12 May 2020

New Zealand in a post-Covid world

From Afternoons with Jesse Mulligan, 1:45 pm on 12 May 2020

Government must address  economic disparities and focus on retraining people left jobless as the economy readjusts to a post-pandemic world, a prominent social critic is warning.

Max Rashbrooke

Max Rashbrooke Photo: supplied

Author Max Rashbrooke, who says Covid-19 is a symptom of a world out of balance, has published an essay on the role of an 'active state' in the aftermath of the new coronavirus.

He told Jessie Mulligan it was imperative government protect the nation’s poorest from the effects of pandemic in the short-term, while rationally restructuring the economy in the long-term to meet the needs of society.

“Unfortunately, the normal pattern of pandemics and crisis is these hit the poor hardest,” he says.

“If look I back at the financial global crisis (GFC) there was almost no dent in incomes of the richest New Zealanders, but the poorest New Zealand took about six years to recover their pre-GFC levels of income and we’re seeing things like that at the moment, with the share markets going great guns at one end, versus unprecedented demand for food banks and parcels and that sort of thing.

“So, I think the government is going to have to keep inequality in its recovery [plans] and I think it really involves a much-more generous safety net cushioning the initial blow.”

One of the biggest and most immediate issues was addressing unemployment, with a post-Covid-19 market forcing painful adjustments on sectors of the economy, leading to mass job losses. Identifying areas where new jobs could be created instead within this readjustment period should lead on to appropriate retraining schemes to meet the skills requirements.

“If government does just one thing from now on, it’s probably a huge redeployment in training efforts to help all people who’ve lost jobs to find new jobs in whatever economy we have post-coronavirus.” 

Rashbrooke is keen to address ideological muddled thinking that this in some way involves a new type of government ‘intervention’. Rather, the state’s capacity to regulate markets for the common good has always been part of its primary function, but which must now be maximised.

“It suggests that there’s a pre-existing natural order of things that government artificially alters. But in fact, government is always there, it’s the bedrock of a lot of things in our society.”

New Zealand’s lockdown and ongoing restrictions affecting the economy and lives of citizens has been a legitimate exercise of power, but debate over what happens next is now essential, he says.

“I think what we’ve seen over the past few weeks is the presence of government in everyone’s lives suddenly increase immeasurably and that’s had been problematic, authoritarian elements, but also we are seeing the government prop up the economy.

“I guess what I’m doing with the essay… is to say ‘what should government look like in the future, what does coronavirus teach us, what kind of government do we need in the coming years.

 “I think that there are some things that are justified as part of the emergency response to the coronavirus and then there are some things that government need to do long-term. And I don’t think that right now, when we’re in a state of emergency and everyone is incredibly stretched, it is a time to make sweeping change, but I would like to see parties coming to the election with proposals for some really serious change.

Specific aspects of change and improved protections for the poor would need to start with what was recognised as already broken within the system – that which had already caused hardship for people.

The welfare system, currently under scrutiny for rules disallowing people with savings to claim benefits while out of work, is a good start, he says.

“We know that we have a welfare system that doesn’t work very well. It’s incredibly complicated and extremely ungenerous.

“I’d like to see us thinking about guaranteed minimum income. So that, if you need support from the government, you know that you are guaranteed to get it at a level where you can live in dignity. There are big changes needed in the future.”

The financial fallout from bold necessary measures by the state would be significant, but nothing that couldn’t be paid off over time, as had happened with nations who rebuilt their economies after World War II while initially incurring huge public debts..

“Financial response to coronavirus is going to go through a number of stages. In the short-term it looks inevitable that there’s going to be an increase in government debt."

But that is no reason to panic, he says.

“Post-World War II, the British government had debt that was two-and-a-half times its national income, but it just paid it off slowly and sensibly and didn’t slash public services or anything like that."

The need to introduce a new tax system would also need to be debated and assessed.

“If we need extra support or cushioning for people to get through the recovery I think there should be a greater contribution from people who have survived relatively unscathed and that will be by-and-large, the wealthy.

"So, one important way of funding the recovery will be some kind of tax on the holders of large fortunes and people who can afford to pay more.”

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