On the day the mid-term US Congress met for the first time in 2011 David Koch waited in the Speaker’s office for his man to come down from the chamber to be given his instructions. He had paid for this right, having forked out $US130 million to the Republicans. It was a bargain. Jane Mayer reports that in the seven years between 2003 and 2010 the brothers David and Charles Koch lavished over half a billion dollars to “public policy” front groups which they had set up principally to deny the reality of climate change. Peanuts. By 2006 their company, Koch Industries, was grossing $US90 billion a year.

The Koch brothers are the best known, richest and possibly the most ruthless lobbyists in the US, the latter distinction being a tough call. They’re significant also in that their huge fortune is based on coal, oil and gas, the industries - along with Big Pharma and Big Insurance - most prominent in influencing Washington to do the wrong thing. Big Oil needs to keep polluting so they concoct lies.

“Money, Money, Money”

The present leader of the Republicans in the Senate is Mitch McConnell, a hack widely regarded as having no interest in policy but a passion for power. He was first elected by being the recipient of Koch funds and he’s there to stay, thank you very much. Yes, that’s generally the case, but with Mitch, it seems to be his one motivation. Addressing a university seminar, he suggested that there were three important principles, writing on the blackboard, “Money, Money, Money”. McConnell embodies contemporary Republicans. They’re in Washington to remain in Washington. So the Koch brothers and he get along just fine. Each can work their patch without worrying about morality or the state of the country.

McConnell’s and the Kochs’ needs are to dismantle Obama’s (already compromised) attempts to provide universal health care and to prevent action on climate change. It was not so long ago that even Republicans accepted that climate change was a threat. Now a large minority of people in the US and other advanced countries and almost all of its Rightwing politicians deny it. That’s the work of the Kochs.

Mayer identifies 2007 as the turning point. The brothers worried that Al Gore’s persuasive documentary, with its insinuating title, was winning the battle of public opinion. “An Inconvenient Truth” was about to lead to political action. Gore and the environment were seen as the top threat to George Bush’s Texas Presidency and thus his Party’s next candidate. Bush was sinking in popularity and the next year was an election year.

Barack Obama was committed to serious action, but his eventual victory did not mean that the Kochs were about to lose out. It meant that they were having to up the ante. Early in January 2009, before the new President had been inaugurated, the brothers summoned their mates to a meeting. Attendees were not allowed to bring phones and all paperwork had to be destroyed before they left. This was to be totally secret, a real conspiracy of the 0.00001%. Mayer, whose research is always thorough, has calculated that the amount of capital that the conspirators controlled amounted to $US214 billion.

The secrecy and the fortune enable the Kochs to set up a complex network of front groups. These operate at several removes from their real source. Some are “moderate” and “academic” but they are all fake.

Koch surrogates have sent fraudulent letters under apparently authentic letterheads of liberal-sounding institutions which purport to say that there is “doubt” about whether the climate is changing. They talk of the need for “balance”.

There is also subversion as a long-standing State dirty trick, formally independent of the think tanks. Mayer says that between 1958 and 1966 the Central Intelligence Agency sent secret payments to universities, TV shows and publishers. Alongside the Government, the think tanks created university courses and hired Right-thinking academics. They’re provided with anodyne names and sound as if they’re interested in polite inquiry, but they exist only to oppose any policy which might threaten the Koch brothers’ billions. They act as if they’re offering objective conventional discourse but their true purpose is to be entirely negative.

At a further layer of disguise the rhetoric from Koch fronts favours the violent, appealing to unreason and hate. A permanent object of the conspirators has always been to dodge taxes. Mayer reports that in 2013 there were in the US 100,000 private charities set up for this reason, many of them initiated by the brothers. That’s why a Koch outfit considered that Congress was the “slave owner”, taxpayers “the nigger”. Goaded by such inflammatory bigotry, deploying a word that is unacceptable in American discourse, the unhinged are given a nod and a wink. The frequent target being accurate information about climate change, scientists regularly get death threats.

In the course of 2012, after five years of misinformation, as the Kochs went all out to deny Obama a second term, the Republican nominee, Mitt Romney, veered from agreeing that climate change was real (and therefore demanded basic changes in the way we live) to ridiculing the idea (at the same time in NZ National Party politicians performed a similar about face).

So, it’s a serious concern when New Zealand politicians tell us that climate change is a “hoax”, as they have done. It indicates that the Key government was explicitly guided by the US think tanks. “Hoax” is a favourite with the Koch puppets.

There’s a frequent pattern to the billionaires that the brothers convene. They’re the sons or grandsons of the founder of the wealth. He invented something at just the right time or cornered a market. He was obsessive, ruthless and bigoted.

For example, the grandfather of the Texan oil man at the Kochs’ bidding called Franklin Roosevelt’s New Deal, a Depression-era investment in public infrastructure and job creation, a “Jew Deal”. Grandpa was into the “restoration of the supremacy of the white race”.

The Kochs’ father found a way to extract gasoline from oil and got started by helping out Hitler and Stalin. The latter he came to regret, he subsequently said. He thought that the only good countries, which America should follow, were the Axis that the US fought in World War Two, Germany, Italy and Japan.

The DeVos* fortune originated with grandpa’s Amway, founded in 1959, a cult-like product distribution chain which fused the marketing of household products with exhortations to celebrate American power and wealth. *Like her husband and father-in-law, Betsy DeVos, the new Education Secretary, emphasises “American values” and “family values”. These include financial and political fraud. For more on the DeVos family see my article on Donald Trump elsewhere in this issue.

Koch Industries belches 300 million tons of carbon dioxide every year, so it’s only to be expected that a routine need is to lie about it. At one stage, when the brothers’ elaborate network of misreporting was breached, it was found that the company reported 1/149th of the real amount of its benzene emissions.

It’s One Big Criminal Racket

The Kochs systematically stole from Native American land by changing the readings of the oil they were contracted to pump. In Oklahoma, where Big Oil rules, evidence suggested politicians were being bribed. A jury found the brothers not guilty. When the FBI investigated one case the Kochs spied on an agent, seeking blackmail material. And so on. So far the brothers have got away with an unknown number of misdeeds and have been convicted of only 24,587 false claims.

The Kochs started out as libertarians. They used to say that the State should withdraw from all its roles except to guarantee property rights. At the extreme end of individualism, they were by no means orthodox Republicans, opposing, for instance, foreign wars on the grounds that having a military involved having a State. In common with several of their fellow billionaires they had been members of the John Birch Society, overtly white racist haters who routinely considered any Democratic President a “traitor”. Ronald Reagan, the god of modern Republicans, they reviled as a “sell out”.

It was a losing tactic, earning them a reputation as cranks, so they learned to be less upfront. By the end of the Reagan era Charles had decided that “to bring about social change requires a strategy that is vertically and horizontally integrated. It must span from idea creation to policy development to education to grass roots organisations to lobbying to political action”. What this means is that he funded all sorts of useful idiots, behind whom he and David could hide. He came to back the sell out Republicans.

What’s come to be called “astroturf” – it’s not real grass that you’re playing on – was the playing field run by Big Business whose need is “to sell the ‘yarn”’ that the game was a real contest involving ordinary people, and not what it really was – the tool of rapacious billionaires. Charles wrote that his team was “composed of housewives, farmers, small businessmen, professional people, wage earners”.

The billionaires have always known that what they want is deeply unpopular. As Charles put it, were the origin of his front groups to become public knowledge, his schemes would be “certainly doomed to failure”. Charles and David know that the vast majority of Americans want clean air, affordable health care and a progressive tax system.

Front Men

Hence the need to set up front men to manage public discourse. Apparently respectable and authoritative, these richly rewarded tools would set an agenda. “Ideas don’t happen on their own”, Charles knew. “Throughout history, ideas need patrons”.

The brothers find pliable figureheads, bribe them, and task them with spreading the word. The knack is to set the agenda. Literally. Concurrently, as they nudge the issues and the language used to describe the issues into common use, they exploit social frustrations.

We’re all too aware of post-truth Trumpery. There was a taste of it from the think tanks back in 2011. The Kochs, once so principled in their libertarian fantasy, were always evolving their plots to be more opportunistic, more aware of the foibles of the little people, and more skilled in inventing fake news. They put it out that Obama was there to take orders from Wall Street. It was thus Obama who connived with the billionaires to plunge the US into the financial collapse of 2008. Aloof libertarian purity had descended into vulgar populism.

In reality the great financial crisis occurred during the George Bush Administration. In reality it was the men in the room with the Koch brothers who dictated the policy changes that hastened the collapse. And it was the men around the Kochs who manipulated influential politicians to achieve one of their greatest victories when in 2010 the Supreme Court voted five to four that there were to be no limits on contributions that candidates for public office might receive. From then the billions flowed to Senators and Congressmen to deny the will of the people.

Another significant achievement has been to facilitate Republicans to gerrymander, the practice of drawing congressional boundaries to favour them. Some boundaries are tortuously artificial, ignoring natural geography or communities of interest. Within states districts are set by non-partisan sounding social welfare groups. In reality the public spirited citizens are often yet more Koch fronts.

So although Obama won his second term, Congress blocked him. The Kochs won. Obama was known in the world of the billionaires with all those American family values as the “cokehead in chief” or “Obama Bin Lyin”. One purportedly serious opinion piece looked at the former President and detected “symptoms of demonic possession”. The hyperbole is childish, but that didn’t matter as the barrage crowded out considered analysis and paved the road to the Trump Tower.

The stimulus that Obama injected to revive the US economy after the Bush collapse might have rescued the country from a 1929-type Depression but it was Government action and so it infuriated the Kochs, whose minions called it a “slush fund”. It was “pork”, a slang term for Government projects aimed at winning office or receiving favours rather than doing the right thing (the Kochs’ activities are only pork). Obama tried to appease the billionaires by taking one third of the impact away through tax cuts but this – inevitably – didn’t help. If you appease bullies they take more.

Ted Cruz, “Lyin” Ted, the Senator from Texas who was the last man standing against Trump through the Republican primaries, didn’t like the Obama package either, so he evoked the spirit of the Alamo, the time when besieged Texas fought off those Mexicans, with the cry “Victory or Death”. If it wasn’t so awful, this lunacy would be funny.

Despite economics, the dismal science, being then in the grip of neoliberal prejudice, 36 of 37 economists at a neutral gathering agreed with Obama’s plan. In the end even Charles Koch came to endorse TARP, the Troubled Assets Recovery Programme. Mayer remarks that his stocks were taking a pounding and Obama was saving him billions.   

So secretive were the Kochs that Obama, surrounded by well connected advisers, never saw the attacks coming. Hillary Clinton had muttered about a “vast Rightwing conspiracy” but the White House never got advance warnings of what to expect.

The Smartest Guys In The Room

In 2010, following the death of Ted Kennedy, Scott Brown, known as a pinup boy on a magazine cover, was elected the Republican Senator for Massachusetts, always a solidly Democratic state. Obama apparently was both baffled and horrified as this tipped the balance against his Affordable Care Act. The President was not to know that Brown was the beneficiary of Koch largesse. Brown soon disappeared from public life, having achieved his one purpose with his vote against Obamacare, but he is expected to reappear as the US Ambassador to NZ.

This suggests that Trump is rewarding him for a service rendered. Surprisingly, perhaps, Trump himself is not mentioned anywhere in the book. Has he really been the outsider that he liked to present himself as? Besides their money and their reactionary views there are some obvious parallels between Trump and the Kochs. Charles’ book, “The Science Of Success”, came out in 2007; Trump’s “The Art Of The Deal” was published in 1987. Did Trump inspire Koch or did he just adapt a title?

Trump is always going on about how “smart” he is, as does Charles Koch, but both tycoons are so self-obsessed that the outside world doesn’t register. As late as 2013 Koch was pleased to describe himself and his cronies as the “smartest guys in the room”.  This phrase has become a joke since it was how the failed crooks at Enron* styled themselves. Was Koch unaware of the biggest corporate blow up in American history or (like Trump) is his ego so grossly huge that he is literally incomparable? *Jeremy’s review of the excellent documentary, “Enron: The Smartest Guys In The Room” in Watchdog 111, April 2006, can be read online at http://www.converge.org.nz/ watchdog/ 11/10.htm. Ed.

In his book, Koch explains his criminal convictions: “We were caught unprepared by the rapid increase in regulation. While business was becoming increasingly regulated, we kept thinking and acting as if we lived in a pure market economy”. To see the business of ravaging the land, impoverishing employees, and cheating, stealing and lying as the working of a pure market economy is the essence of Trumpery.

Growing Apart
by Shamubeel Eaqub, BWB Texts, Wellington, 2014

The good news is that Shamubeel Eaqub, who seems to be NZ’s favourite go-to economist, thinks so too, reacting to Bill English by suggesting that “growth in and of itself is not what we are after. That is the out-modish thinking of the 1980s. Economic growth is a proxy for broader improvements in opportunity and prosperity. The kind of blind faith in growth reflects many of our entrenched ideas about the trickle-down theory, or that the rising tide lifts all” (Sunday Star Times, 5/2/17, “Elections – It’s Not The Economy, Stupid!, http://www.stuff.co.nz/business/opinion-analysis/89059547/shamubeel-eaqub-elections--its-not-the-economy-stupid.  See the review below of “Wellbeing Economics” for further support for this approach).

You can say that again. Or perhaps you don’t need to - in these pages anyway. Eaqub went on to suggest that millennials might be the first generation to be worse off than their parents, meaning that the “growth” hasn’t happened anyway.

Zombie Towns

In his introduction to “Growing Apart” Eaqub quotes a Greymouth journalist who says that people are starting to ask: “Would the last one out turn out the lights?”. With its zombie towns (an Eaqub phrase, coined elsewhere) regional NZ is in trouble.

I first heard the question 30 years ago, on a flight across the Pacific back to NZ. It came from an Australian in the next seat, who went on to inform me that Government policies up until the accession of the Roger Douglas government had been forcing able Kiwis to migrate to the Lucky Country. Roger was bringing him to Auckland, where he was going to enrich himself and those suffering in the dark.

I’m not so sure. Eaqub gives an international context for how the economy has worked out. He reports that in the poorest locality, Kawerau, the median family income is under $40,000 a year, equivalent to Hungary’s median. Our richest locality is Orakei, where over half of families take in more than $100,000, an amount comparable to the living standard of Switzerland and Canada.

Some trends are inevitable and global. Eaqub notes a couple that affect us. Since 1900 land-based jobs, most obviously to do with farming, have decreased from nearly a third of all jobs to less than 10% of them. In 1966 manufacturing provided over a quarter of jobs. Now the number is that same 10%. The common factor is technological change.

At the start of the digital age it was often predicted that, freed from factory or warehouse, people would move away from cities, but the opposite has resulted. Over the last century New Zealand’s urban population went up by over 3,000,000, with the rate increasing in the digital age. Rather than disperse us into a pastoral idyll, computers “simultaneously liberate and concentrate” people, fostering clusters.

Small town and provincial economies were mostly based on a single industry or food product, making them vulnerable to adverse economic trends they couldn’t affect. Young people had to leave to find rewarding jobs. As cities grew, the rural population as a whole has remained static for 100 years.

The larger the city (on NZ’s small scale) the more vibrant the economy. In cities people bounce off each other. In Eaqub’s phrase, cities foster serendipity. Variety and complexity creates what he calls a “thick” labour market. You have to get to a certain size to allow the specialised jobs that are best rewarded.

All these trends, whether geographic, technological or economic, have meant that education becomes ever more important in determining lifetime outcomes. In 1986 a school leaver’s income averaged 90% of what her cousin was paid after she graduated with a bachelor’s degree. Now she pulls in only half as much (this factor is a foundation of Trumpery. See my article elsewhere in this issue).

In descending order, the main population centres are Auckland, where earnings are comparable to those in France; Wellington (cf Finland), and Canterbury (cf Saudi Arabia). Some other comparisons show that Northland is equal to Greece and Manawatu and Gisborne are equal to Timor-Leste. Over the last ten years many regions  - those depending on wine, sheep and beef - have lost jobs, while dairy now employs more. The most lost jobs have been in Manawatu-Whanganui, while the slowest growth since 2001 has occurred in Gisborne.

All of this suggests that the triangle between Auckland, Hamilton and Tauranga, where commuting times are reasonably short, can be expected to host more people and more jobs. Elsewhere in his monograph, Eaqub holds that the point at which cities have the potential to be big enough to generate lively economies is 100,000, so it should be possible for Hamilton and Tauranga, both of which are just populous enough, to avoid becoming mere dormitory cities for Auckland.

That Would Be A Very Bad Outcome

Like Hamilton and Tauranga at a national level, so, if it is to attract as an Asia-Pacific hub to compete internationally, Auckland needs to be about the size it has attained. This seems to be behind the Government’s efforts to boost the city through immigration (which also helps make their “growth” numbers look good) and its determination to do nothing about housing affordability.

You can take a tempting recipe and over cook it. Look at New York, the great city of America, home to Batman and Spiderman, the scene of megacity fantasy. Yet New York houses only 3% of the US population. And London, which dominates every facet of British life, houses just 12% of the UK’s residents. Then there’s Australia, which has been called the world’s most urban country. But it has two dominant cities. Auckland is home – or homeless – for over 30% of New Zealanders. Trying to increase this imbalance yet more would render the country more akin to a Third World mess where “growth” often means one city expands chaotically and ends up by providing mass poverty.

Would Eaqub agree in part or in whole? He doesn’t say.  He makes no specific policy recommendations along these or other lines. Neither does he comment on rival policies that might fly from the Beehive. He is, though, emphatic about two principles. An increased population through immigration will benefit society. And Government intervention to help the regions, while necessary in order to at least slow the currently increasing disparities and inequalities, will succeed only if it leads to self-sustaining outcomes. He’s talking wellbeing, not welfare.<

Wellbeing Economics
by Paul Dalziel and Caroline Saunders, BWB Text, Wellington, 2015

A 1984 conference of economists held at Parliament concluded that “sound economic management must have five basic policy objectives – sustainable economic growth, full employment, price stability, external balance and an equitable distribution of income – while fully respecting social and cultural values and avoiding undue environmental costs”.

Except for the final hint that the environment didn’t really matter, that sounds suitably platitudinous, a more or less OK set of goals, but what followed was that year’s election of David Lange’s Rogernomes and the nice phrases were forgotten.

Dalziel and Saunders, economists at Lincoln University, haven’t been impressed. They point out that in 1984 New Zealand ranked 18th among Organisation for Economic Cooperation and Development (OECD) countries in gross domestic product (GDP) but by 2011 NZ’s GDP ranked 21st. The percentage of people getting by – or not - on less than 50% of the median income more than doubled within the next generation, rising from 6% of the population to 13% by 2012.

The story of how NZ’s policy elites failed the country through a combination of economic ignorance and political incompetence has been told many times and the authors aren’t about to repeat it. They get straight to their point, arguing that “the purpose of economic activity is wellbeing, opportunity, freedom, consumption possibilities, leading the life they value”.

Installed in Government, the Rogernomes were interested only in economic growth, so their failure, judged by their own standards, was considerable. You won’t need reminding that the idea was that if more was produced and more people at the top of the heap got rich then somehow, some day, we’d all get trickled down on. It hasn’t happened. But even if it had worked, even if the economy had roared away with the huge numbers of increasing growth and production that Roger promised, even then the policy would have been wrong. People don’t exist for the economy; the economy exists for people.

Yes, that sounds banal, but it had to be said. That’s because neo-liberalism claimed to be mathematically and self-evidently exact. Policy makers used to talk of the “political economy”, the phrase assuming that economics served social purposes and allowed political choices. Rogernomes banned the expression. They wanted to eliminate the political, because people are often mistaken.

Historically Illiterate Economists

This arrogance allowed economists to become historically illiterate. It became difficult to read a Rogernomic analysis without being lectured about Adam Smith. Smith, who wrote in 1776, is commonly regarded as the first economist. Rogernomes claim that, in showing that markets work amorally and efficiently, he made their point. They can’t have read Smith. Dalziel and Saunders also discuss the great man, but draw a different conclusion. For Smith the purpose of the economy was not production but consumption. 

By consumption, he meant people’s needs. If they are not met then it doesn’t matter how much stuff is made and traded. Three centuries on, the concept of consumption has been bruised by the mania for growth and our authors prefer to talk of wellbeing. If people’s wellbeing is not assured, then GDP numbers, no matter how spectacular, are “profit extraction by the economic elite”.

An obvious and pressing example is housing. As an example from our main city, the authors cite Manukau where, in 1993, 23% of its residents were in overcrowded housing. By 2006, when fully a quarter were poorly housed, the situation had further deteriorated.

Nationally, New Zealand’s housing affordability – measured as the percentage of income taken by meeting housing costs – is the second worst in the OECD. We’re marginally better off only than Greece. Data from 2012 indicated that one third of families were housed inadequately, living in spaces that were too cold or too small or damp or infested with pests – and most likely with more than one such reason for discomfort.

When we get information from the most recent decade, it will almost certainly confirm the trend has continued, probably at a steeper rate, most obviously in Auckland, where house prices and inequality have soared. An associated trend has been the falling rate of home ownership. In the bad old days before the Rogernomes imposed market disciplines NZ had one of the highest rates (or was it the highest of all?) of home ownership in the world.

If you own your house and can meet the mortgage payments from your income you’ll feel secure and ready to engage with your community. That’s what an economics of wellbeing would want to achieve. On the other hand, if you’re poorly housed or if you’re never sure if you’ll be able to pay the bills, you’re more likely to drift into isolation and cynicism.

The authors discuss how housing woes mean that life can so easily spiral down. Cold, damp houses lead to poor health. Poor health leads to poor education. Poor education leads to low incomes. And that leads us back to poor housing, but for the next generation the cycle of deprivation will be worse. It’s been called the poverty trap.

All this should be obvious. Apologists for neo-liberal neglect like to get moralistic or they talk of character or genetics, as if being poor was a moral failure or an unavoidable, if regrettable, failure of intellect. That’s why they favour rags to riches stories. Of course some will manage to extricate themselves, either through luck or skill or crime, but to deny the structural forces that ensure deepening poverty for whole demographic groups is to deny reality. It’s a post-truth thing.

The authors report that while this was going on GDP increased by nearly 40%. Much of this wealth is appropriated by one per centers like Donald Trump, who feel it’s only their due for being smart. As an incentive to get the losers off their bums and get working, the one per centers pressure governments to trim investment on education and health for the 90%, and to sell State houses and cut welfare payments to the poor. Then they ask taxpayers (who don’t include The Donald) to splurge on new prisons and more police to control the resulting anti-social decay.

“Cultural Capital”

This is a concept increasingly in vogue to capture the essence of wellbeing. Here it’s defined as “the values that can give meaning to our life”. Beyond the binary relationships of buyer and seller there are in NZ an astonishing 97,000 non-profit groups, “self-governing, private and voluntary”. These are an encouraging 97,000 reasons to hope that, beyond those “market failures” we so often lament, is a vibrant network of wellbeing. Dalziel and Saunders say that in 2003 the unreported value of non-profits was $3.3 billion.  If mainstream economics were of a mind to assess social goods, it would add 2.4% to its quantification of GDP.

The authors have a good word to say about the Local Government Act (LGA) of 2002. It has sought “to enable local democratic decision-making and action on behalf of communities” in order “to promote social, economic environmental and cultural well-being” now and in the future.

Note that this is a step up from the 1984 thinking, which was happy to allow environmental damage so long as it wasn’t “undue”. The recognition of local agency and the need to take into account the future were other welcome features as they gave some flesh to the otherwise vagueness of what was sustainable”.  Neo-liberalism has no use for such niceties and the Key government expended good will in trying to reform the LGA.

The book ends with a passage on another recent concept, the “living wage”, described as the amount a family needs in order to enjoy a healthy life as contributing members of a community. They’ll benefit, yes, and if the kids graduate from school and stay out of jail we’ll all be better off.