’s money will be created and controlled by private banks.
  3. The money will be created as interest-bearing debt.
  4. All land, all natural resources and natural monopolies can be privately owned, and this means people can profit from buying and selling it.
  5. All major decisions will be made by national or international governments or agencies.

This all adds up to a system with a growth imperative built in.(For years I thought it was just the money system but I believe now after a conversation with Steve Keen it is a combination of that and the land tenure system) The consequences are regular booms and busts, regular monetary crises, banking crises and sovereign debt crises and ever widening wealth inequality.

Edgecumbe floods 2017

The growth imperative also means that it is inevitable that we consume our natural and social capital.  Perpetual growth is not natural. There is no entity in nature which is designed to grow forever, unless, as Margrit Kennedy pointed out, you count cancer. And now we are paying for our blindness with floods, droughts, coastal erosion and food shortages.

Therefore the phrases ‘doughnut economy’, ‘stable state economy’, ‘no-growth economy’, ‘regenerative or resilient economy’ are good descriptive words, but they don’t change the current economy’s DNA. We have been inventing more and more names for this since the publication of The Limits to Growth and arrival of the NZ Values Party in the seventies. They all sound good but we can’t go on and on pretending there isn’t a growth imperative built into the design of our mono-currency economy.

It is like saying I would like this rose to be white and scented but in fact it is red and unscented. The redness and unscented is built into its DNA and no amount of nice new language or great new writing will alter it. We just can’t go on creating more and more names for a good economy.

The Growth Imperative is in the DNZ

I am sure economists like Kate Raworth are contributing to raising awareness but honestly, give or take a few years of dormancy, people in the advanced economies have been at it since the 1970s. The Greens talked about it for a few years but dropped it like a hot cake quite a while ago.

Now I don’t expect too much new thinking will come out of universities. It is tricky for a university economist to breach the parameters of what they can say without losing their salary. Professor Steve Keen is having to crowdfund his salary now.

It is now time to acknowledge that we need to leave the new system alone and invent an entirely new model. We can’t solve climate change within the current model.  Within the old system you can’t put on a hefty carbon tax and expect a different political result from Australia. (Yes you can plant trees and do other things, sure.)

Supposing therefore we allow:

  1. There to be more than one currency
  2. It must be publicly created and controlled for inflation.
  3. The currency will be spent into existence not lent into existence.
  4. The currency will be designed to decay (Silvio Gesell’s quote is “Only money that goes out of date like a newspaper, rots like potatoes, rusts like iron and evaporates like ether can be capable of standing the test as an instrument for the exchange of newspapers, potatoes, iron and ether.”)
  5. The commons must be publicly owned and rent for their monopoly use must replace income tax and sales tax.

I realise that these are all huge jumps in thinking and the last point means there have to be very strong leasehold contracts to protect the occupier of the property together with no rent on land used for conservation or historic purposes.

Naomi Klein has spelt out this challenge for a new economic system in her book This Changes Everything.

Though The Next System Project is grappling with the challenge of finding it in Washington DC it would be great to have a special platform somewhere in NZ to work on it ourselves.

Oh, and by the way, my book The Big Shift – Reinventing Money, Tax, Welfare and Governance for the Next Economic System is available from Living Economies bookshop. It is the result of a four-year think tank of what was the New Economics Party and is the source of the above ideas. We may be right we don’t know, but we tried.

 

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The price of petrol and climate action

Climate change groups were noticeably absent from the recent public discussion about the rising price of petrol. Nobody was saying publicly that if we are to turn emissions around, we have to make it more expensive to drive. Not the Greens, not Generation Zero or 350.0rg. Nobody. It had been a unanimous outcry of pain against high petrol prices. Why? Surely lower petrol prices would clog up our roads, get people off public transport and adversely impact our emissions?

Here was a discussion about how the margins had increased in Wellington and the South Island yet nobody had said we should drive less so use petrol and reduce our carbon footprint. Nobody came out with a comment that the oil companies have a growing debt burden because it is getting more and more uneconomic to get oil out of the ground, so it is not surprising. They have been binging on debt and are struggling to pay dividends and find new barrels. The big four doubled their net debt between 2014-2016.

The public debate was started by Judith Collins the Minister of Energy and Resources after a report came out, and Labour’s Stuart Nash praised her for ordering the report. Labour’s Stuart Nash praised her for ordering the report.

So how important is petrol to us? The average Kiwi family spends $42.30 a week on petrol – only $8 less than their average weekly spend on meat, fruit and veggies. That is mighty close. It won’t take much for petrol to be a bigger part of the budget than food. And to complicate it, when petrol costs rise food costs mostly get passed on to us.

But then I thought of the implications. The gross profit margin on fuel at the pump had doubled to about 30 cents a litre in Wellington and the South Island over the past four years and gone up by 5c a litre elsewhere. It has something to do with Gull only selling petrol north of Levin, but it is more than that.

The petrol retailers Z Energy, BP, Mobil, Caltex and Gull all defended their positions. Maybe the companies are suffering from their growing debt burden so increasing their margins are the only way to stay solvent.

Ten years ago when many environmentalists were involved with peak oil we would argue that the price of oil will one day be over $100 a barrel. It hasn’t turned out that way because we didn’t factor in debt or falling interest rates. As actuary Gail Tverberg says, the economy was far more complex than the original model assumes. “When interest rates fall, this tends to allow oil prices to rise, and thus allows increased production. This postpones the Peak Oil crisis, but makes the ultimate crisis worse.”

We all remember that the economy slowed right down when the price of oil spiked in 2008. That showed us how critical the price of oil is. High prices on energy products ripple through the economy is many different ways. Just thinking about the price of petrol gives a misleading impression. Tverberg says, “Because interest rates, debt, wages, and oil prices (and, in fact, commodity prices of all kinds) are linked, the system is much more complex than what most early modellers assumed was the case.”

Not all of us can get a handle on the huge complexity of it all and I am no exception. But I know Tverberg believes the price of oil will not rise beyond about $50 a barrel because consumers can’t afford it.

Environmental commentators are faced with several problems. First they are unlikely to have an understanding of the complexity of the peak oil problem and secondly because they know that saying petrol prices should rise (through increased taxes) will be unpopular. The petrol price components vary.

What should happen of course for climate change purposes is for the Government to increase taxes on petrol, diesel etc. The fact that the oil companies have been the villain has excused the government for inaction. Now we can cry together that the oil companies are a greedy, conniving cartel. I am not sure that does much to reverse climate change trends.

Back in 2015 the IMF issued a warning that permanently low fossil fuels are choking off investment in renewable sources of energy and hindering the fight against climate change. A year later after a big study, the World Bank chimed in.

 

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Which do you fancy – Economic Growth or Financial Collapse?

I have now watched a TED talk on this topic twice and can’t help but respond. Ecological economist Marjan Van Den Belt is right when she says “we are mindlessly addicted to economic growth, we are growth junkies.” She advocates reciprocity in economies and says that is the key to a circular, sharing, regenerative economy. So far so good.

She urges listeners to take “a small step in the right direction”.  She points out that goal 8 of the UN Sustainable Development Goals is “meaningful jobs and economic growth”. What a shame they the UN doesn’t appear to understand that growth measures both good and the bad and doesn’t distinguish between them. So every time someone gets lung cancer that is good for growth, and when there is an accident the same. But when a mother cares for her preschoolers well or a family member cares for a frail older relative, the GDP doesn’t budge. Family work, voluntary work are not counted.

She also says neoclassical economic theory describes people as homo economicus – rational, self-centred and suggests trying to put that on your profile for a singles site. Yes.

So why do I want to respond? Because we are trapped. We have designed the money system and the land tenure system and together they are leading us by the nose to the growth imperative. And what happens if the economy doesn’t grow? Why it collapses of course. So is this economics professor really suggesting we crash the money system by allowing economic growth to grind to a halt? Does she really want us to have no money in the system, to have ATM machines that don’t work, to have plummeting house prices with negative equity and all the ensuing misery of foreclosures and bankruptcies? I doubt it.

Yes she wants a new paradigm and quotes Buckminster Fuller’s exhortation to build a new model. Good.

That is exactly what I have done in my new book The Big Shift. Although there may be other possible ways to get there, together in our little new economics think tank we designed this new model and believe once it is built and once it flourishes it will provide not only appropriate jobs, but where jobs are not possible, it will give a basic income so that parenting, inventing, producing needed sustainable energy and products will also flourish.

You see we need to get back to community owned land and community created and designed money systems. I know it is a huge leap for our thinking to get to community owned land and we can only do this fairly by adequately compensating landowners for their land. We can only do this by creating new money because there isn’t enough in the system of the conventional debt-based money created by banks.

Today I had a lovely email from a Green Party activist who said, “I have spent the weekend reading your book, couldn’t put it down. All amazing and well outlined ways to change our world small sections at a time. However, are there enough of us who are willing to take that last step?” And she wanted to buy a second copy to lend out to friends. Nice.

And she wanted to buy a second copy to lend out to friends. Nice.

For those wanting to read more about how neoclassical economics started and why, I suggest reading The Corruption of Economics by Mason Gaffney and Fred Harrison. It outlines how neoclassical economics started as a reaction to the influence of Henry George. Land barons, industrialists and bankers paid scholars to corrupt the discipline. After two decades they had succeeded in getting any mention of land, banks, money or credit in the mainstream texts. They had subsumed land under capital so successfully that even forward thinking economists like Gareth Morgan fail to mention land as a separate factor of production. Moreoever he also fails to mention money creation.

This emphasis on pointing out the fallacies of measuring the economy as the growth in GDP has gone on since the 1970s so it is great that more know about it But they don’t know what causes the growth imperative, which, as Steve Keen has pointed out, is the combination of the tax system that fails to address rises in land value (and other assets) and the faulty money system.

 

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Sarah vs the Govt – thoughts after first day in court on climate targets

Sarah Thomson poses for media outside Wellington High Court. She is taking the Government to court on their climate change targets

On approaching the High Court yesterday I was first struck by the sign outside that said “System Change not Climate Change” held up by a pressure group. Why didn’t I call my book this? It’s a damn good slogan. Crowds soon gathered and the media arrived to interview Sarah Thomson, the law student taking the case on climate targets.

When a 24 year old takes the Government to court it has got to be newsworthy and important. When her lawyer Davie Salmon started up, the years of preparation showed and a very long friendly conversation between Salmon and the judge began. Huge piles of documents were behind the young woman judge and I couldn’t help thinking this judge has the power to rule that the government revisit its emission targets and she looks five foot nothing. We have to stand up when she leaves the court.

Sarah Thomson with supporters. From left Deirdre Kent, James Renwick behind, Sarah, Paul Bruce, Tim Jones (behind) Diana Shand RNZ photo

The argument that New Zealand is small therefore we don’t need to do much was thoroughly demolished, especially with Salmon’s suggestion that if the boat is sinking everybody bails, no matter how small their bucket.

He took us through the difference between the target of 1.5 degrees vs 2 degrees of warming. Reality strikes when you realise that, although he said he wouldn’t exaggerate, he used the word ‘catastrophic’. Yes beyond two degrees it is catastrophic and James Renwick had reminded us outside that it is only five years till we get to 1.5 degrees. David Salmon persuasively argued that you shouldn’t rely on technologies that don’t exist yet to take carbon dioxide from the atmosphere. He said it was like telling someone to keep smoking in the hope someone would invent a cure for lung cancer. One cannot predict inventions. Therefore no real weight can be put on that hope.

System Change not Climate Change

He impressed on the judge the comprehensiveness of the AR5 summary of climate change knowledge worldwide. The sheer size and scale of the work was noted and the fact that it is always out of date before it is published. He said, “I don’t want to make you read it all Your Honour, is scary reading about floods and famines, mass migrations and conflicts and some of it is dry and detailed”. She replied, “I’ll be happy to read it”. He said,”Maybe not happy by the time you finish.”

Sarah and her boyfriend were sitting in front of me in the gallery. Occasionally she would lay her head on his shoulder. When later she put her arm around him I wondered if that couple would ever have children and what sort of world will it be for them. Will their mothers grieve for the grandchildren they wish they had? But I do know they should be immensely proud of their children and of themselves for bringing them up to have such a huge sense of responsibility.

My thoughts, as always, went to economics. Where were the economists in this court? I couldn’t see a soul.  What would they say if they were here? Yes, Salmon talked about Business-as-Usual scenario and I thought that even Helen Clark’s government did nothing to stop the intensification of dairy because it feared the economy wouldn’t grow enough and they would be out of government. And so we get agricultural emissions rising.

Sarah Thomson and Prof James Renwick outside Wellington High Court Monday 26 June 2017

And Naomi Klein realised the economy was at war with the climate.

So I thought what would it really take to change the economic system from growth dependent to a healthy one? How many really want to face up to the money system and that the land tenure system (and therefore the tax system) simply have to change. It’s a big shift for people’s mindsets. What causes the growth imperative? It is the combination of privately owned land system with an interest-bearing debt money system controlled by private banks. A match made in hell. Maybe we have to get to hell before we wake up.

We have the choice of catastrophic climate change or economic collapse. Both are horrible. Please, someone, focus on changing the political economy before it is too damn late!!

I kicked myself that I hadn’t written a flyer for my book and taken it with me.

 

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