Friday, January 29, 2010

Land tax - short memories

If you ever had doubts of the degree to which the National Party could be a political whore (which the shift from Muldoonism to free market economics and the recent return to elements of Muldoonism ought to show), take this issue.

When it was previously in government, the Bolger government abolished Land Tax.

For the current government to even contemplate it, or to not hit it on the head absolutely and finally, speaks volumes about how easily swayed the National Party is to the winds.

More importantly, the idea that a party that sold itself in part on the basis of lower taxes is contemplating new taxes to offset tax cuts, tells you even more about how a vote for National is not, and (with the exception perhaps of 1990, 1993 and 2005) has never been about reducing the size of government.

Wednesday, January 27, 2010

Diet - Obama style

President Obama is going to freeze government spending for three years.

Wow, attention grabbing, looks like he's going to be tough on the growth of government and ensure better spending.

Well, not until you read the fine print. He's exempting:
Social security (20%)
Welfare (16%)
Medicare and Medicaid (21%) (oh but it's all private in America say the left!)
Veteran's affairs (1.5%)
Homeland Security (1.2%)
and about another 1% of spending.

Beyond that he can't cut around 5% which is debt servicing.

So about two-thirds of federal spending is untouched, and even his grand diet on spending will only slow down the growth of the deficit. So it will get fatter, a little bit slower. Because whatever cuts happen, they are more than offset by the burgeoning growth in these other areas and Obama's grand plans to invest waste money on pork barrel projects, and expanding healthcare.

So that inspired me to dream up a diet for people to lose weight the same way as President Obama proposes to bring government spending under control

Don't snack or eat high fat or high simple carbohydrate foods is how to announce it, but...

This does not apply to chocolate, fish and chips (and other deep fried food), pies, ice cream, pizza, burgers, cakes, biscuits, sugary drinks, beer, sweets and potato chips.

Call it the Obama diet, think of it as having diet Coke while you eat a double whopper burger with supersize fries at Burger King. After all, you could have had cheese with it.

(Hat tip: Not PC)

Britons wonder why young people commit brutal crimes?

Well take this case..

A thirteen year old boy attacked a 20 year old woman, in front of his two friends aged 10 and 11 (who told him to stop).

According to the Daily Telegraph "He subjected her to a severe beating then screamed at her: “Do what I say or I'll kill you”, before raping her".

The details are rather horrible, he stole her mobile phone and ipod. When he answered a call on it from her boyfriend, she bragged to him about what he did.

He now has only three years in a young offenders institution because he showed remorse. Well any good defence lawyer would have advised that. No doubt the Edlington case attackers were advised similarly, but are so psychopathic and incompetent to be incapable of following instruction.

So why did he get only three years? Well "By law, anyone under 18 years old faces a lesser sentence for rape than an adult, and for those aged 14 or under the term is reduced further".

Excuse me? So the message is, if you want to rape someone, do it before you are 18 because you'll get treated more leniently? So you can have a laugh, wreck someone's life and then get just a few years.

No. Just because you might have a smaller penis is not a reason to regard rape by someone under 18 as less of an offence. Is it because the victim is older?

You see the maximum sentence for rape in the UK is life imprisonment (which is absurd, as it means you may as well murder the victim as well). However, for a minor it is five years (worth noting that had the woman had consensual sex with the boy she would have faced 14 years).

In the UK it would appear that as long as you are under 18, you're given licence to be brutal and get a relatively light sentence, having terrorised your victim. It is one thing to give young offenders who commit property offences or minor assaults a second chance, another for premeditated attacks that are of the kind most women fear.

However, it demonstrates the dichotomy in criminal justice policy and public attitudes. At 13 when someone shows the capability and capacity to rape and commit violent assault, it also shows the capability and capacity to take an adult punishment, before being given a second chance to live a different life. Conversely, life sentences for adult rape are absurd and perverse, unless it is an ongoing process of preventive detention after someone has demonstrated recidivism.

So while the message should be that rape is unacceptable by any measure, it is warped by the subtext "unless you're an under 18 year old rapist, then it's not that bad".


Tuesday, January 26, 2010

Air New Zealand focuses on the premium

It is rare that a New Zealand company captures the global attention of the industry it is in, particularly one primarily state owned. Given that Air New Zealand retains minority private ownership, as is publicly listed, that has ensured that political pressure on how the airline runs its business has been very limited. However, it has also meant it has lacked capital to expand, so has focused on its core business.

The new long haul products announced today are reviewed on my airline service blog here. For economy class it is quite revolutionary for those taking the Skycouch, but is no overall advance for others in economy. in premium economy it becomes best of its class with maybe only one rival (although the legroom has been cut), whereas business premier is more of a tweak rather than a serious change.

From a business perspective what is particularly interesting is how dominant the premium cabins are becoming for the airline.

At present services from Auckland to London via LA, and some other services to Vancouver, San Francisco and LA are operated by Boeing 747s with the following configuration:
46 Business Premier
39 Premium Economy
294 Economy
= 379 passengers.

These are to be replaced with Boeing 777-300ERs, which are smaller than 747s but larger than the current fleet of Boeing 777-200ERs. However, look at the seat configuration:
44 Business Premier
50 Premium Economy
246 Economy (including 66 that will convert into couches for 44)
= 340 passengers

In essence, Air NZ is giving up mass market cheap economy class for targeting more discerning tourists, while focusing more on upmarket tourism and business travellers. Bear in mind that few know one of Air NZ’s most profitable routes is LA to London, because the fares that can be charged on that route are almost as high as Auckland to London – although it is a fraction of the cost to service. However, tourism from the UK to NZ has dropped dramatically due to the recession.

It is betting that given its cost structure is mid range among its competitors (Qantas is higher, Emirates and Malaysian are lower), it needs to pitch itself with something to attract discerning travellers. Not the bargain basement lot who are price focused and who really don’t care about legroom or food.

Still it faces a struggle for growth, given that it is undercapitalised and has missed out on realistic opportunities to plunder the Australian market (but that’s another story of corporate blunders combined with government interference).

Now is not the time to sell, but as the majority shareholder, it would be wise to consider at least some sell down of the airline ownership to get some new capital. Ultimately it will need a strategic shareholding by another carrier to have any serious hope of expansion, which means the word that too many in New Zealand politics are far too scared of – privatisation.

I've reviewed all of the product enhancements on my airline service blog:

The business case
Economy Class
Premium Economy
Business Premier
Catering and entertainment
How competitive is it?
Images of the new products

However if you want my quick summary of it all:

Economy - Skycouches are great for couples, but everyone else loses a little width and legroom. Most economy passengers are slightly worse off.

Premium Economy - A significant improvement with far more width, space and better seats, but the same recline. This isn't as good as business class used to be in terms of recline, and at 36" seat pitch it is frankly the worst for legroom in its class.

Business Premier - Business as usual, little change here, except the catering will leap ahead with freshly cooked food, not reheated.

It will first be seen on the new Boeing 777-300ER, the longer larger version of the current 777-200ER. The 777-300ER (dubbed 77W in the industry) will replace 747s for Air NZ, which means sadly losing the upper deck and nose cabins, both far more exclusive than main decks (with only one seat either side in Business Premier).

The first routes will be Auckland-LA and Auckland-LA-London. The existing 777 fleet will also be progressively retrofitted.

Some industry media coverage:
Business traveller
Flightglobal
Wall Street Journal

NZ Herald has great images of the economy seats
NBR has different coverage
Air NZ website has three press releases and a new website to reveal more in a week.

UPDATE:

Apparently Air NZ got a design company to profile passenger types - and they match Simpsons characters. I'm not thrilled to be a blend between Lisa Simpson and Mr Burns.

Full set of photos on flickr here.

Labour thinks you're too stupid to lose weight

Labour Health spokesperson Ruth Dyson says this "The Government apparently thinks people will simply be able to change their diet and exercise without any assistance or form of nutrition education"

I'm astonished. Changing your diet is impossible without the government. The carefully hidden knowledge that eating mostly vegetables, fruit, lean meat, fish and cereals, and avoiding high fat and high sugar foods helps you lose weight is something that almost nobody knows surely. In addition, without the government how COULD people go to the gym, or go for a walk or swim?

Does anything more clearly show the patronising and condescending attitude the Labour Party, and indeed many statists have for the general public than that? The idea that without the government, people can't look after themselves, don't know any better and wont change.

Ms. Dyson might wonder if one of the reasons Labour became far less popular is that people are sick of being treated as imbeciles, and sick of being forced to pay for bureaucrats to hand hold people.

If people get obese and do nothing about it, then it isn't anyone else's business. If you want to address rationing the health system, then maybe linking its provision to what people pay for it, might make a difference. Imagine, for example, if most people had health insurance and paid more every year if they were deemed to be obese. How much of a better incentive would it be if you paid more for healthcare because of your risk factors, than for some patronising do-gooder to give you nutrition education and tell you to exercise more?

Why is it that so many politicians prefer telling people what they should do than have them face the costs of their actions?

Monday, January 25, 2010

Matt McCarten wants your money

Given he believes in a bigger state, he believes in compulsory welfare, state monopoly education and health care, it is hardly a surprise.

However, he has an odd view of "fairness".

He thinks, as do most socialists, that the imperative behind those supporting the free market in wanting lower taxes is greed. They think simply that people who are relatively successful want more of their own money and to hell with everyone else. The concept that we actually are suspicious of an ever growing state, see abject failure in the state addressing poverty and social mobility, is beyond the likes of Matt.

You see he loves the state, the state for him is the embodiment of humanity. It is a democratic expression of the "people's will" and it both protects and serves. The more it does, the better we all are for it. Given Matt spent much of his political career advocating for the Alliance, an openly socialist political party, this is hardly surprising. He sees the state as an instrument to take by force from those he deems rich to give to those he deems poor - the rich implicitly having not earnt their money "fairly", and the poor, well it isn't their fault, is it?

Matt says: "We need our public services". Hold on. Who is this "we"? Most would accept that they need health care and education, but separating who pays for it from who provides it creates all sorts of problems of performance. Matt doesn't believe this though. He thinks that when people pay taxes they can keep the state health and education sectors accountable for what they receive, even though it's clear that this works rather badly. However, he has spent much of his life representing suppliers, as in workers. He hasn't ever represented consumers of services, and certainly not those paying for it.

He then goes into his favoured taxes, like capital gains tax and death duties. Then he brings up the tired old nonsense of financial transactions tax, without blinking an eyelid as to how the financial sector could avoid much of it by engaging in most transactions offshore.

He says "Most of us wouldn't even notice it. But those who buy big-ticket items would. That's why the ruling class won't do it.". If Matt put down Das Kapital for a second he might think that "big ticket items" might get bought offshore with offshore bank accounts, and there will be other useful techniques to avoid the tax. However, he's cleverer than those who seek to protect their money.

That's a phrase he doesn't understand. To Matt (and many others on the left) taxes are not the money of those who own it, but the state's money - so it can be used for the benefit of the vested interests who best convince politicians to spend it on them and then all others.

Then he makes something up: "Twenty-five years ago we were told that if we cut taxes for the rich and raised taxes on the poor then we would work harder and earn more. It was nonsense then. It's nonsense now."

Who told you that Matt? Who ever called for raising taxes on the poor? In fact, name ONE report or one person who ever supported this? It's a bright Marxist red herring, as nonsense as he says.

The bigger argument is what the role of the state should be. The welfare state in its current form has produced a culture of dependency and entitlement that is not earnt, and needs to be urgently addressed. By keeping those who pay for health and education far apart from those who deliver it, patients and parents find it difficult to influence outcomes and to ensure that those providing those services are accountable to them.

Other countries have adopted significantly more consumer friendly approaches to both health and education that are hardly radical. Sweden's voucher approach to education is difficult to rebut as a significant first step to increasing diversity and accountability for that sector. Singapore's approach to health care has also resulted in far higher degrees of accountability for service delivery, and a greater interest by individuals in their own health care.

Matt prefers the world of - you earn more, you consume less, then you pay more taxes to pay for the health, education and welfare of everyone else (few of whom are ever grateful for it). He likes state monopolies in those sectors so that the workers can command ever increasing incomes from taxpayers by organising themselves as labour monopolies, so that there are more workers, less work and more pay.

You see the very greed and so called selfishness Matt attributes to the rich is exactly what the trade union movement of which he is a part of, demands for its members.

Absolutely none of it is to do with fairness, none of it is to do with users of state provided services and certainly none of it is to do with taxpayers getting value.

It's just from each according to their ability to each according to their means for Matt.

So what would Obama's proposal have prevented?

Nothing, in the UK in any case.

Allister Heath in City AM - the UK's only consistently pro-capitalist newspaper - says:

Barack Obama’s plan to ban banks with retail arms from those activities – endorsed by shadow chancellor George Osborne – would have done nothing to prevent the crisis; not a single bank that got into trouble since 2007 would have been saved had those rules been in place.

Why?

Northern Rock, HBOS, Bradford and Bingley and the Dunfermline did not engage in prop trading. They lent to people who couldn’t repay, assumed property prices wouldn’t fall, relied on money markets for funding rather than deposits, and purchased securitised sub-prime debt as a “safe” high-yielding investment, often tucked away in off balance sheet vehicles. They held too little quality, liquid capital as a buffer against losses.

So you see it's a mirage. What about RBS?

It was over-leveraged, bought vast amounts of sub-prime securities, lent willy-nilly to unsound borrowers and blew a fortune buying ABN Amro, suffering massive goodwill write-offs. RBS made every mistake in the banking book; it would have been doomed with or without Obama/Osborne.

The Tories are jumping on the bandwagon for political reasons. It makes them look like they aren't beholden to rich capitalists in the City of London, and helps attract the envy vote across the country. At the same time the British government, to its credit, is NOT jumping on the bandwagon. Gordon Brown, for all his faults, is smart enough to not frighten the sharemarkets even more by blundering into nodding in unison with Obama.

Funny though how those on the left who would decry the UK following in step with the US when it was Blair and Bush, now want Brown to follow Obama. Funny that it isn't about making your own decisions, but about making decisions they agree with.

A Guardian poll showed nearly 100% support for doing so, but then who reads the Guardian besides those who think the state should intervene in more, except when it comes to overthrowing nasty dictatorships in the Middle East. So of course it has articles saying "yes Obama", as does the Independent and even the Telegraph is conditionally supportive.

It is deeply unfortunate that many who understand the financial sector are typically without much knowledge of public policy or political philosophy. Indeed, the reverse is true with many political pundits, bureaucrats and journalists not understanding the financial sector.

In the meantime too many are prepared to blame anyone but themselves, and to find solutions that are about addressing symptoms not causes.

Child protection law misdirected

There should be some irony in seeing that the day it is announced that parents will be able to check neighbours, friends or partners to see if they have convictions for being a pedophile, that the two parents of the Edlington sadists have name suppression.

The children who are the victims of their children are reportedly frightened that the sadists, who have permanent name suppression and will get new identities, (thanks to the mugs who paid for them and their parents to be fed, clothed and housed), will kill them once released. The other disturbing element is that the two victims no longer wish to associate with each other, in part because the sadists forced them to perform sexual acts on each other.

Allowing parents to ask the Police to check whether an individual has a "child sex offence", seems reasonable to most parents. However, there are a whole range of serious flaws in the idea.

1. The definition of "child sex offence" isn't clear, but it is plausible that it will catch those guilty of relatively minor offences - the classic teenage "oops she was 15, I thought she was 16" situation, where there is consent and the "offender" is only a few years older. However, that person will be deemed to be a "child sex offender" as much as someone who brutally abducts and rapes small children. There is no equivalency between them, but it will greatly hinder the rehabilitation and reintegration into society of those who have essentially committed victimless crimes. Surely if it is to happen, shouldn't there be a definition that weeds out the latter cases?

2. The hysteria about child sexual offences alone has left out the obvious. Rapists and anyone who commits violent offences are completely ignored. What mother would rather know if the man they are going out with is a rapist - of women - or has served time for bashing a previous woman? Why is this not important, or is it part of the modern day hysteria that treats only those who commit sexual offences against children as dangerous. Those who beat children or rape adults are somehow not seen as a risk.

3. If there are child sex offenders in public today that pose such a risk, should they even be out? Surely sentencing should reflect danger to the public and the top priority has to be protection. In an environment when the state is seeking to cut time in prison across the board to save money, surely a better effort would be to ensure sentences of those likely to re offend are sufficiently preventive?

4. Should there not be a bigger debate about what to do with information about convicted criminals? Should everyone have the right to know who has done time for violent, sexual and property offences? Wouldn't you like to check your real estate agent for fraud, your daughter's new boyfriend for violent offences? Or does that put a serious barrier in the way of rehabilitation?

5. Doesn't allowing such checks simply produce a false sense of security? The two boys tortured in Edlington would not have been protected because their assailants were minors too. A significant proportion of child abuse happens in feral homes, committed by people who are never convicted or even charged. Does making such a check become an easy substitute for being cautious, not leaving your children with people you don't know? Indeed shouldn't the best step be to have enough communication between children and parents that when the kids don't like someone, because of what they say or do with them, that parents listen?

This sort of proposal is driven by politicians seeking to get good publicity months out from a general election, a desire to "do something" rather than consider the whole criminal justice framework around protecting children and media hyped hysteria about high profile cases.

A better response is the following:

1. Preventive detention to be used more often for multiple repeat offenders and those who are considered to present, on balance, a real danger to the community. This applies also to minors who are offenders.

2. Applying a sentence of custody denial for anyone convicted of serious violent or sexual offences (including those against children). Intergenerational abuse and criminality is a key problem, and it is about time that parents who abuse are no longer permitted to live in the same home as other children. Why are abusers allowed to breed and raise children, but not allowed to work in schools? Is it less of a concern to make your own victims?

3. Promote self defence techniques for children and the means for them to safely advise trustworthy adults (i.e. at school) if they are frightened or abused.

4. Criminal negligence charges for Police or child protection authorities who ignore multiple reports of offences against children. The Edlington case is a palpable example of this.

5. Permanently deny welfare including housing to all convicted serious violent and sexual offenders. Taxpayers should, at least, not be forced to pay to sustain those who have harmed them. Let them be at the mercy of charities who will spring up to help. Let's not allow them to populate already tragically depressed housing estates and live their lives in leisure in front of TV.

6. Consider how and whether the general public should have access to criminal records of other citizens. Sexual offences are one thing, but so are violent and property offences. Would this make people safer or would it simply result in all criminals being incapable of living lives outside prison without criminality? Would it be a deterrent or would it allow like minded individuals to find each other and collaborate?

It's important to bear in mind that neither the Edlington case, nor the Jamie Bulger case, nor the Huntley case would ever have been prevented by the measures now proposed. Edlington COULD have been prevented by the Police and Child Protection Services, as the offenders had committed multiple violent and property offences over the years.

However governments rarely point the blame at themselves, make themselves accountable personally and financially, and seek radical changes to try to prevent similar occurrences.

Sunday, January 24, 2010

Feral youth require focused response

Edlington is now known in the UK as the place where two boys, aged 11 and 10 attacked, brutally tortured and left for dead two other boys aged 9 and 11. The details of the case are beyond that of most violent crimes, but demonstrate sadistic pleasure in inflicting the most horrendous pain, suffering and degradation. Having a sink dropped on your head, wounds cut to the bone and cigarettes burnt into them, with sexual assaults and left for dead. They even used a mobile phone to film their sadistic game.

Those who committed it now have preventive detention for a minimum of five years. The sentence of their victims will be for much much longer.

While many ask "why", it isn't rocket science to figure out. When asked why, one said "Don't know. Cos there was nowt to do."

The two perpetrators are sadistic psychopaths, probably without any hope of redeeming their lives. The criminal justice system should keep them securely incarcerated for many years, until - as the judge said - they no longer pose a risk to others. A children's charity has said a five year minimum is insufficient, as their victims will still be young and fearing their release. It would only be fair to at least keep them away for at least 15 years. Being granted anonymity for life and new identities is rather premature. Why on the one hand are some relatively harmless people put on the sexual offenders' registry, but these two - unreformed - will automatically be given a chance for a new start? On top of that, should not both be required to give some of their future earnings in compensation to the victims?

Whilst they are primarily to blame, the secondary blame goes to the oxygen thieves who are their parents.

The boys drank vodka and lager and smoked cannabis. Their 38 year old unemployed father would beat them and their mother. Both parents let them watch explicit violent horror films from around the age of 6, including the Chucky films. Their older brother has already been locked away for mugging a pensioner.

Their 36 year old mother is a heavy cannabis user, and has had seven children by two fathers. She said of the incident:
"It’s got nowt to do with me – they weren’t even in my care.”

You see only three weeks before the mother got them put into foster care.

So the father should at least be charged for the violence against the boys, for supplying them with intoxicating substances and neglect. The mother is at least an accessory to all that. Both should also be denied welfare and prohibited from having custody of children for at least a decade. It is about time that such grossly reckless and vile parents faced serious criminal sanctions, and taxpayers freed for being forced to pay for them. It is also about time that such people were denied any rights to live with children for the foreseeable future.

Finally, there is substantial blame to be laid at the foot of the Police and the child protection authorities in Doncaster. Nine agencies failed on 31 occasions to take action against the two boys. I would suggest the parents of the two victims seek legal advice about suing them for compensation for their boys.

An 11 year old neighbour kept a diary about how the boys would abuse her and throw stones at her and her family. In 2006 a boy threatened a school staff member with a baseball bat, no further action was taken. There were arson attacks with no follow up. An incident involving ducklings from a public pond thrown sadistically at a wall and killed. With a constant series of incidents, clearly the relevant agencies did not connect them and did not consider them serious.

A week before this latest incident, an 11yo boy was beaten up and kicked. They were meant to appear in front of Police to explain this on the day they chose instead to nearly kill two boys.

It should be beyond doubt that Doncaster council and the local Police have failed miserably to undertake their duties to protect the public. No one has been fired because of this, but it is about time someone was accountable. Given news the parents are now being investigated, it should not be long before someone from the authorities receives a lawsuit - and only when it is a sum commensurate to the years of therapy, and the loss of enjoyment of lifestyle that the two victims will endure in coming years, will it be taken seriously.

Yes intervening in such cases is difficult, but when two children repeatedly commit violent crimes at what point is that still an excuse?

Obama's grab for populism

Commentators across much of the political spectrum have lauded President Obama's hardly coincidental announcement that he is going to regulate the US banking sector on a grand scale.

It came less than a day after voters in Massachusetts gave the Democrats, including Obama and indeed government a bloodied nose. This was largely due to the ham-fisted attempts by Obama, but most disturbingly by the indisputably corrupt forces in both the House and the Senate, to reform healthcare. Instead of taking a breath, Obama decided to go on the front foot and wage war against what has been portrayed as public enemy number one by the left - the banking sector.

The message was simple:

- The banking sector caused the recession (untrue);
- The government was forced to bail out the banking sector as a whole because of its own failings (mostly untrue)
- The banking sector is full of people who earned a lot of money doing the wrong things (partly untrue);
- Time to punish them all and stop it happening again.

What he didn't say was:

- The banking sector took risks because of the fiat money of the Federal Reserve effectively encouraging such behaviour;
- The Federal government through Fannie Mae and Freddie Mac funded a boom in housing investment including loaning to those who couldn't sustain the borrowing;
- Hundreds of thousands of Americans borrowed far too much money making foolish investment decisions;
- Bad banks could have been allowed to fail and it is time to have a fundamental review of the entire monetary system.

The crisis came about because loose money, combined with rules requiring a portion of lending to risky borrowers, saw a bubble of lousy investment in property. It was a bubble seen in many countries, and it has only partially burst. Had it fully burst there would have been hundreds of thousands of more mortgagee sales across the US, UK, Europe and elsewhere. It would have hurt those property owners, but it would have opened up enormous opportunities for many others to buy homes and engage in the sector.

No. Obama is completely uninterested in this. He is far more interested in gaining kudos from the popular masses for bashing bankers. He is "doing something" to divert attention from the Massachusetts result, whether it is right simply wont be understood by most in the media (who have little understanding of economics or finance), and 99% of the public.

So is he not justified, will his measures make a difference? Alastair Heath at City AM thinks not:

Was the financial crisis due to the fact that some banks own private equity firms? No.
Would Lehman have been saved by the restriction on size or any other of the proposals? No. Just one firm, Bear Stearns, a pure investment bank which would not therefore be covered by the new rules, was destroyed because of its ownership of a hedge fund which invested in sub-prime mortgages.

Would any of these rules have protected Northern Rock or HBOS? No.

Did the losses racked up by the state-sponsored Fannie Mae and Freddie Mac mortgage giants have anything to do with prop trading or hedge funds? No – and neither did the failure of Wachovia, Washington Mutual, Countrywide or the over 100 US banks and many others around that world that have gone bust.

In truth, banking losses were caused by bad property loans – and the purchase of this sub-prime debt by other banks and funds in the belief that they were safe. Wall Street was crippled because it was so leveraged and didn’t hold enough high quality, truly liquid capital. AIG insured packages of sub-prime debt through credit default swaps but didn’t set capital aside in case things went wrong.

Obama’s pseudo-remedies completely miss the point.

Heath believes banks should have living wills and it should be made abundantly clear to banks and to depositors that governments wont bail them out again. Banks' creditors and debtors would need to learn to pay more attention to what is behind their assets. In other words, a deal needs to be struck whereby the state turns it back.

However, this cannot be while fiat money continues to be manufactured by central banks at interest rates barely above zero. What is happening right now is a new series of asset bubbles because of it, with property picking up again in London, share prices getting an unholy boost because bank deposits offer nothing, and the cycle starting once again.

It is most telling and disturbing that Conservative Shadow Chancellor George Osborne supports Obama's proposals. A man who hasn't a clue about the banking sector seeking to show his solidarity with the "common folk" when to get votes (when in fact he has never had a real job, and lives primarily off of vast inherited wealth). City Am notes that Obama's proposals would hurt RBS, now primarily taxpayer owned, showing Osborne's foolishness in speaking in such a kneejerk manner.

However, what's being cultivated is not solutions to problems that are primarily about how individuals react to incentives, but envy. Bankers are public enemy number one, and the foolishness of some, who were paid very well, is a fertile breeding ground for hatred of the whole sector.

It's a sector that bores most, that is largely not understood, and ignorance breeds suspicion. Be sure that few politicians will point out that both the Obama and the Bush Administrations (and Clinton before) all bear much responsibility for the monetary policy, and the investment regulatory environment that inspired and rewarded irrationality.

Sadly, what all of this shows is how incapable democracy is at handling complicated public policy. Politicians are mostly clueless, the media similarly so, those who do understand are often accused to seeking to protect vested interests, and most media seeks sales based on massaging public anger. Few will dare profile the average people who took out self certified 120% mortgages at the peak of the property boom and ask them why they took such risks, yet they too contributed to it all.

However, Obama dare not ever say that banks shouldn't be forced to lend to people who are a bad risk, nor that the Federal Reserve system be subject to a fundamental review. It's blame banks, whether they received taxpayer largesse or not, were foolish or not.

The main winners from this will be those countries that don't follow in line - I expect Zurich, Geneva, Hong Kong, Singapore and Shanghai will all be looking for opportunities to attract more of the financial sector from the West.

Thursday, January 21, 2010

Principles for tax reform

Following on from Not PC's excellent post, here's a simple guide to where the government should start from in what it calls tax reform:

Step One: Stop increasing spending. You don't have the money. You're borrowing money from future generations to pay for current consumption.

Step Two: Determine what the role of government is. The core functions. Be open about it, and be open about what government shouldn't be doing.

Step Three: End funding for anything inconsistent with what you determine in step two.

Step Four: Look again at the role of government, look at what incentives and impacts your involvement in any portfolio creates. End funding for anything negative.

Step Five: Change local government legislation to require it to do the same.

Step Six: Remember that when some areas of the economy are taxed less than others (e.g. property) that means that you should cut taxes in other areas. The lower, the flatter the taxes, the less distortions.

Step Seven: When you run out of ideas to cut spending, look at Hansard from 1999 to 2008. You voted against just about every spending increase Labour introduced, why don't you show some damned backbone and convictions, and reverse the lot. By simply doing that you'd eliminate the budget deficit and have enough surplus to cut taxes.

Step Eight: When you run out of backbone, remember this....

TAXES ARE NOT THE GOVERNMENT'S MONEY, THEY ARE LEGALISED THEFT

Say this every single night 100 times

It might just help you realise who your employers.

Wednesday, January 20, 2010

Massachusetts shrugged?

For Scott Brown, a Massachusetts lawyer and state senator - and Republican - to take the Senate seat of Massachusetts that was vacated when Ted Kennedy finally went into oblivion, is quite something. With 52% against the Democrat candidate Martha Coakley on 47%, it is a clear mandate.

You see in 2006 Ted Kennedy won the seat with a healthy 69% majority. For the Democrats to bleed almost a third of that support in such a short time will be a shock. However, what does it reflect on?

Did Brown campaign better than Coakley and was clearly the better candidate?

Probably yes, but not by THAT much. He travelled by pick up truck, painted himself as the outsider who was fiscally conservative and opposed to Obama's health reforms. Coakley by contrast seemed to assume she'd inherit the seat from Kennedy. His social views put him more in the middle of the Republican Party. He supports civil unions, but opposes gay marriage. She was far more socially "liberal", moreso than Obama. She wants US withdrawal from Afghanistan, supports heathcare reform, but has also been involved in a number of controversies as state attorney general. She played a negative campaign against Brown claiming he wanted hospitals to turn away rape victims, misconstruing his belief that religious hospitals can choose not to offer emergency contraception if they so wish. Coakley was close to trade unions, but they were clearly not decisive in Massachusetts.

However, whilst she wasn't much of a candidate, that shouldn't have meant she would get defeated on that alone. Surely Ted Kennedy personally wouldn't command an extra 20% of votes?

Was there a poor turnout, as Democrat supporters stayed home?

Apparently not. The total vote turnout in 2006 was 2,165, 490 votes. This time it is 2,249,026, a slight increase. It could be argued Republicans turned out this time because they knew they'd have a better chance, but then Ted Kennedy was a polarising figure. It is quite likely many Republicans would have wanted to vote against him on principle, even though the odds of removing him were not high.

Is this an endorsement for the Republican Party?

Well not really. After all, there is no effective Republican leadership at the moment. Mitch McConnell as Senate Minority Leader, and John Boehner as House Minority Leader are hardly household names. Sarah Palin remains one of the highest profile Republicans, but she wasn't seen (thankfully) on this campaign. The Republicans are a rallying point for opposition to the Obama Administration, but really that's about it. It is still a party pulled in different directions by evangelicals (who can't win an election), conservatives and small government liberals (in the classical liberal not US leftwing liberal) sense. Scott Brown is a blend of the last two.

Is this a rebuke of Barack Obama?

Perhaps a little. Obama won Massachusetts by 62% to 36% to McCain, so you'd think most of his supporters would vote for the woman he endorsed. Clearly not all is well with independent ly minded voters.

However, it's worth noting that neither Obama nor McCain won their party's primaries here. Hilary Clinton beat Obama 56% to 41% for the Democrat nomination. Mitt Romney beat McCain 51% to 41% for the Republican nomination. So Massachusetts is a little different from other states. It may well be that the Presidential elections reflected more disenchantment with McCain than Obama as second choice.

Obama's health care reforms have clearly rattled many voters. Given the vast majority of Americans have health care coverage, and see the looming budget deficits under the Obama Administration, there is some serious fear that they may have to pay more and get less because of it. Brown has campaigned clearly on the fact that a win for him would enable the Republicans to filibuster bills in the Senate, including health care. In other words, this very election means that Obama's health reforms will at least be delayed, at most could be seriously compromised. Brown campaigned that the Democrats wont consider tort reform to reduce healthcare costs because they are beholden to the legal fraternity, this perhaps struck a chord.

Furthermore, it has become increasingly clear that the grand promises of "change", and taking a different approach to government, have proven rather feeble. Yes, Bush is gone, but Obama has become beholden to the vast range of special interests and lobby groups that Democrats are in the pay of. It's just a change of personnel, not a change of technique. Pork barrel politics remain as much as they ever were. The hype has not met expectations. Obama is simply another politician.

Is this a rejection of big government?

I'd like to think it is, of course, and it would seem, in part that this is what it is about. Evangelical Republicans may want to pay special attention, as it is NOT social issues that have motivated the change, but it is money.

The amounts of money the Obama Administration is looking to pour into subsidising compulsory health insurance are substantial. Indeed, the Obama Administration has shown virtually no real appetite for fiscal conservatism, with the so-called "stimulus" package often going into consumption and poorly planned projects.

American taxpayers see the bailouts, see the willingness to engage in all sorts of new government projects as an unwillingness to face up to the need to cut spending. In the US, there is a particular degree of wariness about how well government can spend your own money. This is something the Obama Administration doesn't even start to understand, and it is a movement that has been catalysed by the proposals on health care. Bear in mind that nothing in the health care package would cut the burgeoning costs of Medicare and Medicaid, both of which comprise half of all US health spending. Yes - the government's health care plans have poor cost control, so why wouldn't Americans fear state run health care?

Massachusetts interesting has a public health care plan run by the state, which effectively subsidises health insurance for those on low incomes and penalises, through the tax system, those who don't have health insurance schemes. It means 4.1% of people don't have health insurance, which represents those preferring to pay the tax penalty and those who are still unwilling to buy insurance with low incomes. So do the people of Massachusetts simply not want an additional federal healthcare plan, or is it simpler than that?

Conclusion

Coakley might not have been the best candidate for the Democrats, but she didn't lose because of that. Brown might have been quite a good candidate, but he didn't win just because of that. The election was a judgment on the growth of government by the Obama Administration, particular fear of what health care reforms could mean for individual health insurance schemes and for taxation.

Ed Rollins, former political director for Ronald Reagan said on CNN:

Mr. President, don't run away from or misinterpret Tuesday's results. Don't let the Chicago sycophants surrounding you in the White House tell you this defeat had nothing to do with you or your health care legislation or your style of governing. It did big time, and every poll said it did.

You have three more years before the next inaugural. It may be yours or it maybe someone else's. But don't let your team convince you that this loss was only about Martha Coakley being a lousy candidate. (She was.) But she was good enough to win the state attorney general's job three years ago with 73 percent of the vote. She was good enough to trounce three other candidates, including a sitting congressman to win the primary a few weeks ago.

By contrast, House of Representatives lead Marxist with a silver spoon Nancy Pelosi couldn't have lied better than what she said: "We heard, we will heed, we will move forward with their considerations in mind, but we will move forward".

No Nancy, you heard, you're ignoring. This year there are mid-term elections. After two years of Bill Clinton and Hilary trying to introduce more government healthcare, Americans voted in droves to turn both houses of Congress Republican. The Republicans are not consistently small government fiscal hawks, and they are by no means great believers in slashing the size of the state, but if Massachusetts is a sign of wider discontent, the mid-term elections could cauterise Obama's plans on health care and his budgetary ambitions over the next three years.

Tuesday, January 19, 2010

How can John Key cut income tax?

According to the NZ Herald, the Prime Minister said "The Government would like to lower personal taxes"

Great stuff.

The solution involves two words.

CUT SPENDING.

Don't increase GST - that simply increases the viability of a free (black) market in secondhand goods, and adds to compliance costs for business.

Don't create new taxes, because it will create new ways of evading and avoiding them.

Don't even start to believe taxation on real property will address speculative bubbles in the housing market, look at how the RMA, the absurd obsession of councils with the discredited "smart growth" philosophy, the central banking system and most of all, taxes on other investment, create distortions.

So think about this John.

If income and company tax were reduced to a simple 20% with the first $10k tax free (hardly radical and not Libertarianz policy), then how much MORE would that encourage a shift of investment from land to business? Do you really think you and your crew know better how to spend more than that proportion of New Zealanders' income than they do?

If the RMA and tinpot planners in local authorities (especially the new uber council for Auckland) stopped restricting how people can build housing on land, without threatening the property rights of their neighbours, how much supply would be unlocked to ease pressure on prices?

How about a bottom up review of the central banking system, inflation targets and prospects for reform of that?

Monday, January 18, 2010

Who would Matt McCarten prefer?

Oh yes, it shouldn't be a surprise. Matt McCarten's tired old Marxist rhetoric about US foreign policy. Apparently wanting to be an ally of the US is "fawning support", something no country apparently should seek. Why? Because it Matt's world, the US is bad - very bad. In fact given his political heritage I wouldn't be surprised if he missed the Soviet Union, given that the anti-nuclear policy he supported was, in effect, New Zealand opting out of the Western alliances that saw it siding clearly with the US, NATO and Australia against the Soviet Union and its satellites. The middle ground was the middle ground of not giving a damn about which side won.

So what does he believe in?

1. That after 9/11 the US should NOT have attacked Al Qaeda and the Taliban in Afghanistan and overthrown the regime that provided safe haven and support for the 9/11 attacks. Of course not. Did the US deserve it Matt? Do you believe it was a conspiracy? So you prefer the stoneage misogynists of the Taliban who deny girls an education? No, you wont answer them. It's simple enough, the US shouldn't respond militarily when attacked. Of course not. The US is to blame anyway, right Matt?

2. Israel shouldn't build settlements in the West Bank. Well funnily enough Matt, the Obama Administration doesn't believe in that either. However, what would you do? Cut all aid from Israel? Tell Israel it's on its own? Let all of Palestine become a bloodbath of Islamist terror against the state of Israel? No. He doesn't have an answer to this.

3. Gaza should have open borders, and Israel should allow Hamas to import whatever it wishes, presumably including rockets to start attacking Israel again. Oh but it's ok for war to be waged by heroic militants isn't it Matt? You relate to them. After all, just because they attacked Israel proper doesn't mean anything. Not that you're going to tell Hamas to stop waging war, because it's only peace if the US or Western side surrenders right?

4. Iraq is apparently "occupied". Who by Matt? I guess that democratically elected government is illegitimate, although you claim the war against the Saddam Hussein criminal gangster regime was illegal. That means you believe the Hussein clique was legitimate. You'd prefer the Iranian back Islamist insurgents ran Iraq? The same ones who impose draconian sharia law in areas they controlled? Ahh they're not backed by the US so MUST be ok right? Yes, would have been far better to let the insurgents win. Better still to have left Saddam in power. After all, he didn't occupy Iraq did he?

5. New Zealand shouldn't be in a military alliance with the USA. Why? Because Matt and his buddies on the left don't like it. Would it harm New Zealand? Well hardly, but it does put New Zealand squarely against a whole range of rogue states that Matt presumably would like to appease. So why not Matt?

Or is it just your inherent hatred of individual freedom and capitalism that the US still (with many flaws) represents that drives you?

Police don't understand Twitter

"Robin Hood airport is closed," he wrote. "You've got a week and a bit to get your shit together, otherwise I'm blowing the airport sky high!!"

That's what Paul Chambers said on Twitter, jokingly frustrated about snow closing his local airport.

He was arrested under the Terrorism Act for being suspected of creating a bomb hoax. He has his iphone and computer confiscated, and was questioned for seven hours straight.

According to the Daily Telegraph: "I had to explain Twitter to them in its entirety because they'd never heard of it. Then they asked all about my home life, and how work was going, and other personal things," he said.

This hardly surprises me, as one recent experience I had with Police showed a complete lack of understanding of the internet (e.g. what's a blog, what's a message board, how can you find out who people are on the internet?).

Now Paul was foolish, and it may have been appropriate to ask him a few questions. However now it has become a thought crime, a crime to joke about blowing something up. He wasn't at the airport, and it would be clear he just should have been told his statement worried the airport company.

No. Instead he is to be treated like a terrorist, by Police who don't even know the medium he used.

Sunday, January 17, 2010

Silence from the anti-Americans

If you absorb the sneering, semi-automatic anti-Americanism of the left, which is seen in the words of many intellectuals, journalists and bloggers, you'd assume the USA engages with other countries purely in an exercise of imperialism. It intervenes where there is oil to plunder.

So when the USA goes to the aid of Haiti, on a grand scale, when there is no apparent economic imperative, then you notice how silent the left are. How so many of them, who probably haven't contributed a thing to any aid appeals, don't say "thank you USA", or notice that even with rampant budget deficits, the USA is still prepared to help on a scale that dwarfs all others. US$100 million in emergency aid, and a flotilla of vessels and aircraft bringing in rescue crews and supplies.

The nasty comment from the vile Lumumba di-Aping, comparing developed country approaches to climate change as "a solution based on the same values that funnelled six million people in Europe into furnaces" is shown up for the disgusting, dishonest envy that permeates so much of the politics around the developing world. "Give us more" they all want, so many unprepared to produce the conditions that generate wealth in the first case. It doesn't matter that because of the wealth of the USA, it can afford to go in, anywhere in the world, and save lives - with a spirit of benevolence you will find rare in any of the kleptocratic criminal gangs that call themselves governments in much of the world.

It isn't an act of self sacrifice of course. The USA knows that a healthy vibrant Haiti is good for the Caribbean, and good for the US. It would no longer be a source of refugees, but a potential trading partner.

Ban the niqab?

With France moving to ban the niqab in public, it has proven more difficult than was first thought. It looks more like it will be a ban on specific public premises, rather than all public spaces. However, the UK Independence Party (UKIP) is now supporting the idea. No doubt knowing that in doing so, it will have the support of more than a few Conservative voters, but also tap interest from the great unwashed who see something in the BNP.

You can see women wearing the niqab regularly in London. It provokes fear in some, seeing someone completely concealed. Others see it as representing repression of women, that a woman would be required by a man to only go out in public so shrouded. It is highly likely those that wear the niqab, especially in a Western liberal democracy, and those who support women wearing them, are unlikely to be supportive of liberal capital Western society. No doubt many shopkeepers and others would prefer that people enter their property not wearing the niqab.

So is it the right response to ban it?

No.

All shopkeepers and indeed all owners of private property should rightfully be able to set rules on what clothes people can and can't wear on their property without fear of so called "human rights" legislation deeming it "discriminatory". It isn't. If I don't want people wearing certain items of clothing on my property then it is fundamental to me exercising private property rights.

However, to criminalise those who wear the niqab in public is to say the state has the right to criminalise what anyone can wear in public. That is fundamentally contrary to having a free open liberal democratic society. To criminalise it may mean some women are effectively kept at home, which is not to their advantage. Moreso, it criminalises those some who deem to be the victims, not those who enforce this ludicrous tradition.

Freedom includes the freedom of others to offend you, it includes the right to hold silly beliefs and to wear ridiculous clothes in a public place. To surrender this is to ask the question "what next" and it is to hand to Islamists demonstrable proof to them that freedom is not to be embraced, because those who purport to believe in it will abandon it when they are offended. Like banning the vile Islam4UK, banning the niqab wont reduce the presence of Islamism in the UK.

Islamism in the UK will only be confronted when central and local government agencies stop funding or supporting any non-government bodies with a religious affiliation, but most of all when all major political parties, and the general public, stop fearing declaring their utmost support for free open liberal secular British society. Britain allows all citizens to choose whether or not they want religion and to live their lives as they see fit according to those beliefs, but by no means does it tolerate those who seek to use force to change that.

In Britain it should be clear there is a very simple deal - you have freedom to choose how you live your life, and that freedom includes a right to disseminate your point of view, but not to use or threaten force to change the views or lifestyles of others.

One of those freedoms is to wear a niqab, but it is also the freedom of others to ban you from their property if you do so, and to criticise you for doing so, and to call for others to stop wearing it.

Sadly not one of the major or even secondary political parties in Britain really does believe in a free liberal capitalist society.

The spendthrift Scotsman

Scotland is predominantly governed by a devolved administration run from Edinburgh. This administration receives most of its funds from Westminster, and its government is led by a coalition dominated by the Scottish National Party (SNP) - a socialist party dedicated to Scotland becoming an independent nationstate (no relation to the neo-fascist British National Party).

It has faced a bit of a fiscal crisis along with the rest of the UK, but unlike the debate on the UK budget, Scottish First Minister, Alex Salmond, is pretending there isn't a problem. He is blaming a lack of money for Scotland on Westminster. He is either an economic illiterate (for which there is some evidence) or simply a nasty little nationalist who happens to be a socialist, pretending that the enormous budget deficit of the UK has nothing to do with Scotland.

He faces a budget cut in real terms of £35 billion, but is blaming Labour and by implication England, for him being unable to meet his spending promises according to Alastair Darling.

Scotland already has a GDP of which over half is generated by government - in other words it's like Hungary before the fall of communism. Scottish voters voted for the SNP because it offered the best chance to remove Labour, but the SNP has shown itself to simply be old Labour with nationalist drag. Sadly most Scots are so wedded to Nanny State, that even though the SNP is disappointing, and they are fed up with Labour, they wont dare vote for parties that ask them to take more responsibility for their lives.

You see the Scots who believed that have mostly long ago emigrated!

Friday, January 15, 2010

British Labour Pledge Card

He abolished boom and bust apparently. He ran constant budget deficits, he sold billions in gold reserves at the bottom of the market (to offset his overspending) and now he's devaluing the pound to offset his overspending, and prevent a full asset price correction.

Sadly because around a third of Britain lives directly or indirectly off the state tit, (and the Conservative party is an inspiring as a plastic wrapped premade sandwich) this lot still have a reasonable chance of continuing in their jobs.

(Hat Tip: Old Holborn)

Thursday, January 14, 2010

Pity Haiti and the Vatican's hypocrisy

The earthquake has been devastating for a country beset for decades by corruption, kleptocracy, dictatorship and mysticism. It can only be hoped, and no doubt I expect private and government relief to come to this country with a history of being one of the most damned places in the Caribbean. It is ranked 156th by the CIA in per capita GDP, with the average of only US$800 per person per annum, alongside the likes of Cambodia and Chad, and the lowest in the Americas.

If ever there was a country that long needed rule of law,a culture of reason and respect for individual liberty and property rights, and the end of kleptocratic violent government, it would be Haiti.

However, whilst Catholic news services and the Vatican no doubt show true concern about conditions there, even though one questions why a military jet to fly a Bishop from Brazil does anyone any good (except a conscience), it is a shame that the Vatican can't truly be said to be morally consistent about Haiti at all. No, I'm not going to start on the idea that a loving omnipotent God might not strike the most poverty ridden countries with natural disasters like this (that's too obvious).

You see, in 1981 Mother Teresa of Calcutta went to visit Haiti. Not a big deal you might think? Well at the time Haiti was run by a criminal family called the Duvaliers. Papa Doc Duvalier ran the country with an iron fist, all media was controlled by the state and all broadcasting generated a North Korean style personality cult around the Duvalier clan. By 1981 he had been succeeded by his son Jean-Claude (Baby Doc). The Ton Ton Macoute acted as the personal army of the Duvaliers, and would abduct, torture and murder suspected opponents of the regime. Tens of thousands died at the hands of the regime. The Duvalier's meanwhile enriched themselves enormously by creaming off profits from government export monopolies, spending extravagant sums on themselves.

Did Mother Teresa go there to call for freedom, to end abuses of human rights, to call for the Duvaliers to share their ill gotten gains? No.

She received the Legion d'honneur award and praised the Duvaliers for their treatment of the poor. The picture above is of her holding the hand of Michele Duvalier, Baby Doc's wife, who endured the estimated US$3 million wedding not long before Teresa visited. She said of Michele Duvalier that she was "someone who feels, who knows, who wishes to demonstrate her love not only with words but also with concrete and tangible actions . . . the country vibrates with your life work". Vibrates with fear.

Mother Teresa provided open explicit moral support for this gang of thieving murderers. A gang who all up inflicted misery on Haiti for nearly 30 years. It was used as propaganda in Haiti, which has a strongly Catholic population. What more could the Duvaliers have wanted? How disgustingly evil was she in provide succuour to the despicable?

Pope John Paul II by contrast spent only a few hours there in March 1983 and damned the situation in the country.

Yet the Vatican still beatified her. Beatified one who gave warmth to some of Haiti's most evil rulers, who told complete lies about them, and who turned her back on the reality of the country.

No doubt Haitians will warmly welcome any assistance from Catholic charities in the coming days, weeks and months.

However, an appropriate footnote would be to strip Mother Teresa, or rather (her real name) Agnesë Bojaxhiu of her beatification, and to apologise for Haiti for her complicity in supporting the Duvalier regime. There are reports she received funds from the Duvaliers at the time as well. This should be investigated and if found true, it should be spent on providing humanitarian assistance for Haiti.

After all, it is one thing to ignore evil and say nothing, it is another to take a very long trip, to sup with evil, to receive an award, to praise it, to give it credit when it is dripping with the blood of those you purport to care for - and then for your employer to grant you one of its highest honours and respect.

Until then, the Vatican's claim for compassion is deeply darkened by its sympathy for one of its own who did great evil in embracing great evil.

Next UK government must cut spending.

Given it is UK election year, I have decided to start a secondary blog. It simply will report on every announcement by the two major UK political parties calling for increased state spending or decreased state spending.

It is entirely UK focused, and the main purpose is to expose the lies and deceit behind politicians promising to spend more money that isn't theirs, that they don't have, that they would need to borrow from future taxpayers and voters, and not be the slightest bit accountable for.

An election is an advance auction of stolen goods. This UK election is now an advance auction for future stolen goods.

Gordon Brown for 13 years has overspent and borrowed to pay for it. He did so in the good times, and has done so on a grand scale in the bad times. As a result it cripples the public finances for the next decade or so, makes the next government face the need to cut spending and/or hike up taxes. It is a chance for the next administration to seriously address the role of the state in British society, but the chances of that appear slim indeed.

So in the next few weeks there will be more on the Cut Government Spending blog.

Chinese government wants cyber order

Having mulled over how to respond to Google's threat to withdraw from China, the New China News Agency (Xinhua) has responded with a technique well honed since 1949. It evades the truth.

"China's internet is open" it says. So what is the Golden Shield Project about then? Given my blog is now blocked in China, this is demonstrably a lie.

"China has tried creating a favorable environment for Internet". No China has sought to allow the internet to be used for business, but to use it to spy on dissidents and to block discussion, debate and free speech that goes contrary to what the Communist Party of China wants people to see.

Finally it makes it out to not be a big deal at all saying "Google sent a short statement to Xinhua Wednesday, saying, "We are proud of our achievements in China. Currently we are reviewing the decision and hope for a resolution."" This minimises the whole issue, makes it look like it is only a minor point.

Most notably the report says next to nothing about why Google has suggested it withdraw, citing a "dispute" with the government.

However, a darker response came from an official spokesman quoted by the New York Times. Wang Chen, the information director for the State Council (cabinet) said:

"Internet media must always make nurturing positive, progressive mainstream opinion an important duty" as he called for internet companies to "scrutinise" information that may threaten national stability and for online public opinion to be "guided".

Wang Chen thinks he knows better than your average Chinese internet user what opinion is worth considering and what information they should see. Big Brother state is alive and well in China.

The People's Daily (the official paper of the Communist Party) is saying more:

Spinning that this is all about pornography, not free speech per se it reports "all countries should "take active and effective measures to strengthen management of the Internet and make sure their problems do not affect other countries' cyber order." Cyber order?

Then it plays the "people will be victims card" "Chinese Internet users are the real victims if Google quits China. I think Google is just playing cat and mouse, and trying to use netizens' anger or disappointment as leverage" and the government doesn't care "It will not make any difference to the government if Google quits China; however, Google will suffer a huge economic loss by leaving the Chinese market".

Meanwhile its headline talks of linking the internet with telecommunications and broadcasting networks (hardly news), no doubt with the intent of showing China forging ahead with technology and development, to attract foreign corporate interest.

Of course, business analysts are unsurprisingly wondering if Microsoft and Yahoo will reap rewards from this. Neither have shown any great concern for allowing free speech in China, and Microsoft in particular is more focused on getting the Chinese government to combat software piracy. Yahoo in China is predominantly Chinese owned now, so it's sold out, literally.

My big question is how many business people, starry eyed by the size and scope of the Chinese market have sold out free speech, property rights and individual freedoms to make some cash. How many have been disappointed that the enforceability of contracts in the People's Republic of China has more to do with connections, the size of the company you are contracting with, its relationship with the layers of government and the Communist Party? How many have wondered why theft of intellectual property is rampant, as the Communist Party has long regarded theft as a legitimate tool, like the USSR did? How many have found corruption to be rampant and have participated in it?

In other words, how many of those who seek to enjoy the fruits of capitalism spend so little energy and time in supporting the basic concepts that make it work? As such, is it any wonder that they then become victims as governments and citizens turn on businesses, assuming that capitalism unfettered doesn't mean laws against fraud or theft?

For Google, free speech and the ability to enforce laws against trespass (hacking) have proven to be critical to what it does. Maybe it is about time that other businesses in China (and indeed in all countries) paid attention too.

Wednesday, January 13, 2010

Google says no to the Communist Party of China

Google's enormous success as a company offering a search engine and advertising related to it has given it dominance in how people search the internet. A dominance that has upset governments, some of whom are keen to kneecap overly successful businesses (think of anti-trust/competition law agencies, none of which have learnt from the absurd attempt to kneecap Microsoft, only to find that Microsoft itself is facing both competition and the disadvantages of being too big), but others don't like the internet because of it facilitating a free flow of information and media.

Every new communications and information technology has seen responses from vested interests seeking to restrict or ban it. However, they have also proven to be the unlocking of freedom, a check on bullies, charlatans and authoritarians of every bent. It is no surprise that the Nazis engaged in public book burning, that communist Romania banned typewriters unless they were officially approved, registered and their typefaces customised so the Securitate could tell whose typewriter had produced a document.

Whilst the Nazis were the first to extensively use radio broadcasts to rally support across the nation, the discovery of shortwave radio meant that people in authoritarian regimes could get news from free countries. So the Soviets and even today regimes in China, Cuba and Iran still attempt to jam inbound radio broadcasts from the likes of the BBC and Voice of America. North Korea simply produces radios with no tuning dial, with the capacitor preset to the single state radio station.

Television became a key platform to inform East Germans of what life in the West was like, and news from a non-Stalinist perspective, with much of East Germany able to receive West German terrestrial television broadcasts. Satellite TV more recently has made major inroads across the Middle East, Asia and Latin America. However, entry into that market in China has been done respecting local censorship laws.

However, the internet has become revolutionary. As anyone online can produce content, and the content accessed is up to the person online, its scope is ubiquitous and all encompassing. However, unlike broadcasting, the internet is also an essential business tool. Email is now vital to the productivity and sales of many businesses.

In the mid-late 1990s I attended several intergovernmental meetings which discussed "regulating" the internet. At the time Saudi Arabia had banned it, because it had no idea how to handle content that was blasphemy against Islam and anything of a sexual nature. What was made abundantly clear is that with the internet comes freedom of choice, although some countries were and still are engaging in grand firewall projects.

When Google set up google.cn, it agreed to respect the censorship policies of the People's Republic of China. Google argued that participating in the Chinese market would be more positive for free speech than ignoring it. However, whilst Google would explicitly not include certain results in its google.cn searches, it was clear savvy users in China could find ways around this.

Since then, the Chinese government has expressed concern that Google facilitates access to pornography, and has called for Google to step up measures to help with its censorship efforts. It is trying to pursue an endless game and losing.

So the announcement by Google that it will pull out of China unless it can provide a free open uncensored service is astonishing. It has justified it on the grounds that there have been hacking attempts at Gmail accounts from China, and presumably it has little recourse to the Chinese authorities to prosecute this. However, it is a brave move in the country that has now got the largest number of internet users in the world.

Google has apparently stopped censoring google.cn, which must be causing great angst amongst the Chinese government and the Communist Party. Previously censored articles and images of Tiananmen Square, critiques of Mao Tse Tung and support for Chinese dissidents, Taiwan and indeed much porn will now be easily accessible.

More important than that, Google has let all users in China know of its policy. It has called upon the 300 million or so Chinese internet users to note what their government is doing, and how Google will walk if things don't change.

It is a calculated risk. In China, Google is not the leading search engine. A local variant, Baidu, (a blatant copy) is. However, it will not take long before its users learn they can access what was previously forbidden. Google risks losing advertising revenue in China, now the world's second biggest economy. Yet Google also will gain publicity elsewhere and support from millions in the free world.

So what is the likely response from Beijing? I suspect it will seek to wave Google farewell and seek to ingratiate itself with Yahoo and MSN. It is terrified of free information, protests and calls for political reform, so will itself seek to block Google. After all, the odds that millions of Chinese will revolt over this is low. Yet it will put a stumbling block in the growth of the internet in China.

However, kudos to Google. It will have declared its hand as being the search engine for a free world, it will have shown how a private company can frighten the world's largest authoritarian government. After all, look at how sanitised this report from Xinhua (the Chinese state news agency) is about the issue.

Peter Foster, the Beijing correspondent of the Daily Telegraph says: "Interestingly, for all the nationalism and anti-foreign sentiment that typifies China’s more vocal netizens, the majority of comments on Chinese web discussions forums seem to be extremely worried about what Google’s potential pull-out signifies for China in the longer term."

China has made massive progress though its own hard work and ingenuity, but it has also leant heavily on a global knowledge economy whose well-spring is the free-flow of information.

Google is a potent symbol of that idea and while China can get along just fine without Google in the short-term, a decision to shun Google (which at this point looks the likely course) would expose the inherent limits of the Chinese ‘miracle’.

Yes, the relative economic freedom China has experienced in the past 30 years has been matched by much less individual freedom, particularly when it comes to holding government and more specifically the Communist Party to account. It would appear that the Communist Party can no longer demand obedience and surrender by foreign companies seeking to reap rewards from the ample Chinese market.

Tuesday, January 12, 2010

Beware of consultants who know nothing

Take this piece of poorly researched nonsense from Gerson Lehrman Group.

Mistakes?

1. "As launch customer of the stretched, longer range 787-9, Air New Zealand was probably the first major carrier to abandon First Class seating and focus on making money where it counted."

What a non-sequitur. Buying the Boeing 787-9 has nothing to do with abandoning First Class as Air NZ got rid of First Class because it focused on a superior business class hard product on long haul flights, and because NZ demand for First Class is derisory. It was also far from the first "major" (!) carrier to abandon first class. Air Canada, Iberia, SAS, KLM, Alitalia and Finnair all did so, along with Northwest, Delta and Continental on international routes. Clearly the writer has no background in the airline sector.

2. "Boeing has missed a huge opportunity in getting the 787 to customers who so desperately want this new fuel efficient airliner" How? The competition is years away, and the 787 is a ground breaker because of what it is made of, but the writer never mentions that. Funny that. Boeing has screwed up because of supply chain quality and timeliness issues, but the 787 has a key point of difference that the writer doesn't note.

3. "The 747-8 has survived in large part because the passenger variant is still a couple of years away". No. It has survived because most of the orders are for the freight variant, which has successfully killed off the A380F for now.

4. On the Boeing 787 "but there won’t be any cancellations due to the set backs on the program thus far." Except for the cancellations by Qantas, Tui, LCAL and others.

5. Umpteen errors of grammar.

A tip to those who commission management consultants.

Get CVs from those expected to work on the project, seriously query their experience and knowledge. Talk to those involved to quiz them on what they know, and don't let substitutes be offered unless you vet them. Finally, contact the clients they say they have had and ask the clients what the roles were.

Another sign of peace in Iraq

Lufthansa is to be the first major airline to restart flights into Baghdad from later this year.

Austrian Airlines flies to Erbil in Iraqi Kurdistan, but Lufthansa will be a big sign of confidence in Baghdad and Iraq. It will no doubt suddenly make Lufthansa the preferred carrier to Baghdad, although not the first Star Alliance carrier (as Turkish Airlines flies from Baghdad to Istanbul).

Let's hope the confidence is well placed.

Name suppression of ex.MP

The internet has made this entire case a bit of a game. Cameron Slater's post is skirting on the edge of the law, though he explains part of his view on name suppression here. Some have taken to assuming the ex. MP charged of a sexual offence represented this or that electorate, or is in this or that party. It doesn't helop that the New Zealand Herald said "former MP from the top of the South Island" although appearing in the Nelson District Court indicated that anyway.

Ken Shirley has incorrectly been mentioned too often in relation to this, and continuing to name people without any basis for it other than pure speculation is quite unfair. Of course, the list of possible MPs (which if you include all top of the South Island electorates and list MPs) is not great, so it puts a handful under suspicion, although no doubt their family and friends can vouch for them all, bar one.

Of course, given the internet the answer was bound to turn up, and it really wasn't rocket science to figure it out. One very well known and popular website effectively names the accused indirectly. It isn't the only place mentioning it (and no I'm not going to say).

The purpose of name suppression is primarily to protect victims or relatives of the accused. That is entirely fair and reasonable. How this is addressed when the internet is extra-territorial, and allows people to post elsewhere is difficult, as I suspect thousands now know the name and it is being mentioned in person, by phone and even by the foolish by email.

So in effect name suppression has value only in delaying not preventing circulation of names, and in the case of the unknown is likely to be effective. So the question is why should anyone, who has a public profile, be protected from the same sort of scrutiny anyone else might have? Well they should not, people should be treated on a similar basis - and if name suppression is to protect the victim, then it may not be abused like it has been in this case. If it is to protect the accused, then the question has to be asked why?

However, equally disconcerting is that other former MPs from who are nothing to do with this case are having their reputations put under the spotlight because of speculation. Similarly, if there is truth in the alleged offences, then concern should also be for the victim.

It is also fair to note that until the man concerned is convicted, he should be treated as innocent until proven guilty. However, this sort of thing should not be a game. If found guilty, then the name should be released, only if it is not detrimental to the victim. It is quite possible this whole case is very very messy given all those involved.

I am not allowing comments, for fairly obvious reasons.

Islam 4 UK driven underground


The pro sharia law organisation "Islam 4 UK" has now been declared a terrorist organisation by the UK government, banning it, which of course simply means it will regroup under a new name, and re-emerge. The move is unsurprising, but also shows the emptiness of New Labour, which like most things it doesn't like, thinks that a law banning it will make it better - this being the same government that has embraced funding Islamic groups, and has passed laws against "hate speech".

Islam4UK has responded by saying: "what is clear is that if you differ with the Brown regime and those who advocate freedom and democracy and whose citizens are supposedly dying for these ideals abroad, then freedom quickly dissipates to be replaced by dictatorship... Today's ban is another nail in the coffin of capitalism and another sign of the revival of Islam and Muslims. "

Islam4Uk openly admits it opposes freedom and democracy, and is celebrating being banned. Islam4UK after all envisages a world where you'd be imprisoned or worse for "insulting" Islam.

Is a ban helpful? No. It just shows weakness and plays into the hands of the organisation.

What would be a preferable response? A direct, open and loud declaration by all political parties that believe in it that Sharia law will not be implemented in the UK, that Western capitalist liberal democracy has survived threats from fascism and communism and wont tolerate stone age theocrats seeking to undermine it and the rights of individual citizens to live their lives peacefully as they see fit.

Oh and when Islam4UK does ever utter justification for the use of force to advance its politics, then it should be treated as a terrorist organisation (not banned), and its members and associates treated as such by law enforcement agencies.