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June 24, 2005

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Ironically, wasn't it the complete opposite of starving the beast - that is, stuffing the face of the beast - that caused the governments of Canada and New Zealand to reach a near-crisis where they had no choice but to drastically cut spending?

I've said it before and I'll say it again: behind the "starve the beast" approach is the same passive-aggressive cowardice of someone who doesn't have the courage to break up with their partner when they know the relationship is bad, so they sabotage the relationship in various ways to try and get the other person to break up with them.

Norquist and other Republicans who share his approach know that the kind of deep service cuts they favor would be electoral suicide, because they know that the majority of Americans /want/ the government to provide most of the services they want to cut. They know that the only way they can force these cuts on the American people is by presenting them with Hobson's choice.

They know, in other words, that the American people would never support their agenda if it was presented honestly. It's dishonesty and cowardice, plain and simple.

in related news, the Chinese government is converting its US Treasury debt into proven oil and gas reserves.

remember all the posts and comments here and on economic blogs about the huge haircut the chinese would take when they revalued their currency? i guess they decided to buy up whole companies with that debt prior to that revaluation. oops

i may need to read that book about imperial overstretch again.

They know that the only way they can force these cuts on the American people is by presenting them with Hobson's choice

isn't there a word for someone who thinks you're stupid and that you want the wrong things for yourself ?

maybe not, but "elitist" will probably suffice.

"Starving the beast" means taking our country to the brink of those problems in the hope that we will be sufficiently scared once we get there to cut government spending.

It's even worse than that. Nobody really knows where the brink is. It's the nature of economic decision-making that it is driven mostly by expected future events. This means that it is not really possible to know what will bring on a crisis, and that it can happen very fast, and be much less manageable than we imagine. Our current fiscal policy is quite dangerous.

Bernard: I agree. 'Starve the beast' is, in certain respects, a lot like bringing really serious health problems on yourself in order to summon up the willpower to do something: you hope you'll manage to act before you well and truly ruin your life, but you really can't know exactly (or even roughly) when you've reached the point of no return.

The obvious disanalogy is: in my example, I bring these problems on myself. In the case of our current economic policy, the government is risking them on behalf of the country, and in fact the world.

I always thought Norquist's people were more interested in the cutting taxes side of the equation. That's why they're so well-funded. They just don't care about the rest.

Ironically, wasn't it the complete opposite of starving the beast - that is, stuffing the face of the beast - that caused the governments of Canada and New Zealand to reach a near-crisis where they had no choice but to drastically cut spending?

I disagree with this analysis. I am not a Canada or Kiwi expert, but I was pursuing a job in Canada when the Reform party was making its debut, which introduced some of the save 'starve the government to save it' notions that I believe have filtered to other parties. (I'd also note that the party was also endorsed by the Heritage Front and Alliance for the Preservation of English in Canada, which, from my viewpoint, mirrors the way that US groups emphasizing economic conservatism often find themselves aligned with radical right rhetoric)

As for NZ, I was in Auckland when the entire downtown lost power and which had me read quite a bit about the privatization experiment of NZ. This article by Murray Dobbin, a freelance Canadian economist.

. The initial wave of changes -- deregulation, privatization, tariff elimination -- was justified by the infamous debt crisis. This was a ruse all along. Even Sir Roger Douglas admitted this when I interviewed him in 1992. The "crisis" New Zealand faced post-election in 1984 was a currency crisis brought on by Mr. Douglas himself.

As for the debt in 1984, it was NZ$22-billion, but after 10 years of experimenting, it had doubled to NZ$45-billion -- in spite of the sell-off of NZ$16-billion in state enterprises. Today, it has finally returned to 1984 levels, but only through more Crown asset sales. And economic growth? In the years 1985-92, average economic growth in the OECD countries totalled 20%, while in New Zealand it was negative, at -1%. The promised creation of enormous new wealth went into reverse: Real GDP in 1992, at 5%, was below the 1985-86 level. A burst of growth from 1993 to 1995 petered out, and the economy steadily declined until it dipped into negative territory in 1998, posting the fourth-worst growth in the OECD.

The transformation of the economy was supposed to spur foreign investment, but it mostly meant a feeding frenzy on domestic corporate assets. In 1993, the proportion of GDP in investments was just 70% of what it was in 1984.

A rebuttal article on the same site by David Hillary should be read as well, if only for this observation and its relationship to the 1st rule of holes.

The main flaw in the reforms was that they were not certain enough to inspire confidence that they would remain, and some timing problems (mainly deregulating product markets before deregulating labour markets). The reforms did not go far enough. Further reforms are needed, especially to welfare and social services, and the overall level of government expenditure (which is two thirds social expenditure).

Of interest may be this article by the Economist, which along with saying that the reforms did not go far enough, says that the problem was that too much was expected, as well as this Policy review article, which has this conclusion, that

But the right in New Zealand assisted the left’s recovery and current ascendancy by rendering their own market principles inoperable, as these bore a diminishing resemblance to what they actually did when they were in government and to their policies when in opposition. They squandered the legacy of low public spending, which corroded their political standing and has become an increasing drag on growth. Above all, they ceded the political high ground by failing to articulate positions based on principle. It therefore made sense for the electorate to choose Labour. As a party which had greater consistency between what it said and what it does, Labour could deliver a more decisive style of governance.

I think this is why the focus is on Iraq and defining traitorous behavior.

Similar comments over at Angrybear. Hunter-Kerpen, however, at least tried to find some spending cuts as opposed to Andy Roth over at socialsecurity.com.

LJ
The 80's in NZ were a heady time. We literally had no idea what the headlines on any given day might be.
This was strange and exhilerating in a country that bore more than a passing resemblance to 'The Shire'

Asset sales, deregulation of everything, nuke free legislation, rainbow warrior bombings, farmers culling their now unsubsidised sheep instead of sending them to the meatworks which would only result in them getting a bill. (Around christmas time in '85 or '86 there was a carol doing the rounds:

"While sheperds slew their stock by night
and threw them in a pit
the angel of the Lord came down
and said you're in the sh*t ")

When the Lange Labour govt gained power, our books were in a mess (the outgoing Muldoon had once said something along the lines of "the average NZer would not know a deficit if he met one on the number 12 bus from Karori"). The monetary crises Lange faced was made much worse by Muldoons appalling behaviour in not following the advice of the incoming govt and floating the currency. My old pol.sci lecturer tells a story about how on the day Lange's govt was sworn in there were frantic calls to our embassies around the world telling them to max out the credit cards as the reserve bank needed the cash. Interesting times.

Facing the crisis the govt went with a programme that was readily laid out in a treasury paper, with all the current fads, managerialism, agent/client capture and the rest. Something Had To Be Done and There Is No Alternative.

Much of it was a shambles, but much was good. My memories of Muldoons era are vague ( I was 13 in '84) But the country is better in so many ways that one would think it was a different place.

Prior to the reforms for example:

Everything except convenience stores must close all weekend. Import licences meant monopolies on imported goods for sale. We needed govt approval to convert currency to go on an overseas holiday. Any freight travelling more than about 100 km must go by (govt owned) rail. The only tv stations were govt owned and cowed by Muldoon. Like I said a different place.

I'm sure things could have been done better but the perfect is not the enemy of the good is what I suppose I am trying to say.

All recollections and alleged facts in the above, are merely that, and are not intended to contradict anything you or your sources have said.

As a long time lurker from far away, I hope you enjoyed your time in NZ. Please tell me you did not just stay in Aukland, an ode to which by James K Baxter begins "Auckland, you great Ar*ehole".


lschander: welcome! I went to New Zealand last summer (well, our summer; your winter), and travelled from Stewart Island almost all the way north. It was a wonderful country, and I loved it. (Even if I never did get to see a Fjordland Crested Penguin...)

As a long time lurker from far away, I hope you enjoyed your time in NZ. Please tell me you did not just stay in Aukland, an ode to which by James K Baxter begins "Auckland, you great Ar*ehole".

No worries, I've been three times, first time was the South Island, second time was Auckland and the third was Canterbury.

You are right to point out that things did need to change, but my own feeling is that when things are done because of a philosophy rather than out of pragmatic step by step considerations, one is always asking for trouble. I also think that the 'backwardness' was not simply something that afflicted NZ. In the late 80's when I first came to Japan, there were only 4 public phones that one could make overseas calls on in a city of 800,000 and the same kind of restrictions existed. When I was in the UK in the early 80's, the same sort of restrictions were there. Those sorts of store opening restrictions were in my Mississippi town at the same time.

At any rate, I'd second Hilzoy's comment. NZ is a gem of a country.

Thanks for the replies.

Hilzoy: In Wellington we are have the 'Karori wildlife sanctuary' (accessible via the number 12 bus which is still running under private ownership). An inner city block of bush enclosed by predator proof fencing, the idea being that it will serve as a nesting and feeding ground for birdlife. It has been open for a few years now and the increase throughout the city of Tui, Fantail,and Morepork has been wonderful. Hope you got the chance to go up there, there are no penguins but the kaka are great, though too trusting for their own good.

www.sanctuary.org.nz/restoration/index.html


LJ: Sweet as.

I"m sure you will both be pleased to hear that the nation is in good spirits, though largely hungover.
All Blacks 21, British and Irish Lions 3.

This always bodes well for a government in election year, so Helen will be pleased, despite the polls. ugh.

But this is all terribly OT, so thanks again, love the site

Kia ora koutou (general salutation of goodwill, welcome,hello, goodbye, what-have-you. Plural)

Claification:The ugh is about the polls which point to a rather ugly coalition govt including a demogogue, Winston Peters. Not the fact that Helen will be pleased.

So no one busts a gut trying to figure out 'sweet as', you can find it here.

Also, Winston Peters is a fascinating character (politicians are fascinating when you don't have to worry about them representing you, I guess) I was in Auckland when Peters claimed he had Chinese ancestry, and I thought he was finished. I'm amazed that he seems to have recovered.

Any rate, don't be a stranger, Ischander! Kia ora!

All Blacks 21, British and Irish Lions 3.

I was once privileged enough to watch the All Blacks travelling team play the Queensland state team in the Gold Coast somewhere about ten years ago. My dad was the token Aussie fan there in the All Black section, the real Oz fans having buggered off long ago 'cause they knew what was coming. [So did my dad, but he decided to play the role of "honorable opposition".] The first half was close; I think Queensland ended up a try or so ahead at the break.

Then the All Blacks started to play for real.

It wasn't close after that.

But God, was it beautiful.

hilzoy, I appreciate the critique of NR, but I wish you would not use the term "fisking".

This term was invented by people like those at NR to describe their treatment of British journalist Robert Fisk. In their lexicon, "fisking" means "a completely devastating word by word deconstruction of a meretricious article".

In fact, despite all of their malicious words (many of which I read) those guys barely laid a finger on Fisk. Fisk is one of the experienced and highly regarded journalists in the Middle East and has won, I think, more press awards than any other British foreign correspondent.

Your use of the term endorses the NR's opinion of what they accomplished with Fisk. Since they're a bunch of dummies I'm surprised to see you do that. In addition, it misuses the name of a good reporter.

best,

NP

NP: I had no idea. Thanks.

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