Asset sales bad, asset purchases good?

A simple, impertinent question, to ask all those on the left of the political spectrum in New Zealand.  Labour, the Greens, Mana, NZ First (socialism can be nationalist) and the Maori Party.

You are all trying to scaremonger, use barely shrouded xenophobia to frighten the average voter into being opposed to the government selling assets.  The first thing you all emphasise is that "foreigners" will take over, with the implication that foreigners will be out to rip off consumers.  Even in competitive sectors (like electricity, which has five suppliers, or aviation where Air NZ ran 100% private for 12 years, including 4 years under a Labour government).  The implication being the foreigners are devils, unlike the benign, beloved New Zealand government.

The second thing you do is contradict yourself.  Whilst you imply that the assets you want to keep provide cheaper services (and goods if you include Solid Energy) than they would if owned by foreign devils, you then say the government will be losing out on lucrative revenue.   Hold on.  This lucrative revenue comes from the consumers you don't want ripped off.   Are you implying the government could make more money from consumers that it does now from these assets (given you think the government making money from selling goods and services is a good thing), or that taxpayers (the people who effectively carry the liabilities, but don't directly carry the benefits) are getting a lower rate of return than they would have done, had you simply gone out and bought them shares on the stockmarket on their behalf (or better yet, let them invest the money themselves)?

However, your biggest contradiction is in your attitude to the two sides of the government asset ledger.  The government buying assets has considerable costs.   

Labour bought Kiwirail at a price well in excess of its market value, and subsequently Labour and National have spent over NZ$750 million - which is greater than the purchase price itself, in buying more "assets" for the business.  This is money that has come from borrowing, it is money from taxpayers pockets, and is money that is almost certainly never going to be recovered ever from them.  The main beneficiaries of this are the foreign (devils they are not now) businesses who manufacture these assets (don't even start claiming you can make tiny short runs of trains in New Zealand when mass production of cars is grotesquely inefficient on the scale of a country this side), and the small number of New Zealand businesses that benefit from rail freight being effectively subsidised (Fonterra, forestry companies, Solid Energy, freight forwarders, shipping companies).  Why is this good?  Don't use words like "strategic", "environment", "future-proofing", use financial measures, like you use for asset sales.   Why can't you?   Why don't you consider the enormous transaction costs of that purchase, and the Air New Zealand transaction? 

Beyond that obvious example, there is Kiwibank, Air New Zealand and indeed any capital expenditure by the state in any sector.   You don't seem to care when the state increases its pool of "assets" (regardless of whether they raise revenue, most don't), you don't care whether consumers get a good deal from those assets or their owners,  you don't care whether taxpayers make money from them.   

In other words, you don't apply the same standard to asset purchases as you seek to apply to asset sales.

Is that because you are all really full-blown socialists who believe in public ownership of the means of production, distribution and exchange, and like the growth of government ownership of the economy?  (surely you don't all think like that?)  

Or is it because you are conveniently using this rather modest policy (yes National doesn't have many that are easy to argue or communicate), one that in almost every OECD country would be considered relatively benign and inconsequential by the political mainstream (far-left and far-right excluded), to bait the rather deep seated xenophobia and "tall poppy" suspicion of quite a few New Zealanders, who are inately suspicious of foreign business people, and subscribe to the Muldoonist paternalistic feeling that you can't really trust business people to "see you right"?

You want to frighten people into thinking that foreigners will rip them off, will "asset strip" these "great assets" and the country will be "worse off" because people like you don't control them and don't spend the money raised by them.  You like them to believe you are better at spending their money than they are, and that you're a kinder gentler business person than they are.

In other words, aren't you all just playing the Winston Peters card?

New Zealand electoral system referendum 2011

I have to admit I have had some difficulties deciding what to do about this one. This will be my second electoral referendum this year, having voted for the UK electoral referendum, which was a straight choice between FPP and a form of PV (FPP won overwhelmingly).

In the 1992 referendum I voted for no change, but also voted for the Preferential Voting system for change. Why? Well having experienced eight solid years of reformist free market governments, I was pretty happy with first past the post. I also saw the minor parties that were heaving in the polls being what they were. A xenophobic personality cult called NZ First and a lying mass of Marxist reality evaders called the Alliance. I also saw the Christian Heritage Party as the only other one sitting on the sidelines and wanted to avoid Graham Capill like (well you fill the gap). FPP looked like it delivered strong stable government, and MMP was backed by everyone who opposed less government, by those who opposed reforms largely now taken for granted. Preferential Voting was the “least worse” option, and after all it could be argued that a representative electoral system ought to have every MP gaining at least 50% of the vote. 

Much has happened since then, but I am hoping that simply writing this post will clarify my own thinking, as I have not yet decided how to vote. Given I studied electoral systems as part of one of my degrees, I think I have a fair background on all of the options, so here goes. 

The first point to remember is that electoral systems are about counting heads, not what is in them. Some people, across the political spectrum, laud democracy as something rather special, when it is, as Winston Churchill once said, the worst form of government ever devised – except for all of the others ever tried over history. The reason for that should be obvious. There is nothing inherently good, right, whether pragmatically or morally, about what the “majority think”. After all, if you accept that the bulk of the population has average intelligence and abilities, then the majority involves pandering to average people. Indeed, it also means that the most successful, able and intelligent (not always the same) are valued as much as the least successful, able and most dim-witted. It doesn’t take too much to figure out that untrammelled democracy can mean the majority vote to oppress the minority and take from them. 

A simple view is it is like three wolves and a sheep voting for what they’ll have for dinner, but if you look at most politicians, most of what they promise during elections is to take from someone to give to another, although they are usually astute enough to focus on the giving, and ignore the taking. If governments can just spent and borrow and pass the bill to the next lot, then inevitably someone will have to make tough decisions. Greece and Italy are examples today of democracy failing, because people voted for politicians who gave them what was unaffordable. Now they don’t want to vote for politicians to make them face reality. Democracy isn’t good at getting politicians to make difficult decisions, or rather decisions that involve not giving people bribes. Mencken said elections are an advance auction of stolen goods. He was right. Imagine if Churchill had asked the British public if they were willing to go to war against Germany. 

So I take a dim view of democracy anyway, in part because I know my opinion has a higher value than anyone else’s. If you don’t think the same way about yours, then you’re probably right as well. I simply don’t accept that my opinion can be reduced to it being counted the same as some half-brain dead nitwit who votes for John Key because “he’s pretty cool”, or who votes for Winston Peters because “she doesn’t like the Asianisation of the country”.

However, democracy DOES have a useful role – which is to remove governments. It is a limit on government because ultimately it offers one control on what governments do, by giving voters the chance to boot them out. In fact, if you look at recent elections, it is clear that 1999, 1990 and 1984 elections were exactly about that. Politicians and activists about electoral systems are almost always driven by their partisan views. The left love MMP because of the success of the Greens and the various Maori parties, the right don’t because it has seen the likes of NZ First emerge, and because ACT has done badly (and the conservative right has failed miserably too). So ignore them all, they are self interested wanting whatever system helps them gain power or blackmail power or whatever.

I have a different approach. To be honest, it is not something I get enthused about, beyond the basics of how the systems deliver different outcomes for the same votes, but also encourage different behaviour. Yet it is a chance to shake things up a little, so what is it I want from an electoral system?

I’d like an electoral system to enable individuals to be removed from Parliament, and MMP isn’t very good at that, because of party lists. Look also at what MMP does to electorate votes. In most seats, they are now considered irrelevant. However, in Epsom, Ohariu and the Maori seats, they are critical. Indeed they allow for an overhang for the Maori Party that over represents its support. Now supporters of MMP will say that these can be dealt with by tweaking it - such as removing the electorate threshold to let party votes count, or abolishing the Maori seats, but these aren't on offer. 

So I will vote to change the system, but what to?

First Past the Post is easy, but it does create constituencies where MPs win with a minority of the vote, and others where they are so dominant that it renders the voting by others to be irrelevant. Electorate boundaries are artificial constructs anyway, so FPP is far from satisfactory. Why should your vote be less valued because you are on one side of the road and not the other? It would make the National Party comfortable, but why is that a good thing?  FPP did bring Muldoon and brought decades of stagnant do nothing government.  It also brought Social Credit as the stubborn third party of weirdness.  However, FPP most of all means that a lot of people who got a minority of votes get power.  No, I'd rather not support that.

Preferential voting does away with the minority voting for a representative, and it also means every vote counts. You can choose someone who doesn’t win, but then rank your options. This has some appeal, but even at best I can’t see me ranking more than 3. Again though, it becomes a matter of electorate boundaries as to whether this works. Yet it would deal to the Epsom, Ohariu, etc problem. In Epsom, those who don’t support John Banks wouldn’t have to vote for the National candidate, but could vote for the candidate they prefer. Similarly those who would prefer the National candidate but would rank Banks second, could do so as well. Ohariu has a similar scenario. Maybe National voters would rank Peter Dunne second and keep him elected, or maybe most Ohariu voters don’t want him and would rank 1st and 2nd those who oppose him. Tauranga could have got rid of Winston Peters quicker as well. So you see, there is some appeal in this option. 

Supplementary Member is a watered down version of MMP, so on the face of it less list seats, but all this does is reduce the effect of the smaller parties. The main advantage I see is that the list seats will reflect party votes, but this wont be affected by the electorate seat wins. Electorates suddenly become important again, and it gets rid of the “win an electorate, get some party seats as well” distortion that exists now. ACT, NZ First and others would apparently need to get 3% of the party vote to get a seat, but as Parliament would be dominated by FPP seats, it would make only a small difference. 

STV gives you multiple member constituencies, but rather big ones. Some will baulk at huge constituencies, but frankly I couldn’t care less. It will make constituencies a little less partisan and parochial, but also means people can call upon multiple MPs to “help them out” (something I haven’t really understood, because I largely wouldn’t trust an MP to fix anything for anyone in a way that would appear to be neutral). It will mean that all MPs are actually accountable to voters directly. Party lists will not predetermine who gets elected, but voters will. What that really means is voters can remove them as well. STV means voters can rank candidates in preference, just like PV, or can just vote for the party’s list of candidates for a constituency. Candidates who get a majority of votes get elected, just like PV, whereas the remainder get elected based on preferences. In conclusion, I believe STV would be worth voting for. It makes all MPs people elected directly, even if from preferences, rather than MPs selected from lists developed by parties. In other words, voters can remove those they don’t like. It makes electorates important again, but greatly increases their size so that parochialism becomes less important. 

There is one test I haven’t applied. Would it get more Libertarianz candidates elected? Well actually no. I am certain FPP and PV would not help that. SM might, because the threshold for a seat would be only around 3% compared to 5% today. STV I don’t believe would make any real difference to MMP on that front. However, I believe the advantages of STV, more generically, outweigh MMP enough to make it worthwhile of some attention.

Finally, what about the concern of coalitions vs one party government? Frankly I don't care that much. One party government can achieve good or bad, coalitions can as well. What matters is who gets elected. Yes MMP and STV both give the Greens a better chance than SM, PV and FPP, but they do the same to ACT and Libertarianz. I'm not sufficiently enamoured by the two big parties to want to trust them with one party government, besides would Helen Clark have acted any differently had she not been in coalition? I doubt it. So I'm going to say vote for change and vote for STV. If you want preferences, then an honourable second choice would be PV, as it would give constituents a bigger chance to remove MPs they don't like than either MMP or FPP. I'd rank SM in third place, as a way of reducing the threshold for small parties, though it also reduces their influence. Finally, I rank FPP last. I simply don't believe returning to two party politics would help advance freedom any more.

Refurbishment

It's been six years since I started blogging, and since I've been getting older, wiser and less angry, I decided it was time for a refresh.  So I've brightened it up and gone through my links and deleted the ones that don't work and relegated those that haven't been updated for ages.  I'm going to add some new ones and new categories, since I am now almost as much British as I am Kiwi. 

oh and in the meantime, it's time to get serious about the New Zealand election, because far too many don't realise that their little chance to have their say, can be an expression of what they really think, not just a choice between two devils.

ACT should push Brash for North Shore

I've said before that ACT under Don Brash could be very promising, but policies to date have been disappointing.

However, let's look at the bizarre spectacle the whole National-ACT scene is as of late.

ACT came from the Backbone Club, a branch of the Labour Party upset that Roger Douglas had been hounded to the boondocks, and had Douglas's book "Unfinished Business" as its bible.  Douglas proposed abolishing income tax, replacing it with GST and a host of compulsory insurance policies for pensions, health care and education.

ACT didn't have a natural leader, until Richard Prebble lost his seat in 1993 to radical Alliance MP Sandra Lee.  ACT by then had started attracting National Party interest after Jim Bolger unceremoniously knifed Ruth Richardson in the back (Bolger after all, having once been an acolyte of Muldoon).  As we fast forward to 2002, John Key entered Parliament at a time when National, under Bill English, had its worse ever election result.  Less than 21% of the vote, and only 27 seats.   Don Brash also entered Parliament at that election, as a list candidate and became Opposition Finance Spokesman.   Of course, just over a year after the appalling result in 2002, Brash went on to lead the National Party, remember that?  Suddenly, National had policies to cut taxes, to remove race as a factor in government and to reduce welfare dependency.   These policies helped rescue National by boosting the vote to 39%, yet most of that swing was from minor parties - by taking some policies from ACT and NZ First (and making the Nats electable so eviscerating United Future), Brash had moved National to have some policies of principle.

Yet a series of gaffes and the media obsession with Nicky Hager's belief that Brash should have told the Exclusive Brethren not to embark on a campaign that was anti-Green Party, saw him ultimately fall on his sword.  National then backtracked on abolishing the Maori seats, and started moving to the centre, whilst ACT had been reduced to a rump under Rodney Hide.

The 2008 election saw the Nats finally get the swing needed to be the largest party, and with confidence and supply agreements with the Maori Party and ACT - created a moderate centre-right government, by and large not touching most policies Labour had implemented.   ACT had done better than expected, but being in government would take its toll.

ACT started to implode for a number of reasons.  Rodney Hide no longer seemed to be the man fighting for less government and lower taxes, but the face of mega-local government in Auckland.  David Garrett proved to be a walking embarrassment and so Hide was rolled, for Brash.

So John Key and Don Brash, once Parliamentary colleagues, both leaders of the same party, now face an election fighting for the same votes.   However, why is John Banks there?   Who knows - especially with the possibility it will be only him or him and Don Brash forming the ACT caucus after the election...

Don Brash on the campaign launch said there were nine policy areas ACT is looking to work on, but does this look any better?

- Pass Spending Cap (People’s Veto) Bill and Regulatory Standards Bill - This would ensure government spending doesn't rise faster than GDP (and indeed would be slower) and help stymy growth in regulation.  Far better than nothing.
- Reduce government spending relative to the size of the economy to enable radical tax reduction, and a lower exchange rate - The simple point that National is spending more than Labour as a proportion of GDP should cause many National voters to think twice about ticking National for the Party vote.   Brash is suggesting company tax reduced to 12.5% and the top income tax rate to 25%.   Both would make a worthwhile difference to the economy.
- Radically reduce bureaucracy - Brash suggests radical reform to the RMA and Local Government Act, whereas National tinkered with the RMA and the Local Government Act wasn't touched.  He also mentioned amending the Bill of Rights Act to include private property rights "possibly".  Not really enough of a commitment for the Nats to care.
- End ETS - New Zealand rightfully shouldn't cripple itself to save the world, when so many others refuse to do so.   
- Give parents effective control over their children’s education - Bulk funding in effect, with more autonomy for state schools.   Still ridiculously limp wristed compared to Ruth Richardson's 1987 National election policy for education, which was essentially replicating Sweden's successful experiment in vouchers.   Let anyone set up a school and let parents take their taxes back and pay for that school.
-  Promote a multi-party consensus on changes to New Zealand Superannuation - The worst thing about a consensus is that the strongest thing that can usually be agreed is fairly weak.   This is virtually worthless, whereas while I did not agree with compulsory superannuation, it had the merit of granting property rights in a retirement income - something that doesn't exist now, and particularly disadvantages the heirs of those who die before retirement.
- Promote a safer, more secure, society - Supporting the right to self defence is important, and so should be seen as a positive move.
- Push for equal legal status for all New Zealanders, irrespective of race  - Enough said, it should be obvious, except of course to the Greens and Maori Party, who think this is racist.
- Re-establish a constructive relationship with Fiji - Sorry?  No.  This obvious pander to the local Fijian vote is absurd.

Yet while that looks mixed, Brash comes out with gems like this rural policy announcement saying "ACT will overhaul the RMA and reinstate the right for property owners to use their land as they see fit, subject to respecting the rights of others. "  Beautiful stuff for those of us who believe in property rights, but is it a case of the policy being right when Lindsay Perigo is drafting the press releases?

For me ACT should keep things simple. 

It should be about property rights - which means not only the RMA, but about businesses doing as they see fit, about lower taxes and about the right to self defence.

It should be about moving public services into the hands of consumers and suppliers.  So that people can take their taxpayer funding of education to new schools and educational institutions set up freely.  The same with healthcare and pensions.

It should be about personal rights.  That means property rights, but also recognising that people should feel free to live their lives as they see fit,  and that less government promotes more personal responsibility.  It also means treating laws on personal matters, like drug use, tobacco and alcohol, as being up to adults.   ACT should, at least, support medicinal use of cannabis, and taking a radical look at drug laws and whether they are working.

Finally it should be one law for all.  That does not mean denying people national identity, or acknowledging Maori as indigenous people, but it does mean the state is colourblind. 

ACT is relying on John Banks, a man who I don't believe has any real belief in any of those concepts.   It should rely on Don Brash.

Don Brash is standing in North Shore, against no other than Maggie Barry.   It doesn't take two seconds to figure out which of those two is the one with intellect and the one to be more effective for North Shore. 

ACT should be pushing Brash for North Shore.  With Wayne Mapp's retirement, North Shore would be far better represented by a man who would be Party Leader and also be elected in his own right as an MP - by Don Brash.

Then ACT wouldn't be relying on John Banks.

Forget nine points, stick to four:
- It's your life
- It's your property
- One law for all
- Services for the public, not the public service.

and Brash for North Shore. 

It's too late to remove Banks and it would look awful to do so at this stage, but the show should be the Don Brash show.   Besides, does New Zealand need someone in Parliament whose main contribution in recent years has been to warm the hearts of pensioners who like gardening?

The failings of unconstrained liberal democracy

There is literally no excuse for newspapers and news broadcasters not to be filled to the brim with substantive global news.  However, as there is always trivia about celebrities, sports and the fetish for disaster porn, these will always come first, yet 2011 is becoming one of those years that may go down in history as marking a turning point.   It is a time when critical decisions are needed by elected politicians, most of whom are not really up to the job.   The difficulty comes from the nature of liberal democracy.

It takes a certain type of person to stand for elected office.  At best they are well educated, have benign intent (in their eyes), are willing to take advice, and will carefully weigh up the options before choosing policies that appear to generate more good than harm.   In fact, that's what voters by and large expect.

What people get is something else.  Despite the ravings of tabloid media and talkback radio, political office in and of itself doesn't pay well for the hours that politicians are expected to put in.  That is, if you're professional or entrepreneurial.  However, if you're Georgina Beyer, Ken Livingstone, Alamein Kopu, George Osborne, Jack Elder, Diane Abbott, Danny Alexander or Jami-Lee Ross (yes go read up on them to see what genius is behind them), then this is the pinnacle.  You're unlikely to be earning that much doing anything else.  If you want more, you need to be at best planning your future career (consider Simon Power), or to be corrupt.

Your first and biggest concern as a politician is getting elected, which means telling people what you think they want to hear.  It is an exercise in marketing, and to be fair most voters are either loyal customers of a single party (and so uninterested in results, but act tribally), or make the decision based on hunches and feelings, or single policies that tap their emotions.   The number of voters who thing of the long term, and use any combination of economic or scientific analysis (even flawed) to decide who to vote for is insignificant, and engaging with those who do, one on one, is a waste of any politician's time.   Avoiding conflict and avoiding difficult decisions is what they do, because to do so means upsetting people, and those are people you need for support.  

The Eurozone crisis is entirely because of that factor.  Politicians in Greece, Italy, Spain, Portugal and other European countries promised voters a lot of "free" things, whether it be healthcare, education, pensions, welfare, housing, or at least lots of cheap things.  They offered more, year in year out, they promised more, spent more money, didn't ask for it in taxes, and simply borrowed.  There were banks that were willing to loan because it was governments borrowing - Eurozone governments - the risk was perceived to be minimal, so they ignored it.

The politicians offered something for nothing, the voters took it and the bankers loaned to the politicians, in a cycle of delusion that is now breaking apart - because the bankers have finally figured it out.

It isn't confined to the Eurozone either.  The US is finally facing the same hiccup, the UK became close to it, all because for year in year out, governments overspent.

Some on the left will glibly blame it all on "capitalism" and "the banks".   Uncontrolled growth in government spending is about as capitalist as Che Guevara.  The blame banks get is for lending to governments in the first place, although you can be sure if they did not, that they'd be blamed for being "obstructive" and not "socially minded", although there are quite a few countries that find it difficult to borrow on international markets.

Certainly the bank bailouts tipped many government finances over the edge in terms of sheer debt load, particularly Ireland.   However, the counter-factual is rarely argued.  If banks were not bailed out, and they were allowed to collapse, and people faced their businesses, properties and deposits being lost, then would that have been preferable?  I'd argue that yes, there should have been a process for the orderly collapse of banks.  However, neither Bush nor Obama, nor Brown, nor Sarkozy nor Merkel, wanted to contemplate that.   

The arguments about debt claim it is all about the banks, but a cursory look at public debt before the financial crisis shows that is simply untrue.  Greece, Italy, the UK and the United States all had growing public debt burdens, the bank bailouts made it worse, but had the public finances for any of those countries been in a far better state - the current crisis would simply not exist.

So now there is the spectre of Western European governments asking a one-party state - the People's Republic of China - to "invest" in lending to their spendthrift governments.   The idea that the Communist Party of China (which, by the way, runs an economy that has a smaller state sector than most Western countries) will take lessons or instructions that suggest liberal democracy has anything to teach it, is laughable.

The one lesson unconstrained liberal democracy is teaching the rest of the world is that in democracies voters are short term thinkers, politicians are driven by popularity and placating whatever rent seekers are the loudest - and the result is the same as if you had a teenager with a credit card seeking to be popular with his or her friends. 

In other words, Europe and the United States are telling the dictatorships in China, Russia, the Middle East, Asia and Africa that their way, is the path to economic ruin. 

Even those who were elected on the basis of dealing with this are largely impotent for they face the opposition from the rent seekers who benefit from the borrowing state.   The Tea Party Republicans in the US who were voted in on a platform of smaller government and less tax, are finding it rather difficult to cut spending.

The political landscape of liberal democracies has evolved to be dominated by the middle ground, that which Tony Blair called "the third way", or which Bill Clinton embraced.  It is naturally "conservative" in that it isn't dominated by radical reform, but is fundamentally corporatist.  It tinkers with the free market, meddles with business, regulates and taxes and tries to manipulate the economy, whilst maintaining a dominant public sector role in areas such as education, health and retirement incomes.  It is neither old left, nor free market "right".   It did require economic growth to keep tax revenues up to sustain budget deficits, and for the Eurozone, for cheap credit to remain on tap, forever.  The brief interlude of budget surpluses in the US in the late 1990s were quickly eaten up by the post 9/11 hit to economic growth, and then devoured as Bush spent up on wars, and everything else as well!

The problem with this model is that it was incapable of responding to the financial crisis, which it begat because at the heart of this model was belief that centrally managed fiat banking could deal to "boom and bust", and because in the US the tinkering was on a grand scale with Fannie Mae and Freddie Mac as the state owned mortgage guarantor, whilst banks were required to lend to those who would not otherwise be able to borrow.   When this corporatist approach unwound because of the property bubble IT begat, and banks faced collapse, the "middle way" suddenly bolted to the left.  Bureaucrats and politicians decided doing something was necessary, so they printed and borrowed. 

The choice was to be Keynesian - or not.  To be Keynesian, was to spend borrowed money and print some more, in the hope it could generate economic growth.  The problem was that public debt in a few countries looked so large, that banks, who had been warned about being profligate (and faced considerable new rules on the amount of leverage they could have), could see enormous risk, particularly in parts of the Eurozone, but also the US and the UK.

Now in the Eurozone reality is hitting home.  The Greek government needs to either cut spending by around 20%, or hike taxes by the same amount or some combination of either to avoid a crisis.  It is unable to do so, because Greek taxpayers are fed up.  Half of them are rent seekers who have been enjoying bank subsidised jobs and benefits, the rest are tax avoiders who don't want to pay for the rent seekers.  Italy is little different.  The German government faces telling German taxpayers to pay more because the Greeks and Italians have been living on borrowed money and they wont pay it back.

There no longer is a middle way.   Either governments live within their means, cutting back or raising taxes, or other governments bail them out.

It is either less government, more free markets and more of people paying for what they use.

Or it is more government, more transfers from those who are productive (in this case Germans, but also Austrians, as well as Dutch, Finnish and French people), to those who are not. 

Merkel and Sarkozy are looking for a middle way, of the banks that loaned to Greece and Italy taking a big hit, of Greek and Italian taxpayers getting less for more, and for German and French taxpayers to save their own banks.  Yet even this wont wash.  Obama also can't find a middle way, because he can't convince enough Americans to pay more tax, while he is unwilling to cut spending on anywhere remotely near the scale he needs to.

For the period from 1989 to 2011, it could reasonably be argued that mixed economy liberal democracies had "won" the battle of ideas, both in terms of economics, but also socially.   The moral and economic bankruptcy of "actually existing socialism" was obvious,  China and Vietnam already knew the economic bankruptcy of it and had started to change.   The moral dimension of freedom vs. dictatorship had won, at the time.  However, since then, it has been challenged.

Russia has seen some measure of economic success, coinciding with authoritarianism, as it has ridden on a wave of community price booms for energy.  China has gone from strength to strength to be the second largest economy in the world.  Meanwhile, Western Europe has been sclerotic, and the US, following the bubble of productivity and innovation arising from IT and telecommunications, is looking like it did in the 1970s - morose and stagnant.

The trend towards more personal freedom continues.  The Arab Spring is, in one part, about that, as people throw off the shackles of dictatorships, although whether they elect their new shackles is a moot point.  China too, is experiencing freedom of speech and debate unseen in over 60 years, although there are still lines that are dangerous for citizens to cross.

However, on economics, mixed "third way" economies are now seen to be wanting.   It is, in part, due to fiat banking (the inflationary bubble created by printing money is only starting now to apper), but is moreso due to politicians being incapable of being fiscally prudent.   In the US the debate is becoming one about whether Americans want a smaller government, with lower taxes, but less benefits/subsidies, or a bigger government, with higher taxes (for a few), more like Europe.  At least there, the debate is being opened up.  In Europe, the debate is yet to be entered into, but the far-left and far-right are starting to sound off where they want it to be.  The far left want to squeeze business and run big governments, the far-right want to reassert national sovereignty and not pay for bankrupt foreign economies.

The centre is floundering about wanting a "solution", but given their philosophical base is neither to increase taxes, nor dramatically shrink the state - they have no clear answer to fiscal profligacy.  Their bumbling attempt to discuss a financial transactions' tax being inept, and largely pandering to the far-left desire for blood, theft and destruction of the financial sector.

You see, it comes down to politicians.  Most do not understand economics, let alone finance.  A TV journalist some months ago asked a cross section of UK MPs what the difference is between the deficit and debt, and many had no clue.  Why would anyone trust any of them to spend your money or borrow in your name?

They do not know what they are doing, and the voters do not understand what is going on, and will vote based on short term imperatives rather than long term ones.

In other words, liberal democracies can't find an answer because they are inherently incapable of making difficult decisions that must be made.

In this climate, is it any wonder that China is looking on to see the eclipse of the West and the slow withdrawal of Pax Americana from the world, as Obama withdraws from Iraq, seeks withdrawal from Afghanistan, plays a back seat role in Libya, and seems ready to leave the world to others, whilst seeking to follow the European example on economics.

The only way this will be confronted is if voters decide they will no longer expect politicians to deliver them answers, but that government should stick to what it is good at, and do less, and tax less.

The alternative is what the "Occupy" lot incoherently seem to want, which is more government, more taxes on those they don't like, to confiscate property and bugger the consequences.

You see the approach being taken now, of spending a little less and taxing a little more, doesn't deliver an environment for economic growth and more jobs, nor does it meet the demands for blood and money that the far-left are bullying for, because it maintains the corporatist state - that borrows and taxes to give privilege to some.

Meanwhile, figure out for yourself who represents what view in the New Zealand elections and in mainstream politics everywhere else.  Good luck at finding those who aren't of the middle ground or the grow the government mob, or indeed journalists who can understand it at all.