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Privatised profits and socialised costs: What the government was elected to do.

By   /  April 30, 2016  /  12 Comments

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We’ve got an Auckland housing affordability and a housing supply crisis. We’ve got an economy overloaded with private debt. Headlines report an anxiety epidemic, a P epidemic and an obesity epidemic all at once. Scientists show we’re in the midst of various environmental crises.

In many ways these are all linked.

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We’ve got an Auckland housing affordability and a housing supply crisis. We’ve got an economy overloaded with private debt. Headlines report an anxiety epidemic, a P epidemic and an obesity epidemic all at once. Scientists show we’re in the midst of various environmental crises.

In many ways these are all linked. But it’s not that the housing market is on a sugar or P fuelled binge, even though it seems like it. For those already with a toehold in the Auckland property market, buying more houses is an individually rational choice. There’s more money to be made in housing investment than in most jobs, and low interest rates mean debt has a small price to pay compared with escalating capital gains. Poorly managed sprawl, and transport and urban design contribute to unhealthy personal and social health outcomes. Modern lifestyles are taken up with commuting and sedentary work. International markets set up incentives for concentrated investment in certain sectors like farming which then of course leads to concentrated adverse effects.

The free market means we have access to easy global credit, housing pressure driven by positive tax incentives, sugar filled junk food and liquor stores on every street corner, and a political-economic regime that owes more loyalty to transnational megacompanies protected by grand sweeping international agreements, than to its own voters.

Great efforts are made to liberate, enable and empower market forces, and let no domestic legislation, tax or tariff stand in the way of trade. The market is seen as a solution to everything from poverty to conservation of threatened species.

But if the free market is king, and wields the hallowed invisible hand that leads to the optimum distribution of goods for society, it doesn’t explain why the dairy sector warrants government subsidies for immigration schemes, or why roads get more subsidies than rail, or why debt levels are unsustainable but banks are too big to fail. Except that free market ideology is a thin disguise for preferential treatment of some (private) sectors and the disadvantage of others – often those with genuine public or environmental good.

So we have almost less investment in public good services such as environmental protection than we do in commodifying that environment through tourism promotion or development. Regulations are supported only insofar as they actually sustain and protect economic development – with the minimum done necessary to avoid the worst injustices with maximum profit. The welfare state and education systems support the latent workforce with the potential and skills for deployment in jobs as, when and if the economy requires them, but not for freedom of thought or self-determination.

In other cases, as Joseph Stiglitz argues, often the reason the invisible hand is invisible, is because it’s not there. The market isn’t delivering the optimum outcomes beneficial for society as a whole, but rather, externalities that either go unaddressed, or require rate and tax payers to pick up the tab, so that either the environment, the public or future generations pay the price for corporate profit.

So it is with obesity caused by the advertised, state sanctioned proliferation of junk food, and the tragic effects of alcohol harm; Environmental effects caused by overfishing, overfarming, polluting, point and non-point source contamination; The private car culture; Economic effects of a distorted investment market that favours housing speculation and sprawl. 99 people died at work last year because business profits come before workplace safety. The invisible hand is invisible or at least ‘hands off’ when it comes to protecting worker’s safety or security outside the limited sphere of operations required to meet minimal operating and reputational requirements other than to maximise profits.

With all these consequences for health, home availability and affordability, and environmental survival, the free market isn’t really free. Many laws and taxes are socially regressive and have relatively disproportionate impact on poorer people rather than companies or land owning upper classes. (Note the low taxes paid by big corporations in NZ, and also the harsher penalties for crime that apply to certain ethnic and social groups – ie those who aren’t professional white men). The ‘free’ market imposes massive costs on the environment, the commons, future generations and workers both here and in developing countries. The free market is freer for some than others. That same hand that’s almost invisible for protecting workers and the environment is conspicuous, flexed and clenched into a fist when it comes to protecting private property and profits.

But that’s part of the neo-liberal agenda’s success. It tells a convincing lie, that unhindered the market delivers what’s best for society. That if we all worked harder, longer, for greater parts of our lives, we could be rich too. That individuals are responsible for whether they find themselves with either extreme wealth or poverty. That if you’re a young person, you too can enter the housing market if you just forego that BMW, $200 bar tab and twice yearly trip to Bali. The lie tells us that private contractors provide as good a service for essential public works such as hospital food and prison management, even schools, as traditional public service providers.

But market failure is alive and well. In all those epidemics and crises of effects and externalities that have arisen from market activity, we see the negative side of the free market, profit imperative. In building roads, irrigation schemes and tourism infrastructure, in minimising workplace health and safety rules and worker protection, in the installation of private contractors in public services, this is a system that privatises the profits of trade, and socialises the costs.

But inequitable distribution of profits and costs, and unsustainable economic development in the interests of the few shouldn’t be read as a failure of leadership by this government. That’s what the government was elected by its supporters to do. As long as the government keeps delivering on those expectations, for lower taxes, higher house prices and the preconditions for more (even unsustainable) growth, they’ll continue to be re-elected.

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  1. Afewknowthetruth says:

    Yes, Christine.

    The economic system, via GPD and other absurd measures, rewards looting, polluting and exploitation, so that is what we get.

    The financial system, via requirement of interest payments, demands looting, polluting and exploitation, so that’s what we get.

    Those who obtain short-term rewards for destroying societies and destroying the habitability of the Earth are not going to relent just because they are wrecking their children’s/grandchildren’s futures. Therefore, everything that matters will continue to be made rapidly worse.

    The planetary meltdown is accelerating and northern summer of 2016 is going to be exceptionally ‘interesting’:


    By the way, I’m not convinced the government was ‘elected’. I prefer to think the government was installed by the ‘looters, polluters and exploiters club’, to ensure their game continued uninterrupted.

  2. CLEANGREEN says:

    Christine Rose, Good thought put in here.

    When you correctly stated Neo liberal policy of building roads and infrastructure that will benefits they thought, it showed how simple minded these Neo libs really are.

    We are in NZ going down the gurgler with rising deficits and Crown Debt now at $97 Billion and climbing from only $8 Billion in 2008 and nothing spent on regional rail only on Auckland commuter rail for the bubble economy it is so wrong when regional rail was there to feed our growing export driven economies and is now without rail and faces spiralling road cartel pricing that s driving some out of these exporter provinces now and they are going to Auckland and Tauranga where of course the money is all being spent on roads and rail????

    Gisborne, Napier and many other cities like these around the country are now suffering on end with the Key,Joyce,English mad ideas they have of putting all their money into one small area in the country setting them up for a bubble burst and the rest of us set up to fail.

    Kiwirail have warned Government that they believe ceasing rail freight is the best option now to survive without equal shares of funding the rail infrastructure that roads for private trucking enjoys.

  3. jay1 says:

    Neoliberalism: A really stupid idea


  4. Brendon Harre says:

    Great post. The free market is a myth. All markets require rules and refs. It is unfortunate that presently the rules and refs are tilting the playing field towards rich, self entitled pr…ks.

    Christine you are right. This will not change until we vote in a new lot of rule makers to level the playing field.

  5. Noah says:


  6. Noah says:

    LETS GET CUNLIFFE,LETS get voting for him.

  7. Noah says:

    What my name,old school socialist.See how the fool union,my nowing hard line,has selected this compromise chance engineer lawyer as their compromise.Cunliffe,is our person,the others,Cunliffe,your gone or front up.Cunliffe,the bus stop.

  8. CLEANGREEN says:

    Yes the criminal NatZ have our money from our assets they stole and using it against us now by buying everyone with our stolen money so they use it to buy those whom the want to use against us.

    We are effectively at war with these criminals now, and we are the victims.

    • Afewknowthetruth says:

      The criminals, i.e. ‘the 1%’ (not just National but primarily represented by National), declared war on the next generation and on the bulk of society years ago, decades ago even, silencing truth-tellers and replacing the truth with lies, but most people were too uninformed/stupid/stubborn to recognise it.

      Even as the dire consequences of the war emerge -everything from economic meltdown to societal meltdown to environmental meltdown- most people remain oblivious or in denial, largely thanks to the phony narratives and outright lies churned out by the corrupt corporate media, corrupt state broadcasters, corrupt city and district councils, and corrupt, weak-willed ‘opposition’ parties.

      It’s already turning very nasty in a lot of places overseas, and will start to turn very nasty in NZ by 2020.

      In the meantime we can expect our bought-and-paid-for, mendacious, cowardly politicians to continue to ignore everything that matters until they can’t. Especially this:


      ‘We may be witnessing the prelude to a nearly ice free Arctic Ocean this summer.

      ‘An ice free Arctic Ocean is dangerous. The heat that will be absorbed from the sun, along with heat arriving from the Gulf Stream and rivers, may be enough to thaw out methane hydrates on the Artic Ocean floor. It may also unplug cracks that are stopping geologic or mantel methane from coming up. ‘


      We are now recording the steps along the path to extinction, and doing nothing to prevent it.

  9. BruceTheMoose says:

    Due to a deregulated and free market, we have the Leaky Building crisis, along with a severely dysfunctional and under-skilled building industry – both nearly impossible to rectify.
    Thanks National

    • Andrea says:

      We have had a dysfunctional and under-skilled building industry forever. Supported by the mates’ rates favouritism of the local councils.

      The apprenticeship process is less than a hollow laugh. The ‘master builders’ are rarely that. The polytechs aren’t that flash either.

      And the person who picks up the tab is the sucker with the mortgage lasting from early adulthood to the grave.

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