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Free market idealism has had its day. Proponents and supporters of New Zealand's fifteen year excursion into pure free
market economic theory need to acknowledge that the experiment has been a failure. The current account deficit is one
very good example of how it has all gone wrong.
How can the economy be healthy when a deficit of $7.54 billion left the country over the last year? Compare that with
the $500 million that Cullen, in his first budget, was able to get out of Treasury for three years of new government
There have been two explanations presented for this enormous shortfall in the media.
The first, as presented in the Evening Post, most mainstream media and the right side of our political elite, is that as
a nation we are spending more then we earn. This is a blatant miss-representation of the problem. The implication is
that we are living in a false luxury, that we should all be more frugal and that it is our fault for spending too much.
The second explanation, put forward by centrist media commentators and our present government, acknowledges obliquely
the underlying cause. (more on that later) It is suggested that we are not attracting enough foreign investment. Here
the solution proposed is to make ourselves a more desirable investment option to the money makers in New York and
London. Indeed in recent months both Helen Clark and Michael Cullen have been trying to seduce "business" people in
foreign capitals, just as their predecessors have done before them.
However, in fact, the real problem is foreign investment.
As a result of fifteen years of free market nonsense, New Zealand is now owned, lock stock and barrel, by foreign
Consider our land and houses, just one part of a wider problem.
All our banks are foreign owned and they hold mortgages on most of our domestic property. A big part of the current
account deficit consists of interest payments from the local branch banks to their head offices off shore. We are paying
rent for our own houses.
Oh, but those foreign bankers are entitled to a fair return on their investment, aren't they?
No, because it has not been a fair investment. The money lent into the domestic housing market does not come from
somewhere else. The money is created out of thin air by the commercial banks operating in New Zealand. The whole process
is shamelessly acknowledged and supported by our Reserve Bank and the free market mandarins of Treasury.
More than NZ$15 million has been created each day for the last fifteen years by private bankers, according to Reserve
For some reason the people in charge of our economy see it as "natural" and "desirable" to allow foreign bankers to
create New Zealand dollars, "invest" them almost risk free into our housing market, and start charging us the highest
effective interest rates we have ever had.
The only reasons given are theoretical, theory with shaky foundations and no supporting real evidence.
But the opposition has arrived. We do not need to stand for this any more. Our government has the sovereign obligation
to protect our interests, and has the power to do so.
As Green Party Leader Rod Donald recently said:
"The solution to this economic crisis lies in New Zealand striving for more self reliance. Now more than ever we can see
the huge impact on this country of free trade and corporate globalisation."
Grass root opposition has been flourishing this year. People are starting to ask questions they never dared before.
Dissatisfaction with the status quo was the key to the Labour/Alliance victory, however almost nothing has changed.
Taxes and interest rates are still high. Public service spending is still low. And we are still sending the lion's share
of our profit to foreigners.
A paradigm shift is coming. Our culture is starting to change.
The free market ideal assumes that the only valid motivation for doing anything is financial reward. We have reached the
ridiculous point where any other reason for working is considered quaint and naive. Doctors don't heal because they want
to help people, they heal to earn money.
But most people work to stay alive and enjoy their friends, families and the beautiful world we live in. If they are
lucky they also get to do something worthwhile, like helping people, or producing useful things.
Before the free marketeers took over, New Zealand had a culture of pragmatic egalitarianism. However imperfectly
achieved, the objective was to be fair, honest and constructive.
Now we have a culture of financial rationalism. The explicit cultural aim is to be ruthlessly single minded about making
money, however deceitful, dishonest or destructive you need to be.
The first step to releasing ourselves from our economic woe is to acknowledge the failure of the free market idealism.
Then we can take control of our own economy and direct resources to the people who work for us, ourselves. We must stop
grovelling for money from the faceless crooks who have enslaved us.
Finlay Thompson, NZ Banking Reform.