Have to say that normally my eyes would glaze over at the term ‘fiscal plan’. But listening to Shaw’s speech on this, I was drawn into a compelling story of why the Greens should have a large influence in the economic management of NZ by the next government (video at bottom of post).
The Greens released their fully costed fiscal plan this week. It’s based on long-term, intergenerational thinking, and brings together all the policy proposals and plans the Greens are offering.
…how to make the promise of a 100% pure New Zealand an actual reality
– James Shaw
The goals of the plan are:
It’s much easier to market a new road than it is to market a zero carbon economy. But we do it anyway, because that’s who we are, and it’s what has to be done.
The policy launch event was aimed at social entrepreneurs, NGOs, scientists, innovators, leading edge start ups, and businesses who are doing the mahi of job creation. Creative thinkers and people who look beyond the normal 3 year political cycle.
Shaw tells a couple of anecdotes that demonstrate the dynamic of how Business as Usual thinking keeps us stuck in the same patterns even when we try to solve problems. So even though Labour and National both now have goals of reducing child poverty by x amount (thanks Greens!), they’re both still using BAU thinking when we need to go beyond that and adapt our thinking around the fast changing world.
I’m not an economics person, but the speech is very interesting. Shaw presents a history of unemployment and welfare from the post-war era until now. Initially the unemployment rate was less than 1% and by the Ruth Richardson era it was 10%, one in ten workers. More recently the average has been 5%, one in twenty workers, this is the new normal. It used to be one in one hundred.
Shaw asserts that the big difference is that back in the day government created jobs – forestry, rail, public works. There was a very generous welfare state post-war. The average benefit was just under 40% of the average wage whereas now it’s around 20%. So there was a very strong safety net but there were also jobs so not many people needed welfare. This meant that welfare was cheap for the country to run.
At that time we had a generous welfare state coupled with plenty of jobs. Shaw then looks at what happens when you take the jobs away (e.g. 1980s Rogernomics). Welfare increases exponentially and becomes unaffordable, so drumroll Ruthanasia 90s policy making it impossible to survive on a benefit with the supposed intention of forcing people to work. But it didn’t work. Welfare costs only went down when more jobs became available in the late 90s/early 2000s. Again, this is setting 5% as the new normal when historically that rate is abnormal.
Then he moves into the consequences of the 80s/90s policies – child poverty.
Nothing particularly new there (although the figures on post-war welfare were new to me). It’s not rocket science, but it’s great to see the Greens laying this out in business/economic contexts. Welfare, fixing poverty, aren’t just touchy feely nice to haves, they’re integral to functioning economies.
He’s making the economic case here, but he is also reminding the audience that this is about human suffering: overcrowding, homelessness, preventable deaths from third world diseases, unnecessary hospitalisations, the long term impacts of children under 3 being raised in poverty.
On the criticism that the Greens should stick to their environmental knitting and not talk about poverty, Shaw makes 2 points.
The first is that if the Greens don’t talk about this, no-one will. Because the Greens talk about it, others have to as well. Beyond the talking about it, the Greens are proposing the most fundamental reform of tax and welfare in a generation:
This plan could life every child in NZ out of poverty.
Alongside that is the plan to transform WINZ e.g. raising the abatement rate level. In case it’s not clear yet, what the Greens are proposing is a de facto guaranteed minimum income. Welfare can be modernised to be something proactive and useful for individuals and the state.
The second reason for the Greens to focus on poverty and welfare is because everything is linked. Shaw demonstrates the connections between poverty, housing and the environment (starts at 17mins 30). He uses John Key’s house as an example. Key’s Auckland property made $1.8million every year for the 15 years he owned it. That is tax-free income. Compared to the median income in NZ via wages/salary of $48,000 per year, on which everyone pays tax. So Key’s house earned 40 x the average income and paid no tax.
The point being that if you have a few million dollars to invest, are you going to start a business, create jobs that help lower the unemployment rate below 5% and pay company tax? Or are you going to make lots of tax free income from property?
Shaw points to the wealth in the property market being 3 x that of capitalisation in the share market. He ties the tax loophole to why our productivity is low, our salaries are low, and our housing costs are astronomical.
This is the other driver of poverty and all the problems that flow from that:
There is a direct link between the people who live in these houses and the kids who are dying of rheumatic fever in damp, overcrowded houses or how are living in cars. And the reason is, that tax loophole.
Hence a CGT on everything except the family home as one part of addressing the housing crisis. Yes lefties, the Greens actually want to tax rich people and give it to the poor.
So here’s another part of the broken economy and how it affects NZ.
In the last thirty years, we’ve transitioned to an intensive dairy-based economy which is killing our rivers and waterways and threatening our native species, and we don’t have any kind of regulation or tax or enforcement to mitigate or offset or prevent all of that catastrophic environmental damage because . . . We just don’t.
Making the connections. The plan is to introduce pollution levies, so that businesses that pollute either pay the cost or preferably change how they run their business. The difference here is that the Green policy attacks the problem at the source, not the symptom (via the nitrate levy). The revenue generated then goes back into farming via Funds that support practical changes on farms and big picture shifts in how we farm. Think sustainability here (and for the permaculture/sustainability design geeks, Shaw basically says the problem is the solution!).
Which leads us neatly to the plan to shift NZ to a post-carbon economy. A big part of this is proposal to plant 1.2 billion trees on marginal land in NZ. This both mitigates farm pollution, helps rivers, prevents erosion, sequesters carbon, and creates jobs. This is mostly going to happen in the regions, so this is regional development too. The plan is paid for via a carbon tax, that also pays a yearly dividend back to NZers. i.e. NZers also directly benefit from solving climate change and protecting the environment.
So that’s why we talk about poverty and tax and the economy alongside climate change and the environment. The problems and the solutions are bound up with each other.
More on the Climate Protection Plan here.
This isn’t policy development via focus groups. This is the Greens again stepping up and talking about what needs to be done and finding ways to make it acceptable to the mainstream.
Because the only way you get these issues out in front of the public and make progress on them is by talking about things that are difficult and that don’t test well in focus groups.
Finally, there is the fiscal geekery stuff. Explanations, charts and documentation, and even a picture of Winston Peters holding up a sign. You can read the details in the speech transcript and in the policy announcement. I hope lefties take the time to look at this and critique it, I’d like to learn more about how what the Greens are proposing might fit into the mainstream understandings of the economy and where it sits in the progressive and social democratic scheme of things.
Love NZ: Fiscal Plan launch video: (if you can’t see the embed, click through to the Facebook version)
From the Green Party website:
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Love New Zealand: Fiscal Plan
We have provided a fully costed plan to deliver on our bold goals that we have committed to for New Zealand’s future.
Voters have every right to be sceptical about the hope and inspiration their political leaders sell them at election time.
The goals of our plan are:
Goals for a Green government
The Green Party in government will:
The promise of a cleaner economy, a healthy environment, and a fairer society is 100 percent possible. Here is our plan to achieve that:
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