Transcript

01 May 2009

A talk with Mike Moore

Mike MooreMike Moore

Matt Smith:

This is the La Trobe University podcast. I'd be your host, Matt Smith. Good morning, good afternoon and good evening; it does all depend on where you're standing. Joining me today is The Right Honorable Mike Moore. He's the former leader of the World Trade Organization, former Prime Minister of New Zealand. Current writer of opinions, Adjunct Professor of La Trobe University and consultant to how many different places, do you know?

Mike Moore:

I've got some commercial boards, unis and I'm a do-gooder with various agencies. And I do a bit of writing so it's pretty broad.

Matt Smith:

How many mobile phones do you have?

Mike Moore:

Only one. I'm very conservative. Retiring is doing what you want to do, so I do what I want to do. I must say the commercial side has taken a few hits recently.

Matt Smith:

You're here today at La Trobe and you were giving a talk on world poverty. And I'd just like to ask how would you go about improving the state of world poverty? Where do you even start on something like that?

Mike Moore:

Firstly, we base evidence, what works, what doesn't. And the first point I want to make is that the last 60 years have been the most successful in world history in alleviating poverty. Hundreds of millions of people have been lifted out of extreme poverty. We've created more wealth in the last 60 years than all of history put together.

So it's not all bad. In India, China, hundreds of millions of people, life expectancy has increased by 20 years. So overwhelmingly, the world has got better in most places. Where it hasn't got better is where the economies are closed, less trade, less competition, bad politicians, bad bureaucrats, bad business people. And so my case in my lecture was open societies, open trade, but a world without walls is not a world without standards or values.

So you need standards, predictable role of law, independent courts, democracy, human rights, all this is part of the mix to alleviate poverty. And I've showed people things that cost jobs and cost worlds if you've got to go. Taking 500 days to register a bakery in Egypt where there is no land title and you can't borrow against it. And those are the models I was driving at.

Matt Smith:

So a world without walls, is that sort of thing realistic with the current economic crisis that's happened? A lot of countries are becoming a bit more concerned with protecting their own internal economies and worried about outside trade.

Mike Moore:

You put your finger on the big danger that could drive the world backwards. This is a recession. These things happen every now and again, and it's tragic but the recession will be made deeper then could move into depression history shows us if we do the wrong things.

And in the 30's, international trade contracted over two years by 70%. Japan lost half its business, competitive evaluations, protectionist policies. Hoover, the last bill he signed before he left office was “Buy America”, Smith Holly, British Imperial Preferences. So that made the depression lethal. And from that came the twin terrors of fascism and Marxism, nationalistic, lethal, hatred, protectionist against foreigners, against anyone who is different. And you're right, there are those tendencies out there and you can see it manifesting itself.

However, we have instruments that we didn't have in the Great Depression. In the Great Depression, there are very few central banks. In the Great Depression even labor government in England cut out employed benefits, balanced the books. No government is talking of balancing the books, thus spend, spend, spend. Some of that spending was pretty low grade. But when the house is on fire you don't argue with the fire brigade if some of the furniture gets wet. Well, you do actually afterwards. And with World Trade Organization and the European Union setting political instruments that are in place that should stop the excesses of this. But we are in a very difficult time in economic history and people of my generation didn't face it.

Or more current and I didn't say this and I should of, is Japan in the deflation, they suffered in the last 10 years. But it is a very delicate time. In my case and argument was the poor will be locked out. If we're not careful that would get worse. But the poor is going to have to rescue the rich and the poor will rescue the rich because the bottom $4 billion need to be tending to consumers and turned into their own little business. And have a life and have this share in the world and that's the new market for the rich. And in fact that has been happening in China and India in many ways isn't it. But we've got to accelerate that not lessen it.

But you're right, it's a fragile thing. All the leaders meet at the G20 say, “We won't to do this” and then within weeks they haven't done it. Capping, steel leaks, ports popping up industries that are uncompetitive. There's enough blame for everyone to share. But it is delicate.

But I'm actually optimistic. I think we'll come through this. Hence the genius of democratic capitalism and social democracies that when we make mistakes, democracy allows ourselves to redress as we kick out a president or we reform something or we become more prudent. The truth is our banking regulations are totally 19th century and we're in the 21st century. How could Iceland run up debts in its banks 10 times its GDP? Looks like Austria is in a similar situation. How could this possibly happen? Because you can regulate what your banks do in Australia but you can't regulate some other investments in PNG or Eastern Europe.

Matt Smith:

What sorts of steps can be taken to make sure that the economy doesn't go backwards anymore? Are there any countries that are doing this well?

Mike Moore:

I think most countries are doing roughly the same thing and right.

Matt Smith:

Throwing money at the problem?

Mike Moore:

Yes but I think this is a time. Here's the thing, when you're at the bottom of the economic cycle you must be Keynes in. When you're at the top of the economic cycle, you ought to be Mantrust. The whole idea is to bank it when you do well for that rainy day. And Keynes was the great economist who when all the governments in the 1920's were cutting back expenditure to balance the books to get ourselves out of depression which made it worse.

He was arguing the virtues of public expenditure. That when the private sector contracts or hasn't got the confidence it's got to be replaced by the public sector. Now the public sector can do it and governments can do it by either tax cuts or public expenditure. So you go into debt when you build yourself up, then hopefully you can pay it off. And Keynes talked about the paradox of savings where in times of economic stress you actually don't want to people to save.

It's a paradox. You've been telling people save, save, save and now the same bloody politicians are telling you spend, spend, spend and how you get out of it. And the danger is deflation and Japan went through this. And no matter how much they cut taxes nobody would spend. They had no confidence. They wanted to save. They're frightened. So at one point Japan actually had vouchers out there that you unless you spend this money in the shops to get the economy moving you lost the value of the voucher. Then of course, someone set up marketing vouchers. So I've got a voucher for $1,000 but you give me $500. I'd rather bank for $500 than spend $1,000.

Matt Smith:

I've heard that suggestion come up.

Mike Moore:

Yeah. Taiwan just tried it but how do you get expenditure going? And of course there's slippage now. In the old days of closed economies, New Zealand, Australia 20-30 years ago, the money pumped into the iconology and employed people. It does still but it also employs people China because we're importers as well.

But that's a healthy thing if the Chinese do it. And don't forget the Japanese stimulus package is bigger than America's. There is a trillion dollar stimulus package inside China as well, so most governments are doing this. Then of course in 10 years time you need some real bastards like me and Keating who are going to cut this all back again because there's a cycle it. It so disappointing but that's I guess the iron fist of reality.

Matt Smith:

When you were in charge of the World Trade Organization, did you see a collapse like this coming.

Mike Moore:

No, not of this nature. We try to get into the negotiation financial services but it wasn't a go. There were people who were suggesting this. It was unreal. I was in England a couple of years ago and you could get 120% mortgage on your house, plus a trip to Spain. If I was I local, I'd be telling all the unemployed, “Christ mate, go and get a house for 120%. They'll give you all the furniture. Have a trip and if you go broke, what's the worst that can happen? You'll be back in a council flat.”

And the whole thing just went crazy. Then this threaten social cohesion. Ordinary people when they see the balances and payouts of the very rich get very nasty, and they should do. And this makes them vulnerable to nationalistic, tribalistic, protectionist politicians, the Pauline Hansons of this world. But this is a danger and this of course what happened in the 30's.

No I did not say this was going to happen. We did put up the red flag on some of these companies. The trouble is the world economies, there's so many connected and moving so fast that national laws no longer apply. So you can regulate on your own country but you don't know what your mates are doing. And who would have known? You allow Iceland Bank to set up, take all your deposits and then you don't know that they've leveraged outside.

And some bad things happen in America where Clinton's government – when Roosevelt came in, he drew a line between relationship banking and investment banking. And that line was knocked over and so that they were the same thing. Now in my youth, it was relationship banking. That is your bank was like your doctor and lawyer. So it was a family bank then. But then now they're selling you products and then they bundle up these bad debts and sell them off to a city council in Sweden.

So when it goofed and falls over to America, ,nd you got to understand it. I'm running the city council, I've got these reserves, I want to invest them because I know I'll spend them next year. Who's offering the most? Ping and over you go

So what will happen is we'll regulate a lot more as we should and we'll sacrifice a bit of growth and risk for more stability and security.

Matt Smith:

What was your greatest achievement in the WTO?

Mike Moore:

Getting China into the system and launching the new trade route. China is now a new space trading system now. The dangers of some populist in America or Australia or Austria, passing to stop China exporting.

Matt Smith:

Yeah.

Mike Moore:

And this what happened in the 30's don't forget. They can't under the WTO rules because they've all agreed not to. And now China is also answerable to its agreements and rules and dispute systems. So the world will be a much more dangerous place.

Greatest disappointment is we didn't conclude the Doha round. Greatest disappointment, we didn't get Russia into the system. If Russia were in the system it could not turn off exports in wine from Georgia. And their quality energy deal they couldn't do this. They could but enormous cost because the whole world will then sanction them and their tariffs will go up elsewhere. Huge disappointment.

Matt Smith:

I tried to find it out but I couldn't anywhere. Why were you the Prime Minister of New Zealand for only two months?

Mike Moore:

Well what happened, my party collapsed. David Lange was replaced by his deputy, Sir Geoffrey Palmer and we were 20 points behind in the polls. The party thought I could pull them back and I did. We could have ended up third party in any of the 12 seats. I managed to lose the election by only about 8 or 10 points where we would have lost maybe by 30. And then I led for the next election, we got within two seats and I got rolled as you do get rolled in politics.

Matt Smith:

Yeah. There's not a lot you can do in two months anyway.

Mike Moore:

We managed to pull it back. We could have been decimated and there were those who were kind enough to say we probably got an extra dozen seats. But it was about the fight back. And there were those who wanted me to leave the party a year earlier and I said, “Piss off.” Then it got so bad and I said, “I am tribal, we've got to try and save the party here.” And democracy needs a strong opposition. It'll be a very dangerous thing if we had a government with two-thirds of the majority in parliament.

Matt Smith:

If you won the term as Prime Minister, what did you have on your list of things to go to?

Mike Moore:

I'm an economic reformer. I make Keating look like a wimp. But I would've wanted to do some of the things actually Australia did. I'm not saying that because I'm here. I think you handled your personal sagas and super systems better than ourselves. In education and ownership, I would have done that with the unions a different way than we did. And I would have tipped it over privatization and use those moneys to top up people's individual accounts.

And then a lot more in education and health. Labor governments, we've doubled the amount of health expenditure but we've decreased the number of operations. How does that work because we're based on an old model? And education and health in countries like Australia, New Zealand the only industries run based on Taylorism, Fordism forms of management. That is why you don't get the outcomes and it's all about the institution, it's not about the kids and not about the patients. This is a very unpopular conversation to have.

But that's what I want to do. And essentially everything is about growth in a sustainable way and an unexploitive way to the people and the environment. And everything is seen as therefore if it's about growth it's about productivity. If it's about productivity, it's about competition. And I'm a bleeding heart and to help out people at the bottom and then our people at the bottom got shafted as they always do. Mind you, that some of them felt we were shafting them.

Matt Smith:

One last question, has your definition of poverty changed over time of what poverty is?

Mike Moore:

Yes, it has. In western societies, we think we're poor. You see our headlines, we've got third world hospitals. Well bullshit, go to a third world. And when we have statistics that poverty is defined as anyone who earns less than half the average wage, that 50% is always going to be there no matter happens. And it's not a bad thing in countries like ours. It's poor people, you're poor but you have a plasma telly. You're poor but you still have a car and you have a small unit and you're poor.

What you do about poverty has changed in my mind, particularly internationally, in work I do in developing countries, how you attack that. Property rights, ownership, and systems, I have changed the model in my mind of how to do this.

And I've changed some of my views about how we do it in our own countries. From our old fashioned labor, our view was get a guy a house, job and look after them when they're sick and look after them when they're old, you've done the deal. That doesn't entirely work and there's a lot of things I don't understand. I've more and more, as a social democrat and labor person, coming to the view that the state has to enable people to own their own property. The state has to enable people and help them own their own business and own your own health, own your own education, entitlements.

Matt Smith:

Because if you own something you're more likely to take care of it yourself.

Mike Moore:

Yeah. No one in history has ever washed a rental car. And it's a hard world out there. I'm reflecting that my generation may have had it the best. We missed the world war, we missed the depression, we hit the 60's of sexual liberations, the pills but there were no AIDS. My first job or second job building sites, “Mike, will you please come to work and bring those mantles with you.” “I don't want to. We are on the puss, get out of here.” And it was full employment, it was a different age.

And now people are complaining that they're $500,000 house is only worth $300,000. My god, they bought it for $50,000 in 1979. It was a very good age. That's not to say this can't return. And what I fear is the overreaction to this crisis. But you know Aussie's holding firm, New Zealand's holding firm I think there's a common consensus between the parties.

But in the end we're just corks in the stream and it's China, China, China, it's India, India. And my argument today was how to give that 4 billion at the bottom of the pyramid into consumer society and they're our customers. And if we can lift their living standards we lift ours. And we do the decent thing by the poorest people, the poorest of our brothers and sisters.

And I think it's a doable project but it's going to be very hard, bloody hard for the next couple of years. And then of course we're going to give the next generation a shit load of debt and deficit. See we're the generation, our generation. We were just mesmerized by the issue of inflation, debt and deficit because we never lived, only for a couple of years, in single figure inflation. We never lived in our adult lives in countries that didn't have deficits and debts.

In New Zealand, we were spending more on debt servicing than on health or education but we've gone on top of that problem but it's a different problem now. The debt problem, debt and deficit, is down the road. 2015 we're all be cutting these things back.

Matt Smith:

Yeah, indeed. It's going to be interesting then.

Mike Moore:

It's fascinating. It's a great time to be alive but overwhelmingly the direction is right, I hope, I think. Could I be wrong? Yes, but the evidence points to the correct way. And if we're wrong, the genius of democracy and democratic capitalism and social democracy is that people allow the system to adjust.

In business terms it's called bankruptcy, in political terms it's a general election and they'll find someone to do something differently. The genius is we adapt, we adjust. Rigid, frigid command type economies can't adjust because the leaders can't give up. So you humiliate some poor politician like me, send them to the bench and we'll get someone who can do it differently or the same thing but a different phase. So you can blame someone, “It's all these politicians. Get rid of them. Get another set of bastards.” And that's the joy and genius of the idea.

Matt Smith:

Mike Moore, thank you for your time today.

Mike Moore:

Terrific.

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