Stop the Cuts — Make the Rich Pay for the Crisis
Austerity: the policy of cutting public spending during a time of crisis in order to “balance the books”. It is a dangerous idea with a dangerous history. As the cost of living crisis bites and an economic crisis looms, leaders of both central and local governments are moving inexorably towards austerity politics.
"Fix Auckland." That was Wayne Brown's campaign slogan last year when running for the mayoralty. Now delivering his first budget, it is clear what his vision of a "fixed" Auckland entails: fewer bus services; fewer council jobs; fewer libraries and Citizen’s Advice Bureaus; less funding for the environment; a severely diminished arts and culture sector; and less help for the homeless. A city built for wealthy business people to drive around in their expensive cars, desperately trying to ignore the climate crisis even as it unleashes devastating floods and cyclones upon our narrow isthmus.
Brown’s justification for these cuts is Auckland Council’s budget deficit, and his unwillingness to increase rates in response.
“I don’t want anyone to have to cut their budget, but I inherited such a huge debt that we have to do something, and everyone’s got to take a little haircut.”
Meanwhile, on the national stage, Leader of the Opposition Christopher Luxon continues to rail against Labour's "overspending," implying that he will cut spending if elected Prime Minister this year. At the same time, ACT leader David Seymour — National’s would-be coalition partner — is campaigning forcefully for brutal cuts to social and environmental programmes. With a recession on the way and ACT likely to win more seats than ever before, there is little doubt that the right-wing parties will implement far more broad and far-reaching cuts than what Wayne Brown is offering if they enter the Beehive in October.
Even the Labour Government, who (Covid crisis aside) have been as fiscally conservative as they could possibly get away with, have turned towards a form of austerity since Jacinda Ardern left office. Chris Hipkins initiated a "policy bonfire" in his first two months as Prime Minister, slashing $1 billion worth of spending, mainly from climate initiatives such as the "cash-for-clunkers" scheme.
This is not yet outright austerity, as Hipkins has framed his cuts as "reprioritisation." What Labour intends to offer in May's budget to tackle “bread and butter issues” remains up in the air — but the notion that the government can either tackle the climate crisis or focus on the cost of living is itself buying into austerity logic. The fact that the Labour Party is pursuing climate cuts in the immediate aftermath of January's Auckland floods and February's Cyclone Gabrielle is staggering. The Greens and their Climate Minister James Shaw have been left reeling, with many in the party surely questioning whether it was worth supporting this government in the first place.
In an even more shocking move, Immigration Minister Michael Wood announced on Tuesday that Labour will be increasing detention time for asylum seekers who arrive in Aotearoa by sea from 4 days to 28. This attack on vulnerable people fleeing war, persecution and the consequences of climate change is as unnecessary as it is despicable, given no refugee boats have ever made it to our shores.
This xenophobic fear-mongering represents another symptom of the rising tide of austerity politics. To build consent for cutbacks, politicians need to sell the notion that there is no money for anything; that the country is “full”; that there is no alternative. And they need a scapegoat to demonise — someone at the bottom of society who is a “burden on the system.” Attacks on asylum seekers will merely be the start — next it will be unemployed people, single mothers, lazy young people.
But why is austerity fast becoming the order of the day? And is there an alternative?
A System of Crisis
The capitalist system is built on crisis. Roughly every ten years, the economy goes into recession — and sometimes those recessions turn into total meltdowns. That’s what happened in the Great Depression of 1929, and in the Global Financial Crisis of 2008.
A recession is taking shape in 2023. It is too soon to say whether or not this will become a catastrophic collapse of the system, but it is safe to say that the warning signs are there. The global economy has been on life support since the last crisis — capitalism never truly recovered from 2008 — and the already brutal austerity many countries saw in the 2010s could be about to get even worse.
Aotearoa experienced a major recession along with the rest of the world in 2008, but the recovery was stronger than in many countries, and as a result, the austerity we experienced under the government of John Key and Bill English was very mild by comparison to the likes of Greece, Spain and even the United Kingdom. But that doesn’t mean we’re in the clear — the housing bubble in this country is even worse than most OECD countries as a result of the previous crisis being milder. We are therefore overdue for an even bigger meltdown.
Austerity emerges from these periodic crises of capitalism. It’s not simply that capitalists and politicians are bad people implementing bad policies — it is an imperative that someone must pay for the crises. In order to restore profitability, business owners must lay off workers, reduce wages and shrink their operations, whilst in turn the government must ensure that the unemployed are desperate enough that the working class as a whole accepts the lower wages now on offer. In turn, governments must fork out money to bail out failing banks and businesses to avoid the crisis growing even worse; meanwhile, tax receipts from incomes, consumption and business profits all decline rapidly. This creates a huge hole in public finances, necessitating either huge borrowing, or austerity.
There are those within the system who argue for an alternative approach. The “Keynesians” — followers of economist John Maynard Keynes, who put forward this argument during the Great Depression of the 1930s — claim that in times of recession, the government should stimulate the economy by increasing spending and borrowing money to pay for it. But this approach ignores the fact that it is in fact necessary for the capitalist system to contract during periods of crisis. Advocates of capitalism refer to this process as “creative destruction.” In order to restore profitability, capitalism has to drive down wages, drive down spending, and shed the least competitive businesses. It is certainly a destructive process, and it means that it is the working class who have to pay the price and bail out the capitalist class when their system falters. This is why capitalism requires crises every ten years or so in order to function; it is why the harsh policies of austerity are pursued despite the discontent they generate.
Crises in which wages fall and unemployment rises are necessary under capitalism. Austerity in turn is necessary under capitalism. There is no alternative under capitalism. But that doesn’t mean the working class should lie down and take the beating. We need system change.
The Alternative to Austerity
Mainstream political parties and leaders, from Brown to Hipkins to Luxon to Seymour, will always pursue the policies which serve the interests of the dominant class in society. They will do what they need to do to protect the capitalist system — the severity of their policies will differ, but whatever happens, austerity will be at the centre. Labour will offer austerity-lite; ACT will offer the most brutal cuts they can think of.
Austerity is necessary for the capitalist system, but it is an attack on the living standards of the working class — and in a decade where we must take drastic action in order to prevent climate catastrophe, it is also an attack on the future of humanity. Both Auckland Council and the Labour Government’s climate cuts are criminal actions to take when we have so little time left to save our planet. But there is an alternative.
We need a movement of ordinary working class people, led by anticapitalists, trade unions, Tangata Whenua, environmentalists, community groups, and any political leaders brave enough to join us, to resist austerity at every level of society. Whether resisting pay cuts and job losses at work, Wayne Brown’s budget, Labour’s austerity, or the prospect of a National-ACT government coming to power in October, we must stand together and fight back.
But simply saying no is not enough. We cannot simply reject the cuts offered by capitalists and their political representatives without presenting a concrete alternative. We need to campaign for a positive alternative to austerity — a Green New Deal.
This Green New Deal would involve a state-led green energy revolution creating well-paid jobs; more state houses; rent controls; public ownership of key sectors such as energy and public transport; more funding for busses, trains, health and education; strengthened unions and workers’ rights; higher wages and benefits; and more refugees welcomed into Aotearoa. It’s not a utopian vision. It’s a viable alternative under one condition: that we tax the rich to pay for it.
In 2021, the top 10% of New Zealanders held over half of the country’s wealth. The top 5% held 37%, and the top 1% held 15.8%. Meanwhile, the bottom 50% of the country held just 6.7%. This is based on estimates which inequality expert Max Rashbrooke says may be wildly inaccurate; he told stuff.co.nz:
“[Rashbrooke] said there was a caveat in that the very richest people in the country refused to be part of surveys. The 1 per cent might in reality have more like 85 per cent of wealth than 20 per cent, he said.”
The wealthiest people in Aotearoa have the money to pay for the crisis their system created. They will do anything to get capitalism back up-and-running smoothly again, however painful this process is for working class people. Let’s not let them. Stop the cuts. Make them pay for the crisis. Make them pay for the transition to a fairer, greener society. They can afford it — the planet cannot.
Elliot Crossan is a socialist writer and activist. You can read his writing at Watermelon Media