What we were doing wasn’t working.

Written By: - Date published: 6:32 am, April 15th, 2020 - 112 comments
Categories: capitalism, Economy, Environment, Financial markets, Free Trade, Keynes, monetary policy, overseas investment, Privatisation - Tags:

After the lockdown, it is tempting to try and go back to what we had before. To the familiar and comfortable, especially for us that were comfortable. Forgetting that for so many, things were anything but, comfortable.

That won’t be happening. “Before” no longer exists.

Coronavirus has shown the fragility, lack of resilience and failings in our current systems.

Exponential and Continual growth in the use of resources is not possible. The earth, it’s resources and the energy we can use, have hard limits.. Society and the economy has to be structured to allow a steady state economy, where resource use is within sustainable limits.

Our present monetary and economic system relies on exponential growth, to work.

Other ways are possible. https://en.wikipedia.org/wiki/Doughnut_(economic_model)

https://evonomics.com/

Having a tangible product such as gold, power or boulders, as a basis for a currency is not necessary to gain a steady state economy. All of these .are just a means, of ensuring faith and confidence in the value of a countries money.

The real basis of money is the amount of goods and services you can buy with it.  If there is more money than the goods and services available you will have inflation, eventually, whatever the basis of monetary value. And vis-versa of course with deflation. Borrowing is a charge on goods and services (work) to be done in future.

Those of us saving for retirement, with monetary investments such as Kiwi-saver should consider,  unless we invest in future productivity and efficiency of production, future workers and efficiency in energy and resource use,  we will simply cause inflation when we spend those savings  back into NZ. That is, if our savings  haven’t disappeared into a US market failure.

 It will be the big investors, insider traders, who will be left standing when the musical chairs stop. Not us!

Many, looking at their shrinking Kiwi saver balance now, will be questioning the wisdom of privatising super.

Some commentators have mentioned the idea of a money hockey stick.

The growth of debt interest owed  is exponential and now far exceeds the ability of any possible future production of goods and services to service the debts.

US debt, and most countries, now is far in excess of any possibility of repayment with any estimation of the future earning power.  (China has been investing as much of their US dollars in tangible assets as possible before the inevitable inflation makes them  worthless). So much money has been paid, into inflating financial instruments, and share buybacks, that have no relationship whatsoever to the productive economy.

The finance industry is extracting a greater and greater share of the real economy, 90% of the price of all goods is now owed to financial firms. A Ponzi scheme.

A reasonable level of inflation under our present system is mostly beneficial. The owners of large amounts of financial capital would have us believe that it is always bad because it erodes their wealth.  The same people do not seem to have a problem, with excessive inflation in the price of necessities, and their own return on capital.

In fact  inflation benefits young working age borrowers, provided wages keep pace.  It is a natural regulating mechanism against owners of capital taking too large a share, and the expansion of the money supply, inherent in money as a commodity.

For us to exist without exponential growth in the use of resources we have to stop exponential growth as a requirement for a functioning financial system.

This means money must become a means of exchange only.

We must remove the commodity value of money. No interest, no financial derivatives, and no charges for use of money.

Remove the means of using money to make money.  Accumulating more wealth can then only happen if you work, or start something which has value in the future. A productive business,  education, health, (Future labour force) sustainable land use, energy or other resources. Not through owning money.

This is a big step and very hard to do politically and unilaterally.

The protests from banking interests, and those who have managed to accumulate most of our wealth, will make the last 30 years of  fight back, from the financial burglars, seem like a playfight.

We can take some steps, towards a steady state more sustainable economy,  on our own though….

Expanding Kiwibank, to undercut private banks and start to take back control of our money supply  from private banking, is a logical first step. Reducing the capital haemorrhage.

Support Government that has not been bought and paid for by international corporate interests.  From one that is only interested in extracting as much wealth as possible from us, before it is all gone, to one that has a vision for the future.

A financial transactions and/or capital flows tax, to discourage money speculation and offshore currency speculation.

The predatory Capital investment, mostly  from offshore, that has loaded our companies with so much excessive debt, to make short term profits, that they cannot sustain four weeks of lost earnings.

Capital gains taxes . Can be rebated for the family home to a certain value,  and for local productive investment. Make investing in NZ’s more attractive than land speculation, overseas securities or local finance scams.. Prices of speculative investments will probably drop, some inevitably with the present economic contraction, leaving some people with negative equity. Banks as one of the contributors who profited from the situation, should be made to bear the change in equity along with other investors.

A genuine emissions tax, which can be made economically neutral by spending on energy and resource efficiency in New Zealand, or  by giving it back as a general tax rebate.

Change the RBA away from the current single focus on inflation, allowing our dollar to drop to a natural level against overseas currencies, helping both exporters, job creation  and manufacturer’s within NZ.  (Fighting inflation with interest rates is like fighting a fire with petrol. Works briefly and then there is an explosion.).

Refuse to enter trade agreements that constrain what NZ can do on its own.

An expanding population also requires growth. Increasing the standard of education of women and free contraception are both proven, ethical and non-coercive answers to slow increasing population.

Increasing New Zealands population, 20% in 16 years, by immigration, or increasing birth rates, to give an illusion of economic growth, is obviously not an answer.

Government can spend money into the economy for sustainable energy and efficient resource use. (Invest in the future of New Zealand) There is no reason why we cannot borrow against ourselves, as an investment for our kids future, instead of paying interest to a private bank.  Such spending is no more  inflationary  than borrowing from an overseas bank.

Increasing equality, will make such solutions more politically acceptable, as there will be less pain to the majority in the transition..

There will be plenty of spare capacity, in our economy, for some time to come.

Lastly. Look at “just transitions” to a more sustainable future, so workers, including those who do the unpaid work in our society, are not loaded with all the costs of changes. https://www.mbie.govt.nz/business-and-employment/economic-development/just-transition/ while others, who haven’t contributed, run away with the profit.

112 comments on “What we were doing wasn’t working. ”

  • Comments are now closed

  1. Nic the NZer 1
    15 April 2020 at 9:04 am

    I think this post has some unfortunate problems with the arguments being presented. The primary issue is the implied relationship between the amount of spending going on and the underlying money which is turning over.

    This is an important part of the arguments being constructed because how things actually work will cause the improvements proposed to succeed or fail depending on their effectiveness. For an example of a concept which was tried and failed, Milton Friedman, through the course of his career investigated monetary aggregates and eventually concluded there existed a relatively fixed and stable and exploitable relationship between base and bank money and that this also implied a relatively fixed stable relationship between bank money turnover and inflation. Later this developed into the economic theory of Monetarism and attempts were made to use this hypothesis to fight significant inflation using the mechanism of restricting the availability of base money and so the overall money supply and so inflation. At this time, because there was no underlying causal relationship between these quantities, this failed completely (as described by well informed critics at the time). Limiting the amount of base money didn't prevent a growth of bank money in any way (and it was reasonably well accepted that bank money growth drives base money growth) leading to the present compromise position where central banks will lend as much base money as needed for clearing at a monetary policy rate they set.

    The other issue is with the supposed relationship between bank money, its turn over and inflation. Unless there is a causal relationship between the amount of bank money or its turn over driving inflation then this will also not respond to policy reforms trying to exploit such a relationship. But if we understand anything about inflation it is that it is a general outcome of individual and institutional decisions to adjust prices under individual control upwards. This implies a reasonable and maybe exploitable relationship where real resource constraints among other habits drive peoples pricing decisions and this eventuates as an inflation rate. The govt spending should on this basis consider the real resource constraints which apply to its (and the private sectors) spending and where the country needs to develop certain capacity in some sectors, or may need to restrict price adjustments in others or may also need to limit or discourage the private sectors access to certain economic resources.

    • KJT 1.1
      15 April 2020 at 9:42 am

      Freidman has been thoroughly debunked by reality. The present crisis included.

      I don’t really see where we disagree, Maybe I missed something?

      Resource constraints in relation to money do relate to inflation, and you are right that it depends on both policy and individual decisions.

      Perceptions of the value of money, if you like.

      And we can see the effects with housing inflation. Banks have produced a lot of money for housing, directed to New Zealand because of our, relatively, high interest rates, artificially propped up by the reserve bank. As there is no real limit on the amount of money banks could produce, and they could loan it for housing speculation here, with no real risk. Successive Governments have had no will to decrease demand or increase supply significantly. I could be cynical and say too many MP's have made money out of it.

      We certainly need to restrict private capitals access to some resources.

      The huge amount of money used to pay back loans, to drive up speculative buying, for both housing, and farmland, has been a brake on the money capital, able to be used to develop a functional economy.

  2. Blazer 2
    15 April 2020 at 9:41 am

    'But if we understand anything about inflation it is that it is a general outcome of individual and institutional decisions to adjust prices under individual control upwards. '

    The cornerstone of modern monetary policy seems to be to restrict inflation to a narrow band.

    With a world awash in Q.E and this expansion in monetary supply it seems apparent that rampant property inflation that is excluded from CPI measures is the inevitable outcome.

    Btw how long did it take for Friedman economics to be discredited and what has it been replaced with?

    • KJT 2.1
      15 April 2020 at 9:50 am

      Are you unaware of the real world effects of Chicago school economics?

      Playing out in the USA and UK, as we speak.

      Being replaced rapidly, to cope with the virus’ effects on the economy, with their antithesis. Classic Keynes.

      https://thestandard.org.nz/wp-admin/post.php?post=170586&action=edit

      • Blazer 2.1.1
        15 April 2020 at 9:54 am

        No I am absolutely aware, my question was 'how long'….it seemed like a very long experiment…why did it last.

        • KJT 2.1.1.1
          15 April 2020 at 10:04 am

          Obvious I would have thought.

          The people with the money, who buy our Governments, are perfectly happy with the trickle up effects.

          Now, that it is costing them money, they are equally happy to be subsidised by "Big Government".

          • Blazer 2.1.1.1.1
            15 April 2020 at 10:09 am

            the 64k question then is HOW can things change.

            The electioneering of Sanders and Corbyn suggest there is no compelling appetite for change,ironically by those most affected.

            A nice' wish list…all the same.

            • KJT 2.1.1.1.1.1
              15 April 2020 at 10:27 am

              I would argue that Corbyn and Sanders were sabotaged by the same people mentioned above.

              Leaving way to many no option but the "stuff the whole system option", which appeared to be Trump, in the USA.

              Those who control the media…….

              I think they will change now, simply because carrying on with Neo-liberal policies, will collapse the entire system.

            • pat 2.1.1.1.1.2
              15 April 2020 at 10:40 am

              How will things change?….neo liberalism required free movement of capital and with countries closing borders and govs directly financing their economies there will be a tendency to want to take back control of national resources so we could see a considerable change of direction….but given how insidious the whole experiment has been it will take some unwinding and risk.

              • KJT …
                15 April 2020 at 11:08 am

                The problem with the whole "unfortunate experiment" is that it is very difficult to reverse.

                For a start, Governments capability to do things, the skills and knowledge, and the infrastructure, was dumped.

                • pat …
                  15 April 2020 at 12:31 pm

                  yes..it would be a slow process, but the longer we wait the longer it will take and the greater the loss of capability

                  • KJT …
                    15 April 2020 at 1:01 pm

                    And. If we don't do it now, we will have to do it all over again, for the next disaster, GFC, and for the inevitable time, Global warming, bites us.

    • KJT 2.2
      15 April 2020 at 10:02 am

      I've also written before about the counter productive effects of the reserve bank act.

      Destroying the productive economy, to fight inflation in one sector.

      • Gosman 2.2.1
        15 April 2020 at 10:38 am

        Where is the evidence that NZ productive sector has been destroyed as a result of the Reserve Bank act?

        • KJT 2.2.1.1
          15 April 2020 at 11:04 am

          I've written about it before. Complete with evidence, references and all.

          However, once more for the dense.

          The artificially high interest rate, mandated by the Reserve bank act, kept the NZ dollar high. Money flowed in, chasing our, higher then most Western countries interest rates. At the same time NZ manufacturing had a higher cost of borrowing than overseas competitors. Making them uncompetitive.

          Not surprisingly, our manufacturing firms, which also unlike their overseas competition, was deprived of any Government support, to help the unthinking pursuit of “free trade agreements” to sell milk powder, went down like flies.

          • Gosman 2.2.1.1.1
            15 April 2020 at 11:13 am

            Our manufacturing sector is not substantially lower than other comparable nations. Also you seem to regard manufacturing as "productive" and the service sector (which now has much of NZ's economic activity) as less so. Why is that the case?

            https://www.statista.com/statistics/375601/new-zealand-gdp-distribution-across-economic-sectors/

            https://marketrealist.com/2015/12/analyzing-european-unions-gdp-composition/

            • KJT 2.2.1.1.1.1
              15 April 2020 at 11:36 am

              Bring up our GDP, distribution by sector, over time.

              For just one industry, ask why Australia can make and sell caravans, worldwide, despite much higher wages.

              It wasn’t long ago that you, or someone supporting you, were arguing that State sector service workers, i.e. Teachers, were “non productive” supported by “productive” private tax payers. Glad to see you’ve changed your mind.

              • Gosman …
                15 April 2020 at 11:49 am

                Ummm… because of economies of scale and available resources/capital/skills. It is why German industry is still competitive. But note the Manufacturing sector in Europe is (on average) smaller than it is in NZ on a percentage of GDP level.

                It is true that bureaucrats don't tend to add much to an overall economy directly. They can influence productivity indirectly though both positively (e.g. teaching students new skills/knowledge) and negatively (slowing down economic activity unnecessarily. Their wages need to be mainly sourced from the surplus value gained from the more productive parts of the economy.

                • lprent …
                  15 April 2020 at 12:00 pm

                  It is true that bureaucrats don’t tend to add much to an overall economy directly.

                  Just for instance – I would have thought that the legal system does impact business directly. Agreements and contracts are effectively useless without a working legal system backing them. This is first year basic stuff for anyone who does any business courses. Curiously all judges are bureaucrats.

                  Roading networks don’t get paid for and approved by businesses and yet businesses rely on such infrastructure. Nor do sewerage systems, treatment plants, miraculously appear without bureaucrats – and yet waste handling systems are the key to having larger cities – where most of the businesses in NZ and elsewhere reside.

                  Yet these are all direct productivity boosters for every economy and typically by far the largest ones.

                  Yet here you are displaying your profound ignorance of business. You’re only interested in the theory of business rather than its actuality right?

                  I’d point out that I’ve only worked in private industry since for the last 45 years at levels ranging from process line worker to managing moderate numbers of people. It has also been across a very wide range of industries and business styles. That is why I find rank amateurs at business so worthy of sarcasm.

                  • KJT …
                    15 April 2020 at 12:19 pm

                    Yep. Ironic that the biggest enthusiasts for Neo-liberalism, seem to be, Lawyers.

                    Like the tax dodgers Union, twit.

                • KJT …
                  15 April 2020 at 12:05 pm

                  People like Teachers, are generating surplus value, through their work, just the same as the person sitting at a lathe, or making coffee.

                  Or, do you still subscribe to the somewhat comic idea, that a private school adds value, while the same Teachers in a State school are a drain, on "productive society".

                  We are certainly seeing at present, the real value of a competent State service.

                  • Gosman …
                    15 April 2020 at 12:16 pm

                    I stated that Teachers CAN add value indirectly by boosting people's skills and knowledge base. However the measurement of how effective they are being is always problematic. That is one of the reasons behind National Standards.

                • KJT …
                  15 April 2020 at 12:17 pm

                  Ummm. Where did all our capital, skills and resources disappear to?

                  • lprent …
                    15 April 2020 at 12:22 pm

                    KJT: the moderate comments flag was on in this post, it isn't highlighted anywhere. So I'm going to turn it off on the basis that it was probably just accidental.

                    Feel free to turn it back on – but please mention it in the body of the post or in the author discussion if it is deliberate.

                    Thanks.

                    • KJT …
                      15 April 2020 at 12:24 pm

                      Thanks.

                      Unintentional.

                      Don't do this often enough to figure out how the backend works.

                    • lprent []
                      15 April 2020 at 12:29 pm

                      No problem – just caught me because I was looking at the wrong places for the issue. Plus of course initially I thought it was mostly Gosman – but that was just that he was pumping out comments at approx 2.5x that rate of every other commenter into this post.

                  • Gosman …
                    15 April 2020 at 12:32 pm

                    We never really had them in many of the areas we used to manufacture in. Making television sets and assembling cars on a small scale is not a good use of resources.

                    • KJT …
                      15 April 2020 at 12:49 pm

                      Agree that wasn’t.

                      But wrecking possibilities that may have replaced them, was daft.

                      Including supplying parts.

                    • Gosman …
                      15 April 2020 at 12:53 pm

                      Nobody wrecked possibilities for replacing the manufacture of television sets and cars in N.Z. People are free to set up any manufacturing business they want to. Indeed many NEW manufacturing businesses HAVE been set up since 1984.

                      Regardless you still seem obsessed by manufacturing as opposed to other forms of economic activity. I still haven't seem you explain why this part of the economy is more important than any other part.

                    • KJT …
                      15 April 2020 at 1:04 pm

                      Because it is high value, high wages, compared with, say, agriculture and tourism.

                      Note: I consider things like software part of manufacturing, not a service industry.

                      And the high cost, to us, of importing shoddy, short lived manufactured goods.

                    • Gosman …
                      15 April 2020 at 1:47 pm

                      Software engineering is in the service sector not the manufacturing sector. If you want to include it in manufacturing you will find that our manufacturing capacity has probably gone up since the 1980’s.

                      Also it is funny you think NZ manufacturing pre-1984 was not shoddy.

                    • Grafton Gully …
                      15 April 2020 at 7:08 pm

                      Hey Gosman NZ manufacturing pre 1984 was not uniformly shoddy. Temuka Pottery, Mc Skimming toilets and bricks, F and P whiteware, those flecked green enameled cast iron pots and pans, Swanndris, beautifully designed and crafted furniture eg by Nearys, Reed and Whitcombe and Tombs Publishers etc. etc. We also had a fine boatbuilding industry design to finish and a jet boat industry and Healing bikes. Bring it back I say – and the men and women who proudly spent lifetimes designing and making these robust and useful products and owning and running the companies !

                    • KJT …
                      15 April 2020 at 8:18 pm

                      Prices foundry with the, unique pattern making and steel working skills. And many others.

        • Brigid 2.2.1.2
          15 April 2020 at 11:41 am

          Gosman, assuming that you disagree that the Reserve Bank Act destroyed the NZ productive sector, what do you suggest did?

          • Gosman 2.2.1.2.1
            15 April 2020 at 11:50 am

            The NZ productive sector has not been destroyed.

            • Climaction 2.2.1.2.1.1
              15 April 2020 at 3:53 pm

              The low wage portion of it was. But what use is low wage manufacturing when there are lower wage economies with greater access to capital than NZ.

              there are amazing producers in NZ, from dairy to agritech, bio med to software engineering. One wonders if it’s because they don’t product state mandated farm equipment that can be repurposed for consumer use that KJT imagines our productive sector is non existent.

    • Nic the NZer 2.3
      15 April 2020 at 10:09 am

      "how long did it take for Friedman economics to be discredited and what has it been replaced with?"

      Thatchers conservative government strongly endorsed Monetarism around the start of her term. By the end she way denying positions she had previously endorsed (because it didn't work and the UK scorched its industrial base trying to make it work).

      I don't think other governments really tried that hard but you can see a shift in how monetary policy was talked about in reserve bank documents around 1986 where they no longer even conceive that the reserve bank is targeting a fixed quantity of money supply.

      This has had surprisingly little impact on underlying theoretical models however and some of the main-stream text books still describe the money-multiplier and quantity theory of money relationships as being the basis for their model of inflation.

      Unfortunately despite the theoretical models losing their connection to reality the replacement has amounted to something similar to Monetarism in many ways anyway. Though if you look closely the present main-stream modeling and understanding of the economy (as it drives policy) is probably most close to the position against which Keynes argued and espoused at the time by Arthur Pigou.

      • KJT 2.3.1
        15 April 2020 at 11:16 am

        https://en.wikipedia.org/wiki/Augusto_Pinochet

        The purist form of Chicago economics I think was Argentina.

        It had to be imposed by Force, and we all know how it turned out.

        Though Brazil seems to be having a go, now.

        • Gosman 2.3.1.1
          15 April 2020 at 11:24 am

          Argentina has never followed a Chicago school of economics prescription. It has more in common with NZ Firsts brand of economics.

          • KJT 2.3.1.1.1
            15 April 2020 at 11:34 am

            Re writing history. Now?

            • Gosman 2.3.1.1.1.1
              15 April 2020 at 11:56 am

              No, I think you might be meaning Chile rather than Argentina but even Chile was not the "purist form of Chicago economics".

              • Blazer …
                16 April 2020 at 8:39 am

                Naomi Klein(The Shock Doctrine)

                'After the coup and the death of Allende, Pinochet and his Chicago Boys did their best to dismantle Chile's public sphere, auctioning off state enterprises and slashing financial and trade regulations. Enormous wealth was created in this period but at a terrible cost: by the early 80s, Pinochet's Friedman-prescribed policies had caused rapid de-industrialisation, a tenfold increase in unemployment and an explosion of distinctly unstable shantytowns. They also led to a crisis of corruption and debt so severe that, in 1982, Pinochet was forced to fire his key Chicago Boy advisers and nationalise several of the large deregulated financial institutions. (Sound familiar?)

                • Gosman …
                  16 April 2020 at 8:57 am

                  LOL! You are using Naomi Klein's Shock doctrine to make the case on the failure of neo-liberalism in Chile. Considering Chile is both the most open economy and most successful South American economy over the past 30 years that would be ill advised I suggest.

                  • Blazer …
                    16 April 2020 at 9:09 am

                    Wrong..again.

                    'Uruguay is the richest South American nation in terms of GDP per capita. The country is located in South America’s southeastern region where it occupies an area of about 176,000 square km. The population of the country is 3.42 million.

                    Uruguay has a stable economy with a literate workforce and an export-oriented agricultural sector serving as the pillars of the country’s economy. Beef and wool are the most powerful export-oriented industries in the country. Some mining activities are also carried out. Plastics are the most significant manufactured exports of the country. The telecommunications sector is also well-developed. Travel and tourism contribute to 9.4% of the country's GDP'-World Atlas

          • joe90 2.3.1.1.2
            15 April 2020 at 12:02 pm

            Argentina has never followed a Chicago school of economics prescription

            Arse.

            This article analyses the relationship between state policies and economy in Argentina 1991-2001. In 1991 the currency board regime named 'convertibility' was implemented, within the framework of important neoliberal reforms introduced by the State. These neoliberal reforms facilitated capitalist restructuring, characterized by a leap in productivity, investment and profits. Likewise, these reforms generated imbalances which, along with the changes in the world market conditions from 1998, led to the deepest crisis in Argentina's history. The inefficiency of state neoliberal policies in managing the crisis, based on fiscal adjustment to guarantee the continuity of external financing, led to an economic depression and a financial crash, sparking a mass rebellion and the end of convertibility.

            http://www.scielo.br/scielo.php?script=sci_arttext&pid=S0101-31572015000200325

            https://en.wikipedia.org/wiki/Domingo_Cavallo

            • Gosman 2.3.1.1.2.1
              15 April 2020 at 12:07 pm

              A currency board is a managed exchange rate. That is hardly neo-liberal.

              • joe90 …
                15 April 2020 at 12:24 pm

                Flogging over 200 state owned enterprises, opening pension schemes to private providers and pushing unemployment into double digits is Chicago school writ large

                • Gosman …
                  15 April 2020 at 12:28 pm

                  Wow, pensions were opened up to private providers. How terrible. /sarc

                  • joe90 …
                    15 April 2020 at 12:45 pm

                    In 2003 individual accounts and assets were transferred to the government system. So yeah, it was terrible.

            • Gosman 2.3.1.1.2.2
              15 April 2020 at 12:13 pm

              Argentina was never able to control government spending across the entire nation. Even when they followed more orthodox (I still wouldn't classify it as pure Chicago school prescription) Neo-liberal policies at the federal level the individual provinces were spending up large. The total deficit for the State sector (Federal and Provincial level) was what led to the economic crisis in the early 2000's. After that the Peronists returned and have reverted to type. That is why the nation is in such a mess.

          • RedLogix 2.3.1.1.3
            15 April 2020 at 12:13 pm

            Peronism was sometimes pithily referred to as 'right wing socialism'. It's an odd mix that is worth understanding:

            The pillars of the Peronist ideal, known as the "three flags", are social justice, economic independence and political sovereignty. Peronism can be described as a third position ideology as it rejects both capitalism and communism. Peronism espouses corporatism and thus aims to mediate tensions between the classes of society, with the state responsible for negotiating compromise in conflicts between managers and workers

            While Argentina tends to fall outside of kiwis attention span, we shouldn't neglect the place entirely. It has an exceptional geographic potential and strong border security. If they ever get around to governing themselves effectively, there is no question the nation will become a regional power.

            This mistake embedded in Peronism is that as a third way position it rejected both capitalism and communism and headed off into an ideological wilderness that has greatly diminished the native potential of the nation.

          • Nic the NZer 2.3.1.1.4
            15 April 2020 at 1:27 pm

            "Argentina has never followed a Chicago school of economics prescription."

            No country has ever been able to follow a Chicago school economics prescription. This is because Chicago economists in particular don't sully their ideas about the economy with enough realism to exist in reality. One specific example, following the US attempt to apply Monetarism via the Fed and its complete failure to work as advertised in reality (exactly as critics predicted) this was written off as a failure for Chicago economists with the claim that the Fed was not a serious enough central bank to make it work in practice.

          • Tricledrown 2.3.1.1.5
            15 April 2020 at 3:17 pm

            Your right Gosman they didn't follow they were told what to do by the World Bank. 1996-7 Argentina was forced to stop all Welfare including pensions and adopt the $US as its currency.The ACT party followed suite and adopted this policy 3 months out from the NZ election.Within a very short time the Argentinian economy collapsed unemployment went from 6% to 38% the Chicago School experiment was a complete failure.abandoned after 6 months ACT dropped its copycat policy after the truths of the extremist policy failure.

  3. Gosman 3
    15 April 2020 at 10:38 am

    You keep misrepresenting growth. Growth is not just a matter of people consuming more and more resources. People today are generally not using much more resources on a per capita basis than people were in the 1990's or even 1980's yet our economy has grown substantially since that time and we are on average much wealthier than we were back then. Growth is around the value of goods and services. The value of goods and services can increase WITHOUT having to use more resources. For example if I grow Avocados on my land instead of raising sheep I might increase the amount of return I get from the same amount of input. THAT is growth and it doesn't have to involve environmental destruction.

    • KJT 3.1
      15 April 2020 at 10:55 am

      The expansion of dairying is not using more resources, eh?

      • Gosman 3.1.1
        15 April 2020 at 11:01 am

        Depends on your views. What was the land being used previously for and what resources were being used up. See my post below to see how if you properly cost externalities you can determine if resource usage is effective from both an economic and environmental level.

    • Blazer 3.2
      15 April 2020 at 10:56 am

      So if I made a pie 15 years ago and sold it for $2,and today using the same ingredients sold a pie for $5,does that reflect growth and or an increase in my earnings/wealth or is it just an inflated…delusion?

      • Gosman 3.2.1
        15 April 2020 at 11:21 am

        Your mistaking monetary value for economic value. In the case you are describing it is likely inflation that increased the price of your pie given you did not mention anything you have done differently to add value to the pie. If you perhaps used the same ingredients to make pies more attractive to customers (perhaps by customising the look of them) then you are adding value and the increase in value is growth.

      • KJT 3.2.2
        15 April 2020 at 11:26 am

        Growth, without resource use expansion, has found to be a bit of a myth.

        No country has successfully managed it.

        And, I suspect a lot of what we count as, growth is miscounted because of the normal measures we use. The Christchurch earthquake rebuild, was counted as growth.

        While, theoretically we can have economic "growth" by more efficient use of resources, I concur with Gosman on that, in practice, it hasn't happened.

        I suspect a lot of what we count as growth, is simply, inflation. Or, more people.

        • Gosman 3.2.2.1
          15 April 2020 at 11:30 am

          You are speculating without any attempt to analyse and present data that might support your view.

          [lprent: What are you doing that makes the site suspect you? All of your comments are going into moderation for no obvious reason. The odd comment from others as well. But no obvious pattern. Anyway, that is why they’re taking time to come out. ]

          • KJT 3.2.2.1.1
            15 April 2020 at 11:53 am

            Actually plenty of supporting evidence.

            Personally I'd love "Green Growth" to be a reality. But it is not.

            https://www.ft.com/content/47b0917c-f523-11e9-a79c-bc9acae3b654

            " But that’s mostly because these countries have offshored their emissions: much of their stuff is now made in Asia. Moreover, aviation and shipping aren’t counted against national carbon budgets. Once you factor in emissions embedded in imported goods, the EU’s carbon emissions are about 19 per cent higher than the bloc’s official figures, calculates the Global Carbon Project, a network of scientists; for many big cities, the gap is about 60 per cent".

          • Nic the NZer 3.2.2.1.2
            15 April 2020 at 11:54 am

            Has the Standard developed self awareness lprent? It seems to be already more discerning than Hal.

        • mikesh 3.2.2.2
          15 April 2020 at 9:03 pm

          The Christchurch earthquake rebuild in fact constituted growth. In the absence of growth we would not have had sufficient resources for the rebuild. The rebuild could only occur if we put to use resources which were idle previously, or used previously existing resources more efficiently; both of these options would represent growth.

          • KJT 3.2.2.2.1
            15 April 2020 at 10:15 pm

            Yes. Could have used a better example.

            The Christchurch rebuild was counted as an addition to GDP, even though much of it was replacement rather than added value. The "broken Windows" idea

            • mikesh 3.2.2.2.1.1
              15 April 2020 at 10:38 pm

              If the extra production had generated externalities that left us worse off then may may have had a point.

    • Nic the NZer 3.3
      15 April 2020 at 11:32 am

      Where are you getting your evidence from?

      Every chart of real GDP I have seen shows growth in resources consumed, as do similar charts of global resource consumption. While its possible for growth in nominal GDP to occur on more ecologically sustainable basis this isn't presently occurring.

      There are some countries (particularly Germany) which seem to have falling real resource footprints but they are also exporting the growth in their consumption onto countries still implementing more resource intensive production.

      • Gosman 3.3.1
        15 April 2020 at 12:22 pm

        Then you agree the issue is not about growth but how we cost the externalities that impact the environment negatively.

        • Nic the NZer 3.3.1.1
          15 April 2020 at 12:47 pm

          Its not limited to merely costing externalities. We do need to reduce the usage of many real resources to sustainable levels, but so far your comment amounts to 'please imagine that is happening by magic'.

    • RedLogix 3.4
      15 April 2020 at 11:41 am

      Your entire protest against interest rates is rendered mute in an era where they are already almost zero or even negative.

      This means money must become a means of exchange only. We must remove the commodity value of money. No interest, no financial derivatives, and no charges for use of money.

      Money has two inseparable characteristics, one is the trivial 'medium of exchange' aspect, the other arises the moment you introduce time. Deferring expenditure into the future implies a 'store of value' aspect, which is the same as 'commodity value' (just a different word for the same thing).

      Any heroic attempt to eliminate the store of value component of money means that no-one would ever defer expenditure, there would be no savings, no investment, no creation of future value.

      This is linked to the very idea of social stability. In world with zero stability every transaction would only happen in the present; no-one would risk deferring expenditure because the future would be too uncertain. The more continuous and stable a society becomes the more people are willing to risk deferring expenditure in the expectation of a greater reward in the future.

      But risk is never reduced to zero, there will always be some investments in the future that result in a loss. Interest, and it's many relatives, are the instruments we use to measure risk and to ensure investing in the future remains worthwhile.

      It's a statement of the obvious, but young adults start with very little capital in their 20s and as they move through adult life accumulate capital, either in assets, savings or investments. Younger generations, typically under 45 are in the expenditure phase of their life, while over that age they are in the saving phase, at least until they hit retirement.

      Obsessed as we too often are with the flow of money, we overlook that very broadly the flow of capital is from the old to the young. The tradeoff for having fewer children of our own (and thus constraining otherwise unconstrained population growth) is that we invest back into everyone else's children in the expectation there will be a payoff in our future.

      For much of our past, the world was relatively a lot more violent and unpredictable; typically we invested only those we were genetically related to, close family or clan because we could depend on their biological loyalty. The modern world enables us to expand this circle of trust immensely. Because this enables specialisation and dramatically expands productivity, we simultaneously escape the Malthusian poverty trap.

      Now of course a good idea can always be taken too far; there is no question that exploiting the commodity value of money has become far too embedded and distorts the system. It demands reform. But your proposed cure is truly worse than the disease.

      Edit: I see you are in the habit of putting my comments into automoderation on your posts. It is of course your right to do so, but it seems reasonable to ask you make this transparent to everyone what you are doing and why.

    • Brigid 3.5
      15 April 2020 at 11:58 am

      "For example if I grow Avocados on my land instead of raising sheep I might increase the amount of return I get from the same amount of input. THAT is growth and it doesn't have to involve environmental destruction."

      If that were an example it's based only on the fickleness of the market. What will you do when people decide they do prefer meat to avocados. Pull the trees out and replace with dairy cows? Thereby draining and also polluting the local rivers/ground water, along with destroying tracts of indigenous forest to supplement your animals with palm kernal.

      • Gosman 3.5.1
        15 April 2020 at 12:25 pm

        If there is a greater return to be had from meat when the cost of the externalities is factored in then the market is doing it's job.

  4. Gosman 4
    15 April 2020 at 10:58 am

    The concept of growth can be easily tied in with the principles of conservation. If I have scarce resources and I want to get the best use of them from both an economic AND environmental point of view I can incorporate costings of environmental externalities in to my economic modal and can get the optimal resource use. The issue in that situation is being able to cost the externalities to the required level. The model is not broken though.

    • KJT 4.1
      15 April 2020 at 11:20 am

      Properly pricing externalities requires regulation and or, taxes.

      State control.

      Something that is anathema to the Neo-liberal worldview.

      They only like State control of Workers.

      • Gosman 4.1.1
        15 April 2020 at 11:23 am

        Not at all. Neo-liberalism requires a high degree of regulation. You are mistaking Neo-liberalism with Anarchy / Libertarianism.

        • KJT 4.1.1.1
          15 April 2020 at 11:30 am

          Yes. It likes to regulate to ensure that money, trickles up.

          Regulating firms to act ethically and sustainably, is not so popular.

          Nor is the Government investment, and taxation required to change to more sustainable industries.
          Large firms are very poor at changing direction. Worse than Governments.

        • Blazer 4.1.1.2
          15 April 2020 at 12:15 pm

          How convenient it must be to base your argument on labels!

          There is a plethora of evidence regarding the de regulation of the banking system in the U.S, as the cause for the total clusterfuck of Q.E and current farce of unpayable debt internationally.

          The repeal of the Glass Steagal Act to allow the big Wall St banks to undertake massive gambling and invent synthetic 'products', at the behest of Greenspan and his disciples and their notion that the free market would naturally self regulate is the biggest con job in post war history.

          No lessons were learned from the GFC at all.

          • Gosman 4.1.1.2.1
            15 April 2020 at 12:23 pm

            Unpayable debt? What does that even mean?

            You criticise me for basing arguments on labels yet you have just done so with that statement.

            • KJT 4.1.1.2.1.1
              15 April 2020 at 12:26 pm

              It was in the post. Countries with levels of debt, that can never be repaid by any conceivable future production.

              • Gosman …
                15 April 2020 at 12:29 pm

                This is based on what objective measure?

              • Gosman …
                15 April 2020 at 12:30 pm

                BTW Q.E. is not exactly consistent with neo-liberalism so there is a contradiction at the heart of the comment from Blazer.

                • KJT …
                  15 April 2020 at 1:12 pm

                  BTW, debt and QE, are two entirely different animals.

                  QE is more akin to the King minting some of the gold in his treasury, into coins.

                • KJT …
                  15 April 2020 at 1:52 pm

                  One of the defining characteristics of Neo-liberalism, is that principles fall way behind, "who gets the money".

                  The proponents purport to be against State intervention, while they have their hands out to the Government, behind their backs.

                  I suppose the US QE, to bankers, is a form of no added resource use, growth. As they spent it on squirreling wealth away beyond the tax man, buying/speculating in, existing assets, and share buybacks.

                  • Gosman …
                    15 April 2020 at 1:55 pm

                    The trouble with your views expressed here is you are taking how the World works now and then ascribing almost every economic policy to Neo-liberalism. The Chicago school of economics was very much anti bailouts and support from the State to any industry.

                    • KJT …
                      15 April 2020 at 3:28 pm

                      You are assuming that the Chicago school economics was a consistent set of principles, rather than an elaborate justification for raiding the State.

                    • Gosman …
                      15 April 2020 at 3:38 pm

                      If you want to believe in elaborate conspiracy theories based on little more than your preconceived notions related to your ideological perspective that is your choice. I prefer to live in the real World myself.

                    • Tricledrown …
                      15 April 2020 at 9:23 pm

                      The Chicago School has only one objective to keep the US as the biggest bully on the block.Keeping all others in line.its run by crims and conmen who are more interested in protecting tax havens where dictators despots and drug cartels launder dirty money.

                    • mikesh …
                      15 April 2020 at 11:15 pm

                      "You are assuming that the Chicago school economics was a consistent set of principles, rather than an elaborate justification for raiding the State."

                      I don't think it's true that Chicago school economics, whatever you may think of it, is "an elaborate justification for raiding the state". People who do so are not really acting in accordance with principles espoused by Chicago/Austrian school. The latter believe in free markets and small government – stuff which we disagree with – but that's as far as it goes.

                • Blazer …
                  16 April 2020 at 8:31 am

                  'The great irony, then, is that the nation’s most famous modern conservative economist became the father of Big Government, chronic deficits, and national fiscal bankruptcy. It was Friedman who first urged the removal of the Bretton Woods gold standard restraints on central bank money printing, and then added insult to injury by giving conservative sanction to perpetual open market purchases of government debt by the Fed. Friedman’s monetarism thereby institutionalized a régime which allowed politicians to chronically spend without taxing.'

                  David Stockman.-budget director Reagan administration.

                  • Gosman …
                    16 April 2020 at 8:52 am

                    Show me where Milton Friedman or any other economist linked with the Chicago school of economics advocates for Q.E. or deficit spending. I will await your reply in keen anticipation.

    • weka 4.2
      15 April 2020 at 2:25 pm

      The concept of growth can be easily tied in with the principles of conservation. If I have scarce resources and I want to get the best use of them from both an economic AND environmental point of view I can incorporate costings of environmental externalities in to my economic modal and can get the optimal resource use.

      No shit. So you're in favour of the government regulating to require that environmental costs are accounted for?

      • Gosman 4.2.1
        15 April 2020 at 2:35 pm

        Of course I am in favour of government facilitating the cost of externalities. How it does so doesn't necessarily have to involve heavy handed regulation though.

        • weka 4.2.1.1
          15 April 2020 at 2:43 pm

          we've known it's an issue for a long long time. Take climate change as an example and explain how people might be doing this voluntarily or via govt-lite. Because it's not happening now, so what makes you think it will?

  5. pat 5
    15 April 2020 at 2:18 pm

    An excellent and timely piece of public service economics from Brian Easton at Pundit

    https://www.pundit.co.nz/content/a-childs-introduction-to-quantitative-easing

  6. Wayne 6
    15 April 2020 at 2:29 pm

    So KJT's position, with the covid crisis drastically reducing the economy, is to basically reduce it further. Because that is what all these "policies" would do.

    The real challenge for the government is to get the existing economy going again, not to try and radically change it.

    Obviously there will be changes, but not those that KJT advocates. The govt will certainly be spending on infrastructure, it will be spending on education (way more tertiary students), it will be spending on welfare, both personal and business. Quite a lot of other govt expenditure will being trimmed.

    The govt won't be trying to crash the mostly Aussie domiciled banks. In fact they will be essential for the recovery. A huge number of people (especially retired) have their savings in them, and even the current low interest rates are part of their income.

    • KJT 6.1
      15 April 2020 at 2:55 pm

      And then we will do it all over again, for the next financial crash, the next pandemic, global warming.

      And, each time, those Aussie banks, and their US and UK parents will own a little more of the NZ economy, wages will drop even more, the country will depend even more on low wage extractive industries, selling assets and importing billionaires.

      • In Vino 6.1.1
        15 April 2020 at 4:09 pm

        I agree with you, KJT, Unfortunately, we have too many shallow Righties who like the current system because it serves them well. They are loyal to the top few who love it because it is designed to enrich them and screw other people over. All these people will exhort us to "get the economy right first – then we can start fixing the other things."

        Unfortunately, there are too few people wth the depth of vision and historical knowledge to understand that the Economy makes a good servant (Roosevelt used it well to achieve some of his aims, as did Stalin and Hitler). Yes, the Economy makes a good servant, but a very poor master.

        Humankind has to be better than leaving our destiny to the whims of blind and unevenly balanced, easily manipulated "Market Forces".

        I suspect Wayne will continue to disagree… My opinion is that people who claim that the free market is our best way forward are lacking in social vision, and ignoring the lessons of history.

  7. Tricledrown 7
    15 April 2020 at 3:19 pm

    Your right Gosman they didn't follow they were told what to do by the World Bank. 1996-7 Argentina was forced to stop all Welfare including pensions and adopt the $US as its currency.The ACT party followed suite and adopted this policy 3 months out from the NZ election.Within a very short time the Argentinian economy collapsed unemployment went from 6% to 38% the Chicago School experiment was a complete failure.abandoned after 6 months ACT dropped its copycat policy after the truths of the extremist policy failure.

    • Gosman 7.1
      15 April 2020 at 3:40 pm

      ACT has never had that policy. Stop making up stuff.

      • Tricledrown 7.1.1
        15 April 2020 at 3:56 pm

        I don't make stuff up unlike you godman Richard Prebble announced the policy 3 months out from the 1996 election.That policy was dropped several weeks later after the results showed it was a complete disaster like your pathetic propaganda.

        • Stunned Mullet 7.1.1.1
          15 April 2020 at 4:00 pm

          Can you post a link for that Tricledrown – I can't find anything online.

  8. Tricledrown 8
    15 April 2020 at 4:09 pm

    No can't find a link but I was studying economies of the World at the time . I couldn't believe Prebble copied and pasted the WorldBank/CIA/Chicago Schools prescription for Argentina for ACT policy.It was dropped after the disaster it proved to be.

    • Gosman 8.1
      16 April 2020 at 7:49 am

      Of course you can't find it because it isn't factually accurate. Your mind made it up. As I stated above – Weird.

  9. Tricledrown 9
    15 April 2020 at 4:14 pm

    Gosman so you don't Deny Argentina implemented Chicago School policy .caught out again.

    • Gosman 9.1
      16 April 2020 at 7:48 am

      Ahhh…. yeah I deny Argentina implemented the most purist form of Chicago school policy. In fact the plan they put in place in the 1990's didn't come from the Chicago school at all.

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    BeehiveBy beehive.govt.nz
    1 week ago

  • Government consults on extending coastal permits for ports
    RMA Reform Minister Chris Bishop and Transport Minister Simeon Brown have today announced the Coalition Government’s intention to extend port coastal permits for a further 20 years, providing port operators with certainty to continue their operations. “The introduction of the Resource Management Act in 1991 required ports to obtain coastal ...
    BeehiveBy beehive.govt.nz
    1 week ago

  • Inflation coming down, but more work to do
    Today’s announcement that inflation is down to 4 per cent is encouraging news for Kiwis, but there is more work to be done - underlining the importance of the Government’s plan to get the economy back on track, acting Finance Minister Chris Bishop says. “Inflation is now at 4 per ...
    BeehiveBy beehive.govt.nz
    1 week ago

  • School attendance restored as a priority in health advice
    Refreshed health guidance released today will help parents and schools make informed decisions about whether their child needs to be in school, addressing one of the key issues affecting school attendance, says Associate Education Minister David Seymour. In recent years, consistently across all school terms, short-term illness or medical reasons ...
    BeehiveBy beehive.govt.nz
    1 week ago

  • Unnecessary bureaucracy cut in oceans sector
    Oceans and Fisheries Minister Shane Jones is streamlining high-level oceans management while maintaining a focus on supporting the sector’s role in the export-led recovery of the economy. “I am working to realise the untapped potential of our fishing and aquaculture sector. To achieve that we need to be smarter with ...
    BeehiveBy beehive.govt.nz
    1 week ago

  • Opinion: It’s time for an arts and creative sector strategy
    I was initially resistant to the idea often suggested to me that the Government should deliver an arts strategy. The whole point of the arts and creativity is that people should do whatever the hell they want, unbound by the dictates of politicians in Wellington. Peter Jackson, Kiri Te Kanawa, Eleanor ...
    BeehiveBy beehive.govt.nz
    1 week ago

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