A Long Lasting and Bitter Cuppa

Former UK Labour Prime Minister, Harold Wilson once famously observed ‘that a week was a long time in politics’ and John Key must be painfully aware of that observation at the current time. It has been a week in which Key has effectively gone from ‘hero to zero’ as a consequence of him having a simple ‘cuppa’ with ACT’s Epson Candidate, John Banks. A ‘cuppa’ which, although being held in full media glare in a cafe in Epson, had an unwanted addition, as on the same table, unnoticed by either Mr Key or Banks, sat an inconspicuous little black bag containing a switched on recorder, which was quietly recording their private conversation.

Over the past week, the revelation of what might be on that recording has seen the Prime Minister deny any wrong doing in relation to comments which he made in the course of the ‘cuppa’. He has questioned the integrity of the journalist whose bag it was and then accused the New Zealand media of acting like the ‘News of the World’ and UK tabloid journalism in securing the recording. He contacted and laid a complaint with the police about the recording, he has walked out of press conferences, and he has made bizarre comparisons of the recorded conversation with suicide. The entire thing would be completely laughable, if it did not have the potential to seriously undermine Key and National’s campaign and effectively kill ACT in the process.

Key walking out of a press conference and avoiding comments about the matter provoked Labour leader Phil Goff to comment that he could not have imagined any other Prime Minister back to Muldoon, acting in such a manner. I would have to concur. Certainly, one could not imagine Sir Robert Muldoon acting like John Key. Muldoon would not have dodged any media ‘bullets’ and he certainly would not have run from a press conference. Instead, one could imagine Muldoon meeting with John Banks in an office (probably his office in the Beehive, as cafe’s were never his ‘thing’), bluntly laying down the terms for any political concessions and then, later, equally bluntly facing down any journalist who dared question him about the situation.

But, Key is not Muldoon. Muldoon was a person of many attributes. He was a polarising and aggressive figure. However, Muldoon could also be bluntly honest. Key is completely different and that perception of honesty is one of the key (no pun intended) factors in this matter. After all, what can be said about a man who opinion polls are now saying that a significant proportion of New Zealanders like, but don’t really trust.

However, what is really different about Key to me is that he has always appeared as a media creation. As a result, one of the principle interests of the ‘cuppa’ saga has been it effectively taking the ‘shine’ off the Key persona.

In the past a number of political commentators, including myself, have tended to compare Key to National’s last long serving Prime Minister, Sir Keith Jacka Holyoake. ‘Kiwi Keith’ was perceived as having the ability to rise above political disputes. Moderation and consensus were the key terms of Holyoake’s administrations in the 1960s. Key has tried to project himself in that mould.

However, the real comparison to Key is not Keith Holyoake. It is, rather, former UK Labour Prime Minister, Tony Blair. Key, like Blair, is supposedly media savvy – as are his ‘minders.’ Key, like Blair, carefully cultivated the media to bring across a particular image. Like Blair, that image was of Key being an approachable, amiable, likable everyman who had a ‘realistic’ programme, which was divorced from the ‘old’ ideologies which dominated New Zealand politics. Simply, Key wanted to appeal to mostly everyone. He wanted to be liked. He wanted to be ‘cool’.

Yet, despite his attempts to appear, like Holyoake as a progressive conservative; as a mediator and a moderator, as a ‘cool’ person, Key’s Government has undertaken a number of extremely right wing and ideologically motivated decisions – welfare reforms, tax cuts, and changes to employment law amongst the number. In addition, Key and National have also suggested a number of future policy changes should he and they be re-elected, such as asset sales. That is because, Key, like Blair, is actually very ideologically loaded and like Blair, Key has attempted to downplay and minimise these policy changes, by suggesting that they are necessary and ‘sensible’ reforms – when in fact, they are not. However, Key, like Blair, has been (largely) successful in this course of action as he has been aided and abetted by a compliant media.

The ‘cuppa’ fiasco is trivial and in any functioning, politically aware democracy it would not be worth comment except for a few lines in the paper or a few seconds on the news. But, in New Zealand’s ‘New Idea’ focused, politically unaware democracy it has become central to political debate. Yet, this is not just a failure or comment on the status of New Zealand politically unaware news media this is also a failure of Key and his media minders. Not just because, Key has massively stuffed up the situation, but, because I believe that initially it suited Key and National to have the issue centre stage as it effectively deadened debate and discussion during the latter half of the campaign. Key and his minders actually thought that they could initially ‘spin’ it. But, they were wrong and the problem, thanks largely to Key, is that this issue has now taken on a life of its own.

One of the factors that combined to bring down Blair was the media turning against him. In the end all Blair’s years of skilful and careful media manipulation were for nought. Blair, like the Emperor in the famous Hans Christian Andersen tale, was revealed to have no clothes. With the police now threatening to raid key media outlets such as TVNZ and Radio New Zealand for copies of the recording, Key has effectively isolated himself from them and the media at large. Unfortunately, for Key it has also meant that this entire issue will continue to play out for a considerable time to come – right up, possibly, to Election Day next week.

As Wilson went on to observe…” and, a fortnight in politics is an eternity.”

Devil and the Deep Blue Sea

Why a ‘Cuppa’ with ACT is problematic for National

Guyon Espiner has written an interesting opinion piece about the dangers of National sitting down for a quiet ‘cuppa’ with ACT. Espiner feels that such a sit down and chat over a cuppa could place National in some difficulty and actually hurt its chances at the polls. He comments that the vast majority of voters simply don’t like or trust ACT mostly as a result of the various actions of its MPs over the past parliamentary term. However, I think that National is caught between the ‘Devil and the Deep Blue Sea’ on this issue.

It appears to me that National has two options. Firstly, to go for a majority government which would mean that it needs to get over 50% of the popular vote. Although the polls are suggesting that it might achieve this, it needs to be remembered that this has only happened, as far as I am aware, three times previously (1938, 1946 and 1951). While, polls can provide good snap shots, the final poll that counts is on the day itself. In 1996, National just managed to hold onto Government despite polling well throughout the year. In 2002, Labour, despite good poll results previously, only gained 41% on election night and was forced to put together an unlikely coalition comprising Peter Dunne’s United Future Party and Jim Anderton’s Progressive Coalition.

This leads to option two, which is to ensure that there is a suitable coalition partner in the event that National does get under 50% of the popular vote. If past election results are any indicator, it appears more likely that while National will emerge with the highest percentage of votes and as the largest party in the House. But, it may lack ‘suitable’ coalition partners, especially, those parties prepared to back its economic programme – even the Maori Party is not open to the idea of asset sales and the economic and social restructuring that is being suggested by National. Therefore, the only party that National can count on in terms of being open to its ideological agenda is ACT.

To sit down with Brash over a cup of tea (The Devil) may lead to the outcomes that Espiner is suggesting – as he notes, 99% of people don’t like ACT and the spinoff of such a deal could be bad for National along the lines of voter cynicism toward National and a corresponding decline in its vote. Plus, there remains no guarantee that National voters in Epson will vote for Banks, given the enmity toward ACT in the electorate. Even if Key endorsed Banks, Goldsmith could still win.

However, not to endorse Banks and ACT could lead to National being forced, in the event that it does not get 51%, having to put together a coalition (or being a minority) Government in which its key economic and social planks are scuttled (The Deep Blue Sea).

National has painted itself into a corner – it needs to get 51% or it needs ACT in parliament.

Universality – The Giant Killer

I read today of proposed changes to the legal aid system.  A significant component of the proposed changes lies in getting the wealthy to pay their own legal bills.  Doubtless, a number of people would agree with the Minister, Simon Power in his assertion that the wealthy should not get free legal aid.  Why should they not pay for it? 

The nature of Power’s comment is similar to a question posed by David Lange once in the mid 1980s, when his Government started means testing benefits and services, as to why the wives of Doctors should receive a family benefit like those people on lower incomes.  Surely, he asked, wealthy people should be able to pay their own way and pay for their own services?

I would respond that the answer to Lange’s question and to Simon Power’s allegation about the rich receiving the same ability to access legal aid as the poor lies in the fact that it is fair.  The reason as to why legal aid should remain available to all or why Doctor’s wives should receive family benefit lies in the important principle of universality.  This is the belief that regardless of gender, race, social position or background that everyone is entitled to have equal access to and receipt of benefits and services in healthcare, education and the like to improve their life chances.

A commitment to building a better and fairer world, particularly after 1945, drove many people who were involved in progressive politics at the time.  In New Zealand and the United Kingdom, progressive (Labour) Governments produced programmes as a means of achieving that goal.  No one they argued should be subjected to the poverty and illness that had previously existed.  Everyone they alleged would have the ability to have equal access to services and benefits and the right to further themselves freed from monetary or social constraints.  This became the foundation of the notion of social security.

In the United Kingdom, the wartime coalition Government (Conservative/Labour) established a commission under the Liberal Economist, Sir William Beveridge to investigate the issue of social security and to produce a blueprint for a more inclusive society for the UK after the war.  The report of that committee became known as the ‘Beveridge Report,’ and it opted for universality as a means of delivering social services and benefits.  These would be available to all people. The costs would be recouped through the maintenance of full employment and progressive taxation.  

Beveridge saw the ultimate goal of social security as killing the five ‘Giants’ – these were the Giants of want, disease, squalor, idleness and ignorance.  As a consequence, Beveridge was opposed to the idea of means testing (which was a common strategy at that point) because it established and maintained poverty traps.  Means testing sustained the Giants.

However, since the 1980s, successive Governments have used means testing as a way of achieving social and economic goals.  The universal system that Beveridge and others envisaged has been removed and replaced with programmes that last saw the light of day in the 1930s.

I am of the opinion that the emphasis on using means testing as a means of ending poverty is a bit like using an incurable disease to cure illness.  It is, simply, quite stupid.  Indeed, there is actually something morally Victorian in the approach taken by those who advocate means testing that reeks of the ethos of the deserving poor. 

Writing in 1920 on similar matters, future UK Labour Party Prime Minister Clement Attlee commented that;

“’In a civilised community, although it may be composed of self-reliant individuals, there will be some persons who will be unable at some period of their lives to look after themselves, and the question of what is to happen to them may be solved in three ways – they may be neglected, they may be cared for by the organised community as of right, or they may be left to the goodwill of individuals in the community. The first way is intolerable, and as for the third: Charity is only possible without loss of dignity between equals. A right established by law, such as that to an old age pension, is less galling than an allowance made by a rich man to a poor one, dependent on his view of the recipient’s character, and terminable at his caprice”.

In the social democratic state that New Zealand used to be, everyone, regardless of whether they were rich or poor had equal access to benefits and services offered by the state.  The means by which this would be equalised financially was through a progressive tax system.  Simply, if you earned a good income then you would be taxed at a higher rate than if you were on a low-income.  Benefits were not taxed at all.  

The loss of Universality, I would argue, has made New Zealand a less equal state.  This lack of equality is amply demonstrated in those statistics on crime, poverty, health care, education as well as a multitude of other statistics that have been produced since 1984. 

The ‘reforms’ of the 1980s and 1990s have once more meant that targeting and means testing have become a common feature of government policy and assistance.  Given those events, Attlee’s statement about the ‘loss of dignity’ for the poorer sections of the community once more becomes a real issue.  The loss of universality in terms of services has led people in the middle to upper income brackets to question not only the notion of state provision in key areas of the economy and society but the notion of why they should actually pay taxes, especially since they are now paying for private providers out of their own pockets as opposed to having state providers being paid for out of the common purse.  The loss of universality has therefore meant financial cuts and poorer services.  The people who rely on those services are increasingly economically and socially trapped and impoverished.

Beveridge commented once that, “the object of government in peace and in war is not the glory of rulers or of races, but the happiness of common man.”  

The loss of universality ensures that the Giants once again stride the landscape.  People need to ask how their return benefits the happiness of the common man.

And,the Poor Will Always Be With Us.

Margaret Thatcher is an icon of the free marketers.  It was her Government, in the late 1970s and 1980s, which originally drove many of the reforms that were later copied by other free market governments in the West.  In some cases, such as here in New Zealand, we exceeded Thatcher’s economic expectations, implementing ‘reforms’ which she must have only dreamt about.  But, while, Thatcher may have left the UK political stage in 1990, with her resignation as a consequence of policies such as the ill fated ‘poll tax’, her economic legacy survives.

Her comments, such as there “being no such thing as society” and that “… any woman who understands the problems of running a home will be nearer to understanding the problems of running a country …“ not only provide a fascinating insight into her mind. They, unfortunately, still carry leverage and act as a basis for some people in the current political and economic sphere.     

And, it is this legacy that has found root again in statements made by New Zealand’s Minister of Finance, Bill English over the weekend.  For it was that during the weekend, English and John Key addressed a weekend leadership forum.  This forum was attended by ‘leaders’ from Australia and New Zealand.  Such forums can be dangerous places for politicians and so it proved to be so for English.  As, it was during his forum speech that he committed his latest gaffe by criticising Australia’s high wages and conditions before remarking that New Zealand’s low wage economy was actually a selling point for the country by providing it with a competitive advantage. 

He then criticised the Australians for having a poorer electoral system and a more complicated and restrictive set of economic and financial regulations. 

English’s address was interesting, in that he was telling the truth when he talked about the fallacy of closing the wage gap with Australia.  What English has done is openly admit to all that the Government had and has no intention of closing the 30% wage differential with Australia or indeed with any of the country’s other OECD trading partners. 

English essentially stated the truth that if you live in New Zealand you will need to accept low wages and salaries as well as poorer conditions. 

Rightwing Business Commentators, such as the NZ Herald’s Pattrick Smelliee were quick to endorse English’s comments, while, at the same time, conversely trying to pour oil on potentially troubled waters. Smelliee noted in his opinion piece titled, ‘Hang on, Bill English is Right,’ the following;

“He’s not saying it need be that way forever. That’s just how pessimistic Kiwis hear it. The assumption is either that we could never “catch Australia” – whatever that means – or “who’d want to anyway?”

Unfortunately, for Pattrick, that is exactly what it means.  I remember friends of mine who were devotees of the free market cause in the late 1980s espousing much the same line of thought.  They particularly emphasised that New Zealand’s economic success lay with it being competitive in terms of wage rates.  They consequently argued that low wages were the only way to get high wages. Of course, the absurdity of this argument is very obvious.  If you adhere to such a position then you have to consistently maintain a low wage economy otherwise you become uncompetitive.  Indeed, you need to be prepared to lower your wages even further if you are to successfully compete in the global marketplace.

This is not a short term approach, but a long term and permanent one.  That is exactly, what English has spelt out.    

Further, as English and others of his ilk are aware, New Zealand has actively pursued this policy prescription over the past decades. Its wage and salary rates have fallen behind other OECD nations, significantly so in some cases.  There is now a considerable divide even within the country as to what the mass of people earn compared with what is received by those in the upper wage and salary brackets. This divide, while slowing during the 2000s, has actually increased since National came to power.  

Of course, several decades ago, New Zealand used to be ahead of Australia in its rankings of wages, standards of living and productivity.  At that time, there were no complaints or concerns that New Zealand was uncompetitive or unproductive. While, New Zealand slipped in its rankings during the 1970s, its experimentation with monetarism and the free market during the 1980s and 1990’s have effectively ended any hope of this country achieving any of those rankings again. Since the 1980s, New Zealand has consistently had high rates of unemployment, low wages and salaries (as a result of economic reforms and the Employment Contracts Act) and has consistently experienced low productivity in comparison to other OECD states.

Why is that? Simply, because this is a deliberate outcome of those market led economic and fiscal policies that New Zealand has pursued since 1984.  It is a deliberate outcome of these policies to have a set level of unemployment and it is the deliberate outcome of these policies as to why, New Zealanders must have low wages in comparison with other western nations.  The Government could, very easily, increase wage rates and conditions by supporting expansionary policies combined with a more expansive range of economic targets and by imposing economic regulations.  But, it chooses not to. It has chosen to deliberately pursue monetary and fiscal policies that deliberately hold down and restrict people’s wages and conditions.   

The problem is for Mr English that there is always someone lower down the food chain than you.  Most undeveloped nations have people who earn extremely low wages and have poor or no working conditions.  Maybe Bill English should approach them and tell their populations had fortunate they really are?

AMI – Nationalisation is not a Dirty Word

It comes as no surprise that private insurance firms might be feeling the pitch in the light of the recent earthquakes in Christchurch. So it should not have come as a shock when people were greeted with the news this morning that AMI (Allied Mutual Insurance) is facing a financial crisis as a consequence of the Christchurch Earthquakes.  TVNZ reported that,

“Christchurch-based AMI Insurance is New Zealand’s second-largest residential insurer with 485,000 policyholders and 1.2 million policies across the country. In Christchurch alone it has more than 85,000 policyholders with 225,000 policies – or about 35 per cent of the residential insurance market in the city”  

AMI has stated that although it feels it can meet its existing responsibilities to policy holders who have suffered as a consequence of the recent quakes, it might struggle to meet any future responsibilities. 

 This issue has arisen also after another, considerably smaller, insurance company, Western Pacific which is (was) based in Queenstown was placed into liquidation after the February Quake.  It could not meet its obligations to its 7000 policy holders. 

Apparently, AMI informed the Government of its potentially damaging situation in early March. The Government response has been to bail out the insurance company, a move which it announced this morning.  The Company will pay the Government $15million and the Government will extend AMI $500 Million to cover its claims and to allow it to keep functioning, if it is asked to do so by the Company and only once it has exhausted its own reserves.  Bill English also announced this morning that the real total cost to the taxpayer could be more than $1 Billion dollars.  

In the same manner that private banks had to be bailed out by Government (socialism for the rich), Government could now be asked to bail out the private insurance industry (AMI), this means that the taxpayers yet again pick up the tab for private concerns. 

Of course, to be fair, the situation is completely different. The Banks were largely responsible for their own troubles. In this case AMI and its policy holders were not responsible for theirs.  But, questions needs to be asked.  Questions such as, that in the light of these two insurance companies having problems how many others might be in the same situation? And, whether it is a good idea to have private insurance companies carry the sole responsibility for claims? And, lastly, if the taxpayer is going to guarantee insurance payouts for homeowners etc then should not the state play a more active role in the insurance area?

In 1869 the Government was faced with similar issues in relation to the insurance industry. The area was under-capitalised and those private insurance firms which were involved did so under certain conditions and only covered certain people.  The Government’s solution was to establish a state owned insurance company, Government Life.  In later years, the state came to be more and more involved in insurance and ensuring that the needs of the wider community were met.  They met those needs through the establishment in 1898 of the Government Accident Insurance Office and later of the State Fire Insurance.  All of which were effective and successful in what they did.  Prompting rebel Labour MP John A Lee to note in his 1938 book, ‘Socialism in New Zealand,’  

“Undoubtedly judged on state capitalistic lines the State Insurance Department has been a glittering success.  It has been generous to policy holders, its security has been undoubted, it has effected Liberal improvements in policies … Next to the State Advances Office, the Government life is one of the cheapest lenders in the country…”   

Government Life was renamed and sold off in the 1980s, by that ‘far sighted’ visionary, Roger Douglas.  It eventually became Tower Insurance and is one of New Zealand’s leading insurance agencies.  At the time, Douglas queried the logic of the state wanting to own an insurance company.  Why, indeed? The answer to that question is found in the pages of New Zealand’s political history and economics (never Roger’s strong points) and in the current chaos of the Christchurch streets.

There are two options in this situation.  The first is simply having the Government prop up AMI (and possibly other insurance providers) through a capital injection (in this case $500 million) and then allowing it to run as normal (which I suspect is the Government’s preferred option).  The Government’s current option does allow for Government control and ownership if AMI calls upon the cash injection, but only if it needs to. I suspect also that such ownership would only be for a short period of time.

Another option would be for the nationalisation of the company.  Such a policy would allow the Government to directly meet claims, thereby providing policy holders with long term financial security. It allows the Government a direct stake into an industry, which it should never have been removed from in the first instance. AMI has no shareholders due to it being a mutual company – this means that it is directly owned by its policy holders.  There would be no buying out of shares, merely a taking over of policy responsibilities.

Given the circumstances and the need to provide people with secure guarantees, I would go with the latter.  The Government should be a permanent player in the insurance field.

How Labour Won in 1996 – How Helen Clark was not Michael Foot

Several days ago I received a link to a story about an aborted coup against Helen Clark by Labour Party right-wingers in 1996.  Titled, ‘The Anatomy of a Failed Labour Coup‘ it was written by former Labour Party staffer Phil Quin and published in the New Zealand Herald on Saturday 2 April. Quin was an inside member of the Labour Party’s right faction and his description of the aborted coup against Clark was an interesting account of that part of Labour Party history.

It had the effect of setting me thinking about the various strengths that Clark had and also of the importance of her role as leader of the Labour Party in that period. 

I have felt that Labour’s predicament in the mid 1990s could be readily compared to that of its UK counterpart in the mid 1980s.  Both had lost seminal elections twice, NZ Labour in 1990 and 1993 and UK Labour in 1979 and 1983, both were seen as having lost significant support and direction, both lacked credibility and both were seen as lacking determined and dedicated leadership.  What was important for UK Labour in 1987 was that it re-established itself as the second party in United Kingdom politics.  In 1983, it had been strongly challenged by the SDP-Liberal Alliance, which had come within two percentage points of overtaking Labour’s vote in the General Election.  Labour still had a large number of seats in the UK Parliament due to the First Past the Post Electoral system, but lacked credibility.  In 1987, Labour had to convincingly defeat the SDP-Liberal Alliance to retain its status as the major opposition party.  In doing so it would allow its new leader, Neil Kinnock the ability to cement himself as an alternative Prime Minister to Margaret Thatcher and thereby reinforce the perception that Labour was the alternative Government.   

In 1996, Labour in New Zealand had to do the same.  In 1993, Labour had simply been outdone on a number of fronts in terms of direction and credibility.  While, the particularities of First Past the Post may have meant that Labour, as had its 1983 UK counterpart, gained more seats in Parliament, there was little debate as to the fact that it had been beaten in seeking voter’s hearts and minds by the Alliance and New Zealand First. Added to this was Moore’s, some might say, ‘unhinged’ behaviour on election night in 1993.  If UK Labour’s 1983 Manifesto has been labelled as the world’s longest ‘suicide note,’ Moore’s rambling incoherent speech conceding defeat in which he blamed everyone else for Labour’s failure, combined with references to a ‘long dark night’ was, without doubt, New Zealand’s longest political suicide speech.  It was in those moments that Moore cemented his fate as Labour Party leader. 

In comparison, Jim Anderton’s political behaviour in the aftermath of the 1993 election, especially when compared with Moore’s, saw him being lauded.  Jim’s status was upgraded to statesman.  And, for a brief few months, James Patrick Anderton was the preferred Prime Minister of a significant number of New Zealanders. Labour slumped in the polls. 

Given those circumstances, Helen Clark had to take over the reins of the Labour Party. She was the only plausible option. 

But, unlike, Michael Foot who stood aside for Neil Kinnock, Moore had no intention of going quietly. What followed was a period of bloodletting in the Party combined with even more strange behaviour from Moore, before Clark could settle into her role as Labour Party leader.

But, it paid off.  Labour was, even though it lost, the victor in the 1996 Election.  Like 1987 was for the British Labour Party, 1996 was for the New Zealand Labour Party.  The aftermath of the 1996 Election secured Labour the position as the dominant party of the centre-left and crippled the Alliance as a potential and potent left-wing force. This had occurred despite Labour having lost the election and dropping in percentage points.  The Alliance did as well.  But the difference lay in how they reacted. Labour emerged from the wreckage of the 1996 Election sounding confident.  Clark emerged sounding like a potential Prime Minister.  This is in comparison to the Alliance, whose campaign consisted of a petition that failed to fire, a series of ads and sound bites that were simply embarrassing and an organisation that was wracked by inter and intra party strife. Unlike the Alliance, the Labour Party ran a coherent and competent campaign.  The fact that its vote fell in the 1996 Election had more to do with the campaign and message projected by Winston Peters and New Zealand First which substantially increased its vote, than with a failure on Labour’s behalf.  However, in the end what really counted was Labour and Clark’s ability to dust themselves off  and pick themselves up. 

Moore or Goff did not have the ability to project that level of leadership in the aftermath of 1996.  They lacked the ability to sound like winners despite a loss and of having the ability to unite a Party around them. Both were too tainted by their experiences with and in the Fourth Labour Government.  Both were seen as part of the Party’s right and both lacked the resolve and determination that Clark presented, especially in the aftermath of 1996.  Retaining Moore in 1993 or electing Goff as Leader of the Labour Party in 1996 and toppling Clark would have almost certainly would have had the effect of killing the Party’s chances.

Helen Clark was a leader – it remains to be seen whether Goff can match her in the aftermath of an election defeat.

If Cuts are the Answer -Then It’s a Pretty Stupid Question.

The Government has announced further cuts to New Zealand’s public sector because of ballooning debt.  The public sector, which has been the focus of Government cuts since the election of the National led Government in 2008, is being told to prepare itself for more cuts and even, privatisation in some areas.

As I mentioned previously in this blog, the Government is going to attempt to reduce some of the nation’s debt by reducing the public sector.  Key had mentioned this course of action last year, he then trotted it back out in the aftermath of the second Christchurch Earth Quake, muttering that it was the only option.  As I said at the time it was rather disingenuous considering he had already proposed this line of action previously.

The fact is that the New Zealand Public Sector is already very compact compared to other Western Democracies. It is not bloated and it is actually, thanks to 25 years of cuts, privatisation and corporatisation, fairly efficient.  New Zealand’s public debt as a total of GDP is actually very low and as the CTU’s economist Bill Rosenberg noted in the CTU’s November Economic Bulletin, that Government expenditure as a percentage of GDP in 2007;

“ … are below the small country average, and below higher income countries such as Finland, Denmark, Sweden, Austria, and Norway. On the other hand, Ireland with lower levels of government spending is now suffering economic calamity. Average spending in these smaller countries is higher than the OECD average as a whole. Even so, New Zealand’s expenditure has been below the OECD average for most of the decade (until about 2006).”

Where oh where then is New Zealand’s increase in debt coming from?  Firstly, it is from Government borrowing, which the Government needed to do to starve off the worst effects of the recession.  But, the vast bulk of the debt is actually private sector debt, (70% of which is owned by the Banks) which has ballooned in this country since the mid 1980s.  Simply, the argument that the public sector has to be reduced to lessen debt has been the argument which has existed for as long as the New Right has had the purse strings.  It is an ideological argument and nothing more, and an exceptionally weak one at that.  Its weakness in this regard is noted by none other than the High Priest of the Free Market, Roger Douglas who in 1993 commented that;

“I am not sure we were right to use the argument that we should privatise to quit debt. We knew it was a poor argument, but we probably felt it was the easiest to use politically.”

The final insult to injury is allowing the very sector that is actually responsible for the majority of New Zealand’s total indebtedness run some public sector agencies and operations after the Government’s razor has been through the public accounts.  The Government has announced that the private sector will pick up some of those resources that will be cut.  Having the private sector run areas of the public service is akin to asking Dracula to run a blood bank. 

Simply, the Government is doing everything it can to cover up for its own appalling and inept policies in the economic area.  Having cut taxes for its friends on New Zealand’s rich list and then got everyone else to pay for it, through a hike in GST, it is now resorting to cuts and privatisation (which it always wanted to do anyway).  Simply, the Government’s own policies are responsible for the state that the country is in.  Instead of opting for policies to boost production and alleviate the recession, it is, instead, going to add to it.

People have to ask how long does it take before this particular baby is thrown out with the bathwater.


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