Latest / The SME Stream / NZ Initiative's Oliver Hartwich: 'Germans hate inflation with a passion'

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NZ Initiative's Oliver Hartwich: 'Germans hate inflation with a passion' · The SME Stream

0:02
Speaker 1: Madam.
0:06
Speaker 2: Hi, I'm Liam Dan, New Zealand Herald's Business editor at Large,
0:09
Speaker 2: and welcome to this episode of Money Talks. This is
0:13
Speaker 2: a podcast about money, but we're not going to tell
0:16
Speaker 2: you how to get rich, and we're not going to
0:18
Speaker 2: try and pick the next interest rate move. In this series,
0:22
Speaker 2: I'll be talking to interesting New Zealanders about how money
0:25
Speaker 2: has shaped their lives and what they've learned over the years.
0:29
Speaker 2: For today's podcast, I'm joined by doctor Oliver Hartwich, economist
0:33
Speaker 2: and CEO of the independent public policy think tank, the
0:36
Speaker 2: New Zealand Initiative. You're Oliver. Welcome to Money Talks.
0:39
Speaker 1: Great to be with you, Liam.
0:41
Speaker 2: Hey, look, just regular business newsreaders will know your name
0:45
Speaker 2: well and the initiative in its work, but can you
0:47
Speaker 2: just describe a little bit you know, what is a
0:49
Speaker 2: think tank exactly and how do you see its role?
0:52
Speaker 1: Okay, So, as you said, we are thinking. We're also
0:54
Speaker 1: a business membership organization, but we work predominantly as a
0:58
Speaker 1: think tanker. That means we are thinking about the big
1:00
Speaker 1: issues affecting New Zealand. We are trying to make New
1:03
Speaker 1: Zealand a better country for all its people, and we're
1:06
Speaker 1: trying to do that through policy research. So we're looking
1:09
Speaker 1: into issues ranging from education to housing, to social policy, transport,
1:14
Speaker 1: local government, anything that we think needs to be fixed
1:17
Speaker 1: and could be better, because we want to create a
1:19
Speaker 1: better future for this country.
1:20
Speaker 2: Sure, and economics kind of goes to the heart of that.
1:23
Speaker 1: A lot of it, A lot of it is economics,
1:25
Speaker 1: but not all So in our team we're quite diverse. Actually,
1:28
Speaker 1: We've got a psychologist, we have someone from a classics background,
1:33
Speaker 1: so we have quite a range of different specialties in
1:37
Speaker 1: our team.
1:37
Speaker 2: Sure, and what would you say to people who are
1:39
Speaker 2: inevitably particularly on the left that they would say, oh,
1:42
Speaker 2: right wing thing tank. What do you say when you
1:43
Speaker 2: hear yourself described that way?
1:46
Speaker 1: I would say evidence based think tank because we do
1:49
Speaker 1: our research, and we do our job well and you
1:52
Speaker 1: can look at our research on our website and you
1:53
Speaker 1: can see that all our research is extremely well documented,
1:56
Speaker 1: well researched by people who really know what they're doing, and.
1:59
Speaker 2: You kind of, I guess you'd say, quite focused case
2:02
Speaker 2: by case on what the you know, the right prescription
2:04
Speaker 2: of policy is for different aspects of the economy and
2:09
Speaker 2: social life.
2:09
Speaker 1: And of course when you're doing research into fiscal policy,
2:12
Speaker 1: that differs from monetary policy, and it certainly differs from
2:15
Speaker 1: what we're doing in education.
2:16
Speaker 2: Yeah, sure, okay, Look, we'll come back to a bit
2:18
Speaker 2: of that. And it was some questions later on, but
2:20
Speaker 2: I wanted to go right back because people might have
2:22
Speaker 2: already guessed from your accent.
2:23
Speaker 1: Really I'm trying to hide it so well.
2:26
Speaker 2: That you didn't grow up in New Zealand. So you
2:29
Speaker 2: can you tell us a little bit about well, we
2:31
Speaker 2: start with your first memories of money and what that was,
2:34
Speaker 2: and maybe from there where you were growing up.
2:36
Speaker 1: Okay, So, for my first memories of money are Dodge marks, yea,
2:39
Speaker 1: and that's where I'm from. So I was born in
2:41
Speaker 1: West Germany in nineteen seventy five, and so I grew
2:45
Speaker 1: up with the German mark. So if you're asking me
2:47
Speaker 1: about my first memories of money, it is that currency
2:50
Speaker 1: then no longer exists, and that's the money with which
2:54
Speaker 1: I grew up. And we had marks, we had Phoenix
2:57
Speaker 1: and Germany of course has a very complicated test with
3:00
Speaker 1: money because we can probably talk about this later, but
3:04
Speaker 1: there were quite a few instances of hyperinflations before my time,
3:07
Speaker 1: but they have certainly shaped how German still feel about
3:10
Speaker 1: money until this day.
3:11
Speaker 2: Sure, but you're growing up in the so you're growing
3:13
Speaker 2: up with the late seventies and the childhood in the eighties.
3:18
Speaker 2: That was a pretty strong time for the West German economy,
3:21
Speaker 2: wasn't it.
3:21
Speaker 1: That was the time immediately after the so called economic miracle.
3:24
Speaker 1: So after World War II, Germany of course was in ruins.
3:28
Speaker 1: It was also morally discredited. And out of that ruins
3:31
Speaker 1: came a surprisingly strong economy because of the policies introduced
3:35
Speaker 1: by one man, and that was looked Rich Earhart. So
3:37
Speaker 1: Aerhard was the economics minister first under Chancellor Conohad Ardenaw
3:42
Speaker 1: and he later became Chancellor himself, and Aerhart started something
3:45
Speaker 1: that he called the social market economy. It is an
3:48
Speaker 1: economy that was basically free, and Erhart argued it was
3:51
Speaker 1: an economy that was inherently social because it produced prosperity
3:55
Speaker 1: for all and that was his big slogan, prosperity for
3:58
Speaker 1: all people after the war, and that worked really well.
4:02
Speaker 1: And after about twenty years under that prescription, Germany actually
4:06
Speaker 1: overtook Britain in gdpeper capital for the first time ever.
4:09
Speaker 1: So that really worked well. And so when I grew
4:12
Speaker 1: up that was really the period straight after that economic miracle,
4:15
Speaker 1: So it was a time when West Germany at least
4:18
Speaker 1: had enormous amounts of prosperity.
4:20
Speaker 2: Yeah, I mean, did you feel that growing up, that
4:22
Speaker 2: sense of you know, economic prosperity around you.
4:26
Speaker 1: I guess yes I did, although I should probably qualify
4:30
Speaker 1: that a bit. The region where I'm from is actually
4:33
Speaker 1: Germany's version of Liverpool, so it is a region that
4:37
Speaker 1: was built on call and steel, but that region had
4:40
Speaker 1: been in crisis since the late nineteen fifty because German
4:43
Speaker 1: cool became uncompetitive, and so it was an area that
4:46
Speaker 1: was always struggling when I grew up, with its predominant sectors.
4:50
Speaker 1: But apart from that, I mean there was a sense
4:53
Speaker 1: of stability, and the whole country was doing well. It
4:56
Speaker 1: was just something that was specific to my region where
4:59
Speaker 1: you could feel that the transition actually from this these
5:01
Speaker 1: old industries to something you hadn't actually properly started.
5:04
Speaker 2: Yeah. Sure. And so did you get pocket money? And
5:07
Speaker 2: did you go and spend that pocket money somewhere?
5:09
Speaker 1: I certainly did get pocket money, and I remember my
5:11
Speaker 1: parents started giving me fifty phoenix per week from whenever
5:15
Speaker 1: six and that automatically increased by fifty phoenix for each year.
5:18
Speaker 2: Yeah. Yeah, and then what did you spend it on?
5:21
Speaker 1: Well, at the time, I think that would have still
5:23
Speaker 1: brought you probably an ice cream in a corner with
5:25
Speaker 1: ye two scoops. I mean those were the days. And
5:29
Speaker 1: inflation today of course means that you probably now look
5:31
Speaker 1: at about a europe per scoop, but back then that
5:33
Speaker 1: was probably enough for an ice cream a week.
5:35
Speaker 2: So it's actually, I mean, it's not that different. When
5:37
Speaker 2: I talked to people growing up in New Zealand and
5:39
Speaker 2: the seventies or eighties, they talk about going to what
5:41
Speaker 2: we call the dairy obviously, yeah, but corner sharp something
5:44
Speaker 2: like that exactly. Yeah, yeah, absolutely, And did you have
5:49
Speaker 2: a part time job and all that sort of stuff?
5:50
Speaker 2: Did you deliver papers?
5:52
Speaker 1: And I did actually deliver papers for a while, and
5:55
Speaker 1: then I also help people with their computer needs, and
5:58
Speaker 1: I also helped tutoring, so yes, I had a few
6:00
Speaker 1: jobs on the side.
6:01
Speaker 2: Yeah. Sure, So that sounds like you were like in
6:04
Speaker 2: tune with computers, which was kind of like a new
6:08
Speaker 2: thing at that time.
6:09
Speaker 1: Yes, and it was fascinating. I think I had my
6:11
Speaker 1: first computer when I was eleven, and it was an
6:13
Speaker 1: Amiga five hundred if you remember them, I do five
6:16
Speaker 1: and twelve killer bites and really good graphics actually for
6:20
Speaker 1: the time.
6:20
Speaker 2: I mean I remember back to Zide's eighty one I
6:22
Speaker 2: think is the earliest. Okay, right, just for the computer
6:27
Speaker 2: nerds out there, but.
6:28
Speaker 1: Certainly exciting times and technology.
6:30
Speaker 2: Yeah, yeah, sure. And I mean what were your parents,
6:32
Speaker 2: what do your parents do growing up?
6:34
Speaker 1: Well, my dad worked as a policeman and my mum
6:37
Speaker 1: was a whole wife from the time I was born,
6:39
Speaker 1: and so I would say it was a typically kind
6:41
Speaker 1: of family in a pretty working class area.
6:46
Speaker 2: Yeah. And at school, were you I mean the interest
6:49
Speaker 2: in economics did that sort of come early? Do you think?
6:52
Speaker 1: Or I think that came actually really early. I was
6:54
Speaker 1: interested in politics and economics from a very early age,
6:57
Speaker 1: I think even at primary school, imer having discussions with
7:00
Speaker 1: my primary school teacher. So that continued then into high
7:05
Speaker 1: school or what we call gumnasium, so that's a grammar
7:08
Speaker 1: school basically. And yes, I did take social studies at
7:13
Speaker 1: grammar school and English and history and I loved this
7:16
Speaker 1: kind of stuff.
7:16
Speaker 2: Yeah, and you must have been were you still at
7:18
Speaker 2: school when the war came down at the Berlin.
7:20
Speaker 1: Wall yes, that was right in the middle of my
7:22
Speaker 1: school career really, nineteen eighty nine, of course, and we
7:26
Speaker 1: were glued to the television at the time watching it
7:29
Speaker 1: because it was really the most exciting thing that could
7:31
Speaker 1: have happened.
7:31
Speaker 2: Yeah, I mean, if you're interested in politics, to have
7:34
Speaker 2: that happening around you was probably quite quite incredible, right.
7:37
Speaker 1: Yeah. When the war fell, I was fourteen, and I
7:39
Speaker 1: was totally aware of what was happening. And actually I
7:41
Speaker 1: had visited East Berlin just a year before, so I
7:44
Speaker 1: actually spent a day in East Berlin. Under communism, we
7:47
Speaker 1: visited West Berlin mainly, but we spent a day in
7:50
Speaker 1: the East. And if you had asked me back then
7:52
Speaker 1: whether this wall will ever disappear would have set absolutely not,
7:55
Speaker 1: because it looked so permanent. And so when it came down,
7:59
Speaker 1: that came as a big surprise, as a shock really
8:01
Speaker 1: to all of us, and it was the most exciting time.
8:04
Speaker 2: Yeah, yeah, I mean there was a lot of optimism
8:05
Speaker 2: and all that, but also was a bit of an
8:07
Speaker 2: economic shock for Germany. Wasn't it to have to absorb
8:11
Speaker 2: East Germany which was not in great shape?
8:14
Speaker 1: That's right, And actually until this day I think actually
8:16
Speaker 1: the policies that the Germans took when it came to
8:20
Speaker 1: unification were fundamentally wrong because they didn't give the East
8:24
Speaker 1: German economy any chance to kind of change or gradually arrive.
8:28
Speaker 1: For basically, we had monitory union between East and West,
8:31
Speaker 1: and from that day onwards, the East German economy was
8:34
Speaker 1: completely uncompetitive. They couldn't evalue their currency, something that might
8:38
Speaker 1: have been possible in other transformation countries in Eastern Europe.
8:42
Speaker 1: And so I think unification from an economic perspective actually
8:45
Speaker 1: didn't work that well.
8:46
Speaker 2: Yeah, I mean it's I guess it's like two I mean,
8:49
Speaker 2: you could say New Zealand Australia or something. But having
8:51
Speaker 2: suddenly running one monetary policy for two quite different economies.
8:56
Speaker 1: That's right, and not just monetary policy, but really from
8:59
Speaker 1: one day to the next of whole apparatus of West
9:01
Speaker 1: German regulations were put in place in East Germany and
9:03
Speaker 1: of course nobody could deal with them.
9:05
Speaker 2: Yeah.
9:06
Speaker 1: There was another thing. Actually, we subsidized a lot of
9:10
Speaker 1: the development from west to East, so billions and really
9:14
Speaker 1: by now twillions of euros were shifted into the East
9:18
Speaker 1: and subsidized basically capital, well capital is mobile anyway, so
9:22
Speaker 1: I'm not sure whether if anything needs to be subsidized
9:25
Speaker 1: its capital. What might have actually worked better in the
9:28
Speaker 1: long run would have been to subsidize labor for a while,
9:31
Speaker 1: at least in East Germany, because the way it happened
9:34
Speaker 1: it came as a complete shockgun. It actually led to
9:36
Speaker 1: large parts of the East German population just leaving because
9:38
Speaker 1: it was so brutal.
9:40
Speaker 2: Yeah, yeah, absolutely, so that's happening when you're a teenager.
9:45
Speaker 2: You obviously were keen to go to university. Was it
9:47
Speaker 2: straight in with economics at university?
9:49
Speaker 1: Yeah? But actually at the time, we had a military
9:51
Speaker 1: draft in German, so I had a choice between doing
9:55
Speaker 1: twelve months in the German army or fifteen months of
9:57
Speaker 1: something else. Because I was always a that I would
10:00
Speaker 1: be the first to kill myself cleaning my gun. I
10:02
Speaker 1: did fifteen months of something else, and I worked in
10:06
Speaker 1: a daycas center for people with mental health problems.
10:08
Speaker 2: Oh wow. Yeah, so that was sort of like you
10:09
Speaker 2: had to do some public service basically exactly.
10:12
Speaker 1: So fifteen months of that dealing with people who were
10:15
Speaker 1: suffering from all sorts of mental problems, and that was
10:18
Speaker 1: eye opening and quite an experience for a teenager.
10:21
Speaker 2: Yeah, I bet, I mean, did it change your attitude
10:23
Speaker 2: on life?
10:25
Speaker 1: It did change my attitude on mental health and mental
10:28
Speaker 1: problems because I came to recognize them as something absolutely
10:32
Speaker 1: normal and it's a disease almost like any else. It
10:35
Speaker 1: can happen to anyone. And I mean back then in
10:38
Speaker 1: the nineteen nineties, there was probably still a little bit
10:40
Speaker 1: of stigma around mental health issues, and just working with
10:44
Speaker 1: our people, I've quickly got over that and actually realized
10:48
Speaker 1: it for what it is.
10:49
Speaker 2: Yeah. Sure, so you've got a PhD here, doctor of economics.
11:00
Speaker 2: Oh no, it's not economics.
11:01
Speaker 1: It's not economics. I got a doctorate in law.
11:04
Speaker 2: Okay, So how did you make your choices around what
11:07
Speaker 2: to study?
11:08
Speaker 1: Well, economics was what I always found fascinating and what
11:11
Speaker 1: I was interested at school, and so for me it
11:14
Speaker 1: was quite a natural choice to go to university and
11:16
Speaker 1: study economics. But actually the university I chose had a
11:19
Speaker 1: combined degree, so you did economics and business administration together
11:23
Speaker 1: all the way up to the master's degree, which at
11:25
Speaker 1: the time in Germany we called a diploma. And I
11:30
Speaker 1: did marketing in my business studies, and I did public
11:34
Speaker 1: finance and public choice on the economics side. And towards
11:39
Speaker 1: the end of my studies, I was nevertheless quite disillusioned
11:42
Speaker 1: with economics as a discipline, and I wanted to do
11:44
Speaker 1: something else. And we had a very good law teacher
11:47
Speaker 1: at the time, and I took some voluntary law classes,
11:51
Speaker 1: and so after the master's thesis, I thought, what, actually,
11:54
Speaker 1: this might be something for a PhD, right on the
11:57
Speaker 1: border of economics and law. And I thought, well, I'll
11:59
Speaker 1: get to go and I tried to figure out where
12:01
Speaker 1: I should do that, and I found, to my great
12:04
Speaker 1: surprise that our law faculty at Boham University opened the
12:09
Speaker 1: PhD program to non lawyers. That's why I applied. And
12:12
Speaker 1: I said, well, I would like to do something that
12:14
Speaker 1: is a law thesis, but with a lot of economics
12:17
Speaker 1: in it. Would you like to take me on? And
12:18
Speaker 1: so they did, And so in the end I got
12:21
Speaker 1: a law PhD. But I've got no law undergraduates.
12:25
Speaker 2: To stand in the court and trying I couldn't.
12:27
Speaker 1: I lack the proper qualifications.
12:29
Speaker 2: For what was the What was the topic of the PhD.
12:33
Speaker 1: Topic of the PhD was actually a critique of German
12:35
Speaker 1: unfair competition law. That sounds a bit abstract, perhaps, but
12:39
Speaker 1: it's basically the regulation of advertising. I've had done a
12:43
Speaker 1: few internships with companies and was always puzzled actually be
12:47
Speaker 1: how complicated advertising law was in Germany. I mean, just
12:51
Speaker 1: to give you an example, you could not legally offer
12:55
Speaker 1: your customers a cup of coffee because then some lawyers
12:58
Speaker 1: would argue that you're putting a psychological pressure compulsion really
13:03
Speaker 1: to buy on your customers. And so just because he
13:05
Speaker 1: gave them a cup of coffee, they felt really grateful
13:08
Speaker 1: now that they had to buy the whole kitchen from you.
13:11
Speaker 1: And so absurd regulations like that actually drove me into
13:15
Speaker 1: my PhD thesis and I wanted to critique that, and
13:17
Speaker 1: I did it from a legal history point of view,
13:19
Speaker 1: where I went through two hundred years of German legal
13:22
Speaker 1: history trying to figure out where all of this came from,
13:24
Speaker 1: and I found it had a lot to do with
13:26
Speaker 1: Nazi law. And then I compared this with the experience
13:29
Speaker 1: of Australia. So I spent a year in Australia comparing
13:31
Speaker 1: with a Trade Practices Act, and my conclusion was, actually,
13:34
Speaker 1: the Australians do it a lot better than the Germans.
13:36
Speaker 1: There's much to learn. And then I finally did a
13:39
Speaker 1: law and economics chapter just comparing how unfair competition law
13:43
Speaker 1: could be done from a liberal economic point of view,
13:46
Speaker 1: from an Austrian school point of view, and how legal
13:49
Speaker 1: systems actually deal with it in practice, and whether this
13:51
Speaker 1: is in any way efficient. And just to conclude this,
13:53
Speaker 1: I had an example where I do all of these
13:55
Speaker 1: perspectives together and looked at comparative advertising because it's really
13:59
Speaker 1: fastating there.
14:00
Speaker 2: Yeah, so that was your first time this part. I
14:03
Speaker 2: mean you went to Australia, so obviously you know, just
14:07
Speaker 2: looking for how you ended up with this connection to
14:08
Speaker 2: this part of the world. Was that did you stay
14:10
Speaker 2: in Australia long?
14:11
Speaker 1: Yeah, My connection with this part of the words ax
14:13
Speaker 1: my wife. Right. So what I haven't mentioned is I've
14:16
Speaker 1: coursed at the real background to my PhD thesis. Was
14:19
Speaker 1: the design to spend some time with her. Yeah, because
14:22
Speaker 1: we started off as pen friends when we were when
14:24
Speaker 1: she was fifteen I was sixteen. We started writing. We
14:27
Speaker 1: had a pen friendship for eight years.
14:29
Speaker 2: This is one of those classics I sort of had
14:30
Speaker 2: one old school years. You swounded up and you found
14:33
Speaker 2: a pin free, yes.
14:33
Speaker 1: And there was no internet, and we didn't telephone because
14:35
Speaker 1: it was ridiculously expensive back then. It was all before
14:38
Speaker 1: the liberalization of the tel course, and so we wrote
14:41
Speaker 1: led to us the old fashioned way, and so whatever
14:44
Speaker 1: I wrote, it would take about a couple of weeks
14:46
Speaker 1: until I got an answer from Australia and vice versa.
14:48
Speaker 2: Wow.
14:48
Speaker 1: We did this for eight years and then we met
14:50
Speaker 1: on my first trip to Australia a holiday, and I thought, okay,
14:54
Speaker 1: and no, one wouldn't need a really good excuse to
14:56
Speaker 1: spend more time with her, so why not actually include
14:58
Speaker 1: an Australian chapter into my PhD?
15:00
Speaker 2: Fantastic? Yeah, And so obviously you got married, yes, yeah,
15:03
Speaker 2: And well I mean from there did you stay in Australia,
15:06
Speaker 2: because I noticed on your CV you've spent some time
15:09
Speaker 2: in London, including the House of Lords, which looked interesting.
15:12
Speaker 1: That follows straight from that story, because after I finished
15:15
Speaker 1: a PhD and we said, okay, it's now time to
15:18
Speaker 1: bring our long distance relationship to a clause and move together.
15:22
Speaker 1: And London was a compromise. So for me it was
15:25
Speaker 1: relatively easy because it was before Brexit and you didn't
15:29
Speaker 1: need a visa at the time as a German to
15:30
Speaker 1: live in London. It's all changed of course, for in
15:33
Speaker 1: Australia it was relatively straightforward visa program exactly. And so
15:37
Speaker 1: we decided to meet in London, and we got married
15:41
Speaker 1: in London, so we could actually stay a bit longer.
15:43
Speaker 1: And yeah, I worked in a House of Lords. That
15:45
Speaker 1: was my first job I got. And then afterwards I
15:48
Speaker 1: got a job with a think tank called Policy Exchange,
15:51
Speaker 1: which turned out to be David Cameron's. But I actually
15:55
Speaker 1: got this before David Cameron was Leader of the Conservative Party,
15:58
Speaker 1: and it was only after he became leader. Policy Exchange
16:00
Speaker 1: became basically his ideas factory and I was chugor economist there.
16:05
Speaker 1: And then yeah, after four and a half years in London,
16:07
Speaker 1: we decided, okay, we had enough. My wife, bizarrely, although
16:10
Speaker 1: she was Australian, wanted to move to Berlin, and I
16:13
Speaker 1: bizarrely wanted to move back to Sydney. And so the
16:16
Speaker 1: compromise we had was, I mean, for her it was
16:19
Speaker 1: relatively easy to get jobs no matter where. For myself,
16:22
Speaker 1: I said, well, it's a bit harder. So I said, okay,
16:25
Speaker 1: I'll apply for jobs in both places. We'll see what
16:27
Speaker 1: comes up, and the best job wins. And I got Sydney.
16:30
Speaker 1: So I won.
16:31
Speaker 2: Yeah, so that was that was that was that with
16:32
Speaker 2: a think tank in Sydney.
16:33
Speaker 1: Yes, I was the Center for Independent Studies. I knew
16:36
Speaker 1: them for my time in Australia when I had studied there,
16:38
Speaker 1: and I had been in touch with them before, and
16:40
Speaker 1: so I knew who they were and what they were
16:42
Speaker 1: doing and I liked them, and well, they liked me
16:45
Speaker 1: and hired me, and that's how I end up back
16:46
Speaker 1: in Sydney.
16:47
Speaker 2: Okay, so a bit around off this bit, how do
16:49
Speaker 2: you end up in New Zealand from there?
16:52
Speaker 1: So what happened was actually that I met a few
16:55
Speaker 1: New Zealand That's what I was working in Australia. We
16:56
Speaker 1: had conferences and they often came over and so they
17:00
Speaker 1: knew me. And when it came to the formation of
17:02
Speaker 1: the New Zealand Initiative, they had heard of me, they
17:05
Speaker 1: had met me before, and then they asked me whether
17:08
Speaker 1: I would be interested in leading a New Zealand think tanker.
17:10
Speaker 1: And at the time I didn't know New Zealand that well,
17:13
Speaker 1: but sounded interesting yeah, and I thought why not? And
17:17
Speaker 1: that was twelve years ago. Initially I thought this might
17:19
Speaker 1: just be another five six years continuing my normadic lifestyle.
17:25
Speaker 1: But then we had a son in Wellington and we
17:28
Speaker 1: had bought a house and suddenly things felt a lot
17:30
Speaker 1: more settled.
17:31
Speaker 2: So now you really are, like, you know, you're adopted kiwi.
17:34
Speaker 1: I guess well, I'm a naturalized key words passport.
17:38
Speaker 2: Yeah, and as soon as you've got kids as well,
17:39
Speaker 2: that's always a really draws you, draws you? And can
17:43
Speaker 2: I ask then, just because I'm curious and I know
17:46
Speaker 2: that there's a lot to it, But you know, culturally,
17:49
Speaker 2: have you noticed differences around money in this country compared
17:52
Speaker 2: to say Germany, particularly.
17:54
Speaker 1: Growing up massively? Yeah? Massively? So where do we want
17:57
Speaker 1: to start? Yeah, I mean for star Germans love cash.
18:02
Speaker 1: It is a cultural thing. I'm not quite sure where
18:05
Speaker 1: it comes from, but we do love cash wars. Of
18:08
Speaker 1: course in New Zealand everything is.
18:09
Speaker 2: By contesting because I mean everyone knows the stories of
18:12
Speaker 2: Germans in the hyperinflation years in the twenties and in
18:16
Speaker 2: pre war wheelbarrows for the cash and all that sort
18:18
Speaker 2: of stuff. Do you think there's a cultural hangover from that?
18:22
Speaker 1: There might be, and that's the other difference. Actually, Germans
18:26
Speaker 1: hate inflation with a passion. Yeah, I mean, okay, New
18:28
Speaker 1: Zealand's have recently had their own experience with inflation, but
18:31
Speaker 1: in Germany it's quite something. So even when inflation was
18:35
Speaker 1: still in the you know, one or two percent range,
18:38
Speaker 1: inflation news every month in Germany that's kind of front
18:41
Speaker 1: page news because everybody was always panicking. We had this
18:45
Speaker 1: experience twice. We had the big hyper inflation in the
18:48
Speaker 1: Weima Republic in the nineteen twenties. We had another case
18:52
Speaker 1: of hyper inflation after World War two, and so Germans
18:55
Speaker 1: have actually made the experience that from one day to
18:58
Speaker 1: the next, audier money can be worthless and saw inflation reporting,
19:02
Speaker 1: even if it's just one or two percent, is always
19:05
Speaker 1: kind of big news in Germany. So from that perspective,
19:09
Speaker 1: actually looking at the creation and of the European Central
19:12
Speaker 1: Bank and the transition into the Euro or the Germans
19:14
Speaker 1: were always the more skeptical. And it's why and when
19:16
Speaker 1: I look at New Zealand, well, New Zealand's never really
19:19
Speaker 1: had that experience with hyperinflation. Yes, we've had some periods
19:22
Speaker 1: where there was a bit more inflation in nineteen seventies,
19:25
Speaker 1: but then again everybody had that. But this complete eradication
19:29
Speaker 1: of all your previous wealth in one gore very quickly.
19:32
Speaker 1: That kind of collapse I think New Zealand's never had. Yeah.
19:35
Speaker 2: Also, you come into New Zealand and how does it
19:38
Speaker 2: look politically because we're an interesting max we sort of
19:42
Speaker 2: flip flop. We had a fairly long period, you know,
19:46
Speaker 2: post war until nineteen eighty four where we were almost
19:50
Speaker 2: sort of into socialist territory or certainly the state was
19:54
Speaker 2: involved in everything, and it's changed and we you know,
19:57
Speaker 2: how did you see all that when looking in as
20:00
Speaker 2: an outsider.
20:01
Speaker 1: Well, first of all, I arrived in twenty twelve, and
20:04
Speaker 1: if you remember Australian politics at the time, that was
20:07
Speaker 1: the time of Kevin Rutt and Julia Gillard and later
20:10
Speaker 1: again Kevin Rudd. It was well, let's put it mildly,
20:14
Speaker 1: it was a turbulent.
20:15
Speaker 2: Time in Australian politics as exactly.
20:19
Speaker 1: And so arriving in twenty twelve in New Zealand, I
20:21
Speaker 1: felt like, oh great, finally I was in government and stability.
20:27
Speaker 1: I mean that was just my first impression actually, and
20:30
Speaker 1: things politically were quite settled in using I mean, whether
20:32
Speaker 1: it was previously Halen Clark or John Key. But I
20:36
Speaker 1: didn't have the feeling that it was like Australia where
20:38
Speaker 1: they spopped their prime ministers every fortnight or so, and
20:42
Speaker 1: that was actually quite nice. It felt good actually coming
20:44
Speaker 1: from this craziness of Australian politics into New Zealand.
20:54
Speaker 2: We'll come back to a little bit more of those
20:56
Speaker 2: big questions, but I do want to get through some
20:58
Speaker 2: of our quick fire questions. Just to go back on
21:01
Speaker 2: some of your experiences with money over the years. Can
21:03
Speaker 2: I ask one of the ones we love here is
21:06
Speaker 2: what's the poorest you've ever been?
21:08
Speaker 1: Probably when I was a student. I mean obviously that's
21:13
Speaker 1: where I was living on some of the money that
21:15
Speaker 1: I still had for my grandparents. Actually they were quite
21:17
Speaker 1: nice to leave some money for my studies for me. Yes,
21:21
Speaker 1: I had a job at university as well, but yeah,
21:24
Speaker 1: it was not a luxurious life, I would say.
21:27
Speaker 2: And flip side of that is what would be the
21:29
Speaker 2: when you when you first got a proper job, like
21:32
Speaker 2: a decent salary. Do you remember what what you was there?
21:34
Speaker 2: Something you splashed out on or what what's the most
21:37
Speaker 2: indulgent purchase you would have gone for?
21:39
Speaker 1: Actually I do remember such an incident and that was
21:41
Speaker 1: actually when I at the civil service time after school
21:44
Speaker 1: at the mental Health Decare Center and my first few
21:47
Speaker 1: salaries because it wasn't much really were invested into a
21:51
Speaker 1: video recorder.
21:52
Speaker 2: Oh yeah yeah, which was actually quite a big deal.
21:54
Speaker 1: It was quite a big deal back then. I mean
21:55
Speaker 1: you probably have to explain it for the younger generation.
21:58
Speaker 2: Could take you or you could get a movie out
21:59
Speaker 2: and you could a movie at home, and it was amazing. Yeah, yeah, absolutely.
22:03
Speaker 2: I mean, how are you with money? Do you think
22:06
Speaker 2: so yourself as a without going into you know, specifics,
22:09
Speaker 2: but are you a good saver? Do you do all
22:12
Speaker 2: the right things with the personal finance? Or are you
22:15
Speaker 2: a spender?
22:16
Speaker 1: I actually think I am a saver and I'm an investor,
22:19
Speaker 1: and I like to keep my money together and i'd
22:21
Speaker 1: like to have full control over it, and I need
22:23
Speaker 1: to dot or almost onto the last dollar how much
22:26
Speaker 1: I currently have, otherwise I wouldn't sleep well. But then again,
22:29
Speaker 1: I'm sure German.
22:30
Speaker 2: Yeah, yeah, so an investor but relatively conservative then like
22:33
Speaker 2: you're not taking wild risks with well.
22:35
Speaker 1: Actually I am taking some risks. I've invested in a
22:39
Speaker 1: number of ETFs and investment funds. But then again, you
22:43
Speaker 1: see that's a.
22:44
Speaker 2: Way to take some risk in a measured way.
22:46
Speaker 1: Right, yes, And I've spread it over so many of
22:48
Speaker 1: them that are trying to cancel each other out, and
22:50
Speaker 1: so I'm trying to get some return, but I'm trying
22:52
Speaker 1: to also have a reasonable risk profile.
22:55
Speaker 2: Sure, And just like for people listening to ETF is
22:57
Speaker 2: kind of like a fund that will track a certain
22:59
Speaker 2: sector of the stock market.
23:01
Speaker 1: Right, that's exactly right. And so what I've tried to
23:03
Speaker 1: do is actually combine different regions, different industries, different risk profiles,
23:08
Speaker 1: different everything, basically just to mix it as much as
23:11
Speaker 1: I could. Except you remember probably a couple of years ago,
23:14
Speaker 1: after the Russian invasion of Ukraine, every single essa class
23:18
Speaker 1: went down and I wanted something wrong.
23:20
Speaker 2: Yeah, well, there are times when you wonder where you
23:22
Speaker 2: can put money. But during the election campaign last year,
23:26
Speaker 2: Christopher Luxen was asked how much he spends a week
23:29
Speaker 2: on groceries and he came up with sixty dollars, which
23:32
Speaker 2: was a unusual pets politically thing to say. But are
23:36
Speaker 2: you are you the grocery shopper in the house, and.
23:39
Speaker 1: Do you know actually that is mainly my wife. I'm
23:41
Speaker 1: an idu occasional shopping, but know that that's typically her territory.
23:45
Speaker 2: Yeah, So it's not like you're not controlling the money,
23:49
Speaker 2: not down to needing to check.
23:50
Speaker 1: Or no, nor way.
23:52
Speaker 2: Yeah, because I say that because I kind of am
23:55
Speaker 2: like I'm going through the supermarket checking that the onions
23:59
Speaker 2: are good and all that sort of stuff. How about
24:01
Speaker 2: we often ask if you buy lotto tickets and if
24:06
Speaker 2: you're you know, when you imagine winning lotto, how much
24:10
Speaker 2: would you imagine winning?
24:12
Speaker 1: Well, I always have a bad conscience when I do
24:14
Speaker 1: buy a lot of tickets, which I do occasionally, because
24:17
Speaker 1: as a cold hearted and rational economist, I know this
24:19
Speaker 1: is nonsense, of course, but I do it for the
24:22
Speaker 1: thrill of just playing, and also knowing, of course that
24:25
Speaker 1: whatever profits the company makes it goes into good products,
24:28
Speaker 1: so that's fine. So I don't really plied with the
24:32
Speaker 1: expectation of winning anything, but just for the fun of
24:35
Speaker 1: it and actually for doing something good.
24:37
Speaker 2: I guess I ask about how much money because sometimes
24:40
Speaker 2: you know, and I'm thinking about Loto, it might be like,
24:43
Speaker 2: I'd rather just win two million dollars. I don't want
24:45
Speaker 2: to win forty four million dollars and turn my life
24:47
Speaker 2: upside down.
24:48
Speaker 1: Say win forty four million dollars and then just give
24:50
Speaker 1: the rest away and keep as much as you like.
24:51
Speaker 2: Well that's true. Yeah, yeah, yeah, I mean I get
24:54
Speaker 2: I guess.
24:55
Speaker 1: If you don't know what to do with the other
24:57
Speaker 1: forty two million dollars, I mean, I do't cank give
24:58
Speaker 1: you my address.
24:59
Speaker 2: Yeah, I can fund some research projects that would be
25:03
Speaker 2: a good idea.
25:04
Speaker 1: Yeah.
25:04
Speaker 2: Yeah. Coming back to some bigger questions, but that you know,
25:07
Speaker 2: how much is money important to you and how much
25:10
Speaker 2: has it been sort of a byproduct of the career
25:14
Speaker 2: you know.
25:14
Speaker 1: Well, I think money is important, but it doesn't make
25:18
Speaker 1: you happy, but it calms you down. So what I
25:23
Speaker 1: really want to see with my money in my investment
25:25
Speaker 1: is actually that I don't have to worry too much
25:27
Speaker 1: about what will happen in maybe twenty or thirty years time.
25:30
Speaker 1: So weirdly, perhaps I think most people are not quite
25:33
Speaker 1: like that. I've always had this perspective that, well, you
25:37
Speaker 1: don't want to rely on state pension in the end,
25:40
Speaker 1: because of my constant moving around anyway, I couldn't actually
25:44
Speaker 1: bank on any state pension system to pay me anything
25:47
Speaker 1: because I was always too short in the country, so
25:49
Speaker 1: I was only spending a few days a few years,
25:52
Speaker 1: and so I always thought I have to kind of
25:55
Speaker 1: do it for myself. I can't rely on anyone to
25:58
Speaker 1: really pay me a pension at the end, and so
26:01
Speaker 1: I always had this idea of being totally self funded
26:03
Speaker 1: in the end, and that made me quite conservative in
26:06
Speaker 1: a way.
26:07
Speaker 2: Sure, these last questions are sort of kind of a
26:09
Speaker 2: sitter for you know, given you know that you're at
26:13
Speaker 2: a think tank and they're sort of policy type questions.
26:15
Speaker 2: But if you had to say one thing, what do
26:18
Speaker 2: you think the biggest driver of social inequality is in
26:20
Speaker 2: the sense of, you know, why some people are rich
26:24
Speaker 2: some people are poor.
26:26
Speaker 1: I think that a too. Actually one is education, and
26:30
Speaker 1: I'm the best example. So I come from, as I said,
26:33
Speaker 1: a typical kind of middle class background in a not
26:36
Speaker 1: so flash part of Germany. But I had an excellent education.
26:39
Speaker 1: I had a fantastic school, a state school, by the way,
26:43
Speaker 1: and that the door to all sorts of jobs afterwards,
26:46
Speaker 1: and education is super important for that kind of social mobility.
26:51
Speaker 1: The other factor I think that makes a massive difference
26:53
Speaker 1: is housing, And I mean often housing and education are linked,
26:57
Speaker 1: but we are now at a situation where, I mean,
27:01
Speaker 1: for ordinary New Zealander's coming from not so flash backgrounds
27:04
Speaker 1: actually owning our house as a major challenge and sometimes
27:07
Speaker 1: outright impossible. And so I think actually, with the craziness
27:13
Speaker 1: of our property markets, the property letter has actually lost
27:16
Speaker 1: its bottom rungs and that is a massive warrior, and
27:20
Speaker 1: it should warry us all for social reasons because I
27:22
Speaker 1: think that is one of the biggest drivers of inequality
27:25
Speaker 1: in this country. So housing an education, both of them.
27:28
Speaker 2: Sure, So I think that it probably sets up the
27:30
Speaker 2: last question really, which is if we could make you
27:34
Speaker 2: prime minister for a day, and if prime ministers could
27:36
Speaker 2: actually wield this kind of power, what would be the
27:40
Speaker 2: policy you would focus on that you could would want
27:44
Speaker 2: to bring through to try and address some of those issues.
27:46
Speaker 1: I've got so many ideas after twelve years at the
27:49
Speaker 1: end stiff, but I would really focus on these tools.
27:53
Speaker 1: In education. I mean, we have a government that's currently
27:56
Speaker 1: undertaking a lot of reforms, introducing a new curriculum, introducing
28:00
Speaker 1: changes to teacher education, and new assessment system, so all
28:03
Speaker 1: of these things are really important. I mean, there's not
28:05
Speaker 1: that one silver bullet that would fix the whole education system,
28:08
Speaker 1: but that's roughly what I would do too. And on housing,
28:11
Speaker 1: I mean, we've had discussions in the past you know
28:14
Speaker 1: that I'm a great believer in decentralization and subsidiarity and
28:17
Speaker 1: giving incentives to councils because I think that's the only
28:20
Speaker 1: way we can really crack that housing market. But I
28:23
Speaker 1: would do that, and if I had a third wish,
28:26
Speaker 1: I would also liberalize or foreign direct investment regime.
28:29
Speaker 2: Yeah, which may be going to happen to some extent.
28:31
Speaker 1: Looks like it. I think it's in the Coalition agreement.
28:34
Speaker 2: Yeah, but I guess, you know, with the housing and
28:37
Speaker 2: the logo, the idea. I mean, we've talked before about
28:39
Speaker 2: localism does seem difficult for even seen to right parties
28:44
Speaker 2: in this country. It's sort of there's a lot of
28:47
Speaker 2: central control in Wellington.
28:48
Speaker 1: Right now, Yes, and much more so than in most
28:51
Speaker 1: other countries. So we have more than ninety percent of
28:53
Speaker 1: our texas and tax revenue and spending control by central
28:57
Speaker 1: government in Wellington. For most other developed countries it's more
29:01
Speaker 1: like a two thirds kind of central control. And New
29:05
Speaker 1: Zealand's been like that for a long time, although not forever.
29:08
Speaker 1: So if you go into the nineteenth century, can find
29:10
Speaker 1: that New Zealand was way more decentralized than it is today.
29:14
Speaker 1: New Zealand back then looked a bit more like Germany
29:16
Speaker 1: or Switzerland today, so that there is a localist tradition
29:19
Speaker 1: even in New Zealand. I think it's just something that
29:21
Speaker 1: we have to rediscover.
29:23
Speaker 2: Well, look, that is fantastic, all of it. We're going
29:25
Speaker 2: to leave it there. But thanks for being on Money Talks.
29:27
Speaker 2: Thank you Liam, Thanks for listening to this episode of
29:30
Speaker 2: Money Talks. If you want to get in touch, drop
29:33
Speaker 2: me a line at Liam dot Dan at inzme dot
29:37
Speaker 2: co dot zed and you can read more from me
29:40
Speaker 2: at inzidherld dot co dot nz. Thanks to my producer
29:43
Speaker 2: Ethan Sills and sound engineer liamn McDonald. Follow Money Talks
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