Thursday, May 31, 2012

Frank Newman: Closer to Europe than we think

Money is leaving the Euro zone and heading across the Atlantic to the US, because investors with lots of money to lose see it as a saver haven. That in itself shows how dire the economic situation in Europe has become because the US itself is not all that flash but it is more attractive than the Euro black hole.

That black hole is getting a whole lot bigger - Spain is now teetering on the edge of the vortex to a debt default. The Spanish government now has to pay 6.7% interest on its debt, compared to 1.7% in the US. That is how much of a risk the markets are now viewing Spain.

The solution the Euro-politicians are proposing to their compounding problems is exactly what one would expect – more regulation and more control to the political elite.

Control/intervention/regulation is the business of politics so it is no surprise they see the solution in the context of their own universe of self-importance. Giving more responsibility to people who are part of the problem is not an enduring solution. Unfortunately there is no perfect solution to the management of human traits (especially when it involves money), but it really comes down to what or who one believes in the most: the collective self-interest of the free market or the singular self interest of a few political leaders.

In effect the solution the Euro leaders are proposing is to bring the Euro nations’ independent banking institutions into a union over which they can exercise greater control, and bail out if necessary, via a Euro fund levied upon the Euro countries.

These political “solutions” simply compound an already failed model of government. A model that attempts to unify diverse nations by imposing a common currency and common commitments ignores the pervading will of individuals and the tribal instincts of peoples to be independent to pursue their own hopes and aspirations. The human spirit does not want to be incarcerated within a restrictive regulatory regime. Europe is already well down the path towards a messy separation, albeit one that will take decades to complete.

Unfortunately the hallmarks of demise so obvious in Europe are also evident in our own local councils. Last week central government announced it was putting a “review team” into the Kaipara District Council because the council itself can’t cope with the mess it has created for itself. Kaipara is our Greece.

And last week the Whangarei District Council announced its debt limits had been breached – for the third time in recent years that I can recall. Their solution was typically European – increase the limits! That is, continue to spend and kick the can down the road for future ratepayers to deal with. Remarkably, the Council has even given up trying to balance the annual budget, and has legitimised its past failings by adopting a policy to run annual deficits. Astounding.

These problems compound when governments (and councils) take on a persona that assumes it knows better than those they are supposed to represent. Shunning ideas like referenda to engage the public in decisions or even refusing to survey the pulse of opinion, yet at the same time making vacuous statements like “we are learning to listen better” just shows how arrogant the ruling elite has become.

The solution for Europe and for local government is to capture the energy of personal initiative by assisting citizens instead of managing them. A good start on that new road would be for politicians to stop mining property owners and income earners and become more creative and enlightened as to what it means to be a leader.

1 comment:

Kiwiwit said...

I think the solution for our councils, if not for European nations, is to make the elected leaders personally liable for their budget overruns and require them to have personal liability insurance to meet any claims.

This is what we expect of our company directors and private sector professionals, why shouldn't we expect it of our elected representatives?