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    Essential Information on an Essential Issue

    Letter No.51

    6 December, 1996

    -- GARTH NOWLAND-FOREMAN on Dissecting the Golden Goose
    ROBERT BLY on Fathers and Work in the 1990s

    There are now one billion people either unemployed or under-employed worldwide, according to the latest figures released last weekby the International Labour Organisation (ILO). This is up from 820m people in 1993-94, and represents crisis levels not seen since the 1930s depression. In its report World Employment 1996/97, the ILO says that the modern-day disarray in labour markets is "neither inevitable nor irreversible" and argues that "the concept of full employment, suitably updated, should remain as a principal objective of economic and social policy..."

  • The ILO decries "the widespread questioning of the usefulness of the concept of full employment", that has come to prevail in academic and public-policy circles worldwide, with the proliferation of vogue concepts such as 'jobless growth' and the 'end of work'. Dismissing these as empirically unfounded and potentially harmful, the ILO insists that "there is no evidence that there is or soon will be a dearth of useful work such that full employment will no longer be available..."

    Source -- International Labour Organisation "World Employment 1996/97 -- National policies in a global context" ILO Press kit from their internet site

  • See the Jobs Letter Summary of this report in the next issue of the Jobs Letter

    The Treasury's latest forecast for the NZ economy paints an optimistic portrait and assumes that interest rates will fall next year. The December Economic and Fiscal Update predicts that next year's economic growth will be 2.6%, Employment growth will be at 2.8%, and unemployment will stay at 6.3%
    Source -- December Economic and Fiscal Update from Bill Birch, sent to the Jobs Letter.

    The Business Round Table is much more pessimistic about the current state of the economy. In a speech to the Auckland Chamber of Commerce, chairman Doug Myers says that the economy has lost competitiveness, and many export industries were under stress. He forecasts faltering economic growth, rising unemployment, and a return to government deficits. His recommendations: the government should deregulate producer boards, reduce top tax rates, privatise more state assets, and spend less on government and social services.
    Source -- New Zealand Herald 29 November 1996 "Myers predicts loss of jobs, return to budget deficits" by NZPA

    The moth-balling of the Waitara Valley methanol plant, one of the jewels in the Think Big Crown of the early 1980s, will see 30 staff lose their jobs. This comes on top of the already-announced 40 job losses from the Kapuni Natural Gas plant, plus about another 100 jobs to go if Fletcher Challenge Energy decides to shift its Taranaki operations to Auckland. All up, this will mean about $10m less money each year flowing into the Taranaki economy from the energy projects.

    The gradual closure of these plants is dependent on new stocks of gas being found in the region by 1988. (The Methanex plants at Waitara and Motunui use almost half of NZ's total usage of gas a year). Even if enough gas is discovered before 1998, it may not be developed in time, or at a cheap enough price to enable the plants to be re-opened.

    Methanex is a global corporation and plans to expand its Chilean complex. Methanex denies that it is getting free gas for their South American operations, but admits that the gas, from Argentina, is "the cheapest of the whole Methanex group".

    Source -- The Daily News 2 December 1996 "Closure of methanol plants now possibility" and 4 December 1996 "Methanex confirms closure of plant at Waitara" by Neil Ritchie, and The Dominion 4 December 1996 "Methanol plant faces partial closure by 1998" by James Weir.

    The ACT Party says that about 2,000 farms will 'go under' by May next year, and a further 6,000 farms will be facing the refusal of banks to lend them any more money for the following season. ACT blames the over-valued dollar and high interest rates for eroding export returns. Their prescription: Contain government spending.

    ACT: " While a substantial part of the public believes that the social sector deserves more funding, to do so at the present time would be to dangerously inflame the already critical situation.

    Source -- New Zealand Herald 3 December 1996 "Rural sector's future looks grim says Act" by Bernard Orsman.

  • Treasury last week confirmed that the problem was particularly grim for sheep and beef farmers. Their latest economic outlook showed that income of meat and wool was continuing to decline, while at the same time there was rising incomes amongst dairy farmers due to high international prices and record production. Federated Farmers reports that many more sheep and beef farmers are taking off-farm jobs because their income was only covering running costs.
    Source -- New Zealand Herald 4 December 1996 "Farmers leaving land to survive" by Glenys Christian

    " For the first time in living history we have legislation that is ripping the guts out of farming and no-one knows what to do about it. The Reserve Bank Act gives us the highest real interest rates in the world, and these result in a falsely high currency. The result is a boom to importers, bankers, brokers, merchant bankers, mortgage arrangers and the like and an absolute disaster for the lifeblood of the country -- anyone connected to making a dollar for NZ by exporting..."
    -- Geoff Sleeman, Havelock North, writing in the New Zealand Herald 4 December 1996

    Treasury and the State Services Commission earlier this year released a report by American public policy expert Professor Allen Schick, who had been commissioned to draw up an independent report on our state sector reforms. Professor Schick observed that ideas drove the reforms, which was unusual because Treasury did not derive its prescription by studying the organisations first.

    Schick: "The [Treasury] brief ... has an undertone of everyone knows government is inefficient, so there is no need to prove the point ..."

  • Professor Schick also commented that the new public service system relies too heavily on contracts. The virtue of a contract is that things are itemised and can be checked off as delivered. The problem is that things not itemised are not done. Too much can fall between the cracks, and managers can too easily confuse accountability ("I'll do it because the contract says I must") with responsibility (I'll do it because it needs to be done").

  • PSA President Tony Simpson reports that there are now 32,900 NZ'ers working in the core public service, compared with 71,000 eight years ago. Simpson: " Although some now work in crown entities and state-owned enterprises, this still amounts to a huge shrinkage of the government's payroll ..."

    Source -- New Zealand Herald 3 December 1996 "Public Service reforms: where do we go now" by Tony Simpson

    The APEC nations which met in the Philippines last month plan to create the world's largest free-trade zone embracing half of humanity. Jane Kelsey reports from Manila that anti-APEC conferences were held all over the Philippines in the week before the big event. While the politics of the various meetings were different, Kelsey says that the universal message was clear: "APEC will benefit the rich at the cost of the poor, and deny the sovereign right of the people to control their own economy and their lives ..."

  • The APEC debate was sharpened by the leak of the draft 'individual action plans' which were endorsed by each country. The plans are APEC members' voluntary offers for achieving the long-term goal of free and open trade and investment by 2010 for developed countries and 2020 for less developed countries. Because of the secrecy surrounding such agreements, the final versions remain unknown. But for the first time in the history of APEC, people have been able to take a look at what has been asked before the deals were made.

    According to Kelsey, New Zealand's draft action plan promises that NZ will : Continue to deregulate utility and essential facility markets (such as electricity and ports); continue to consider the scope for further privatisations of State-owned businesses and assets; consider reform options for essential facilities largely owned and operated by local governments; maintain and review the existing foreign and domestic investment regime; actively promote the removal of restrictions on foreign services in the GATT agreement on services (tourism, advertising, education and so on); and consider extending the list of services which are covered in the next APEC action plan.

    Kelsey: "There is a serious contradiction here. NZ voters did not re-elect those who developed the draft individual action plan. And commitments in the plan contradict key elements of New Zealand First, Alliance and Labour election policies ..."

    Source -- New Zealand Herald 25 November 1996 "APEC hated by man in Manila Street" by Jane Kelsey

    The International Monetary Fund (IMF) is having second thoughts about one of the cornerstones of monetarist theories -- the non-accelerating rate of unemployment (NAIRU) , which economists and policy-makers have long used to justify the continuation of mass joblessness. This change in philosophy could well influence present moves in NZ to get the Reserve Bank Act changed in order to reflect employment goals.

    In its recent publication World Economic Outlook, the IMF says it no longer believes that monetary policy must be directed solely at maintaining low inflation. It says that at the same time as limiting inflation, monetary policy must also try to stabilise output and minimise cyclical unemployment.

    The IMF: "The proper conduct of monetary policy does not consist only of raising short-term interest rates to forestall a potential rise in inflationary pressures ... over-ambition in reducing inflation too rapidly also has unwarranted adverse consequences for output and employment." Michael Mussa, IMF chief economist, believes that the NAIRU is a bit like an economists' unicorn: "... a mythical beast we've never met head-on and perhaps wouldn't want to.'"

  • Anatole Kaletsky of The Times (London) reports that the IMF now rejects the idea at the heart of monetarism: that interest rates work through a number of channels to affect real economic activity and employment. The IMF says that it is only by suppressing or stimulating employment and real economic activity that monetary policy indirectly affects inflation. Kaletsky: "For a generation of economists brought up on [...] monetarism and rational expectations, the assertion that monetary policy acts mainly on employment and only indirectly on inflation is as heretical as Gallileo's assertion that the earth goes round the sun ...."

    Source -- The Times (UK) "IMF heresy illuminates economic blind faith" by Anatole Kaletsky reprinted in The Australian 30 September 1996 (email from Keith Rankin to the Jobs Letter)

    In Canada, the British Columbian Premier Glen Clark is urging a closer look at the redistribution of work time as a way to reduce unemployment. Speaking to the convention of the B.C. Federation of Labour, Clark pointed out that the labour movement has historically been in the forefront of the movement for reducing the hours of work, and needed to regain the initiative in this fight.

    Clark: "At a time when thousands of workers can't find a job at all, those who are employed are working longer and longer hours. While unemployment remains stubbornly high, the workweek is actually getting longer. [...] I am convinced we must look for ways to redistribute the work available so that more people can be employed. And I am convinced that we can make these changes while actually maintaining or improving productivity ..."

    Clark cites one example of the Canadian Auto Workers settlement with the big three auto manufacturers in Ontario. While the news media focused on the controversial issue of "outsourcing" labour contracts, what may be at least as important to the labour movement was the expansion of special time-off provisions into this settlement. Clark: "These give top-seniority workers as much as one week off for every four weeks worked. The CAW estimates this provision will create 300 positions in Windsor alone... and 1,000 new jobs at union rates across the Canadian auto sector..."

    Source -- from the Futurework List Conference 26 November 1996 "The Long Term" by Tom Walker

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