Dr Liz Gordon – The politics (and economics) of poverty

By   /   February 9, 2018  /   10 Comments

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It is to our political shame that (a) the economics of neo-liberalism have remained entrenched ever since; (b) that now two generations of people dependent on the state (and many workers) have been raised in poverty; and (c) we have accepted the inequalities of our society as ‘normal’, OK and due to some sort of meritocracy, rather than as the systematic robbing of the poor to pay the rich.

The Expert Advisory Group on child poverty considered the causes of the big rise in the number of poor children, and pointed the finger at one event above all others: the 1991 ‘Mother of all budgets’.  For those of you who were not around at the time, Ruth Richardson’s budget reduced the level of the benefit by a whopping amount, on the basis that the rate was too generous.  It came several years after Labour had dropped taxation rates for high income earners.

This was a purely neo-liberal economic move.  The goal was to make the rich richer by increasing profits and make the poor poorer by allowing wages to fall.  To allow wages to fall, first benefit levels had to fall.  The allegory was as follows: feed the horse more oats, more droppings will come out the other end and the sparrows can have more too. Otherwise known, of course, as the economics of trickle down (or, nowadays, as the failed mantra of trickle down, because the droppings have been sparse and the horses have got fat).

It is to our political shame that (a) the economics of neo-liberalism have remained entrenched ever since; (b) that now two generations of people dependent on the state (and many workers) have been raised in poverty; and (c) we have accepted the inequalities of our society as ‘normal’, OK and due to some sort of meritocracy, rather than as the systematic robbing of the poor to pay the rich.

Max Rashbrooke’s work reminds us that 90% of us are worse off as a result of these policies than we would otherwise have been. Geoff Bertram’s work on assets also shows a huge shift, including the negative assets of our poorest, who often get by through the completely unregulated Payday loan system, where sharks prey on those who need more and cannot get it.

The National government took the first step towards reducing child poverty (having been complicit in many policies to increase it) by increasing the benefit by $25 per week in 2016. This appears to have led to a modest reduction in the number living in poverty.  In principle, it demonstrates that you can “throw money at a problem” and being to solve it, which is the opposite of what we have been told for years.

This points to what works.  Child poverty cannot be ended by good health or education policies (although the effect can be mitigated).  It cannot be ended by building state houses (again, though, good state housing at income-related rents can make a big difference to those lucky enough to have it). Lots of schemes can mitigate the worst effects of family and child poverty. But mitigation is not solution.

In short, the solution has to be economic redistribution – higher benefits and higher wages at the bottom end.  But what about benefits?  We have heard for years that the solution to family poverty is to get off benefits and into work.  Would creating lots of well-paid jobs solve the problem? The answer is that it would help, but lots of people find themselves needing to be on the benefit for periods, and many of them are women alone with children. They need a fair go.

And, frankly, I am really tired (as a researcher and a person) with the badmouthing of people who need support from the state. Those criticising beneficiaries nearly always do so from a position of complete ignorance. Until we solve the problems of rapid family formation (and deformation), high levels of drug and alcohol abuse, structural unemployment and so on, people will continue to need that support.  There is no need to kick them when they are down.

Sorry about the rave… getting back to the topic at hand, the solution to child poverty is to raise wages and raise benefits to the level each would have been at, had the 1991 budget never occurred.  I am not an economist so I don’t know what those levels would be, but I am sure someone could work it out.  And, yes, that is simplistic too (because so much else has changed, like the soaring incomes at the top), but it is a benchmark, a start.

Plus, what also needs to happen is re-adjust taxation rates so that the highest income earners pay their fair share.  I am talking primarily about the top 10% here, and especially the top 1%.

Am I just trying to unpick what was done from 1984 onwards?  No, but in many areas, inequality and poverty being the chief ones, unpicking has to happen.  We were a country of modest inequality where people on government support could live reasonably well, and now we are not.  We need to recapture that earlier sharing of wealth.  Initiatives like family tax rebates for working families are useful in the current situation, but are essentially patches on a very holey blanket.  We need a substantial and sustainable result.

I am confident that this government could use appropriate economic levers to make New Zealand a place that all of us can live well, if it is ambitious enough to make it happen.

 

Dr Liz Gordon began her working life as a university lecturer at Massey and the Canterbury universities. She spent six years as an Alliance MP, before starting her own research company, Pukeko Research.  Her work is in the fields of justice, law, education and sociology (poverty and inequality). She is the president of Pillars, a charity that works for the children of prisoners, a prison volunteer, and is on the board of several other organisations. Her mission is to see New Zealand freed from the shackles of neo-liberalism before she dies (hopefully well before!).

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10 Comments

  1. jeni cartwright says:

    Kia ora Liz, thanks for the article. It’s important to note that there is no current evidence of the $25 increase in benefits having reduce poverty even marginally. The data to support such a claim (mostly only printed in news or lauded as’fact’ by Paula and Bill) is not even out yet. The household income report detailing any such evidence will be out in July 2018.

  2. jeni cartwright says:

    Kia ora Liz, thanks for this article. It’s important to note that the $25 benefit increase has not shown any reduction in poverty, even marginally, to this date. Such a claim that has been lauded by Bill and Paula and other news is incorrect, as any data evidencing the fact will be contained within the household incomes report that isn’t due until July 2018

    • Tamati Tautuhi says:

      Trickle Down Theory is the oldest trick in the book for the Neoliberals but the public fall for it every time.

  3. Marc says:

    Thanks for the reminder, Dr Liz, many need it, sadly too few will read it here. While the new government has promised an increase in the minimum wage, up to 20 dollars per hour by 2020/21, this will only offer little help, as employers will adjust and try to get more out of their part time and full time workers, plus increase prices.

    We need some radical reforms on the labour market, more than what the Labour NZ First government has so far offered.

    What they are doing is only a first step.

    Re benefits and the serious issue of child poverty, I get very concerned about this debate, as NOBODY ever talks about those on health and disability related benefits now, who have NOT received ANY increase for endless years.

    What about them? Do they not deserve a decent life also, especially those unable to work? That is something that must not be forgotten.

    • jono says:

      Unfortunately the Neo Liberal reply to you is businesses will pack up shop and take there business overseas. I am not an apologist for the business sector thats what these people say.

      Also many of the new generation have been brainwashed by those with the money and power… They don’t have another point of view as they have been trained to look to the employers as role models. Thats just how society is. They think Neo Liberalism and the current labour market is the only way and look down on acidemics who question the current philosophy.
      This has been brainwashed by those with money and power as well.

      It is going to take one big financial crash to level society before we will see change. Too much power and influence is in too few hands. Thats my 2 cents worth.

      • Cag says:

        Yes but I’d also say that there are more in the younger generation who are questioning the brainwashing and more in the older gens – the Babyboomers and Gen Xers – who are still believing the old Neo Lib lines.

  4. Tamati Tautuhi says:

    Quote Roger Douglas on Neoliberalism “The pain before the gain ?”

  5. Yes, the 1991 benefit cuts need to be restored, Liz, but so, too, does union protection in the workplace. 1991 was also the year of the Employment Contracts Act.

    As you note above, the suppression of beneficiaries incomes and workers’ wages went hand-in-hand.

    • jono says:

      Agree Chris Trotter. But also attitudes in society have got to change aswell. The rich and influential have convinced there staff to believe they are one of them. They only find out later when hard time come when they are laid off they are not. These people are clever. The right wing are a powerful lobby.

  6. Marc says:

    And what we get from MSD and WINZ these days are endless trials and other outsourced projects, under the past government’s so called ‘investment approach’, with which they try to get beneficiaries with ‘issues’ into whatever kinds of jobs on the job market. That many jobs do not even pay a living wage, that is a matter they seem less concerned about. Hence we have now the phenomenon of the working poor, also in NZ Aotearoa.

    Some info to consider:
    https://nzsocialjusticeblog2013.wordpress.com/2018/01/28/msd-release-oia-info-on-failed-mhes-trials-three-years-late-only-upon-advice-by-the-long-underfunded-half-committed-nz-ombudsman/

    https://nzsocialjusticeblog2013.files.wordpress.com/2018/01/msd-release-oia-info-on-failed-mhes-trials-3-years-late-only-upon-advice-by-the-ombudsman-report-28-01-18.pdf

    But some high paid ‘advisor’ mercenaries do well:
    https://nzsocialjusticeblog2013.wordpress.com/2017/05/01/msd-releases-oia-info-on-dr-bratts-and-other-senior-health-advisors-high-salaries-nearly-4-years-late/

    https://nzsocialjusticeblog2013.files.wordpress.com/2017/05/msd-releases-oia-info-on-health-advisors-salaries-nearly-4-years-late-post-30-04-171.pdf

    Bill’s recipe:
    http://nzsocialjusticeblog2013.wordpress.com/2014/10/19/nz-finance-minister-bill-english-insults-beneficiaries-with-mansel-aylwards-work-will-set-you-free-approach/

    Discredited approaches and so called ‘evidence’:
    https://nzsocialjusticeblog2013.wordpress.com/2016/08/16/senior-scientist-and-legal-experts-discredit-evidence-used-by-msd-and-dr-bratt-when-claiming-the-health-benefits-of-work/

    I suppose that is what meritocracy looks like in a constrained welfare system we now have. Add cheap immigrant labour, the system is perfect for the bosses and exploiters.

    I hear by the way, an Auckland construction firm or developer want to bring in 200 Chinese tradespeople and labourers, otherwise, so they claim, they cannot complete a luxury hotel being built.