- Date published:
9:55 am, November 6th, 2010 - 51 comments
Categories: capitalism, greens, labour, leadership, Left, monetary policy - Tags: economic alternatives, neoliberalism
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?
What do you reckon – time for a change?
Unfortunately the neoliberal beast will inevitably rear its head again. I’m waiting for the comments along the “it didn’t work because we didn’t get to implement our agenda fully” lines.
who said :that the main problem”had been in communication, not policy”
For those of us who are economically illiterate or should that be Illiterate with Economics, we will have to be nurtured.
Does this mean that trickle down is dead?
Does it mean that the market decides is dead?
Does it mean that economics is paramount in deciding the direction of policy?
Does it mean that Social Responsibility is born again?
Hopefully all of the above. The debate is now on.
Wouldn’t it be nice to be something more than a “consumer”?
We can’t spend the next 30 years chasing our own tails. 🙂
I love that you’re still coming up with new dog puns
Halwo Marty G. 🙂
I agree Marty – has me howling with laughter at times and thinking of more puns for him as well
US NeoLiberal Paradise has produced disaster for most Americans here’s a clip from one American who has published a book on the US’s dire straits where he says revolution is necessary! Scroll up to access video.
Another disaster from NeoLiberal US. Michael Parenti discusses his California supplier of gas and electricity(Pacific Gas and Electric) which severely neglects safety by not replacing ageing pipelines, this has caused a major explosion where people have been killed and homes destroyed. The Company guarantees its shareholders 11.1/2 return yearly!!! an incredible return in a depressed economy such as California’s.The CEO and his associates pay themselves huge salaries. Now they are putting smart meters into people’s homes despite the objection the radio wave communication is bad for health. (My power provider Genesis wanted to put a smart meter in my home, I responded by changing to another supplier which doesn’t use them-there was no consultation like “Would you feel ok about these meters considering the health concerns around them?!”)
Death and Profits: The Utility Protection Racket
The California Public Utilities Commission (PUC) permits PG&E to charge rates that are 30 percent higher than the national average. PG&E’s shareholders enjoy a guaranteed 11.35 percent yearly return on equity. That’s slightly higher than the 11 percent that swindler Bernard Madoff pretended to offer his investment victims
PG&E enjoys a captive consumer market of 15 million customers in northern and central California. The utility is a shining monument to state-supported monopoly capitalism. If costs rise, then so do customer rates (in order to guarantee the 11.35 percent return). PG&E carries a $17 million insurance premium and additional millions in insurance deductibles; these expenses, too, are picked up by its ratepayers.
An Avoidable Catastrophe
Along with all the other expenses they bear, PG&E’s ratepayers usually pay for the enormous costs of utility accidents. This may still prove to be the case with the disaster recently visited upon San Bruno. On September 9, 2010, a PG&E pipeline blew apart. Gas explosions and flames ripped through the San Bruno community, taking the lives of at least eight people, injuring over 50 others (some very seriously), and completely destroying or damaging upwards of a hundred homes. An official from the National Transportation Safety Board described it: “My immediate assessment was the amazing destruction, the charred trees, the melted and charred cars, the houses disappeared.”
Critics argue that the smart meters are too smart. They often inflate electric bills. Worse still, they may be harmful to our health. There is evidence that radio-frequency exposure is linked to cancer and other diseases. A number of ratepayers already complain of being sickened by the heavy doses from smart meters. PG&E gives reassurances that the frequencies pose no great danger, but it continues to face community resistance and skeptical questions from independent investigators.
Smart meters cut labor costs. Lower labor costs do not bring lower rates for ratepayers, but higher profits for managers and stockholders. Never accuse PG&E of neglect or stupidity. The company knows what it is doing. In keeping with the essence of the corporate capitalist system, PG&E exists not to serve the public, but to serve itself.
Another reason why every house/home needs a wired broadband internet connection.
I find it difficult to believe that Labour has had a road to Damascus moment. You can’t go the opposite direction to your neo liberal one if you have a Roger Dougas acolyte as your leader.
that is just not credible. really, they are having a laugh.
The move to the left by Labour is probably to head off the new leftwing party that is in the advanced stages of being formed. Move to the left squash the upstart and then swing back to centre right again. classic (just what Helen did to the Alliance)
Anyway it’s going to put the cat amongst the pigeons.particularly as the new party may well have an electorate seat. which of course will free up the labour left to vote for them.
Remember how the Alliance was once out polling Labour?.
Now not a moment in time, certain people in Labour have realised the fallacy of Chicago school free market economics for many years now.
And it took a crashing defeat at the polls, but finally the parliamentarians are ready to set a new direction.
Don’t forget that former ‘followers’, once they leave the fold, can become the most ardent critics of their former ideology.
AND it is up to us as a mass movement to keep Phil’s feet to the fire every hour of every day.
Say what one will about National they were very good in opposition they set the agenda Nanny state blah blah
In comparison Labour seem weak and ineffective just a year out from the election.
How many people out there actually know about Labours apparent change of heart?
On a local level with the two Browns things are changing, but Labour nationally. not only needs feet to the fire ,but a rather large kick up the jacksee
Setting up a bunch of ‘nanny state’ PR memes is not really much of an Opposition, yeah? I mean, we can see how much thinking NAT have actually done in their 9 years in the wilderness, yeah?
au contraire Labour is on a roll my man. The activists now see 2011 as highly winnable, and NAT as slowly panicking as the tide starts going back out on them.
And when commentators like Colin James, Bernard Hickey and Chris Trotter start focussing more and more on Labour’s economic direction as something quite different to the “just left of National” norm of the past you know that something is very different.
No doubt though there is a lot more to be done and you do raise a good point, Labour has to communicate much more clearly to the electorate.
effective in terms of they now are in control and 50% in the polls. they were like fox terriers on every issue particularly between 05 and 08.
I don’t think it is winnable unless we are looking at MP GP NZF and Lab
just making it over, And I don’t think that u can guarantee support from the first three :~]
and there is the HMS party
.to come maybe :~]
anyway too off topic I suppose
I suppose a lot depends on whether the parties of the left decide to support each other, or undermine each other…
like the JPF you mean ?
Yeah – that’s the kind of thing!
O, I share your concern with Labour not getting the message out and wonder if they have really changed.
I think Matt running in Mana will force Labour, perhaps unwillingly, to modify its policies because he is a very liked and respected figure who through his sheer mana and message of helping working people might embarrass Labour into action.
Labour needs to start its campaign right now and run an absolutely excoriating one on NACT, never letting up and not letting them get away with the least little thing. It needs to give massive publicity to past infidels who have promoted catastrophic economic policy such as Hickey and publish their words recanting their mistakes. Labour neeeds to get its foot soldiers out there advising voters how to vote if tactical voting will ensure victory. In my electorate I live on a main drag so I’ll have Labour posters along the length of my fence and I will get out and distribute flyers.
The way things are going I believe we are in the Great Depression 2, we just have fancier toys these days and will need a government like MJS from 1935 that focuses on the really important, nitty gritty stuff like full employment, decent housing, health and education but with a less paternalistic slant. The government is going to have to get honest with the population about peak oil and why the transition to public transport is necessary for most everyone, and to that end will need to massively subsidise it at first so that people will consider themselves nuts to even consider using a vehicle.
A wartime mentality never to be extinguished will need to become the new norm where conservation is paramount, waste is very much frowned upon and the inculcation of community over the individual is seen as more important. I’m not saying people should become cookie-cutter drones as I like people to be themselves even if they are outre and find them more interesting than people who follow the party line and I don’t mean people who are in gangs or those who indulge in criminal behaviour.
Will Goff be the leader to take Labour to victory? I don’t know, we haven’t seen or heard enough of him to get the measure of him as a man or the message he should be carrying.
Nope it is real. I’m pretty ‘right’ on economic matters, been in business and exporting for decades. , But over the last 10 years it has become evident that the hands off approach to the economy has been failing NZ.
The most obvious sign of this is the level of unproductive investment going on. Quite simply you cannot get capital to build businesses, but it has been easy to invest in unproductive bubbles like the housing market or unsustainable farming on unsuitable land. Labour did a moderately good start on trying to shift that over the last decade – but it was politically faught because so many people were vested in the bubbles.
Now the economic climate has changed and so has the political feasibility. The time for a long overdue change has come and with a great deal of relief, people inside and outside Labour are discussing where we go next. It won’t be to a daddy state like Muldoons (or Anne Tolley and her national standards)’ but it will have the state concentrating on what is required for our development decades ahead.
Name one fucking thing Labour did to tip the balance away from so-called unproductive sectors.
They held Labour Conference 2010.
I sense an undercurrent of panic in the NAT Cabinet as they see the tide slowly seeping back out from under their toes, and that John Key in response is not providing any leadership to them at all.
2010 and Labour are not in government. And the National government has done more to shift away from unproductive elements of the economy than Labour ever did in the previous 10 years. And National get slammed for it. For instance the removal of depreciation on most assets was a wise move and yet the left labeled it as “pushing rents up” even though most of them want to see a capital gains/land tax that has proved utterly useless in preventing speculation (one only has to see Australia for that instance) and would do considerably more harm for anyone renting than what National has done.
Not that I believe National has done enough. But I really can’t see much vision in Labour’s ideas either. Do Labour honestly believe that a country the size of New Zealand with much smaller GDP than Singapore can control our capital markets and somehow create an artificial low dollar? It just isn’t feasible or likely and will undoubtedly add complications. And you can’t sell the idea of housing affordability and at the same preach for people to stop investing in land and housing especially when Labour offer no alternative.
NATs done frak all. In good times, sure, they would get credit for their mediocre efforts. But their response to the ongoing GFC aftershocks is…totally confused.
And because of that NAT will continue to get slammed.
And NAT will continue to be stuck in neutral and will continue to get slammed because what NZ needs today cannot be accomlished between the ideological lines of a hands off, laissez faire free market Chicago-School style economy.
YES I honestly do. Why? Because Singapore only overtook us in GDP per capita in the 1980’s. Up until that point we had been LEADING Singapore. BTW we are not creating an “artificially low dollar” we are creating a dollar which is not artificially inflated in value due to highly liquid speculative capital inflows.
I’ll give you a clue. Affordable housing means that there can be no more financial speculation on houses. It means that developers who put money into creating new housing will have to do so on the basis of generating affordable added value housing instead of waiting for speculative asset bubbles to inflate and trying to overleverage off capital gains.
And it means turfing the NATs out and looking at seriously rebuilding the Government’s stock of state houses.
Wrong question… Politically you don’t try to break peoples addictions until they’re ready for it to happen. Think about Nordmeyer.
Right question. What did Labour do to tilt investment towards more productive sectors? That’s easy – just look at the major programs for reasearch and development (including market development) that national cut to pay for tax cuts.
Every company I have been in in the last decade has used one or more of those to bring in board additional funding. There are virtually none of those programs running under nationals current regime.
Even you should be able to answer that question…
“time for a change?”
Love it… the same line that was denigrated when National were saying it now pops from the mouths of the Labour supporters. Why oh why are partisans stupid enough to say ‘time for a change’ is hollow when it’s used against them then go use it again themselves when it suits them.
Good to see that you’re as farcical and shallow as ever Burt.. If you changed and put some thought into your comments then we’d have to worry that the bone was being shaved from your skull enough to let some new ideas in there….
Its time for a change burt, try it out, you’ll be a happier camper.
There’s one major difference burt – NACT weren’t really talking about changing anything except to give themselves and their rich mates more of our money whereas the left is actually talking about changing the system to one that actually works.
Here you go Burt – It’s time the average Kiwi had an alternative to the B/S thats being peddled and pushed by todays Govt .
Fixed, all better now!
Well I did talk about partisans but I didn’t ask for a role call…
As mistakes go, that’s amusing! (Presumably it ought to be “roll call”)
I was laughing at that too but I thought I’d best leave it to the teacher to point out 😉
It really is gratifying when other parties move towards policies the Alliance has had for years. It indicates that although I might not have been on the winning team all this time, I was on the morally correct team.
Ummm, I’ll give you fashionably correct from time to time. Morally correct needs to be justified with a lot more evidence than the call of ‘time for a change’.
Its time for a change.
26 years of neoliberal freemarket nonsense has done nothing but disadvantage the NZ economy and ordinary NZ workers, while putting more power and influence in the hands of those with the most financial capital.
I said “indicates”, not proof.
Other indicators include geni, youth suicide, unemployment rates, ambulatory-sensitive hospital admissions, access to education, access to food, access to water, access to clothing, access to shelter, crime rates, imprisonment rates, crime clearances, general morbidity/mortality, etc etc etc.
Lab 99 version distanced themselves from Lab 84 with “we were wrong”, Lab ’10 distanced themselves from Lab 08 with “we were wrong”. With 15 years of experience in govt we get the appologies of being wrong the previous 2 times. So how can those educated under the Neo Lib system (from Phil, Jones, Cunliffe and co, even Peter Conway) now come out and say that we need a new system and we are to have confidence that they can:
a: educate us in an election of what they propose with detail, that most can understand.
b: communicate what benefits and initial suffering from the transition.
c: Manage the change, and react when reality do not follow planning.
d: Not tell us in 2018 we were wrong … again
It sounds like Labs version of national standards.
It is not just a matter of changing a few economic policies. It is also about courage. Labour likes to talk big when it is in opposition but lacks the guts to stand up to capital when it comes to the crunch. We will see the same old pattern of labour pretending to listen and take on board the concerns of the working class until they are elected. The day after they win an election they will start backtracking as fast as they can. Social democrats are feeble buggers who can’t really make up their mind what they stand for and defend their position. Until they are prepared to name their enemy ,show loyalty to their class, and mobilise the people against the ruling class, not just to vote, they are worse than useless.
Until they are prepared to name their enemy ,show loyalty to their class, and mobilise the people against the ruling class, not just to vote, they are worse than useless.
Actually, I think it is more important for the people to collectively mobilise against the ruling class, and not wait for someone else to do it for us. Decisive leadership is very important for a political party, but without the large numbers of progressive and left-leaning people actively pressurising for change, political leadersip is pretty useless.
On whether Labour/the left generally has “changed its spots”?
I noticed a major difference in approach, between Brown & Banks in the Auckland mayor candidate debates, and I think this should guide the way forward for the left grass roots. Basically, Bank’s approach was top down, and was characterised with a, “I know what’s best for Auckland” attitude by Banks. He constantly referred to the corporate/business-based finance people having doing the figures, with the result that Banks, & other powers at the top, were presented as knowing what is best for Auckland. Brown’s approach was more of a bottom up, “consult, engage with local wards & communities, consult, and consult again.” And the people responded to that with the votes.
This indicates to me, that the power of the broad mass of (relatively) disempowered working, unemployed, and/or underclass people is in mobilising the grass-roots, on & offline. The aim should be to put pressure on the left and progressive representatives in local and national governments. …. including Labour & other left party MPs and leaders, as well as relevant people with a public voice.
The MSM, frontline messages to the masses is part of a corporate, top-down approach. There are more considered views presented in the op ed columns away from the front page headlines. But most of the public don’t read beyond the front pages & headlines on and offline. The top-down approach of the neoliberals also works through the digitial networks of right wing blogs and discussion forums, where the main neolib ideas are first seeded and then virally circulated. The neoliberal champions have the finances to keep working that system.
But the power of the people, is in the grass roots, collectively-engaged, bottom-up mobilisation. I know it’s not totally clear-cut with digitised social networking, and talk-back media capabilities that engage with (often asymmetric) two-way processes.
But the main strength of the neoliberal philosophpies, pushed, in contradictory ways, by the corporate powers, is in the top-down pressure, exerted by those with wealth, polical power & financial influence. The main strength of the less powerful, but larger numbers, of working and unemployed people, is in applying pressure from below, through multiple networks, on and offline, as part of a large, collectively-engaged movement.
Now is the time to work the grass-roots networks of the left, progressive, dissaffected, and disempowered, working and underclass people, through every means of connection possible, on and offline. And it is especially important now that many Labour & other party leaders, as well as diverse progressive thinkers are opening up the lines of communication between them and ordinary people.
Hi Carol, I reckon your comment here is good enough to be a guest post 😀
This is why the arguement against free trade is absurd: http://www.youtube.com/watch?v=j0pl_FXt0eM
Friedman was extremely intelligent, but also really dumb.
– New exporting jobs weren’t created to replace US steel jobs lost because US corporations offshored every major industry that they could. Steel was only one of many. Only low value service jobs which could not be exported stayed. (And they had a good crack at offshoring those too e.g. contact centres).
– What exactly is a US steel mill worker going to do when his plant closes down? He can’t suddenly become a computer programmer or accountant even if those professions become more prominent. He is stuck unemployed for a long period of time. How is he going to feed his family in the meantime while he retrains?
– Giving USD to Japan in the hopes that they would spend it back in the US was a foolish notion. The Japanese are SAVERS not spenders. And in fact what happened was that money fueled a huge unproductive asset bubble in Japan and all that wealth was lost. That money did not make its way back to the US real economy – except through Japan lending the US Govt money, increasing today’s Federal debt burden and because the US had to pay interest on monies the Japanese leant them it cost them even more. Oh yeah, the Japanese also used a bunch of cash to buy up important US businesses.
– The banana growing example he gives is dumb. South America has a natural climactic advantage in growing bananas. Japan has no natural climactic advantage in milling steel. In fact, Japan has multiple disadvantages e.g. it has to import all the ore required to make the steel it has none of its own.
– The laughable idea that Japanese Govt subsidies for their steel producers = foreign aid for the US. Did anyone look at the tax loss to the US Govt and in US GDP to not have all those steel workers employed in well paid manufacturing jobs but go to get jobs flipping burgers instead? All the ancillary engineering and technical companies destroyed by the loss of an entire heavy industry? (And the loss of all the tax revenues provided by them?) Where on earth was the cost/benefit analysis to the US as a country?
– Cheap steel for US consumers seems like a good deal. For those consumers who still have jobs and can still buy products. For the 20% of Americans who are unemployed or underemployed, having cheap steel benefits only one group: US business barons.
– Who took into account the costs of socially and economically destroyed steel cities and towns? Detroit, Pittsburgh, were left as shadows of their former selves. Of course, US business leaders now had access to cheap foreign steel, they did not have to pay for the costs of those destroyed towns, and they managed to destroy the strength of the worker unions too when the US mills all closed down and everyone lost their jobs. What a WIN
Don’t you mean the argument for free trade. “The theory of comparative advantage” was heavily qualified even by its first advocate.
“Free trade” has been as ruinous to most of the worlds population as “free markets”.
Cheats prosper at the expense of people who’s work adds to community wealth.
Just another excuse to take money off the many and give to the few.
Do you really believe every country in the world is going to pay back debt by out exporting all the others.
Read up on Peak oil, peak money and peak resources.
Great read with 60minutes doco on the 99s (Those in NeoLiberal paradise of USA who have their unemployment cut off after 99weeks). With Key and Wodney economics profits come before people,in the US Corporations make huge profits by having their factories in China where they work for a fraction of the US wage. That American citizens who end up on the scrap heap are an externalised cost-not their worry buddy! Bye! Scroll down to 3rd report.