Closing the gaps - again

In the lexicon of recent New Zealand political history, "closing the gaps" has certain connotations.

For this was the slogan attached to Labour Party policy designed to deliver targeted social assistance programmes to Maori and Pacific people during the 1999 general election campaign, but which was subsequently much criticised as a move towards "social apartheid". The label was quietly dropped.

Although some of the initiatives survived, imprisonment, unemployment and failing education statistics for Maori and New Zealanders of Pacific Island origin continued to remain alarmingly weighted. The recent National-led government has also grappled with the issues, through the Maori Party's "Whanau Ora" social policy package, for example, but there is much work still to be done.

The latest OECD report on inequality, Divided We Stand: Why Inequality Keeps Rising, takes a more holistic and structural look at the performance of developed nations with respect to the generally widening gap between rich and poor.

The starting point for the report is that the income gap widened in 17 out of 22 developed nations between the mid-1980s and the late 2000s - and has widened even further in most countries during the last three years of recession. Its philosophical context is that growing inequality could lead to social resentment, political instability and diminished economic performance.

Of pressing concern for politicians and high-level policy boffins may be the revelation that the gap between rich and poor has widened further in New Zealand - and in Sweden - than in any other developed countries during the past quarter of a century. However, unlike Sweden, the main impetus for that disparity occurred in this country between the late 1980s and 1990s, slowing down again over the following decade to 2008.

This is hardly surprising. Up until the late 1970s and early 1980s, New Zealand remained one of the most egalitarian among developed countries: egalitarian, but as David Lange and Roger Douglas were to discover upon taking office in 1984, essentially broke.

There followed the period of abrupt and far-reaching economic realignment in which State assets were sold to the private sector, subsidies of various kinds were removed, and the "user-pays" mantra gained widespread currency.

Labour's free-market "Rogernomics" and its subsequent National government counterpart, "Ruthanasia" - after then Finance Minister Ruth Richardson's "mother of all budgets" in 1991 - modernised the economy along neo-liberal lines, but also presided over a previously unseen growth in disparity between the haves and the have-nots.

Subsequent redistributive tax policies of the Labour-led administrations from 1999-2008 - Working for Families, for example - appears to have slowed the disparity growth rate somewhat.

In the wake of the report's release there has been a focus on the reversal of some of these redistributive policies by the National-led government of the last three years.

True, it did follow through with its personal tax cuts policy which, along with its raising of GST, has been criticised by some for increasing disparity; but it also chose to retain the Working for Families policy framework. And to focus entirely on tax policy is to ignore a greater context. What the report says is that there is nothing inevitable about growing inequalities.

Any policy to reduce the income gap should rest on three main pillars: investing in education and training; creating jobs and helping people into them; and, finally, better designed tax and welfare policies.

Addressing the report, OECD Secretary-general Angel Gurria said this week: "This study dispels the assumption that the benefits of economic growth will automatically trickle down to the disadvantaged". This may take the wind out of the sails of hardline neo-liberals, some of whom set their stall by such logic. But it is also incorrect to trump the report as an indictment of recent government policy.

Clearly what is required is to address inequality on all fronts - and to achieve it on some may require leeway on others. There is, for instance, some force in the Government's position that its tax policies are designed to help create jobs, thus reducing unemployment and, at the same time, chipping away at the destructive bane of inequality.

 

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