• The Voters’ Anger

    The disenchantment of British voters with democracy, we are told, is to be explained by the anger they feel at the failings of politicians. Those failings, it is supposed, are to do with the perception that politicians are “on the make”; but that conclusion – while no doubt partly justified – is surely far from the whole truth.

    The Guardian/ICM poll finding that 50% of respondents chose “anger” as their principal sentiment when thinking of politicians may well conceal a deeper malaise. The scale and depth of public disaffection is, I believe, to be explained by something much more fundamental than the sadly all-too-common instances of politicians breaking the rules governing their “perks” and allowances.

    What is in play instead is a growing realisation that the political class – which extends far beyond the ranks of elected MPs to include the whole of what used to be called the establishment – has failed a country that is now in a state of unmistakable national decline. Those responsible for what passes for serious debate about the state of the nation – and that includes business leaders, the media, civil servants, leading academics and experts, as well as politicians – have contributed to a process that has not only meant manifestly hard times for many of our citizens but also offers little hope of a better future.

    Despite constant assurances that better times are just around the corner, the UK has over the last four or five years suffered the sharpest fall in living standards in over a century. Those who have borne the main brunt of that precipitate decline have been the weakest in our society, for whom the safety net is regressively being withdrawn. Economic decline and social disintegration are now seared deeply into the national consciousness.

    None of the major contenders for government seems to offer anything but further retrenchment. The voters look in vain for an alternative to the current orthodoxy. Labour continues to suffer the burden of the New Labour legacy. The Tories commit themselves to self-harming austerity and promise to make life tougher for the already disadvantaged. The Liberals look for ways of distancing themselves from Tory failure without giving up the fruits of office. Even those voters tempted by UKIP recognise that they offer a counsel of despair rather than redemption.

    Little wonder that voters feel a sense of frustration and anger. They understand that the democratic process has not protected them from national failure and decline and that – although the formal power of decision is exercised by government – the shots are really called by global business interests whose dominance over what actually happens has, if anything, increased as the failure of the policies they enjoin has become more evident.

    What the voters expect from those who govern them is what they expect from any other group of supposed professionals – simple competence. What they see instead is a bunch of amateurs with little understanding of the economy they are supposed to manage and therefore totally at the mercy of political prejudice and vested interests.

    The cure for voter disaffection with democracy is simple. Politicians have to convince the electorate that they are able to abandon a failed orthodoxy that continues to smother new thinking, in favour of a fresh and more positive economic policy – and then deliver on that promise.

    What should be the elements of that new policy? It should focus on real issues and not on imagined problems. It should take as its starting point the need for a sustainable rate of growth which current policy is incapable of delivering.

    It should recognise that decades of comparative failure have left us with a profoundly uncompetitive economy and a manufacturing industry that is on its last legs. We cannot rebuild our productive base for as long as we cannot compete in international markets.

    The loss of competitiveness means that we cannot and dare not grow for fear of ballooning trade deficits and rising inflation. It means that the government’s debt – even while public spending is being cut – will continue to grow faster than the economy as a whole. And while growth languishes, unemployment continues to cost us lost output, acts as a brake on recovery, and undermines our social structure.

    We need to face facts and to engineer an exchange rate that allows us to make a fresh start by immediately improving competitiveness. We need a new approach to monetary policy, treating it not primarily as a means of restraining inflation but as an essential facilitator of increased investment in productive capacity. We need an agreed industrial strategy and new investment institutions to ensure that an increased money supply goes into productive investment rather than into consumption or bank bonuses.

    Above all, we need to restore full employment as the central goal of policy. An economy that offered productive work to everyone able to work, that provided ample finance for those ready to invest in new and competitive businesses, that found ready markets around the world for all it could produce, would not only restore faith in the value of government and democracy; the Labour Party should note that putting such proposals forward might get them elected as well.

    Bryan Gould

    29 December 2013

    This article was published in the London Progressive Journal on 31 December and in Comment Is Free in The Guardian on 6 January.

  • Learning the Lessons

    Once in a while, a single event can bring a whole range of apparently unconnected developments into a new and clearer focus. One such instance was the two-hour stoppage a week or two ago by 1500 employees of the Oceania Group, the country’s largest rest home operator.

    The stoppage, although staged again this week, quickly dropped out of the news, as other industrial disputes in the port of Auckland and in Affco freezing works took centre stage. But that limited action by aged care workers gave us a valuable insight into so much that is going wrong in our country.

    The facts can be simply stated and are wearyingly familiar. The Oceania workforce is largely female and part-time; many are paid just $13.61 an hour, only 11 cents above the minimum wage. Oceania will not budge from their offer of a 1% pay increase – much less than the rate of inflation. The workers – with very little bargaining power – tried to draw attention to their plight in the only way open to them.

    But it is when we dig a little deeper that the real significance of the dispute becomes apparent. The aged care industry (as we must now call it) is a prime example of the privatisation of what was once a public service.

    As public services that care for the elderly in their own homes have been – supposedly on financial grounds – wound back, the opportunity to make a profit by providing accommodation and care in privately owned rest homes has increased. The public purse still provides the funding, so the taxpayer still largely picks up the bill; but the money now goes via a per capita payment to private companies rather than public employees.

    The expanding industry has offered a tempting investment opportunity to private investors. Two New Zealand-owned companies, ElderCare and Qualcare, had built a strong market position; Oceania achieved its dominant position in the New Zealand industry by buying both of these firms.

    Oceania is a group of private equity investors which was set up under the aegis of Macquarie Bank, the Australian banking entity popularly (or should that be unpopularly?) known as the “millionaire’s factory”. The new Australian owners knew nothing about care of the elderly, apparently motivated solely by the prospect of making a good return on their investment.

    But they had miscalculated. The new venture offered a smaller return on their investment than they had hoped, perhaps because they had paid too much. They found themselves owing a large debt to Macquarie Bank, rather than enjoying the fat profits they had expected.

    The investors demanded that this position should be corrected. Since the operation’s income was largely pre-determined by the amount paid to them by the government, the only way of squeezing out a higher return was to cut costs – and that meant making real-terms cuts in the wages of an already low-paid workforce. With costs cut, and the debt re-paid, rich pickings were in prospect.

    That exercise has been reasonably successful, at least from the viewpoint of the investors. The operation is now producing a profit and the debt is being reduced. But the profits have been squeezed out of the workers, and have no doubt meant as well a lower standard of service to elderly customers who have little power to insist on better.

    Those profits – tens of millions of dollars produced from the funding provided by New Zealand taxpayers – are now being paid across the foreign exchanges into the pockets of Australians. They thereby add to the burden we face in trying to balance our overseas payments and compel us to borrow more from overseas.

    Changes in employment law – both actual and planned – mean that New Zealand workers are pretty much at the mercy of their employers, and – as other industrial disputes currently demonstrate – employers are newly confident that they can do what they want. Like most overseas owners, Oceania have little knowledge of and even less interest in the welfare of their New Zealand workers – to say nothing of New Zealand customers and taxpayers.

    The current ethos, after all, is that the bottom line is all that matters. As in the cases of both the Port of Auckland and Affco, owners need only specify a desired rate of return to ensure that everything else – including of course the interests of the workers –must be subordinated to that goal. We increasingly see workers treated as just another production component rather than as human beings with families to support.

    What lessons can we learn from this sorry tale? They are short and sharp.

    The real goal of privatised companies is profit, not service. We cannot prevent privatised firms – despite the government’s obfuscation on this issue – from falling into foreign hands. Enterprises owned overseas have little concern for the interests of their workforce. New Zealand workers are increasingly at the mercy of hard-nosed employers. Profits paid to overseas owners are not only a loss to the country but an unwelcome addition to our borrowing requirement as well.

    As we look at the wider issues now facing us and our under-performing economy, can we have any confidence that our leaders are learning these lessons?

    Bryan Gould

    8 March 2012

    This article was published in the NZ Herald on 14 March.