In the following individual essay, the discussion will be to analyse if New Zealand capitalism is justified. This essay will focus on capitalism from when New Zealand entered a mixed market model from 1984, specifically around inequality. New Zealand capitalism from 1984 is not justified due to the reduction in benefits for the largest group of stakeholders. To show how, this essay will define context around New Zealand capitalism, a measurement of justification, the role of corporate social responsibility and the individual results of morality in the job market and cost of living.
New Zealand engaged in a welfare state through (1935-1949), halting the market economy in favour of welfare being a right of every New Zealander (McClintock, 1998, p. 499). Unemployment and poverty decreased during these times (Easton, 2018; McClintock, 1998, p. 501). However, amidst Great Britain’s political changes (Butler, 2014, p. 324), New Zealand found themselves with high inflation (Evans et al., 1996, p. 1858) as too much reliance was placed on commodities exporting to Great Britain (Nixon, 2010).
New Zealand’s Great Capitalist Restoration (GCR) was a push towards market liberalisation, better known as Rogernomics, this swift state action pushed New Zealand into a mixed market economy, through privatisation, reducing barriers to trade and a progressive tax system (McClintock, 1998, p. 501). However, privatization of state-owed assets happened without increasing competition, effectively privatizing the state monopoly (Douglas, 1990, p. 6).
The ideological nature of capitalism has been implemented in different ways, this theory is known as the Varieties of Capitalism (VoC; Hall & Soskice, 2001, p. 1).
Definition. Capitalism is defined as an economic system where the majority of the property is in private hands and operates under a market system (Shaw, 2016, p. 105). In New Zealand, the competitive nature of businesses aka, the market, is not free. New Zealand stakeholders hold the government to account to enforce rules of trade. Therefore, companies that are empowered by the government to provide services have a degree of separation between their actions and accountability (Kelsey, 1993, p. 39).
From the onset of Rogernomics, the government aimed to deliver quality medium-term solutions instead of the instant gratification (Douglas, 1990, p. 2). This liberalisation appeared to be a rollback of the state, but due to high barrier to entry, the New Zealand government was unable to obtain competition and had to create forced prices and loan the market the money to buy these assets (Kelsey, 1993, p30). The results from 1985 to 1990 show that prices had become stable, as promised by global markets (Evans et al. 1996, p. 1865), yet created a broader set of inequality traits, such as income distribution, lower GDP growth and higher ratio of imports to exports (McClintock, p. 502).
When New Zealand joined the global market, it opened up a wide access to opportunities and resources. The internet and global neo-capitalism markets meant that companies did not have to rely on a limited pool of resources (Heshmati, 2003, p. 80). For example, Xero from New Zealand was able to acquire/seek multiple clients because the admin overhead had decreased. This was not limited to the accountancy sector only, but for all office-based jobs. However, this has had a negative impact on the medium-skilled workers/positions due to fewer prospects for growth into more complex roles (Heshmati, 2003, p. 85). Furthermore, with the rise in living standards and minimum wage (Pacheco, 2007, pp. 4-5), it has led to substantial unemployment or under-utilised people in New Zealand (McClintock, 1998, p. 500).
Companies seeking to outsource globally, improve return of investment and leverage technology for a leaner more agile attitude, are acting in the best interests of the company, but it is not in the best interests of the average New Zealand stakeholder, due to fewer long-term prospects and outsourcing of industries. During the technology revolution and GCR, we can accept that a decreased ability for workers to progress into higher skill work, has led to a decreased percentage of company profits, this, in turn, can cause a relative rise in living costs.
Since 1985, the cost of living has increased by 184%, and the average wage has gone up by 135% (rbnz.govt.nz, Stats.nz). Although imported goods and leveraging technology can lower net wealth of the individual, it can feel to the consumer that their wages go further. The people of New Zealand through media have only recently realised that with lowering global buying power, there is a decrease of affordable local goods and services as a result. In a free market, there would be more competition for services locally, reducing the cost of entry and thus the price to the consumer would decrease (Busso, 2014, p. 27); furthermore, removing the minimum wage, smaller businesses could train members at a mutually beneficial rate
(Hashimoto, 1982, p. 1075).
The cost of living growth over wages is not in the best interests of the average New Zealand stakeholder, neither the employees, through loss of buying power; also it’s not beneficial for companies, where they will be forced to increase wages to compensate for living expenses (Gray, 2016). When prospects become dim for one generation and the squeeze of living expenses becomes apparent, ensuring the future generations have better opportunities is the next logical step for inequality, this was one cause of the large 1990s boom in education.
Corporate Social Responsibility
Where the government has a leading role or influence in a country, company purposes can be influenced in the best interest of New Zealand stakeholders and not just directed at a profit. A companies responsibility, in the long run, is to the stakeholders it impacts with, and this is why governments can look to enforce or pressure corporate social responsibility (CSR) on companies to ensure they put the needs of stakeholders ahead of profit ( Shaw, 2016, p. 156). The market solution for this is known as conscious capitalism; this is a grass root movement where companies purposes are for long-term benefit to stakeholders. Companies like Google, focus on people before profit and slowly customers realise that these companies are more trustworthy to do business with, which in return means more profit (Marketing, 2013). There is a clear distinction between CSR and conscious capitalism, one is a top-down management on the company to meet specific requirements, driven by external authority and the other is a choice from the company to put people first.
It is in the best interests for New Zealand stakeholders that companies practice people before profit; this allows a solution that keeps jobs in New Zealand or stops cost cutting on a product in the short term, for the long-term benefit to the customer and wider stakeholders. With any market, if there is open and honest information, the customer can choose the correct company to do business with. As this is not a free market in New Zealand, with free access to information, the government must enforce CSR on companies to ensure the result is good for New Zealand stakeholders, where applicable. Once information is transparent to customers, it would be irrational for consumer’s en mass to choose products that are not in their best interests and with further competition, conscious capitalist companies should prevail.
The profit motive of companies in the short run, over the long-term interests of the customer, shows us this is not morally permissible, as the results show wider problems for the largest number of NZ stakeholders (Kelsey, 1993, p. 58). Customers need to be held accountable for their choices, until then, a company with profit motive and government-backed support, has no rational reason to think of long-term benefits for NZ stakeholders.
Logical and factual statements are required for a moral conclusion to be defensible (Shaw, 2016, p. 34). If discussing the outcomes of capitalism are justifiable, teleology theory; morals based on consequences (Shaw, 2016, p. 56), will allow this essay to determine justification.
Teleology can be argued using egoism or utilitarianism, this essay will focus on what is in the long-term interest of the stakeholder, this is known as Egoism (Shaw, 2016, p. 70) and stakeholders are the legal persons of New Zealand. Egoism and Capitalism have similar thought processes and allow a fair evaluation of moral permissibility. By determining if an action is in the long-term interest of the stakeholder, it can be inferred if the action is justified.
The reason this essay is not using a utilitarian approach to morality is due to the extensive subjective calculations of benefits that would be needed to ensure an accurate answer (Rothbard, 1974, p. 347). A utilitarian approach to morality requires a cost-benefit analysis to reasonably assign a net return (Shaw, 2016, p. 75).
Complex markets, built on trust and with the correct protection, thrive (McClintock, 1998, p. 501). Capitalism brings high competition and where competition is at its highest, innovation inevitably follows. Change brings wealth and prosperity to all stakeholders, irrespective of gender, race, or other minorities (Cudd, 2015, p. 761). Innovation by definition creates inequality, to innovate, one must have something that others do not have. Therefore, is it not inequality itself that is not in the best long-term interest, for invention plus commercialisation equals innovation. As the invention is commercialized, the stakeholders impacted are rewarded.
Although global inequality has decreased since the 1980s (Sutcliffe, 2007, p. 37), inequality in New Zealand using the Gini coefficient has increased, only dipping during recessions (Creedy, 2018, p. 34). “Gross inequality is harmful not in itself but because it biases the rules in favour of the wealthy and to the detriment of the poor” (Cudd, 2015, p. 764). Although on a macro scale the global stakeholders benefit, on a micro New Zealand scale, inequality is becoming gross, this allows large wealth and government to influence the larger population through culture and consumables (hegemony; Varol, 2017, p. 608).
As New Zealand has benefited from innovation, the New Zealand market economy does benefit the lowest earners of society by ensuring they are better off, by government-provided benefits and cheaper consumer goods, it does benefit the higher earners of society and corporates by the state backing their interests and by increasing global reach of customers. However, it does not benefit middle New Zealand, who are worse off than 1985 and are spiralling into a wealth cycle that may see social unrest. This essay has shown how by creating a global market with barriers, the New Zealand government has lowered prospects for middle New Zealand, this in turn with overseas investments has allowed the living costs to increase and has led to vast mortgage, education and credit card debts (rbnz.govt.nz), to try and keep up with the global growth. Overseas social unrests have already appeared in America, Britain and France as the largest population has no apparent future, being blocked by the state on both sides and forced into mediocrity (Lou, 2017).
As a global economy it is worth mentioning that the Pareto distribution, this shows that within a market, the largest amount of wealth is held by the smallest group of capitalists (Klass, 2006). This in itself is only beneficial to New Zealand stakeholders, if they position themselves within the minority if not, this level of global inequality would not be morally permissible for New Zealand stakeholders as it would reduce opportunities for happiness, prospects and relative living standards.
The common good “the sum total of social conditions which allow people, either as groups or as individuals, to reach their fulfilment more fully and more easily” (Pontifical Commission of Justice and Peace 2004, p. 164). Common good definition and the information from this essay helps to understand more clearly, that a mixed model market economy does not provide the framework, to which the stakeholders of New Zealand can reach fulfilment easier or more full, therefore not a common good. Adam Smith stipulates in his book, wealth of nations (Smith, 1776, p. 8) that irrational people do exist, that their actions will be punished by the market. However, this isn’t 1776, and the level of large corporations backed by the government is not the scale this author believes Mr Smith could foresee. The actions of these large corporations globally now go unnoticed and the immoral behaviour has much larger consequences on the stakeholders (Lehman Brothers, 2010).
Through this essay, a few key points around inequality were discussed, to prove or disprove the author’s statement that New Zealand capitalism cannot be justified based on outcomes post-1984. This essay defined the context around New Zealand capitalism, the logical sequence of events or joining a global market with barriers to entry, the role of corporate social responsibility and how moral permissibility is defined from an egoism perspective. The results of the post-1984 mixed market economy do not justify the actions, the model confuses accountability, reduces competition in key industries and ends up with the majority of New Zealander stakeholders worse off. What this essay has shown, from an egoism perspective, where defining the stakeholders at a national level; is how using global economics can validate social nationalism and this opens the door for questionable solutions. It is worth considering that the same thought process can be used at a city or family level and doesn’t allow for objective morality on a global scale, which would intend the greatest benefit for all life on earth.
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