- - - - - - - - - - - - -

Monday, December 06, 2010

It's the God damned economy stupid

Goff says middle NZ feeling squeeze of stalled economy
Labour leader Phil Goff will discuss the squeeze on middle income New Zealanders in one of his last major speeches of the year today.

Mr Goff said he would not be unveiling any specific policy details this far out from the election, but he would be discussing the need for an active government.

Middle income earners in New Zealand were feeling the impact of rising prices and a stalled economy, he said.

"They're not poor enough to get much in the way of help from the benefit system and they're not wealthy enough to find things pretty easy as higher income earners do."

Labour would not promise the world during the election campaign next year because there was no money to back it up, Mr Goff said.

But an active government with vision and a plan was needed, he said.

Indeed! Keynesian managed Capitalism, not the deregulated neoliberal Milton Friedman wet dream, is the way forward at a time when Capitalism is in crises, and what a crises, the gap between those well off and those who are not increases in NZ...

Lifetimes of toil to equal bosses' pay
Wage gaps between workers and chief executives have grown so large that some staff would have to work for two lifetimes to earn the same as their boss's annual salary.

...and the pain just keeps on coming...

More go broke from job loss
Nearly 3000 New Zealanders went broke in the year to June because of losing their jobs.

...and this is happening right when so called 'free trade' is being used to rob us of our political rights...

Protests planned for trade talks as NZ calls for caution over rights
New Zealand has warned other countries negotiating the Trans-Pacific Strategic Economic Partnership that they need to be cautious about intellectual property provision of any deal, a leaked paper shows.

In a paper it submitted to the TPP group of nine countries, it says the negotiators should be "ready to maintain an open dialogue" with groups opposed to strengthening of IP rights and that it is taking on a significant political dimension in many societies.

The paper was released yesterday on the eve of the fourth round of TPP talks, beginning today in Auckland, by a Washington-based public advocacy group, Public Citizen.

...and this is all happening right when Paula is back fresh from her free 6 week CV expansion course re-educating her on the benefits of privatization t tell dirty filthy bennies that they will be getting less...

Paula Bennett awarded trip to the Big Apple
Social Development Minister Paula Bennett is off to the big apple after being awarded a fellowship from the Eisenhower Foundation. The Minister will take in eight to 10 cities on her six week tour, as well as learn about corporate social responsibility along the way.

...and the economy is in worse shape than the Government are telling us...

Govt deficit $1.9b higher than forecast
Finance Minister Bill English has foreshadowed a New Year review of government spending following news the government ran a NZ$4.4 billion operating deficit before investment gains and loses (OBEGAL) in the four months to October 31. This was NZ$1.9 billion higher than expected, Treasury said this morning.

...Govt deficit $1.9b higher than forecast but Bill English says we'll make that up out of the mouths of beneficiaries. Welcome to the new economic darwinism, the cheapest compassion society can privatize.

The recession is not over, it has just begun and the political anger it will brew is starting to bubble.


At 6/12/10 10:24 am, Blogger sdm said...


Specifically, what policies would you want the government to introduce?

At 6/12/10 10:57 am, Blogger Fantail said...

Labour has a credibility problem with the people they need to vote for them. They can't just jump to talking about the middle-class squeeze without acknowledging they got it wrong during their 9 years in power. They put band-aids on the cost-of-living crisis and helped minorities and the extremely marginalised, but did not make the fundamental changes necessary to alleviate the squeeze. For that they have to do what Helen Clark never did, and that's say sorry.

Then they have a chance at doing the other thing Clark never did and that is restore the economy to some properly regulated capitalism, starting with some properly weighted taxation - in good Adam Smithian capitalist terms, known as "reinvestment".

At 6/12/10 2:53 pm, Blogger AAMC said...

Maybe sdm they could take some policy inspiration
from countries like Germany or Brazil who are not
suffering as seriously at the hands of this recession and who don't take their inspiration from the ideology of a failed
American experiment.

As Bomber has noted many times, putting our faith in a Banker at exactly the moment that bankers brought the global economy to it's knees seems the definition of insanity.

At 6/12/10 7:29 pm, Blogger sdm said...

AAMC - once again you lack specifics.

Let me put it like this

Given that a governments tax take is approximately 36% (!) of GDP, what else is it that the government should be doing?

At 7/12/10 8:53 am, Blogger Bomber said...

36% is what happens in a crises caused by dogma driven deregulation though isn't it Scott?

The great recession demands a return to managed Keynesian Capitalism, your crazy free market shit just got the living Christ beaten out of it, I hardly think the right are in any political position to defend free market principles when John Key just bailed out Mr Magoo to the tune of $1.7billion. I can make global references to Wall st bail outs as well, but that would take a lot of time.

At 7/12/10 9:07 am, Blogger AAMC said...

Well perhaps we should be a little less focused on GDP and contemplate the health of our society, and I'm sure this is where our paths will diverge sdm. I will consider we have a successful government when prison numbers drop and poverty rates reverse, not when GDP booms.

Firstly, citizens need to re-engage in their democracy, but for this to happen it needs to be an accountable, equitable and participatory democracy, of the people, by the people and FOR the people. Policy which allows corporate interests to buy campaigns doesn't foster this.

Porto Alegre a city of 3 million people in Brazil has practiced a policy of participatory budgeting since the late 90's, the polar opposite to our CCO's. Now 100 cities in Brazil and 300 around the world have followed their lead, you can read of it's success here.



Keynes said "if economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid", so policy which takes advice from "Experts" but doesn't devolve into faith and ideology would help, because faith is the enemy of reason. Remember that the "Market" is a human construct and it should serve all of us and not us it. So policy which manages the market, like those Germans and Brazilians I was referring to.

Stewardship rather than ownership of our resources so that we New Zealander's, and not foreign corporations and their shareholders, benefit and derive wealth from them in perpetuity.

Food sovereignty, for exactly the same reason as above. We should not be buying barren seed from Monsanto. Which leads us to support of and investment in value added product. Luxury, quality New Zealand brands that hold the same desire as those the Chinese are now buying from Germany. Organic production for instance attracts a premium price and there is strong demand for it. Because New Zealanders don't place value on sustainability and good farming practice doesn't mean we shouldn't benefit financially from all of those who do. Selling milk and logs is 100 year old thinking, time to update our mantra.

Strong Government support for Research & Development to help create and build these value added products.

Why are we subsidizing private schools and yet cutting adult education and failing to rehabilitate criminals. We need to invest properly in our young people in order to generate motivated positive citizens. A fast track to prison via video link or residence in Grey Lynn Park don't help any of us.

And as Mike Williams pointed out on Q&A on Sunday, if we want to catch up with Australia, we need to consider copying them and implementing Compulsory Superannuation and stronger Unions.

Our policy makers need to be open to the fact that both ideologies of the last century have failed and the gluttonous consumption that the "Market" fosters is destroying our planet. It's time to put some new ideas on the table, even if it dents those corporate profits and compromises the campaign budget.

At 7/12/10 11:18 am, Blogger Gosman said...

Financial bailouts are hardly free market Capitalism; in fact they have more in common with Keynesianism than Monetarism.

I'm with SDM on this one. Specifics would be useful for those who throw around generalities about returning to some sort of utopian managed capitalism like we supposedly had prior to the 1980's.

I presume this means capital controls then as that were one of the main means of managing a economy previously. That and of course wage and price freezes as well as high import barriers and state subsidies to the productive sector (kind of like what the Hobbit got but on a much, much bigger scale).

So you will require people wishing to purchase foreign currency to undergo a large amount of burecratic checks before they do so?

How about someone who wishes to get a loan to buy a house or perhaps start a business? Will they have to wait the months and months that it used to take for this sort of thing prior to 1980's?

Of course you can't impose trade barriers again without falling foul of the WTO. You could always unilaterally pull of of the WTO though. I’m not sure how the other countries we do business with would regard that action.

Is this in your visions for a back to the future return to Keynesianism? If so then Wellington is in for a real boom economically as most large businesses shift head offices back to the Capital to be able to lobby Government for assistance.

At 7/12/10 11:21 am, Blogger Gosman said...

Organic food??? How is this in any way Keynesian?

The main reason Organic food hold a premium at the moment is because all the trendy greeny types who 'feel' it is healthier for them when there is virtually no evidence supporting this view.

Of course the other reason is that organic food is significantly less productive than other food to produce and if we went down that track we would be struggling to feed our own population let alone export to the rest of the world.

At 7/12/10 12:03 pm, Blogger sdm said...

The problem with the SCF bailout is that the government had no choice. Had it not bailed them out, investors would have sued the government. You cant have a contractural relationship, and then not honor it.

And btw I dont dissagree that wall street needed stronger oversight - however much of the blame does fall on the shoulders of those who insisted that credit be made available to those who couldnt afford it.


My point with gdp is that we are significantly taxed already. You talk about stronger unions equalling stronger wages etc - well companies need to be able to afford it, and therefore they need consumers to buy their products. Hurt the consumer, punish the worker.

I agree with the compulsory super. We need to, in time, do away with the universal super. We are paying money to people who dont need it. You can have $10 mil in the bank, mortgage free, and get a super. Its making the country go broke.

Basically, if you are under 40, you shouldnt be reliant on the state to retire. So save. And the tax breaks should be better - maybe the first 100K shouldnt have any tax on the interest.

If you use the super money to invest in companies, this allows them to grow, and pay their staff more.

The Union point isnt as strong as you think, given the propensity of kiwis to work for small businesses.

At 7/12/10 2:29 pm, Blogger AAMC said...

"Organic food??? How is this in any way Keynesian?"

You seem to have a very small window to the world Gosman, get out a bit more! You may find there are part of the world that don't share your ignorance.

Do you claim that Monsanto's dominance in American agriculture has helped their economy, their farmers, their health, their environment? Food production is critical, and at a local scale it can feed us. It's industrial farming that endangers us.

Organics was intended to be one example of deriving a premium from what we produce. Likewise, we could actually make something with the timber we grow or the milk we produce, which would benefit more than the few companies in that primary sector.


I am under 40 and I am making an effort to save. But I am fortunate enough to have a successful career, and with our housing costs and two children it is very difficult to save. And I can assure you I am not a blind consumer, I'm not throwing income away. So how do you see those who inhabit the rest of society saving?

The Union point is intended to be provocative, I understand a lot of us work for small businesses, but the previous National Government drove us towards a low wage economy. Throughout the neo-liberal world, at the hands of both "Center right" and Center Left" politics, the gap in income has grown since the 70's and the middle class is disappearing. Tax cuts for the rich and property law that favors people like you or me doesn't help those consumers buy those products.


But as much as you call for specifics, it's ideas we need and an acknowledgment that we simply can't sustain endless growth. My children would like to feel confident of producing their own offspring, and if your solution is simply to get people spending again to fuel the next bubble and contribute to that big island of rubbish in the Pacific then you and your kin need to wake up.


At 7/12/10 3:10 pm, Blogger AAMC said...

Also Gosman, have you been in an English or Australian supermarket in the last 10 years?

A quick search on organic food production can put your can't feed us all, not economically viable arguments to rest.



Remember, organic farming actually employs people ,you know , the citizens of the country you share.
Would you rather that the wealth created through our food production go to Australian shareholders? Please explain to me how that benefits our economy?

At 7/12/10 3:36 pm, Blogger Gosman said...

So do you believe Organinc farming employs people and non-organic farming doesn't? What evidence do you have for this strange belief because last time I checked the New Zealand agricultural sector was overwhelmingly non-organic and employed quite a few people who, funnily enough, are also citizens of this country as well.

What actual premium is organic actually adding to the food? Scientifically there is no persuassive evidence that Organically produced food is either nutritionally or healthier than non-organic food overall. The only premium is illusionary as it is based on a few people willing to pay extra for something that they think they are getting. Kind of like someone deciding to pay for extra for Homeopathic pills when they could just get a generic sugar pill for the same effect.

At 7/12/10 4:42 pm, Blogger AAMC said...

Organic farming employs more people and less machinery than Industrial agriculture. Both of the links already provided discuss this, you should try reading Gosman rather than just blindly defending a pre-held position. Here are some more links...


You'll find that not only can the wine producer or farmer sell their product for more but they also don't have to put all of those industrial chemicals on their land, are able to produce their own seed, tend to be smaller operations which are owned by New Zealanders rather than overseas interests.

This whole Organic debate is a tangent from Bombers post, I thought we were discussing economics rather than nutrition. Where did I proclaim the nutritional benefits of organics, it's a separate discussion.

At 7/12/10 5:07 pm, Blogger AAMC said...

Food production is not just about nutrition Gosman...


At 7/12/10 6:16 pm, Blogger Gosman said...

" but they also don't have to put all of those industrial chemicals on their land,"

So Copper, (which is used as a so called Organic fungicide), isn't an industrial chemical in your bizarre world view?

The fact that more people are required to produce organic food than non-organic food is not actually a good thing. It means it is not as productive and the accumulation of surplus capital is less.

If you want to turn back the clock to pre-industrial times then go ahead and recommend that as a policy for some leftist political party. I think the Khmer Rouge shared a similar philosophy at one stage.

At 7/12/10 9:59 pm, Blogger AAMC said...

Yeah yeah, better to have fewer people employed and the world owned by fewer people right Gosman. Thank you for exposing your humanity again. Cause as long as GDP is up it doesn't matter if the world is ownerd by only a couple of companies and nobody has a job.

I think it's your world view that is extreme Gosman, you would fit in far better with Pol Pot or perhaps Hitler than I would.

Answer me one simple question. Do you disagree with Alan Gteenspans admission to congress that his ideology had failed? Do you truly believe we in modern economics have pursued a course which has been successful and is sustainable?

At 7/12/10 10:44 pm, Blogger AAMC said...

And now that I've further digested your post gosman.

I don't want to turn any clocks back, I just wish we could move forward and have debate and evolve, but unfortunately both sides of the debate want to protect the status quo, as you are evidence.

And as for that accumulation of surplus capital, in who's hands does that end up? Go on tell me?

At 8/12/10 10:50 am, Blogger Gosman said...

AAMC I am surprised that I need to give you a lesson in basic economics.

The whole point of surplus production is what Human Civilisation is based on. Surpluses enable people to spend time on unproductive activities like looking after the sick and elderly or running a large State Bureaucracy.

You on the other hand seem to want to swim against the tide of economic development and return to a time where more people are required to produce less output. You are entitled to this Luddite view of the world but just be aware that there will be less surplus to spend on those unproductive aspects of life that you might value.

At 8/12/10 4:39 pm, Blogger AAMC said...

Do you call what Europe and American are going through atthe moment economic development Gosman?

Now please answer my question, do you disagree with Alan Greenspan?

At 8/12/10 5:49 pm, Blogger Gosman said...

Of course I disagree with Alan Greenspan. He is one of the people responsible for this mess by trying to avoid the economic correction throughout the late 1990's and early 2000's.

Everytime there looked to be a serious correction in the market in response to the bursting of a bubble the Fed lowered the cost of capital to try and stimulate domestic demand. All he achieved was a postponement of the day of rechoning. The Economist magazine was predicting such an outcome throughout much of the years 2000 onwards.

You seem to think that just because Greenspan regards himself as a monetarist that he followed standard monetarist policies when he was in charge of the Federal Reserve. The correct thing to do would have been to allow the Market to rebalance much earlier on.

At 8/12/10 10:39 pm, Blogger AAMC said...

When testifying before congress to Henry Waxman Greenspan proclaimed, "I do have an ideology. My judgement is that free, competitive markets are by far the unrivaled way to organize economies. "
Later..." I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works"
Waxman; "in other words, you found that your view of the world, your ideology, was not right..."
"Precisely. That is precisely the reason I was shocked , because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well"

You obviously havent had the same epiphany. What I'm asking is not the detail of the Fed's actions but whether you
are prepared to admit that the free market, as it's
been persued over the last 30 years has failed. You propose that the banks should have been allowed to fail? And Greece and Ireland and Spain and Portual to come?

At 9/12/10 10:59 am, Blogger Gosman said...

I'm stating that Greenspan actions were not consistent with with professed belief in the primacy of the market. If he actually practiced what he supposedly believed in he wouldn't have loosened Monetary policy every single time there was a shock to the system. He did it when the Dot com bubble burst, he did it again after September the 11th 2001, and I also believe after the Worldcom and Enron meltdowns.

Tell me what part of free market economic thinking states that it imperitive for the State to try and avoid cyclical economic down turns by loosening monetary policy at the first sign of problems?

At 10/12/10 12:32 pm, Blogger AAMC said...

So we would be in a better position now if we'd allowed the
Ponzi scheme of sub-prime mortgages er all to bring the banks down?

I agree, I wish the Free Market had been allowed to follow it's course to it's conclusion. It would simplify the argument I agree. I just don't share your faith that the outcome would have been pretty.

Do you concede that under a neo-liberal globalised world, almost all wealth will naturally fall into very few hands? How do you propose a free market deals with mass unemployment and inequality?

At 10/12/10 3:01 pm, Blogger Gosman said...

I doubt very much we would be better off now if that had been left to fail. However in the medium to long run you would have had a much healthier financial sector if they had failed. The investors would have learned a very valuable lesson about financial risk and I expect they would have been more circumspect in the future.

Of course if the authorities hadn't been so detemined to intervene to avoid a downturn previously it would have been quite likely that this painful lesson could have been learnt much earlier and for less impact than what has occured anyway.

As for your view that all wealth is naturally concentrated in a few hands, of course I reject that. Free markets are dynamic and the winners at the moment won't necessarily hold that position over the long term. Unemployment is handled quite nicely by the free market as is. As for inequality that is a subjective term and is the realm of politics not economics to resolve if you desire to do so.

BTW the financial crisis was not caused by some sort of giant Ponzi scheme. That is a false analogy.


Post a Comment

<< Home