By Gareth Morgan and Susan Guthrie
Prime Minister John Key's newly elected government should be bold enough to confront the message from a December 5 OECD report.
It confirms rising inequality in developed economies is a major problem that needs addressing urgently - and yes, New Zealand was included in the study and yes, we've had pretty much the greatest increase in inequality in the OECD in the last 30 years.
Further, the OECD data only relate to cash incomes (wages, profits for the self-employed, interest and so on).
If you were to do the study incorporating the non-cash returns to wealth you'd see the impact of the house price explosion in particular, opening the gap between those who do and those who do not own property.
That would reveal even greater widening of the disparities.
Should we care? Is the description of egalitarian New Zealand a hoary old chestnut nowadays and one we should just get over?
This is the debate New Zealanders need to have. Just what do we aspire to for the shape of our social fabric?
Should we ensure everyone has a dignified life - whether they're in paid work, involuntarily unemployed or voluntarily in unpaid work benefiting their families and communities?
Is there a minimum, unconditional level of income people in this relatively rich society should be entitled to?
For now, the low-paid, the involuntarily unemployed and the unpaid are left wallowing further and further behind those of us doing well in the market economy.
In time, increased polarisation of income and/or wealth leads to social disruption, political polarisation and paralysis, and eventual change, sometimes non-peaceful. Placed against the OECD's recommendations on what to do, the National Government's economic strategy is struggling - it's certainly insufficient.
This from OECD secretary-general Angel Gurria: "The social compact is starting to unravel in many countries. The benefits of economic growth DO NOT trickle down automatically, this study dispels that assumption. Greater inequality DOES NOT foster social mobility" (OECD's emphasis).
Markets won't naturally generate "trickle down" benefits. Well-designed curbs and checks are needed, supplemented by taxes that redistribute from the rich to the poor.
This was well known to the first modern "economist", the philosopher Adam Smith, writing in the 18th century as an unfettered industrial revolution made the poor poorer.
However, these basic truths about modern market economies have been forgotten, pushed aside by an ideological tsunami which began in the late 1970s and centred around the ideal of freedom.
The euphoria that accompanied this global movement affected not only politics (contributing to the break-up of the Soviet Union and the fall of the Berlin Wall) but economics - less regulation, lower taxes, less social support, increased globalisation and displacement of low and average wage jobs in developed economies.
In spectacular fashion, the global financial crisis has reminded us that freedom in economics will only get you so far; it needs to be strategically curbed by regulation and supported by effective redistribution. Freedom to lend certainly has come to an ignominious end.
It's worth looking at what the OECD sees as causing widening income inequality. While the evidence is mixed and difficult to unravel, they point to the role of technological change and globalisation in widening wage gaps (both make some skills and experience, especially low skills, obsolete and others highly sought-after), with the adverse effects on wages compounded where employee protection has been weakened.
Over time, tax and social assistance welfare policies have become less effective in ameliorating the effects of the widening wage gap on net income.
It's clear from the OECD report that piecemeal responses to single issues simply have not cut it as credible policy responses to this major economic challenge.
We may be mesmerised by the cheaper goods on offer, but they're expensive if your income falls faster.
In the words of the OECD: "Any policy strategy to reduce the growing divide between the rich and poor should rest on three main pillars: more intensive human capital investment; inclusive employment promotion; and well-designed tax/transfer redistribution policies".
National's election campaign emphasised investment in education. This is a necessary condition to prevent widening disparities but it needs to be focused correctly.
The OECD calls for increased access to tertiary education, for example. We recognise that getting early childhood, primary and secondary schooling right is important too. By comparison, National's charter school initiative is tinkering at the margins. Similarly, its proposal to push increasing numbers of Winz customers into (in practice, low-quality, insecure) jobs doesn't have the ring of strategic vision.
"Policies for more and better jobs are more important than ever," the OECD says. On tax, the message is clear: close down the loopholes.
"Tax reforms that increase average tax rates without raising marginal tax rates (for example, by scaling back tax reliefs) could enable greater redistribution without undue blunting of incentives."
In New Zealand's case, that means more than just looking at allowable tax deductions - it means taxing gains to wealth comprehensively, not just the cash income component.
Most countries in the OECD already have capital gains taxes and the more enlightened have wealth taxes (including, in some cases, taxes on owner-occupied homes). We essentially have neither.
We are unambiguously backward in this area. For New Zealand, the potential gains of real tax reform are enormous. They have not, as Finance Minister Bill English claims, been instigated. He has tinkered.
It's possible to design policies to address the great challenge posed by rising inequality. In the book The Big Kahuna, released in August, we detailed reforms to tax and welfare that would close glaring gaps in the tax system and thus create a better business and investment climate (a positive for sustainable job growth) and make human capital development more likely (an unconditional basic income or "UBI" of $11,000 net paid to everyone aged 18 and over, making it easier to up-skill and innovate).
By providing people with the flexibility and freedom to live their lives as they see fit (without interference or compulsion from Winz), the UBI would increase the resilience of our population in the face of the challenges posed by technological change and globalisation.
Who knows which skills will be obsolete in a few years? - certainly not the good folk at Winz.
By contrast, with access to unconditional support people would have the means and the freedom to extract a life they value, whatever the challenges they faced. That technological and global challenges will continue at a rapid pace seems inevitable. But it's not necessary for our society to be torn apart by them. People must have the flexibility to make changes and not be discouraged by the high effective marginal tax rates of targeted welfare.
What's possible is clear, and the opportunity is staring us in the face. What appears lacking is statesmanship - the leadership and political will to take New Zealand forward rather than stubbornly cling to and fine-tune a broken down system.
Present day strife in Europe is surely a clear lesson of what can happen when leaders don't step up to the podium.
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Gareth Morgan is a Director of Gareth Morgan Investments
This article was first published in the NZ Herald.
You can do your own comparison of the policies of most NZ political parties here »
97 Comments
What a dreadful man. Yeah, Gareth, we can't have that 'ideal of freedom' - and you can't have political freedom without economic freedom. Not possible.
He may be 'bright' in some given specialisation, but there's no intellect working on a philosophic, or historical, level here. Gareth is an apologist ultimately for the totalitarian state, because that's where his beliefs will always lead.
Perhaps instead of bossing me about how I should be forced to redistribute my limited wealth (while his huge wealth keeps him 'free'), he might want to get informed. He could start here. Or, he could read this. Or he could watch this. Anything, just get out of my life Gareth. The problem is the State, and the over-spend of politicians following the illusion of a welfare state that creates poverty - 80 years of welfare state, it's not worked. You won't solve the problems of welfare - and for those problems, just watch the news each night - with more welfare, and more theft, sorry, redistribution.
Morgan should read this article also.
Quote:
A key problem with the focus on income gaps rather than on improving the skill attainment and job prospects for those currently at the bottom is that it panders to the absurd Marxist notion that the rich have somehow got rich at the expense of the poor. Yet there is no basis for saying that people who are not working are poor because others are earning good incomes by working hard and productively. Wealth generation is not a zero sum game.
Another key problem is that the OECD’s measure of inequality proposes that New Zealanders would be just as well off if everyone were poor as they would be if everyone were rich. This is because the only thing that matters under this measure is equality of outcome. The ideal income distribution is reached when differences in effort and skill go unrewarded. Those who work hard should earn no more than the most idle in the community.
The trouble you have with his argument is that wealth is really measured in time and the accumulation of other peoples. I doubt anyone of any serious wealth has done it without this. So it isn't a zero sum game, because not everyone can use other peoples labour.
Try Isaiah 65:21&22
Isaiah? I'll give that a miss thanks.
You are trying to raise the argument that we 'are all part of the village': and I agree with that. However, you're taking it one step further and saying the village owns me: it doesn't.
What you are missing is that people make wealth in the private sector through voluntary transactions: I can transact with them or not. This is the opposite of my dealings with Big Brother State, that always works via coercion only (bullying, in other words).
You don't want to become informed? But still want other people to listen to your ideas?
Then you also presume to know what I am saying without reading the reference.
Talk about missing the point. But yes there is common ground you will find at the bottom of it should you choose to look.
Both parties to a capitalist transaction take value - such a transaction is not a zero sum game, both parties are winners. That is never the case with government.
I don't care if people don't listen to me, I just want to be left alone to live my life: but that's impossible in our social(alist) democracy.
You might be interested in http://www.privateislandsonline.com/ :) Gotta say, I don't particularly like the idea of the govt / powers-that-be telling me how to live my life or imposing their rules...but we do live in a society so strictly speaking, being "left alone" is a bit of an utopy.
People will build houses and live in them themselves - they will not be used by someone else . They will plant vineyards and enjoy the wine - it will not be drunk by others . Like trees , my people will live long lives . They will fully enjoy the things that they have worked for .
....... now Mr Tribeless , that wasn't so painful , was it ? ...... Isaiah 65 : 21-22 .
.... wine huh ?.... yum yum , time to be well into it ...... yipppppeeeeeeeeeee !!!
A bottle of Isaiah 65 please....! Here you go Gummy....a hobby for you...and you know what to do with them..... http://www.growinghopsyourself.com/
Well that wasn't so hard was it Gummy. I would have thought that someone who regularly professes to know how people should be governed would be as well versed as you in the oldest manual available:) You have redeemed yourself.
Actually I bet you just googled it, but how hard was that?
Ahh missed getting my rhizomes in time for this season Wolly, but there will be another. Nothing like a bit of fuggles eh? I have an ESB in the bottle maturing now that has a mix of NZ Fuggles and NZ Goldings. Couldn't resist trying a bottle to see how it was coming along though, or two.
Munich Dunkel on the table tonight though.
The Gummster has read the good book cover-to-cover . ....... and still has two fine copies ..
....... but your point is well made , I really should stop hectoring people to be free , to think for themselves , to be strong & independent ...... it's not for me to lecture others to follow their dream ......
Thankyou Mr scarfie : I am humble & contrite . ...... . . Adieu , mon ami .
OK GBH - find the location of this one (without Google): "Listen, you rich people, weep & wail because of the misery that is coming on you ..... You have hoarded wealth in the last days ..... the wages you have failed to pay the workers who mowed your fields are crying out against you ... You have lived on earth in luxury & self-indulgence ... "
I didn't Google the previous verse , Mr scarfie provided the book & verse number ....
.... I read the bible , Mr MB ....... I didn't memorise it ! ...
.Nice exerpt though , it sounds alot like Bernard Hickey & his self-indulgent life-style .....
...... bless you , my child . Go in peace .
Read your blog on the Lyttleton situation.
In a minarchist state - I'm guessing the road would not have been cleared yet - if ever - given one would assume that a collective of residents/users would need to stump up the labour/cost.
That's been our experience in terms of a large number of land holders off a private road leading to a property we own - there are always any number of users who cannot or will not pay for the maintenance/upkeep (rendering the thing virtually unpassable for all).
So, the others, who can and are willing to pay (and want to retain access) need to provide a private transfer of their wealth to the remainder (those unable or unwilling to pay). I think in economic terms these individuals to the transaction are called "freeloaders".
My point being there will always be those that have or choose to "freeload" whether a society is publically or privately structured. I just don't see how infrastructure gets built and maintained in a minarchy.
As to whether our Government is too big - yes of course it is ... its a bit dumb these days to think a population of 4 million can sustain all the bureaucracy that goes with modern societal management. When working in central government, I got the impression very early on that there would be signficant cost savings to NZ becoming a state of Australia. But that's off topic.
As to the Big Kahuna model - my interpretation is that it does deliver much greater freedom to most in our society as our society is so heavily structured around transfer payments. Therefore making those transfers unconditional and universal frees a very large slice of the population from current requirements for interaction/reporting with the state. I would also think that given the simplification of the tax regime under the Kahuna policy - the interaction/reporting of those receiving few transfers under today's system (I assume this is you included) would also diminish considerably.
That is not to say it delivers freedom from taxation - merely more freedom from over-burdened interaction with the state regards taxation matters. Under such a regime the accountancy profession would diminish in its importance.
Kate, what I particularly despise in what Morgan writes now, is his language, which betrays his mind, and the mind of the true socialist. He uses redistribution so flippently: redistribution is theft, pure and simple, it's a violent, brutal act that a civilised society would have no bar of from the state. It represents the brute, barbaric state that is on its way to totalitarianism in one form or another.
And understand what is at the bottom his advocacy for redistribution: it's not about inequality, look at my links above, the issues around inequality are bullshit. Rather, it's always about a blackmail: the State must redistribute my income, otherwise the need that is grown by the welfare State will take it from me brutally.
I want out of the ignoble, rotten and corrupt world that Morgan sees in his own soul, the world created by our politicians and this Nanny State, protected by the iron fist of her Big Brother - I want my freedom from it.
Everytime I see one of those TV commercials advertising the existence of poverty and starvation, I too want (as you say) "freedom from it".
We all want freedom from something, but the reality is neither you nor I are ever going to live at a time when we achieve our vision of utopia - the (im)balance has tipped too far.
In my case I think we (humankind) lost the struggle when we failed to control population growth - in your case (perhaps you think) we lost the struggle when we failed to eradicate poverty at the time when capitalism and classic liberalism was the new order.
The new order morphed into what we have today - the state of globalization - and like it or not, we can't go backwards even if we now know what mistakes we made....
http://mams.rmit.edu.au/es4cefpg6ifj1.pdf
Yes.
One final point, just to put the hatchet for good into this nonsense; all students of history and economics know to switch off when Morgan writes this point:
... 18th century as an unfettered industrial revolution made the poor poorer.
Unmitigated rubbish and lies. Bare faced lies.
von Mises put the truth well:
All the talk about the so-called unspeakable horror of early capitalism can be refuted by a single statistic: precisely in these years in which British capitalism developed, precisely in the age called the Industrial Revolution in England, in the years from 1760 to 1830, precisely in those years the population of England doubled.
Leave free men and women alone Gareth.
Missed that passage myself ( innate tendency to glaze over when Morgan starts spouting his redistributionist spiel ) ....... during the industrial revolution the " poor got poorer " only because the do-gooders keep raising the bar as to what defined poverty , because the poor kept getting richer , vastly richer than before.......they left the incredible hardship and grinding poverty of the farms and villages , for the big mill cities . As harsh as their lot may appear to us today , if was remarkebly elevated from their former lifestyle ...
.. one other thing I picked up . the OECD Sec. Gen. whittering on about the trickle down effect not working properly , and about the checks & balances needed to redistribute to take from the rich and give to the poor ....... absolutely correct , in one sense , trickle down doesn't work ...... conveniently bypassing the fact that folk are usually enriched by trickle up ...
.. wealth comes from the bottom up . not from the top down . Sadly this crucial point is utterly lost on these bureaucratic control freaks , or they'd prefer the populence to not understand the amazing benefits of the free market mechanism , for the truth shall set you free .
The Welfare State
One point three billion to the telcos to put in broadband so they can sell us more services such as cable TV (Note they won't spend their own money).
Half a billion to the farmers in Canterbury putting in irrigation which will quadrupple their land values at the expence of the taxpayer (and no capital gains tax on it either). And not to mention the government buying into an irrigation company so they can suppy irrigation equipment at good prices.
TVNZ ging into partnership with SKY and guess who is putting up all the costs (30 million). Well not SKY.
Two billion to South Canterbury Finance investors including their rich interest rates.
The private sector are into all the government perks they can get their greedy little hands on. Running prisons, Hospital services, Bus services (Council), Waste services (Council). And now they are going to run schools and buy State assets. Why? because they are too useless to start their own businesses.
Look at the top NZ companies on the NZX, Telecom, Auckland airport, Air NZ, Contact Energy, on on and on. All ex government because we DO NOT have the people who are able to start their own businesses so they just bludge ours.
Why is it you people never mention these bludgers?
One eyed no doubt.
What surprises me about libertarians, is that they continue to live amongst us, enjoying the benefits our taxes provide, rather than going off to establish their perfect society in some virgin territory.
Perhaps they're like those communists of the 1930s, who continued to live their comfortable middle class lives in western democracies, "roughing it", rather than joining comrade Stalin in the USSR?
Your last sentence is absurd. Actually, so is your first, because 'you' won't let me lead the free life I want to - the Nanny State simply doesn't allow it. Nor can the people of Lyttelton for that matter.
Do you think more welfare solves the problems of welfare?
'you' won't let me lead the free life I want to - the Nanny State simply doesn't allow it.
Correct me if I am wrong but you are free to rant and rave without anyone banging on your door that wants to take you away to a Gulag.
NZ needs to start taking more heed of what Gareth is saying as it is now plain to me as an outsider (moved out of NZ 2 years ago) that this country is now sowing what it reaps.
Correct me if I am wrong but you are free to rant and rave without anyone banging on your door that wants to take you away to a Gulag.
You're right we live in a Gulag of Good Intentions.
Am I free to live as I want? Don't think so, and I wouldn't even know where to start.
I've already proven in the previous link that the people of Lyttelton certainly aren't free to live as they wish.
MP Katherine Wilkinson, who is in theory signed up to the party which believes in limited government, is currently putting through a 360 food bill that will mean many of the producers who currently sell me fresh produce at farmers markets (one of my passions in life: food), won't be able to. And I can't track down a single statistic on anyone having died by buying food from a farmers market, or even sick (whereas I'm willing to bet people get sick weekly eating in the highly regulated restaurant market).
I'm certainly not free to do as I wish, including supporting the charities that are important to me, with all of my income, as so much is compulsorily taken by government to build a Big Brother State that, apart from the rule of law, I have very little agreement with. And the State is so huge now, that it is even destroying the rule of law in that it is the chief abuser of my property rights.
.... and I could go on, but I've got to work. Tax and all that.
It's very difficult to provide incentives that allow a free market economy, as well as a socially and enviromentally responsible economy. I don't think it is possible with the current monetary system. The highest risk investment is in new technology, and for every success there are hundreds of failures. I have some friends that manage angel investment type funds, and they reject lots of proposals, and about 3% end up getting money, and of those that get money, they expect 30% to make a profit. The rest end up failing from lack of investment, and from having a bad idea.
The reality is that the current economic model does not encourage reasearch, or inventiveness. Inventors lose 99% of the time, they lose through not having a regular job, failed ideas. Many of these people will mortgage their homes, and beg borrow and steal from friends and family, and there is no guarantee for success.
Without them, the world would be much poorere, yet they face the greatest disincentives, while the FIRE sector gets the greatest incentives, and is socially, and enviromentaly destructive.
We have such an ambigous tax code, it's ridiculous. Everything is subject to interpretation. Some of this is just an inherent weakness in the english language, and the rest is there to be exploited by whoever is holding the aces at any given point in time. There is a real need to dumb down the tax code. so anyone can easily understand it.
I agree that we have reached a situation where a small minority control a disproportionate amount of wealth.
Why is this ? Never in history have the opportunities for (legally) maximising profit margins been better for big businesses. The ability to both reduce costs and increase prices is at an all time high. And the small rich minority have managed to corner most of the profits arising from the above.
Reducing costs by outsourcing to cheaper manufacturing locations, locking in efficiencies gained from technological innovations, and by management keeping a control on labour costs while expanding use of technology/machines.
Increasing prices, by using psychology and clever marketing to create a consumer culture in the public which "must have" the latest and the greatest, and setting prices based on what the "market will bear" -- prices that are way above the actual costs of production & delivery.
This is supported by co-opting (corrupting ?) politicians of all persuasions via lobbying (every 1$ spent on lobbying is estimated to return $22,000 in the US). to set up legislation supporting profit maximisation and retention. An example is the creation of lightly regulated commodity/ futures market that are highly manipulated by leveraged speculators, also allows increasing the prices when there is no real increase in the underlying cost of production. (e.g. increase in staple food prices a few years ago totally unrelated to the cost of production)
All the excess profits created go to the owners and the top echelon. Very little trickles down to the others.
But I do not agree with the rhetoric that rebalanacing/fixing this requires "taxing" the rich. I would very much prefer the approach where participants in any enterprise get to share more of the profits. Profits that go to directly to willing participants that help generate the profits. No unions, No government.
Increasing taxes is the socialist utopia and is a recipe for a more invasive and inefficient government. In this I support a key tenet of the Big Kahuna-- a smaller governement machinery to minimise unproductive activity.
And the profit pool must become much larger than at at present. The increase in the profit pool must come from owners leaving more of the enterprise profits on the table or sharing with employees. And, I also believe that there is a pool of money that can be released by correcting the imbalance in salary diference between a top level workers CEO etc (i.e. non owner) and the lowest level workers. Management compendsation must be high, but not at current eye popping levels (e.g. George Frazis)
This requires a change to national culture, commercial culture, and employment laws that support significant flexibility in choosing between performance based bonuses and a small salary.
This provides incentives for employees to work hard to ensure profits are made. It avoids the trap of government becoming a powerful money conduit trapping people into government dependence or being trapped by an less productive majority that votes for more money for themselves at the expense of more productive members of the society.
The rich will not notice the difference in their income. The less well off will. And they will spend most of it, hopefully after setting aside a decent dollop for saving, and the country will progress.
This approach is better than distributiing wealth in the form of cold charity proposed/practiced by Buffet, Gates overseas and Morgan, Horton et al locally.
May be some of the proponents of change should walk that talk and start the ball rolling ?
You are focusing your attention on entirely the wrong things.
Bill Gates gets wealthy because he sells things to people, that provide value in their own lives, of a lot more than the asking price of the product.
The MORE a system incentivises rather than penalises this sort of thing, the better off everyone will be, even if some of the BEST providers of value become disproportionally wealthy in the process.
What really matters most, is zero-sum wealth transfers and non-productive rent-seeking in an economy.
George Soros, for example, has made massive capital gains on property investments.
Economies that MINIMISE such gains, will suffer far less hindrance to social mobility even if "producers" get rich. In fact, wealth transfers and successful rent seeking HINDER genuine "producers" of wealth from doing so.
One of the outstanding illustrations of this, are the low-regulation cities in Texas, where urban land values are low and stable (and land value curves are close to flat accross the entire urban area) and have been for decades. Soros type investors hate this. Mortgage lending institutions hate this. Wall Street hates this. There was little earnings to be made from inventive mortgage-security-related financial instruments involving Texas real estate.
There was little volatility in property prices, and little money lost in the famous "crash". (Texas can genuinely claim to have suffered "fallout" not at all of their own making).
Even so, as Rick Perry points out, three quarters to two thirds of ALL new employment in the USA since 2007, has occurred in Texas. So what if workplace laws are weak and wages comparatively low? The cost of housing is and always has been, low, and discretionary spending has been higher than famous "liberal" states with high wages BUT even higher housing prices that require more than 70% of the average income, to buy.
Inequality has been increasing faster in California than any other US State, in spite of their famously "high incomes", dedication to "protecting" employees, and massive State government spending of all kinds. The price of housing, thanks to environmental preservation, is the most powerful possible driver of inequality that any economy can introduce into itself.
Bill Gates made his fortune with the help of governments. Without them he would not have done what he did. He got governments to enforce his copyright on his products.
You may argue that he had a right to copyright protection, but he needed a GOVERNMENT to enforce it.
Secondly, was this copyright protection justified? I think not. Look up the GPL (General Public Licence), Linux and the Free Software Foundation.
Finally Steve Jobs spelt out what he thought of Bill.
The moment that you're brought into this world , and the mid-wife smacks you on the bum ( where's the anti-smacking bill then , huh ! ) ...... you ought to give thanks that you're born in New Zealand . The odds are 300 time greater that you'd be born into a Chinese family , facing true grinding poverty , and a dictatorial bunch of self-serving bucolic old farts running the show ........... you got bloody lucky !
..... you have no " entitlement " to anything other than personal safety . No one need " ensure " an income for you . You need to be responsible for yourself . Anything you require can be sourced via the free market enterprise system . And you too , add value to that market mechanism by your production of goods or services .
There is no requirement for government intervention . They have the simple task of creating crystal clear rules of law : " Thou shalt not murder thy fellow human " etc ..... and operating a judicial system which upholds the laws . ..... Simple really ........ so why does the current government in New Zealand spend 50 % of the nation's GDP ..... their required tasks are so few ....
Who says you have any entitlement at all? Is this your idea Gummy, that you are entitled to personal safety? Either you have unlimited rights, or you have no rights. Rights are just ideas, created in the mind, magic happens when you transform things from the realm of thought into the physical realm, and there is no such thing as magic.
..... if you wish for complete freedom , then tootle off to Somalia to gain an experience of their anarchy .....
But as there's so many of us living together here in NZ , we do require a few simple iron clad rules to live by . Personal safety is one of them ........ mass medicating the population by shovelling folate into their bread is not .......
.... some commonsense is required .
Gummy if you want to have some baisic human rights, here are the objective and logical ones. The right to food, clothing, and shelter.
If you say everyone should have to work to be entitled to these basic needs, then give them a right to a job, and fair pay. Give people a right to live, whats the point in giving any other rights if you don't have that.
Some common decency is required, but..... whats common is hardly decent..... whats decent is hardly common.
You have every right to obtain food , clothing , and shelter within our society .....
....... you are not entitled to them as a birthright ..... off the back of someone else's labour
.. ..put a little energy into the free market enterprise system and your rewards will amply pay enough to satisfy your needs & desires .. there are plenty of jobs and opportunities , currently .... indeed , this has been so since the 1930's .
..... the " benefit " has long since ceased to be just a safety net for those who really need it , and morphed into a lifestyle option for a mulititude who've become incentivised by " free " munny & no obligations ...
And WFF has taken the welfare state into the lives of the middleclass .... seriously dopey policy , that .....
WFF = single income families that are not in the top 5% become beneficiaries. Are wages too low, or are we just lazy and greedy? Or is the entire economic system in serious need of a TOTAL rewrite?
My tax bill, as a business owner, is about half what it would be if I was on PAYE, (benefits of being a golden egg laying goose?) I would still be in business, employ the same amount of staff, nothing would change if I was paying similar tax to PAYE.
As a side-note, the miniscule amount of Folic Acid (or Vitamin B9- ESSENTIAL to many body functions) added to bread would go a long way to preventing Spina Bifida in this country. You're obviously don't know anybody with this condition or you're a complete crank.
Do you wear a pointy tin foil hat as well?
No need to resort to abuse , OK ! ....
.... the idea of a government legislating to mass medicate the citizenry in this way is utterly repugnant ........ and it is the thin edge of the wedge , which could lead to other additives being utilised to control the population in some way .
Preggies who don't get their folate acid naturally , through a normal diet including leafy green veges and plain old corn-flakes , have serious issues in their lifestyle choices . Mass medication of the entire populence is not the answer .
Ingested in high quantities ( 10-12 slices of folated bread per day ) has been shown in clinical trials in the US to increase the incidence of prostrate cancer . .. Some teenage guys do eat this much bread daily .
If we were to analyse the amount of "income redistribution" that is already taking place in all first world nations, the question would have to be asked, how much more could the economy stand without killing the goose that lays the golden eggs? It is not just a matter of cash transfers via social welfare; every one of us carries a price tag of millions of dollars in State spending from birth to death; most of us will never pay back in tax, what has been spent on our health, education, public safety, infrastructure and amenities. Even those of us who never earn their own income and never pay tax, are millions of dollars ahead of around 50% of humanity. In a way, it is quite audacious to say that actual transfers of cash ON TOP OF THIS (in welfare payments) are “inadequate” and that the highest income earners are being “greedy”. The amounts already paid disproportionally by the higher income earner, are already massive long before actual cash payments to the “less well off” are considered.
Sir Roger Douglas pointed out years ago that if everybody got simply "given the money" and then paid their own way in free markets for health, education, and transport at least; even the poorest could live like kings. Instead of beating up on Sir Roger as is the fashion, we could seriously look at "value for money" in all the spending of "transferred wealth" that already IS taking place, yet is perversely not regarded or calculated as “transferred wealth”. And if politicians really are wanting to redistribute wealth, they should not be spending it in ways that are captured disproportionally by higher income earners or special interests who could well afford to pay their own way.
The goose that lays the golden egg, has never, and never will be the rich. I has always been the working man. This is fact, put as many rich men on an Island as you want, give them as much money as you want, Without LABOUR they havn't got shit. Put working men on an Island, without money, they can still create value, as much resources as are available can be used to create value, this can be done irrespective of wether or not there are any rich to suck the profits off their backs.
But the rising returns to labour, has always involved rising productivity, which is seldom anything to do with those "pairs of hands". This is largely to do with "capital" and entrepreneurship. This is why countries like Bangladesh and North Korea can have "full employment" guaranteed by the State, yet never get anywhere.
The share of the benefits of productivity captured by labour, is like "the bargain of the millennia". Labour should be grateful for this, and see where their real interests lie.
Henry George in particular, said a lot about the land owning class gaining from Labour and Employers fighting each other instead of them. Labour and employers are sitting on the same branch of a tree; Labour attacking employers is like sawing the branch off.
It might be part of Sweden's secret, that Labour and Employers long since managed to come to an accomodation that benefits both of them.
Of course educating the workforce in a way that enhances the application of capital to increase productivity, is essential.
http://www.city-journal.org/2011/21_4_skilled-labor.html
This represents an appalling failure of education - young people with the wrong qualifications, unemployed or working at McDonalds, while high tech industry, which actually is the main thing that brings the wealth IN to the economy in the first place, is having to import workers. I wonder if NZ has similar problems?
Capital is nothing without labour, neither is entrepreneurship. The share of benefits captured by labour has been in decline for the last 50 years, and you may rightly call this the deal of the mellenium if you are on the right side of the equation. The rich are rewarded for being rich, and to say that a progressive tax system is killing the goose that lays the golden egg, is a lie used to confuse the masses.
Do you have a reference for that claim?
The best work I know on this, is “Sharing the Wealth Generated Between Work and Capital and Its Evolution”
By Remy Prud’Homme.
You need to Google Search it and then use “Google Translate” to change it from French into English. It is extremely enlightening.
Google search:
Go via “Translate this page”, under Prudhomme’s site
“Accueil – Site de Rémy Prud’homme”
This brings up his page in English. Go to the “Publications” page, and you will find the paper about halfway down. – Prud’homme, Remy. 2010. “The sharing of the wealth produced between labor and capital”. Comment. No. 128, Winter 2009-2010. Pp. 945-953
Trying to post direct links to a Google-translated document is fraught with difficulty. Someone really should get this on the internet, in English, easily accessible.
I certainly believe that "returns to PRODUCTIVE capital" have been far too low, because of the rake-offs being made by RENT-SEEKING "capital" as the result of regulatory and political distortions. The finance sector's share of profits in the economy have risen while the share of "main street" profits have fallen.
Henry George was absolutely right - "Labour" advocates inability to see this, and see that their interests are intertwined with those of "productive" capital AGAINST those of rent-seeking "capital", is a cause of major ruin already, with worse to come. The employers and producers and wage payers are the first to get hung by the revolutionaries, while fat financiers who were ruining those employers as well as their employees, are far away and laughing.
Elephants in room:
The single biggest cause of rising inequality:
Urban planning that forces up the cost of entry to home ownership, and transfers wealth to incumbent property owners.
The next biggest:
Increased solo motherhood and children being raised without fathers. Marriage accross socio-economic boundaries was always a substantial leveller in society, and so was subsequent patterns of "inheritance".
Ironically, almost nobody realises the secrets to Sweden's famous "low inequality" at a relatively high level of wealth. (Leftwing liberals ignore that there are examples of equality in poverty too). Leftwing liberals are so stupid, that they claim it is Sweden's welfare system and its high equality that makes it successful. This is like claiming that Microsoft is successful not because it designs and sells a lot of clever computer gear, but because Bill Gates gives a lot of money away.
The real answer is that Sweden already exemplifies Paul Callaghan's argument that industries that pay high wages, are the only way to increasing national wealth. Before one starts to talk about dividing up the cake fairly, one has to grow the ingredients of the cake. Bangladesh is not going to become Sweden by introducing social welfare.
Sweden has less than 10 million people and has a nuclear energy industry and an arms industry that exports fighter jets, gunboats, tanks, and guided missiles. Ironically leftwing liberals mostly oppose any arms industry, or nuclear energy, in their own country. (Paul Callaghan identifies NZ's anti-nuke unreason as a feature of our poor regard of science and technology).
People often claim that the USA benefitted relatively from WW2 because it did not get bombed, and its industries grew considerably. But Sweden did not fight at all, and sold arms to both sides.
Sweden's other advantage that leftwing liberals choose to ignore, is the "social capital" of centuries of Protestantism, and a near "monoculture" with few citizens of cultures that are more vulnerable to perverse incentives. The McCarthy Commission in the early 1970's in NZ presumed from Sweden's example, that generous welfare provisions would not result in significant perverse behavioral changes in NZ. They were completely wrong, especially regarding young Maori women and the DPB.
The main cause for Scandinavian countries highly publicised recent increases in inequality, are their equally apparent destruction of the social capital represented by centuries of Protestant belief, and their mindless multiculturalism. Surprise, surprise, when you promote alien cultures as "equal" to your own when in fact they are not, you get rising numbers of people in your society, that follow these alien cultures, failing to keep up.
THIS guy has the temerity to suggest that "the ten commandments and the gospels are superior to the Koran":
http://www.youtube.com/watch?v=ODXgGS50AVY&feature=related
This whole lecture provides incisive insights into "the modern liberal mind".
If liberals wrote the sports page, every result would be reported as one team "cheating" and "exploiting" the "unfair disadvantages" of the other.
Ineqaulity produces the feral underclass mr laws talks about.
The ferals want what you have but don't want work fot it. So begins a life of fearing to leave youré property ,car etc because you know these ferals will take it.How do you fix it i have no idea would be to introduce what New york city did.Ithink it was called broken window policy on crime.
..... another school of thought has it that the welfare state , in attempting to blot out " inequality " , actually creates more of it ... " ferals " are encouraged to breed , be idle , do drugs & alcohol .. .. 'cos some lily livered civil servant is always available to bail them out , and to agree that " society is to blame " .......
Who is it that is so wise that they can draw a line in the sand ... and say , " you lot are in poverty , you guys with less than that group over there " ... " we'll top you up with some of their's , it was their's , and they earnt it.......... but we'll take it from them by force , and we'll foist it upon you , 'cos we're all equal here .... " ..... is the new messiah , Morgan , so wise ?
When Gareth says
Further, the OECD data only relate to cash incomes (wages, profits for the self-employed, interest and so on).
Does that mean they don't include transfers such as WFF, unemployment benefit etc?
In any case I cannot see how the Big Kahuna is going to reduce inequality of outcome.
How will an unconditional basic income of $11,000 - less than many beneficiaries are getting now - make it "easier to up-skill and innovate"? How will $11,000 help people to "live their lives as they see fit"? Are we seriously saying that if everybody has that, there will be no need for any further benefits so WINZ can pack up and go home?
And even if it does have this effect, the fact remains that some people will take advantage of the opportunity created with more intelligence, foresight and luck than others; and some will see fit to live their lives in a way that makes lots of money, and others will not. The result of equality of opportunity is still inequality of outcome.
The number of billionaires don't concern me.
Much more important than inequality is the standard of living for those who are poorest.
Despite the doom and gloom projected by the media and 'equality' advocates, the world is a much better place than it was 30 years ago when things were more 'equal'. Violent crime is much lower, and life expectancy is greater and increasing. See the work of Steven Pinker: http://www.amazon.com/Better-Angels-Our-Nature-Violence/dp/0670022950
Don't believe the hype, the world is getting better, not worse!
Agree. The real rational assessments are books like
"The Rational Optimist" - Matt Ridley;
"The Skeptical Environmentalist" - Bjorn Lomborg;
"The Improving State of the World" - Indur Goklany
"The State of Humanity" - Julian Simon
G K Chesterton famously said, "when people stop believing in God, they start believing in anything". Environmentalist mantras today ("we are running out of everything yadda yadda yadda) are classic illustrations of "enlightment" thinking, where Jacobinsim, Naziism or Bolshevism replaces "theocracy", not "reason" at all. "Reason", of itself, never stands a chance.
David Horowitz said at the conclusion of "Roads Not Taken": "I am persuaded that reason supported by truth, is insufficient to displace from the human heart, a lie grounded in desire".
... get orf the grass , sport ! ... Stone the flamin' crows ... you want NZ to be to Australia as Greece is to Germany ?
Stuff that for a joke . ..... we've got some pride in our ability to pay our way in the world , not to coat-tail orf someone else's success .....
[... throw another tinny on the barby , Sheila ... I'll be all done here in a mo'. .. ..]
Yes, but the moral of the story "Animal Farm" is............?
Was Orwell a stooge for the luxury-living rich?
See my distinction above, too, between rich people who have provided "value" to millions of customers, and those who have benefitted from zero sum rent seeking and wealth transfers. No economy benefits from penalising the former, or suffers from penalising (or not enabling in the first place) the latter.
PhilBest :
All I am trying to point out is that currently the rewards are skewed towards business owners and senior management rather than workers. You dismiss this outright with out explaining why ?
I am not sure I understand the fixation on property owners i.e. your "zero sum rent seeking and wealth transfers" crusade against property owners.
You say -- "The single biggest cause of rising inequality: Urban planning that forces up the cost of entry to home ownership, and transfers wealth to incumbent property owners"
Apaprt from the really big developers, most of the property owners own and live in their own homes. Whose values rise and fall with the tide that they cannot control. Rising values do not do much for this majority--except to make them pay more property taxes. They cannot sell their propertes and buy a bigger property because all property values have gone up at the same time with the tide
I doubt if many property owners had the ability to create cheap mortgage money which drove up asset prices. I also doubt if many property owners had the ability to constrain supply of land, or create urban planning conditions to increase the asset values.
In your example, given the competition between the states in the USA -- why dont businesses and people go and congregate in Texas or Arizona because according to you land is cheap and rent seeking is not posible.
Yours seems to be a simplistic argument.
Ah, would it help to convince you, to learn that business is indeed tending to shift to Texas and other low land price States, from the high land price, high regulation States?
http://texanomics.blogspot.com/
(Arizona is not a low price State, BTW).
Do you know why Boeing is building a new factory in North Carolina? (Not Seattle where it has been based all along).
http://www.newgeography.com/content/002558-which-states-are-growing-mor…
You are right about incumbent property owners - but most of them simply do not want the price of their property to fall, even if it really makes no difference to them because they can't cash it up right now anyway. Some, of course, have used the house value as an ATM, to borrow money against.
An absolutely "must read" on this very subject, for anyone who has not read it: a hard-hitting open letter from successful Silicon Valley entrepreneur T. J. Rodgers arguing that California has now destroyed the conditions under which Silicon Valley was able to begin, especially low cost land and small business premises.
http://www.fcpp. org/images/ publications/ Cyprus%20letter. pdf
I quote, from the second to last paragraph:
".....our days of investing in California were over. We would never subject ourselves or our shareholders again to public insults by an anti-business politician over a destructive tax that never should have been passed. We have invested nothing more in our San Jose fab and will soon sell it, to complete the move of the very last of our manufacturing facilities out of the state of California. With only a few exceptions, the silicon has indeed been forced out of Silicon Valley....."
He also refers to two acronyms in common use in the business sector in the USA:
"GTT" stands for "Gone To Texas" and "ABC" stands for "Anywhere But California".
Do read the whole thing.
Gareth, you are a great ideas person, and agree or disagree we should all cheer you for sharing those ideas with us. Such revolutionary ideas cause one to sit back and think which makes us all wiser.
Having said that, there are some comments i am having difficulty with and feel they require explanation.
Firstly, how can a single person, say a retired widow, possibly live on $11,000 when that won't even cover the rent? So the big Kahuna is not going to solve poverty.
Secondly, is the solution to inequality solved by taxes? Will this just cause more and more moaning "I am being robbed by the government, it's my money" and so on. Will pushing up taxes just push up the incomes to these people?
"The Big Kahuna that proposes a single tax rate on all income, including from capital" How does this help equality if your income is $6,000,000, such as the head of Telecom
Or does the answer lie elswhere, such as better wage equality to start with?
Why does a guy on $ 2 millions, causing a car accident pay the same fine then one on $ 20’000.- ?
Why does a guy on $ 2 millions, buying daily food paying the same price then one on $ 20’000.- ?
Why does a guy on $ 2 millions paying the same for a dentist/ doctor hour, then the one on $ 20’000.- ?
There are a lot of injustices in this world. Good on you Gareth !
----
Looking into current developments on many fronts – the world will never recover again, simply because among the powerful in societies ethic and moral requirements and standards don’t prevail.
I did read your other comment but what you suggest would hardly be fair on the millionaire :) How would it be right of me to ask for them to pay more for my services than what the said services are actually worth? I can easily imagine asking for a lower rate, or even doing something for free for someone (and have in the past) but I wouldn't feel comfortable at all, and would have a lot of trouble justifying (to myself), asking for more than fair value.
Imagine going to the hairdresser and the price list going:
Haircut --- income <20K $5, income 21K to 50K $10, income 51K to 100K $20, any rich prick who dares earning more than 101K $1000.
Same at the petrol station etc. And to be honest, I thought we had this already but at the source rather than at the retail end... in the form of progressive income tax! (or community services card at the retail end).
Not to mention the logistics involved to determine's one's income, except for very simple cases (1 salaried job, no investments or other form of income at all). In many cases (self-employed etc), people don't even know their exact income until after the end of the fiscal year.
As for the injustices in this world, you are too right. Life is anything but fair. I mean, what's fair about this for example http://www.stuff.co.nz/national/health/6111798/Dying-mothers-final-wish? Makes you wonder why people are so focused on wealth. As if it was the most important thing in life...
Elly, in effect though this,
"Haircut --- income <20K $5, income 21K to 50K $10, income 51K to 100K $20, any rich prick who dares earning more than 101K $1000."
Is what happens....poor sods like me grow long hair,
;]
......rich ppl go to expensive salons.....they dont go to the Sat morning barber...
Other things, petrol etc are in effect commodity pricing....and again rich ppl drive porsche's....I dive a 16 year old car...
;]
regards
Steven, yeah, I grow long hair too :) As for the car, probably older than yours. Not that I care, mind you, I couldn't even tell you what make it is without going to look at the logo on the back of it (I do know it's blue though, and that I can fit the 5 car seats in!).
Elley – of course you can make such easy implementations, bloody complicated. What is your acceptable proposal to tackle inequality and make our system fairer ?
As Gareth suggested it would only affect the super rich, say the $ 200’000.- plus NZearners.
With my proposal most money would not flow like other proposals (Capital Gain, etc) into the government, but straight into the private sector – stimulating the struggling economy.
Kunst, as I said above there is already an implementation of what you suggest in the form of progressive income tax, community services cards and, like others have mentioned, discounts for pensioners, students etc.
As for "fairer", I guess you'll have to define that. People on higher incomes already pay a great share of the tax take (the honest ones anyway). At what point do we say that the system is fair enough? When people on higher incomes become the ones with the less $$$ left in their pockets after tax?
As for my acceptable proposal to tackle inequality, I never pretended to have one. I just try to do my bit and live my life in a way that means I can look at myself in the mirror (not that I do much of that though!). For me it means doing the best I can for my family (being there for my kids, working to help provide for us, etc), being grateful for what I have and doing what I can to help people less fortunate through giving to charities. I wanted to save the world when I was a kid but I realised I couldn't quite quickly so I focus on what I can do to make a small difference instead. The other day my 5 1/2 & 7 years old girls said to me they wanted to make something and go buy a Christmas present with their savings for a child whose parents don't have enough money to do that. I must be doing something right. Maybe.
Elley – I always respect your small steps within your family and yes communities are very important. Considering the worldwide complexity, my understanding of the situation isn’t as relaxed as yours.
I think it is fair enough to say greed and corruption lead to an extortion of salaries/ wages, especially in the last two decades.
Inequality and the resulting severe consequences is a major concern for most society. An already stressed economy to the limit needs urgent revitalisation. Here in New Zealand with more then 450’000 enterprises capital need to be distributed not to the government, but straight into businesses.
Without urgent steps, especially unemployment among NZyouths will skyrocketing in 2012/ 13.
It is so simple and works in a few other countries:
http://www.stayfreemagazine.org/public/wsj_finland.html
Especially in the private sector the circulation of money would be far more wisely/ fairer distributed in societies and inequality reduced, especially among hardworking people. Wages in top businesses such as retail/ service/ manufacturing would grow considerably also.
I know for many of you guys, this idea looks new – but think about, how much positive impact this would make for our economy. I’m sure with an open mind such efforts for changes are considered in various countries.
We already do this with student rates at the cinema and senior rates for using the bus, etc.
Its now voluntary and poses some problems ethically, but to force it would never work in the private sector since to do it, you'd need a totalitarian state dictating prices rather than a free market.
The sliding scale for fines does make sense, if the purpose of the fine is to punish someone. A $200 fine is not much punishment to the rich, and honestly, isn't much punishment for most people at all, compared to the price of rent for example. Most fines could be increased a lot more.
Great link, maybe we should rethink the crime/fines system if the Finns have safer roads than us. But I don't want to see poor people driving more stupidly than they already do because they get a discount for being stupid!
So when the unwashed masses find the 11K doesn't support the lifestyle they feel they deserve, then what? Gareth advocates no interference or compulsion from Winz.
There always has, and always will be a sector of society that will need a WINz.
Gareth is currently suffering a common complaint of 'nouveau riche' , that because he is well off, everybody else should be the same, or there must be something wrong with them.
Never mind Gareth, One day you will grow up. I wouldn't bother running for a political office just yet if i were you.
There always has, and always will be a sector of society that will need a WINz.
Well perhaps, but there will not always be an ability to fund it.
Targetted benefits render our present welfare state unaffordable (never mind the perverse incentives) - simple as that. The Kahuna proposal is harsh, but so is reality.
EXACTLY.
If you want to fund Swedish level welfare, you need Swedish level industry, Swedish level average brain power, and Swedish level average work ethic.
Why is there so much stupidity these days ("The Spirit Level", etc) that alleges that Sweden is what it is BECAUSE of its welfare and hence its "equality"? How back to front CAN you look at things.
I just read something by Kevin D. Williamson, that pointed out that Swedes perform above average wherever they are. Swedes in the USA earn higher incomes than Swedes in Sweden, and higher than the US average.
Even more interestingly, every quantifiable racial group performs better in the USA than anywhere else, including Sweden. Somalis in the USA massively outperform Somalis in Sweden.
Another interesting point about Sweden vs the USA: the USA has similar disparities in both income and wealth. But Sweden's WEALTH disparity is much higher than its INCOME disparity. Hence studies that focus on income do not provide this insight - Sweden's "wealth" disparities are merely average.
The libertarianz political party whose views Tribeless seeks to impose on all readers of blogsites on which he posts,received 1595 votes in the 2011 elections.His party advocates that people should be allowed to use any illicit drugs they choose.The Aotearoa Legalise Cannabis Party obtained 11738 votes in the 2011 elections.
I would not vote for the libertarianz party on a large number of grounds.Among them would be the fact that I do not support the legalisation of hard drugs.
The philosophies which Tribeless expounds,are clearly not effective politically,as his party continues to languish in the polls.
Considering his historic comments in regard to South Canterbury Finance,developments of recent times contradict Tribeless' stance.
The Finland article is an excellent one,which completely contradicts the libertarianz viewpoint..
The problem I have with the viewpoint of those such as Tribeless is that their utopia is a world where people are completely selfish.
The post Muldoon years have seen a NZ society which is increasingly that way.
http://homepaddock.wordpress.com/2011/11/23/classroom-socialism/
This one is doing the rounds - the thing is, people say that the modern 'system' doesn't work. Apart from the US (where they have little or no welfare system), I see the main failing of governments is of them trying to look after the 'less fortunate'. It is a good idea in theory, but leads to an underclass.
Unfortunately Mr Morgan would like to redistribute everybody else's wealth, while preserving his own.
That little parable about socialism in the classroom got well and truly picked apart HERE:
http://www.macrobusiness.com.au/2011/12/myth-of-the-socialist-classroom…
I think the anti-socialists still won the argument in the comments thread in spite of the best efforts of the topic poster.
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