TUMEKE EXCLUSIVE: Phil Goff interview
You simply can not write off part of your community as if they were just another good or chattel and say we have no further use for you and then expect our society to be a decent place in which to live.
Phil Goff on the free market, free trade to America and the possibility of a double dip recession in the United States. Answers whether NZ is under a Washington Consensus or Beijing Consensus. Talks about mainstream media bias and how to politically sell a capital gains tax.
Expresses his concerns at appointing a Governor General under accusation of circumventing the Geneva Convention and discusses marijuana law reform and the moral and fiscal failure of prisons.
TUMEKE: Mr Goff, we face the steepest economic recession since the 1929 stock market collapse. You have seen the documentary 'Inside Job' detailing the venal corporate greed on display from unregulated capitalism, what lessons have we forgotten about the role of the state in the free market?
PHIL GOFF: Well we've forgotten that while the free market might be efficient at doing some things, it's not efficient at regulating itself in the interests of all of the people and it's not efficient in providing a fair outcome for everybody. The free market takes you so far but what we saw in inside job were some appalling examples of what I can only regard as corruption.
Where Goldman Sachs, Merrill Lynch, people going from there into the Secretary of Treasury, the whole link up between the wealthy finical interests and political establishment conspired to create a situation where some people got fabulously rich but in an unsustainable way that eventually led to the collapse of the economy and cost the United States dearly. So there are lessons to lean from that, and greater regulation of the private sector and we've seen it in NZ. The same people who bankrupted companies in the 1980s are back at their old tricks again in the 21st century. So you need proper regulation. You need to stop people who by acting in a reckless and greedy way can damage the whole of your wider community. To allow free enterprise to work but not to believe that the free market is the solution to all of your problems.
By crippling the welfare state, why should the most vulnerable in society do with less because of an economic crises they had no hand in making?
Well absolutely, that's the unfairness of it and also it's the sort of stuff that you see coming through in the Spirit Level and Jospeh Stiglitz in his recent article in Vanity Fair.
What Stiglitz pointed out was that income and wealth were becoming more and more concentrated in the United States, and the flipside of the rich getting richer is that you actually lose the quality of opportunity and that means that there is a whole strata of your society that doesn't get opportunity, that doesn't get the opportunity to live the good life or in NZ to live the Kiwi dream, doesn't get the chance to contribute. You simply can not write off part of your community as if they were just another good or chattel and say we have no further use for you and then expect our society to be a decent place in which to live.
I was knocking on doors in the Botany by-election and met up with an immigrant from South Africa, he was a nice guy but he voted Kiwi Party in the last election and I asked him where he came from and he said 'Johannesburg' and I said you know what I remember about Johannesburg and he said 'no. what's that'. I said, 'that the houses routinely had razor wire around the parameter of their property. You came to NZ because you didn't want your kids growing up in that sort of society, and it's really important that we create a society and build on a society in NZ where that doesn't happen, and he actually agreed with that said, 'that's a fair point, that's exactly why I cam to NZ'. That's why we cant afford to allow part of our society to be written off and not utilize the skills of every New Zealander.
Overnight the private employment figures in America came out. There was an expectation of 177 000 jobs created, they only achieved 38 000 sparking a 2% drop in the Stock Market. Is America in danger of a double dip, and if that is the case, is NZ insulated from the financial feedback?
Well I don't think you can rule out the situation in the United States. This has been a prolonged recession and those figures will be a huge disappointment to the American's. If you look at NZ's track record we've been pretty much parallel to that. John key in 2009 saying that in 2010 we would be aggressively coming out of recession and we actually did the reverse of that. If you take the Christchurch figures into account we actually went back into recession. We are very fragile here and the only reason we are doing better than the Americans is because our two major markets Australia and China are actually doing pretty well and we are getting the best ever prices for our diary and wool and meat and forestry and NZ should be doing a lot better but that money has not feed through to effect the living standards of middle and lower NZ.
The Reserve Bank Governor, Alan Bollard in his book Crises says that the US had written up a quadrillion dollars in credit default swaps. Aren't Treasury predictions beyond optimistic when you consider how over leveraged the global financial house of cards had been allowed to grow to and that the correction is at best half way through?
Well I think that may well be right listening to the radio as I drove into a breakfast meeting this morning with Treasury saying two weeks after the budget that they may have been too optimistic in their predictions in the budget. Two weeks after coming out and telling most of us what we knew already that the idea that we were going to get 4% wage rise and create 170 000 jobs was wildly optimistic. We had that promised in the budget last year and it wasn't delivered and sadly I don't believe it will be delivered this year. It's always jam tomorrow and not jam today.
It wasn't until the mid to late 1930's that the full social impact of the 1929 stock market hit people, is what National are proposing by selling our State Assets going to prepare us for a worsening recession?
Well I think it's about as dumb as you can get in an economic sense. When you are in trouble as a person or as a company or as a country, it makes no sense to flog off your best performing assets. Take those three power companies, they bring in $700 million that is money going to the NZ community, to the taxpayer and so it should be because it was our sweat and brains that built them. If we sell off those assets we lose that asset and the dividend stream. I asked Key in the House how much real rate return from our assets, he said 17% and I asked him how much the debt was costing us, and he said 6%. What doesn't he understand about not flogging off assets bringing in 17% to pay off debt costing you 6%. That's dumb economics and Labour simply will not sell those assets, voters have a clear decision at this election. A Labour led Government would not sell those assets, a National ACT one will.
We are not going to grow by 4% next year are we Mr Goff?
I'd like to think we were but no, there's nothing in this budget that will help produce that outcome. I was looking at something on the web this morning, it was something from PriceWaterHouseCooper saying if you want to get growth you have to invest in a smart, clever economy, you have to invest in R&D. There's no investment in this budget for R&D, if you want to get growth you have to have a highly skilled population. This budget took 90million dollars out of skills training at a very time we are short of the skills to rebuild Christchurch. How can the Government say that we are going to get growth when there is no plan for growth in this budget, they are simply sitting on the sidelines saying that they hope international conditions takes us out of this recession. There's no plan and none of the investment to suggest that we can achieve real growth in the economy.
It was during the privatization agenda of the 1990's that our suicide rate tripled to the shameful OECD figures they are today, the Government can't pretend it isn't aware of that reality yet are cutting public services when the public need those services most. Where do we find the money to invest into more not less public services Mr Goff?
There are two things, the first is growth. You need growth to create Government revenue and when you've got no growth and revenue is falling you getting into more and more trouble. The second thing is that you have to differentiate that when you cut to make a short term saving that you aren't creating a long term cost. Let me give you a simple example of that. I was talking to a women in her 90's living out in Mana and she had some serious health issues and she was getting a few hours care for her to live in her own home, and they cut those hours to her. That service was costing the taxpayer maybe $90-$100 a week, that lady is now living in a rest home and it's costing the taxpayer $800 a week. Now that cut robs her of her right to live independently for as long as she can, but that cut also ends up costing the taxpayer more on the pretense that it's going to save us money.
Just like cuts to early childhood education. You cut early childhood education you stop kids from laying good foundation for a future education and a role in the workplace, that's not going to save you money, it's going to cost you for a long time and continue costing you.
Isn't the reality Mr Goff that we don't have a broad enough tax base and you really need to bite the bullet politically and promote a land tax or capital gains tax to show solutions? How do you politically sell a capital gains tax?
I think successive parties in Government and opposition have lacked the confidence to do that, it's very easy for the Government to create scare stories around it but there is an argument to broadening the tax base. One of the things I have announced already, is that we will be ringfencing investment in property, let me give you an example of what can done at the moment.
Say a Cabinet Minister on quarter of a million decides that he is paying the top tax rate and he doesn't want to do that so he goes out and he'll invest in 6 rental houses. He'll leverage himself up to the total amount that he can, he'll offset his cost on those rental houses off his tax, end up paying very little in tax on his other income, and then at the end of it sell it and make a capital gain on top of that. Now that's not productive in insuring that there is a level playing field investment. Ringfencing is one of the things that will help that.
Ireland, France and Germany are all seriously looking at a Financial Transaction Tax, Mana have suggested a Hone Heke Tax, why shouldn't the corporates who have benefited so well from capitalism pay their fair share of civic burden and pay more tax via a Financial Transaction Tax?
I agree that people have to pay fair shares across the community and when you look at the Tax Working Group that the Government set up they make the point quite clearly that there are many mechanisms that makes paying tax voluntary for the very wealthy and that not many are volunteering. Whether the Financial Transaction Tax is the way to go I'm not sure. One of the worries is that people on low incomes make a lot of transactions and that it might be a regressive tax. No country is looking at doing it yet and I'm not sure I want to be the guinea pig, but we should look at all examples across the world of a system that is marked by its simplicity, it's efficiency and it's fairness.
I was talking to a woman who was expecting her second child and she was saying that she was losing out on kiwisaver and early childcare, a lot of middle class people are finding that they are paying the tax burden that the high end income people don't share in and I think the worst thing this Government did in the budget was say we are going to put the burden on the low and middle class people but not going to touch the people we gave fabulous windfall tax cuts to last year. 2 and a half billion dollars went to the top 10% the bottom 20% got 1.4% of the tax cuts, that shows you how unfair John Key's tax cuts were.
If you look at John Key's comments on the poor choosing to be poor if they receive food parcels and that bugger all would starve to death if he cut off the benefit, does it suggest our multi-millionaire Optimist Prime is out of touch with the reality of poverty for the 40% of NZ who earn less than $20 000?
Absolutely out if touch, that kind of arrogant comment that if you can't make ends meet it's a lifestyle choice, is something straight out of Charles Dickens' England.
I think if you look at the list of property and incomes earned by National Party members of Parliament and Cabinet Ministers, you will see people that have a lifestyle that has nothing in common with the people in my electorate who are struggling every week to pay the bill when going through the supermarket check out or are struggling to pay for petrol in tanks of their cars. It is absolute arrogance to say that, and at a time when Chief Executives have given themselves a 14% pay increase last year for them to scream and National to scream about Labour's proposal to lift the minimum wage to $15 per hour is just double standards.
How can people raise a family when they are being paid $13 per hour. They need a boost, and if we give them a boost they go out and spend the money and that creates more jobs, not diminish jobs.
It was Amnesty International's 50th Birthday on the 28th May, an organization you have had a lot of time for in the past. Do you think NZ is living up to it's role as a human rights defender with the allegations from the Metro Article claiming SAS troops handing civilians over to known torture units 35 times while in Afghanistan?
Let me congratulate Amnesty International on it's 50th birthday, I've been a member for about 30 of those years, and it's a great organization.
On Afghanistan I've got real worries about it and that's why I've supported the call for an inquiry. In 2002, unbeknown I think to the Government, and certainly to me, our SAS troops were involved in the taking of detainees. They had no facility of translation to talk to the detainees nor anywhere to keep them and the NZ forces handed them across to the Americans and the Canadians on the basis that these two country's were signatories as we were to the Geneva Convention for the treatment of detainees. Allegations have been made that these detainees were tortured, I don't know if there is truth in that, but the fact that I don't know means that it wasn't satisfactory and that was the last time under our Government that detainees were taken.
Just to clarify Mr Goff, you had no idea of the torture allegation at the time?
I've never been told that they may have been tortured, I became Minister of Defence about 3 years after that and I had raised some questions about it. There had been some talk from some of our soldiers that they didn't like the way the Americans had shoved some of these detainees around. To be fair to our guys they act with decency and integrity and I'm proud of what they do but there wasn't any suggestions of torture. I actually went back to the Defence Force and asked what had happened to these detainees and I was told by the defense force to the best of their knowledge all the detainees had been released. There was never any suggestion made to me that they had been tortured. So I don't know, the allegation has been made and it's a serious allegation and the allegation is made more serious by suggesting that this is ongoing with detainees being handed over not to the Americans but to the internal security forces in Afghanistan who have a bad reputation. I'm not jumping to conclusions, but I am saying I think there should be an investigation so we can be sure that NZ is living up to its international agreements that we have signed up to and that they are being honored. That's not a rash demand, it's what every NZer would want to know that if we are signing up to an international agreement against torture and maltreatment of detainees we need to know that what we are are doing is preventing those things occurring.
Is it appropriate for the new Governor General to be appointed before an inquiry can establish whether he used a legal loop hole to contravene the Geneva Convention?
I don't know whether he did that, I would normally give Jerry the benefit of the doubt that he is a decent person but it is unfortunate that he will assume our head of state with that cloud hanging over his head and I think that if the Government can clear that matter up then they should do so quickly because that is not the sort of thing that you want our Governor elect to take over office with that sort of question mark hanging over him. I don't think it's fair for him and that's another reason why the Government should come clean with that information.
How soon would a Labour Government pull SAS troops out of Afghanistan?
I would want them out as soon as possible, their term would not be extended. We pulled them out in 2005 not as a reflection on their integrity or professionalism, but because they could be compromised by those they were working with. My worry is this and let me declare my vested interest. I have a nephew serving with the Americans and I had a nephew who had one of his older brothers killed in Afghanistan. I think that if you are going to sacrifice your young people then that sacrifice needs to be worth that cost.
If Al Queda was operating out of Afghanistan and posing a threat to the world we would have a different scenario. That scenario is long since gone, you are now talking about a fight between domestic Taliban forces and the Khazai regime. Sadly that regime is known for its corruption, known for its involvement in drug trafficking and known for being unable to win the hearts and minds of its civilians. I don't think that we can resolve the internal problems in Afghanistan through the participation of international forces. And I think the dangers we have at the moment is being drawn into the sort of conflicts where things will happen from the side we are currently supporting that you can't justify and you wouldn't want to justify and it's time for an exit strategy not just for NZ forces but all international forces.
Foreign Ownership with our Assets up for sale will be an issue at this election. Do we want to replace the Washington Consensus with a Beijing Consensus? Whose sphere of influence does NZ now lie in?
Well Obviously NZ wants to own it's own future, even the PM said at one point that we shouldn't be tenants in our own land, but then he has failed to act to prevent that, especially in so far as sales of farmland to foreign investors are concerned.
Look let me make this absolutely clear, I'm not against foreign investment, if we are not raising enough funds in NZ to maximize our productivity as a country then we have to rely on investment from abroad, and there is a place for foreign investment and we would encourage it, but there are areas where we would exclude that foreign investment from. one area is strategic assets where we should maintain ownership over. That's why I was outspoken as a Minister against selling off for example Auckland International Airport to foreign investors whether they be from Dubai or Canada.
We do not see any advantage in selling off our farm land. A big business from Hong Kong doesn't know anything about farming. They can't help us with animal husbandry, pastoral management, agri-technology, they will not add value by that investment, but we risk the loss of control of our farmland because if they decide to control the whole supply chain, there is nothing to stop them for example from shipping produce that is only partially value added in NZ to add greater value in their country of origin and that's not good for NZ.
Let's look at the other side of the coin, if we want to own our future we've got to save more ourselves as a country. That is why we set up the NZ super fund which they've stopped contributing to, that's why we set up Kiwisaver which they have slashed and created uncertainty about. We should have kept our Kirk superannuation fund set up back in 1974 that would now have $250billion to invest into our future. We've got to look moving step by step back towards a scheme where everyone can contribute to supperannuation saving so we can own and invest in our own country.
China has had a sudden flurry of arresting bloggers, artists and Christians worshipping during Easter, do we want a country with that level of human rights abuse having more influence on our economy?
Well, we've always had a constant stand on human rights and everytime I met China as Foreign Minister I always raised human rights with China. When you are in Government you obviously seek to influence countries, in this situation it is difficult. 4.3 million NZers trying to influence a country of 1.3billion isn't easy but we have an obligation in humanity to do that and do that in a way that is most effective.
Would I stop trading with China? The answer is no, if we stopped trading with every country that we disagreed with on policy that would be to the disadvantage of NZ without making an impact on the world. I think we should keep those communication channels open with China, when I was personally advised by China not to met with the Dalai Lama, I told China that was a decision I would make as a member of parliament of NZ and I wouldn't be told by the British or the Americans or the Chinese who I should meet with and who I should not meet with so we need to maintain that independence.
I have no problem with Chinese investment in areas where I don't have any problem with foreign investment. I'm not xenophobic about that type of investment, but we need to make sure that in the areas where we need to control and own NZ, we continue to control and own NZ.
The free trade deal with America that John Key is pretending we will make billions from will in fact open us up to prosecution by corporations in overseas tribunals, kill off pharmac, end any local broadcasting content and make environmental law more difficult to implement. Is this draconian restriction of our economic sovereignty America's attempt to economically mark their turf in the Pacific against a looming China?
(Long pause) Um, No. But those are things when you are negotiating you design bottom lines around, look at Pharmac. There is no reason on earth that Pharmac needs to be sacrificed for a free trade agreement. Parmac does not stand in the way of free trade, Pharmac is a sensible way in which a country of 4.3million people say 'we need to have some negotiating strength with the big pharamucutical countries'. NZ is smaller than most states in the United States. The Pharmusutical companies may not like that we can chisel a better deal out of them but that's no reason we should sacrifice Pharmac and that should be a bottom line.
In terms of an overall free trade deal with America, I'm in favor of that but you do not sacrifice things you should not sacrifice, you look at things that will be mutually beneficial and you sign up to that. CER with Australia has been beneficial, free trade with China has been beneficial. But no country is setting out to benefit your people, you've got to negotiate and you've got to negotiate hard and set your bottom lines.
The Media bias against the left seems more intense this election. Government pollster David Farrar has been given an unchallenged blog in the NZ Herald while there seem to be more stories on your hair colour and lack of tie than any real critical analysis of Government policy. If TVNZ was privatized, how much worse off would be the quality of public debate in NZ and what impact does that have on democracy?
Yeah, well I'd like to think the charter made TVNZ a public broadcaster but I'm not sure I can in good faith argue that point. We do need a good public service broadcasting in this country because commercial TV doesn't provide the level of information, analysis and debate we need. I'm against the privatization of TVNZ because I've seen the way the international media conglomerates work, I've seen the way they use their control of the media to support whichever side they choose to support in politics and I think that's wrong. NZers are entitled to get proper analysis and impartial reporting, too often we don't get that in the media because the ownership of the media and level of income of those who run it align most media with one particular side in politics. I think that is wrong, so we don't need that privatization, we do need a better standard of media analysis and investigative journalism than we are currently seeing.
As an example of the bias Mr Goff, How come the State interfering in the reproductive lives of the poor isn't 'nanny state political correctness gone mad'? Isn't state sponsored sterilization programs for the poor as promoted by the Ideologically stacked welfare razor gang a twee bit more invasive than power saving lightbulbs and water saving shower heads?
Political correctness is in the eye of the beholder and the party that accused us of being Nanny State doesn't hesitate to say that they can interfere in the most intimate part of the lives of those who are most disadvantaged.
I have some advice for this Government, do we want the numbers of people dependent on the State for their incomes down? Of course we do, but what has been the track record of this Government? It's been to push up the number of people on benefits by 110 000. Why is that? Not because people have suddenly become lazier or want to be dependent but because the jobs aren't there and the trainsing opportunities to increase your skills to get the jobs that are there have been taken away.
What rank hypocrisy from Paula Benefit (sorry, Bennett) that got the training incentive allowance when she was a solo mum and got the education that enabled her to get decent income, what rank hypocrisy for her to then withdraw what she benefitted from for other people. The former state house kid John Key who's Mum was rightfully helped out by the first Labour Government not wanting state houses in his electorate. These are people who climbed the ladder of opportunity provided by the state and now want to lift that ladder up so other people can't do what they have done.
Bill English in his budget notes said that NZ Prisons were a moral and fiscal failure. Hasn't his Government incentivized that moral and fiscal failure by privatizing prisons and building a profit margin into incarceration?
They have done to prisons what they are trying to do to ACC. When you privatize something, the private sector build in a profit margin, and the way they do that is cutting back on their costs. In prisons they are cutting staff numbers which will make prisons less safe, or they raise the charges which is what they will do with ACC. From my perspective both Prisons and ACC are both core state functions. Both need to operate efficiently, I believe on the most part they do, and handing them over to the private sector produces not better quality services at lower cost but higher costs and too often worse quality services. It makes no sense.
Under this Government we are facing the largest roll back of civil liberties ever passed in modern history with jury trials thrown out, desensitizing TV screen trials and no independence of Legal Aid combined with an expansion of Police powers that allows NZers to be spied on for 3 days with no judicial oversight. How can after almost a decade of Labour rule NZ have so many civil and legal protections eroded in as little as 3 years with virtually no media focus whatsoever?
The worst of those things were the changes to legal aid, when they set the level of income for legal aid 100 dollars lower than minimum wage. What that tells me is that a whole lot of people who struggle to pay basic living costs will never be able to afford justice. We pride ourselves in this country on our justice being blind and fair to all, but if you can afford a good lawyer you've got a much greater chance of getting off the charge and if you can't afford legal aid at all there is a much greater chance even if you are innocent of being convicted and that undermines the basic assumptions of our justice system.
Overnight former world leaders have called for a decriminilization of marijuana pointing out that the war on drugs has failed with devestating consequences. Isn't it time we stopped arresting people for pot and tax the industry Mr Goff? In tough economic times couldn't Obama's the audacity of hope become the audacity of dope?
(laugh) Look for the person who is a user few should be locked up for smoking but I don't want to encourage it either. I don't want to make criminals out of smokers. Labour won't legalize dope, but you also won't see a movement to criminalize people for being users.
Finally Mr Goff, the promise of democracy is that every citizen can look into the face of their child and know their child will get a better deal of it than they got. The angry electorate of poverty grows and for the first time in many Middle Class NZers lives, they don't feel middle class. Is that promise of democracy alive or stillborn under this Government?
I think the kiwi dream that was a part of the NZ I grew up in the 50s and 60s has sadly gone. The dream where most families could aspire to own their own home, and everyone had the chance to earn their own livelihoods because we had near full employment. The concept that jack was as good as his master, that we may have different skills and different income levels but we were all equally NZers. Something that had perhaps been strengthened by the war years, that it didn't matter of you were a lawyer or a laborer , you had put your life at risk, sacrificed for your country and when they came back they said if the sacrifice had been even, then so should the post war NZ we build - those things are gone and that is a huge loss to NZ. Seeing the figures today that NZ is the 7th most unequal country in the developed world is a matter of shame for all of us. I want the best for my kids, but I want the best for every NZ child, Peter Fraser said as Minister of Education back in the 30s was that his dream was that every child regardless of their background could realize their full potential, that is a dream we need to keep alive today. That is fundamental to a decent society, that is fundamental to a productive society because it doesn't make sense to rule out a whole section of your community from achieving as much as they should be able to and that is a dream we need to rekindle, recreate and realize in NZ.
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