Capitalism is good. Globalisation is good. These are pretty much givens in “Western” countries. Certainly they are taken for granted in mainstream New Zealand politics. The two major parties tinker with the parameters, but they’re both playing in the same ball park.
But it’s good to challenge assumptions every now and then, and recent pieces by two excellent authors, often quoted here at The Standard, do just that. First up Bernard Hickey:
Tough reality in a world of hurt
Does globalisation work to make most people better off most of the time?
Until recently it was mostly the more left-wing fringes of academia and political life that asked this question and didn’t like the answer. The events of the past four years have shoved this debate firmly into the mainstream and now even the most conservative of economists and academics are questioning the drive to globalise everything. …
Four years on from the Global Financial Crisis and we’re now in a second round of a global debt crisis. Economies in the West are slipping into Zombie-like states of perma-recession with high unemployment, falling real wages and intense social pressures.
High-paid manufacturing jobs that underpinned healthy middle classes have been gutted in the drive for globalisation and replaced by often insecure and lowly-paid jobs in fast-food joints, hospitals, shops and hotels.
Now a debate is growing after the publication of a research paper by mainstream economists in the United States with the dry title: The China Syndrome: Local Labor Market Effects of Import Competition in the United States. It shows a quarter of America’s manufacturing job losses are due to the effects of cheap labour in China and that the shift in jobs has significantly increased government spending on unemployment benefits, healthcare costs and retraining costs. …
Globalisation makes things cheap and helps lift millions out of poverty, but the costs are borne largely by the developed world’s middle classes. …
Gordon Campbell rattles the cage of orthodoxy even harder:
Why State Capitalism Is Beating The Free Market
And why New Zealand is no good at either…
Late last month, the Economist magazine published a debate on state capitalism, in which it proposed that state-led market economies are fast becoming a global rival to the old models of liberal, free market capitalism. The chapter and verse it provided is indeed pretty impressive. More than three-quarters of the world’s oil reserves, the magazine reported, are controlled by state-backed companies, ranging from the world’s biggest natural-gas company, Russia’s Gazprom to Brazil’s Petrobras. Saudi Basic Industries Corporation is the world’s second largest diversified chemicals company, Russia’s Sberbank is Europe’s third-largest bank by market capitalisation. Dubai Ports happens to be the world’s third-largest ports operator, and Emirates is one of the world’s fastest growing airlines.
Reportedly, state companies comprise 80% of the value of the stockmarket in China, 62% in Russia and 38% in Brazil. Together, the Economist summarised, they accounted for “one-third of the emerging world’s foreign direct investment between 2003 and 2010 and an even higher proportion of its most spectacular acquisitions, as well as a growing proportion of the very largest firms: three Chinese state-owned companies rank among the world’s ten biggest companies by revenue, against only two European ones.”
All of which suggests that long ago, the real world made up its own mind about whether government belongs in business. The trend seems very relevant to New Zealand, given our history of dependence on the state for building social and physical infrastructure, fostering innovation and investing in research and development – and our habit of living in denial about this discomfiting reality. Yet as the financial analyst Brian Gaynor points out by way of illustration, the current share market is full of companies like Solid Energy, Air New Zealand, Telecom etc that owed their origins to the state. Paradoxically though, our political rhetoric since the mid 1980s has been dominated by liberal exhortations to cut regulatory red tape, lower taxes, reduce labour protections, privatise assets and thus release the entrepreneurial spirit alleged to exist within our private sector. For all the free market noise, little in the way of sustainable growth has eventuated.
In other words, economic reality in New Zealand tends to differ from the political rhetoric that is routinely in play. …
That’s just the start of a long and interesting piece, head on over and read on.
Are we going to learn any lessons from the global financial crisis, and the ongoing years of stagnation and chaos? How much longer can economic reality and political reality proceed on separate paths before something breaks? Is any political party prepared to think outside the square and start a debate on the issues raised by these authors (and others)? How about this: time for the state to lead, get in to clean-tech in a big way, and keep the jobs here in NZ. It’s a plan so crazy that it just might work.