Debtors Are Not Choosers

At each election political parties campaign on the basis of their commitment to address increasing social problems. Recent announcements by the Shipley government about further reductions in social security are typical of government policies since 1984. Once again, Government is moving to deprive the most needy members of society whilst, in this case, offering tax cuts to the wealthy. How can anybody take political rhetoric seriously?

More importantly, what motivates decent people who are charged with governing this country to behave as what must appear like two-faced liars when their words and actions are compared? What are the realities of government that force well-intentioned people to take hard unpopular political decisions that clearly disregard the wishes and best interests of average New Zealanders?

The phenomenon is not new. But consistently since 1984, New Zealand governments have espoused various forms of a better decent caring society but slashed government spending on welfare, education and health. At the same time these governments have continued an unprecedented fire-sale of public assets against the wishes of the majority of New Zealanders.

For example, how could the Labour government sell Telecom when more than 80% of New Zealanders opposed this? How could forestry cutting rights be sold for $1 per tree when New Zealanders did not favour the sale? How could the National government slash benefits in 1990 when as they now concede a subsequent economic contraction was an inevitable result of a billion dollars less spending by beneficiaries?

The modern problem stems back to the 1970s, when in the space of six years, 1973-79 the cost of one of our most significant raw imports rose by 1300%. Before 1970 debt was not a significant problem globally. With the 1970s oil shocks government (and private) budgets blew out all over the world. The response was unprecedented borrowing from the people who were making unprecedented profits trading oil.

By the end of the 1970s, Latin America, and much of the rest of the world, was completely unable to service the moneys it had borrowed. New Zealand was in a similar position. Muldoon regulated to limit the damage by imposing carless days and a price freeze.

International commercial banks who had previously extended credit to these nations began to refuse. At that point the only sources of significant available credit were the International Monetary Fund and the World Bank. The IMF and the World Bank have particular borrower requirements that relate to economic policy.

One thing that people do not seem to realise is that when borrowing money internationally a government is in much the same position that they are when seeking an overdraft or mortgage. Basically, if you don’t make the bank manager happy, you don’t get the money. So if the IMF and World Bank insist that a debtor government adopt particular economic policies and practice, then the debtor has no choice.

The lending conditions imposed by the IMF and World Bank are a set of free market policies which are internationally known as "structural adjustment". This is the origin of Thatcherism in the UK and Reaganomics in the US. It is the same force that determined the virtually identical policies of Roger Douglas – Labour, and Ruth Richardson and Bill Birch – National, here in New Zealand.

The announcement of Ms Shipley that beneficiaries will be further humbled is a strong indicator that she answers to the same masters as her predecessors. Consequently, do not expect this government to live up to its word, or the decisions taken to reflect the best interests of New Zealanders. The economic and social policies of our government are set by the international financial community which will do as little for New Zealanders as it takes to remain in power.