Tuesday, 2 April 2013

The Paradox Of The Free Market

Non-Market Player: A Greenpeace protester position's himself in the path of the Orient Explorer as part of the ultimately successful campaign to drive deep-sea oil prospector, Petrobras, out of the Raukumara Basin. The National Government now proposes to make such protests illegal. It is the great paradox of "free" markets that they require an ever-stronger state to keep them functioning.

AT THE HEART of the so-called “free market” is a puzzling paradox.
Around the world, the justification for implementing free market policies was said to be the damaging effects of state intervention on economic performance. In his inaugural address, that arch free-marketeer, President Ronald Reagan, warned his fellow Americans that “Government isn’t the solution … Government is the problem.”
For prosperity to be guaranteed, argued the free marketeers, the power of the state must be curtailed, and its interfering hands forcefully removed from the economic levers.
The paradox of the free market lies in the political implications of those two words: “curtailed” and “forcefully”.
To prevent non-market players from intervening in the economic life of society and increase the scope and freedom of market forces, the power of the state must not, under any circumstances, be “curtailed”. Quite the opposite, in fact: to protect the operations of the free market, the capacity of the State to act “forcefully” must be increased.
The latest proof of the free-market paradox comes in the form of an announcement from Energy and Resources Minister, Simon Bridges.
In his media statement of 31 March, Mr Bridges states:
“The Government is proposing stronger measures to protect offshore petroleum and minerals activity from unlawful interference”.
In a Supplementary Order Paper to the Crown Minerals (Permitting and Crown Land) Bill the Cabinet has provided for a firming up of the protection available to “lawful offshore petroleum and minerals activity”. The SOP, to be tabled in Parliament, also gives new enforcement powers to police and defence force personnel.
Explaining the Government’s decision, Mr Bridges points to recent attempts to “seriously disrupt lawful mining and related activities”. Such actions, says the Minister, “impose significant costs on companies carrying out legitimate activities under permits, and present very serious health hazards and safety risks”.
Those “recent activities” no doubt refer to the successful 2012 campaign by Greenpeace and a local Maori organisation, Te Whanau a Apanui, to disrupt and dissuade the giant, state-owned Brazilian energy company, Petrobras, from continuing its deep-sea oil prospecting in the Raukumara Basin off East Cape.
The most effective protest action of the Greenpeace/ Te Whanau a Apanui Campaign involved a small flotilla of seven boats sailing into Petrobras’s prospecting zone and taking up positions around its large survey vessel, the Orient Explorer.
When a local Maori fisherman, Elvis Teddy, steered his own vessel, the San Pietro, across the Orient Explorer’s path, dropping buoys and long-lines, the National-led Government authorised the Police and New Zealand Defence Force naval units to move in and arrest him.
Powerful Combination: Elvis Teddy's San Pietro sails towards its confrontation with the Orient Explorer. The pairing of Greenpeace and Te Whanau a Apanui proved to be a winning political formula in the campaign against deep-sea oil prospecting off East Cape.
To the Government’s dismay, the charges against Mr Teddy were later dropped. The Court declined jurisdiction because the protest action took place outside New Zealand’s twelve nautical miles territorial limit.
Earlier this year, on 13 January, Petrobras announced it was pulling out of New Zealand.
Minister Bridges “stronger measures” are designed to prevent any further protest interventions along the lines of those developed by Greenpeace/ Te Whanau A Apanui.
“The changes address a gap in the current legislation. They provide an effective deterrent, and readily workable operational powers, to act against unlawful interference with legitimate exploration and production activities.” Mr Bridges stated.
Future protest groups face jail sentences and massive fines if they violate a “notified minimum non-interference distance” of up to 500 metres.
What just happened here?
The National-led Government is keen to develop energy potential of the Raukumara Basin. Accordingly, it invites large multinational energy companies to acquire the necessary permits and begin prospecting.
Greenpeace, in alliance with Te Whanau a Apanui, oppose deep-sea oil drilling as an unacceptable threat to both the kai moana of local whanau and hapu, and the acutely vulnerable deep sea environment. They point to the devastating Deepwater Horizon disaster which spilled billions of litres of crude oil into the Gulf of Mexico.
Now, consider the State’s role in this classic stand-off.
From the outset it has given preference to market over non-market interests. In spite of the fact that New Zealand lacks both the technology and the financial resources to adequately respond to a deep-sea drilling malfunction on the scale of the Deepwater Horizon spill, it promotes and facilitates deep-sea prospecting in the Raukumara Basin.
Thwarted by the Court’s refusal to punish the behaviour of the protest flotilla, the National-led Government sets about equipping the State with new, quite draconian, powers to protect any future oil-prospecting multinational corporations from the physical obstruction (and attendant publicity) of Greenpeace’s “Stop Deep Sea Oil” protest campaign.
It will soon be perfectly lawful to deploy the New Zealand armed forces to protect and defend not the victims of war or natural disaster, but vast, privately-owned corporations whose profit-seeking activities threaten both the New Zealand environment and economy.
Whose freedom is the Government protecting here? The market’s, or our own?
This essay was originally published in The Press of Tuesday, 2 April 2013.


David said...

This should be ringing alarm bells right around the country. The fact that it isn't, doesn't make it any less real in its implications. Essentially it is turning the Government and its resources into a force for oppression of the population, or at least that part of it that doesn't agree with what it is doing.

sean fliegner said...

looking forward to labour 1.fighting this thuggery all the way and 2.undertaking to repeal this bad law on being elected.

also looking forward to the maori party doing the right thing for once and refusing to back this toxic law

yeah right !!

Anonymous said...

The protestors certainly don't speak for me and I doubt if I'm alone in that.

Maybe oil isn't the answer but NZ needs to do SOMETHING to lift it's economic game, otherwise people are going to continue voting with their feet as they see no future here anymore.

The social democratic state (which I'm in favour of, for the record) dosen't pay for itself, it needs a tax base, which requires a productive, growing economy. The most effective way to have one of those is to actually allow businesses to function with a minimum of interference.

Anonymous said...

You might want to read The General Theory of Second Best, Chris. A wholesale demolition of he central FM claim that seems to have been ignored for 50 years. One writer regards it as the best piece of ammunition the left have, and they've never used it.

Davo said...

@Anon 1.47pm

Yes, we do need to improve our economic game but is this the way? What concerns me is the move toward an Army backed dictatorship, Burma anyone? To use our Navy for Police purposes is a dark road to take.

We need to be adding value to our produce not shipping raw logs or milk powder to other countries.

Labour (Gnatlite) won't do anything but whine about this issue and John 'The Gambler' Key will just leave NZ when his actions are finished, after all he is a US Citizen.

We need it improve our manufacturing sector again, not competing with China but doing something similar as Germany. Targetting the upper end of manufactured goods.

OneTrack said...

I am getting pretty tired of "protestors" interfering with people lawfully going about their work. The last straw for me was the nutbars who threw away over a million tax payer dollars by slashing the dome cover at Waihopai. We bitch and moan about poverty and those rtards just throw money away like that. And what did they achieve - yes they made a strike against the evil satan headed by Barack Obama. Opps. The protesting around the Petrobas surveyors was in a similar light. Too bad if the rest of the country wanted the wealth that would come from a find. No, these guys were just going to do their best to screw things up. They probably felt like they were reliving their youth. High five. And hen back home to pick up thier dole payment.

Protesting fine. But do it outside Parliament on the lawn. Write to the newspaper. Just dont put other peoples lives in danger with your puerile hubris that you know best and screw everybody else, including the democratically elected government of New Zealand.

Davo said...


Spoken like a true blue Conservative! People are allowed to protest as long as their protest doesn't affect you.

Chris is quite right, for a Free Market to function it needs further and deeper regulations to control society. New draconian powers of search and seizure for the Police. Our Navy becoming the Police in our territorial waters etc.

Could some-one tell me just how the sale of the Maui oilfields benefited NZ? The amount that the Govt. gets in royalities is just a pittance compared with the amount of profit Shell gets from the field.

Deep water drilling is fraught with dangers that we, as a country, can not cope with. we simply don't have the resources to do so. Even a small leak would have disasterous consequences for our fishing industry.

I have no problem with people's legitmate right to protest something they fell strongly about. It was the protests back in the 80's that eventually caused the apartied Govt. of Sth Africa to become more democratic, yet the cost to our taxpayers here3 was enormous. we need to look past the cost and see the ultimate benefit to the country or the world.

Mark Hubbard said...

Chris I've written a rebuttal to this post, that has ended up too big to put under comments, thus, and apologies if you think this link-spamming (personally I think that notion of the Internet is to not understand the Internet), I have posted to my own blog:

Premise Checking Chris Trotter: Mining, Protest, Indigenous Rights, Externalities, Free Markets

Read if you wish.

Anonymous said...

What a handy little law this could be! The Government could use it to stop people protesting whaling! Whales have minerals in them, right? And the Japanese are conducting legitimate whaling for scientific purposes, right? One of those scientific purposes could be to investigate whether the minerals in whales are worth mining! Yeah! I'm joking!I need something to cheer me up! This Government is depressing me no end!!

Chris Trotter said...

I must say, Mark, I'm tempted to rebut your rebuttal, but experience has taught me there is nothing to be gained by doing so.

Those who believe as you do are simply not available to the sort of debate that takes as its starting point the reality of events in historical time and their continuing influence on the present and future.

This sort of debate assumes an opponent who exists in the same historical time-frame, and who is subject to the same physical laws as myself.

Which you do and are, of course, but, mysteriously, you don't think you do.

Yours is a strange Platonic sort of universe: a world of ideal concepts and forms - which simply doesn't respond to the logic of the gritty old world the rest of us inhabit - down here on Planet Earth.

So, I'll just say that I enjoyed your posting. It is, I reckon, a little masterpiece of its kind.

But, in terms of having a discussion about what really happens - or is likely to happen (out there on the high seas, for example) - there really isn't anything to get to grips with.

Like Plato's ideal chair, it looks very sturdy in my mind's eye, but, unfortunately, when I try it sit down on it there's simply nothing there.

Anonymous said...

My goodness....I'd forgotten just how utterly pompous and needlessly verbose libertarian bloggers can be.

Oh, who am I kidding? They're ALWAYS like that.

Atually reading another one of them was surprisingly surreal. The cultlike, and chillingly clinical detachment from any concept of how states or societies actually function in practice is jarring to say the least.

Mark Hubbard said...

Well you did better out of this than I did Chris. All I've got from here to my blog is some spammer selling small goods for pets, and two individuals who are incapable of anything by ad hom.

Yes, we have different world views. The debate on which is 'reality' is interesting, but that's not to beg the principles involved either.

I'll take the peaceful, free, non-coerced society, and remain debating for that.

Anyone else coming to my blog, I'll debate content under the wine is over, but leave the ad hom: you're wasting both of our times. Chris would probably agree with that also.

Cheers Chris

Mark Hubbard said...

I've got this theory that once everyone posts under their own identity, not anonymously, that is, owns their thoughts (self-responsibility), my 'utopia' woud be possible.

Anonymous said...

It really boggles the mind how anyone can expound libertarianism.

It is totally amoral and would lead to the complete unraveling of society if any political movement was stupid enough to try and force it on society.

It is totally against all hitherto (hehe)existing major value systems right down the line and you'd have to be philosophically illiterate to claim otherwise.

This is what I wrote on the blog:

Orwell would have spat at the society you advocate, Mark.

Libertarianism is the same as Stalinism. Both (need to) decimate the democratic will of the people and the tough and nasty rise to the top.

How can you have powerful corporations free to promote what they will AND a republic severely limited in it's mandate. Those two poles of power existing without cronyist interaction between the two? That is unrealistic thinking on common human behaviour.

The saving grace is that no one would vote for your society. The only people of any significance who favour such things are angry businessmen and they would depend upon Orwellian methods to enforce such tyranny on the rest of us.

Mark Hubbard said...

As if there's not enough butts already in this thread, I've also rebutted every point made by Andrew Mahon above in the comments on my thread (link in my first post above), including the ludicrous, nay, offensive, parallel he draws between libertarianism and Stalinism. Better to be utopian than stupid, Andrew.

Chris Trotter said...

Please post your comments here, Mark.

The whole point is to debate with the readers of Bowalley Road on Bowalley Road.

And that means keeping them reasonably pithy - no long rambles or libertarian dissertations!

Davo said...

I read through your post Mr. Hubbard and I responded thoughtfully without any ad hom. as you put it.

What you are describing is a Platonic Utopia that simply can not work in a real world. Out here it is literally "Dog eat Dog" not a society where everyone is nice, gentle and oh so honest.

As Chris so eloquently put above, a 'Free Market' society has to have rules to govern behaviour. Without those rules society would become un-governable.

Yiour post, whilst well written is long on rhetoric but very short on substance.

And I post under my own name too.

Anonymous said...

Come over here, we welcome your investment and exploration.You can rest assured we have taken steps to ensure your exploration and its investment shall be free of protest and interference.

Totalitarian governence or what.

Mark Hubbard said...

Davo, you can call me Mark. This Mr Hubbard, in context, is the closed fist way of relating with people which will end you in that dog eat dog world you speak of. My world is not that, my friends are kind, honest people. Perhaps you need to reassess how you interact with people, and whom you choose to do so with?

Your comments on my blog were, from memory - addled a little by wine, as I'm on holiday - without ad hom, well, basically, and I answered all your points in the spirit of entente. Thanks for taking the time to post.

And note the libertarian society has rules, the rule of law, which, unlike in our social(alist) democracies, the government, itself, is bound by. If you watched the news tonight, or care to read the Tax Administration Act, you'll find that for a long time our governments operate arbitrarily above the rule of law.

Thank you for your complements on my well written blog; if you were to read my entire blog, you would find an abundance of substance.

Just to pull you up on one point; posting under 'Davo' is not posting from your identity.

Go gently into the night. .. Oh look, Mrs H is walking over with a bottle of Oyster Bay Sauv. Lovely.

Anonymous said...

Mark. Libertarianism is a dogmatist's ethic. It attempts to force upon people a peculiar conception of rights and human agency by dogmatically assuming that they are real. For example, while human societies generally have rules about who has use rights over things, they don't have to look like western property rights and frequently don't. Trying to reduce them to western property rights is somewhat barmy.

David Graeber's "Debt" is a thorough trashing of the view that the capitalist mode of exchange is natural or normal.

All that Libertarians do is insist on starting points that favour their own pet causes. It's neither honest nor very clever.

Oh, and people who understand philosophy do not take Ayn Rand seriously as a philosopher. Stick to Nozick or someone with brains.

Anonymous said...

Oh, and you don't understand Keynes either.

Davo said...

Bryan Gould put an excellent post on his blog about the world economy and how it works now.


Worth a good read and it explains what is going on out there.

Davo Stevens said...

Mark; thank you for your response and also for allowing me to refer to you by your first name. I was brought up to be respectful to all even those with whom I disagree.
I referred to your post as "Utopian" because that is precisely what it is. Unfortunately we all live in a real world where "Utopia" is just a state of mind and bears no relationship with our real lives.'
For an analogy think of driving down a motorway where there are no road rules. According to your ideas everyone would be kind, gentle and give way whenever it was necessary, people would slow down when conditions are bad, and everyone would behave in a considerate manner. Sadly people are not like that and it would be chaos. Would you or I survive long on such a motorway? I think not!
Mark, we are all a product of where we slot into society and and we tend to look at the world through that aspect.

One thing we can agree on is Oyster Bay Sauv, a great drop and so is Mud House Pinot Noir.

Anonymous said...


Robert M said...

I would agree with John Howard, Australia's greatest, fairest and libertarian PM and obviouly loathed by Fran O'Sullivan. Not to extract the coal and oil and gas is lunacy. Reagan would have ordered the coal train that Francis Mounter lay down before for the ridiculous 'save the snails' marxist group- to run them over and chop off their legs. An he did.
Reagan's message was an even more literal interpretation of Hayek than Thatcher made. Watch Reagans 1964 speeches on youtube and you will understand the core of Reagans message is a recognition that the key to a sustainable state is a massive reduction of the social worker police state and a downsizing of the leftist public health system.
Surprisingly but correctly, Reagan and Enoch Powell identified psychiatry as the chief enemy of freedom. Enoch Powell's notorious speech attacking immigration in 1969 actually used phases which he first used in all out attack on British psychiatry and the NHS when he said he would make a funeral pyre of ever mental asylum of the nation.
While the Californian and Washington bureacrats were prepared to support Reagans desire to close every state mental hospital in the US the success of Reagans social revolution and economic stability was blunted from the start because the massive cuts ot social work programmes and public health were not supported by the US Health and Welfare depts.
Therefore with a too large state, Reagan could only stimulate the ecoonomy with tax cuts and military and fighter aircraft programme.
The truth is the current medical profession and hospital systems make little contribution to public health and happiness and are the core public weakness.
However where I would agree with you, Chris is that most industrial, farming and cultural activities in a small poor nation like NZ require a large mix of government support and infrastructure support to succed and the Act Party are ignorant nuts in every area.
In no area is this more true than coal mining where a worthile solid energy programme exporting a viable amount of 20 million tons of coal a year less than a fifth of Queensland coal exports- would have required over the last hundreds years of the porogressive development of modern electrified railways from the West Coast and Buller to Lyttleton and Nelson.

Anonymous said...

@ Davos - I can bitterly attest to the unsociable habits of humankind in Auckland, in the form of the car drivers who use the Waterloo Quadrant-Alten Road-Symonds St intersection weekdays at peak traffic.

The accepted road use guidelines is not to drive across unless you can clear the intersection. However there is many times on many days when I've followed the rules but 5 obnoxious drivers didn't (i.e. I'm the one that sits through 5 changes of lights and become the target of the ire of the other drivers behind me). (And the 5 cars block the buses with right of way, selfishly inconviencing even more of the population.)

If that is Libertarianism, I'd prefer something else where everyone gets a fair chance to go.

Anonymous said...

Hmmm. Thinking on this post further, I am not so sure there is a 'Paradox of the Free Market' Chris. You say:
"To prevent non-market players from intervening in the economic life of society and increase the scope and freedom of market forces, the power of the state must not, under any circumstances, be “curtailed”. Quite the opposite, in fact: to protect the operations of the free market, the capacity of the State to act “forcefully” must be increased."

There is no paradox in that to libertarians or right-wing liberals (nor to left-wing liberals who are logically consistent). The entire premise of the purist liberal is that the sole role of the state is to enforce and protect private property rights and transactions.

In that sense, liberals would/should claim the National government is simply increasing ineffective deterrent penalties to the point of being effective. That is, they are improving their performance in their free market liberal role as protector of private property rights (in this case, the right of oil corporates to explore and drill).

For those of us non-liberals, we would quibble that the NZ state has extremely dubious claim to any legal right of enforcement outside the 12 mile nautical limit, so the state appears to be engaging in international piracy when the arrest protesters like Elvis Teddy.

But that is not a paradox - it simply makes you wonder why the working class tolerate such draconian free market liberals and their police state ways... ;(

Mad Marxist.

Anonymous said...

"It is the great paradox of "free" markets that they require an ever-stronger state to keep them functioning."

It's the same with jobs and welfare. Just look at all the "courses" and "programmes" and "training" we have now for young people. Courses to get get into courses to get into courses. And none of them really work because the reality is the jobs aren't there. The free market has created the labour market we currently have, so government responds by providing the young and the unemployed with skills it believes will help the competition for the ever lessening number of jobs available. Just all this "extra help" we give the unemployed (and it's now for the sick and those who care for children, also) does nothing to the number of jobs, criminalising protest against deep sea drilling does not stop make the concerns of those who oppose deep sea drilling go away. Yes, it is interesting how the government needs more and more to exert the strong arm of the state to further its agenda. No prizes for guessing what the Right would say if it were a Labour government doing this.

Tony said...

Sorry, but I do not see the "The Government is proposing stronger measures to protect offshore petroleum and minerals activity from unlawful interference" is any example of "The Paradox of the Free Market". This is more of the government strong-arming protesters to get out of the way of their monopoly resource development partner, "Crony Capitalism" perhaps but "Free Market" ... I don't think so.

Just look at how even you described the situation:
"The National-led Government is keen to develop energy potential of the Raukumara Basin. Accordingly, it invites large multinational energy companies to acquire the necessary permits and begin prospecting."

"When a local Maori fisherman, Elvis Teddy, steered his own vessel, the San Pietro, across the Orient Explorer’s path, dropping buoys and long-lines, the National-led Government authorised the Police and New Zealand Defence Force naval units to move in and arrest him.

To the Government’s dismay, the charges against Mr Teddy were later dropped. The Court declined jurisdiction because the protest action took place outside New Zealand’s twelve nautical miles territorial limit."

What we have is the government providing a monopoly permit to a private development company to develop seabed resources that the government claims to own through its exclusive economic zone. When protesters lead the government to call in the police for essentially sailing in the open ocean, the courts reject the charges on the very reasonable grounds that NZ legislation, written by previous governments, does not extend outside the legal boundaries of the country !

The government acts by changing the law.

So what element of the above story involves the free market ? Ownership of the seabed ? No that is the government ... no Free Market here. Issuing the monopoly development permit to Petrobras ? No, that is also the government. Was the protest on private property ? Yet again No, the ocean is a public (and international) space, there is no trespass issue. How about writing the law that protects "the operations of the free market" in public spaces ? Nope another government responsibility.

Now I agree that the proposed legislation appears to be obnoxious (perhaps this is what you were trying to highlight). But this is just a rubbish example of trying to support your claim of "The Paradox Of The Free Market" !

James said...

There is not,nor ever has been in living memory a Free market in New Zealand. A free market requires that the state be separated totally from the economy...for the same reason we desire a separation of the church and state.When state power is able to be harnessed and used by either religious orders or Corporate players to their own ends then market freedom is by default curtailed.

NZ is a mixed economy....a put upon private sector trying to crawl out from under a controlling State hellbent on maintaining a crippling and soul sucking welfare state to the detriment of us all.

A libertarian free market is no more "unattainably utopian" than having a everyday household where please and thank you are routinely used and all parties are consenting to the living arrangements.Its top down state control that is the deluded fantasy that never works and indeed creates the very disorder it claims to exist to prevent.