Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search


The Real Cure For Poverty Is Growth

What’s new on our Breaking Views blog…
Mike Butler: Waikato greed, double dipping
Ron Smith: Knowing the Truth
David Round: The Hobbit - and Chris Trotter
Kevin Donnelly: Freedom of religion and faith-based schools

NZCPR Weekly:

The Real Cure For Poverty Is Growth
By Dr Muriel Newman

Last week former Prime Minister Helen Clark was subjected to a scathing review of the United Nations Development Programme that she has run since 2009.[1] The evaluation was carried out by her own executive board and covered the last two years of operation. It paints a picture of a confused organisation that is failing to achieve its goal of global poverty reduction despite spending more than US$8.5 billion between 2004 and 2011. The report was essentially a performance review of Helen Clark. It warned that the UNDP had underachieved in a wide range of areas including failing to properly evaluate the success of its poverty reduction initiatives, failing to share good ideas between its 162 country offices, and failing to ensure that worthwhile pilot programmes were expanded to maximise their benefits.

According to the World Bank, the number of people living in abject poverty on US$1.25 or less a day is continuing to fall across the globe, declining from 1.9 million in 1981 to 1.3 million today. This number is expected to continue to fall - not because of programmes like the UNDP, but because economic growth is lifting people and nations out of poverty.

In 2001, the World Bank published a study that examined economic progress in 92 countries over four decades, searching for the factors that were responsible for lifting the incomes of the poor to the greatest degree. In Growth is Good for the Poor, the authors found that when average incomes rise, the average incomes of the poorest fifth of society rise proportionately.[2] This held true across regions, periods, income levels, and growth rates. They found that factors responsible for improving economic growth between countries, such as the rule of law, openness to international trade, and developed financial markets, benefited the poor as much as everyone else. While they did find some evidence that lower inflation and smaller government increased the income share of the poorest fifth in society over other groups, the results were inconclusive.

In 2005 a further World Bank study, Aid and Growth: What Does the Cross-Country Evidence Really Show?, reinforced these findings: there was no evidence that aid was able to improve economic growth – ever.[3] Part of the reason for the failure of aid to produce any significant long-term benefits appeared to be that most of the funding either came with strings attached - dictating that the money must be used in particular way that sounded good in New York or London but was largely ineffective in the field - or that it goes to governments and leads to corruption.

As Zambian economist Dambisa Moyo explained, “We know that there is no country - anywhere in the world - that has meaningfully reduced poverty and spurred significant and sustainable levels of economic growth by relying on aid. If anything, history has shown us that by encouraging corruption, creating dependency, fueling inflation, creating debt burdens and disenfranchising Africans (to name a few), an aid-based strategy hurts more that it helps.”[4]

Helen Clark has hit back at her executive board, defending her UNDP actions with ‘transformational change’ rhetoric. However, this has echoes of the Closing the Gaps strategy that her government introduced into New Zealand in 2000 in order to close the so-called income gap between Maori and the rest of society. Closing the Gaps was a misguided policy based on the notion that income disparity was a race issue. Helen Clark planned to spend $140 million over 4 years on this Rolls Royce affirmative action programme to deliver services based on race instead of need.

But the policy met strong opposition and was discredited. The Race Relations Conciliator at the time, Dr Rajen Prasad - who is now a Labour Member of Parliament - climbed into the debate claiming that delivering social services through iwi and other Maori structures would result in discrimination against non-Maori. Even the Plunket Society joined in, saying that poor health was linked to lower incomes, not race. But the nail in the coffin of the policy was a damning critique produced by the Department of Labour’s senior research analyst Simon Chapple that showed Maori deprivation was a socio-economic issue based on factors such as age, education, skills, and place of residence rather than ethnicity.[5]

At the time the policy was launched, Helen Clark said the initiative was in response to a “strong voice from Maoridom urging that it be able to take control of its own destiny, determine its own strategies, and devise its own solutions.” While the Closing the Gaps policy was abandoned, those same strong voices from Maoridom did not give up and were clearly behind Whanau Ora, the $134 million reincarnation of the policy, that was launched in 2010 as part of the Maori Party’s confidence and supply agreement with National. New Zealand First leader Winston Peters is a strong critic of Whanau Ora, attacking the programme as a “bro-ocracy” designed to gift taxpayer funding to Maori for family reunions, gang activities and other “nonsensical purposes”.

As with overseas aid, such welfare programmes often do more harm than good. Instead of pouring funds into questionable schemes, governments should focus their efforts on lifting economic growth and creating an environment in which small business can flourish, since these are the only proven pathways for improving outcomes for the disadvantaged.

With that in mind, the comments last week by the outgoing boss of Coca Cola, that New Zealand’s ingrained anti-corporate mentality is stifling business growth in this country, should ring a warning bell.[6] While “big business” has traditionally been a scapegoat for the union movement, these days the anti-business mantra is also being promoted by the environmental movement, and together their influence is poisoning public attitudes. The problem is that their attack on business - which is purely political and based on self-interest - is now damaging the country. With their anti-business propaganda being parroted by the media, there is a danger that the public risks losing sight of the multitude of benefits provided by our bigger businesses. The contribution they make to our society in terms of providing secure jobs with good incomes, along with great down-stream opportunities, is immense. With private sector businesses - not governments - responsible for improving living standards, we should be championing business success, not condemning it.

Late last year, a report on child poverty in New Zealand was published by the Children’s Commissioner. It identified 78 recommendations that it claimed would alleviate “child poverty” in this country - at a cost of $2 billion.[7]

In his report the Children’s Commissioner defines relative poverty as “60 percent of median disposable household income, after adjustments for housing costs”. The median disposable household income for a New Zealand family of four - after paying the rent or mortgage - is $1,000 a week. That means that any child in a family of four with a household income of $600 or less a week - after paying their housing costs - is classified as living in poverty. Using this definition, the Children’s Commissioner claims some 270,000 New Zealand children are living in poverty. But the problem is that as the median household incomes rises, to say $1200 after housing costs, so too would the value of relative poverty, to $720 a week - and 270,000 children would still be classified as living in poverty, making a mockery of the whole measure.

The Children’s Commissioner’s estimates of poverty are based on relative poverty, not the abject poverty seen in third world countries. But relative poverty is not a real measure. Instead it is a political construct that is used by socialists to justify the on-going redistribution of wealth, since by its fundamental definition, it can never be eliminated.

Welfare commentator Lindsay Mitchell, this week’s NZCPR Guest, has examined the issue of child poverty in New Zealand looking to identify the cause. In her article Born on a Benefit, she looks at the high rates of birth to families on welfare and concludes that child poverty is largely the result of irresponsibility – an irresponsibility caused by welfare.

“The Norm Kirk government of 1973 which bowed to pressure to provide statutory assistance for mothers who'd lost the support of a partner, would have been aghast if afforded a glimpse of a future in which supposedly single woman were allowed, and even encouraged by some, to breed on a benefit. Twenty two percent of all babies born in 2011 were on welfare by Xmas. But even pre-recession, when New Zealand briefly enjoyed the lowest unemployment rate in the world during 2007, the percentage only dropped to eighteen. Having babies on a benefit is part of the New Zealand culture. That's what's primarily driving this country's child poverty scandal. In a word, irresponsibility; irresponsibility of the people who produce the kids, but arguably worse, irresponsibility of the society that sanctions it.” To read the full article click HERE

Last year, Treasury produced a report that looked at income mobility and deprivation in New Zealand. It found that after seven years only a quarter of those who were assessed as being in the bottom income decile were still there.[8] In other words, three quarters of those in the poorest households were able to improve their situation. The resulting policy recommendation was that the government should ensure that people do not face barriers to improving their circumstances.

With this in mind it is interesting to note the German experience, which ten years ago was grappling with high unemployment. That is until they realised that the real problem wasn’t the supply of jobs, but the supply of willing workers. That’s where mini-jobs came in: “There is special focus on mini-jobs, contracts that allow a worker to earn 400 euros a month tax-free on the condition that they can be sacked at any moment. Germans can have as many such jobs as they like, but only one with the same employer. The official figures show that, within a year of their introduction, there were 500,000 more part-time jobs, with a good record of leading to full-time employment. Youth unemployment was indeed halved.”[9]

Whether or not the mini-jobs concept is right for New Zealand, what we do know is that just as more aid will not cure world poverty, more welfare will not permanently improve the lives of the disadvantaged. The government must continue with an unrelenting focus on growing the economy and creating opportunities for people to improve their circumstances through their own efforts.

Do you believe that the Children’s Commissioner’s estimate that 270,000
New Zealand children live in poverty is realistic?
Click HERE to vote

*Read this week's poll comments daily HERE
*Last week 98% of voters believe the Maori Electoral Option should be abolished
- you can read the comments HERE

1.Executive Board UNDP, Evaluation of UNDP contribution to poverty reduction
2.World Bank, Growth is Good for the Poor
3.World Bank, Aid and Growth: What Does the Cross-Country Evidence Really Show?
4.Dambisa Moyo, Aid Ironies
5.Herald, Time to reassess Closing the Gaps
6.Herald, Parting Shot by Coke boss
7.Children’s Commissioner, Child Poverty
8.Treasury, Dynamics of Income and Deprivation in New Zealand 2002-2009
9.Fraser Nelson, Our jobs market is broken – and Germany may have the answer

NZCPR Guest Commentary:

By Lindsay Mitchell

The high rate of New Zealand children born onto welfare gives rise to numerous health and social problems down the line, not least abuse and neglect. We now know thanks to a recent Auckland University study that 83 percent of substantiated child abuse and neglect cases concern children who appear in the benefit system before the age of two.

There is an especial problem with Maori children. Not only are they more likely to be born onto a benefit, but they are more likely to have a very young mother who will have difficulty raising her child away from the sort of environmental risks that result in teenage parenthood in the first place; a dysfunctional family life, alcohol and drug abuse, family violence, transience, and crime. A strong correlation exists between the over-representation of Maori children on welfare and their marked predominance in many other negative statistics surrounding poor health and low educational achievement. Being born onto a benefit does not set them up for life.

Read the full article HERE

New Zealand Centre for Political Research


© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On The Tokenism Of New Zealand's Role Against Islamic State

To date, the Opposition has continued to occupy itself with the marginalia of the issue. E.g. whether Key did or didn’t know whether Barack Obama would be present at the US briefing last week on IS, or whether New Zealand’s military involvement is or isn’t already a fait accompli.

It might be better to tackle the issue, head on. Our contribution against IS will be to send SAS forces to train the Iraqis? That’s like offering trainers to General Custer just as the 7th cavalry reached the Little Big Horn.


Parliament Today:

Scoop Business: Shell And Todd Caught Drilling Without Approval

Multi-national oil company Shell’s New Zealand arm and local energy giant Todd Energy have breached the new law governing New Zealand’s Exclusive Economic Zone, the Environmental Protection Authority says in an Oct. 10 document released by the Green Party. More>>


Labour: Tea Breaks 'Gone By Lunch Time'

“How cynical that on the eve of Labour weekend, the National government is pushing through legislation that takes away the statutory right to tea and meal breaks along with collective bargaining protections, and makes vulnerable workers jobs even less secure." More>>


Gordon Campbell: On Pharmac, Gough Whitlam And Sleater-Kinney

We’re not at the outset of these negotiations. The outset was six years ago, and negotiators were hoping to have some sort of ‘framework’ deal finished in time for the APEC meeting in a few weeks’ time. These ‘extreme’ positions are what we’ve reached near the intended end of the negotiations… More>>


PM Of Many Hats: Questions, No Answers On Whale Oil

Dr RUSSEL NORMAN (Co-Leader – Green) to the Prime Minister: How many times since November 2008 has he spoken with blogger Cameron Slater on the phone and how many times, if any, has he texted him?
Rt Hon JOHN KEY (Prime Minister): None in my capacity as Prime Minister. More>>


Aussie Investigation Dropped: Call On Minister McCully To Pursue The Case Of Balibo Five

West Papua Action is deeply concerned at the lack of any clear outcome from the Australian Federal Police inquiry into the 1975 deaths of the ‘Balibo Five’ including NZ journalist Gary Cunningham. More>>


'Feed The Kids' Bill: Metiria Turei To Lead Fight On Feeding Hungry Children

Green Party Co-leader Metiria Turei is urging all political parties to support the Feed the Kids Bill which she inherited today from Mana leader Hone Harawira. More>>


Parliament Today: State Opening Of Parliament

The House sat at 10.30am on Tuesday before MPs were summoned to hear the Speech from the Throne in the Legislative Council Chamber. More>>


Tertiary Education: Students Doing It Tough As Fees Rise Again

The Government is making it increasingly difficult for Kiwis to gain tertiary education as fees continue to rise and access to student support becomes even more restricted, Labour’s Tertiary Education spokesperson Chris Hipkins says. More>>


Housing, Iraq: PM Press Conference – 20 October 2014

Prime Minister John Key met with press today to discuss:
• Housing prices and redevelopment in Auckland
• Discussions with Tony Abbott on the governmental response to ISIS, and New Zealand’s election to the UN Security Council More>>


Get More From Scoop



Search Scoop  
Powered by Vodafone
NZ independent news