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Insights 35: 24 September 2021
Webinar Invite: 28 Sept 11-12pm: Why New Zealand needs better Covid testing systems with Dr Anne Wyllie, Yale University
Podcast: The security implications of the new AUKUS alliance with Oliver Hartwich
Report: Illusions of History - How misunderstanding the past jeopardises our future by Bryce Wilkinson

Illusions of History: How misunderstanding the past jeopardises our future
Dr Bryce Wilkinson | Senior Fellow |
Who thinks that the current Labour government should seek to emulate the “great traditions” of the 1935 Labour government?

At least one person thinks it should, and his opinion counts. He is our Minister of Finance.

In his Budget Speech last year, Grant Robertson saw a rare opportunity to “hit the reset button” for New Zealanders. Labour was making decisions that “will define the lives and livelihoods of many people for years to come”.

Those who would prefer to define their own lives and livelihoods should take heed.

Robertson applauded the 1935 government’s big increases in capital and welfare spending. However, he did not acknowledge that its policies led to a major overseas funding crisis in 1938. (In the three years to March 1936 it had increased real per capita current spending by 40% and public works spending by 225%, with further big increases underway.)

For emphasis, he pilloried the policies of the Fourth Labour Government (1984-1990) and the Fourth National Government (1990-1999). These policies successfully extricated New Zealand from a foreign exchange crisis. He did not acknowledge that either. Instead, he asserted they caused economic carnage”, “wreaking havoc in our communities” and were based on a “tired set of ideas”.

This week we released my report Illusions of History. It exposes the illusions in these interpretations and the dangers in the indicated direction. Economic historian, Professor Gary Hawke wrote the foreword.

A strong economic recovery was underway before the First Labour Government was elected in November 1935. Higher incomes bolstered tax revenues. The government’s spending plans came to exceed its capacity to borrow.

It hid the developing crisis from the public during the October 1938 general election. Two months later, it imposed draconian foreign exchange controls as a last-ditch measure. In 1939, then Finance Minister Walter Nash spent two humiliating months in London trying to avoid default.

In the event, imminent war with Germany impelled the UK government to twist financiers’ arms to help him. Soon, comprehensive war-time measures buried the issue of why strict peace-time foreign exchange controls were necessary.

The report points out the parallels with the policies that preceded New Zealand’s 1984 foreign exchange crisis. It also rebuts six myths about the post-1984 policies.

By diminishing the governments that fixed the 1984 crisis, Robertson seeks to justify a return to a bigger and more intrusive and directive government. He does so at our collective peril.

Untangling vaccination rights and freedoms
Roger Partridge | Chair |
The vaccination phase of the Covid pandemic raises some tricky conflicts. The Government is reluctant to make vaccinations compulsory. And rightly so. Freedom from compulsory medical treatment runs so deep in New Zealand law it is enshrined in the New Zealand Bill of Rights Act.

But just as workers and customers are free to choose not to be vaccinated, firms should be free to choose whether or not to allow the unvaccinated into their workplaces. Faced with the highly contagious Delta variant, vaccine passports (for customers) and vaccine mandates (for staff) are among the few tools available to firms to comply with their obligations to keep their staff and customers safe.

However, for most firms, exercising this freedom requires some changes to the law.

Privacy laws currently prevent most employers from identifying which of their staff are unvaccinated. During a pandemic, this is madness. A law change should permit employers to require staff to disclose whether they have been jabbed.

Restrictions imposed by the Human Rights Act also hinder most firms from keeping unvaccinated customers and workers away from their premises. The Act prohibits firms from discriminating against workers and customers on a range of “prohibited grounds.” One of these grounds is “disability.” Another is “religious belief.”

An inability to have a Covid vaccination on medical grounds counts as a “disability.” This means blanket vaccine passports and vaccine mandates risk breaching the Act’s anti-discrimination provisions. A similar problem arises where a worker or customer opposes vaccination on religious grounds.

Yet surely it is more important that firms are free to keep the unvaccinated from the workplace (and from crowded premises), than it is for the unvaccinated not to be discriminated against? A simple amendment to the Human Rights Act, specific to Covid vaccination status, would solve this problem.

Employment laws also create obstacles for firms wanting to ensure their workplaces are safe for workers and customers. The Human Rights Act aside, employers can make it a condition of employment that new workers are vaccinated. But for most employers, employment laws will prevent them from mandating vaccination as a condition to continued employment for their existing workforce. Changes to the Employment Relations Act are needed to allow this.

These law changes would also serve a greater purpose. The public good demands high vaccination levels. Giving firms the freedom to implement vaccine passports and vaccine mandates will incentivise the holdouts to get vaccinated.

And it will help keep us all safe. As Aucklanders know only too well, without this, all our freedoms are imperilled.

Human misjudgement of experts
Leonard Hong | Research Assistant |
The process of decision-making is complex. Furthermore, its significance transcends both the private and public sectors, and is crucial not just in politics.

Some believe that if everything were left to the smartest people in the country, things would turn out exactly the way we planned. Experts would be able to handle everything.

But is this always the case?

Not always. American writer David Halberstam explores this hypothesis in his book ‘The Best and the Brightest’. He delves into the foreign policy decisions made by those in the Kennedy and Johnson Administrations.

Harvard's 'whiz kids' were the brains of the government. The list included the brilliant Defence Secretary Robert McNamara, an executive with excellent business credentials, and Air Force Secretary Harold Brown, an expert in nuclear physics who has a PhD.

Members of the Cabinet and Advisory Board possessed outstanding industry experience or were highly regarded academics. They oversaw reshaping US policy in Vietnam. 

Nevertheless, these men ultimately failed. Although they spent over $1 trillion in modern dollars, they didn't contain Communism.

Since the rise of Mao Zedong in China, they were convinced about the ‘domino theory’ of the spread of Communism. If it spread to one country, it was pervious to others surrounding it.  

It was an oversimplification. Vietnamese national circumstances were ignored – they simply sought independence. Vietnamese retaliation was particularly strong due to the prior experience of French imperialism.

During the period 1965-1975, the US government deployed 2.7 million soldiers. More than 7.5 million tons of bombs were dropped – twice as much as during the Second World War.   

The greater their investment, the lower the return. Mentally, the 'sunk cost' fallacy kicked in, increasing military and financial investment in Vietnam. The Kennedy and Johnson administrations wasted a great deal of resources due to the misjudgement of ‘experts’.

Halberstam described their efforts in Vietnam as "brilliant policies that defied common sense".

On similar grounds, renowned investor Charlie Munger talked about recognising patterns as a way of understanding how humans behave both rationally and irrationally. Perhaps McNamara and Brown would have made a different decision had they considered the alternative.

Confirmation bias of elites leading to the double-downing of the policy that was doomed to fail. As economist Thomas Sowell once quipped, “The road to hell is paved with Ivy League degrees.”

Halberstam concluded that simply featuring 'the best and brightest' people on your team does not guarantee success. It's not an indication that they can make sensible decisions without falling into fallacies. 

On The Record

Initiative Activities:
  • Podcast: The security implications of the new AUKUS alliance with Oliver Hartwich
  • Report: Illusions of History-How misunderstanding the past jeopardises our future by Dr Bryce Wilkinson
  • Submission: Reforming industrial allocation in the New Zealand Emissions Trading Scheme by Matt Burgess
  • Submission: Designing a governance framework for the New Zealand Emissions Trading Scheme by Matt Burgess
All Things Considered
  • Graph of the week: Genes reveal how and when humans reached remote corners of Pacific
  • Has a gap in old-school handwriting and spelling tuition contributed to NZ’s declining literacy scores?
  • The relative unscariness of Covid if you're vaccinated
  • David Seymour leads accidental ice cream-centred anti-Taliban protest
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