Bill Rosenberg: Yes, the market is innovative, but it's also brutal
OPINION: It is good to see Oliver Hartwich acknowledging that it is the Left that has been on the right side of history.
It led in economic and social advances such as the welfare state, equal pay for women, unionism and progressive taxation which drove the historical reductions in inequality in the middle of the 20th century, creating broad-based advances in living standards. It led advances in rights for women, homosexual law reform and opposing racism. It led in environmentalism and safety and health standards. This is why the Left is described as progressive.
What Hartwich does not acknowledge is the impact of "pro-market reforms" he advocates – also known as neoliberalism. Beginning from the 1970s with Thatcher in the UK and the 1980s with Rogernomics and Ruthenasia here in New Zealand, this was an often brutal programme which reversed many of the economic and social advances.
Neoliberalism has failed internationally, as even Jim Bolger and senior staff in the former bastion of such policies, the International Monetary Fund, have acknowledged. Recent voter rebellions can be traced to the failure of neoliberalism to deliver.
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Neoliberalism has failed in its own terms: internationally, GDP growth has been less than under the Keynesian policies that preceded it. Instead it is notable for enormous growth in inequalities. It enriched the rich and left low and middle-income earners impoverished or falling further and further behind.
The global financial crisis, caused by the deregulation of the financial sector, one of the greatest beneficiaries of neoliberalism, made many rethink "pro-market reforms".
It had also become increasingly obvious that its narrow economic view was flawed. It is unable to address the epochal problem of climate change. Perhaps most tellingly in economic terms, it failed to recognise that a high level of inequality is a scourge on society in its own right.
Those on the Left who Hartwich said adopted neoliberal economics – like Tony Blair, Bill Clinton, the Clark government in New Zealand – at best stopped the rise in inequality and economic and social problems but did not reverse them. Inequality remains at historically high levels. Under Clinton and Blair particularly, many problems worsened.
These "Third Way" policies stand in contrast to successful states in northern Europe. They also came under pressure from the financial sector and big business to adopt neoliberal policies, but did not move nearly as far. They maintained much more equal societies and have been highly successful in both economic and social terms.
So it is quite wrong to say there are no economic alternatives to "pro-market" policies. But there is indeed a challenge to the Left as to what economic policies it should follow.
The market is innovative but brutal. Its innovation can be beneficial invention and development or it can be self-serving speculation, shifting costs to others, and exploitation. Left to itself it will create enormous inequalities. It cannot address the huge collective problems nations and the world face.
A key question for the Left is therefore how to take the best features of the market while regulating its worst features and stepping in where collective actions will do better. While the Right see strengthening the market as an end in itself because that benefits its most powerful supporters, the Left should see the market, appropriately regulated, as just one means towards its objectives.
It is misleading to see the choices only in terms of markets. Many of our biggest challenges, such as inequality and climate change, cannot be solved without collective actions: that is the role of government.
Governments can also do many things more efficiently, effectively and equitably than the market, including health provision, universal pensions, education and social welfare. It can be a powerful engine of innovation (as it was for space technology, the internet and in New Zealand agricultural research and geothermal power) where the private sector is unwilling to take risks.
Current policies are running the economy below capacity, creating unacceptable joblessness. They are structured to maintain low-wage work, high inequality and poor productivity growth. They are withholding resources from public services that the government does best, increasingly forcing people to pay or insure for costly private healthcare and stigmatising people who need society's help in times of trouble. They fail to take global warming seriously. There is plenty for the Left to do.
The neoliberal view belongs to the 19th century. It cannot resolve the problems we face in the 21st century. The right size of government is the size that can address the problems we face as a nation. Budgets, government debt, GDP growth and the market are important, but are just means to an end. The real test of economic policies is whether they make New Zealand, and the world, a better place for people to live.
Bill Rosenberg is the Council of Trade Unions' economist and director of policy.
- The Dominion Post