It’s been interesting watching the dominoes of those who used to support neoliberal economic orthodoxy (here within NZ) falling one by one. I’d argue that one of the first signs of discontent was Bernard Hickey’s extraordinary open letter to Generations X and Y in June last year:
Dear Generations X and Y
Did you realize the baby boomers running the country have just decided to make you poorer for decades to come so they can retire early with all the assets and high incomes?
Did you realise your taxes are going to rise and you won’t be able to afford your own home? Did you know the baby-boomers are refusing to save their own money now for their retirements so they can live off your hard work? Did you know you will be slaving away paying high taxes in your 40s and 50s to pay for their pensions and health care? Did you know you’re wasting your time trying to build a family and life in New Zealand? Did you realise you have huge student loans while they received free tertiary education?
That piece is driven by profound disquiet with fundamental issues, which all came to a head for Hickey a couple of months ago in this extraordinary piece:
Why we must abandon the economic orthodoxy and embrace capital, trade and exchange rate controls
I feel like a priest who has been wrestling with his belief in god and has now decided god does not exist.
It’s time for me to recant and to say what I’ve been thinking for months: the economic god of completely free markets and capital flows is not worth believing in anymore and we must look for other things to believe in and do.
I think New Zealand needs to have a debate about capital controls, about foreign ownership of assets, about measures to control our currency and about being openly nationalistic rather than internationalistic about our economic policy.
I think the Global Financial Crisis and the preceding decade of debt-driven instability in global capital markets and trade flows have demonstrated the failure of the economic model most New Zealand policymakers have adhered to for nearly 3 decades.
Well worth going to read the whole thing. Who’s next? Economics teacher and author Peter Lyons:
Mantra of free market ideology wearing thin
This worldwide recession can be attributed to the actions of the private sector, in particular, the finance industry. … Dodgy lending and the use of financial instruments of mass destruction such as mortgage securities were legalised by governments under the guise that “markets know best”. …
Ideas matter. In the past 25 years New Zealand has embraced the free market ideology of neoclassical economics.
This ideology states free markets, competition and the profit motive ensure a society uses its resources in the most efficient way to maximise the well-being of its citizens. I teach this mantra on a daily basis and have written text books on it. My job sometimes feels uneasily like a form of indoctrination.
From 1984, New Zealand was a laboratory for free market economics. This experiment has been described as a country that prided itself on its pragmatism encountering its first full blown ideology.
A better description would be a mugging. Yet there is still little understanding of this ideology and how it continues to shape our society. Neoclassical economics is an elegant and logically consistent theory. The only problem is it is based on some major assumptions that in the context of a society such as New Zealand simply do not work.
Author Ian Fletcher:
Free trade theories based on dubious assumptions
The price of living in the fantasy world of free-trade economics continues to rise for America. …
Any serious discussion of free trade must confront David Ricardo’s celebrated 1817 theory of comparative advantage, whose tale of English cloth and Portuguese wine is familiar to generations of economics students. According to a myth accepted by both laypeople and far too many professional economists, this theory proves that free trade is best, always and everywhere, regardless of whether a nation’s trading partners reciprocate.
Unfortunately for free traders, it is riddled with holes, some of which even Ricardo acknowledged. If they held true, the hypothesis would hold water. But because they often don’t, it is largely inapplicable in the real world. …
And so on and so on. It’s a good time to be exploring these issues — because at the moment too many people are asking “Are we heading for a second recession?” in NZ. The old ways of thinking got us in to this mess, and they won’t get us out again.
Some people get it. Some people are offering alternatives. The Greens have long had ready a comprehensive alternative — the Green New Deal. The CTU is offering an alternative economic strategy. And at their last conference Labour broke the mould on the old thinking (and there was much rejoicing). Ex UK MP and former vice-chancellor of the University of Waikato Bryan Gould sums up:
Labour reopens economic debate
Something important has happened in New Zealand politics. After two-and-a-half decades in which economic policy has been a no-go area for political discussion, we have at last seen the beginnings of a debate about what is potentially the central issue of our politics. …
The Labour Opposition has been thinking. They seem to have grasped that there is no upside in either electoral or practical terms in simply agreeing with the Government, and that the evidence before our eyes demands that New Zealand should strike out in a new direction.
So, the two-party consensus on economic policy is at an end. It is proposed that the purpose and techniques of government’s involvement in economic policy should change. Macro-economic policy is back. …
The voters may or may not reward Labour for its courage in challenging an orthodoxy that has prevailed for so long. But we all owe Labour a debt of gratitude for starting a debate that is long overdue.
According to some, the very definition of madness is doing the same thing over and over and expecting a different result. In economic terms the world, and NZ, have been doing the same neoliberal economic agenda over and over for the last 30 years. It hasn’t worked. More of the same will have the same result. So we need to try something new! Labour, the Greens, the CTU, and others, are offering alternatives and new ways of thinking. National is stuck in the failed policies of the past. What do you reckon – time for a change?