Monday, February 15, 2016

Inequality is holding us back

One of the right's arguments for accepting inequality is that it is necessary for economic growth that only the rich benefit from it. But the OECD has found the opposite: inequality holds us back. And thanks to Roger Douglas and Ruth Richardson, New Zealand has been the worst-affected country in the OECD:

New Zealand: New Zealand's economy could have grown by 44 percent between 1990 and 2010, but the country did only achieve 28 percent growth due to inequality. Hence, it lost 15.5 percentage points -- more than any other country. This is particularly surprising, given that New Zealand was once considered a paradise of equality, as Max Rashbrooke, the author of a book called Inequality: A New Zealand Crisis, pointed out in the Guardian newspaper.

"New Zealand halved its top tax rate, cut benefits by up to a quarter of their value, and dramatically reduced the bargaining power – and therefore the share of national income – of ordinary workers. Thousands of people lost their jobs as manufacturing work went overseas, and there was no significant response with increased trade training or skills programs, a policy failure that is ongoing," Rashbrooke writes in the op-ed. He also blames New Zealand for a lack of affordable homes which led to higher rents and unpaid mortgages.

Compared to the "gains" from the TPPA - a 0.7% increase in GDP over 15 years - these losses are enormous. And they certainly show what our real problem is: not a lack of free trade, but an economic system which systematically funnels all wealth upwards, while leaving more and more people behind.