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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