A visit to art deco central – and its poverty

I visited my home town of Napier a few weeks back and was stunned by the obvious poverty now evident across the place – this in the past twelve months, since a disastrous cyclone. This much poverty hasn’t generated that quickly, but it’s as if the cyclone made it visible.

There are homeless people trying to live on the Marine Parade beach where I used to kick around as a kid. It didn’t feel safe to walk on streets that I’d happily walked about – day and night – years ago. Social media is awash with reports of break-ins, petty thefts and vandalism. And there’s a major gang problem.

This, it seems, is twenty-first century New Zealand.

Napier’s Gilray Fountain and the ‘Spirit of Napier’ statue, on the beach where I used to play as a kid. The azure Pacific crashes and roars behind.

The local New Zealand problems are shared with the rest of the western world, one way or another. How has it happened? The cause is the neo-liberal economic system, which structurally syphons wealth from the poor into the pockets of rich corporates whose sole purpose is to maximise profit for shareholders.

The first mechanism by which this happens is price stability, the darling of the neo-liberal movement because it helps corporate financial planning and thus profits. To an extent price stability also helps households – but not if you look deeper into the mechanisms. Back in the 1960s-70s, high inflation eroded the value of savings – but also debts. Income, however, was typically inflation-corrected. Thus an everyday middle-class mortgage could be paid off purely through the erosion of its value in what economists call ‘real’ terms. This had the effect of transferring wealth from lenders to house-owners. The lenders, quite rightly, didn’t much like it – but the problem since has been that this inequity has simply been reversed, not given equitable treatment. With ‘price stability’ reigning supreme for all but the last three or four years, mortgages hold their value. People can’t so easily own homes – and worse, there is a looming debt crisis.

Second, deregulation has opened the door for monopolies and increasing corporate control over everyday lives. People are paying more and more for vital services where they have little say over pricing, including necessities of life. Here in New Zealand food prices are controlled by a foreign-owned monopsony, for instance. Already people can’t always pay.

Thirdly, the tax system has swung from a mid-twentieth century focus on income taxes to one in which corporate and income taxes are lowered and where the difference is made up with sales taxes. This discriminates against the poor. Consider: Person A has a weekly income of $1000 and costs of $200. Person B has a weekly income of $100 and costs of $100.  Government then sets a ten percent sales tax. That’s no problem for Person A, who still has a $780 weekly excess of income over costs, but suddenly Person B has costs that exceed income and can’t make ends meet. Eventually, Person B can’t cut back any further. Various countries have addressed this by, for instance, excluding food from sales tax. But that isn’t the case in New Zealand, where Goods and Services Tax applies to everything.

We’ve had 40-odd years of this system across the western world, and it’s fast approaching the point where debts will be unable to be paid, where middle income earners won’t be able to make ends meet, and where poverty is endemic. Add to that the consequences of 40 years of infrastructure under-funding, and the fact that every new government does nothing to change the failed system, and I keep thinking that the twenty first century isn’t going to end very well.

Thoughts?

Copyright © Matthew Wright 2024