Investment, risk management and democracy

Investment was back in the news last week on two counts. But more by implication than design.

“Investment” has a ring of substance and responsibility. Spending is of the moment.

Was the budget decision to junk the $1000 kickstart for KiwiSaver an investment decision — assessing the return on the investment to be too low — or a spending decision — saving money to help Bill English to a better fiscal balance?

The answer from the cabinet papers seems to be that annual fiscal savings were the driver.

Even then, spluttered the Financial Services Council of businesses which want to manage your KiwiSaver stash, this relied too heavily on KiwiSaver savings data that went up only to 2010.

Hop down the cabinet from fiscal savings minister Bill English to Anne Tolley, minister in charge of helping badly damaged children.

Two grim reports landed last week, one from Judge Carolyn Henwood’s committee which has taken evidence from those who survived their time in state care while children, the other from Children’s Commissioner Russell Wills on how the overstretched Child, Youth and Family (CYF) deals with those children.

Tolley’s response was to point to a taskforce under Paula Rebstock.

Rebstock headed the Welfare Working Group which came up with the “forward liability investment approach”, borrowed from the Accident Compensation Corporation.

This was applied to getting beneficiaries into paid work and keeping them there, thereby avoiding paying a lifetime’s benefit to them. It is about to be applied to prisoners to keep them out once released.

It is still too early for a full analysis of this approach though critics have piled in. One criticism not yet argued much here is that for some unsettled people work is not an automatic character builder.

But there is a deeper question: is the Rebstock formula really investment?

There are “co-benefits” — of a more dignified life for those who can and want to work but have lacked personal and other skills and acquire them through continued intensive case management once in work. They make a more constructive contribution to society and the economy and to English’s fiscal bucket. Case managers get more of a kick out of their work, too.

But English and Co show no sign of picking up on the co-benefits to build a genuine asset-building investment approach. By sticking to the Rebstock line, they are doing risk management, just as an insurance company does.

That way of thinking has failed too many children in CYF’s domain. Some argue instead for a genuine therapeutic approach: intensive investment in the children, to ameliorate the damage and give them the tools for a real shot at a real life.

That would be “forward asset investment”, which is real investment: investment to build stronger people out of the children and investment for a financial and societal return to us all.

Apply this to trade. In the Trans-Pacific Partnership (TPP) negotiations is Tim Groser investing to build an asset from which we will get a future return? Or is he just trying to avoid a risk, that of being excluded from a trading bloc?

Groser has been dismissive of and condescending to critics and even to free-trade supporters nervous that TPP is qualitatively different from previous trade deals.

But he has refused to say what is in the deal so far — except to tell a Japanese journalist that Japan and others have “never given even minimal offers on things that are of interest to New Zealand that we could accept”.

That doesn’t read like investment.

Likewise in Groser’s other grand global venture: climate change. The cabinet’s approach has been short-focus risk management at home, not long-focus investment in reputation abroad (not to mention the climate).

That is despite Business New Zealand’s investment in energy scenarios and in organising a group of chief executives to stretch their thinking about what could be possible or necessary in the 2020s.

Labour and the Greens want a far more ambitious target than Groser’s cautious, heavily conditional 11% cut by 2030.

The Greens want 40%, as James Shaw will say in a speech on Thursday, backed by a paper arguing 40% is our “fair share” if warming is to be contained to 2 degrees.

The Greens will later issue a paper with detailed supporting calculations, then hold a one-day conference on September 25. They are also trying to set up a local chapter of Globe, a network of parliamentarians working for the environment.

Labour and the Greens object to ministers’ disdain for cross-party agreements on trade and climate.

That disdain is technically correct constitutionally: the cabinet has the power to conduct international business while keeping Parliament and the public in the dark.

But in 2015 such trade and climate change exceptionalism is starting to look like executive over-reach — out of keeping with expanding notions of how a diverse, informed 2010s democracy might or should operate.

And investment in real democracy pays a good dividend.