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IMF: Neo-liberalism dead

Written By: - Date published: 9:03 am, April 7th, 2011 - 47 comments
Categories: economy, equality, privatisation - Tags: ,

If you’ll oblige me, this post is largely by Dominique Strauss-Kahn, head of the IMF – an institution famed in the past for forcing third world countries to sell off their water supplies etc on the grounds that the market knows best…

IMF press release of his April 4 speech states:

Mr. Strauss-Kahn called for more progress with financial sector reform, including across borders, and called for a financial activities tax.

“In designing a new macroeconomic framework for a new world”, he stated, “the pendulum will swing—at least a little—from the market to the state, and from the relatively simple to the relatively more complex”.

Mr. Strauss-Kahn called for policymakers to pay more attention to inequality and social cohesion. “The lethal cocktail of prolonged high unemployment and high inequality can strain social cohesion and political stability, which in turn affects macroeconomic stability.” He suggested that inequality, which was a factor in the Middle East, might also have been among the root causes of the global crisis, and that sustainable global growth is associated with more equal income distribution.

“We need a new form of globalization, a fairer form of globalization, a globalization with a more human face”, he said. “The benefits of growth must be broadly shared, not just captured by a privileged few. While the market must stay center stage, the invisible hand must not become the invisible fist”.

Mr. Strauss-Kahn stressed the virtues of enhanced cooperation and multilateralism in the post-crisis world, noting that “the great challenges of today all require a collective solution”

When the IMF are rejecting the free-reign of the market, stating that the pendulum must swing from market to state, you know that when you’re advocating neo-liberal policies you’re on the wrong side of history.

But National, in the absence of an economic plan, keep doing precisely that.  They’re slashing-and-burning public services to pay for their tax cuts for the rich; they’ve decided that the market will save Christchurch, and magically train the skilled craftsmen needed; they aim to privatise our energy firms…

47 comments on “IMF: Neo-liberalism dead”

  1. lprent 1

    National – always advancing boldly, looking backwards into the past….

  2. PeteG 2

    A good quote from the post:

    “The benefits of growth must be broadly shared, not just captured by a  privileged few. While the market must stay center stage, the invisible  hand must not become the invisible fist”.

    Jami-Lee Ross made a good maiden speech yesterday, but leans too far with this:

    Socialism is a failed experiment. The socialist  doctrine seeks to close the gap between rich and poor, a reasonable  goal. But rather than doing so by incentivising wealth creation,  socialism seeks to redistribute the limited resources of wealth creators  by using the coercive power of the state. If tax and spend was all we  had to do to achieve what we wanted, then every nation on earth would be  a glowing utopia of human desire. Clearly, that is not the case.

    If I may paraphrase Baroness Thatcher, the problem  with this approach and the problem with socialism is that eventually you  run out of other people’s money to spend. The problem with trying to  spend your way towards closing the gap between rich and poor is that  eventually we all collectively become poorer.

    Too much socialism fails, as does not enough regulation on capitalism. The problem with adopting one ideology over another is there’s a tendency to keep moving that way rather than continually seeking the best balance.

    Mr. Strauss-Kahn stressed the virtues of enhanced cooperation and  multilateralism in the post-crisis world, noting that “the great  challenges of today all require a collective solution”

    That’s important if we are going to rise above pettiness. Greed for individual or party power is as bad as greed for money. We should be promoting a parliament that puts collective solutions above political power struggles.

    • Carol 2.1

      Actually, socialism doesn’t just advocate tax & share.  Many lefties call for an economy based in the production of real stuff that society needs, rather than the speculative, derivative ponzi approach of neo-liberalism.
      Socialism also aims for a system of production that is structured more fairly, so that workers are not treated as under-paid wage slaves to produce a lot of wealth for the powerful.

      • RobM 2.1.1

        Jami-Lee Ross should have read this: Of the 1%, by the 1%, for the 1% | Society | Vanity Fair

        “Alexis de Tocqueville once described what he saw as a chief part of the peculiar genius of American society—something he called “self-interest properly understood.” The last two words were the key. Everyone possesses self-interest in a narrow sense: I want what’s good for me right now! Self-interest “properly understood” is different. It means appreciating that paying attention to everyone else’s self-interest—in other words, the common welfare—is in fact a precondition for one’s own ultimate well-being. Tocqueville was not suggesting that there was anything noble or idealistic about this outlook—in fact, he was suggesting the opposite. It was a mark of American pragmatism. Those canny Americans understood a basic fact: looking out for the other guy isn’t just good for the soul—it’s good for business.
        The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.”

        Then he may have written this:

        “The state capitalist doctrine seeks to widen the gap between rich and poor, an unreasonable goal. It does this by incentivising wealth destruction, seeking to redistribute the limited resources of workers by using the coercive power of the state. 

        The problem with this approach and the problem with state capitalism is eventually you run out of other people’s money to spend. The answer is to print your way towards widening the gap between rich and poor and eventually we all become collectively poorer.”

         

    • Pascal's bookie 2.2
      We should be promoting a parliament that puts collective solutions above political power struggles.
      I really don’t know what you mean by this in practice. You seem to assume, and please correct me if I’m wrong, that politicians don’t really believe that they have better solutions to problems than their opponents.
      If it is true that they don’t believe their solutions are better, and that there is no real difference of opinion about what the sensible thing to do is, then it follows that our politicians should just get on with it.
       
      I think it makes more sense to assume  that people actually really do have different opinions about what will work and what will not work, and that they elect politicians who broadly agree with them in the hope that those politicians will try and do what they think will actually work.  If that is a valid assumption; then ‘political power struggles’ is the best option for resolving the problem of what to do. No? 
      • PeteG 2.2.1

        Why don’t a party like Labour let the strongest faction dicate everything and just get on with it, the faction that believes they have the best solutions so everyone else’s solutions must be crap, and leave the rest to squabble and bitch and moan and try and bring them down?
         
        If the Canterbury and Auckland factions of the All Blacks carried on like parlimentarians, and strung along or ignored the Wellington, Waikato and factions, we probably wouldn’t be in the World Cup let alone hosting it.
         
        The current way is not doing a great job, there has to be a better way.

        • Pascal's bookie 2.2.1.1

          Could you try again please? I have no idea what you are trying to say.

           I think that people really do have different opinions about what the right thing to do is, and that representative politics is the best way of deciding what to do given that genuine disagreement.

          You seem to disagree. But I’m not sure what you want to see happen. You seem to want to abandon disagreement. How is that supposed to work?

          • PeteG 2.2.1.1.1

            How does a caucus work? Disagree and argue and discuss and compromise and barter until they arrive at the best and most supported way of doing something.
             
            How does Parliament work? Disagree and argue and bicker and suggest the opposite and try to kneecap and spoil until the caucus/es in charge ram through their opinions.
             
            Each term nearly half of our elected representatives are virtually an annoying burden who seem to think moaning and spoiling is their best way to wait until it’s their turn.
             
            Nuts.

            • Pascal's bookie 2.2.1.1.1.1

              Political parties are made up of people that generally agree about things. Parliament is made of parties that don’t. This is an important distinction. 

              Parliament is the way it is, because the electorate at large doesn’t agree about a lot of things. People elect parties they think will best represent their views. What use is it if those parties then just ignore that and all agree to do whatever Peter Dunne reckons? If they wanted Peter Dunne, they would have voted for him, but they didn’t.

              • PeteG

                People in a party may be more inclined to agree. The Anderton Party and the Dunne Deal Party won’t have much trouble agreeing, and neither will NZF where Winston always agrees with Peters, but in the rest I’d think there is a lot of different ideas and disagreeing, like Carter, like Harawira, like Roy.

                People elect parties they think will best represent their views.

                That’s why some will vote. Some vote becasue they like someone’s smile. My guess is that many vote for who they think will do the best job of running the country (and not into the ground).
                 
                The Maori Party in partucular seemed to have decided they will get more of what they want, like plastic wakas, by arguing within a coalition rather than grizzling without.
                 
                The current Labour strategy seems to be to wish the government and New Zealand gets into to huge mess so voters will kick the Nats out and choose Labour to clean up the mess. Do you notice that Labour aren’t flavour of the month, or flavour of the term?
                 
                What do you think might happen if Goff managed to get his caucus to agree (do you think that’s possible?) to back him on a new strategy. For him and his party  to pledge to be as constructive as helpful to the running of the country as possible, but similar to coalition partners reserve the right to take the government to task when it is really justified rather than every week to try and score some points or kick someone in the guts.
                 
                And they pledge that after the election if they win they will work as constructively as possible with all MPs, and the same if they lose, to do the best they can to improve government and improve the country. Naturally there would still be arguments and disagreements, but most of the abilities and energies would be positive and would be utilised.
                 
                Do you think some of the electorate would thik it could be worth giving Goff some more consideration? Or do most people just prefer watching train wrecks? Except when it’s their balls on the line of course.
                 

                • Pascal's bookie

                  People in a party may be more inclined to agree.

                  There is no ‘may’ about it.  If it were not the case, then the party would split, as happens from time to time. But in a party that has not split, then it follows that the differences that exist are less important than the agreements.

                  …like Carter, like Harawira, like Roy.

                  Three individuals, two of whom are no longer in the party they disagreed with, and one who has agreed to accept the party’s majority presumably because the differences are not as important as the agreements.

                  Some vote becasue they like someone’s smile.

                  True enough, but so what? The number of swing voters is dwarfed by the numbers of steady voters. Even now Labour has upwards of 1/3 of the country’s support. The base of a party seems to exist for a reason. I strongly suspect that the reason is policy approaches. ie, ideas.

                  My guess is that many vote for who they think will do the best job of running the country (and not into the ground).

                  Good guess! I hope you don’t mind if I try and extend on that.  

                  ‘Who I think will do the best job of running the country’ includes ‘having ideas I agree with about how the country should be run’. I would suggest that that is most of what it means. 

                  What do you think might happen if Goff managed to get his caucus to agree (do you think that’s possible?) to back him on a new strategy. For him and his party  to pledge to be as constructive as helpful to the running of the country as possible, but similar to coalition partners reserve the right to take the government to task when it is really justified rather than every week to try and score some points or kick someone in the guts.

                  Again, this is largely what happens. There is a lot of work that gets down with cross party support. Where they disagree about what is best for the country, there is political conflict. I think that if the Labour party decided to just ignore their disagreements with National for the sake of not causing a fuss or whatever, then their base would desert them. Just as National’s base would desert them if they just agreed to go along with things that they disagreed with.

                  United future had it’s best result using exactly the positioning you are talking about. It wasn’t as popular as either National or Labour, and wasn’t sustainable.

                  Again, and it’s a point you haven’t really addressed, I think that within the electorate, there is a large amount of disagreement about what sort of policies we should follow. People genuinely, and in good faith, strongly disagree about a number of issues. It is because of those disagreement that we have parties reflecting those disagreements elected to parliament.

                  It is right that politicians work to represent the people that elected them, and they should do so by fighting for their preferred version of what they honestly believe to be in the best interest of the country. 

                  • PeteG

                    The number of swing voters is dwarfed by the numbers of steady voters.  Even now Labour has upwards of 1/3 of the country’s support.

                    Dwarfed? National got 20.9% in 2002.  Of Labour’s current 30-35% less than that will be steady voters, likely to be closer to where National bottomed out. Greens would have less than 5% of dedicated voters, and the rest combined would be similar.
                     
                    In any case it only takes a few percent of swing voters to swing an election one way or another. And I’m sure there will be a significant proportion of swing voters who don’t give a stuff about policies, and particularly not the supposed historical principles of any party. Some  vote as narrowly as on what they think of the leader, that’s what get’s most of the media attention.
                     

                    • Pascal's bookie

                      Are you taking he piss? Ignoring the fact that you have chosen to ignore the substance of our discussion in favour of focussing on a passing remark, let’s check out what you have to say.

                      National’s 02 result was a disaster, for sure. But look at what else happened in that election. There was a low turnout, NZFirst and and United Future got big boosts and Labour got a small nudge up.

                      It looks to me like the obvious conclusion to draw is that some of National’s base stayed home, and some of their softer support voted for NZF or UF. 

                      If you look at the results for when Labour was last in opposition you will find that they averaged around mid thirties. It’s worth noting here that turnout was higher than in 02 in all elections, and that there was some hangover from the 80s such that a small part of what is now Labour’s base was voting New labour and then Alliance. 

                      I’d say that both the main parties have a base of around 35% of the lectorate, and that ACT Green NZF plus sundry others would have a combined base of around 10-12%. that makes for 82% for the base party votes. I don’t think it’s unfair to call an 80-20 split a dwarfing.

                      Your evidence for the parties having a 20% base seems to be ‘OMG look at National’s freakishly bad 02 result, that’s the obvious baseline.’

                      pffft. Stop wasting my time.

                    • PeteG

                      A slightly related take on it today from Bryce Edwards:

                      A return of the old left-right divide?
                      Certainly few voters see their electoral choices through the prism of class, left-right, and socio-economics; and the big left-right issues have been off the table for a number of elections now. Instead, the influential debates prior to polling have tended to revolve around what political scientists refer to as the post-materialist spectrum (social-liberalism vs social-conservativism).

                      In line with this, the big issues of recent elections have related to social issues: civil unions, smacking, prostitution, law and order, the environment, race relations, and foreign policy (wars, nuclear ships, etc).

                       
                      Issues rather than party policies.

                       
                      Yet in 2011 it appears that there is a nascent but significant element of class politics emerging in the election, with politicians and voters talking more about old-fashioned left-right. For the first real time in a generation, issues of economic inequality are on the public agenda – for example my own research shows that the use of the term “inequality” has more than doubled in our most read newspaper. Similarly, terms such as “working class” are suddenly in vogue amongst political commentators and leftish politicians. Of course, much of this is rhetoric, and it’s driven by the ongoing economic slump.

                      I’d say that most of it is rhetoric as part of a plan, but it seems a bit backward looking.

                    • Of Labour’s current 30-35% less than that will be steady voters, likely to be closer to where National bottomed out.

                      PeteG

                      You know one of the most annoying traits that you have is that you keep spouting this bullshit and you do not have the slightest understanding of reality.

                      Honest you are full of shit.  Please, please, please back up the above statement with the slightest shred of factual support so we can have a real debate.

                      And I am saying this with a significant background of grassroot activity and community involvement.  Tbe current situation is nothing like 2008, people are changing their attitudes big time and heading left.

                      Please quote some support so that we can have a real debate.

                    • PeteG

                      MS, it’s likely Labour’s core support is less than 30% as they have polled that low (on Roy Morgan down to 26%) and have regularly polled not much higher.. I also think it’s a reasonable assumption that it’s at least a bit lower. So somewhere in the mid to low twenties is quite likely.
                       
                      Unless you are suggesting it’s lower than National went – do you have data on that?
                       
                      On factual support – do you have any that I work in the Beehive or have any connection whatsoever with CT?

                    • Pascal's bookie

                      Elections are what tell you what the base is, not polls. Polls don’t have consequences, elections do.

                      If you look at the nineties, when labour was last in opposition, their results should give a pretty good idea of what size their base of support is. Their low tide mark was in 96, they got 28% of the vote, in an election where the Alliance got 10% and NZF got 13% after campaigning against the National party.

                      So that’s the absolute low tide, 28% in an election with the New Labour dominated Alliance in play and Winston railing against a Tory government.

                      Other than that, while in opposition, with the alliance also in play they got, 

                      90: 35%
                      93: 34% 
                      96  28%
                      99: 38% 

                      When in govt that were getting about 40 percent of the vote.

                      Not difficult to see what is base, and what is swing. 

                      But now I guess you will tell us that the base should really be estimated by looking at how many votes they get while in opposition and subtracting some number that you pull out of the air, because, that’s why.

                    • PeteG

                      There’s a flaw to your theory – it assumes that all the base voted for Labour in 96 and no one else voted for them. That’s unlikely.

                    • MS, it’s likely Labour’s core support is less than 30% as they have polled that low (on Roy Morgan down to 26%) and have regularly polled not much higher..

                      It aint likely at all.  Since January 2010 Labour has been higher than 30% for every poll except two.  Labour was at 26% in February 2009.  

                      So your statement is either crap or factually challenged or both.
                      I also think it’s a reasonable assumption that it’s at least a bit lower. So somewhere in the mid to low twenties is quite likely.

                      It is if you are either a retard or willing to lie in the hope that your preferred party’s support will improve.

                      Unless you are suggesting it’s lower than National went – do you have data on that?

                      How fecking stupid are you?  National plummeted in 2002.  Labour is remarkably solid.  How about you say if you have data.  How about you back up your preposterous claims.

                      On factual support – do you have any that I work in the Beehive or have any connection whatsoever with CT

                      None but you have posted a great deal recently.  I cannot believe that you have a normal job and yet are able to do this.  So either you are not working or you have a job where your participation is encouraged.

                      If I am wrong then as soon as you apologise for the above I will apologise to you for saying that you are either a Behive worker or a CT plant.

                    • Pascal's bookie

                      Wtf? I’m saying that in 96 they got supported by less than their base, just as in 02 National couldn’t get the support of their base.

                      I think it is fair to say that for National in 02, and for Labour in 96, when they got abnormally low votes even when accounting for the fact they were in opposition, that those that did vote for them were the hard core base. Will there have been a few swingers in those miserly totals? Sure, but not enough to be relevant to anything.

                      The base still has to be motivated to vote. They are not guaranteed votes, they are just the rough number of people that agree with the general position of the party. They are the votes they should get. ie, the ones they get when in opposition. Or around about 35% of the electorate.

                      That doesn’t seem like an outlandish definition to me. 

                      Honestly. 

                    • PeteG

                      Ok PB, seems like a bit of a pointless argument, it depends on what anyone considers the definition of “the base” is, and I think we have different ideas on that. I was looking at it more as the lowest it could go, but yeah, it could also be the level of votes a party “should” get.
                       
                      Percentages are also complicated by voter turnout – you’re talking around 35% of those who end up voting, so 35% of 50-70%. Polls try to get responses from a representative sample of all potential voters. In the final count it’s number of seats that matter.
                       
                      And “the base” could still be a variable – for example, whether the Winston First party ends up in the mix or not, whether the Hone party gets off the ground etc. With all the uncertainties (eg National’s performance, and will Act claw back or collapse) and electoral weaknesses (eg Labour) I think only the Greens are looking reasonably comfortable in achieving their aims. I wonder if Hagar tries anything this year.
                       
                       

                    • Pascal's bookie

                      If you go back to what I was originally saying, I was always tallking about the number of people that tend to vote for particular parties because those parties represent their ideas.

                      And turnout in the 90s was typically around 85%, not 50-70.

                      If you stpped hauling things out of your arse and dumping them on the interenet, people might stop thinking you are full of shit.

            • Pascal's bookie 2.2.1.1.1.2

              Come to think of it, what you are asking for is pretty damn close to what you’ve actually got.

              A caucus agrees on many things but has areas of disagreement. In those areas they have an argument followed by a vote. The winners then get their way and the losers can’t do anything about it.

              In parliament, exactly the same thing happens in terms of how it gets decided what will happen in areas of disagreement ( argument + vote) except that the losers are under no mutually agreed obligation to publicly toe the line for the sake of party unity. Instead, they can continue the argument in public in the hope of swaying voters. In just the same way, the losers in a caucus vote can continue their intra-party squabble and try to win out.

              The only difference is that in the parliamentar squabble, the differences are all out in the open and voters get to see and decide who o support. That’s what you seem to want to get rid of; the public squabbling. Consequently, you would be getting rid of the information voters need to decide on how they want to vote.

              Or have I got you wrong? If so, how?

    • Irascible 2.3

      Jammy Lea-Ross also believes that the local government should not provide social assets like libraries, swimming pools and other facilities as these waste local govt money. His sense of social responsibility stops at his own pocket and limited world view.
      His thought processes also stop at echoing slogans from discredited politicians like Thatcher, Cameron, Clegg, Reagen, Hide & Douglas. He is more at home with ACT than Key’s national party.
       

    • Draco T Bastard 2.4

      Too much socialism fails, as does not enough regulation on capitalism. The problem with adopting one ideology over another is there’s a tendency to keep moving that way rather than continually seeking the best balance.

      Socialism is the balanced option.

  3. RobC 3

    I’m going to broadly agree with you here Pete. Except, as you noted yesterday, unfortunately in respect of your last sentence, go and get that lotto ticket.

  4. Samuel Hill 4

    Fuck National.

  5. Bored 5

    The whole thing stops a little short of an admission that they got it wrong for 30 years, sounds to me like a call for the “state” to bail out the corporates then to give the roles of the state to the said corporates…..

    On top of that they also talk growth…the real issue is managed contraction, how we do it and spread the pain in an equitable manner. 

  6. uke 7

    Since when has “the invisible hand” ever not been “the invisible fist”? (Quite like his term.)

  7. Samuel Hill 8

    Whilst on one hand, National sell off state assets, on the other they are forced with the grim reality that the capitalist system is failing in this country, and they have to bail out insurance companies. Giving insurance companies “time to find a market investor” or words to that effect. Isn’t the free market the free market? No, because these companies effect so many people’s livelihoods. Everybody knows the struggle of getting money from insurance companies, because when something is damaged or lost, we face a reality that yes – “This thing is broken”.

    The government will have to bail out every insurance company that goes under unless they want to see a huge paradigm shift. We are on the brink of massive economic collapse in New Zealand.

  8. randal 9

    national are just like any other gang of manques trying to squeeze the public purse and devising all sorts of irrational justifications for their pelf.
    the only problem is our gng must make promises to stay in power.
    labour has to abolish that tendency but also take care of the general welfare.
    tricky job but getting rid of the cro magnons and the nenderthals will be half the fun.

  9. Samuel Hill 10

    Roger Douglas just set the ideological barometer for the house. Fair enough I have to say. He is asking why the market is being helped out. Looks like I should have started an insurance policy, might have got more money from AMINational? if I had something damged than I do from my student allowance.

  10. lefty 11

     
    Beware the fine words of an international banker.

    I think things like the bailout of AMI is partly what Strauss-Kahn was talking about when he referred to the pendulum swinging and the state doing a bit more. The finance sector will demand more and more help from the state as the financial system fails. Strauss-Kahn is also smart enough to realise the greed of the international financial oligarchy has become so great they are at risk of killing the goose with the golden egg, so he would like a bit of regulation to help rein it in.

    When he talks about inequality he is simply recognising the risk involved with  shrinking  the middle class. The middle class don’t mind workers doing it hard but they start getting edgy when their own kids are unemployed and their own standard of living threatened. In these circumstances they might even start working with the working class to bring about change – this is what has been happening in the Middle East, and what often happens in revolutionary situations.

    Enhanced cooperation and multilateralism among capitalist countries is not usually a good thing, except for the priviliged few, and when political parties stop arguing and concentrate on capitalist economic growth you have facism – thats what the sort of collective capitalism he seems to be arguing for is.

    And so it goes.
     

  11. RascallyRabbit 12

    Left leaning people on here shouldn’t bad mouth the risk of failure and explicit govt. guarantee for AMI Insurance.
    AMI Insurance is a Mutual Company – often a company structure favoured by left-wing types and those with a social conscience as it seeks to benefit its member/customers through mutual co-operation and doesn’t necessarily seek to maximise profits, capital gains and dividends to anonymous shareholders.
    There are no shareholders or foreign owners to please and not necessarily an excessive desire to screw every last cent out of the system.
    http://en.wikipedia.org/wiki/Mutual_organization
    If you were to keep pointing at the failure of AMI then by comparison you are highlighting the success of IAG and Vero which are both Australian owned and need to please their predominately Australian shareholders at the risk of marginalising the interests of New Zealand policy holders.
    The government has given this guarantee/backing so that AMI can raise additional capital in the market (mutual organisations ability to raise additional capital quickly is limited by their structure).
    The other companies because of their Australian parents and structure do not need to do this as it is easier for them to raise capital in the market.
    Therefore if there has been a failure it could be said that the failure has been one of the Mutual structure rather than the ‘market’.
    Just be careful what you wish for as what everyone may end up with is more Australian owned insurance companies (or companies in general) and less co-ops or mutuals.

    • RobC 12.1

      RR, I think your post needs a couple of corrections.

      First, and what a lot of ppl fail to appreciate, is AMI has not failed at this point in time. You do allude to that initially but then say “the failure of AMI” as if it has already happened. It hasn’t, yet.

      You cannot assume the failure of AMI / a mutual automatically “highlights” the success of other insurance companies operating under a more common ownership structure. There are plenty of “normal” companies (ummm, think finance companies) that have failed under capitalist structures.

      You are closer to the truth when you comment the mutual structure has failed. I would argue the failure, if it transpires (which it won’t now thanks to the taxpayer), would be a combination of two extraordinary events and operating a mutual structure in a capitalist world.

      To draw an analogy, if Mad Cow disease swept the country I would suggest a small dairy co-op in the back-blocks of Taranaki would unfortunately go under while Fonterra would probably have the ability and resources to withstand the event.

      I don’t have total sympathy for policyholders. The point is by being part of a mutual structure you enjoy lower premiums as there are no shareholders demanding profits. So, pay less in the good times while running a small risk being caught with pants around ankles in extraordinary circumstances (which unfortunately has happened). It’s a bit like investors who chase higher interest rates in finance companies expecting there’s no extra risk involved …

      • Pascal's bookie 12.1.1

        I don’t think the different ownership models count for much, I’d look at managements actions, how management was incentivised, and what was the regulatory framework. 

        How many ami customers knew it was a mutual, and how many knew what that meant.

        If the answers to those questions are ‘not many’ and ‘ummm cheaper premiums?’ then my answer is ‘management capture’.

        If the members didn’t know anything about the business, if they weren’t in control of it, then I don’t think the theoretical ownership model matters a jot. Same goes for the sharemarkets, FWIW.

        • RobC 12.1.1.1

          PB, I guess my point is mutuals have an advantage with pricing because of a “lower profit structure”. They have a disadvantage in that if for any reason (incl. adverse events) they need to raise capital they are quite limited in what they can do.

          So, pros and cons between the two. Two earthquakes in 6 months have brought the cons home to roost.

          Most customers won’t know the nuances of insurance to fully understand what mutual ownership really means, but neither can you blame management for using their “mutual advantage”. If they managed the business properly (and I have no reason to suspect they haven’t), it’s not really the issue.

          Most insurance companies in this part of the world started as mutuals – AMP (Aust. Mutual Provident Society), National Mutual (before being sold to AXA) are two examples. Yes, they changed their structure in the face of a capitalist world, and maybe AMI should have too, but 20/20 hindsight is a wonderful thing.

    • jimmy 12.2

      I agree, the socailisation of risk is one of the key factors in modern development. Ulrich Beck is good for sociological/political theory and Ha Joon Chang for economic theory if anyone is looking for an overview.

  12. Afewknowthetruth 13

    Bored has it: ‘the real issue is managed contraction’. 

    However, the likes of the IMF are not interested in spreading the pain. Their role will be to keep transfering wealth to those who already have far too much.

    Growth is over, other than growth of prices, growth of deficits, growth of company failures, growth of unemployment. There is no more cheap oil, no more cheap coal, no more cheap phosphate. Most of teh forests have been chopped down. The oceans have been slargely stripped of fish. The system is headed towards collapse. The five hundred year experiment in looting the planet is almost over. A completely new system is required.

    Unfortunately the fire hundred year experiment in colonialism, industrialism and looting has depeleted the Earth of resources, polluted the atmosphere and oceans, and caused population overshoot.

    Of course, the system has no answers for the real issues because it is geared to looting and destructrion of the natural world.

    ‘the real issue is managed contraction’ but it will not be addressed.

    • Bored 13.1

      Thanks AFKTT we sing silently in the dark, the cacophony of passing traffic and the dazzling array of neon lights leaves our message unheard. Our song will later be drowned out by the moans and laments that will deafen the darkness when the barrels run dry.

  13. Oleolebiscuitbarrell 14

    But National, in the absence of an economic plan, keep doing precisely that [advocating neo-liberal policies].

    Meanwhile, what?, yesterday, we were criticising them for being too involved in the market and bailing out SCF.

    • The Voice of Reason 14.1

      Nope, that’s not being involved in the market, that’s just socialising the losses. The profits from the SCF collapse remain in private hands.

      • PeteG 14.1.1

        It sounds like you know how much profits in whose hands.  What are the details?

        • Pascal's bookie 14.1.1.1

          Remember how investors got paid out including the interest?

          Even the people who invested after National had been told by treasury that it was a basket case and National went on including it the scheme.

          Those people made a profit.

          • Oleolebiscuitbarrell 14.1.1.1.1

            Being involved int hemarket is valuable and important, except when it not a good idea to be involved in the market.

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  • Protecting Kiwis with stronger financial supervision
    A new five-year funding agreement for the Reserve Bank will mean it can boost its work to protect New Zealanders’ finances, Finance Minister Grant Robertson says. “New Zealand has a strong and stable financial system. Financial stability is an area that we are not prepared to cut corners for, particularly ...
    BeehiveBy beehive.govt.nz
    1 week ago