Friday, December 19, 2008

Resurrecting the 90's

Before the election, I blogged that one of the choices on offer was between a government which used monetary policy to create a labour shortage to drive wage increases, and one which used it to create unemployment to drive wages down. Unfortunately, we got the latter sort - and they've wasted no time about changing things to ensure lower wages for ordinary New Zealanders and higher profits for their corporate backers.

How? This morning, the government signed a new Policy Targets Agreement with the Reserve Bank. So where previously we had this:

The objective of the Government's economic policy is to promote sustainable and balanced economic development in order to create full employment, higher real incomes and a more equitable distribution of incomes. Price stability plays an important part in supporting the achievement of wider economic and social objectives.
Now we have this:
The Government's economic objective is to promote a growing, open and competitive economy as the best means of delivering permanently higher incomes and living standards for New Zealanders. Price stability plays an important part in supporting this objective.
The difference is obvious: employment and equity are now no longer part of the Reserve Bank's equation. And the result will be a return to the neo-liberal mindset we saw in the 90's: that low wages are good for growth, and unemployment must be maintained at high levels in order to produce them and prevent "wage inflation" (ordinary people getting a share of those higher living standards the government claims to want). This has severe social consequences, and ensures that a large slice of New Zealand society - most of us, in fact - miss out entirely on the benefits of economic growth. Instead, their rich mates get it all - just like they did in the 90's.