I’ve been meaning to write this post for sometime, but have put it off because it takes some small bits of research. Here goes.
While the political division between right and left is overly simplified, in New Zealand there is at least one fundamental difference in policy between the two which for me marks a clear distinction. It also reveals the deep cynicism of right wing politics.
In recent New Zealand history the left made it a political and economic goal to have full employment. The labour government of 9 years from 1999-2008 was lucky enough to have strong local and international growth during this period which enabled them to get very close to the target, in 2007 unemployment fell to historically low levels in 3.4%.
A change of government in 2008 to a right-wing government coincided with the Grand Financial Crises and this of course led a surge in umemployment numbers. The blame for increased unemployment, at least initially, can not be put on the right wing party. However it is very interesting to note a change that occurred to the reserve bank soon after National took power.
There is a policy targets agreement between the governor of the reserve bank and the minister of finance. The 2002 Michael Cullen version is first, and the 2008 Bill English version is second.
Left Version 2002
The objective of the Government’s economic policy is to promote sustainable and balanced economic development in order to create full employment, higher real incomes and a more equitable distribution of incomes. Price stability plays an important part in supporting the achievement of wider economic and social objectives.
Right Version 2008
The Government’s economic objective is to promote a growing, open and competitive economy as the best means of delivering permanently higher incomes and living standards for New Zealanders. Price stability plays an important part in supporting this objective.
Read them carefully and a clear difference emerges between the left and the right, and how they use the instruments of government to affect the country. This is one small passage that influences the way the reserve bank acts, which potentially effects thousands if not hundreds of thousands of lives.
From these passages we understand that the left is using the reserve bank to get as many people as employed as possible. It does this knowing that this may well put pressure on inflation, because as it become harder to find workers they can charge more for their work which if this happens widely enough makes things more expensive which pushes up inflation. Inflation is bad because it devalues peoples investments and savings. But the left understands there are vast social, health, and economic gains to be had from having full employment. The least of which is that the states doesn’t have to support as many people. The strange and misunderstood aspect of this is that there is likely to be less people on welfare under this approach than the right’s, which I will explain now.
The right uses the reserve bank to encourage a strong economy as a means to delivering higher incomes and living standards. It prioritizes price stability so as to avoid the corrosive effects of inflation. However the removal of the mention of employment gives us a sense of what this means. If price stability is the priority, then keeping wages down is also a priority, and one of the most effective ways to keep wages down is to keep a level of unemployment. The employment pool acts as a reserve to put pressure on wages and salaries so that inflation is kept low, so that peoples and companies saving and investments are protected.
Now at this point, it is a largely healthy disagreement on how to deal with the economy. We have different political parties so that we can have different views and discuss the merits of those views and have discussions and discourse around them. All fine and good.
The bit that makes it nasty is when we follow the behavior of the right. If we accept the need for a certain level of necessary unemployment, (which I don’t) but seems like a logical economic policy in some regards, then we are in reality asking a certain amount of the population to sacrifice jobs they might otherwise have for the good of the country. What I find disgusting is the same party that creates this condition then spends vast amounts of energy denigrating and attacking those very people that could otherwise be employed as been lazy and bludging of the state.
In New Zealand around 2008 long term unemployed (as a percentage of total unemployed) was 3.2%. This means for every 100 people on the dole only 3 or 4 of them had been on the dole for more than a year. From a total of 72,000 unemployed people, 49,000 of them were on the dole for less than 26 weeks; the churn of people losing jobs and quickly gaining new ones. Of the total only 1300 people in the entire country had been on unemployment benefit for more than two years. Read that again. It clearly illustrates that the myth of dependency on the dole and preference to want to live off $200 a week rather than work an honest job is a fallacy. If the jobs are there people take them.
The thing about full employment is that everyone starts to benefit and social, class, ethnic and gender divisions are lessoned by the participatory nature of the work force, and the increased social mobility that employment provides.
The dumb thing about requiring a certain level of unemployment is that inevitably its certain groups, for various geographic, historic, and soci0-economic reasons, that end up without work. In New Zealand this is the young, some elderly, and Pacific Island and Maori people. These people end up unemployed because of a way the government chooses to run the economy and then turns around and specifically stereotypes these populations and been deficient for some reason. Its foul and immoral.
There is obviously some economic incentive to denigrating the unemployed because it makes people even more desperate to work in low-wage jobs, and keep inflation down, and a nice conveyor belt of cheap workers. The crushing of the unemployed is also managed through giving them less than is needed to survive with any dignity in New Zealand. A specific policy that was established in 1991 by Ruth Richardson.
I’ll leave the conclusion to the superb idiot/savant of norightturn, who I have sourced most of the links from in this article.
There is an underlying problem of benefit adequacy, dating back to the 1991 benefit cuts. As explained in Alister Barry’s In a Land of Plenty [part 5, from 10 mins, to part 6] experts worked out minimum food budgets for beneficiaries based on nutritional needs and different expectations of diet. Treasury took the lowest level – which was inadequate to meet basic nutritional needs – and cut it by 20% to provide an “incentive”. And while benefits have been inflation adjusted, that basic gap between benefit levels and minimum nutritional needs has remained ever since. And now we’re back in an era of mass unemployment and longer durations on benefits, it is again coming back to haunt us.
This is indecent. No-one should starve in our country, and a government system which guarantees starvation is simply immoral. But it is also stupid. Kids who grow up malnourished and starving have higher health costs and do not reach their full potential. In other words, the short-term “saving” of benefit cuts in fact produces long-term costs. But it won’t be the present government paying those costs – they’ll be well out of office when the bill finally comes due, and cleaning up the mess will be someone else’s problem.
As a society, we have chosen to have a certain level of unemployment in exchange for low inflation. Therefore, as a society, we have an obligation to care for those whose lives and prospects we are sacrificing. Policywise, this means trying to ensure that unemployment is not too great a burden and easy to escape from (or at least, not a trap). This suggests both decent benefit levels, and policies centered around improving “churn”: training, education, active job finding, and an array of grants, loans, housing and transport assistance to help people move or travel to work.