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.
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.
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:
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]