The threats of President by Twitter

Just as well Robert  Muldoon didn’t have Twitter, he meddled and tried to manage a lot of things himself, and the country ended up nearly going broke.

However Donald Trump seems to be trying to influence a lot of things via Twitter.

ODT: Trump threatens border tax on GM

President-elect Donald Trump has threatened to impose a “big border tax” on General Motors Co for making some of its Chevrolet Cruze compact cars in Mexico, an arrangement the largest American automaker defended as part of its strategy to serve global customers, not sell them in the United States.

Trump’s comments on Tuesday marked his latest broadside aimed at an American company over jobs, imports and costs before he takes office on January 20, signaling an uncommon degree of intervention for an incoming US president into corporate affairs.

“General Motors is sending Mexican made model of Chevy Cruze to US car dealers-tax free across border. Make in USA. or pay big border tax!” Trump said in a post on Twitter.

Trump did not provide further details but previously vowed to hit companies that shift production from America to other countries with a 35% tax on their exports into the US. He also has denounced the North American Free Trade Agreement between the US, Mexico and Canada.

If he taxes US companies for manufacturing offshore for international markets he will make some of them uncompetitive, and it will impact on their viability in the domestic market.

That’s a significant potential threat to the US economy.

President by Twitter could be a bigger threat.

Clint’s trendy job chart criticised

Green’s Hey Clint published a manufacturing jobs chart on Twitter which he claimed showed trends. There are a number of problems with it.

@ClintVSmith: Here’s an update on manufacturing jobs under National

Charting purists jumped on an obvious point.

@keith_ng: Starting the axis at 160k for an area-based representation. GRRR. #cheating

@hamiskofoed: you have misrepresented that graph with the jobs number starting at $160k. U should correct it and re tweet

@sakkaden: you have misrepresented that graph with the jobs number starting at $160k. U should correct it and re tweet

@sakkaden: I do this for a living. Use a line graph if omitting zero. Amputated bars are a high school level failure.

@isaacfreedom: Vertical axis should start at zero, otherwise you exaggerate proportion of change, which isn’t cool.

Clint defended his choice of scale and bars but accepted the criticism.

I had it as a line graph but annoying to make part red part blue in excel.

Zero not compulsory, scale narrower so u can c trend still down. shld hv been line but multi-colour line hard in excel

Next time i’ll do line, as with the previous graphs I’ve done on this topics.

So here’s what it looks like as a line graph.

Manufacturing QES line scaledHmmm, does the trend look like it’s changing? Here it is with the full height Axis, which is less dramatic.

Manufacturing QES unscaledThe visual trend there looks like jobs have dropped a bit with our recession followed by the Global Financial Crisis plus two major Christchurch earthquakes and it has leveled off – with possibly the start of a very modest recovery.

This is what Clint said about it:

The trend since the recession ended is -500 jobs per quarter

My count is from start of the GFC, mid 2008, when manu jobs went from steady ~230 to ~190K in a year.

When did the recession end? According to Wikipedia:

The financial crisis of 2007–2008, also known as the Global Financial Crisis and 2008 financial crisis, is considered by many economists the worst financial crisis since the Great Depression of the 1930s.

The crisis played a significant role in the failure of key businesses, declines in consumer wealth estimated in trillions of U.S. dollars, and a downturn in economic activity leading to the 2008–2012 global recession.

To my eye manufacturing jobs bottomed out in 2012 and since then is a hint of recovery.

Yeah, it’s the lack of recovery, in fact, continued decline, that’s the problem

It doesn’t look like a continuing decline to me. And blaming it on National is a bit picky, the rest of the world has seen a manufacturing decline through the recession. Australia:

It represents a hollowing-out of traditional manufacturing in Australia, with the sector now accounting for just 6 per cent to 7 per cent of economic output. Employment in the sector fell by 140,000, or 13 per cent, between the year 2000 and November last year. New South Wales lost 52,900 jobs, or 18.5 per cent of its manufacturing workforce over the 13-year period. Victoria was hit even harder. It shed 95,100 jobs, more than 29 per cent of its manufacturing workforce.

http://www.smh.com.au/business/australia-needs-to-smarten-up-its-act-with-manufacturing-exports-20140214-32ref.html

Australia is yet to be hit by the closure of major car manufacturing plants which will result in a further 50,000 job losses.

So what does the overall job trend look like?

All jobs QESCherry picking data and choosing a chart style to suit making a point is easy.  But there’s a lot more to job trends than a Green political diss.

Greens have been proposing Green jobs, in part through manufacturing green energy thingies. There’s a bit of that happening but it can be a very expensive sector to invest in. And it’s very difficult competing in manufacturing with China and India, as the rest of the world is finding.

green job, also called a green-collar job is, according to the United Nations Environment Program, “work in agricultural, manufacturing, research and development (R&D), administrative, and service activities that contribute(s) substantially to preserving or restoring environmental quality.

Specifically, but not exclusively, this includes jobs that help to protect ecosystems and biodiversity; reduce energy, materials, and water consumption through high efficiency strategies; de-carbonize the economy; and minimize or altogether avoid generation of all forms of waste and pollution.

Green Party Green jobs:

We have a practical economic plan that creates decent jobs, adds resilience to our economy, and protects our natural environment. It is a plan for clean green prosperity for all New Zealanders.

Our plan will create 100,000 new jobs through direct government investment in housing, by ensuring our state-owned energy companies capture the massive export opportunities in the renewable energy sector, and, most importantly, by shifting the drivers for green jobs in the private sector

How are they going to do it?

Our plan is detailed and fully-costed. It includes plans for direct government investment, building sustainable infrastructure, supporting the greening of our small and medium enterprises (SMEs), driving innovation, introducing smarter regulation, getting the prices of resources and pollution right, protecting our brand, reforming capital markets, making our workplaces fairer, and measuring progress differently.

So far it’s very vague and idealistic. Some Green ‘highlights’:

Direct investment
We will ramp-up the Heat Smart home insulation programme ensuring it is rolled out to a further 200,000 homes over the next three years, costing $350 million and employing 4,000 people directly — 10,400 if you include indirect and upstream employment effects.

That’s an extension of a scheme that’s been running for several years. It’s not clear how many additional jobs would be created by a Green ‘ramp-up’.

From my own experience it can be as cost effective doing this without a Government subsidy because that is inflating prices. I bought a heat pump at least as cheaply as I would have if I used a subsidy and I had more choice doing it through the open market.

Keep it Kiwi
We will retain ownership of our state-owned enterprises while creating the right incentives for them to partner with clean tech entrepreneurs in the private sector and develop renewable energy solutions that we can patent and export abroad. With the right incentives in place, if we can capture just 1% of the global market for renewable energy solutions, we’ll create a $6 to $8 billion export industry employing 47,000–65,000 people in new green jobs.

Very idealistic and vague. This would require large Government investment in high risk enterprises. If it was a viable market it would be happening of it’s own accord – green tech has often proven to be very expensive.

Support for Small and Medium-Sized Enterprises
Through a mix of government procurement policies, tax incentives, start-up funding, and a $1 billion boost to R&D funding, we’ll support SMEs to step up and rive new job creation in the cleantech sector.

More idealistic vagueness. See 100,000 green jobs for New Zealanders (PDF) –

I welcome a chart from Clint showing projected job growth through these policies over the next (say) ten years. Here is another  Green graphic:

Wind power. Apart from the obvious problem that wind power must work alongside other power generation to cover times that not enough wind is blowing (some of the coldest time in winter is calm and frosty weather) there is a an ironic issue – environmental protest.

Wind power plan cancelled

Meridian Energy has decided not to go ahead with their plan to put 176 wind turbines in Central Otago. Local people set up a protest group. This group has spent a lot of time and money fighting to stop Meridian Energy for the last six years.

An earlier plan by Meridian Energy for hydro power from the Waitaki River in Otago was cancelled in 2004, partly because of protests from local groups.

Would a Green government ban environmental protesters so they can proceed with green energy projects?

I’m sure Greens could create some green jobs – at a cost. But it will be challenging to do it in an economically sustainable way – a lot more difficult than adding a Green line (or blocks) to a campaign chart.

Opposition discover existing policies will solve manufacturing crisis

After a a several month long inquiry into manufacturing the opposition parties – Labour, Greens, NZ First and Mana – discovered that a collection of previously announced policies will solve the manufacturing crisis.

Major recommendations 

Recommendation 1: The government adopt macroeconomic settings that are supportive of manufacturing and exporting, including:

  • a fairer and less volatile exchange rate through reforms to monetary policy;
  • refocusing capital investment into the productive economy, rather than housing speculation;
  • and lowering structural costs in the economy, such as electricity prices.

http://manufacturinginquiry.org.nz/report/

After this success the parties are believed to be considering launching further inquiries. They hope that the same politicians running those inquiries will also discover that repackaging policies was much more efficient than coming up with new ones.

They are optimistic that NZ Power, NZ CGT and NZ Money will alsobe able to be packaged and sold as capable of addressinmg other crises and will:

  • Eliminate poverty
  • Reverse global warming
  • Cure cancer
  • Win them the next election

They are believe that at least one of those will be seen as a realistic goal.

Manufacturing a crisis

The opposition parties continue to try promoting a crisis in New Zealand manufacturing. Green Party spokesperson ‘James Henderson’ posted at The Standard:

The manufacturing crisis & the Right’s wilful blindness

Is there a crisis in manufacturing? Hell yes.

And part of that crisis is due to the fact that National and its lackeys refuse to acknowledge the problem.

Is the Left wilfully exaggerating? Commenter ‘tsmithfield’ thinks so.

I have to disagree with the word “crisis”. This has the implication of something, sudden, unexpected, adverse, and in need of a urgent solution.

I think the word “trend” is more appropriate. There has been a long-term trend, as in many other western countries, for manufacturing to be relocated to countries that provide cheaper labour rates for mass production (e.g. China et al.). The currency situation doesn’t help. But it isn’t the cause.

If we see the situation as a long-term trend, then the answer might well not be in “fixing” the manufacturing “crisis”. This might well be akin to trying to stop the tide, and simply mean tipping money and resources down the toilet. The answer might well be in adapting to the reality of the world, and focusing on our strengths. This might well mean a continuation of the trend in manufacturing. But as long as we are focusing on our strengths, and competitive advantages, then the country as a whole should prosper.

For example, for the last several decades we have seen many, if not most of our manufacturing clients relocate their production to the likes of China. We have adapted by aligning our business associated with food production or construction.

I think manufacturing can succeed in NZ. But it needs to be more “botique” in nature. That is, we need to focus on shorter-run, specialised type products, and high-end products that can’t economically be produced in the likes of China. However, I believe the days of long-run production of products for export in NZ are pretty much over. Other than for food related products where we have a competitive advantage.

In contrast to the Green rhetoric that is far closer to the reality of the situation with manufacturing.

I worked for a manufacturing company in the mid 1980s. It closed down in about 1987 due to the difficulties competing with cheap labour based manufacturing in Asia. I then worked for Fisher & Paykel at their Taieri appliance factory.

A generation later my son worked in the same F&P factory, and was just able to complete his apprenticeship before the factory shut down, moving it’s manufacturing to Thailand and Mexico – that was in 2008, while Helen Clark’s Labour ws still in Government.

Claiming we suddenly have a crisis now is one of the worst kinds of political overstatement and scaremongering, because it could impact on business confidence.

New Zealand manufacturing certainly faces challenges – as it has for decades. Another opposition ‘cry wolf’ won’t help them.

A party poll crisis does not justify manufacturing a crisis.

Facts on manufacturing

David Farrar asked on Kiwiblog: Is the manufacturing crisis manufactured? This led to discussion on the number of jobs in manufacturing.

A comment from ‘JC’:

Lets get some facts on the table..

Since about 1950 manufacturing has fallen from around 30% of GDP to 10% in the US and NZ, ie, its a sunset industry in terms of employment and importance to GDP. Automation, robots, improved processes and stuff made in lower cost countries etc mean that your widgets cost way less.

Manufacturing is thus going the same way as agriculture in the previous century.. still essential but far less important in comparison to IT, innovation and services.

As in the Western world in general, customers are not loyal to local manufacture if the stuff from China, Korea, India and Vietnam is cheaper and sufficient in quality.. for us, the old social model of a middle class built around making widgets is dead and gone.

The other day John Key mentioned that in any 90 day period about 100-200,000 jobs are destroyed in NZ and about 100-200,000 jobs are created. Its this “creative destruction” of the old and tired replaced by the new and better that makes our economies work, not hand wringing and political BS.

Now, about the history of manufacturing.. all my adult life of over 50 years I have been subjected to publicity campaigns from manufacturers seeking tax payer support for every little or big downturn.

Initially they wanted direct subsidies and when that palled they have sought indirect subsidies by way of a low exchange rate.. these people are not your friends and increasingly not your employers.. they are those rent seekers who use their waning clout to avoid modernising their factories to produce cheaper and better goods.

Modern manufacturing is about using capital intensive machines, automation and robots with fewer humans to produce competitively priced and quality widgets.. or products of flair and innovation that can only be produced by highly trained and well paid humans.. for the moment.

There’s no doubt manufacturing has changed substantially in my lifetime. In the mid 1980’s I worked for a manufacturing company, it closed down due to difficulties competing with international competitors with lower labour costs.

It’s not just the nature of manufacturing – far more automation – that’s changed, it’s also the reality that manufacturing keeps moving to low wage countries to keep costs down. We simply can’t compete with much of that in New Zealand, except in specialist niches in the market.

Propping up industries that are no longer competitive doesn’t make economic sense for any country.

Politics and reality on the manufacturing inquiry

Excellent commentary on the opposition’s manufacturing inquiry, but not from the Mike Smith at The Standard in his post – Minister Tin-Ears – he’s an employee in David Shearer’s office so unsurprisingly is attacking National and promoting standard Labour lines:

New Zealand’s remaining world-class manufacturers are sick of being told by politicians that they need to work harder when they have been doing that for years, but face a huge headwind from an over-valued dollar.

We can only hope that National’s lack of action or ideas does not do too much more damage to the productive economy before then.

Trying to dutifully reinforce the idea that National runs a ‘do nothing’ government. But this ignores the reality – the exchange rate is mainly governed by international financial influences and there is little we can do about it in New Zealand.

Nick Tuffley (chief economist at ASB) has just spoken about it on Firstline.

The challenge with monetary policy is there is very little the Reserve Bank can do.

I don’t think there’s a free lunch.

We need to fix the UK, fix Europe, fix the US, and then we might have a lower currency.

By far the best at The Standard came from down the thread in a comment by ‘Tiresias’, who spells out the reality

There ain’t nutt’n no Government can do about the exchange rate, unless it’s prepared to sacrifice almost everything else on that altar.

And even if the Government could do something about the exchange rate it would have to think very carefully before doing it. Government debt isn’t frighteningly high. Private debt in New Zealand is. Most of it is via the banks and therefore funded from overseas in the almighty dollar.

Bring the NZ dollar down by 10% (at least, as you’d have to in order to make a difference) and you’ve increased NZ’s overseas debt by 10% overnight and that would have Standard & Poors, Moodies et al running flags up flag-poles left, right and centre.

So why is the opposition having a parliamentary inquiry on this? It’s hard to see it as anything but political grandstanding.

Full comment by Tiresias:

“I am optimistic that the Enquiry will produce some action no later than 2014.” – Mike Smith

I fear I’m not. Much as I loath this present Government I have to say that if there was a magic wand that could be waved to help exporters and manufacturers, Key et al would be waving it furiously. After all the MDs and CEOs and Directors of these businesses are National’s through and through, and I’m sure they’ve been demanding something for their money from the Government privately at parties and golf-courses and business breakfasts since before the last election.

The only way you’re going to bring the exchange rate down is to sabotage the economy so it looks as shaky as Spain’s or Italy’s. The Reserve Bank Governor set it out in a speech last October:

“So there are clear limits to what monetary policy and exchange rate intervention can do to lower the New Zealand dollar. In order to achieve a sustained reduction in the New Zealand dollar it would be necessary to alter the overall level and pattern of saving and investment in the economy. In particular, it will be necessary to tackle our addiction of depending on foreign savings to finance our consumption and investment. This dependency means that we have persistently needed interest rates above those in most developed economies to maintain inflation at target levels similar to those being followed elsewhere. Policies that increase domestic savings, including reducing the government’s fiscal deficit, and to reduce the flow of resources into the public sector and other non-tradables sectors, would help to achieve a sustainable reduction in the exchange rate.”

“http://www.rbnz.govt.nz/speeches/5005204.html”

Trouble is, to increase domestic savings you have to increase interest rates which puts up mortgates, both of which dries up High Street consumption which may help exporters but hurts all the rest of New Zealand’s businesses and retailers. Also, New Zealand’s Government fiscal deficit isn’t all that bad compared with the countries in trouble. It’s private sector overseas debt that’s causing the concern in the ratings agencies and the Govt. can’t do much about that except ask businesses to stop borrowing:

union.org.nz/sites/union.org.nz/files/Working%20Through%20the%20Issues%20-%20Debt%20(Revised).pdf

Plus “reducing the Government’s fiscal deficit &tc” is banker-speak for austerity which is just Graeme Wheeler toeing the official line.

Politicians – including Shearer in his State of the Nation speech – dream big dreams of other people coming up with better mouse-traps that are going to take the world by storm. Well, it might happen just as I might win Lotto. (Actually I’ll never win Lotto as I don’t buy a ticket, so make that “just as you might win Lotto”.)

There ain’t nutt’n no Government can do about the exchange rate, unless it’s prepared to sacrifice almost everything else on that altar. And even if the Government could do something about the exchange rate it would have to think very carefully before doing it. Government debt isn’t frighteningly high. Private debt in New Zealand is. (see union.org.nz above). Most of it is via the banks and therefore funded from overseas in the almighty dollar. Bring the NZ dollar down by 10% (at least, as you’d have to in order to make a difference) and you’ve increased NZ’s overseas debt by 10% overnight and that would have Standard & Poors, Moodies et al running flags up flag-poles left, right and centre.

So are you going to subsidise New Zealand’s world-class manufacturers just like you didn’t support New Zealand’s world-class wind-turbine manufacturer Windflow in Christchurch so that it’s had to lay off most of its staff – including world-class engineers and designers – and is now looking to sell its world-leading, New Zealand developed technology to a foreign competitor for a mess of pottage? http://www.nbr.co.nz/article/windflow-dream-fades-shares-plunge-ch-96636

Sorry Mike. All the hot air your inquiry will produce over the next few months might have generated a few kw electricity from a Windflow gen set had there been one available – but for the rest it’s just another charade of politicians forming a committee to look at all the ways you might get other people to reshuffle the deckchairs on the Titanic.

Yes, it is difficult to see the inquiry producing anything but hot air.

The inquiry seems to be a futile exercise that may do little more than give manufacturers false hope and waste their time.

Metiria Turei – smart green?

From Metiria Turei’s column in DScene Protect the skills already in workforce:

We have to protect our manufacturing base, make it a priority as part of an economic vision for a sustainable green economy.

We cannot predict future economic difficulties or political machinations. So, we need to build resilience into our economy. That means investment in our workforce, high quality education, continued workplace training in new developments and investment in technology to help meet new challenges.

The end result will be that our manufacturing base is resilient, flexible and able to withstand not just the prevailing economic winds but the political hits that come as well.

We can make a difference.

By expressing a preference for New Zealand made content in Government procurement contracts we can support our local businesses.

Differences in prices can be offset by receiving better quality products and increased tax revenue from the stimulated economy.

This is a smart green solution to helping stem the outgoing tide of manufacturing jobs.

We have to do what we can to protect as much of our manufacturing base as possible, I doubt anyone would dispute that.

And keeping business local does help stumulate the economy.

But there’s nothing specific in this that points to any new way of trying to achieve vague idealistic goals. Investment, education and training all take place now.

Turei suggests the end result will be a flexible manufacturing base, but she is proposing flexible procurement ‘preferences’.

But there’s little here to support her  claim of it being  ‘a smart green solution’. Some may buy it as smart green PR but it’s little more than vague party palaver.

The Greens will need to come up with far more detailed and specific proposals if they want to be seen as a serious governing party. It will take much more than slick marketing slogans.

Smart green will be seen as smart arse Greens unless they can add substance to their vaguely defined ideals.

 

We could print money, but can’t print markets

In a post on interest.co.nz

Bernard Hickey wonders why New Zealand is not printing money and thinks we are being severely disadvantaged by not following the crowd.

The New Zealand dollar seems set to rise towards US$1 if the current trends continue.

He then went on to explain what is happening around the world, including:

  • The US Federal Reserve announced an essentially unlimited plan for money printing on Friday morning.
  • Economists are now expecting the Reserve Bank of Australia will cut its interest rates through 2013.
  • This month the European Central Bank unveiled its own programme of unlimited bond buying.
  • The Bank of Japan, which has been printing and stimulating with 0% interest rates for almost 20 years, is considering fresh money printing to try to drag its yen lower.
  • The Swiss National Bank has been printing francs in unlimited fashion for months to cap a rise in its currency against the euro.
  • The People’s Bank of China is also on the verge of its own fresh stimulus.

In the meantime New Zealand doesn’t even fiddle while the world’s economies burn money like it’s going out of fashion.

Yet we are standing aside from this giant game of musical chairs and scratching our chins, wondering why the world is so unfair. We point to the skies and say there is nothing we can do about this bad economic weather.

Outgoing Reserve Bank Governor Alan Bollard reiterated in his valedictory news conference and parliamentary appearance that there was nothing New Zealand could do about these acts of economic gods.

And our manufacturing sector shows signs of more strain.

All this chin-scratching and finger waving in the air is having very real world consequences. In recent weeks we have seen hundreds of job losses at Tiwai Point, Spring Creek, Huntly, Kawerau and at a fish processing plant in Tauranga. The Reserve Bank’s own Monetary Policy Report noted a slump in manufacturing, particularly the import-competing type in the last year.

I guess we could print more money.

But we can’t print more aluminium, coal or newsprint markets. I put that to Bernard on Twitter (where he was discussing the issue with Fran O’Sullivan).

As yet he hasn’t responded.