Wednesday, April 30, 2008

Governments to blame for 'the coming economic meltdown.'

Just how much of the current econimic strife from high food and energy prices down to the actions of government- and I don't just mean our's in New Zealand.
It seems quite a lot and much debate is now emerging over how the 'success' of government in restricting supply, is causing what others claim is 'market failure'.
Yes, both energy and food markets are seeing a huge increase in demand from India and China, both to fuel their growing economies and to better feed their richer palettes, as they seek a more 'Western' diet.
But if government regulations restrict supply, then what?
Obvious a commodity becomes scarce and its price will rocket.
This is true whether it is oil, rice, or as we have seen in other debates, land and housing.
Over at Not PC, Peter Cresswell notes how government restrictions on oil supplies, with large areas of the US 'off limits' to oil exploration' is preventing the market from meeting the demand for extra fuel.
Had the market being allowed to supply the extra demand from India and China, oil prices would not have risen to $100 or more a barrel.

It's not a failure of markets, it's an obvious success of government: success in stifling production of the very stuff of industrial life, and in burying the ability of producers to respond to price signals in the way they need to.

The same applies to global food markets, where in some countries governments are now banning the exports of foodstuffs, thus depriving farmers the chance to make the best return and deterring them from increasing production.
Creswell links to other surveys and reports saying as much.
And then there is the whole biofuels debacle, where government policies have promoted the growth of foodstuffs to feed cars rather than people; which is also increasing our food prices and causing starvation.
Indeed, I have come across a worthy article from The Intellectual Conservative, which refers to government and energy's role in 'the coming economic meltdown.'.

Government policy over the last several decades in all fields of energy production has had the direct impact of restraining energy supply while demand has grown.
This government interference has reached a crisis level where high energy prices will sap the strength of the United Sates economy and create a condition of stagflation.
As these policies have impoverished the United States they have enriched Middle East, African and Venezuelan oil suppliers.
In addition, this policy has undermined the security of the United States by weakening the United States economically, destabilizing the LDCs (lesser develope countries) by food shortages, and through direct payment “leakage” to terrorist organizations.
It is rather doubtful that United States energy policy could have been more poorly formulated.

Indeed, a full read of the article will also note the folly of following many so-called 'green' policies.
Not only are such policies fuelling recession and inflation, as their higher costs take money and spending power out of the pockets of workers/consumers, they typically have as many or more environmental drawbacks than traditional policies.

So when in New Zealand, Liarbour plans an emissions trading regime, look at how it will hit you and your employers' pocket.
And when Liarbour prevents the building of a coal fired power stations in New Zealand, think how that will impact on your own power bill.
Not to menton whether it truly is any greener!


Anonymous said...

And when Liarbour prevents the building of a coal fired power stations in New Zealand, think how that will impact on your own power bill.

What do you mean when.

NZ needs about 5GW of new capacity online now.
Ti Point & NZ steel are already being asked to reduce their capacity so that Helen's voters don't have blackouts this winter.

That's criminal policy on two fronts: first, not building the capacity, and second, giving power to people (who often don't pay for it of course) who do absolutley nothing to help NZ's productibity, while keeping it from some of our largest exporters who pay all the bludger's wages.

The electricity "market" in NZ is just another example of failed regulation: the largest and most consistent consumers (businesses) should be able to negotiate firm, low priced contracts for their power use, while the small, fickle consumers (households) should be on the spot rate.

What Labour did in NZ is exactly the reverse.
National's plan to sell of the state-owned generators so that Ti Point, NZ Steel & co can buy their own plants and have continuity of supply will go quite a long way towards resolving that imbalance.

mawm said...

All goverments stuff things up - what else would you expect from people who can't get jobs elsewhere, know nothing about anything, make promises which they never keep - in fact the only thing they know how to do, and do well, is bulls**t the public into voting for their version of utopia (which will never happen) and make you to pay and pay and pay for it. Barack Obama is the perfect example of a politician - good orator but nothing else.

Anonymous said...

It is somewhat bizarre when a few weeks back you said higher oil prices would lead to more supply, which would bring pprices back down.
But yes, you forgot to account for the impact of government and the restrictions it imposed at the behest of the green lobby.
Obviously , New Zealand is a price taker in the world economy, rather than a price maker, but our journalists and right-wing politicians should quiz the left, the greens and the government on the impact of their decisions.
Allowing a free for all in oil exploration might not do much for petrol prices but I am sure they would help our shambolic balance of payments.
Allowing easier fuel generation though should impact on energy prices and help householders who are currebntly suffering.
Labour has forgooten how m,uch its policies are huting New Zealand.