National signs NZ up to Ethiopia land grab

A media release from the National Party states that NZ have signed a Food Security Cooperation Arrangement with the Ethiopian government.

Foreign Minister Murray McCully states that NZ’s involvement is:

…to assist in the development of commercial scale agriculture in Ethiopia, and build food security partnerships in the region.

Indicatively, the food security arrangement is less about feeding one of the poorest countries in the world, and more about commercial agri-business gaining access to millions of hectares of land in Ethiopia.

Fred Pearce explains in his book The Landgrabbers that:

The [Ethiopian] governments five year plan promises to lease 3 million hectares for large scale mechanized agriculture by 2015, much of it in the rebellious tribal border lands of Gambella (chapter 1, p.12)

Pearce also points out, the development of commercial-scale agriculture has devastating effects on those regions where the land is most sought by commercial interests. In order to get land ready for commercial agriculture, the government collects the dispersed local inhabitants (predominantly tribal groups) into state-designated villages while foreigners get exclusive use rights of their land, forests, fields and hunting grounds through arrangements like the Food Security and Cooperation Arrangement.

The effect on the inhabitants, the ecosystems, the wildlife and biodiversity in general is disastrous. In addition to being forced from their lands and into a lifestyle they are not accustomed to, they have their livelihoods snatched from them as their fields and forests are cleared, waterways diverted and lands enclosed.

Many end up working on the farms for low pay because they are now required to pay rent in the village they did not freely choose to live in to a landlord who took what had been freely available to them. Moreover, because they work on the commercial farms, they are unable to tend to their own food crops which makes food security even more difficult than their previous subsistence living.

The governments and commercial enterprises that participate in these land grabs often proclaim their businesses will lead to prosperity and jobs for locals. This is rarely the case. In Ethiopia, the companies bring in foreign nationals and the highland Ethiopians to do the technical work, while limiting the local lowland Ethiopians  opportunities  to unskilled  very low paid work. Despite that its the lowland Ethiopians whose land is most often subject to these land grabs.

To make matters worse these companies export most the food grown on these commercial farms. The locals lose their own ability to feed themselves through loss of land and an inability to buy expensive imported food, so that commercial agri-business can use their lands to feed foreigners for profit.

McCully’s media release highlights the commercial advantages for NZ in signing the agreement, pointing to Ethiopia’s proximity to key markets in the Gulf, but it is vague on the issue of food security.

Food security is defined by the WHO ‘as existing when all people at all times have access to sufficient, safe, nutritious food to maintain a healthy and active life.’ However, given the signals in the media release focusing on commercial scale agriculture I am doubtful that the arrangement concerns food security for the most vulnerable Ethiopians.

The National governments acceptance and support of commercial agri-busness in Africa is evidence that the colonial past lingers on.

This is exploitative, destructive, neo-colonialism. We should be ashamed that our Government would make us complicit in a practice that intentionally destroys the lives of already marginalised people for profit.


Reviving Georgism: How the Greens could improve their taxation policy

Previously, I wrote that I would vote according tax reform policy because I consider tax reform as fundamental in resolving economic equality in NZ and abroad. It’s also no secret that my voting preferences are best understood in a left-wing framework, but this does not presuppose I would vote for a NZ Left party if their tax policy had worse outcomes.  Anyhow, I was reading the Greens taxation policy and decided this was a good time to write the third installment of Reviving Georgism and discuss how the Greens could improve their taxation policy to address the unrelenting economic inequality smothering NZ.

(Obviously, I am critiquing from a non-economist perspective but in light of Henry George’s economic theory)

Summary of Greens Taxation policy

The Greens state that they envision a tax system that ‘supports communities and the environment, encouraging sustainable behaviour while providing sufficient revenue for the effective operation of Government’.

They insist that a tax system should be broad based to avoid excessive reliance on personal and business income taxes, and that the tax base should include: Personal & Business Income Taxes, Consumption & Expenditure Taxes, Targeted Environmental Taxes, and Taxes that acknowledge the value of common property (Resource Rents).

The Greens also advocate Ecological Taxes (ET), a Capital Gains Tax (CGT), and a Christchurch Earthquake Levy (CEL) as part of their policy proposal. In addition, they recommend setting up an ecological tax commission, increasing the top marginal personal income tax rate, altering the progressive tax scale, and introducing a universal tax free threshold for the first $10,000 of income.

The Greens support exempting the family home from CGT, restricting foreign purchases of local assets, and treating investment income equally for tax purposes.

This taxation policy is intended to ‘shift taxes off work and enterprise, and onto waste, pollution and scarce resources’. The Greens insist under their taxation policy ‘clean business pays less and everyone pays less income tax’.

Note, I will not be discussing The Greens monetary policy included in the taxation scheme, in this post, except to point out that if productive income tax is abolished, individuals would receive their full wage and this is likely to be spent back into the economy, increasing the money supply in circulation without having to artificially create more money or print more money.

Why tax at all?

Most of us probably agree that under current economic conditions we need to fund public services for the most vulnerable members in our communities and for other community needs. And generally, tax is considered acceptable for this purpose. The question for now then is not whether we should tax, but rather what should we tax.

Of course, hard leaning right libertarians will probably dispute the use of taxation altogether, but for the purposes of this post, I will not explore that particular argument.

As pointed out in my previous posts on Reviving Georgism here and here, I explain how Henry George proposed targeting what we take not what we make and he saw this is as fundamental to eradicating poverty and instrumental in advancing progress.  I think that the Greens vision could be highly compatible with Georgism if more radical changes were made to their taxation policy  and if they simplified rather than complicated the tax system because their vision is not too dissimilar from George.

Analysing the Greens under a Georgist lens

Currently, the Greens taxation policy is not the fairest way to draw revenue for public services because it places a large tax burden on the productive earnings of individuals and businesses and burdens them with further costs attributable to an array of other taxes (existing and new).  But it does at least feature land and resource rents, which are not only relevant to Georgism but probably the most important component of an efficient and effective tax system.

I find the Greens phrase  ‘funding the effective operation of Government’ problematic, because it’s so general in nature it ignores that the tax system must be simple or efficient if we want effective government. As pointed out in the Taxing Question of Land ‘complex tax systems allow for avoidance, evasion and expensive administration costs to both the public and private purse’. So it is really a matter of fiscal responsibility to implement a simple tax system. The Greens seem to presume that the introduction of CGT counters the avoidance issues, but they ignore the cost it takes to administer further taxes and to enforce payment, and the fact that individuals and businesses may still be able to hide that revenue in offshore tax havens.   Unfortunately, the Greens policy does not simplify the monstrosity of a tax system we currently endure, it introduces a raft of new taxes without abolishing any existing taxes, and effectively feeds the monster.

The Greens also insist that a broad base tax system is necessary to reduce the burden on income earners, but seem to equate ‘broad base’ with many taxes. Broad base just means not restricting to narrow sources, and as the Land Value Tax Campaign argue land itself is the broadest base of all from which to draw public revenue since it’s the hub of basically all economic activity. The Greens seem to overlook the practical role of land and natural resources in this sense.

The Greens insist that their taxation policy lowers income taxes but it doesn’t. It raises the top PAYE rate to 39% for those that earn over $80,001.00. The Greens retain a tax-free threshold which is intended to offset the land and resource rents that form part of their ecological taxes. In addition, there is no reward for clean business, there is simply an exemption from paying the maximum rate.

In order to understand the alleged benefits of the Greens income taxation, I carried out a comparison between the current PAYE scheme and the Greens PAYE scheme. The table below shows the current thresholds and tax rates against the Greens taxation proposals. It also provides two examples illustrating that the Greens are wrong to say that ‘everyone pays less income tax’.

Current PAYE 
Tax rate
Greens PAYE
Tax rate
Up to 14,000
14,001 to 48000
48,001 to 70,000
Up to 10,000
10,001 to 42,500
42,501 to 80,000
(Note: all comparisons exclude all other levy's/taxes)
Example A: XX earns $90,000 per annum
AA under PAYE
AA under Greens PAYE
$14,000  - 10.5%
$34,000  - 17.5%
$22,000  - 30%
$20,000  - 33%
$10,000  - 0%
$32,500  - 19%
$37,500  - 33%
$10,000  - 39%

Example A shows that someone who earns $90,000 p.a pays an extra $1,380 p.a under the Greens taxation scheme.

Example B: XY earns $48,000 per annum
XY under PAYE
XY under Greens PAYE
$14,000 - 10.5%
$34,000 - 17.5%
$10,000  - 0%
$32,500  - 19%
$5,500   - 33%

Example B shows that someone who earns $48,000 p.a pays an extra $570 p.a under the Greens taxation scheme.

So despite the Greens universal subsidy for the first $10,000 earned, no real benefit accrues to the income earner. The use of progressive taxation nullifies the intended effect of a tax-free threshold. It’s probably why Labour dropped it and why National have argued against it.

LVT avoids issues inherent in progressive taxation

Supporters for progressive taxation schemes typically argue that the most well off members in society should pay more than the least well off members. I agree to an extent, except I don’t think ‘well-off’ should have any bearing on actual income earned – such income goes to the income earner in exchange for their labour. I’d argue that well-off is those with the privilege of holding land, that is, those whose increases in wealth occur through the State sanctioned legal privilege of land holding (*NB, I do understand that there are persons who are asset rich and cash poor which needs special attention when implementing a tax reform such as LVT).

Other issues that concern me with progressive taxation are:

  1. self-employed earners may opt to work for cash jobs to avoid paying the higher tax rate, thereby reducing the amount of revenue collected for public services/effective operation of Government
  2. it could discourage individuals and businesses from acting charitably because of the increase in tax from their productive earnings, thereby reducing the funds that might otherwise be invested or directed toward charitable causes
  3. by having the income tax rate so high and introduction of resource taxes on top along with a raft of other taxes without removing any pre-existing taxes, may in fact drive down wages or employers may choose to employ fewer people to maximize their profits

Avoiding xenophobia allegations

I do worry about the restrictions on asset purchases targeted at foreign purchasers. Restricting foreign purchases of local assets suggests xenophobic attitudes, whether intended or not. However, if land rents are implemented, there is no need for the restrictions because the landowner becomes liable to pay the land tax. The rents accumulated are then redistributed back to the community whose efforts created the unimproved value of the land. This unimproved value is also why I think the Greens are wrong to exclude the family home as a source of tax revenue. Homeowners can simply hold their properties without making any improvements yet the land value increases through the efforts of others but the benefit of that unearned increment goes straight to the land title holder.

Greens compatibility with Georgism

In reference to my earlier posts on Georgism, I do think The Greens are right to argue that ‘work and enterprise should be encouraged and speculative investment in non-productive assets discouraged’, and I also agree that ‘the taxation burden should be reallocated away from income and towards resource use, waste, and pollution’, which is why I think the Greens policies could be highly compatible with Georgist economic theory.

If the Greens explored the fundamentals of Georgism, I think they could create a sound tax system that fits their vision while simultaneously addressing the economic inequality smothering NZ.

I think the best way to improve the outcomes of our most disadvantaged members is by abolishing income tax altogether.  This does not mean abandoning social security. The LVT is an effective precursor to introducing a UBI, and subsequently the dismantling of an overreaching State by reducing the need for many of the services the State provides. It is simple and  efficient.

In my opinion, The Greens are in a favourable position. Without the support of the Greens, Labour probably wont be able to govern. This means that instead of the Greens having to resort to incrementalism (after all, Labour have that covered) they can use their influence as part of a coalition to push more radical policy that is less State centred while trying fresh ideas to revitalise the Left and broaden their appeal across the political spectrum.

In summary, The Greens could improve their taxation policy by abolishing taxes on productive earnings and focusing on taxing land and resources. This would simplify the tax system, work toward reducing the size of government and act as a precursor to implementing a UBI.


FYI – Over the next week or so, I will be updating my blogshelf to include a page designated to Land Value Taxation. Please email me:  if you have a blog or website and want to make sure I include it! Thanks. 

Defending the Left-Right dichotomy

Following Pablo’s piece on Kiwipolitico, where he ascertains that ‘the Left is well and truly dead in NZ’, I noticed that there was relatively little commentary, well, aside from Whaleoil.

(A silent acknowledgment of a shared sentiment, perhaps?)

I don’t actually think the Left is dead, rather I think it’s dormant, largely due to what Pablo identifies below:

Many of the Left political elite prefer to maintain their positions in the status quo rather than heed the demands of their grassroots to push for fundamental change. Their concerns are about the distribution of power and resources–their own and that of the organizations they front–within the system as given, not about changing the system.

Many argue that the Left-Right dichotomy (LRD) is increasingly unhelpful and results in meaningless political generalisations. Others insist that the traditional LRD has changed (I’ve written a little on this see: Politics as a broader spectrum than Left vs Right, note that some of my views may have changed or slightly altered).

Bryce Edwards wrote about The Changing Nature of Ideological Conflict in NZ Electoral Politics in 2009. He suggested that many other dimensions are at play that can conflate and/or confuse where parties sit on a political spectrum. For instance, Liberalism is often conflated with the Left and Conservatism with the Right, yet we can all probably think of examples where this simply isn’t true.

In my experience, the generally accepted convention is that Left is symbolic of a Socialist economic vision (noting that there are variations within that Socialist worldview) and that Right is symbolic of a Capitalist economic vision (again noting that there are variations within that Capitalist world view). Given the wide scope necessary for discussing political spectrum’s and the various dimensions at play in full, this post is limited to discussing the LRD with regard to the conventions set out above. I am not presuming to be an authority on the issue and I acknowledge the risk of confirmation bias by limiting the discussion in this way.

Unsurprisingly then, I largely disagree that the LRD is either unhelpful or meaningless. Why?

Firstly, many of those who say the LRD is meaningless, still refer to it when discussing their own political views or the views of others. Arguably because its helpful for (1) differentiating their views from others, especially if one wants to create distance from a view they strongly oppose and (2) for building a rapport with like-minded individuals or groups. It is at least a helpful and meaningful as a reference point.

(On a side note, I notice that it is mainly those who have identified as Left who tend to disapprove of the LRD)

Secondly, it tells us something about the parties, that is whether they broadly subscribe to a Socialist or Capitalist worldview. Its helpful because as noted above, it gives us a reference point that we can assess or analyse the parties against and it highlights if the respective parties policies are consistent with the visions they proclaim.

However, I do think that the sentiment of meaninglessness has some teeth, that is, when a party claims to have a specific alignment (i.e. they usually indicate if they are Left or Right) but their policies are inconsistent with that alignment. This can make the LRD appear meaningless, but in my view, it only makes what the party says meaningless. It does not impinge on the LRD itself. Moreover, it legitimates the use of the LRD as a measure of credibility or honesty.

Lastly, the LRD is helpful for retaining a space for socialism to further evolve.

Morgan Godfery, blogger at Maui Street, tweeted:

which he later qualified as being the ‘the modern left’.

I can see the attraction in wanting to expand the definition of the Left to include those with socially democratic values albeit with capitalist inclinations. As a Socialist in a Capitalist society its difficult to reconcile ones practical life with ones ideological views. What I worry about is developing a concept of the Left that is so incoherent that it becomes both meaningless and unhelpful. I consider that including Capitalism within a Left framework is to concede to Capitalism. That is, we reinforce the  position that NZ Labour party have perpetuated since 1984 – that Socialism is an untenable vision.

Socialism is not the shit stain that Capitalists (irrespective of whether they call themselves Left or Right) proclaim and as such I think the LRD should be preserved because the ‘Left’ space gives Socialists a reference point (at least) that is unimpeded by an ideology with which it is inconsistent to further develop. Additionally, by allowing Socialism to evolve unimpeded, this may help to overcome the pejorative way in which a large proportion of the public view Socialism and the Left. So to this end, I defend the LRD, especially so in the current political economy.

Reviving Georgism: What is Land Value Tax

Firstly, I recommend watching either or both of the following clips before or after reading through this post (whichever you prefer):

There are some much longer documentaries on this topic, but the above two give a basic rundown and hopefully get you curious!

Land Value Tax (LVT) is a tax (or levy) on the unimproved value of land. LVT aims to reduce the value of land to make housing affordable by discouraging land speculation (unproductive behaviour) and to encourage entrepreneurship in business through abolishing taxes on productive behaviour. LVT is not intended as an additional tax, rather as a replacement of all other taxes.

Some prefer to call LVT a groundrent and not a tax because it reflects the rent paid for the use of property rights in land which is distinguishable from the ownership-use rights in buildings and other capital improvements.

[Note: I will discuss how LVT could be implemented in a later post and will address the differing views on what to call the LVT, as I’ve noticed some friendly contention among Georgists on terminology]

Henry George recognised that land obtains it value through its location and  demand. He noted that a vacant lot can increase in value without the landowner having made any improvements. He called the increase in the unimproved land value ‘unearned income’ (i.e. there is no cost in producing land because land is itself not produced by labour – although as pointed out in The New Statesman recently, some landowners have in fact produced land, e.g. the Palm Jumeirah).

Similarly, Professor Michael Hudson writes that:

Classical economists developed the labour theory of value to isolate economic rent, which they defined as the excess of market price and income over the socially necessary cost of production (value ultimately reducible to the cost of labour). A free market was one free of such “unearned” income – a market in which prices reflected actual necessary costs of production or, in the case of public services and basic infrastructure, would be subsidized in order to make economies more competitive. Most reformers accordingly urged – and expected – land, monopolies and banking privileges to be nationalized, or at least to have their free-lunch income taxed away.

[emphasis added]

George argued that unearned income from land should be taxed because:

If land were taxed more heavily, the quantity available would not decline, as with other goods; nor would demand decline because of land’s productive uses. By taxing the whole of the value of unimproved land, the government would drive the price of land to zero 

[emphasis added]

So why drive the price of land to zero?

In a nutshell: there is no cost in producing land since (predominantly) no-one produced or created it. Land is a natural resource (like air, water etc) that we rely on for survival. However, because our current system does not take into account the community efforts that give land its value, it is treated as a commodity allowing land speculators, homeowners and those employed in the FIRE (Finance, Insurance and Real Estate) sector to profit from the efforts of others simply by holding and selling land and obtaining the ‘free lunch’ or unearned income.

Reducing the land value to zero would mean that future homeowners would only need to borrow money for the improved value of the land and not the unimproved value and could mean that some future homeowners would not have to borrow at all from a lending institution, thereby making home buying much more affordable.  It also encourages those sitting on vacant lots (i.e. land speculators and property developers) to develop the site or sell it to someone who will develop it (i.e. putting it to productive use), because the land owner would still be required to pay the LVT whether or not any improvements were made. This would also address concerns about foreign ownership of land in NZ, because foreign owners would also be required to pay  LVT.

LVT is preferable to productive income taxes, because there is a fixed amount of land, so any rent could easily be collected. This means we could simplify the tax system and address avoidance issues, as people cannot shift land offshore to a tax haven. In addition, it means that workers and businesses can retain their full productive earnings thereby encouraging productivity (entrepreneurship, research and development etc) which will improve economic outcomes and assist in bringing about equality.

Matt Nolan (TVHE and Infometrics) states that:

If you tax land, the price of land will fall, but the amount of land being used will not change.  In contrast, a tax on labour income will lead to some people working less, and a tax on capital will lead to lower levels of investment in New Zealand.  This attribute of a land tax means that it is more “efficient” than other taxes, implying that for any given amount of revenue the government wants to raise this tax will do it for a lower cost to the rest of us.

Nolan also notes that while the introduction of a land tax would have ‘adverse implications for those who own a significant amount of land or those who own land but have a variable income year to year, that changes in wealth as a result of the imposition of a land tax will only happen once, so it would be possible for the government to compensate the immediate losers of the changes through lump-sum payments if it deems the adjustment to the new tax unfair’.

The fairness argument is a significant component of Georgism and its unsurprising that land owners including Mum and Dad homeowners and the FIRE sector resist the introduction or dismiss the idea of a LVT system given the intent to reduce land values. But Georgists and many other renowned economists argue that LVT is fair and in fact is the fairest tax system because it penalises unproductive behaviour rather than productive behaviour. The Land Value Taxation Campaign set the fairness argument out as follows:

Land (unlike goods and services) has no cost of production. If an ample supply of land of equal desirability were available everywhere, there would be nothing to pay for its use. In reality land acquires a scarcity value owing to the competing needs of the community for living, working and leisure space. Thus land value owes nothing to individual effort and everything to the community at large. It belongs justly and uniquely to the community. Conversely, the reward for individual effort can belong only to the one who earns it, to spend, save or give away as he or she may see fit.

Because of differences in positional advantages, fertility or natural resources, some locations are more desirable than others. Demand for access to these features gives land its rental value. Land Value Taxation, being assessed on these values, is fair in its incidence.

Georgism is not immune from criticism, but  Nate Blair argues that:

The problem with Georgism is not the idea, which is basically flawless.  The problem with this idea is that it seems both radical and inherently moderate to anyone understanding it.  The revolutionary aspect of Georgism threatens the predators of caricature “capitalism” and angers the conservatives. The justice and honesty threatens communist revolutionaries and angers armchair progressives, who are fine with paying a bit more but not with giving up their privilege.

[emphasis added]

My current view (which may change as I come to understand Georgism and LVT a bit more) is that LVT as a single tax is insufficient for capturing other forms of unearned income, and given George was writing in a time when technology and global networks were not nearly as sophisticated as they are today, perhaps he may have considered a tax system that captured all unearned income. However, some Georgist’s suggest that LVT would capture most unearned income, since it derives from land holding in some way.

In concluding, it is important to note that LVT is not an end in itself but it is the most equitable way for bringing about progress and eliminating economic inequality. And who knows what will follow, but in my view we should at least be trying to set the right foundations.


Reviving Georgism: Introduction


“This association of poverty with progress is the great enigma of our times…so long as all the increased wealth which modern progress brings goes to build up great fortunes, to increase luxury and make sharper the contrast between the House of Have and the House of Want, progress is not real and cannot be permanent” – Henry George

Henry George is most well known for his ‘single tax on land’ proposal, or what is most commonly referred to as Land Value Tax or LVT (although, he was not the first to popularise this idea). George’s theory is summed up on Econ Lib as follows:

Most taxes, noted George, stifle productive behaviour. A tax on income reduces people’s incentive to earn income; a tax on wheat would reduce wheat production, and so on. But a tax on the unimproved value of land is different. The value of land comes from two components, its natural value and the value that is created by improving it (by building on it, for example). The value of a vacant lot in its natural state comes not from any sacrifice or opportunity cost borne by the owners of the land, but rather from demand for a fixed amount of land. Therefore, argued George, because the value of the unimproved land is unearned, neither the land’s value nor a tax on the land’s value can affect productive behaviour. If land were taxed more heavily, the quantity available would not decline, as with other goods; nor would demand decline because of land’s productive uses. By taxing the whole of the value of unimproved land, the government would drive the price of land to zero.

I have briefly alluded to LVT before here and here .

A social advantage of the LVT is that it obtains support from across the political and economic spectrum, that is, its not strictly left, right or centre. For example, David Farrar (right wing blogger/National Member) recently commented that he supports a land tax and Stuart Nash (left wing blogger/Labour Member) did the same earlier this year on the Daily Blog .

My understanding so far is that George wanted to bring an end to privilege. He thought that the dependency relationship between land owner and non-landowner enabled the conditions for poverty to flourish and he considered that a land value tax to replace income taxes would reduce the resultant economic inequality by placing the tax burden on the unproductive gains of the land owner rather than the productive gains of the worker.

This presumably has the effect of encouraging the least well off members of society to obtain their full wage, thereby incentivising productivity and reducing the incentive of land owners to hold vacant land which drives up property prices.

As a non-economist, there are definitions I am still trying to get my head around, so any economists reading this feel free to correct any errors in the comments below. I’m still reading ‘Progress and Poverty’ (among multiple other texts) and I’ve decided that I will address Georgism in a series of posts over the next few months, with the holiday season nearing, I may be somewhat distracted. I will try to write according to the titles listed below and I will update with hyperlinks as I post:

  1. What is land tax
  2. Who does land tax apply to
  3. Why we should favour land tax
  4. How will land tax reduce economic inequality
  5. How we can implement land tax fairly in Aotearoa New Zealand

NZ’s attachment to the State

I have written, rewritten, changed the angle on this post multiple times over the past week and have just today reduced this particular post from the 4,200-word monster it was to something more digestible.

Recent political events indicate how attached to the apparatus of State we are here in NZ. When I began writing this blog just over a year ago, many people accused me of being a ‘statist’. They were right. I genuinely believed that we required the State to regulate both the economy and our social systems because I considered the only alternative was a corporate/multinational controlled society. My initial concerns derived from my strong opposition to neoliberalism (NL) and my limited understanding of how economies work.[1]

I imagine that the ingrained fear of the ‘free market’ is responsible for the general attachment to the State. The fear is probably well founded, given the concept of the free market we have differs significantly from the free market advocated by classical liberalism (CL). Under NL, the ruling elite have an advantage over the masses because they control the policy making of the State (I explain one angle of this later in this post). NL diverges from CL at this point, because the free market was supposed to be free from State intervention. As Michael Hudson points out, ‘Today’s neo-liberals say a free market is free for predators. It’s free for monopolists, free for land speculators, free for bankers to extract as much income from wages and industry as possible’.[2] I’m not here defending CL, merely pointing out that the NL conception has created this State attachment, that perhaps a free market under CL conditions wouldn’t have. Noam Chomsky argues that Adam Smith advocated [free] markets only on the grounds that under perfect liberty [free markets] would lead to perfect equality’.[3] But my concern is that a great disservice has been done to the concept of the ‘market’ itself, as if markets are inherently evil and designed to privilege the few.

The dominant theory is that the State is necessary for regulating the market to ensure that the least advantaged members of our society are not made worse off by the privileged few under the NL framework. Parties on the Left most often espouse this view, but it sits awkwardly with the Labour Party given that they implemented this system during the Fourth Labour Government. Additionally, as highlighted by Giovanni Tiso in his latest post, The leader vanishes, the Labour Party still considers that [Labour] ‘took difficult and long overdue decisions necessary for the modernisation of the New Zealand Economy’.[4] Clearly, an endorsement of the neoliberal project, yet in his bid for leadership, David Cunliffe asserts that he will increase taxes for the rich, and even touted the ‘socialist’ card.[5] So I am somewhat confused as to Labour’s true position.

As I mentioned above, I believed that we needed the welfare state[6] to overcome the existing structural inequalities in NZ. However, exposure to further information highlighted the flaws of the welfare state, specifically, that if the State are the arbiter of human rights and freedoms, then we are vulnerable to the same authoritarianism that we are currently experiencing under this National led government.

Sebastian AB writes on C4SS blog that what the state is capable of giving, it is also capable of taking away – by force.[7] The GCSB Act is the most current or at least, the most publicly discussed example of the seizure of human rights and freedoms (i.e. privacy) from individuals.

In my view, NZ’s political framework appears to be an amalgamation of the welfare state (WS) and NL. and the tension between these two ideologies has (arguably) created the worst possible outcomes for everyone. NL underpins all the policy decisions made in NZ, and policies targeted at improving outcomes for individuals and families (welfarism) are developed and implemented within this framework. Despite any perceived improvements under Labour or National, the changes have had no substantive impact on social or economic equality.

I was disturbed about the aggressive pronouncement (by Cunliffe, but also advocated by other left wing parties) of increasing income taxes for the rich, because it reaffirmed that our left is devoid of new ideas and are rehashing stale policies from the state socialist handbook.

Labour, Greens and Mana (LGM) argue that increasing taxes on high-income earners means that such earners will contribute their fair share to society. I appreciate and endorse the sentiment – we don’t want to leave our least advantaged members struggling to survive.

But what are the consequences of increasing income taxes for high-earners?

Those who pay proportionately more in taxes receive benefits from the State in the form of policy privileging their interests, otherwise the government risk being ousted by those with the most capital. The effect is the same as crony capitalism. This interventionism causes the deprivation that LGM insists their policies protect against.

Taxation is a huge reason that income inequality exists, and income tax is actually a relatively modern concept. Some critics even question the constitutional legality of taxing personal income, given its denouncement in the Magna Carta.[8]

In NZ, we use a progressive taxation scheme, i.e. a tax system that takes a larger percentage from high-income earners than it does from low-income earners.[9] LGM simply want to increase the percentage further for higher income earners, and some parties have even called for reducing the percentage to low income earners.

Problem – when those who earn high incomes become subject to a heavier tax burden, they seek increases in their net income to counter the loss through taxation. The obvious result is that low income earners lose out so that businesses can retain those high earners – these are typically academically qualified professionals who have the ability to negotiate their wages in their favour. This creates job losses/reductions in the lower echelons of business. When jobs become scarce in the lower echelons of the business, the workers compete for the available jobs and workers tend to accept less than the true value of their labour. In addition, they are often forced into beneficiary queues, state housing, state education and state healthcare systems and must conform to the criteria of those State schemes to even receive or become entitled to assistance thereby limiting their individual autonomy. Moreover, low income earners become the subjects of government data collection, further infringing their rights to privacy.

We will continue to play cat and mouse with income taxes as the rich are pitted against the poor. History tells us who wins. Our taxes effectively pay the ruling elite to tell us what we can and cannot do.  In fact, this is neoliberalism 101. The statocracy have convinced us that without the State, the market will plunge us into the deepest pits of inequality we have ever known.

As a nation, we have been indoctrinated to view State intervention as an indicator of a compassionate government, resulting in an unhealthy attachment to the State apparatus through propaganda used to obtain support to implement unpopular policy – usually policy that intends to limit human rights and freedoms for the economic advantages of the ruling elite.

I consider myself left because I still believe that socialism is preferable to capitalism, because in my view, profit over people is never justifiable and hierarchies are inextricably linked to capitalism where bosses control and exploit rather than emancipate workers. But I am not a socialist who thinks the State can resolve structural inequalities and is necessary towards that end. I can appreciate the pragmatic arguments for the State, but I doubt that we would be thrust into an Arab Spring like revolution in rejecting the State in an attempt to minimise its control over our lives.

[1] I admit that I am still a novice when it comes to economics and do not even pretend to hold any kind of expertise on the topic.

[3] Noam Chomsky on Libertarian Socialism via YouTube at (1:07)

[4] Giovanni Tiso, “The leader vanishes” on Bat Bean Beam available online at:

[5] See Colin Espiners article David Cunliffe is Labours top dog available online at:

[6] “A welfare state is a concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those unable to avail themselves of the minimal provisions for a good life… The welfare state is funded through redistributionist taxation and is often referred to as a type of “mixed economy”. Such taxation usually includes a larger income tax for people with higher incomes, called a progressive tax. This helps to reduce the income gap between the rich and poor” Wikipedia available online at:

[7] Sebastian AB on C4SS “Taking power with or without Chris Hedges” available online at:

[8] H/t Mark Hubbard’s blog (dedicated to tax issues) Life behind the Iron Drape available online at:  see also Ian Wisharts Income Tax: 1297 law holds key to challenge in Investigate (June 2000) available online at:

[9] Progressive Tax, Investopedia available online at:

Are we apathists?

Plato proposed that ‘the price of apathy towards public affairs is to be ruled by evil men’.[1] Put in the context of today at a time when global dissent is growing, we here in New Zealand sit apathetically on the periphery of this global movement lending truth to what Plato proposed. But why is that? Why do we accept that because our government is perceivably less authoritarian than other governments that we can sit idly by while they usurp our civil liberties and democratic rights? I do accept that authoritarianism permeates our political structures and that its not attributable to a particular side of the political spectrum; however, since the election of the National led government we have seen some clear trampling of rights and severe abuses of process. This post discusses why (in my opinion) we are a nation of apathists who criticise those who actively oppose the destruction of our rights.

In understanding the source of our apathy, we must understand from where it derives. We need to acknowledge that what we have is a two party state. National or Labour are at the forefront of any legislation implemented via our parliamentary processes. Note that Labour have an equally terrible history of overriding our civil liberties and democratic rights, most notably for me, the Foreshore and Seabed legislation passed under Helen Clark that actively denied Maori the right to be heard with regard to claims on the Foreshore and Seabed.[2]

But despite the fact that Labour have a poor record, National in particular appear to have no proclivity for the rights of individuals. It considers itself above the law and invincible. It has passed and intends to pass multiple pieces of legislation that limit our rights as individuals and within our communities.[3]

We receive our daily dose of the extremism of the Left in the myths perpetuated by right wing media streams whether that be in mainstream media or the blogs. We are told that the Left want to take your taxpaying money and give it to the lazy, bludging, griever, minority imbeciles (welfare state). We are told that the Left want the government in, on and under your bed (statist). We are told that the Left despise prosperity (communism) and lack the necessary skills to create a prosperous economy (anti-neoliberals/anti-freemarket). And most people believe it. Because most people are too busy trying to survive in their current economic situations to take the time to learn, think and critically evaluate that rhetoric.

The other myth perpetuated is that our government is far less authoritarian than other regimes and the crony policies it implements are for the growth of our economy. For the record, exponential economies are not sustainable; the myth that economic growth is the only means for prosperity is false. Exponential economic growth will destroy prosperity and humanity in the process.

When the public are saturated with the fear of a collapsing economy, they rely on their government to remedy the issue. Depending on the narrative, people consent to handing over their rights to the government. This is where we are. We are so afraid that we are going to wake up with empty bank accounts through no fault of our own, that we allow the government to implement whatever laws they deem necessary to avoid this happening. In fact, it is precisely such laws that will create these situations that we fear. Economies don’t collapse because of small businesses and hardworking individuals. Nor do they collapse because of the poor and unemployed being a supposed burden on the government books. Economies collapse because banks and multinationals call in their debts when the market becomes unstable. Moreover, the banks and multinationals create unstable markets so that they can call in their debts in order to increase their profits. This is what has often been referred to as the freemarket. The system of private lending that allows individuals to create wealth. Its bogus. But nonetheless, our government supports this supposedly freemarket that is in fact engineered to benefit the banks and while its possible that some individuals will benefit from this structure, many others will indubitably suffer. This supposed freemarket works best when smaller governments that have been forced to rely on borrowing to fund state infrastructure become so indebted to these banks that they have no choice but to comply or face the wrath of the quite visible hand of the IMF. The IMF impose strict conditions on lending and force compliance with those conditions through authoritarian governance – forced legislation to the benefit of the banks and multinational companies. South Korea is a prime example, such that the IMF claimed they were helping the nation out of insolvency. Instead, they vindictively devalued the currency and bankrupted major economic players in the Korean economy opening the market up to foreign economic domination. In my view, this is the likely plan for NZ. There can be no other reason for signing up to the TPPA and for selling legislation to multinationals that limits the rights of the people in Aotearoa New Zealand.

Sergei Karaganov writes on Aljazeera that:

“Western capitalism’s model of a society based on near-universal affluence and liberal democracy looks increasingly ineffective compared to the competition. Authoritarian countries’ middle classes may push their leaders towards greater democracy, as in Russia, but Western democracies will also likely become more authoritarian”

In my view, the New Zealand government are preparing us for this shift. In fact, I would go as far as saying that we are already part of that current. As Roger Douglas once pointed out, if we create a crisis and act swiftly so that people do not have a chance to think then we can move closer to implementing this freemarket. The National led government have passed many laws under urgency and this is a hallmark of Douglas’s literature. In addition, the government have used the perceived success of authoritarian China as a means to impose these standards in NZ with this narrative further reinforced by the US creating a moral panic that the Chinese will inflict authoritarian structures on the vulnerable nations in the South Pacific so we must act authoritatively to counter that influence. Both narratives support the implementation of authoritarian forms of governance.

So are we apathists? Hell, yes. While we have a small activist contingent, who remain committed and informed on matters of public affairs, the wider public tend to think that they are powerless and they disengage. Is feeling powerless the same as apathy? No. Irrespective of whether or not we think our voices will be heard or listened to, sitting by idly waiting for change or accepting defeat only feeds authoritarianism. I am guilty of being a slacktivist. I sit at my computer and purge criticism at the government and a few people will read what I have to say, but this is not the same as walking side by side with those who physically enter public spaces to voice their dissent. It doesn’t matter if you voted for National or a National led government, or if you fall within the other half of the population that voted against a National led government. If you disagree with the undemocratic actions of this government, the only way to make that clear and to co-opt change is a public show of solidarity.

We currently have an example of solidarity in Turkey. The elected government secured over 50% of the vote. Similar to here in NZ. Yet the people have said no to authoritarianism and in a show of solidarity have taken to the streets, despite the brutal backlash from the government and the dictatorial speeches of Tayyip Erdogan to quell the dissent. We are unlikely to experience the same violence in NZ because the government knows NZ will not accept blatant state aggression against the people.

But its time we start seriously considering who the extremists are: those actively opposing and publicly condemning the usurping of our rights or the government and their cronies who have taken active steps to abuse our parliamentary processes to deprive us of our rights and civil liberties?

[1] I am unable to find the original source of the quote, so I cannot guarantee that it is stated verbatim nor that it has not been misattributed. Nonetheless, it is still aptly fitting for this particular post.

[2] Note, it doesn’t matter if you think Maori have an actual claim on the Foreshore and Seabed, what matters is that there is a process that allowed the claim to be assessed and Labour removed the ability for Maori to go through the process. Its similar to the Health and Disability Amendment that has removed a process for parents as carers of adult disabled children are denied a process of judicial review of this particular amendment, despite the express discrimination inherent in the amendment.

And the government says “Punish the kids!”


And the government says “Punish the kids!” Well, not exactly. But they may as well. The National government have contributed around $40 million dollars in funding to private schools, but will not even entertain the $5-6 million Kids Can estimate or the $15 million CPAG estimate (estimates according to David Shearer on Radio Live this evening) to assist in alleviating some of the effects of child poverty.

The price however, is irrelevant. The relevant point is the flawed argument propagated by many economically-right thinking people (ERTP): If people can’t afford to have kids then they shouldn’t have them.

Isn’t the value of hindsight a wonderful thing? How many times have we all made decisions that attract costs that on hindsight we probably shouldn’t have made even though the decision was reasonable in the circumstances at the time? I’m sure we can all think of examples on both a personal and political level.

Admittedly, having children is a more complex decision because the relevant factors are not just around affordability. But according to many ERTP, a decision to have a child should always be based on affordability. Whether you say it out loud or not, the implication of this premise a big resounding ‘keep your legs shut’ or you have no right to complain when your kids are starving. That is effectively the message the government gave women today and previous governments have given in the past. And what about the solo dad’s struggling to raise their kids? Well, the government just gave you a kick in the nuts too! Don’t stick your bits inside a female; you can’t trust that she’ll stay around to feed your kids. Harsh? Yes. But this is the message a government sends when it refuses to incorporate funding for hungry children into the national budget.

I am amazed ERTP having come out and blamed women for child poverty given the underlying premise of these arguments. But I digress.

We can accept the premise that it is the parents responsibility to feed their children. Generally. However, what we must expect is that when parents are unable or fail to provide for their children, the government will step in to assist those children. If they don’t, then what? I can appreciate that the government don’t want parents to abdicate their responsibility because the government have a safety net. But this argument is the same one that Bill English gives about parental responsibility. It is overly simplistic and lacks the empathy required to build a community that thrives. Moreover, this argument is redundant when these families are forced into poverty through failed economic policies.

What’s not taken into consideration when demonising these parents who are unable to feed their children is the fact that children aren’t born in hindsight. Additionally, other arguments flapped around various social media sites and on talk back radio are the sterilisation of women or forced abortion if the prospective parent[s] have a poor financial outlook. Wtf? Fortune telling determines who can have children? This quackery is normally scoffed at but is legitimate when it applies to persons in poverty? What gives any person the right to determine that a prospective family with a poor financial outlook should terminate a pregnancy?  That is a very dangerous road to go down. When we start advocating for the State to determine who can and cannot have children and under what circumstances, it begins to look remarkably like the eugenics programmes carried out in Nazi Germany and the less talked about programmes in the United States.

It is a myth that people live in poverty by choice. They stay in poverty because successive governments have failed to make the necessary reforms to improve their situations or to prevent people ending up in that situation. And this is no accident. Without poverty, capitalism cannot survive. Poverty usually stems from an inability to obtain employment or to obtain employment that improves ones’ financial situation. I have discussed this in earlier posts, but have no expectation for you to go back and read them, so here is my summary:

“In order to sustain a capitalist growth economy, out of necessity we must ensure there is a stable level of unemployment. However, we must be careful not to make any welfare scheme that compensates for this necessity, too attractive, or the whole economy will collapse”

This is in effect government induced poverty. ERTP must accept that when the government creates poverty for their benefit, it must at least act to alleviate it. A start is to provide kids with food in schools, but don’t expect that it is the full solution. A government that refuses to take action to assist these kids, punishes them.

Update: Below is an extract of a post on Facebook. I’m using it to show the ineptitude of the many people who consider State intervention bad (i.e. the ERTP described in this post) unless it acts to controls the lives of those who are forced into poverty through ineffective economic policy. Although written in the context of the US, I’ve seen many ERTP in NZ hit the like button on this:

This was in the Waco Tribune Herald,   Waco  , TX , Nov 18, 2011

PUT ME IN CHARGE . . .Put me in charge of food stamps. I’d get rid of Lone Star cards; no cash for Ding Dongs or Ho Ho’s, just money for 50-pound bags of rice and beans, blocks of cheese and all the powdered milk you can haul away. If you want steak and frozen pizza, then get a job.

Put me in charge of Medicaid. The first thing I’d do is to get women Norplant birth control implants or tubal ligations. Then, we’ll test recipients for drugs, alcohol, and nicotine. If you want to reproduce or use drugs, alcohol, or smoke, then get a job.

Put me in charge of government housing. Ever live in a military barracks? You will maintain our property in a clean and good state of repair. Your home” will be subject to inspections anytime and possessions will be inventoried. If you want a plasma TV or Xbox 360, then get a job and your own place.

In addition, you will either present a check stub from a job each week or you will report to a “government” job. It may be cleaning the roadways of trash, painting and repairing public housing, whatever we find for you. We will sell your 22 inch rims and low profile tires and your blasting stereo and speakers and put that money toward the “common good..

Before you write that I’ve violated someone’s rights, realize that all of the above is voluntary. If you want our money, accept our rules. Before you say that this would be “demeaning” and ruin their “self esteem,” consider that it wasn’t that long ago that taking someone else’s money for doing absolutely nothing was demeaning and lowered self esteem.

If we are expected to pay for other people’s mistakes we should at least attempt to make them learn from their bad choices. The current system rewards them for continuing to make bad choices.

AND While you are on Gov’t subsistence, you no longer can VOTE! Yes, that is correct. For you to vote would be a conflict of interest. You will voluntarily remove yourself from voting while you are receiving a Gov’t welfare check. If you want to vote, then get a job.

Note: I do not endorse what was said in this Facebook post and am well aware of the flaws in the arguments this person makes. I apologise in advance for any rage this excerpt may cause those with a social conscience.

Electricity belongs in the commons

I was asked (along with a number of other people) if I bought shares in Mighty River Power (MRP) and if not, why not. The answer to that question is set out in this post.

Corporatocracy* is the control of our political and economic systems by corporations. Its relevant to this post because it helps to succinctly articulate the problem with privatisation. I acknowledge that not all privatisations involve corporatocracy but there are enterprises that I consider no government should have the right to transfer to corporate control, such as, electricity companies.

Rather than selling electricity companies we should be acquiring them. As a developed country, we have come to rely on electricity and we could not thrive without it.

My view is that we should supply electricity to all households the way we supply water and waste services. Electricity would then properly be a public utility rather than a profit driven company that limits public access.

Note: public utilities do not require State management they could be managed instead by publicly elected bodies or associations.

So when asked the question set out above, my reason was not that I think the State should own them. But because I consider that removing MRP from State control takes it further away from the potential control by the people.

Electricity belongs in the commons and I do not think that resources that belong in the commons should become the subject of competitive markets. The logic is that power prices are cheaper when there is competition. My point is, power should be a service supplied to all people through publicly generated revenue and therefore would not require a competitive market.

By divesting state control of MRP and other electricity companies, we place a resource that belongs in the commons under the control of corporate elites. This control over our electricity (and other sources of energy) allows corporations to dictate the prices we pay and who has access to electricity despite the necessity of it in our households.

The difficulty is funding electricity as a public utility.  Under our current tax system, we would require another tax or increases to an existing tax or rates. Untenable. We  need tax reform urgently. Irrespective of your preferred economic model (i.e. capitalist, socialist), we need to simplify our tax system and find a more just way of collecting public revenue. A single land tax would help address many of our underlying socio-economic issues. I was reading an article this morning that sets out how a land tax would work.** See the link:

My closing remark is that if any of our political parties were serious about effecting real change, then tax reform would be top priority. Of course, feeding kids, building houses, improving healthcare and education are extremely important, but there would be better outcomes in all those areas if we reformed our tax system.

Note to readers:  increasing personal income tax is not tax reform neither are tax cuts for the wealthy. My assessment of parties going in to next election will focus on what their intentions are around tax, because this will tell me how badly they want the change we need.

* h/t @AAMCommons

** h/t @TaxLandNotMan

The Greens and the implication of exponential growth

So I was reading one of the Greens newsletters this week which left me feeling extremely confused about their economics. My criticism is not because I think Dr Norman is incompetent but rather that I think his commentary is in conflict with what I understood to be ‘sustainability’, an ethic that the Green’s advocate and that in fact the party was founded on.
Dr Norman this week criticised the government for a decline of 0.6% GDP in the tradable sector of the economy. He also stated:

 “A shrinking tradable sector combined with a strongly growing non-tradable sector means only one thing – increased borrowing and a ballooning current account deficit”.

I’m curious, wouldn’t a reduction in the tradable economy sit well with Green politics. For instance, he mentions that ‘manufacturing is a key sector for driving high, value-added exports and creating well-paid jobs’ yet the reduction in this sector would surely be an environmental advantage? I mean, less carbon emissions, smaller ecological footprint, ability to restore the now unused land to forest or other environmentally friendly business that would contribute to reducing carbon emissions e.g. industrial hemp farms for various products such as paper, building products, fabric and so on?
My question is: Shouldn’t the Green’s be advocating for reductions in exports and imports and promoting wider support for local trading – which could also create well paid jobs by enabling local business owners to employ local workers as well as minimise environmental impact? I’m not saying here that there is no room for exports in a sustainability framework, only that continued steady growth of our tradable sector is unsustainable and therefore the outcome will be no different to that of the neo-liberalism the Green’s have openly advocated against.
Dr Albert A.Bartlett states that ‘the greatest shortcoming of the human race is our inability to understand the exponential function’. The exponential function is a tool used to measure steady growth patterns, such as Gross Domestic Product (GDP). The benefit of understanding exponential growth is to inform ourselves of how long it will take for steady growth to double; using a simple calculation and this gives us the ability to interpret what that level of growth will mean for our society. Dr Bartlett focuses on the use of exponential growth in relation to population as this is where he sees the function as being most important due to its understatement at both the local and global level. My purpose is to show why the Greens focus on economic growth is not in line with their principles of sustainability – the very value that gave birth to the party.
GDP is often used to indicate the standard of living in a country and so it follows that the more economic growth the better the standard of living. But the exponential function can dispel this myth.
Exponential growth is measured by a constant (fixed fraction) over a fixed period of time. In 2012, NZ’s GDP was recorded as 2.5%. Dr Bartlett indicates that if it takes a fixed length of time to grow, in NZ’s case 2.5% then it follows that it takes a longer fixed period of time to grow 100%. This longer fixed period of time is called the doubling time. The doubling time (T2) is calculated  as follows: T2 = 70/(% growth per unit) = time.
What we can say is that if NZ’s economy continues to grow at 2.5% then in 28 years our GDP will double to 5% (Calculation: T2 = 70/2.5 = 28). This may not seem so bad, but consider the growth rates for the 28 years following each of the preceding periods:
  •          2012 = 2.5%
  •          2040 = 5%
  •          2068 = 10%
  •          2096 = 20%
As Dr Bartlett points out, we need to understand that “the growth in any doubling time is greater than the total of all the preceding growth and that modest growth rates give us enormous growth in modest periods of time”.
My conclusion is that if Dr Norman is concerned about sustainability then criticising the government for the decline in growth in the tradable sector is not particularly consistent with the principle of sustainability. If modest amounts of growth in that sector will give us enormous growth in a modest period of time then this will require major depletion of natural resources and massive increases in waste to sustain growth at those levels. I wonder if perhaps Dr Norman should instead be encouraging local trading (within NZ) to improve job prospects and the prospects of local business owners and support the reduction in exports rather than advocating a position that has an apparent conflict with Green Party values.