Thursday, August 28, 2008

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

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8 Comments:

Anonymous sagenz said...

better slap yourself into the red team for a week. :) naughty naughty

8/28/2008 07:36:00 am  
Blogger Stephen said...

Barely twenty-four months of the past few decades have seen reform that even paid lip service to freer markets

That's a meaningless comparison when the quality and rate of that 24 months is taken into account...

8/28/2008 09:34:00 am  
Anonymous Seabastian said...

Its pretty meaning full given that the remaining time has been spent desperately clawing those reforms back.

8/28/2008 09:37:00 am  
Blogger Stephen said...

Mmm. On balance, we're still a lot more 'free' than we were in early 1984, so that 'clawback' has really been utterly glacial, if that.

8/28/2008 09:41:00 am  
Blogger Owen McShane said...

I just love the claims that our expensive housing is caused by free market ideology.

8/28/2008 10:08:00 am  
Blogger PC said...

Stephen, I said that "in the final analysis many of the reforms, including those Mr Lyons criticises, were actually destructive of freer markets and a freer country..."

That's true. The Reserve Bank Act, which gives a bureaucrat complete control of the money supply, was part of the 'free market' reforms.

So too was Commissar Rebstock's Commerce Commission -- the previous home of Commissar Alan Bollocks.

And the Resource Management Act was a keynote of National's 'failed policies of the nineties.

Quality? My arse.

8/28/2008 10:53:00 am  
Blogger Stephen said...

RMA - ah well I thought you were talking about the 80s in that "24 months".

8/28/2008 11:00:00 am  
Blogger PC said...

I was combining the 'pre-cuppa' mid-eighties and the 'Ruthenasia,' early nineties, a period during which 'free market' reforms represented about twenty-four months or so.

8/28/2008 11:13:00 am  

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