Darkhorse: Roger’s legacy – the fallacy of economic efficiencies under a neoliberal regime

Written By: - Date published: 10:02 am, July 16th, 2012 - 19 comments
Categories: economy, monetary policy - Tags:

Darkhorse writes amazingly insightful economic pieces on his ‘How Daft’ blog (the title gives you a clue as to what he thinks of the current state of affairs). The neoliberal experiment has been an abject failure by any rational measure. And there are alternatives. Darkhorse has given us permission to syndicate his posts, the originals are here.

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Roger’s legacy – the fallacy of economic efficiencies under a neoliberal regime

In the 1980’s Roger Douglas in his foolish belief in the righteousness and efficiency of the market place laid waste to the public service.  He sold of all sorts of public assets and functions of the State often at fire sale prices and sometimes with the most dubious of procedural integrity.  What he also sold was the power for government to act as agent for the nation.
In the good (relatively!) old days before Roger a Minister got things done by  allocating a budget and directing the relevant Head of Department or Ministry to get on with the job.  Now this wasn’t perfect but that is a foible of democracy.  Roger didn’t change the quality of the governance he only changed the manner in which they can take action.  Unfortunately for the worse.
Much of the advice Roger listened to came from lawyers and accountants and partners in the big consultancies.  These people are not known for their altruism.  What these people want is more business for themselves.  They of course told Roger that they could do it better than some boring old public servant on a tenth of a consultants pay.  Roger being a dogmatist and not a thinker took to this as THE ANSWER.  So we got a country run by economists and bankers and accountants and lawyers in place of public servants.  Now if you want to get an accountant or a lawyer to do your bidding you have to write laws and regulations and pay big bills.  You can no longer just get on the phone and give orders to your lowly paid and subservient bureaucrat.
So Parliament started writing laws to get done what once was done with a few phone calls and the honest hard work of a dedicated public service (not always but mostly) with the results being obvious in the graph below.
This figure illustrates the growth in Volume of legislation (Acts and Amending Acts) on the NZ Statute Book by year of enactment from p23 Improving Public Access to Legislation PriceWaterhouseCooper for the Parliamentary Counsel Office 1999
And so everything became expensive and complicated and hard to do.
As the graph shows law making went exponential with Roger’s reforms.  Where before the reforms parliament was busy if it passed 15 new pieces of legislation a year quite quickly it was passing 150.
And while parliament was busy passing all this legislation it stopped doing anything else.  It lost any vestige of strategic view it had and instead become bogged down in a vast complexity of select committees and parliamentary debates.
The accountants and lawyers and consultants loved it.  Every new law bought more work for these parasitic elements of the economy.  And so we became a country bogged down in a vast complexity of vested interests playing with legislation.
But for all of this legislation and for all of the expensive minds working in the system we now get less done than we ever did before the reforms and nothing got cheaper or more efficient.
Even dear old Bill English lamented recently that the non-productive part of the private sector share of the economy (lawyers, accountants, bankers and consultants) was growing far faster than any other sector of the economy.
This legislative binge has also bred a whole new public service that is about writing and interpreting rules and managing information rather than doing anything useful.
In hindsight Rob Muldoon might not have been so bad.  At least he got things done.  But more about that in another post.

19 comments on “Darkhorse: Roger’s legacy – the fallacy of economic efficiencies under a neoliberal regime ”

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  1. Enough is Enough 1
    16 July 2012 at 10:13 am

    I think they do have the intellect and the balls. They just have the wrong front bench. Parker is a liability.

    These numbers are distressing. Marty G was going on about trends years ago. Now is the time for the left. The government is being hit on every front yet they are still a very popular party. If Banks is arrested in the next couple of months and an election is forced upon us you would expect the left to destroy this hopeless mob. But who would be confident going into an election today. Labour cetainly shouldn’t be going on their failure to gain any new support since the election.

    There is a real prsopect of an election before Christmas with the Banks and Maori Party isues. Are we ready?

    • Enough is Enough 1.1
      16 July 2012 at 10:23 am

      delete above

      went in wrong thread for some reason

    • darkhorse 1.2
      18 July 2012 at 6:03 pm

      Labour needs to be doing better than just crying down the National Party’s stupid initiatives and fumble bumble and mumble. Labour needs to be presenting better ideas.  Pointing out National’s failures is easy showing some leadership is what the voter is looking for and presently Hone Harawira is doing a better job of that than most.  National is persisting with support because they may be doing stupid stuff but that aren’t scaring the fearful and the conservative.  And no one is stepping up and showing a clear and courageous alternative leadership model.  If the fearful and the conservative are to move from their current comfort zone it has to be a high return low risk decision.

      Opportunity is going begging at present for want of some visionary leadership -actually even just good old sensible commonsense leadership could probably pull a  landslide. 

  2. Gosman 2
    16 July 2012 at 12:04 pm

    Alternatively the quality of legislation might be better now than it was in the past. The graph linked to provides no conclusive evidence for anything beyond that the volume, (whatever that means), went up and now has come down to a lower level than it went up to.

    • Colonial Viper 2.1
      16 July 2012 at 12:06 pm

      Gosman now promoting the benefits of ever increasing legislative bureaucracy.

      Who would’ve thunk it.

    • Bored 2.2
      16 July 2012 at 12:21 pm

      The graph is a real give away: legislation is used to enable something to happen OR not to happen. The graph inclines me to believe that the neo lib revolution begun by Douglas, carried on by Richardson and endorsed by Clark and Keys governments could not keep clear of “managing”. The numbers are fairly conclusive.

      Seems somewhat paradoxical that neo libs call for less government YET legislate with gay abandon: the handed down neo lib shibboleths dont equate to “hands on Fortress NZ” that had so much less legislation.

      Maybe less legislation occurred prior because it was debated for longer? Maybe less occurred earlier because we trusted the citizen to “manage” themselves? Maybe the current managerial trend is to force the issue because “we” the citizens cannot be persuaded?

  3. Colonial Viper 3
    16 July 2012 at 12:04 pm

    Cogent, Darkhorse.

    And as we have seen, the results since the 1980’s have been pretty stinking mediocre even as more and more of our country’s income has been siphoned off for private profit.

  4. Tom Gould 4
    16 July 2012 at 12:30 pm

    I wonder how much of government spending these days is the profit margin and padding of the private sector providers and consultants? Roger aimed to replace public sector inefficiency with private sector efficiency. We all know the mantra. But how is that actually working out? Has anyone ever crunched the numbers?

    • Draco T Bastard 4.1
      16 July 2012 at 3:34 pm

      Has anyone ever crunched the numbers?

      Not for NZ but I believe they have for the US (IIRC, Penny Bright linked to it sometime) and the added costs far outweigh any efficiencies gained.

      • mike e 4.1.1
        16 July 2012 at 5:00 pm

        Here in NZ it has meant paying more to private consultants than it was costing in house.
        Last budget it cost blinglish $600 in Consultants and redundancies to save $20 million.
        with an ongoing cost of over $200 million pa.
        Beaned brained bean counters.
        Research and development has been hurt the most by short sighted bean counters like Rogueanomics ruthenasia bills birch.
        Leaving NZ still largely a commodity based economy.

  5. mickysavage 5
    16 July 2012 at 2:15 pm

    As a somewhat seasoned observer of these things can I blame the increase in the length and complexity of legislation at least in part on the wordprocessor that started to emerge in numbers in 1984.  This meant that nothing was too difficult to include and legislation tended to be added to rather than subtracted from.
     
    But there is definately a corelation between the worst excesses of rogernomics for instance and statutory activity.

    • darkhorse 5.1
      16 July 2012 at 10:33 pm

      Try the electricity commission on for size!

      Once the ECNZ did it all, the boss got paid a few hundred$k and we had off peak electricity and a bunch of engineers that could build power stations

      now we have a whole lots of villains playing mini-Enrons 

  6. Murray Olsen 6
    16 July 2012 at 3:40 pm

    This makes me wonder if when you have a functioning public service, changes can be made by regulation, or even a simple phone call. When the activities of the state are taken over by the private sector on the other hand, they would need all sorts of enabling legislation. Does all this legislative activity just cover a shift of sovereignty from an elected government to an appointed consultocracy?

  7. bad12 7
    16 July 2012 at 11:23 pm

    Efficiency as per Roger-spit-nomics = remove from NZrail 15,000 of it’s admittedly susidized workforce thereby saving 100 odd million a year,

    On the other side of the ledger double the number of prison inmates and increase the number of those collecting the unemployment benefit at a cost of 200 million dollars a year,(after the capital cost of building more prisons),

    Claim victory for both as the spend at NZrail has provably fallen and all your measures of fighting crime must be successful hence the doubling of the prison population,

    Have the tame editorial staff always point out the cost of employment at NZrail while never pointing out the true costs of your actions downstream,

    Hey presto, efficiency according to Sir Roger(spit)Douglas…

    • darkhorse 7.1
      17 July 2012 at 8:02 am

      most of the over employment in NZR and NZPost were not inherent empire building in the old Government Departments they were employment schemes by proxy established at the decree of Muldoon.

      By the time NZR was “sold” it was the only profitable publicly owned railway network on the planet

      That it wasn’t a management issue was also highlighted by the fact that many of the SOE executives stayed on after privatisation (usually making a crock of cash for themselves in the process).

      It was political stupidity then and nothing has changed except perhaps the governance function has deteriorated further.

      It was never an ownership problem or a management problem it was a political failure 

  8. Colonial Viper 8
    17 July 2012 at 1:18 am

    This post ties in tight with another current one describing the massive amount of money National has wasted on private sector roading design and consulting.

  9. captain hook 9
    17 July 2012 at 8:30 am

    woger dugwas is just another frootcake who bleieves his own thoughts to be facts.
    unfortunately his brand of logic is just like booze or cigarettes.
    twice as addictive and ten times more insubstantial.

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