CTU Alternative Economic Strategy

Written By: - Date published: 4:00 pm, October 30th, 2009 - 24 comments
Categories: economy, workers' rights - Tags:

If you watched the media coverage of last week’s Council of Trade Unions conference you’ll have walked away thinking it was about John Key telling teachers to take a pay cut and some woman threatening to throw a shoe at him.

Entirely missed was the launch of the CTU’s Alternative Economic Strategy. That’s a pity, because at a time when neoliberalism’s failures are more apparent than ever we deserve better than the National-ACT-Treasury echo chamber that currently dominates our economic debate.

Below is a piece from Bill Rosenberg in the latest CTU Economic Bulletin about why the strategy’s needed and how unions and progressive forces can start building a stronger, fairer and more sustainable economic system.

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Seeking Alternatives
Bill Rosenberg, CTU Economist

Discussion on an Alternative Economic Strategy was launched at the CTU Biennial Conference last week. It will be considered by affiliates over the next 6 months, with the intention to finalise it in June 2010. There were two papers provided to the Biennial Conference a short discussion paper and a longer background paper with much more detail. Both are available on the CTU website.

The strategy originally arose from requests from affiliates for proposals on an alternative political economy. But it is particularly timely. The global financial and economic crisis has illustrated the recklessness of deregulated capitalism and demands rethinking of economic assumptions, ideas and policies. And for many people in New Zealand and the world, the economy simply does not work for them, whether it is massive inequalities, unacceptable levels of poverty, in New Zealand and around the world, unfair wage systems, or unsustainable demands on our environment.

This is a major crisis in historical terms the worst financial crisis since the 1930s Depression. It grew out of international policies of domestic and international deregulation and particularly the excessive influence of deregulated finance capital in the economy.

The equivalent of almost two months output of the world economy has been lost US$8 trillion. To the extent it has not been as bad as feared, it is because of government stimulus programmes totalling US$5.5 trillion so far in the US, Europe and Asia, which will leave all the governments affected deeply in debt, and workers paying for it. Despite US$1.9 trillion spent internationally to bail out banks, many are back to their old ways and we are still not sure the financial system is stable.

The United Nations estimates that ‘between 73 and 103 million more people will remain poor or fall into poverty’ as a result of the crisis, mainly in East and South Asia. The economies of the richest countries, those in the OECD, are expected to contract by 4.1 percent in 2009 and unemployment is expected to be at 8.3 percent at the end of 2009 and reach 9.8 percent in 2010.

The economic theories which justify the approach to managing an economy which encourages these trends are commonly known as ‘neoliberalism’. They suited the interests of the large corporations which wanted to expand internationally and the finance sector which funded them. Neoliberalism has at its heart the belief that unregulated markets will produce optimal results for an economy, and that there is little role for government other than to set and enforce the rules that allow the market to function. But contrary to what we are told, there are always alternatives.

Looking at New Zealand it is almost exactly 25 years since the 1984 Labour government was elected and brought neoliberal policies to New Zealand. It was unsuccessful even in its own terms, but hugely destructive of society. Despite enormous pain during the late 1980s and 1990s, there have been weak gains.

ctugraph500

Growth in the economy has been weak compared to other OECD countries, such as Australia, as illustrated in the above graph. This is a symptom of weak productivity growth. Companies have relied on low wages rather than investing to increase productivity, which would in turn allow increases in wages. All this means that there are insufficient parts of the economy which can compete internationally. Exports are hindered by an exchange rate driven by international capital movements rather than the real economy. The economy has been very successful at attracting foreign investment, but it is often low quality. Our international liabilities are at unsustainable levels which drive a constantly high current account deficit creating yet more debt which there is insufficient saving in New Zealand to cover.

Worse, though, have been the effects on working people and beneficiaries. We looked at wages in the September Economic Bulletin. Wages have only just kept up with rising prices. They fell in real terms in the early 1980s and never really recovered. Working people’s incomes have missed out on the substantial productivity increases that have occurred since 1980.

This has helped drive the fastest rising inequality in the 1990s in the OECD, and unacceptable levels of poverty. Poverty peaked in 1994, when one measure showed 26 percent of the population in poverty and 36 percent of children. In 2008 up to 18 percent of the population could still be described as living in poverty and 22 percent of children. Income related rents and Working for Families made a difference for people with paid work but not for low income households whose main source of income is from an income-tested benefit or New Zealand Superannuation. These measures stopped inequality growing rather than reversing the trend.

There are a large number of policy proposals in the Background paper. Many are still sketchy and all are up for debate. They are based on principles (detailed in the Background paper) of Fairness, Participation, Security, Improving living standards, and Sustainability; and a three-pillar framework of Sustainable economic development; Decent work and a good life; and Voice: real participation in workplace, economic and community decision-making. Some examples:

  • Government support of firms, with conditions such as employment creation; export or import substitution potential; and industry standard employment agreements
  • Buy back Telecom’s physical network and begin to buy back the electricity system
  • Stabilise the exchange rate through management of international capital flows and currency controls in cooperation with other nations
  • Finance for local investment through Kiwi bonds, and the NZ Super Fund.
  • A new internationalism: emphasising the need for cooperation rather than always a market approach (such as in trade agreements)
  • Introduce a 45% tax rate for incomes over $150,000
  • A capital gains tax exempting primary homes
  • A Green New Deal
  • Flexisecurity combining employment security with employer and worker flexibility and providing 90% income replacement on job loss for the first year and active labour market policies for those out of work
  • The right for workers to require a Pay and Employment Equity workplace assessment
  • Low interest funding for new housing through the Reserve Bank in the short term and in the longer run, creating a National Housing Strategy
  • 6% compulsory employer Kiwisaver contributions (phased in over 4 years)
  • Improved worker participation and depth and diversity of the news media

We hope that these papers provide a useful framework for a healthy and informed debate that will help take the union movement, and progressive forces within New Zealand, forward to a better society.

[The whole document is available here]

24 comments on “CTU Alternative Economic Strategy ”

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  1. Jcw 1
    30 October 2009 at 5:21 pm

    Flexisecurity combining employment security with employer and worker flexibility and providing 90% income replacement on job loss for the first year and active labour market policies for those out of work.

    Perhaps the worst proposal there. Totally unfundable, not to mention it provides disincentive to seek work for an entire year.

  2. Herodotus 2
    30 October 2009 at 5:34 pm

    As with JCW there are a few items onthis discussion document that worry me, that you are going to far. At least unlike the Labour party you are putting something tangable out there. Many items are very valid. I am affraid that such discussions will be marginalised by far more important issues being driven by personnalities. Some by poor decision making and others as a diversion. e.g trev and his bike, Bill and his house, Jk and his smile & Rodney and his love life.
    I look forward t hearing and hopfully having some input (evan as a blogger input). As I believe that until we have real debate on issues WE ALL LOSE, no matter who is in power.

  3. Bill 3
    30 October 2009 at 5:53 pm

    They have the gall to header this tosh ‘Seeking Alternatives’?

    Hurry up and find those three pillars chaps! And don’t go running off down that third or fourth way. No, no. Quick! Propose the mysterious ‘no label’ way.

    Everyone else calls it the mixed Capitalist market economy way, but hey, you can’t sell the discredited same old same old if you call it by it’s real name.

    Scandinavian model is Capitalism. Green new deal is Capitalism. Your workers cooperatives are wholly dependent upon a Capitalist financial framework and therefore capitalist And the rest of what I’ve read so far is all regulation and nationalisation.

    And they call themselves unionists?

    What about ending the exploitation? The wage slavery? What about proposing something that is actually progressive rather than diminishing the term by tying it to a soft cock intellectual wank on.

    Pertinent comments on the ‘Treasury Provides cover for Nat’s right Wing Agenda’ thread, but I suspect that effective, straight forward simplicity is the last thing they want.

    • Quoth the Raven 3.1
      30 October 2009 at 6:18 pm

      And they call themselves unionists?

      They have every right to call themselves unionists. I support unionism (though not the economic proposals above) and worker self-management. Do you think all unionists have to be anti-market like you? In fact I know of many who are pro-free market and members of the IWW.

      Scandinavian model is Capitalism. Green new deal is Capitalism. Your workers cooperatives are wholly dependent upon a Capitalist financial framework and therefore capitalist And the rest of what I’ve read so far is all regulation and nationalisation.

      Agreed witht he first two. But the third is no reason to oppose worker co-ops. Co-ops are great for workers. They still have to raise capital. You can support one and oppose the other. Also the cooperative movement has always had its involvement with mutual banking and credit. I think you may just oppose them becasue they are still market entities.

      • Bill 3.1.1
        30 October 2009 at 6:31 pm

        Do you know any wobs who are pro capitalist Quoth? I’d sincerely hope not.

        My criticism of this bullshit document might be better put by proposing an alternative title ” How the CTU proposes to save Capitalism”

        On the co-op front, I think that the proposals in the document are fucking ludicrous and would result in co-operatives in name only insofar as they are wedded to profit motive and (it seems) to be utterly dependent on external financial structures for ever and the day. What are the internal structures? do they perpetuate exploitative divisions of labour? I doubt the CTU authors even bothered to ask such fundamental questions

        I’m a strong advocate of workers collectives. You know that, or should do from previous comments I’ve made here. In my experience, workers collectives stand in opposition to exploitative models of capitalist production rather than being ‘feel good’ mimics of those models.

        • Quoth the Raven 3.1.1.1
          30 October 2009 at 6:55 pm

          Do you know any wobs who are pro capitalist Quoth? I’d sincerely hope not.

          I suppose it depends on your definition of capitalism Bill, but not what most people think of.

          I see no merit in the CTUs plans either.

          The internal structure is important, but by definition it’s going to be at least somewhat better than the standard firm.

          I don’t see any reason to oppose it simply because they need to get external finance. They have to start somewhere.

          • Draco T Bastard 3.1.1.1.1
            30 October 2009 at 10:48 pm

            When in doubt, use a dictionary – that way there won’t be any confusion…

            hahahahaha

            yeah, right – I was joking 😛

            The problem is that there are, essentially, two meanings for the word capitalism. The first is the one in the dictionary and the second could be defined as financial capitalism which is more concerned with the creation, accumulation and control of money (ie, banking). Bill seems to be more concerned with the latter in this instance than the former but I’m pretty sure he doesn’t like the former either.

            • Quoth the Raven 3.1.1.1.1.1
              31 October 2009 at 3:13 pm

              To the second. The creation and control of money are operations of the state. Hence the free market argument against fiat money.

            • RedLogix 3.1.1.1.1.2
              31 October 2009 at 3:30 pm

              The creation and control of money are operations of the state.

              So you’re a Chartalist then?

              You may be interested in Bill Mitchell’s work.

            • Quoth the Raven 3.1.1.1.1.3
              31 October 2009 at 3:45 pm

              Hadn’t heard of them. I’m merely skeptical of fiat money.

            • RedLogix 3.1.1.1.1.4
              31 October 2009 at 4:03 pm

              Neither had I until Steven Keen very generously referenced Bill Mitchell here.

              Turns out that the vast majority of money in existence is not govt printed fiat money, not even when leveraged by the famous ‘money multiplier’ effect… most of the money in circulation is pure credit, brought into existence solely through the operation of banks making mortgages, overdrafts and credit cards.

              The vital question I have never been able to satisfactorily answer is, why do privately owned banks have the privilege of creating credit and then charging interest? How did private entities gain this virtual monopoly over money supply?

              The Chartalist argument put simply, restores the right of money creation back to the State where it rightfully belongs.

            • Quoth the Raven 3.1.1.1.1.5
              31 October 2009 at 4:21 pm

              Red – You can’t escape central banks. They print the money. They’re the banker’s bank. I simply cannot see how they could possibly have the privilege you speak of without central banking. Try reading the relevant chapters of Rothbard’s Mystery of Banking

            • RedLogix 3.1.1.1.1.6
              31 October 2009 at 4:34 pm

              If Central Bank fiat money was the sole arbiter of money supply then following the classical ‘money multiplier’ effect, the total money supply would be M0 divided by the prevailing Reserve Ratios (typically about 10%). ie M3 = M0/0.1

              But in reality the M3 supply is many, many times this value. It got so out of control by 2005 that the US govt stopped publishing M3 numbers cos they were just plain embarrasing. The fact is that what we really have is a pure credit money supply system, with a small central bank fiat money system retained for cosmetic and ideological purposes.

              Yesterday I posed the question, why is it that everyone gets panicky and obsessive with unions driving wage inflation (when unions have been regulated to an inch of their lives and haven’t driven inflation in decades)… but we blithely accept asset price inflation driven by a lightly regulated banking industry printing uncontrolled amounts of credit?

            • Quoth the Raven 3.1.1.1.1.7
              31 October 2009 at 4:55 pm

              Red – I’m not an expert on this but I believe the answer comes back to fractional reserve banking. You’ve got to ask yourself how fractional reserve banking could occur to the extent it does now on the free market. The answer as Rothbard notes in that piece is either you enforce a greater reserve or have free banking.

      • rave 3.1.2
        31 October 2009 at 1:24 am

        Ravin do you mean IWW as in international wankers of the world?
        Free market unions is an oxymoron. The free market advocates consider all individuals to be sovereign and as soon individuals ‘combine’ (read conspire) to form a ‘union’ they are taking advantage of individuals like Bill Gates and Warren Buffet who of course have a backroom combination going with the Federal Reserve, the military,the media, the church and anyone else who props up the capitalist system.
        The problem with the old recycled AES of the union tops is that it is dumb and doesnt see this reality and hopes that by getting down on its knees and sucking they will get more than a kick in the teeth.
        The crisis wasnt caused by deregulated finance capital, but by a surplus of profits that went into speculation instead of production. And there is nothing in the system to stop this happening again and again until it is thrown out. Regulation is no answer, revolution is.

        • Quoth the Raven 3.1.2.1
          31 October 2009 at 3:00 pm

          Trust a marxist to call workers wankers.

          Regulation is no answer. I agree there.

          All individuals aren’t sovereign now, but they ought to be. I believe that.

          Free market unions are not an oxymoron. Unions are part of the market. They are private entities involved in bargaining on the market.

          The crisis wasnt caused by deregulated finance capital, but by a surplus of profits that went into speculation instead of production. And there is nothing in the system to stop this happening again and again until it is thrown out. Regulation is no answer, revolution is.

          The causes of the crisis were multiple. You mentioned the federal reserve. Why don’t you look at that and the rest of the state’s role in this crisis. As to the “surplus of profits” one would think considering Marx’s predicitions that in all the time past since his time it would be pretty bloody low by now, or not?

          Evolution not revolution is the answer.

    • roger nome 3.2
      31 October 2009 at 8:06 am

      heh – i don’t think the union movement is looking to revisit “Black Tuesday” Billy.

      http://www.nzhistory.net.nz/politics/black-tuesday/the-1912-waihi-strike

      What you’re proposing is NZ to be torn apart by ideological class war. But what you haven’t learned is that kiwis are more interested in rugby and beer than politics, and would rather spend an hour or so shouting drunkenly at their TV screen than tending to a barracade.

      Your approach is lacking in common sense.

  4. Daveo 4
    30 October 2009 at 10:41 pm

    Bill, I imagine they’re looking to a set of policies that could actually be implemented without socialist revolution.That means working within capitalism for the time being.

    I mean, feel free to argue for socialist revolution if you like, but the CTU doesn’t have the mandate to call for that. Politics is the art of the possible. You want hardline socialism, you go convince enough workers and the CTU will be right behind you.

    • bill 4.1
      31 October 2009 at 12:48 pm

      Jeez!

      The CTU release a discussion document. I’ll emphasise that….a discussion document on proposals for the future….or possible futures.

      And they have tied and limited the discussion to a perpetuation of Capitalism. That is where my criticism is…on the limitations that have been placed on the discussion.

      I never said they should call for a fucking revolution as some of the comments contend. That, in my opinion, would not be their call to make. Ever.

      But. It’s a discussion document. From a union body. And their horizons seem to be on a par with what I’d expect from a knitting circle or similar.

      It is obvious even from this middle of the roadish pro-social democracy blog that I am most assuredly not alone in being sick and tired of wage slavery; that I am not the only one who is over being forced to participate in the death of my planets living systems in order to avoid acute chronic poverty….killing my planet to live.

      And the institutions that should embody, at least to a degree, the more radical expressions of discontent and hope from the working classes has settled for being complacently and wholly capitalist.

  5. Edosan 5
    30 October 2009 at 10:52 pm

    I support many of these propositions. A few have me a bit worried though.

    “Government support of firms (with) … import substitution potential”

    -Surely companies remaining competitive is still a good thing right?

    • Daveo 5.1
      30 October 2009 at 11:00 pm

      Well, they’re a bunch of proposals for discussion at this stage, so I guess by nature they’re wide-ranging and up for debate. I’m not sold on all of them, but I think there are some good ideas in there that are worth wider discussion.

    • Quoth the Raven 5.2
      31 October 2009 at 3:01 pm

      Sounds like corporate welfare to me.

  6. Edosan 6
    30 October 2009 at 11:10 pm

    Definately, It’s good to see.

  7. roger nome 7
    31 October 2009 at 8:23 am

    I see that the CTU still isn’t advocating for a return to centralised collective bargaining/an Awards sytem. So all workers get in the impossible to unionise, and sizable, small business sector is the minimum wage for protection against exploitation?

    I just don’t see how you can increase worker participation in those work places without having government mandated participation requirements through an Awards system.

    The economics of organising work-places with below 20 workers just doesn’t stack up, and they make up about 30% of paid positions. It’s astounding that the CTU’s vision excludes the working lives of these people.