Thursday, February 21, 2008

National's sweatshop economy

John Key's "explanation" for his statement that he would like to see wages drop: "I was talking about Australia". Pull the other one, it has a symphony orchestra. The context of his quote is here [PDF] in black and white, and its immediately apparent that he's talking about New Zealand, and specifically about countering the trend of recent wage rises here caused by the labour shortage. I should also point out that this isn't the first time Key has made such statements - back in July he complained that the economy could not grow because it lacked "spare capacity" - which means unemployment. John Key's model of the economy is not one in which New Zealanders enjoy higher standards of living through productivity increases, but one in which business quarries a pool of cheap, disposable, low-skill labour - exactly as it does in China. In other words, a sweatshop economy.

Of course, this isn't new to Key, but longstanding National Party policy. Don Brash pushed exactly the same line: the way to "close the gap" with Australia was to reduce wages in New Zealand.

As for how it would be done policywise, I've noted for a long time that National's welfare policies have really been labour market policies, aimed at forcing people who are too sick to work into the workforce as a "reserve army of labour" in order to keep wages down. The second strand would be a crackdown on unions and a tilting of employment law towards business, for example through the introduction of probationary employment and the removal of protections against dismissal (all strong features of National's employment policy). But the main change will come from changes to monetary policy and the Reserve Bank's policy targets agreement, setting a tighter inflation band and removing the clause about disruption to the labour market, meaning higher interest rates, more unemployment, and (by the law of supply and demand) lower wages - just as Don Brash did for them in the 90's.

This agenda isn't about improving the living standards of ordinary New Zealanders. It isn't "ambitious for New Zealand". It's about transferring wealth from the many to the few, and ensuring that any benefits of economic growth flow exclusively into a very small number of pockets at the top of the pyramid - exactly has happened in the 90's.

(Billboard courtesy of The Standard.