Ken Hanly on New Zealand

Louis N Proyect lnp3 at columbia.edu
Wed May 8 07:57:42 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 in1984. 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 theFilmon 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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