And,the Poor Will Always Be With Us.Posted: April 11, 2011
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?