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Mont Pelerin in Iceland

March 17th, 2009

A reader has pointed me to this fascinating site showing the impact download The Arrival

of the Mont Pelerin Society on Iceland. According to the material prepared for its 2005 conference in Reykjavik, the Society’s intellectual influence directly guided those responsible for making Iceland what it is today.

Categories: Economics - General Tags:
  1. Hermit
    March 17th, 2009 at 06:58 | #1

    It would make ecological sense if several of Australia’s aluminium smelters relocated to Iceland. They would run on hydro and geothermal not coal power. We could send them boatloads of bauxite and bananas. Iceland would get jobs to replace those lost in the banking sector. What we got instead is ETS protection for ‘trade exposed industries’ to ensure nothing changes.

  2. TerjeP (say tay-a)
    March 17th, 2009 at 08:01 | #2

    JQ – we know that you are running a personal campaign to blame all the worlds ills on capitalism. Do you have anything positive at all to say about the system?

  3. jquiggin
    March 17th, 2009 at 08:04 | #3

    Terje, do you define “capitalism” as “the economic and social model espoused by the Mont Pelerin Society”?

  4. March 17th, 2009 at 08:13 | #4

    John Quiggin, if you hate capitalism so much, maybe you should go and live in my home country of India, where they practice socialism? If you need to learn more about the glorious virtues of the social democratic lifestyle in India, where poor people beg on the streets while bureaucrats roll in riches, you could try reading my dad’s book. I know some people who would be helpful in getting you a job there. Or perhaps you’d prefer Cuba?

    It’s really quite amusing to hear ivory tower intellectuals such as yourself saying that capitalism is at fault for our economic problems. If that’s what you really think (as opposed to what you think will get you the most government grants), then please move to a Big Government paradise and leave the rest of us alone.

    I prefer capitalism, that’s why I moved to Australia, a country that ranks highly in economic freedom indices. So I’m putting my money where my mouth is, unlike you.

    And you persist in repeating the fallacy that the central bank is a free-market institution. Weren’t you going to do a post addressing the Austrian Theory of the Business Cycle?

  5. Ikonoclast
    March 17th, 2009 at 08:37 | #5

    Wake up and smell the carnage, TerjeP. The system you worship is corrupt and dying. Try this;


    and this;


    If anything, JQ is far too kind and sanguine about the chances of reforming capitalism.

    Capitalist apologists are going to have to get used to Marxists and Socialists being right on some key issues.

    Capitalism suffers all kinds of contradictions (internal and external) which it cannot solve. The need for the state to step in and nationalise a bankrupt system and (attempt to) save it from its own systemic failures is a case in point.

    The capitalist system is now collapsing irretrievably. The Marxist diagnosis and prognosis for capitalism was and is correct. The Marxist prescription for correcting the faults of capitalism was incorrect. What system will follow the collapse of this one, no empirically honest analyst can predict.

    The belief that we can foretell the new system is an historicist fantasy. That is where I part company from the Marxists. Revolutions are always hijacked by a new class of exploiters. There is nothing so consistent are man’s desire to exploit his fellows. Despite 10,000 years of social evolution we remain selfish and vicious primates one step out of the jungle. You will see that fact come to the fore as this plays out.

  6. March 17th, 2009 at 08:53 | #6

    Hermit, it wouldn’t pay to ship bananas to Iceland. They already grow bananas competitively, in geothermally heated greenhouses.

  7. Socrates
    March 17th, 2009 at 09:14 | #7

    Terje and Sukrit

    If you really believe what you post, I hope you had all your savings in high risk equity :)

    I like Aristotle’s philosophy that there are two extremes on most topics, and they are usually both foolish. Thus communism and unregulated capitalism are two extremes on the spectrum of economic thought: either government owns and controls amlmost everything, or virtually nothing. Both such extremes have now been shown to fail. Saying that regulated markets is an extreme position is rubbish. Liberalism or social democracy is a middle ground view that is far preferable to the right wing drivel that has gotten us into this mess. Right wingers can deny their guilt all they like, but it would be amusing to watch them walk into an average pub now and tell people that free markets always work.

  8. Socrates
    March 17th, 2009 at 09:16 | #8


    True on aluminium. Australia could meet 20% emission targets by eliminating just two industries – aluminium smelting and beef cattle. They employ less than 1% of the workforce.

  9. March 17th, 2009 at 09:16 | #9


    I am still waiting for an answer to my question of 7 months ago:

    “… could you please provide us with a list of what you consider to be ‘free market’ successes of recent decades, and while you are at it, could you also provide a list of ‘free market’ successes of the 1920’s, which, as we all know led to such boundless happiness, prosperity, peace and harmony through the 1930’s and 1940’s?”

    Or to use own words, where has the neoliberal project “delivered in spades”?

    Sukrit, it’s not so much a question of whether we are for ‘capitalism’ or against ‘capitalism’. Rather, it is a question of whether or not democracy should be over-ruled in order to serve the needs of ‘capitalism’.

    As we speak, democracy is being subverted in Queensland in order to serve the ‘capitalism’s’ need to impose its solutions to fix its own crisis.

    Thus we are having an early election campaign at break neck speed and candidates such as myself, who offer policies different to the free-market policies of the major parties are being denied air time to put our point.

    The real issues at stake are not being discussed. Rather we are being asked to give one or the other pro-business political parties an effective blank cheque to impose upon Queenslanders whatever solutions to the crisis is deemed acceptable to the Queensland and international corporate elites.

    I have asked Anna Bligh, Andrew Fraser and Lawrence Springborg to give a categorical assurance that they will not privatise any more assets, but have yet to get a straight answer from any of them.

    Voters, who overwhelming oppose privatisation are entitled to know which candidates can be relied upon to block any further privatisation, but are not being given that information.

    James Sinnamon

    Independent candidate for Mount Coot-tha

  10. Alice
    March 17th, 2009 at 10:15 | #10

    Isnt that the Monty Pelican society?

  11. jquiggin
    March 17th, 2009 at 10:24 | #11

    Sukrit, I can’t say that I appreciate the invitation to go and live somewhere else, and I think your knowledge of Australian history must be a bit lacking.

    The advocates of free-market reform presented themselves as attacking a set of policies they described as “the Australian settlement”. It is they who should be invited to move elsewhere if they don’t like it here.

    On your opening sentence, can you point to anything I’ve written to suggest I “hate capitalism” as opposed to preferring the social democratic version to the catastrophic failure advanced by the Mont Pelerin society and variously referred to as laissez-faire, free-market capitalism etc.

  12. Alice
    March 17th, 2009 at 10:26 | #12

    Look at their resumes, the high priests of Mont Pelerin, peppered with the dogma of free trade, extensive liberalisations, privatisations (oh mi goodness – you cant have a public bus – lord no!), free choices and liberalisaions…then look at the basket case that is Iceland and now half the world. Great ideas from Monty Pelican.
    Their ideas are not indicative of well managed capitalism for those who may think they are, they are indicative of a fanaticism bordering on the destructive.

  13. Jim Birch
    March 17th, 2009 at 10:35 | #13


    Isn’t your comparison between India and Australia just a tad facile. Do you really think that the if they converted to a economic system modeled on ours they’d pretty soon all be sitting around barbies at the beach house knocking off boutique stubbies? I mean, could there possibly be any other factors?

    Even if you really, really support the some kind of hands-off ultracapitalism telling people to move to India still isn’t a rational argument. If India adopted your preferred economic policies would you move there?

  14. Socrates
    March 17th, 2009 at 11:10 | #14

    it seems to me that the explosive growth of both India and China is proof that fre-markets work best when the free refers to tariffs and trade barriers. But in other respects markets still need government regulation adn sometimes even intervention and direction. There has been a considerable amount of government central planning and intervention in both India and China not only in provision of supporting infrastructure, but in skills training and in some cases even govenrmetn investment in industry. The strange thing is, it has worked.

  15. Ubiquity
    March 17th, 2009 at 11:52 | #15

    If Iceland is allowed to liquidate quickly, it will recover quickly while the rest of the world wallows around in its own debt for the years to come.

  16. Alice
    March 17th, 2009 at 12:15 | #16

    15# “allowed to liquidate quickly?” Nice elegant solution. The car is crashed. Let it be towed to the wreckers yard. Problem solved. Mess gone. Build new car and put new crash test dummies inside.

  17. TerjeP (say tay-a)
    March 17th, 2009 at 12:20 | #17

    it seems to me that the explosive growth of both India and China is proof that fre-markets work best when the free refers to tariffs and trade barriers.

    Taxes are a tariff on inter household trade. They do to domestic trade between households what tariffs do to corporate trade between nations. If I we were offered a policy of low taxes then I could be persuaded to live with tariffs on cross border trade.

    “… could you please provide us with a list of what you consider to be ‘free market’ successes of recent decades

    We pay more now in per capita taxes than at any time in history. The notion that events of late are due to some free market trend are misguided. The primary difference between now and the 1950s/60s is that in the 1960s taxes were for most Australians quite low and the fiat currency the world used in the 1950s/60s were subject to a more disciplined than the fiat currencies imposed on us today.

    Having said that there has been some progress at removing government involement in the running of enterprises via privatisation and the introduction of greater consumer choice. I would think the substantial increase in personal wealth over recent decades is nothing to snivel at.

    Personally I am very happy that we got competition in long distance phone calls. It made my life a lot more interesting. I like the fact that imported electronic goods are now cheaper. I’m glad that clothes don’t cost as much as they used to. I like the cars we have these days. I’m pleased that pubs don’t close at 6pm. I like shopping on weekends.

  18. Michael
    March 17th, 2009 at 13:46 | #18

    The problem with Iceland was that it didn’t embrace neo-liberal economics fully enough.

    As any Uncle Milton acolyte would know, there are no half, or three-quarter, measures. Their economic program must be implemented fully or the the purity of it will be distorted, leading to economic disaster. Such disaster is confirmation of the need for more of the same – liberalisation, privatisation and austerity measures.

  19. Alice
    March 17th, 2009 at 13:52 | #19

    18# Right then Michael – they didnt go far enough right? Isnt that what you are suggesting? Uncle Milton wasnt quite the fool you and others have mistaken him for (accidentally on purpose) and did not advocate laissez faire.

  20. jquiggin
    March 17th, 2009 at 14:21 | #20

    #18 (Sorry if I missed irony alerts in responding) I got tired of the “never fully implemented” argument when I used to hear it from Trotskyists regarding the Soviet Union.

    In this case, we don’t have to worry. We have it on the authority of the Mont Pelerin Society that Iceland was on the right track, so unless you can find acolytes of Uncle Milton purer than that, I think we can stop worrying.

    For any such acolytes, I have an offer you can’t refuse.

  21. PeterM
    March 17th, 2009 at 14:25 | #21

    Re TerjeP 2 & Sukrit 4

    I believe that John Kay in his book “The Truth about Markets: Their Genius, Their Limits, Their Follies (Penguin, 2003)”, does an excellent job of stating the case for the middle of the road economists you seem to be attacking. Kay is not anti-capitalist but he opposes the dumbed down version of capitalism you seem to support.

    The following is a extract from an interview Kay gave to the Strategy & Business magazine in 2003.


    “S+B: Your book describes and dismantles what you call myths about markets. What are some of them?

    KAY: There are four central myths behind what I call the American business model, or ABM. The first is that greed is overwhelmingly the most important motivation in economic affairs. Of course, it is a motivation, but it is not overwhelming for most people. Most people work because they want to do a good job, because they enjoy the respect of their friends, and so on. If you ignore these other motivations, you actually undermine the relationships that make corporations effective.

    False premise two is market fundamentalism. It says you should impose as few restrictions and limitations as possible in the operation of markets. But this doesn’t recognize that markets actually operate — and can only operate — through an elaborate social, political, and cultural context. While some of that may be government regulation, a lot of it is self-regulation — the ways people expect to behave. To suggest that unregulated markets are more efficient is wrong. Markets rely on rules and signals. Without these, you get chaos.

    The third premise, which in a sense is obviously mistaken, is that a successful business needs a minimal state. This argues that the only legitimate role for the state is in the protection of property rights and the enforcement of contracts. But when you look at them closely, you find that successful market economies have the largest and most powerful governments the world has ever seen.

    S+B: And the fourth myth?

    KAY: The fourth is that there’s an overriding need for low taxation, which is also untrue.”

  22. billie
    March 17th, 2009 at 15:01 | #22

    Alcoa used to have a mission statement that said “We are in business to maximise profit in a socially acceptable manner”. It’s up to society to set the boundaries on corporate behaviour. Australian society and corporations operating in Australia rely on government to regulate corporate behaviour, and clearly the global financial crisis shows we haven’t regulated corporations properly.

    No I don’t want more mountains of regulation but I do want regulation that is stated clearly enough that the spirit of the legislation must be complied with, its easy to understand for both the corporation and their customer and its easy to follow so its easier to comply with and not worthwhile flouting the regulation.

  23. derrida derider
    March 17th, 2009 at 15:07 | #23

    Peter Harcher in the SMH today had a good piece on China (here). But for this thread, the relevant para is:

    One of China’s most influential strategic thinkers, Yan Xuetong, observed some years ago that China had put its communist ideologies aside in pursuit of economic growth, while the US increasingly based its economic policies on political ideology: “Which is the ideological country now?” he asked.

    The Mont Pelerin lot and their acolytes have done us all great damage.

  24. James Haughton
    March 17th, 2009 at 15:22 | #24

    Not to mention that (according to the Australia Institute) we subsidise the aluminium smelters to the tune of $210 million a year in discount electricity. Plus they are the major consumers of “baseload” power and so hold us back from utilising more variable renewables.

  25. SeanG
    March 17th, 2009 at 16:31 | #25

    Can ProfQ and others explain that if regulated capitalism is such a wonderful thing and would have helped prevent the catastrophe that has befallen us, then why have so many European banks being nationalised and why is unemployment and discord in Europe growing? Surely their stiffling regulation would have helped them out?

  26. jquiggin
    March 17th, 2009 at 16:41 | #26

    Sad to say, Sean, financial deregulation has been pretty much universal. The European banks made the same kinds of bad investments as their US counterparts.

    As regards unemployment, this has been one of the areas where the US until recently looked a lot better than the EU. The US is now higher (8.1 vs 7.6). I haven’t compared employment/population ratios, but I imagine the picture is similar.

  27. Donald Oats
    March 17th, 2009 at 16:44 | #27

    If you want to test the awesome power of the pure market (neoliberal wet-dream version), what better test than to take one of the trashed economies, such as Iceland, and watch them attempt a pure market rescue of the country. No government handouts, no state interference good or bad, just pure individual greed and the sweet-oh-Lordy-so-sweet unregulated free market. Private police, private roads, private money mints, private hospitals, oh so lip-smacking good.

    Alice#18 – wasn’t there a “Dead Pelican” sketch by Monty Pelican?

  28. Jim Birch
    March 17th, 2009 at 16:49 | #28

    Thanks for that link PeterM. I like his last line in the article:

    People have a psychological need for simple explanations.

    I think that sums up this debate. Actually looking at the detailed evidence case by case is too hard.

  29. March 17th, 2009 at 16:51 | #29

    Oh, there is a difference between the means and institutions of calculating the use of resources, the need to maintain incentives for individuals to increase production and therefore decrease prices, the means of resolving conflict between competing groups of people in a political order, and the distribution of the wealth created by doing all of the above.

    In the sense that capitalism and socialism fail, our attempts at both have been largely because we understand them as forms of faith or forms of religion, or political preferences, or biases, rather than understanding a theory of teh social sciences that lets us compare them by other than historical outcomes.

    We will always have capitalist institutions. We will always, now, have social redistribution. The problem is not undermining the economy through shrinkage with socialism, or destroying it through expansion with capitalism, but instead, understanding how we can and must calculate production and the use of resources, while redistributing gains without undermining incentives, or causing distortion in the information system we have built in order to cooperate economically instead of compete violently.

    Capitalism will have another version. It will continue to evolve in response to the size of our population. It will be the dominant means of human development. Schumpater will be right in that we will have some sort of socialism, or rather public redistribution of wealth. But we will have capitalism, or the use of property to perform economic calculation as well.

    The person above who refers to Aristotle is of course correct, in this sense.

    I question whether democracy will survive. I suspect not. It never has. It is just another name for communism on a slower time scale. And communism is a silly little idea. I do not know why, when threatened, and in chaos, the wealthy would not hire some set of the population to oppress and conquer the remaining part. Usually this can be done with as few as one in twenty, and I suspect that it can be done with one in one hundred.

  30. Michael
    March 17th, 2009 at 17:04 | #30

    JQ @ #20

    Sorry, forgot the irony alert.

  31. TerjeP (say tay-a)
    March 17th, 2009 at 17:30 | #31


    I’m not familiar with the text by John Kay. However in the piece that you quote I find nothing to disagree with in principle. The furtherest I would go would be to say that low taxes are beneficial but I would certainly agree that they are not essential (within certain bounds).

    To his credit (at least in the quote you offer) Kay makes a distinction between rules that we migh call conventions and rules that we might call regulations.

  32. Oldskeptic
    March 17th, 2009 at 18:03 | #32

    Capitalism is like a dog. Well trained it will bring you a lot of fun, keep you fit, protect your house, give its life for you and your children.

    Badly trained it will eat kids, attack everyone and dominate you.

  33. Oldskeptic
    March 17th, 2009 at 18:29 | #33

    I should add … it will wreck the house as well.

  34. SeanG
    March 17th, 2009 at 18:41 | #34

    ProfQ – Europe has not invested in financial deregulation. The European model for banks is “universal” ie. retail and commercial banacassurance, corporate banking and private banking. This was not brought about by deregulation of the European financial market.

    European banks have made horrific losses but this is not due to deregulation in Europe. What you appear to be doing is taking an issue that annoys you (financial deregulation) and apply it to anyone that lost money.

    The French and German banks are incredibly corporatist in their approach and the respective French and German governments have interfered heavily in their running. This has lead large problems within the banks ie. bad loans, poor HR policies, etc. This is not due to deregulation.

    The French local councils, for instance, are absolutely sh*tting themselves at this moment. Why? Because they bought securities with subprime embedded in them. All they wanted was a stable cash flow. Was this caused by deregulation? Of course not! It was caused by poor governance, idiotic direction by central government as to what type of investments are appropriate and a cosy relationship with French banks.

  35. Alice
    March 17th, 2009 at 19:01 | #35

    19# Re my own post at 19. I meant to say Uncle Adam not Uncle Milton. Uncle Milton was just an avowed conservative partial to the liberal freedom of market participants to choose in vibrant small markets (good model for street cafes and the like until Starbucks moved in) as far as I can read in his greatly undersized and greatly overrated paperback. Nothing like the distorted markets we have now – nothing at all.

    I notice the corporate insurers are now bemoaning and wailing about the culture of civil litigation “that is now out of control.”

    Isnt that interesting – so these large corporate managers of other corporates’ risks dont like the storm clouds brewing on the legal horizon (for a hefty price). Yet they are the same large firms who rail against regulation.

    Bad luck. Cant have it both ways…. or can they?

    Will that be the next neo liberal Monty Pelican idea? De-regulate, privatise and float the legal system and judiciary and make it impossible for class actions against irresponsible CEOs and their teams?

    Too late isnt it?. The class actions are coming. One good thing is, they will tear themselves apart. The only people gambling will be the lawyers.

  36. Alice
    March 17th, 2009 at 19:04 | #36

    I must have said cia@o again! I got moderated.

  37. Alice
    March 17th, 2009 at 19:13 | #37

    Sean – even the doyens of free trade – the IMF and WTO now claim it was a massive failure of inadequate regulation ie NOT enough regulation (not too much). You must be one of the last men standing who thinks this GF failure was due to too much regulation. Im starting to think you are more of an anarchist – suggesting policies to lead society and systems to complete breakdown. Oh well, Karl Marx didnt mind free unregulated trade either – he thought it would make the capitalist system crash sooner. I suspect he may have been right. So the Montis Pelicans are really the anarchist Marxi Pelicans (or perhaps just plain old quacks).

  38. Alice
    March 17th, 2009 at 19:35 | #38

    38# Perhaps its time for something much much smarter….. Monty Python.


  39. SeanG
    March 17th, 2009 at 20:25 | #39

    Alice – have you read my comments? Even comparatively highly regulated banking sectors failed. Have you read my previous comments where I explained how and why risk has magnified? The regulators failed their duty but to categorise me as the last man standing of an ideology that has lifted billions out of poverty… well I’ll accept that!

  40. Ernestine Gross
    March 17th, 2009 at 20:35 | #40

    1. The links in JQ’s post contain enough information to do a network analysis on the Mont Pelerin Society and its off-springs. (The date for the node “Sydney” is 1985)

    2. I could not find one name on the lists of economists found on the links, which I could say has made a contribution to analytical economics since WWII. By analytical economics, I mean Walrasian and non-Walrasian general general equilibrium theory and game theory, applied to Economics, and various more applied work in areas such as environmental economics.

    JQ, or anybody else, please correct me if I am mistaken.

    3. I am also asking for a reference to a precise theoretical model of ‘capitalism’.

    In the mean-time I am using the term ‘capitalism’ for the ‘school of thought’ of the Mont Pelerin network and Karl Marx.

    4. The precise theoretical work (eg Roemer) that came out of Karl Marx is often classified as Marxist economics. I’d a comment on this point.

  41. jquiggin
    March 17th, 2009 at 21:48 | #41

    #30 No worries, Michael. A most convincing imitation of the real thing.

  42. Alice
    March 17th, 2009 at 22:27 | #42

    The lifting billions out of poverty is over rated and globalisation has also plunged a lot of people into poverty. Its totally arrogant to presume globalisation is a cure all for the worlds ills and you cannot ignore the freedom that it gives larges global firms to exploit labour, the environment and tax systems (causing dysfunction and instability at the national level). In a global expansionary phase we would expect people’s lives to be improved but de-regulation taken to an extreme, we just as easily expect weaknesses to emerge leading to crises. I think we have just seen that now. No policy taken to an extreme is ever going to work Sean (and especially one as dangerously hands off as suggesting that we remove as much regulation as we have in financial capital flows, and leave the market to sort it out for itself). I am by the way pro capitalism but I am not pro fanaticism. There is quite a difference. Ill take my capitalism healthy and functioning well for the majority where I live Sean, rather than swallow the line that what is good for the corporate structure (to have the freedom to go where and when it likes for whatever reason it likes) is also good for me. I dont like standing here in Australia right now watching the predictions of unemployment climbing to ten plus percent (and eve that is understated).

  43. Alice
    March 17th, 2009 at 22:39 | #43

    Alanna #19 on Michael #18
    Ditto – missed the irony alert – Doh! Agree with JQ – convincing Michael. You could have been any old usual suspect…

  44. SeanG
    March 17th, 2009 at 23:31 | #44

    Alice – I suggest that you re-read all my comments again. When did I suggest that globalisation was the cure for everything? Where did I suggest that what “is good for the corporate structure” is good for all?

    I suggest that you re-read all my comments before posting a response because it is very hard to follow your logic.

  45. Tom N.
    March 17th, 2009 at 23:37 | #45


    JohnQuiggin @ #11 said: The advocates of free-market reform presented themselves as attacking a set of policies they described as “the Australian settlement”.

    John, could you please name these Australian advocates of free markets.

    To narrow this task down, let me point out that, from my inside knowledge of the Australian economic policy community, very few if any of those who advocated policies different from the Australian settlement – and some of the organisations I have worked for have been at the forefront of this – were and are advocates of the free market. Certainly, virtually all those policy economists I have worked with recognise the need for government intervention in various markets, and they certainly did not reach their recommendations for deregulation, in the instances where that is what they recommended, on the basis of some starting point that markets are superior to governments at managing all kinds of risks – words you have used previously (although, to be fair, at that time you subsequently softenned your words when I pointed out that no economist I know holds that view).

    If the people you have been suggesting are Australian free marketeers turn out not to be policy economists, who are they? Are they certain politicians, such as Howard and Costello, notwithstanding their high tax and spending record; or are you refering to certain business people, such as the bank bosses cited in the SHM article you referred me to on Andrew Norton’s blog?

    If the latter, it would be useful, to avoid confusion among your readers, if in future you clarified the people you are referring to by the use if such labels, so readers can get a sense as to what relevance, if any, the group being attacked is to policy formulation in Australia.


    PS: I realise that at some point my demands that you tightly specify these terms, and to whom they apply, may become tiresome. Equally though, I hope you will appreciate the reasons – and I hope validity – of my efforts to ensure precision in this area.

  46. Ubiquity
    March 18th, 2009 at 00:10 | #46

    Socrates @ 7

    “I like Aristotle’s philosophy that there are two extremes on most topics, and they are usually both foolish. Thus communism and unregulated capitalism are two extremes on the spectrum of economic thought: either government owns and controls amlmost everything, or virtually nothing.”

    I think Aristole was as wrong about the above as he was about the geocentric model – ie. the earth being the centre of the universe.

    Liberalism (democrats) and Conservatives (capitalist) are opposing ideologies. There is no common ground.

    The philosophy of romanticism carries a morality of altrusim in which all living things naturally want to help each other and co-exist (liberalism). “Value” and “self interest” (conservativism) play almost no role in altrusim. Liberalism is the opposite of conservatism. In fact common ground between conservatism and liberalism is a flat out contradiction in terms.

    The recession of the world economy has a lot to do with the pseudo capitalist economies (eg.China, India, europe, Australia, Americas) only partly introducing capitalism. The “closet” socialist governments were trying to introduce freedom while maintaining control. That is a contradiction in terms.

    Solution is simple. We all agree on the philosophy of capitalism (no comprimise)then formulate an agreement on what the governments job description is.

    In regard to capitalism beginnings, it started in the early 1800′s. It is still evolving and has a distance to go. In debates it will continue to be exploited for its weaknesses by the liberals.

    Meanwhile, Mont Pelerin Society dreams of the perfect capitalist world. Iceland has bottomed and the only way is up. The rest of the world pump prime themselves into the dark bottomless pit of debt.

    Reference: Punchinello’s Chronicles “why is there no middle ground

  47. El Mono
    March 18th, 2009 at 00:36 | #47

    @ 21 I realise it was only one point of Kays and i don’t necessarily disagree but you do not have to argue against greed being the key driving force of economic activity to argue for gocernment intervention. Market faillure occurs even when agents are assumed to be self interested in the traditional material sense.

  48. Socrates
    March 18th, 2009 at 08:07 | #48

    Sean G 38

    Now you are lumping regulations together; there are many forms of bank regulation. The critical fact in the current problem is that none of the OECD coutnries regulated the derivative market, which was the source of the problem in the US and now world wide. Because that market (CDO and CDS) was inadequately regulatd the rest has become irrelevant, because of the losses. Even in Lehman Brothers UK office right up to the day they collapsed, their UK division was profitable – it was their CDO/CDS trading in New York that sank the whole company, including the profitanble and unprofitable bits.

    Ubiquity 45

    Saying Capitalism and Libealism are opposites is incorrect. (That is like saying that gravity is the opposite of electricity.) Capitalism is an economic system, Liberalism is a political doctrine. You can have Capitalist countries that are either Liberal (eg England) or dictatorships (eg Chile under Pinochet). It so happens that Liberalism contains moral principles that are irreconcilable with extreme forms of capitalism. Likewise you can also have Liberal countries where Capitalism is highly regulated (eg Sweden). When you abolish private ownership that is at the heart of capitalism you get Socialism or Communism, not Liberalism.

  49. Ikonoclast
    March 18th, 2009 at 08:41 | #49

    In face to face conversation we detect irony by facial expression or tone of voice. In the online world, a wink or tounge-in-cheek emoticon will do the trick. Use emoticons a little more folks… or is that too unintellectual for such a high powered blog? ;)

  50. Uncle Milton
    March 18th, 2009 at 08:54 | #50

    There’s a good article on Iceland by Michael “Liar’s Poker” Lewis is the most recent Vanity Fair.

    It’s all rather incredible how naively they swallowed the free market line. Of course, being rubes – literally, fishermen who decided on a career change and instantly became bankers and hedge fund managers – they got sold the worst of the worst junk assets by investment bankers in London and New York who saw them coming.

    When a distinguished University of Chicago economics professor, Bob Aliber, told them in 2006 that they were in the midst of a financial market bubble that would burst and end in tears, they didn’t want to know. So confident was Aliber that he put Iceland as a case study of a bubble in his textbook, before it burst.

    Much blame attaches to David Oddson, a poet who became Prime Minister and then got himself appointed as Central Bank Governor.

    None of it is funny. But semi-amusing was the local academic economists who sought to explain Iceland’s apparent financial success with theories of “informal networks” – everyone knows everyone in Iceland. Some academics can find a way to rationalise anything!

  51. jquiggin
    March 18th, 2009 at 09:35 | #51

    #44 Tom, before replying let me observe, as I have done on quite a few occasions, that there were two distinct streams of thought among the advocates of reform in the 1980s and 1990s. One group saw reform as necessary to refurbish and sustain the social-democratic welfare state, and the other as a process that would lead to its replacement by a free-market alternative.

    The former group was dominant in the Hawke-Keating government, though there examples of both (Keating could be found in both groups at different times in his career).

    In the latter group, I would place:

    * Think tanks such as CIS (local offshoot of Mont Pelerin, BTW), IPA and the various WMC front groups such as HR Nicholls Society, Bennelong Group, Lavoisier Group and so on. Prominent individuals associated with these groups have included Peter Walsh, Gary Johns, Nick Greiner, Tony Abbott, Gerard Henderson, John Hyde, Nick Minchin, PP McGuinness and so on. I think you can add plenty more without my help.

    * The IAC/Industry Commission from the late 70s to the early 90s or so (before that, it was focused fairly tightly on industry policy, and from the early 90s onwards it became much less dogmatic than it had been in the past).

    * The Business Council for much of the period, notably when Hugh Morgan was a dominant force.

    * The Liberal party from the end of the Fraser government to Howard’s final recapture of the leadership (by which time he cared only about winning).

    Coming back to the phrase itself, it was of course coined by Paul Kelly, though the idea really belongs to Gerard Henderson who used the less appealing ‘Federation Trifecta’. I’d put Henderson in the second camp and Kelly as someone who fluctuated between the two.

    I hope this helps.

  52. David Irving (no relation)
    March 18th, 2009 at 09:56 | #52

    Oldskeptic, nice analogy. Iceland’s pitbull appears to have chewed up everyone’s shoes and s**t on the carpet. I prefer my capitalism to be a bit more like a chihuahua – nasty tempered, but too small to do much damage.

  53. Tom N.
    March 18th, 2009 at 12:03 | #53


    Thanks for your reply John. I am not sure that most of the people/groups you have nominated are in fact genuine free marketeers, but let me focus on the only policy economists you mentioned – namely those in the IAC/Industry Commission.

    The IAC started, as you know, with a focus on border protection and it is fair to say that its recommendations were largely for “free [international] trade”. But free trade is not the same as free markets, as you would be aware. We do not know what the IAC thought about labour market regulation, for instance, nor a raft of issues that have been addressed by its successors – such as gambling, housing, health, privatisation and so on. I thus do not know on what basis you believe that the IAC was a free market outfit. Similarly the Industry Commission.

    You say the Industry Commmission and now Productivity Commission has become ‘less dogmatic’ – reports such as gambling, R&D, housing, OHS, and infrastructure access, for instance? – but in fact I would argue that the Commission has applied exactly the same analytical framework to these issues as its predecessors did to the earlier border protection issues. Its just that the market failures in the latter cases are far greater than in the former.

    In any case, your claim – even if correct – was only for the period from the late 70s to the early 90s; that is, up to 15 years ago. Thus, even accepting it at face value, the implication is that your current attacks on free market policies do not relate to the views of the Australian economic policy community.

    Given the nature of the comments in the threads on this blog, that often assume that your attacks against free market reforms and neoliberalism are attacks on policy economists, I think that, at a minimum, it would be worth clarifing this point when you launch your next assault.

  54. March 18th, 2009 at 13:05 | #54

    Pr Q says:

    According to the material prepared for its 2005 conference in Reykjavik, the Society’s intellectual influence directly guided those responsible for making Iceland what it is today.

    Its not entirely fair to blame the Mont Perelinites for the ills of post-modern capitalism. The ills now besetting the worlds economic system are largely the product of the financialisation of industry. Particularly highly-leveraged fractional reserve banking and top-heavy disintermediated securitisation.

    If anything gold-bugged Libertarians (Eg Rothbard)are exceedingly critical of FR banking. Although they probably would have given securitisation a free-pass on deregulatory grounds.

    The MP Holy Trinity (Hayek, Friedman & Rand) were mainly concerned to criticise the deformities of modern statism ie antiquated nationalised industry, closed shop union featherbedding, unconditional welfare handouts, cripplingly high rates of marginal taxation and inflationary public financing.

    If you want a show-case for the Mont Pelerin society then why not Switzerland? It is definitely a neo-liberal state with relatively low-taxes and stingy welfare. Although it looks like it is about to reap its wages of financial sin it is not an economic basket case.

    But there is no doubt that Iceland drank the New Right’s financialisation, deregulation and securitisation Kool Aid with gusto. It was something of a Nordic poster child for Economic Freedom (EcoFree), improving its Cato EcoFree rating from 54th in 1980 to 10th in 2004. Heritage Foundation ranks it 14th most EcoFree in the world.

    Although EcoFree indices are not really a good predictor of financial crisis. For example Spain is the worst hit USE nation yet no one would name it as a beacon amongst freemarket nations. It is, like Nevada and Queensland, a sunshine sand state with a preponderance of get-rich quick artists.

    And lets not forget that the key factor in exacerbating the US’s housing asset price-bubble was the Clinton-Bush policy of “relaxing credit standards” to promote a big increase in minority home ownersip or the mass provision of cheap private rental accommodation for minorities. The NY Times does the post-mortem of another Bright Idea from President Nimrod:

    He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent — and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.

    This was deregulatory neo-liberalism alright. But of a distinctly unconservative nature for traditional green-eyeshade bankers used to red-lining uncreditworthy applicants. The result was massive minority foreclosures especially in California, sending the Masters of the Universe securitisers into bankruptcy.

    This suicidal credit policy is not part of the Mont Perelin Society’s New Right manifesto. Instead it can be laid squarely at the door of the New Left, with all its “housing activists” and “community organizers” hustling to get a piece of the action.

    Realistically, the US financial crisis is the product of both wings of post-modern liberalism. This inconvenient fact has been air-brushed out of History by Left-liberals eager to shift all the blame onto their Right-liberal ideological con-freres.

  55. March 18th, 2009 at 13:27 | #55

    James Surowiecki of the New Yorker has an interesting take on Iceland’s woes:

    So how did Iceland get in so much trouble? That’s the odd part of the story: it isn’t because its banks gambled on the worthless subprime securities that helped undo Bear Stearns and so many others. Iceland’s banks prudently avoided the subprime market, even as they embarked on a lending boom at home and expanded abroad.

    In normal times, this might not have mattered, given the country’s solid economic fundamentals. But these aren’t normal times.

    The subprime crisis, in which investors realized that they had greatly underestimated the risks of lending to people with bad credit, has spawned a wider credit crunch: investors now suspect disaster behind every door, and even seemingly solid borrowers find credit much harder to come by.

    The subprime crisis was an earthquake that caused a tsunami: the quake has done plenty of damage on its own, but the tsunami looks set to do even more. Iceland has been swamped by that tsunami because it trusted in the availability of global credit in time for that credit to evaporate.

    What got Iceland in trouble was something more subtle: its banks got their money primarily from international investors, making the Icelandic miracle heavily dependent on foreign capital. And the fact that Iceland has been so dependent on foreign investors makes those investors even more skittish about investing there: in markets, weakness often begets weakness.

    Further, the country’s troubles have made it a potential target for speculators seeking to drive down the value of its currency and perhaps cause a run on the banks.

    Heavily dependent on foreign lending, housing price bubble, vulnerable to currency speculation…where have I heard of these problems before? Hey wait a minute, that sounds like AUS!

    This is the puzzle for critics of the neo-liberal financial policy: why has AUS so far escaped the worst of the GFC? I argue its our high immigration rate which has propped up the property market. High immigration is itself a neo-liberal policy.

    It would be nice if someone besides me chose to look at these anomalies.

  56. Ikonoclast
    March 18th, 2009 at 14:43 | #56

    “Why has AUS so far escaped the worst of the GFC.”

    Well as His Bobness would say;

    “Don’t speak too soon for the wheel’s still in spin/ And there’s no tellin’ who that it’s namin’”

    Hmmmm, come to think of it, Dylan wrote some execrable cliche-ridden doggerel didn’t he?

  57. smiths
    March 18th, 2009 at 15:08 | #57

    If you want a show-case for the Mont Pelerin society then why not Switzerland? It is definitely a neo-liberal state with relatively low-taxes and stingy welfare.

    switzerland is an anomaly and should not be used in this context,
    it is a secrecy and tax haven that has maintained its strange status by being absolutely amoral,

    i am sure even hayek would not have advocated an economy based on taking a cut from harbouring and transferring the proceeds of death, drugs, prostitution, blackmail and corruption

  58. Ben S
    March 18th, 2009 at 16:00 | #58

    I feel like I’m taking crazy pills here. How on earth can you blame the current crisis on free markets? How can you call the cozying up of big business to Washington in order to get guarantees so they can take stupid risks a free market?


  59. jquiggin
    March 18th, 2009 at 16:39 | #59

    Ben, feel free to take up the offer in #20

    Jack, the MPS picked Iceland as a showcase, not me.

  60. Ben S
    March 18th, 2009 at 16:43 | #60

    What offer is that? The link seems to point to nothing.

  61. jquiggin
  62. Ben S
    March 18th, 2009 at 16:58 | #62


    Have you considered that the problem in Iceland was not in fact a problem with the free market going mad? The problem with the Krona seems to have started when the government of Iceland acted to take over Glitnir.

    Glitnir itself could have easily failed, the assets sorted from the liabilities, the wheat sorted from the chaff and the Icelandic economy could have chugged along happily. The act of the government buying out Glitnir seems to have shaken confidence in the Krona and lead to the collapse.

    Any thoughts on this?

  63. jquiggin
    March 18th, 2009 at 17:01 | #63

    Tom, I don’t think I’ve written anything to suggest that I’m attacking the Australian economic policy community in the sense in which you define it (PC, Treasury, RBA etc). I don’t always agree with them, but I broadly accept your characterization of them as accepting the mixed economy and (RBA at least) aware of the risks in the bubble economy and open to the case for more intervention to stop asset price bubbles. The big changes we’ve seen were largely driven by the global financial sector, backed up by neoliberal ideologues like those I’ve listed.

    Looking at the IAC/IC/PC etc, the gambling report did mark a big shift from the dogmatism of earlier reports (not online unfortunately). But this is ancient intellectual history now, as you say.

  64. BilB
    March 18th, 2009 at 17:04 | #64

    Surely the only true laissez-faire environment has to be complete anarchy. Anything less involves regulation. Then the issue is how far can one go with regulation before laissez-faire is impure? The answer is no regulation at all because that is the only way that there is pure and total freedom.

    Freedom to one person, however, can be a prison to another. For one person to gain, another has to loose and freedom is distorted. So the idea of total freedom is mythical.

    The catch with this is that freedom is totally unnatural. Nature, our very substance, is a complex of constraint, and the beauty of life is every thing that becomes possible within those constraints.

    Economies are a natural consequence of our being, and constraint within economies is as necessary as is constraint for our very existence.

  65. jquiggin
    March 18th, 2009 at 17:05 | #65

    “The problem with the Krona seems to have started when the government of Iceland acted to take over Glitnir.”

    Not true as you can see from this article I wrote in 2006. People on both sides of the debate recognised Iceland as a test case for neoliberalism.


  66. Alice
    March 18th, 2009 at 17:26 | #66

    Ubiquity says

    “Meanwhile, Mont Pelerin Society dreams of the perfect capitalist world. Iceland has bottomed and the only way is up.”

    So by your logic Ubiquity, in order to get the perfect economy, first we destroy it, to watch it rise like a pheonix from the ashes.

    I dont think so.

  67. Alice
    March 18th, 2009 at 19:26 | #67

    Ben S

    You started taking “crasy pills” when you thought free markets were a cure all.
    Ive heard enough nonsense on free markets to last me a lifetime and unfortunately they will last my kids and grandkids lifetimes too. Ive watched labour pushed into unconscionable contracts. Ive watched government services disintegrate because of privatisations (which do a worse job). Ive seen the financial sector grow bloated and heavy with excess. I watched share prices become so much hot air and spin that people have lost the confidence to invest in companies. Ive watched corporate CEOs claim their remuneration is a market based reward for their exceptional talents (for three years at this company and two years here – each time taking huge wads of company profits when they transfer). Ive watched tax havens grow so that it is acceptable and normal for companies who make profits and sell goods in one country to move those profits to a poor nation who is so desperate, even for their savings and the pttance it will bring them, to waive all taxes to accommodate them. Ive watched so called religious people like Tony Abbott suggest the poor or the unemployed shouldnt be assisted in our society. Ive watched single mothers and their children get treated like dirt and plunged into further poverty. I see great ills in society in the name of free markets and de-regulation and the like of those who support so called “monte pelerin” style remedies. These are not remedies at all. They are very destructive. They emanate from the same sort of people in Nazi Germany who thought the Aryans were a superior race and destined to lead. They think their policies will transform us all to their idea of Utopia where they get to be the leaders.o convinced are they of their own selfrighteousness.

    There are 21 million people in this country, not just those who think they are destined to “lead.” To JQ’s list of names I would like to add Rupert Murdoch, and his list of regular contributors. I would like to add Janet Albrechtsen, Id like to add Costello, Howard, Abbott, Devine, Piers Ackerman, Bishop (both), the entire core that supports the unhappy liberal party. Add Angus, the leader of the young liberal brat pack (and add all his unethical vote rigging machinations).

    The entire electorate voted trhem all out resoundingly.

    That is a rejection of them and their views but they and their lackey journalists and whoever they still have inside in plum public servants positions just dont get it. The electorate doesnt want or need Monte Pelerin or any other version of it.
    They want intelligence and common sense and practical skills and balance to lead our economy not any “no compromise” view.

  68. Bruce Littleboy
    March 18th, 2009 at 19:43 | #68

    Alice #67

    Godwin’s Law!!

  69. Alice
    March 18th, 2009 at 20:07 | #69

    Ok – Bruce. I get your point but I am seriously approaching 1 in my distaste for neo liberalism in terms of what its doing to this country. Forgive me my patriotism, but I cant stand to see these policies actually undoing us. I really dont give a fig about the “grand plan for the globe.”

    Brancors was a heaps better plan but you only get one chance in a generation or two to listen to a very intelligent man – but they didnt listen.

    If only as Oldskeptic commented.

    I just abhor the fact that fools have been deciding important matters ever since.

    What can I say. Godwins law. What Godwins law failed to recognise is that nay time we see evil, we have a natural tendency to raise the subject of Hitler. I dont think thats so bad. Monte Pelerin are not much different. Fanaticism is still with us and wasnt Hitler the perfect eridite example (and fortunately for him, his economic problem just happened to have a perfect victim).

  70. Alice
    March 18th, 2009 at 20:07 | #70


  71. Alice
    March 18th, 2009 at 21:20 | #71

    Ok then lets hear what Keynes did have to say…on free markets…

    “I sympathise, therefore, with those who would minimise, rather than those who would maximise, economic entanglement between nations. Ideas, knowledge, science, hospitality, travel…these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and above all, let finance be primarily national.”

    “National Self sufficiency ” , 1933.

    Fools. GFC ? Fools.

  72. Tom N.
    March 18th, 2009 at 21:45 | #72


    Thank you John (#63) for confirming the point. I accept that you have not stated that the Australian policy economists have pushed neoliberalism and a free market ideology, but it is clear from many of the responses to your posts that many of your readers have not realised the distinction. Hence my crticisms on the unhinged, Puseyesque nature of much of the discussion in some of the comments threads.

    Regarding the PC’s Gambling report, I would point out that the framework used was essentially the same public economics framework that the Commission has used throughout its existence – chapter 4 sets up a standard markets/market failure/government failure framework, for instance.

    You may say that relaxing the simplifying rationality assumption was a change, but the Commission had gone down this “radical” route well before – for example, in its 1994 report on smoking regulation. These reports used the same broad public economics framework, as I have said, as the other reports undertaken by the Commmission on border protection issues. It is my contention that the Commission’s framework and approach did not change in any significant way; what changed was the subject matter that the Commission was asked to inquire into.

    The same framework also underpinned the National Competition Council’s approach, which, as I mentioned on Andrew Norton’s blog, I had a hand in formulating.

  73. Alice
    March 19th, 2009 at 06:55 | #73

    Tom N # 72

    I never found Pusey as unhinged as a lot of so called “economic commentators” in our media as a matter of fact. I find Pusey’s writing refreshingly honest. What I have found more offputting is the attempt to disparage many academics, particularly over the past ten to fifteen years, for being just that.. honest.

    I see the same tone in your disparaging comment about Pusey located nicely next to the word “unhinged.”

    I think thats pretty defamatory actually.

  74. Ben S
    March 19th, 2009 at 07:11 | #74

    John Q,

    I don’t understand why you have linked to something you wrote in 2006 to disprove that the Krona collapsed in 2008 because of gov intervention.

    Can you explain what you mean by linking to it?

  75. jquiggin
    March 19th, 2009 at 08:15 | #75

    Ben, the linked article notes that the run on the krona began in 2006, well before the nationalisation of Glitnir to which you attributed it (and only shortly after the triumphal MPS conference).

    As a general rule, an event that took place in 2008 (and wasn’t anticipated even a few weeks before it happened) can’t have caused another event that began in 2006. I’m finding it hard to understand how you are finding it hard to understand this.

  76. Ben S
    March 19th, 2009 at 08:35 | #76

    But John it (the Krona) just wasn’t tanking that hard until the takeover. It took a sharp and dramatic fall once the takeover was announced. The uncertainty seems to have caused the loss of confidence in the Krona.

    So an already somewhat weakened Krona was tipped into collapse by government intervention to fix a problem caused by bad debt that was created (and could only have been created) by government intervention.

    How is this a problem with free markets?

  77. Ben S
    March 19th, 2009 at 08:47 | #77


    Be wary of labels. They have a dehumanizing effect. Labeling something neoliberal has that effect and means you don’t have to think about where the ideas are coming from.

    A free market is advocated by an eclectic assortment of individuals. From standard issue conservatives right through to Individualist-Anarchists. At it’s core it’s a belief in freedom and equality. That people should be free to do what they please as long as they hurt no one. Classic Liberalism, which is the general sort of philosophy of Hayek et al, is the idea that lives should be lived as free from coercion as possible. That it is immoral for anyone to force people to do their bidding.

    The economic argument is fought on two fronts: Morality and Utility. The moral argument is where I generally sit but it’s kind of seen as a fringe ideal. Most of the people who formed the original Mont Perlerin society feel that free markets are the best thing for society because they provide the best outcome for society as a whole. When you leave as much spending up to the people as possible then you have less waste and the standard of living goes up as a consequence.

    So these men share the same ideals as you. They want a better lot for everyone. It’s just that they have reached a different conclusion about the path to take to get there. Their ideas, contrary to what John Q may say, have been proven to be right. The world marches towards a better world for all of us and it’s thanks to governments giving more and more control back to the people.

  78. jquiggin
    March 19th, 2009 at 08:50 | #78

    Ben, if you want to ignore the evidence and keep on claiming victory for the free market amid its obvious collapse, I can’t stop you, but I’m not going to respond any further.

  79. Ben S
    March 19th, 2009 at 09:07 | #79

    That’s so weird! I was pretty much about to say exactly the same thing to you John Q. We should buy a lottery ticket or something.

  80. Alice
    March 19th, 2009 at 09:24 | #80

    79# Ben – Include me on the lottery ticket Ben. I think Id do better out of that than I have out of the free market ideologies that have been forced on me in Australia over the past two decades. Better buy a syndicate share for the Icelanders too.

  81. Alice
    March 19th, 2009 at 09:31 | #81


    If you had a hand in formulating that NCP that was pushed throughout the public sector, you ought to be ashamed of yourself. You replaced a better system with an inferior one. You diverted legions of public servants from getting on with providing their helpful services, on a wild goose chase of wasteful, unnecessary and inventive charging of the department next door to theirs and the public. The NCP failed dismally to notice the distinction between public and private purpose and turned the public service into a circus juggling balls.

  82. Alice
    March 19th, 2009 at 09:43 | #82

    #72 Furthermore Tom – on Michael Pusey,

    Michael Pusey, Professor of Sociology at UNSW and a Fellow of the Academy of Social Sciences in Australia, was listed in 2005 by the Sydney Morning Herald as “one of Australia’s top 100 public intellectuals.”

    Your comment,

    “Hence my crticisms on the unhinged, Puseyesque nature of much of the discussion in some of the comments threads”

    is a shabby attack on one of Australia’s foremost academics, in an attempt to support of your own questionable policy initiatives.

  83. Tom N.
    March 19th, 2009 at 10:57 | #83

    Alice, you’re not related to Alana, are you?
    I say this partly because she didn’t understand what NCP did and didn’t require either. As for Pusey’s honesty and ranking as an intellectual, I suggest you read Andrew Norton’s piece here.
    Over and out,

  84. jquiggin
    March 19th, 2009 at 11:15 | #84

    Can we cool this down, please?

  85. chacona
    March 19th, 2009 at 13:40 | #85

    In case somebody has not already mentioned this, but Michael Lewis´ article “Wall Street on the Tundra” in Vanity Fair is worth reading:


    In view of all that, it is all the more remarkable that Mishkin and Herbertsson gave a clean bill for Iceland back in 2006:


    All this is quite extraordinary: anyone in his or her right mind and with some understanding of the speculative bubbles of Nordic countries (Norway, Sweden, Finland) could have predicted the sordid end of the Icelandic flight of fantasy. And yet the Icelandic free market fundamentalists went ahead and found economists crazy enough to cheer them on!

  86. Alice
    March 19th, 2009 at 14:24 | #86

    83#Tom – the link you gave is a blank page from the CIS site. Not surprising.

  87. Alice
    March 19th, 2009 at 15:35 | #87

    Andrew Norton doesnt even do any research. He just appears to be an outspoken critic of what other much superior academics do. Where is Andrews analysis? Where are his surveys? Where is his data? There doesnt seem to be any but no doubt he locks himself away writing publication after publication (for his sole publisher) on the emporers new clothes. He is one of those offered up as “a doctor” with nothing useful to push except the political ideology of the silly far right (and yes, JQ is correct, The CIS is linked to Monty Pelikan through one of their Australian directors who seems to be the local MP Branch president. Sillier and sillier. I was down at the beach today and saw three of them sitting in a Norfolk island tree branch. It was swaying badly and threatening to break.

  88. Tom N.
    March 19th, 2009 at 15:40 | #88

    That’s surprising, Alice, as the link works from my and other machines. However, since your 186 seems to have a filter on material that might contradict your world view, here is a summary of the key points.

    Michael Pusey’s bungled attack on economic reform
    By Andrew Norton, May 2003

    In his new [2003] book, The Experience of Middle Australia: The Dark Side of Economic Reform, Michael Pusey argues that the economic reforms carried out since the early 1980s have had significant detrimental effects on Australian society. Major newspapers have reported his argument, but there has been little discussion of numerous serious errors of fact and logic.

    • Many of Pusey’s economic claims are incorrect—unemployment has not increased, job turnover is not higher, job security is not lower, small business is not in decline, and real wages have not been held down.

    • Even when Pusey gets his facts right, he wrongly assumes that economic reform caused certain outcomes, and does not consider alternative explanations such as technological advances, social change affecting work participation, varying international trading conditions and increasing levels of education.

    • Pusey misinterprets his own survey data to suit the argument he wants to make. The polling results are often inconsistent with Pusey’s hostility to economic reform.

    • Pusey quotes or cites very few economic reformers, and shows little sign of understanding why economic reform took place.

    • Instead of real explanations, Pusey offers conspiracy theories about ideology and corporate interests. More likely reasons, such as the mostly Labor reforming governments trying to increase employment and maintain social services despite resistance to higher tax, are not considered.

    * * *

    You will find the evidence underpinning these points carefully set out in the article, which can easily be googled if you really can’t link it. The second last point above – about Pusey criticising what reformers have been doing (and why) without actually ever citing or consulting the source of those reform recommendations – is something that I think has been particularly prevalent in the comments on this blog, which is one reason why I have referred to them as Puseyesque.

  89. Alice
    March 19th, 2009 at 16:46 | #89

    Right Tom – thats enough for me. The CIS is scurrilous and this hearsay of Nortons “opinion piece” that is not even research but a wailing criticism, when he offers no research on anything himself anywhere, is even more scurrilous. He is a witchdoctor hired as a propagandist by the CIS who is his only publisher as far as I can see (unless you want to include any media pieces).

    I will not be continuing this conversation. I dont approve of the tactics of the CIS and I dont approve of the denigration of real researchers with virulent ideological rants like Nortons. Its a total disgrace, the extent of it that exists in this country. Australian people are not fools even though some with means seem to think they are.

  90. Ben S
    March 19th, 2009 at 16:46 | #90

    Thanks for the link to the vanity fair piece chacona. From what it says though, these guys were hardly free market fundamentalists. They were…fishermen. Fishermen who believed that they could continue to buy cheap money and make interest on it by buying up assets at inflated prices.

    Somehow or other some people seem to think that free market advocates claim that this won’t happen in a free market. That’s not the case. What does happen though in a free market is things are allowed to bust. Prices find bottoms and bad decisions are punished. This discourages the bad decisions from occurring again. Bailouts only encourage bad behavior and throw the system into disarray.

    It was interesting to read that the government turned the fishing industry into a profitable system by clearly defining property rights though. Well done!

  91. Ubiquity
    March 19th, 2009 at 17:44 | #91

    Socrates @48

    I accept I was a little unclear.

    Liberalism is a political ideology/doctrine (as you pointed out). Liberalism is the philosophic next step of the morality of altruism which in the end decends from the overall philosophy of romanticism.

    Conservatism is a political ideology/doctrine. conservatism is the philosophic next step of the morality of capitalism which in turn descendes from several philosophies, but has never been fully defined. Which is why it has so many weaknesses when confronted by romanticism.

    Which brings me back to your point that Aristotle’s suggests two “extremes”, absolute communism vs unfettered capitalism are foolish positions to take. You imply the Social Democratic position seems to try to encapsulate the best of both ideologies, “The middle ground” (correct me if I am wrong). I suggest this is a impossible position to take because of the contradictions between both ideologies.

    The impossibility of these two ideologies coexiting in harmony is evidenced in our current economic climate.

  92. Ubiquity
    March 19th, 2009 at 18:19 | #92

    Alice @66

    Iceland economy has imploded ( bankrupt)from what I can understand (and I don’t claim to be an expert on the Icelandic economic woes) as a result of foreign money dissapearing from it banks and economy. It was clearly part of the global economic community and practiced its ” Mt Pelerin like unfettered capitalism” (to the glee of many of the bloggers here) with absolute confidence whilst the rest of the world practiced some sort of democratic socialism.

    Iceland primary fault was not to take into account the weaknesses of the foreign economies it was so dependent on for its prosperity. The irony of the argument for protectionism in “a bit of capitalism and a bit of socialism” managed / mixed global economy.

    Now that Iceland is broke, it continues to practice what it preached. For me the proof in the pudding is who gets going first and how many tents are on the fringes of Reykjavík.

    Alice you said

    “So by your logic Ubiquity, in order to get the perfect economy, first we destroy it, to watch it rise like a pheonix from the ashes.”

    The economy is imploding on itself, we don’t have to destroy it. It isn’t a perfect economy but surely one of the indicators of a successdul economy is the speed of recovery. Iceland will be one the ones first pass the post.

  93. Tom N.
    March 19th, 2009 at 18:25 | #93

    You are correct Alice (#89) that diminishing marginal utility has set in, but in one respect I am surprised that you withdrawing, as the Black Knight always wanted to fight on, regardless of how many limbs had been lopped off.

    Either way, this will be my last word too…

    Regarding Andrew Norton, since you obviously won’t take my word for it, I should point out that Andrew has John’s respect too, I’m fairly certain, as a sensible and solid researcher and commentator. (At least, at a minimum, John has linked to Andrew’s blog and has contributed to discussion on it).

    Moreover, as I mentioned, the evidence underlying Norton’s “scurillous”, “wailing”, “hearsay” critique of Pusey’s book, based on CIS “ideology” – as you variously sought to denigrate it – is actually referred to in his article.

    However, it is clear that there is not much point in trying to tie you down to evidence and reality. In this context, it is worth quoting an extract from the end of Andrew’s article – ironically under the heading The Impossibility of Debate – that you might do well to reflect on too:

    In Pusey’s mind, when reform wasn’t motivated by a desire to further enrich big business, it came from ideology. He says that “our own economic rationalist prescription proceeds from the extreme assumption that economies, markets, money and prices can always, at least in principle, deliver better outcomes than states, governments, and the law”. Aside from a few anarchists with no influence on Australian government, nobody believes this, and no policy proceeds on its basis. If Pusey read in detail what actual economic rationalists say—only four are cited or quoted, and even then only in passing—he would know that the limits of markets are well-known and widely discussed.

    John has effectively endorsed this same point earlier in this thread (at #63), at least insofar as policy economists are concerned but would also, I have no doubt, in relation to people like Andrew Norton – notwithstanding that he sometimes writes for the CIS. By eulogising Pusey as you have, and through your extreme language about Andrew Norton, who your own words reveal that you actually know little about (eg “He just appears to be…”), you rule yourself out of any serious discussion of these issues.

    Alas, you are not the only forum dweller who engages in such unhinged conmmentary. However, you and the other “Al” are together among the more prolific.

  94. Alice
    March 19th, 2009 at 18:38 | #94

    Its not just Iceland Ubiquity. But Iceland is a test case for extreme market practices (so is global financial deregulation). So I will not be continuing my discussion with either yourself, Ben or Tom. You people have a very strange view of the world economy and how you think it should be managed (or mismanaged in my view).
    As for the poor Dr Norton – to even say that unemployment has not risen can be disproved in two seconds flat. Dr Norton also doesnt even (conveniently) mention casualisation and underemployment. If half your “entrepreneurial” masters at CIS got on with the job of building widgets, instead of spinning their share prices of spinjets inc up with media nonsense, acquiring and divesting in the same month, to make themselves and mostly only themselves a complete fortune I might have more respect for these Captains of industry and their views. But when they turn into extremely self interested distorters of the facts for short term share price hot air or policy changes (from which they can extract profit through insider knowledge and speed of entry and exit and avoiding sensible and important regulation) I dont have a lot of respect for them at all. They are not true entrepreneurs. Let them build a company and stay in for the long haul in Australia and create jobs and a product that is worthwhile and that everyone here can enjoy even if their personal family wealth is slightly less (then they will have my respect), not argue a case for why they should be allowed to freely outsource labour to India or the slums of Pakistan or Asia and shift subsequent profits tax free to the Seychelles. There are in Australia currently some diectors of businesses working for a dollar a day to preserve their businesses and keep their workers. I take my hat off to those like that – not to these obscenely wealthy fly by nights who think they can run the country via a savage media campaign of distortions and outright lies. I also add, that, many on the list of directors of CIS probably have greater interests overseas and their most enduring interest in Australia is the token spare change they devote to divisive and disturbing media seeking organisations like the CIS. All I would suggest is, “obedience to conscience”, something they CIS dont seem to have in overly large quantities.

  95. Bruce Littleboy
    March 19th, 2009 at 18:45 | #95

    What does “Iceland is bankrupt” mean in principle and in practice?

  96. Alice
    March 19th, 2009 at 19:00 | #96

    Bruce #95 says
    What does “Iceland is bankrupt” mean in principle and in practice?

    The “practice of bankruptcy” of an entire country is apparently something of little concern to Ben and friends and I doubt they could explain its everyday effects on the group of people who actually reside in Iceland (and cannot fly off to the Mediterranean for the summer and ignore the parlous state of their economy).

  97. daniel
    March 19th, 2009 at 20:47 | #97

    From about 1995 when I first read Atlas Shrugged, and on ward to my attendance of the Mont pelerin Society meeting in Kenya 2007, I have been of the impression that unregulated markets/small state are the basis of progress and civility. Wwhat happened? I bumped into Francis Fakuyama’s book on State building. It carries the expert insight that the issue at stake isnt what size ought states be, rather whether the state is strong enough to deliver on the primary objectives for which states exist.Its take home suggestion is that it is the combination of a strong state with a bias towards extensive relegation to the market, of tasks the state can only do poorly, which ought to be our supposed focus, and not our hitherto misplaced recipes regarding state and markets. The market and the state, like man and woman, should be married,and not antagonised against each other.We are free and have been free to disenfranchise the authority each commands. To what end?

  98. Alice
    March 19th, 2009 at 21:13 | #98

    The market and the state, like man and woman, should be married,and not antagonised against each other

    Exactly – that was the original idea and purpose of the state until some like the Monty Pelicans decided we could do better without any state at all. People and nations like the U.S. spent decdes (and many thousands lost their lives) fighting those who thought the State should own the entire means of production. This is just as bad for their extremist ideas (the private sector should won the entire means of production) have infected the highest levels of government in Western industrialised nations, to the great detriment of the ordinary working man on the street.

  99. Alice
    March 19th, 2009 at 21:38 | #99

    “Andrew Norton – notwithstanding that he sometimes writes for the CIS. ”

    Sometimes Tom? Come now. He is a prolific in CIS publications.

    Anyway, I tried to be polite about it before, but I find both the economic ideas of the Monty Pelicans and CIS tediously boring and empty without any substance, research or rigour at all. Lets be honest about it – their brief isnt research and honesty and a cold impassionate look at what would work in terms of economic policy at all – its about reducing costs for big business (their business costs). No credibility at all.

  100. Ubiquity
    March 19th, 2009 at 22:08 | #100

    “The market and the state, like man and woman, should be married,and not antagonised against each other”

    My intial impression of this comment is optimistic with a warm fuzzy feeling. But then..

    I must say, I am not buoyed by this comment after checking out the divorce rates in some parts of the world. I am not sure whose doing the antagonising but I am assuming it is in the hands of the man and woman, market and state.

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