Saturday, October 29, 2011

Roger Kerr - the Courage of His Convictions.

I have just read that Roger Kerr has died.

This was a man with the courage of his convictions, who did not shy away from his strong belief that economic rationalism and free enterprise were the correct path for New Zealand to return to prosperity. He held the unorthodox view in today's society that most people are intelligent and capable enough to make their own decisions on how they should earn a living, care for their loved ones and others in the community, and provide for their own retirement. He believed that we would all be better off without an interfering, authoritarian government bossing us around in all areas of our lives.

Unfortunately we live in a topsy-turvy world where conventional wisdom considers an interfering, authoritarian government to be moral, and leaving people to make their own decisions on what is best for them and their communities is considered immoral. Roger was often on the wrong side of what are considered politically acceptable views in this country and was vilified for it. But he stuck to his guns to the end, posting this blog defending New Zealanders' saving record against politicians who want compulsory savings the day before he died.

Roger Kerr had the courage to espouse his views, unpopular though they may have been. I can think of no other prominent New Zealander who did it so convincingly.

I extend my deepest sympathy to his family and friends.

Tuesday, October 25, 2011

Time to Return to Reality

The New Zealand All Blacks won the Rugby World Cup on Sunday night, in case you hadn't heard. Like most New Zealanders, I watched and celebrated the win and was pleased that we were able to win it for the second time, matching South Africa and Australia in successful campaigns for the Webb Ellis Cup.

But now is the time for New Zealand to return to reality. The Rugby World Cup won't reduce the $380 million per week that the Government is borrowing to pay for its profligate expenditure (a third more than it takes in revenue). Nor will it restore New Zealand to the top ranks of OECD nations in income per capita (we currently languish at the bottom on the list). It won't help rebuild Christchurch or fund the more than $18 billion of losses sustained in the earthquakes. It won't address the disenchantment of many New Zealanders who feel they are being treated as second class citizens in a country that now treats Maori as a special elite. It won't stop our best and brightest workers emigrating to countries with better opportunities. It won't reduce our terrible youth (and older age) suicide rates. And it won't eliminate the violent crime that results in imprisonment rates that are second only to the USA.

These things will take a greater courage than that shown by the All Blacks in defending their narrow lead on Sunday night. For the All Blacks courage, without detracting from its merit, was a physical courage. Solving New Zealand's problems will require a moral courage that I'm not sure any of our current political leaders are capable of showing. Perhaps the All Blacks' win will inspire them. I certainly hope so.

Tuesday, October 11, 2011

Representation Through Taxation

I used to be a pure democrat, convinced that the concept of one man (or woman), one vote had a moral sanctity that could not be questioned by any right thinking person. But I am becoming increasingly convinced that it is our system of universal suffrage that has led to the current economic plight of most Western nations. Specifically, it is the separation of representation and taxation that is the problem in my mind.

The American Revolution was started with the catch-cry of "no taxation without representation," a protest about King George III's government levying taxes on the American colonists without granting those colonists representation in Westminster. In the West we have gone to the opposite extreme - every adult has an equal say in the election of the government irrespective of whether they pay any tax at all.

Benjamin Franklin said "democracy is two wolves and a lamb voting on what to have for lunch," and this is precisely the nature of Western democracy. In most Western countries the vast majority of the taxes are paid by a very few taxpayers (in New Zealand, the top 17% of taxpayers pay 97% of income tax and in most Western countries it is a similar ratio). This means the small minority of people who pick up the bill for almost all government spending are held to ransom by the majority who pay nothing and who continue to demand more and more.

The current prolonged economic downturn in the West is, in the opinion of an increasing number of commmentators, likely to be worse than the Great Depression. Almost all Western governments are living beyond their means, running up huge budget deficits and adding to their existing mountain of debt to fund them. The only response by governments is to spend more through so-called "quantitative easing" while calling for the productive few to pay even more taxes. The situation is unsustainable and few politicians have any alternative solutions.

I believe most leaders in the West know what is the real solution to the problem but lack the political courage to implement it. The solution, of course, is to significantly cut government spending and regulation, balance the budget and put money back into the hands of the productive few who will invest it to grow their businesses and create new jobs.

The issue with doing this is that politicians are not going to reduce expenditure and handouts to the unproductive majority while that majority determines whether they will continue to govern. Turkeys cannot be expected to vote for an early Christmas. That is why we must change the voting system if we are to change the economic behaviour of governments.

I believe the answer is a system that I call "Representation Through Taxation". I discussed this in an earlier blog and reiterate its key points below.

I would like to see a revision to our electoral system, call it a new form of proportional representation if you like, where you get to vote in proportion to the taxes you pay. Under this system, taxation could become voluntary but if you wanted to influence the political system you would have to pay taxes to, in effect, buy votes. Each $1000 you paid in taxes would buy you one electoral vote. The average of your tax contribution over the three years prior to the election would be taken to avoid stacking the votes in the last year of an electoral cycle. If you paid no taxes, you would get no votes. I see no reason why corporations shouldn't be given votes in proportion to the taxes they pay as well.

But what about those who contribute to society through unpaid voluntary work, I hear you ask? Well, it would be simple to ensure those people are recognised for their efforts too by giving them equivalent tax credits for the hours they worked in their voluntary jobs.

This is a radical change to the fundamental premise of "one man, one vote" that, I am sure, will have the left-wingers screaming from the rooftops. They will shout it down with claims that it is a return to the feudal age where the aristocracy got to determine who governed everyone - but it is not. It is system that gives everyone who contributes to society a vote proportionate to their contribution and it holds governments accountable to those who pay the bills. It is, therefore, a system that will promote economic rationalism and responsibility.

It is time those who paid the piper got to call the tune.

Friday, October 7, 2011

Steve Jobs was the "factory owner"

I think the greatest tribute I can make to Steve Jobs was to say that he was the factory owner I wrote about in the blog below. Okay, I know the iPhone and iPod manufacturing was outsourced to factories in China, but he was the man whose vision created the products and brought them to market.

He was also the man who, when it was suggested that he should give the rest of his life over to philanthropy was reported to have responded that "he could do more good focusing his energy on continuing to expand Apple than on philanthropy".

"That’s his legacy. Everything else is a distraction."

He understood, unlike Bill Gates, Warren Buffett and Ted Turner, that his products and services would do far more for mankind than any philanthropy.

It is paradoxical that so much praise for this wonderful industrialist comes at the same time as the political left wing and media vilify his kind.

The Elizabeth Warrens of this world who want to pull us all down to the same size, to make us meek and mild servants of society and the state, in effect want a world without Steve Jobs. I am pleased we still have a world that can give rise to his kind.

Wednesday, October 5, 2011

Nobody Got Rich On Their Own...

I found the recent comments of Elizabeth Warren, Democratic Senate candidate in Massachusetts and former White House financial reform adviser, to be so ridiculous that I wasn't going to bother to blog on them, but none of the responses have fully captured the reasons why her comments are so ignorant and wrong so I thought I should set out the counter arguments here.

Just to recap, if you didn't see the video, Elizabeth Warren said:

“You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

“Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

The gist of what she is saying is that everyone in society pays for everything that goes into the factory owner's goods and that therefore the factory owner owes society and should pay and pay and pay.

There are several problems with this argument:

1) The factory owner is the only one who pays all of the input costs to his goods. He not only pays for all the parts and raw materials that go into his goods, he pays for the transport of getting those parts and raw materials to his factory including road user charges. He pays for the education of his workers in the higher salaries he must pay qualified staff. He pays for the fire service in the insurance levies on his buildings and plant. Perhaps the only input that he does not pay the full cost of directly in most countries is the police force, but as we know the police these days do not have protection of private property as a priority and therefore the factory owner has to pay for a private police force in the form of security guards and electronic alarm systems.

2) The factory owner is the source of all revenue that provides the tax base. He not only pays tax on his company's income and on the goods he sells (through sales and value added taxes), he pays the gross salaries of employees from which payroll taxes are taken. He pays these in addition to all the input costs mentioned above and receives little or no direct value in return for all the taxes he pays. And because almost all of the Government-provided services that Elizabeth Warren mentioned have a user-pays element in their pricing, he is actually paying for these twice.

3) His goods and services provide added value to those who purchase them and to the wider community. After all, the books and materials that are used to educate our children, the medicines that are used to cure our diseases, the fire trucks and the hoses that are used to put out our fires, the uniforms, cars and police stations used by our police - all these things are provided by factory owners.

Elizabeth Warren and her ilk want the factory owner to pay more. Why? So that she can dole more out to those in society who don't provide all the goods and services, jobs and taxes? Already, in most Western countries the vast majority of all income taxes are paid by only 10% of the population (e.g. see this US article Guess Who Really Pays the Taxes). They even pay the salaries of ungrateful, left-wing fools of politicians like Elizabeth Warren.
And she think those few people should pay more?

Sooner or later the productive few in society are going to say, enough! I think we are at that point already. Atlas is about to shrug (to use an expression of philosopher Ayn Rand who predicted precisely this). Those who carry the whole world on their shoulders will throw off the burden. And why shouldn't they?

Elizabeth Warren wants slavery. She wants the productive in society to be slaves to the unproductive. Not content with the partial slavery we already have in most Western countries, where we are forced to work a significant proportion of our time to pay taxes to the government, she want us to accept that the society owns 100% of our bodies and our time. It is not surprising that she thinks we should be grateful to society for allowing us to keep any of our incomes, for that is the attitude of a slave owner. Of course, she sees herself as the slave owner rather than the slave.

The problem with her attitude (aside from the twisted morality of it) is that no slave ever produced an iPhone (or, if you want a more 'worthy' example, an MRI scanner). Elizabeth Warren's philosophy leads to a society where there are no factories, or at least only factories that produce Trabants rather than BMWs. If you want proof of this, you only need to look at the contrast between North and South Korean today. North Korea is built on Elizabeth Warren's philosophy and it is the inevitable result.