What were – and are – the major drivers behind the major wealth redistribution that has occurred over 30 years across OECD countries?
The policies that delivered this massive redistribution of wealth requires a look.
In the United States it was known as Reaganomics, and in Britain as Thatcherism, after US President Ronald Regan and UK Prime Minister Margaret Thatcher.
The two powerhouse economic leaders set a course that led to an economic framework based on globalisation and underwritten by supply side economics.
In this country, the incoming 1984 Labour Government took these policies and put them on steroids. It was known here as Rogernomics, after Finance Minister Roger Douglas.
The policy foundations are known as supply side economics or trickledown economics. They are underpinned by the pillars of deregulation, privatisation of public assets, monetary control leading to low interest rates, labour deregulation – in large part the destruction of labour and unions and also lower taxes particularly for the wealthy.
The Rogernomics blitzkrieg promised a more efficient and effective delivery of state services. It offered the breakup of state monopolies so that entrepreneurial New Zealanders could dream to start their own business and become self-made millionaires.
The argument was, once we built a more efficient and effective economy, wealth retained by the Government could be redistributed to build wealth for all New Zealanders.
The magic in this policy framework was that all New Zealanders lifestyles would lift and be so good that by the late 1990s we would be the ‘leisure society’ working four days or less a week.
Anyone that stood up against this global tsunami was deemed to be a heretic, a dinosaur, a communist or a nut case.
Not many people put their hands up to be defined as any of the above.
Of course it is true to say that a number of changes were positive but thirty years into this great experiment, there are unintended consequences or perverse results of the policy.
Trickledown economics allows for the most pristine form of capitalism to play out. That is the setup of price-fixing cartels, oligarchs and or monopolies. Either way, trickledown inevitably starts with a big splash, delivers some early wins and then when the new order seizes power wealth becomes aggregated at the top of the new power elites.
Who would have thought at the beginning of Rogernomics that the great brewery barons that led Lion and DB would be owned out of Japan and Holland and now Japan solely?
Who would have thought that our four largest trading banks would all be Australian-owned and that they would transfer between $4-5 billion a year of New Zealand profits across the ditch to Australia?
Who would have thought that electricity is now run by five companies all inviting you on a merry-go-round as they play a pricing game with Kiwis?
Who would have thought that the cream of our manufacturing industries, that may well have led us into a more innovative future, would be destroyed in the name of products made at times by child labour overseas but ultimately by cheap labour that New Zealanders could never compete with?
We were also told New Zealanders were far too dependent on agriculture and we must move away from being so lopsided and dominated in our economy.
So apart from tourism doing outstandingly well – which is all about the race to the bottom
in importing cheap labour to make coffee and serve tables – dairy, beef lamb, fish and forestry are still a significant backbone of the New Zealand economy, even after trickledown.
People that have done extraordinarily well out of the trickledown of course love the status quo and likely have a say over their 40-hour employment contract, and earn enough to feed, clothe, educate and house their families.
While we have low employment, we have thousands of New Zealanders on low incomes who are underemployed because to be efficient and effective you must ensure as the trickledown starts its downward spiral, less and less gets through to the bottom. By the time the trickledown hits the cup at the bottom of town there’s only vapours left.
The end line recipient doesn’t have much bargaining power – apart from his or her labour.
They also have to keep on the right side of the boss. They will bow their heads and do what they have to, ensure they are not deemed – as usual – the problem, because they had the same opportunities as those who tend to have a fuller cup.
So this article has nothing to do with decrying those who work hard and earn a lot. It has everything to do with asking the questions. What sort of society or country do you want to live in? Are you comfortable seeing fellow Kiwis on Struggle Street sleeping in cars and under hedges? And are you comfortable making significant profits, having the whip hand over wages, hours, conditions and therefore the livelihood of your fellow citizen.
We’ve seen a major collapse in integrity and credibility in business leadership in this country, whether it was the collapse of the finance houses or whether it was the captains of industry who sat on the district health boards and pretended that everything was okay. That wages for nurses were good and that buildings that housed patients were fit and healthy for purpose.
We all know differently. We know that in every sector of our community, the great underwrite for this country was that everyone was able to have a fair go. I’m not sure that is the situation.
A fair go can only exist in an open, transparent society. The only institution that can reassert a fair go is the New Zealand Government.
45th wealthiest country (by GDP)
68th wealthiest country
House costs were two to three times average household income
House costs were six to seven times average household income
Source: NZHerald. World Bank