Nigel Latta outside Sth Auckland loan 'sharks'. |
As we begin to focus on the upcoming
elections Nigel Latta’s TV programme is timely. It is surely time to move away from on
the personalities of leaders and to focus on the real issues facing our
country.
The programme was a serious attempt
to get to the core of inequality in NZ and its consequences for us all.
Once NZ had
one of the highest home ownership figures in the world and we didn’t see
examples of extreme wealth. Latta is careful to say he is not against people
doing well but he was stunned to learn that over the past decades the gap between the rich and poor in NZ has
widened more than anywhere in the Western World.
He wondered why this is the case; how
did it happen and what are the consequences for us all?
.The recent
Quality of Life Survey has reported that 1 in 5 families do not have enough
money to live on. Many families have to resort to food banks that were not
necessary in the 70s. One in 3 households cannot survive more than a few weeks
if they were to lose their jobs.
Yet while there are those struggling
to survive there are a relatively smaller number of people
who are now fantastically
wealthy. Bernard Hickey (Financial Adviser)
makes the point that during the 2008
global financial crisis (GFC) the people who were rich got richer and now
corporate executives live in luxurious style. The trouble is, says Hickey, that the widening gap presents real
problems, ‘When you have very unequal societies they tend to be slow
growing economies. People with wealth invest in gold, houses and land which do
not generate lots of jobs.’
Bernard Hickey |
The richest 100 people in NZ have
increased their wealth in 12 months by 7 billion – an average increase of 47
million. During the same period the real wage fell by .05 %. We have been told for decades that
the money would ‘trickle down’ but, Hickey says, ‘could it be actually flowing
the other way?’
Hugh Fletcher (one of New Zealand’s
richest men) states bluntly ‘the trickle-down theory doesn’t work.’ ‘All the
fruits of the economy has gone to the top and the average income hasn’t gone
anywhere in the last 30 years. Fletcher is concerned about the inequality because of its
effect on social cohesion; ‘extreme poverty does not bring about cohesion’.
Hickey continues by saying ‘when you
have a lot of poor people living in poverty they do things – they upset the
apple cart’. He says
that ‘if you continue to press down and impoverish a group of people they end
up living behind barb wire walls. The
last time we saw such levels of impoverishment was during the 1930s.’
Traditional advice to those
struggling is to get a job, work hard and save but this it seems to Latta is no
longer possible.
Many poor families have two people currently working but still can’t
make ends
meet. Such families, the programme showed, are able to feed their children
properly of give their kid’s simple treats. One job may be at the minimum wage
the other cleaning jobs earning $10 an hour working all hours of the night.
These families are becoming the working
poor. 40% of families with children living in poverty have parents in full
employment.
Growing underclass |
Latta states the obvious (but too
often ignored by politicians from the right) ‘research shows strong correlation
between poverty and teen pregnancy, drug abuse, suicide, imprisonment and life
expectancy’. The biggest impact of inequality is the crucial consequence of the
effect it will have for later generations.
Dr Garesh Nana |
Dr Garesh Nana (Chief Economist BERL)
pointed out that the critical factor for life success is your endowment – what
you start out with in life. Some people start well ahead – others well behind and the gap widens. There is no level playing field. The
wealthy are able to buy up property while the others become increasingly
desperate and those who start with the greatest advantage will eventually
dominate all the others. So much for the trickle-down theory!
The bottom 10% adjusted wage rises
have risen 13% since 1984 while the top 10% have seen their wages rise by 78% which is 40% faster than those in
the middle who have seen their wages
rise by 19%. The rich are getting richer!
Gabriel Makhlouf |
Gabriel Makhlouf ( Chief Executive of
NZ Treasury) tells us inequality was on the decline but through the 80s the gap
has widened due to two causes: the impact of technological changes that ‘have emptied out
jobs’; and the impact of globalisation – things can be made cheaper elsewhere
due to lower wages.
Bernard Hickey (Financial Consultant)
comments that ‘the benefit of globalisation has accrued to those at the top and
the costs spread to middle and lower income groups’.’ The real victims of globalisation
has been the loss of a large number of jobs- it started in factories and now is
being seen in the service industries- legal services, accountancy services,
medical services, education services – jobs moving into the cloud and
overseas.’
But it is not just overseas, says
Hickey, incomes in NZ have also been eroded. In 1989 the hourly rate was $21.83
.If this had kept pace with productivity workers’ wages would have increased by
50% but instead have only risen by 16%.
So, asks Latta, how has society
become so unequal (if you haven’t worked it out by now)?
Jane Kelsey |
Jane Kelsey (University of Auckland)
joked that ‘the government has been snatched by the money men’. ‘The major U-turn began in the mid-80s- this is when inequality took
off’. ‘Everything was liberated from the financial to the labour market. As
a result we now have more conspicuous wealthy and the reality of poverty more
obvious – there are now beggars on the streets’.
Dr Charles Waldegrave and others have
stated a campaign for a minimum living wage – defined as enough to supply the
family with the basic necessities of life. ‘Research’, he says, ‘shows that with a minimum wage
you increase production, increase work happiness, decrease instability’. ‘Such
a living wage should be not be compulsory – but an aspirational goal to appeal
to the best in people.’ ‘This is an idea that has been picked by such companies
as the Warehouse – if they can afford it why not others?’
The world of the elite rich! |
This, Hickey says, ‘ends up with a
housing market that is worth 12 times than the stock market and a very serious
debt problem’ ‘The moment interest rates rise people will get mortgage debt and
be wiped out’.
The 2008 Global Financial Crisis (GFC)
‘was a warning shot across the bows. Says Jane Kelsey, ‘and there will be more and they will affect NZ more deeply than the
2008 crisis’. ‘People cannot continue with a pyramid of debt. People don’t appreciate how indebted the
NZ economy is – they would be shocked. It
is not public debt it is private debt.’ ‘It is the debt that makes up the
gap between real wages and what families have to live on.’
Jane Kelsey’s vision has Nigel Latta
worried!
Back to Makhlouf at the Treasury.
What are his concerns? The issue of private debt – household debt! There
is, he warns, the possibility of the ‘housing bubble bursting’. ‘The surge
in our debt is because borrowing has become easier; if the banks won’t loan
there are the loan sharks’. Repayment for many is too much for wages to cope
with.
Latta comments that ‘poverty leads to
immediate thinking and people fall into debt trap’ – the really poor fall back on pawn
shops for cash supply for immediate needs. ‘Things are seriously messed up when
good people are paying impossible interest payments to loan sharks’.
Even the idea that education is
seen as a basis for a successful life is in doubt.
Students mount up tremendous debts. University students leave with
$50000 loan debts and still have trouble finding jobs. Even students of the
middle class are feeling the squeeze – something never experienced by their
parents. Fee education is a myth.
So what has changed asks Latta in
regard to Government money for public good?
The trouble is that the government
gets less tax from companies and from people on a higher income. And lots of people are fiddling
their taxes. As a result the government get less tax. Dr Lisa
Marriet (Victoria University of Wellington) tells us that
‘there is a significant amount of undisclosed tax – more than 5 or 6 billion!
‘And’, she says, ‘it is not just local companies and individuals, an enormous
amount of tax is avoided by international corporations – Google, Facebook and
Apple pay no taxes anywhere!’
Dr Lisa Marriet |
We would all be better off if
everyone paid their fair share of tax.
Make them pay a fair share! |
As Nigel Latta says ‘it seems crazy
to me that the tax system has been changed to suit the people with lots of
money while the low earning kiwis, young people and students are forced into
debt’.
day. If
you can’t you are in debt trap which
some people see as the biggest failing in our current economy.
Over the past 25 years most of us
have seen little in wage growth while we all have been faced with increased
house prices and ballooning debt – which you have to repay while living from day to
With regard to wages Bernard Hickey
said that ‘Henry Ford quadrupled the wages of his workers so they could afford
to buy his cars!’ ‘Our economy will
stall if we get to poor to pay for goods’.
Nigel Latta: ‘we need some visionary
thinkers in business. People prepared to make bold movers that Henry Ford
himself would find impressive. Luckily we have such an individual in Derek
Handley’.
Derek Handley |
Derek Handley is a self-made millionaire - a
successful entrepreneur. Handley has
joined a group of business visionaries concerned with the role business plays
in the role preventing inequality. They are determined to revolutionize the way
business leaders operate – they are calling themselves ‘The B Team’. Their mission is to encourage the purpose
of business away from short term to long term gains/profits so as to be a
driving force for social, environmental and economic benefit.
They want to change the game because
of the growing problems and issues facing us. They are
asking if business is so powerful why businesses aren’t playing a pivotal role
in addressing such important issues that affect us all?
It is an ambitious plan but it has
the support of global heavyweights such as Sir Richard Branson. Business has
the power to make the world a better place but it needs a ‘Plan B’ –one that
concerns itself people, the planet and the economy. There are business leaders in NZ
who want to be part of such a movement.
Handley says, ‘We are talking about a
total lack of moral leadership in business leadership’.
Handley believes that ‘it would
only take a 100 of the top CEOs to change the world. Such people could be the
leaders pointing the way to a better future for all.
As Latta comments, ‘up until now it
has been profits first – why wouldn’t business leaders change? Why would they
care?
Handley
answers by saying, ‘In the long run sustainability will be big business –
businesses will need to include social and environmental goals’. Such goals
will not only will it make our community better but it will be profitable in
the long run. Businesses can help deliver on both.
Even the Treasury is considering measuring
aspects well beyond GDP - to measure quality of life. It seems we have focussed
too much on financial success for a few and not enough on the quality of life
for everyone.
Something new we will have yet
to discover but to base success on simplistic GDP is so last century and is
centred on the Christchurch rebuild and the dairy industry.
We owe’ says Latta, ‘a better life
for our children; a dream of a better world for our kids; for them to grow up
in a country where everyone has a fair chance of a job; a decent home to live
in; and able to feed their kids’. ‘We don’t want a world where we have working people living
in debt with the rich living in gated communities afraid of the poor’
.
‘Addressing the issue of growing
inequality’, Latta comments, ‘is a no brainer because ultimately inequality
hurts us all’. ‘More and more people are getting disillusioned. New economic
thinking is
required to face up to the reality of growing inequality’.
Beggars in NZ! |
Nigel Latta has timely defined the
real issue of the 2014 election – and without a politician in sight!
Political leadership will now be
required to go forward
(Apologies for any
misinterpretations; check the video yourself – Bruce Hammonds bhammonds@clear.net.nz )
More detailed
information available at http://www.union.org.nz/economicbulletin159.
4 comments:
Thanks for taking the trouble to share this with us Bruce. As you say an in depth look at an important issue - perhaps the most important issue as we face up to an election. Far more important than comparing leaders personalities!
I think it was worth the effort to record the ideas Latta researched. Better than listening to 'spin' from politicians. His next programmers is on education.
Excellent summary of key points. I thought he did a great job, I liked the way he used a range of experts, and managed not to put his personal slant on any comments. I think it made the programme more authentic.
That's pretty awesome thanks for the information you shared to us!
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