Monday, May 19, 2014

A rising tide lifts all boats?

One of the great myths of capitalism is that "a rising tide lifts all boats". Economic growth is supposed to be good for everyone - a fact we're reminded of endlessly when politicians are gutting government services and handing tax cuts to the rich to "increase growth". But the graph below, from Polity's Rob Salmond, shows that in National's New Zealand that's simply not true:


According to Salmond,

The chart shows that the next three years will see real growth in the economy overall far outstripping growth in real wages. While there is modest redress for wage earners in the following two years, it is not enough to undo the harm. Across the whole forecast period, real GDP per capita is slated to grow by 8.5%, while real wages grow by only 5.8%.

And in practical terms it means that the benefits of economic growth will flow to owners and shareholders, rather than ordinary people - just as it did in the 90's.