Damien Grant’s lazy support for the poverty myth

Damien Grant’s latest column Poverty isn’t fault of the rich is one of the most appalling pieces of opinion I have read outside of a Bob Jones’ column. You can read it for yourself, but let me give you a quick breakdown of the key points:

  • there is inequality;
  • some people blame the rich;
  • they blame the rich because they think there is a fixed amount of money in the economy;
  • that can’t be right, as the rich are innovative and entrepenuerial, so they make more money for our economy;
  • the real problem is the poor lifestyle choices and laziness of the poor.

I really did think any reputable columnists were past this mythologizing of the ‘bludger vs kiwi battler’. The off-hand, one line way in which Damien includes it is appalling, because it suggest he believes the majority of his readers will just nod their heads at this received wisdom. Perhaps he is right, which almost puts me off my breakfast (it’s a very nice breakfast, so I’ll fight through and eat it).

New Zealand has one of the worst levels of income inequality in the world. Damien is asking whether there is a causal link with poverty, in other words, whether this matters. Robert Shiller, 2013 Nobel Prize winning economist, says it is the most significant social problem in the world today.

There is good evidence from a number of reputable economists that high levels of income inequality affect social and health outcomes and reduce overall social cohesion across the board in a country, not just for people in poverty. But does it cause poverty? Well, it seems to be a key feature in long term, persistent high levels of unemployment, which causes people to become impoverished. Income inequality does this because it distorts redistribution within a society of wealth and resources, so that you have a long tail of unproductive capacity (i.e. unemployed people).

Innovation and entrepreneurial zeal may generate more resources, but if that doesn’t benefit wider than the business person or people at the top of pile, it can only exacerbate the problem. Trickle down is a failed idea: there needs to be systems in place that encourage redistribution of wealth; like a fair tax system, like support for people to transition from unemployment to employment.

Is that a problem in New Zealand? We hide our unemployment in the benefit system in sickness benefits, domestic purposes’ benefits (I realise Minister Paula Bennett has given them other names, but you get the idea) and other such areas. We have a significant youth unemployment issue, a common problem across OECD economies. I’d argue we have a real and significant unemployment issue that is long term and persistent.

Are people unemployed and/or poor because they are lazy? It doesn’t seem so. There is regular anecdotal and quantitative evidence (often cited by the Minister herself) that people want to work, but that also want enough money to make work more worthwhile than a benefit. Whilst media reports generally class the poor as our ‘untouchables,’ when any investigative report is done or research undertaken, the affirm that the choices of poor around their money and time is not dissimilar from anyone else, bar the fact that they have to make unacceptable choices between paying rent, buying food, supporting children’s schooling and so on.

We deserve better opinion, blogs and journalism on the issue of poverty and income inequality. We cannot expect a functional society if we allow ourselves to blame a group in our society for our shared ills and worries. Projection onto a scapegoat stops us from examining ourselves and finding real solutions to poverty.