You hear socialists a lot these days crowing that free market capitalism is failing and that countries such as the US and New Zealand, supposedly bastions of economic freedom, are in trouble.
The truth is that, New Zealand in particular, has never had a totally free market. When Roger Douglas began his reforms in the 1980's he only saved New Zealand from bankruptcy and eliminated favouritism by the removal of subsidies and import restrictions. Before those reforms the restrictions on New Zealander's freedoms would have made Communist countries proud. Remember that equitable 66 percent top tax rate, having to get government permission to send more than $5 overseas, waiting 6 weeks for a telephone to be installed. Ahhhh those were the days.
The then Prime Minister David Lange's "cup of tea" break from reforms proposed by Douglas has left New Zealand in a hiatus ever since. Douglas only completed a quarter of what was needed. Subsequent governments have lacked the "balls" to do what was needed to follow through on Douglas's bold ideas. National in particular, whose founding principles closely match the Douglas themes, has tinkered and gradually moved left of it's core principles.
New Zealand is a mixed economy, not a free market. It has elements of a free market mixed with government control of areas they should have no business in. recently the New Zealand government has embarked on a partial sale of some state assets. Of course the statists oppose this. And I do too. But only because it does not go far enough. They should sell the lot.
Like wise in the US a free market does not exist. Arguably the US government has even more of a control over the money and liberties of the American people. The mess the US economic system is in is the result of too much government control not too little. But their sharemarket is at all time highs I hear you say!
And that's fine for those lucky enough to own shares. for those with cash savings and getting almost zero percent it doesn't feel so fair. The banks have been pilloried for risky lending yet it is the Federal reserve which has encouraged this with it's low (no) interest rate policies. Now the Fed has painted itself into a corner and is afraid to remove the economic stimulus it has created for fear of sending the economy into a death spiral. it's the same as if you keeping feeding a drug user drugs to keep him happy. Eventually you will kill him but if you remove the stimulants the resulting chaos and withdrawal symptoms may be just as bad.
The Federal Reserve caused the 2007 financial crisis, then propped the economy up again. They just haven't learnt that they are the cause not the solution. The end game is coming and it will be messy. Very messy. The bubble the Fed has created has been on the go for decades and has been responsible for directing money into more and unproductive areas. One by one those asset classes have fallen. First was the dot.com bubble, then the real estate bubble, the bank/financial crisis. The only asset class left was Gold and even that has topped ( perhaps temporarily).
What the Federal Reserve has accomplished through it's artificial low interest rates is a transfer of risk to the stock market, and a devaluation of the US currency, thereby making all Americans poorer overall. It has propped up big business and the banks through its crony capitalism.
This is not a freemarket. If anything the US in particular is moving further and further away from the free land its founding fathers set up. It's socialism and protectionism at its worst.US banks have been deemed too big to fail at the expense of the ordinary American.
When it all ends the anti freedom socialist will claim the death of capitalism and the free market. In reality it will be the death of state control and the nanny state . I hope it will be seen for that so that America can return to its roots and the liberty its constitution is meant to protect.
In New Zealand we are likely to elect a Labour/Greens government at the next election in 2014. The current National government has lost touch with the mood of the people and more importantly with what it stands for. When a populist government loses touch with what's popular and has no principles it has little left to elect it.
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