Saturday, February 17, 2007

Has Ms Royal learnt nothing?

Some people obviously still labour under the delusion that there's another lesson just waiting to be learnt about economics after Thatcher.

The idea that governments can tweak and fiddle the knobs to produce "better" outcomes to the market still isn't dead, despite the wreckage and the ruin spread over time and place to you'd think would make anybody still up and pay attention.

But no, we still get empty slogans about economic rationalism, neoliberalism and market fundamentalism.

For me the question is quite simply really. What works and what produces better outcomes? And the answer to that is itself pretty simple and obvious.

Or should be.

Toby, a very smart lawyer from Sydney and a fellow "homocon" (he thought of the term - I wish I had), points to an article in The Economist about Ms Segolene Royal's program to further bind and hinder the French economy:

"Yet the 100 detailed policies that Ms Royal unveiled to steer France down this soft-focus path amounted, in the main, to a long wishlist of spending pledges, with little explanation as to how any of them would be paid for. Thus she promised to increase the minimum wage to €1,500 ($1,950) a month, to introduce interest-free loans worth €10,000 for every 18-year-old, to push up unemployment benefits to 90% of previous salary, to raise the lowest pensions by 5%, to renationalise and merge Electricité de France and Gaz de France, to penalise firms that pay dividends rather than reinvest profits, to boost public R&D spending by 10% a year, to cut class sizes in poor areas and much else."

Oh dear.

But even with a conservative government here in Australia we just can't quite get away from the illusion that governments are good at picking winners and can interfer (ie distort) the market and not produce unintended results.

Last year there was considerable heart burn in Oz's wine producing regions because of a glut of wine grapes that had led to a collapse in prices being paid to growers and the inevitable calls for the government to bale the industry out.

Now, I'm sympathetic to these calls, but only on the basis that the mess was in part produced by the government distorting the market, by offering generous tax breaks to wealthy doctors and lawyers so they could indulge their hobby of making wine.

What was the totally predictable result?

Investors and accountants rushed in to secure the tax benefits and large new areas were planted with vines.

Nobody saw the over supply coming?

This kind of thing hasn't happened before? But the special interests got in and rorted the system, aided by the junior partner in the governing coalition (the Nationals - formally the Country Party - and derided as a bunch of "rural socialists" who like to capitalise their gains, but socialise their losses).

More news of economic chickens coming home to roost here, this time in Venezuela.

1 comment:

Span Ows said...

"Every autocrat uses the same ploy to keep himself in power--he wraps himself in the flag and screams that an enemy is at the gates. It's the oldest trick in the books: "It's not my fault, it's those bad people over there."

hahaha! Hugo Chavez Frias to a T!!