Surprise, Surprise, Another Recession Is Coming

Ten years ago the global economy suffered a calamitous meltdown and millions of people around the world struggled as a consequence. Now, if economists are to be believed, we are looking down the barrel of another recession.  

People could be forgiven for not hearing about it, but these concerns have been published a range by media outlets around the world (see below).

Forbes: Is the Next Recession on the Way?

Money.com: The Next Recession is Coming by 2021, According to an Overwhelming Majority of Economists

The Guardian: We are due a recession in 2020 – and we will lack the tools to fight it

Stuff: Why the Next Recession will be Bigger than The Global Financial Crisis

Unfortunately, this sort of thing simply doesn’t make the front page of the news. Trump or some other distasteful aspect of United States politics tends to occupy that spot. It is unfortunate that more people in the media and parliament are not talking about it because we are still dealing with the impacts of the last recession, and perhaps most frighteningly, we seem not to have learned any lessons.  

The Global Financial Crisis of 2008 was a disaster for many people, but it was also an opportunity to change things. The predatory loans handed out to people from low socioeconomic backgrounds that were largely responsible for the crash should have earned the lenders serious jail time, yet they and everyone else who played a part got away with a fine and a slap on the wrist. Worse, many of the bankers who were bailed out used that money to pay themselves hefty bonuses and, in the absence of the introduction of meaningful legislation to prevent something similar happening again, many were able to carry on conducting business as usual.

For those interested in justice, the failure of lawmakers around the world to punish those responsible was frustrating. The Occupy Movement was the product of the anger and frustration of millions of people around the world disaffected with the way the global economy operates and the disproportionate power wielded by the financial and political elite. As valid as their points were, the media and indeed many ordinary people ridiculed the protesters in typical fashion using generic insults without even bothering to engage with the critiques or solutions the Occupy Movement was discussing.

Trying to understand how the economy works is no easy task, whether it be in the local or global context. Thus, we rely on the information that we regularly receive (the news) and our lived experience. Those of us who are better off than others didn’t notice any immediate or significant change to our lives during or after the GFC, so we have little reason to complain and also little reason to analyse the claims of those speaking out against the status quo. Unfortunately, it is those who maintain this ignorance that are the biggest obstacle to doing things a better way.

This ignorance is not necessarily surprising, but it is incredibly disheartening. We know that the wealthiest 1% holds most of the world’s wealth and power and that accumulation drives many of our socioeconomic problems, which was one of the key points raised by the Occupy Movement, yet we still love to idolise the likes of Elon Musk and Jeff Bezos as though they are our saviours. We are quick to ignore the fact that recessions offer the wealthy and opportunity to seize more assets (as happened with property particularly in the US after the GFC) which further deprives ordinary people the chance to get ahead. Perhaps most disappointingly, even though we know recessions occur every decade, we seem so shocked when the next one comes along.

People are often quick to dismiss socialism as a system that doesn’t work, and perhaps it isn’t a perfect model either, but we cannot continue to live under a paradigm predicated on greed and competition. More, to extol the unequivocal success of capitalism seems foolish when, not because of any anomaly but its very nature, it is driven into crisis every ten or so years, adversely affecting millions of people in the process. Ignorance is one thing, but we aren’t going to get anywhere if we keep repeating the same mistakes over and over again.

I won’t lie, I’m not that thrilled about living in a system that we know is going to go belly up at certain intervals while we routinely do nothing at all to prevent it. The recent IPCC report claimed we have 12 years to stop runaway climate change, but if we can’t even manage not to crash the economy we revere so much, I fear there is little chance we will make the necessary changes that have been recommended to prevent many of the impacts of climate change.

That said, maybe there is reason to be optimistic. By all reports, the fallout from the upcoming recession will be bad, perhaps worse than last time. Also, we in New Zealand were lucky to be insulated from much of the fallout then, and it is likely we will not be so lucky next time. Maybe, just maybe, we will take the opportunity we didn’t take last time and seriously redesign the way society operates, because it may be that we have no other choice. It won’t be easy and will require massive amounts of energy, coordination and will, but another world is possible.

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Disparity by Design: Challenging Neoliberalism

Whether we understand what neoliberalism is or not, the reality is that it affects our lives more than most people may realise, and not in positive ways. We might come across the term in an article or see someone post about it online, and we even heard our soon-to-be Prime Minister claim that it had failed New Zealand in September last year although her government is doing nothing to challenge it, yet if we don’t understand it we may not give it much thought. It is important to talk about it because over the last three decades it has played a significant role in many of the social, environmental and political issues we experience today and in order to address these issues, we need to understand how exactly it drives these problems.

Understanding Neoliberalism

There has long been contention about the use of the term, especially by free-market advocates that claim people, mainly critics on the left, use it as an insult without knowing what it really means. While the term does have an interesting history and the meaning has changed over the years, variations of the common usage of the term have become accepted, not only in the academic literature but also by society in general.

David Harvey gives a definition of neoliberalism as “... a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets and free trade.” Basically, it is an economic theory proposes that business without restraint is good for everyone, and as liberterians love to say “the freer the market, the freer the people”. It is the realisation of capitalism’s most dangerous ideals, or capitalism on crack if you prefer.

To achieve this market freedom, deregulatory policies were introduced during the economic reforms of the 1980’s known in the United States as “Reaganomics”, in the UK as “Thatchernomics” and here in New Zealand as “Rogernomics”. Prior to the advent of neoliberalism, economic growth in most developed nations was significant due to government intervention, social welfare programmes and more progressive tax systems. What are now known as neoliberal policies gave greater power and freedom to employers, and soon after unions across industries were disempowered and dismantled reducing the capacity for workers to maintain their rights.

NZ-annotated-gini-chart-8-July

Tax reforms over the years have seen the corporate tax rate reduced from 48% to 30% and top income tax from 66% to 33%, allowing wealth to be concentrated in the hands of a smaller elite. Austerity is often adopted by neoliberal politicians, where concern about government debt results in policy-makers cutting social spending, favouring the economy over the needs of people. Free trade deals, like the controversial CPTPP our government recently signed, are only partially about trade and largely about securing privileges for corporations.

Proponents of neoliberalism somehow believe that the market will regulate itself, as though the demands of consumers will hold companies accountable for their actions, and they also think the concentrated wealth will trickle down to everyone else. This delusional thinking seeks to portray bloated corporations as a vital part of the economy that serves a public good, despite countless examples of free market policies destroying human lives, e.g. Grenfell Tower, human rights, e.g. Apple and most companies that have factories overseas, and the environment in pursuit of profit.

When the government steps back and allows private companies to deliver essential services without supervision, we are all going to have a bad time. Consider the pharmaceutical industry. While Martin Shkreli was demonised in the United States for hiking the price of Daraprim by over 5000%, he is only the tip of the iceberg that is Big Pharma’s distorted ideologies (Watch the Netflix show Dirty Money’s episode on Valeant). But privatisation in any industry is problematic because governments generally pay subsidies, which in the case of British Rail can get rather expensive. It also means workers are exposed to the whims of unrestrained business and the impacts discussed above are exacerbated.
Neoliberal Values Have Become The Dominant Values

In a stricter sense, neoliberalism refers to the policies and legislation that favour the freedom of markets, but in order for these ideas to take place, the collective values society holds must reflect those ideals. Thus, neoliberalism has successfully become the dominant ideology in developed nations like New Zealand by embedding its values within society itself and suppressing views and theories that propose different ways of doing things.

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A phrase often associated with Margaret Thatcher and her support for the market system. It also resembles common responses when challenging dominant ideologies.

Individualism

People often lament that we have lost our sense of community and our desire to care for each other, and it is pretty clear that individualism trumps collectivism, and we are led to believe that happiness in life comes from looking out for ourselves before everyone else. Look at how we define success. A ‘successful’ person it seems is one that has achieved both fame and wealth, and reality TV stars from shows like Married at First Sight and wealthy businesspeople like Bill Gates or Jeff Bezos are examples of this. Tragically, they are given more media coverage than people working to improve the lives of others and held up as role models for people to aspire to.

Individualistic thinking in this economy can be dangerous because of the impact it has on people’s health. We are led to believe that in developed societies such as ours, every person, regardless of their heritage and situations, are capable of being successful (in terms of social and financial status) if they work hard enough. Coined ‘magical voluntarism’, this way of thinking convinces those better off that they achieved their wealth through their own hard work and nothing else, even though this is usually untrue. On the other hand, those who fail to achieve those goals are convinced they alone are responsible for their failures, inevitably developing confidence and identity issues that can develop into depression and anxiety and other mental health disorders.

Competition

Individualism breeds competition, and competition is one of the core principles of free market ideology, justified by claims that economic competition results in innovations that benefit everyone. What really happens when companies compete is that shortcuts are taken that have adverse impacts on everyone but the companies themselves.

Competition turns us against each other, not just to the point where we backstab colleagues for a promotion, even people or entire sections of society we don’t even know. Beneficiaries are the favourite political punching bag of conservatives, who make sweeping generalisations about welfare recipients as lazy dole-bludgers who would rather drink, gamble and take drugs than find a job. The disdain held for the lower class by middle class is one of the key ways in which neoliberal values are upheld.

See, although the majority of the world’s wealth is concentrated in the hands of a very small few, this does not deter the middle class, or even many of the working class, because they genuinely believe one day they will become part of the wealthy class.

Steinbeck
Applicable to more places than the US.

They believe this despite evidence to the contrary that shows the wealthy are not in the business of sharing, after all, it is hard to stay rich if you let everyone else get rich, which is why corporation use their economic and political power to monopolise their respective industries.

Greed

Corporations are essentially given free reign to do whatever they please. No matter how many times they make mistakes or ruin people’s lives, the punishments are so pathetic they keep going as they are. Going back to the example of the pharmaceutical industry above, it is important to remember that Shkreli was not indicted for gouging consumers, after all, that is fairly standard now, but he was arrested for defrauding investors.

Screwing people over is simply good business, which is why Jeff Bezos is painted as a successful businessman despite so many Amazon employees turning to food stamps to survive. The idea enforced by the media that a good business is one that posts high profits, regardless of the corners cut to get there, and we blindly celebrate it. Like politicians who are blatantly bought out by private interests (e.g. most US politicians) or their more subtly corrupt counterparts (e.g. Winston Peters and the racing industry or Judith Collins and Orividia), we give tacit consent to practices that undermine democracy and our way of living in favour of the private interests of industry.

It is fascinating that greed is not considered an abhorrent thing. We actually celebrate those who accumulate masses of money even though that wealth usually comes at the expense of others, and it is amazing people are surprised when private companies undertake such dodgy actions, after all, by definition their obligation is to profit and their shareholders, not the public good.

 

How do we move beyond neoliberalism?

The world’s most powerful people and organisations have considerable stake in the status quo, so to challenge these overarching ideologies is to challenge the extraordinary power they hold. That is not to say it is impossible. While the wealthy and businesses hold a lot of power, in a country like ours they must operate somewhat discreetly as opposed to the blatant corruption we see overseas, and more importantly, their will (possibly) can be defeated by the ballot.

Compassionate Policy

Every generation has their own challenges that are different from the challenges of those that came before them. My generation, the millennials, and the Gen Z’s that follow, are set to inherit one hell of a mess. We are deprived of the same opportunities that those who hold the wealth and power now enjoyed, and many of us are struggling to get by or buy a house. Because of this, and more that will be discussed another time, there is a pretty good chance then that when we take the reins of power we are going to do things differently. Just as the Baby Boomers as a whole voted for policies that suited their interests at the expense of others, there is reason to believe that once my generation realizes its power they will vote for more compassionate policy. Indeed, already questions are forming about the future of capitalism and how long we can keep going down this road. 

Of course, it is not enough to simply wait for change, nor is the blame or burden to act placed on any one generation. That isn’t to say that there isn’t already well organised resistance to neoliberalism, because there clearly is. Jeremy Corbyn has become hugely popular as leader of the Labour Party in the UK and although he is routinely attacked by conservatives and centrists for his socialist policies, the fact that his policies have so much support from the young and the progressive left give hope that a new model for organising society is on the horizon.

Jeremy_Corbyn,_Leader_of_the_Labour_Party,_UK_speaking_at_rally
Jeremy Corbyn speaking at a rally – Source: Sophie J. Brown

Similarly, the support Bernie Sanders is still experiencing following his presidential campaign and the ongoing success of the progressive movement he started in electing progressive candidates suggests that democratic socialism may well find a platform to challenge the neoliberal model.

Social Enterprise and Alternative Models

Here in New Zealand we don’t really have this sort of “radical”  representation in government, with Ardern’s Labour Party being very much a centrist neoliberal party and the Greens moving towards the centre. But there are other ways to challenge the unrestrained ambitions of capitalism, in part by changing the nature of business. Although it is not without flaws, social enterprise does offer a model of business that uses its profits to provide a social good, rather than simply accumulating wealth for the sake of it.

A good example of this is Eat My Lunch. Yes it is a company that is making money, but a good portion of that profit is used to expand its service and facilities while continuing to provide food for children in need. This isn’t simply tokenistic charity to appear philanthropic to promote one’s business, instead it is a different model of operating a business with producing positive social outcomes at the centre of its purpose.Social enterprise is becoming popular in the regions, particularly in rural areas with high levels of deprivation, and many Maori are exploring social enterprise as a way of overcoming intergenerational poverty, although they must be careful of falling into the trap of equating economic development with Maori development. 

Transition towns are an example of local resistance to the global capitalist system. This model proposed enhancing the self-sufficiency of small towns by keeping production and consumption of goods local as much as possible, at times even advocating measures like local currencies. Time will tell whether these initiatives will work in the long run, and their success is determined by the level of support, including financial support, they receive to help them get started. Such models show that thinking big but acting small is the first step in the right direction when governments fail to act in the interests of the people.

Understanding to Overcome

Perhaps the most important thing when confronting neoliberalism in any context is to be aware of its influence. Whether you are addressing poverty, environmental degradation or homelessness, in order to find permanent, sustainable solutions one must first acknowledge that neoliberalism is ultimately responsible for creating the situation, and work to find an alternative that challenges that ideology. Merely tinkering at the edge without challenging the status quo in any way will simply yield the same result.

Change has to be truly transformative, and as discussed above, neoliberalism is enforced by values that are dominant in society.  These values have changed how we interact with each other, so reclaiming the value we place on community, protecting our environment and caring for each other must occur in order for public sentiment towards policy to follow. We have been conditioned to compete with each other and think of ourselves, so we need to move towards a society that works with each other and thinks about everyone else.

Currently I am interested in how to improve outcomes for people in rural areas with high deprivation, like my hometown pictured below. While the instinct from the Government is to simply throw money at the area and create jobs, there are countless social implications that prevent this from working, things like substance abuse, disenfranchisement and mental health issues.

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Kawakawa Township – Source: twincoastcycletrail.kiwi.nz

Overcoming the feeling of being isolated and demonised by others, as so many people in these areas feel, does not come from having a job or money but by being shown by your community that people care about you and they believe in you. As my whanaunga said to me recently, a healing needs to take place, a personal, sometimes spiritual healing that counteracts neoliberal values. Once we have looked after each other’s mental well-being and given each other purpose and direction, then those jobs and that money can help turn people’s lives around. 

It’s about money, but at the same time it isn’t. It is about our values and the kind of world we want to live in, and the first step in creating a better world is by actually caring for each other and putting that into practice.

 

Why Some People Seem to Hate The Poor

Labour’s plans to address child poverty offer hope for positive change after decades of successive governments ignoring the issue and allowing it to grow out of control. While the bold proposals outlined are a bit vague, they seem genuine in their intentions. On the other hand, National pay lip service to the importance of addressing the issue while obscuring the causes and potential solutions for the issue. While they seem so concerned about the importance of targets, if National and their supporters actually cared for those living in poverty the social policies of the last nine years would have demonstrated just a little bit of compassion. Instead, they showed a willingness to do nothing but appear to address the issue.

Maybe people are simply unaware of what causes poverty, but that seems unlikely. There is enough evidence and information out there, but instead we only seem to hear the same old myths, half-truths and excuses repeated over and over again. “People are just lazy, and if they worked harder they could escape poverty”. “If they didn’t spend all their money on ciggies and booze, they could afford proper food”. “They’re dole bludgers that don’t want to get a real job”. I could go on, but you get the picture. Understanding why people buy into these myths helps us understand why such negative attitudes towards those in poverty prevail.

Myth 1: The poor need to work harder

Critics of compassionate social policies love to frame their opposition in economic terms, citing fears of potential impacts on national debt and GDP to justify their stance. The fixation on money trumps any concern for their fellow people, and such uncritical perspectives on the economy prevent them from acknowledging the role the financial system plays in perpetuating poverty. Suitable housing, electricity, food, water and transport are essential human rights everyone except hardcore libertarians can surely agree on, so when people are struggling to afford such basic rights, clearly things are not right with the way wealth is distributed, because there is certainly enough money to meet everyone’s needs as evidenced by recent reports on the state of economic inequality.

The important question to ask here is why have we allowed things to become so unfair? As mentioned earlier, one of the great myths we hold to is that if you work hard, you will be rewarded fairly. This belief drives us to perform to higher standards in our workplaces and fuels our ambitions to climb the ladder and gain new positions and responsibilities, which of course come with appropriate financial compensation. What this myth doesn’t do is define what “hard work” actually is. Some people can work their butts off for 40+ hours at a factory and still stay on the minimum wage or thereabouts for years, sacrificing quality time at home simply to make ends meet and provide for their families. That is hard work, yet those people will likely never by millionaires unless they win Lotto.

The truth is that it is not always about having a great work ethic, but about having an often single-minded ambition to accumulate as much wealth as possible, one of the sociopathic core tenets of capitalism. For those on top of the ladder, the “hard work” myth creates compliant and diligent employees that are willing to do more for less in the hopes of advancement, thereby maximising their profits. Whether it is running a company or investing in stocks and the housing market, simply having money allows one to make more money. As the ultra-rich continue to hoard the means of producing more wealth, the working poor are deprived of such opportunities to escape poverty because money flows up, but it doesn’t trickle down despite what many right-wingers would have us believe. For example, earlier generations snapped up property when houses were affordable and continue to make money today by renting or flipping properties, a luxury not shared by the poor and later generations because the market was made unaffordable by this drive to build absurd “property portfolios”. Disregarding the moral argument that housing is a human right that should not be commodified anyway, everyone in my generation should be outraged simply because the ladder into the housing market was pulled up by those who had already accumulated property to service their greed.

To be clear, none of the points raised above signal a flaw in the capitalist system, rather, they are simply the embodiment of its core intentions. This system has thrived by convincing many of us that the problems are of our own making, which is why blame is laid on the individual’s choices and actions rather than the system that created the poverty in the first place. That is why tales of “sacrifice” in order to buy a house are forced upon us (See Exhibits A, B, C and D), to show us that we need to change our behaviour and stop being so lazy, a narrative that favours the wealthy and the status quo.

Myth 2: We all have the same opportunities

There exists another similarly damaging myth, which is the idea that everyone in New Zealand has the same experiences and opportunities as everyone else. This construction of New Zealand as an egalitarian society has long been a source of pride for patriotic Kiwis, albeit one with little basis in fact. As discussed above, economic disparities exist by design and have done so for years, growing worse during the neoliberal reforms of the 1980s of which New Zealand is considered one of the more aggressive adopters. However, there are also wider social factors that influence poverty which are often overlooked by the privileged. Consider education for example. Formal education has long been considered a pathway out of poverty, however, jobs that pay well often require high levels of literacy and knowledge in math and science, things which can be difficult for those who are struggling with poverty to gain. As a result, they are often forced to turn to low-skilled labour like retail and factory work, jobs that do not normally pay very well and keep people trapped in poverty.  

There are perfectly explainable reasons why attaining education can be difficult for those living in poverty. The first, is that our Western education system often fails to facilitate learning in a way that is appropriate to those from other cultures. It assumes a homogeneous capacity and desire for learning, and although our national curriculum is progressive and encourages flexible teaching for students of diverse backgrounds, it’s application has not gone far enough to genuinely include and accommodate everyone yet. This is compounded by recent reports of racism directed towards students that denigrated them and made them feel like they can’t succeed, attitudes shared by many Maori and Pasifika students, the same demographics who unfortunately bear the brunt of poverty. Such reports are not hyperbole; as a former educator I have spoken to young people who can articulate all too clearly how the racist sentiments of middle-class New Zealanders make them feel like they can’t do well in life and forces them to question why they should even bother with school. If you were those young people, why would you want to be part of a society that treats you that way, that looks down on you and makes jokes about you for being poor? Because of this, is it a surprise that Maori and Pasifika have lower levels of educational achievement?

For argument’s sake, let us again assume that the unseen issue, in this case racism, is not a problem. What other barriers are there to education? For one, poverty usually means a lack of food. Strangely enough, children find it hard to pay attention in class when their stomach is rumbling because they haven’t eaten all day, which again is a reality and not hyperbole. You can’t learn if you can’t eat, and sometimes those who are eating are not eating the right food. Healthier foods like fruit, vegetables and nuts improve brain health, but because they are expensive compared to processed foods, such benefits are experienced by those who can afford it and the detriments by those who cannot. Poor nutrition also leads to sickness, which when combined with ongoing illnesses stemming from substandard housing, leads to time off school and results in students being left even further behind. It is at this point in the discussion that condescending remarks about budgeting and food planning are raised, but when the decision is between quantity and quality, opting for a higher quantity of food and the expense of nutritional value is understandable when you and your family are hungry.

Beyond physical struggles, pressure from others affect an individual’s attitude towards education and society. Schools, like the wider geographic areas in which people reside and spend their time, provide countless opportunities for people to be influenced by those around them. We make friends with people we relate to and who share similar values and beliefs, so when people who share disdain for education and a discontent with society itself form bonds with each other, they are less likely to conform to the conventional idea of ‘success’ that is forced upon them. Processes like gentrification that displace the poor and essentially segregate suburbs according to socioeconomic class exacerbate both inequality and the levels and nature of influence different groups experience. The adage “It’s not what you know, it’s who you know” becomes more truthful as one gets older and enters the workforce, and it is certainly more advantageous to reside in affluent and connected neighbourhoods than those plagued by crime, gang-related activity and poverty.

It seems we forget that the people we are, including the values and beliefs that define us and guide our actions, are shaped by our experiences and influences. I come from a family heavily involved in the education sector, and clearly those shared values rubbed off on me. I’m sure many others could also say their interests and values were influenced by those around them. With that in mind, it helps explain why those who have never experienced poverty like to blame those who live in poverty for their own misfortunes. They cannot comprehend that the pressures and struggles people face were different to their own, and empathy is difficult we fail to acknowledge that people think and see the world differently to us.

A context in which this mentality is apparent is when dealing with drug and gambling addictions. If you are poor, some ask, why are you wasting your money on pokies when you could buy food? If people understood the nature of addiction, they would know that merely berating people does nothing to cure their state of mind, if anything, they will become more resistant. More than that, addiction to gambling among the poorer parts of society is no accident, for gambling machines are placed deliberately in poorer communities where they make more money, with little regard given for the social costs. This uncaring attitude towards addiction is also demonstrated in our views on substance abuse, and again we ignore why liquor stores are more often than not placed in less affluent neighbourhoods. This is made worse by the twisted desire held primarily by older generations to simply incarcerate drug users rather than dedicate funding to proper rehabilitation and the lack of discourse about why drugs are so appealing to the poor; chiefly because it offers an escape from the unpleasant realities of their lives.  

These cold attitudes suggest that perhaps blame is warranted after all, but it should not be directed at those who are struggling but at those who throw stones from their seats of privilege. Those that say people should stop making bad decisions or blame them for their situations are part of the problem. Voicing disdain for the poor might offer momentary satisfaction and vindication of one’s life choices, but what good does that accomplish, apart from showing everyone else how out of touch and ignorant you are? To truly understand what people go through, we need to step out of our bubbles, shed our preconceived ideas of how others should live their lives and learn to listen and understand what people go through.