Riding High in the Saddle…

The National led Government completed its first 100 days in office recently. And, among all the self trumpeting about its various achievements in this period, it gained an added bonus in the form of several opinion polls that showed National leading Labour by a substantial margin. National, it appeared could do little wrong in the eyes of the voters.  It was reacting quickly and decisively to the economic crisis, leaving the Liberals (Labour) to wallow in its wake and claim that they would have done exactly the same, only better. 

Frankly, I would have been surprised if the Government had gone down in the polls. It has come freshly elected into office and inherited an economy, which is in a deep recession.  It has then suggested various schemes and programmes to promote economic growth and employment.  The L(iberals) on the other hand have not really been able to suggest an alternative.  Indeed, L(iberal) leader Phil Goff actually stated that he would support government proposals and the suggestions from the Jobs Summit, if the Government dropped its commitment to tax cuts. 

The public wanted a political change and fresh ideas and, from their perspective, Key and co are providing them.

Of course, as the old saying goes, ‘the proof of the pudding is in the eating.’  The Government’s economic package is actually not daring or fresh. Like three day old cabbage it is rather stale.  As such, the L(iberals) are quite correct in their assertions that they would have done the same or better, simply, because they would have.  Indeed, economically there is not that much different between either National of Labour.

A case in point is the recent Jobs Summit.  The Job Summit has played a part in stimulating debate about the economy and job creation even if its proposals were laughably weak.  The promoted ideas from the summit were policies relating to tax write offs for business, a 9 Day Working Fortnight and the building of a nation wide system of cycle lanes.  

The 9 Day Working Fortnight is especially being touted by the Government and its allies in the Business community, as being useful for those in the manufacturing and service sector.  It’s implementation, they claim, will allow workers to keep their jobs in this area, even if they do not keep their wages or conditions.  As the Prime Minister euphemistically stated on March 4;

“…even if workers are to take a reduction in their pay, we have always made the case that it might be a lot better for workers to hold hands and for all of them to keep their jobs, even if on a slightly reduced pay, than for some of them to lose their jobs.”

Some people have commented about the need to have ‘equality of sacrifice’ during the recession.  However, what is emerging is that the sacrifice is going to be very unequal.   Nowhere is this more evident than in the 9 Day Working Fortnight and its emphasis on those industries which are largely staffed by low income workers. Of course, these industries are merely a reflection of the low wage status of the New Zealand economy as a whole. 

This fact was even touted by the Government in a Question in Reply to National List MP, Michael Woodhouse.  In response to Mr Woodhouse, the Minister of ACC, Nick Smith noted that the average household income is $67,000. This amount, which if it was divided between two main bread-earners in a household, would equate to roughtly $33,500.  This is hardly a princely amount on which to feed, clothe and provide shelter and provide transport for a family.

Equally, while National, ACT and the Business Community argue that workers taking a 9 Day Working Fortnight and forgoing two days worth of pay is a sacrifice worth making to save their employment, it might very well have the opposite effect.   A 10 percent pay cut, which is what the 9 Day Working Fortnight effectively is, will detrimentally affect the living standards of those workers who undertake it and of the wider community. The 9 Day Working Fortnight with its 10 percent less pay for workers will mean 10 percent less to spend in the community. In the 1991 recession, cuts to wages and benefits by the fourth National Government literally bled the economy, by substantually reducing domestic demand and increasing unemployment.  Wage cuts in the Great Depression had even worst effects.  In short, wage and salary cuts in economic recessions are not good ideas.

As I mentioned previously, the proof of the pudding lies in the eating.  And, the day for eating is rapidly approaching.  Although, National is currently riding high in the saddle, New Zealand and the two main parties have been largely living in a ‘fool’s paradise’.  This country has been largely engaging in a phoney war with the economic recession, with the result that most people have been thinking that it won’t be that bad.  Only now are they becoming aware that it very well might. 

Weaned on 25 years of neo-liberal economic thought, National and Labour are largely relying on the market and the Business Community to economically revive themselves.  Unfortunately for them, the Business community are in the process of  bunkering down. Thus, we come to the nub of the problem, as aside from tinkering around the edges, neither party appears to have any coherent long term plan.

The Government needs to provide a strong lead and to do so it needs to work out what its priorities are.  At the moment, both major parties appear to be to hoping for a quick return to the economic conditions of the early 2000’s. Therefore, there has been no movement to examine the underlying commitment to the market and policies and legislation like the Reserve Bank Act, Free Trade, Overseas Investment and the like.  These cornerstones of the freemarket are to remain in place, even as the edifice crashes around itself. 

I would argue that if we want to have an economy that promotes high wages and full employment, then like the first Labour Government we have to be courageous and to commit to those principles as the centre piece of the economy and put in place programmes that promote those goals. Unfortunately, National and their L(iberal) counterparts are shaping up more like George Forbes and his failed United Party than either Harry Holland or ‘Micky’ Savage.    

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