Retorts

Economic Controversy

Rodney Hide [Viewpoint, April] tries to burst John Peet's socialist balloon, but only succeeds in letting some air out of it.

Most New Zealanders would agree that the market has its uses, and that we ignore these at our peril. When Hide quotes doom-sayers as proof that "the resource box is expandable" his argument is unsound. Sure, Ehrlich underestimated, and the limits to growth published in 1972 clearly didn't include recent discoveries of resources. They were wrong about timing, but this does not prove they were wrong in asserting that there are limits.

The question is not whether there are limits to natural resources, but what the limits are. We live in just three spatial dimensions, and there are clearly limits to our biosphere. Hide's "we are still here and we still prosper" could be an echo from share market punters prior to the crash. Just let the free market reign unfettered, and we'll happily make the wisest use of our resources ever after, he seems to be saying.

Why self-interested capitalists should be able to make wiser decisions about use of natural resources in the long-term than well-informed governments, Hide doesn't explain. There are notable examples of successful intervention by New Zealand's governments.

Our government intervened in the mining of native forests by creating a Forest Service to establish exotic plantations for our domestic wood supply. We now have an exotic forest industry of enviable quality. Without intervention, private milling companies may well have mined all our merchantable native forests to destruction; they had already done so with kauri.

There are also examples where intervention was sadly lacking. The treatment of some of our fisheries is a tragedy of market-driven insanity over-riding informed advice from government employees.

Hide suggests that the price mechanism ensures that resources are conserved, but this is not happening with resources like fish, whales, or rainforest. It's well documented (as "the tragedy of the commons") that when free markets operate in situations where resources cannot be owned by individuals prior to harvest, the results don't resemble conservation in any way. Even if they are privately owned, in local areas resources can be mined to destruction without greatly affecting international prices.

It's therefore difficult to see how a "price mechanism" can prevent this. In addition, when we use interest rates to help us make decisions, it's too easy to sacrifice the long-term future in favour of the present, on the mistaken assumption that the resources we destroy are "expandable".

Using interest rates for decision-making in a long-term enterprise like forestry, it can appear worthwhile to sacrifice productivity from future crop rotations in order to lower current costs. In these situations, regulation is needed.

The inequitable down side of a free market is not addressed in Hide's article either. What about all the homeless, unemployed, and those without proper access to health care or education in the western world? Hide may "still prosper", but millions of downtrodden citizens in western capitalist countries are definitely not prospering. Intervention is needed to address these problems.

No thanks, Mr Hide, I'll vote for some liberal doses of careful study, regulation, compassion, and common sense, along with a measured amount of market. Take your dog-eat-dog menu back to the Business Round Table and let the rest of us live humanely.

Euan Mason, Christchurch