The death of trickle down economics and the mess we’re in

Written By: - Date published: 7:11 am, June 17th, 2015 - 138 comments
Categories: capitalism, class war, economy, housing, poverty - Tags: , , , , , ,

As National’s Auckland housing omnishambles spirals out of control it is of course the poor that suffer the most. There was a good summary in The Herald yesterday:

Vulnerable worse off in frantic housing market

Record numbers of people are sleeping rough or in cars this winter as Auckland’s desperate housing shortage makes life harder than ever for those at the bottom of the city’s frantic housing market.

The Auckland City Mission and Lifewise, which work with the homeless, say people are sleeping in cars and outside heating vents at all-night supermarkets and anywhere else they can get some shelter from the cold.

“There are more and more people who are not only rough sleeping but who sleep in their cars and who sleep in accommodation that is inappropriate,” said the City Missioner of the past 17 years, Dame Diane Robertson. “The incidence is higher than it has ever been, and it is much more visible than it has ever been.

Welcome to the “brighter future”, I think we’re “on the cusp of something special”, don’t you?.

National’s standard response to poverty is that the poor just need to get motivated and get a job. There are many (many) problems with that glib simplification, these days the biggest one is that many working people are in poverty too. Welcome to the NZ of the working poor – I’ve written about it before (here, here). In England, for example, “Over half of all families in poverty are also in work”. Another study on Child poverty and social exclusion has just reached the same conclusion: “Analysing the characteristics of poor children it confirms that now a majority of poor children are living in households with someone in employment”.

Policies that weaken the rights of workers and keep wages low are not only keeping people in poverty, they are bad for the economy too. The OECD reckons that growing inequality in NZ since 1985 has held growth back by a third. The IMF reaches similar conclusions. Just yesterday in fact, the latest from the IMF:

Pay low-income families more to boost economic growth, says IMF

Study indicates stagnating incomes of the poor and middle classes could have been instrumental in the financial crisis

The idea that increased income inequality makes economies more dynamic has been rejected by an International Monetary Fund study, which shows the widening income gap between rich and poor is bad for growth.

A report by five IMF economists dismissed “trickle-down” economics, and said that if governments wanted to increase the pace of growth they should concentrate on helping the poorest 20% of citizens.

The study – covering advanced, emerging and developing countries – said technological progress, weaker trade unions, globalisation and tax policies that favoured the wealthy had all played their part in making widening inequality “the defining challenge of our time”.

Read on for plenty more. Raising the income of the poorest 20% is good for us all, but here in NZ we’re working on the opposite.

It’s all connected. Low wages that lead to increasing poverty that leads to low growth that contributes to property speculation that drives up property prices and rents that consume a larger proportion of income that combines with low wages to increase poverty… and so on. The policy settings are wrong everywhere. What a mess.

138 comments on “The death of trickle down economics and the mess we’re in”

  1. One Anonymous Bloke 1

    The IMF are late to the party, aren’t they, considering this is what the Left has been telling them since before they started on the experiment.

    Have they apologised for the part they played, the ruined lives, the death?

    • Colonial Rawshark 1.1

      if you observe the way the IMF are running things in Greece, demanding further cuts to pensions and a rise in VAT, it would seem not all their departments have rceived the memo.

      • AmaKiwi 1.1.2

        Viper, you’re confused. The IMF thinks someone (maybe the tooth fairy) should help the poorest 20%.

        Viper, you must NOT confuse helping the poor with me not getting back my $500 million I loaned them.

        The poor will be best served by learning fiscal responsibility. After that I am prepared to help them by buying their remaining assets at fire sale prices.

        Remember the Golden Rule: Those who have the gold make the rules.

  2. Tracey 2

    Given that John Key is constantly refusing to say there is a housing crisis in Auckland, it will be interesting to see what this Government argues in support of its interpretation of the right to buy of Iwi…

    Key said

    “”We don’t think the Government wanting to provide housing on existing Government land triggers a right of first refusal.”

    BUT delaying the payment required by a private company to purchase the land isn’t the same as it being a public venture. Or for public benefit per se

    Then there is this from English in 2014

    “New Housing NZ Minister Bill English is pushing ahead with reforms to the Government’s NZ$18.7 billion stock of state houses that he hopes could ramp up the development of social housing by Iwi and other community-owned housing providers to address a massive shortage of affordable housing.

    The reforms could see billions of dollars worth of state houses and land sold to Iwi and community groups that use hundreds of millions of dollars of state subsidies for social housing to fund the redevelopment and expansion of affordable housing. Valuing those state housing assets and then financing those redevelopments privately, possibly through banks and pension funds, will be the major challenges.”
    http://www.hivenews.co.nz/articles/721-english-pushing-ahead-with-housing-nz-reforms

    Leaving aside the desire to involve iwi in the development of state housing, This gives one definition of “social housing”.

    Then English said this

    “English said he expected the Government to be in position to begin selling houses in the first quarter of 2015, although in many areas consultation with Iwi groups would have to be completed before any sales could be made given the land was subject to Treaty of Waitangi clauses granting Iwi Right of First Refusal (RFR) when Crown land is sold.‘”

    • dukeofurl 2.1

      Who is the ‘Housing’ minister ?

      Is it Nick ‘You cant make this up’ Smith

      or is it Bill ‘ I cant meet my own targets’ English,

      or is it Paula ‘I am making this up” Bennett

  3. vto 3

    it’s like shouting into the wind …..

  4. Capn Insano 4

    I’d bet that Wrong Key and Billock will say the IMF is wrong too like they did with the OECD. They’re right, everyone else is wrong, they are poster-children for Dunning Kruger.

    p.s. it’s also Labour’s fault, and the Greens, and journalists…

    • AmaKiwi 4.1

      They will say nothing.

      The front pages will be filled with car crashes, animal stories, and weather warnings.

      • Mike S 4.1.1

        And don’t forget the flag, I wouldn’t be surprised if that’s one of the key pieces of advice given to the Government by it’s propaganda people – If you need to distract the sheeple from thinking about real issues then talk about the flag again. Or come up with some new way of blaming beneficiaries for everything, the sheeple love that shit.

  5. Gosman 5

    Congratulations on knocking down another strawman that the left has created.

    • vto 5.1

      I imagine it is a bit hard to stomach such strongly held beliefs being shown to be utter nonsense.

      You should get yourself an open mind

      • Gosman 5.1.1

        Have you ever argued with someone who promoted the ‘Trickle-down’ theory?

        • vto 5.1.1.1

          What is your understanding of the trickle down theory?

          • Tracey 5.1.1.1.1

            Don’t (please) play into his derail. This one, with Venezuela are his MO. This will become a discussion about whether a description of rhetoric justifying back door subsidies for businesses etc as “trickle down” is an actual economic theory and the thrust of the IMF report will be lost.

        • Tracey 5.1.1.2

          Stop being churlish. It’s a description of policy motivated (in wholeor part) by the notion that idea “that economic benefits provided to businesses and upper income levels will indirectly benefit poorer members of society when the resources inevitably “trickle down” to them.”

          IF you are trying to suggest that modern governments don’t suggest that by making businesses strong and profitable and expanding GDP the low wage earners will benefit you are being disingenuous.

          IT is a description.

          Take your red herring and FOG thinking and stop deliberately derailing the thread.

        • Rae 5.1.1.3

          What’s to argue – it does not work

          • Coffee Connoisseur 5.1.1.3.1

            A little bit like the wealth redistribution model in general. But hey lets keep doing the same shit all the while hoping wishing and praying for a different outcome.

        • Lanthanide 5.1.1.4

          How was “tax cuts for the rich” not trickle-down theory?

          Apparently cutting taxes for the rich would encourage people to work more and increase productivity and growth.

          Actually pretty much all research on the subject shows you get better growth and productivity when you cut the lower rates of taxes because those people spend into the economy directly. In terms of encouraging people to work more, adjusting abatement rates on benefits, which produce high effective marginal tax rates, is more effective than fiddling with rates at the top.

          • dukeofurl 5.1.1.4.1

            Plus all the ‘cousins’ of TrickleDown.

            Heres my short list

            Labour market inefficiencies- paid too much

            Skills Shortage- we dont want to pay them more

            Flexible labour market- Zero Hours

        • adam 5.1.1.5

          you

        • joe90 5.1.1.6

          Have you ever argued with someone who promoted the ‘Trickle-down’ theory

          You’re right, wingnuts promote ‘supply side’ theory.

          Yes, Stockman conceded, when one stripped away the new rhetoric emphasizing across-the-board cuts, the supply-side theory was really new clothes for the unpopular doctrine of the old Republican orthodoxy. “It’s kind of hard to sell ‘trickle down,'” he explained, “so the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory.”

          http://www.theatlantic.com/magazine/archive/1981/12/the-education-of-david-stockman/305760/?single_page=true

  6. Jenny Kirk 6

    “”A report by five IMF economists dismissed “trickle-down” economics,”” –

    quite frankly, its about bloody time !

    But the IMF won’t offer any assistance in helping clean up the mess they helped create. No way.

  7. Ad 7

    Nice quote from the day on inequality:

    Johann Rupert, the owner of Cartier, is worried that the commoners are ready to run the jewels.

    Speaking last Monday to the Financial Times Business of Luxury Summit in Monaco, an event reported on by Bloomberg, the South African billionaire said the social dangers created by the entrenched structural inequities of late capitalism “keeps me awake at night.”

    “How is society going to cope with structural unemployment and the envy, hatred and the social warfare?” he said. “We are destroying the middle classes at this stage and it will affect us. It’s unfair.” Continuing in dire terms, he said: “We’re in for a huge change in society. Get used to it.”

    “And be prepared.”

    So it was that Johann Rupert—worth an estimated $7.5 billion as owner of more than 20 luxury brands—worried aloud to the congregated capitalists that luxury-goods markets will suffer during widespread unrest and class war, and that, as Bloomberg paraphrased, “the rich will want to conceal their wealth.”

    • Tracey 7.1

      He sounds like Marx 😉

      • Ad 7.1.1

        A very beautifully dressed Marx.

        • Tracey 7.1.1.1

          hehehehe. He describes the same degradation but with “slightly” different words…

          “Capitalism (according to Marxist theory) can no longer sustain the living standards of the population due to its need to compensate for falling rates of profit by driving down wages, cutting social benefits and pursuing military aggression.”

          wikipedia

          Sounds like a description of the National Party vision for NZ though, doesn’t it. 😉

          http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10718419
          http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10876513
          http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11407112

        • Colonial Rawshark 7.1.1.2

          Marx was very comfortably off he was by no means a member of the underclasses….

          • te reo putake 7.1.1.2.1

            Er, no. Marx most of his adult life without support from his family and lived the latter years of his life mainly living off Engel’s charity and surviving in a series of rough houses in London. 3 of his children died of illnesses associated with poverty.

            • Ad 7.1.1.2.1.1

              As a member of the Terminally Bourgeoise, I feel the aspiration to luxury goods like anyone, but I have that perpetual nagging feeling that I have to save like a bastard for retirement first and foremost. The Retirement Commissioner’s savings targets for a reasonable life grow ever more distant.

            • McFlock 7.1.1.2.1.2

              Yeah.

              Basically, Das Kapital is probably one of the best recent-history examples of unpaid labour having a high social impact.

            • adam 7.1.1.2.1.3

              Still had his maid though, te reo putake…

              • Helene Demuth was more than a mere maid, adam! She was a household manager for Marx, and after his death, Engels. She also helped curate and compile Marx’s writings with Engels.

                There’s a lot of debate about her child’s father. While it’s alleged to be Marx, Engels claimed the boy and looked out for mother and son. Hemuth is buried in the Marx plot in Highgate cemetery, apparently fulfilling the wish of Jenny von Westphalen, Marx’s wife, which suggests there was no ill will between them.

                As with most things financial, Marx didn’t pay for her. Initially the salary (which I imagine would be peanuts) was met by the family of Marx’s wife, Jenny, and latterly by Engels. Engels subsidised Marx in London because he recognised the value of his thinking, and wanted him to be able to work full time on his writing, but the Marx family were never far from penury.

                • adam

                  But he still had middle class pretensions. Via, the having a housekeeper/maid. Don’t care about people’s sexual relations – find them just pitiful arguments. If Marx fathered the child, so what – was the child raised in a warm, loving, safe environment? That is what interests me. People’s sex lives are their own – and to dismiss someone because of sex, seems lazy thinking to me.

                  Always liked Engels for what he did for Marx, more than half decent. I think Engel is under rated, his book “The Condition of the Working Class in England” should be more widely read. And “The Origin of the Family, Private Property and the State” is another woefully overlooked by many socialists.

  8. Enough is Enough 8

    “National’s standard response to poverty is that the poor just need to get motivated and get a job”

    Source?

    • vto 8.1

      “poor lifestyle choices”

      straight from the ass’s mouth

    • Charles 8.2

      Source? What difference would it make to you?

      “National believes that any job is a good job.” ~ Paula Bennet.

      On ever decreasing wages, ever increasing uncertainty of hours, with National working hard to make health and safety laws less effectual, and working, more dangerous. Yup, anyone should do well on that recipe of stupid.

      Source? The last six years.

      • Enough is Enough 8.2.1

        When you are trying to bring down a very popular government it is very important to me that we don’t use hyperbole that can easily be dismissed and ignored by those on the right.

        If someone from National has said “the poor should get motivated and get a job” then lets get stuck into them for it.

        But I can’t find any example of them saying such a thing, or it anyway being a “standard response”.

        • vto 8.2.1.1

          again, “poor lifestyle choices”

          straight from the ass’s mouth

          • Enough is Enough 8.2.1.1.1

            Again – Is that their standard response?

            • vto 8.2.1.1.1.1

              It is an “example of them saying such a thing”

              Of course the Nats don’t use that as their “standard” response as that would make them look as bad as their nasty mean supporters who mutter that shit all day every day. It is the Nats “sometime” response to remind their nasty mean supporters of what they would like to say.

              This is the thinking of those on the right imo.

              • Enough is Enough

                I certainly don’t disagree with you that this is sadly the standard thinking of a large sector of society.

                However National’s PR machine ensures that their standard response is in fact the very opposite of what Rob claims.

                The point is that it is very hard to gain traction in an argument when we say things about National that aren’t in fact true. They can simply turn around and call bullshit on us.

                • Macro

                  National have put guards on the door of every WINZ. You have to have an appointment, and ID even to get in. The hurdles are made higher and higher at every turn. If you have poor communication skills the ability to gain now what one is entitled to is too much. The number gaining assistance drops – which is what National continually crow about, and the numbers sleeping rough grows. It’s simple really. You just have to point to the increased numbers on the streets and the ever increasing number of food parcels being issued.
                  Furthermore there are more and more requirements for those receiving assistance to be either job seeking or having to prove more rigorous tests for ill-health, or less time to care for children. The total emphasis on all of this is for people – what ever their circumstances – to be either seeking work or in some crap dehumanizing job paying peanuts so National can boast about more people in the work force eg a comment by Wayne on Pundit a few weeks back. (which actually doesn’t mean more people in employment or more jobs – it means there are more looking for work).
                  So yeah!
                  “National’s standard response to poverty is that the poor just need to get motivated and get a job”

  9. Colonial Rawshark 9

    The intellectual recognition is important but the left lacks power and leverage to force either National or Labour to move further Left. In fact, one can see within Labour an inclination by parts to nudge the party further rightwards.

    BTW will we hear Little or Robertson denounce neoliberalism and free markets as a failed economic ideology? Cunliffe would have. We have in the Andersons Bay Peninsula branch of the Labour Party and would welcome other branches and LECs of the party to do likewise.

    • Tracey 9.1

      What does that look like in practice CR (genuine question). Let’s say Labour/Greens/NZF got Treasury benches and the dismantling began.

      • Colonial Rawshark 9.1.1

        You permanently change some of the underpinnings of day to day economic life in NZ while making sure there is something in it for the 1%, the 0.1%, and the banks/trans-national corporates (because we want this new government to last longer than 1 year).

        So:

        1) a UBI set at $250/week, 100% available from 18 years of age, 33% available from birth.

        2) Lump sum payments of $15K when a citizen reaches 25, 45 and 65 years of age.

        3) A full programme of measures which ends houses as short term speculative investments. Capital tax, capital gains tax, stamp duty, public housing, advantaging long term professional landlords, further restrictions on bank ability to lend on non-occupier property etc.

        4) Reduce extreme wealth inequality with a 50% top income tax rate set at 10x the median wage, a financial assets tax and an FTT.

        5) Jobs guarantee. Anyone who wants a full time job or half time job, gets it, and must work hard to keep it.

        6) Massive industrial, infrastructure and cultural transition to a non-fossil fuel age, over a 20 year period.

        7) Reform of the banking/financial sector, transactions infrastructure, money creation system, etc.

        8) Halve the MMP threshold. A programme of measures to take money out of politics. Reduce the threshold needed to achieve a citizens initiated referendum. Introduce and set a tough threshold for binding referendums. Bill’s idea of set term parliaments.

        9) We court the worlds power elite in ways which help NZ achieve its goals and which are beneficial to them as well.

        10) Strengthen our defence and maritime security sector, including our ability to project into the Pacific and the Antarctic.

        • Tracey 9.1.1.1

          Thanks CR, food for thought indeed.

        • Tracey 9.1.1.2

          Thanks CR, food for thought indeed.

        • Lanthanide 9.1.1.3

          “5) Jobs guarantee. Anyone who wants a full time job or half time job, gets it, and must work hard to keep it.”

          That sounds like a bit of a contradiction. Anyone who wants one gets it, but if they don’t work hard they lose it.

          But then, they fall under the “anyone who wants one gets it” clause again and can just get another job. So where’s the incentive to work hard?

          Also, what are these productive jobs that they’re doing, and where does the money come from to pay for them?

          • Colonial Rawshark 9.1.1.3.1

            But then, they fall under the “anyone who wants one gets it” clause again and can just get another job. So where’s the incentive to work hard?

            Come on Lanth, you can think up systems, procedures and criteria which will serve the objects of the programme. It’s not that difficult to come up with solutions instead of just coming up with problems. You don’t have to keep jumping to Catch 22 recursive loop scenarios you know.

            Also, what are these productive jobs that they’re doing, and where does the money come from to pay for them?

            The Standard comes up with ideas for productive jobs all the time. Public broadcasting, building state houses, flood relief, Christchurch rebuild, improving water quality, rental WOFs, voter enrolment, etc. And that’s not even looking at the creative and cultural life of NZ.

            As for “where does the money come from” – from taxes, from borrowing and from spending into existence. In other words, the usual places.

            • Lanthanide 9.1.1.3.1.1

              It’s not that difficult to come up with solutions instead of just coming up with problems.

              If it’s so easy to come up with solutions, what your solution to the problem I have highlighted?

              You’re the one proposing this scheme. Not me. Seems you should have the answers for obvious problems in it. Either you have the answers, or you haven’t actually thought through this policy at all.

              The Standard comes up with ideas for productive jobs all the time. Public broadcasting, building state houses, flood relief, Christchurch rebuild, improving water quality, rental WOFs, voter enrolment, etc. And that’s not even looking at the creative and cultural life of NZ.

              How many of these currently unemployed people who “want a job and will be given one” have the skills to do the jobs you’ve listed? Who is going to manage all of these new workers? How come these skilled workers don’t already have jobs doing these things?

              As for “where does the money come from” – from taxes, from borrowing and from spending into existence. In other words, the usual places.

              Except “spending into existence” does not happen, at the moment. So once again, you’re proposing a policy of funding these dramatic new policies that is unlikely to sit well with our international trading partners, on whom we rely for our first world standard of living.

              —————–

              Look, I can come up with pie-in-the-sky wishes about how awesome life would be if we did X, Y and Z. But that doesn’t mean X, Y and Z are actually practical to implement, or that when implemented would actually turn out the way it was originally imagined.

              • maui

                Then there’s all the jobs that could be created from shifting to fossil-free. Large scale tree planting projects, refitting homes for energy efficiency, manufacturing of appliances that are ultra efficient, reasearch into alternative fuels/low carbon materials and subsequent production.

                There is a lot of unskilled work in jobs like the above, and if we did it seriously we’d be talking serious economic growth.

              • Colonial Rawshark

                If it’s so easy to come up with solutions, what your solution to the problem I have highlighted?

                Why don’t you give me a million dollars to spend on a working committee and I’ll sort it out on paper?

                But off the top of my head:
                1) You would have to apply for the jobs available as per any other employment.
                2) You would be given significant on the job training (paid like any employer should provide).
                3) You would have tough performance criteria to meet as well as support to meet that expected performance.
                4) If you lost the job through misconduct or extended poor performance, you would be stood down from eligibility from the programme for a minimum 3 month period, and you would lose the ability to apply for premium roles. for a time
                5) If you did the job well and wanted to move on you would be given a professional reference befitting someone who had performed at their role.

                Basically, it’s a real job and you would be expected to perform as such. Not brain science, right?

              • KJT

                “Except “spending into existence” does not happen, at the moment”.

                Where does all that money that China pays for our milk powder come from.?

                • Colonial Rawshark

                  Or the electronic money the US uses to buy Rakon crystal oscillators for their military industrial complex. Or the electronic pounds sterling the UK uses to buy our beef and lamb cuts.

                  Clue: they come from keyboard strokes at their central banks.

                • Lanthanide

                  Key word: China.

                  Not: New Zealand.

                  • Colonial Rawshark

                    And why not NZ? What is your ideological reason for denying the Crown from issuing its own currency?

                    • Lanthanide

                      As I’ve stated many times before, it’s not ideological. I’m simply not assuming that if we print our own money, that there would not be any negative consequences from any other countries in the world, which is what you are doing.

                    • Draco T Bastard

                      I’m simply not assuming that if we print our own money, that there would not be any negative consequences from any other countries in the world, which is what you are doing.

                      No, you just assume that there will be only negative ones and that they’ll destroy the economy. Whereas CV and I have looked at the research and come to the conclusion that there’s only a slight chance of negative effects and a high probability that things would be much better.

                    • Lanthanide

                      @Draco:
                      You and CV, huh? So Gareth Morgan, a noted economist, came up with The Big Kahuna which is a ‘radical’ suggestion of a UBI for New Zealand.

                      How come he didn’t go a step further and suggest social credit, or whatever crazy system it is you’re propounding?

                      Where’s all the experts coming out and backing what you’re saying?

                      How come no other country in the world, including the successful socialist Nordic countries, are doing what you’re suggesting?

                      Is it because they’re all stupid, or is it because actually your ideas don’t work in practice, or at least not in the global geopolitical and financial system the world has developed into?

                    • Draco T Bastard

                      Where’s all the experts coming out and backing what you’re saying?

                      Really? Have you missed all of the links to Positive Money and MMT theory that I and others have linked to?

                      Plenty of experts coming out in favour, you just seem to be ignoring their existence.

                      Is it because they’re all stupid, or is it because actually your ideas don’t work in practice, or at least not in the global geopolitical and financial system the world has developed into?

                      It’s because people, especially the ones who are benefiting from the present failed system, are resistant to change. Similar changes that have happened in the past that took years, decades and some times centuries to change are:

                      1. Slavery – people were actually agitating to get rid of this ~2500 years ago. We finally started to get rid of it 300 years ago. Do you think getting rid of slavery was a good idea or a bad one?
                      2. Women’s Suffrage also took awhile. Do you think allowing women to vote was a good idea or a bad one?
                      3. Dropping the laws against homosexuality and changing the marriage laws to allow gays to wed. Still on going in most of the world. Do you think changing these laws was a good idea or a bad one?

                      Just because it isn’t being implemented doesn’t make it a bad idea, it just means that some selfish arseholes with too much power are standing in the way.

                  • Draco T Bastard

                    Banking systems are the same the world over.

              • Colonial Rawshark

                Look, I can come up with pie-in-the-sky wishes about how awesome life would be if we did X, Y and Z. But that doesn’t mean X, Y and Z are actually practical to implement, or that when implemented would actually turn out the way it was originally imagined.

                Sorry mate, but if you think a jobs guarantee programme is “pie-in-the sky” wishful thinking you must have missed the four decades after WWII where NZ did it.

                We need to buck our ideas up as a nationb. Tinkering with the status quo isn’t going to cut it any more. It is time to envision what we want as a society, and to create the systems and processes which will deliver it.

                • Lanthanide

                  The pie-in-the-sky part is that we can print money (‘spend into existence”) as much as we want, and suffer no ill consequences from our trading partners.

                  • Colonial Rawshark

                    “as much as we want”

                    Wrong mate, as much as is deemed necessary for the welfare of our economy and our citizens. And if you are afraid of “ill consequences” get out of the game. Personally, I think we can do an even better job of working with our trading partners and buying/consuming more of their products. Win win.

                    • Lanthanide

                      “Wrong mate, as much as is deemed necessary for the welfare of our economy and our citizens. ”

                      Which is what, in practice?

                      How do you quantify this?

                      Who deems what is necessary for whom? What is everyone wants $15,000 iwatches? Obviously that’s an extreme case. But what if the definition of poverty becomes “does not have a 42″ TV at home” or “does not have access to fibre broadband”.

                    • Colonial Rawshark

                      Sorry mate but if our civic and community leaders can’t determine what is good for our society and for people in their neighbourhoods, let’s just fuck it all and stay at the pub.

                    • Lanthanide

                      @CV:

                      How many drinks in the pub do you need to have a week before you fall under the poverty line? If poverty is defined as “missing out on a wholesome life as part of society”, then surely going to the pub and drinking beer is a necessity, and not just a want, right?

                    • Colonial Rawshark

                      Lanth, what structural changes to the economy are you proposing? How are you suggesting that life be made far more manageable for those in the bottom 50% of society, and in a way which helps society itself accomplish its goals?

                  • Draco T Bastard

                    Why should there be ill will from our trading partners? We’ll still be able to buy their products and they’ll still be able to buy ours.

                    • Lanthanide

                      International trade relies on trust. If you lose trust, you can lose access to markets.

                      If our dollar drops through the floor, because our trading partners lose trust in our economic system, then it will become much much harder to buy products from them.

                      Similarly, no one may want to buy $NZ off us because they see it as worthless. So then if we sell our milk powder for $US, we can’t then exchange that $US for $NZ, we simply have a bunch of $US on our hands that we can’t print at-will and so have to use that to buy goods on the market denominated in $US, and hence losing the whole advantage of having a sovereign currency in the first place.

                      North Korea is an economic pariah that has to scrape to get all the foreign exchange it can, in order to import technology and other goods they can’t produce themselves. Now obviously they’re an extreme example and the cause of their problems are quite different to the situation I’m outlining, but they are a precedent of how countries can be cut off from international trade.

                    • Colonial Rawshark

                      jesssuz the world is going to be desperately short of protein, of water, of carbohydrates, of trustworthy food sources, of innovative and safe biologicals.

                      And there will be demand for NZD to buy those things with if we make sure that those things are valuable and wanted.

                      What is wrong with you? It’s like you’ve forgotten what the basics of trade is like. The US prints hundreds of billions of dollars a year. Yet demand for US dollars is still sky high. Ever figure out why?

                    • Lanthanide

                      @ CV:
                      “the world going to be”

                      Future tense. So, isn’t, right now. And you’re suggesting we implement these policies right now. I’m discussing them in the current context of the world situation, not what the world will be like in 20 years time (which could be very very different, as you note).

                      “The US prints hundreds of billions of dollars a year. Yet demand for US dollars is still sky high. Ever figure out why?”

                      Oil is priced in $US.

                    • Draco T Bastard

                      International trade relies on trust. If you lose trust, you can lose access to markets.

                      There’s no reason for them to lose trust. If anything, they’d increase trust in our dollar.

                    • Lanthanide

                      @Draco:
                      Just like how everyone gained trust in the Zimbabwean dollar?

                    • Draco T Bastard

                      And immediately the idiot reaches for an extreme example as if that’s an argument despite me having said several times that money creation by the government would have strict controls on it. In fact, I’ve said that it would have more controls on it that the private banks presently have in creating money.

                    • Lanthanide

                      @ Draco:
                      The Zimbabwean government also had strict controls on money creation.

                      “In fact, I’ve said that it would have more controls on it that the private banks presently have in creating money.”

                      So the system will be simultaneously stricter, and yet more free. Weird.

                    • Draco T Bastard

                      So the system will be simultaneously stricter, and yet more free. Weird.

                      Nope. Stricter on money creation, more free for the government to act. Much of the latter is because so much of the money won’t be going into price inflation, especially house price inflation.

                      Again, as has been explained to you before.

                    • Colonial Rawshark

                      Lanth you seem so very keen on the status quo broken system. Do you have so much NZD denominated assets now that you can’t bear any change in monetary policy which might put the real value of your investments at risk, whether that risk is real or imaginary?

                      Like I always argue with Gossie (who habitually brings up the example of the Weimar Republic and of Zimbabwe): hyperinflation due to oversupply of currency compared to demand for that currency only happens in very specific circumstances.

                      Don’t worry I’ll make sure your NZD denominated investments are safe in value.

                    • Lanthanide

                      @ CV:
                      I never mentioned the hyperinflation of Zimbabwean dollars.

                      From the currency’s creation in 1980, they never had a single year where inflation was below 7%, and before hyperinflation (100% or more in a year), the average annual rate of inflation was 18.3%, with several years up around 40-50%.

                      You don’t need to have hyperinflation to have a currency that is progressively worthless for international exchange.

                      “Don’t worry I’ll make sure your NZD denominated investments are safe in value.”

                      The value of my NZD assets by definition is irrelevant, since they’re denominated in NZD. What I am concerned with, as I’ve already made quite plainly clear, is the ability to trade with other countries who supply goods and services that are vital to NZ’s current standard of living, such as petrol, computers and other high-tech electrical goods (as well as the mundane stuff like clothing).

                    • Draco T Bastard

                      We’re not going to get hyper inflation. If we were, we’d already have it due to the banks reckless creation of money flooding the market.

                      Or we could say that we do have hyperinflation and that it’s just going all on to housing which a few people regard as good rather than the debilitating effect it really is.

              • Draco T Bastard

                How many of these currently unemployed people who “want a job and will be given one” have the skills to do the jobs you’ve listed?

                Probably all of them in some form or another. For those that don’t training will be provided.

                Who is going to manage all of these new workers?

                Probably some of the managers that are presently out of work. I know a couple just in my family.

                How come these skilled workers don’t already have jobs doing these things?

                Because the government, with the help of the private sector, runs policies that ensure 6%+ unemployment.

                …on whom we rely for our first world standard of living.

                Actually, we rely upon ourselves for our first world standard of living by producing stuff.

                • Lanthanide

                  We don’t produce petrol to run our cars, or computers, or the vast majority of clothing. All of these things are imported, and are the bedrock of what constitutes “first world standard of living”.

                  • Draco T Bastard

                    We don’t produce petrol to run our cars

                    Actually, we do but the important point there is that we should be building infrastructure from our own resources to keep us moving without the need to import petrol or diesel.

                    or computers

                    And the only thing stopping us there is will – political will. We certainly have the resources and capability available to produce them. All we have to do is develop those resources.

                    or the vast majority of clothing.

                    The amazing thing about hemp is that it can be grown pretty much anywhere and can be used for cloth, medicines, resins, etc, etc. Of course, that’ll take a couple of years to set up but, again, there’s nothing stopping us from doing so.

                    In the interim I suggest that we wear leather from the ~70 million cows that we’re going to be slaughtering because, all of a sudden, no ones buying our milk.

                    BTW, One of the points of having a floating dollar is that, as it decreases in value on the forex, it encourages development here.

                    Then there’s the point that you seem to have forgotten – we used to produce all this stuff before some schmuck decided that we were all to enfeeble and that we should just let our betters do it.

                    • TheContrarian

                      “I suggest we wear leather”

                      I think I have discovered the solution to your pants problem from the other day Draco.

                    • Lanthanide

                      “Then there’s the point that you seem to have forgotten – we used to produce all this stuff before some schmuck decided that we were all to enfeeble and that we should just let our betters do it.”

                      Please tell me when we produced enough petrol to fuel all the cars in the country at the time.

                      Please tell me when we produced enough computers to fulfil demand in the country at the time.

                      Please tell me when we produced enough clothing to fulfil demand in the country at the time (ie, clothing imports were 0).

                    • Draco T Bastard

                      Oh, look, another idiot in need of remedial reading lessons.

                      I didn’t say that we produced all that we needed, just that we produced it.

                    • Lanthanide

                      So we didn’t “produce all this stuff”, we just produced some of it. And had to trade for the rest.

                      Hence the problem with your entire theory, because you simply state that international trade will not be a problem, and don’t have any academic arguments to back that claim up.

                    • Draco T Bastard

                      Hence the problem with your entire theory, because you simply state that international trade will not be a problem, and don’t have any academic arguments to back that claim up.

                      Except for the fact that there are and I’ve linked to them before as you well know.

                  • Mike S

                    Re: Zimbabwe – The following is (I think from memory) taken from Ellen Brown’s excellent book “Web of Debt”

                    The Case of Zimbabwe
                    The same foreign banking spider that has been busily spinning its
                    debt web in the former Soviet Union and Latin America has also been at work in Africa. A case recently in the news was that of Zimbabwe, which in August 2006 was reported to be suffering from a crushing hyperinflation of around 1,000 percent a year. As usual, the crisis was blamed on the government frantically issuing money; and in this case, the government’s printing presses were indeed running. But the currency’s radical devaluation was still the fault of speculators, and it
                    might have been avoided if the government had used its printing presses in a more prudent way.

                    The crisis dates back to 2001, when Zimbabwe defaulted on its
                    loans and the IMF refused to make the usual accommodations,
                    including refinancing and loan forgiveness. Apparently, the IMF
                    intended to punish the country for political policies of which it
                    disapproved, including land reform measures that involved reclaiming the lands of wealthy landowners. Zimbabwe’s credit was ruined and it could not get loans elsewhere, so the government resorted to issuing its own national currency and using the money to buy U.S. dollars on the foreign-exchange market. These dollars were then used to pay the
                    IMF and regain the country’s credit rating.13 Unlike in Argentina,
                    however, the government had to show its hand before the dollars were in it, leaving the currency vulnerable to speculative manipulation.

                    According to a statement by the Zimbabwe central bank, the
                    hyperinflation was caused by speculators who charged exorbitant rates for U.S. dollars, causing a drastic devaluation of the Zimbabwe currency.

                    The government’s real mistake, however, may have been in playing the IMF’s game at all. Rather than using its national currency to buy foreign fiat money to pay foreign lenders, it could have followed the lead of Abraham Lincoln and the Guernsey islanders and issued its own currency to pay for the production of goods and services for its own people. Inflation would have been avoided, because the newly created “supply” (goods and services) would have kept up with “demand” (the supply of money); and the currency would have served the local economy rather than being siphoned off by speculators. But while that solution worked in Guernsey, Guernsey is an obscure island
                    without the gold and other marketable resources that make Zimbabwe choice spider-bait. Once a country has been caught in the foreign debt trap, escape is no easy matter. Even the mighty Argentina, which at one time was the world’s seventh-richest country, was unable to stand up to the IMF and the “vulture funds” for long.

                    All of these countries have been victims of the Tequila Trap –
                    succumbing to the enticement of foreign loans and investment, opening their currencies to speculative manipulation. Henry C K Liu writes that the seduction of foreign capital was a “financial narcotic that would make the Opium War of 1840 look like a minor scrimmage.” In the 1990s, a number of Southeast Asian economies would find this out to their peril . . . .

                    • Draco T Bastard

                      Henry C K Liu writes that the seduction of foreign capital was a “financial narcotic that would make the Opium War of 1840 look like a minor scrimmage.”

                      And just look at how our government decries that we need foreign investment and capital when, in reality, we don’t. We just need to utilise our own resources using our own money created for free by our own government.

                    • Lanthanide

                      Thanks, that’s a good example of what would happen to NZ if we tried to get out from under the thumb of the international monetary system by printing our own money.

                    • Draco T Bastard

                      So, we should just stay as serfs to the private corporations Lanth?

              • Mike S

                “Except “spending into existence” does not happen, at the moment.”

                Then what are those billions and billions of dollars the government borrows used for?

                • Lanthanide

                  Spending into existence means spending money without first borrowing it. You’ve just stated the government is borrowing the money it is spending, therefore it is not “spending into existence” – it is “borrowing into existence”.

        • Naturesong 9.1.1.4

          I thought you said you wanted it to last more than a year?

          By the time you get to number 4, there’s a fair chance that someone’s going to get assassinated.

          Chile springs to mind

    • Ad 9.2

      I’d be quite happy if Labour just pronounced a clear ideology of any sort at the moment. I would know where I stood at least.

      • Colonial Rawshark 9.2.1

        Labour is for winning, and against losing? But somehow, that message is not appealing to the voters.

        • Sable 9.2.1.1

          Labour is for behaving a lot like National. Its no wonder people are not impressed.

          • Colonial Rawshark 9.2.1.1.1

            In that case, surely the answer to Labour’s poor performance is to mimic National even more closely? 😛

      • dukeofurl 9.2.2

        Ad , is a classic concern troll.

        • Colonial Rawshark 9.2.2.1

          Ad is a Labour supporter who is not stuck in Thorndon Bubble thinking (which probably means that his perspectives are considered invalid in the Thorndon Bubble).

  10. Wonderpup 10

    When I was young we had a pet sheep. Its name was “Trickle”, as that’s mostly what it did. I learned then what it was that trickled down on us from the 1%, and its not wealth.

  11. Sable 11

    The IMF are, in my opinion, a bunch of economic pirates. The only reason I suspect they are saying this is the great “economic miracle” they are a part of is such a conspicuous failure to say otherwise is to loose any shred of credibility they might have left.

    That said I personally would not expect any change in a hurry from them or the vested interests they represent. Its one thing to point to a failing, its quite another thing to actually do something about it.

    • Jones 11.1

      They’re saying that because they, like anyone else with eyes open, can see revolution on the horizon and they’re concerned about the impact of that on their stakeholders (for want of a better word).

      If they want to keep the show going they cannot afford for the music to stop and to do that they need the money to keep circulating. The moment it accumulates in one place it’s game over, and they and everyone else dance to a new tune they may not be making, nor even conducting.

      So… they will be seeking just enough change to placate the masses to keep their stakeholders in power.

  12. Atiawa 12

    If the numbers of working poor are increasing, why aren’t they joining unions?

    Bring back compulsory unionism.

    • Macro 12.1

      You know as well as I that the current legislation (employment law) brought in over the past 30 years is almost all aimed at discouraging people joining Unions. Begun by the 4th “Labour” Government, extended by Bolger and Shipley, tinkered with by the 5th Labour government but never repealed, and now workers are as poorly off as they were in the 1890’s.
      Shame on you Labour. Shame! (and you wonder why the workers won’t vote for you anymore?)

    • TheContrarian 12.2

      “Bring back compulsory unionism.”

      NZ Bill of Rights and the UN Declaration of Human Rights kinda gets in the way of that.

        • TheContrarian 12.2.1.1

          Freedom of association. Specifically article 20 of the UN Declaration.

          • te reo putake 12.2.1.1.1

            Article 22 seems to trump 20. I don’t see compulsory unionism as we used to have it in NZ being affected by either FoA or BORA. The old legislation had opt outs and I presume any new legislation along those lines would, too.

            • TheContrarian 12.2.1.1.1.1

              Opt-out means it isn’t compulsory.

              The freedom of association is extremely important in that it not only means you have the right to join or form a union but you also have the right to not join one if it you feel it doesn’t reflect your best wishes or interests.

              (As an aside – no article “trumps” the other. If it was contradictory declaration then it wouldn’t be very useful)

      • Macro 12.2.2

        It’s not the compulsion. That was never the case under the old employment law. But what the old law did was to encourage workers to join a union and union officials freedom of access to work sites and to workers. It gave time for workers to meet and to discuss their work conditions, it encouraged arbitration on conditions of employment by unions on behalf of workers, and guaranteed fair conditions, reasonable time, overtime payments and work breaks.
        Workers in general saw the benefits of belonging. The temporary “benefits” to encourage workers to give up their collective bargaining in favour of individual contracts at the start have now all disappeared. But the Unions now are more and more outside of the workplace, and young workers having no experience of the benefits of collective strength, fail to appreciate what they are missing.

        • RedLogix 12.2.2.1

          My understanding was what the old law effectively did was to prevent employers from passing on terms and benefits they had negotiated with the union – directly on to their non-unionised workers.

          • Macro 12.2.2.1.1

            Yes that was the case – ie it encouraged workers to join. And there were many other conditions that existed that assisted Unions to do their job – such as access to workplaces, stop work meetings etc.

            • RedLogix 12.2.2.1.1.1

              And in reality the term ‘compulsory unionism’ was nothing more than a smear tactic from the right.

              • Colonial Rawshark

                Labour is never bringing that stuff back.

              • Atiawa

                Unionism never rose much over 50% of the total workforce during the “compulsory” years. Legend has it that Mabel Howard chased on foot a non compliant free-loading worker in a quest to secure her membership and arrears.
                Households categorized as working poor don’t stand a chance continuing as they are. What other options will uplift them?

  13. Atiawa 13

    Yeah. Shame is endemic in NZ, sincerity is under control.

  14. Bill 14

    Policies that weaken the rights of workers and keep wages low are not only keeping people in poverty, they are bad for the economy too.

    I dunno about that. I mean, what’s more important? The economy or market share? Given the multiple peaks on the horizon, it makes sense from a certain perspective ( a bad bastard capitalist one) to exclude many millions of people from the economy and grow market share on a basis of shrinking resources.

    Health care, housing, education and so on are (perhaps) ‘not to be’ for many in a world bent on increasing market share in a shrunken economy.

    • Colonial Rawshark 14.1

      Also, access to resources and energy is access to power. Keeping the downtrodden economically repressed and on short rations helps with that process.

      • Bill 14.1.1

        Well, yes. That was kind of my point.

        Do people really think it was some kind of accident that third world* populations were excluded from any ‘post war dream’ while we lapped cream? The third world* is now being expanded to our doorsteps. And many of us are intended to be very much a part of it.

        * deliberate use of the term btw

  15. Mike S 15

    To all those in this thread and others who say you can’t have government creating it’s own money because of hyperinflation, printing too much, etc,etc.

    Bollocks, of course you can create your own money supply. What’s the inflationary effect of the government borrowing say..a billion dollars? – The money supply is inflated by a billion dollars with whatever downstream effects that has on the economy. What’s the inflationary effect of the government creating that billion dollars itself? Exactly the same thing. In terms of inflation, borrowing or printing money both have the same effect except with borrowing you have to pay shitloads of interest to privately owned run for profit international banking cartels who have conned us into letting them create our money for us and charge us interest for the privilege of using it.

    All that matters is that there is an independent watchdog or the like which ensures that the government only creates enough money that is required to facilitate the demand for goods and services. You could use taxes to maintain price stability by removing money from the economy when required via taxes.

    The public should enjoy the benefits of money creation, not the private banks. Money should be created to benefit society

    • maui 15.1

      Agree, there is obviously no political will to look into this and what would best serve the people’s interests. Many can’t bear to break with orthodoxy or are terrified to even look at it a different way.

      The private banks are absolutely milking it and they don’t even have to lift a finger, all this benefit goes offshore to Australia.

      ANZ profit for 12 months: $1.7 billion
      Westpac profit for 12 months: $0.86 billion
      BNZ profit for 12 months: $0.85 billion
      ASB profit for 12 months: $0.80 billion

      What if the Government acted as the “private” bank and profits were reinvested into sustainable transport projects, health and education instead of a rich corporate’s overseas bank a/c.

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