by David Clark
Labour candidate, Dunedin North
At one level, this is simple stuff. Some people having all of the opportunities while others have very few – just doesn’t feel right. Most of us understand that instinctively. But Stiglitz explains why it makes no economic sense either.
The article uses examples from the USA but the principles apply equally to New Zealand:
1/ Growing inequality equals diminished opportunity. If some of our people are not trained and available for their best contribution to society, we all miss out. In New Zealand one in five children is born into poverty. These kids have to battle the odds. They are more likely to suffer from diseases of poverty, less likely to succeed in the education system, and have higher chances of ending up in the justice system. For our country to get ahead, we need all children to grow up to be net contributors to our economy.
2/ If our brightest are tempted by financial awards away from professions that support the whole of society, and towards those that preserve the interests of a wealthy few, we all miss out. As Stiglitz dryly puts it: “many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy”.
3/ ‘Collective action’ is a requirement for any modern growing economy. Infrastructure is an example: witness growth in China’s high speed rail network. It’s more than 12 times bigger than it was in 2008, four times larger than that in any other country, and projected to continue growing at an astonishing rate. This could not happen in the USA. The truly wealthy cease to value common assets; able to buy what they desire, they have no need for them. Where a critical mass of the truly wealthy exert undue influence on the political process—investment: in infrastructure, education, research, healthcare and other matters related to the common good, dwindles. And we all suffer.
Stiglitz’s article offers some clear reasons why a fairer society is better for everyone. But I’d add a fourth reason why societies where there are fewer disparities tend to be more successful. People work harder when they know the rules of society are fair: when everyone has to do a fair day’s work to live well; when it is always possible for someone born in a family of modest means, to be truly successful in their chosen field.
Dude, shared assets and a good standard of living for those at the bottom are great things to get behind.
The problem for the ‘1 percent’ is that they only have 1 percent of the votes. So how do they get enough of the other 99 percent to vote for top end tax cuts? Oh, that’s right, they buy newspapers and TV networks, and fund bloggers and think tanks, and spontaneous ‘grass roots’ movements.
So we should only expect people to work hard if there is an obvious benefit for them presented clearly in advance?? What about the idea that through hard work first comes reward later?
If we measured poverty in NZ in the same way I see it in the developing world I would be more inclined to agree with your contention. The fact is opportunity exists in NZ for all, it is disguised as hard work.
We have a simple choice of encouraging growth and rewarding success or redistributing limited wealth to the detriment of all. Only one if these options will provide an environment where the poor can prosper (hint- it isn’t the later option)
The Labour Movement reallys shows utter contempt for ordinary people when its supports say things like this.
Every time a majority takes a different view from “derr moovment” (often a misrepresentative collection of zealots) it’s blamed on manipulation by the rich.
How about accepting that, once in a while, people really do think that the position of the Labour Party isn’t what they want?
More concerning than the ability of 1% of the electorate to ‘buy’ votes (which must be pretty ineffective given the amount of time western democracies end up being run by the left) is the ability of 20% or more of the electorate to vote for policies that give them more, paid for by other people, without them having to raise a finger to contribute.
The cleverest thing the Left has done over the last 50 years is to redefine basic concepts to their own ends.
Hence they can talk about ‘poverty’ without it having any relation to the image most people hold in their minds. Ditto with ‘abuse’, ‘bullying’ etc.
Having achieved this they’re then able to hog headlines by claiming that ‘a quater of all children in NZ are living in poverty’ or ‘70% of all children have been bullied’ and using the attendant emotive language to paint a picture that really doesn’t exist.
It was an excellent article, I actually blogged about on my Friendburst blog it is largely an American blogging site. Usually a blog of that nature attracts quite a bit of flack from the Republican / Tea Party nut cases but they stayed away from the comments and the 50 or so comments I received were on the whole very supportive. The blog got 250 views so the right were definitely reading it. I suspect that they were very surprised by the article.
That of course raises the question of the failure of the American media to raise issues like this. To read this sort of stuff you have to look for it.
” In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent.”
That is one of the quotes I used and it is a disgusting situation. Fortunately NZ is still a long way from that.
George. There are approx. 3 million voters in NZ. 20% (or more) = 600,000. According to latest stats, there are 331,500 beneficiaries.
Get a new calculator.
“Every time a majority takes a different view from “derr moovment” (often a misrepresentative collection of zealots) it’s blamed on manipulation by the rich.”
oh you mean like how ACT got less than 4% of the vote but have almost all of their policies implemented within 2 years of that election?
George, you want answers as to why ordinary working folks vote conservative, read the recently deceased Joe Baigent’s “Deer Hunting with Jesus.”
All will be explained in a clear and good read.
Nope, it’s actually the right that has been redefining and using language for their own ends.
http://news.stanford.edu/news/2004/may12/left-512.html
http://www.telegraph.co.uk/comment/columnists/janetdaley/8378365/Budget-2011-Why-the-Tories-cant-talk-about-cutting-taxes.html
http://en.wikipedia.org/wiki/Political_correctness
http://www.npr.org/templates/story/story.php?storyId=5536444
OK, make that ‘over 10%’. The principle remains.
One could have said similar about the Greenies and HC’s last administration. At least one of those policies enacted under Labour will go down as the least supported policy in the history of parliament.
The reviews suggest that it’s a well written and entertaining read, so if I can find it at a resonable cost I’ll give it a try.
At the end of the day, though, the truth remains that it’s far better for most people to be living in the US than in any of the states who ever declared themselves to be ’socialist’. No amount of bellyaching about how unfair it is can change that. All socialism has ever delivered is equality of poverty (unless you’re a top party member, of course).
George has obviously never heard of countries like Norway!
A quote from John Harris, The Guardian. “Whenever a microphone is put in front of a Labour politician, one phrase should pass their lips within seconds: inequality of sacrifice.”
Actually I’ve been skiing in this oil rich country several times.
Even with all the oil their economy was stagnant in the early 80s, with double digit inflation and needed to be rescued by a government of the right. Whose prudent policies Bruntland then kept with once Lab came back into power. Without oil revenues I think the country would be somewhat different.
As long as Greenpeace is given any say in the matter, of course, we’ll never be in a position to generate significant revenues from the exploitation of our natural resources. But then you’ll know all about the implications of the policies of these Labour bedfellows.
@ George: OK, the principle remains … when you quote statistics that are exaggerated by about 100% don’t expect to be taken seriously.
When you’re doing so badly it’s the little perceived victories that are really important, isn’t it Rob…
Yeah like the lucky grampa who found a two for one deal on his cat food!
He decided to invite Maisey around for some chow! 
!
Before the 2008 elections National thought inequality (particularly compared to Australia) was a problem that needed to be fixed. Now, nearly 8 months out from the next elections inequality has ceased to be a problem and it now thinks it is an “advantage”. Is Labour going to let them get away with such a blatant broken promise? I hope not, National deserves to go down heavily for a lie that would do Gadaffi proud.
Marty – when trying to sell NZ’s services to the world a wage rate 30% lower than Australia’s clearly is a competitive advantage.
It may not be one anyone is happy with, or one that anyone wants to see remain in place, but whilst it is there it would be foolish to not point that out to potential purchasers of our services.
George, it’s just kind of duplicitous coming from a party that spent the entire campaign on 2008 beomaning the so-called brain drain and their promise to close the gap…
The 2011 version looks so different – it seems Bill is mocking us all for believing them in 2008
“GUYON The last headline I saw said Australian had dropped its unemployment rate to 4.9%, added 37,800 jobs. Unemployment here pushing 7%, wages 30% higher over there – why wouldn’t you go?
BILL Well, some people will, and that’s fine, but why would we sit round being mesmerised by the fact that some Kiwis go to Australia ? “
Then maybe Labour should actually implement socialist policies instead of the free market capitalism they now stand for.
Somebody has been using my ID to post messages, whoever it is pick your own name! The point is George, National has done a complete flip-flop on its previous election promise – in simple terms it has now been caught telling a whopper and everybody seems a bit afraid to take it to task for its dishonesty. If this policy is so good for the country, why didn’t National have the guts to say this before the election? Answer – it was prepared to go to any lengths of dishonesty and duplicity to win. Should we be surprised? It has happened many times in the past.
Marty – I think you’re misunderstanding English’s comments, either deliberately or otherwise.
Nothing he has said suggests that having a wage gap of 30% between NZ and Oz is policy.
What he said was an acknowledgement that the gap did exist, and that one way to encourage business (and thereby reduce the gap over time) was to emphasise all our competitive advantages, of which that is undoubtedly one.
It’s only ‘policy’ when a party that has very little support, and even less to offer, has the need to clutch at a straw.
george can you explain for me how the government has gone from fixated on the so-called brain-drain and urging us to vote for them to reverse it to “why would we sit round being mesmerised by the fact that some Kiwis go to Australia”
George, can you name the policies/plans English referred to when speaking of the advantages low wage rates give companies for competitiveness of how he would be raising those wages?
“one way to encourage business (and thereby reduce the gap over time”
So, let me understand, you are saying that Bill is saying that having low wages will make nz companies competitive and then they will raise wages which will, make them less competitive?
NZ has had a low wage economy, relative to NZ, for a long time. Has it made NZ busineses more competitive? And how competitive will it be when a large proportion of the workforce heads to Aussie for the higher wages?
Carol it’s a myth. It’s the NZ version of the American Dream. Work harder you lazy workers, you have low wages cos you dont try/work hard enough. Work harder and you will be rewarded.
let’s see the evidence that low wage competitive businesses become high wage competitive business, for people other than the bonus receiving CEOs.
it’s more smoke and mirrors. I know people who still have their belts tight and are waiting for the trickle down Ms Richardson promised all those long years ago.
That doesn’t surprise me, Tracey. And just saw my typo above:
NZ has had a low wage economy, relative to NZ, for a long time
Should be relative to Aussie
“One could have said similar about the Greenies and HC’s last administration. At least one of those policies enacted under Labour will go down as the least supported policy in the history of parliament.”
No george one could say the same thing about the Greens but they would be wrong. Have you even read the information posted for you in another thread showing the full breadth of ACT policy implementation since Nov 2008?
Right toward the end you will notice yet another ACT policy recently implemented, the productivity Commission. No, the gReens who had no one around the Cabinet table have not had their policy implemented to anything like the extent of ACt, and yet greens had at least twice as much mandate as ACT
“A Leadership Council of myself and John Key has been established to regularly consult on major strategic elements of the Government’s programme, review progress towards improvements in the rate of productivity growth, and consider new initiatives.
We meet once a month – or more often as required.
There are seven key elements of our agreement. Here is how they are being progressed.
First, law and order.
The country needs stricter provisions on sentencing, bail and parole.
And our ‘Three Strikes’ Bill is now before Parliament.
It’ll mean recidivist violent or sexual offenders will get mandatory 25 years to life if they commit a third violent offence.
National supported the introduction of the legislation, which is now going to a Select Committee.
Indications are that this clampdown will have widespread public support, as well as being a sensible and effective way of dealing with hardened criminals who need to be taken off the streets.
We will be supporting other reforms of the criminal justice system that provide more security and safety for law-abiding New Zealanders.
Second, climate change.
We campaigned to abolish the Emissions Trading Scheme, which we believe is based on doubtful science and was rushed through without any serious cost benefit analysis.
We have differences with National on this issue but it has agreed to the establishment of a special Parliamentary Select Committee to review the current Emissions Trading Scheme, including carbon taxes.
The key thing we need is a proper assessment of the costs and benefits to New Zealand of the ETS.
It’s shocking that has not yet been done, with the ETS guaranteed to put up costs to families and businesses, and deepen the impact of the recession.
We want that analysis carried out.
If a rigorous Select Sommittee examination results in a credible case in support of the scheme, or perhaps a carbon tax, we will support it.
Third, controlling government expenditure.
We believe in small government.
Currently, Government spending is grossly excessive and needs to be brought under control.
I am now a member of the Cabinet Expenditure Control Committee.
A focus of our work is eliminating programmes that do not deliver value for money.
ACT does not want nibbling at the edges of spending.
We want whole programmes that are wasteful and unnecessary to go.
It’s not just central government that is spending wildly and irresponsibly, local government is too.
In my role as Local Government Minister I will be looking at ways to reduce needless regulations and compliance costs, and encourage Councils to keep rate rises to inflation level or below.
Fourth, tax.
ACT believes that, as a timid initial step, we should align personal, trust and company taxes at a maximum of 30 percent.
National has agreed that’s a desirable medium-term goal.
We remain fundamentally committed to substantial reduction in tax rates, and that involves cutting back government spending.
Fifth, reducing red tape and bureaucracy.
New Zealand businesses are being held back – if not bludgeoned to death – by a raft of unnecessary and petty restrictions, rules and regulations.
National has agreed to set up a task force to carry forward work on the
Regulatory Responsibility Bill.
As the Minister for Regulatory Reform I’ve started a sweeping review of rules and regulations in order to cull the unnecessary, the small minded and completely outdated.
Once the initial cull is complete, we’ll be holding annual reviews to make sure the improvement process is ongoing.
We will look at exploring the concept of a New Zealand Productivity Commission associated with the Productivity Commission in Australia in order to support higher productivity growth and improvements in the quality of regulation.
Six – we’re reviewing and reforming the RMA.
The initial changes were announced recently. There will be more.
Beyond the short term, consideration will be given to further improvements – including better mechanisms for water allocation and compensation for regulatory takings of property rights.
High quality advisory groups will be established for such tasks.
We’re also looking at changes to the Building Act and the Local Government Act.
All of these reforms will have a huge impact on productivity and benefit businesses, communities and individuals.
Finally, education.
ACT favours greater choice and competition in education.
National has said it will “work, over time, to increase the education choices available to parents and pupils so families have more freedom to select schooling options that best meet the individual needs of their children.”
So we’ve agreed to set up an inter-Party working group to examine policy options relating to the funding and regulation of schools that will increase parental choice and school autonomy.
Ladies and gentlemen, it is vital we meet the challenge
So are we making progress?
We have our tough sentencing and parole laws going through Parliament.
We are reviewing the ETS.
We are cutting red tape and petty over-regulation, and you will see real progress in this area in the coming months.
Reforms to the RMA have already been announced, with more to come.
And that’s just the first three months.
My team is making an impact as individuals.
Most recently, David Garrett has done an excellent job in promoting and speaking on our ‘Three Strikes’ legislation.
Sir Roger Douglas is getting strong coverage around the country, and his Orewa speech was widely reported by the urban and provincial media.
John Boscawen has been a particularly effective performer in Parliament.
By the next election, I am planning on having 10 ACT MPs.
ACT is making real progress and there’s more to come.
I love being a Minister.
I’ve never had so much fun in my life, and such a sense of adventure.
Thank you.”
As an aside, note the lack of reference to Heather Roy at the very end of Rodney’s speech
“a fundamental problem with the “jobs” narrative that is being driven up by the right wing in this country and used to hammer any worker who might want to have a voice in the economy or world of work. The narrative is largely unchallenged and is holding us back in many areas and is part of the growing corporate dominance over of our society and community.
Basically the story runs like this – and I am simplifying it. Work is a benefit, business is the benefactor and workers are merely the beneficiaries. Workers should be grateful for a job; a job is a privilege; employers should be lauded for the contribution they make to growing economic wealth. This narrative not only devalues the contribution of labour and fails to recognise the exchange of labour for wages that is taking place, but it also provides the justification for the removal of work rights, insufficient pay rates, government subsidies to business and the like. It paints anyone who joins or seeks to organise a union as disloyal, a wrecker or an ingrate, throwing charity back in the face of the giver.
It paints the union as an outsider, an interferer in a relationship based on charity. The employer is to be revered – deference is the name of the game. Employers have bought into this narrative and you hear it regularly in the commentary of their advocacy groups. It is also used here and internationally to justify unsatisfactory and unfair trade arrangement, environmental degradation etc. It is being resisted but is overpowering in many situations. It is similar to the so-called ‘trickle down’ approach – where, if everything is done to make business profitable, the benefits will flow down to the deserving poor. We saw that in the 1990s – but the benefits only trickled up.”
http://www.scoop.co.nz/stories/HL1104/S00081/helen-kelly-the-hobbit-dispute.htm