Thursday, February 13, 2014

Steve Baron: New Zealand's Titanic Problem

Imagine for a moment you’re in the middle of the Atlantic Ocean aboard the Titanic. You’re in the ballroom having the time of your life rubbing shoulders with other wealthy individuals—the few who could afford such an expensive first class berth on one of the most expensive ships of its day. 

Suddenly the ship lurches and you wonder what the hell happened. Then you bump into Professors Richard Wilkinson and Kate Pickett (authors of The Spirit Level). They’ve just come up from below deck and tell you there’s a massive rip along the side of the ship and it’s taking on water fast. The Captain then makes an announcement over the ships intercom; “Don’t worry, we’re just taking on a little bit of water but the pumps are working well. By the way, we’ve rearranged the deck chairs and the band will play its latest hit song, so you can all sit back and relax without a care in the world”.
Comparably, what a shock it was to hear the Captain of our ship, John Key, announce in his recent ‘Key Notes’ video blog that; “Income inequality has actually reduced”. The reality is that New Zealand society has a colossal rip along its entire side which was highlighted by the statistics in Wilkinson & Pickett’s book. For Key to simply spin such propaganda regarding this devastating social problem is to show a real lack of sagacity and a disconnection with society in general.

Of course it’s not surprising that Key wants to paint a rosy picture, after all it is election year and he doesn’t want anything unbalancing his ship. However, Key ignores this problem at the country’s peril. Income inequality is a curse on us all and certainly far more important than Key’s facile attempt to sidetrack the public with his magniloquent flag debate—surely hypocrisy at its pinnacle  given Key’s refusal to respect the public’s wishes in previous referendums.

Unfortunately wealthy people are often quick to dismiss income inequality as an issue, believing it has little effect on society and probably doesn’t concern them specifically. They often believe income inequality is simply a cunning socialist plan to take yet more money from the rich and give it to the undeserving poor… let the poor work their way up just like John Key and I did, from our humble State house beginnings. The difference is that back in our State house days, we had equal opportunity. Today it’s a completely different ball game for young people. The poor of today do not have equal opportunity to get themselves out of the poverty trap because the steps on the ladder are simply too far apart.

Even though the wealthy don’t realise it, income inequality affects them directly too. The hard part is trying to explain the significance of income inequality and getting politicians to come to grips with it as a serious social problem. It’s like a balance of payments deficit or inflation, it’s there but it doesn’t affect anyone does it? In fact income inequality produces ‘displaced aggression’ and that aggression gets played out in everyday life leading to: child abuse, spousal abuse, substance abuse, youth suicide, petty crime, violent attacks and increased taxes which we all pay to pick up the pieces. Like inflation that eats away at our wealth, income inequality eats away at our society—without us being fully aware of it or even connecting up all the dots.

It’s going to take a leader with guts and foresight to address the problem. It’s going to take a Paul Volcker (Chairman of the US Federal Reserve under Presidents Carter and Reagan from 1979-1987 who showed the world how to smash inflation) to smash income inequality. President Obama is beating the drum on income inequality in the USA, but in reality, whether or not he can do anything about it there, given the USA’s complicated political system, is yet to be seen. Even if Obama or his successors can solve the problem in the USA, their solutions will not necessarily be what New Zealand needs to solve the problem here. Income inequality is a cunning beast and the poison to kill it off in one country doesn’t always work in another. One thing is for sure, dismissing this problem as inconsequential is like saying the Titanic wasn’t in trouble.

Steve Baron is a political scientist, co-editor of the book ‘People Power’ and the Founder of Better Democracy NZ.


Lindsay Mitchell said...

Are you aware of either Peter Saunder's or Christopher Snowden's rebuttal of the Spirit Level?

And for balance Prof Wilkinson and Pickett respond:

My point being their findings are highly controversial.

Also, the data Key is using comes from the offical Household Incomes Survey/Household Economic Survey which is not vulnerable to political manipulation. What data do you think he should use?

"Today it’s a completely different ball game for young people. The poor of today do not have equal opportunity to get themselves out of the poverty trap because the steps on the ladder are simply too far apart."

They have better access to tertiary education and student allowances, though I can agree that right now, due to the GFC, job opportunities are fewer. It is also true however that youth unemployment levels are beginning to fall. And disaffected youth/teen parents are being offered more intense, practical assistance than ever before via MSD-contracted Youth Service providers.

Charter schools are also an attempt to allow committed education providers to do what they know works with children from poor backgrounds.

paul scott said...

I do not agree with you at all.
I think your analogy is absurd and typical of a political intellectual.
It was always quite expensive to take your child through University to a career, or a good future . I know this my father showed me the figures.
When it came time to put my own daughter is was still quite expensive.
No life boat for you dude. Leave now.

Brian said...

Titanic Problems = Titanic answer!!!
Inequality, well it has been with us from time immemorial, and will be with us until the end of that time.
Yes inequality is more visible right now than say it was in the 1950’s, but why? Let us not forget that New Zealand prior to the first Lange Government, was a sheltered, tariff protected paradise; loved by the majority who basked in a a lifestyle of full employment (even if this did mean two workers did the work of one).
Let us not forget that the cost of all this protection fell upon the shoulders of the exporters, who being price takers, competed against protected and government supported firms overseas. While they had to purchase on an inflated union controlled workplace that every government whatever their particular political colour bowed down too. “You have to buy New Zealand made with a “Take it or leave it attitude” from an over protected uneconomic NZ Industry on a cost plus gravy train.”
Before we get too carried away with this problem Steve, let us look at P.M. Key’s problem which is not unique. We are losing the battle to manufacture products in New Zealand; just like Australia, just like the United States, and just like the rest of the Western Countries. No Western Country can hope to compete with those low wage economies, excused from similar health, safety, or environmental costs that our Industries have to face in the production of exports.
Consequently we have high number of unemployed, a situation which could be improved by the simple but effective measure of directing the long term unemployed who unfortunately live away from commercial and industry areas into areas which need labour. As the Greens continue to inform us all, the erosion of our hill country is a grave problem, what better way to cure this problem but by using the unemployed (or even the unemployable) in rectifying this problem?
Shades of Roosevelt’s new deal and similar schemes of the 1930’s! In N.Z. Politically suicidal and therefore unacceptable? Perhaps so under our undemocratic M.M.P change the system!
Of course all this does not fix the real problem that Western Civilisation finds itself in. One answer would be to leave the confines of a U.N. riddled as it is with the third world, environmental problems, human climate change, and its tolerance of Muslim extremism, and anti American attitudes.
Form a Western Civilisation United Nations of affluent countries and let “Trade Begin”. Cruel, unsocial, isolationist, and ignoring the plight of the poor in third world countries! Dead right it is!
But it is one hell of a better bet than our Western Civilisation ending up on the industrial and commercial scrapheap of history, and a permanent feudal debtor to Asia.