Dealing with ‘black swan’ days

Dealing with ‘black swan’ days
The “black swan” effect is now the popular way to describe acts of randomness that can have widespread and unexpected effects.

Earthquakes, shipwrecks and gas pipeline outages are not strictly speaking “black swan” events but after string of bad happenings that should only occur occasionally, the past week certainly feels like one.

Even before Rugby World Cup euphoria had disappeared, the Maui gas pipeline shutdown in Taranaki was having severe repercussions.

The NZIER estimates the losses could be as high as $75 million a day to the companies who have had to close operations. These have proved highly disruptive to “just in time” industries such as food processing and manufacturing.

On the wider scale, the gas shortage has exposed the fragility of infrastructure when companies and regions are highly dependent on a single source of energy supply.

Obviously, backup and emergency replacements are expensive, though necessary. Too often these measures aren’t taken until an emergency occurs.

Infrastructure planning is not a top political priority, despite the efforts of the minister, Steven Joyce, and others to make it so. Instead, the priority is on maintaining income transfers and benefits.

This is evident, too, in Labour’s priorities of maintaining direct government ownership of existing operations rather than allowing investment in new ones.

The natural gas pipeline network was a government-backed “think big” project and is halfway to its end-of-use life. It will need more investment from its private owners.

The priority should be on ensuring new sources of capital, which is best found in savings such as pension funds.

If infrastructure “black swans” are to be avoided in future, the political agenda must change its priorities to areas of higher productivity rather than hanging on to worn-out assets.

Meanwhile, over the Tasman
An infrastructure deficit and the need for higher productivity have been identified in Australia, where new tax rules are being discussed to tackle both.

Assistant Treasurer Bill Shorten and Infrastructure Minister Anthony Albanese have released a brief 15-page discussion paper that removes tax disincentives and encourages more private investment in infrastructure projects works on roads, bridges, rail and ports.

"The proposed changes will allow investors to more easily and with greater flexibility claim losses, making this type of investment more attractive to the private sector, including superannuation funds," they say.

Under the new rules tax losses from infrastructure projects could be carried forward at the 10-year government bond rate, currently 4.40 %. And businesses can sell the projects with the tax losses transferred to the new owner.

Shortcomings in infrastructure have been a focus in Australia for some time since its national productivity began declining from the highs in 1990s. It is only in the past year that a similar lacking has been recognised in New Zealand.

The government advisory board Infrastructure Australia’s priority list has something like $A86 billion of projects on its books, while the private sector lobbyists, Business Council of Australia and Infrastructure Partnerships Australia, says the overall infrastructure deficit is $450-700 billion.

This is the kind of language New Zealand politicians should start talking about for the country’s future.

Bearing gifts to Greeks
The sob stories coming from Greece should stir the thoughts of generations of Kiwis who have spent part of their OE travelling around the islands by ferry.

In my day, Greece was a cheap as chips, had good weather and hosted thousands of like-minded backpackers. The euro will have changed that, so breaking out of the eurozone and bringing back the devalued drachma will be like good days.

According to Reuters, the tax-averse Greeks are getting their own back at German tourists with comparisons to the World War II occupation and accusations the government is made up of dosilogos (traitors).

Of course, this is a highly partisan view of the euro crisis and who is to blame for the Greeks’ plight – mainly the profligate use of borrowed money to feed voters’ desires for a welfare state without the ability to pay for it.

It’s hard not to sympathise when a country’s standard of living collapses and crime is rampant, as the Independent reports, but it also says this:

Austerity measures insisted upon by the Troika – the EU Commission, the European Central Bank and IMF – have been introduced, but not the structural reforms that are part of the same package. Greece is still a long way from cutting the size of its Byzantine state machine and forcing the wealthiest 20% of Greeks to pay taxes. Tassos Teloglou, one of Greece’s premier investigative journalists … doubts the capacity of the Greek state to reform itself. “We need intervention from outside,” he says…

I suggest one intervention: The sale of citizenship to Greek-loving Kiwis and Aussies. Locked out of the UK and the rest of Europe except as tourists, they would be able flood back to the cheap islands of their youth.

Kim’s Club
Groucho Marx once said he would “refuse to join any club that would have me as a member.” Some recent interviewees will be feeling the same way about “Kim’s club.”

Kim Hill is a superb interviewer when she is genuinely seeking information and has a subject who is both interesting and expert.

But beware if that person is not welcome in her club. A recent example was one Thomas L Friedman, America’s best-read commentator on globalisation, three-time Pulitzer prize winner, New York Times columnist and author of books such as The Lexus and the Olive Tree and The World is Flat.

Kim has the strongest pull of any broadcaster so her producers can get time with Friedman when the rest of the world probably pays him tens of thousands to hear him speak.

But the interview did not go well: Listen here. 

While Friedman would call himself an American small “l” liberal and is perfectly acceptable at top dinner tables and important offices around the globe, his demeanour was abruptly shattered by being labelled a “neo-liberal” – something he insisted he didn’t know.

I’m not surprised as this is a term hardly used outside of the University of Auckland and is usually reserved for Marxist academics describing anyone who doesn’t like socialism.

It’s not that Kim is biased when she disagrees with her subjects; her chat with Sir Paul Callaghan, who would have been delighted to sit next to Friedman at an Oxford dinner, went famously, even though it, too, was about, er, globalisaton.

Back in June, Rational Optimist author Matt Ridley also got the Friedman treatment; but at least Ridley got to say something about his shale gas report, which has done more to destroy the myths of “peak oil” and global warming than anyone else.

So tune in the next time Kim interviews someone who’s not in her club or welcome at the University of Auckland: Steven Pinker, perhaps?