Saturday, December 31, 2005

Editorial: On balance, 2005 a very good year

Looking back on 2005 we can count it a good year for New Zealand, another year of seemingly endless economic health.

Jobs abounded, skills were in demand, unions claimed 5 per cent pay rises, house values were impervious to counter-inflationary interest rates. Oil prices spiked and business confidence was suspended as the Reserve Bank stepped harder on the brakes, but households continued to borrow and spend as though it did not matter.

We might pay the price next year, but equally we might not. If the dollar stays high consumer confidence could carry the country through another year. If the dollar drops as it should, the exporting industries will get a much-needed boost. This is an adaptable economy now, evidenced by six successive years of riding smoothly over fluctuations in commodity prices, exchange rates, immigration and, this year, an oil shock.

It was also election year and despite the continuing economic sunshine, the country considered a change of Government. After 10 years of Budget surpluses the case for tax cuts became compelling, but the Government was slow to read the mood. Michael Cullen failed to dampen expectations, and his Budget disappointed them. He broke Helen Clark's golden rule: Under-promise and over-deliver.

It was a golden opportunity for the National Party, which seemed to have lost the momentum of the previous year's appeal to mono-culturalism. Orewa II, as Don Brash's 2005 speech was dubbed, advocated child adoption as an alternative to the domestic purposes benefit but it did not give the party the same lift. Tax cuts did the trick, helped by the propensity of a new Labour minister, David Benson-Pope, to put his foot where he allegedly put tennis balls as a teacher.

With the polls running for National and tax relief, Labour dispensed with fiscal rectitude. First it promised to scrap interest on student loans for borrowers who stayed in the country. Then it devised a $1.5 billion package of tax credits for low and middle income earners. National, still to announce the detail of its cuts, hastily absorbed Labour's offer into its own proposal and emerged with $3.9 billion of cuts for all. For the first time since the start of serious economic reform, an election had become an auction.

National's rising star, finance spokesman John Key, pointed out that everyone, including students with loans, would be better off with the tax cut, and he was prepared to increase public debt to pay for it. But on election day the hip pocket, by a narrow margin, did not prevail. Labour survived by 2 per cent and the decision of two small conservative parties, New Zealand First and United Future, to support the party that was first past the post.

Helen Clark thus became the first Labour Prime Minister to win a third election, an achievement too little noted amid the post-electoral bargaining that made Winston Peters foreign minister though not, he insists, part of the Government. He and Peter Dunne ensured the Greens were shut out of power, and the Greens' year was soon to get worse with the sudden death of co-leader Rod Donald.

The year also brought the death of David Lange, the imprisonment of Donna Awatere Huata, the defeat of John Tamihere and the demise of Paul Holmes, first casualty of a 7pm television war.

We welcomed the right to host the Rugby World; admitted an independent Maori Party to Parliament; farewelled Judy Bailey; and worried about police performance, oversized pylons, new school exams, TVNZ, a troubled tertiary "wananga" and a celebrity drug ring.

The year had more than its share of disasters abroad but not here. It was another year of economic resilience, political stability, national progress. May the new year be as happy.

Fran O'Sullivan: One more mountain for Clark to climb

Helen Clark likes to climb mountains. Sometimes she conquers them; sometimes she "chickens out" when the weather turns adverse. You would hardly expect her to play daredevil given the responsibilities that go with being New Zealand's "most popular and competent PM".

I've no inside knowledge on whether Clark is using her traditional Christmas break to climb mountains, or to simply plough across distant snow-fields with husband Peter behind her on their snowmobile. But the choice could be telling.

One of the books I've been reading is Wharton management professor Michael Useem's Upward Bound: Nine original accounts of how business leaders reached their summits.

Useem, who takes business people to the Himalayas on "leadership treks", reckons his charges get a great insight into themselves and the qualities it takes to oversee expeditions or companies.

"One of the over-riding themes is you need enormous self-confidence to be in a leadership position; it's stressful, risky and often unpleasant but on the other hand if you give in to too much hubris, you're going to step off a cliff."

When she was first PM, Clark continued to seek out distant mountains in Latin America or Africa - she was not so worried about stepping off a cliff.

But last year it took 40 hours after the Boxing Day tsunami struck for Clark's staff to contact her. (She was outside cellphone coverage, skiing in Norway.)

Her absence is not at issue. (Although I am sure she has not travelled outside cellphone range since without taking a satellite phone). The point is whether Clark has become so comfortable that she no longer feels it personally necessary to conquer mountains (the whole point about climbing) and herself.

The other more telling point about risk aversion is whether she is so enraptured with her position that she fears to make a fool of herself if she does not meet her challenges.

As the Wharton book points out, "falling" - as in knowing when to slide a bit and start up again - is an important quality of leadership.

If Clark has indeed become risk averse - and applies this quality to her political persona - we should worry.

The changes that will be required to stop 2008 becoming both a political and economic washout will require her to deeply plumb hidden reserves to provide the sort of leadership she has not had to demonstrate to date.

It might seem futile for me to position Clark as the person to lead New Zealand forward. Arguably politicians are at the mercy of trends in the world economy far beyond the control or influence of the prime minister of a small nation of 4.3 million.

And Clark could justifiably throw the 1990s business mantra - that the Government should get out of business' way - back in the face of those who want now for her to lead.

But globalisation is fast remaking the world in ways that surpass the ability of our existing political structures to cope.

Just look at the headlines from 2005: China outclassing the United States in technological growth; 10 Southeast Asian nations (some of them tinpots) strategising to form a new Asian bloc to rival Europe; Brazil taking on the giants of world trade; the decline of the US as the world's only superpower; the demographic changes that make the young (which India has in abundance) portenders of where wealth will be generated.

Many of our neighbours, such as Australia and Singapore, think strongly about the implications of this geographical redistribution of power and act accordingly.

One of Clark's strengths is her international outlook. She has steered her officials towards forming linkages with the world's new powerhouses and trading blocs.

But there is a gap between international performance (as in hers) and leading the domestic changes necessary for our small nation to thrive.

It is time for Clark to reach beyond her Government and forge an alliance with the private sector - and her political enemies - to bring about a new consensus on the transformative policies necessary to ride out these major geopolitical shifts.

She turned her back on the 2001 Catching the Knowledge Wave proponents which failed because it was too much a University of Auckland marketing exercise and hence exclusionary.

The reality is that all Clark had to do to succeed in her first term was ride that glorious economic weather when New Zealand and Australian economies were deliciously out-of-sync with Northern Hemisphere economies.

Very shortly, Reserve Bank Governor Alan Bollard will - in all likelihood - add a dampener to the holiday cheer by raising interest rates (again) to lower the boom on the debt-fuelled economy.

It will be a futile move - not sufficient of itself to persuade New Zealanders to make the individual shifts required for this country to become a savers' paradise. The central bank's linear approach has clearly been under-mined by the market which long ago got the measure of the referee.

Japanese bondholders and the Australian banks which dominate our banking sector will continue to "profit ship" funds offshore as fast as Bollard hikes rates.

This conundrum is not all of the Government's making. But the solution is.

Clark should come back refreshed with sufficient sense of purpose to make a difference with her prime ministership - to climb that mountain rather than snowplough her way through her third term, no matter how comfortable.

Gwynne Dyer: Rewriters of history mired in fantasies

In almost any bookshop in the Arab world, you can buy a translation of The Protocols of the Elders of Zion with no acknowledgement whatever that it is a malicious anti-Jewish forgery.

And in any school in Japan, you can find a history textbook that portrays the country's bloody history of imperial expansion in Asia between 1890 and 1945 as a series of unfortunate but basically well-intentioned misunderstandings with the neighbours.

Those who want to shape the future often start by trying to reshape the past.

In Japan, at least, there is still resistance in high places to the rewriting of history.

Emperor Akihito, in a speech to mark his 72nd birthday on Thursday, urged his people to remember that "there were rarely peaceful times for Japan" between 1927 and 1945, and that they should strive to properly understand their country's history when they are dealing with the rest of the world.

In other words - blunt, explicit words of the kind that no Japanese emperor would ever use - Japanese people should bear in mind that their country tried to conquer all of Asia within living memory, causing the deaths of some tens of millions of innocent men, women and children, most notably in China.

This experience, the emperor might have added, has left a lingering resentment and a good deal of nervousness among Japan's neighbours and Prime Minister Junichiro Koizumi's visits to the Yasukuni war shrine do not help. But he didn't say that, because it would be un-Japanese to speak so frankly.

Still, Akihito's words were an unprecedented rebuke to the conservative politicians who have been trying to revive Japanese nationalism and remilitarise the country.

His motive was almost certainly to stop Japan's drift (encouraged by Washington) into a military confrontation with its giant neighbour, China.

But on the very day of his speech, Japan's Foreign Minister, Taro Aso, warned yet again that Chinese military power was becoming "a considerable threat".

If today's Japanese were fully aware of the horrors that other Asians experienced at their country's hands in the past - as Germans are aware of what other Europeans suffered at the hands of the Nazis - they would be less vulnerable to the scare tactics that are now being used on them, and more open to genuine reconciliation with their neighbours.

But the scare-mongers who are in power don't want that, so the history books in Japanese schools are getting vaguer and vaguer about exactly what happened under the banner of the Greater East Asia Co-Prosperity Sphere.

The Arab deniers of the Holocaust are different in one major respect: they are falsifying someone else's history, not their own.

They are a fairly recent phenomenon, for the Muslims of the Middle East traditionally treated the Jews who lived among them with tolerance and respect - far better, in fact, than the Christians, who subjected the European Jews to centuries of pogroms and expulsions and then failed to save them from Hitler's Final Solution.

But then the land of Palestine became a bone of contention between the Arabs who lived there and the Zionist Jews.

Now Jews are demonised in Arab popular culture as the sinister force behind almost everything bad that happens, and part of that process is denying them the moral status of victims, even in the past.

That is why Mohammed Mahdi Akef, the leader of Egypt's Muslim Brotherhood, wrote a lengthy diatribe on the party's website last week complaining that Muslims who denied "the myth of the Holocaust" were being unfairly condemned.

To Akef, as to many other people in the Arab world today, the Holocaust cannot be true, because to acknowledge that it happened would add a level of moral ambiguity to a struggle that they prefer to view in simple black and white terms.

The Muslim Brotherhood, whose candidates won 19 per cent of the vote running as independents in Egypt's recent parliamentary elections, ought to be evolving into a modern "Muslim Democratic" party like the governing Justice and Development Party in Turkey.

Moderate, sensible Islamic parties are probably the Arab world's best hope of evolving fully democratic systems without a bloodbath, since the old secular parties are discredited in Egypt and most other Arab countries.

But instead, the Islamic parties in these countries are foundering in a morass of paranoid political fantasies.

The dispute over Palestine is a quarrel between the recent and the former possessors of the same land. Most Jews and many Christians favour the Zionist claim, almost all Muslims support the Arab claim, and the rest of us just accept that this sort of dispute tends to get settled by force - and that this one already has been.

Israel cannot maintain its preferred borders by force in the face of Palestinian numbers, and Arab forces cannot destroy a nuclear-armed Israel without triggering the simultaneous destruction of the Arab world.

By opting for this impotent obsession with a worldwide Jewish plot that governs the course of history, the Islamist parties do no harm to Israel at all.

They simply postpone the day when competent, democratic Arab states can deal realistically with the unwelcome but permanent reality of having Israel in their midst.