Free Market reforms have not made our country better

By   /   March 8, 2013  /   7 Comments

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“I came to the conclusion that we are in a bit of a mess here in New Zealand. And that it seems like we have been sold a bit of a lie. A lie that the market was supreme and that somehow we needed these great “market reforms” of the last few decades in order for us to be unshackled from the oppressive restrictions of state control.”

chris Flatt 006Well look at that, it’s March already. To churn out that old hairy chestnut, it will be Christmas soon.

The thought of that will probably make most of you deeply worried on many levels. If you are like me, you are probably still paying off the credit card from the last Christmas holidays. Because the cost of living just seems to be getting higher and higher. And as a result, many New Zealanders are doing it tougher and tougher. And the National Government’s recent increase to the minimum wage of 25 cents an hour will not make it any easier.

So preparing for my first post on The Daily blog, I got to thinking about the cost of living in Aotearoa New Zealand. And then I saw a recent newspaper story about how a majority of Kiwis felt that they were better off 10 years ago. And I started to wonder whether every generation looks back at the good old days or whether it really has got that bad and if so, how did we get here, and I started to look at a few costs that most of us have to pay for and I started to see a pattern.

So first there is the price of food. And I wondered who sells us our food. And I realised it was basically just two big companies – I think the economists call it a duopoly market. Hmm no surprises there then.

Then there’s that roof over our heads. And I wondered who helps us put a roof over our heads. And I realised that if you are lucky to own your own home then it’s the banks. More importantly, it’s the big overseas banks. And I remembered a recent newspaper article that reported a profit of $3 billion over the 2011 financial year (up 18% on last year) mostly for the four big Aussie owned banks.

Then there’s the price of the house itself. And I wondered why are prices so high? And I realised that with no capital gains tax in NZ, buying and selling your house is one of the few non-taxable earning opportunities for many Kiwis. And that NZ house prices by all economic metrics are way over valued and a new speculative housing bubble seems to be growing again. Even the Reserve Bank has noted that houses remain expensive in affordability terms relative to household incomes at 4.5x versus 3.0x in the 1990s.

Then there’s the electricity that is vital to run our homes. And I wondered who owned the electricity companies. And I realised that it was the government, but a government that had long given up on the view that the role of government-owned electricity companies was to provide cheap electricity to its citizens and instead saw them as a very lucrative dividend stream.

And not only that, but a current government that as we speak is spending over $1million of our own money on an advertising campaign to convince you to buy shares in an electricity company you already own! And I thought, well I don’t see the price of electricity coming down any time soon. Especially if those “Mum and Dad” investors we seem to be hearing so much about decide to sell their shares on the secondary market to realise a potential capital gain (remember we have no capital gains tax here).

And I came to the conclusion that we are in a bit of a mess here in New Zealand. And that it seems like we have been sold a bit of a lie. A lie that the market was supreme and that somehow we needed these great “market reforms” of the last few decades in order for us to be unshackled from the oppressive restrictions of state control.

Because as far as I can see these changes have not led to a cheaper cost of living, let alone a fairer, more equal or richer New Zealand. In fact all the stats seem to be pointing to the opposite reality.
And I thought, well isn’t it good that the new Daily blog has been established so we can discuss these things, and maybe, just maybe, and with your help, suggest an alternative fairer vision for Aotearoa New Zealand.

Cause despite these issues, I love this country, it’s my home, my place, and I love it too much to let it be sold further from underneath me. You with me?

Chris Flatt is the National Secretary of the NZ Dairy Workers Union

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7 Comments

  1. Draco T Bastard says:

    Because as far as I can see these changes have not led to a cheaper cost of living…

    From what I can make out it was never supposed to do that. All the logic of the capitalist free-market leads to a few people owning everything with dictatorial control (note the speed with which Warner Bros got this government to change the laws in its favour). I know the economists say that it can’t but they’re wrong and the reason why they’re wrong is because the underlying assumptions of the free-market theory are wrong (actually, delusional is more correct). And the biggest wrong assumption that the economists make is to assume that the purpose of the economy is profit rather than to support everybody.

    To become a fairer and sustainable society we need to dump the Worship of Greed that is the free-market and re-purpose the economy to support everyone.

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  2. Brilliantly put, Chris…

    A very simple look back at our history.

    I sometimes wonder if there’s something in our collective psyche that sez if we vote for “pain”, we;’ll eventually get “gain” at the end. I wonder if that’s why 1,058,638 people voted for Key in 2011, despite knowing he was about to flog off our state assets?

    Perhaps, having forgotten the last 30 years of neoliberalism, they thought another 30 years would fix up the problems of the first 30?

    It’s interesting to note that the Alliance offered a very real alternative to ‘free’ market ideology in 1996 – and yet people still voted for National (and NZ First).

    We could have free education; free healthcare; good housing for those on low or fixed incomes; affordable for the rest of us; and an appropriate taxation system to pay for it. But most seem to prefer the gaudy baubles of consumerism instead.

    That is, until rising prices (electricity, food, housing, fuel, etc) push those gaudy baubles out of our reach.

    Then the middle class aspirationists, feeling betrayed and somewhat “put out”, turn away from their Friedmanite Apostles, and elect a Labour-led government, demanding,

    “Fix this! Fix this NOW”

    By then it’s too late, and state assets are gone; balance of payments are crippling our economy; poverty and unemployment is high; and the wealth/income gap is widening.

    Those New Zealanders who escape to Australia perhaps understand this, in a subconcious sort of way, and recognise they cannot change our urge for masochistic neoliberal self-abuse.

    Yet, this all could be undone.

    But it will take a Labour Party that has a vision and policies so bold, that New Zealanders will be forced to sit up and take notice.

    Eventually, the decision will be crystal clear for all Kiwis; more of the same – or a radical (?) change to directly control our future.

    And to hell with the “Free Market” advocates, who keep scaring us with stories of doom if we veer from the monetarist road.

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  3. Pete George says:

    “…I started to look at a few costs that most of us have to pay for and I started to see a pattern.

    So first there is the price of food.”

    Food prices increased:
    January 2008 to January 2009: 9.5%
    January 2009 to January 2010: 2.2%
    January 2010 to January 2011: 3.8%
    January 2011 to January 2012: 1%
    January 2012 to January 2013: 0.8%
    (Statistics New Zealand)

    “Because as far as I can see these changes have not led to a cheaper cost of living, let alone a fairer, more equal or richer New Zealand. In fact all the stats seem to be pointing to the opposite reality.”

    Which reality?

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    • Draco T Bastard says:

      This one:

      Since 2008, global food prices have been consistently higher than in preceding decades, despite wild fluctuations. This year, even with prices stabilising, the food price index remains at 210 – which some experts believe is the threshold beyond which civil unrest becomes probable. The FAO warns that 2013 could see prices increase later owing to tight grain stocks from last year’s adverse crop weather.

      The one that most politicians and economists don’t want to admit exists.

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    • Tim says:

      Can you tell me though WHAT food items are used as measurement?
      It sure as hell seems strange to me that my food bill has increased consistently over the past few years.
      It’s especially disconcerting when taking a trip across the ditch to visit the escapee relatives, one finds NZ meat, fish and dairy products being sold more cheaply there – especially when the NZ tax payers pay for the cleanup costs of dirty rivers, irrigation schemes, and have paid for the damns et al to generate the electricity for producing same.

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  4. Nitrium says:

    I guess I need to add my rant to this. It is, tragically, not what many of you will want to hear.
    The main driver of inflation in NZ is, believe it or not, National’s horrific budget deficit, compounded by Obama’s horrific budget deficit and our bank’s relentless horrific emission of credit. If you increase the denominator of “money” that is present in the system, which you are obviously doing when the Government spends more than it takes in via taxes or banks emit credit, the value of each unit inevitably declines by the exact same percentage as that which you emitted compared to GDP. This is exactly identical economically to a tax increase. It punishes especially savers, beneficiaries and the working poor. It rewards the wealthy and promotes speculation. It needs to be stopped, and stopped immediately.
    Russell Norman, incidentally, has EXACTLY the wrong response with his QE policy that will only further exacerbate this relentless inflationary march, screwing over the very people he proclaims to represent.

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    • Draco T Bastard says:

      97% Owned
      Why don’t economists understand money? (new video)

      The banks creating money are responsible for most of the inflation we today but in a specific way – they’re creating money to be spent entirely on houses and usually pre-existing houses at that. The deficit that the government has will actually be creating very little due to the fact that it’s going to very few people and so demand isn’t being increased by it.

      All the rest of the inflation we see is, IMO, being created by the fact that you can’t get anything for less than it costs. When demand goes down and we see less sales that means that the costs per unit go up and thus we will see an increase in shelf price per unit.

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