Saturday, July 29, 2023

NZCPR Newsletter: A Big Idea

The bedrock of any successful democracy is that it delivers government of the people, by the people, for the people. In the case of our current government, and too many other western democracies, this once abiding principle has been subverted. We now have government of the people, by the government, for the government.
– Sir Roger Douglas 2023

How on earth has a fiercely independent nation like New Zealand, with its number eight fencing wire heritage and strong pioneering spirit, reached a point where The Government is doing almost everything for us – including feeding our children?

The answer is simple. Because we, the people, let them!

The reality is that politicians will do almost anything to make themselves more relevant to voters. It’s the nature of politics for politicians to do more, not less.

All parties in our Parliament have gravitated towards the mantra that Government is the answer to our problems in order to remain important to voters – and to advance their political careers!

Even the ACT Party, which was  founded on the principles of personal responsibility, has moved to the left. It now occupies the ground the National Party traditionally held, as they too have moved left in pursuit of those swing voters who used to occupy the centre.

This seismic shift towards greater state intervention and socialist control can be largely attributed to our former Prime Minister Jacinda Ardern. Her heavy-handed approach, especially when directing The Government to step into our lives during Covid, took away New Zealanders’ most basic rights and freedoms, and has left the country under a shroud of State oppression.

As a result, it’s now taken for granted that “The Government” will  educate our children; provide healthcare, welfare, and a pension; a house for those who need one; family support for those with children; a Police force to keep us safe – and even free lunches for our kids.

The problem is, they do none of these things well.

Where New Zealand was once a world leader in education, the latest Progress in International Reading and Literacy Study ranks Kiwi students last amongst all English-speaking countries and 24th out of 26 OECD nations. It’s a similar story in maths and science. Add to that record low school attendance and a curriculum that focusses on culture instead of knowledge, and it’s clear that Government-run education no longer guarantees children a good future. 

New Zealand used to be a nation of home owners, but that has fallen from 78 percent in the 1980s, to around 55 percent today. As a result of the declining affordability of housing – especially over the last few years – only 38 percent of people between the ages of 55 and 64 are now mortgage free. For those of retirement age, around 28 percent are either still paying off a mortgage or are renting.

When it comes to health, in spite of Labour’s claims that the health reforms would clear the hospital waiting lists, the situation is worse. Not only did the number of New Zealanders waiting longer than the target 4 months for treatment or a first specialist appointment increase by more than 30 percent in 2022 – to reach over 75,000 by December – the chronic shortage of nurses, doctors and specialists has become a crisis.  

Then there’s welfare. At 211,617, the number of children reliant on a benefit has now risen to its highest level since Labour took office in 2017. The majority of these children are supported by single mothers on Sole Parent benefits. In spite of a critical shortage of workers, these benefit numbers have been allowed to escalate over 22 percent, even though the danger to children of long-term welfare dependency – including a greater risk of child abuse and neglect, truancy, and youth crime – is well documented.

Thanks largely to Labour’s misguided goal of reducing the prison population by 30 percent, crime is now running out of control, reaching the point where New Zealanders no longer feel safe in their own homes.

On top of all this, Labour’s odious decision to segregate New Zealanders by race for essential public services like health, has created a deeply divided society.

With such a dismal record of failure, it’s hard to fathom how anyone can have any faith that Governments are the answer to our problems.

As President Ronald Reagan warned in 1982: “There is a threat posed to human freedom by the enormous power of the modern state. History teaches the danger of governments that overreach – political control taking precedence over free economic growth, mindless bureaucracy, all combining to stifle individual excellence and personal freedom.”

This view, brilliantly encapsulated in the former President’s famous expression “The nine most terrifying words in the English language are: I’m from the government, and I’m here to help” – conveys the fundamental truth that Governments are not the solution to problems, they are the cause.

So why is it that New Zealanders are so accepting of big government when the evidence of failure is all around?

The answer, of course, is a lack of leadership and vision.

Where are the leaders advocating an alternative approach that prioritises personal liberty?

Where is New Zealand’s Milton Friedman – the Nobel Prize winning economist who used his book Free to Choose to highlight that the greatest gift political leaders can give to their people is the freedom to improve their lives: “A truly free society is one that releases the energies and creativity and abilities of everyone. It prevents some people from arbitrarily suppressing others. Freedom means diversity but also mobility. It enables today’s disadvantaged to become tomorrow’s privileged, and, in the process, enables everyone from top to bottom, to enjoy a fuller and richer life.”

One New Zealander, who has been dedicated to improving the lives of the disadvantaged – so they too can enjoy a prosperous future – is former Labour Finance Minister and ACT Party founder, Sir Roger Douglas.

Coming from a  family of union leaders and Labour Party MPs, Sir Roger was always destined for Labour Party politics.

With a firm belief that ‘privilege’ has no place in public policy, he held the view that there had to be a better way to ensure that all New Zealanders have the opportunity to live a decent life.

When working as an accountant for Bremworth Carpets he wondered why everyone couldn’t enjoy the sort of personalised pension scheme the company provided for employees.

Singapore, of course, established such a scheme in 1955. The Central Provident Fund, which required employees and employers to contribute into individual accounts, provided a pension annuity on retirement, health insurance, and funds for home ownership. Due to the power of compound interest, Singapore has been transformed from a third world backwater with few natural resources into one of the most prosperous nations on earth.

As an Opposition Labour MP, in 1972 Roger Douglas drafted a private member’s bill to create a similar contributory scheme for New Zealand. This formed the basis of the New Zealand Superannuation Act, which was passed into law by Norman Kirk’s Labour Government in 1974. The scheme required employees to contribute 4 percent of their wages into their own super account, which was then matched by their employer.

In 2014 Infometrics estimated that had the scheme not been axed by Prime Minister Robert Muldoon in 1977, it would have been worth almost $300 billion, which at that time was equivalent to more than the combined value of the New Zealand Super Fund, Kiwisaver, and the New Zealand Stock Exchange!

In 1987, Roger Douglas proposed a flat tax for New Zealand of 23 percent, along with a Guaranteed Minimum Family Income for low-income families, but then Prime Minister David Lange pulled the plug and the scheme never saw the light of day.

These days, Sir Roger believes the solution to the problems New Zealanders face, is not more government regulation and intervention, but a transfer of political power back to individuals who know what’s best for themselves and their families.

He points out that New Zealanders pay tax into a system to fulfil our half of a social contract, which guarantees the State will look after us when we are sick and will provide a living income when we retire.

While we have kept our part of the bargain, the State hasn’t. If you are sick these days, there is no guarantee you will get the medical treatment you need. And if you are young, there is now no guarantee there will be a pension for you in old age.

Sir Roger Douglas is this week’s NZCPR Guest Commentator with a groundbreaking paper that sets out a visionary path for New Zealand that addresses the stark and uncomfortable reality that if we carry on as we are, according to Treasury, we will be bankrupt within 40 years:

“Treasury’s recent Long Term Fiscal Projections for the period 2021-2061 highlight how far our country has descended into the economic and social mire, and why the very future of our democratic systems might even be under threat.

“Unfortunately, this and last year’s budgets were not only devoid of courage but also of imagination. Why is a lack of imagination so important?

“Because imagination serves as the starting point for change and because, in falling back on the old trope that bigger government equals better government, the Prime Minister and Minister of Finance have manifestly demonstrated that they lack the courage to do what is right and so obviously necessary for New Zealand if we are to prosper and grow over the next 10 to 50 years. Instead, they elected to walk a soft and easy path – one walked by too many governments before them – and which they believe will help them successfully navigate the next election. They have decided to tax and borrow, spend and hope.

“Unfortunately, when our current government looks to the future, it envisages a larger state, higher taxes, government ownership and delivery of social services and even greater opportunity for it and its army of bureaucrats to meddle with our lives. In the process it has given up on fiscal prudence and sentenced New Zealand to low productivity growth.”

Sir Roger believes the only way to solve the huge problems we face is for the public to be empowered to direct a proportion of the money they usually pay in taxes – topped up by the government where necessary – into their own savings accounts.

“By doing this, we can shift power away from a system of government which is becoming more and more wasteful and self-serving and deliver it instead to individuals and families. This, surely, is the purpose of our democracy. It is meant to deliver government of the people by the people for the people, not government of the people by the government for the government.”

Sir Roger explains that if we were bold enough to introduce such a savings-based system every New Zealander could look forward to having a personal saving scheme with at least a 5 million dollars on retirement.

There would be an associated all-of-life catastrophic healthcare insurance policy plus an annual healthcare account to pay for small medical expenses. An income protection saving fund would cover unemployment, sickness, and accidents.

Furthermore, such a fund would provide the opportunity for home ownership for everyone who works, an ability to send children to a school of choice, along with the lowest personal and corporate tax rates in the world – with a top rate of just 10 percent by 2048.

Such a scheme would provide a real solution to poverty, disadvantage, and inequality.

Despite the potential of Sir Roger’s proposal, and the abject failings of the status quo, left wing parties and vested interest groups have expended a great deal of energy over the years discrediting any suggestions that challenge their socialist ideology and the dependency culture it creates.

That leaves parties to the centre and right of politics – will they seriously consider this big idea as a way to create a better future for New Zealand?

For the sake of all New Zealanders, we hope so.  

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Dr Muriel Newman established the New Zealand Centre for Political Research as a public policy think tank in 2005 after nine years as a Member of Parliament. The NZCPR website is HERE. We also run this Breaking Views Blog and our NZCPR Facebook Group HERE

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