The economy scam

At least once a week, the media carries a story about how “badly” New Zealand is doing relative to other countries, especially Australia. Yesterday, The New Zealand Herald carried an article by Andrea Milner, which began, “As Australia's economic recovery strides ahead of ours, Kiwis wanting career opportunities and financial reward would be better off going there next year.”

Her justification for that opening was, “Official statistics show that Australians enjoy incomes one-third higher than New Zealanders do, and some market-watchers predict that as our neighbour comes out of the slow-down faster than New Zealand, the gap will increase to around 40 per cent.”

Like most economic coverage in the media, this only presents part of the story, reporting breathlessly about how much higher salaries are in Australia. She offers ONE brief paragraph as balance, admitting that the Kiwi couple she mentioned who found an income more than twice what they could in New Zealand was paying $1,000 a month for a one-bedroom apartment and that groceries cost more than in New Zealand.

Salaries only tell part of the story: Taxes, hidden government fees and costs of living (housing, food) are almost always higher in Australia. Include those factors and the salary difference is much less. Contrary to the headline for Andrea Milner’s article, man Kiwis have found that “Oz, our pot of gold next door” doesn’t ring true.

But the business elites don’t talk about higher salaries in Australia: To them our lagging behind Australia is “our” fault. Alisdair Thompson, of the Employers and Manufacturers Association, wrote in today’s Herald that, “New Zealanders, as a whole, live constantly beyond our incomes, so much so that our domestic savings fall well short of our borrowings.”

We hear that a lot from the business elites—we’re a nation of binge spenders. Trouble is, they don’t really mean what it sounds like they’re saying: What they really mean is that ordinary people don’t buy shares and that the government’s deficit relative to GDP is “too high”.

To the business elites, money that ordinary people save or invest in some other way (like a mortgage) is merely “deferred consumption”. That may be a holy doctrine among business economists and the business elites, but it’s bollocks.

Ordinary people do of course save money so they can spend it later—in the past that was encouraged as a positive virtue. Now, as Thompson lovingly asserts, “the purpose of all production is ultimately consumption” (well, duh! What’s the point of producing products or services if they’re not bought?). However, the point of life is not consumption, and this is where the business elites and shallow business journalists completely lose the plot.

People want to improve their lives, and sometimes that means consuming things. But it also means providing a home, the necessaries of life and enough unnecessary extras—luxuries—to make life fun. None of that necessarily involves buying shares, nor does it automatically mean going into debt.

Money saved in New Zealand does, contrary to what the EPMA implies, provide money to loan here in NZ. But since the main banks are all Australian-owned—thanks to policies championed by the business elites—the banks ship their profits back to Australia, and that loses money that could be re-invested here (and, without a hint of irony, Thompson condemns Kiwis for buying foreign shares, even though doing so is the reverse of what the banks do: bringing profits made overseas back here).

Also, a case can certainly be made that government deficit spending—particularly in a recession—is a good thing to do, not something to be condemned. That is, of course, if one believes that government has a duty to its people, and doesn’t treat them like the business elites want.

Business elites like the EPMA see us as resources to be used: Our labours to make their products and services, our money to buy their goods and services and our savings to allow their businesses to expand until they can sell out to foreign owners (which the elites believe should be the ultimate goal for all business).

Blaming ordinary people for the lack of cheap domestic credit for business lets those businesses off the hook completely. Perhaps they could look at how their own bad behaviours—greedy exploits that have wrecked ordinary folks’ confidence in corporate governance, for example—have helped create this mess they’re in.

Ultimately, business elites, business journalists and conservative politicians all need to keep in mind two simple things: First, they serve us, not the other way around—without us, they could not exist. Second, many of us love life in New Zealand and money isn’t our sole motivator, nor is consumption our only goal. They can pontificate as much as they want about how awful it is in New Zealand, how much better it is somewhere else, but that doesn’t make it true.