Supercharge the Stimulus: Wipe student debt now
In response to the devastating economic conditions wrought by COVID-19, New Zealand’s government has announced a fiscal stimulus package of ambition, surpassing that of other governments (e.g. Australia), and indeed surpassing the ambition of New Zealand governments for decades. Regardless, it falls short of a ‘new social contract’, as some commentators have labelled it. Indeed, without addressing the underlying political economic conditions that will determine the success of the stimulus, we will simply kick the can down the road, as the road crumbles.
In order to get ahead of the massive market crash the world is coasting for, the New Zealand government should take steps to fundamentally reorder the political economy now, before the worst is upon us. This is also an electoral necessity - the ‘politics of kindness’ will not stop a recession, and presumably Labour want to get re-elected.
Now, in a chaos-stricken 2020, Labour have an opportunity to change Aotearoa's trajectory over the coming years, by dealing with the issue of student debt.
It is canon that throughout the ‘80s and ‘90s, New Zealand’s economy was restructured along neoliberal capitalist lines, in one of the most far-reaching transitions of this kind ever attempted. The effects of this were catastrophic in the immediate term as New Zealand’s formerly protected industries scrambled to survive in their new reality. Farmers were hit horribly, as were the most vulnerable communities.
The long-term effects of some of the less flashy legislative shifts have been equally catastrophic. Employment legislation weakened workers and strengthened the rights of employers. All of this was deemed necessary as employers were no longer protected by state-led measures. The result has been a race to the bottom that has exacerbated and entrenched inequality. Small and medium enterprises (SMEs) struggle to compete in a deeply unequal playing field with international capital and powerful local interests, and must keep wages and other worker entitlements lean in order to do so.
Inevitably, the path of least resistance to capital accumulation in New Zealand has been to invest in property, locking younger generations (or at least those younger people not linked to family wealth) out of the housing market. Fierce opposition to the introduction of capital gains tax has further entrenched this divide.
Contrary to popular memes, this opposition should not be attributed to a unique generational selfishness, but rather should be cast as a reaction to what happened in the ‘80s and ‘90s, where sequential governments stripped wealth from communities and left them to fend for themselves. The bitter irony is that the same generation that enjoyed free education, and other public goods (until they were unceremoniously ripped away), are now determined to deny the generations born into stifling austerity a chance to claim a future. This is not lessened by understanding why the more secure cling to their enrichment at others’ expense.
Which brings us to one of the most insidious changes that was handed down as part of New Zealand’s political economic restructuring: the (partial) privatisation of education. By this I mean the funding changes for tertiary education providers, and the introduction of student loans as a means of casting education as a private good rather than collective one.
The logic of those educational changes was the same as the strategy that pits us against each other in the property market. It suggests that rather than being part of a social fabric, we are individual utility maximisers who can fully privatise our humanity.
This logic ultimately fails us. The idea that it is a generational divide that has stalled progress in New Zealand is useful framing for those who wish to stymie a collective response to our increasingly dire outlook. Keeping us fighting about whether education should be free, or whether wealth should be taxed like income from labour, redirects our attention from why our supposed fiscal constraints are what they are, and turns us against each other as the ship slowly sinks.
New Zealand can never return to some imagined past utopia, before Muldoon got drunk and called a snap election, because the global economy will never return to a previous state. We have to look to the future and determine how we will best navigate the choppy waters ahead, as a collective. Part of that is admitting where we’ve dug ourselves into holes rather than helping ourselves - where can we reverse the disastrous policies of the past without having to confront some of the bigger, long-term issues we have to address?
Abolishing student loans is one such step. Not only will it make the lives of New Zealand loan-holders ever-so-slightly easier in the face of global economic downturn, it will free up crucial capital that needs to be flowing through our economy. The amount of capital is not insignificant; total student loan repayments from FY-18 were approximately $996.2 million. Taking into account all possible caveats, the redirection of these kinds of sums is worth considering. We should encourage former loan-holders to spend their freed up money on local businesses rather than government-held debt. Given the need to restrict tourism (one of our major exports and at present crucial to the health of the economy), putting cash in the hands of New Zealanders will be vital.
There are huge structural barriers to New Zealand being able to take the kinds of measures that would reorient our economy and society toward a more prosperous future. Aside from the self-imposed fiscal responsibility metrics, and ideological cleavage to low inflation (another change from the ‘90s now presumed to be iron-clad economic law), there are the many trade agreements binding us to particular targets and methods. There is the real problem of how a small, export-oriented economy such as New Zealand’s could ever reverse the changes made in earlier decades without causing capital flight and related issues. These are discussions we need to have, and soon.
For now, let’s do what we can to avert some of the coming catastrophe. In the middle of a crisis, decisions come to the fore in ways that simply do not occur otherwise. Let’s abolish student debt.