Wednesday, April 17, 2013

Did the Iron Lady really lift people out of poverty?

In a week of politics not short of opportunites for satire (Weapons of mass destruction?? Really??), up pops Gerry Brownlee on last night's TV3's news (at about 24 minutes) to tell us Margaret Thatcher was "under-rated for lifting people out of poverty". According to His Gerryness Mrs T will be "remembered as someone who was very strong in the certainty of her views [and was] somewhat under-rated for the way in which her views lifted so many people out of poverty." He was then reported as saying her influence extended to New Zealand; her fingerprints were all over the Rogernomic reforms of the 1980s.

This wee item tweaked our interest because the overwhelming evidence is that the neo-liberal economic policies espoused by Thatcher and her fellow travellers were not notable for lifting people out of poverty, although they did increase the income gap between the rich and everybody else. But rather than just believe us, let's look at what the government's data says.

On p82 of Perry's report is a graph (Graph 1) of New Zealand's Gini coefficient going back to 1982, two years before the Rogergnomes started their rampage.
Graph 1
The Gini coefficient is a broad measure of income inequality. There are others but the Gini is the most commonly used. The graph shows that up until the mid-late 1980s New Zealand had an income distribution similar to that of countries such as Sweden and Denmark. After the 1987 sharemarket crash, followed by the truly Thatcherite Mother of All Budgets in 1991 New Zealand's income inequality increased, and its income distribution became much more like that of countries such as the UK and US. The gentle downwards drift evident after the early 2000s was largely due to better economic growth during this time, and the impact of 2004's Working for Families, which put a bunch of money into the pockets of low-income working families.

And what about "lifting people out of poverty"? Not much evidence for that sorry, Gerry. There are a number of ways to measure 'poverty' in rich countries, and different demographic groups have different poverty rates - in other words, hardship is not dispersed evenly among the population. Graph 2 below (Perry p94) shows the proportion of the population living below 60% of the median income after housing costs (note: the before housing costs (BHC) annotation in the graph is incorrect).
Graph 2

The different lines are for different base years - it's difficult to hold years constant over a long period of time because so many other things change. The important thing to note is that the shape of the line is the same no matter what base year is used. So although the number of people living in poverty (by this measure) declined in the 2000s, we see that even now we still have a higher proportion of people living in poverty than was the case prior to 1984. I'm going to put my neck out here and suggest that 2009 low point will transpire to be an inflection point and if National continues its economic mismanagement then in a couple of years we will start to see those poverty rates rising again. Why do I think this? Because one clear indicator of poverty is children's hospital admission rates for infectious diseases, and these are rising again.

Which brings us to child poverty, the issue that just won't go away. Children have fared much worse in New Zealand and elsewhere under Thatcherite economics.

Graph 3
 Graph 3 (Perry p109) shows child poverty rates. This shows the same general trend as Graph 2, but the rise in child poverty during the early 1990s is far more pronounced. Plus we can also see that despite various governments' lip service to alleviating child poverty, children as a group are still worse off than they were in the 1980s.

Perhaps this is why Mrs Thatcher is under-rated for lifting people out of poverty. Because she didn't. What people got was deeper and more persistent poverty for those at the bottom, and a sense of smug entitlement among those at the top.