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Insights 43: 11 November 2016
The Inequality Paradox: Why inequality matters even though it has barely changed
 
Report launch and panel discussion Monday 21 November
 
Julian Morris: Lessons from the sharing economy and the vapour revolution - 28 November

Give Trump a chance
Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz
According to most commentators, the election of Donald J. Trump signifies the end of the West, the end of the international post-War framework, or at least the end of the United States.
 
I beg to differ. With apologies to a truly great American, Mark Twain, reports of the death of America, the West and the World are greatly exaggerated.
 
You do not have to be a Trump fan (I certainly am not) to come to a more balanced view and forecast, and there is no better starting point than Trump’s acceptance speech.
 
Even people who were deeply opposed to Trump applauded the tone of his first remarks after the election.
 
Trump was gracious to his defeated opponent Hillary Clinton. He promised to be a President for all Americans. He thanked his family and supporters. And he did not say anything outrageous.
 
It is true that any other successful presidential candidate would have said the same. But that is precisely the point. Trump said what any other President-elect would have – and that alone was enough to surprise us on the upside.
 
The expectations the world has of Donald Trump are so low that he will continue to positively surprise us by doing things any politician would do.
 
It is a safe bet that Trump will thank Barack Obama in his inaugural speech. He will not insult foreign leaders when he finally meets them. When Trump visited Mexico during the campaign he already showed that he can behave himself on the international stage.
 
President Trump will also surround himself with people who understand the business of government better than he does. His politically experienced running mate Mike Pence was a good choice in that respect. Trump will also feel the natural constraints of office and learn the art of the diplomatic deal.
 
Again, there is nothing unusual about that. Most heads of government start off relatively inexperienced in international affairs and only develop a deeper interest and skills in this field over time.
 
Of course, most of Trump’s ideas in the campaign have been flawed, loony or just plain stupid (especially on trade, please read Eric Crampton's piece below). But that does not mean that he will implement them as President. He is a politician after all, albeit one with money.
 
So let’s follow Hillary Clinton’s advice and give President Trump a chance. He might well turn out to be a bad or even a mediocre, but at least not a disastrous, President. And that would already be better than what most people now expect.


The Chaos Ladder
Dr Eric Crampton | Head of Research | eric.crampton@nzinitiative.org.nz
As Game of Thrones fans will remember, while it’s tempting to see chaos as a pit, chaos can also be a ladder.

As the latest season of America’s Game of Thrones reached a climax more shocking than the Red Wedding, New Zealand should look to potential opportunities.

The main threat seems to be the collapse of global trade. Candidate Trump remained very vague on the details about everything, leaving room for him to be less than totally terrible, as Oliver Hartwich explains above, except on foreign relations. 

On immigration, Trump wants walls to keep out low-skilled foreign workers. On trade, he wants tariff walls to keep out cheap foreign goods. The Trans-Pacific Partnership Agreement is effectively dead, and NAFTA is up for renegotiation.

And so the main opportunity is building robust international trade agreements without the United States. The case for it was good before Trump; it is critical today.

It was very clear during the TPPA negotiations that rather a few negotiating partners had very weak commitments to free trade. America wanted to protect its dairy sector, and so New Zealand’s access was limited; America also wanted to foist lengthy copyright terms onto the rest of the world. Canada could not imagine doing away with supply management in dairy, and so they were worse than useless at the table. 

If America pulls out of international trade and starts building tariff walls, Pacific countries committed to free trade must have real trade agreements with each other. Free trade agreements aren’t about locking in rules around intellectual property – they never should have been. They are about knocking back tariffs, preventing sneaky non-tariff barriers, and blocking governments from discriminating in favour of local politically preferred suppliers. 

New Zealand and Australia have a common market. New Zealand and China have a free trade agreement. It is time to build a real free trade area for the Pacific, limiting negotiations only to those countries actually interested in free trade. Then, expand it by inviting other countries to join on the terms already negotiated. Instead of having Canada around the table trying to wreck the deal while protecting supply management, invite them to join a large common Pacific market, on our terms, and showing them the benefits to Canadian manufacturing if they do. That changes the political calculus. 

We are going to have some chaos. It does not have to be a pit. Let’s look for the ladders. 


NEET policies need tidying
Dr Rachel Webb | Research Fellow | rachel.webb@nzinitiative.org.nz
The issue of what to do with the 74,000 young New Zealanders who are not in employment, education or training (NEETs) is a tricky one. Labour correctly pointed out in its conference how difficult and despairing it can be for young people in this situation and what a waste this represents to society.

It is good that Labour has set its sights on helping this group. However, the policy ideas are not the neatest.

To start with the bad, the proposed ‘training levy’ on employers who are not training young New Zealanders makes no sense. Why punish them for failing to hire young New Zealanders when employers are complaining about how difficult it is to do exactly that? This seems like a major own goal for a party trying to shed its image of being out of touch with business.

The proposed six-month job scheme for young NEETs makes more sense. The devil, as always, will be in the details. And the fact that the proposal does not seem to have been properly costed means we should be very sceptical that they have banished the detail devils. However, the idea of providing more opportunities for work experience to young NEETs is appealing. 

There has been a lot of mud-slinging at employers for not doing their bit to help train these people. To which employers counter that their efforts to do so are met with apathy. If Labour is right when they defend NEETs against accusations of laziness and bad attitudes, then this programme could well be a success. 

To someone who has never been able to obtain a job, opportunities for work experience can be invaluable. And if it helps young people make the step from long-term welfare dependency into a career, then the societal value is potentially huge. Collecting data on the economic and psychological outcomes for participants will be helpful to determine whether it is providing value for money.

It will cost more than they have advertised, especially once administration and other non-wage costs are considered. However, it will be a drop in the bucket compared to how much the Government spends on tertiary students. And the cost-benefit ratio for the marginal student would likely be comparable.   

So while the policy is not worthy of a ringing endorsement, the direction Labour is taking is commendable. Let’s reserve full judgement until more details are available. 
 
On The Record
 
All Things Considered
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  • The Industrial Revolution: Why it didn't happen in China.
     
  • Sleeping: Are you a morning person or a night owl?
     
  • Student loans: What the system will look like under Trump.
     
  • It's all in the DNA: Online 'dating' service for endangered species
     
  • Take a guess: What New Zealand website has had a 2500% increase in site visits?
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