NZ the illusion of progress.

HANLY at BrandonU.CA HANLY at BrandonU.CA
Tue May 7 14:23:02 MDT 1996

This is a letter I published in our local paper. Some of the material is
>from Pen-L and much is from Jane Kelsey's recent book on NZ. Let me know if
the line breaks are screwy as this is transferred from a PC and composed in
 Microsoft Word then saved as a text file with line breaks. However on my
screen on the Vax it looks to have lines that are too long. Maybe Uncle Louis
knows the proper Marxist solution.
  Cheers, Ken Hanly

Letter to the Editor

New Zealand's  Social Decline

	New Zealand is becoming internationally famous as a supposed success story of
economic restructuring. The fundamentals of  restructuring are: market liberalization and
free trade, limited government, monetarist financial policy, a deregulated labor market,
and fiscal restraint.  As well as exporting sheep, New Zealand now exports shepherds who
are to guide the international sheep to the lush meadows of the new economy; or perhaps
they are fattening us all for the coming slaughter. Among these shepherds are former
ministers in the Labor and National governments: Roger Douglas, Richard Prebble and
Ruth Richardson. Recently a representative of the Reserve Bank of  New Zealand,  David
Mayes, appeared at a workshop on foreign direct investment in Budapest to preach the
virtues of promoting foreign direct investment and relate the marvelous results of
economic restructuring in New Zealand since 1984. When another participant asked
Mayes of  the effects of  economic restructuring upon wealth distribution no answer was
forthcoming. The answer is clear: the rich are getting richer and the poor poorer. A recent
book by Jane Kelsey, and further data from Infometrics and the Dept. of Social Welfare
give us some data.
     The following table shows changes in income from June 1984 when restructuring
began to June 1990, of three different quintiles (fifths) of full-time wage and salary
earners. The table uses 1981=1000 as the base of comparison. The first quintile is the
lowest fifth of earners, the 3rd the middle fifth, and the 5th the highest fifth:

      			1st quintile	3rd quintile	5th quintile

June 1984		973		974		1052
June 1990		937		952		1081
 % change		-3.69		-2.26		+2.76    (March 1981=1000)

  Only the highest paid wage-earners are better off than in 1984 before the reforms. Middle
income earners and those worst off have lost ground. This is before additional "reforms"
were introduced that further weakened the union movement. In September 1993
Infometrics reported that the top 20 per cent of households received 45 percent of all
income. This compares with 35 per cent in the late seventies before the reforms. It is
predicted that this share will rise to 50 per cent by 1997/98. Economist Brian Easton said
in 1994: "The number of people below whatever poverty line you choose increased about
40 per cent from 1990 to 1992." When the wide disparities in income were pointed out in
the journal "Economist",  the Minister of  Finance, Bill Birch, agreed and claimed that they
would widen further but that this did not worry him.
    Perhaps the experiment has been a success in producing growth? The record is actually
not impressive at all. In 1993 there was a turnaround of sorts but the experiment started in
1984. Growth  in OECD (Organization for Economic Co-operation and Development)
countries during the period 1984-1992  averaged 20% while New Zealand's economy
actually shrank by 1%. The 1993 growth is hardly worth shouting from the rooftops given
this dismal prior performance. During the 1984 to 1992  period, investment as a
percentage of  gross domestic product halved and spending on research and development
was only half that of the OECD average. Now three years into the turnaround, and amid
the chorus of international hurrahs for this great triumph of neo-liberal policy,
unemployment is still far higher than before the experiment started and the public debt is
just approaching the same level as when the great leap forward began. Much of  the
countries' industrial plant is now owned by foreign investors and this will create a drain of
finance capital from the country as profits are repatriated. It also ensures that the
government will be unable to promote any policies that might challenge the interests of
global capital. Of course, this is the whole purpose of economic restructuring. Talk of
efficiency and growth are smoke screens to cover the naked pursuit of  the interests of
international capital.   The statistics on foreign ownership are interesting.
	Foreign ownership of  New Zealand stocks has risen from 19% at the end of 1989
to 56% at the end of 1995. Foreign debt still remains at about 70-80% of GDP. These
figures come from David Mayes, one of the shepherds, who thinks that this is all very
good since it supposedly creates jobs, brings new knowledge and technology to New
Zealand, and makes New Zealand industry more competitive. Unemployment is relatively
low but not nearly as low as before all this started, and  real wages have declined while
income distribution is much more inequitable.  There are signs that growth is slowing. The
solution recommended is: further deregulation, more cutbacks in the social safety net, and
even more incentives for foreign investment.    There is a universal jargon associated with
the brave new restructured world. Here are a few examples:
       shedding workers: This is used to refer to the practice of  terminating workers
during downsizing. The metaphor is interesting in that for insects and some reptiles it is
required for growth that the skin be shed and so the language seems appropriate.
However, workers are living beings, not dead skin. The metaphor dehumanizes the
worker.What really happens is that the workers are skinned alive.
       incentives: This term is used when benefits to workers and those depending on the
social safety net are cut. These cuts are described positively. Cuts cause all the lazy louts
who ought to be working to go out and take any job no matter how crappy it is.
Incentives of this sort are not usually meted out to executives or those whose income
depends upon shares or bonds. The rich apparently are just naturally hard workers.
       broadening the tax base: This means reducing the corporate tax load and generally
shifting the tax burden from the rich to the poor. As the statistics I have given show, it
works very well.
      international competitiveness: This means reducing environmental regulations,
weakening labor regulations and union power so as to compete with countries where
workers' wages are below the poverty level and where capital is allowed to degrade the
environment without check .
     an open economy: This means adopting policies that favor foreign investment and
takeover of a nation's industrial and natural resources.
     deinstitutionalization:  This involves closing state institutions, privatizing services,
and ultimately making families and communities directly responsible for the cost of
services. As a result those less well off face greater burdens.
    labour market flexibility: This means going to bed not knowing if you will have a job
to go to the next morning.
    fiscal responsibility:  This means continual cuts to social services and benefits.
	What happened in New Zealand is not unique. Much of the recent policy of the
Filmon government is based upon a similar model. Filmon is fiscally responsible in that he
cuts social services and benefits to balance the budget. Indeed he has passed legislation
that requires balancing the budget. Of course no business would hesitate to go further in
debt if it thought the debt was a good investment; apparently,  investments in health and
education just aren't worth taking the debt risk. No business would sell off assets that are
doing quite well. However, Filmon is quite happy to sell off our public businesses such as
MTS. Apparently, what might be good for business is not good for government; however,
it may be good for the business friends of Filmon.
	Ken Hanly

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