Douglas’s reforms were an economic disaster for the country

Roger Douglas is on the campaign trail and third on the ACT list. He’s been given plenty of electoral oxygen by the media to espouse ACT economic policy.

If only we did this or that, he tells us, nirvana would be just around the corner. We’d have higher standards of living, less government interference, more choice and less bureaucracy.

He’s even held some cottage meetings where unsuspecting neighbours are invited to meet and listen to Milton Friedman’s most fervent disciple. He’s not so much a snake-oil salesman as a preacher with the myopic devotion of a religious convert. Having seen the free-market light, no manner of common sense, logic or irrefutable evidence will dim the glorious glow for this true believer.

But we’ve heard and seen it all before. This architect of Rogernomics enacted these policies before as minister of finance in the 1984 Fourth Labour Government and they were disastrous.

The scale of the disaster is apparent from an OECD (Organisation of Economic Co-operation and Development) report, Growing Unequal, which was released last week.

Not that Roger would have necessarily noticed because I’m not aware of a single journalist having questioned him about the social and economic wreckage he left in his wake and which is so cruelly and accurately recorded in the report.

The report’s title refers to the dramatic growth in inequality in OECD countries and New Zealand in particular from 1985 to 2005.

The gap between rich and poor widened rapidly.

Roger Douglas told us there was no alternative to his reforms and there would be no gain without pain. What he neglected to say was that the gains would be for the wealthy and the pain for the poor. And so it was.

We have finally reached the top of the OECD but for the wrong reasons. We are second to none for growth in income inequality from 1985 to 2005 and we are also close to the top for the sharpest increase in poverty over the same 20-year period.

In the first 10 years of Douglas’s policies, incomes for the wealthy rose sharply, while real household incomes for the poor and the middle class slumped.

Has Labour learnt from this and delivered real change in the economic boom times of the past nine years? No.

In its first five years, poverty actually increased and it’s only since Working for Families that the working poor have been assisted. No relief for beneficiaries, though, who continue to suffer through Labour’s refusal to restore benefit levels after they were slashed by National in 1991.

We should be learning big lessons here. In case there was any lingering doubts among New Zealanders, the OECD report tells us the Douglas reforms were a social and economic catastrophe for the country. They were an unmitigated disaster.

Unlike most OECD reports, which National or Labour politicians will selectively use to attack their opponents, this report tells of the betrayal of New Zealanders by both major parties. Both have done their best to ignore it.

Helen Clark is embarrassed that she sat at the Cabinet table with Roger Douglas, while John Key became enormously wealthy from the type of free-market policies imposed under Rogernomics.

Labour wants to bury the 1980s. They’re ashamed they let Roger Douglas loose on the economy. The truth is that Labour’s middle-class activists went along with Rogernomics because the economic carnage was visited mainly on working-class New Zealanders. Urban liberal Labourites were kept on side by the likes of David Lange and Helen Clark, who promoted liberal social policies. The price for the likes of our anti-nuclear policy and homosexual law reform was the destruction of the welfare state.

But still neither National nor Labour is prepared to provide any real break from the free-market economic policies forced on the country by Roger Douglas. Both are still talking so-called free-trade, continuing destruction of New Zealand manufacturing, more user- pays for roads, schools and healthcare. Both parties’ proposed tax cuts disproportionately favour the rich.

Last week I mentioned some socialist-oriented alternatives on offer this election.

In addition to those is the Alliance, who have a well-organised campaign and are polling much higher than ACT across many electorates, not that you’d notice from media coverage. They also have a fully costed alternative economic programme.

So while the long, dark cloud of Rogernomics remains over the country, there are some signs of hope. For a breath of fresh air, have a read of the Alliance manifesto.

Financial crisis should spur discussion of economic alternatives

You’re unlikely to have heard of Sanitarios Maracay but by the end of this column I hope you’ll take the time to find out a bit more.

The international economic crisis has been in the headlines for two months now. For the most part, New Zealand has watched developments from the sidelines of a crisis centred in the arcane world of shareholdings and risk, confidence and speculation, guessing and gambling.

This is John Key’s world where reckless speculation makes you wealthy but honest labour makes you poor. His Merrill Lynch company is now at the front of the queue for billions in corporate welfare.

The most insightful statistic which backgrounds the crisis in the US goes as follows:

In 1980 the value of US financial assets (bank deposits, government and private sector securities and shareholdings) was 120 per cent of gross domestic product (GDP). By 2007 this had grown to 356% of GDP. Thus the value of financial assets had bubbled far beyond the real value of goods and services produced by wage and salary earners. It was value based on financial hot air but like an insane pyramid-selling scheme the value grew as speculation and greed were fuelled by US government-sanctioned stupidity.

As the artificial bubble collapses the crisis will shift from financial markets to the real economy. Early warning signs here have been the collapse of 27 of our 70 finance companies and falling house values.

However, when commentators and politicians talk about hard times ahead it will not only be smaller investors with some spare cash who will be hit. The greatest impact, as always, will be on wage and salary earners. These are the people who create the only real wealth, as measured by GDP, but are now being asked to bail out the parasitic financial markets.

It’s another case of no gain without pain as Minister of Finance Roger Douglas said back in the 1980s. The pain then was reserved for the most vulnerable workers while the huge gains were reserved for a small wealthy elite.

This time round will be no different. It will be the most vulnerable who suffer the most. Low-wage workers will be laid off as production declines, people conserve their cash and the service sector takes big hits.

With such a dramatic crisis unfolding the level of debate has been abysmal. Nowhere in the mainstream media is there more than the most superficial criticism of the markets. The prevailing mood seems to be that once this crisis is over things will more or less return to normal with the current economic structure essentially unchanged. More government regulation will be proposed but not much more will change.

Back in the 1980s Douglas also told us ad infinitum there is no alternative to the free market.

This is as untrue now as it was then.

At least two of the minor parties are promoting real economic alternatives for New Zealanders to consider and these deserve a good airing during the election campaign.

The Workers Party and RAM (Residents Action Movement) are fielding candidates around the country. They both offer socialist alternatives to the capitalist system of running an economy.

The Workers Party slogan is Workers should be running the country while RAM has a whole host of policies to redirect the economy so it works for people rather than market mandarins.

Its worth spending 11 minutes to check a video clip on the Workers Party website which focuses on a company called Sanitarios Maracay in Aragua, Venezuela.

Its a ceramic bathroom products factory which the owner tried to close down. Instead, the workers occupied the factory and restarted production.

They have taken on a Herculean task.

In the middle of a capitalist society it will be almost impossible for the factory to survive because it needs to get raw materials and find markets which are themselves controlled by other capitalist companies who are determined to see the workers’ venture fail.

The factory works with a flat structure whereby the workers themselves make decisions about all aspects of the production, distribution, pricing and marketing. The workers say it is producing for human need rather than private greed or government directive.

The workers are asking the Venezuelan Government to nationalise the company so they can continue to operate it as a worker- controlled business.

New Zealand workers are no less capable of running a factory as a democratic enterprise.

The next time Fisher & Paykel wants to close a plant here we know there are alternatives.

The only benefit of the global financial meltdown would be if it spurred a real discussion of economic alternatives.

Let’s be brave enough to listen to the workers at Sanitarios Maracay.

Education missing in election campaign

With the global financial crisis rolling along as an election backdrop it’s likely important policy areas won’t get the coverage they deserve.

While both main parties are rolling out almost identical proposals in most policy areas, including defending and underwriting private banks, significant policy differences elsewhere are being overlooked. Differences in education (and health) are the most significant.

There is plenty in education to be concerned about. In international comparisons New Zealand students do as well as students anywhere in the world but unlike most other countries we have what’s described as a “long tail of underachievement”. In reality this is the “long tail of poverty” which bedevils children, families and the whole country. After nine years of supposed economic prosperity we still have 175,000 children growing up in families below the poverty line and this group dominates the almost 20% of our children who leave school without reaching basic standards of literacy and numeracy. Despite Working for Families and other initiatives these kids begin school behind the start line and never catch up. The National Party is fond of saying our public schools have failed but these are the kids who are so often not at school or are in perpetual transience between schools without putting down educational roots.

Neither Labour nor National want to face this issue because it calls for profound economic change beyond the jingoism of tax cuts.

Labour points to improved NCEA results from schools in low-income communities in recent years and this reflects positive changes in assessment practice which measure what students know as opposed to predetermining the failure of 50% as under the old School Certificate. Labour recently announced a Pacifika education initiative and there are always several programmes to target Maori underachievement but these focus on symptoms of the problem and will of themselves make little, if any, difference.

National counters that setting national standards in primary and intermediate schools is the answer. They want each child’s progress regularly checked against these standards to identify a child’s strengths and weaknesses and use this information to assist the learning process. In fact this is precisely what schools and teachers have always been doing but for National it fits another agenda. They want these results publicly available for every school. The news media will fall over themselves to provide titillating league tables of primary schools just as they currently do for secondary schools. And what we can predict long before we see the results is success rates which perfectly match the income levels of families in the local community. National will use this mechanism to create a market-driven education system at primary level.

Parents will be encouraged to compete to get their kids into the “best” primary schools in high income areas. The tests themselves would become all important for schools because their reputations will depend on the results so and time will be taken from teaching and learning to “teach to the test”. Many children will be stressed by these “high stakes” assessments and schools will become less creative, more boring and most importantly the overall standard of education and learning will not be improved.

Another area where neither National nor Labour has released significant policy is in the sneaking privatisation of education whereby fees are increasing in all sectors and the quality of education depends on the ability of families and students to pay higher fees at schools or for tertiary education. Labour increased operations grant funding to schools by five percent in this year’s budget which barely met the rate of inflation. National says it will also restrict school funding increases to the rate of inflation.

This is a huge issue. The operations grant is bulk funded to schools so the government is not committed to meeting the actual costs of education. The difference is left to parents and the community to make up. Many schools now raise half their operating costs from sources other than the government.

Funding is a critical issue for tertiary education also. National plans to keep Labour’s interest free student loans and its “fees maxima” policy whereby tertiary fees can only rise above five percent if permission is gained from the Tertiary Education Commission. In practice the five percent has become the minimum with 10% increases approved for some courses.

The hope is that Labour may introduce a universal student allowance. If so this would be a welcome break. As students frequently and rightly point out, they are the only group in the community which must borrow for their food and rent.

Will any of these issues get a fair hearing this election?

Sweatshops taking hold

Can you imagine turning up for work to do a six-hour shift only to be sent home with just an hour’s pay because your computer breaks down. What about being sent home without pay when the person doing the roster has booked too many staff and there aren’t enough computers for everyone. Or imagine a scramble at the start of each shift to get a pair of reasonable headphones rather than be left with broken gear through your shift.

Welcome to work in a call centre. They have sprung up all over the country and are our fastest growing area of employment. They mark the transition in New Zealand’s economy from manufacturing to servicing . . . However, unlike relatively well-paid jobs associated with manufacturing, these jobs are not so flash.

Just looking around some of these centres is an eye-opener. Cheap tables covered with phones and no cubicles. They are noisy workplaces and workers frequently end up with ringing ears after a few hours.

Typically people have targets to meet and the pressure is on. At several centres if you miss the target you simply don’t get shifts allocated to you the next week. No shifts, no income. At another the staff have a target for each day and a monthly target. However, once the monthly target is reached the workers are sent home two or three days with no pay until the start of the following month.

The work is poorly paid, the hours uncertain and week-by- week income is unpredictable.

Employers like this casualised employment because it reduces their employment responsibilities. They like having a large pool of workers to choose from, all working on day-by-day rostered employment and earning on or just above the minimum wage of $12 per hour.

They can use the employees labour as and when they want without concern for the employees’ welfare or income.

There is no doubt the flexibility of many call centres suits some workers. A few hours each day or evening for students is a welcome source of income, but for those raising families it’s hopeless.

Turnover is huge. One worker told me of his call centre where from a staff of 50 most weeks will see 10 people leave and 10 new people start. We’re not a charity, says the owner of one centre when staff request to go to the toilet during a shift.

It’s our 21st century equivalent of Dickensian England.

Unite Union has embarked on a campaign to unionise call centres in New Zealand to support moves by Australian unions faced with threats from their bosses to take the call centre work to New Zealand where the pay and conditions are poorer. So concerned have the Australian unions been that they sent a union organiser to New Zealand for several weeks earlier his year to help kick off the campaign.

Inbound call centres, such as telephone faults or telephone banking, are increasingly being shifted to countries such as New Zealand, India, Korea or Thailand where pay rates and conditions of work are particularly poor. Outbound call centres, such as political polling, market research surveys are less likely to be outsourced because ability with the English language is more important.

Call centres compete for contracts with price as a key component. This means wages are held artificially low by market pressures and call centres effectively compete on their wage costs with the workers the losers. Competition to keep wages low is just the sort of competition New Zealand doesn’t need. Hence the union is attempting to negotiate a MECA (Multi Employer Collective Agreement). If pay rates can be stabilised across the sector then companies will compete on the basis of factors other than wages. It could be a win-win situation, but the employers are either negative or hostile to the idea. Their commitment to their employees extends as far as next week’s roster.

The Labour Government talks fondly of the large number of extra jobs which have been created in the economy in the last decade and proudly boasts when New Zealand appears close to the top of the list of the easiest countries in which to do business.

These low-paid call centre jobs are what the government is talking about while being near the top of this easiest-place-to- do-business-list means New Zealand has pathetic labour laws, endemic low pay and narrowly-based trade unions. With both National and Labour adopting employer-comes-first policies nothing here will change quickly.