Presentation to ‘Spirited Conversations’, Nelson, July 25, 2012.
At a public meeting of the Tax Working Group, whose recommendations were the basis of the 2010 tax changes when GST was raised to the benefit of those on higher incomes, a member of the public raised the question of the role of fairness in their thinking. Perhaps he was wondering about a capital gains tax or about the high marginal tax rates faced by the poor – far higher than those on the rich which were worrying the TWG. Perhaps he was wondering about the increased inequality that the TWG members, so concerned with taxes on their own class, were ignoring. Whatever, a member of the group replied that it was most unfair that some similar investments were taxed at different rates.
Hardly what the questioner meant, but nicely illustrating the importance of ‘fairness’ in New Zealand’s public rhetoric. Yet for all the references, does the notion loom large in public policy? Every day someone sensitive to the issues of equity and inequality meets examples where their concerns are breached by those who, at best, pay lip service to the notions or, more frequently, ignore them altogether.
The notion of fairness is not easy, and we tend to use it casually. We have an inherent notion of justice, but its application evolves through time. A couple of generations ago we treated women more differently from men than we do today. We probably think today that the older treatment was unfair to women (and to some men too). But in both eras we were trying to be fair.
One could provide a long – and perhaps boring – account of what we might mean by fairness and justice. But instead, let me give the approach that I use. It is due to the twentieth century philosopher John Rawls who proposed a criterion based on decisions being taken behind a veil of ignorance.
A simple example – and one I have applied a lot – is that suppose we are thinking about a gender issue. Behind a veil of ignorance I would not know whether I was a man or a women and I try to choose a resolution which seems acceptable to me not knowing which I am.
As an egalitarian I do not demand exact equality and am willing to tolerate a lot of income differences in society, because I know they are but one dimension of the totality of social and economic diversity. If I have to choose between an income of $500 a week and $550 a week, I would choose the larger amount. But if I was on the lower amount I would not get particulalry indignant. There will be other differences which mean the comparison is not exact; the higher income may be associated with longer hours or additional stress. However when it comes to a big difference, say between $500 to $500,000 a week, I get uneasy.
Rawls argued that any differences – of income, say – are acceptable if they make those at the bottom judge themselves better off as a consequence. That would mean that an informed person at the bottom would agree to the high incomes at the top, so that capitalism – say – may generate acceptable income inequalities because the initiatives of those who are well remunerated lift the standard of wellbeing of those at the bottom. So they may not begrudge the wealth of Peter Jackson, say, for it reflects the pleasure his films have given to so many others; more subtly the wealth of Stephen Tindal is a consequence of his Warehouse chain providing many products to New Zealanders at lower prices and in greater variety than before.
But the acceptable difference principle is not used extensively in our public policy deliberations. I am not aware of the Tax Working Group consulting those at the bottom as to whether we should give those at the top a reduction in the taxes they pay.
The Rawlsian notion of fairness requires empathy, that, is the capacity to recognize and, to some extent, share another’s situation, feelings, and motives. It is of course, to be done with humility – this man is never going to fully understand what it is to be a woman – but without it we cannot effectively operate from behind the veil of ignorance. The consequence of empathy is that a person is a member of a community. This membership is not instrumental whereby we favour a community because it enables us attain our individualistic goals, and would dump it if a better option came along. Rather community membership reflects belonging and having a commitment to the community.
Rawls’s approach to justice is not as revolutionary as it might seem. It developed from Immanuel Kant, whose ‘categorical imperative’ was to act as if what you do was a universal rule. That itself comes from the biblical injunction – the golden rule – to do unto others what you would have them do unto you. Closer to home – in time and place – the First Labour government established the welfare state with the principle that the first call on the resources of the economy was for the young, the sick and the elderly. They called it “Applied Christianity”.
Clearly there are a number of ways to define fairness and it is not obvious which notion we should use. Or which we actually use. But we need to avoid ‘fairness’ as a fossilised term whose meaning is long forgotten – as when we say ‘goodbye’ which once meant ‘god be with you’.
Eminent American historian David Hackett Fischer was so struck by the importance of fairness in our public rhetoric when he visited in 1994 that he wrote a book, Fairness and Freedom: A History of Two Open Societies, contrasting New Zealand with the United States, where the stress is on “freedom”. Here are two open settler societies which ought to have much in common but which seem to diverge on a crucial matter of public priorities.
His answer is provided in the introduction. Fischer uses the word-count facility in Google’s million book corpus to show that “liberty” was frequently used in the period up to about 1825, while “fairness” only becomes important after then. It would appear that America, founded in the earlier period, latched onto freedom, while New Zealand, founded later, was more influenced by fairness. Apparently each notion has persisted in the political culture for generations.
Liberty (or freedom) is much less about community than justice (or fairness) is. It is a notion based on the individual. Since the obligations of a community may well limit the individual the tension between freedom and fairness is central to living in a modern society. To what extent am I an individual; to what extent do I belong to a community?
It is well to remember that in the medieval and early modern societies community obligations could be oppressive. One could be fined for not going to church the state said you must. More serious breaches could lead to being burnt at the stake.
Given the central role of religion, the liberty of the early modern era centred on the freedom to follow one’s own religious conscience. Over the centuries the notion has widened to include human rights and the freedom to contract. Even so, the notion of religious liberty is still there, popping up in surprising ways; almost half the citizens of the US categorise themselves as “Christians” rather than Americans.
Of course not all liberty issues were resolved by the nineteenth century when its importance in the corpus diminishes and the significance of fairness rose. But there had been good progress in liberty and rights in Britain, whence much New Zealand thinking came. Te Tiriti o Waitangi guaranteed to Maori the rights of British subjects. Although they were not as extensive as they are today, they were thought sufficiently important to be incorporated in the treaty.
A number of reviewers, misunderstanding Fischer, have suggested his book indicated that New Zealand was an exception. While it apparently gives a balanced account of the two countries’ histories, it is actually a plea to Americans from a Boston liberal to give greater weight to fairness in public life. It is the US which is the exception. A recent Pew Research Centre survey of five countries found Britain, France, Germany and Spain all gave it greater weight than the Americans – just like us.
This might be interpreted to suggest that America’s public values are a fossil from the eighteenth century, whereas Western Europe continued to evolve past liberty to incorporate fairness in the public’s thinking. If so, the American right’s insistence on liberty as the direction of the future is rather a redirection to the past. Of course, liberties are important – authoritarian regimes need to be replaced by systems which respect individuals, giving them the human rights we take for granted. But if they are necessary they are not sufficient. We live in communities which we want to regulate by fairness.
Market mechanisms operate on the basis of individuality and in doing so they can undermine the community, as the development of New Zealand since the 1980s well illustrates. Much of Fischer’s account of New Zealand reflects the country before the Rogernomics Revolution rather than the country as it is today. He seems to have been misled by the nostalgia of New Zealanders and the public rhetoric which is still couched in the language of fairness even if equity is no longer as central to public practice. Today those involved in public policy do not have the once normal distaste for severe inequality.
Why did this happen? The American right points to the inevitability of liberty as the destination of humanity. Certainly there is a strong element of this in today’s New Zealand right which was not there in the 1970s. The Burkean tradition in the New Zealand political right represented – although not first expressed – by Harry Atkinson continues through to at least Jim Bolger. But there has never been anyone who has articulated a distinctive New Zealand version.
The case for market freedom, aside from historical determinism, is that increasing complexity has meant that the paternalistic state could no longer directly regulate as much of life as it had. That meant social change, much of which was destructive of traditional communities. In any case communities evolve more slowly than the external shocks which disturb them. It seems likely that any policy responding to the challenges posed in the 1980s would have had to break some of the tight linkages (say in remuneration rates), thereby disrupting traditional notions of fairness. However that does not explain why public policy concerns about equity were increasingly abandoned even though initially the rhetoric was retained.
There are at least two reasons for this failure. The first is that there were few experts on the impact of tax and scoial security on inequality although everyone has ill-informed opinions. Since 1984 those experts have been excluded from the policy process, which has meant the most anti-egalitarian policies could be introduced without anyone seriously challenging them. Some Labour politicians genuinely thought they were being fair while they steadily retreated from their egalitarian traditions. Sometimes the most ludicrous arguments were advanced to justify patently unfair policies, perhaps no more so than during National’s attempt to privatise the public health system in the early 1990s. For instance, some Maori were convinced that the privatisation of the health system would improve Maori health; yeah right.
The second reason was that the insiders – those who had not been excluded – were increasingly influenced by American thinking, even when it was not particularly relevant to New Zealand. The thinking is, of course, an idealised account of America but then it is hard for a New Zealand historian not to idealise our history without going to the other extreme.
There are areas of human life where we remain committed to ‘fairness’ – more or less – such as in gender and race relations. But notions of economic fairness are drifting off the practical public agenda while, perhaps, remaining there only in the rhetoric. When was fairness last a driver of change in distributional policy (except in the grumble that it was not fair the rich paid so much tax)? Hardly anyone mentions that we have not raised the real level of social security benefits since they were cut in 1991, over twenty years ago. Is it fair that beneficiaries dont share in the nation’s prosperity?
A nice illustration of the transition is the eagerness with which many have seized on the research of the ‘Spirit Level’, which argues that increased economic inequality may reduce the level of health in the community and increase the level of crime. That may well be true but suppose it did not. Would we not still advocate reducing income inequality because we were concerned with the unfairness which currently exists? While there may be an instrumental case for reducing inequality as a means of seeking higher goals, surely fairness in its own right is one of those higher goals .
There is a real sense that much of our public policy is becoming more like that of the US where, for instance, the dispute over Obamacare is in part that individuals with quality health care do not see that their good fortune should be extended to others – although behind the veil of ignorance we should surely conclude that it should be
Soon the generations who remember a New Zealand when there was a strong commitment to egalitarianism will have passed on. Will all that is left be the echoes of fairness in the rhetoric as we become overwhelmed by notions of liberty without community?
How to evolve an alternative? It cannot be a matter of just going back to the past. If we want to reestablish equity as a worthwhile social goal, we will have to do so in a fresh way, for today’s New Zealand society is more market-driven than it was once.
The first thing is we need to affirm – in public and loudly and frequently – is that fairness is a crucial element of New Zealand’s social goals. The notion of fairness being promoted should be a community one, not the individualistic one of the five-year old who throws a tantrum with “it’s not fair” when the child means “I don’t like it”.
Nor should fairness be about the politics of envy, which says people should not be better off than average. My reading of the New Zealand tradition is that we were much more concerned about providing a decent minimum for those at the bottom than decrying those at the top. Certainly everybody, including the rich, should do their share in supporting those at the bottom. But we need to avoid the divisive politics of envy in which parts of the community are pitched against one another.
The rich could help by being a little more humble, rather than pretending that their wealth made then more worthy than the rest of the community. There is a considerable element of luck in any of our personal achievements. It would be helpful if this humility meant less dependence upon conspicuous consumption – including vanity publications praising the rich. That sort of thing goes on even down into the middle incomes with their SUVs and bigger houses. You can help by ignoring the flaunting of wealth, while respecting those who make large contributions to society relative to their means. Perhaps TV should read the parable of the widow’s mite once a week or illustrate it much more often. Many of the rich are generous in supporting public activities; while I am grateful for that I cant help observing that the rich were just as generous before 1984 but less public with their private charity.
When you advocate fairness do not make it one dimensional say, by paying attention only to gender or ethnicity or whatever. Fairness has many dimensions. Do not unintelligently recruit another dimension – say income inequality – to justify your chosen concern. It is true that an individual Maori is more likely to be in poverty than a non-Maori, but it is also true that there are more non-Maori in poverty – simply because there are more of them. The ignored Pakeha poor – who outnumber the Maori by more than two to one – have showed remarkable restraint; I would greatly regret that the exclusive focussing on the Maori poor turns the Pakeha poor against their brown neighbours, which the politics of envy encourages.
Sure, you may put your effort into a single tile of the mosaic of unfair treatment – all of us have only so much energy – but acknowledge the entire lattice. Best wishes with your effort, and on behalf of men and women of goodwill, I say thankyou for doing it.
So the first thing to get back on the public policy agenda is a fairness which celebrates and is committed to community. But it has to be an empathetic one, not some narrow self-interested claim that fairness is what makes you better off. (And of course to succeed you must live fairness in your private life too.)
Before finishing defining fairness, we need to think about what is the relevant community. We typically belong to a set of communities. One will be our family and close friends. A wider one may be the neighbourhood or colleagues. Some will belong to an electronic community – like Facebook, heaven help you. And there is also your national community (and you may also feel a community with the whole of humankind). While they go from small to big they may not quite nest inside one another. Some of your family will live offshore, few will live in your neighbourhood. That is a big change from two hundred years ago.
I am going to focus my remaining remarks on the nationwide community, although there is much you can do in your smaller ones. I have only time to cover the welfare state and taxation. There are of course other institutions – such as symbols and the environment – which bring us together as a nation and contribute to the community that we are.
Let’s begin with our public health system which is universal and free. Of course it is constrained by limited resources and there has to be prioritisation. But the primary principle for eligibility of treatment is medical need; neither ability-to-pay nor privileged status are relevant factors. Certainly we have a private system alongside where those with the ability-to-pay can obtain treatment. We worry it could undermine the universality and priorities of the public health system – we should worry. But as long as we can keep it progressing and staff it with people who are committed to its principles the public health system should survive as a key community institution.
The biggest attempt to destroy it was the proposed privatisation of health in the early 1990s. That failed for three reasons. First, those pursuing the destruction were incompetent, hardly knowing anything about how a health system works. Second, they chose a variation on the American health system, which is almost universally acknowledged as the most inefficient and unfair system in the rich world. But third, the community rose up, defended its public health system and rejected a privatised system and the unfairness it would have created.
You would have thought the government would have learned, but twenty years later, the Accident Compensation system was put under a similar attack. Perhaps a new minister wanted to redisorganise it, as it is common for a new minister. That was not the whole story for the health system redisorganisation in the early 1990s. We know some of the key advocates of change were neo-liberals who wanted to reduce, or eliminate, the significance of government; that an effective public health system was an anathema to them. So privatisation was a part of their agenda. Possibly what has been happening to ACC is another ill-thought out preparation for privatisation.
Another area critical to our sense of community and fairness is the provision for the aged. Again the privatisation forces were beaten back, this time in 1998. New Zealand First had proposed a second tier community superannuation scheme not unlike that enacted by the Labour government in 1974 or the current Kiwisaver Scheme. However, by the time it went to a referendum it had been transformed into the scheme proposed by Roger Douglas in his neo-liberal tract Unfinished Business, the foundation policy document of ACT. The public rose up in wrath and soundly rejected the ACT scheme by a huge majority.
New Zealand Super is undoubtedly an integral part of the New Zealand community institutions. But we should not allow it to fossilise and fail to adapt to changing circumstances. I am an advocate for raising in small steps the age of eligibility. There is nothing sacred about the current age of 65. Forty years ago Bill Sutch wondered whether the eligibility should soon be raised to 67. Since then the life expectation at 65 has risen by almost another five years; how do we respond to that?
There is an important issue here that I need to touch on and to which I shall return. Modernisation and responding to change is always difficult, but today we have an additional problem that we do not trust those proposing change. Too often they have a hidden agenda of privatisation and the abandonment of fairness. Our distrust is perfectly understandable given their record over the last quarter of a century. So how are we to adapt? It depends upon having people in charge who are committed to fairness.
The third area which the first Labour government prioritised in its welfare state was children. We continue to pay lip service to that objective, but as a myriad of reports – usually including international comparisons – tell us, we are not treating our children well, despite it being a whole community who brings up a child.
I have been observing child policy for five decades and we persist in giving a low priority to children’s needs. Why we continue to fail is another presentation but briefly it is the same story of paying lip service to fairness and community, but ignoring it in practice. That applies to education too (that’s also another presentation).
To repeat my earlier caution; times change and so do the needs a social security system meets. Again we need to avoid fossilising it to something which may have worked reasonably well long ago, but no longer does. To be fair, to Welfare Working Group chaired by Paula Rebstock recognised that change was necessary. But no one trusted its deliberations because it seemed to give a greater weight to neo-liberal analysis; they see a repeat of 1991 when benefits rates and entitlements were savagely cut. Of course there is a need to adapt and progress the system of income maintenance but if the government keeps putting neo-liberals on its advice committees it has to accept that the advice will be resisted by the public, even when it makes sense, especially if success is couched in terms of cost savings and advantaging the well-off relative to the rest of the community.
The real level of basic welfare benefit has not been raised since 1991. In that time New Zealand superannuation has gone up a third more than the rate for a single unemployed 25-year old. If it had kept up with the elderly, the level would be around an extra $70 a week for the young adult. Is that fair? Some of the gap may be covered in various supplements but even they are indicative of failure compared to the simple and fair system we once had, much commended by the 1972 Royal Commission on Social Security.
There are numerous reasons why we are so mean towards those at the bottom of society. Certainly there are malingerers who need to be pushed. Certainly the system traps some people into dependency on benefits – which is a way of thinking about the conclusions of the Rebstock committee, if not its solutions to resolve the failure. But underpinning these is the simple matter that the priority of distributional policy in recent decades has been keeping taxation down on the rich; that means strangling the state of the funds it needs for contributing to a fair society. As long as we drive our tax system with the objective of what Fischer calls “freedom” – and I would call prioritising individuality over community – we ignore issues of fairness and justice. Those at the bottom will suffer, while as the Spirit Level warns us, the overall effect may be poorer health and greater criminality as well as a loss of life opportunity for those who are in the margins of society.
These issues are not easy. How does one combine individual freedom with community concern and a commitment to some sort of nationhood, especially in an increasingly globalised world? Are we up to the challenge or, as the last quarter of a century suggests, will we fail to engage and slowly succumb to a neoliberal vision of a world of individuals without communities, a world which Thomas Hobbes described as “solitary, poor, nasty, brutish, and short”?