National Socialism

John Key's 'Dancing Cossacks' plan for the 'Cullen Fund' to amend the law "so the Finance Minister can direct the allocation of the fund" and allow Bill English to start buying up New Zealand for the government has given everyone the chance to spot the economic illiterates around the traps -- most of them people paid to pretend they know what they're talking about.

The Herald's Paula Oliver, for instance, who blithely reports, "The policy would see a greater amount invested into New Zealand."  Well, as I explain below, not necessarily.  The policy would see a greater amount of the Retirement Fund invested into New Zealand ... but that's not the sme thing at all.

And the Herald's John Armstrong, for instance, for whom politics is just sport -- and economics is just something Finance Ministers do to each other -- who says on the Herald's front page that Key's plan may offend the "economic purists," i.e., those who know what they're talking about, "but his announcement cleverly outflanks Labour...  National's bolder move has given it back some of the initiative on economic policy..." 

What a twit.  National's move has shown that in a time of economic crisis John Key is just as ignorant about what to do as the other team.  If Armstrong was doing his job he could point that out.  Instead, he say, "It will be seen by most voters as the right call in worsening conditions."  If that's true, it's only because when voters read commentators like Armstrong they don't realise he's so bloody ignorant of the subject on which he's paid to comment -- in this case economic policy.

To call this "bold" or "brave" -- let alone to use adverbs like "cleverly" -- is to ignore completely the effects of such a policy, and to demonstrate the paucity of your grip on what your job should be. 

To ignore how enormously destructive it is to give politicians the keys to this particular candy box; how irrational it would be to crowd out foreign entrepreneurial investment in NZ, and to forego higher returns elsewhere; how bloody risky it is to put so many of NZ's future retirement eggs in the same bloody basket as where they were hatched; how ridiculous for the NZ taxpayer to be investing in taxpayer-backed bonds... 

Yes, yes, Oliver asks a few "experts" later in her piece, under the fold on page 3, two of whom (Weldon and Skilling) are in a froth about the prospects of getting their hands on the candy jar.  (It's Weldon who calls it "brave" -- and not as an ironic reference to Sir Humphrey's warning: "'controversial' can lose you votes; 'courageous' can lose you the election.")

Thank goodness then for Brian Gaynor (and I don't say that too often), the other expert interviewed by Oliver, who points out his concerns with "the principle" of the move -- and bravo for a man who knows that principles are guides to right action -- "Where does it stop?" asks Gaynor, "It leads to pork barrelling -- go and build an airport in Kaitaia, or something like that."  Drive around Europe and see all the pork barrelling projects scattered around Europe like EU confetti, super-highways to nowhere and bridges made just for bungy-cords, and you get an idea of what sort of "returns" politically-driven "investment" brings.

Thank goodness too for commentators like David Hargreaves who writes in BusinessDay,

    [Key] wants the fund to take money from higher returning assets overseas and pump it into lower performing New Zealand assets as a short run boost to the economy. It is an easy way of the government increasing spending, without increasing its budget deficits.
    What it means is the returns to the fund are likely to be less in future years than they would be if the fund was left alone. Therefore the fund's ultimate ability to service pension requirements in future will be reduced.
    And worse, once the fund has become a play thing and source of easy money for the government to invest in its pet projects, you will lose the very high calibre of people the fund currently has.

Bingo!  And then there's the 'Dancing Cossacks' problem,

    that the New Zealand economy runs the risk of being heavily skewed by the impact of the fund. The fund already at this early stage has to be careful that it does not cause distortions in the markets through its activities. This risk will grow as the fund grows.

Sure will.

    One of Key's long ago predecessors as National Party leader, Rob Muldoon, won an election by lambasting a superannuation scheme set up by Labour. The argument was that as the Labour super fund grew, then so it could be used as a political tool. National scrapped that scheme after it won in 1975 and delivered us on the route to the future pension problem we now have.
    How ironic then that a National leader is now attempting to politicise a fund that has been set up for all of us.
    New Zealanders should have absolutely no truck with this idea. Key wants to mess around with money that is set aside for your retirement. In doing so, large chunks of that money could be lost.

Exactly right.  Now, John Key says he's been thinking about this since 2004! -- Gawd help us! -- but it takes only a moment of thought to realise, as Matt Nolan explains so simply that what he's "thought" about is a way to make "more" local investment mean less:

If capital at home made the highest return, then we wouldn’t need to legislate a 40% investment - as the Cullen Fund would put all its dosh there anyway. As a result, by “forcing” the fund to keep 40% onshore, we are reducing the return on our investment plain and simple.

As Nolan concludes, this is a terrible idea. National=Labour Lite -- "but they seem to be bouncing worse and worse ideas off each other."

It's just utterly pig ignorant, and shows beyond doubt that the single biggest danger with Key is not just his craven need to appease, but the idea apparently so strong within him that his laudable success as a currency trader gives him the credentials as Prime Minister to tinker with the levers of a very fragile economy.

We had one hot shot already who thought he could do that job, and we all know where that left us in 1984, don't we.

When Cullen announced earlier in the week his own plans to dig into the Super Fund chocolate box, Adolf from the No Minister blog called it "a defining election issue." It still is. In a time of terrible financial crisis, we now know absolutely that Key has no more clue what to do than Cullen.

UPDATE 1: Elijah is right, "Those people who have gone down the "vote National to get rid of Labour" track should be ashamed of themselves... A vote for National is now, without doubt, a vote for left wing socialism and State ownership..."

UPDATE 2: Yes, I've changed the title of the post. The more I think about this, the angrier I get.