Salient. Victoria University Student Newspaper. [Volume 39, Number 19, 1976.]
Nothing from Nothing
Nothing from Nothing
The Muldoon Government, recently arrived from Nauru, gave its first multi-budget last Thursday. Unless you're going overseas, are buying a stereo or an outboard motor, you probably didn't notice it much.
In retrospect, the worries we had about the Budget were at bit extreme. The rumour about a 10% increase in taxation for example. Or about the massive increases in sales taxes. Sure, 7 cents on fags and 70 cents on imported whiskey might hit you hard, but other things coulda bin far worse.
The rumours hadn't been helped by Muldoon. His warnings of 'stern measures' and 'complete package" got us a bit Worried. The most complex things was the wrapping, and the sternest measure his approach to the whole affair.
Economy in a Mess
|1.||record and growing rates of inflation|
|2.||a massive and increasing Government deficit of expenses over income|
|3.||a massive external deficit (we buy more goods overseas than we can sell there)|
|4.||the highest level of unemployment since 1940.|
|5.||A crisis in capital accumulation.|
To my mind, the last of these is the most important. Capitalism can easily survive with any of the others, but if not enough money is put into new machines and equipment, then the system starts shaking a bit. And that is precisely what is happening in New Zealand.
In agriculture, stock numbers and output have not risen significantly over their 1965 levels. The investment funds available have not gone into machinery for local industry either. Much has gone into superfluous export-orientated industries, who import their machinery and mateirals and export their products. One could be forgiven for thinking that this has little to do with the development of this country.
The other avenue for firms profits has been in nonproductive uses. Into expensive beach speculations for example. Or, as Lincoln Laidlaw, the President of the Manufacturers' Federation, said into takeaway food bars and massage parlors. Whatever the quality of such services, they don't have much influence on the future productivity of this country.
This is not to deny that the other issues are important (tho' I see them slightly differently to Muldoon) but, as can be seen from the Budget measures, this is the central question. The crisis in capital accumulation.
The high unemployment figures are directly related to this - obviously if you're not building new machines then there are no jobs to make these machines, nor jobs to work with them. The other three are more independent, but all five combine to agree. The economy is in a Mess.
Interest in the Budget
As Muldoon was elected last year on belt-tightening living-within-our-means platform, so people began to expect harsh measures. In one respect, this was disastrous - importers, expecting imminent controls, started importing even more.
Many of the measures the Nats have taken have been tough - especially on low-income earners. The lifting of subsidies on milk, transport, bread. Yet the savings (and Walker's 1984 snooping on unmarried mothers is a classic example) have been small. As the problems didn't go away, in fact worsened, we awaited more action.
As I argued in Salient 2, the March financial minibudget achieved little in resolving the problems. In referring to that 'package' in Parliament, Muldoon said it was taking effect, although us citizens had no concrete evidence for it the later tried to manufacture some, but it hadn't set). I tell you its working! Like I tell you inflation's getting smaller when the latest figure is the highest ever?
It came to budget time, so we expected the heavy hand (and got the soft cushion?). And I bravely went into the lion's den to watch the unfolding spectacle. Meeting a rep from the Soviet Novosti Press, Tom Scott introduced us as both from revisionist newspapers the Russian disagreed slightly!
The fun and games started when everyone filed in at 7.30. They're an impressive lot, our Parliamentarians (and don't ask me to prove that). The Labour Party went nutty and forced a silly division to waste ten minutes valuable drinking time right at the start. They got their deserts at the end.
Muldoon started by describing themess the economy is in, concentrating on the first four points above. However, [unclear: e] wisely said, the remedy for any one would exacerbate one or more of the others. So you sit tight and hold on? Surprisingly, he didn't get as stuck into 'three years of mismanagement' as much as I expected. Possibly his invective was suffering from jet-lag.
The description of NZ's situation, and world happenings stemming from his last tour (leaving out Paris strip-clubs), went on for some time. I had some gems, like the contradiction between our supporting Pacific nations independence but not allowing them independence to do something we don't like. Between the image and the reality and all that.
People were beginning to lose interest. So we turned to agriculture and started the analysis of no new capital accumulation. The question why? Wasn't answered very well it appears to have something to do with individual's motivations. If every farmer in Godzone wakes up one morning and says "Stuff the fertiliser" agriculture bombs.
More sensibly, the reason is that finance can find higher returns for its investment in non-productive areas. If the analysis was not there, the answer certainly came from it - giving more generous depreciation allowances, incentives and investment to encourage investment.
Similar depreciation favours were dispensed to fishing and the export industries. Unfortunately, the policies draw no distinction between the rich and poor in an industry. Consequently, as with the sheep retention scheme of 1967, the wrong people will benefit the most.
Some retraints are to be placed on local industries as increased sales tax. However, it is likely that Muldoon's wish to increase sales taxes, or even income taxes, were vetoed by Treasury, pointing to the effect this would have on retailers. As can be seen from the larger number of sales at the moment to give ready cash, many retailers are close to the wall. A little extra nudge......
Everyone was getting thoroughly put to sleep by this stage, so something had to happen. A very quiet National Party suddenly had a flurry of notes passing around. And then: Last year Government expenditure increased by 28.6%.....[0-0L] I Said: Last year Government expenditure increased by 28.6%
- shocking! said the chorus
And Government spending grew to 42% of the Gross National Product
- Terrible! said the chorus
We will ensure that the Government deficit will be only $850 million this year.
- Hear! Hear! said the chorus.
[last year National viciously attacked Labour for budgetting a fantastic deficit of $700 millions. Funny that].
It got quiet again, and the chorus tipped its head and ducked off to the loo.
So we moved off into a general survey of Government spending, with very little mention of works and development, and huge apparent increases in Health and Education (actually small real declines). After education the rot started in the public gallery, and the masses dragged their weary ways to the door.
Not much new stuff back on the floor. A leaving tax to discourage NZers going overseas. More incentives for exporters, and some to regional development.
The start of National Superannuation in February 1977, but still no idea how it'll be funded. Substantial increases in pensions in the menatime. But little more.
So we have the interesting spectacle of a Government on one hand proud of the reliance it places on private enterprise. On the other, doling out tax dollars fast to bolster firms' profits in agriculture and export manufacturing. A Government that cannot raise taxes much for fear of bankrupting retailers but has to pay out more to help others from bankruptcy.
It's quite clear that with such a situation, there's no way the Government deficit can be heavily reduced. It was a return to comparative sanity that there were no new hare-brained schemes to hit Government expenditure. Yet the effects of the cuts so far, especially in works deferred, will be with us for a long time.
The only policy to reduce inflation was the already announced wage-freeze. Apart from the travellers tax, nothing to better the balance of payments. But the Government has taken severe measures to reduce unemployment figures. It has made it harder to register as unemployed. Watch those figures drop (Labour did the same thing last year......lies, damned lies and unemployment statistics).
So most of the problems of the capitalist economy remain unchanged. The complete failure of the Labour Government to take firm action (e.g. with import controls) is continued by National. You'd think laissez-faire overseas action would at least be questioned by now. And in the major part of the budget the economy pushes the Government into a corner and a major contradiction.
Muldoon sat down, a sustained National Party applause. I can't work out whether because of the Budget or the fact he'd finally sat down. Probably the latter. A bubble of relief settled into the Chamber.
Labour Bombs Out
Then the bubble burst. The Leader of the Opposition is supposed to give some pithy and sarcastic comments. Perhaps he was also asleep, or else waiting for the cheese to come around again. He finally membled something about calling the thing the "blunder budget".
From across the hushed chamber came the sardonic "What would You have done?" Good question on sir, I'm glad you asked that question. What would the dynamic Social Democratic leadership have concocted? Mr Rowling was obviously not at all pleased the question had been asked. He muttered sleepily about the procedure of the House, and moved an adjournment.
The House showed what they thought of procedure by totally mucking up the adjournment. Confusion. Noting it was 9.30 and the budget hadn't changed closing time I made for the door. Waving breezily to the Movosti Press man, one revisionist to another and leaving the party games behind.
Doing the old Les Moyniton down the front steps, and eventually to a bus stop, where a boy with a transistor is telling the driver all about the Budget.
- What's Muldoon put the price up of now?
- Oh, lots of things, cigarettes, air travel (more hesitantly] and beer
- Beer? The bastard. And I bet the bastard's put up the price of petrol again
- (very hesitantly, thinking "Well I could always say I misheard"] Yeah.
- The bastard.
The bus coughs into life and into the rain-sodden night mourning the increase in whiskey prices. And perhaps realising the small impact of any Government's measures on an essentially unsound and anarchic economic system.