The ever-hilarious Jonathan Pie on economics. Ehconomics? Who even knows!
Originally posted at On The Left.
Inequality has become a central political issue in New Zealand and around the world. But there’s always been some argument, from the right, that inequality just happens, or provides an incentive for people to pull themselves up with their own bootstraps.
Now, a new OECD report is fairly straightforward about the issue:
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.
New Zealand gets a specific mention:
Figure 2 shows by how much the GDP growth rate would have increased or decreased over the period 1990-2010 had inequality not changed between 1985 and 2005 (The most recent inequality trends since then are not taken into account as they affect future growth patterns).
Rising inequality is estimated to have knocked more than 10 percentage points off growth in Mexico and New Zealand…
As Grant Robertson put it on Morning Report, “This isn’t the Socialist International. This is the OECD – the conductor of the Trickle-Down Economics Choir – saying that the show’s over.”
So you might think that’s the end of it – surely this is an unequivocal explosion of the trickle-down economics theory, and we can all turn to finding actual solutions to reverse inequality and the real harm it causes in people’s lives.
But unfortunately, our Minister of Finance has taken the John Key line of saying he doesn’t accept the findings of the report. It’s one of the great strategies of this government, acting like there’s no such thing as objective fact and the only thing that matters is how you frame something.
We’re not going to see any kind of shift in their behaviour or policies (though I’m sure we’ll definitely hear them talk about inequality more, as we did in the lead-up to the election.) But what this report gives us is another tool to use against the National/ACT narrative – that the right are pro-growth, that tax cuts and penny-pinching will lead to prosperity, that there’s no alternative to their mean-spirited policies.
In my post yesterday I said:
… there’s something obscene about the way the economic story gets framed: the figures on a page, the points on an index, the number of dollars someone can swap for a number of different-coloured dollars.
Let me revise that a little.
Numbers can be incredibly useful for telling a story. For example, in the article I linked to in that post, there are these numbers about the size of Housing New Zealand’s “priority A” waiting list:
June 2007: 133
June 2008: 248
June 2009: 261
June 2010: 368
June 2011: 402
June 2012: 425
June 2013: 1290
June 2014: 3188
There are these numbers from FIRST Union about the $4.14 million package paid to ANZ’s CEO:
“That’s $80,000 a week – more than most bank workers earn in a year.”
And it can be a problem when we just don’t have the numbers:
[Child Poverty Action Group] spokesperson Donna Wynd says, “The lack of data means the public has little idea of whether the government’s “relentless focus on work” is actually improving outcomes for children, or protecting vulnerable children – something the government claims is a goal of welfare reform. Living on a greatly reduced income, with benefits cut by half, has major consequences for children so it’s critical to know the number of children affected by sanctions and for how long. The public deserves to know the impact of pouring millions of dollars into reforming social assistance.”
The problem is this: to most people – even university-educated people like me – the kinds of numbers we usually hear about are completely opaque. We’re expected to take it for granted that if mean quarterly household incomes have risen, it means people are doing better. Or if the performance of manufacturing index grows for three consecutive months, it means people are doing better.
People are not doing better in New Zealand. Even people like me, who don’t have a lot to fear from three more years of a National government, do not prosper when society grows more unequal, when financial poverty forces people to live in cars, when preventable diseases are rampant, when businesses move their work overseas because of a lack of infrastructure and jobs training, when desperate people tune out of society and turn to addiction or crime.
Numbers can be a guide. They can be useful – even necessary – to figure out what’s working or where more work is needed. But unless they are related to the real lives of people, we should stop giving them weight. Because people are more important than numbers.
Housing affordability was an issue in the election – but the discussion was derailed by arguments about the intricacies of capital gains tax and exactly how many hundreds of thousands of dollars constitutes “affordable” house prices.
This is the real story, which is now getting some post-election coverage in the Herald.
Salvation Army Manukau community ministries director Pam Hughes said some families were now paying more than 70 per cent of their incomes on rent, but could not keep up payments and came to her service in crisis.
“We are seeing an increase in families in vehicles. Families in cars have been increasing over the last three or four months, simply because there isn’t enough affordable accommodation for them,” she said.
The Tuuu family – mum, dad and their six children – have been living in a van for a week because they cannot find a house. …
Tamasailau Tuuu, his wife and their children, aged from 15 to 3-months-old, were doubling up with another couple and their three children in a three-bedroom house after their landlord sold their own rented home in Clendon, South Auckland, two months ago. But their friends asked them to move out.
“She was worried about her tenancy, and the neighbours were complaining about my baby crying at night, and the house was overcrowded and her kids needed their own privacy,” Mrs Tuuu explained.
That’s right – before they had to start living in their car, the eight members of the Tuuu family were sharing a three-bedroomed house with five other people.
Tamasailau Tuuu is a fulltime worker.
Meanwhile, on the Herald’s economy pages, it’s all about the numbers, and how “there’s something for everyone” in a recent Statistics NZ report on income:
A defender of the status quo can point to a 6.2 per cent rise in the average household income from all sources over the year to June 2014. A critic of the status quo can point to a rise of 1.7 per cent in median hourly earnings for wage and salary earners over the same period, or just 0.1 per cent after adjusting for inflation. The year before median hourly earnings had risen 3.5 per cent.
There is an interesting discussion to be had about the way numbers can be used (or manipulated) one way or another depending on the argument you’re pushing. In the run-up to the election, National were trotting out numbers all over the place – more tertiary students than ever before (don’t mention population growth)! Wages the highest they’ve ever been (ignore inflation)!
But there’s something obscene about the way the economic story gets framed: the figures on a page, the points on an index, the number of dollars someone can swap for a number of different-coloured dollars.
I’m sure the following statement will raise sneers; the right love to paint the left as silly ingenues who don’t understand big, serious economics. But I cannot comprehend a worldview which says “all is well, for the numbers tell us so” while families are living in cars, workers are losing their jobs, and children are dying from preventable diseases.
More and more people I know – comparatively well-off people – have being speaking out post-election about setting up automatic payments to charity organisations, or emailing journalists who write stories like the one above to offer direct assistance to the people whose plight makes it into the media. It’s a compassionate response. It does some real good. But it’s also a sign that we have fundamentally failed as a society.
Private charity isn’t even an ambulance at the bottom of a cliff. It’s a bandaid over a gaping wound. It can’t even begin to cover the damage caused by the decades-long erosion of our social welfare system. It does nothing to prevent that damage from happening in the first place. The only thing that does is a strong social welfare system, which treats people in need with dignity and respect, instead of suspicion, and is motivated by real success – not the numbers of people the Minister can claim “have moved off benefits”.
When we only talk about economic numbers and measure our success in percentage points and turnover, we erase people. And when we can’t even make sure every person has a home and can feed their kids, those numbers are meaningless, and continuing to use them is a crime.
Yesterday Jordan Williams – head of the Taxpayers’ Onion and courageous fighter for the right to call women ugly in private – sent out a tweet which got me all excited:
I’m a helpful kind of woman, and yes, my household’s income is over 120k. I got ready to put my hand up and aid Jordan in his doubtless completely-unbiased quest to help the media tell a balanced story about
National’s stellar economic management whatever it was.
Alas, his next tweet dashed my hopes:
Two strikes and I’m out.
There were some amusing, and some serious, responses to Jordan’s request:
But it made me think. Why the focus on a non-political person or family? I suppose the obvious answer is to ensure there’s no political agenda behind what a person chooses to tell the journalist, but in that case I wouldn’t be asking Jordan “runs to the Backbencher to film Winston Peters drunk” Williams to be finding my candidates.
The other possibility is: because a non-political person might be more likely to take the question at face value. Do I feel better off now than I did 6 years ago? Hell yes I do. Things now, compared to 6 years ago, are going swimmingly.
Of course that might have something to do with the fact that 6 years ago my household wasn’t earning 120k! Not even close! We didn’t own our house. I was still in university typing dictation part-time, he was at the beginning of his career.
Through a very fortunate series of events, including a decent dollop of sheer good luck, we are now very well off, especially for our age group, and depressingly high on the wealth distribution table.
None of that makes me think “gee, the government’s done a great job.” It makes me think: How are people raising their kids on the low wages in this country? How are other people my age ever going to afford to buy their first home?
And how can we survive another three years of National?
(I think the answer might be Voting Positive because we #LoveNZ.)