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

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.