New Zealand politics

Rodney Hide MP
Finance Spokesman
http://www.act.org.nz
Office: +64 4 4706630; Mobile: +64 25 772 385
FOR IMMEDIATE RELEASE: 22 FEBRUARY 2000
For more information contact:
Trish Sherson: Office: +64 4 4706644; Mobile: +64 25 570 803
tricia.sherson@parliament.govt.nz
SPEECH
New Zealand On $100 Million A Day
Rodney Hide MP
January 1999

Aristotle observed that man is a social animal. And that’s certainly true. We spend so
much of our lives, most of our lives, very little of our lives doing anything other than
doing things for other people and having them do things for us. That’s how we live.
And when you think about it for a moment there are three ways and only three ways to
get another human being to do something for you.

The first, and I believe it’s the most powerful, is love. We do things for our wives, for
our husbands, for our children – and likewise they do things for us – simply because
they love us. And we can ask them to do things for us. And they will do them no
questions asked. We have close friends that will do things for us if we just ask them.
Love is an amazingly powerful force for people doing things for other people.

The incredible thing about love is that it quickly attenuates. It doesn’t reach down the
end of the street. So if your neighbour at the farthest end of the street asks you to do
something that your wife or your husband or your children might ask you to do, saying,
“Please, do it for love”, you’re unlikely to be moved that way. So love is powerful but
it’s just for a few people in our lives – our family and our closest friends.

The other great motivator – the other way of getting people to do things for us – is
through trade. “You do this for me and I will give you this. You give me that and I will
give you this”. And that ladies and gentlemen is the most powerful mechanism for
social organisation right around the world. It’s what we do in our work. Look around
this room and realise that everything here was produced by trade, by the capitalist
spirit, by markets, by business, by the search for profits. That’s the power of trade.
And it’s terribly respectful because it recognises that the other person doesn’t have to
do it. And so it gives them something in return and if they choose to do it, and the price
is right, they will.

There is a third way of getting people to do things for you: force, the gun. You put a
gun to a person’s head and you say “Do this, or I’m going to pull the trigger”. That is
the third way of getting people to do things for you.

Ladies and gentlemen, I am an MP, a Member of Parliament, I’m a politician. Today I
stand before you and I represent the gun. I represent the force in our society to get
things out of people.

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The gun and force have delivered nothing good in the world. This past century has
been a terribly destructive century. Millions have been killed because of the gun,
because of politicians and because of Government. And that’s what I stand before you
to represent and you people, you folks, you represent the traders. The people who
produce, not through the gun, but by getting out, making a living and trading.
The socialist of all descriptions are interesting because they hate trade. They hate the
thought that you can go to someone and do a deal. They hate that. They hate that
people can make money. They think it is somehow exploitative. And they believe that
everything should be done for love. They want all of society organised like we organise
our families.

And what happens when they try that? They quickly discover everywhere it has been
tried, all through the ages, that love doesn’t stretch far enough, that it doesn’t reach
down the street. And so we end up the totalitarian dictators with the gun at the
peoples’ head and saying if you’re not going to do it for love, you’re going to do it for
this reason because if you don’t do it I’ll pull the trigger.

I think it’s fair to say talking to people here and listening to the conversations that you
think that Government wastes money. I think it is fair to say that people sitting in the
audience think that we have too much Government, too much bureaucracy. By the
time I finish here today, you’re going to know it. Because I’m going to take you on an
insider’s journey into politics. What the politicians don’t tell you about how it works and
I’m going to take you right back to the very day that I turned up in Parliament and some
of the things that I’ve learnt about what they’re doing with your money.

ACT campaigned for three years to get into Parliament with as a new “less tax, less
government” party and we achieved 6.2% of the vote and got eight seats. I’d worked
very, very hard, but I was like the dog chasing the car, having arrived in Parliament
following the election I didn't know what to do. No MP gets a job description, you don’t
have a boss and I flew to Wellington and I went in and got an office and I was sitting in
my office wondering, “What does an MP do”? There are MPs that have been there for
twenty years and still ask that question.

And there was a telephone there so I rang all my friends in Wellington. He wasn’t
home.

On my desk was a computer, so I turned it on. This to me symbolised so much. And
the computer starts. I’ve never heard a computer like this before. It goes, ga-ching,
ga-ching, ga-ching, ga-ching. It was like it was just not connecting with the network or
something. And I went out – like all Politicians do – to get a cup of coffee. And have a
rest. And I came back with my cup of coffee, and it’s still going, ga-ching, ga-ching, gaching,
ga-ching, ga-ching. And then after several minutes of this, I got “Windows”.

Amazing. And then I pushed the little icon for “Word”. Ga-ching, ga-ching, ga-ching,
ga-ching, ga-ching, and again, I finished my cup of coffee, and then it appeared
“Word”.

I started to type and it couldn’t keep up. “Hey, this isn’t good enough”, I thought. This
isn’t going to work, you know, I’m in Parliament, I’ve got to have the gear. So I got the
parliamentary directory. There’s a thousand people that work in Parliament in New
Zealand. I should say on the payroll in Parliament. A thousand people on the payroll
and I found there is a man in charge of computers called John Preval and I rung him
up. I said “Hello John, it’s Rodney Hide”. He said, “What can I do for you”. I said, “It’s
about my computer”. He said, “Hang on, I’ll be there in a minute”. And the door

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everyone just yawned – “Oh yeh, who cares?” But they heard about that $29,170 on
cabs and they said, “this is an outrage”. Because that is an amount that we can feel,
that is an amount that represents something and then you have to ask yourself, “how
could you spend $29,000 on a cab?”

That’s enough to go from Auckland to London and in Jonathan’s case, still have the
odd trip into town for dinner.

Five billion dollars that’s what the Government had just announced. Does anyone
know what a billion dollars looks like? Well, I will tell you. Imagine you have a bundle
of a hundred-dollar notes, it’s a centimetre thick. There’s ten thousand dollars in it.
You slap it down on the table, bang, put another bundle on top, there’s twenty
thousand, another bundle on top, that’s thirty thousand, that’s Jonathan’s taxi bill; it’s
only three centimetres high. Another bundle, forty, fifty, sixty thousand. How high does
a billion reach? It’s a kilometre. It’s a kilometre. We were worried about three
centimetres and the Government had just announced spending of five kilometres high
of hundred dollar notes. That’s how much a billion dollars represents. And so behind
that campaign to clean up the MPs and fund them properly and to reveal their
accounts, was a very serious message that these guys have got to get real with your
money which seems a reasonable ask I would have thought.

The next big thing that happened and highlights about Government was the plans to
build the new executive wing. I moved into a new office tower and it is very nice and I
got wind of the fact that they were planning a new executive wing. And, I asked
around, it was going to cost one hundred million dollars, and I have to say I was new to
politics and a hundred million still sounded like a lot of money to me. So I inquired a bit
more and then discovered that we didn’t need this building. So the ACT caucus, eight
MPs met, and convinced ourselves that we didn’t need it and we would organise a
campaign against it.

Richard Prebble dubbed it the Parliamentary Palace, which did more to kill it than
anything else we did. Over 200,000 New Zealanders in three weeks signed a petition
opposing the Palace. That’s 10% of the voting public, against the Palace – mad
Socialists signed it, right wingers signed it, everyone signed it. People like us signed it
too. Sane, reasonable, intelligent people like us – signed that petition. That petition
came into Parliament and we forced a parliamentary inquiry. I forced it into the public
and so the select committee had to sit there and we heard from every interest group
under the sun, from the CTU, that is the Union, the hard core union, to the Business
Roundtable which is the sort of hard core business representative interest group lobby
in New Zealand, and they’re all against the Palace. Submission after submission after
submission said this Palace is nuts. There was only one submission that we got by the
way that was in favour of it and that was from a little union in the construction industry
based in Wellington. And they had some very cogent arguments that the committee
picked up on. We had three days of public hearings and we went back into committee.
Back in the Committee room, the MPs were all in favour of the Palace. “Well,” I said,
“that’s all right. Let’s vote on it. I’m against, who is for?” “Oh, I’m not going to vote,”
they said. I said, “Why not?” “Well, you will just tell everyone how we voted. You are
just going to go into our electorate and leaflet everyone and say, you know, that this
MP and that MP, and we all voted for the Palace.” And I said, “that’s right. Let’s vote.”
Oh, no one wanted to vote. We need to talk about it some more. We met for three

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further weeks to discuss it. Who is in property development in the audience? OK,
who’s done a hundred million-dollar development, that’s big, one hundred million is big.
I said let’s have a look at the financials. Don McKinnon who is the senior National
party politician on the fiscally-conservative side, he said, “You know it’s not a lot of
money Rodney, what are you beefing about?” It’s a hundred million. I now know what
he was getting at. Politicians in New Zealand spend one hundred million dollars each
and every day – three hundred and sixty five days of the year. A hundred million to a
politician is not a lot of money. But it’s a million New Zealanders paying one hundred
dollars. And a hundred dollars is a lot. And a million people is certainly a lot, and a
hundred million dollars is a lot.

We discovered that there were no financials done. There was no comparison of costs.
I kicked up about this and the financials were duly prepared. I have seen numbers,
ladies and gentlemen, that have been cooked. These weren’t cooked; they were
poached, they were fried, they were scrambled – the benefits were double-counted,
costs were netted out. It was just garbage. Turned out that we would have built this
one hundred million-dollar building for nothing – which is pretty impressive even by
New Zealand Government standards. We had the Minister in front of us and I started
to question him and his officials about these numbers. I got three minutes into it ladies
and gentlemen and the chairman of the select committee said, “Look, we don’t want to
get bogged down in the minutiae do we”, and shut me up. Talking about spending one
hundred million dollars to a politician is getting bogged down in the minutiae. Can you
believe that?

I was brought up a Protestant, I’m not religious now, but my parents were Methodist,
Presbyterian and Anglican, sounds like I had three parents, no, we moved around in
the country. And it has left me with this terrible thing about having fun. I don’t know
what Methodism was like outside of North Canterbury, but in North Canterbury having
fun was sinful and the next thing was spending money. And to this day I still struggle
spending money. I was brought up that you just earned money, I don’t what you did
with it, you just put it in your sock, like my father did, and you just let inflation take care
of it. And so I have this terrible problem about spending money and here I am a
politician spending millions and millions and millions.

I go home most nights with a knot in my stomach just from watching millions and
millions being spent, you can imagine how it feels. And you walk out of Parliament or
you come home to Auckland or you go on the road and you go to the Taranaki or to
Gisborne, or you go anywhere, and you see how hard people work and you see what
ten or twenty or thirty dollars a week means to them and you view and realise the
contempt with which Government and politicians spend that money and it makes me
personally ill. Because it is not our money to spend. It’s your money. And I think you
should spend other people’s money much more carefully than you spend your own. Of
course, we do the reverse.

By the way, politicians enjoy it. Just like the IRD enjoy watching you shiver and shake,
politicians enjoy spending money and I know this for a fact because I was sitting in a
committee once and a politician slumped down beside me and to give him his due, he
was from the left wing party and so I guess by wasting money he was following their
policy line, but he just said “You won’t believe what has just happened in the meeting
we just had”. I said “What’s that?” He said “We just agreed to spend another two
million dollars, imagine that,” and he started laughing and I said “What on?” And he
said, “Buggered if I know. But two million, can you imagine it?” I said, “I might tell
audiences that”, and he shut up.

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Five months previously he had been an ordinary bloke, toiling away. Got elected to
Parliament, suddenly had access to the back pocket of all the people in this room. And
he had just raided it and spent some dough and it felt good. It felt great. Felt that he
was doing God’s work and improving the Ministry of Women’s Affairs. Because they
work hard, do lots of good work.

But back to this Palace. So we struggled around with it and they didn’t want to vote.
And we got all the plans out and everyone was trying to look for a way forward and I
was obstinate. And what I have decided to do in politics is that I don’t fight all the
battles that one can fight, I just pick one or two, and I just be obstinate on those one or
two. They had all the plans out and you will know that Parliament has this beautiful old
stone building, built in the depression, and then beside that, that ugly Beehive built in
sixties, and someone said, “Isn’t it a shame that the Beehive is right where it is,
because if it wasn’t there we could finish Parliament”. So I said “Well, why don’t we
shift the Beehive.” I said it as a joke. The next week we came back and the officials
had prepared plans for shifting the Beehive. The Beehive weighs 20,000 tons, it’s solid
concrete, it would have been the third largest building in the world ever to have been
shifted. All you need to know about the economics of shifting large buildings is that the
other two were all in the former USSR. I am sitting there with a typical political
dilemma. What do I do now? Everyone is jumping about, saying, “Yeah, we’ll shift the
Beehive, what do you think Rodney?”

I decided on a cunning plan. I said, “That’s a good idea, let’s look at it.” We would
write the report saying, “We would shift the Beehive subject to getting the costs
checked out” and that would get the committee moving, everyone would laugh like you
did about shifting the Beehive and it would kill it, and would kill the Palace with it,
because we recommended against the Palace. So all that happened, the report was
prepared, and New Zealanders, you will remember this, they just roared with horror,
laughter, disgust, that here they had prepared a 200,000 signed petition, they had gone
to the select committee and beaten up the politicians, and the politicians had gone
away and thought about it saying, “The people of New Zealand don’t want to waste
money on a Palace, so we will spend twice that and we will shift the Beehive”.
At that point voters started to think that their government was out of touch. And I
thought – that’s great, that’s it dead!

Three weeks later I get a phone call from the Holmes Show saying, “The Prime
Minister has just announced that as part of the millennium project, the Government is
going to shift the Beehive”. I couldn’t believe it. I went on the Holmes Show with the
Prime Minister. And he was losing. I didn’t have to say much. I just kept saying “put it
on wheels Prime Minister, put it on wheels Prime Minister?” And I just shook my head
like this guy is nuts. I didn’t say anything, I just shook my head – what is wrong with
this guy? And then Prime Minister Bolger, got on the attack and he said “But Rodney
Hide, Rodney Hide, you were part of the committee that recommended this”. And I
was just sitting there and the camera just went on me, and I felt like saying “It was only
a joke Prime Minister – I never thought anyone would be stupid enough to ever take it
seriously.” But I faded at the critical moment and I said something a bit softer than that.
And of course, the public were outraged and that was killed.

But think about it, hundred million. We spend a hundred times that in New Zealand on
welfare a year. A hundred times that, on welfare in a year and what do we buy?
Misery, broken homes, kids not being looked after. Do we see a petition being
generated about that – no.

But these examples illustrate the politician’s propensity to spend money without regard
to the people who earned it. To the people that it actually belongs to, to the people that

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we represent and who give us this money, presumably for good purpose, not for bad
purpose. And that’s what’s happened around Governments around the world.

About this time in Parliament I realised I was suffering some sort of cultural shock.
When you do any job, it has a culture and you quickly learn it and you get comfortable
with it. I used to drive trucks a lot as a living and when you are a truck driver, you meet
other truck drivers and you talk about horse power, and tonnage, and the quickest
routes, and who can carry the most the fastest, and you have that smell of diesel about
you. I then went in and taught at university, and the same thing. You talk about
lecturing and about students learning and about research. And that has a culture too.
If you’re in business, it has a culture of profit and loss, of talking about customers, of
talking about what works and here I was in Parliament, and this culture just didn’t fit. It
didn’t make sense, I was out of tune with it. I felt like a person behind enemy lines.
The language was all different. The social mores were all different. Everything was
different about it to what anything I had ever experienced in my life.

And I have discovered what it is. It is because Parliament and politics and
Governments and politicians, we don’t produce anything actually. We don’t produce
anything. And it is very hard to have a culture like that you are familiar with if you’re not
producing something, because that’s what you talk about, that’s your reason for getting
up in the morning, to go there and get in that truck and shift some freight, or teach
some kids, or make some money. Politics? The only thing we do is spend and that is
the culture, it is a spending culture. There’s not a problem out there that a politician
can’t fix by throwing more of your money at it. He knows actually, and she knows, that
it won’t fix it, but it looks good. There you go, throw some money, that will fix it.
Where’s the next one? And people love you when you throw money at them even
though it is their money. Sort of with about 50% siphoned off on the way through. So
it’s a spending culture.

There is another thing about politics that I discovered. I call politics “decision making
without property rights” because no politician or Government Official owns anything.
They don’t have any assets, and they don’t have any liabilities, as we understand the
phrase. So, no one fixes problems. No one says yeah, that’s a problem let’s fix it.
People in this room, you all have assets and liabilities. If your business or your
property is in trouble you have got to put your hand up and fix it, because it is your
responsibility, you know it, and if you don’t fix it, it is going to cost you. In politics we’re
not like that. Ho, here’s a problem, oh good, shove it to that guy, flick, and he gets it
and oh, oh, I don’t want this problem, so flick. And then finally what we do is we just
shuffle problems into the future for someone else to deal with and then we think that’s a
solution. And you can see problems being shunted around in sound bites on TV.

It is nothing like the capitalist process where there is an owner, where there is an
asset, where future income streams are being capitalised in the value of that asset and
you have to respond to the costs and benefits of that stream and do something about
them. Nothing like that exists in politics. It is all fluff and no substance and that’s why,
that’s why, we look through the veil of politics and feel so deeply frustrated and so
irritated because we know there are real problems in education and health and in
welfare and with Government spending and with bureaucrats out of control, but no-one
in Government will put their hand up and say, “yes, I am responsible for that, watch me,
I’ll fix it”. Never. They shift the problem on to someone else.

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And of course, the root cause of all of this is tax. Tax, it is the lifeblood of the political
process. It’s our ability to get money out of peoples’ pay packets, out of their weekly
budgets, out of the petrol that they buy, out of everything that they do, that feeds us
and allows us to survive. And the tax laws are hugely complex, no one can follow
them. I recently had the New Zealand Inland Revenue Commissioner Graham Holland
before a select committee. And I said, “Commissioner, do you understand the tax laws
of New Zealand”. He just looked at me. Then the committee chairman beat me up and
said, “Oh, you can’t abuse the Commissioner of Inland Revenue like that”. “I wasn’t
abusing him, I was just interested, does he understand the law that here we are
passing”. He doesn’t. The Commissioner of Inland Revenue doesn’t understand all
the tax laws. The dairy owner has to. The plumber has to. Every property developer
has to. But no one can, no-one can sit in this room and feel comfortable that they’ve
obeyed the tax laws of New Zealand because you don’t understand them and take it
from me folks, I sit on the Committee and in the Parliament that passes these things,
and we don’t understand them. We do not understand the tax laws that pass in New
Zealand, it is the same in Australia, the same in Canada, it’s the same in the United
States.

We had to employ a QC on the select committee to advise us about what the IRD were
telling us about the law because we couldn’t understand it. He got confused. They
ended up concluding that the law, this was on international tax, they concluded that it
wasn't perfect, it had a lot of mistakes in it, but we would pass it anyway and fix it up
next year. Can you imagine running your business like that. And we’re running the
country. We not only spend money ladies and gentlemen, we make laws just to put
you in the right box.

Tell you one law we passed, it was under urgency. Urgency is a big deal. It goes into
urgency, important things to be done. You sit there all hours and everyone fights and
scraps – I love it. And came up under urgency and people may have missed this. But
we passed in 1997, under urgency, the Medical Auxiliary (Podiatrists) Amendment Bill.
Now podiatrists are foot doctors, you know they blow your corns off and cut your
toenails. And we had a very serious problem confronting New Zealand. Because, we
have a Podiatrists’ Board just to check that the people that are doing podiatry are
kosher, and they have a set of exams and a certificate that you get and in 1984 the
Government changes the rules and said, because we had immigrant podiatrists, and
they just used to come in and they would satisfy the board and they would get a
certificate too. But the Government in 1984 changed the rules and said, that they
could no longer just come in willy nilly, but they have to sit the New Zealand exam for
podiatry in order to be duly qualified. That was great, that passed in 1984. However,
no one told the Podiatrists’ Board. And of course, you remember the 1984-1996
period, podiatrists were just sweeping into New Zealand from overseas and the
Podiatrists’ Board was giving them their certificates if they said they said that they had
been taught at Harvard or somewhere. But this was illegal. And so what we had to do
was pass under urgency, retrospective legislation that would enable eleven immigrant
podiatrists to practice here in New Zealand like they had been doing for several years.
I don’t know about you folks but I find it sort of scary that we have a Podiatrists’ Board.
I find it sort of scary that you need a licence to cut someone’s toenails for a fee. I find it
sort of scary that Parliament had to pass a law to make it legal for eleven immigrant
podiatrists to practice here. What I find really scary was that our Parliament spent one
hour and forty minutes debating it.

At the time, our schools are in crisis, kids are going there spending years and years of
school not getting educated, our health system is a mess, 120,000 people queued up

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in agony — paid tax all their life, can’t get treated. Pension schemes busted with a
bang, it’s bankrupt. We had the downturn that was winding down the economy,
provincial New Zealand was bleeding, but don’t worry, we’re in Parliament under
urgency debating for one hour and forty minutes the Medical Auxiliary (Podiatrists)
Amendment Bill to make sure eleven podiatrists weren’t here acting illegally. If you
ever wonder why politicians are so boring, you try talking for ten minutes about
podiatry. And about the effect illegal immigrants practising podiatry has on the social
fabric of New Zealand. I watched it done.

So we pass laws, we pass laws, we pass tax laws and the tax laws that we have in
New Zealand, we don’t understand them, thousands and thousands of pages of these,
we’re supposed comply, God knows how you can. And think about the power that they
shift across to the tax department. The awesome powers and the comparison is to the
Police.

In New Zealand, the IRD can bust into your business, into your dairy, into your
plumbing shop, into your farm, they can bust into it, any hour of the day and they don’t
need a warrant. The Police can’t do that. The Police might be chasing Son of Sam
and they’ve got to get a warrant. They might be chasing the worst rapist in history and
they’ve got to get a warrant, and they are trained. But these IRD officers with very little
training, who are up against, you know, really scary people like plumbers and
paperhangers, people that work for a living. They have powers to enter your business
at the drop of a hat and do a search. Your Parliament gave that department those
powers. They have powers to require you to answer every question that they put to
you. If you are scumbag murderer or rapist, you can say, “I’m not answering that
question”, but if you are a dairy owner you had better, and it’s the IRD you have to,
because if you don’t they can hit you with a fine for $25,000.

Are we starting to talk like our values are upside down. That we have rights to protect
the criminal class but the productive class, the working class, the people that create all
the wealth have no rights when confronted with the tax department after its pound of
flesh and pint of blood.

They have the ability to assert that you owe a debt and it is your job to prove that you
don’t. Nowhere else in our legal processes do we have that. We believe that we
have a free society, a capitalist society, a democracy where you’re innocent until you
are proven guilty. That’s true if you’re a murderer, that’s true if you’re a rapist, that’s
true if you’re a burglar, that’s true if you’re a thug, but if you’re a taxpayer, it’s not true.
You are guilty until you prove that you are innocent. So the department can allege a
million-dollar debt and you have to prove that you don’t owe it. How can you prove that
you don’t owe it, when you don’t even know what it’s about? And they’re not required
by law to tell you what it’s about. They can just assert it. Not only can they assert a
debt against you, but even before it goes to Court you have to cough up half. Can you
imagine that? You’re paying for your lawyers, you’re paying for your accountants,
you’ve got this big debt, you have to pay half even before your case is heard. This is
an outrage. And these tax laws are having a huge consequence. There are two
problems with tax. It’s too much, and the laws are too vicious.

The IRD made a mistake a few years back. They brought in some overseas
economists to study the economic impact of tax in New Zealand. They discovered,
contrary to what the IRD thought would happen, that tax is way too high. The IRD
believe their propaganda and believe that tax is great and it’s the price we pay for
civilisation. These economists searching in New Zealand said that if we’d had the tax
take of 20% or 25%, which is still too high, but which is what we had post-war through

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the fifties and sixties, if we had that tax take in New Zealand today, rather than 35%,
that New Zealand would be 50% wealthier. Can you imagine that? Fifty percent
wealthier. It’s not just what they have taken off us that we lose, it is all the lost
opportunities, it’s all the investments, it’s all the businesses, it’s all the jobs that would
have been, if the tax rate hadn’t been so high. Imagine how much richer you would
have been if we hadn’t have had tax for all those years?

You think the department and the politicians would get that report and say, “Oh, this is
great news! We know how to get the economy moving. We know how to create jobs”.
No. They suppressed it. They wouldn’t release it. It took me over twelve months
hounding the department with official information requests as an MP to get my hands
on those documents. This research was paid for with our money. And still they
wouldn’t cough it up, and so tax is having a tremendous impact on our economy, on
our businesses, on our jobs at an economic level but at a personal level too, because
how can you operate in business confidently, concentrating on your customer,
concentrating on your costs when you’ve got this band of thugs, state-sanctioned
thugs, ready to pounce? How can you operate with confidence and with joy as you go
about your job?

I want to end with just one story. There is a guy in New Zealand, he lived on the Kapiti
coast. Ian Lee Mutton was his name. He was a good guy. Father, husband, two little
kiddies, and he was a good sportsman, and he worked and he liked a wee drink and
having fun. And his business was, and he worked hard at it, was putting in air
conditioning units in new office towers. And he had a dream, he dreamt that rather
than working for other people he could go out into business on his own. And he did
that. And he was good at the work, but he was a lousy businessman. He quoted too
low, some of his people didn’t pay, and the costs got out of control. But he persevered
and he learnt. He got to the end of one year 1992, and he owed $6,000 terminal tax.
No big deal, knew he owed it, was going to pay it.

He then had an accident off a ladder at work and broke his ankle and couldn’t work.
He had been assessed for this tax, and the demands kept coming. His ACC, such as it
is for self-employed didn’t come, even though he had been paying it all these years.
So he and his family were suffering no end. Here he was hobbling around on crutches.
He went repeatedly to the IRD with his wife saying, “Look, I can’t pay this”. They
wouldn’t listen to him. He had to pay, they’re the rules. He says, “I’m not working”,
doesn’t matter. He gets back to work, someone smashes his utility up and he has to
spend more money so he can keep working. He pays his tax that year, he pays his tax
the next year, he pays in his next year more tax than he has ever paid in his life as a
percentage. And he gets to the end of that year, and he owes more than he did at the
start. Because the penalties and the interest are just overwhelming him. His
accountant and his business manager go in to see the IRD begging them to give this
guy some relief. He’s working hard, here’s all his accounts, give him some relief. They
wouldn’t.

His marriage split up, his wife couldn’t take the pressure. He was behaving strangely,
the pressure was huge on him. That bills were just being generated by that horrible
computer that the IRD has and they would be arriving at his house in envelopes and in
the finish, he couldn’t even open them, he just threw them in the bin. In his final year,
he went on booze a bit. He didn’t pay any tax, so it mounted, and the debt got to
$45,000. He then snapped out of it, he stopped the drinking, he got back with his wife,
he realised that he had to make his business go bankrupt, stop his dreams, stop his
aspirations. And he got a job working in Queenstown, putting in air conditioning units
working for someone else. All he had in the world at that point was a utility worth
$5,000 and $1,100 worth of tools.

Page 11

On the day that he was to leave to Queenstown to take up his new job, the IRD turned
up. They wanted the ute, and the tools, to offset the debt. They were going to take the
very means that he had to make a living. He drove the utility up to the Otaki Gorge and
killed himself. He penned before he died a message to the IRD, saying that “you are
responsible for this, that you have taken everything that I ever had, that I now leave this
world like I came into it, with nothing, but that I beat you, because you no longer going
to get any more out of me,” and he signed, the last thing he did on earth, was to sign
that note, “one happy man”.

The IRD got that note, they turned up at the widow’s house wanting the ute and the
tools. She then, ladies and gentlemen, goes outside and stands on the porch and sees
her twelve-year-old son hanging dead from the tree. He couldn’t take his father’s
death. The IRD have never apologised, never said they have done wrong.

These laws, ladies and gentlemen, they are not just costing us jobs, they’re not just
putting us in fear, but they’re costing good people their lives. That’s what our tax laws
are doing in this country.

And do you know, the basic amount of money that the IRD were chasing Ian Lee
Mutton for wouldn’t pay for one MP’s taxi for a year. Are our values upside down or
not?

I want to leave you with this message. I’m a politician, I’m in Parliament, we have the
guns. We have the flash cars and we have the flags. It’s great driving in a car with
flags. But we have no moral authority. Because we produce nothing. We generate
nothing. We are parasitical on the taxpayers of New Zealand. We are parasitical on
Ian Lee Mutton and we are parasitical on each and every person in this room. The
moral authority, ladies and gentlemen, rests with each and everyone of you, because,
you are the producers, you are the workers, you are the creators, not Government, not
politicians, not bureaucrats, you are. And we will make progress in knocking back the
state when each of you, and I think every one in this room have already done this, but
you need to get your neighbours to do it, and your friends to do it, and your family to do
it, say, “We are not asking government for anything” – because when you ask
Government for things, that’s when you lose your moral authority, that’s when they get
it, and they’re only going to take more than they ever give. Don’t ask the Government
for anything. That’s the key to getting taxes down, and the key to getting taxes down is
say, “This is my money, I earnt it, don’t you spend it”, and ladies and gentlemen, I truly
believe we are going to have a revolution around the western world and it’s going to
start in New Zealand. Because we’ve had enough. It is going to start in New Zealand
and spread to Australia and Australia is going to start cutting its taxes. And when
people see what that is doing to our economy and to our people, America and Canada
will follow. Europe will follow. Because the world is a competitive place and if one
country starts dramatically cutting its taxes, all countries will have to follow. And let’s
hope and pray and work towards that day. Because ladies and gentlemen, when we
have that day, we will have more love, we will have more trade, and we will have less
gun. And that, ladies and gentlemen, is something worth working towards.

ENDS

ACT's Welfare Vision: ACT Alternative Budget 2002 Speech by Dr Muriel Newman

Sunday 19 May 2002 Dr Muriel Newman Speeches -- Economy

Speech to launch of ACT Alternative Budget,

9.45am Crowne Plaza Hotel, Auckland, Sunday, May 19, 2002

Richard, Rodney, Ladies and Gentleman.

Today I have real pleasure in sharing with you ACT's vision for welfare, outlining why reform of New Zealand's welfare system is fundamental to creating a prosperous society that is based on individual responsibility.

The reality is that our entrenched Welfare state has now changed so much from that conceived by its creators, that without a completely new welfare philosophy, we simply cannot build a society of strong families, high average incomes, low crime, quality health and education services, that only 40 years ago made us the world's third most prosperous nation.

When the welfare state was created in 1940, we had just experienced a severe depression with real hardship. New Zealanders overwhelmingly voted for a vision of a society based on compassion for those, who for no fault of their own, had no income, no job, and couldn't pay for basic health services.

In 1951, there were 29,601 New Zealanders on benefits. Paying for this were 716,000 full time workers.

There was no long term unemployment, no DPB.

The architects of the Welfare state had made it clear: Welfare was not a lifetime right. Fundamental to its sustainability, was the nation's ability to afford it.

For 20 years, the numbers of working age beneficiaries remained small in relation to the full time work force who were paying for it.

But from 1970, New Zealand began to change, slowly, steadily, and irreversibly, and at such cost to so many.

In swept the Labour Government: the DPB was born, benefit levels were lifted, and new categories of benefit were created. As a result, the numbers of New Zealanders seduced into the low income - `here's money for no work' philosophy - grew and grew.

Until this time, anyone unemployed was known by name by the Labour Department. There were jobs; there simply was no long-term unemployment.

And fathers who deserted their wives and families were chased by the Justice Department, and made to face up to their responsibilities.

Today, there are 400,000 working age adults supported by benefits. Of those, 111,000 have been there for over 5 years, with 56, 000 being on the dole or the DPB.

What have we done to our nation?

In 1970, 36,000 beneficiaries were supported by 1 million full time workers

Only 30 years later, 400,000 beneficiaries are supported by one and a half million full time workers.

Taking a conservative view and leaving out the partners on benefits, the 30-year dependency growth is staggering.

In 1970, there were 28 fulltime workers for each full time benefit.

Today, there are 4 fulltime workers for each full time benefit.

If we look at the bigger picture, paying for 450,000 pensions, and 400,000 benefits - that's 950,000 adults - are one and a half million fulltime workers and 400,000 part timers.

One and a half million fulltime workers to 950,000 on state incomes - that's around two people on a state benefit or pension to every three full time workers. No nation, with this level of state dependency to fund by taxing a small workforce, can grow as fast as, or faster than its competitors.

Of the $40 billion a year spent by this government, $14 billion goes to the welfare department on benefits and pensions.

As a Nation, we simply cannot hope to have the lower tax rates, high educational achievements, leading health services, strong families, and low crime rates, that we aspire to, when our welfare system prevents hundreds of thousands of working age Kiwis from contributing through the workforce.

Of the 400,000 working age beneficiaries dependant on working New Zealanders for their income 270,00 are on an unemployment-related or sole parent benefit. By taking a `soft' approach to welfare - essentially removing the requirement for able-bodied beneficiaries to need to find work - Government forecasts show that all benefits - Unemployment, DPB, Invalid and Sickness Benefits - will continue to rise.

Yet overwhelmingly, research here and overseas shows across all social indicators, that adults and children who are dependent on a benefit in the long term fail to do as well as those who work; and the human cost is considerable.

I recently asked the Minster of Justice how many benefits were suspended or cancelled due to imprisonment. He replied that with regard to a prison population of 6,000 inmates, some 4,600 benefits were suspended due to imprisonment. In other words, out of New Zealand's 2.8 million adult population, 6,000 have committed a crime serious enough to be sentenced to prison, and 60% of those came from the beneficiary population of around 400,000.

These very serious statistics must however, be taken in the context of the fact that the great majority of the people on benefits are good New Zealanders, who want to work, and who are battling hard to raise their children well - often without much help and support.

I've been on a benefit and I can tell you that it is not easy - but then neither is life. Life is tough, and those on these benefits face a harsher day-to-day existence than many.

But not necessarily harsher than many hard working New Zealanders on low incomes, where mum and dad hold down basic jobs and struggle day to day to put food on the table, clothe the kids and pay the bills.

And they have to work so hard to keep their heads above water that I find it difficult to understand how we can accept as a nation, that it is OK that in our country we can have a family working long hours on $20,000 a year, while next door we pay a working age person the same, and ask for nothing in return - nothing.

What sort of nation have we become?

We are born to work. Work is a fundamental part of who we are. Work brings meaning and purpose to our days. Work makes us feel important, needed by our employers and colleagues.

To give people money for nothing - so they can waste their days and their lives - is wrong. It sends a message to working age beneficiaries that society thinks so little of them that as long as they are tossed a pittance they can then be forgotten. Well I say that's not good enough. It's an indignity to hundreds of thousands of New Zealanders and we simply have to do better.

That is why ACT wants to overhaul the welfare system, and we have three major initiatives that will help to do just that.

But I need to state, first and foremost, that in order to turnaround the present and future bleak welfare statistics, it is essential to put in place economic strategies that will lower taxes and cut red tape to create growth of over 4%. Growth is fundamental to creating the real jobs that are necessary to get our nation working.

The first of ACT's Welfare proposals is to introduce maximum life time limits to the DPB and the Unemployment Benefit, of 5 years. This includes a maximum spell of two years for any one continuous period on these benefits.

This policy will be accompanied by guaranteed job placements for those who reach the time limit, with a small discretionary exemption for Regional Commissioners.

Extra childcare subsidies, intense individual placement support, and assistance with relocation expenses will all be available if needed.

Secondly, all Unemployment and Sole Parent Beneficiaries who can work, will be required to participate in individually designed 40 hour a week programmes of work, training or organised job search - activities designed to improve their chances of getting a good job. As well, they will develop the habits, skills and disciplines needed in the workforce. Further, in line with the realities of the workforce, if they don't turn up or don't comply, they will not be paid.

This initiative will initially involve around 200,000 people including 150,000 on the Unemployment Benefit, and 50,000 on the Sole Parent Benefit whose children are of school age. It will fundamentally change the expectations of the welfare system for the able-bodied, re-establishing benefits as temporary financial support that must be earned.

Thirdly, ACT will not pay out the DPB to women who do not name the father of their child. It is extraordinary today that of 110,000 sole parents on the DPB, some 16,000 women say they cannot or will not name the father, particularly in this day and age where paternity testing through DNA hair samples is a simple and inexpensive procedure.

Again, ACT will provide a limited discretionary power with the Chief Executive of the Welfare Department, but we will not accept the increasing numbers of fathers who are either shirking their responsibilities or who are being prevented by the mother from providing fatherly support to their children.

Those, Ladies and Gentlemen are three ACT welfare positions that, hand in hand with lowering taxes and cutting red tape, to attract investment and grow our economy, will re-create welfare in New Zealand as the temporary safety net that its creators intended.

ACT's vision of society and welfare in New Zealand is so different from that of the government. Labour believes that welfare is a life-long right, and their policies are designed to deliver more and more working age New Zealanders onto the benefit system.

ACT believes that the economic and welfare policies, that we are proposing will deliver to New Zealand:

· Over 4% growth creating tens of thousands of real jobs;

· A huge reduction in the numbers of able-bodied working age beneficiaries as people move back into the workforce with the eventual elimination of long term dependency;

· The provision of dignity and organised days for those who still need benefit support.

It is an unashamedly tough-love approach to welfare, helping people to help themselves. We will not cut benefit payment rates, but we will place big expectations on working age beneficiaries who can work to take personal responsibility for their lives, their livelihoods and their future.

This policy will send the clear message that welfare is meant to provide temporary help in times of need; those who deserve help will get it, but in return, they will have the same 40 hour work week as the rest of adult society.

People who are in a position to work will no longer be paid to do nothing, and as a result, tens of thousands of our poorest New Zealanders will regain control of their own future through work and higher incomes.

This strategy will work. It has produced unprecedented results overseas. But be assured, this is a New Zealand policy created for New Zealanders.

ACT's vision of welfare is of a truly compassionate system that gives people a hand up to work, independence and a better future. That is why I am so passionate about ACT.

ACT is the only party that places the future of our poorest, and the children of our poorest, as our highest priority. We are the only party that has the plan to empower all New Zealanders to pursue success in their own way and in so doing help transform this country into one of the most prosperous nations on earth.

Welfare reform is at the heart of that plan and I am privileged to have had the opportunity to present our programme to you here today.

An Open Letter to my Friends on the Left
Steven Horwitz
Department of Economics
St. Lawrence University
sghorwitz@stlawu.edu

September 28, 2008

My friends,

In the last week or two, I have heard frequently from you that the current financial mess has been caused by the failures of free markets and deregulation. I have heard from you that the lust after profits, any profits, that is central to free markets is at the core of our problems. And I have heard from you that only significant government intervention into financial markets can cure these problems, perhaps once and for all. I ask of you for the next few minutes to, in the words of Oliver Cromwell, consider that you may be mistaken. Consider that both the diagnosis and the cure might be equally mistaken.

Consider instead that the problems of this mess were caused by the very kinds of government regulation that you now propose. Consider instead that effects of the profit motive that you decry depend upon the incentives that institutions, regulations, and policies create, which in this case led profit-seekers to do great damage. Consider instead that the regulations that may have been the cause were supported by, as they have often been throughout US history, the very firms being regulated, mostly because they worked to said firms' benefit, even as they screwed the rest of us. Consider all of this as you ask for more of the same in the name of fixing the problem. And finally, consider why you would ever imagine that those with wealth and power wouldn't rig a new regulatory process in their favor.

One of the biggest confusions in the current mess is the claim that it is the result of greed. The problem with that explanation is that greed is always a feature of human interaction. It always has been. Why, all of a sudden, has greed produced so much harm? And why only in one sector of the economy? After all, isn't there plenty of greed elsewhere? Firms are indeed profit seekers. And they will seek after profit where the institutional incentives are such that profit is available. In a free market, firms profit by providing the goods that consumers want at prices they are willing to pay. (My friends, don't stop reading there even if you disagree - now you know how I feel when you claim this mess is a failure of free markets - at least finish this paragraph.) However, regulations and policies and even the rhetoric of powerful political actors can change the incentives to profit. Regulations can make it harder for firms to minimize their risk by requiring that they make loans to marginal borrowers. Government institutions can encourage banks to take on extra risk by offering an implicit government guarantee if those risks fail. Policies can direct self-interest into activities that only serve corporate profits, not the public.

Many of you have rightly criticized the ethanol mandate, which made it profitable for corn growers to switch from growing corn for food to corn for fuel, leading to higher food prices worldwide. What's interesting is that you rightly blamed the policy and did not blame greed and the profit motive! The current financial mess is precisely analogous.

No free market economist thinks "greed is always good." What we think is good are institutions that play to the self-interest of private actors by rewarding them for serving the public, not just themselves. We believe that's what genuinely free markets do. Market exchanges are mutually beneficial. When the law messes up by either poorly defining the rules of the game or trying to override them through regulation, self-interested behavior is no longer economically mutually beneficial. The private sector then profits by serving narrow political ends rather than serving the public. In such cases, greed leads to bad consequences. But it's bad not because it's greed/self-interest rather because the institutional context within which it operates channels self-interest in socially unproductive ways.

This, my friends, is exactly what has brought us to the mess we are now in.

To call the housing and credit crisis a failure of the free market or the product of unregulated greed is to overlook the myriad government regulations, policies, and political pronouncements that have both reduced the "freedom" of this market and channeled self-interest in ways that have produced disastrous consequences, both intended and unintended. Let me briefly recap goverment's starring role in our little drama.

For starters, Fannie Mae and Freddie Mac are "government sponsored enterprises". Though technically privately owned, they have particular privileges granted by the government, they are overseen by Congress, and, most importantly, they have operated with a clear promise that if they failed, they would be bailed out. Hardly a "free market." All the players in the mortgage market knew this from early on. In the early 1990s, Congress eased Fannie and Freddie's lending requirements (to 1/4th the capital required by regular commercial banks) so as to increase their ability to lend to poor areas. Congress also created a regulatory agency to oversee them, but this agency also had to reapply to Congress for its budget each year (no other financial regulator must do so), assuring that it would tell Congress exactly what it wanted to hear: "things are fine." In 1995, Fannie and Freddie were given permission to enter the subprime market and regulators began to crack down on banks who were not lending enough to distressed areas. Several attempts were made to rein in Fannie and Freddie, but Congress didn't have the votes to do so, especially with both organizations making significant campaign contributions to members of both parties. Even the New York Times as far back as 1999 saw exactly what might happen thanks to this very unfree market, warning of a need to bailout Fannie and Freddie if the housing market dropped.

Complicating matters further was the 1994 renewal/revision of the Community Reinvestment Act of 1977. The CRA requires banks to to make a certain percentage of their loans within their local communities, especially when those communities are economically disadvantaged. In addition, Congress explicitly directed Fannie and Freddie to expand their lending to borrowers with marginal credit as a way of expanding homeownership. What all of these did together was to create an enormous profit and political incentives for banks and Fannie and Freddie to lend more to riskier low-income borrowers. However well-intentioned the attempts were to extend homeownership to more Americans, forcing banks to do so and artificially lowering the costs of doing so are a huge part of the problem we now find ourselves in.

At the same time, home prices were rising making those who had taken on large mortgages with small down payments feel as though they could handle them and inspiring a whole variety of new mortagage instruments. What's interesting is that the rise in prices affected most strongly cities with stricter land-use regulations, which also explains the fact that not every city was affected to the same degree by the rising home values. These regulations prevented certain kinds of land from being used for homes, pushing the rising demand for housing (fueled by the considerations above) into a slowly responding supply of land. The result was rapidly rising prices. In those areas with less stringent land-use regulations, the housing price boom's effect was much smaller. Again, it was regulation, not free markets, that drove the search for profits and was a key contributor to the rising home prices that fueled the lending spree.

While all of this was happpening, the Federal Reserve, nominally private but granted enormous monopoly privileges by government, was pumping in the credit and driving interest rates lower and lower. This influx of credit further fueled the borrowing binge. With plenty of funds available, thanks to your friendly monopoly central bank (hardly the free market at work), banks could afford to continue to lend riskier and riskier.

The final chapter of the story is that in 2004 and 2005, following the accounting scandals at Freddie, both Freddie and Fannie paid penance to Congress by agreeing to expand their lending to low-income customers. Both agreed to acquire greater amounts of subprime and Alt-A loans, sending the green light to banks to originate them. From 2004 2003 [corrected on 10/19/08] to 2006, the percentage of loans in those riskier categories grew from 8% to 20% of all US mortgage originations. And the quality of these loans were dropping too: downpayments were getting progressively smaller and more and more loans carried low starter interest rates that would adjust upward later on. The banks were taking on riskier borrowers, but knew they had a guaranteed buyer for those loans in Fannie and Freddie, back, of course, by us taxpayers. Yes, banks were "greedy" for new customers and riskier loans, but they were responding to incentives created by well-intentioned but misguided government interventions. It is these interventions that are ultimately responsible for the risky loans gone bad that are at the center of the current crisis, not the "free market."

The current mess is thus clearly shot through and through with government meddling with free markets, from the Fed-provided fuel to the CRA and land-use regulations to Fannie and Freddie creating an artificial market for risky mortgages in order to meet Congress's demands for more home-ownership opportunities for low-income families. Thanks to that intervention, many of those families have not only lost their homes, but also the savings they could have held onto for a few more years and perhaps used to acquire a less risky mortgage on a cheaper house. All of these interventions into the market created the incentive and the means for banks to profit by originating loans that never would have taken place in a genuinely free market.

It is worth noting that these regulations, policies, and interventions were often gladly supported by the private interests involved. Fannie and Freddie made billions while home prices rose, and their CEOs got paid lavishly. The same was true of the various banks and other mortgage market intermediaries who helped spread and price the risk that was in play, including those who developed all kinds of fancy new financial instruments all designed to deal with the heightened risk of default the intervention brought with it. This was a wonderful game they were playing and the financial markets were happy to have Fannie and Freddie as voracious buyers of their risky loans, knowing that US taxpayer dollars were always there if needed. The history of business regulation in the US is the history of firms using regulation for their own purposes, regardless of the public interest patina over the top of them. This is precisely what happened in the housing market. And it's also why calls for more regulation and more intervention are so misguided: they have failed before and will fail again because those with the profits on the line are the ones who have the resources and access to power to ensure that the game is rigged in their favor.

I know, my friends, that you are concerned about corporate power. So am I. So are many of my free-market economist colleagues. We simply believe, and we think history is on our side, that the best check against corporate power is the competitve marketplace and the power of the consumer dollar (framed, of course, by legal prohibitions on force and fraud). Competition plays mean, nasty corporations off against each other in a contest to serve us. Yes, they still have power, but its negative effects are lessened. It is when corporations can use the state to rig the rules in their favor that the negative effects of their power become magnified, precisely because it has the force of the state behind it. The current mess shows this as well as anything ever has, once you realize just what a large role the state played. If you really want to reduce the power of corporations, don't give them access to the state by expanding the state's regulatory powers. That's precisely what they want, as the current battle over the $700 billion booty amply demonstrates.

This is why so many of us committed to free markets oppose the bailout. It is yet another example of the long history of the private sector attempting to enrich itself via the state. When it does so, there are no benefits to the rest of us, unlike what happens when firms try to get rich in a competitive market. Moreover, these same firms benefited enormously from the regulatory interventions they supported and that harmed so many of us. The eventual bursting of the bubble and their subsequent losses are, to many of us, their just desserts for rigging the game and eventually getting caught. To reward them again for their rigging of the game is not just morally unconscionable, it is very bad econonmic policy, given that it sends a message to other would-be riggers that they too will get rewarded for wreaking havoc on the US economy. There will be short-term pain if we don't bailout these firms, but that is the hangover price we pay for 15 years or more of binge lending. The proposed bailout cannot prevent the pain of the hangover; it can only conceal it by shifting and dispersing it among the taxpayers and an economy weakened by the borrowing, taxing, and/or inflation needed to pay for that $700 billion. Better we should take our short-term pain straight up and clean out the mistakes of our binge and then get back to the business of free markets without creating an unchecked Executive branch monstrosity trying to "save" those who profited most from the binge and harming innocent taxpayers in the process.

What I ask of you my friends on the left is to not only continue to work with us to oppose this or any similar bailout, but to consider carefully whether you really want to entrust the same entity who is the predominant cause of this crisis with the power to attempt to cure it. New regulatory powers may look like the solution, but that's what people said when the CRA was passed, or when Fannie and Freddie were given new mandates. And the very firms who are going to be regulated will be first in line to determine how those regulations get written and enforced. You can bet which way that game is going to get rigged.

I know you are tempted to think that the problems with these regulations are the fault of the individuals doing the regulating. If only, you think, Obama can win and we can clean out the corrupt Republicans and put ethical, well-meaning folks in place. Think again. For one thing, almost every government intervention at the root of this crisis took place with a Democratic president or a Democratic-controlled Congress in place. Even when the Republicans controlled Congress, President Clinton worked around it to change the rules to allow Fannie and Freddie into the higher-risk loan market. My point here is not to pin the blame for the current crisis on the Democrats. That blame goes around equally. My point is that hoping that having the "right people" in power will avoid these problems is both naive and historically blind. As much as corporate interests were relevant, they were aided and abetted, if unintentionally, by well-meaning attempts by basically good people to do good things.The problem is that there were a large number of undesirable unintended consequences, most of which were predictable and predicted. It doesn't matter which party is captaining the ship: regulations come with unintended consequences and will always tend to be captured by the private interests with the most at stake. And history is full of cases where those with a moral or ideological agenda find themselves in political fellowship with those whose material interests are on the line, even if the two groups are usually on opposite sides. This is the famous "Baptists and Bootleggers" phenomenon.

If you've made it this far, I am most grateful. Whether or not you accept the whole argument I've laid out here, I do ask one thing of you: the story I told at the start of the role of government intervention in this mess is true, whatever your grander conclusions about the causes and cures are. Even if you don't buy my argument that more regulation isn't the cure, to blame this mess on "the free market" should now strike you as an obvious falsehood and I would hope, in the spirit of fair play, that you would stop making that claim as you speak and write about the ongoing events of the last two weeks. We can disagree in good faith about what to do next, and we can disagree in good faith about the degree to which government intervention caused the problems, but blaming a non-existent free market for a crisis that clearly was to some extent the result of government's extensive interventions in that market is unfair. So if I have persuaded you of nothing else, I hope deeply that I have persuaded you of that.

In the end, all I can ask of you is that you continue to think this through. Explaining this crisis by greed won't get you far as greed, like gravity, is a constant in our world. Explaining it as a failure of free markets faces the obvious truth that these markets were far from free of government. Consider that you may be mistaken. Consider that perhaps government intervention, not free markets, caused profit-seekers to undertake activities that harmed the economy. Consider that government intervention might have led banks and other organizations to take on risks that they never should have. Consider that government central banks are the only organizations capable of fueling this fire with excess credit. And consider that various regulations might have forced banks into bad loans and artificially pushed up home prices. Lastly, consider that private sector actors are quite happy to support such intervention and regulation because it is profitable.

Those of us who support free markets are not your enemies right now. The real problem here is the marriage of corporate and state power. That is the corporatism we both oppose. I ask of you only that you consider whether such corporatism isn't the real cause of this mess and that therefore you reconsider whether free markets are the cause and whether increased regulation is the solution.

Thanks for reading.

Steve