How to run a economy 101.

I’m not an economist. I work for the government, but I have seen the various fashions around economies. I have lived under a completely planned economy (courtesy of the Muldoon National government), an economy with minimal regulation and social Darwinism (courtesy of the Bolger National government) and now a government which borrowed in the hope the global crisis will be short (the current National-led government of John Key). I’ve also traveled a bit.

The way to run an economy is to emulate those that consistently grow. Look for quasi-fascist states that don’t intervene much. Singapore is a good example, Hong Kong is better. (Hong Kong is a functional colony of the PRC, who don’t want to spend much on it. Very similar to how the British ran it).

The principles are to have a minimal set of regulations and laws, and then let the market flourish. Therefore.

1. Have security of property and contract law. Do not allow arbitrary confiscations of land. Compensate when you take land.
2. Keep you criminal code short, and your tax code shorter. In NZ, most people do not have to do tax returns due to the Pay as you earn system and the total lack of deductions.
3. The state limits its roles to areas where it has a monopoly. That means the ministries of war, justice, prisons and public health. Some things (such as eradication of TB) require coercion. Other things (mental health) involve the indigent. And you should never contract out keeping the peace and sovereignty.
4. Keep the tax rate minimal and the use of legal systems almost as minimal. Avoid having a constitution (so there are no constitutional lawyers).
5. Let the churches. the unions, the friendly societies and families organize the social structure of the society. Expect the members of your government to be masons, knights of Columbus, Presbyterian communicants, lay members of the Franciscan orders. Fund raise for charitable wards. But keep the state away from them.
6. Keep the US federal regulators out of your financial system. The Swiss let them in, and have regretted it ever since.

And then let the market get on with it.  This is not perfect. But over regulation causes more harm than good.