Kerry Grundy: The New Right reforms have been a dismal failure

Last week the Otago Daily Times ran a series of commentaries by some of the politicians responsible for the New Right reforms of the past 15 years.   Disappointingly,  rather than a meaningful analysis of the restructuring process,  we were subjected to a mishmash of anecdote,  ideology,  and obfuscation which defied,  in any real sense,  the label of serious analysis.   For example,  the best that Roger Douglas  (the major early protagonist for these reforms)  could come up with was that he would rather not  "dwell on the past"  alleging that  "the benefits were there for everyone to see"  and that  "the results speak for themselves".

To me,  and I suspect many others throughout New Zealand,  the benefits are not there for everyone to see,  and to get a worthwhile perspective on this period of restructuring it is obligatory to compare the present with the past.   So let us examine how the results of these reforms do,  in fact,  speak for themselves,  not simply by asserting meaningless platitudes,  but through actual analysis.
 

 

Firstly,  over the ten years prior to 1984 New Zealand's economic growth was consistently higher than the OECD average.   Over the period 1984 to 1998 economic growth has been abysmal and well below the OECD average for most of the time.   Between 1984 and 1992 our economy actually shrank while other OECD countries grew at a rate of 20%.   Despite a modest recovery in the mid 1990s,  our growth rate has again fallen and our economy is entering a recession once more.

As a consequence,  unemployment has doubled.   The official unemployment rate is now 7.7% compared with less than 4% in 1984.   At no time since the reforms began has unemployment fallen below 1984 levels.   It has at times reached levels over 10%.   The reforms have,  in other words,  directly,  and substantially increased unemployment.   They have also changed the nature of employment.   Job security is a thing of the past.   Part time,  casual labour has increasingly replaced full time work  (and it is worth noting here that anyone working more than one hour per week is counted as employed and is excluded from the unemployment statistics).

In constrast to the rhetoric from the New Right about reducing so-called welfare dependency,  the number of beneficiaries has skyrocketed since 1984.   For example,  the number of solo parents receiving domestic purpose benefits doubled over the period from 53,000 to 104,000.   The number of sickness beneficiaries soared 300% from 9400 to 34,000 and disability beneficiaries exploded by a mind boggling 1599%.
 

 

Our health system,  previously one of the best in the world,  is now in perpetual crisis.   People are continually denied treatment because of lack of resources.   The mentally ill are discharged into the community with inadequate care.   Our youth suicide rate has doubled since 1984 and is now the highest in the Western world.   At the same time bureaucratic restructuring and extravagant managerial salaries eat up more of the available health fund.

Early childhood education and kindergartens have been described as in crisis.   Parents of school children face increasing fees to cover inadequate funding.   A high quality,  free tertiary education accessible to all is being replaced by a user-pays system that is placing huge debt burdens on the younger generation.   Students now owe a staggering $2.25 billion collective debt.

New Zealand's once progressive state housing system has been dismantled.   A system which assisted the low paid into their own homes or provided state housing with rentals pegged to income levels has been turned over to the market.   Consequently we now have families paying over half their income in rent,  or who are doubling up in houses because they can't afford to rent,  or living in garages,  caravan parks and even empty cars  -  circumstances we left behind years ago.
 

 

As for our standard of living,  most wage and salary earners are now worse off in real terms than they were in 1984.   A recent study from Massey University revealed that over the period 1984 to 1998,  80% of the population suffered a decline in their share of the national income,  and this decline was most marked in the poorer sections of society.   Only the top 10% of New Zealanders have experienced an increase in their share of national income,  and this increase was greatest in the top 5% where it rose by a massive 25%.   International studies have confirmed that income inequality in New Zealand has been increasing faster than in any other OECD country over the same period.   The bottom 20% of households now receive less than 3% of total national income while the top 20% receive over 50%.   From being one of the most egalitarian nations in the world we are fast becoming one of the most economically and socially polarised.

A consequence of this growing disparity in wealth is increasing levels of poverty.   It is estimated that 20% of all New Zealanders now fall below the poverty threshold  (over 600,000 people).   In addition,  33% of all New Zealand children live in poor households and 72% of single parent families exist below the poverty line.

Increasing numbers of families,  not only beneficiaries but also working poor,  are being forced to rely upon food banks for their sustenance.   Food parcels given out by the Anglican Methodist Family Care Centre  [Dunedin]  have increased by over 1000% since 1990.   Over $20 million worth of food is distributed annually by food banks.   This is a disgrace in a supposedly developed nation.   In stark contrast,  food banks did not exist before 1984.
 

 

And so it goes on and on and on.   According to practically every social and economic indicator these reforms have been a dismal failure.   The only area where they can be called a success is that they have succeeded enormously in increasing the wealth of the top 5% of income earners in New Zealand and the wealth of overseas investors.   As the Massey University study concluded:  "It transpires that New Zealand's economic reform programme over the period 1984-96 saw the very rich become even richer,  while the bulk of the rest of the population became poorer in relative terms,  with the poorest faring the worst."

In short,  there has been a massive redistribution of this nation's wealth from the public sector to the private sector,  from labour to capital,  from small capital to large capital,  and from domestic capital to foreign capital.   From this perspective,  these reforms have been a resounding success.   And if we are honest about it,  this is what they actually set out to do.

However,  everyone else in New Zealand is less well off  (socially and economically)  as a consequence.   Moreover,  they will remain so until the citizens of this country finally realise that there is no  "long term gain for short term pain".   Instead there is  "long term pain"  for the many and  "gain"  only for the few.

©  Kerry Grundy  1998
 

This article was first printed in the  Otago Daily Times  of August 10, 1998.   We reproduce it here with the author's permission.   Kerry Grundy is a researcher and tutor in the Department of Geography,  University of Otago.
 

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