National’s 2012 budget focused on cutbacks and reducing government debt. The budget increased research and healthcare spending through cuts to KiwiSaver, Working For Families, the public sector, and the education system.
Cutbacks in the public sector are a basis for casualisation, with contractors profiting by undermining labour conditions (public sector cuts will be covered in more detail in the August issue of The Spark). Attacks on financial assistance have served to scapegoat beneficiaries, workers and students.
These cuts have generated resistance in some sectors, with particularly sharp confrontations in tertiary education. Fight back will need to be consciously broadened to challenge the system which produced this crisis.
Government debt and private debt
Talking to the press, John Key consistently emphasised government debt as the reason for cutbacks: “If you keep borrowing money and spend more than you earn, you eventually not only have to pay that back, but you have to pay it back with interest.”
National is mystifying the situation by not distinguishing between government and private debt. Treasury reported that of this country’s national debt, most borrowing has been undertaken by the private sector. Although government borrowing has increased since the crisis and the tax cuts, government debt makes up 33.7% of GDP. By contrast, private debt makes up 166% of GDP, with housing loans making up 90% of private debt.
Private debt has increased because income does not cover prices. Real wages (wages relative to the price of commodities) have fallen 25% in the last 30 years while productivity has increased 83%. Rather than investing in research and development, successive Labour and National governments have increased labour productivity by working people harder for less. This rising rate of exploitation leaves a shortfall in savings, requiring the extension of credit. Although this contradiction has not reached the point it did in the US, it is the main factor driving national debt.
Increasing income would address private debt, and improve most people’s lives. Neither option would suit the National Party’s corporate backers. Instead, National prefers to mystify the problem, scapegoating those who require state assistance. Cutting back assistance will only increase personal debt.
Education cuts and resistance
National is largely treating public education as an inconvenient expense, but there are promising signs of fightback. When Education Minister Hekia Parata announced a policy of increasing class sizes, a resounding outcry from parents and teachers forced the government to back down. However, Education Minister Hekia Parata has announced that she will be making cuts of up to $174 million elsewhere in education to make up for it.
Tertiary reforms cut back access to financial support. Most absurdly, the Student Allowance was cut entirely for post-graduate students, a glaring contradiction when government funding is based on producing research. Many students will now be unable to participate in post-graduate research. The government also increased loan repayments, although student loans make up only 6% of private debt.
On budget day in Auckland, We Are The University (WATU) blockaded the streets under the slogan “Blockade The Budget.” Finance Minister Bill English provocatively commented that students “need some Greeks to show them how to do it,” and WATU responded by calling on students to “Protest Like The Greeks” the following week. The state clamped down hard. Video footage caught acts of clear police brutality against non-violent students. Many of the students were arrested and released without charge.
The student movement is relatively isolated, partly because many teachers at universities are cowed out of taking action – although teachers in primary and secondary education are more militant. University students will need to develop links of solidarity with other sectors; with teachers, workers, beneficiaries. We need to think and act strategically to confront this system, which indebts then blames the majority.
Treasury: Report of the Savings Working Group (January 2011)
Mike Treen: Exposing Right-Wing Lies