Polity by Rob Salmond

This post is about where “the things we think we know” come from, and what happens when they’re misused.

 The “$38 billion” man

Readers may have seen Labour is investigating the merits of changing New Zealand’s tax and welfare policy to incorporate a Universal Basic Income. A change like that is hugely complex, and I know Labour is far from decided.

Enter David Farrar. Yesterday he decided he can put a cost figure on this policy, despite nobody having said what the policy is. Here’s his headline:

Labour’s $38 billion bribe!

 Ohmigod! $38 billion! That headline sounds massively expensive. But it’s also utterly, hopelessly dishonest.

UBI policies are based on providing everyone a basic income, but reducing welfare entitlement and increasing tax rates on added income to compensate. David Farrar’s $38 billion figure is only true if you provide everyone with a basic income but you make absolutely no changes to either welfare entitlements or tax rates.

That’s like calculating National’s tax switch policy in 2010 was a “four year, $18 billion bribe,” by just excluding the GST rise from the calculations. Ludicrous. Imagine the gnashing of teeth and proclamations of economic illiteracy that would follow if I did that, including from a certain David Farrar.

Later in the article, Farrar does concede the cost would cut in half if you altered welfare entitlements as part of the package. But that didn’t stop him sticking the much bigger figure in the headline. Once you also factor in tax change (beyond the cartoonish example Farrar uses), the cost can be near zero, with many wage-earning taxpayers coming out ahead, only a few coming out behind, and massive efficiency savings in the public sector because you don’t have to spent so much time and effort enforcing labyrinthine benefit rules.

Now, David’s a smart guy, and he’s completely aware how UBI works. He was just more interested in generating a large-sounding number than in telling the truth.

Somehow the editorial staff at the NBR missed this obvious dishonesty, and reposted Farrar’s article on its website, screaming headline and all. That’s shoddy journalism.

Labour’s Asians lost?

So what happens when one of these not-true-home-truths becomes ingrained? Well, a small corner of Tracy Watkins’ weekend column provides a clue. In this post I’m not taking any particular issue with Tracy’s assessment of Labour’s performance last week – certainly it was a tricky wee period. I’m taking issue an important, but false, asserted fact:

Labour used to have a stranglehold on the ethnic vote. No more.  

(By “ethnic” here, by the way, Watkins means “Asian.”)

Both elements of that statement are false, and one of the country’s leading political journalists should know her history better than this.

Did Labour used to have a “stranglehold on the ethnic vote?”  No.

When Labour last won an election, in 2005, it got 41% of the vote overall. It’s vote in the Asian community was 44%. There’s almost no difference.

How about more recently? In 2014 Labour got 25% overall, and 29% of the Asian vote. Again, there’s almost no difference between overall performance and performance in the so-called “ethnic sector” Again, Labour’s performance is better in the Asian community than elsewhere.

Very little has changed in this dynamic: Labour’s a bit – and only a bit – more popular in the Asian community than elsewhere. Labour’s long-term problem since 2005 has been a fall in popularity generally, not a particular problem among Asians.

Once these tropes get hold, they can lead to poor decisions. “You can’t think about UBI – it costs $38 billion!” leads to people ruling out a potentially helpful policy innovation based on malevonent lies about how policies work.

Similarly, “we’ve been disproportionately bleeding votes from this particular ethnic group” leads to overly-narrow political strategy, based on benevolent ignorance about vote history.

I’ve learned to expect this kind of manufactured-made-up-trope from David Farrar and Cam Slater and other tools of National’s publicity machine. But it shouldn’t take someone like me to point out when its been making it up. That’s the fourth estate’s job, too, yeah?

Many will have seen the Herald’s excellent investigation into tax avoidance by large multinationals operating in New Zealand.

It shows global firms are collectively paying only $1.8m in tax, while reporting around $10b in New Zealand sales. That means they’re collectively claiming a profit margin in New Zealand, after expenses, deferrals, and so on, of 0.06 of one percent of revenue. Globally, the profits of those same (parent) firms appear to be around 17%, some 270 times higher than reported New Zealand profit.

The cost is estimated anywhere from $500 million a year upwards. Those costs end up being borne by every New Zealander in the form of lower levels of public service and/or higher levels of their own tax.

I had four reactions to this report:

1. Generalized indignation and outrage

It is, of course, blindingly obvious that these taxes bear almost no resemblance to actual profits from multinationals’ New Zealand operations. Pernod-Ricard, for example, says it somehow made a loss selling booze to New Zealanders. As a county, we drink pretty heavily – more per person than the USA, more than Canada, and only a little less than Aussies, the Brits, and the Germans. If they can’t sell us Jacob’s Creek and Absolut Vodka at a profit, there really is little hope for them in business. 

2. Oil

I’ve got slightly more sympathy for the oil companies than for many of the rest. Separate from their operating profits, energy firms do pay New Zealand over $200m in royalties for the oil and gas they extract. Exactly how they net off those payments in their accounts I don’t know.

Additionally, I am willing to buy that oil companies have a lower profit margin in far flung, spread out New Zealand than elsewhere. They have a cumbersome, heavy product to distribute all over the world, and the transport costs per litre here must be much higher than in Asia, Europe, or North America, where there are masses more consumers living much closer together.

I’m not saying I actually believe ExxonMobil made a $50m loss on $2.8b worth of sales. But the situation for them is slightly more complex than for some others, especially the tech companies, who have many products that don’t suffer from the tyranny of distance at all…

3. Facebook

There’s a special place in tax avoidance hell reserved for Facebook. Facebook has around 1.4 billion users, 2.5 million of whom live in New Zealand. We’re about a sixth of one percent of the global market. But from the nonsense accounts Facebook filed, they’re claiming only NZ$1 million of their US$18 billion in sales is attributable to New Zealand. That’s one 250^th of one percent.

Do we really believe a single Facebook users’ attention is forty times as valuable to an advertiser outside New Zealand as it is inside New Zealand? Of course not. It’s a fucking lie, and it’s ripping every New Zealander off. Facebook looks free right? Well, the way Facebook runs its business costs all of us money.

4. Apple

Here’s an especially revealing paragraph from Matt Nippert’s investigation:

Apple Inc's New Zealand subsidiary Apple Sales New Zealand recorded $732 million in sales for the year, up nearly a third from 2014. But despite this stellar growth in sales the company reported relatively meager profit margins here of only 3.6 percent, after its parent billed $702m for costs of goods sold.

Here’s the thing. I can buy the same 13 inch Macbook Pro (2.6GHZ, 128GB HDD, 8GB RAM) from Apple for $2,399 and from JB HiFi for exactly the same price. There’s no way JB HiFi puts up with all the normal risks around stocking goods that can get superseded, get broken, and so on in return for a meager 3.6% return.

I’m willing to bet JB HiFi gets a better deal than that from Apple, which means Apple (worldwide) is – on paper at least - charging its own subsidiary in New Zealand a higher wholesale price than it charges it’s New Zealand competitors. As a business practice, that makes zero sense except as a way to hide profits and stiff taxpayers. I’d be surprised if the IRD found nothing chargeable here if it did a proper investigation.

I reckon Facebook and Apple are two good cases to make an example of. You don’t necessarily need a law change – more aggressive enforcement of existing laws, including testing grey areas in court, could get us on a good path. That helps not only collect proper amounts in current years, but encourage these multinationals to submit more reality-based accounts in future years.

I say this as a lover of both company’s products – I’ve got Facebook open on by Macbook Pro right now. But having a cool product doesn’t get you out of paying your fair share.

If current polls are to be believed, this month the flag referendum will fail as more than 60% of voters reject the Kyle Lockwood design in favour of the current flag.

This news won’t be welcome with Prime Minister John Key, who has been a passionate advocate for change, and for the Lockwood design in particular.

In advance of that defeat, Key and his proxies have been casting around for anyone to blame, and anything to distract people.

Which brings me to the tragic case of Matthew Owen Hooton, and a new, debilitating condition called Key Derangement Syndrome Derangement Syndrome (KDSDS).

The main symptom of KDSDS is a reflexive tendency to accuse other people of having Key Derangement Syndrome (KDS - an irrational, all pervasive hatred of John Key), regardless of what they are actually doing.

For example, current polling on the flag referendum has 60-65% of people opposed to change, including about half of John Key and National’s own supporters. Afflicted by KDSDS, Matthew Hooton thinks this state of affairs is down to the left’s irrational, all pervasive hatred of John Key. He sees it as another case of KDS.

Quite how the New Zealand left (current polling ~41%) has persuaded 65% of the country to hate John Key on this one issue but not on other issues is left unstated. And quite why half of John Key’s own voters would suffer from one-issue-KDS is also unclear. But the point of Matthew’s argument isn’t to make sense, it is to distract from the referendum’s failure.

That’s garden variety KDSDS.

Sadly for Matthew, however, his KDSDS has reached a more advanced stage. He appears to be having hallucinations. Below are two pictures of the Labour party’s logo, one from last year and one from this year.

     

Notice the different placement of the fern. To most people, this is unremarkable. But Mathew, in his distressed state, sees it very differently:

It seems his KDSDS is giving him visions. Matthew thinks this little change in the logo happened because Labour hates John Key.  He really does think it's more KDS! It seems that while everyone else sees this in Labour’s newy-tweaked logo:

Matthew sees this:

He clearly needs help.

Should the flag referendum fail, I expect we’ll see more examples of KDSDS popping up on the right of New Zealand politics. “Someone doesn’t like they TPP? They have KDS!” “You want melanoma patients to get proper treatment? KDS!" Again, the point of these exclamations isn't to be right, it's to move the conversation on from uncomfortable issues.

In truth, Key will have nobody to blame but himself if the flag referendum fails. It was his process, which he started and he championed. And the process was a dog at every turn, leading to a wholly uninspiring final vote. As much as the Prime Minister would like like that to be someone else’s responsibility, it just isn’t.

Now, let’s see how long it takes Matthew to tweet this post, claiming I, too, have KDS for daring to argue the PM should be responsible for the failure of a process he started, oversaw, and championed. The quicker he posts, the worse his KDSDS.

Like Wrestlemanias and Superbowls before it, the Greater Wellington Brewday had its IVth annual festival at the weekend. In a paddock decorated with hay bales, flannel, and amusingly non-ironic tattoos, 2,000 appreciators of beer congregated to sample the finest ales, stouts, lagers, pilsners, and limbics Wellington has to offer.

Brewday has a relaxed, semi-hipster vibe. There are beards aplenty, police afew, and covers bands galore. It’s much more chilled out than the other festivals around Wellington. The organisers even brought in a few livestock transport trucks as a temporary windbreak when they saw the forecast. Because they’re looking out for us. Gold.

This was my third Brewday. In 2014, I discovered the joys of Panhead’s big, bold, American-style ales like Quickchange and Supercharger.

Last year, I fell in love with Funk Estate’s Superaphrodisiac Imperial Stout.

And this year, we experimented with personalized beer fetcher service, because our group are job creators. Job creators, I say! Specifically, we created a job where an enterprising student got paid a living wage and got a free Brewday ticket if he spent much of his Brewday fetching beer and food for us. It was like having our own under the radar hipster butler called Finn.

The festival organizer told us nobody else had thought of this idea before. We’re either ahead of the curve, or the laziest people in the history of Brewday. Or both.

Once you divide it by a few people, the cost isn’t super high. And it made it us own little stealth business class. We’d say “those dumplings that guy’s carrying looks great!” and three minutes later we’d have a plate of our own right in front of us. “Ooh, I remember this ale form last year!” Almost magically, it appears. “Haha - what’s with this odd lemon and coriander beer?” Here, find out.

Actually, that was the only problem with the beer fetcher concept – lack of a cool-down period between having the kind of ideas people at Brewday, and having someone go and carry out those ideas. It’s like the Twitter of waiters.

Actually, sometimes those hare-brained ideas work out surprisingly well. For example, part way through the afternoon one of my colleagues saw a beer called Cookie Beer. That sounded crazy dumb! But we were intrigued just long enough to get Finn to bring us some. It turns out Webb St Brewery’s Cookie Beer is delicious. It tasted like chocolate chip cookies, sure enough, but somehow that didn’t make it any less refreshing as a beer. Amazing! You probably wouldn’t want to drink lots of them in a row, but it was a really fun idea.

Not all the “gee I wonder if this’ll work” beers worked, of course. That’s kind of half the fun. Garage Project is one of my favourite brewers, and their Death from Above and Pernicious Weed provide great unique takes on the big hoppy IPA. But their Tournisol, which promised meyer lemon and coriander in a Saison style, went too big on the lemon and came out, in my amateur opinion, more like a mild Saison mixed with double-strength Raro.

Overall, our crew gave line honours again to Funk Estate’s Superaphrodisiac Imperial Stout. It’s a big, bold stout, with really rich flavor additions coming from the combination of fig, vanilla, and chocolate flavours.

I was going to say it’s just a shame the beer isn’t available year round – it’s a Valentine’s Day annual release – but in retrospect I’m actually glad I have to look forward to my yearly dose of romance-themed inky stout. Like the DB ad says – beer always tastes best if you’ve earned it.

So long Brewday and see you next year for Brewday V where, if history is any guide, mega powers may collide or a horse might ride a cowboy.

At the outset, let me say this is not a post that says the polls are wrong, nor that the left are where they want to be. 

But the analysis of the polls this week has been poor.

Primarily, there’s been the claim that National’s high 40s ratings show the TPP protests and/or Labour’s tertiary policy launch have had no impact. That claim is wrong, both because an overall poll rating doesn’t say anything in particular about single events, and more importantly because the government has actually lost almost 2% support over the summer break. Here's the evidence:

There were four public polls in November / December  2015 – two from Roy Morgan, and one each from TV3 and the New Zealand Herald. Across those four polls, National’s average was 49%.

There have been three polls so far this year – two from Roy Morgan and one from TVNZ. Across those three polls, National’s average was 47.5%, 1.5% below its average from November-December.

Over the same period, the government as a whole (National + Maori Party + ACT + UF) is down an average of 1.8%.

So the claim of “no movement” is a stretch.

TNZV made that claim by comparing their poll in February with one in October, some four months ago. There’s been a lot of events over those four months, not just the TPP and Labour's policy launch, including a bunch of more recent polls to compare against. Corin Dann generally does a good job reporting his polls, but I think he slipped up there.

For completeness, the latest Roy Morgan poll does in fact show National up slightly from January to now. But I’d hardly be the first to note the jumpiness of that particular poll from one polling window to the next. I always prefer more evidence than that. 

Despite any marginal shifts in the polls, of course, National remains stronger that the alternative coalition. No doubt about it.

Comparing the November-December polls against January-February, there’s been only a 0.1% shift the combined left’s support. They’re hovering around 41%, both before and after the break. And both polls this week, despite their quite different results for the individual left-leaning parties, have the left overall at 40-41%.

Instead, the winner has been New Zealand First, up almost a point over summer and massively outperforming its normally low mid-term levels of support.

So, nit-pickery about poll interpretation aside, where do we stand?

National, of course, remains in the box seat. Along with its solid hangers-on (ACT, UF), it sits in the high 40s. Solid supporters of an alternative government (Labour + Greens) sit a little above 40%, and the swinging centre is climbing towards 10%.

If the election were held today, I’ve little doubt National would be returned even though – as noted on One News - Labour + Greens + NZF would be very nearly able to form a government if they wished. On today’s numbers, I think Winston would choose Key if offered the choice.

To be seriously in the game, the putative left coalition needs to at least tie National at election time. Obviously, having the combined left beat National is better again, and the higher the margin the better. But at a minimum, a tie’s required.

That means the left needs to shift around 4% of the population from supporting the status quo to supporting change. That’s about one in every twelve National voters. 

Yes, that’s a hill to climb. No, that’s not a towering cliff-face. I think any prognostications of doom are pretty premature at this stage.

If the left wins over 1/12^th of current National supporters over the next eighteen months, we’d have an election result of something like National 44%, Labour 33%, Greens 11%, and the rest going to parties in the middle or being wasted on the fringes. Given those numbers, I think Winston would choose change.