Child Poverty is a Political Choice
Why Continue to Base our Politics on a Myth That Allows Child Poverty to Exist?
Child poverty is a sin in New Zealand. It is also a sin to remain ignorant in understanding how the government spends money - especially when the self-imposed ‘fiscal straitjacket’ worn by all political parties has played a crucial role in prolonging and exacerbating this problem.
If we have the tools to understand that every dollar the government spends is a newly created dollar, and we understand the process behind this, then why ignore reality and continue to base our politics on a myth and allow things like child poverty to exist?
Stalling child poverty rates in New Zealand demonstrate the continued failure of the political system to make progress on fixing it.
This post reiterates that the mechanics of government finance are the same for everyone. These mechanics represent an established process through which the government spends money. This doesn’t change from person to person. This point is significant and worth repeating.
Of course spending money on child poverty alone won’t fix it. However, finding the resources and using them effectively will be helpful in fixing it.
Understanding the mechanics of government finance changes our perspective on the scope of public policy and highlights to us that child poverty is a political choice. If the resources are available for the government to use, then the reluctance to do anything about it is entirely political and ideological.
The Mechanics of Government Finance Are Not Naturally Occurring
The mechanics of government finance transcend ideology.
They aren’t a naturally occurring phenomenon like an atom or a cloud. They didn’t drop out of a clear blue sky one sunny day and they weren’t discovered in a lab.
The mechanics of government finance as they exist today came from a complex mix of historical, social, and intellectual processes. This created the process through which government spending occurs. We know that all government spending originates from the Crown Settlement Account (CSA) and that every single dollar the government spends is a new dollar. This process was established in the late 1980s/early 1990s.1
This process is the same from Nicola Willis to Barbara Edmonds, the Taxpayer’s Union to the Council of Trade Unions, ya mum to your neighbour (assuming your mother and neighbour have different ideological perspectives).
Understanding that the mechanics of government finance transcend ideology does not preclude fiscally conservative politics. I have no problem with someone saying that ‘we need the government to spend less’ if they accept that this is an ideological position. This position privileges business above all else because it enables business to utilise resources that the government is not using. This is the sectoral balances logic in action.
The problem is that reality (or failing to admit that your reality is in fact ideology) catches up with you.
Child poverty shows the failure of this business-orientated ideological position inherent to politics of all ideological dispositions. Child poverty shouldn’t exist in a high income country with plenty of resources to go around, but yet it does with no solution in sight.
Time to Move On
We shouldn’t be surprised by all of the problems facing New Zealand society. What do you expect when you apply a short term, financially orientated perspective to everything?
What do you expect when we don’t understand how the government spends money?
It is time to move on from this. We do have an opportunity to change this. It is up to us to understand how the world actually works and what we can do to fix it.
This is a prelude to a series of future posts on post-World War II international economic history. Understanding this history enables to us to understand:
Where the mechanics of government finance have come from
The intersection between national government expenditure and international trade
The significance of the recent shift in US Foreign Policy
It is worth noting that this is a best guess. The old government accounts were abolished in 1989, so we can assume that the CSA was established after this.
Despite that the detail of accounting can be used to create an illusion that tax-then-spend is the means of government procurement, wouldn't it be true to say that 'every gov't dollar spent is a new dollar' has been true ever since the abandonment of gold exchangability (1915 in NZ?) or perhaps the end of the 'proxy gold standard' of Bretton Woods? Accountancy as a plausible means of obfuscation is commonplace in money-laundering, valuation of businesses for sale etc, so one can.presume it was also used 'post-gold' as a deliberate idoelogical obfuscation of the new reality of money.
Too often, 'reduction of child poverty' is treated as a moral signpost rather than a target for a policy rooted in structural choices. I appreciate this post for going beyond the emotional appeal and pointing to need to study the deeper mechanics. If we keep debating symptoms without unpacking the system, we are just decorating the problem.