NZ Aid's New Direction, Neo-Liberalism, and Poverty as a Structural Problem

Fr Kevin Barr's "rushed comments" on last weekend's article by Gerald McGhie on NZ Aid. Fr Barr is the Chairman of the Wages Councils.  You should read McGhie's article if you have not already done so.

1. NZ Aid under the former government was directly targeting projects for the poor (identified through its scoping mission of which you were part for a while). Squatters and other poor communities were direct beneficiaries.  The recent change of direction to encouraging   economic growth seems to me to be in line in WB, IMF and ADB general approaches.

2.  Pollard and Abbott's three pillars are good and appreciated. But where are we really seeing pro-poor growth?  For years here in Fiji we have been calling for people-centred budgets but what do we get?

3.  My constant question is "How does economic growth translate into poverty alleviation and a better quality of life for the ordinary people of the country?" It rarely does.  The ADB slogan "Poverty Alleviation through Economic Growth" in fact is an excuse for promoting privatisation and other forms of private sector development and "poverty alleviation" is just a nice phrase to make it seem acceptable.  We end up getting low wages being encouraged, no effective price controls, increases in VAT.  There is also the encouragement of SMEs and small business loans which all look good but a high percentage of them end up in failure. Some give the failure rate at 80-90%.  Then there are the projects for "lifting people out of poverty" or "breaking the cycle of poverty" whereby women are taught flower arrangements, how to make jams and chutneys, cake making, a sewing machine to make clothes, etc.  Men are given some forms of skills training in carpentry, plumbing or agriculture but then there are rarely job opportunities which pay a decent wage. 

All of this is good and helps to some small extent and, of course, "good governance" is part of the solution.  But rarely does anyone go to the root caused identified by sociologists that poverty is basically a structural problem and needs to be addressed at that level.  The economic policies we introduce are vital.  The mentality of many of our economists is still the old economic rationalism of neo-liberalism.  Like Mahend Reddy and the AG they promote a liberal market-driven economy Many have not learnt the lesson of the recent economic collapse that controls need to be put in place.  Taxes need to target the right people, inequality needs to be curbed, the effect of policies on the poor need to be assessed.

4.  There was a NZ economist (Professor Small ??) who wrote in our Fijian newspapers some years ago strongly criticising neo-liberalism and the famous "trickle down" theory, policies of "user pays" and economic growth that benefited only the rich business interests. He wrote long before the current economic crisis.  I don't know if he is still around but he was really on the ball.

Ed. note: This note on the relationship between growth and income from the US experience: "Between 1980 and 2005, the richest 1% of Americans got more than four-fifths of the country's income gains.  Does anybody seriously believe that the other 99% didn't deserve to take home a much larger share?" Joanathan Cohn in the New Republic 17 Oct 2010.

And another statistic: Between 1979 and 2007 the real after tax income of the bottom 20% of workers increased by 16%,  the top 20% of workers by 95% and —wait for it — the top 1% by 281%.  Time magazine Nov 1, 2010.