In his column just posted, Brian Easton argues what I have long thought; that politics as we know it in NZ is largely a zero-sum game. He says that:
“Although the rhetoric of economic debate is about accelerating economic growth, the reality of politics is mainly about redistributing income.”
He gives a couple of examples. Assuming an economic gain of $50m from privatising ACC (ignoring PricewaterhouseCoopers, who say no gain), and Merrill Lynch gains $200m as they think, then the rest of us would be $150m worse off. But Merrill Lynch and the recipients of their donations are happy.
Likewise Rogernomics/Ruthanasia set NZ back 15% compared to the rest of the world in lost growth, but the top-bracket tax payers were still better off. Who could blame them for wanting more of the same?
He cites a recent Ministry of Social Development report which finds that the real incomes of the wealthy rose in most years between 1984 and 2007, but that those for the bottom deciles rose hardly at all. There’s a neat little graph in the report that shows how the deciles did in terms of real income over the period 1988-2007:
Note that this is despite the bottom 5 deciles doing much better than the top five under Labour-led governments of the last nine years. For example, Real equivalised household incomes (BHC): changes for top of deciles 1-9, 2004 to 2007:
Easton concludes, “In New Zealand, the economic rhetoric in elections is about improving the economy; the economic dog whistles are about what is in it for the voters.” It’s hard to disagree.
Tags: Brian Easton
Jafapete's Weblog 
August 18, 2008 at 12:53 pm |
Are you trying to argue that the reforms of the 90s were unneccesary?
Looking through the report it appears to me that though the top income earners are getting more pie, the pie is bigger so everyone is better off.
Relative inequality may have increased but overall everyone is better off. Without some of those difficult decisions being made we may have a ‘fairer’ or more equal distribution but everyone would possibly end up with a lot less pie.
August 18, 2008 at 12:55 pm |
Easton is confusing electioneering, which is indeed about who gets what, and economic policy which should be about creating new wealth but is often still about who gets what in Labour governments.
August 18, 2008 at 1:24 pm |
“it appears to me that though the top income earners are getting more pie, the pie is bigger so everyone is better off.”
Andrew: The chart shows no increase at all in the income of people in the lowest decile. This reflects the fact that there has been
no (inflation adjusted) increase at all in wages for the 500,000 people working in part-time, casual jobs . It also reflects the impact of the 1991 benefit cuts.
The pie has gotten bigger, but that hasn’t translated into a higher standard of living for the bottom 10% of income earners, and it’s only meant a very small increase in living standards for most people. Corporates, business owners and professionals are the only ones who have really benefited from the increasing “size of the pie”.
August 18, 2008 at 1:33 pm |
“Are you trying to argue that the reforms of the 90s were unneccesary?”
Don’t think many people argue that no reforms were necessary. We did however implement the most radically rightwing reforms of any OECD country during the 1980s and 1990s, and as a result income inequality grew faster than it did in any OECD country.
Australia during the 1980s and early 1990s offers an example of a sensible, moderate reform program. Labour markets were liberalised, without destroying the labour movement, the minimum wages was continually increased and state owned assets weren’t sold to profiteering natural monopolies/duopolies as they were in NZ. In other words, reform was grounded in reality instead of being pulled from a chicago econ 101 textbook.