Hands-on economies are dying

The bigger the lie, the more likely it will be believed

OPENING SALVO

The bigger the lie, the more likely it will be believed.

Today’s left wails that the global financial crisis has undermined the case for so-called neoliberal economics: free and open economies, price stability as the primary goal of monetary policy, freely traded currencies, prudent fiscal policy and private ownership of productive assets.

David Shearer says “the hands-off, leave-it-to-the-market approach has failed all over the world.” Labour/Green will be “hands on.”

To Labour’s credit, it still says New Zealand needs to return to surplus – as well it might, with net public debt forecast to reach Zimbabwean levels by the middle of the century.

But, broadly, the ideas exciting today’s left are abandoning so-called austerity, pump-priming economies with borrowed or printed money, managing exchange rates with unspecified new “tools”, picking winners and supporting them with taxpayer cash, more regulation, and keeping all state assets in their current ownership forever.

This, they say, would have avoided the financial crisis and is the path to recovery.

Even a drop of real data shows it to be absurd.

Click to enlarge

Freedom Index
The countries that best weathered the crisis were exactly those that have followed the so-called neoliberal agenda.

According to the Heritage Foundation’s Index of Economic Freedom, the world’s six freest economies are Hong Kong, Singapore, Australia, New Zealand, Switzerland and Canada (see table).

These six have avoided anything like the deep and prolonged recessions of more interventionist countries.

The IMF continues to forecast higher growth for the six than for countries further down the freedom list.

Even more important, both unemployment and youth unemployment are lower in the more free-market economies.

“Hand’s-on” countries like Sweden seem unable to design an economic system that avoids a quarter of their young people being unemployed.  In the six freest economies, youth unemployment is half socialist Europe’s.

Moreover, it wasn’t free-market economics that created the crisis.

The US’s troubles were driven by fiscal profligacy and the Clinton Administration’s populist housing policies.

In Europe, the crisis was caused by what amounted to fixing the Greek, Italian and other currencies to Germany’s, followed by massive over-spending.

n the UK, Gordon Brown borrowed more than all previous British governments for the last 1000 years combined.

In contrast, no free-market economy, operating prudent fiscal policy, has suffered anything like the same problems.

Predictably though, the left now tells us, the best path forward for the US, the UK, the PIIGS and New Zealand is the spending and interventionism that got the world into trouble in the first place.

Shearer’s favour
Still, Mr Shearer has done us a favour by launching a “hands-on / hands-off” debate.

It highlights the risks of departing from successful free-market economics towards the kind of EU-style interventionism first begun by Jim Anderton and continued ever since.

With SkyCity, Warner Brothers, Mediaworks, ultra-fast broadband and roads of national significance, Mr Key’s government is quite hands on enough, thank you very much.

The data suggests it would be doing us all a favour if it dropped those types of interventions and just got on with radically liberalising the labour laws and the Resource Management Act.

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99 Comments & Questions

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Yeah, yeah, yeah, blah, blah, blah... meanwhile in the real world.

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Wake Up lad! Get some one to explain these facts to you in very simple terms.

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Yes Paul I agree and back your opinion up with one name: China.

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Would you rather live in China?

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I thought that's what National's adherence to rampant capitalism aspires for us. Growth, growth, growth!! China is the shining example of that path and really the only difference between us and them is that we have got less people. Our systems are just as flawed.

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The fact that we are having this discussion without being dragged off to who knows what is proof of a difference in systems. Anyone reading the press will see that although growth is a key target, it is far from mindless. You would need extremely blinkered observation to miss the philanthropic, the cultural, and the innovative approaches that come with systems we employee.

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I'm talking about our economic and infrastructural systems. And I disagree with your assertion that our addiction to growth is mindless. Of course it is mindless. All the stats indicate if we keep on doing what we are doing we are going to get what we have got in increasing measure. Pollution, unsustainably huge populations and massive inequalities in wealth. Yes the human spirit continues to thrive but the 'system' is slowly but surely destroying us.

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Which statistics are these, Mr Chin? Or are they ones that you have made up? There have always been inequalities in wealth. If you don't work, you don't have any. If you do, you are pulling further ahead of those who don't.

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Perhaps you should change your name to sanctus simplisitus. What if market failings result in high unemployment? What if rapacious capitalists pay a minimum wage under the smiling, benign gaze of their rich buddies in government? What happens when the same capitalists cynically cash in on externalities like pollution to line their own wallets to the detriment of all of us? What happens to the inequalities between the have money vs the have no money then?
Don't attribute the inequalities in wealth to some obscene notion of social Darwinism. Attribute it to where it actually lies. The base human characteristic of greed and an obsession with power, control and status measured through conspicuous consumption. You want stats? Look them up for yourself if you can be bothered. Climate change, deforestation, population increases, the increasing gap between rich and poor, decreasing home ownership rates in NZ and no work for almost a quarter of our young. Break out your fiddle and wine In Vino Veritas.

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Mr Chin, people could always take personal responsibility for their own situation and upskill, learn, train and educate themselves into a better future. All it takes Is hard work, sustained effort, forgoing immediate gratification and hours on the couch...

Then that same person taking personal responsibility for their situation can chance their own situation into something better for themselves.

Personal responsibility is what it's called.

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Catch-up effect.

The fact they were held back for so long was because of interventionist policies. These are now being removed and their economic output is quickly moving to a natural level. Although their growth rate is higher than ours their economic output per capita is still of course far less. Eventually, the annual growth from liberalisation will diminish as they catch up to other more industrialised countries.

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Another stuck record... you can say all you like, but income/standard of living disparity is huge, basics are among the most expensive anywhere on the planet, up to 200,000 kids are living in dumps and going hungry, our SEO model, particularly power, is screwing us, drones like Mr Hootten everywhere getting paid for no more than a couple of hours of real work per day, no national effort call to action on exporting, which is the only effort that can make this country richer, and a gradual drift towards an apartheid-style constitutional arrangement. So go educate yourself, sonny, this country could be managed a hell of a lot better in the interests more New Zealanders than just your type.

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Just because I can . . .

I think you mean State Owned Enterprise (SOE) Model. Not Search Engine Optimisation (SEO) Model.

I find quite a few people make this mistake when they rant too fast :)

Oh, and if you could elaborate on what exactly an apartheid-style constitutional agreement is, that would be swell.

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Pedant

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Treaty of Whycan't-we-have-it-all?????

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Right on.
Thank you for being one of the few in the MSM to finally start calling out Labour on all the bullsh@t they spout, looking beyond the populist rhetoric electioneering bribes they so freely give away... Because its someone else's money.

Can you please also look into the various unions funding of labour that have in some cases been 7 consequitive years late in filing their minimum legal financial reporting requirements. By publicly available information, it's been demonstrated on WOBH blog that the unions have millions in cash and assets that "appear and disappear" in their obfuscating legal filings. Seems there's plenty of scope for wide ranging corruption with this going on... Just like how we are witnessing with the Aussie unions and Labor party... And no one seems keen on exploring this possibility?

Seems rather strange since Labour Party MP's have proven themselves corrupt again and again.. And their union financiers are hiding millions in both cash and assets.

Could be quite the coup lifting the lid on sordid, on going political corruption...

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It's hard to understand your rabid obsession with pillorying Labour and exposing their supposed corruption. They are the biggest of the opposition parties. They bring balance and democracy to the process of government. If you want an inquiry into the financing of political parties and corruption amongst politicians, then widen the scope and include them all. Could be quite the coup indeed.

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"All that's needed for evil to flourish is for good men to do nothing." Edward Burke, I do believe. Or something along those lines anyway.

Through publicly available information, commentators on WOBH blog have discovered millions and millions in both cash and assets that appear and disappear in their incorrectly filed yearly accounts... In some cases 7 consecutive years late! 7 consecutive years late!!

With the electioneering bullsh@t bribes the left throw out, which for me means being overtaxed even more to fund their free handouts at election bribe time.

I don't think this is right at all. Nor isn't ethical, logical or even credible. But most of the MSM seem to gloss over their deceit and lies and give their corrupt MPs a "free ride".

These liars, cheats and proven corrupt politicians on a number of occasions across a number of locations, topics and opportunities need to be held to account and should have to justify to NZ Inc their fully costed policies... Instead of the fairytale populist rhetoric they spout that is rarely ever questioned. Eg, all we know about Labour/Shearer's housing policy is that they will build 100,000 new houses in Auckland for under $300K each. Where are the damn details?

Why the free ride on such a wishful, populist rhetoric? Would the MSM question them properly if they promise a unicorn in each backyard also?

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An absolute gem of an article Mr Hooton. I predict the neoliberals will dismiss it largely unread or analysed for no other reason than it might rattle their consciences.

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They left a few interesting countries: Japan, China, South Korea, India, Indonesia, Brazil, Holland, Denmark.

They don't really like the way we do things here. For example, I don't think the Heritage Foundation would support Obama care or welfare programmes designed to help people get back into the workforce.

We would be too "big government " for them.

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Are you seriously suggesting that the Singapore is not 'hands on' in the running of the economy?

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Shearer is "lengthening the rope" with his continued BS. The lie bore govt squandered over $20 billion of surplus during their last tilt at the helm AND during that time of prosperity we still had over 250,000 kids in poverty! The Labour/Greens hands-on approach doesn't work. The Greens are pre-occupied with measuring water quality or wind quality but aren't interested in measuring the quality of our teachers and education system. Talk about penny wise and pound foolish!

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A couple of rebuttals are called for. The surplus was squandered by the National-led government, aided and abetted by a woefully misguided Maori Party bailing out failed big business buddies in the form of finance companies and giving tax cuts to the greedy few who can never have enough.The Finnish education system (widely acknowledged as the best in the world...) trusts its teachers to do the job they are expert at without hands-on government interference.

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Headmaster should take off the red-tinted propaganda glasses and relearn history again because the surplus was squandered by Labour. In fact, they left a $1Bn hole in the ACC budget, Cullen bought a decrepit and failed rail business at a considerably higher price than would be usual under normal commercial "due diligence" criteria ... then the finance companies started falling over as the the GFC started to really bite.

National received the biggest fiscal hospital pass in all of history from Labour.. but fortunately for NZ Inc, we had a National government to stear NZ Inc through it all - otherwise we would probably be like Greece and just about all the other failed socialist economies.

What do socialists do when they run out of other people's money to spend? They proclaim they want to be the Minister of Finance so they can print as much money as they need to get out of debt!

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What a tired old apology for a National government with no intellect or imagination. Borrow and hope, and line the rich buddies' bank accounts for the hard times coming is the National mantra. It's time to get innovative.

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With Headmasters like this, it is no wonder that 20 - 25% of the children leave school functionally illiterate and innumerate.

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Maybe those 20-25% of those children are better at other things like rugby or sailing or making stuff...

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...if they can't read an OSH safety manual to keep themselves safe...

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You would throw them on a scrap heap somewhere?? How about they get someone to read it for them?

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How about we get rid of the useless teachers the unions shelter, prosecute parents that fail to deliver basic, bare minimum "living standards" to their children who elect to spent their monies on booze and ciggies, so the kids can then get breakfast, so they can then concentrate at school so they can learn.

Or the kids - of almost any age - can take responsibility themselves and try and learn. Asian kids of all ages have the "right" attitude - most Kiwi kids don't. Go figure? It's not ethnicity that decides this - it's attitude!

The real issue though, is that everyone should be able to read and write long before they enter intermediate school. Parents are failing their dependants and schools are culpable for allowing it to happen and not reporting those failing parents to the likes of WINZ and or police.

It might not be the kids fault they can't read or write - but it darn well is the fault of the parents for not teaching and supporting their dependants.

It's about time parents were names and shamed as those responsible for not supportiung their dependants... and shame and ridicule them publically if they think it's the job of any sitting government.

It's all about attitude... and some parents need their attitudes adjusted BIG time!

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You are a nut case.

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I'm telling my therapist on you. Seriously, though, why the schoolyard bully boy name-calling tactics?

Is it because home truths start being a little too close to home? Or as a master of head you think only teachers can teach children to read and write?

Your logic is as skewed as your politics, master.

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Headmaster - time for you to head back to the standard.
I didn't see any rebuttal in your reply, but let's look at Finland - masters degrees min requirement and selective training programmes and the freedom for principles to remove under-performing teachers. Would love to have that here!

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Just to put the record straight about Masters Degrees for teachers in Finland. The basic degree all Finns get when they go to university is a Masters degree, There is no Bachelors equivalent. All their nurses, lawyers and accountants have Masters degrees too!

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Rebuttal: offering a contrary contention or argument. Obviously, one of the 25% I hope you can do something else useful. We have a process for removing under-performing teachers here, too. Don't let the facts get in the way of your prejudices, will you.

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My dearest, Headmaster, I think if you research you will find that Labour instigated the bailout just before leaving office, agreed to by National. However, if y'all want to live in the past that's OK, too, but really what happened yesterday cannot be changed only what happens from now to the future. I thought a Headmaster would understand this?

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Oh yes, Labour were responsible for Novapay too, weren't they? Living in the past and blaming a previous administration does get a bit tiresome after a while. Some forward-looking innovation from the government would be good, though entirely unlikely.

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When Labour got in 1999 total Govt spending was about $29b and when they got thrown out it was about $60b. During an interview on TV Cullen said it was ok for Govt expenditure to increase at the rate of increase of GDP and they pushed a large number of costs from central Govt onto Councils. What about being more efficient. Hi i'm from the Govt and i'm here to help you.

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How do you explain that the fiscal deficit (on an accrual basis) reached a record high of 9¼ percent of GDP in 2010/11, raising net government debt to 20 percent of GDP by mid-2011 from a low of 5½ percent in 2008. The National led government continues to spend at an alarming rate to the benefit of their rich friends. Rather than financing it through encouraging diversification and innovative new initiatives in the New Zealand economy they stick with tired old orthodoxies and they borrow.

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Of course fiscal debt was going to increase by 2010/11. Clark and cullen left a lot of hidden, yet to be implimented 'millstones' for the incoming government. They both knew that Labour wasn't going to win the 2008 election, so didn't care about what expenses they bequethed to the future.

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Of course New Zealanders care about the legacy they leave for other NZers. You can't seriously attribute that level of economic treachery to ex-ministers of the Crown! Political parties act in accordance with the wishes of the constituents. National is obsessed with looking after their rich mates to the detriment of workers and the environment. This outdated greed-based approach benefits a few in the short term. Following this approach is going to result in a net government debt that is going to peak at about 30% of GDP in 2015. It's time to get creative and generate sustainable progress and fair wealth distribution for the benefit of everyone, not just the few.

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Trevor...on ya bike ya troll.

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Headmaster, Labour had 9 years of the best economic conditions of a generation. Labour had the funds to decrease the deficit, increase (alamingly - from 15% if GDP to 30% of GDP) spending and leave nothing except future liabilities for an incoming government saddled with the worst global financial crisis since the depression.
Before Labour were voted out, Treasury were predicting large, ongoing deficits (on top of unemployment reaching 7.3% in 2011), and what did Labour do about that? Thats right, nothing.

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Ever hear of the world wide GFC and the Christchurch earthquakes? You might be a master at giving head... But you really need to re examine your understanding of recent history.

FFS... Please don't tell us you teach the children of NZ Inc either...

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Yeah, whatever. Another familiar tired old smokescreen attempting to hide the National-led government's lack of intellect, innovation and imagination. Thank Christ for the Greens.

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Can I just say, I have read the entire of this comment thread and that very last comment had me rolling on the ground with laughter. Pretty much explains why I was so confused reading your other comments. Thank you Headmaster for brightening up my day :)

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The problem with the Labour/Greens current philosophy, is that it still only looks at quantity, and not QUALITY.
The facts in this article are probably beyond the comprehension of the Labour Party and its followers, even Cunnliffe with his high faluting degree doesn't seem to understand the basics of economics.
The greens can't even read the article.

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I'm Green and I'm reading it. Do a degree and challenge your prejudices.

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A degree does not challenge your prejudices; if it is a degree of any real value, it broadens your outlook and increases your powers of enquiry. Thus making you a more useful person in the economic and social world.

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Oh, so it reinforces ones prejudices?

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