Friday graph: why Ireland is broke

This is a graph courtesy of the Institute of Public Affairs in Melbourne, an impressive Australian thinktank.

It comes from the Irish government’s own 140 page ‘National Recovery Plan‘ published last week.

It is amazing reading.

  • From 2000 to 2009 average public sector salaries increased 59%
  • In 2004, 34% of income earners were exempt from tax. In 2010, 45% were exempt
  • In 2007 property taxes generated 6.7 billion euros.  In 2010 that figure will be 1.6 billion
  • In 2009 interest on government debt was 8% of tax revenues.  In 2014 it will be 20%.

Naysayers try to tell you that the Celtic Tiger was a myth and that free-market policies brought the Irish economy down.

The truth is exactly the opposite.  Liberalisation caused the Irish economy to surge until a return to big government crushed it.  Membership of the eurozone, poor banking regulation and the government guarantee of bank depositors and creditors were also major factors.

I wrote this article on Ireland recently (Otago Daily Times, 5 November 2010).

Watch British MEP Dan Hannan talking about it in the European Parliament below:


MMP Mythologising

Philip Temple is a Dunedin-based author of novels and children’s stories.

He has also been a long-time crusader for MMP.

Last week he had an article in the National Business Review that criticised an article on MMP by James Allan, a professor of law at the University of Queensland and formerly at the University of Otago, and a critic of the MMP system.

Mr Temple’s article was more fiction and fairytale than fact.

Start with his economic understanding, which seems almost non-existent.  He writes:

Professor Allan can’t make up his mind whether Helen Clark or MMP is responsible for New Zealand’s “relative decline in economic performance … Divide the blame up … in whatever proportions tickle your fancy.”

This is pretty slack thinking from a professor of law, especially when we have been reminded frequently that, after nine years of Clark and Cullen, New Zealand was better positioned to weather the global financial crisis than those FPP bastions, the UK and the US.”

Better positioned?  The Clark/Cullen legacy was a rate of productivity growth that has slumped to close to zero, an economy in recession before the GFC struck, and a string of budget deficits that will take years to correct.

The article goes on:

And what western country has weathered the current crisis best of all?  Why the home of MMP, Germany, with its endless coalitions.

Mr Temple seems to have overlooked our nearest neighbour Australia, and for that matter Canada, both of which sailed through the crisis better than others in the OECD.  Germany by contrast is in dire straits with weak banks and an anaemic growth outlook.  It only looks better than the sick economies that surround it.  The days of Germany as the ‘free market economic miracle’ are long gone.

Even more ludicrously, the article then says:

In any case, given that most of our economy is owned or part-owned by overseas interests, the fate of our economy is in others’ hands.

What rubbish!  Most New Zealand assets are owned by New Zealanders, globalisation is a worldwide phenomenon, and New Zealand is totally sovereign economically: our decisions on our own institutions (like our electoral system) and policies largely determine our economic fate.

In respect of institutions, MMP is a serious ball and chain on the economy.  Economic research indicates that proportional systems are associated with higher levels of government spending.  In New Zealand MMP has contributed to over-expanded government and to stalemate and compromise.  How many worthwhile economic reforms have happened under MMP?

When it comes to political arrangements, the article doesn’t get any better.

Mr Temple observes that you can get minority government under first-past-the-post (FPP) as well as under MMP, and cites recent elections in the United Kingdom and Australia.

That is disingenuous in the extreme.  Minority governments in those countries have occurred once every few decades; under MMP they are routine.

In response to Professor Allan’s criticism that after an election under MMP there is all sorts of horse-trading and bargaining between parties to try to form a coalition government, Mr Temple writes:

And as for the “horse-trading and bargaining,” at least this is out in the open and not behind two-party closed doors.

But there’s nothing wrong with debate and compromise within parties – that happens under MMP as well as FPP.  The point is that under MMP no party can assure its voters that it will deliver on its election promises.  Horse trading occurs after voters have had their say.  MMP institutionalises promise-breaking.  Think National’s commitment to abolish the Maori seats and the deal that it struck with the Maori Party.

The article goes on:

The list component also allows the inclusion of talented politicians who have expert skills to offer, over and above electorate legwork.  Transport Minister Stephen (sic) Joyce, a list MP, is a prime example of this benefit of MMP.

This is a fair point but it is not an unalloyed benefit.  All electoral systems have strengths and weaknesses.  MMP may throw up a Steven Joyce but it may also throw up an Alamein Kopu – candidates who would never get elected in a direct constituency vote.  Moreover, as the outstanding UK member of the European Parliament Daniel Hannan writes in his new book The New Road To Serfdom: A letter of warning to America:

In most European countries, where legislators are elected on party lists through proportional representa­tion, politicians are even further removed from their electorates. If you are near the top of your party list, you are effectively irremovable. So, naturally enough, you spend your time sucking up to the person who de­termines which position on that list you will occupy: your party leader. Once you have secured a high­ranking place, you are invulnerable to public opinion. Even if your party suffers a heavy defeat, you will still be in the national assembly and with a fair chance of being in government as a minor coalition partner.

This gets to the heart of the problem of MMP (and other proportional systems).  What is the key issue in considering any voting system?  The political philosopher Karl Popper concluded, rightly in my view, that it is the ability of the electorate to throw out a government it dislikes.  This almost always happens under FPP or similar systems; it often doesn’t under MMP or other PR systems.  We saw that in the very first MMP election in 1996: Winston Peters’ party gained votes in the expectation that it would not back National, but it turned around after the election and gave National three more years of power.

A final howler: Mr Temple writes:

The only small parties to have survived throughout since the advent of MMP in 1996 are the Greens and United’s Peter Dunne.

Last time I looked the ACT Party was still in parliament!

A footnote to the article states that Mr Temple has been given a Wallace Award by the Electoral Commission for his writing on electoral matters.  If this article is any indication of the quality of his work, and if the award involved money, taxpayers have been well and truly ripped off.

Scraping the barnacles off liberal

I read a nice piece yesterday by firebrand Member of the European Parliament and YouTube star Daniel Hannan, who visited New Zealand last year and spoke at a Business Roundtable function in Auckland – see his excellent speech on why Britain should get out of the EU here.

In the blog Dan examines the origin and abuses of the word liberal and the need to restore its true and honourable meaning.  Like the terms left and right – labels to which I and many others strongly object (see my black holes speech) – liberal has been commandeered for all sorts of misleading purposes.  Dan Hannan’s preferred label for himself? – a Whig.  

Dan begins:

My old friend Sholto Byrnes asks at The New Statesman whether “liberal” is becoming a dirty word again. He recalls the way Michael Dukakis was bludgeoned to a bloody pulp by the epithet in the 1988 American presidential election, and cites two contemporary examples of liberalism in retreat, one to do with gay rights in the US, the other with multiculturalism in Germany.

If we scrape away the barnacles that have attached themselves to it, the word “liberal” is rather an attractive one. It means committed to freedom, generous, tolerant.

and ends with a stirring defence of the liberal tradition:

Like Sholto, I think the liberal tradition in Britain is an honourable one. It has great achievements to its name: parliamentary supremacy, religious toleration, meritocracy, votes for women, the legalisation of homosexuality. I am, as regular readers know, a Whig. I believe in British particularism, parliamentary sovereignty, personal liberty, small government and maximum democratic control. I’d have been for Parliament in 1642, for the Revolution in 1688, for Reform in 1832, for Gladstone against Disraeli. I’d probably have been one of those Whigs who broke with the Liberal Party when began its drift towards social democracy at the end of the nineteenth century (the “and Unionist” bit in my party’s title dates from the merger of these “Liberal Unionists” with Bonar Law’s Conservatives in 1912).

Because liberal, in the US, simply means Leftist, Americans who believe in maximum freedom took to calling themselves libertarians, a soubriquet that crossed the Atlantic in the 1970s, but hasn’t caught on here to the same degree. Call it what you will, it’s as persuasive and manly a creed as any on the market. I leave the last word to J S Mill:

The only freedom which deserves the name is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it. Each is the proper guardian of his own health, whether bodily, or mental or spiritual. Mankind are greater gainers by suffering each other to live as seems good to themselves, than by compelling each to live as seems good to the rest.

Click here to read the full blog

For those who haven’t seen it, and because I couldn’t resist, here’s Dan’s evisceration of Gordon Brown in the European Parliament last year: