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2008/01/21

NZ Economics - Poverty + Income distribution

The January 2007 newsletter from Move to New Zealand - a website which seems to be currently targetting the largely ex-UK immigrant market - includes an article which refers to income distribution in NZ for 2006, and shows a graph depicting income distribution in deciles, by gender.
(Graph apparently sourced from Statistics New Zealand.)

The startling thing about this is that, if you had looked at the same statistics for about 1982, you may well have seen a far more egalitarian view. If you studied the economic history of NZ since then, you might be very surprised indeed - especially if you looked at the effects of rising levels of poverty in this "Godzone".

What happened to change the dynamics was the 1984 election of the Labour Party (under a now defunct "first past the post" electoral system), and Labour leader David Lange as the Prime Minister. The outgoing government - which had been described as a more or less "liberal democratic" party - had been led by Robert Muldoon as Prime Minister and Finance Minister. Muldoon had presided over several years of interventionist, restrictive and protective economic management by the government.

David Lange essentially handed over the reigns for economic management to new broom Finance Minister Roger Douglas, who turned out to be what has been described as "a capitalist and a conservative". There ensued several years of "Rogernomics" - economic change, reformation, privatisation and restructuring - which completely altered the economy, but left it still largely reliant on pastoral production. The reduction and finally the removal of most restrictive trade practices and tariffs, and the spinning off of the Reserve Bank as an autonomous body to regulate the economic engine-room, seems to have been largely the result of the application of economic theory/ideology, as directed by relatively green academics employed by Treasury, who operated according to their own peculiar paradigms.

Ego, hubris, arrogance and a surprising amount of what has been called "corruption" and "sharp practice", and huge tax rorts - e.g., the sale of the Bank of New Zealand, the Winebox Affair - meant that those people and an attendant caravan of "golden boys" (NZ icons) - profiteers - could make no mistake and certainly seemed unstoppable. However, on being found out, some icons ended up broke or in prison and some of the more prominent amongst them seem to have been asked to go and live overseas, permanently please.

As Douglas Myers, Chairman of Lion Nathan Ltd. put it in 1997, in Reflections on the Winebox:
  • "Writing about the winebox affair shortly after the report of the Commission of Inquiry came out, Mike Moore described it as a dark and ugly period in New Zealand's history, which changed our political, social and business landscape. He said the public hysteria engendered by political opportunism was one of the main reasons New Zealanders voted for MMP. The fallout for business, the economy and our political institutions has been massive."
NZ - once a welfare state - is currently far from being egalitarian. There is a large and still growing division between two main social classes - The Haves, and The Have-Nots. Research by independent bodies over the years has shown that between 20% to 25% of children in NZ are affected by poverty - figures which successive governments have tended to strenuously deny, probably because to agree to them would be tacit admission of a failure of social policy.

The NZ Child Poverty Action Group has drawn some inarguable and seriously worrying conclusions from its and others' research. For example:
  • "CPAG believes the existence of child poverty is due to policy neglect and can be eliminated."
  • Loan sharks and pokie machines are the two main "Parasites on Poverty". Profits made by this kind of company often come at the expense of families in financial crisis, especially in low socio-economic groups - those trying to bridge the gap between low wages/low income and the money needed to keep a family above the poverty line.
  • "The problem ["Parasites on Poverty"] exists throughout New Zealand but is at its most acute in low income communities."
  • "What impact does poverty have on people?"
Impact of poverty on public health: Despite social policy called "Bridging the Gaps", it did not stop "at risk" children (considered to be those in lower socio-economic, impoverished and/or mainly Maori and Pacific Island families) from incurring increased levels of vaccine-preventable diseases - e.g., especially Meningococcal B. This was becoming Third World stuff.
The Meningococcal B Immunisation Programme introduced by the Ministry of Health was dependant on the development of a database system (the NIR or National Immunisation Register) to manage the administration of the Meningococcal B Immunisation Programme. Apparently, though originally planned as an approx. 12 to 18 month development, the NIR project was beset with mostly predictable difficulties and went into service approx. 12 months late. As the then outgoing Director of Public Health, Colin Tukuitonga put it, the project delay could seem obscured behind a fortunate and corresponding delay in the manufacture and delivery of the vaccine to NZ. (You cannot implement a vaccination programme without a vaccine.)

Poverty + Crime: As the old saw goes, "Poverty is the mother of crime". Thus, perhaps not surprisingly, since 1982 there has been a marked increase in most aspects of crime - especially, for example, crimes such as theft, "home invasion" and associated violence and GBH. Disturbingly, but also perhaps not surprisingly therefore, is the evidence that a population minority comprising a mostly lower socio-economic group forms a disproportionately large share of the total prison population. The disaffected Maoris.

Economic Summary: (extracted from the CIA World Factbook entry for NZ)
  • "Over the past 20 years the government has transformed New Zealand from an agrarian economy dependent on concessionary British market access to a more industrialized, free market economy that can compete globally. This dynamic growth has boosted real incomes (but left behind many at the bottom of the ladder), broadened and deepened the technological capabilities of the industrial sector, and contained inflationary pressures. Per capita income has risen for eight consecutive years and reached $26,000 in 2006 in purchasing power parity terms. Consumer and government spending have driven growth in recent years, and exports picked up in 2006 after struggling for several years. Exports are equal to about 24% of GDP, down from 33 percent of GDP in 2001. Thus far the economy has been resilient, and the Labor Government promises that expenditures on health, education, and pensions will increase proportionately to output."

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