LABOUR’S DAVID CUNLIFFE yesterday released his economic vision for New Zealand in a community hall in Blockhouse Bay.
At least, we were told to expect by sundry bloggers, commentators and Mr Cunliffe himself to expect an “an economic vision worth fighting for,” “some ideas around economic development”—”a signal of where Cunliffe would take the party if he was in charge”-- “the most important speech given from a high ranking Labour Party politician since David Lange articulated NZ's independent foreign policy in the 1980's”—but it was in vain that I scrolled through his speech in search of either vision, or plans, or proposals for the future—or anything that might possibly make it “important.”
I didn’t expect to agree with it, but I at least wanted to know what it is, this “vision” of his of “economic development.”
Now, his speech to the faithfully invited did indicate where he might take Labour if he were in charge, i.e., even further down the gurgler from where it is now, but what it mostly contained was not vision but bullshit, bluster and ego-driven ennui: a litany of historical errors and a mess of shop-worn cloth-cap clichés.
But there was nothing at all about economic development. Nothing at all to even suggest he understands how economies do develop. And if there is any “vision” at all in David Cunliffe’s head, the evidence is those visions are somewhat like those of Saint Joan’s—which is to say of himself at the head of some “True Labour” Column.
Perhaps he has forgotten she was burned as a heretic.
The whole sorry speech deserves a good fisk, but who has the time. So let me just pluck out a few of his more farcical pronouncements on history, on economics, and on politics… [Cunliffe’s flaccid prose is in italics.]
The major reason that voters didn’t vote for Labour, and sometimes didn’t vote at all, is simply that Labour failed to inspire voters that it was a credible alternative to National.
Really. No shit.
You hear the National government talking about the need to sell assets because we have so little money in this country. Do you know why we have so little money in this country? It’s because a large percentage of our economic assets are overseas-owned.
No, it’s so much spending of the spending in this country is poured down government holes instead of building up the capital structure—which means so much that New Zealanders do save goes to better homes overseas where they can find decent investments, instead of here.
And because so few large assets are easily bought by wealthier foreigners. (Cunliffe does realise that every purchaser of an asset has to hand over money to the local owners first, doesn’t he, who can then re-invest it here to make greater profits—essentially doubling available local capital with every foreign purchase?)
While the hippies were out protesting in the streets [in the 1970s], a professor at the University of Chicago called Milton Friedman, was selling his students the idea that taxation was evil and that businesses worked best when they were deregulated.
Actually it was Ayn Rand arguing that taxation is theft. Unfortunately, Milton Friedman and his Chicagoites just wanted to make taxation more “efficient.” Which they did: the total tax take under Roger Douglas and David Lange’s Labour Party went up to its highest ever level; something about Friedman would be delighted and Douglas was. But Rand would not be.
Does this sound familiar? It should be. The Republican Party in the US, the Conservative Party in England and the Labour Party in New Zealand enthusiastically took up Friedman’s philosophy, which is now called neo-liberalism.
This will be news to Ronald Reagan’s Republicans, who followed the blatherings of supply-siders, more than Friedman’s Chicago-ites. (Friedman had to go to Chile to try his ideas out properly.) And Margaret Thatcher’s Conservatives were followers more of UK-resident Hayek than that crass American from across the ditch. (Thatcher was famous for banging down Hayek’s book Road to Serfdom Constitution of Liberty on the cabinet table exclaiming “This is what we believe!” No similar stories exist about Friedman’s Free to Choose.)
And the “philosophy” is only called neo-Liberalism by people to the left of Jane Kelsey and Tim Hazeldine.
Neo-liberalism has become such a dominant economic philosophy that it is now the only economic philosophy taught in many universities.
This will be news to anyone studying politics or economics in virtually any university in the world, even in Friedman’s Chicago home-base. And to anyone studying under Jane Kelsey or Tim Hazeldine.
Friedman revived a belief in the “invisible hand” of the market. It was a fairy tale that Adam Smith had said a century earlier would automatically deliver the best of all possible economic worlds.
It was actually two centuries before Friedman became popular that Adam Smith produced his analysis of what made nations rich--in the eventful year of 1776 to be precise. (Maybe Cunliffe should have studied history at Harvard instead of poetry?) Adam Smith’s answer to the question of what made them rich was, famously, division of labour.
But “Silent T” apparently knows nothing of this, since the reader will search in vain in Cunliffe’s many turgid writings for anything understanding what Smith might have said, or for anything in Smith suggesting division of labour would “automatically deliver the best of all possible economic worlds”—or for knowing what else might have happened in 1776. Because Smith observes in some detail that the division of labour, and the freedom it requires, allows new resources to be produced and discovered and put to their best, most highly-valued use, producing more wealth and infinitely more real harmony than the pressure-group warfare of Mercantilism that Smith’s opponents (and “Silent T”) invariably seem to favour.
And for those who fail to see the economic plan in the free market, rest assured there is one. It’s called the price system.
Of course many of the rogues who benefited from [‘neo-liberalism’] have never believed [Smith’s story] – they remember how they got rich…
The people who were the most enthusiastic supporters of neo-liberalism were … advisors to government.
If he had read Smith’s Wealth of Nations (described by PJ O’Rourke as the study of why some places are as rich as hell and others just suck), Cunliffe would have noted Smith’s derision in passages like these at the type of “businessman” who gets rich by government favour:
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”
Note too that Cunliffe’s “vision,” or what there is of it, calls for more government subsidies for business, not less. Ask yourself what type of “businessman” this policy will favour.
Did you know, for example, that British Labour Prime Minister Tony Blair, regularly lunched with Rupert Murdoch, the far-right media boss? Tony, apparently, used to test which policies would be acceptable to Murdoch.Thus we have a far-right media boss influencing the policies of what was supposed to be the party of the people. It’s shameful.
This is blatant hyperbole, heading off into Ian Wishart territory.
But perhaps Cunliffe just prefers the media owners, media people, and media trainers that Helen used to lunch with-and with whom he would like to break bread if he ever manages the ascent of the greasy pole.
I think that’s a major reason that nearly one million voters deserted us at the last election. It wasn’t because we failed to communicate our policies. Quite the opposite. Those voters saw that our policies – with the exception of asset sales – were mostly the same as National’s.
Largely because National’s policies were copied from Labour.
The good news, if you can call it good news, is that the economic myths that drove the world into this current mess are starting to unravel…Europe’s current economic crisis was caused by bankers who loaned money on riskier and riskier ventures until the whole structure collapsed.
Um, actually Europe’s current economic mess was caused by government’s borrowing to pay (first) for their bloated and obese welfare states, and (second) to pay for the failed stimulunacy that has left them in a deeper hole and still digging.
And you know what? Despite all the promises that the European economic austerity measures would turn this tragic situation around, the opposite is occurring.
And you know what? The only governments in Europe attempting anything remotely like austerity are Norway, Sweden, Switzerland and Estonia (whose government currently has the only balanced budget in the Eurozone). These are the few Europeans who are doing even relatively well.
As for the UK government itself, despite the political rhetoric Cameron and Osborne have imposed the very opposite of austerity. For the past five years their deficit has been between two to five times that of New Zealand…
Austerity economics does not work. It did not work in the Great Depression of the 1930s and it will not work in the Great Recession of the current decade.
Once again Cunliffe’s history fails him. It actually did work: in every place that it was tried. What didn’t work was the Keynesian stimulus of Roosevelt’s America: their recovery had to wait until 1946-47, when govt spending plunged after the war and ten million came home to start producing things instead of shooting at other soldiers.
When you start closing down your government services and firing your workers, those people have no money to spend. Because they have no money to spend, the local businesses suffer. So they start firing staff. And so the economy goes into deep recession, with no easy way out.
Spending doesn’t stop when you close down your government services. It just changes its form: the money that was taken to buy government waste and pay back government’s debt is left in the producers’ hands and spent instead on private production and capital formation. So instead of spending it on arseholes to play with paperclips, the money can be spent instead on new capital goods—on production instead of consumption—on industry not on bureaucracy.
This is what actually produces wealth (as Adam Smith could teach Cunliffe) and why cutting government leads not to recession, but to prosperity.
You know, these problems that we face today stem from a lack of appropriate regulation or a lack of enforcement of existing regulations. The global financial crisis was caused by unregulated banking…
This is a complete fantasy. The three areas of the US, European and local economies that are and were most heavily regulated are the production of money, the production of housing and banking. It is no accident that it was the intersection of these three industries where the crisis began. Perhaps Mr Cunliffe could read about the true causes of the crisis before he travels the country spouting his fantasies.
Leaky building syndrome was caused by deregulating the building industry…
What planet is this moron on? There has been no “deregulation” of the building industry. It has become more regulated by the decade, not less. And the causes of leaky houses was plain enough: poor building systems mandated, approved and allowed by government agencies unqualified to vet them (agencies like the BIA whose names were changed after the debacle to avoid litigation) and inspected, assessed and approved by councils unqualified and too inexperienced to know what they were looking at.
SO ANYWAY, WE’RE NEARLY two-thirds through this grand-standing “positioning paper” and still yet to see a “plan.” Perhaps this is it:
Do I favour supporting positive businesses? You’re damned right I do. Businesses help create jobs and economic growth. I want to see a future Labour government get stuck in and do more to help the economy grow.
Do I support all businesses? No way. Businesses that let workers die unnecessarily, or abuse and exploit their workers, or steal from old people: all these business need a strong, legal response from the state.
All this requires regulation…
This is all that can be found in his diatribe that even remotely approaches his promised delivery of a “simple, credible economic development plan.”
And all it amounts to is three paragraphs of tax, subsidise and regulate--a vision promised by a man whose biggest “achievement” as minister was to eviscerate the country’s biggest business and nationalise its infrastructure.
In other words, it’s a wet dream for a command economy—a plan without a plan, and vision without any vision; a plan like that of Karl Marx’s, of which Ludwig Von Mises observed it “just assumed roast pigeons would in some way simply fly into the comrades' mouths, while omitting to even consider how this miracle is to take place.”
It is a sign of Labour’s desperation that anything in that could be taken for vision.
UPDATE 1: Canterbury University’s Paul Walker, who writes at the Anti Dismal blog, responds:
Does Cunliffe know anything about economics? This speech is awful. A few quick points.
"While the hippies were out protesting in the streets [in the 1970s], a professor at the University of Chicago called Milton Friedman, was selling his students the idea that taxation was evil and that businesses worked best when they were deregulated."
Friedman wanted markets regulated, but he knew that the best form of regulation is competition
"Does this sound familiar? It should be. The Republican Party in the US, the Conservative Party in England and the Labour Party in New Zealand enthusiastically took up Friedman’s philosophy, which is now called neo-liberalism."
As Friedman (see “Capitalism and Freedom”) said himself his philosophy is call classical liberalism.
"Neo-liberalism has become such a dominant economic philosophy that it is now the only economic philosophy taught in many universities."
Do any universities teach courses in "economic philosophy"? Most economics departments will teach many things I'm sure Friedman would not like, they will argue that there are many reasons for market failure and government interventions.
"Friedman revived a belief in the “invisible hand” of the market. It was a fairy tale that Adam Smith had said a century earlier would automatically deliver the best of all possible economic worlds."
No one says that. Adam Smith never said that and no economist today says that. The best you will get is that markets are better than the alternative.
"You know, these problems that we face today stem from a lack of appropriate regulation or a lack of enforcement of existing regulations. The global financial crisis was caused by unregulated banking…"
Unregulated banking?!! One of the big problems with banking was over regulation. People believed that the government has made banking safe and no business is safe. The moral hazard problems the government caused are still with us.
Paul concludes, “If this speech is an indication of the quality of economic advice Cunliffe is getting he needs to change his advisers.
Much more here at his post “Just what does David Cunliffe know about economics?”
UPDATE 2: No, my mistake. “It’s a cracking speech,” says Russell Brown this morning.
Well, that’s me and Paul told then.
UPDATE 3: Eric Crampton: “That Cunliffe seems to think he can use Bernard Hickey as trump card over Milton Friedman suggests he has little grasp of modern economics. Or of anything else.”
UPDATE 4: NZ Classical Liberal blogs:
Cunliffe outlines plan for economy; forgets plan
Drawing attention to his speech on Red Alert, he titled his post Economic Development Ideas, and in his introductory remarks promised to tell us what a Labour economic development plan should contain. Yet nowhere in his speech is there a specific policy to be found…Despite devoting at least two thousand words to the failures of neo-liberal economic policy, not once does he deign to sully his flowery prose with anything so base …
Cunliffe’s speech may well have its merits as a means of motivating Labour’s base and laying the groundwork for a leadership challenge. Measured against its stated goal of articulating a new economic plan for New Zealand, however, it is nought but facile verbiage, bereft of ideas, wanting of genuine thought and devoid of purpose beyond rhetorical attack on economic freedom.
Before his next speech, perhaps Cunliffe would do well to reflect on the words Churchill once dedicated to a waffly Labour politician of his own time: “We know that he has, more than any other man, the gift of compressing the largest number of words into the smallest amount of thought.”
But on the other hand, his record is nothing like as bad as his critics would have you believe. The structure of political economy in which we live today is still the house that Douglas built, and even his harshest critics did nothing to alter his floor plan. And without his reconstruction, there would be many more grandparents than there are now around New Zealand mourning the loss of their children and grandchildren to richer pastures overseas. 
