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.]

'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.

Labour's cynical election bribe just more legalised theft

The New Zealand Labour Party has announced that if it becomes the government later this year it will introduce a new welfare payment of $60 for babies born to families earning under $150,000 per year for the first year and continuing payments for families with lower incomes. This is on top of the Working for Families scheme that Labour introduced when last in power, which extended welfare to families on incomes of well over $100,000 per year, and other existing welfare benefits. 

As welfare commentator Lindsay Mitchell points out on her blog here, this means that a first time mother in Auckland on welfare will receive $672 per week and a further $124 for every child after that. The median New Zealand full-time wage (June 2013) is $844 per week. An individual taxpayer will pay about 15% tax on their income so will receive about $720 in the hand. Beneficiaries get additional entitlements such as lower cost government services and discounts from many private sector organisations, so you would have to conclude that most young, single women would be better off having babies than working for a living.

The inequity of this situation, and even the fact that all the evidence says that encouraging welfare dependency produces poor social outcomes, are not my primary objections to this policy. It is the cynical opportunism of it that gets to me. No one can seriously argue that New Zealanders incomes of up to $150,000 need welfare, so this policy is not about need. As with Working for Families, it is about making more and more New Zealand families dependent on, and grateful for, the largesse of a Labour Government. Elections are won and lost on the votes of the middle class and these policies bring almost all of the middle class into the welfare system. 

All taxation is, by definition, legalised theft (OED defines theft as to 'take another person’s property without permission'). Most people justify the taxation and welfare system because it enables government to provide for the needy in society. Labour's new policy doesn't even have that merit. As Lindsay Mitchell points out again here, the most commonly used measurement which counts children in households below 60 percent of the median household after-housing-costs income, has fallen from 37 percent in 2001 to 21 percent in 2012. No one needs this policy, least of all higher income earners. Where is the morality in taxing a young school leaver earning the minimum wage ($13.75 per hour) so the government can give money to someone earning say $145,000 per year?

Fortunately I think most New Zealanders will see this policy for what it is - a cynical election year bribe. However, between Labour and its fellow-traveller Green Party, they may muster enough votes to out poll the governing National Party and implement their dishonest policies.