Friday, January 13, 2012

Growth and distribution

Labour's failed Rangitikei candidate Josie Pagani has a piece in the Herald this morning, in which she gives her views of what went wrong for Labour, and talks of the need to "[increase] the size of the pie so everyone can get their piece". In response, the Dim-Post asks:

why are Labour still using ACT Party rhetoric about the panacea of economic growth, when all our economic statistics, social indicators and lived experience over the past thirty years tell us that the benefits of ‘growing the pie’ now aggregate to a small number of high-net worth individuals? The rest of us stay where we are, or go backwards.
Because while that was certainly the experience during the 80's and 90's, it wasn't what happened last time Labour was in power. Compare the following two graphs from MSD's Household incomes in New Zealand: trends in indicators of inequality and hardship 1982 to 2007. The first shows decile changes in real equivalised household income (that's household income normalised for family size) from 1988 - 2001 - basically, the Revolution):

The second shows the same change between 2004 and 2007:

Quite a difference, isn't it? Instead of the poor being impoverished for the benefit of the rich, we have a much more equal distribution, with most of the benefits of growth being directed to those with greater need. While the exclusion of beneficiaries from Working For Families meant that it didn't do enough for those at the very bottom (an exclusion Pagani supports, I should note - which makes me glad she is not in Parliament), its undoubtedly a fairer distribution.

There are basically two types of economy in New Zealand: The National economy is marked by high unemployment, regressive tax changes, and attacks on workers' rights. The Labour one by low unemployment / an engineered labour shortage, large increases in the minimum wage, and a more progressive and redistributive tax system. And the two produce very different distributional outcomes.

The problem is that the more we live in a National economy, the more we believe that that rhetoric is at best empty, and at worst a direct threat to make you worse off for the benefit of some suited Auckland fat-cat. If Labour wants to use growth-rhetoric, it needs to be clear that it is offering a different sort of growth. And I think that being explicit about that, about how it is achieved and about National's distributional record, is the best way to do that.

(Of course, we also need that growth to be sustainable, and not based on the mining of our environment. But that's a different kettle of fish altogether...)