The name of Kelsey’s book refers to an acronym for economies primarily based around “finance, insurance and real estate”.
### ODT Online Thu, 10 Sep 2015 Foretelling end of neoliberalism
By Carla Green
Legal scholar Jane Kelsey has described the “morbid symptoms” of neoliberalism’s impending downfall. The University of Auckland law professor was speaking during the presentation of her new book, The Fire Economy, in Dunedin this week. Read more
Image via Idealog.co.nz
Bridget Williams Books (promotion + sales)
The FIRE Economy: New Zealand’s Reckoning
The FIRE economy – built on finance, insurance and real estate – is now the world’s principal source of wealth creation. Its rise has transformed our political, economic and social landscapes, supported by a neoliberal regime that celebrates markets, profit and risk. From rising inequality and ballooning household debt to a global financial crisis and fiscal austerity, the neoliberal ‘orthodoxy’ has brought instability and empowered the few. Yet it remains remarkably resilient, even resurgent, in New Zealand and abroad.
In 1995 Jane Kelsey set out a groundbreaking account of the neoliberal revolution in The New Zealand Experiment. Now she marshals an exceptional range of evidence to show how this transfer of wealth and power has been systematically embedded over three decades.
Today organisations and commentators once at the vanguard of neoliberal reform, including the IMF and Financial Times journalist Martin Wolf, are warning the current model is unsustainable. A post-neoliberal era beckons. In The FIRE Economy Kelsey identifies the risks posed by FIRE and the barriers embedded neoliberalism presents to a progressive, post-neoliberal transformation – and urges us to act. This is a book New Zealand cannot afford to ignore. BWB Link + Book Preview
Fri, 17 Jul 2015, 4:30 pm The FIRE Economy: New Zealand’s Reckoning – By Jane Kelsey
Opinion: Professor Jane Kelsey Introduction – An Extract
The global economy imploded in 2008 and confirmed a stark reality. Entire nations and billions of people are captives of an unstable and amoral economic system powered by finance, insurance and real estate – FIRE. New Zealand included.
‘The FIRE economy’ is a metaphor for the fundamental shift in global capitalism since the 1970s. Finance has replaced industry as the driver of wealth creation in affluent countries – a transformation known as financialisation. Neoliberal ideology, rules and institutions acted first as the midwife and then as the guardian of this new economic order.
The Global Financial Crisis (GFC) showed the world’s richest countries, notably the US and the nations of Europe, that the globally integrated economy they had created, and from which they have prospered, could also bring them to their knees. Faith in the neoliberal ‘orthodoxy’ that shaped and sustained them seemed shattered. The fallout was fast and furious, and quickly spread to many other parts of the world.
A cursory look might suggest that little has really changed. Neoliberalism remains deeply embedded in most countries. The finance industry is resurgent and those who profit from it are unrepentant. Conservative parties with pro-market and pro-austerity mandates have been elected to govern some of the countries hardest hit.
Appearances are, however, deceptive. Confidence in the FIRE economy has faltered since the GFC and the hegemony of the neoliberal model is in decline. Core tenets of neoliberal ideology are being repudiated, even in institutions like the International Monetary Fund (IMF). Social inequality and poverty in and between countries are now recognised as symptoms of a sick system. Popular unrest in Europe has intensified, and new political parties from neo-Nazi fascists to the socialist left have gained ground. There are credible predictions of further crises.
The United Nations Conference for Trade and Development (UNCTAD) warned in its flagship Trade and Development report for 2014, six years after the GFC erupted, that the ‘world economy has not yet escaped the growth doldrums in which it has been marooned for the past four years, and there is a growing danger that this state of affairs is becoming accepted as the “new normal”’. That ‘new normal’ is not sustainable.
The world is entering a period of transformation equivalent to the epochal shift to Keynesian interventionism from the 1930s and the neoliberal revolution from the late 1970s. We are in the interregnum. The old orthodoxy is unstable and fragile; a new one has yet to be born. It remains to be seen how this plays out, how much resistance it will encounter, and whether alternative approaches can really break through the barriers designed to protect neoliberalism and the FIRE economy from just such a transformation.
While the GFC has plunged rich countries like the US and England and later Spain and Greece into turmoil, New Zealand seems to be basking in the belief that it has survived the crisis pretty much unscathed. The standard Kiwi narrative treats it as a northern hemisphere affair, triggered by greedy American bankers and profligate European governments. The story goes something like this.
In today’s globalised world there was bound to be some collateral damage from other countries’ post-crisis recessions, but our financial system was shown to be basically sound (mainly because the Australian banks that own ours are sound). Governments on both sides of the Tasman responded promptly and effectively. Temporary interventions provided fiscal stimulus and bank guarantees steadied the ship, staving off a more serious recession. Stability was restored. Each country then resumed business as usual, regardless of their governments’ political hue. Helped by exports to China, future prospects looked positive, even rosy. Exuberant commentators went so far as to hail New Zealand as the ‘rock star’ economy of 2014. The strong centre-right vote at the 2014 election suggested confidence in the status quo or, at least, that the belief in TINA – there is no alternative – still prevails.
Before the 2008 election, as the GFC began to erupt, business journalist Bob Edlin observed how the country’s leaders seemed ‘curiously phlegmatic about global financial upheaval and its economic implications’. Their offerings ‘amounted to little more than tweaks of programmes that have brought us to where we are – a standstill’. No one was ‘peddling a cyclone-shelter or rebuilding programme’. Nothing has changed since then.
Couldn’t happen here?
This complacency is deeply disturbing. Neoliberalism has not served most New Zealanders well. Nor, in other than a hedonistic sense, has financialisation. Structural poverty and deep inequalities of wealth and income have transformed the social landscape. We have a shallow economy that depends on FIRE, farming, post-earthquake reconstruction and immigration. Periods of sustained economic growth in the 2000s have been fuelled by cheap credit. As a consequence, households, farmers and the country sit on a growing mountain of debt. Trading in property has become the main source of easy wealth, creating repeated incipient property bubbles. We have most of the preconditions that have been identified as triggers for a crisis.
A former Reserve Bank of Australia governor, Ian Macfarlane, is under no illusion there will be further crises. In 2008 he pointed to at least eight financial crises that impacted on Australia – and hence New Zealand – in the three decades before the GFC. Five were banking crises, and three involved excessive and risky lending in the property sector. Some affected New Zealand much more severely than the GFC. However, it was the depth and contagion of the latest crisis that Macfarlane says made it the most significant internationally and invalidated the model of the deregulated financial system.
New Zealand is much more at risk than Australia because successive Labour and National governments have located this country at the pure end of the neoliberal spectrum. For years it was known as the Wild West of financial markets. Adjustments during the 2000s were still premised on light-handed risk-tolerant regulation. Even since the GFC, governments and their advisers have continued to position New Zealand as an outlier, ignoring doubts in other countries and international institutions over the wisdom of letting financial markets rule.
Without some fundamental changes, New Zealand risks sleepwalking into a social, economic and political catastrophe. No one knows how or when that might happen. The tipping point could be another massive offshore crisis. Or it could be self-generated, as it was in Iceland and Ireland, if we fail to heed the warning signs. There is much to learn from Iceland’s successful post-crisis strategy of intervention, redistribution and capital controls, and from the tragedy of austerity economics in Greece, Spain and Ireland.
Time to act
Waiting for Armageddon is hardly a progressive strategy. It makes much more sense for New Zealanders to confront the country’s challenges now and begin to shape a socially progressive alternative than to battle over models in the midst of a crisis. While it is true New Zealand’s fate will inevitably be caught up in the unfolding of international events, Kiwis can influence how those global dynamics shape our future. Read more