Thursday, June 30, 2016

Wealth redistribution is fragile

There were two interesting statistics that received some coverage in the New Zealand media this week.

Firstly, it was revealed that 3% of New Zealand households pay 25% of income tax. Most of the media coverage of this was couched as a defence of the Government's income redistribution policies but there was recognition that there was "a risk to our tax base because people are mobile and can move." I think this is the first time I seen this acknowledged in recent years in the mainstream New Zealand media. That statistic actually doesn't reveal the true extent of the issue because almost all (97%) of income tax in New Zealand is paid by 17% of households*. 

The other statistic that received much more attention this week was that 10% of New Zealand households have around half of the wealth. The predominant media narrative was about how unfair this was, but when you delve into the figures a little more you find that around 60% of the assets held by New Zealand households is the family home. It seems to me to be churlish to begrudge people the wealth they have built up by buying the house in which they live.

Looking at these two statistics together gives a more holistic picture than either on its own. A few New Zealanders who work hard pay nearly all the income tax that supports the rest of society, and a few more, particularly those who are able to save enough to buy homes, manage to achieve some level of personal wealth over their lifetimes. This is the edifice on which all left-wing wealth redistribution policies are based. It all seems quite fragile really and a sudden economic shock - another global financial crisis, for example, that resulted in significant job loses and a property market crash here in New Zealand - could see the whole edifice crumble.

The left-wingers who call for ever-more-punitive taxation should bear that in mind.

* This is based on 2011 Budget figures but it won't have changed much since then.

Sunday, June 26, 2016

Let them eat cake

The people have spoken - the ignorant, bigoted, little-Englanders who are too old and stupid to know what is good for them (or so churlish Remain supporters would have us believe) had the gall to opt out of the great European superstate.

The reaction to the Brexit vote in the last few days has been unsurprising, given the contempt the political elite and their supporters showed for Leave supporters in the lead up to the vote. The irony of this reaction is that it is exactly why the Leave side won. When the political elite treats the rest of the population with contempt, they shouldn't be surprised when the rest rise up and destroy that which the elite hold dear. Thus has been the case with all political revolutions throughout history. It was 'let the eat cake' all over again.

This was only the second British referendum on membership of the EU since 1975 when Britain proposed joining what was then called the European Economic Community. Successive UK governments have since signed up to the Maastricht Treaty (1992), the Amsterdam Treaty (1997) and the Treaty of Lisbon (2007), amongst other commitments, without seeking a mandate from the British people to extend the reach of the EU into British domestic affairs. In fact, the entire political model of the EU seems to be about gaining ever-increasing power for Brussels without seeking any democratic mandate to do so.

Anyone who has a ounce of political sense could have foreseen that this carefully-crafted, undemocratic accretion of power would start to unravel sooner or later. The only question now is whether or not Britain will be the last of the EU member countries to leave, with politicians in The Netherlands, France, Italy, Sweden and Denmark calling for similar referenda for their countries.

There is already a rear-guard action being fought against the Leave decision with a petition for a second referendum and for another Scottish independence referendum, but there is no reason for a British Government to respond to these calls. Those who opposed the Brexit decision need to accept the majority decision and give the British Government (whoever leads it) time to negotiate Britain's new relationship with the EU and other countries. Predictions of disaster will, I am sure, come to nothing and, given time, the Remain supporters might be surprised by the positive outcomes of the decision for Britain.

Thursday, June 23, 2016

The 'give back' argument is the opposite of the truth

This post is an enlargement of a comment I made on Lindsay Mitchell's blog today. Lindsay wrote about the response of a 'social entrepreneur' who had contacted 300 local businesses to pay for school lunches for children, and who had had no takers. The 'social entrepreneur' said, 
"I'm not trying to sound harsh but if there are businesses that are making money off our community then I'm sort of garnering towards making them socially responsible to give back to the community that it makes money from."
What I said in my comment was,
"Businesses...'give back' in the taxes, rates and other government charges that they have to pay - often amounting to more than half their profits. But that is just the start of what they 'give back'. They also employ most people who work in their communities, paying their wages, their PAYE, their ACC, their holiday and sick pay, and their on-the-job training. Add to that the fact that many businesses sponsor local sports teams and cultural events, and that many business people are prominent in community service organisations, and you start to see why such claims that business people should 'give back' make me sick."
I have written before about the socialist U.S. senator Elizabeth Warren's "you didn't build that" argument - that businessmen do not create the wealth in their businesses but rather ride on the backs of everyone else in the community. As I pointed out in that earlier post, Elizabeth Warren exactly reverses the true facts. The reality is that everything in the community, every dollar* earned and spent by every worker, and every tax dollar collected and redistributed by the government has been created somewhere, sometime by a business owner or operator or investor.

But, I hear you say, the business owner sells his products and services to the community and therefore isn't he just recycling money that already exists? That would be true if the economy was a closed system and a zero sum game, and, if it was, we would never get wealthier as a society. In fact, we would get poorer because as the population increases and some wealth is destroyed by disasters, war and decay, our wealth per capita would decline. So how do we explain the following graph, showing an exponential increase in global GDP per capita (while the population was also exponentially increasing) over the past two hundred years?

The answer is capital, and by capital I don't just mean money invested. Capital is the sum of human knowledge - it is the equipment and processes, the inventions and patents, the brands and goodwill, and all the other things that go into producing and selling the goods and services we consume. It is the leverage that enables relatively unskilled workers, who would have trouble making a wooden cart wheel on their own, to produce a modern automobile. And because capital is as much about the ability of the human mind as it is about anything physical, it is limitless.

Marxists would have you believe that capital and labour are in conflict - that the more of the final price of the goods and services that go to reward the use of capital, the less that is available to reward labour. This is rubbish. Capital enables labour to be more productive and it is why workers in the Western world today are paid much more for their labour than at any time in history. It is the efficient use of capital that is characteristic of a free market (i.e capitalism) and that enables wealth to increase without limit - and for that increase in wealth to churn through society, thereby improving everyone's standard of living.

So next time someone says that a businesses should 'give back' to the community, just remind them that everything in the community has been derived from businesses in the first place.

[* Note that actually this isn't strictly true for a dollar of fiat currency, but it is true if you think of a dollar as a fixed equivalent amount of gold.]

Monday, June 20, 2016

Brexit could be a small step back to Great Britain

I am not much of a betting man but even if I was I wouldn't want to wager on on the outcome of the Brexit referendum. It could go either way. The polls last week showed a surge in support for Leave but this has been reversed in the last few days since the terrible news about the murder of British MP Jo Cox, which reminds us that actual events have a way of confounding even the most confident predictions.

I am not surprised at the bitterness of the debate, especially from the Remain side since it became apparent that Leave might win. The Eurocracy and its cronies have a lot to lose, after all. The Remain side has become more and more desperate as its fortunes have waned and the Leave side has struggled to stay focused on the arguments as it has been subjected to ad hominem attacks, outrageous claims of doom and, most disgracefully, to being blamed for the actions of the mental health patient who killed Jo Cox.  

Even here in New Zealand we haven't been immune from the crazier aspects of the debate with the Fairfax Media group managing to dig up a farmer who believes a Leave win would be bad for New Zealand agricultural exports. Given that Britain joining the European Common Market was probably the single most economically damaging event in New Zealand's history and that the EU's Common Agricultural Policy continues to significantly impact our agricultural trade with the whole world, one can only laugh at Fairfax's gall.

I am pro-Brexit because I believe in small, representative, rights-protecting government and I think the European Community is the exact opposite - monolithic, unrepresentative and rights-trampling. However, I am not overly invested in the outcome of the referendum and I don't delude myself that Britain is suddenly going to become a paragon of individual liberty if a majority votes for Brexit next Thursday. Britain is a shameful example of the growth of the authoritarian state in Western countries, particularly so because it is the origin of so much of classical liberal thought and practice.

A win for Leave will be a small step on the way back to the truly liberal society Britain once was. A vote for Remain will be the very end of the road for that great tradition.

Monday, June 13, 2016

Some thoughts on Islam post-Orlando

Recently I wrote about Islam and the insight I had gained into that faith from the books of Tom Holland and Michael Houellebecq. I have thought some more about what I had learned from those books in light of the massacre in Orlando.

It is claimed that Islam is a religion of peace but I think Muslims mean that only in the sense that if you submit to Allah, you will be at peace. The Koran exhorts its followers to holy war - jihad - until all have been converted or killed.

The opposite of submission is emancipation. Having fought for hundreds of years to emancipate every section of Western society, are we going to give it all up in appeasement and submission?

In the hierarchy of victimhood, being Muslim now appears to trump being gay, black or female. Who gets to choose on which of these we compromise?

Islam is not a religion of live and let live, which is the essence of the classical liberalism that led to the freedom and prosperity that we enjoy in the West. Islam is a package deal but it seems that Western liberalism isn't.

We cannot make physical war on a philosophy - only on its agents. We must fight the philosophy philosophically.

Finally, if Islamophobia means fear of Islam - given New York, London, Boston, Paris, Brussels, Orlando and all the other massacres carried out by the fanatics of that religion - is that fear really a bad thing?

Tuesday, June 7, 2016

'Child poverty' is really a euphemism for parental neglect

There has been the usual bleating from the lefties over the past couple of weeks since the New Zealand Government's budget about the lack of Government action to reduce 'child poverty'. Fellow blogger Lindsay Mitchell prepared a report on the subject for Family First (which is described on Wikipedia as a "Christian lobby group") identifying single-parent families as a significant factor in child poverty (for a PDF copy of her report, click here). While her conclusion hardly seems controversial, it occasioned significant comment and criticism from the social commentariat, some of which Mitchell responds to on her blog.

It seems to me that with all the commentary on child poverty, everyone has missed a very salient point: there isn't, and cannot be, such a thing as child poverty for the very simple reason that children cannot own assets or incur liabilities in their right. In New Zealand, the age of majority for entering into legal contracts. owning property or incurring debt is 18 years and until they are of that age, it is parents or legal guardians who own assets or incur liabilities on children's behalf. Therefore, legally, a child cannot be rich or poor.

You might think I am being excessively pedantic, after all there is no doubt that children live in impoverished circumstances, but the language is important because I am sure the political left-wing deliberately uses the term child poverty to shift the blame from parents and guardians onto society as a whole. But society is not to blame for bringing these children into the world and for not providing them with adequate care. In fact, New Zealand society already does a very great deal to ensure that parents and guardians are provided with the means to adequately care for their children. Our welfare benefits and social housing provision are generous by international standards and our social support organisations are strong and effective.

The left's view is that society has an obligation to provide for every child irrespective of how negligent parents and guardians are towards their charges and that society should provide more and more money and benefits to those parents and guardians irrespective of what they choose to spend the money on. They can blow their welfare payments on gambling, alcohol, drugs, Sky Television, or anything they want, and still it is society's fault and society's responsibility to provide for their children. This is the message behind the words 'child poverty' and that is why I object to the term. It is really a euphemism for parental neglect.

Tuesday, May 31, 2016

International politics provides relief from local tedium

Politics in New Zealand is soporific at the moment with a boring budget and even a quite muted response from the left-wing opposition, but politics in the rest of the world it is getting quite exciting.

In the US, leading Democratic political candidate Hillary Clinton has been found by the Inspector General of the State Department to have breached government policies by using a personal email server for departmental business. What is worse is that she repeatedly lied about it (as even MSNBC, which is usually hugely sympathetic to Clinton, now admits). The Inspector General's report puts the onus on the FBI, which is running a parallel investigation, to decide whether she and her staff should face criminal charges, and if that happens her run at the presidency is over. Does that mean the Democratic nomination will go to Bernie Sanders? Not necessarily. The Democratic Party seems intent on tearing itself apart into implacable Hillary vs Bernie factions, and Democratic Party rules allow the delegates pledged to Hillary to switch to a candidate more acceptable to the Clinton faction like Joe Biden or John Kerry (as Karl Rove points out in this Wall Street Journal article).

Meanwhile the mainstream media continues to do what it can to undermine Donald Trump's run at the presidency, with the New York Times leading the charge by giving legitimacy to claims that Trump is a fascist. I think Trump is a big government cronyist and a racist, sexist demagogue, but I don't think he even begins to qualify as a fascist. Such claims just add to the perception that Trump is the antagonist of the political establishment and that is a lot of the reason for his increasing popularity with American voters. I wonder whether the geniuses at the New York Times will ever realise this and that they are helping pave Trump's road to the White House.

In the United Kingdom, the prospects of a decision to leave the European Community in next month's referendum are on a knife-edge (the polls are currently averaging 40% to 39% in favour of Remain). I believe we may see a last minute surge in support for Leave due to the Remain campaign's increasingly desperate appeal to people's fears with their ridiculous claims that Brexit will lead to World War 3, worsening climate change and national economic collapse. Whatever the outcome, British politics will not be same with the Brexit issue having created new alliances and splits that cross the traditional left-right divide and many in the Conservative Party are already calling for David Cameron's scalp for his dishonesty during the Brexit campaign.

It is all entertaining, if nothing else.