In Our Democracy, It’s Dollars Not Votes That Count
In what we are pleased to call a democracy, we count votes – one per citizen – on polling day, but on every other day we count only dollars; and when it comes to dollars, the more you have, the more political influence you wield.
Very few of us seem to realise how thoroughly the power of the purse has colonised and subordinated our supposed rights as citizens to an equal voice as to how we should be governed. Our government (and the present government especially), once elected, pays little further attention to ordinary citizens and makes its decisions according to what might serve the interests of the wealthy.
The rationale for this approach is presumably the long-discredited “trickle down” theory of economic wellbeing – that if the rich are encouraged to become richer, we will all be better off by virtue of the crumbs we might enjoy from the rich man’s table.
But the belief that wellbeing is to be measured purely in dollar terms takes us much further than that, and now penetrates almost every aspect of our national life. An obvious example is a trend that has begun to really gather pace over recent years – treating universities and other institutions of tertiary education, not as repositories of learning, mainsprings of new knowledge and the facilitators of a wiser and more far-seeing society, but simply as agents of economic development.
If an institution’s graduates cannot be shown to be immediately of value to the process of making a buck, it will be marked down and its future funding threatened. Little value is given to a more educated society for its own sake; the only purpose of education, it seems, is to promote a higher GDP.
Considerable effort is devoted to “educating” the public to accept that the only worthwhile goals are those with a dollar value. The search for profit, we are told, is the only motivation that will produce a higher level of effort and achievement. We see instances of this thinking wherever we look.
Selling off (or privatising) public assets? Who worries about levels of public service for society as a whole when better-off members of the public can be introduced to the joys of making some unearned income on the stock market?
The “free trade” deal with the US? Who cares about maintaining some element of control over our own destiny as a nation if some of us can trade that away for increased profits?
Instances of this kind abound, even at a very detailed level. I came across a further example the other day. This country welcomes immigration as a stimulus to growth, but we have also learned to value its benefits in helping to develop a society with a richer texture and a wider cultural base.
Commendably, our government set up a few years ago, under the aegis of Immigration New Zealand, a support service for immigrants to help them to settle and adapt to their new country. The service, known as Settlement Support, has done excellent work and has eased the path for countless new migrants so that they can enjoy greater success and can make a worthwhile contribution to our national life.
Until now, the service has provided face-to-face help to any migrant who cares to ask for it. The help largely takes the form of information on where to go for advice on a whole range of matters, and is of value both to the migrants themselves and to employers who might contemplate employing them. Customer satisfaction (at 91% for migrants and 83% for service providers and employers) is at a high level.
But someone has decided that the service is too “unfocused”. The inevitable consultant’s report has been commissioned and it has duly served the purpose of those who commissioned it.
It seems that too many migrants of low economic value are availing themselves of the service. What is needed, the consultants recommend, is a service that focuses on the 12% of “high priority” immigrants; the employers of such people are also to be priority customers. There will be a second category of medium-priority customers (20% of the total) who might one day become “high priority”. It is these categories who will receive a high level of support and attention.
At the bottom of the heap are the 58% of “low priority” customers. Under the new “Proactive Customer Management Model”, they will no longer have a face-to-face service. They will not be encouraged to seek help; they will have to make do with a web-based service.
These migrants, whose low economic value apparently makes them undeserving of real help, must overcome their unfamiliarity with the language, their lack of resources to allow them to access the internet, and their sense of confusion about the society in which they find themselves, to negotiate their own way through the maze of agencies and sources of help and advice that might be of use to them.
Immigrants of “low economic value” might be seen as of little consequence; but are they not just a sub-category of those ordinary home-grown citizens of whom our government makes the same judgment?
Bryan Gould
19 October 2013
The Lump of Labour Fallacy
Popular wisdom and what passes for common sense are not always the best guides to running a successful economy. That is why businessmen who have a good practical grasp of what it takes to run a successful business are often wide of the mark when it comes to making policy for a whole economy.
An economy, contrary to what is often asserted, is not like a business. Particularly in down times, the measures that might be required in the interests of an individual business are the very reverse of what is needed by the economy as a whole. Cutting costs, deferring investment, and laying off workers will help to balance a single set of business accounts but are the last thing that a whole economy needs if it is to avoid continued recession.
It is often the case that good economic management may seem counter-intuitive. A case in point is what economists call the ‘lump of labour” fallacy – the belief that there is a fixed amount of work available and that the task is to decide how that is to be shared out fairly.
The fallacy is alive and well in the minds of even experienced policy-makers. We saw shades of it in the “nine-day fortnight” that emerged as a counter-recessionary strategy from last year’s job summit. The idea, which not surprisingly had little impact in practice, was based on the notion that if a fixed amount of work could be shared out, more jobs would be created, or at least saved. By diverting attention from what was really required – a policy which would increase the number of jobs – it actually hindered the fight against unemployment.
The fallacy rears its head unhelpfully in other contexts as well. In the perennial debate in developed countries about immigration, one of the main arguments advanced against allowing an inflow of newcomers is that they will “take our jobs”. There is little recognition of the real possibility that a controlled rate of immigration could create jobs and expand the economy.
There are of course many considerations in determining what are appropriate levels and kinds of immigration; but we would no doubt reach better decisions on matters such as this if we could free our minds of intuitive fallacies and look at the practical evidence. The great economic success of a Hong Kong, for example, was greatly helped by the constant inflow over many years of (often illegal) immigration from across the Chinese border.
The “lump of labour” fallacy also underpins an important current debate in our own country. The stubborn refusal of comparatively high unemployment to melt away has again prompted discussion of what the government could or should do to “create” jobs. The very suggestion that something could be done has, however, been greeted – even by very experienced commentators – with the apparently incontrovertible objection that “the jobs just aren’t there.” And that means, it is said, that there is nothing the government can do.
If that were really the case, of course, the government’s push to get people off benefits and into jobs would be futile. The jobs cannot both be non-existent for the purpose of getting unemployment down, yet waiting there for lazy beneficiaries to take up. And while it is certainly true that there are strict limits as to how far (if at all) governments should try to create jobs by putting in place “make work” schemes, that is not the real issue.
The reality is that the number of jobs in an economy is not a given, but is a function of the level of demand and therefore of economic activity. The number of jobs falls in a recession and rises in better times. If we want to recover from recession, we need policies that will stimulate demand and purchasing power so that people will buy what producers make, and retailers can boost sales, and employers can see that it is worthwhile to take on more staff, and more people earning good wages will keep the virtuous circle going – so that the government’s finances benefit as well through a higher tax take.
There is no mystery about this. And the level of demand is very largely determined by policy. A government that provides stimulus to the economy through maintaining or increasing its own levels of spending and investment, as the Australians did, can achieve a great deal in avoiding recession and fighting unemployment.
If the policy priority, however, is to get the government’s (perfectly manageable) deficit down, the outcomes are equally clear. We may comply with good business practice by pleasing our bankers in the short term, but our economy will be smaller, unemployment will be higher and the recession longer. If we really want to please our bankers in the longer term, we should be growing the proportion of our resources devoted to production and exports. That will not be achieved by allowing a prolonged recession to close down parts of our productive capacity.
Bryan Gould
15 August 2010
This article was published in the NZ Herald on 31 August.