John Boscawen is dead right on Morning Report this morning. The apparent substantial reduction in large political donations as reported under the Electoral Finance Act shows what cynical hypocrisy it was. It was never designed by Labour to increase transparency. They deliberately left loopholes in it.

The loopholes worked. They do in every country that tries to bottle political energy. It is like bottling steam. If you succeed it turns to water. Electoral finance laws all over the world increase both the perception and the reality of political corruption.

In our case as John says the real objective was to gag third parties with passionate convictions, to ensure that effective electoral participation was permitted only to the insiders – the professional operators from the registered parties. It was also designed to increase pressure for taxpayer funding of election campaigns

I know from my legal work on that Act that it reduced transparency during the last election. It did what the creation of most victimless crimes does – generated smart and successful effort to avoid it. 

If instead it had been intended to strengthen democracy, it would have freed up and encouraged third party involvement, it would have set parties free to decide how they allocated their spending, and it would have focussed on requiring disclosure only of donations at a level where there is a serious likelihood that they might influence a party’s policies, in effect at the level where they could be the price of a vote in Parliament,

When I sat on the Justice and Electoral Select Committee reviewing the 2002 election, the Chairman, Tim Barnett, worked hard to get the committee to suggest taxpayer funding of political campaigns. During that debate (behind closed doors) the United Future MP Murray Smith, persuaded us to have a frank discussion about what amount of money we thought would actually be likely to influence a party’s manifesto. We eventually reached a consensus that it was around $50k.

Murray then proposed that we suggest $50k as the disclosure threshold, with substantial upgrading of the provisions to catch avoidance mechanisms (by splitting donations to avoid the threshold) and dedicated enforcement to detect and prosecute breaches.

Perhaps even then most of us had lost confidence in Police impartiality for electoral law enforcement purposes.

The benefit of raising the threshold would be the same benefit as is provided by the secret ballot. It allows people to express their political beliefs without fear of governing party vindictiveness. Murray and I  believed that fear of Labour was increasing, and with it  increasing reluctance by people with something to lose to be publicly involved in politics.

Campaign funding laws play into the hands of ruthless governments prepared to instil that fear.

Murray’s practical suggestion was favoured by  National and ACT  and Nandor Tanczos for the Greens was prepared to discuss it. Labour was horrified, but from recollection it was the NZ First hostility that most surprised me.

The excellent work by Kitchin and the DomPost on the Glenn saga last year made it all more understandable.

H Clarks’ connivance in Peters’ plundering of tax money to benefit his racing industry sponsors was among the low points of her reign. I very much doubt that she will be remembed at the UN in years to come as the corruption reformer they desperately need.

Comments on my first post on this deserve a response, particularly Nikki Pender. 

I respect her judgment, and there is little of what she says with which I disagree, except the conclusion. And the conclusion illustrates what I think is wrong about the misplaced respect given to lawyers’ values, as opposed to legal reasoning.

We have to keep asking of all activities and value systems that purport high moral worth – what is their outcome? Are the fruits valuable enough to justify the priority we give the activity, compared with the other ways we could employ the same resources?

 This Bain proceeding is  vain because the outcome is preordained. He has already served the time that murderers of that era serve. He was apparently an obedient prisoner and the Parole Board will not be able to find the necessary basis of threat to the community that is their only authority to hold him in for more time.

And the other purpose of the re-trial, vindication, whether of the original Police case and the convictions, or of Bain, can no longer be served at this distance. The evidence leaves enough handholds to clutch for those of either faith to stick to their persuasion despite any verdict.

There are wrongs that can not be remedied. It is dangerously pretentious for the legal system to be trying old cases. The Bain case is now far after the event and even the most scrupulous will have been rehearsing their memories, consciously or unconsciously. Many trials of old cases, especially sex cases that turn on the word of one person against another (albeit abetted by recovered memory specialists) are a disgrace.

The more we learn of how memory works the more disgraceful these charades become. I do not doubt for a moment that many of them target people who are guilty. But beyond reasonable doubt  –  too rarely.

So I come back to my view. I hope the Attorney General takes charge of the Crown Law Office and requires it to update the 1992 Guidelines governing the charging discretion. They need to make it more clear that the public interest is not the same thing as the self regard of the justice system insiders.

Yesterday’s  Legal Research Foundation’s capital markets seminar came just after Thursday’s release of the Commerce Select Committee’s woeful report on a bill intended to simplify capital raising. The Bill was a pitiful effort to start with, and the Committee has made it near useless.

The Select Committee’s intuitive nonsense is the kind of political reasoning that turns commercial law to mush. For example:

 "There is an important distinction between the primary and secondary markets. An offer made on the primary market is made by the issuer, who is in possession of any adverse information. It is, therefore, entirely reasonable to expect directors, when seeking new funds, to ensure that all relevant information is disclosed.

But the whole point of their compulsory continuous disclosure rule was that all material information must be made available continously. This is the rule that keeps sensible smaller companies away from listing, but why on earth should not those afflicted with it, already listed, at least be able to benefit from their existing cost of complying.

More worryingly (in terms of whether there is any analytical competence in the committee’s work) if the object of the law is investor protection, of what relevance is the reasonableness of an extra burden on directors, to the investor who buys in the secondary market or from a fresh issue, if it is at the same time and price and with the same information in the market.

 It get worse:

"With secondary market trades, on the other hand, neither party is presumed to have any special knowledge about the issuer; both must rely on information released under continuous disclosure. It would be unreasonable to require directors to undertake due inquiry at all times to support trades on the secondary market.

This concern about fairness to directors is touching, but it was not the issue. Who ever suggested due diligence to "support trading" at all times. The issue is for what purpose is the pointless compulsory disclosure, not whether the directors can do it or not.

Then we have the breathtaking knowledge of these people about matters that waste useless $$$millions each year (albeit to the enrichment of my specialty in the profession)

Prior to a new issue, such due inquiry [due diligence] is appropriate but need not be onerous if there are effective processes in place for continuous disclosure."

I hope this committee effort reflects a rush of blood to the head of presumptuous MPs, and is not instead the evidence of a loss of capacity in the MED to conduct disciplined analysis.

The seminar in Auckland was encouraging for the large number of people who attended. It is not often that commercial lawyers and investment bankers will spend a day watching policy debate. It is very hard to turn it to money. Perhaps it was evidence of nothing better to do.

But most discouraging was the Securites Commission chairman’s feverish disclaimer of any responsibility for the finance industry losses. She made the extraordinary false claim that the finance industry had been "completely unregulated". She must have seen jaws dropping around the room, because a few sentences later the claim was modified to "almost completely unregulated". The industry guys there who knew how much they’d been spending on regulatory compliance for the last 20 years must have been stunned to learn that it must have been completely voluntary.

Instead we had the Commission’s usual "dont look at me" in numerous ways, but mainly in the form of covering clamour for lots of new rules. These people have made pitiful use of their existing powers, Desperate eagerness for more rule-making is their only defence.

There was more of the now common blaming of trustee companies. We should not let passive regulators seize the chance to  deflect their responsibility on to the trustee industry. Trustees may have had weak trust deeds, but it was never their legal responsibility to dictate the form of deeds, and those deeds were fully disclosed.

The Securities Commission had the power to compel witnesses, to issue public warnings without fear of defamation liability, to educate the public to the emptiness of some of the poor deeds. Theyh could have shone light on the dark corners of related party dealing over the last 5 years. They failed.

When I was on the Commission I supported a chair who was happy to do some of that. I am proud of forcing at least some drongos and scamsters to scuttle to the shadows. Several years after leaving the Commission I had to fight them to get the evidence to successfully pursue insider trading in New Zealand’s most presitgious company.

Now of course the Commission are in a frenzy of activity. Too late!

 The Bain re-trial is a disaster on many fronts. I’ve seen one estimate of a $10m cost to the Crown but a bigger cost may never be recognised. 

 Many justice insiders believe that what they do is sacred. They are sincere,and it is important.  But they are not challenged as they should be.

I was interested to hear Helen Clark use the term "the bottom billion" in her parting comments. I recently read Paul Collier’s 2007 book of that name. I’m sure she would do the homework for her new job, but the book’s glowing reviewers would be pleased to know that she has read it. Many suggest that it should be compulsory reading for the world’s leaders and aid bureaucrats.

I wonder if it caused her to reflect on  the last three decades of Government efforts at Maori ‘development’. 

Collier’s book does not extrapolate his conclusions from nation-to-nation comparative statistical  analysis to the treatment of ‘bottom million’ ethnic groups within nations. Nevertheless the mechanisms may be similar, especially as members of failing groups tend to think and even call themselves ‘nations’ within nations.
 

I was thinking about all this as I read last week’s speeches of John Key and Chris Finlayson to the Te Kōkiri Ngātahi Treaty Settlements Hui.

New Zealanders invest so much hope in the settlements process. After 25 years of the industry it has become a matter of political necessity to complete it. Most of our political elite genuinely believe that redress for ancient grievance is a necessity and that it will help Maori. In John Key’s terms:

"I am impatient to see all Maori standing strong, economically independent and fulfilling their true potential.  I see the completion of historical Treaty Settlements as an essential part of achieving that.  Because only when the wrongs of the past have been addressed, will we all truly move our sights to the promise of the future." 

To stall the process now could be disastrous. But that does not mean that pious hope should lead us into thinking it is a substitue for reforming the welfare state, or part of the cure for Maori crime rates, or ill-health.

There is not much evidence from anywhere to sustain hopes that asset endowments work like that. War reparations seemed to have harmed some recipient economies more than those paying. And one of Collier’s most robust and depressing findings is that "natural resource wealth is an important part of the story of the poverty of the bottom billion".  

He reminds us of what was called "the Dutch disease" – the malady that the Dutch have only recently recovered from after North Sea oil and gas revenues made many of their other services uncompetitive.

But the problem is much worse for people with strong tribal traditions (i.e. without hard-wired cultural protections against corruption). That appears to be the case for Maoridom. For example, Tariana Turia is one of the more principled members of our Parliament yet we watched her embrace the Donna Awatere, and later Taito Philip Field after and seemingly because of the disclosures of their wrongdoing. My colour kin, right or wrong.

I’ve never forgotten a respected Maori National party leader telling us through the Dominion that we pakeha should get used to nepotism because that is the Maori way. David Lange’s only non-jocular comment to me about becoming an MP was in passing criticism of holders of Maori seats "I do not know that any of them is not venal".  

There are of course thousands of entirely decent Maori in leadership positions. But Collier’s thesis is that they are ousted in societies corrupted by the unearned wealth of resource rentals. It is not just that it is hard to learn how to hold wealth if you have not had the experience of growing it.

Unearned wealth must be managed, and the rents from it will go somewhere. It sucks a people into valuing distribution power – their brightest and best focus on the politics of controlling the taps. in-crowd politics does not reward the skills and values of engineers and scientists and service industry managers who know how to grow more for people who want to pay for the best or the cheapest.

Collier expresses it bluntly – "Resource rentals worsen governance. …The heart of the resource curse is that resource rents make democracy malfunction"

He argues that access to resource rentals in an ethnically diverse democracy results in "survival of the fattest" in political leadership. Embezzlers who are most prepared to be ruthless are the most likely to prevail in a patronage society.

Looking at Collier’s suggested remedies I hope Minister Finlayson and the Prime Minister set some absolute non-negotiables in their speeded up Treaty negotiations. Recipient institution probity, independent audit, and transparency to beneficiaries should be entrenched parts of their constitutions, irrespective of what the negotiating elite might claim to be insults to Maori values.

I’ve enjoyed sparring with Willie Jackson since he came across the House to ask me how I knew to heckle the Maori Labour MPs as "kupapa Maori" (the term for the majority loyal Maori without whom the Crown could not have won the land wars – or as the kupapa Maori saw it – put down the rebellion).

I’ve been deeply interested in Maori history since a book on Te Kooti spurred me to hitchhike (as a school boy) to Te Porere, the temporary pa site that was to be Te Kooti’s last stand. I crawled around in the scrub, before Tongariro National park rangers cleared it and fenced it off. I clambered the heights at Ngatapa near Gisborne, where Major Ropata’s success drove hundreds of Te Kooti’s people to leap to their deaths.

Among the most enjoyable times as an MP were with Maori broadcasters. Some had the time, the boldness and the curiousity to explore issues that were beyond MSM journalism, dominated as it is by young ignorami unaware of how PC blinkers have narrowed their intellectual world.

But I might not risk too many more discussions with Willie after today’s Eye to Eye, broadcast at 11-30 am, and to be repeated at 6-30 pm this evening on Maori TV. It is the  second to last in the series, which will finish next with a one-on-one John Key interview).

He’s frequently sought me as a foil, to wind up his the guests who support his pet causes. He’s always disgracefully misrepresented my position ("far right fundamentalist " etc). I’ve not minded too much, seeing it as absurd puffery, a tactic to create a climate of combat.  But on Friday evening when today’s program was filmed,  Willie was dogmatic and distracted. It may not have come through on screen, but he was not much interested in the pros and cons put up by any of his guests.

Yesterday’s promo for this edition exemplifies that lack of interest in truth. It’s billing (by text and email) led with "Seabed and Foreshore Review not in the interests of New Zealand says Stephen Franks on Eye to Eye with Willie Jackson…."

There was nothing said by me or anyone else, screened or unscreened, that came anywhere near that claim. As ACT’s Maori Affairs spokesman I cast the ACT votes against the Seabed and Foreshore Act because it did not respect property rights. I helped organise an academic hui designed to persuade Labour to be more respectful of both property rights and the rule against retrospective legislation.

When asked by his staff last Wednesday:

"Seabed and foreshore: Cullen admits it’s not acceptable to Maori. National have promised the Maori Party they’ll review it. What do you think?

I responded:

"Strange review group – looks like the Maori Party got whoever they put up. On the other hand it is so obviously unbalanced that if it comes out with something unpalatable it will have no political clout,  so the government can say, in Clark’s immortal words about an earlier Waitangi Tribunal decision [the Taranaki oil and gas decision] – "No, because it is not in the interests of New Zealand".

Sadly Willie risks losing the role that is his to inherit – as one of our foremost broadcasters for the long term. Despite his warmth and his smile and the free pass that often allows Maori leaders publicly to spout historical bullshit without being pulled up, his career would be more secure if he cared more about the truth of what comes out of his mouth.

Or has that free pass helped corrupt our public discourse to the extent where no one much cares any more about truth and falsehood, as long as Punch and Judy keep performing?

Kiwiblog covered the background to what has now become an association of Gordon Brown (through his press secretary and head of strategy) with a plan for a ‘Red Flag’ attack site running false blog smears on the Conservatives.

Daniel Hannan (a Conservative member of the the European Parliament and blogger for the Telegraph) may be drawing too long a bow in the following comments, but they are readily applied to the Standard here in NZ:

The Draper-McBride affair is the latest demonstration of one of this blog’s long-standing contentions, viz that free-marketeers take more naturally to the possibilities of the internet than Lefties. Lefties tend to believe in control (or, as they prefer to put it, "collective action"). They don’t understand that the web is the enemy of regulation. Instead, they struggle to press the internet into their existing systems, treating it as just one more way to get their message across.

The whole wretched saga of LabourList pefectly proves the point. From the moment of its inception, it has been a top-down rather than a bottom-up website. Its zeal for the party line made it so dull that even committed Labour supporters stopped reading it. It was, in short, the precise opposite of what a blog should be.

This, incidentally, is why people now have trouble believing that the scurrilous emails were not, at least on some level, authorised in Downing Street. Derek Draper, the man behind LabourList, denies it. Then again, he denied (while being rude about me) ever having discussed these things with Damian McBride – a denial that, we now know, was made with smoke billowing from his pants. Many Rightist blogs are now demanding Draper’s dismissal, but I hope he stays for as long as possible. Watch his performance here to see why.

The whole episode shows how blogs have pulverised the old media and political monopolies. Some Leftie journalists dimly perceive this point, even if they don’t truly understand it. They are vaguely aware of the connection between the rise of YouTube and of online news, and pay cuts in their own industry. They can see that most of the new entrants are, like Guido, on the libertarian Right, and they resent the fact with the impotent rage of men who see their day passing. I say it again: the internet has changed politics – changed it utterly and irretrievably.

I came across Hannan first when Dan McCaffery sent me the link to the remarkable European Parliament YouTube clip of Daniel Hannan on Gordon Brown.

Now I learn from his blog. For example, the European Parliament have now passed their attack on freedom of association in the guise of an anti-discrimination law. Hannan has the gift of succinctly summarising principled objections to PC attacks on freedom.

Giving credit where it is due, Rodney is reported to be popular and effective with the surprised mainstream public service staff working with him. 

The most recent comment was " I’m almost glad I am not in his immediate team, though they’re having fun, because he’s so persuasive and such an effective user of the people that I fear I’d lose my objective judgment, which is what we’re supposed to provide".

I’m glad – because I think Rodney wondered how he’d go if he had to work within Ministerial disciplines. Caucus discipline chafed and he urged us at times to commit to remaining outside government.

If he can pull off his regulatory reform project and cut local government red tape and help get real RMA reform through he’ll more than repay the trust of voters who had to swallow to look past Dancing with the Stars.

Gary Weiss is the third speaker on the ABC’s ‘Big Ideas’ lecture session yesterday. Topic –  the GLC (global financial crisis) how bad will it get?

Gary follows Bernie Fraser (former Aus Secretary of the Treasury – who says nothing new) and an academic, Steve King.

Gary started his legal and business career here in Wellington but is now best known as a Guinness Peat boss. Even in our discussion of Law School class assignments he avoided group think. So I listened.

Gary offers only a chilling recital of folly, quoting Ben Bernanke against Nouriel Roubini, hardly needing to do more.

Steve King’s address, before Gary’s, told me things I did not know.  I particularly applaud his condemnation of the lack of economic history content to economics teaching (my BA major was cconomic history).

Do not listen to King or Weiss if you’d prefer to enjoy our New Zealand Indian summer in the mellow mood our leaders are striving to maintain for us.

Check out some twits twittering (for those not easily embarrassed for others) –