The Market Society and its fallout

NRT has a post on what he calls "market culture", using the example of energy policy to outline how extreme many of our policy frameworks are in their use of market mechanisms.

Roger Douglas and the fourth Labour government did us a serious disservice with their belief that markets are always better. Ruth Richardson and the fourth National government compounded the error by moving markets into many other areas, some of which were just not appropriate. They also privatised things inappropriately, again leading to market problems. The list of examples will spring to your mind immediately.

The general response of those on the right to such a critique is to imply that lefties want to go back to an era of big public monopolies, state ownership of assets, and other things - and that we want to impose such a model without regard for the circumstances of the industry or sector involved.

Of course, this is a caricature of our position, but it is a commonly held one. The left has not had a persuasive critique of market extremism that has been well trotted out, mainly because it involved levels of nuance that are beyond the media's ability to understand or articulate.

The real point is that our under-regulated economy suffers from the extremism of our policy arrangements. The Labour government is making changes in many areas, but some of those changes have not gone far enough (e.g. energy, climate change, broadcasting). They have all been done under the mantra of market solutions to avoid causing offence.

This isn't sustainable in the long run. Market extremism damages the economy because it leads to failings in important infrastructure which a modern economy requires to function. Our lack of broadband, our poor investment in public transport, our failed railway system, our slow action on climate change -- all of these are direct consequences of extremism in the application of markets to public policy, and are to a greater or lesser degree testimony to how NOT to make policy.

Consumer markets often provide freedom for people to buy, eat, wear, drink what they want. Fine and good. Sometimes they fail to take account of their externalities - air travel for example - but usually they deliver some approximation of what people want.

The problem with markets in more important areas of a small economy is that they *don't* deliver what people want - they deliver what the particular market structure interprets them at wanting. Markets are always structured, usually by government - and the chosen framework can set out the winners and losers. The whole notion of "free markets" is that they aren't - it is an abbreviation, usually, for "markets that serve the rich best."

It might be ok for people to buy the wrong shirt or the wrong hamburger; they can go buy a different one next time. If the people collectively though buy the wrong electricity system, or the wrong telecommunications network, or the wrong rail provider - well, we can't really afford to screw those things up. It is a public responsibility to make sure those basic services work, to give an economic framework that the rest of the economy can actually use to drive growth.

On top of the economic damage there is the social dimension. Diversity has flourished in society and that is good, but so has insecurity. They are not intrinsically connected. Arguably, you would see a more diverse, confident and dynamic society (and economy) in a situation where economic insecurity or work poverty was not a feature of everyday life. Extreme marketisation delivers economic insecurity, either through labour market deregulation (taken to the limit here under the old ECA) or a more general gap, where people forget the unequalled potential of political decisions to affect and improve their own lives.

It may be that in forty years we look back at this fifth Labour government and see that it turned the tide; slowly starting to edge New Zealand away from market extremism. I certainly hope so. The country would be decidedly better off if that is the case.

As an aside, that's one of the reasons the next election is so important. National still thinks it can govern with its old extremist ideas. A third consecutive election defeat at the hands of a mildly left-wing government might help hammer home the fact that they're wrong.

Comments

[Rob Davies]

Well said! It's important New Zealanders understand that whilst the economic ‘reforms’ of the 1980's and 1990's were, in part, inevitable thanks to a growing world economy, the pace at which they were implemented caused extreme social destruction. It's important that we point out Don Brash not only supports those historical reforms but also the way in which they were implemented. His ‘landmark policy speeches’ focus attention on the consequences of his own beliefs. Our problems with law and order, the problems within our education and healthcare systems, pensioner uncertainty, and growing disparities between NZ and Australia can all be attributed to the reform process he still supports.

[Idiot/Savant]

Again, I think that we could make a lot of milage out of sticking photos of Roger Douglas and Don Brash side by side.

[Sean]

One question? You say that the right makes a "caricature of our position" - are you not guilty of doing the same to the ideas of the right? We do not claim that markets are always better, where a market is not possible (as with defence) it is the responsibility of government. I'd say a lot of our problems post-Douglas were due to withdrawal symptoms and/or naive regulation.

[Jordan]

Sean - I haven't ever said that the right claims markets always work. I don't know anyone who wants a market in courts, or defence, or who wants user-pays streetlights.

At least, I don't think I do...

[Idiot/Savant]

Jordan: Some Libertarians are happy to talk abour privatised justice systems, but they're very much at the anarcho-capitalist end of the spectrum.

[Stephen Cooper]

I particularly liek to question Ayn Rand's followers how a privitised currency system would work, particularly when you consider the courts would be privitised (and therefore bribable)

Markets first premise is that society exists, and secondly within rational (for most matters legal) limits. These are conditions necessary for a market to operate effectively, not condtions markets deliver

[Sean]

It's a mistake to think that we actually have a free market when the money suppy is controlled by the government - no? A privatized system would likely use gold and silver - the exchange value of which would be left to the market. Governments today are no different from governments past - their intervention tends to debase the currency and make us all poorer.

[Idiot/Savant]

The problem with a privatised currency scheme is a) the risk of business failures evaporating people's fortunes overnight; and b) there's no incentive other than the market not to run an inflationary regime (and if doing so increases the share price or next-quarter's profits, it will be done).

As for gold and silver, I just can't understand the obsession. Their value is just as much by consensus and delusion as fiat money, and they have an additional inflationary risk from large finds (see C16th - C17th Spain for a nice example of this).

I think the courts are a better example of the problems of extreme anarcho-capitalism. Neutral justice is a public good. A system which fails to provide it will simply encourage people to take matters into their own hands, and so we're back to Hobbes...

[Millsy]

In a free market, it is assumed that everybody is rich, when everybody is actually not.

Also, there is nothing wrong with public control - look at electricity - with the Electricity Department and the power boards in charge, you didnt have blackouts or brown outs and you didnt have customers getting cut off if they couldnt pay their bills - look at education - everyone gets an education, regardless of whether they can afford it or not - health - everyone is able to see a doctor, and not some bloodletting quack, and so on and so forth.

If Don Brash comes to power and wants to privatise health and education, I will be the first one to chain myself up to the public hosptial here and tell him not to do it.

[Mark]

"hammer home the fact that they're wrong". Good and evil is it? Geez you sound like Bush. Further, "MILDLY left wing"?? uh huh

[Jordan]

I don't think I've ever said National is evil... but that doesn't mean they aren't wrong.

[Mark]

Well, they aren't wrong - Labour is. The general NZ public hates bludgers. Which essentially what left wingers are. Of course, when you are a loser you desire high taxes bla bla

[Jordan]

Strong arguments there Mark. Clearly you don't know m/any left wingers.

[Stephen Cooper]

I'm a bludger, I get lots of laughs for free at the expense of the inept arguments of neocons.

[sag]

Cooper. It is your smug ilk who are proud of their freeloading on the rest of society that makes those with a sense of fairness so intent on reforming welfare. we have no problem with a helping hand but will be damned if we are taken advantage of.
Jordan/NRT/LT you write as if the markets failed. It is the small of accretion of better decisions over the course of decades, even centuries that has lead those globalisation promoting, free trade, free individual choice, market, freedom, liberty advancing countries the world leaders in economic and social development. Those countries who are over generous like Sweden and New Zealand fall off the pace and are left behind. It has taken 30 years to fall to where New Zealand is now and with people like you in charge there will be argentinian riots in the street in another 30.

[Stephen Cooper]

I remember in 1999 your "ilk" proclaimed immediate economic collapse. Yet we are still here, and going strong.

I think you are caught up in a dialectic with the Soviet Union's propaganda, and have failed to see that the argument has moved on.

I don't think many people are arguing for ending social injustice by paying everyone the same wage and killing the employers in a glorious revolution which will bring on peace on earth.

Old Centrist Labour certainly isn't.

Reforming Working Conditions, which hasn't gone far enough yet, to pretect workers from bad employers hardly seems anti-freedom. Promoting better oppurtunities to our young people isn't anti freedom. Protecting our environment for the next generation isn't unfair.

Not participating in the illegal (yes!) invasion of Iraq, when the more peaceful options had not been exhausted and the world from Mexico to France to South Africa knew the danger wasn't imminent, is not against "liberty advancement".

I'm not smug, theres more to do, and I'm certainly not freeloading. I don't think your engaging critically, your simply spouting ad hominem.

[Millsy]

Well, Stephen, I think the "freedom" that sag stands for is "freedom" from those nasty unions and those nasty public schools and hospitals of ours.