AMI: Still believing in financial fairies

It may finally be dawning on even the government’s sternest critics that a major natural disaster can have far-reaching economic consequences that need to be understood rather distorted.

The AMI bailout, which could amount to a $1 billion taxpayer-funded underwriting deal, is not because the company was badly managed or was inadequate for most circumstances.

AMI is a mutual insurance operation, which means it has no capital other than the surpluses its policyholders pay in but don’t take out, plus any interest earned on that money. In other words, every policyholder gambles on a risk that nothing will happen rather than it will.

In any actuarial business, where future commitments can be charted with some degree of certainty, it is possible to form a working business model.

The Labour party, which has called for the government to resign over its handling of the South Canterbury Finance receivership, ignored this basic rule when expanding ACC to cover a wide range of new ailments without giving it the financial capability to do so.

Similarly, when Michael Cullen agreed to guarantee all the country’s retail bank and most other deposits, at the height of a financial crisis, he wasn’t doing so to make a billion-dollar payout.

Instead, he was preventing a run on the banking system. Similarly, the AMI bailout is a safety blanket to stop a similar run in confidence – this time on insurance policy payments.

No journalist who has covered the business scene since the rise of the non-banking financial sector believes David Cunliffe’s conspiracy theory that a touted South Canterbury Finance rescue plan would have been better than a receivership.

The government paid out to investors who believe, like Mr Cunliffe, in financial fairies. They, like him and AMI policyholders, should be grateful that a group of heavily taxed workers and employers remain to fund a government that can still deliver the goods when disaster strikes.

NZPA: The inside story
The NBR’s relationship with NZPA, which is to close in a few months, has proved short-lived.

For most of our 40-year existence, the newspaper-owned agency has been a resolute “closed shop” in dealing with competitors or welcoming new members. We were well and truly kept out.

That changed a few years ago when NZPA decided to become a standalone news agency on a par with its UK, American, Canadian and Australian counterparts.

They sell commodity news to allcomers – most of them broadcasters and more recently websites – as well as to the newspapers that own the agency.

Mostly these agencies concentrate on domestic news that regionally-based newspapers are ill-placed to cover. Meanwhile, the development of networked broadcast news pushed the public focus increasing on to major national and international stories.

The agencies also lost when newspaper ownership consolidated and they were able to put their own reporters at the centre of power or business.

After dropping its overseas correspondents, NZPA found itself providing only basic business and political coverage to its subscribers. From being a core provider of news for daily newspapers on fixed deadlines it became a complementary one.

Meanwhile, Newsroom and Scoop emerged as rapid and more efficient disseminators of public announcements. NZPA’s role as a “gatekeeper” of what was news among these announcements diminished.

While broadcasters and other independent news providers (such as NBR) were able to use NZPA as a backup, APN and Fairfax could rightly feel they were losing on several counts. They were effectively paying for NZPA stories as well as for their own, while also giving access to competitors who could concentrate on their own news agendas without fear of missing run-of-the-mill stuff.

We figure NZPA will not be missed. The news without it will have more variety, be more interesting and offer more choice.

On rebels and rabbles
It’s been another bad week for tyrants and a good one for the “international community," a much-abused shorthand term for western countries and publics that are appalled by human rights abuses in Africa, the Middle East and Asia.

Though all of the latter are members of the UN, they are not this community. Neither are China nor Russia, India nor Brazil – all countries that abstained from a Security Council vote that effectively decided on regime change in Libya.

With the UK and France to the fore, and a reluctant US providing the firepower, these upholders of western values have used their superior military force to impose positive change.

Cynics will note, and the media usually do, that this is really about oil and not about dictators killing their people at will. In the case of Ivory Coast, it may have been about cheaper chocolate.

But that is not how the imprisoned and impoverished populations of the Middle East, Africa and Asia see it. They recognise that western air forces can bomb relentlessly without fearing casualties. They also want to migrant to the west in ever increasing numbers.

The “international community” has a lot going for it and I’ve noticed even most of the media have recognised their own interests are best served by embracing western values of freedom and seeing good when those policies are pursued.

Changing minds matters
The popular uprisings in the Arab world have forced a radical rethink on those who have assumed that Israel is not a member of the “international community.”

Among them is the South African jurist Richard Goldstone, who carried out a report for the UN on the Gaza conflict a few years ago. He has recanted on important findings that Israel deliberately targeted civilians when trying to stop rockets being fired out of Gaza.

The conclusion rightly disturbed many Israelis, as well as its defenders abroad, though at the time Mr Goldstone was refused cooperation by Israel's defence force. (In breaking news, Mr Goldstone has accepted an invitation to visit Israel to explain his change of mind.)

The IDF's error of judgment has since been corrected by Israel agreeing to have a member on Sir Geoffrey Palmer’s panel to investigate the flotilla affair. Sir Geoffrey is unlikely to make the same mistake as Mr Goldstone and could well place the burden of blame on the Turkish groups who fired first.

Regardless of Sir Geoffrey’s yet-to-be-published conclusions, the damage to Israel’s image as a country that fights by the conventional military rules, and retaliates only when attacked, cannot be undone, as Michael Weiss argues in the Daily Telegraph.

But at last there are signs some are recognising that Israel has been used as tool by the Arab regimes, as well as by Turkey and Iran, as a convenient diversion from shortcomings in their own societies.

Up until now, outbreaks of popular anger against Israel have been swallowed by gullible western reporters as genuine displays of opinion. But an Arab journalist, Khaled Abu Toameh, based at the Hudson Institute, sheds some light on why taking Middle East media at their face value is dangerous:

Instead of reporting on the grievances of Arabs living under dictatorships, these journalists often engaged in heaping praise on Arab regimes and criticising only one country: Israel. When was the last time a Syrian journalist living in Syria published an investigative report about massive abuse of human rights or financial corruption in his or her country? Or has anyone ever heard of a Saudi journalist living in Saudi Arabia who dared to criticise the monarch or a member of the royal family there?

In time, Toameh’s list could shorten to exclude Tunisia and even Egypt, but that will depend on how far the Muslim Brotherhood is prepared to go with its agenda. The window of freedom may be open now but it can easily close.