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Posts Tagged ‘Liquidations’

The National Party, common sense, and sausage sizzles

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Frank Macskasy Blog Frankly Speaking

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I’ve been involved in politics, in one form or another, for much of my life. I think I have a fairly good ‘handle’ regarding politicians; their ideologies; and their Parties.

I’ve seen Muldoon come and go; Bolger and Richardson; Shipley and English; and now Key and English, try their hand at managing our economy and spending our tax dollars.

Without exception, folks, every single National Government, from Robery Muldoon onwards, has been an apallingly bad fiscal manager.

National’s modus operandi,

  1. Cuts short term spending, worsening long-term social problems, which will become more expensive eventually, as social ills remain unaddressed,
  2. Cuts state sector employees and services, then realises that essential issues still remain,
  3. Cuts taxes when we can least afford it,
  4. Implements fiscal, political, and social policies that impact negatively on economic and social indicators,
  5. Borrows from overseas lenders when it was never necessary in the first place (or reduced borrowing, had tax cuts not been implemented)
  6. And generally makes bad choices that, long term, will cost the taxpayer more.

So – how on Earth has National ever built up a reputation of being a “sound fiscal manager” of our economy?!?!

Because every time National has been in office, it has left the country in an absolute economic shambles.

From Ruth Richardson’s “Mother of All Budgets”, to Jenny Shipley’s and Bill English’s “slash and burn” of the health sector,  state housing, Police force, and other essential state services in the late 1990s – National  has proven time and again it’s ineptness.

This Party is utterly clueless when it comes to simple matters of cause-and-effect.

One thing, though, has escaped me utterly.

How have they  sucked in the public to effect a (undeserved) reputation of sound fiscal management?

Whilst National runs deficits,  Labour, in the 2000s, ran surpluses. (A fact National attempts to hide by clumsily  persisting in re-writing history.)

See previous blogpost: Labour: the Economic Record 2000 – 2008

Case in point; Dear Leader and his minions has made a great deal about slashing the state sector. National has made deep cuts into state sector services and sacked over 2,500 much-needed employees,

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Frank Macskasy Blog Frankly Speaking

Full Story

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As 2,500 people were sacked from their jobs – all for a grand saving of $20 million,  National belatedly realised that their slash-and-burn was little more than a false economy.

It soon became apparent that many of the sacked workers were much-needed experts in their field, and essential personnel to make the State function smoothly.

National took “appropriate action”,

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Frank Macskasy Blog Frankly Speaking

Full Story

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Frank Macskasy Blog Frankly Speaking

Full Story

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Frank Macskasy Blog Frankly Speaking

Full Story

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Two thousand, five hundred of our fellow kiwis lost their jobs for “savings” of $20 million.

The Economic Development Ministry alone  increased spending on consultants, contractors, etc,  from $6.7 million in 2008-09 to $19.2 million in 2010-11. Other ministries most likely spent several million on their consultants, contractors, advisors, and Uncle Tom Cobbly.

See: ‘Consultancy culture’ cost $525m last year – Labour

So much for “savings” of $20 million.

One can only try to imagine what those 2,500 people who were sacked by National, must be feeling right now.

So the question remains; how has National managed to paint itself as a “responsible steward” of the country’s economy? Especially when a cursory study of their real performance reveals otherwise?

Tracey Watkins, writing in today’s (19 May)  ‘Dominion Post‘, may have  offered a clue,

But while these sorts of measures might be an annoyance, they do not cause widespread pain.

And in a perverse way, Europe helps Bill English’s cause. It maintains a sense of crisis while the sight of workers marching in the streets only underscores the gentle and low-fuss nature of our own austerity drive.

This is why Labour has struggled so far to run a coherent argument against National’s management of the books – the danger has always been that protesting any cuts to date look not only shrill, but profligate. To voters, less is more at the moment.

See: Kiwis are tolerating moderate austerity

A sense of crisis “. It may well be that the Middle Classes have been panicked by overseas events. There may be an under-lying fear that – like households in tough times – the country needs to cut back on spending, to avert a Greece-like melt-down in our own economy.

There may be an underlying belief  within the collective consciousness of New Zealanders that, in “tough times”, National is better at cutting than Labour. In “tough economic times”, cutting expenditure may appear to the public as more of a priority than, say, job creation.

Such feelings are not necessarily based on any reality or logical analysis of the country’s true economic situation; nor of the side-effects of cutting back on State expenditure. These may be deep-seated feelings based on how people may view the economy.

Generally speaking, people have very little experience with macro-economics; Keynesian-vs-Friedmanite economic systems; nor any real understand of how government economic policies work.

For most folk, their only experience is running the finances of their own households. Doing a household budget; paying bills;  and balancing the chequebook is the extent to most peoples’ exposure to finances.

And yet, government finances is not like household finances at all. The former is more complex, with control over fiscal and taxation policy; revenue streams;  and policies that can work to generate income for the state. The State has access to borrowings (if necessary) not open to ordinary households. By widening the tax-base, the State can increase its revenue – no easy task for ordinary households.

In short, the State has options not readily available to households.

But  through a dumbed-down media which focuses mostly on superficial political issues; mindless entertainment; and on the Here-And-Now, the public have become low-information voters.

By not being aware of the true extent of the State’s abilities, the public are trapped in a narrow paradigm of  the State being akin to “household budgets”.

So when National cuts expenditure, services, and jobs – it appears to the public to be a “common sense” plan to follow.

The public are not so aware that austerity measures can have negatives impacts on our economy and society, even in the short-term. Cutting back on government economic activity means a drop in all-round economic activity.

It is no coincidence that following Ruth Richardson’s “Mother of all Budgets“, that unemployment, company liquidations, economic growth, and other indicators worsened.

This is a Party that I would barely trust to run a sausage sizzle. They’d get rid of the volunteers; sell the barbeque; pay themselves a hefty fee; and claim success,

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The ‘mother of all budgets’

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Frank Macskasy Blog Frankly Speaking Mother of all budgets

Prime Minister Jim Bolger and Finance Minister Ruth Richardson make their way to the House of Representatives for the presentation of the 1991 budget. Richardson was from the radical wing of the National Party, which promoted individual liberty and small government. This was reflected in the budget, which severely cut government spending, including on welfare. Richardson proudly proclaimed her plan as the ‘mother of all budgets’, but such was its unpopularity among voters that it – along with high levels of unemployment – nearly cost National the next election.

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Frank Macskasy Blog Frankly Speaking

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Frank Macskasy Blog Frankly Speaking

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In the above graph, note the two ‘spikes’ in unemployment. The first in the early 1990s, after cuts (through the “Mother of all Budgets”)  created a rise in unemployment. The second rise occurred in the late 1990s, when the Shipley/English government again cut government services.

However, unemployment fell after the election of a Labour-led government in late 1999.

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Frank Macskasy Blog Frankly Speaking

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The implications of austerity policies should be crystal clear to everyone:  reducing government expenditure and activity in the economy dampens overall economic activity.  Everyone is affected – no one escapes the inevitable downturn.

Hence why the new French President, Francois Hollande, has rejected austerity policies for his country. President Hollande understands full well that cutting government expenditure will result in reduced state services; more unemployment; and a drop in economic activity and  growth.

As long as the public are aware of these facts, then they can make decisions accordingly.

Ignorance of these facts will be painful, as anyone with memories of the 1990s will attest to.

In this case, ignorance is not most definitely not ‘bliss’. And no one will be exempt.

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Additional

Dominion Post: Public service cuts get deeper

Bloomberg:  Hollande Vows to Fight Austerity After Beating Sarkozy

References

Te Ara: Story – Business failures and corporate fraud

Te Ara: Story – National Party

Trading Economics: New Zealand

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From 2011 back to 1991?

1 December 2011 23 comments

Even without a Tardis, John Key’s National government is set to return New Zealand to 1991, as it plans to cut spending and make more state sector workers redundant,

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Full Story

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Yet, the NZIER is warning of dire consequences  should National proceed with more cuts to state sector spending,

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Source

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Many will recall that it was precisely brecause of severe cuts to state spending in 1991 that made New Zealand’s recession so much worse at the time. Ruth Richardson even boasted that her budget was the “Mother of All Budgets”.

Economic data is presented here, in graph form, and shows the immediate conseqences that impacted on New Zealand soon after Richardson’s Budgetary cuts were implemented. Unemployment skyrocketed to approximately 11% – the highest since Depression days in the 1930s.

It is generally considered that Richardson’s harsh cuts unnecessarily deepened New Zealand’s recessionary effects. It caused considerable misery throughout the country as businesses collapsed; GDP fell; the prison population increased; and credit ratings agencies downgraded the country.

As John Key’s government lays plans for implementing more state sector cuts, it is clearly apparent that New Zealand’s economy is still struggling,

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And just to really drive home the fact that matters are becoming dire,  ratings agency Standard & Poor’s today downgraded the credit ratings of our major banks;  ANZ New Zealand, ASB, BNZ, and Westpac New Zealand,along with their Australian parents.

Things are not looking terribly flash,

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Whilst it is abundantly obvious that we cannot influence events on the other side of the globe, and that the slow disintergration of the Eurozone; the economic downturn in China; and America’s mind-numbingly huge deficit – that our government can still play a role in what happens locally.

First and foremost, now is not the time to be cutting back on state sector spending and government workers. Adding to unemployment will not help matters and will simply,

  • reduce overall consumption spending by unemployed civil servants
  • make it harder for 154,000 currently unemployed to find jobs
  • reduce overall economic activity

John Key needs to read up on our recent history and learn from the mistakes of his predecessors, Jim Bolger and Ruth Richardson.

He needs to understand that government cutbacks during a recession will not help – and will actually make matters much worse.

Instead, the incoming government should be considering the following;

  • Shelve all plans for further cutbacks
  • Abandon further cutbacks of state sector employees
  • Implement a crash training programme for those currently unemployed, removing barriers such as fees
  • Raise the minimum wage to $15 an hour
  • Compensate the increase in  minimum wage with a correlating tax write-off/reduction, for companies affected for one year
  • Increase the top tax rate for income earners over $100,000
  • Review Working for Famlies for those earning over $100,000

Some high income earners, businesspeople, and free marketeers may squeal at the above suggestions – but we either pay to keep our economy afloat and maintain high employment – or we’ll pay for  welfare, increased crime, social dislocation and other problems, as well more skilled Kiwis fleeing to Australia.

Why not pay to achieve positive outcomes instead of the proverbial ambulance at the bottom of the cliff?

Because either way, we will pay.

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Additional

Wellington hit with leap in mortgagee sales

Wellington furniture company in liquidation

Fourth National Government of New Zealand

The 1991 Budget and Tertiary Education: Promises, Promises…

Reserve Bank – Employment-Unemployment

Dept of Corrections: Prison sentenced snapshot trend since 1980

Annual figures for Bankruptcies and Liquidations since 1988

Chris Ford: National/ACT Coalition aiming to complete New Right revolution

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