Head of Lifestyle Economics at the UK's Institute of Economic Affairs (IEA), a free-market thinktank, has written an excellent piece at The Critic called "On Britain as a capitalist command economy".
The central hypothesis is that the UK is both far removed from being a free-market economy with a small state and light-handed regulation, and from being a state-owned economy run by bureaucratic, politically driven trading departments. It is worth reading in whole!
He describes the conundrum of how to describe the UK economy...
The left call it neoliberal but neoliberals have had no meaningful influence on British governments for thirty years. The right call it socialist but neither the Tories nor Labour have shown much interest in seizing the means of production. Keir Starmer’s government is more left-wing than he wants you to believe, but even if he renationalises the rail and water companies, it will be a nostalgic gesture rather than a heartfelt effort to control the heights of industry. Only on the fringes of the left is there any desire to return to the days when British Airways, Jaguar and Thomas Cook were under “democratic control”.
Arguably New Zealand isn't much different. Jim Bolger put the brakes on free-market liberalisation and shrinking of government after the 1993 election, although the direction of travel largely remained the same until 1999 when the Clark Government starting turning things back - notably by passing legislation to cancel the contracts of private ACC employer account providers to return ACC to a state monopoly insurer. Clark followed by renationalising Air NZ and the Railways, setting up a state retail bank (Kiwibank) raising income taxes and vastly expanding the welfare state with "Working for Families". The Key Government did little to change this trajectory, and the Ardern/Hipkins Government doubled down, with significant spending increases (even leaving aside the Covid response), and increasing both the size of the public sector and scale of regulatory intervention in the private sector.
On the face of it, the post-Thatcher settlement has held, but there is nothing Thatcherite about this government, nor the ones that preceded it.
Likewise in NZ. It's not to say the Douglas/Richardson (note it isn't the PMs noted for these reforms) reforms have been unwound. New Zealand isn't returning to rampant protectionism, nor has Labour embarked on vast renationalisation (the Government isn't going to get a national bus company, shipping company, hotel network or life insurance company), but what has happened is an accretion of central command and control. The UK of course has long had it with the Town and Country Planning Act, the single biggest act constraining housing supply and enabling local government to be the greatest NIMBYs in the UK's history. It was passed in 1947! New Zealand has only had the Resource Management Act since 1991 (passed during the height of Ruth Richardson's reforms, but inherited from Labour led by Geoffrey Palmer - which speaks volumes), but it too had kneecapped housing supply, inflated the cost of infrastructure and is only now with a chance of being replaced with something a bit less worse.
Snowdon writes about price caps introduced in the UK on energy, the Starmer Government's ban on "no-fault evictions" of tenants and enabling legal challenges on rent increases.
He highlights the nonsense of the Equality Act in the UK, which is being used to impose "pay equity" claims of the sort Brooke Van Velden has put a stop to, much to the chagrin of retired former politicians.
the Equality Act ... stipulates that men and women should be paid the same salary if they do work of “equal value”. Grotesquely over-interpreted by activist judges, this led to the bankruptcy of Birmingham City Council and 16 months of strikes after it was ruled illegal for (mostly male) dustmen and gravediggers to be awarded bonuses when (mostly female) cleaners and carers were not. ..
In the Next case, it was revealed that the company offered its 25,000 retail staff a chance to work in the warehouse but only seven took up the offer (three of whom walked out within a year). Despite one of the claimants admitting that she didn’t find the prospect of working in a noisy warehouse appealing but would have considered it if she was offered a lot more money, the company still lost.
The process used to determine what was "equal value" is what Snowdon describes as "that looks like something from a Marxist professor’s fever dream to decide the value of an employee’s labour." This diagram is the basis for a bureaucratic central planner's view of how people's pay should be set, which bears zero reference at all to how many people want to do the job for the pay offered. Have you seen a single politician or journalist in New Zealand outline how ridiculous this is? This is exactly the outcome of the philosophy of the capitalist command economy.
Snowdon describes it as essentially the application of activist state seeking to remould capitalism to meet centrally determined goals:
An activist state is systematically coercing the private sector in the pursuit of a range of social engineering goals, all of which are implicitly assumed to be more important than the economy. It is a form of central planning, albeit with a patchwork of different plans rather than one overarching goal.
Following on from my previous post, this is exactly what you can see from the Opportunity Party, whose leader "stepped into the world of... purpose-driven business". The purpose you can be sure is not why people and other businesses risked capital in the business, it's a purpose that is mostly about signalling virtue, and just chips away at its competitiveness, its resources to respond to consumers and competitors (especially in economies that don't have this sort of regulatory impost).
It's commonplace for people to refer to the People's Republic of China as a "communist" country. While it is led by the Communist Party, and has a great deal of central command and control, in many aspects it lets private enterprise run rip and be competitive, especially when exporting and seeking to win against foreign rivals. While it has plenty of state owned enterprises it directs and controls, it is less interventionist in the private sector. You see China actually cares about economic growth and development, because it works.
In the UK and across much of the developed world, governments are far more concerned about social engineering goals. Snowdon notes Net Zero (regardless of cost) which in the UK sees car retailers fined for selling too many cars that people want (petrol or diesel powered) relative to cars fewer people want (EVs). The market doesn't price goods the politicians want people to buy cheaply enough, and the public don't want to pay more for them, so the politicians penalise companies selling people what they want. The Ardern Government did this more softly by taxing the cars people wanted to subsidise the ones the government wanted people to buy. It did it by implementing US style government procurement rules to preference responses to tenders that included Maori enterprises, just because of their ownership, regardless of the value the enterprises offered to taxpayers relative to others.
Snowdon notes how far the public health lobby has gone in the UK (and it's obvious the same lobby in NZ wants similar steps):
Supermarkets have already been banned from offering multi-buy price discounts on “less healthy” food and are prohibited from displaying these products in certain parts of their shops. Wes Streeting plans to go even further and start fining supermarkets for selling too many calories.
I don't think New Zealand is quite so bad. A cursory look at economic statistics indicates:
- State spending as a proportion of GDP is 41% in NZ, 44% in the UK
- Tax as a proportion of GDP is 27% in NZ, 35% in the UK
- Public debt as a proportion of GDP is 41% in NZ, 98% in the UK.
It's notable that many of the command and control steps in the UK haven't been followed in NZ, although some of these were stopped with the removal of the Hipkins Government.
However, the approach of regulatory control of the private sector remains at the heart of what the Wellington bureaucracy advances to meet social goals, and it has widespread support in academia. Some elements of the capitalist command economy remain very much in place.
Even with its replacement, the Resource Management Act will still not put private property rights first, and will still mean local government very much is in command.
The electricity industry remains a weird blend of a market economy, with significant state investment, constrained by the planning system, which neither resembles a free market (given how difficult it is to build new generating capacity, and the state majority owning three quarters of the sector), nor a socialist system (as there is not a monopoly state provider). The previous ban on new oil and gas production (which in the current environment seems absurd) was purely an exercise in social engineering and virtue signalling, to show off a commitment to "Net Zero" even though it made virtually no impact on such targets (and no impact on climate change). However it certainly scared off new investment in the sector, fearing a change in government could ban its industry once again.
While supermarket competition is not what some would wish, this is largely due to the planning system, although there remain calls to split up the industry in ways unheard of in other countries, with even the Finance Minister having floated it, and it still being a "live" policy with some political parties. The fact this was even considered by a purportedly centre-right government indicates how far from the 1980s and 1990s NZ has gone.
New Zealand lacks the compulsory centralised pay bargaining seen in Australia, which bears the cost of it because the wealth generated from mining is so significant, the loss in productivity is diluted. However, it was only a change in government in 2023 that stopped it being implemented in NZ.
So I'd say New Zealand isn't quite as far down the path of regulatory sclerosis as the UK, but that is not because of a lack of will to continue down that path. You can see it in Labour, the Greens and the Opportunity Party, as well as within the glance of part of the National Party and NZ First to seek to add "just another" regulation to make business have "purpose" to meet the politicians' goals.
The fascists of the 1930s (actual fascists, not David Seymour) didn't advance communist style nationalisation of the economy because they preferred to use regulation and state control over business and industry to meet their goals. The word is vastly overused by the far-left, but its approach philosophically is not a million miles away from the bureaucratic command and control state regulating capitalism to meet the lofty ambitions of politicians.
One thing is for sure, it sure isn't a free-market capitalist economy.
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