Two South Island crises in the last couple
of weeks have seen the government step up to the plate. The failure of South Canterbury Finance and the
Canterbury earthquake were very different disasters but both required government – acting on behalf of all of us –
to make good losses suffered initially by a minority but threatening to impact on the whole community.
Despite their differences, the two crises shared common features.
The initial bill in both cases will reach into the billions. The losses occurred through no direct
fault of those who will bear the main brunt. The government quickly calculated that the cost of doing nothing
would greatly outweigh the cost of doing what seemed necessary.
It is of course the case that there will be many victims of earlier finance company failures who will
ask why they were left without help while investors in South Canterbury Finance had their chestnuts pulled out of the fire.
But the government correctly calculated that the economic black hole – if left unfilled –would do terrible
damage to the South Island economy. And in any case, the expectation is that much of the government’s
initial outlay will be recovered through an orderly winding up of SCF’s affairs.
No such backward glances are warranted in the case of the Canterbury
earthquake. Immediate emergency help and a prompt beginning on the task of reconstruction are clearly needed,
and only the public purse is deep enough to get this underway. And, encouragingly, the longer-term consequences
of a recovery programme might actually be beneficial in economic terms.
No one should discount the immediate personal and social price that the earthquake has exacted.
But the injection of significant new capital into the regional economy could prove to be a shot in the arm to Canterbury
– and beyond. We need only think of the new jobs in construction, the boost to manufacturers of materials,
the lift in services from transport to accountancy, to understand how this might work.
In both cases, too, it is significant that – at a time when the
current emphasis seems to be on smaller government – it is again to government, as at the time of the global financial
crisis, that we turn for the kind of help that no other agency can deliver. It seems that no matter how
often we learn this lesson – whether in wartime, or in economic crisis, or following a natural disaster – we are
quick to forget it as soon as what passes for normality is restored.
A case in point is our recent treatment of unemployment. The disaster that overtook
tens of thousands of Kiwis in the aftermath of both the global and our own domestic recessions, when they lost their jobs
or businesses, may not have had the dramatic impact of a single terrible event like the earthquake or even the SCF failure,
but the consequences for individuals and families are equally destructive.
And the parallels with the two South Island crises are clear. The victims of unemployment
are equally innocent of responsibility for the calamity that has struck them. They did not cause the recession.
The numbers involved are just as large. The economic consequences are equally serious, not just
for those directly affected, but also for the rest of us.
The loss of the productive capacity of tens of thousands of our fellow citizens makes us all poorer.
The personal and social consequences for individuals and families make our society weaker and less cohesive.
The longer-term impact – such as the renewed exodus across the Tasman – blights our prospects as a nation.
Just as in recent days, action and investment
by government would be a proper response to this disaster. A dollar invested by government now, just as
in Canterbury, could be repaid not just immediately through the relief of distress but also in the longer term through more
jobs and a stronger economy. If we can do it for earthquake victims, why not for the unemployed?
Yet, in our response to unemployment, there has
been no sense of the community pulling together to provide help to those who need it, no recognition that we will all benefit
both economically and socially if we invest in the productive potential of all our citizens.
Instead, we have turned and pointed an accusing finger at the unemployed.
Not only can we not afford to help them with a crisis for which they are not to blame, we tell ourselves; they should bear
not only their costs but ours as well. So we cut the minimal benefits on which they are forced to live,
and salve our consciences by seizing on the occasional well-publicised anecdote about welfare cheats and scroungers.
And instead of investing (as in Canterbury) in
economic reconstruction, we give priority instead to getting a government deficit that is already one of the lowest in the
developed world down a year earlier than it would otherwise be.
Shouldn’t we step back and have a good look at ourselves?
7 September 2010
This article was published in the NZ Herald on 8 September.