Wednesday, 6 March 2013

Chicago free-market technocrats have run New Zealand from behind the diplomatic curtain for many decades.

Chicago free-market technocrats have run New Zealand from behind the diplomatic curtain for many decades. Updated Fri 2 March 2012

(First update blue writing at bottom)
Those of you who thought your vote actually made a real change to who has run the nation of New Zealand might not want to watch the videos’ or read the book excerpts this article contains from New Zealand Ministers of Finance and Prime Ministers. Because you will be sorely disappointed as you witness the same technocrats, with the same ideologies that history has now proven abject failures, have controlled governments from behind the scenes for decades;
Muldoon, Lange, Douglas, Prebble, Richardson, Bolger, Clark, Cullen
Back Office – Middle Office – Front Office
The New Zealand Economy, A Personal view, by Rob Muldoon 1985
Page 33-34;
I well remember Keith Holyoake coming into Caucus in February or March of 1961 and the shock that it gave a brand new backbencher when he told us that the honeymoon was over and that we were faced with a serious situation, in respect of both Government accounts and our overseas transactions………….. In May 1961 we raised a sterling loan of 20 million pounds, a substantial sum for those days.
We announced that we would be joining the International Monetary Fund and the World Bank and a principal reason was that it would give us access to drawing rights. Although this had not been in our election policy, we carried out our policy by appointing various advisory bodies in the economic field, the principal one being the Monetary and Economic Council, a three member council with supporting staff which had the task of advising the Government on matters of economic policy, but most importantly, the right to publish its advice, in various forms, with various amendments to its composition and order of reference, the Monetary and Economic Council and its successors have continued up until the present time.

pg 71

New Zealand has a record that is second to none in its support of international institutions of which we have been members, and our willingness to obey the rules, both in letter and inspirit. We have been constantly disappointed however, by the fact that so many countries -and among them some of the most affluent - have for domestic political reasons been prepared to bend or even ignore the rules when it suited their purpose. The history of the IMF and itssister organisations since the break down of the Bretton Woods system has unfortunately been one were short term self interest has overridden long term wisdom. That this has now apparently been recognised can not alter the unfortunate history of the years since 1971.
pg 109;
Following the second oil shock in 1979 the volume of petro-dollars increased but the position of the non oil developing countries began to look less attractive, particularly as some of thenew industries that were being developed found that when they came on stream their products, and steel was an example, were facing, protectionist barriers in their natural markets in the wealthy industrialised countries, in some cases the very countries that had provided the loans to build the plants.
page 153;
The international institutions must be reformed with a mandate that fits the needs of the1980s and into the 21st century. The immediate debt crisis must be dealt with, not as a baleout of either the heavily indebted countries or commercial banks but as a means of averting the collapse of the worlds financial system with a resulting world wide depression such as we have not had since the 1930s, a depression from which no countries economy would be immune.

Excerpts of David Lange interview by Brian Edwards in book - Helen – Portrait Of A Prime Minister– by Brian Edwards – Published 2001
Pg 166
The in-Fighting led to a leadership spill which Rowling is said to have survived by one vote – his own. But the attacks on him continued and, not surprisingly, increased in intensity after the 1981 defeat.
David Lange - " That’s about the time the Party decided two have two Labour caucuses and go-away caucuses and all these other things to avoid decision making.
Caucuses were filled with overseas travellers who were going to do all sorts of derring-do. They’d say, ‘yes, yes, yes! and they’d go away and plot.
Remember that we’d increased the numbers by 1981 and the bigger the caucus the more likely that you’ll get factionalism. And the chances of becoming an isolated minority become even stronger."
Pg 168 – 69
David Lange:
"I often said that Roger didn’t have a secret agenda for many of the things he did, and that’s true. He didn’t plan huge income tax reductions. He certainly didn’t plan GST. But in terms of their strategising to get control, that was clearly going on, I would say from 1979, when I was elected Deputy Leader. I was their hostage in that sense, right from way back. I was their boy. I was their man. I was their candidate. I worked very hard not to be pushed. When you look back on it now, its quite obvious that I was calculated to be the flag carrier for this particular homicidal attack, but I didn’t actually fit there.

In a funny way I resented it. I considered by ‘81 that I was completely unfit to be leader. I was in some physical danger. And that’s why I said "shut up, I’m not doing anything. I’m going to go to hospital. I’m going overseas.’ And I called them off."
I didn’t have much to do with the philosophy, I didn’t have much to do with Roger. I’ve never been to his house. I don’t know where he lives to this day, I haven’t seen him for four years."

Toward Prosperity, by Roger Douglas 1987
pg 22;
I began talking to the Treasury officers seconded to the Rowling’s office and the economists in Labours Research Unit. Between 1976-82 there was a group of them - Paul Carpenter and John Wilson, along with John Whitehead and Barry Saunders in the Research Unit.
Barry later became one of Rowling’s private secretaries. He had also been in PR before leaving that for senior positions with first the Manufacturers Federation and then the meat board, but he went beyond just being a journalist; he had a good economic knowledge. Outside parliament there were people like Murray Smith and Jim Holt to talk to.
It was a good combination. There were the people like me who were largely self taught alongside those more formal economists.
As we argued through the issues of economic and social situation at that time, I learnt more. And as my knowledge grew I became more and more dissatisfied with Labours fragmented and unrealistic approach.
pg 42;
The day after, the Government announced its sixth overseas loan for the year (1984) – $NZ 50 million from the Netherlands in addition to the $135m in Yen, $140m in Deutschemarks, $216m in Sterling, another $100m in Yen and $62m from the Middle East, all raised earlier the same year.
pg 45;
Meanwhile the secret memos, known only to a handful of top Government officials and even fewer people in Government, kept flowing.
On 28 June (1984) Reserve Bank Governor, Spencer Russell, and the Secretary to the Treasury, Bernard Galvin, had jointly signed a memo to Sir Robert reporting a sharp acceleration in the removal of funds from New Zealand and forecasting even faster future movement. They wanted a meeting as soon as possible.
The next day Spencer Russell told Sir Robert that the Reserve Banks attempts to raise more money overseas were running into trouble. One banker had agreed to lend $30 million, but for only two months. A second insisted on a high interest rate, which was seen as a reluctance to lend. A third refused entirely, citing ‘balance sheet reasons’.
pg 130;
Over the last decade their method of going back to first principles, and working out their arguments from there, has become much more apparent. Although it began much earlier with Henry Lang and Bernard Galvin who, on joining the department in the 1950s were the first of a new breed with highly developed analytical skills, in more recent years under Bernie’s leadership, officers like Jas McKenzie, Graham Scott, John Chetwin, Roger Kerr, Bryce Wilkinson, Rob Cameron and others led the analytical development of the Treasury.
pg 137;
The arguments in favour of financial deregulation had been going on for sometime. In 1966 a report published by the Monetary and Economics Council recommended financial reforms to improve competition and efficiency. By the time Labour was elected in July 1984 most of the work to enable a float to be put into practice had been done years before by officials in the Reserve Bank and Treasury. We did not need to spend time, as we did on aspects of tax reform, working out the detail. Government and the bureaucrats knew what had to be done.
pg 140;
Other major changes in monetary policy began as early as 27 July when the Reserve Bank announced the Government stock tendering programme would resume. For hundreds of years governments have sold bonds to the public as a way of raising money for a variety of purposes. Investors loan their money to the government with negligible risk, for a set period at set interest rates. Before the changes in 1984 the bonds tendered locally usually offered very low interest returns and were largely brought by banks and financial institutions who had to hold a certain amount of their assets in government stock. One of the uses of government bonds is to keep the amount of money in the financial system in balance. Under previous administrations, when government departments spent more than the government received in tax, more money was injected into the banking system than was withdrawn by taxes. As a result there was more money to spend on the same amount of goods and services in the real sector and inevitably prices(inflation) rose. The financial sector is distinct from the real sector of the economy. The former handles the buying and selling of financial assets, the real sector produces, uses, buys and sells tangible items or services. Now by selling Government Stock and Treasury Bills at interest rates dictated by rates offered in the market, we ensured every extra dollar injected into the banking system would be taken out.

I’ve Been Thinking, by Richard Prebble 1996
page 95;
Countries call in the IMF when they cannot pay their debts. Repudiating debt for a trading nation is not a viable option: other countries refuse to trade with you. The IMF as a condition for providing emergency financial loans requires the recipient government to introduce a very stringent financial reform program. The UK had to do it. New Zealand was much closer than most commentators realised.

Ruth Richardson - Making A Difference 1995
Pg 25
All Western style democracies will witness, during the closing stages of the 20th century, the continuous trade offs and strains between freedom and fairness and wealth.
Pg 34
Those in the National caucus who saw the need for wholesale change were in a small minority. Straight after the 1981 election four of us – Derek Quigley, Michael Cox, Doug Kidd and myself – held an out of Wellington strategy meeting on how to advance the free-market agenda.....the arrival of Douglas as the Treasury Minister was a most fortunate meeting of minds. Douglas had clear plans to liberalise the economy, reform the tax system and bring down inflation. The Treasury for its part had learned a great deal from the failures of the Muldoon years, and was more than ready to give Douglas the assistance he required...... Legislation was soon introduced to deregulate the banking sector.
Pg 50
In those days there was very little in the way of support staff available to the opposition I had no formal qualifications in economics; although philosophically a committed free-marketeer I was on a steep learning curve on the detail of economic policy.
Soon after taking the finance job I wrote to Roger Douglas requesting a fulltime economic adviser. Douglas generously agreed and I managed to persuade my friend Charlotte Williams to take on the role. Charlotte proved to be an ideal choice.
She was a breath of fresh air around the opposition wing and helped inject a long over-due dose of economic rigour into the oppositions policy machine.
Pg 55 - 56
To help me acheive this new softer persona I was sent to charm school under the guidance of former United States image-maker Jack Byrum - the man who had reputedly turned Richard Nixon from losing Presidential candidate into President......... Late in 1989 I had an intensive two day session with Jack Byrum. He analysed me relentlessly, stripping me down and gradually building me up again, making some extremely acute points along the way. Towards the end, thoroughly brainwashed, I was ready to do almost anything he asked. Unfortunately at that point Jack got his hands on the speech I was due to deliver the next day. The speech was to the Mont Pelerin Society - a pretigious worldwide association of market liberals which was having its first ever conference in New Zealand. It was one of the most intellectually high-powered audiences I would ever address - precisely the wrong audience to try out Jacks touchy-feely approach. However, by this stage I was past resistance. My speech was completely rewritten. Out went all the boring economics and in went some heart and soul.

The next day I stood up before an audience that included a Nobel prize winner and other luminaries, treated them to my coquettish new smile, and delivered a speech of numbing emptiness. Still under the influence, so to speak, I thought I had gone down rather well. I little knew that over morning tea a dozen converations were going on to the effect of: ‘what has got into Ruth’? My philosophical allies had intended the conference to be a symbolic handing over of the torch from Roger Douglas to me. Over subsequent days, as I gradually became myself again, various people quietly broke the news to me that my speech had in fact been less than a roaring success. The moral of this story is not that I should have made no attempt to soften any image - only that I should have picked the right audience.
At the same time Anna came on board, I also managed to persuade Jim to have a Treasury economist seconded to his office - something he had always been entitled to do. The economist who came, Iain Reenie, would do an outstanding job in helping to educate Jim, and steadying him at crucial times. Jim even became considerably attached to Iain, who, when we eventually took office, for a short time went into the Primeministers department. Those of a paranoid disposition, who believes treasury has its tentacles everywhere and secretly runs the country, would of had their theories further reinforced had they observed Iain Rennies influence on Jim.

There’s been much debate in the political arena on the issue of economic sovereignty. All New Zealanders want to know that their sovereignty is secure and this will certainly be reinforced by the knowledge that government net foreign debt is forecast to be nil at the end of the 1996/97 year, so we will no longer be beholden to the gnomes of Zurich and elsewhere
…………Incredibly the Labour Party stated yesterday that the tax cuts are irresponsible. I totally disagree. Ordinary working New Zealanders in my view deserve a tax cut and will get one starting 1 July this year. All this strong, positive, economic news which has caused excitement and admiration around the world is of course up for grabs at the election in 20 weeks time. Put bluntly, the risk is that the recent very successful economic performance will collapse if irresponsible coalitions seek to outbid each other to see who can spend the
surplus first and force New Zealand back down the dreary path of debt, higher interest costs and loss of sovereignty to international bankers once more.

Helen – Portrait Of A Prime Minister – by Brian Edwards – Published 2001
Pg 156 – 157 – Helen delivered her maiden speech to Parliament on 27 April 1982
In a segment of her speech that foreshadowed the economic debate that would tear Labour apart over the next nine years, Helen turned to the parties philosophy:
" The Labour philosophy sees the state rather differently from the way in which the conservative philosophy sees it. We believe that the state must act to correct the imbalances in our society, favouring the rich and powerful. The conservative position is the laissez-faire posture. ‘The less the government does, the better,’ they say, and ‘ lets the market sort the matter out.’ We know that if the market is left to sort matters out injustice will be heightened, and suffering in the community will grow with the neglect the market fosters. The law of the unregulated market is, in the end, the law of the jungle, where only the strongest can survive.
"My objectives for, and demands of the Government are relatively simple. They centre on the right to work and to be adequately housed, the need for better living standards, for access to health care at a price everyone can afford, for free and quality public education, for recognition of rights of minorities, and for tolerance and social peace within the community. All those objectives, though simple, seem very far from realisation for the people I represent. There is an immense job of social reconstruction to be done – a job that can begin only when a Labour Government, committed to social change and equality, is elected." ……….My greatest wish is that at the end of my time in this House I shall have contributed towards making New Zealand a better place than it is today for its people to live in."
PG 168-9
Brian Edwards:
So David would be the front man for the Douglas faction, the acceptable face of Rogernomics.
He would win the election, a feat which Rowling was patently incapable of, and take the prize. He would be the Prime Minister of New Zealand. Douglas’s prize would be the Finance portfolio and the opportunity to realise his vision for New Zealand as a model of the market
economy. Providing no one blew the gaff, everything was in place for the restructuring of New Zealand society, the like of which had not been seen since 1935.
Helen Clark:
" unquestionably, the confidence of the Labour Party that it could win an election increased. But for those close to the action there was some apprehension about what an election victory might deliver."

Pg – 176
Helen Clark:
"The fundamental divisions within the Party would have been very obvious to anyone on the inside in ‘81 and ‘84, because we couldn’t produce an economic policy. And in the end Geoffrey Palmer, who used to in fact run the policy council, went away and wrote a policy that could have meant anything, in order to satisfy both sides. But everyone knew that we were going into an election where the Minister of Finance was eventually going to run the
(Iain Parkers’ note - Helen Clark became another leader that failed to live up to her ideology due to lack of knowledge of the financial sector the responsibility she handed off to several other financially illiterate Labour Party Members of Parliament in Michael Cullen and Trevor Mellard. Michael Cullen being dominant.)

Excerpt from Reserve Bank Governor Alan Bollards book - Crisis - One Central Bank Governor & The Global Financial Collapse - published Sept 2010 makes it plain how those appointments turned out. Note the presence of longtime financial corporate raiding co-operative John Whitehead who has spanned the behind the scenes central advisory institution over many governments ;
pg 46
On 3 September (2008) Michael Cullen, John Whitehead and I had dinner at the Reserve Bank. We had found that an occasional meal together was a good chance to talk things over without the usual tight agenda, queue of officials outside the door and private secretary taking minutes.
These dinners were simple enough affairs - salad, a meat dish and a good New Zealand red wine. In our positions, fancy food is to be minimised or avoided altogether - we have to keep an eye on our lifestyles, our waistlines and our watches. On the specifics of our conversations that evening I will not break confidence.

(Iain Parkers’ note - from pg 80 of the same book we get the picture that Bill English is just another financially illiterate puppet);

(Tuesday after 2008 election)
pg 80
We met Messrs Key and English in the Opposition Leader suite. Also present were the John Key’s chief of staff, Wayne Eagleson and his economic adviser, Grant Johnston. They wanted an up-to-date picture of the international markets and economy, and how they were affecting New Zealand. Of course Key and English were already well informed from their own market contacts and analysis.
What they really needed was our assurance that there was no hidden bad economic fiscal news, no dead rats in the cupboard. We were able to reassure them.
We all knew one another reasonably well. I had worked with English when he was Minister of Finance in 1999. I was Treasury secreatary then and Winston Peters had just been pushed out of the government by Jenny Shipley.
Bill English took over the position smoothly and brought a steady hand and a cautious, inquiring approach.
I had been aware of John Key for longer - back in the 1985 my wife had worked with him a Merchant Finance in Wellington. Then he had been a young star among financial markets traders before he progressed to bigger roles overseas. Now he sat before us, absorbing information quickly and asking questions about what could happen.
We had further meetings with Bill English about the Reserve Bank’s range of functions, some of which he knew from his previous time as Minister but others he had not had reason to experience - payment settlement systems, currency and liquidity management. Mainly we focused on the economy and the banks.
Pg 19-20
Banking practices differ around the world, but we ensure ours meet international standards. These are set by a somewhat shadowy group called the Basel Committee on Banking Supervision. Comprised of representatives of large countries( not including New Zealand ), the group meets in Switzerland at the Bank of International Settlements (BIS). Over the decade they had been developing a new set of banking standards known as Basel ll.
Meanwhile, on 6 March a senior team from the Wellington made its three-monthly trek across Bowen Street, along the walkway above the Cenotaph, through security checks in the Beehive and across to the ornate old Parliament Building to Committee meeting rooms. Here, committees of parliamentarians from across all parties routinely advise on upcoming legislation and examine public bodies on their use of public funds. We are used to appearing before them as they regularly examine our Monetary and Financial Stability Reports. But this session was different. As was their duty on behalf of the taxpayer, they wanted to talk about the crisis, the steps we were taking and the costs and risks for government. The 2008-intake Finance and Expenditure Committee under the chairmanship of Craig Foss was seriously focused and prepared to put aside political differences during the crisis.
I was worried about what might happen at the session. Proceedings are on the record with journalists sitting in the back, television cameras rolling, digital recorders running and even media blogging live from the room. Select Committees have strong powers - they can require people to attend and answer questions. I knew that I might be asked questions about exchange rates, foreign reserves, bank liquidity and a whole range of topics on which straight-forward answers could upset financial markets. The day before the hearing I rang the chairman and explained my concern. Craig Foss has a background in financial markets; he readily understood the dangers and assured me that he would guide the Committee away from dangerous questions in public.
They treated us deferentially. (they even started calling me Sir:) I sat with Deputy Governor Grant Spencer and our head of financial Simon Tyler, at the front committee table, our desk almost beneath microphones and recorders. In carefully moderated terms, we told them about the crisis. We explained how, partly because of the new mortgage-backed security liquidity facility, the Reserve Bank ballance sheet had grown hugely to $36 billion; this had increased risk to the government, but by a very manageable amount. Then they inquired about a small company called Mascot Finance, which was in the news because it was making losses. Though a very small player, we were soon to be hearing more about it.
Pg 183
"In self-interest, banks may encourage New Zealanders to take on more debt than is good for them individually or deliver more external liability than is good for the country."
Pg 186
The worlds financial system and the worlds economy are inextricably linked; a banking crisis hurts growth in the “real economy”.
Pg 148
The New Zealand business sector had been suffering. Profits were down across the board, staff lay-offs were in progress, investment had halted and firms were finding it hard to get funding. This was worsened by the banks’ response to the crisis, which had been to cut lending, abandon committed lines of credit and impose onerous terms and conditions on banking covenants.
Pg 157
Another governance worry related to the power and competence, or lack thereof, on the part of banks chief risk officers and risk committees. These officers assess the possible outcomes from any deal and decide whether the risks are acceptable under the banks mandated policies. We were now hearing about cases where risks had been miscalculated, procedures bypassed and officers overruled, all in the race for higher earnings.
Pg 165
Bad debts had started to emerge on their lending books. Most of these concerned small businesses or farms where borrowers had over-committed themselves at a time of high property and farm prices. There were also residential mortgage defaults followed by evictions and mortgagee sales, but these were mercifully rare. Foreclosures attracted considerable media and political criticism.
In the case of some of the agricultural defaults, we felt that certain banks had been over-optimistic and under-analytical in their lending, and we moved to tighten some of the relevant capital requirements for the future.

Iain Reenie, the treasury advisor Ruth Richardson said did an outstanding job of educating National Party leader Jim Bolger back in the 1980's is today in 2012 currently the Commissioner of State Services which is a technocrat position that does the recruiting of all Chief Executive Officers of government departments that are approved by public representatives in what amounts to little more than a rubber stamping exercise. The government departmental CEO's then have powers independent of public representatives to control recruitment below that. No surprises that our bureaucracy has become bloated with neo liberal free-marketeers as documented in this previous article; 

John Whitehead that Roger Douglas stated was part of a Treasury group from pre 1982 went on to become Secretary of the Treasury unto 2011 and made these statements in his speech before departing to become a Director ate the World Bank;
"It is fair to say that the Treasury I joined more than three decades ago was a very different Treasury from the one that I will leave at the end of this month. But let me take you back a little bit further than that.....Formally established in 1840, the Treasury is one of New Zealand's oldest institutions. In fact it is arguably older than New Zealand itself: on a trip to Sydney I discovered that there had been a NZ section of the NSW Treasury in the 1830s."
"Nowadays, we employ almost 400 staff and the task of looking after the Government's finances is no longer our only role - our core responsibilities now are to act as the Government's lead advisor on economic, financial and regulatory issues, and to demonstrate public sector leadership as a Central Agency, alongside the State Services Commission and the Department of the Prime Minister and Cabinet."
"Our Debt Management Office has been credited with “keeping New Zealand afloat”. This small Treasury team raises about $300 million a week to do so - money that the Crown needs to bridge the gap between revenue and expenditure. Recently,
because conditions have been favourable for us, we've been raising more than we need – in one recent tender we broke the billion-dollar mark for the first time."
Rob Cameron
Big investment bankers form alliance
5:00AM Friday Jul 25, 2008
By Tamsyn Parker
Two of Australasia’s biggest investment banking names have joined forces.New Zealand’s Cameron Partners and Rothschild Australia – the Australian arm of the global Rothschild empire – have formed an alliance to extend their global reaches.
Rothschild Australia executive chairman and head of investment banking Trevor Rowe said it began looking to establish a presence in New Zealand two years ago because of the high number of Australian private equity players interested in New Zealand companies.
The Capital Market Development Taskforce will be chaired by investment banker Rob Cameron. It will develop a blueprint and action plan to be released in late 2009.

Graham Scott
Dr Graham Scott, former Secretary of the New Zealand Treasury, and former advisor to the Prime minister of New Zealand was a key advisor to the government and responsible for advice and implementation on major reforms to economic policy and public sector management in the 1980s and early 1990s.
Dr Scott earned a PhD in Economics from Duke University and a Master of Commerce from Canterbury University, and has completed the Advanced Management Program at Harvard Business School. In 1994 he was a Visiting Scholar at the International Monetary Fund.
Dr Scott has been Chairman of the New Zealand Health Funding Authority, the New Zealand Electricity Market and the Asia Pacific subsidiary of the global consulting company LECG. He is a founder and executive chairman of the UK based public sector consulting company Southern Cross Advisers Ltd, which assists governments in developing and transition countries to design and implement programs of administrative reform.
Please note the speech Ruth Richardson mentioned in her book she made to the first Mont Pelerin Society meeting in New Zealand and then witness the views of one of the pioneers of that society below;
Milton Friedman, pioneer of free-market liberalism and the Mont Pelerin Society
The result of above detailed by Naomi Klein in doco-movie - Shock Doctrine:

No comments:

Post a Comment