SWAMPED BY THEIR OWN WAKE

So much of the political news is about things we won’t even remember next week, while things we really ought to fix never seem to get discussed. Here’s one political event from last week that is worth remembering, though.

The child poverty figures, a product of Jacinda Ardern’s Child Poverty Reduction Act, were released (the bill didn’t actually reduce child poverty, it just required reports be produced on it). They showed the number of children in material hardship had risen for the first time in four years, to about the same level as in 2018.

Ardern didn’t change the one thing she said she was in politics to change back in 2017 when she became Prime Minister. However, that’s not why we should remember this news. It’s worth remembering because it shows so well that government can’t improve the world by handing out more money.

Just to be clear, the figures released last week were for the year to December. The new Government did not influence them. They reflect the six years Labour was in power, and more importantly the policies they chose in that time.

The summary, as Free Press has said many times, is that Labour increased spending by 30 per cent above inflation and population growth. $100 billion of that spending was borrowed. Sure, some of it was COVID but they didn’t rush to stop the spending when COVID ended, either.

Their main strategy for reducing child poverty was to give out more money through raising benefits and soft pedalling sanctions. The predictable response to paying people more to be on a benefit that’s easier to stay on was… more people on a benefit. While child poverty fell on paper, more kids living on a benefit planted the seeds of future child poverty.

Employers see it in ‘interviews’ (often performative on the interviewee’s part) for entry level jobs. If we had a dollar for every employer who’s told us their would-be staff don’t want to work because they are better off on a benefit, we could almost pay Grant Robertson’s debt.

Benefit-priming worked for a while. People on benefits had more money and could afford more stuff so they weren’t counted as being in material hardship. Then the long-run effects started catching up with them.

Besides having more kids in benefit-led households, the extra money started getting swamped by inflation. Like a boat getting caught by its own wake, Labour’s attempt to spend its way out of poverty has foundered.

The most basic lesson is that there are no shortcuts. Yes, the Government can borrow and print money for a while. Then reality catches up just like inflation is catching household budgets.

The hard work is getting the economy well-regulated so more projects get the go-ahead. It’s making sure the MSD is not there to cure poverty with hand outs, but make sure the ‘work ready’ beneficiaries actually take a job then get out of bed to show up for it. It’s about ensuring knowledge is transferred from one generation to the next by showing up to school and learning a curriculum with actual content. All of this must now be done with less as the new Government faces up to the financial record of the old.

As for Jacinda Ardern, she remains as a stark reminder that wanting the right thing and delivering the right thing are not the same. In fact, doing just the first can be worse than doing nothing at all. Harvard can have her.

That's it for this week, be sure to stay tuned next Monday

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