What's in a name? Are we really a "capitalist command economy"?

WHAT'S IN A NAME?

What do you call an economic system that's neither a free-market economy with a small state and light-handed regulation, nor a state-owned economy run by bureaucratic, politically-driven trading departments -- it's neither, sometimes both, but mostly a mongrel grab-bag of bits from small govt and large. They're wrestling with that question in the UK at the minute -- and we could just as easily ask the same question here:

The left call it neoliberal but neoliberals have had no meaningful influence on British governments for thirty years. The right call it socialist but neither the Tories nor Labour have shown much [recent] interest in seizing the means of production. 

Liberty Scott puts the question:

Of course the Greens, TPM and parts of Labour will say t[that New Zealand] is under the oppressive yoke of neo-liberalism, and their latest scapegoat "billionaires" and "foreign capital"; and, of course, people like me will rail against the "commie kids" on the left in Parliament and in local government, but [in truth] there's little real evidence of NZ embarking on [either] Douglas/Richardson Mk. 2 or becoming the DDR ....

It's not to say the Douglas/Richardson ... reforms have been unwound. New Zealand isn't returning to rampant protectionism, nor has Labour embarked on vast re-nationalisation ... ["but hold my beer!" says Winston], but what has happened is an accretion of central command and control.

This is one reason some pundits are beginning to realise that, beyond the usual vitriol, there's so little separating the two tired main parties that a Grand Coalition would at least be more honest than continuing their pretence of difference. They've both kept the institutional structure established by Douglas/Richardson, while quietly growing an activist state to increasingly dictate how (and by whom) it will be run -- "regulatory control of the private sector remain[ing] at the heart of what the Wellington bureaucracy advances to meet [their] social goals."

Some might call this Fascism, i.e., the pretence of private property with an activist state dictating terms. But we're not there yet.

Ludwig Von Mises, who'd seen and escaped from the Nazi's fascism, would probably have simply called it a Hampered Market:

The system of interventionism or of the hampered market economy differs from the German [i.e., the Nazi] pattern of socialism by the very fact that it is still a market economy. The authority interferes with the operation of the market economy, but does not want to eliminate the market altogether. It wants production and consumption to develop along lines different from those prescribed by an unhampered market, and it wants to achieve its aim by injecting into the working of the market orders, commands, and prohibitions.

BOTH MISES AND HIS student Ayn Rand were quick to point out that the Hampered Market, or what Rand was happy to dub the Mixed Economy, was of course a mongrel mixture on the way to something else -- that no matter how tired the state's representative might seem, it is still their coercion that is pulling the strings. Any analyis of the Mixed Economy must logically, she said, begin by identifying the two elements that are being mixed: A mixed economy, she identified "is an explosive, untenable mixture of two opposite elements,” freedom and statism, “which cannot remain stable, but must ultimately go one way or the other.”

A mixed economy is a mixture of freedom and controls—with no principles, rules, or theories to define either. Since the introduction of controls necessitates and leads to further controls, it is an unstable, explosive mixture which, ultimately, has to repeal the controls or collapse into dictatorship. A mixed economy has no principles to define its policies, its goals, its laws—no principles to limit the power of its government. The only principle of a mixed economy—which, necessarily, has to remain unnamed and unacknowledged—is that no one's interests are safe, everyone's interests are on a public auction block, and anything goes for anyone who can get away with it. ...

A mixed economy is rule by pressure groups. It is an amoral, institutionalised civil war of special interests and lobbies, all fighting to seize a momentary control of the legislative machinery, to extort some special privilege at one another's expense by an act of government—i.e., by force. In the absence of individual rights, in the absence of any moral or legal principles, a mixed economy's only hope to preserve its precarious semblance of order, to restrain the savage, desperately rapacious groups it itself has created, and to prevent the legalised plunder from running over into plain, unlegalised looting of all by all—is compromise; compromise on everything and in every realm—material, spiritual, intellectual—so that no group would step over the line by demanding too much and topple the whole rotted structure. ...

The only danger, to a mixed economy, is any not-to-be-compromised value, virtue, or idea. The only threat is any uncompromising person, group, or movement. The only enemy is integrity.

If there's one thing New Zealand's so-called opposing parties do agree on, beyond their love for the activist state, it's their hatred of the groups their erstwhile opponents appear to favour., their cronies or voting fodder But as Rand points out, 

If parasitism, favouritism, corruption, and greed for the unearned did not exist, a mixed economy would bring them into existence.

ECONOMICALLY, WE LIVE IN a Hampered Market. Politically, we live in a Mixed Economy. Realistically, we should be aware that neither can exist indefinitely. Things "must ultimately go one way or the other."

State of the Nation address on behalf of the Honesty Party

"My fellow New Zealanders, whether citizens, residents or those just passing through en route to Australian pastures, it gives me little pleasure to deliver this State of the Nation address on behalf of the Honesty Party because the State of the Nation is, to use a variety of technical terms, knackered, stuffed, buggered.

"While I am sure many of you use far more less technical terms, we can all agree, in the spirit of total honesty that this great party proudly stands for and embraces, that the country is not what it was nor indeed what it claims to be – and hasn’t been for decades.

"The Honesty Party recognises that our problems and issues as a country predate Rogernomics and Ruthenasia. Muldoonism was a failed experiment in populist authoritarianism and economics that failed to adjust to a rapidly changing world. What was once the (if briefly) wealthiest country in the world had already begun its decline and fall. The long snooze of the Holyoake years had set the tone of a ‘steady as she goes’ mentality, one that too often has meant the ship of state has steadily gone aground on the rocks of despair and desperation.

"The basis of our economy is one that no other first world nation has decided upon. A primary-production exporting economy to which we have added tourism, an overinflated housing market and high levels of immigration sets us apart, for a reason. New Zealand used to be the social laboratory of the word; today in all honesty we could say New Zealand is the economic laboratory in how to over promise and under deliver."

~ Mike Grimshaw from his post 'State of the Nation Address: The Honesty Party (An exercise in political honesty)'

"Everyone wants growth. But will ... they have the courage to upset vested interests on their own side?"

"The problem is that politics is not about good intentions, but trade-offs and results. Everyone wants growth. But will ... they have the courage to upset vested interests on their own side? The government still has promising changes in the pipeline on housing and infrastructure. But elsewhere? ...

"[H]ere’s [a] strategy, one advocated in a fascinating essay from 1989. The author opens by arguing that 'politicians tend, worldwide, to avoid structural reform until it is forced upon them by economic stagnation, a collapse of their currency or some other costly economic and social disaster. Politicians tend to close their minds as long as they can … because they believe that decisive action must inevitably bring political calamity upon their governments.'

"But the writer goes on to make precisely the opposite case: 'Political survival depends on making quality decisions; compromised policies lead to voter dissatisfaction; letting things drift is political suicide.'

"Voters, he argues, 'ultimately place a higher value on enhancing their medium-term prospects than on action that looks successful short-term but which sacrifices larger and more enduring future gains … There is a deep well of realism and common sense among the ordinary people of the community. They want politicians to have the guts and the vision to deliver sustainable gains in living standards.'

"Strategically, he also advises pursuing reform in 'quantum leaps' rather than small steps; 'otherwise the interest groups will have time to mobilise and drag you down.'

"The whole 35-page paper, 'The Politics of Structural Reform',' is worth reading, not least because so much strikes a chord today ('Inadequate politicians see instant popularity as the key to power. If their rating slips, they feel threatened. They look for policies with instant appeal to create continuous public bliss').

"But what is most striking is that the writer is a Labour politician: Roger Douglas, who, as minister of finance — equivalent to [the UK's] chancellor — led New Zealand through one of the most bruising periods of free-market reform in any nation’s history (a programme known as Rogernomics) and saw his party re-elected with an enhanced vote share at the end of it.

"Starmer’s Labour came to power by taking the opposite of Douglas’s advice. It told the public that spending would rise, growth would rise but taxes and borrowing would not. That no one would have to feel any pain. And when that turned out to be a lie, it got hammered for it.

"Wherever the government goes next, it is unlikely to be down a path of Douglas-esque, business-friendly radicalism. But I believe — I have to believe — that the public will still reward politicians who are honest about our country’s problems and visibly try their damnedest to fix them. Because if not, what hope have we got?"

~ Robert Colville from his London Times column 'https://archive.fo/E7HXi'

The Coming of the "Principles"

Matiu Rata: "... the most effective NZ
politician of the last half-century?"

As 1975 began, neither Treaty nor Tiriti were part of New Zealand law. By years end, the Treaty's legal status was transformed, and "it's place in the new Zealand polity and the country's history and culture were assured." [1]

This is when the "Treaty Principles" were born. "Treaty" was the English text (and was only ever a draft). "Tiriti" was in missionary Māori, and was the document that was signed. Arguably the actual treaty. Something called the "Treaty Principles" was supposed to moderate between these two allegedly irreconcilable documents, with the priesthood of the Waitangi Tribunal empowered to "interpret" the space between. Under Eddie Durie's stewardship, that space was gently but firmly prised open to reveal an ever-flowing vein of political privilege and alluring economic wealth.

It all began with a Labour Party manifesto. Historian Bain Attwood explains:

What transpired amounts to a case of unintended — and thus unforeseen — consequences.... The Labour Party, led by Norman Kirk, had been returned to power just two months earlier for only the second time in twenty-two years; [Matiu] Rata had become both the Minister of Maori Affairs and the Minister of Lands; ...

The Labour Party had been elected on the basis of a manifesto (in both English and Māori) that included a promise to examine a ‘practical means acknowledging legally what it called ‘the principles set out in the Treaty’. After introducing legislation about Waitangi Day shortly after winning office, it belatedly turned its attention to this commitment, directing its caucus committee on Māori affairs to provide a report on the matter. In undertaking this work the committee largely conceived of its task in terms of this question: whether any legislative action could be legally taken regarding the Treaty? Answering in the affirmative required it to demonstrate that the Treaty was a valid legal agreement and a binding one....

The committee was struck by [a recent academic] argument that whereas the English version had long been regarded as the authoritative version, the Māori version should have primacy because it had been widely circulated and signed by most of the 540 Māori chiefs and it was the one that was first signed (at Waitangi). ... Moreover, it held that ‘the question of versions’ was primarily important only in respect of the first part of the Treaty’s second article, and this was because Ross had noted that the English version was more specific about the kinds of Māori property the Queen had guaranteed to protect than was the Māori text.

[T]he committee was determined to demonstrate that Parliament could give some legal effect to the Treaty. Consequently, it asserted that the central issue was not whether the Treaty was in Māori or English but that it was a binding agreement that had been made by the Crown and the Māori chiefs. This was in keeping with its insistence that the Treaty could become ‘an instrument of mutuality.’... that, as far as Māori were concerned, ‘no amount of legalistic argument’ could detract from the fact that their forebears had entered into a binding agreement with the British in good faith and that the Crown had a responsibility to uphold the Treaty’s principles. Clearly, the committee regarded the Treaty in the same way that Māori and some Pākehā ... had long conceived of it — as a moral agreement rather than a legal contract — and so it emphasised the spirit it believed the Treaty symbolised rather than any strict rights it might be said to contain.

In short, the actual words of the Treaty/Tiriti became less important than the spiritual importance of this binding agreement, this "instrument of mutuality," this beginning of a "relationship" —or of something said to be "akin" to it. 

Observe here that Parliament itself never bothered to define the principles, leaving it open to the Waitangi Tribunal and later the courts to do so. And nor does the Treaty, in either language, state principles. As Gary Judd KC explains, 

It is an agreement recording an exchange of values, including future obligations. Parliament created the fiction that there are principles, which produced the opportunity for creativity in their formulation. The Ministry of Māori Development’s 2001 summary shows how this can be done. If one is able to search for, “underlying meanings, intention and spirit,” the scope becomes very wide, and open to adoption of subjective viewpoint.

So as the words lost importance in a legalistic sense, at this very same time a new organisation was established, a tribunal, that was empowered to fill that vacuum themselves. Their pronouncements became known as the Treaty Principles, which would encompass some of those more "mystical" interpretations of meaning. This is how it happened:

The committee ... recommended the establishment of a tribunal ‘for the purpose of maintaining, upholding, advising and hearing of any matters related to the treaty to which existing laws offer no redress’. However, once the Cabinet agreed to endorse this proposal, an unexpected question arose, and the way it was answered would, inadvertently, enable the Waitangi Tribunal to do the transformative work that it eventually undertook.... 

[But] the Secretary of the Department of Maori Affairs, J. McEwen, realised that an important question had to be addressed because the committee had recommended that both the English and Māori texts of the Treaty be considered in any legislative enactment. ‘As the two versions differ, it will be necessary to state clearly which version is to be authoritative’, McEwen pointed out to Rata. ‘It can be either the English version or the Maori version, or both, but if the latter alternative is chosen, there will have to be a specific provision which empowers somebody to decide the true meaning of the words. I would suggest that the way around the difficulty would be to make both versions authoritative and expressly empower the Tribunal to decide any issues arising from the differences in wording.’ Consequently, he drafted a clause that stated: ‘In exercising any of its functions under this section the Tribunal shall have regard to the two texts of the Treaty set out in the First Schedule to this Act and, for the purposes of this Act, shall have exclusive authority to determine the meaning and effect of the Treaty as embodied in the two texts and to decide issues raised by the differences between them.’  

In time, this clause would see the matter of the two texts become central to the Tribunal’s work and allow it to bestow a degree of authority on the Māori text that McEwen could never have imagined and which he had actually tried to prevent in his drafting. Nor did anyone in government anticipate that McEwen’s adoption of the Labour Party manifesto’s mention of ‘the principles’ of the Treaty would prove similarly vital to the work the Tribunal did.

And lo, 'the principles' were to take on a life of their own.

He might have only read comics, but there's a strong case to be made that the most effective political reformer of the last half century isn't Roger Douglas; it's Mat Rata.

* * * * 

1. Bain Attwood, A Bloody Difficult Subject: Ruth Ross, te Tiriti o Waitangi and the Making of History. 101 

2. ibid, pp 101-3

3. ibid, p. 103

"If the Campbell affair triggered a broad discussion on what to do about the public service, that would be a positive outcome."

"The sacking of Rob Campbell from his role as chair of Te Whatu Ora/Health NZ ... [is] symptomatic of a wider problem, which is the politicisation of the public service. This politicisation is not necessarily party-political in nature. Rather, it is that the public service has developed its own idiosyncratic mindset.
    "At the risk of overgeneralising, the public service usually prefers central government programmes to local solutions. It believes in the power of the state and distrusts markets. It also works towards maintaining and growing itself, even when its failures become impossible to ignore...
    "What a functional public service can achieve was demonstrated in the reforms that rescued the New Zealand economy in the 1980s. Though politicians get credited for them, they would not have happened without the foresight and preparedness of qualified and committed senior public servants.
    "A future reform-minded Government will find it much harder than the Labour Government did in the 1980s.
    "There are not enough people inside the public service today who could design and lead such reforms. On the contrary, we can expect large parts of the public service to resist evidence-based reforms that might upset the status quo.... The best policy ideas are worthless if they cannot be practically implemented.
    "Public service reform is needed to address the challenges facing New Zealand. If the Campbell affair triggered a broad discussion on what to do about the public service, that would be a positive outcome."

~ Oliver Hartwich, from his post 'Public service reboot needed'

ECONOMICS FOR REAL PEOPLE: The Roger in Rogernomics

Your chance this week at Auckland Uni Econ Group to question a former politician whose economic programme of thirty years ago still casts a long shadow over the political landscape today.

Hi everyone,

Welcome back from the study break. We have some great speakers lined up for the Economics Group starting this week.
This Thursday we are delighted to have join us a very significant figure from New Zealand's economic history - Roger Douglas.
As Minister of Finance in the Labour government from 1984 to 1988 Roger Douglas implemented a series of economic reforms often referred to as ‘Rogernomics.’ These reforms are still the subject of lasting controversy.
This Thursday evening, Roger will paint us a picture of what the New Zealand economy was like before he became Minister of Finance; the motivation behind and the nature of his reforms; and briefly mention what further reforms he feels are needed to ensure future economic growth for New Zealand.
Following the presentation there will be a period for questions and discussion.
    Date: Thursday, 1 May
    Time: 6-7pm
    Location: Case Room Two, Level 0, University of Auckland Business School, Grafton Rd
                            (plenty of parking in the basement)
This is an exceptional opportunity to hear from and question a major figure in New Zealand’s economic history.
We look forward to seeing you there.

It’s the economy, stupid.

“Finance Minister Bill English says the govt deficit for the year is likely to be about $16 billion to $17 billion - the largest deficit New Zealand has ever had.”

And this government wants to run with Bill English’s handling of the economy as a “core” election issue!

Unbelievable.

This is the largest deficit any New Zealand govt has ever run. Ever. And they think it give them economic credibility.

That they do is one more reason to damn them.

Make no mistake, this economic disaster is not the result of a natural disaster. Things were already well out of control well before half of Christchurch was destroyed. It is not the result of things beyond this government’s control. It is precisely because this grossly irresponsible govt has made some very, very bad choices:

• To swallow the dead rats that have now come back to bite us.
• To smile and wave instead of knuckle down and do the right thing.

Roger Douglas is right. This sort of result is what happens when you put off dealing with problems in your first term for fear of scaring the horses.

But big as this deficit is—big enough even for ratings agencies and the IMF to notice—there is an even bigger deficit here, and that is the ability deficit of this Finance Minister and his Master—and of their opposition counterparts in Hard Labour.  Hard Labour’s David Cunliffe is right that Key’s men have no economic plan. But neither does Silent T. Nothing at all. Frankly, it’s beyond him too.

But it’s frankly not hard to know what has to be done. Not hard at all. It’s precisely the same recipe now as it was in 2008, only more so:

• Don’t spend so goddamned much.
• And get the hell out of the way.

At this dangerously destructive point, you’d be stupid not to.

A retiring Roger Douglas

Roger Douglas is retiring from politics. Again.

At the age of 74, this time it’s probably for good.

His record isn’t anywhere near as good as his supporters would seem to believe—and because the reforms for which he was responsible were done in part by stealth, and the architects of the Rogernomics revolution never bothered to foster a parallel revolution inside people’s heads, it was a record which led many to believe that the free market itself operated on stealth—and it poisoned a generation on the very idea of free-market reforms.

In that respect, he and his colleagues helped bring the ACT Party’s ever-worsening fortunes on themselves.

But on the other hand, his record is nothing like as bad as his critics would have you believe.  The structure of political economy in which we live today is still the house that Douglas built, and even his harshest critics did nothing to alter his floor plan. And without his reconstruction, there would be many more grandparents than there are now around New Zealand mourning the loss of their children and grandchildren to richer pastures overseas.

New Zealand is a richer place today than it would have been without him. For that he deserves thanks.

As a politician he really only had four years in the sun, four years when he found the courage to admit to himself all he had previously thought was wrong—four years when, for all the blundering, he and his reforms (let’s admit it ourselves) rescued New Zealand from becoming the Polish shipyard it had almost become. Whatever else he did before or since, it will be those four years of crisis on which history will judge him. (And the best judge of that history in my estimation was not written by a bitter David Lange, but by the man who as the country’s “go-to” interviewer at the time saw it all up close: Lindsay Perigo.)

There are two great tragedies in Douglas’s late career.

The first is that a National Government facing another economic crisis and with no answers to meet it could not find it in their embittered souls to make use of his ability. There he sat for the last two years doing almost nothing while his coalition partner fiddled. What a waste.

The second tragedy is that he didn’t just sit quietly and do nothing for those last two years.  Instead he was jetting off round the world to see his grandchildren, and charging to to the taxpayer’s tab—and when he was sprung for it he compounded his error by telling us to our face that he is “entitled” to dip into our pockets.

A sad final act for a man whose performance in his short time in the sun makes him a once-legendary player.

The irony now is that he plans in his final retirement to spend more time with his grandchildren.

My worry is that it will be us picking up the tab for all the frequent trips to see them.

The Douglas “Revolution” [updated]

Turns out a few of my Australian readers are either members or supporters of Australia’s Liberal Democratic Party, and since the main choice this election seems to between a feral unionist and a feral evangelist, any freedom-loving Australians should think seriously about following Liberty Scott’s recommendation and voting for them.

Unfortunately, however, since Roger Douglas delivered the world’s most boring speech at their National Conference recently, I’m told several LDPers have become unfathomably enamoured of the man who some people still believe carved out a “revolution” in New Zealand twenty-five years ago.

So for the benefit of those otherwise good folk (and anybody else still in thrall to that idea) I can thoroughly recommend Lindsay Perigo’s 1996 take on the idea that Roger carried out a revolution: In the Revolution's Twilight.  Perigo explains how the various reforms have ultimately failed — and describes the philosophical revolution it will take for liberty to succeed:

Introduction

Part I: The Foundations of a Revolution
Advocating an Ethical Revolution; The Reign of Altruism

Part II: Of Three Who Fell
The Fall of the Nationals; The Ascendance of Roger Douglas; Principles, Hayek, or a Cup of Tea

Part III: The Betrayal
The Return of the Nationals; Liberty or Hayek; A Coalition Forms; The Fallout

Part IV: The Choice
One Step Forward, Three Steps Back; Theory and Practice; The Moral and the Practical

UPDATE: Oops!  Links fixed.  They should all work now.

“I’m entitled!”

There’s a certain irony, don’t you think, in  a politician from a supposedly low-tax party getting the taxpayer to bankroll his latest vanity publishing effort – which includes speeches on the subjects, I’m sure, of the benefits of lower taxes and a decreased burden on the public purse.

Read Douglas publishes, public pays.

And ask yourself just what the hell is going through the head of these “I’m Entitled” moochers. Does something happen to these bastards when they take up the job of Finance Minister?

VSM

Despite my overwhelming support for the principle of Voluntary Student Membership (VSM), and my delight when Andrew Bates and co. won the vote that made Auckland Uni voluntary a few years ago, I haven’t yet written anything about Roger Douglas’s VSM Bill: i.e., his Private Member’s Bill, drawn last week, that would allow Voluntary Student Membership at all New Zealand’s tertiary institutions – upholding, says the Bill’s stated aim, “students’ right to freedom of association, by ensuring that no student is compelled to join a students’ association.”

I haven’t written about it for one simple reason – because I’m unsure if I support the Bill.

Why?

First off, it looks to me like utter hypocrisy for a politician to write a bill allowing students to resile voluntarily from joining and paying for their student union, while insisting loudly and volubly that you and I and every other taxpayer stumps up compulsorily for his foreign holidays.  Sorry Roger, your credibility is about zero with me right now.

Second, while the bill allows a student to resile from joining the student union at their campus -- and thus from supporting the unsavoury political positions of student politicians intent on putting their professors’ nutty political ideas into immediate action –- and to resile as well from paying for the numerous follies and iniquities of their campus’s student union -- it doesn’t however mean that the student union itself is starved of cash.  When Auckland went voluntary, the balance of the student union’s costs were (as far as I’m aware) largely paid for by the uni itself, which means students were simply paying indirectly. 

And so, while their name wasn’t necessarily attached to the various calls to make the Auckland campus a sister campus to Pyongyang University, they were still helping to pay for Martin Bradbury to visit Pyongyang in tribute to his spiritual home.

And third, you know what: the issue of Voluntary Student Membership is just so damned basic, that it’s worth having that battle on campus once a year just to give students practice in arguing for freedom.

As I said a couple of years ago,  the issue pits freedom, individualism and voluntarism on one side, against collectivism, compulsion and bossyboot busy-bodying on the other. On the one hand it gives training, intellectual ammunition and a platform for freedom lovers to argue the issue of our age: freedom.  And on the other, it shows just how disinterested the collectivists are in freedom, and how excited they are at the chance to get their noses in a trough.  Any trough.

It’s not whether you win or lose a VSM campaign that’s even most important: The real victory of a VSM campaign comes in the number of people each and every year that a VSM campaign permanently switches on to freedom -- everything else is gravy. If campuses are going to be a breeding ground for future politicians, which they are, then I’d far rather they be a breeding ground for young student politicians who understand freedom and know how to argue for it.

And as long as you’re arguing about freedom every year, then you’re not arguing about making your campus a sister campus to Pyongyang University, are you.

It would be an awful shame to take that all away, don’t you think?

Bill & Roger: Just a couple of overinflated beneficiaries

Beneficiary Bill and “Roger the Taxpayer.”  Two graduates of the entitlement culture running right from the top to the bottom of the New Zealand political tree. Two people with their hands in your pocket – two moochers who saw a racket, and wanted in on it.   Two looters – one of whom as minister of finance increased the total tax take, the other of whom increased the total deficit.  Two bludgers, neither of whom ever saw an “entitlement” they didn’t want part of.

Two of the country’s most highly-paid beneficiaries, with morals to match.

Seems to me that whatever claims to moral authority either of them might have had once, and any such claims must be vanishingly small, their studied and unrepentant fleecing of the taxpayers has now destroyed it.  As Adam at The Inquiring Mind says, “Bill English has committed the cardinal sin of being the resident of a glass house who has commenced to throw stones.  He may not have ‘broken the rules’ but he has undoubtedly diminished his ability to speak with any authority . . . “  Given Douglas’s previous reputation, that goes double for him.

Frankly, except for the occasional party zealot, who are out in force even now insisting neither of these bludgers has done anything wrong, who would ever again take seriously anything either of them has to say on taxing, spending, belt-tightening, economising, responsibility, or honesty.   Who could?

Rogering the taxpayer

It’s hard to take a man seriously who talks about fiscal responsibility when he just spent $44,000 of our money on his overseas travel – spending which he calls an “entitlement.”

Once a bludger, always a bludger.

How does it feel?

Here’s a question for erstwhile ACT voters:

How did you feel when Rodney Hide and Roger Douglas stood and applauded a budget that reneged on promises of tax cuts?

Local & offshore stimulunacy [update 6]

Do I really need to write any more on so-called stimulus packages, or the fiction of the so-called multiplier effect, just because John Boy and Billy Bob invoke these statist delusions again today?

UPDATE 1: 61 traitors voted to pass America’s stimulunacy package.  Jeff Perren has a list of just some of the pork for which American taxpayers are going to have their pockets picked, absurdities which almost make our local package look sensible, and the Wall Street Journal steps up to the plate with this cogent dismissal of error at the heart of the stimulunacy and the multiplier delusion.

    So there it is: Mr. Obama [and the local layabouts are] now endorsing a sort of reductionist Keynesianism that argues that any government spending is an economic stimulus. This is so manifestly false that we doubt Mr. Obama [or the local layabouts] really believes it. He has to know that it matters what the government spends the money on, as well as how it is financed. A dollar doled out in jobless benefits may well be spent by the worker who receives it. That $1 of spending will count as economic activity and add to GDP.
    But that same dollar can't be conjured out of thin air. The government has to take that dollar away from someone else -- either in higher taxes, or by issuing new debt in the form of a bond. The person who is taxed or buys the bond will have $1 less to spend. If the beneficiary of that $1 spends it on something less productive than the taxed American or the lender would have, then the net impact on growth will be negative.

 UPDATE 2: Wanna get your head around the scale of the problem created by all this stimulunacy? Simple.  Just watch Glenn Beck Making Fed Data Fun & Scary.

UPDATE 3: Paul Walker says:

    Given that the government has just announced that it will waste $500 million of taxpayers money on our very own stimulus package, it may have helped if John Key had read the recent Wall Street Journal article by Gary S. Becker, the 1992 Nobel economics laureate, a professor of economics at the University of Chicago and senior fellow at the Hoover Institution, and Kevin M. Murphy, a MacArthur Fellow, an economics professor at the University of Chicago and a senior fellow at the Hoover Institution, before making such an announcement.
    Becker and Murphy make the obvious, to everyone but the government, point that There's No Stimulus Free Lunch: It's hard to spend wise and spend fast…
    [Their] four points apply as much to New Zealand as they do to the US, so I would like to hear the government's reply to them. It is incumbent on both supporters, and opponents, of any stimulus package to evaluate each of [their] four factors. Has the government really done this? If so, what are their conclusions? If not, why not?

UPDATE 4 [revised]: Charles Anderson has done some sums for Obama’s package. At US$825 billion and an estimated 3.7 million jobs “saved” (an estimate without backup, by the way), “The cost per job created or saved in Obama's plan,” he says, “can be calculated to be US$222,973”!

The exclamation mark is my own. 

Feel free to send me your own calculations showing us how much NZ taxpayers will be paying per “job” to attempt to keep the economy inflated. You may use in your calculations either the NZ$500 million boasted about in John Boy’s and Billy Bob’s announcement early this morning, or the NZ$11 billion boasted about in parliament earlier this morning, or the NZ$35 billion Bill English told the House this afternoon is going to have to be borrowed over the next five years just to avoid cutting spending (the sort of thing Roger Douglas called “mortgaging our children for the next round of spending increases,” and Dick Armey more colourfully called “fiscal child abuse.”  You could divide these by some arithmetical sum based on the “the 170,000 people predicted by Treasury to be unemployed over the next 3 years,” the 105,000 people presently drawing the dole, or the roughly 300,000 NZers on all forms of welfare (apart from WFF).

UPDATE 5: Newstalk ZB’s Barry Soper reckons that when asked about the number of jobs he expect this package to “create,” John Boy nodded his head at a figure of about 2000.

UPDATE 6:  Here’s a question for eager young economists:  How about you explain in one easy paragraph the relationship between the Broken Window Fallacy and the jobs created and the money spent through “stimulus” packages like this.  And then send that explanation to all those so-called economists talking it up who clearly don’t have a clue what you’d be talking about.

UPDATE 7: Be thankful for small mercies, says Liberty Scott. “Be grateful the package is rather small, [which means] its damage will be relatively small.”

Douglas offers taxpayers a ‘Conscientious Objection Option’ [update 2]

Roger Douglas has been reading Libz policy again, and he’s put it at the heart of his new plan to save the economy and put it on the path to prosperity, to be announced at Orewa tonight. 

Libz have pushed for a tax-free threshold for income tax of $50,000.  Douglas is willing to allow $30,000.

Libz have for years pushed for a ‘Brian Edwards Option,’ allowing those like Edwards who advocate higher taxes to keep paying them and to keep receiving state-funded health and education, while the rest of us can opt out and in return look after our own health, welfare and education.  We call this last the Conscientious Objection Option, which over time would become the preferred option.  Douglas is allowing an “opt in” system which is not a million miles away, and not at all difficult to introduce. Says Douglas,

I believe that the only way to change our economic prospects is to radically redesign our income tax system in concert with our social welfare system. Individuals should have the ability to opt in to the new system. Individuals who like high tax rates and monopoly-run health, welfare, education, and superannuation services can stick with the old system. But if you want to opt out of that failing system, then you should be able to have a lower tax burden in exchange for taking personal responsibility over your life.

It’s not all that’s needed by a long chalk, but it’s a start.  Would that he were listened to.

UPDATE 1:  Douglas’s full speech is here, so you can pick out all the fish hooks.  Plenty of reviews around the traps, including from NZPA, NBR, Jeni MacManus at The Independent, and Audrey Young at The Herald.

UPDATE 2: The only things that travels faster than bushfires is ideas.  From Libz, to Douglas to America’s influential National Review Online in … less time than it takes for politicians to start pointing the finger.

Libertarianz: setting brushfires in people’s minds since 1996. [Hat tip New Zeal]

Greatest living New Zealander?

Hands up all those who think Helen Clark is the greatest living New Zealander?  Well, frighteningly, 23% of Herald website readers do. 

And apparently Don Brash thinks the greatest living New Zealander is Roger Douglas!  Now, that’s sad, isn’t it, when your greatest living NZer is a politician?

Who’s the greatest living NZer in your assessment?

Why Vote Libertarianz?

A final message from Libertarianz leader Bernard Darnton, who's much more diplomatic than I am:

What sort of country do you want to live in? Every action you take, everyday, helps determine what sort of country you live in. On election day you get to make a public statement about what you'd like this country to be like. Do you want to live in a country where an exclusive cadre of politicians tells you how to live, or a country where people are free to choose and pursue their own goals? A country where the government mismanages half the economy, or a country where hard work and entrepreneurialism make a difference?

If you want to be free to choose and pursue your own goals and live in a country where hard work and entrepreneurialism make a difference, you have to vote as if you mean it. Only one party in this country consistently stands up for small government, for free speech, and for free markets and that's Libertarianz.

If you believe in those things then you must vote Libertarianz. Most parties actively oppose these ideas but even those that sometimes pay lip-service to freedom are not worth your vote. They water down liberty to the point where it is unrecognisable mush.

Today's National Party is a perfect example. National under John Key is devoid of ideas. Even if they do have ideas, they've kept them well hidden so as not to frighten the horses, preferring to parrot their opponents. Voting for National is an own goal in the contest of ideas.

Act still lives under Roger Douglas' shadow. In 1984, Douglas underwent a Damascene conversion to free marketeer. He zealously decided that the free market's results were so good that they should be compulsory, rather missing the point. Believing in freedom and voting for Act is delusional.

For politicians, the holy grail is "the mandate". By voting for a party that treats politics as a game with us as the pawns you're providing that mandate; you're providing your permission for every oppressive, expensive, and ill-thought-out scheme their "strategists" will dream up.

Voting for change but getting all the same policies back is a wasted vote. Voting for the lesser of two evils and hoping that you don't get the evil you deserve is a wasted vote. Voting for compulsion-touters in the hope of gaining freedom is a wasted vote.

Only voting for a party that stands for what you believe in and that is willing to promote those ideas honestly and openly gives your vote any value. Only voting for Libertarianz tells those in power that freedom actually matters to you. Vote like you mean it.

For more information, see www.libertarianz.org.nz or contact:
Bernard Darnton, Libertarianz Leader
Email: bernard.darnton@libertarianz.org.nz
Libertarianz - More Freedom, Less Government
www.lp.org.nz
Authorised by Robert Palmer, 10 Tui Glen Road, Birkenhead, Auckland, as mandated by Helen Elizabeth Clark, 4 Cromwell Street, Mt Eden, Auckland.

Planned Chaos!! [with a Douglas update!]

Well, that worked!  The overnight collapse of world stock markets, led by a seven percent one-day drop in the US Dow Jones index, shows just how well the trillion-dollar bailout worked to arrest economic collapse.

In two words: It didn't.

One trillion dollars of printed money just disappeared down the black hole marked "failed economic theory."

The lesson is obvious to those who know what they're looking at.  The naked emperors of mainstream economic theory have no clothes. To everyone else however -- and sadly, "everyone else" seems to describe most of the emperors themselves: the people with their fingers in the till, their heads up their arse and their hands on the legislative tillers -- the failure of the bailout is only going to lead to more calls for more bailouts, more regulation and even more government control of the economy.

And like the leeches and blood-letting of an earlier age, the cures will only exacerbate the disease, and credit crunch will lead to credit crunch which will eventually lead to near-complete state takeover of the financial system.

For most of the ignorati in positions of power and influence, the state played no part in the economic collapse.  No part in the government-sponsored mortgage banks and the state's insistence on lending to people who couldn't pay for it; no part in the state's restrictions on land and lack of restrictions on their own destructive spending; no part in setting up and backstopping the inherently bankrupt fractional reserve banking system ,and Alan Greenspan's pumping of the money supply.  For people with bone where their brain should be, all this was the product of "deregulation." 

Talk about ignoring the obvious: especially the multi-billion dollar golden shower that Alan sprayed over financial markets in his post-Dot.Com "bailout" from 2001 to 2004.  What we're left with is economic destruction combined with widespread economic ignorance -- which means, as Sharon Harris observes, we now face "The biggest assault on free market ideas since the 1930s New Deal. That's what we're facing with the current economic crisis. Overnight, decades of hard work building public support for free markets has been threatened. Enemies of economic liberty are gleefully using this crisis to discredit free market ideas and ram through a Big Government agenda. We're hearing them everywhere."

We sure are, some from people who should know better, but most from people in a position to do even more damage:

• "Raw capitalism is dead." -- Henry Paulson, U.S. Treasury secretary, TIME magazine, September 18.
• "The high priests of capitalism are in sackcloth and ashes, their belief in markets shattered, their catechism of risk-taking renounced. From Wall Street to Detroit, once-devout believers in unfettered private enterprise are running from their religion. ... Perhaps the pendulum is finally swinging back to a widespread recognition that government has a role to play in regulating markets, protecting consumers and providing a social safety net. ... The worship of unfettered private enterprise has been exposed for what it is -- just another cult." -- Cynthia Tucker, syndicated columnist and editor of the opinion page of the Atlanta Journal-Constitution, the South's largest newspaper.
• "[The idea that] the market knows best -- that era is over. Market fundamentalism is taking a beating in policy circles and the public mind." -- Lawrence Mishel, president of the Economic Policy Institute.
• "This can bring about a turn toward a new era. If we have the money to bail out Wall Street, we can provide funding for health care, childhood poverty, infrastructure and sustainable energy." -- avowed socialist U.S. Sen. Bernie Sanders, I-Vermont.
• "... The free market in finance, unregulated and unsupervised, has failed." -- New York Times.

Well, no it hasn't, but it's going to be a hard job convincing the ignorati of that.

The plaintive cries are almost messianic -- a clear and present danger when the present US election pits two economic ignoramuses against each other, one of them with a messianic aura not seen since Franklin Roosevelt hit the White House and began to strangle the US economy.

Roosevelt is a reliable litmus test of statism: as an unreconstructed apostle of big government, exuberant interventionism, voodoo economics, and state welfare used as an electoral club, anyone who calls himself an admirer can be seen immediately as a statist of the first water.

There are two admirers just one election away from the White House.

We are in a crisis of political economy.  The crisis is economic; it was caused by politics.  As Chris Sciabarra argues, "The current state and the current banking system require one another; neither can exist without the other.  They're so reciprocally intertwined that each is an extension of the other."

The present banking system needs the state's imprimatur to maintain its dangerously fraudulent (and fragile) fractional reserve system, and the credit spigot of the world's central banks; and the state desperately needs the smoke and mirrors and the inflation of the fractional reserve system, and it regularly mainlines from the banking system's credit spigot (and as of yesterday afternoon we've all been reminded of just how much NZ's engines of state need the products of that credit spigot).

The crisis was caused by governments.  It will be exacerbated by governments.  Just as there is no escape from the crisis, there is now way out from the intellectual battle against those who would squelch recovery and make the crisis worse.   Said Ludwig von Mises:

No one can find a safe way out for himself if society is sweeping towards destruction. Therefore everyone, in his own interests, must thrust himself vigorously into the intellectual battle. None can stand aside with unconcern; the interests of everyone hang on the result.

When we see the destruction caused by the depression of the thirties and the means by which the Roosevelts of the world both extended it and then used it to permanently enthrone big government, it should be clear to anyone with eyes to see that what politicians do in the next few months will effect us all for good or ill for at least a generation. 

I urge all readers of NOT PC who do understand the issues at stake to make your voices heard.  Loudly! 

As Ayn Rand writes in “What Can One Do?”: “When you ask ‘What can one do?’—the answer is ‘SPEAK’ (provided you know what you are saying).”

A few suggestions: do not wait for a national audience. Speak on any scale open to you, large or small—to your friends, your associates, your professional organizations, or any legitimate public forum. You can never tell when your words will reach the right mind at the right time. You will see no immediate results—but it is of such activities that public opinion is made.

Speak up: Write blog posts -- and comment on blogs that toe the statist line.  Write letters to the editors of newspapers and magazines, to TV and radio commentators and even to politicians (who depend on their constituents). If your letters are brief and rational (which will be an unusual pleasure for them to receive), they will have more influence than you suspect.  Take every opportunity you can to debunk the lies, and to tell the truth about the failures of government intervention

Two invaluable resources for intellectual ammunition are the Mises Institute's Bailout Reader and the Ayn Rand Center's Financial Crisis website. Bookmark them now.

UPDATE 1: "Regulators cannot avert the next crisis," says Johan Norberg in The Australian, but they can make it much, much worse.

UPDATE 2: European commentators are now screaming for the printing presses to be turned up high to rescue all the blunderers.  Screams one idiot in The [UK] Telegraph:

    We are fast approaching the point of no return. The only way out of this calamitous descent is “shock and awe” on a global scale, and even that may not be enough.
    Drastic rate cuts would be a good start. Central bankers still paralysed by a misplaced fear of inflation – whether in Europe, Britain, or the US – have become a public menace and should be held to severe account by our democracies. The imminent and massive danger is now self-feeding debt deflation...

Well, no, the imminent and present danger is more of what caused the problem in the first place, which is more and more money pouring off the government's printing presses. The Telegraph commentator quotes approvingly US Fed chairman Ben Bernanke from his 2002 "helicopter" speech extolling the virtues of his inflationary central bank:

The US government has a technology, called a printing press(or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost... under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

As Lew Rockwell explained a year ago, when the cost of Bernanke's printing press was already obvious to those who knew what they were looking at:

    Picture the Joker from the movie Batman throwing money from his float on the parade and you can see where this is going. Or imagine the alchemist of medieval lore, attempting to conjure up wealth from chemical mixtures. 
    The sea of inflationary credit is the core problem behind the falling dollar, the subprime crisis, the housing meltdown, not to mention the rise in the national debt and a thousand other problems.
    And how do they deal with it? More credit and more calls for controls. No one in Washington seems to understand the reason for the crisis, much less how to fix it...
    A good indication is President Bush's [December '07] freeze on subprime mortgage rates. It is a classic case that provides serious lessons for all of us. It shows the political penchant for intervening in the market, the market response, and the further interventions that are called forth when the first round doesn't bring the utopia they imagine.
    Here is the great mortal threat that intervention poses to the economy: not the first round, not even the second round, but the relentless dynamic of political rescues that drive us further into the pit of state planning...

As Austrian economists, and some of the saner mainstream economists have been saying to little notice, the pain caused by Bernanke's printing press is now inevitable -- the only choice is whether the pain is dragged out for years and even exacerbated by meddling and interventionism, as Roosevelt did in the thirties; whether it's dragged out for a decade of stagflation, as it did for Japan in the "lost decade" of the nineties; or whether we bite the bullet and have our correction, including the necessary correction in wage rates, and get back on track as swiftly as corrections such as that of the early twenties were effected.

UPDATE 3: NZ politicians don't even appear to look like they've realised there's a tsunami on the way. Yes, they've all noticed that the money coming their way is looking somewhat slimmer, but there's little sign they see it as a any reason to slim down -- and no indication at all from any of them that they even see the wider world beyond Molesworth St.

In this interview on Leighton Smith's show this morning, the finance minister who pulled NZ out of a hole in the eighties, Roger Douglas, sounds like he's at least halfway to understanding what needs to happen this time.  Listen here courtesy NewstalkZB - Douglas starts about 34:00 in.

An apology

I have an apology to make. On July 9 this year I said of Mr Peter Lyons, teacher, that parents of St Peters College students "should be grateful they have such an insightful chap teaching their youngsters." "Thank goodness for good economists like Mr Lyons," I said.

As yesterday's Herald column from Mr Lyons demonstrates however, I was wrong. Horribly wrong. Mr Lyons is not an economist's nutsack. He has in fact bought every pseudo-economic nostrum that the likes of Paul Krugman and Susan St John and all the "failed-policies-of-the-past" crowd have ever served up, fallacies that are best summed up in the title of his piece: 'Free Market Trip to Lower Wage Future.'

Wages are low and prices are high, he says, and all because "In the past few decades New Zealand has embraced the global marketplace with an enthusiasm matched by few other countries." "Kiwis are struggling to own their own homes and pay the weekly bills," he argues, because "We have applied a textbook economic model of capitalism to a real society" -- a "free market model [that] prescribed controlling inflation," "privatisation" and the implementation of "perfect competition" and "unfettered financial markets," based on a model in which "people base economic decisions on full information."

Really? I'm not sure about either you or Maurice Williamson, but I haven't noticed any unbridled cross-spectrum support for privatisation recently. Have you? If you're not sure, just ask David "Telecom" Cunliffe and Michael "Fail Rail" Cullen.

Nor have I noticed a full-blooded drive for free markets. Barely twenty-four months of the past few decades have seen reform that even paid lip service to freer markets, and in the final analysis many of the reforms, including those Mr Lyons criticises, were actually destructive of freer markets and a freer country.

And if our financial markets are so free and "unfettered," as Mr Lyons seems to think, then what's all that stuff that Alan Bollard gets up to all about -- how come we're not free of him? In fact, the very idea of "controlling inflation" through meddling by bureaucrats like Bollard is the very antithesis of an unfettered financial market.

And this notion of "perfect competition": it's not only horribly wrong, but with power given to the likes of Paula Rebstock to enforce the foolish notion -- giving her wholly unchecked power to be judge, jury and executioner over her moral superiors -- it's also horribly destructive, and hardly demonstrative of a free market.

And what of this ridiculous notion that "people base economic decisions on full information"? That's not the argument of genuine free-market economists, who recognise that people always act in a context, but the insistence of the state-worshipping "market-failure" branch of economics begun by Alfred Marshall and embraced by the likes of Paul Krugman and the text-book writers (for more on this particular nonsense see here and here; and more on "market failure" here).

Where, in the New Zealand of today -- a place where politicians are about to embrace a savage fiscal attack on industrial emissions and where talk of toll roads is enough to get everyone hyperventilating -- where, oh where is this free market of which he talks? A more sensible Herald columnist, Fran O'Sullivan, sensibly points out that "As the toll-roads fiasco demonstrates, New Zealand has become an economic cul-de-sac when it comes to the willingness to openly debate policies that are run-of-the-mill as far as most of our trading partners are concerned."

In other words, we're not even as free in our markets as as most of the people overseas with whom we do business, or would like to, and our position in the economic cul-de-sac has come about precisely because of our our unwillingness even to debate policies that are run-of-the-mill as far as most of our trading partners are concerned!

A free market in New Zealand? Never really had one, more's the pity. It's still, like the subtitle of Ayn Rand's best-seller on the subject, An Unknown Ideal.

UPDATE: In response to my claim that "Barely twenty-four months of the past few decades have seen reform that even paid lip service to freer markets ," commenter Stephen says, "That's a meaningless comparison when the quality and rate of that 24 months is taken into account..."

Well, yes and no. Given that Mr Lyons talks about "decades" of "embracing" the free market, at least we do agree he's talking horse shit. But the quality? Really? I've made a brief comment in the comments on that, but the best detailed response can be found here: Lindsay Perigo's overview of it all 'In the Revolution's Twilight' -- a summary of New Zealand's market reforms from one who was at the coal face, countering some U.S. libertarians who believe these reforms represented a veritable revolution, explaining how the various reforms have ultimately failed — and describing the philosophical revolution it will take for liberty to succeed.

I strongly commend it to your attention