Neo-Liberalism is a failure; not just in human terms, but by its own measures. Since the concepts of neo-liberalism were wholeheartedly taken up by Roger & Ruth 26 years ago, up until our current government as the heirs to Rogernomics and Ruthenasia, neo-liberalism has driven down wages as a share of GDP (56% down to 46%), it has massively increased inequality (NZs Gini score gone from 0.27, 13th in world to 0.34, 23rd) and it has stripped workers rights (Employment Contracts, reducing rights to strike etc). But it set out to do that, so those could almost be termed its “successes”.
Where it has failed is in growing the pie to make up for the vast majority of us getting a noticeably smaller piece of the pie. Nobody embraced neo-liberalism like New Zealand – we are its ultimate guinea pigs. But what has happened to our GDP per capita? In 1987 we were 22nd in the world. 2007? 32nd. Back in the 1980s, when Nact would have you believe all those workers’ rights and industrial unrest were doing terrible things to productivity, it was increasing by 1.3% per year (19th in world). The last 2 decades? 0.9% (22nd).
How about investment? In the G71 in the 70s 14-16% of GDP was invested in production. Under neo-liberalism’s business friendly environment, business would naturally invest, right? By 2006 it was down to 6% – and will no doubt have dropped in 2009’s recession. New Zealand has a chronic and acute shortage of productive investment, so its figures probably look even worse. If there’s no extra investment, what about R&D spending? We’ve dropped from 20th to 22nd there, and that’s with most of New Zealand’s R&D being from the public sector.
Neo-liberalism has removed almost all barriers to foreign investment, but it hasn’t brought much of the right sort. It’s not on the whole created jobs, or invested in plants and machinery to improve productivity. It’s bought the ownership (particularly of our banks), and is now just hauling off the interest and profits overseas. Our Current Account Deficit has steadily grown under neo-liberalism to 8% of GDP2; the vast majority of that deficit being interest and profits siphoned off. That’s 8% of our pie that is being taken off New Zealand and fed to wealthy foreign companies instead.
So, what’s the answer? Nact thinks it’s more of the same, with a few more tax cuts for the rich on the side. This despite the policies they’re pursuing having has exactly the opposite effect of their stated intentions. We need a government that invests in the New Zealand economy, that creates jobs for New Zealand workers. One that funds New Zealand businesses with New Zealand money.
It’s often thought that neo-liberalism is anti-government. It’s not: it wants (and has got) a small strong government that stands up for businesses rights (giving them former state assets, keeping inflation low to keep wealth protected, building them roads and infrastructure for them to use for free etc), to the detriment of the worker (institutionalising unemployment to keep workers hungry, removing their rights with individual employment contracts etc). We still want a strong government – just one that’s on the side of the worker (that’s over 85% of us after all), creating jobs and investing in our health and happiness, not businesses’ profits.
* hat-tip: Economics For Everyone’s Jim Stanford.
1 sorry no NZ figures
2 although it has temporarily dipped due to the recession meaning a lack of profits to export