Speech delivered to the New Zealand Business Roundtable, Wellington, 22 February 2011

Ladies and gentlemen,

It is a great pleasure to be here tonight. We have chosen the title ‘Confessions of a political disaster tourist’ for my speech.

Well, then, I have a first confession to make. It is actually my first visit to New Zealand. My life so far has mainly happened travelling back and forth between Britain, Europe and Australia.

Sadly, though, I had never made it across the Tasman before and so I was very excited when the Business Roundtable invited me.

The other confession I have to make is rather an apology. I am going to talk about my passion for political disaster tourism but let me just make it clear that this is not meant to refer to New Zealand.

In fact, Roger Kerr had asked me whether I wanted to comment on some economic issues affecting New Zealand at the moment. I was very hesitant about that.

If there is one thing I cannot stand then it is visiting academics who, after the first few days in the country, start telling the locals how their country works.

Perhaps I can tell you a little anecdote to illustrate what I mean.

We had Joe Stiglitz, the Nobel Prize winning economist, touring Australia last year. The immigration stamp in his passport had barely dried when his first article about Australia’s macroeconomic policies appeared in an Australian newspaper.

It was obvious from the article that Stiglitz was blissfully unaware of Australia’s precise economic circumstances.

But Stiglitz had heard that Australia had implemented a big stimulus programme, that it did not suffer a recession during the GFC and that therefore the stimulus must have saved the Australian economy.

Life is so simple when you’re a Nobel Prize winner.

It was quite frustrating to us at the time that a flying visit of an international economics guru could seemingly cancel out all the good domestic economic research.

It was even more annoying when I later read an article by Stiglitz in a German newspaper in which he repeated his questionable claims about Australia to an unsuspecting audience.

The combination was just perfect: An American economist, who did not understand Australia, writing for a German audience, who did not know Australia, either.

When I am thinking of Joe Stiglitz’ travels, the term disaster tourism acquires a completely new meaning.

Bearing in mind my own frustration with self-proclaimed international experts, I hope I will not fall into the same trap.

So instead of telling you everything I do not know about New Zealand, I wanted to talk about something I do know. I would like to share my own experiences in political disaster tourism with you.

In German, there is an even better word for what I have in mind, and it is called Schlachtenbummler. It’s a composite word made up of Schlachten (battles) and Bummler (traveller). The word has its historic origins in the Franco-Prussian war of 1870.

By the way, that was the last war that Germany won.

In the 1870 war, there were civilians visiting the battlefields simply because they were curious how such a war looks and feels up-close. So the original Schlachtenbummler were travelling from battle to battle, looking at all the tragedies and brutalities of war.

They were actually finding it, well, quite interesting, though perhaps not really pleasurable. And that probably makes them the first disaster tourists in history.

And I sometimes feel a bit like a political Schlachtenbummler. I had studied economics and law in Germany and Australia. Then I moved to London where I first worked in the House of Lords and later at a think tank. And now I am with the Centre for Independent Studies in Sydney.

So what makes my life political disaster tourism? Maybe because I left Germany when I was fed up with the government of Chancellor Gerhard Schroeder and his Greens coalition partner. International newsmagazines at the time referred to Germany as the sick man of Europe, and so I thought I better get out of there.

That’s why I moved to London, where I had hoped to find a more liberal country. It didn’t take long to realise that I was only jumping out of the frying pan and into the fire. And when Gordon Brown became Prime Minister and the wheels were falling off the British economy, I reckoned it was a good time to leave for something better.

So Australia looked pretty promising, especially with its charismatic new Prime Minister, Kevin Rudd. Well, we all know what happened to him, and so for the time being I am now stuck in Gillard land. And what positive can you say about Gillard apart from the fact that she has now brought New Zealand apples to Australia?

From Schroeder to Blair, from Brown to Rudd and now Gillard, who knows what’s next for me: Robert Mugabe? Silvio Berlusconi? Nicolas Sarkozy? The possibilities of being governed badly seem infinite. At least Hosni Mubarak is gone now.

It brings to mind the famous Einstein quote: ‘Two things are endless. The universe and the stupidity of the mankind. Actually I’m not sure about the universe!’

So this is what I mean when I talk about political disaster tourism. It is the experiences of political follies and bad government policies in different places and at different times.

Although, admittedly, ‘bad government policies’ almost sounds too much like a pleonasm. You know, like ‘black darkness’, ‘burning fire’ or ‘alcoholic doctor’.

Now, this sounds quite negative and awfully pessimistic. But I don’t really think it is. Because whenever there are really bad political disasters, there is at least a chance that other countries will learn from them and avoid them.

Like Germany’s confused electoral system. I mean, seriously, who would ever copy that?

Oh sorry, bad example. I just remembered that New Zealand actually did it.

From what my New Zealand colleagues tell me, once upon a time New Zealand was a remarkable country where economic reforms could happen.

That was perhaps also due to the fact that it used to have an old-fashioned first-past-the-post electoral system. For better or worse, when you have first-past-the-post it usually delivers clear majorities. And then you either get a good or a bad government, but at least you know who really governs you.

With a Mixed Member Proportional system – or MMP as it is affectionately referred to – that is obviously different.

Not only that you never quite know which party to blame for the latest policies. Most voters probably do not even understand what their two votes at elections are really good for.

They may want to vote for parties when in fact they are only picking constituency candidates and they may give their votes to parties although they think that the election is decided in marginal constituencies.

You can operate under MMP rules for decades without actually understanding how the system really works.

Ah, and by the way, this was not meant to be a comment on New Zealand domestic politics. I was, of course, only talking about Germany. However, I have been told that Jim Anderton doesn’t understand MMP, either!

As I said, New Zealand imported its voting system from Germany. So perhaps it is a good idea to look at the operation of MMP in Germany and see where it leads to.

Actually, when I first heard about MMP being a German export success, I could hardly believe it. Sure, Germany is a big exporting nation. You only need to think of BMWs, Miele kitchens and German beer.

Germany has also exported its Royal Family to Britain, Ludwig Leichhardt to Australia and Ludwig van Beethoven to Austria. The corresponding import from Austria, that little-known painter with the funny moustache, was not such a good deal, though.

On the other hand, you wonder how they could ever fill the hours on the History Channel without all those Nazi documentaries.

So Germany has given lots of things to the world – some good, some less so. But among them MMP must be the strangest export ever.

The German version of MMP is called ‘personalisiertes Verhältniswahlrecht’. It is as complicated as it sounds.

After the War, the Germans could not decide what kind of political system they were going to have. Some wanted British-style First-past-the-post. Others wanted a purely proportional electoral system. It ended as it always ends in German politics, namely with a flawed compromise.

So they introduced the electoral system that is still operating today. With your first vote, you vote for the constituency candidate, but the second vote determines the overall composition of parliament. It’s exactly what New Zealand has now.

And it is, of course, a brilliant system – in theory. It lets you pick constituency candidates independent of whether you like their parties, and the parliamentary outcome perfectly reflects the will of the voters.

The problem with this system certainly does not lie in the theory. It’s in practice that the system does not work.

The biggest problem is that it has gradually fragmented parliamentary democracy in Germany. It was a slow but steady process.

In the German federal election of 1965, the two major parties – that is the right-wing Christian Democrats and the left-wing Social Democrats – won a total of 86.9 percent of the vote.

The biggest three parties, and that also includes the small Liberal Party (FDP) united 96.4 percent of the voters behind them. Because there is a five percent threshold to get into parliament, there were only three parliamentary factions.

Now compare this with the last election of 2009. The biggest two parties are down to just 56.8 percent, the biggest three combined only have 71.4 percent.

But in addition to the traditional parties there are now the Greens and a party called ‘The Left’. That name – ‘The Left’ – is meant politically, but actually it is really all that is left of the old East German communist party.

It is the same picture in Germany’s state parliaments where you now typically find four, five or sometimes even six different parties. The erosion of the political scene makes it almost impossible to predict coalitions. They do not depend on political proximity but only on the ability of the parties to somehow construct a parliamentary majority.

And so you get liberal-green-conservative, or liberal-green-social democrat, or social democrat-post communist, or social democrat-green-post communist, or social-democrat-conservative or liberal-conservative or liberal-social democrat coalitions.

There is something very arbitrary about German politics these days. German political parties are now so open in every direction that they are leaking credibility.

If you combine MMP with Germany’s version of cooperative federalism, what you get is a de facto all party coalition running the country. And because every party now has to be able to work with every other party, in effect you only have a choice of social democratic parties with no distinctive features.

The best example of this non-committal style is Chancellor Angela Merkel. Supposedly, she leads a right-wing party but this is how she summed up her own philosophy: “Sometimes I’m a liberal, sometimes I’m a Christian socialist, sometimes I’m a conservative.”

Next to Merkel, even a chameleon would blush with envy.

I would argue that MMP has to take some of the blame for Germany’s sick political culture. The country would have benefited from robust debates between left and right. Instead it has been sleepwalking towards eternal compromise and consensus.

I don’t know whether this is what New Zealand really aspires to. If it is, then by all means keep MMP.

Because I don’t want to make this an anti-German rant, we will now turn to another country on our political disaster tour. So let’s talk about Britain.

Disaster tourism and Britain – that seems like a natural fit. Anyone following British affairs would know that Britain is a country plagued by disasters.

Whether it is heatwaves crippling the country when it’s barely 20 degrees, the wrong kind of snow stopping British trains, British aircraft carriers no longer carrying any aircraft because there was no money left for them after the recent budget cuts, or the Deputy Prime Minister not accepting messages after 3pm because it’s bad for his work-life balance: there is always something wrong with Britain.

After a week of reading the Daily Mail, you may come to the conclusion that there is no such thing as intelligent life on the British Isles.

Official Britain would, of course, never admit that. So they try to gloss over the disasters with brilliant marketing campaigns.

A few years ago, the British government was looking for a new national motto. They were envious because all great nations have one. The French have their famous ‘Liberté, Egalité, Fraternité,’ the Americans proclaim ‘In God We Trust,’ and even a country like Burundi comes together under the words ‘Unité, Travail, Progrès’ – and that’s all that the Burundians can really hope for.

But Britain? The only thing that gets close to a national slogan is the royal family’s ‘Dieu et mon droit,’ but after all the British royals are half-German and their motto is French, mon Dieu!

Before the government could even make a decision on the motto, British newspapers were already flooded with suggestions. The best ones were: ‘Pride comes before a fall’, ‘Past my sell by date’, ‘We apologise for the inconvenience’, ‘Third World nation, First World prices’, ‘World’s largest industrial heritage park’, and ‘Someone get me outta here!’

Why is it that the British are so frustrated with their country? Well, I have an idea: Because they can no longer afford to live in it. ‘Third World nation?’ – Okay, fine, the Brits can endure that with a stiff upper lip. But ‘First World prices’ – that’s asking a bit too much.

Britain is one of the most expensive countries on the planet and London its rip-off capital. Filling your car, eating out, staying at a hotel or just doing the weekly shopping are all more costly undertakings than in other industrialised countries around the globe – even without taking house prices into account.

So why is Britain so expensive? I believe that there is quite a simple reason for the phenomenon of ‘rip-off Britain’. And it’s got something to do with land-use planning.

The story of modern British land-use planning begins in the late 1940s. Britain had just won the War, but the new Labour government under Prime Minister Clement Attlee now wanted to win the peace. They set out to build the New Jerusalem, and planning for better cities was a core part of this undertaking.

There was an influential movement of intellectuals, politicians and planners who believed not only that planning was possible. They also thought that it was superior to the alleged chaos of the market.

It is hard to understand this now, but people at the time played down individual rights and liberties and played up subservience to ‘the greater good’. Sir Patrick Abercrombie, the leading British planner of the day, wrote of the economist as ‘a muddler who will talk about the Law of Supply and Demand and the liberty of the individual’.

There was a conference of planners in 1944 where the profession outlined their – well – plans for the post-War period. The speeches were quite telling. Here are two quotations. When they discussed the question ‘Can we induce people to move?’, the borough surveyor of Tottenham, in north London, said: ‘It seems that the most difficult hurdle to surmount will be the wishes of the people of Tottenham’.

Another contributor took the view that people’s views were unimportant: ‘Planning means control – you have got to put people out, tell them where to live and if someone wants to build a factory, you have got to tell them ‘nothing doing in Tottenham – you must build a factory in so-and-so.’’

To underline the last point, the speaker then explained that other countries had planned systems, too: countries like Russia, Germany, and Italy. Never mind that these other countries were communist, national-socialist or Fascist!

So you can see that the origins of Britain’s planning system lie deep in the socialist thinking of the 1940s. But it has survived until the present day. The only other institution that has also survived from that era is the National Health Service, which has become Britain’s secular religion.

Planning in Britain is led by the implicit belief that government knows best. It is for politicians and bureaucrats to decide what to build, where to build, how to build and how much to build. If this sounds a bit like Soviet tractor production to you, then you have got the right association.

It is ironic that this plan-led system even survived the allegedly neo-liberal Thatcher revolution. Indeed, it is even more astonishing that in 1990, a year after the fall of the Berlin Wall, the Conservative government under Thatcher strengthened the five-year plans for housing development in Britain!

So what happened in these 60 years of plan-led land-use development in Britain?

The answer is: Basically the same as in Soviet tractor production.

The British planning apparatus never provided enough of the kind of housing that Britain needed and wanted:

They decided that more development should happen in the North of the country. But people actually wanted to live in the South.

Then they wanted that more people live in denser cities. But people still wanted to live in traditional suburbs.

They decided that people should live in apartments. But people actually still wanted to live in traditional family homes.

The whole British planning process was a constant battle of the state against its citizens. Some enlightened planners always thought that they knew best what is good for the people.

There was only one problem with this: They didn’t.

The result of decades of town-planning in Britain was an endemic undersupply of the kind of housing that Britain really needed. And so the British came to live in ‘rabbit hutches on postage stamps’, as Alan Evans, with whom I co-authored a series of housing reports for the London think tank Policy Exchange, once put it.

The British now live in the smallest, pokiest and most expensive houses in Europe. The typical newly-built dwelling in Britain has a size of only 76 square metres. That is in fact smaller than the existing dwelling stock.

Unfortunately, the problems do not end with unaffordable housing. Because at the root of the housing crisis is a land crisis. It is land that is expensive, not the bricks and mortar. And so everything that uses land in Britain is expensive, too.

Whenever you stay at a hotel or dine at a restaurant, you are not only using their facilities or enjoying the food they prepare, but you are effectively renting some space from them for a limited time.

Because that space is so expensive in Britain, two things happen. First, land is used more intensively which means that business owners try to squeeze in more customers on the same space. Small hotel rooms or two or three restaurant sittings in one evening are examples of this practice.

Second, high land prices will be passed on to customers. No wonder that Swiss Bank UBS came to the conclusion in a survey that London restaurants and hotels are among the most expensive in the world’s top cities, second only to Tokyo.

Unfortunately, high land prices also leave a mark on other prices. Take the retail sector, for example. Selling goods needs land if you want to display and stock them. But again the price of the land required for this is passed on in their prices.

The difference that land prices make can be shown when you compare identical, imported goods in different countries.

Ikea is the perfect example. Much of its furniture is now produced in Asia, so in cost terms it should not make much difference whether you sell it in Australia, Germany or in the UK. But when I compared Ikea prices for a Policy Exchange report, the most expensive Ikea catalogue was the British version. When Ikea was then pressured into explaining the price differences, they confirmed that the differences were due to land prices.

And it is not just Ikea. Anyone who has ever spent time in London will be able to confirm that everything is more expensive.

So restrictive land-use planning in Britain is an all-round disaster. It has crippled the British property market, it has increased retails prices, it has probably also contributed to the decline of British manufacturing … because that uses land, too.

And yet: British-style planning is alive and well. Not just in Britain. In Australia and in New Zealand we stand in the tradition of the British planners who designed this planning system after the War.

It is not as if there were no alternatives to British planning. You would only need to look at continental European countries to see how you could avoid exorbitant land prices. Switzerland and Germany, for example, have had stable property markets for decades. They managed to build more because they managed to supply more land. And they supplied more because the planning system provided better incentives for development and it reacted to price signals.

But although the failings of British-style land-use planning are so obvious, it is widely regarded as almost sacred. And yet, I think this seemingly benign planning system is actually one of the most pernicious assaults on economic competitiveness, our quality of life and social mobility.

For its failing planning system alone, Britain is a must-go for any political disaster tourist.

There are many political disasters in Europe that I could still talk about such as the state of public finance, the implications of monetary union in Europe, or the ageing of European societies.

However, in the time that I have left I would like to draw your attention to a development that worries me even more than these supposedly hard core economic topics. I am talking about social cohesion, migration policies and multiculturalism.

The last few months have been quite extraordinary in Europe because they brought frank admissions that Europe’s traditional approach to the integration of newcomers does not work.

In October last year, German chancellor Angela Merkel broke with her own political habits and for once delivered a clear-cut statement. She said that “multiculturalism has failed and it has failed utterly.”

And then, just two weeks ago, it was British Prime Minister David Cameron who joined in the critique of multiculturalism. At the Munich Security Conference, he said:

“Under the doctrine of state multiculturalism, we have encouraged different cultures to live separate lives, apart from each other and apart from the mainstream. We’ve failed to provide a vision of society to which they feel they want to belong. We’ve even tolerated these segregated communities behaving in ways that run completely counter to our values.”

David Cameron and Angela Merkel can hardly be described as ugly, xenophobic, racist right-wingers.

On the contrary, both Merkel and Cameron belong to the same school of middle-of-the-road, touchy-feely, modern, tree-hugging, compassionate and cuddly conservatism. So it is perhaps even more surprising how blunt their rejection of multiculturalism now comes across.

It sounds even stranger, perhaps, when you have the kind of multiculturalism in mind that is practised in Australia and perhaps also here in New Zealand.

As I said, I don’t want to comment on New Zealand too much so let me instead use the Australian example.

In Australia, about a quarter of the population was born abroad and almost half the population has at least one parent who was born overseas. In terms of ‘diversity’, life does not get much more multicultural than in Sydney or Melbourne.

Anyone telling Australians that multiculturalism has utterly failed would be laughed at. That is because the integration of migrants into Australian society has worked very well.

School performance of migrant children is as good or even better than average education achievements.

Migrants are less likely to be imprisoned for serious crimes than the rest of society.

Skilled migrants also show a much higher labour market participation than the native population. They are less often unemployed, and they actually also earn more than the average Australian household.

By all standards, migrants in Australia have contributed enormously to the economy, and they have integrated extremely well into Australian society.

And that is despite the fact that Australia has had a relatively higher intake of migrants than any European country.

Correct me if I’m wrong, but I believe that the situation in New Zealand does not differ that much from Australia.

So why is it, then, that multiculturalism works in Australasia and fails in Europe?

I believe there are two reasons. The first reason is quite simply that when we are talking about multiculturalism in Australia or New Zealand, we mean something very different than the Europeans.

When I applied for my Australian visa, I had to sign a so-called Australian values statement. Perhaps you haven’t yet come across Form #1281 from the Australian Department of Immigration and Citizenship, so let me quote:

I understand:

• Australian society values respect for the freedom and dignity of the individual, freedom of religion, commitment to the rule of law, Parliamentary democracy, equality of men and women and a spirit of egalitarianism that embraces mutual respect, tolerance, fair play and compassion for those in need and pursuit of the public good;

• Australian society values equality of opportunity for individuals, regardless of their race, religion or ethnic background;

• the English language, as the national language, is an important unifying element of Australian society. [Even when it is spoken with a German accent.]

I undertake to respect these values of Australian society during my stay in Australia and to obey the laws of Australia.

Of course, this is a formality, a symbol. But such symbols are important. The Australian values statement underlines that it is not enough to just physically arrive in the country but that it is your responsibility as a migrant to play by the rules of your new home.

Just compare this with the kind of multiculturalism as practised in Britain and on display in every British town hall.

The British government and its agencies now rival the United Nations in their employment of interpreters and translators. London’s Daily Telegraph reported that the police spend £25 million on interpreters annually for the benefit of foreign offenders, victims and witnesses who do not speak English.

Haringey Council welcomes visitors to its website with information in French, Kurdish, Albanian, Somali and Turkish.

The council of Salford went even further. They recruited a ‘Welfare Rights Linkworker’ to provide advice on ‘means-tested, non-means tested and disability benefits as well as tax credits’ in Urdu and Punjabi.

Although such initiatives are certainly well-intentioned, they send a very problematic message to newcomers: English is optional.

Australia has always demanded a greater integration effort from its migrants – that’s one difference between Australian and European multiculturalism.

But there is another difference: Australia and New Zealand have always been more selective and careful in the choice of their migrants. You could call this a cherry picking of migrants. But I would say it is just common sense.

In modern industrialised countries like Australia and New Zealand there is a very limited demand for unskilled labour. The unskilled jobs that existed two generations ago have either disappeared altogether – or they have relocated to cheaper countries.

OECD countries have little to gain from unskilled migration. In many cases, unskilled migration means migration straight into the arms of the welfare state. But that is precisely the kind of migration that Europe got. Little wonder that Salford Council felt the need to recruit a welfare advisor who could work in Urdu and Punjabi.

Far too long European countries have not selected their migrants carefully. They have not demanded much of them either in terms of language skills, professional skills let alone in terms of their willingness to integrate.

And now politicians like Cameron and Merkel are surprised that their countries have not succeeded in integrating these migrants.

In this part of the world, I think migration policy has been far more selective. But if you select your migrants better, if you make sure that they have the potential to make a contribution to society, then integration does not have to be forced upon your migrant communities. It is something that just happens.

When I am looking back to Britain and Germany, I am afraid that their waking up to the realities of a fragmented, broken, segregating society may well come too late.

After decades of ‘anything goes multiculturalism’, both countries have created a disenfranchised, welfare-dependent underclass of migrants. These people do not identify with the countries they live in and so they look for substitute identities in their parents’ or grandparents’ nationalities and religions.

Without a doubt, this is an unfolding disaster for European societies on an epic scale. I hope that Australia and New Zealand, with their very different integration experiences, will pay attention to what is happening in Europe.

We need to understand what went wrong with multiculturalism in Europe – as now described by Merkel and Cameron – if we want to avoid a replay of the European experience here.

This finally brings me back to ‘political disaster tourism’ and why we need it.

It is a very useful experience to travel to the scenes of political disaster. Because they hold lessons for us to learn. At least that’s my own experience travelling between Europe and Australia.

Marx was right – and I mean Groucho Marx, not Karl: “Learn from the mistakes of others. You can never live long enough to make them all yourself.”

I think that almost sounds like an advertisement for political disaster tourism.

Thank you.