Polity: OECD on inequality and growth

Written By: - Date published: 7:42 am, December 10th, 2014 - 33 comments
Categories: economy - Tags: , , ,

Reposted from Polity

The OECD announced today:

Widespread increases in income inequality have raised concerns about their potential impact on our societies and economies. New OECD research shows that when income inequality rises, economic growth falls. One reason is that poorer members of society are less able to invest in their education. Tackling inequality can make our societies fairer and our economies stronger.

This argument has been bubbling away for a while, but it is always helpful to have the OECD’s stamp of rigour and authority on a finding.

The OECD goes further than this in New Zealand’s case, estimating that the rapid increase in New Zealand inequality since 1985 has caused growth here to be only about two thirds what it could have been if inequality had stayed the same. This is the biggest negative impact of rising inequality in the OECD, costing every person in New Zealand an average of around $4,000 per year.1

And, here’s the kicker, the OECD also finds that tackling inequality directly, through well designed tax-and-transfer programmes, does not harm growth at all.

New Zealand needs leaders who get all this. Let’s see if National do…

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1. OECD growth comparison figures, my multiplication to get to dollars

33 comments on “Polity: OECD on inequality and growth ”

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  1. Nick K 1
    10 December 2014 at 8:06 am

    It’s rubbish. Just because John Key gets paid more than me doesn’t mean that I don’t have enough money, and therefore cannot afford an education.

    • vto 1.1
      10 December 2014 at 8:19 am

      Well that’s just fine and dandy for you Nick K, but you have completely missed the point of the OECD report.

      Try again silly.

    • One Anonymous Bloke 1.2
      10 December 2014 at 8:21 am

      🙄

      The evidence is strongly in favour of one particular theory for how inequality affects growth: by hindering human capital accumulation income inequality undermines education opportunities for disadvantaged individuals, lowering social mobility and hampering skills development.

      They’re way ahead of you, Nick.

    • mickysavage 1.3
      10 December 2014 at 8:39 am

      Yep bloody left wing OECD, full of socialists and Marxists …

      • tracey 1.3.1
        10 December 2014 at 10:36 am

        A point well made by Robertson

        “Mr Robertson said the report highlights the need for redistribution of taxes and benefits to prevent inequality rather than the trickle-down economics that the National Party has favoured for decades.

        “Governments of all shades have to take a look at this kind of analysis and say: ‘What can we do?’

        “This isn’t the Socialist International telling us this, this is the OECD – the conductor of the trickle-down economics choir saying that the show’s over and there needs to be a different approach.”

        “That growing inequality is actually holding the economy back,” says Mr Little.

        “The more you concentrate wealth in the hands of a few and don’t share it around, you reduce demand, you undermine economic drivers and actually in the long run, it’s bad for the economy.”

        http://www.3news.co.nz/nznews/inequality-damaging-nzs-economy—oecd-2014121008#ixzz3LRHExcIQ

        • Murray Rawshark 1.3.1.1
          10 December 2014 at 8:16 pm

          “the trickle-down economics that the National Party has favoured for decades.”

          Yes they have. Ever since Labour introduced this obscene type of politics. Robertson needs to address that before he has a go at NAct. Labour is still pretending to be different.

    • tracey 1.4
      10 December 2014 at 10:30 am

      I don’t want to explode your head Nick, so please sit down, and breathe…

      Neoliberalism and our form of capitalism doesn’t work for enough people.

      The latest report makes it very clear that Labour and National parties have BOTH contributed to lowering our economic growth by their blind allegiance to failed ideology. Of course this all assumes that economic growth is desirable and I leave it to others to have that debate.

      For now let’s assume that economic growth is a good thing.

      “This compelling evidence proves that addressing high and growing inequality is critical to promote strong and sustained growth and needs to be at the centre of the policy debate,” said OECD Secretary-General Angel Gurría. “Countries that promote equal opportunity for all from an early age are those that will grow and prosper.”

      Here is an important bit

      ” The impact of inequality on growth stems from the gap between the bottom 40 percent with the rest of society, not just the poorest 10 percent. Anti-poverty programmes will not be enough, says the OECD. Cash transfers and increasing access to public services, such as high-quality education, training and healthcare, are an essential social investment to create greater equality of opportunities in the long run.

      The paper also finds no evidence that redistributive policies, such as taxes and social benefits, harm economic growth, provided these policies are well designed, targeted and implemented.”

      You with me so far?

      Given many on the right believe there is no real poverty in New Zealand that leaves them free to focus on “Cash transfers and increasing access to public services, such as high-quality education, training and healthcare, are an essential social investment to create greater equality of opportunities in the long run.”

      All of this assumes that those in politics on the Right and Left actually want to reduce inequality.

      • KJT 1.4.1
        10 December 2014 at 12:16 pm

        Even if we return the fact that continuous growth is unsustainable in a finite world.
        Do those who currently hold most of the wealth really believe they can make only the poorest 90% bear the costs, while they continue to live it up as usual?

        Without the pitchforks appearing?

    • Paul 1.5
      10 December 2014 at 10:45 am

      What an ignorant comment.

    • Murray Rawshark 1.6
      10 December 2014 at 8:13 pm

      If you can afford an education, what’s your excuse for staying ignorant?

  2. les 2
    10 December 2014 at 8:47 am

    ‘Let’s see if National do…’Bill English has given plenty of signals that he doesn’t give a shit!

    • ianmac 2.1
      10 December 2014 at 8:59 am

      Bill English on Morning Report this morning in denial – as usual. Guyon tried to pin him down but Bill the Slippery One.

    • miravox 2.2
      10 December 2014 at 9:08 am

      “Bill English has given plenty of signals that he doesn’t give a shit!”

      If the economic direction is about growth for English the needs to give a shit…

      Rising inequality is estimated to have knocked more than 10 percentage points off growth in Mexico and New Zealand, nearly nine points in the UK, Finland and Norway, and between six and seven points in the United States, Italy and Sweden

      …Otherwise he needs to change his narrative. That should give plenty of ammunition for journalists, no?

    • tracey 2.3
      10 December 2014 at 10:35 am

      Here is English’s problem (well, one of them) and I didn’t hear the interview so don’t know if Espiner pointed this out. Sometimes Bling likes the OECD reports, even when they are about inequality!

      “New Zealand was one of only six developed economies in which both income inequality and disposable income inequality was flat or slightly better between 2007 and 2011, according to the Organisation for Economic Cooperation and Development.

      In its latest report, which looks at the impact of the global financial crisis on inequality across 33 developed economies, the OECD confirms New Zealand performed relatively well through the GFC and its aftermath, Finance Minister Bill English says.

      “The domestic recession in New Zealand under the previous government in early 2008 and the global financial crisis that followed were tough on many New Zealanders and their families,” he says.

      “However, this Government ran large deficits and borrowed through that period to continue its significant support programmes. At the same time, we also set a track back to surplus and supported an economic recovery that is now delivering more jobs and higher incomes.

      “This latest OECD research confirms that while inequality increased in many OECD countries during the global financial crisis, this was not the case in New Zealand.”
      https://www.national.org.nz/news/news/media-releases/detail/2014/06/24/nz-among-better-performers-on-inequality—oecd

    • tracey 2.4
      10 December 2014 at 10:38 am

      Oh and here too, This is Bill accepting the central proposition of the OECD report on economic growth in November 2013

      ” The economy is set to grow 3.3 per cent next year, putting New Zealand in the top six developed countries according to an OECD report.

      The forecast rate would put New Zealand well above the OECD average of 2.4 per cent forecast for next year, and ahead of Australia on 2.7 per cent.

      “This is the latest in a series of encouraging reports on the New Zealand economy, which confirms that we are well placed compared to most other countries,” Finance minister Bill English said.

      The OECD is also forecasting an improvement in the current-account deficit, which was expected to narrow from 4.3 per cent of GDP to 3.6 per cent this year.

      “We still have more work to do, but this is significantly better than the current-account deficits of more than 8 per cent of GDP five years ago and shows that we are making progress towards paying our way in the world,” English said.

      “And it [the OECD] describes the Government’s fiscal prudence in setting a path back to surplus in 2014-15 as appropriate.”

      http://www.stuff.co.nz/business/industries/9421266/Economy-set-to-beat-global-growth-OECD

  3. goodsweat 3
    10 December 2014 at 9:12 am

    When I migrated to Sweden around 2000 the gap between rich and poor was the closest I’ve ever seen it. Supermarket check-out girls were paying off their own places. It was fantastic, I loved it, most did.

    The lowering of EU borders and their socialist sharing nature has pretty much brought it all to a bitter end. There are now about 20 neighbourhoods in Stockholm that ambulance officers can’t enter without an armed Police escort.

    I wonder what would happen in NZ if 3 meals a day were available in schools? The scheme was put in place in Sweden so that both men and women could be equally responsible for working in full-time jobs. It worked a treat. These days the dining rooms with little furniture are being treated as free kid’s restaurants by people that have no intention of working. What would happen in NZ if like in Sweden about 15 years ago the dole for a single man was the average wage of about $600 per week in today’s money?

    Sweden’s ability to provide welfare, their productivity, their equality, they’ve all taken a big hit. I don’t think it’s due to an uncaring neoliberal government but an ever increasing group of people that soak up far more than their fair share of resources and provide very little in return.

    • tracey 3.1
      10 December 2014 at 11:33 am

      Did you read the report?

    • greywarshark 3.2
      10 December 2014 at 11:43 am

      @ goodsweat
      You bring up a good point. The complacency of accepting good things being given to you by right. We have that attitude here from the retired on so-called superannuation. I believe good welfare is where everyone is involved. The important thing is that everyone should be putting into the polity, paid or unpaid, to support it and help it to run. The unpaid work provided is of assistance to assist the whole country and paid workers lives will be happy and satisfactory to them.

      It’s not acceptable to have a welfare system where people who can think are not putting their minds to some task that helps society, people who are able to get around need to be helping somewhat and somewhere with work that helps the community doing needed work. Then welfare is working fairly. Everyone who receives it receives the respect for a citizen. Those who are not well, only do what they can, and they should have as enjoyable and useful a life as is possible.

    • Foreign waka 3.3
      10 December 2014 at 7:06 pm

      You forget to say that this is largely caused by unfettered immigration from the east whose people belief that their plight is caused by the “wealthy” west. Hence the attitude of a lot of immigrants. Coupled with the religious background and to add an element of a generation that has grown up with a sense of entitlement -this spells mayhem.
      Of cause this is not just happening in Sweden but in all the EURO countries that were west of the iron curtain just a 25 years ago.

      Europe comprises 54 countries and there are around 300 languages.
      This is not the USA with a history of 200 years, one language and a belief system that spells “greed is good”.
      Europe is quite a different place with a a few thousand years of history and now victim to an experiment whose outcome is questionable at the least.

  4. tricledrown 4
    10 December 2014 at 9:29 am

    Double Dipton Blinghlish has benefited
    more than just about any other New Zealander by having his mortgage on his wellington home subsidized by $56,000 per year.A free tertiary education govt paid jobs.
    John Keys mother got a state house widows pension child allowance.
    Key got the benefits plus a free tertiary education.
    It was good he was able to have those opportunities, now Key and English are denying anyone else the same opportunity !

  5. Philip Ferguson 5
    10 December 2014 at 9:49 am

    I can understand the temptation of the argument that inequality is bad for economies. After all, the left has been losing the economic arguments – or certainly the economic batttle – for 30 years. Since Labour, bless ’em, gave us ‘Rogernomics’. Plus along comes the respectable OECD and research which suggests that more equal societies produce more dynamic economies.

    But there’s a serious problem with this argument and the research. It is all abstracted from the kind of economy we have. It’s not simply *an* economy, it’s a *capitalist* economy. And it operates according to particular laws of motion, regardless of OECD reports and academic research.

    Massive attacks on the working class were *necessarygot rid of what * for capital in the 1984-1993 period because NZ capital was up shit creek without a paddle. The ruling class spent ten years trying Keynesian ‘solutions’ after the end of the postwar boom in the early 1970s, but they failed to work. So slash and burn was the alternative. While slash and burn got rid of the so-called ‘obstacles to growth’ (unions, penal rates, bits of the welfare state and so on), the result wasn’t the dynamic economy promised by Chicago School economists, so the ruling class had to look elsewhere and we ended up with ‘Third Way’ under the fourth Labour government and a slightly more market version of ‘Third Way’ under Key-English.

    The growth of poverty and inequality are not primarily products of a set of economic policies – they’re a product of the actual workings of the market, of the capitalist economy. The only time in which capitalism narrowed the gaps was in the postwar boom, from late 40s to early 70s; that boom had no precedent and has never returned. And, even during that boom, the lessening of inequality within the First World was accompanied by massive inequality in the Third World.

    Instead of looking at trying to make capitalism work well for everyone – a hopeless task given that it depends on the economic exploitation of the majority – we need to start looking at a better way of producing and distributing the goods and services humanity as a whole needs.

    In the meantime, check out:
    Is inequality the cause of capitalist crises?: http://rdln.wordpress.com/2014/03/13/is-inequality-the-cause-of-capitalist-crises/
    Inequality and capitalist fears: http://rdln.wordpress.com/2014/09/17/inequality-and-capitalist-fears/
    Aso see the vid of an excellent talk by Michael Roberts: http://rdln.wordpress.com/2014/09/17/inequality-and-capitalist-fears/

    I admire the work Max Rashbrooke and others are trying to do. But there are also some problems with it. See: Max Rashbrooke, inequality and the ”c” word: http://rdln.wordpress.com/2014/03/24/inequality-in-new-zealand-report-on-a-meeting/

    An interesting exchange between Max and veteran left-wing activist Don Franks: http://rdln.wordpress.com/2012/09/09/how-to-tackle-poverty/

    Phil

  7. greywarshark 7
    10 December 2014 at 11:29 am

    The OECD is an eminent group which NACTs quote when the figures, measures and memes suit them. But to be shot down by friendly fire! Unconscionable. OECD have turned on their compatriot the New Zealand government with criticism that cuts through their heart of doublethink. Disgraceful. Not to be countenanced.

  8. Draco T Bastard 8
    10 December 2014 at 1:55 pm

    New Zealand needs leaders who get all this. Let’s see if National do…

    Well, we know for a fact that National don’t and will deny the facts about it as they go against their ideology. The big question is if Labour get it and, from what I can make out, they don’t.

    • peterlepaysan 8.1
      10 December 2014 at 8:24 pm

      That is a real worry. Too much caucus infighting to pay attention to what is happening on planet earth (where the membership live).

  9. Dialey 9
    10 December 2014 at 6:45 pm

    Just listened to the interview on RNZ – Econometricians? What on earth is English on about with all his woffle. As my better half said: “sounds like another extra-terrestrial from Planet Key”

  10. Foreign waka 10
    10 December 2014 at 6:45 pm

    Today’s news covered:
    Tax evasion by the rich. Even Mr Morgan admits that since it is permissible, its all good!
    IRD debt ballooned to 9.3 billion, 3 billion being fines and interest. Shortfall of GST 1.8 b- this is company tax. A large chunk are student loans whose owners moved overseas.
    OECD report that the “trickle down” theory does not work and NZ lost an estimated 15.5% growth since the 90’s. Well, those who had to pay for the stupidity knew this all along.
    Fonterra payout predicted to fall below 5%.

    Reading this in conjunction spells:
    Economy in decline (lets not add the housing market in Auckland and Christchurch please as this will come to a halt too) and with less jobs an even lower tax take and higher debt levels. Surplus? Must be a pipe dream.

    Unfortunately, many NZlanders do not know what is going on in Godzone. This makes it so easy to deny the OECD report and give all and sundry a story that rivals with the best of fiction writers.

    • Tracey 10.1
      10 December 2014 at 7:22 pm

      akshully that is not true.

      • Foreign Waka 10.1.1
        10 December 2014 at 8:13 pm

        My guess is you mean that many NZlanders don’t know what is going on in politics? My experience tells me a different story. Many people I know are your average punter whose focus is entirely on making enough money to get by. Cause most haven’t got time for such trivia as a 12 hour working day can be quite long. Reality bites.

  11. Sable 11
    11 December 2014 at 10:49 am

    The MSM who report comments by politicians as fact often without any checks taking place to verify facts has resulted in the people of this country being misled. I know many people who think things are not too bad when in fact they are going to hell. This report comes as no surprise and I doubt things will improve anytime soon.