The government’s announcements today are a useful start to combatting the impending crisis. There is an international economic recession unfolding that will cause many businesses to cut spending and slash jobs.
The spread of the Coronavirus pandemic is causing public health responses that are disrupting trade as more and more people are effectively being told to stay at home to prevent spread. The aviation industry is facing a crisis that will lead to airline collapses and mass job losses.
The job of any government is to try to counteract the spending declines that occur to sustain incomes and jobs.
New Zealand is also in a particularly good position because the levels of public debt are extremely low by international standards. That means it is easier for the government to run deficits for a period without the risk of the international
But, it is also true that the squeeze on government spending over many decades to produce surpluses and repay debt has caused huge infrastructure and social spending underinvestment. That means our health system, for example, is operating with old cramped buildings, lack of important equipment an staffing levels that produce a crisis each winter without the additional impact of the Covid 19 virus.
The government has announced a $12.1 billion spending package to combat the impact of the crisis.
An important difference in this package of measure from those that we have experienced in the past is that people receiving a benefit have been included. There is a $25 a week increase in the basic adult unemployment benefit. This is on top of the scheduled $10 a week rise from April 1. However, benefits had been allowed to halve in value over the last two decades from being at around 30% of the average wage to only 16% today. The planned increases will take it back to around 20% only. More is still needed.
The expanding of the in-work tax credit means all working families, who aren’t receiving a main benefit payment and fall below an income threshold, can expect to receive the credit regardless of how many hours they work.
The tax credit of $72.50 per week, or $3770 a year, has previously been received by sole parents working 20 hours or more a week, or couples working 30 hours a week.
Beneficiaries, those with dependents and superannuitants also get a doubling of the winter energy payment to $40 a week for single people over the winter months.
There are also wage subsidies for up to 12 weeks available to some employers that can show the impact of the economic downturn on their businesses that will keep more people in work than would otherwise be.
There is also a special benefit available to people who have to self-isolate for up to 8 weeks. This has been made available for the self-employed as well. (See Employer COVID-19 wage subsidy and leave payment information sheet)
There is additional spending of $500 million on the health sector. This is another good start but there are massive deficits – financial, material and human – that needs to be overcome at speed. Private hospitals should be made part of the public health sector to help achive these goals.
The estimated overall impact this government package is estimated to be worth a boost of 4% of gross domestic product.
All forms of public transport needs to be integrated and planned for the duration of the crisis. Again this sector should be brought under public control and democratic planning. Profit should not determine success and failure.
Transport and cleaning staff should be paid at least the living wage immediately.
The measures the government taken to combat the impact of the impending social and economic crisis and developing world recession are the opposite of what happened the last time New Zealand tried to change its economic and political course in the late 1980s and early 1990s.
During that period the government adopted measures that compounded the recessionary impacts of the 1987 sharemarket crash by a massive sell-off of state assets, allowing the so-called “free markets” free sway to impose their havoc, and slashing spending on benefits for the unemployed and other welfare recipients.
The ensuing recession was prolonged and official rates of unemployment went from three to 10 percent. There was a wave of factory closures as tariffs were removed allegedly to make New Zealand more competitive. Wages were cut, penal rates for overtime and weekend work eliminated, unions gutted and their membership collapsed in the private sector never to recover again.
Maori and Pacific families and working-class suburbs like Mangere and Porirua were subject to official unemployment levels of 20-30 percent. The broader “jobless” number which included those wanting more hours or had given up looking was even higher still.
The victims of policies imposed were them further demonised as lazy welfare bludgers.
Working people who had lost their unions and been thrown on the scrap heap were simply told to fend for themselves.
It was made more and more difficult to access basic entitlements like a benefit for being unemployed or having a child.
Basic family life and protections that go with that were torn up by the so-called “neoliberal” revolution. Fast food replaced meals at home. Children went hungry to school.
The impending worldwide economic recession is happening at a time the capitalist system which dominates the planet had already outgrown its usefulness as a wealth creator and has now become a destroyer of social capital, working people’s livelihoods and the planet itself.
The ruling rich used the last big crisis to just further enrich themselves and hoard even more wealth and power. In this crisis working people need to dispossess this class of its wealth and power and reorder society in such a way as to be able to serve the interests of humanity and the planet we exist on.
That system can’t be based on ever-expanding commodity production for private profit.
The virus has exploded the debt pyramids and speculative excesses reflected in the implosion of the world’s stock markets.
A decade of austerity measures in the USA, UK and Europe has created extreme vulnerabilities in the system’s ability to respond with the necessary speed. That has ensured rapid spread of the virus and subsequent massive fatalities.
The class of billionaire one-percenters responsible for this systemic disaster should not be allowed to continue to call the shots.
Economic sanctions should be immediately lifted on all nations suffering them today.
As big businesses and finance companies start collapsing they need to be nationalised and placed under community and worker control rather than simply bailed out and handed back to the class of racketeers who have wrecked the world in the first place.