Two wings and a prayer
The EPMU has just launched a website to encourage support for the campaign to get Air New Zealand to retain its heavy maintenance operation in this country.
In a press release in October Rod urged shareholding minister Michael Cullen to consider allowing the Government to take a lower dividend in order to save the 600 or so jobs that would be lost.
He also warned that by moving maintenance to plants in Singapore or China, Air New Zealand was damaging its own good reputation.
“Many travelers place a high premium on safety records, when making decisions on which airline to fly. If they become aware that vital maintenance work is being carried out by low-paid workers in huge plants in Shanghai, I believe they are likely to chose another airline, or worse change their destination, robbing New Zealand of valuable tourist dollars.”
Cullen, however, has taken a decidedly hands-off approach to the whole problem.
Sue Bradford has twice asked Cullen questions, see here and here, about the situation and both times he has indicated he won’t be flying to the help workers’ plight.
In November
Sue Bradford: Does the Minister agree with the Aviation Industry Association that New Zealand will lose specialist engineering intellectual property and human capital if Air New Zealand maintains its long-haul aircraft overseas; and why does the Government not put its money where its mouth is, take a smaller dividend, and demonstrate that it really does have a commitment to keeping highly skilled, high-wage jobs in New Zealand?
Hon Dr MICHAEL CULLEN: Firstly, of course, we have had only one dividend. Dividends are an unusual thing in the airline industry, so a promise to forgo a dividend would not have a great deal of effect. Secondly, we are not a 100-percent shareholder. There are minority shareholder interests to be considered, and those are very important to consider in this kind of situation. Thirdly, I do not want to sound overly cynical, but if the Government gets into the business of subsidising jobs in order to keep them when a company wants to restructure, I have a feeling there would be an awful lot of New Zealand companies lining up to restructure and pass on the wages of 600 jobs to the New Zealand Government.
This week
7. SUE BRADFORD (Green) to the Minister of Finance: What advice will the Government, as majority shareholder in Air New Zealand, seek on proposals from the Engineering, Printing and Manufacturing Union regarding Air New Zealand’s engineering capacity, which are due to be presented today?
Hon Dr MICHAEL CULLEN (Minister of Finance): I have been advised by the Engineering, Printing and Manufacturing Union of its proposals. I would expect the board to advise me of its response. As a general matter of good employment relations policy, I would also expect, and am confident that, the proposals will be considered seriously.
Air New Zealand is our national carrier and the Greens believe the Government, as a major shareholder, has an obligation to do whatever it can to protect the airline’s reputation and the livelihoods of its workers.
I agree.
December 9th, 2005 at 8:46 pm
Cullen is entirely right. Try to save jobs and you end up with the whole country demanding you to bail them out. Of course this will be regressive in practice, as only larger employees will generally get attention due to political clout, leaving most small businesses out in the cold. Every time the Government folds to a lobby group, it becomes more corrupt, as taxpayer dollars from groups without sufficient political clout are used to please the lobby groups. Power and money ends up concentrating even more into the groups that have political clout than it is currently.
Notwithstanding the whole protectionist/free trade/morality of subsidies as well… but that’s more values based.
December 10th, 2005 at 1:37 am
Nichlemn - Yes… like any good capitalists, the board of directors is perfectly happy to sell the rope required to hang us out to dry. In 10 years, more or less, after this operation is complete and the skilled labour here in NZ has disappeared to overseas or simply gotten completely out of date, Singapore Airlines unilaterally arranges that the deal be renegotiated and NZ Air ceases to exist within a week.
There is a strategic value to the nation, of retaining its skilled labour force. It is of course, outside the realm of simple economics and economists, and like Global Warming, it isn’t something they can see coming using the tools they favor.
Maybe it won’t happen… but I’ve never seen a capitalist who could resist trying something like it if they thought they could get away with it. Penalizing people who’ve invested their lives in some really remarkable skills seems somewhat counterproductive to the economy and the effort to build high-wage jobs.
Everything is connected here. You may notice that.
You can never do just one thing.
respectfully
BJ
December 10th, 2005 at 4:12 pm
“Everything is connected here. You may notice that.”
Which further reinforces that the Government should not try to intervene here - the unintended consequences are huge.
Not to mention: Nationalism is Cronyism. “These people were born here, so therefore, they deserve some kind of special treatment.” “Save New Zealand jobs!” There’s no such thing as a “New Zealand job” - a job is a job. The “New Zealand” side of things exists only for political reasons.
December 10th, 2005 at 6:16 pm
Nichlemn - If a job is in New Zealand done by a Kiwi, what on earth would you call it but a New Zealand job. In spite of the recent boom in the internet and the currently low but rising price of travel, the more than 1000 Nautical Miles between us and any other market or productive entity actually DOES count for something. Your statements denies the existence of distance and time and the energy requirements of overcoming those. It also denies the importance of having and keeping a national identity… which is sort of peculiar and not particularly useful on a planet divided on those lines already.
I was of course, referring to your riff about high paying jobs on a very different thread… as a way of pointing out that the two positions aren’t very easily reconciled. We need to know what a high-wage society is still, my guesses aren’t enough to debate on. A waste of time to guess again.
New Zealand is a peculiar place. It costs a lot (relatively) for any physical product or resource to get here or leave here. We are not that large a place either, a mere 4 million and not all of those productive workers, some of us are old, others young, and economies of scale mean that we cannot compete easily with a larger market. Our airline mechanics and facilities will never be able to get the sort of volume working to make the operation anything more than marginal… and that effect applies to dozens of products. Most of what we export… and the price of that transportation is going irresistably upwards.
Which is the big disadvantage to living here. It is hard to compete with the rest of the world from such distance. This begs the question of what our society as a whole does. What do YOU think we should do to create a high-wage society. What basis do you use? or do you simply accept the gutting of the country and its people and abandon it.
respectfully
BJ
December 10th, 2005 at 7:55 pm
bj - we should be exporting ideas, films, software and internet services. Basically anything digitizable. Nothing else makes sense to export from so far out in the south pacific with transport growing inexorably more expensive and environmentally more catastrophic. Our primary produce market will eventually shrink down to an internal market. Incidentally, having only 4 million people is very nice I think — can you imagine how horrible NZ would be with 10,20,30,40,50,60 million people - it would end up like all those other sterile, pillaged ‘developed’ countries with almost no nature to speak of. But actually if we don’t get serious about a knowledge economy then our country is going to go down the toilet very fast because those rising transport prices are going to slowly but surely shut us completely out of exporting primary produce. If we don’t have an alternative export industry then our balance of trade is going to do bad things and we are going to be paupers.
December 10th, 2005 at 8:57 pm
Transportation costs are going to be factored into it. If somethings cost $15 an hour overseas but $20 here, but transportation will cost another $6 an hour, that’s factored into your costs and therefore you’d hire the New Zealander. Simple. If you’re worried about enviromental costs, if externalization is properly managed that should be fixed as well. But this hardly seems the motive - you’ll notice that the USA won’t have protectionism from one end of the state to another, despite the reasonably amount of travel. It’s all for other reasons…
But the whole “save New Zealand jobs for the sake of New Zealand jobs” reeks of protectionism. It benefits no-one bar those being protected and the Government. To see evidence of how it only exists for articial political means, you should count the amount of trade barriers within a country. Should I, living in Christchurch, purchase something Christchurch-made over Auckland-made to “help my local economy”? Why not keep on centralizing it? Only something made by someone on this street…
A “national identity” is hardly more than a political ploy. Politicians don’t care outside of their constituents, so they’ll focus on “what we’ve achieved for this country” over what humans overall have benefited. 600 more jobs in New Zealand may read “+600″ on New Zealand’s side, but 600 others could have had those jobs. Except, we don’t care about them, they live in other countries. Are we really so bigoted? Even ignoring any economic costs, protectionism raises some moral issues. We may criticize politicians from appointing their friends, yet we’re perfectly happy for them to legislate that only our “mates”, others born in this country, can have these jobs.
“Imagine there’s no countries.” Not necessarily to do merely with economic globalization, but trade barriers as a whole are a sympton of the larger problem. We’re all humans! The overall effect of protectionism on the entire world is always negative, since it’s another distortion. Even if it proved beneficial for a country involved, the motives should definitely be called into question. But in most cases, including this one, they have economic downsides as well. As mentioned above, the unintended consequences are serious, and the economic cost of paying more.
December 10th, 2005 at 9:49 pm
Do you oppose protectionism in labour Nichelnm, or just goods?
December 11th, 2005 at 1:04 pm
I oppose all forms of protectionism, or all nationalism really. It really benefits no-one bar politicians and a few people who can gain from it.
December 12th, 2005 at 9:16 am
Cool, cos one thing that does annoy me is people who claim to be for free trade but oppose the free trade of the only commodity most people on the planet possess.
I think there are arguments for both protectionism and free trade, but I don’t think I’ve ever seen an argument fror free trade in goods and services without free trade in labour which didn’t just seem to be arguing for protectionism in one area and not others.
December 12th, 2005 at 12:22 pm
Actually, I would think there are good reasons for buying something made in Christchurch, or your own street, rather than elsewhere. The less transport costs the better.
Anyway, the subsidising of NZ jobs is no more a ‘market distortion’ than the factors that cause those jobs to move - things like making trade unions illegal, having low health and safety standards, low environmental standards and the like. If there was a pure global market, skilled labour costs would be much the same everywhere.
And protectionism isn’t just about nationalism. It would be hard to complain if these jobs were simply moving countries. The reality, though, is that well-paid workers are being sacked and replaced with people who will work for less. As a class, workers are losing out.
December 12th, 2005 at 1:18 pm
Nichlemn - Somehow I suspect that the “Imagine there’s no countries” and “no religions” riff works better as a song and an ideal than it does in the real world. That thousand NM difference between being here and being in Oz is important , and like it or not, the world is organized in societies that compete, sometimes violently, for resources. It is divided up on dozens of idiotlogical measures and there’s no help for this that I know of , the religious issues are perhaps the worst, but all of them are problems.
That being the case, I think it would be wrong to give away what little in the way of economic opportunity we have to people who have less, just because they have less. In the end that is what your philosophy boils down to on this planet and in the real world.
The argument becomes basic lifeboat ethics, and it isn’t pretty. I don’t like having to make choices like these, but on this planet, and in the situation we have been driven to by the raw capitalism manifesto and lack of foresight contained therein, I believe we’d better consider what our attitude is towards such choices, both as a party and as a nation.
There is nationalism and there is Nationalism. I reckon that one of them has to do with self-preservation and the other has to do with abusing the rest of the world for your own gain. How to distinguish one from the other is a problem.
respectfully
BJ
December 12th, 2005 at 3:01 pm
1. Cullen shows that the govt’s crumbs to the Greens, in the form of a “Buy NZ Made” campaign, is a complete sham.
2. As others have pointed out, NZ is a long way from anywhere. If we can’t maintain our own aircraft, in the long term we are putting our independence at serious risk. Nationalism aside, we are down here isolated by the surrounding ocean. we need ships and aircraft to carry goods and people. by giving up our ability to maintain aircraft ourselves, we are at the whim of others who will not be looking out for our interests. economically, for Air NZ, this may be a good move. economically, for the inhabitants of these islands, it is likely to be disasterous.
3. is protecting your own vital interests “protectionism”? If so, what are military forces for then?
4. please get real. hollywood flicks are not ever going to be the mainstay of the NZ economy. and no matter how “digitized” that particular industry is, it also happens to involve *flying* lots of people and stuff around the country and around the world.
December 12th, 2005 at 4:35 pm
Tochigi : Thank You - respectfully BJ
December 12th, 2005 at 6:39 pm
tochigi — I generally agree, and I am happy to be corrected on the film bit. The films I would like to see made here would not necessarily involve hollywood actors, but I take your point. Nevertheless, flying things around the country is definitely cheaper than flying thing to Europe, by about an order of magnitude.
December 13th, 2005 at 12:15 am
Nichlemn : the funny thing about right wingers is they generally don’t understand about markets.
Imagine there’s a market at the end of your street. Fruit, veg, dairy, meat etc all produced within walking distance or a short drive.
Imagine there’s a supermarket over the road. You can buy all the same stuff (with added plastic and cardboard) for, say, the same price. Which do you prefer? No preference?
The thing your artificially simplified world-view doesn’t consider, is the self-interest involved in being economically engaged with those around you. Your local producers may be a bit dearer than the supermarket stuff (they have economies of scale etc to offset transport costs), but the money you spend is recycled locally… you are enriching YOUR community. Directly or indirectly, your suppliers are likely to be YOUR clients, insofar as you are engaged in the local economy in some way yourself, and so better able to pay you.
So, yeah, enlightened self-interest dictates to prefer locally-produced stuff to things from the other end of the country, and nationally produced stuff to imports.
Too hard to understand?
December 13th, 2005 at 1:31 am
i was thinking (dangerous, i realize), and it ocurred to me that if the govt says Air NZ wants to oursource its major aircraft engineering operations, then why not negotiate with the airline to spin off the business as a going concern and sign a long-term contract with Air NZ to provide engineering services? (if this has already been discussed, my apologies.) maybe Air NZ has to free up its capital for other purposes, but if this business is viable, surely a consortium could be formed to invest, with some modest incentives offered based on the strategic value of keeping these skills and facilities in NZ?
after all, the movie partnerships get all sorts of tax breaks, don’t they?
December 13th, 2005 at 7:50 am
Tochigi - It makes some sense to me. I don’t think it’d actually be viable enough without government support, but it IS in our interests to keep capabilities local. The government could support it in part by using the same facility for maintenance & overhaul of military aircraft, NZ would have a maintenance resource. The market will never be more than what it is, small.
respectfully BJ
>
December 13th, 2005 at 9:54 am
Some things that are being missed:
- the total maintenance effort is well over 2000 staff. The proposal is for a fraction of that total, not the whole shebang. So it is not a choice between having or losing the capability.
- the work is inherently import-intensive anyway. NZ supplies only the labour content: most parts and assemblies are imported.
- some of the work is on airframes for overseas airlines. Consider a Korean airline: why pay for your airframe repositioning, and all parts to be freighted, to NZ when (say) Singapore is closer? This is the ‘food miles’ argument applied to higher technology….
- what mil aircraft, bjchip? Six Herky birds with 35 yr old airframes and a bunch of choppers? Little or no commonality with the wide-bodied civilian passenger airframes. Variety causes costs, you know.
This is a genuinely difficult business decision, not to be solved by one-size-fits-all sloganeering.
December 13th, 2005 at 12:40 pm
Waymad - You are right of course, the parts do have to travel some. They would anyway, one way or another. Fly the plane to the parts or the parts to the plane.. but the plane flys there anyway…. and I did say it wasn’t really likely to be anything better than a marginal operation. However, keeping the capability local is important to us.
There’s more commonality than you may think, but the issue is whether we can maintain the aircraft. Dumping the 600 engineers and the heavy maintenance is IMHO wrong. If we permit the size of our market to wholly dictate our economics we are going to be extraordinarily vulnerable to disruptions in and control over our overseas supply. It is economically correct, but not a secure position to be in nationally… because there are many MANY places with cheaper labour… so if we let them do all the work what do WE do? What do we pay them with? What do we do when they discover that they have the power to bring down our Airline?
This is a problem with the global employment arbitrage that outsourcing creates. It puts our economic fate in the hands of people who really could care less about it except to the extent that it impacts their own. The USA has embraced it - GM is headed for bankruptcy, Ford is following close on their heels. Boeing and Lockheed get government support and the defense department eats half the budget.
We have the ability to build the wings for the Airbus? We do. If so we also have the ability to do a lot of the heavy maintenance indeed. Sure, we import fuel pumps and turbine blades and a bunch of other stuff, but I do not like being dependent on someone else to fix either the aircraft OR the ships that allow us to have commerce with the rest of the world.
That comes under the heading of a “vital national interest” IMHO, and we need to work out how to make it work.
Actually, from Boeing to here and Boeing to Singapore is pretty much the same… Airbus parts shipments would probably favour Singapore.
It IS difficult, and I wouldn’t ever say it isn’t, but I find it short-sighted to transfer this capability into the hands of strangers in a foreign country, particularly a foreign country that still feels that death is an appropriate penalty for the state to mete out.
respectfully
BJ
December 13th, 2005 at 1:34 pm
waymad:
saying NZ only supplies the labour content, even taken at face value, that is still extremely important highly skilled labour you’re talking about. but i also think this “labour only” view is an oversimplification of what they do. i don’t think it’s a basic assemblyline operation clipping together imported components.
bjchip:
on the subject of global labour arbitrage, the conservative anti-Bush commentator Paul Craig Roberts has written several very interesting essays on how this is destroying the US economy. it’s not all bluster, he backs it up with statistics from the US Bureau of Labor Statistics. check google or counterpunch.org.
December 13th, 2005 at 5:47 pm
Gosh, guys! Having autonomous manufacturing capability when we (for example) don’t even do the most basic industrial component - bearings? And what about the OS that Frog is using (I assume, like a good open-sourcer, Linux?) - shurely the kernel for that was assembled, offshore, from a Bell Labs Unix starter kit?
I once (in my Values Party youth) espoused a similar line of thinking (we shouldn’t need to import anything) in front of (it turned out) a Lincoln Uni economics lecturer. Still remember the response, too:
(Removes glasses from bridge of nose and pipe from mouth)
“How quaint! A siege economy…”
Repairing stuff made from metal - well, that involves Mining, n’est ce pas?
(I think we both need to sidle away from the untenable positions taken, in true lets-dialogue-this-to-death fashion, now.)
December 13th, 2005 at 8:47 pm
Waymad
We actually DO provide the aluminium for the wings of the big Airbus. The alumina comes from Oz.
What does linux have to do with anything? That’s SW, there’s no transport cost and it doesn’t cost anything except time? You think all the smart folk in NZ should get work as SW engineers? This appears to be a non-sequiter, no idea how you think it is connected with what I thought we were discussing.
I did not say we shouldn’t need to import anything… I pointed out that the labour market and the market for goods and services is such that our distance from everywhere and small native market hinders our competitiveness, but should NOT be used as a reason to ship ALL our production to places where the economies of scale are better and the labour is much much cheaper.
Yes, it involves mining. ??? Is there something about this that I’m supposed to do? Maybe throw my hands in the air and wave them wildly as I run screaming from the room? Mining is not “wrong” - certain practices at some mines are abominable, but mining is not “wrong”. Digging up coal to be burned is stupid, but digging up ore to turn into beer kegs is an entirely understandable and reasonable industry
The question is philosophical in the end. Can NZ support ANY higher manufacturing and engineering work? Where do we get the tech base necessary to do research if the engineers are all overseas? Does the R&D go too? That leaves us with primary crop production and no real reason to get an education beyond the 3rd grade, like anyplace else in the 3rd world. Or do we as a society elect to keep, at some cost in efficiency, a technology base? If the latter, how do we pay for it? WHO channels the money?
respectfully
BJ
December 13th, 2005 at 9:13 pm
Higher manufacturing and engineering base. Hmmm….I’d point at two good local examples which are the wave of the future, rather than persist with examples from the air, as it were.
Nanotechnology - the so-called Cluster assembled devices technology, developed right here in Canterbury. Nano Cluster Devices bought in to this: see http://www.phys.canterbury.ac.nz/research/nano/ for details.
Stirling engine technology, known to the world as Whispertech. See http://www.whispertech.co.nz This has the potential to transform power generation to a truly decentralised model: PowerGen in the UK has ordered 000’s of units already.
This is where the tech base comes from - real R&D, internationally recognised ideas. Imagine Peter Jackson in a lab….
So I’m not into crocodile tears over ‘capability’ in a slowly-declining industry. And li’l ol’ NZ is doing quite well at real world-class R&D.
The trouble with governments ‘electing to keep a technology base’ is threefold: they’re using Our money to do so and thus preventing alternative and more efficient uses of said money, they’re appallingly bad at selecting said technologies (remember the old, 4x overstaffed Post Office, Railways and wharfs, anyone?) and their commitment over time is to keeping power and bribing electors, not to making even half-smart choices over long terms.
So we are doing great R&D, selling our IP, getting noticed. Without the central death grip on the controls, too. Hmmm - is there a pattern here?
December 13th, 2005 at 10:08 pm
wymad:
respectfully, if you want to indulge in straw man-based non-debates, please count me out.
December 14th, 2005 at 5:56 am
Waymad - Whispertech is doing low volume manufacture here and the bulk manufacturing is to be done ELSEWHERE and rightly so.
Once Whispertech builds the initial 1000 units I reckon that the people who make it possible to build 1000 of anything, the skilled machinists and the engineers, will be looking for work again. You watch that space and see. It is a nice one-shot and it is built on an existing tech base that still exists largely because the manufacturing sector has historically been subsidised somewhat by the government.
The nanowires have yet to reach a commercial use and the licensing of the technology is going clearly going to mean that it goes overseas for bulk production as well.
HOWEVER:
These are examples of exactly what I have been talking about BECAUSE the government has taken a hand. Or haven’t you seen the hand of government in those releases? Haven’t you seen the government support acknowledgements? Don’t you count the government support of the University?
The trouble IN NEW ZEALAND with not “using our money” to keep a technology base, is that if we don’t there WILL NOT BE a technology base - in about 2 generations. Government need not “pick winners” to do this. Realistically it needs to work through the transport costs issues that keep us from being competitive, but it is a cost that has to be borne “using our money”. Libertarians are EXQUISITELY short sighted about the issues that actually require government to function. Mention of any sort of government involvement at all and the immediate response is to vomit.
The problem for you is that the reality of your examples is that both benefit and have benefitted from government support. That the government support helps is VERY clear, and the support IS primarily in transportation and maintenance of a foreign presence…. office space and shared staff in the US for example, half the cost of attending an important trade show in Singapore… and a bit of help in prototype development. I know this area WAY too well Waymad, I work in it myself… and I know what would happen if there were no “support from government”.
You are right that the system is an area of great temptation in terms of government empire builders and waste, but it is pretty well managed even now in the 3rd term of this government and it is indeed allowing us to do great R&D and selling our IP. There is a pattern, just not the one you see with the one eye closed.
respectfully
BJ