Monday, September 7, 2020

Gerry Eckhoff: A few thoughts…

Inequality is something of a new buzz word, yet this particular human condition has been around for ever. Equality does not exist in nature, the sports field, in business nor in any other aspect of life, yet it appears that financial inequality is to be placed under the spotlight for redistribution.

It (inequality) exists because each one of us acts in differing ways and in our own or family’s interests. Some excel within the arts or academia; others appear to possess the Midas touch. For most however, being prepared to take risk, along with hard work, long hours, short holidays coupled with some good, reasoned choices creates wellbeing but also increases inequality with those who choose a differing value system.

An individual’s financial or investment decisions allows for wealth creation but also for loss should the market turn as it does on an irregular basis. Wealth creation is now deemed to be a negative in the eyes of the those who believe that it is a Governments responsibility to somehow equalize well - being.  The problem for Governments is that equality never travels in a straight line.

Although wealth creation has inevitably brought a higher standard of living to all those of us fortunate to be living in the western world, the focus now appears to be on how Government can safely relieve those with a little bit more than some and redistribute to those with even less.  New Zealand is fast moving towards a system which will increase the tax on hard work and success - to subsidise non- work and poor choices.

There still appears to be a belief (despite overwhelming evidence to the contrary) that Governments are responsible and required to provide for our wellbeing whether they be wants or needs. For most of the world that is not so. A cursory glance in the direction of a North Korea or a Venezuela where, to borrow a phrase, the citizenry boil stones to make soup, should disavow most of that notion.

A Government’s primary function is to look after the public good needs such as defence, police, infrastructure, where all can benefit, and none can be excluded. If incentives are applied well and (crucially) good public policy implemented, society will function in a coherent fashion but rarely if ever with undiluted equality. Society reasonably expects good outcomes from public policy and always looks for results - not the objectives. The promise of Minister Twyford to build thousands of houses is a case in point. The objective was fine - the result was an abject failure.

The “father” of economics Adam Smith (1723-1790) showed us all a pathway to opportunity and a future which actually has worked. Despite commentary that implies neo liberalism has failed and is a far worse alternative to neo Marxism, few if any are emigrating to the misnomer of the People’s Democratic Republic of dictator Kim Jong Un. That unhappy country offers its population almost complete equality with virtually no opportunity to better oneself. Immigration is unheard of. Closed boarders seem to be a hall mark of such authorities’ regimes throughout the world.  Cubans only ever sail one way.

For those of us who inhabit the real and free world, the judicious use of sanction and incentive by Government actually works where certain social outcomes are desirable. Affordable housing for the less well-off is not a nice to have but is a necessity if we are to live in a prosperous non-gated society where we all benefit from each other’s skills. Successive Governments have failed to address the supply of land at an affordable price due to council planning decisions under the RMA. The cost of a new build is unaffordable to most, so a new concept needs to be applied and this is where the sanction and incentive comes into its own.
For those living in a state house, saving a deposit is well-nigh impossible, so an incentive to achieve home ownership and therefore a real stake in society is necessary.

If the rental of a state house were treated as capital repayments for say 10 years during which time the property was well cared for by the tenants, the Government could then put in place a wider scheme to reward and further incentivise those living in a state house. Employment records for all members of the family could well show a genuine commitment and contribution to society which would earn substantial “community credits” which would also go towards ownership of “their” rental.

Should any member of the family however commit a crime or fail to be gainfully employed, or use illicit drugs, then credits would be withheld or lost along with the chance of early or any home ownership - which is the necessary sanction. The better the behaviour, the more “community credits” awarded towards complete home ownership.

The current problem is not the lack of determination by the less well- off to succeed but the absence of any real incentive to do so. The real issue society faces is the demand by those with a differing value system and a philosophy for the Government to always be a provider. Regretfully, too many in Parliament also rely on such a system for re-election which perpetuates dependency, hence the regrettable inevitability of inequality.
Gerry Eckhoff is a former councillor on the Otago Regional Council and MP.

1 comment:

Anonymous said...

More than one in four households are contributing nothing to New Zealand’s tax take.

A table from Finance Minister Bill English’s office shows 663,000 households – or 40 per cent – receive more in tax credits and other benefits than they pay in tax. Thousands more are neutral contributors, or are close to it.

A timely reminder how generous a welfare system we have.