Keith Rankin’s Chart for this Month: Crisis Postponed

Chart for this Month: Crisis Postponed

By Keith Rankin

Another financial crisis coming? Graphic by Keith Rankin.

There will almost certainly be another major financial crisis, just like there will be another big earthquake (or, as the Australians would instead say, another big bushfire). We can do much to improve our monitoring of systemic stresses, our awareness of critical-state dynamics, and our before-and-after mitigation processes. Wilful blindness is not a strategy that works well.

In the pre-World War 1 capitalist era, financial crises happened approximately every ten years. Some were worse than others, and they became increasingly global in reach. Melbourne’s massive financial crisis of 1893 was initiated by the financial failure of the Buenos Aires Water Supply and Drainage Company, and the ensuing bank crisis in London. But the economy of Victoria in general and Melbourne in particular was in a critical state then, and would have suffered a financial collapse in the 1890s regardless of those particular precipitating events.

The ‘Long Depression’ of the 1880s in New Zealand was triggered by the collapse of the City of Glasgow Bank in 1879; a collapse that was largely caused by that bank’s unsupervised exposure to rampant land speculation in Canterbury.

This month’s chart suggests that, while there is more than enough unspent income to fuel a financial crisis, the global financial system is not presently in a critical state. We still have learning time.

The chart shows global financial balances for the private (non-government) and government sectors from 1981 to 2017. As can be seen clearly, the normal state of the world is for the global private sector to run financial surpluses (ie spending less than its total revenue; this is the ‘private urge to save’), which means that the combined governments of the world must run accommodating deficits (ie spending more than their global total revenues). It’s a zero-sum system. The financial balances of all sectors combined add to zero. This means that the private sector persists in striving for substantial surpluses AND governments persistently seek to avoid deficits, then the capitalist economy finds itself in a state of collapse.

Capitalist collapse is avoided by governments accommodating the private urge to save (Japan’s government provides our best example of accommodating deficits), or by us having periodic private debt‑fuelled spending binges (which enable governments to collect more taxes and run surpluses for a while); binges which lead to acute financial crises within the private sector. Or by our addressing and countering the unsustainable accumulation of financial assets, thereby rendering financial crises unnecessary.

The chart shows three of these private-sector ‘binges’, in the mid-late-1980s, in the late 1990s, and in the mid-late 2000s. The chart shows a different pattern in the mid-late 2010s. The banks struggle to get private households and businesses to spend more, despite record-low interest rates.

Following the 2008 global financial crisis (GFC), the private sector responded to its insolvency by paying down large amounts of debt, and by taking on much less new debt. This private sector objective was partially accommodated by unusually high government deficits (‘fiscal stimulus’) – governments taking on new debt, and running down (or halting contributions to) sovereign wealth funds.

This objective and was somewhat thwarted, however; fiscal stimulus in most countries was never more than a partial accommodation to extreme private caution. The thwarting intensified in 2010 through government ‘fiscal consolidation’ programmes, otherwise known as ‘austerity’. The most egregious example of ‘thwarting’ was the European Union (EU) programme to balance government budgets in the Eurozone countries. Fortunately, governments in the emerging and developing economies were able to increase their deficits, helping the government sector to effectively offset private surpluses in the mid‑2010s.

We can get a sense, from the chart, that world private surpluses (especially those in excess of economic growth rates) represent fuel to be consumed during future crises. A dramatic fall in private balances represents the beginning of an acute financial crisis. In the 1987-92 period, the crisis happened in two parts; New Zealand and the United States (and others) mainly experienced the 1987 shock, while Australia, Japan and Scandinavia experienced their financial crises in 1991. In the 1997 financial crisis, east Asia was most affected, while the United States was little affected until late 2000. In 2008 the crisis was global, although Europe descended into its more chronic crisis around 2011.

The chart also tells us that an early-decade pattern of falling private balances has halted; debt-enabled spending looks unlikely to accelerate in 1919 or 1920. The next major crisis may not occur until the 1927-31 period. And a crisis then likely will be different in character to both the 2008-09 GFC, and the Great Depression of the early 1930s. There may be a critical mass of accumulated private surpluses to fuel the crisis of 2029 (the midpoint of 2027-31), a new ‘yuppie’ generation with little memory of the GFC, and an academic establishment no more equipped to anticipate a sudden change of circumstance than there was in 1928 or in 2007.

The chart shows only one form of dichotomous interconnection – that between private individuals/organisations and governments. There are other financial dichotomies that may prove to be equally as important in the twenty-first century, but generally are much harder to get data for. These include households versus businesses (before the GFC, business surpluses were accommodated by household deficits), advanced current account surplus economies versus developing deficit economies (data is plentiful in this case), young versus old (older persons’ financial surpluses are accommodated by younger persons’ deficits), and rich versus poor (richer persons’ [eg world’s wealthiest five percent] surpluses need to be accommodated by the deficits of the remaining 95 percent as well as the deficits of governments. The cessation of any of these present accommodations can be expected to precipitate financial consequences that we are unprepared for. Unknown unknowns; so long as we persist in a bubble of wilful ignorance.

As private surpluses accumulate (the blue columns in the chart), the tension builds. As the tension builds, accommodating sectors cannot (or, unwittingly, choose not) to play their necessary deficit roles. Debtors default, or otherwise stop spending in favour of debt ‘deleverage’. Asset values diminish as sellers of goods, services and assets struggle to find buyers. Deflation sets in. Real interest rates need to be negative to restore a semblance of balance, meaning that interest rates actually should be more negative than inflation rates. (Negative interest rates since 2014 have already substantially eased financial tensions in non‑Eurozone Switzerland, Sweden and Denmark.)

What can we do today to avert a crisis of liberal capitalism in about ten years’ time?

Governments can commit to long-run deficit targets of two‑three percent per annum. (This is contrary to the fiscal accord that all parties currently in the New Zealand Parliament have signed up to.) Younger people can continue to borrow, and purchase goods/services rather than assets, and then turn to bankruptcy as an accommodating mechanism. (The bankruptcies of persons without assets does represent a systemic rebalancing, albeit an unpalatable one.)

Or other new methods of containing the growth of income inequality (with a view to reducing inequality eventually to 1960s’ levels) – methods other than higher wages, which coexist with unsustainable economic growth – should be adopted. Such methods do exist. It is up to each of us to learn about them; to be willing to see. Don’t wait for the politicians, nor the entrenched political left or right. We, in civil society, need to reclaim our public equity.

MIL OSI – Source: Evening Report Arts and Media

West Papuan ‘independence day’ – nationalist thugs attack rally in Surabaya

Report by Dr David Robie – Café Pacific.

A bloodied Papuan student attacked during yesterday’s December 1 Free West Papua rally
in Surabaya, Indonesia. Image: Human rights sources

From the Pacific Media Centre

By Tony Firman of Tirto in Surabaya

A protest action by the Papuan Student Alliance (AMP) in Indonesia’s East Java provincial capital of Surabaya yesterday demanding self-determination for West Papua has been attacked by a group of ormas (social or mass organisations).

Police later raided Papuan student dormitories in the evening and detained 233 students in a day of human rights violations as Indonesian authorities cracked down on demonstrations marking December 1 – “independence day”, according to protesters.

The group, who came from a number of different ormas, including the Community Forum for Sons and Daughters of the Police and Armed Forces (FKPPI), the Association of Sons and Daughters of Army Families (Hipakad) and the Pancasila Youth (PP), were calling for the Papuan student demonstration to be forcibly broken up.

READ MORE: Surabaya counterprotest, 300 arrested in West Papua flag demonstrations

“This city is a city of [national] heroes. Please leave, the [state ideology of] Pancasila is non-negotiable, the NKRI [Unitary State of the Republic of Indonesia] is non-negotiable”, shouted one of the speakers from the PP.

At 8.33am, a number of PP members on the eastern side of Jl. Pemuda began attacking the AMP by throwing rocks and beating them with clubs. Police quickly moved in to block the PP members then dragged them back.

The AMP protesters had began gathering at the Submarine Monument at 6am before moving off to the Grahadi building where the East Java governor’s office is located.

However they were only able to get as far as the Surabaya Radio Republic Indonesia (RRI) building before they were intercepted by police from the Surabaya metropolitan district police (Polrestabes) and the East Java district police (Polda).

‘Independence’ day
The AMP demonstration was held to mark December 1, 1961, as the day West Papua became “independent” from the Dutch. For the Papuan people, December 1 is an important date on the calendar in the Papuan struggle which is commemorated every year.

The historical moment in 1961 was when, for the first time, the West Papuan parliament, under the administration of the Dutch, flew the Morning Star (Bintang Kejora) flag, symbolising the establishment of the state of West Papua.

Since then the Bintang Kejora was flown alongside the Dutch flag throughout West Papua until the Dutch handed administrative authority of West Papua over to the United Nations Temporary Executive Authority (UNTEA) on October 1, 1962, then to the Indonesian government on May 1, 1963.

The UNTEA was an international mechanism involving the UN to prepare a referendum on whether or not the Papuan people wanted to separate or integrate with Indonesia.

The referendum, referred to as the Act of Free Choice (Pepera), resulted in the Papuan people choosing to be integrated into Indonesia.

Since then, the administration of West Papua has been controlled by the Indonesian government and the flying of the Bintang Kejora illegal – as it is deemed an act of subversion (maker) – and have responded to protests with violence and arrests.

A video of the arrests in Ternate, North Maluku. Video: Arnold Belau/Suara Papua

Police arrest 99 Papuan activists at pro-independence rally in Ternate
Arnold Belau of Suara Papua reports from Jayapura that at least 96 activists from the Indonesian People’s Front for West Papua (FRI-WP) were arrested by police in Ternate, North Maluku, after they forcibly broke up a rally in front of the Barito Market.

A Suara Papua source from Ternate said that the FRI-WP action was closed down by police and intel (intelligence) officers and the demonstrators forced into trucks as they were about to begin protesting in front of the Barito Market.

The source said that several activists were dragged and assaulted as they were forced into the truck.
“Several comrades who were at the action were dragged and forced to get into a truck by police and intel in Ternate,” they said.

The source said that as many as 99 people were arrested, 12 of them from West Papua and the rest activists from FRI-WP. One of the protesters had to be rushed home because because of breathing difficulties.

“One of the people had difficulty breathing and was rushed home. Twelve people were from Papua and the rest from Ternate. Currently they are being taken to Polres [district police station]”, they said.

Ternate district police Tactical Police Unit head (kasat sabhara) Aninab was quoted by as saying that the protesters would be taken to the Ternate district police station.

‘Given guidance’

“We will take them to Polres, question them. If in the process of delving into the matter it is discovered that they committed a violation then they will be charged, but we will bear in mind that are still young and [they should be] given guidance,” he said.

Earlier, the protesters sent a written notification of the action to the Ternate district police but it was rejected with police saying that the planned action was subversive (maker).

Upon arriving at the Ternate district police station they will be registered and those who originate from Papua will be separated from those from North Maluku.

FRI-WP is demanding that the Indonesian government must resolve human rights violations in Papua and that the Papuan people be given the freedom to hold a referendum to determine their own future.

Although it is widely held that West Papua declared independence from Indonesia on December 1, 1961, this actually marks the date when the Morning Star (Bintang Kejora) flag was first raised alongside the Dutch flag in an officially sanctioned ceremony in Jayapura, then called Hollandia.

The first declaration of independence actually took place on July 1, 1971 at the Victoria Headquarters in Waris Village, Jayapura.

Known as the “Act of Free Choice”, in 1969 a referendum was held to decide whether West Papua, a former Dutch colony annexed by Indonesia in 1963, would be become independent or join Indonesia.

The UN sanction plebiscite, in which 1,025 handpicked tribal leaders allegedly expressed their desire for integration, has been widely dismissed as a sham.

Critics claim that that the selected voters were coerced, threatened and closely scrutinised by the military to unanimously vote for integration.

Both of these articles were translated by James Balowski for the Indoleft News Service. The original title of the Surabaya article was “Peringatan 1 Desember Papua, Demo AMP Surabaya Diadang PP & FKPPI” and the Jayapura one “Peringati Hari Lahirnya Embrio Negara Papua Barat, Polisi Tangkap 99 Orang di Ternate”.

This article was first published on Café Pacific.

MIL OSI – Source: Evening Report Arts and Media

Bryce Edwards’ Political Roundup: Suffrage reality check – prisoners still can’t vote

Political Roundup: Suffrage reality check – prisoners still can’t vote

by Dr Bryce Edwards.

Dr Bryce Edwards.

Yesterday marked 125 years to the day since women first voted in a New Zealand General Election. However, celebrations received a reality check when an inconvenient truth resurfaced in a new campaign – the fact that not all New Zealand women have suffrage, because prisoners are still denied the right to participate in elections. 

The campaign to give the vote to prisoners has been launched by the justice reform campaign group, JustSpeak, which has started a new petition: Right to Vote for All. The petition, which includes an open letter to Minister of Justice, Andrew Little, currently has around 200 signatories.

Here’s the key message: “We believe that in a fair and democratic society all members should have the right to vote, and people living in prisons are part of our society. They are valued members of communities and families. To take away their right to vote is an unfair disenfranchisement.”

In conjunction with this new campaign, two very compelling videos have been released that deal with suffrage issues and voting. Yesterday, the first video about women in prison not being able to vote was launched: Can’t: the NZ women still unable to vote, 125 years after suffrage.

And today, the second in the series “examines some of the many and complex reasons why, after 125 years of women’s suffrage, so many women don’t vote” – see: Don’t: the NZ women still not voting, 125 years after suffrage.

To accompany these videos, the Spinoff website is also running a series of articles on prisoners’ suffrage. The most important one for explaining the arguments in favour of prisoners being able to enrol and vote is by JustSpeak’s Tania Sawicki Mead and Ashelsha Sawant – see: To call ourselves a truly representative democracy, this voting law must change.

Looking at the current law that bans prisoners from voting, they say: “It’s the worst kind of anti-democratic law – harsh, disproportionate and fundamentally at odds with the idea that human rights belong to all of us.” And they also point out that New Zealand is an outlier in this regard: “Most democracies around the world either allow prisoners to vote or have recently reinstated their right to do so. New Zealand lags behind in comparison as one of the handful of countries who still have a blanket ban.”

For a poignant argument in favour of prisoner voting, it’s worth reading a very personal account from Awatea Mita, who has spent time in prison – see: A society that denies the incarcerated a vote is a society stamping on human rights. She argues: “Rehabilitation as a safe, responsible, and productive member of an egalitarian society must include the most basic right of the democratic process — the right to participate in choosing who governs, the right to vote. There is research that shows an association between civic engagement, such as being able to vote, and the reduction of offending.”

The role of the Supreme court in suffrage rights

The campaign for reform has been given a massive boost by the landmark New Zealand Supreme Court declaration earlier this month that the ban on prisoners voting – passed in 2010 as the Electoral (Disqualification of Sentenced Prisoners) Amendment Act – is inconsistent with the Bill of Rights Act. This is best covered by Sam Hurley in his news report, Supreme Court upholds decision saying ban on prisoner voting inconsistent with Bill of Rights.

This report quotes Justice Paul Heath, who made the decision in order to “draw to the attention of the New Zealand public that Parliament has enacted legislation inconsistent with a fundamental right”.

The article provides some history of the ban on prisoner voting in New Zealand. It also, interestingly, cites Jacinda Ardern’s strong opposition to the current voting ban, quoting her statements from when she was Labour’s spokesperson on Justice. For example, Ardern said, “This was an arbitrary law and one that is full of contradictions and inconsistencies” and “Parliament has a responsibility to respect fundamental rights for all. The Government now has a responsibility to assure all New Zealanders it understands that”.

For more on the process of the case being brought to the Supreme Court by current prisoner Arthur Taylor, see Alex Baird’s Kiwi prisoners’ right to vote upheld Supreme Court rules. Taylor appeared in the Supreme Court case via audio-video link from prison, and when he won the case, he says there was celebration from his fellow inmates. Taylor says: “Some of them have made me a cake out of biscuits and things they can buy on their purchases, so that was quite nice, the thought’s there anyway”.

Will the Government extend suffrage to prisoners?

The above article also quotes Justice Minister Andrew Little explaining that although the courts had ruled against the ban, he didn’t see it as a priority to correct the error. Instead, he explained that his priority was to fix the judicial-legislative constitution problems caused by the landmark ruling: “The priority is to get in place a process that requires parliament to respond to any declaration made by the courts on inconsistency with the Bill of Rights.”

Elsewhere, Andrew Little has said that, although he personally opposed the ban on prisoner voting rights, he didn’t see it as a “priority” for the current government, and he’s been reported as believing that “Ministers were unlikely to consider the issue for at least a year” – see RNZ’s Youth advocacy group disappointed in govt’s stance on prisoner votes.

This article also reports JustSpeak’s Tania Sawicki Mead’s response that Little’s stance “was hypocritical because in opposition Labour MPs opposed the law change banning voting”. Mead is quoted: “I think it’s a question of how much this basic issue of access to democracy and your fundamental right to participate is a priority to this government or not… I hope that they seriously consider making it a part of their legislative agenda next year.”

Leftwing blogger Martyn Bradbury has reacted with incredulity that the Labour-led Government would essentially oppose returning votes to prisoners, and argues that this decision is based on political pragmatism trumping principles: “Little’s kicked for touch so as to not infuriate NZs easily angered sensible sentencing lynch mob” – see: In just 7 words did Andrew Little demolish real prison reform?

Bradbury explains how the complete ban on prisoner voting came out of the National Party opportunistically playing to a conservative audience, but Labour is now doing the same: “So smart politics to play to the angriest and most easily upset elements off society, but to also shrug off the crucial point that prisoners do have human rights regardless of imprisonment actually cuts to the very heart of the issues Little is attempting to force change on.”

Another blogger, No Right Turn, is also outraged that Labour have decided not to advance a remedy for the problem with urgency: “This is simply not acceptable. When the Supreme Court makes a ruling like this, it should automatically become a priority for Parliament, and should be formally drawn to its attention for a response. The government has already signalled that that is what it wants to do in future, so why won’t it do it in this case? And there’s a pressing need: we’re having an election in 2020, and it would simply be unacceptable given the ruling for prisoners to be unable to vote in it” – see: “Not a priority”.

Furthermore, see his update from yesterday: “in Parliament today the government said that they hadn’t even considered the issue and that it wasn’t a priority for them. Which tells us everything we need to know. This government is not committed to fundamental human rights, and is quite willing to violate them for political profit” – see: Still not their priority.

For the best analysis on the Government’s reluctance to enact universal suffrage, see Gordon Campbell’s On prisoner voting. He points to New Zealand First as the primary barrier to reform.

Here’s Campbell’s main explanation: “Not for the first time, prisoners are being treated as political footballs. Just as the Key government played to the redneck vote back in 2010, Little seems OK about Labour becoming captive to the hardline ‘lock ’em up’ faction that exists within New Zealand First. Earlier this year, Little had been blindsided by NZF leader Winston Peters when Labour tried to scrap the “Three Strikes” legislation. Rather than risk losing a similar fight, Little now seems gun-shy about fighting at all on this issue.”

On the question of whether fixing the problem should be a priority, Campbell says this should be obvious: “Centre-left governments used to think that the rights of prisoners shouldn’t be sacrificed to indulge the desire for societal revenge. I’d also have thought that – when you’re the Justice Minister – defending section 12 of our Bill of Rights should be a priority.”

There is now a chance that the Government might be pressured to give the vote back to prisoners, with the Green Party launching their own campaign yesterday – see Henry Cooke’s Green Party makes call for law change to allow prisoners the right to vote.

According to this, the Green Party’s Justice spokeswoman Golriz Ghahraman “is asking Justice Minister Andrew Little to prioritise the change, but legislation would be needed, so NZ First would need to get onboard. The party has not ruled out attempting the change as a members’ bill.”

Finally, when we think about extending the electoral franchise, perhaps we need to think about lowering the qualifying age as well. Today, Azaria Howell has made the case for it being two years lower – see: Make it 16: a teenager on why we should lower the voting age.

MIL OSI – Source: Evening Report Arts and Media