Oliver Hartwich: New business think-tank headby Morgan.J
With his genuine talent for upsetting people – including political leaders – new business think-tank head Oliver Hartwich is guaranteed to start making his presence felt.
If New Zealand think tanks have been running on empty in recent years, they are about to get an injection of fuel. Oliver Marc Hartwich is a high-octane German import brought in to head the New Zealand Initiative – a new ideas shop for economic policy, which replaces both the Business Roundtable and the New Zealand Institute. It is the merger of two organisations with opposite problems. Since the departure of its first director, David Skilling, the New Zealand Institute has lacked profile and scale. The Business Roundtable, meanwhile, has struggled to remain relevant to a new generation of business leaders, and to the public in general.
Into the somewhat barren environment of New Zealand economic debate – which often consists of business versus unions – comes Hartwich, a precise and colourful economist with impeccable credentials and a genuine talent for upsetting people. He has just finished four years as a researcher at the Centre for Independent Studies (CIS) in Australia – a right-wing think tank that has a lot in common with the Business Roundtable. Before that, he was chief economist at a British think tank, Policy Exchange, which was once described by the Daily Telegraph as “the largest, but also the most influential, think tank on the right”.
But if his record in Britain and Australia is anything to go by, it seems highly likely he will be loved and loathed in equal measure in New Zealand. He was ushered out of Britain in 2008 with this parting remark from Tory leader David Cameron: “I gather he is off to Australia. The sooner he gets on the ship the better.” The Policy Exchange had been a favourite of Cameron’s. But then Hartwich and his colleagues wrote a report called “Cities Unlimited”, which caused great offence in the north of England by suggesting vast amounts of money had been wasted trying to revive cities such as Liverpool, Hull and Sunderland.
The report suggested that although they’d thrived during the Industrial Revolution, their location was not doing them any favours now. That upset the fiercely proud people of the north, so Hartwich provided some “balance” in a follow-up article blasting the other end of the country. “Britain is one of the most expensive countries on the planet and London its rip-off capital,” he wrote. Hartwich, 36, appears to relish the opprobrium he generates, and highlighting his favourite pieces of abuse in a section on his website, including many from his tenure at the CIS. “Oliver Hartwich comes across as a clown, dragging out the tricks of bogus logic to bolster a position that is under attack only in his own imagination,” said one correspondent in the Sydney Morning Herald, howling against his free-market thinking.
On the other hand, an article Hartwich wrote last year about foreign direct investment was singled out for praise by Roger Kerr, on Kerr’s own blog. Describing the article as a “nice little piece”, Kerr referred to Hartwich as a “highly talented researcher”. “Would that more New Zealand journalists and commentators exposed the fallacy of the ‘sending profits abroad’ argument,” he lamented. So, give Hartwich a while – he likes to get his feet under his desk before striking out – but it’s unlikely he will pull his punches for a Kiwi audience. And if that injects some vigour into our economic debate, that’s a good thing, isn’t it?
When Hartwich talks to the Listener, the movers are at his Sydney home as he prepares to shift to Wellington for his new job. Despite its relatively rosy economic circumstances, the Australia he is leaving is curiously pessimistic, he says, and feels very different to the place he experienced in his first stint in the lucky country a decade earlier. In his final column for Australian website Business Spectator, he admitted to leaving with an “underlying sentiment of disenchantment”. Australians don’t realise how lucky they are, he argued. And what’s with their belief that their gigantic continent can support only 22 million people?
“I wonder whether Australians take their good fortune too much for granted. Instead of celebrating the resources boom, Australians only wonder how they can tax it. Instead of celebrating their multi-ethnic success story, Australians spend a disproportionate time discussing illegal arrivals,” he wrote. He’s not inclined to lecture New Zealand about its failings just yet. But he is already perplexed by our loyalty to MMP. Hartwich is staggered that anyone would want to import Germany’s electoral system. German machinery, cars and beer – yes. The German electoral system – no. MMP has made Germany “completely unreformable”, he complains. It was, after all, designed after World War II to stop another Hitler-type dictator. He believes it is a confused and confusing system where you never know who to blame for bad policies, and governments “sleepwalk towards eternal compromise and consensus”.
If that hasn’t got your back up, maybe his tongue-in-cheek views on the porn industry will. “Thank God for the porn industry,” he wrote in a newspaper column two years ago. “The seemingly questionable industry does not care about morality, but is nevertheless a constant source of innovation and social improvement.” The column lauded the industry for the development of 3D films, predicting the technology – if not the content – could be used by schools to make geography and chemistry lessons much more interesting. “With some justification, sexual needs could be called the mother of the web’s invention. Without streaming videos of screaming porn stars, bandwidth would not have been added so fast to the global net,” he suggested.
If his ability to place the porn industry in a purely economic context is controversial in a superficial sense, his views on the causes of the global financial crisis are rather more predictable for someone of his persuasion. Forget greed, derivatives, credit default swaps and collateralised debt obligations – the two basic causes, he argues, were a monetary system that favours the creation of a vast amount of debt, and Western governments spending more than they earn, particularly on redistribution through the welfare state. For the past few decades, he says, Western governments have been trying to suspend the “iron laws” of economics: that you can only spend what you earn, you can only spend a dollar once, and you can only save for tomorrow what isn’t consumed today.
Since the end of the gold standard in the US in 1971 – which required the US dollar to be backed by a fi xed amount of gold – money has had no intrinsic value. Hartwich believes we need to again anchor the monetary system to a commodity – although not necessarily gold, and maybe a mixture of commodities. He’s not a lone voice on this. In 2010, World Bank president Robert Zoellick called for a return to the gold standard, saying the world needed a more co-operative monetary system and should “consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values”.
Hartwich’s friend and colleague Detlev Schlichter, author of Paper Money Collapse, says the financial crisis is not an accident of capitalism but the “unavoidable consequence of the political decision to abandon a gold standard and to adopt in 1971 a system of unrestricted fiat money creation”. Hartwich believes New Zealand and Australia should consider moving their currencies to some “new system of commodity banking”, although he hasn’t got a recipe for how that could be done. For him, the second reason for the fi nancial crisis is linked to the first: overspending by governments. For decades, he says – ever since the gold standard ended, in fact – Japan, the US and Europe have been spending more than they have been collecting in revenue.
Countries used fiat money to finance their projects through debt, resulting in basketcases such as Greece racking up much more debt than its entire GDP. Many countries now face the prospect of massive fiscal adjustment to bring debt back to sustainable levels. The only answer, he says, is to reduce government spending, and not allow any spending that exceeds government income. Although international leaders promoting stimulus packages often say they are following the path of British economist John Maynard Keynes, Hartwich claims they often misrepresent his actual writings. “Keynes never said you can spend and spend and spend.” In the 1920s, Keynes even said that government should make up no more than 25% of the economy. “That would make him a neoliberal by some standards today,” Hartwich chuckles.
But if Hartwich is hostile to the idea of spending your way out of trouble, Europeans are already rebelling against austerity. Critics of the British Government said its belt-tightening would lead it back into recession, and the Dutch Government recently collapsed over the issue. Then, of course, there were the French and Greek election results. On the eve of another zero-Budget in New Zealand, the stimulus versus austerity debate is simmering here, too. Expect Hartwich to turn up the heat. But whether those who matter will take any notice remains to be seen.
The idea of merging the Business Roundtable and the New Zealand Institute was the brainchild of Tony Carter, former managing director of grocery giant Foodstuffs (and brother of Primary Industries Minister David Carter). He became chairman of Fisher & Paykel Healthcare, then chairman of the New Zealand Institute. “It became pretty obvious to me that the institute lacked scale and resources and that we needed to look for an organisation to merge with,” Carter says. He approached Roger Partridge, chairman of Bell Gully since 2007 and Business Roundtable chairman from 2010, and they put the New Zealand Initiative together over eight months.
The institute had about 15 members and the Business Roundtable about 25. All have now joined the New Zealand Initiative, and the aim is to increase membership to include the 70 biggest companies in New Zealand. Each member pays an annual subscription fee of $45,000. So, what do they get for that? Carter says the Initiative is a think tank, not a lobby group, so members “don’t get infl uence”. He says the difference is partly one of outlook. A lobby group generally considers how government policy could affect the business sector in the short- or medium- term, whereas a think tank will consider longer-term outcomes for the country as a whole.
He insists the new venture has none of the baggage carried by the Business Roundtable. “Their reputation was a bit tarnished, rightly or wrongly, and you want the new organisation to be fresh and able to create a debate.” They found Hartwich through an international headhunting firm and, after some initial hesitance about appointing a non- New Zealander, realised he was just what they were looking for. Hartwich is obviously well to the right of centre, yet he is not an aggressive tax cutter. He agrees there is a relationship between economic growth and levels of taxation, but he derides last decade’s Bush tax cuts in the US as “fiscally irresponsible” and does not believe governments should go into defi cit to fund them.
Asked about his top priorities for New Zealand, he names education and housing policy. He also wants to examine social issues such as mental health. He worked for 15 months in a mental health institution as a young man “because I didn’t want to join the army”, and was moved by the experience. The ongoing financial crisis will present big challenges for New Zealand, but also opportunities, he believes. We might, for example, be able to snap up some European financial institutions for a bargain price. “It is always good to buy from someone who wants to sell.”
New Zealand should also be trying to lure educated Europeans who are underemployed, he says. He is a big believer in the economic benefits of migration and notes that he is coming to New Zealand for the reason that migrants often travel: “Because I got a great job opportunity.”
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