Revenge at Last

The occasion for this supposed reverse metamorphosis was the highly anticipated budget day, with suggestions that, after three years of treading water, the government was gearing up to announce something major. Labour had, after all, just come off a stunning landslide election win that gave it a single-handed outright majority, a first since the country’s 1996 electoral reforms. More than that, the country’s public debt is low, as are interest rates and, therefore, the costs of servicing it. Observers waited to see how Labour would spend the oodles of political capital it had gathered off the back of one of the world’s best pandemic responses.

The government very cannily framed its budget as a reversal of 1991’s “Mother of all Budgets,” one that would “right the wrongs” put in place by its author, the National Party’s then–finance minister Ruth Richardson, who designed maybe the most extreme case of welfare state retrenchment in the Western world. This framing has, in turn, largely been rebroadcast by the press, which has painted a picture of a budget “dyed the deepest red.”

“The end of Ruthenasia,” cheered the Labour-aligned Standard, referring to the nickname given to the brutal austerity program initiated by Richardson’s budget.

That 1991 document had aimed to complete the neoliberal revolution started by Labour itself in the mid-1980s. While that suite of reforms had seen a mass sell-off of state assets and the dismantling of New Zealand’s extensive system of regulations and economic controls, it had left its welfare state mostly untouched. Richardson used several different economic issues — including a higher-than-expected deficit forecast and a recent credit-rating downgrade — to finish the job, making steep welfare cuts of around 20–30 percent the centerpiece of the budget.

The result was what you’d expect: poverty and hunger persistently rose while wealth inequality dramatically widened, with Richardson’s beloved government surpluses built predominantly on the back of often poor families. The budget was so toxically unpopular that the National Party just barely clung on to a majority, thanks only to the distortions of New Zealand’s electoral system, and soon removed Richardson from her position, reversing some — emphasis on some — of her budget’s provisions.

The case that Labour’s budget last week avenges these misdeeds is based on its $3.3 billion boost to welfare, set to incrementally rise over the next year, first in July, then in April 2022. According to the Child Poverty Action Group (CPAG), that funding will see families on benefits eventually get around $40 to $115 more per week, in line with the recommendations made by the Welfare Expert Advisory Group (WEAG) that Ardern convened three years ago and promptly ignored until last week.

Needless to say, all this is welcome news in a country where poverty is not only shockingly high but has stayed frustratingly static, even worsening over the course of the pandemic.

But look closer and, encouraging though it may be, the reality of Labour’s budget falls short of the most effusive praise. Its decision to stagger the boost means families in need will now be pointlessly deprived of much-needed funds until next year. It’s chosen not to forgive debt owed to the ministry in charge of welfare, nor acted on the WEAG’s calls to lift punitive sanctions on beneficiaries.

And skyrocketing living costs, thanks especially to an out-of-control housing market, have made these numbers worth significantly less since WEAG’s recommendations. CPAG estimates that families on welfare would need an extra $100–$230 a week to stay above poverty, and that the Treasury’s own forecasts only see child poverty dropping a mere 1.4 points to 17 percent by 2023, leaving at least 180,000 kids in poverty.

Little wonder CPAG and other experts and anti-poverty campaigners have been bitterly underwhelmed by the government’s announcement. They weren’t alone: the head of BusinessNZ similarly suggested the government could’ve been more generous with its benefit increases. All the talk of a budget returning Labour to its roots starts to ring hollow when even one of the country’s leading business advocacy groups thinks the government was a mite stingy on helping the poor.

Revolution of the Mind

What would it take to really reverse the “Mother of all Budgets” and its malignant legacy? The first step would be recalling that it was more than “just” a merciless assault on welfare.

Richardson’s budget radically overhauled housing policy, scrapping programs that supported homeownership, replacing income-based rents with market-based ones for state housing, and sold off the government’s $2.4 billion worth of mortgages that had helped struggling families buy their first homes. It made cuts to ACC, New Zealand’s accident compensation program, while shifting its funding burden from employers to employees’ paychecks. It made similar cuts and restructuring to the university system, moving it further along in its transformation from a public good to a private service.

And it took aim at New Zealand’s old-age pension system, raising the retirement age from sixty to sixty-five and freezing payments for two years. Most controversially, when it came to the superannuation surcharge — a claw-back tax on high-earner pensioners that dented the program’s universality — the budget both raised the rate and expanded the number of people who had to pay it.

All this wasn’t about the nuts and bolts of practical policy. It was explicitly an ideological project. Then–prime minister Jim Bolger aimed to “arrest New Zealand’s drift from work to welfare,” end what he believed was “permanent dependency on the state,” and “achieve a permanent and substantial reduction in the financial and human cost of welfarism.”

Richardson likewise complained about the “excessive size” of government spending, and she “saw the cuts as a statement about the types of lives people should be encouraged to lead,” she would later say: ones of “independence and self-reliance.” The fact that welfare rolls were only as full as they were because of the economic misery created by the preceding round of neoliberal reforms didn’t seem to matter.

In other words, Richardson and her allies aimed not just to tinker with select programs but to transform hearts, minds, and what was politically acceptable. They wanted to redefine the relationship between New Zealanders and their government. To that end, they successfully shrunk the size of the state and the scope of its involvement in the economy, and they looked to make putting debt and surpluses ahead of people a permanent feature of politics.

And the budget further tilted economic policy in a “trickle-up” direction, with beneficiaries losing one-fifth of their income (or as high as one-third for single-parent beneficiaries), even as the rich prospered. But rather than just throw people off welfare, Richardson replaced the very ideas that underpinned it. While the 1972 Royal Commission on Social Security defined the aim of welfare as giving those with disadvantages “a standard of living much like that of the rest of the community,” by the 1990s, the system came to be viewed as simply a “safety net,” and one that Kiwis had to be discouraged from using as much as possible.

Needless to say, Labour’s budget has nothing approaching this ambition, nor does it even try to reverse all this. If anything, it shows how firmly New Zealand remains under the thrall of this thirty-year-old document.

Richardson’s debt-and-surplus obsession lives on in this current government, which has consistently justified its resistance to more public investment by pointing to debt fears, and even took care to frame this budget as “keeping a lid on debt and tracking a responsible return towards surplus” through “targeted investments.” Labour’s continued refusal to get rid of benefit sanctions reflects a fundamental acceptance of Bolger and Richardson’s moralistic distaste for welfare, as does its plan for a separate unemployment insurance scheme. And there is little sign that, beyond emergency measures necessitated by the pandemic, the party is planning to permanently re-expand the size and scope of government.

In this respect, New Zealand’s 2021 budget looks less like a repudiation of Ruth Richardson’s ideology than the furthest left you can go while operating under it.

The More Things Change . . .

It’s heartening to see New Zealand’s Labour government finally acting on years of pleas and demands to take the popular measure of lifting benefits. And it’s good to see them, albeit slowly, adopting the commonsense point that putting money in the pockets of the least well-off is actually good for the economy. Limited though this announcement is, not even Helen Clark’s Labour government in the 2000s dared to try and wholly undo Richardson’s welfare cuts, a sign that things really are slowly shifting.

But does this make the Labour Party socialist?

If so, this must be the most unusual socialist party in the world. Labour refuses to implement a wealth tax or otherwise raise taxes on the rich, while continually placing more and more of the burden on consumers through regressive consumption taxes. Its policy decisions, particularly around the housing market, have further concentrated wealth at the top while raising housing costs for ordinary Kiwis, in response to which it refuses to implement rent control. It continues to severely underinvest in areas like health care, infrastructure, and climate change out of debt concerns that put it out of step with even the world’s right-wing politicians and economists. And one of the first high-profile fights it picked with its newly gained political capital was with public-sector workers and the union that represents them, whom it tried to hit with a pay freeze.

Politics is changing in Aotearoa, as it is all over the world. But New Zealand remains a laggard behind the rest of the globe, still firmly stuck in a decades-old ideological framework that never worked for most people, but that is especially horribly unsuited to meeting the civilizational crises of today.

It’s nice that Labour’s not afraid of the word “socialist” anymore. But personally, I’d prefer a lineup of self-described liberals governing like socialists, rather than a group of “proud socialists” governing like neoliberals.