by Russel Norman
Sustainablity is going to be one of the most contested words of our times. Michael Cullen’s latest speech to the Waikato Chamber of Commerce shows once again how he is trying to get “sustainability” to mean “endless exponential growth in GDP” which is the very antithesis of true sustainbility (unless we can delink GDP growth from growth in material consumption or colonise another planet, both of which he doesn’t address!).
Cullen says he wants a “sustainable economy” and goes on to make it clear that he means annual high growth in GDP. He makes no comment as to the environmental impact of growing GDP by 3% or 4% every year – the increase in greenhouse emissions, the pollution of our lakes and rivers… And he goes on to sprout about the biggest road building programme the country has seen since the nineteeth century. But building more roads generates more traffic, more pollution and more resource use and hence less sustainability. But this contradiction never seems to occur to him.
The only time an environmental issue briefly protrudes into his speech about creating a “sustainable economy” is at the end where he makes some perfunctory comments about climate change. He even says that “the cost of carbon will have to be reflected in the workings of the economy”. Which I totally agree with but after seven years of government there is still precious little indication that this will happen.
In both this recent speech and the one to the Auckland Chamber of Commerce earlier in the month he makes much of fairness. He is keen to nail his social democratic colours to the mast. Aside from the dubious claims over where our society is going in terms of inequality, which I want to deal with another time, he continues to have a social democratic blind spot when it comes to the environment. If we trash the environment then all the GDP growth in the world won’t give us a better life. And moreover, he struggles to understand that climate change is a social justice issue – it is the poor who will inevitably be affected worse and who will have the least resources to cope.
Published in Economy, Work, & Welfare | Environment & Resource Management by Russel Norman on Sun, February 25th, 2007
Tags: environment
More posts by Russel Norman | more about Russel Norman
on the trolls and those who are unable to keep on topic
Your post, particularly paragraphs 2 and 4, highlights an opportunity for the Greens: explaining to the electorate in a reasoned way what “economic growth” really entails, in terms of the costs to the things that people hold dear, and what the commonsense and practical alternative is.
This may be a message to which people are increasingly receptive, particularly as it is dawning on people that with climate change, peak oil and so on, rosy business-as-usual scenarios are not realistic.
This could be part of an ongoing strategy involving the Greens positioning themselves not (necessarily) for the next election but as the party of the 21st century.
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Very interesting post Russel. Yes, this government has said various things at various times over many years about “sustainability”, but I get the impression that economic development trumps all else there. Years ago, Pete Hodgson used to talk about a planned carbon charge, but we know what happened there – as decided by all of the coalition parties. And even Hodgson seems to have been right behind a huge road building programme. Almost funny really, the road building and the big limos. Kind of reminds me of the Monty Python parrot skit: “No, our sustainability programme really is alive!”
When it comes to the crunch, I do wonder how much of the electorate supports real sustainability, although I know that times are changing. It seems to me at the moment that a lot of people would perceive economic growth as being in their immediate interests, and I recall an old saying that I heard decades ago: “People vote with their wallets”. This can drive us in the direction of sustainability (if the exponential growth issue can be solved); but I think that government needs to set sufficient parameters to allow it to happen. It seems to be like waiting for Godot! 14 years since Rio and what has happened?!
As Strategist says, this is an opportunity for the Greens to make the difference.
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I’m being pedantic, but this is a correct use of the word sustainable- an economy can grow by ‘boom and bust’ cycles or at a rate that can be sustained, i.e. you can keep it going without the risk of a crash. Witness Australia’s economy over the last ~20 years.
Environmentally sustainable is another kettle of fish- very little modern activity is sustainable over the long term. That’s not to say we shouldn’t bother, but just that as a society we value enrichment now over future quality of life.
As such the cost of putting a price on carbon emissions is too high to continue ‘business as usual’, and alternative schemes have to be developed.
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Fair comment uk_kiwi, but even within that tight definition, business as usual re our economy is not sustainable in the face of the coming energy crisis.
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This is a classic example of politicians grabbing hold of the latest concept and stealing its meaning, turning it into a meaningless buzzword.
To be fair, undoubtedly Cullen has done a better job than anyone in recent years (in NZ’s history?) in managing the economy to avoid the boom/bust cycle that is the usual pattern. And I agree that raising the savings rate through the Kiwisaver scheme is a good thing with respect to classical economic sustainability (as long as NZ has a chronic balance of payment deficit because it is exporting profits, then even Cullen’s narrow claim of sustainability is hollow).
But all that is pretty trivial compared to the true meaning of sustainability. I think Cullen is probably doing this on purpose, combining talk of sustainability and passing mentions of climate change and the environment in the same speech… it’s a clear case of linguistic hijacking.
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Economic growth for growth’s sake at the expense of the planet makes no sense.
No planet=No economy, period.
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Boot – that is exactly right but it isn’t economically acceptable in the current versions of economics taught and studied by economists of the west. We have fiat currencies and inflation based economies and GDP HAS to increase or the basis of the distorted capitalist system falls to custard. That this will happen in the end no matter what they do is of no consequence if they can stave it off while they’re in office. They use inflation (expansion of the money supply) to rob us and they reckon they’re doing a great job because all their banking industry mates tell them so on on the golf course.
Yeah… I have heaps of something for them, and it ain’t respect.
So when Cullen talks about “sustainable growth” you have to guess what it means cause it’s just a bunch of syllables without meaning to people with his education and experience.
respectfully
BJ
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Labour’s meaning of ‘sustainability’ is simple – it means “vote for us, we are nice and green”. The following two quotes illustrates this definition very well:
“ New Zealand needs to go the extra mile to lower greenhouse gas emissions and increase sustainability… New Zealand has the potential to lead the world in its commitment to renewable energy.?
– Helen Clark, 13th of February, 2007.
Solid Energy New Zealand Ltd is a state-owned enterprise, which operates as a commercial company but with only one shareholder, the New Zealand Government.
Solid Energy expects to start developing the new mine in late 2006. About five million tonnes of coal will be progressively mined at Cypress over approximately 10 years in two opencast pit covering 105 hectares. A further 155 hectares will be used for overburden disposal, roads, water treatment facilities and associated infrastructure.
– Solid Energy Website
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From Micheal’s speech…
“According to company tax returns, profit growth averaged over twenty percent a year in 2003, 2004 and 2005.”
What has happened to wages in the same period?
There was a 3.2 percent increase in salary and wage rates (including overtime) in year to December 2006 quarter. (CPI increased 2.6 percent in year to December 2006 quarter so wages only just kept up).
So sustainability is one thing, what about social justice?
W
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Good catch Bliss….
I don’t think “Social Justice” is a guiding principle for Labour.
respectfully
BJ
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You have to love this term “social justice”
Why not just call it taxing the hell out of those who work hard and giving it to those who do not.
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The (Greenish) Greens will have to face the same problems as every other party when it comes to sustainability e.g. Tourism is the countries biggest employer and one of the biggest users of fossil fuels.
Sustainability/ the environment, is a problem affecting everybody and should be given top priority. However as one of you said, we in the Green party see every issue as part of the environment, hence, no clear slate/ open mind, which is a precondition of mass involvement. I find it hard to point my formidable intellect towards Green(ish) Party discussions
jh
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BB
It’s shorter for one thing (got you there
.
More seriously, it is important to equalize opportunities for kids growing up and the perception of the society as fair for all. Social Justice is NOT about giving away money and though it is often about transfer of wealth it is also about ignoring wealth before the law.
When you think about every transaction we make it is a “transfer of wealth” with varying values put on the different sides of the transaction. Capitalism makes winners out of owners and they get a disproportionate benefit. Look at the stats Bliss showed us… profits skyrocket and wages stagnate. Something has to even that equation out…. and despite your clearly stated anguish over the situation these days, this government is not even accomplishing that much. The fix is still in.
respectfully
BJ
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BJ say
” sustainability is just a bunch of meaningless syllable”
what do yous say BJ is the capital gains no tax regime sustainable
would Donald Brash have abolished capital gains no tax
be aware blissed out that NZ company pay tax, Goldstein dont,
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dudes
imagine you a japanese house wife with USA$100,000.
you have a guarantee form Bliss’s “Michael” that you get 8% soon.
that compares to their 1%
hundred billion dollar of japanese housewife money in NZ dudes
now poor old bollocks acting on his idiot commander instruction raises
interest rates,
if you want equity dudes get capital; gains tax:
try it on i dare you,
see how fair to the ordinary people that the helengrad is,
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once we have capital gain tax dudes,
the dollar crash for a while,
then Equtiy and fairness return
NZ get well,
but by then of course helengrad she in United Nations old and ugly,
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Capital Gains no tax is unsustainable in any syllable dudes
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Firstly, technological improvements could allow the GDP to continue increasing without the environmental cost increasing. Maybe the government could increase research funding for technology that could lead to lower negative environmental impact.
Secondly, the 3-4% annual GDP increase isn’t anything to get excited about. And since a lot of this increase is going towards increased profits for those who own capital, not much for those that actually do real work, what is in it for us?
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PQ – perhaps, but definitely exempt the family home of residence.
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It seems to me that Dr. Cullen can have quite good growth for a while
First there would be growth in services to clear roads and fix houses and farms damaged by increasing weather events
We could then have heaps of infrastructure increase as we allow all the Aussies in to help us eat our exports, we could probably squeeze in lots of Europeans and Asians too. Well they haven’t got anything left to eat at home. Eating the exports here saves fuel here anyway, we just have to stop buying motor cars and computers and things, clothes from China too.
We can have economic growth also from the extra Police we will need to control the masses who can’t buy land anymore as demand gets high, and the losses from environmental damage and crops that won’t grow anymore will certainly hype up the people who can’t feed their families.
We will definitely get growth from hospitals full of people getting cancer and other diseases as the acidity increases blow our immune systems away.
The only problem will be that the wealthy and big business will be the only ones left to tax, and even they might bugger off to somewhere else – maybe Aussie where the beaches will be sunny and wet and they won’t need food much as their would be fewer and fewer of them in that bracket anyway.
And the Greens get called doomsday merchants, it seems Dr. Cullen and his ilk are tuned into that process and the Greens are the only ones with guts enough to try and solve the problem.
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I reckon the Capital-Gains-No-Tax has to go PQ. I understand that the party isn’t shy about looking at it either.
I agree that the dollar would take a hit when it went in, cause it would put the carry-trade at a less clear advantage.
There is an exclusion for the home you own and live in, your “first home” but not for any others, which is supported in Green discussions.
Anarchist – The only tech improvements that can do what you say long term and large enough to cope with the population we have already would be Cheap Access To Space and/or the development of a “Mr Fusion” power module . Anything else just nibbles at the edges.
At 3-4% – how long to double consumption? At 3% it doubles every 26 years, at 4% it doubles every 18 years. This is not trivial on a global basis. Heck, it’s not trivial if we’re consuming electricity here at home either. Every 26 years we have to double our efficiency of energy consumption to break even, or find 2x the sources of new energy. We’re nowhere near that pace and neither is the rest of the planet. Something WILL break.
It actually IS something to get excited about because, as you point out it is profits that show up only for the owning class, not for workers, and it is necessary (I’d have to recover the logic to show this and I am sleepy) for the current banking and currency regime to function. It is also a reason to become excited because of the energy requirements that increasingly drive us to burn whatever we can lay our hands on.
Not sustainable at all.
Then too, not all GDP is created equal. You are invited to visit the mismeasure of the US GDP here
http://www.shadowstats.com/cgi-bin/sgs/article/id=344
Makes you wonder what the truth actually is.
The truth is that the folks who run banks lie with and about numbers all the time.
The truth is that the world is headed for a major economic recession sometime in the next few years. The US dollar cannot remain the reserve-currency for the planet.
The truth is that the current trends of population growth and economic growth cannot be sustained. We are well past the comfortable carrying capacity of the planet given our technology.
We have to stop breeding.
respectfully
BJ
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My income generating rental proprty is owned by a company. I wont be selling the house but I will sell the company that has as its major asset a house.
What you are proposing for those people who own a business (which in this case owns a house but could equally own a truck, bus, or like my other business, CNC machines) and then sell that business you would tax all captital gains associated with that assets included in the sale?
Similarly if your second house is owned by a family trust it may never be sold. Stays in the family to generate income for ever more. The dependents of the family trust never need to sell.
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Yes I guess so Gerrit. It seems unlikely that you’d make much of a capital gain selling a bus or a truck… property is funny like that. As you well know, a lot of property investment is done in order to generate capital gain rather than to generate income. Is the investor somehow serving some useful economic purpose by buying and selling property in this way?
Apart from the fact that it would presumably cost you personally money, what objection do you have to a tax on capital gain on such property assets?
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Alistair, None
You have to decide on when a business is sold which assets have appreciated in value and how much tax you have to pay. The house is not being sold. Just the business which owns an asset which has appreciated in value. The asset may have a lot of capital spent on it to improve it’s value.
Economic value is for the seller. Whom might be a builder selling a new house (do you double tax a builder for profit plus capital gain?).
After all the seller fronted with the capital so makes any profit. Company tax is already paid on the profit. What you are proposing is a double tax.
I think the initial thought of a capital gains tax sounds good but there are a number of fish hooks that need to be thought through.
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People who are speculating/investing in property will get discouraged by Capital Gains, people who are buying to live in will see no such issue.
Gerrit – Does a CNC machine appreciate? I can see how some might in some conditions… scarcity is like that… and the exchange rate… and it may be that the computation of a gain would have to take into account the exchange rates. That level of detail is negotiable and needs to be business friendly.
I’ve no comment to make on the family trust issue. It isn’t a speculative investment… nothing wrong in principle with speculative investment either, except when, as in the case of housing, it bubbles, froths and crowds out the folks who just want a place to live.
The point about housing is that houses have been so favoured by the investment, banking and government communities that nothing else can touch them in terms of sure-fire tax-free return on investment. New Zealanders are not stupid. They’re doing exactly what that market is telling them to do.
Which reminds me that I should be setting up a family trust for my family.
No big tax advantages I can see, but continuity of ownership of things are maintained after I’m gone without much difficulty.
Or am I wrong about how that works here too
respectfully
BJ
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Yes Gerrit – Capital Gains would not and could not be a simple tax to administer properly. The fish hooks have to be sorted and we may well get a jab or two in the process, but doing nothing leaves things as they are now and that is not going to resolve any of the issues we have. I focus on housing because I want to be able to buy a dog for my kids.
Renting makes that impossible, I have to buy a house. Makes for a damned expensive dog, I know, but that’s a function of this market. Doesn’t matter that I’ve got a good down payment to make. I’d have to be saving faster than the inflation in the housing market, and I can’t and I don’t know anyone who can.
respectfully
BJ
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If people think that adding a capital gains tax is going to make houses more affordable, they’re dreaming.
It will make them less so. Supply will decrease and CG will be factored in. See UK…
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BJ,
No but I can depreciate it and when its useful life is spent will need to invest another $500.000 in a new machine. Lifespan of a machine 30 years, house 100 plus.
Housing, if insured and maintaned, last a lot longer then machinery. Hence while my machines depreciatable, the replacement cost is large.
The replacement cost for a house excludes the land off course.
Another scenario. I buy a run down place cheap as an individual (as opposed to a proerty developer). Do it up properly and increase its value. Can I recoup those investment cost off material and labour against the capital gains tax? My property owning company can and does. The private home owner who has invested in a rental property cannot but if he faces a capital gains tax perhaps he should.
I’m not against the tax per se, just want people to be aware we discuss the total implications and the loopholes that will be available to minimise it.
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I think all this discussion on Capital gains is forgetting that in a big part of the world the baby boom is ending and populations are declining or about to. NZ schools are just starting the decline now. The resourcing issues for schools will change as baby boomers want retirement comfort. I think a lot of our property boom has been about this and immigration. If we look historically the land was regulated by rating the biggest economic resource and a monopoly. Income Tax shifted the base to effort. With a younger population efforts carrying baby boomers it is totally unhealthy for future families to be carrying the burden of labour and tax while baby boomers spend their capital surpluses without any input. Someone in the finance industry told me that over the last few years in his company they have seen 80% of the borrowing going to baby boomers based on their Capital gains on property. In the economies with a population decline, if we don’t start squashing values down the population decline will see it bump anyway, and take a lot of saved equity with it.
Infrastructure has been paid a lot from rates and all this new development is not paying for it, but being passed to the purchasers and this is probably unfair on the earners. Kopu bridge near Thames is going to cost $10m to upgrade and most of the year it is ok. It is people going to the new surplus developments on the Peninsula that are requiring it yet the locals are subsidising this usage. Increasing rates to cover the issue would effect the old locals unless Rate rebating for low incomes is enhanced. Otherwise a Capital gains tax will claw some back but only when the places are sold – a declining population with lower prices would mean the community again picks up the tab. Rates does it as it goes and the greater the social need the more the rake back on the surpluses.
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Gerrit
In the implementations I’ve seen the costs of improvements are deducted against the gains. Private owner or company, same deal. You’re right to keep on the point that the tax code gets more complex.
Once upon a long time ago I learned to program CNC machines. Haven’t done it in almost 25 years so I imagine it’s gotten easier.
PEL – This isn’t the UK. The situation here is AFAIK, completely unique and bizarrely biased. Capital gains reduces speculation and pushes some of the hot-money out of the market. That money, coming out of the Japanese carry-trade, is not flowing to the UK. It flowed to the US and if flows here in a big way. It has to find places to go, and the investments made are largely winding up in housing which jacks up the price. There’s no shortage of demand from the non-spec market at reasonable prices. At current prices we don’t even bother looking. In short, I do not think your assessment is entirely correct.
I also do not think that CG is the entire answer. There are other structural problems in housing… but this isn’t the right thread for this conversation and I am again guilty of hijacking a thread to diss the government’s housing policies… shame on me
respectfully
BJ
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BB
I have never understood why hard work in itself is considered to be so virtuous. Most world religions/philosophies emphasise virtues such as charity, humility, temperence and justice. Hard work is only admirable when it is working towards those goals. Ther is no reason why we should reward hard work just for the sake of it. Most of the world’s most ruthless dicators worked extremely hard, but the world would have been a better place if they had stayed in bed on a benefit.
Similarly, the hard work of many current capitalists is simply contributing to environmental degradation and ensuring there is no work for those who really need it.
On the other hand, those who work extremely hard in their communities, or for a cause like animal rights or the environment (ie for charity, humility, justice or temperence) are not rewarded by society, but often abused and told to “get a job”, as though that is the only measure of someones’ worth.
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Koire1
I always understood that if those who “emphasise virtues such as charity, humility, temperence and justice” can do that provided they fund their own lifestyle by whatever legal means. No you dont have the “work hard” to live like that.
However if those whom seek enlightenment do so without working and receive a lifestyle benefit from those who by their “hard work” pay the taxes to keep their lifestyle viable, then yes the tax payer is untilted to question the tax distribution.
By all means live the “good life” but bear in mind you need to pay your own way.
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kiore1 – I think that you have made excellent points. The authors of the book “Affluenza” have similar views, I think. As I recall, they think that
-many people are working too hard
-suffering a reduced quality of life
-much of this for the production of material goods which they don’t need to make them happy
-and contributing to environmental degradation.
They have a Wellbeing Manifesto, which they encourage people to read and sign: http://www.wellbeingmanifesto.net/ .
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it seems to me that we may be giving away too many “freebies” to off shore purchasers of property; that intangible, low population, Kiwi lifestyle?.
All the new dwellings in the mess that is Queenstown, look at the same lake, but the feeling changes, as a relaxed, quiet, restfull town turns into the Tijuanna of the South Pacific.
Bhutan, has a quality of life index (?), when tourists visit they pay x$US to be in the country. Has there been serious studies done of how much externalising of costs property devellopers get away with?
Dolf DeRoos on his Buy NZ campaign in the US, touted among other things, our underpriced coastal property, generous tax laws, and “No Capital Gains Tax”. The impression, I got (upon reading that magazine article) was that other countrys must have struggled with the CG tax issue and won?
I did a quick esarch and apparently a committee looked at it and decided it was too hard???(o—
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(o—
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Gerrit
Your point is fair enough, but what I am saying is that our society needs to better reward those who work for the traditional (and generally agreed upon) virtues, not those who work for material gain. Work for greed needs to be discouraged, and work for community interests or positive societal values needs to be encouraged.
Virtue may be its own reward, but if this is so then working for policy that rewards virtue is also virtuous and will also be its own reward (and so on).
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kiore1
I have in the back of my mind that valuing hard work as a virtue came historically from puritanism. I’m not sure if that’s right.
I once heard it professed that in hunter-gatherer societies adults typically worked an average of four hours per day which provided for their own needs and allowed the community to provide for the needs of children (and the old?) Perhaps this would have varied according to local conditions – a traditional Inuit lifestyle may have needed more than four hours work because of the conditions perhaps? Subsistence societies came to an equilibrium with their natural environment.
In many ways modern societies compares poorly with those traditional societies. In modern societies, work is spread very unevenly. Many people work very hard for more than 8 hours per day, while others have little work at all. The benefits of modern society fall disproportionately to the rich and powerful. We’ve created classes and underclasses, and we tend to blame people for their situations without examining the structure of society.
What is more, modern society is not in any kind of equilibrium with the natural environment. We are consuming finite natural resources at a growing rate – some resources perhaps at an exponentially growing rate. And we have no firm idea if our environmental impact will reach some tipping point and result in catastrophic climate or ecosystem changes – although evidence is growing that it could.
What sore of society do we actually want, given we have the gifts of education and modern technology? Given we are told that technology has the potential to make us more productive, we could expect to have a better society than subsistance societies. I would want to have a society where I have enough to eat, a roof over my head and clothing to wear. I would like everyone in my neighbourhood to have sufficient food, clothing and shelter. I’d like to do better in terms of the standard of housing than subsistence societies. Also, I’d like to live in peace with all of humankind, and to experience “fellowship” or “community” with my neighbours, and to live in a tolerant society with rich cultural expression. I’d like to do this and have adults expected to work for only four hours per day or less. And importantly, I think it’s essential to reach an equilibrium with our natural environment before we destroy it.
I think modern society is a fraud. Television, cars, alcohol and tobacco, XBOXes, aeroplanes, cellphones, large corporates, governments, bureaucracy, marketing, speculation, Spa pools, war…. the list goes on. All these things I could do without. What do you _really_ think is an important benefit of modern society?
One feature of modern society though that makes things hard to change though it money. Money allows some people to amass obsecene amounts of wealth, and benefit from the modern economy. They also sell the idea that things are really good as they are, and anyone who wants to be like them just needs to work hard. The truth, of course, is that the disproportionate benefits enjoyed by the wealthy are supported by the hard work of the poor (as well as the exploitation of the environment.)
We need to design a new society/economy, because our present one is unsustainable (in terms of the natural environment.) Lets measure our new society against those of our subsistance forebears and make sure we get at least as good a deal.
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Well said Alex!!!!!
This constant rightwing BS that people in society are wealthier because they work harder gives me the heebie jeebies.
The majority of the most long-working and hard-working people I have ever met are people who do unpaid work in their communities – in fact many of those (contrary to BB’s tired old implications that beneficiaries are all lazy unmotivated layabouts) are people on long-term benefits who ALSO work fulltime caring for their families – and they get very little credit from society for their efforts except for the occasional community award.
The whole balance of payment for worth is completely out of balance and the value placed on business executives working (hard?) for their own personal greed and status compared to the plebs who work (much harder?) for the well-being of our society and future generations is a sad indictment on the state of western values (spiritual or otherwise).
I will start believing we have something resembling a fairer “social justice” in this world when the executives on the highest corporate tiers are earning something in the vicinity of 5 times more than those on their factory floors rather than 300 times more and every person in the company gets wage increases at the same rate.
Call me a pinko communist with a (secret?) hard left agenda if you like – but WTF, I don’t care
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Fwog, is that you fwog? and BJ respectfully and yous Green,
look slaves most of your ideas about river and environment, well we steal them so fast yous don’t want to believe so you got to get hold of a lightening Rod soon, to retain sets. In next election,
Unsustainability of capital gains no tax.
Do you want to help sustain an inequitable society fwog?
How many peoples now can’t afford the house what I sold and live off the capital, give me as income for like fifteen years dudes,
See me like drinking and lurching and cruising past women in the V8 and all from yous work slaves.
Disgutsing isn’t it. Fat lazy slob that I am. I apply for WINZ benefit because I don’t like work, and capital gain is not income so they might give me it.
Yous don’t rely on the Reserve banker to correct anything because even when inflation was 15% in the eighties house price kept rising.
Green and BJ and Fwog you have a 5% following but there more people than that can’t afford house, yous must capitalise on this fact,
and if you think helengrad bad, wait till you get the millionaire PM.
NZ is a society for the rich on the foreshore dudes.
You got to be ferociously bwave fwog, you represent the poor not just the Green.
What happen after we demolish the greed tax fwog?.
Investment in residential house falls away and is replaced by investment in commodity and industry.
Be bwave fwog, take the plunge, say it loud, take the venom, and do not be afwaid, remember we in ACT collapsed because NZ knows that like people like me who have income from
capital gains is income with no tax
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zANnavAShi
Well said too!
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I think that the first steps to changing things is getting people from seeing security in excess wealth as security is the step after earning enough when we turn to the virtues to enrich the lives of all around us. Then we don’t have to put up security systems, police forces, armies to protect our excess. I remember a study by a psychologist that showed that a big proportion of the really wealthy are actually unstable people with issues such as fear and their empires are so they don’t have to deal with them. Stuff like this needs to be put out there to change the community mind set.
Organic Farming is another important example as study shows the products are higher in nutrients therefore we can eat less – obescity counter? The cost of producing, transporting are more economic because of this. We at the same time put more carbon back out of the air into the soil as a bank that does us good as intended by natural process.
The savings however that would occur don’t show in GDP. The bean counters and policy people in Treasury need a new set of goal measurements and there is one already working in other places that they have looked at GPI. http://www.gpionline.net/index.htm or http://www.gpipacific.org/
Economic Schools were traditionally philosophy schools but now they are about bean counting systems so we need to reeastablish or start anew an Economic thinktank. Blogs that get out there are a substitute for now.
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I forgot to say that the battle to buy a home or land to produce has got to the point that overseas capital is the only thing that can keep the market working other than a major downturn in price – this burning the money giants. Farming is not making much return for the capital outlay and Capital gains and borrowing off them were all that was keeping the smaller guys in the picture, and feeding a lot of the older farmers excesses such as flash “batches” High price has been reflecting into the lifestyle block/small holding where the innovative new land uses can grow and new products such as flax fibres instead of nylon.
If we want to allow these processes to happen we have to noisely resist the growing overseas financing and purchasing of NZ land. Up to 100000 odd hectares sold last year compared with 60000 the previous year. People might cry out about a loss in value and their rights but we stopped slavery as wrong. Land is the other half of the economic equation and just as essential for freedom so to halt excesses in a monopoly situation ( no new land to be produced), is a process of democracy and freedom. Europe has had this limitation on freedom/growth for longer so they are responding faster to the ideas. The colonies are just starting to face the processes of defining this as artificial scarcity is produced by excess in a system hitting its natural limits. This time we haven’t got colonies to ease the pressure so we have to deal with the issues better, at least we haven’t got population growth as another hurdle thanks to the early campaigning in the 70′s and 80′s – people do learn thank goodness. If we let a lot of hill country back as earth lung and only use a third of our land mass we would still have about 30 acres per family. Our exports are feeding 30m odd people so the situation is good in NZ and we can allow skilled immigrants for our needs- and be socially caring in this. We just have to find the sense and compassion to solve the issues and show the world how. It is only the technocratic overpopulated societies that will have to adjust a lot
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This is a great thread, if nothing else it proves that the Green party is only Green on the outside.
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big bruv Says:
February 28th, 2007 at 11:14 am
This is a great thread, if nothing else it proves that the Green party is only Green on the outside.
————————–
There isn’t much room for ideas outside of a narrow base.
jh
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I thought the thread was just being logical in a community sense as the alternative is probably survival of the fitest and those who are living a community ideal are more likely in that situation to survive in a basic lifestyle that comes from the breakdown from anarchistic systems.
We are only technically “advanced” as we have worked together as a community to allow specialisation. Therefore if we expect technical answers to solve sustainability issues then we have to be focused on community goals such as in war, but we can get confused and illthought leadershup that is not aware there is a fine balance here between what is community and what is personal.
Maybe we can say that to stop anarchy and rebellion over scarce resources we have to have a fair allocation of base resources(capital) but the individual has the choice of how he uses that share(income). True market economics then selects the efficient processes by what people spend. The monopolising of resources then is not ticked as a valid way of making a living and freedom and innovation is stimulated in the economy. The boom bust cycles of traditional economic models could well be minimised. Survival of the fitest I guess says that all those people who invest in growth in a system that is contracting for population or resource shortage end up loosing their lot and starting again or try to take someone elses lot. The polluting of everyone elses share as well as your own, in effect is an act of violation and in an anarchistic society would have others beating down the door, but the community tries to find a balanced approach.
Our present system allows a lot of those violating others right to good health to keep doing so and those claiming an anarchistic process should not expect the police to stop other locals from shutting them down.
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Oh wow BB & JH…. you’ve really gone and outed me now guys!
Here’s a newsflash for y’all…. I am proud to call myself a Watermelon…. Green on the outside and Pink in the middle…. as I expect are many other Green Party supporters who hang out on this blog hoping to find a civilised thread where they can pop their head in to contribute a few thoughts (or questions)…. So what is your point?
Are you expecting me(us?) to be offended by constant references to the issues and beliefs that we hold dear and labelling them as communist/socialist/marxist/whatever-ist as if this is your way of paying us an insult? Or conducting your own personal campaign of 21st century McCarthyist witchhunt? Whoooooar! I’m really scared now! Burn the socialist witch!!!
Yeh OK, so I was obviously exposed to too much Monty Python during my formative years…. and sometimes satire is the only thing left to resort to in order to cope keep when you start to wonder whether you are a crazy person living in a sane world…. or a sane person living in a crazy world (hopefully for my sake it is the latter…. since I just got home a root canal treatment at the Dentist…. and I’m spinning on elephant-grade painkillers…. and can barely identify which is my left foot right now)
But I digress…. so…. on a more sincere and slightly less hysterical note…. (DISCLAIMER: these thoughts and $3.50 will buy you a nice double shot soya latte at my fave beach cafe) here’s my thing guys….
What exactly IS your point?
Why do you come here…. what’s in it for you….?
The Green Party Charter is what it is and it’s been collectively decided upon by the body of it’s membership. You don’t agree with that as a package….? Then as I see it you have two options….
1. You join the Party and attend conferences like other members do and make your voice heard to be part of what shapes those policies. Be part of the policy shaping process and address the portions of those policies you don’t agree with in venues where your opinions might actually make a difference…. I think they call that “participatory democracy”…. yes?
2. You go find yourself an alternative political Party forum…. one who’s policies are more in line with your own personal visions for a better society…. and you put the same amount of energy into voicing (and voicing…. and voicing…. and voicing….) your opinions in that venue in way that might (hopefully) actually give more weight to the changes that you say you would like to see happening.
The way I see it is this…. if it is my mission in life to be a change agent for social justice…. then the best way to do that is to get alongside a system/organisation/whatever that is harmony with my personal beliefs…. and work together co-operatively with those people that share your vision.
I mean to say…. it’s not rocket science is it? I call it “being part of the solution” instead of “being part of the problem”…. it’s an interesting concept don’t ya think…. yes?
Where does the power for social change come from if you are standing outside the window…. chanting cheap political slogans…. repeating the same tired old whatever-ist jibes (and platitudes) to a group of people who have already evolved their policies to a place of mutual consent…. and the only thing left to do is bounce around discussion about what the best way to refine and be implementing their collective vision…. huh?
Now don’t get me wrong, my little right-wing friends…. I am not saying this is one of those “you are with us or you are against us” kinda dealios. Hey…. I know for myself that I do not agree lock stock and barrel with the entire Green Party package…. on some issues I am actually more conservative than yourselves even…. and others I am very far from being PC about…. but then I don’t harbour any mythical delusions that any one political party is gonna be the pathway to my personal Utopian vision….
But overall I like what this Watermelon thing stands for…. and I believe that supporting the Greens is my very best chance for evolving the kind of holisitic and caring society that I dream of for myself…. a society I would actually want to raise kids…. and that my kids kids kids would have that same quality of life and environment…. (hey, do you hear that….? it’s the theme from The Man From La Mancha playing in the background…. tra-la-lah…. oh gawd my opera singing voice sucks…. *cough*)
And as to policies where I think that the Greens are not working fast enough (or hard enough…. or exactly in the right direction as my personal ideals…. or maybe plain don’t have a policy on….)?…. well then I have the personal choice to find other political parties or organisations (….but mostly I would choose organisations…. because in many ways I think that non-partisan groups are more effective in the long-term than partisan ones)…. who’s mission I can align myself to without any need to compromise my core belief system…. are you following me here…..?
Hey I know this is probably very disconcerting to the kinda reasoning that thinks that “one size fits all”…. but yanno…. I like to pride myself on these little random outbursts of lateral thinking…. it’s really kinda fun…. nearly as much fun as Monty Python movie I tell ya!
So here’s my novel idea…. and I invite you to consider it thoughtfully…. you do know what “thoughtfully” means right? As in…. thought being an original thing that you composed and considered inside your own head without any assistance from the mainstream media….
Why don’t we find the areas of COMMONALITY and get working side by side…. together in sweet harmony (uh-oh…. I feel another theme somg coming on….) on those issues that we do agree on….!!!!! Sound like a plan….?
Cos let’s face it cupcake…. the Greens do not agree with or support some of your conservative ideals (some might even say neanderthal…. hey but I’m not gonna go there…. cos like…. it would be much more fun to work along with you on the stuff we passionately agree about…. like those animal rights and marine conservation issues…. warm fuzzy stuff like that….) and that’s just not gonna change…. and seriously if you really did want the Greens to change on those things then you honestly have to get with the program…. send us your membership fees and get involved in the decision making process at a grassroots level…. instead of heckling from the cheap seats…. comprendez?
As to the other stuff…. yanno…. the cold non-fuzzy bits…. like “one rule for all” and “put the lazy buggers on a work gang” and “lock em up in a concrete cell with no mattress” and “give me my hard-earned tax dollars back right effing now” and “court-ordered depo-provera injections for the solo mothers” and “line em all up for a daily spanking before breakfast” and “let’s hold an inquisition and ship all the commies off to live with Fidel”…. well why not take all that to an alternative venue…. one where you can all sing together (in sweet harmony?) and put some real force behind those beliefs…. working alongside others who are pulling in the same direction as you…. and don’t be coy old chap (yooooou know where I mean…. wink-wink….)
And here’s the best part…. and the crux of my point really…. yanno… my point about what is YOUR point…. and however it is that I got from there to here…. and that point is…. that there is absolutely NO point in trying to change the ideals/opinions/beliefs/principles of a group of people who’s primary reason for gathering together in the first place is grounded in that very commonality…. this is not to say that we are not open to new ideas…. just that we are interested in the ideas that further refine (implement… or whatever) our core purpose for congregating….
You don’t have to take it as a package deal…. nobody ever said you did…. and I certainly don’t…. but the bottom line is that it wastes YOUR energy to try and change the core nature of what it is that makes Greens what they are and it wastes OUR energy to be constantly diverted into endless debate (derision?) about those core policies…. and maybe you don’t give a flying fork about wasting your own energy like that…. but I would venture to say that most of us here do…. and it only leaves BOTH parties (no partisan meaning intended) the worser off for it….
So whaddaya say BB? Let’s bounce around some ideas for saving those whales and on the weekend (while phil is busy with his Sunday afternoon joint)…. we can hook up the old boat trailer and all cruise off to the beach for a spot of fishing and a barbie…. (shssssssssssssssh…. don’t tell the other Greenies here…. but I always wanted to go for a ride in a Hummer…. vroooooom-vrooooom…. gawd how I miss my old HQ ute….) Woohoooooooo….. I feel another theme song comin on….
“Why can’t we be friends…. why can’t we be friends…. why can’t weeeeeeeeeeeeeee be friends…. why can’t weeeee be fwends….”
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Oymygawd! I think I’m starting to sound like Phil after his Sunday afternoon joint!!!! (….chill phill…. I didn’t mean that good ole kiwi “joint of lamb” thingee….) but if there was ever a case of “don’t do drugs…. (even legally prescribed ones….) and dance on your keyboard” I think I am a very good example of it right now…. (hrmmmm so this is why you type so many ……….’s around here huh….? Whoar blimey!!!!!)
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That was beautiful zAN,
Looking forward to seeing what sort of considered response (like hell) it evokes from the targeted ones…
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Zan
Sorry for the delay but as Eredwen correctly identified I am not a university graduate so it takes me some time to read and comprehend all that.
Right..where do I start, firstly I am more than happy to go fishing with you or anybody else as I am yet to meet a person i did not like who fishes (is that the right word Eredwen?)
And I am more than happy to take you for ride in the Hummer, hell we can stop by and pick up Russel on the way past.
As for the “joint” thing..if you are talking about meat then count me in, the other thing you can keep for yourself.
I am also fully aware that I do not have to take the full package, and as much as I am 100% against anything to do with social justice or redistribution of wealth I am fully behind the Greens when it comes to my real passion in life which is fighting against animal cruelty.
I have already stated that I will vote (both ticks) for the Greens at the next election if you can manage to convince this corrupt govt to ban battery Hens and Pigs in crates, I might be a lot of things Zan but I am a man of my word.
What I will not do is be silent about the things in life that annoy me and the injustices being perpetuated (like that word Eredwen?) against the hard working middle classes in NZ, they more than any other group need a break.
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bb: Yes “perpetuated” is a good word. You might like to use “perpetrated” for a different meaning. (Both work well in that sentence.)
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bliss,
- ““According to company tax returns, profit growth averaged over twenty percent a year in 2003, 2004 and 2005.? What has happened to wages in the same period?”
Firstly, that’s a three-year period you are talking about. Hardly sufficient to draw any conclusions. Wages go up in line with productivity, but it’s never a perfect straight line.
But also, what is your explanation for why profits may have grown faster than wages during the past few years?
Why were such “excess” profits not competed away as one would expect? Have companies suddenly aquired pricing power they didn’t have before? If so, how?
Markets set wages, not companies. Any particular company cannot decide how much to pay its workforce. It depends on the skills of the worker and the alternatives available to him. Try offering $10 an hour for a skilled position and see what sort of response you get.
Moreover, much of government business regulation, rather than hurting companies, acts as a barrier to entry for new startups and serves only to entrench existing large companies, protecting them from competition and allowing them to charge more. Thus a government which steps aside and merely facilitates a free and competitive marketplace is the one that best serves us as both workers and consumers.
- “…what about social justice?”
Any payments for labour over the market rate would simply be charity. The question then arises of why the company’s workforce should automatically be the ones to receive this charity. Why not those who *don’t* have a job? Why not those in poor countries who don’t have enough food, healthcare or education?
Companies should stick to their role of delivering profits to shareholders through the efficient provision of desirable goods and services. No more and no less. Those shareholders – who will each have their own notion of “social justice” – can then spend it in accordance with their personal priorities. What we don’t want is thugs using state violence to impose their own concepts of “social justice” on everyone else.
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The question then arises of why the company’s workforce should automatically be the ones to receive this charity. Why not those who *don’t* have a job?
Ah so you’re arguing for higher company tax! Good on ya!
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From a philosophical point of view, Dwarp, it’s clear that, to you, the employees are simply a raw material to be used as a company sees fit; they have no “right” to any value created by the company. If their ingenuity and hard work, along with the capital and wise management of the owners, contribute to growing profits, then they have no right to stick their hands up for higher wages, because that would be “charity”.
Others here have a higher idea of what work is about.
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From an economic point of view, if profits are growing while wages are not, then that is clearly a reallocation of economic wealth away from labour and towards capital.
This might conceivably be a good thing, if the economy were being strangled by wage inflation and capital was so poorly rewarded that there were no investment. I don’t really think that’s the case in NZ at the moment…
On the contrary, Cullen’s economic strategy is clearly to keep NZ as a low-wage economy, despite the good profits being generated. Most NZers with decent skills can’t get a fair market rate for their work without going overseas. If they stay, it’s because of non-market factors… i.e. NZ is not such a bad place to live on the whole…
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Mouldwarp
It seems to me that you contendi that markets set wages and profits. I am interpreting you, sorry if I have missrepresented your opinion, but it seems unlikly that only wages are set by the market in your model.
I agree, mostly.
The problem, as I see it, is how the market operates. We have to allow for market power. Employers (owners) have it, workers do not. Workers have much more now than they did ten years ago when the unemployment rate for workers low on the food chain was around ten percent. But it is the owners that control where their capital is invested, and how it is used. They can choose toi move their capital much much more easilly than workers can choose to move their labour.
Also as you point out tyhere is a lot of friction in the market regarding setting up businesses. It has very little to do with govt. regul;ation (it is very easy to set up a business in that reguard, and easy to employ people. Very light regulation.) But it is to do with simple economic forces. Committing capital to a new venture is much more risky than investing capital in a current one.
For that reason, and others, as the business cycle does it’s thing big firms get bigger and small firms get smaller till they are taken over or go out of business. That is a side effect of the market economy that so called “free market” advocates do not like to mention. It leads to oligopolies with two or three large firms dominating the sector (like in retail food distribution in this country, or liquor production).
Thus workers find themselves with only a small number of potential employers and employers (owners) find themselves in the position of making monopoly rents in the market.
Hence profits go up faster than wages.
I have grossly over simplified the issues but the evidence is clear. The rewards from the economic boom under labour have not been fairly shared, Mouldwarp says do not worry, it is the market. I say be very worried, it is the market.
The solutions are not simple, and whatever is done will cause distortions in the economy. But the market (as I have explained) alredy distorts the economy: restults in oligopolies iin nearly all sectors.
W
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zAN – I didn’t know you had it in ya… that was gorgeous.
BJ
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I agree that Cullen has been trying to hold Wages – possibly to be competitive with Asia. Every time someone asks for more wages or a bit of tax back at the base level it is cried down as inflationary. Whereas we see the example of the Company profit increases which can go to investors, and all the increases in land price and little is said. In fact return on the Capital is praised up but unless it is returned into production it is probably inflationary too. The inflation measure I feel is not operated very well and does not count a lot of things that it should. We have had an interesting consistent level in inflation with the decline in durability of product and it’s lifespan. A tee shirt that I am only just discarding after 10 years cost very little more than quite a few I have bought recently that last only 1-2 years. Same with shoes, tools, cars and these are also the imports that our balance of payments can’t afford. If we have to buy the same item more often it is not only waste in the tip but it is inflation. Yet wages have been declining since the 60′s in real terms. The monopoly of resources, especially land, means we can”t move forward without extreme effort which helps the capital owners more as we produce in their facilities. I contend that a system that fails to share the benefits of the monopolisation of resources is the same as slavery – just hidden in economic technical jargon. If we had a base right to a few acres that we could live subsistently off, we could then ignore all the unjust and polluting employers if we wished. The growth in population and the limits to new land are huge democratic/economic impediments but those benefiting from the old patterns don’t necessarily see it unless the message is clearly framed and presented.
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I wonder Bliss if the continuing growh of companies and the falling away of smaller competitors has another factor in the technology and energy use today. It is easier to transport stuff so it easier to work large processes and distribute the produce, an example is the modern agribusiness. That is why they have had an advantage but it looks as if it really another part of the sustainability question and why so many of these big players are trying to ignore the question. I was told that in the 70′s we were using energy equivalent to 70 slaves so we were able to indulge so many whims. Now we have to choose which whims are important, or watch the weather go to pieces so we can’t eat. I think the Greens for some time have seen the Social Justice part of the equation as those with little can easily become the greatest victims whereas those making the huge unsustainable benefits can hedge their bets. In some ways they are antisocial gains as the message about planet system limits
has been around since the 50-60′s and most have heard about it but didn’t want to look. I give Prince Charlie a bit of credit for trying to set a good example and taking the criticism of his travel. I think that is why the power groups and press in the UK have not liked him as he has too good a grasp on things.
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Alistair,
- “Ah so you’re arguing for higher company tax! Good on ya!”
Higher company taxes mean lower wages for workers. This is so because, being just pieces of paper, companies do not pay taxes; it is simply another overhead (like regulatory costs) borne by the shareholders, employees and customers.
Workers would be paid more if company taxes were reduced or abolished (how much of that extra salary would then be taxed away by the state is a different matter, but it would at least get rid of the fiction that the company was paying any tax).
- “If [the employees] ingenuity and hard work, along with the capital and wise management of the owners, contribute to growing profits, then they have no right to stick their hands up for higher wages, because that would be “charity?…?”
By all means they can stick their hands up and ask. However, if they are asking for more than the market rate it would indeed be nothing but charity. Why should a company pay charity? And if companies are indeed expected to pay charity money, why to that particular group of people and not, say, to some starving Africans living in squalor? Really, I want to know.
Companies are (or should be) nothing but vehicles for efficient wealth-creation. What individuals subsequently choose to do with their share of that wealth is up to them. Certainly it’s great to give to charity, but having individuals spend their own money is the only moral (and efficient) way to do it. The last thing you want is for politicians to steal that money and squander it according to their own selfish priorities (i.e. buying elections with bribe money stolen from the workers.)
Besides which, salaries are a market signal. We can all agree that nurses are great but, believe it or not, you can have too many of them. Do you think everyone who wants to be a nurse has the *right* to be one (and on a great salary to boot)?
If there is a sufficient number of suitably skilled nurses then salaries should *not* rise. What we see instead is that salaries of plumbers and plasterers have risen quite quickly, because there aren’t enough of them.
So it’s not up to you to dictate how much everyone should be paid. You and I know nothing about what skills are in demand and which are in decline. The *market*, through the usual price (salary) mechanism, tells us this. No central planner – no matter how “fair” he was (i.e. he agreed with you on everything) – could ever operate with anything like this efficiency. It is a sheer impossibility.
- “Others here have a higher idea of what work is about.”
If you are at all concerned for others you should perhaps stop romanticising and start thinking.
- “From an economic point of view, if profits are growing while wages are not, then that is clearly a reallocation of economic wealth away from labour and towards capital.”
This is what we have seen globally in the last few years since, thanks to India and China, the labour pool has increased enormously whilst the amount of available capital has not. One would *expect* to see returns to capital increase in such a situation, but only in the short term: Wages in China have been growing at a furious rate, and we can be sure it’s not due to any charity on the companies’ behalf. It’s that evil market again.
- “Cullen’s economic strategy is clearly to keep NZ as a low-wage economy, despite the good profits being generated.”
Profits always return to the mean as long as there is a competitive market. If a certain sector is making large profits you can be sure that new entrants will come in to undercut them (forcing up wages at the same time).
- “Most NZers with decent skills can’t get a fair market rate for their work without going overseas. If they stay, it’s because of non-market factors… i.e. NZ is not such a bad place to live on the whole…”
The term is “market rate” not “fair market rate.” “Fair” is in the eye of the beholder. You might think it fair that workers in the famous buggy-whip industry get paid above the national average. The market, on the other hand, says there is no demand for such workers at *any* price.
NZ wages are indeed lower than in a number of other countries. What is your explanation for this?
Do NZ companies retain more of their income as profits than those other countries? I’ve seen no evidence for this and, in a competitive market, such a phenomenon could not last long, especially when there is currently zero unemployment.
So what is your explanation? What is your evidence? And what is your solution?
Here’s my suggestion: NZ should position itself as another Switzerland. Given the right banking laws and a low flat tax it could quickly achieve European levels of GDP per head.
The only obstacle to this fantasy is, I suggest, leftist internationalism. Clark loves to suck up to the UN and any other international extensions of state power. We’ve seen recently how the EU has been highly critical of Switzerland because of its “unfair” tax policies (i.e. companies won’t stand still and allow themselves to be fleeced). Probably the Greens also would posture against such a policy because, whilst they have no shortage of plans for spending our money, they frown on such grubby and materialist things like how us workers are supposed to earn it for them in the first place.
bliss,
- “We have to allow for market power. Employers (owners) have it, workers do not.”
In the 2005 Annual Enterprise Survey (from http://www.stats.govt.nz) is says that income to all industries rose by 7.8% and that total salaries and wages increased by…7.8%.
The figure is not apparent in the 2004 survey, but the 2003 survey says “total income across all industries increased by $14,244 million (3.7 percent)…total salary and wages paid to employees across all industries increased by $3,605 million (7.2 percent) in the 2003 financial year.”
So where is this market power that employers are supposed to be exploiting, even in the recent short term?
- “big firms get bigger and small firms get smaller till they are taken over or go out of business. That is a side effect of the market economy that so called “free market? advocates do not like to mention.”
This is just so much nonsense. “Small companies get smaller”? Well, some of them maybe. But others grow.
For your theory to have any credibility you must first demonstrate that NZ companies are significantly (and increasingly) more profitable than those abroad. Can you do that? If not, you don’t have even the beginnings of an argument.
- “Thus workers find themselves with only a small number of potential employers and employers (owners) find themselves in the position of making monopoly rents in the market. Hence profits go up faster than wages.”
Again, complete nonsense. According to Statistics New Zealand the number of non-farm enterprises at at Feb 2004 was 324,293, a 9.9% increase in just one year. The year before that, the number of enterprises grew by 4.8%.So your claim that there is a shrinking pool of potential employers is simply false. The truth is completely the reverse of your little fiction.
And as we have already seen, the proposition which underlies you theory is simply false – profitability does not go up faster than wages over the medium and long terms. In a competitive economy such a situation is simply not possible (and if the economy is not competitive it is typically due to government interference under the banner of workers’ “rights”.)
The reality is actually the reverse; wages are sticky when profitability falls. How often do people take a pay cut when profits drop? Hardly ever. Instead, unemployment increases. So the fact is that wages are fairly quick to rise and almost never fall.
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Dwarp : you say Workers would be paid more if company taxes were reduced or abolished
but that is in direct contradiction to your earlier statement
Markets set wages, not companies. Any particular company cannot decide how much to pay its workforce.
If company taxes were abolished, there is no reason that companies should increase wages. That would be mere charity. Right?
Well, pointing out your contradictions is trivially easy. The more important points are ideological. You contend that employees are mere canon fodder; I contend that they have a stake in the companies they work for, and are morally entitled to share in rising profits. Your ideological blinkers make you claim, counter-factually, that profits are NOT rising faster than wages because, well, that simply CAN’T be true. I leave you to your fantasies.
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Alistair,
- “If company taxes were abolished, there is no reason that companies should increase wages. That would be mere charity. Right? Well, pointing out your contradictions is trivially easy.”
No, you are quite wrong. Wages would rise because the market rate would rise. There would be no charity.
This would happen because the increased profit (due to the abolition of the tax) would inevitably be competed away down to its normal level. In a competitive environment it is impossible for this *not* to happen.
- “You contend that employees are mere canon fodder; I contend that they have a stake in the companies they work for, and are morally entitled to share in rising profits.
I suspect most people don’t *want* to have a stake in the company they work for, because having a stake means sharing the bad times as well as the good. How many people would be willing to link their annual salary to the profitability of the company they work for? Suppose you worked for Ford or GM – giant companies which have made multi-billion dollar losses recently? Are your worker/stakeholders going to go without salaries all the years those losses are racking up?
No, employees are entitled to whatever benefits they agreed to in their contract. No more and no less. If that includes a profit-related bonus then so be it. And if they wish, they can risk some of their own savings to become shareholders in the company and take a share of any profit or loss which transpires.
A better bet, I suggest, is for employees *not* to have any stake in their company they work for and instead, if they wish, become shareholders in entirely unrelated companies. That way they have a predictable income from their job and can spread the risk of their investments.
- “Your ideological blinkers make you claim, counter-factually, that profits are NOT rising faster than wages because, well, that simply CAN’T be true. I leave you to your fantasies.”
Actually I quoted Statistics New Zealand. By contrast, you provide no evidence whatsoever.
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I feel the arguments about wage/profit allocation are forgetting the shifting sand of inflation – I don’t think it is measured very well either. If the wages being payed buy less, and land/rent issues are a vital part of our existence on the treadmill, then wage earners are effectively losing ground if they don’t own property. Companies/employers also face the same issues of inflation and thus we get established companies making a gain from their property from inflation while new entrants have the hurdle of getting established. This is true also for wage earners who own property but the younger family man is struggling harder and we are seeing the statistics of child related problems as parenting is forced to second place. 13000 women have opted out of working to child rear since the new families package. This of course makes the wage earner a more valuable commodity, but unless the pressure is kept on to stop foreign influences to keep property value up, we have a lid on new enterprise and innovative companies trying to deal with sustainability.
Inflation in this sense is a community issue and a mechanism is needed to fund the social issues created by it, and it seems the smartest way is to take the inflation out of the economy for community purposes. This is what rating does if handled properly so we need to put more emphasis on rates and resource fees than on income tax. An added advantage is that it puts the democratic control away from central buearacracy and to our community councils that we have a better reaction with. A lot of services could then be decentralised and more reponsive to community needs.
We have to be mindful of the fact of foreign interactions that also effect the process. It is true we are at the tale end of a period of labour surplus but policies were set in place that artificially increased that fact, and the land boom made it very difficult for those surplus individuals to be innovative without lending big sums from foreign sources – and we now have a huge deficit of payments. Paying that will cut our spending power and have a big effect on retailing but sustainable upgrades could well get a lot of people work in the meantime, as can Buy NZ and improving the durability of products. Maybe taxation of the higher incomes and companies should be turned to facilitating the changes as the people generally earning in this area are the ones who have benefited off the damage done, and we put them up as role models when there leadership was sadly lacking in long term perspective. In fact they have been downright derogatory at times to the Green ideas.
It is true also that enterprise is stimulating but how much of this is sustainable, so some help by leadership that understands sustainability can transform our economy to something that works well for the next generation, and not just for the whims of the baby boomers.
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On the general issue of sustainability, I have been pleased to see the NZ television programme on Tuesday nights that tackles waste. It promotes recycling and energy efficiency, including increased use of public transport. It is wonderful to see this programme on television. I think it can really help people to see how easy these things are, and how much money and ecological footprint they can save.
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Mouldwarp is struggling with a little bit of economic knowledge.
I am sorry I have been away fro the weekend so it has taken me so long to reply.
In short: The idea that markets work to set wages and prices in a *competitive* manner is a simple one, and in practice, incorrect. Barriers to entry and monopoly power work against the market setting competitive prices and wages. My advice, if you do not understand, is do some reading about monopoly effects on markets and on barriers to entry in capital intensive industries (most industries).
I am not going to address directly most of Mouldwarp’s points, my general comments above should be enough.
But on wages:
http://www.stats.govt.nz/products-and-services/hot-off-the-press/labour-cost-index-salary-and-wages/labour-cost-index-salary-wage-rates-dec06qtr-hotp.htm
Wages grew 3.5% upto Dec/06
http://www2.stats.govt.nz/domino/external/pasfull/pasfull.nsf/4c2567ef00247c6a4c2567be0008d2f8/4c2567ef00247c6acc25717000830c98?OpenDocument
3.1% upto Dec/05.
Basically stayed still in real terms. I am not going to look up inflation, but it is about the same.
What does the relative profitability of NZ firms have to do with the business cycle effects on the shape of business?
Lastly: We are in a boom (nowhere near the bottom of the cycle, either still going up or about to turn down). Let’s see how many businesses there are in 7, 10 or 12 years, after a slump. That was my point Mouldwarp.
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