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Opinion: A comprehensive, principle-based redesign of tax policy is urgently needed

Opinion: A comprehensive, principle-based redesign of tax policy is urgently needed

By Susan Guthrie

The gap between rich and poor is an important issue that rarely gets discussed by our economic mandarins.

Yes, we're told - relentlessly - whether or not economic activity is increasing, and how the risks to that activity are large and looming, but there is very little discussion of how the spoils of all that effort, or the burdens of downturns, are divided among us.

Yet, as the IMF recognised in a report last year (Leveraging Inequality, December 2010), increasing inequality can destabilise economies - indeed the IMF believes a failure to contain inequality has contributed to the global financial crisis:

"Restoring equality by redistributing income from the rich to the poor would not only please the Robin Hoods of the world, but could also help save the global economy from another major crisis."

So it was a welcome change to learn that Prime Minister John Key and Labour leader Phil Goff finally aired the issue in Parliament last week.

However, they were boxing in a fog.

The truth is, we really don't know whether the gap between those who have plenty of resources available to them (annual cash income and, more importantly, available wealth) and those who don't has been rising or not, or by how much.

For a start, we haven't measured household wealth.

Typically, we've only had taxable income to go on and that is a poor indicator of someone's resources, especially when you have a tax regime that encourages the wealthy to minimise taxable income.

Take the share of total taxable income commandeered by the top 1% of the population. It looks as if the period from World War II to the mid-1980s was a golden era of improving equality. The top 1% of personal taxpayers had around 15% of all taxable income during the 1920s and 1930s and this had fallen to 5.5% by the early 1980s.

However in the 1920s the top tax rate was about 23% while during the late 1930s it rose sharply and by 1940 was well over 60% where it remained (more or less) until the late 1980s.

It should be no surprise that fewer people declared huge incomes during this period - big earners had every incentive to take their income in non-taxable forms (meaning the estimated gap between the haves and have-nots was probably understated).

From the late 1980s, high earners began to race ahead, with the top 1% again earning 14% of all income by 1999. It may well be that globalisation of the executive recruitment market, financial liberalisation and changes to the public sector led to accelerating executive packages.

But isn't it also possible that the radical lowering of the top tax rate in 1989 to 33% (when it had been over 60% just a few years earlier) - a level that was retained until 2001 - led to high incomes again being reported to the IRD?

The benefits of avoiding tax had fallen enormously. The reported share began to fall again once Michael Cullen, in an outburst of populist symbolism, raised the top tax rate to 39% in 2001.

More recently, surveys have been used to measure household income. But these exclude income earned and retained within family trusts (income distributed by family trusts to trust beneficiaries is included). In 2009, that meant income equal to around 12% of the total wage bill of the economy was not captured in the surveys.

This wouldn't matter too much if the same proportion of income was retained within trusts every year - the survey trends would be accurate.

But when the top personal tax rate increased to 39% in 2001 while the trust rate stayed at 33%, the proportion of trust income that wasn't distributed began to rise strongly.

The pressure to retain income within trusts increased further when Working for Families was introduced in 2004. Undistributed trust income was ignored when determining eligibility for the Working for Families tax credits - changes in the last Budget mean trust income will now be a factor affecting eligibility for the tax credits.

So heavy scepticism is warranted about claims the income gap has narrowed since 2004. Sure, Working for Families successfully boosted the income of low-wage families, but it also prompted migration of some high incomes into trusts (and other vehicles) and out of official statistics (and possibly out of the tax net). Can anyone really claim the true gap between the haves and have-nots narrowed at all?

Until we start measuring households' wealth (held in their own name and in their family trusts) as well as the income they receive, we won't know how large the divide really is.

And the debate between the Keys and Goffs of this world on this issue will be pointless.

The distribution of resources (income and wealth) in our community is hugely important. If we didn't know that already, we now have confirmation from the IMF.

We appear to want to ensure the gap doesn't get too wide - otherwise why do we persist with progressive tax rates and means-testing cash transfers such as Working for Families?

However current policies (tax, Work and Income benefits, Working for Families, NZ Super and other transfers) are a very poor quality attempt at redistributing.

They leave considerable amounts of wealth untaxed and redistribute cash on an arbitrary but populist basis. Current policies arguably exacerbate differences in market incomes and goodness knows what they do to wealth distribution.

A comprehensive, principle-based redesign of policy is long overdue.


Susan Guthrie is an economist at Gareth Morgan Investments
This article was first published in the NZ Herald.

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 Addressing inequality needs more then tax reforms - a culture change.

One of governments/ policymakers task is to stimulate it’s economy, accordantly to the social stratification ratio to it’s population. This is not the case here in New Zealand. For years we have a very one- sided, unbalanced economy.

Working and middle class people in this country simply do not have enough decent job opportunities. The consequences are increasingly visible with  talented youngsters unemployed or leaving the country and many families not able to pay the bills for daily necessities - a poorer nation.

PM - Minister Joyce - current national policies of allocating infrastructure needs in sectors such as energy, transport and telecommunication in the billions and skillful jobs to foreign countries/ companies needs to be reviewed.

Wealth Inequality is a HUGE issue that needs solving. Yes some should earn more than others, and Govt handouts is not the way to address the problem (e.g. WFF).

The Rich Listers have achieved great things and should be respected. But many have started their careers on inherited wealth (e.g. Chandler, Friedlander, Doug Myers was gifted a brewery Australia - Murdochs, Packers etc..). Inherited wealth is the key driver behind wealth inequality.

It's perverse for someone to worth 1,000 times more than the average, when they aren't 1,000 times more talent...they just inherited capital.

The way forward is:

- Govt to agree on a Pareto distribution that is fair (e.g.Top 10% to control 30% of wealth)

- Inheritance taxes to be implemented

- Some sort of tax of capital (e.g. land tax etc..)

- Lower income taxes

Wealth should be distributed on the basis of talent, experience and work a result our capital market will have more participants, and not dominated by a minority (e.g. Rich Listers.)

Shouldn't you be working to pay off your mortgage debt Parky...if people didn't sign up for the credit.....! Now off you go and service your mortgage.

Yes because savers need the interest income!!!!!!!

I always love how the talk is about redistributing (taxing).  There is very little discussion about how you actually grow the wealth base.  Taxing to redistribute creates nothing. I'm sure we could close the gap tomorrow if we wanted to, but who cares if the gap is zero, if the average income is $1000pa?

Now if Susan is actually talking about changing policies to encourage people to create wealth, then I'm all for it, but the article is sufficiently vague to be able to read it anyway you want!

The problem for the type of global and unfettered capitalism we have at the moment is that income is created for the very few, who then promptly hoard it.

Capitalism works best when the middle classes are employed and spending their money.

When the money is redistributed to the very rich (who then hoard it) then capitalism has a problem.



 "who then promptly hoard it"....really!....I spose there are some who buy ingots of gold and stash it under the bed with the artworks and rare books stamps and coins....but most accumulated wealth IMO is promptly invested back into the system...and likely as not generates more employment and wealth....check out the billions invested into the drugs and medical sector BH...where is that coming from.

The problem is not capitalism BH..the problem is attitudes and the fostering of them by politicians out to make personal gain.

If the parasitic stranglehold the banks have over this economy could be destroyed by the peasants telling them to shove their credit, then you would see a 'better' outcome for more people in the long run but there would still be a % who would want others to fund their lifestyle while they sit on their arse in front of the gogglebox or whatever.

If you want to see improved outlooks...push for a change of attitude on the part of Kiwi peasants.

but most accumulated wealth IMO is promptly invested back into the system...

Yes, it's invested into the systems in places such as the Cayman Islands or Luxembourg.

You took the words out of my mouse.

Good idea Wolly, tell the banks to stick their credit then there would be no reason for banks to take deposits or savings.

They could then charge you for having credit funds in bank like Swissiland and Japan or even UK and US where you get next to nothing for your savings.

Then they could charge the actual cost of maintaining bank accounts and other banking facilities. That would get the peasents going!!!!!!

Then you could all invest in equities, commodites, stamp collections or dare I say it property to get some kind of return on your hard earned savings.

No demand for lending means no demand for savings or deposits!!!!!!!!!!!

The value of something no one wants is zip!!!!!!!


i agree bh

probably the best economy i have lived in was sth.korea 2002-03. features i remember:

-tarriffs on imports that hurt their manufacturing base,

-tremendous freedom to trade,

-great infrastructure,

-a happy and hardworking middle class, 

-a govt who were prepared to intervene if they could see it was in the national interest

of course there were poor people and rich people, but the largest sector was the middle class, and they worked hard and played hard. i didnt warm to the people, weather,food, or geography, but it was a good mix of private and public activity

and strong armed forces

like NZ - not  !

I am pretty sure they don't hoard it.  As an individuals wealth expands the range of potential investment opportunities increases and if they are smart the potential to lose it all on one bet falls (unlike a mum and dad with all their money in a finance company or the family home).

You and I would have trouble getting our meager savings into a private equity fund, but once you have taken your own advice and become very rich I am sure you will be able to BH.  Of course you are never going to become rich via redistribution!

So if by hoarding you mean that they are able to make more and more money, I would agree, but they are also generally providing the capital needed to produce the goods that the middle class aspire too.

As for comments that it all ends up in the Cayman Islands, that is a tax haven, nothing is created there other than being able to avoid some tax and even that is extremely hard due to anti-money laundering laws, post-911.

Susan raises some excellent points, which at least suggest the endless 'rich are getting richer' debate might need to be re-calibrated.

Working for Families was misguided because the loose eligibility crtieria provided a welfare (I mean, tax credit) rebate to many people the underlying philosophy didnt mean to subsidise. I'm not saying I know the answer, but I am saying the statistics are not as clear cut as they are alleged to be.

In addition, before the 1980's a low percentage of New Zealanders owned shares or interests in mutual funds. Today, especially with Kiwisaver, this is quite a different figure. Longtitudinal studies on how the wealth is distributed would be interesting.

It's interesting in New Zealand we don't seem to celebrate success, with the 'good for you' mentality of some other countries. I think the negativity about success is part of a national attitude. If we had a national ethos that success was to be admired, we might see an attitude change.

WFFs was that bandaid the government applied to try and save an endangered species: the middleclass. When I was born, the wealth distribution in NZ was shaped like an egg. Then along came Muldoon, and since this time it has merged into an egg-timer shape. But at the end of the day, this is what NZ voters have chosen. We make our bed, we sleep in it.

Susan may be arguing that the rich are getting richer may needs to be recalibrated, but I think she is also arguing that the top incomes are understated, i.e. inequality is understated and the recalibration of wealthy needs to be an upwards recalibration.

The rich have always been with us, the illusion that the poor could join in the party has been a recent phenomenon that has turned out to be short lived and impossible. The rich just need to start the illusion up again, to get the masses back to the hamster wheel, lotto just isnt enough to cut it on its own.

Wealth is built on exploitation, and the reason we have a code of laws is 'so that the strong should not harm the weak'.

The reason people allow the exploitation is because they believe a lie.  The lie is this, that the same wealth can one day be theirs.  Once the gap becomes so great that they realise that the wealth is forever beyond their reach then you have 'social unrest'.

In NZ the top wage is around 125 years of work on the average wage.  In the USA its over 13,000 years of work on the average wage. 

When you have a society that encourages firms to pay workers as little as possible in order to maximise the profit from their labour and redistrubutes this profit unequally then you need to have laws that in turn redistrubute this back to those whose labour earnt it, and the society that provided the enviroment for it to be created.

"Power always lies with the people doing the labour. It's their choice" - Excuse me?

Can you explain this statement as it relates to the real world, re NZ or other western nations. I am especially keen to hear how you think that the offshoring of jobs at all levels gives people the choice or the power..

May have read your reply incorrectly.


Ok, Yes I'm with you now.

You are talking about somehow changing the mindset of people who have been brainwashed (marketed) to using very effective techniques. This is now more than a generation old, and until something truly breaks, I do not believe stands a chance to change.

It can be seen everywhere, adults acting like children, the child like mentality of people , the vanity and 15 minutes of fame culture, attached directly to an out of control consumer mindset.

It needs to change I agree

Correct me if I'm wrong, but doesn't a huge proportion of our population, something like 40%, effectively pay little net tax, once all the welfare support is dished out to them, and  a small proportion of higher earners pay a huge amount of the tax take.  eg what proportion of income tax is paid by just 20% of workers, think you will find it is substantia! I don't have the figures at hand, may be someone does.  So what on earth is she on about?

I reckon you are wrong -- as you are just looking at income tax, not gst -- which is regressive and hence those who may pay lower income tax pay proportinately more gst.

No need to reckon, even adjusting for GST approximately 40% of household pay no tax, net of goverment transfers. That is the government transfers offset any tax they may have had to pay including GST.

Have just come across some figures for USA in 2008, the top 25% earning $67,000 or more, paid 86% of federal income tax, bottom 50% paid 2%.  Suspect figures will not be too dissimilar for NZ

ok me. what about general electric getting a net tax rebate last year, for example?

tax systems end up full of politically created loopholes . that's yer problem.

Yeh,WFF, that was just a subsidy to employers so they could pay workers substandard wages, which in reality is probably all they could afford. In th end the problem comes back to the banking system, it is meant to be a  self governing, conservative, boring industry providing liquidity to our economy and keeping black market lenders out. Instead its become a self serving monster sucking the life out of the economy, clipping all our tickets as we try to survive, lets put the blame where it belongs the rest is just a side show.

For all sorts of reasons, people are not equal. Why should their pay be any different?

More marxist drivel.

Drivel indeed DB....however there is something very wrong about half million dollar pay packs for the Sir Humphreys in wgtn and multi million dollar pork being dished out to some public company bosses.

I see no problems with bosses/owners of private companies receiving billion dollar pay's their business...but the likes of the AIA ceo salary bloat and Telecom and many others...nah...that's just wrong.

David B and Wolly, what do you think would really happen if we left the free-market to its own devices? Might you both spend some thoughts on this question, as it might answer yours.

Gosh you think the outcome would be as bad as leaving the market to be managed by the politicians...might you spend some thoughts on will help answer your question!

I don’t need to consider it because the world isn’t like that. I don’t support unrestrained anything, and that includes capitalism. With resect, if I say something is 3 inches, it’s a bit silly to then say to me that I should consider what it would mean if it’s 30ft! It isn’t, and its pointless/meaningless to suggest it is.

Where do these comments say that everyone should have equal pay?  I think the issue is whether a reduced range of pays is socially desirable compared with the present.

  Your dead right their even in the dark days of Comunist Russia. Where everyone had a job and a place to live..The elite (Card carrying Comunist party members) Could shop at the GUM store to buy American ciggies Beluga caviar and Georgian Champagne.Pheraps all systems are flawed and have a limited time of efficiency.But at the moment the residents of Detroit and Gary Indiana..Would be glad, to have a job and a place to live.

Management set their own salaries so of course increase theirs by more than their employees.  These are signed off by Directors, who sign off each others' increases.  It's a joke. 

The multiple is getting out of hand. Reduce the multiple so that it is more equal, but enough for people on here to feel they are better than others aka 'are getting ahead'.

Meanwhile, my wife and I are creaming it.

Equal pay implies that all work is equal. It isn’t, so it ain’t.

"Experts" like Wilkinson and Pickett, authors of "The Spirit Level", completely miss the obvious correlation with culture and religion. There are numerous studies on this aspect by academics like Iannoccone, Barro, Stark and McCleary.

The nations with the least inequality happen to be numerically dominated by a single culture that works this way. The nations with the highest inequality in the world, happen to have a dominant single culture that tends powerfully towards inequality. Saudi Arabia, for example. The more "multicultural" a nation is, the more confusing the results will be; as some cultures tend to inequality within them, others tend to a high rate of success among their adherents, and others tend to a low rate of success among theirs.

Japan is number one, with its monoculture with a strong work and savings ethic. The Scandinavian nations next - Lutheran and Calvinist "social capital" at work there. Nations whose predominantly Protestant past has not yet been significantly watered down by mass immigration and multiculturalism occupy the next few positions.

The USA is of course the most multicultural nation in the world. No surprises at the inequality there. Another factor is the high proportion of poor recently-arrived immigrants, in which the USA leads the world; the USA also leads the world in the rate of "remittances" sent back to their countries of origin, by immigrants, many of whom remain quite poor in USA terms, but wealthy in their "country of origin" terms. 

By the way, this is nothing to do with "race". Culture is not race. Anyone can change their culture. We all had miserable pagan ancestors somewhere back in our past.

The UK is a special case, apart from its relatively high level of multiculturalism. Recent studies from the London School of Economics have stated that Britain's 5 decades of "Town and Country Planning", and the resulting high land prices; have been a more powerful force for social inequality than income disparities themselves. Maybe NZ and some other nations are also starting to suffer from this effect. Academic studies have certainly pointed to this effect in California, where they have operated similar policies of "urban planning" for not quite as long as the UK.

If we were to analyse the amount of "income redistribution" that is already taking place in all first world nations, the question would have to be asked, how much more could the economy stand without killing the goose that lays the golden eggs? It is not just a matter of cash transfers via social welfare; every one of us carries a price tag of millions of dollars in State spending from birth to death; most of us will never pay back in tax, what has been spent on our health, education, public safety, infrastructure and amenities. Even those of us who never earn their own income and never pay tax, are millions of dollars ahead of around 50% of humanity.

Roger Douglas pointed out years ago that if everybody got simply "given the money" and then paid their own way in free markets for health, education, and transport at least; even the poorest could live like kings. Instead of beating up on Sir Roger, we could seriously look at "value for money" in all the spending of "transferred wealth" that already IS taking place. And we could look seriously at the causes and pre-indicators of inequality. Marriage and the traditional family were powerful forces for equality for several reasons: marriage and subsequent "inheritance" that crossed socio-economic group boundaries being just one obvious reason.

Pehaps more equal societies have a culture of equality. And more unequal societies have culture of inequality.

I have read The Spirit Level book and found it very good and really explained to me why NZ has not done very well on so many measures that matter even as we have become richer.

Another interesting factor in society-wide measurements of "inequality", is that many recent immigrants, while they are "low income" in terms of the host society, frequently "remit" a large proportion of their income back to their families in their country of origin. By the standard of their country of origin, they are a "high income earner". The "Index of Global Philanthropy" published annually by the Hudson Institute, has recently been re-titled "The Index of Global Philanthropy and Remittances", because remittances are so significant; more significant, in fact, than philanthropy.

"Remittances" from the USA to the rest of the world, massively dwarf all other international flows of philanthropic giving. Ironically, the USA stands accused of high "inequality" within its borders, AND of low State-provided "Aid" to the rest of the world, compared with, say, Scandinavian countries. But the Scandinavian countries PRIVATE sector "aid" is almost non-existent, while the USA's is significant; and when "remittances" are taken into account, funds flowing out of the USA utterly swamp all other international aid flows by any measure of comparison. Interestingly, New Zealand is one of the few other outstanding examples; Pacific Island immigrants remit large amounts of money to their families back in their country of origin, while constituting a major factor in the existence of “inequality” as measured within New Zealand.

The following are causes of increasing inequality and decreasing social mobility. With all these factors at work, it is a wonder we do not have much worse inequality than we do; and furthermore, efforts to address this inequality through income redistribution are inevitably failures.

Provision of services, etc, with public money, that primarily benefit the wealthy, and the neglect of infrastructure that was a greater benefit, proportionally, to lower income earners. The neglect of roads, and time wasted in congestion, has a disparate impact on the poor, who tend to depend more on motor vehicle use than middle class people who can choose where they live and can organise their life around public transport. Public Transport routes converge closer to city centres, so that those who live in the higher-priced homes in those areas, find public transport convenient but those who live in lower-priced homes further out, do not.

The subsidy of cultural centres and art galleries benefits the wealthy at the expense of the poor. New Orleans was a classic illustration of the consequences of concentration on trendy cultural vibrancy and the like, by the local administration, at the expense of vital infrastructure that was fought tooth and nail by chardonnay greenies and NIMBY-ists.

Worth a specific mention, are "free" public goods like Water (in some jurisdictions). In so far as poorer people use a lot less and yet pay for the resource, and wealthier people use a lot more, the cost burden falls disproportionately on the poor in comparison to politically unfashionable "user pays" systems.

Background reading: "Back To Basics", by Joel Kotkin

The “conservation” of land, and restrictive zoning, has a disparate impact on the poor, on the young and those who do not own properties, in favour of the more well-off who maintain their nice views and surroundings, while property values escalate out of reach of all who are not already property owners. An excellent article in this respect, is “Green Disparate Impact”, by Thomas Sowell. (The “poor” population of California is actually being driven out of state by escalating property values).

Also, in "The Housing Bubble and the Boomer Generation", Robert Bruegmann argues that this phenomenon has resulted in "the greatest intergenerational wealth transfer in history", in favour of older, existing home owners, at the expense of young, first home buyers. The "boomer generation" benefitted from pro-development policies that enabled them to buy low-price first homes on the urban fringes, while at the same time the price of all houses was kept low. But now the boomer generation has supported land conservation policies that result in the prices of all homes being driven up, which benefits them but prices first home buyers out of the market. And when these property price "bubbles" burst, it is the people who bought more recently, mortgaged to the limit, who suffer the most from bankruptcies.

Urban planners have come to favour a "monocentric" urban model, under which these effects are the most marked - that is, property values vary far more dramatically than in mixed-use, multi-nodal type metros. The justification for the monocentric model, is that it creates higher density residential zones that make planet-saving commuter rail more viable. The capital gains captured by owners of CBD properties in a monocentric metro are many times as high as the capital gains captured by anyone in a non-monocentric metro.

The recent fashion to insist that roading and indeed all transport infrastructure be financed from petrol taxes, adds to this trend. Most people do in fact travel by car and pay petrol taxes; while the capital gains that result from the infrastructure they are paying for, is captured mostly by the owners of centrally sited property. The lowest income earners who cannot afford the most conveniently located homes, (including homes located convenient to public transport) end up paying the most into this wealth transfer especially via petrol taxes. Furthermore, the capital gains resulting from the proximity of properties to new commuter rail lines and stations, are always highly concentrated; whereas the capital gains resulting from road expansion are much more diffuse. Subsidies from gas taxes and general taxation, for commuter rail projects, represent a wealth transfer from these "payers" to the owners of conveniently located properties. (Economist Colin Clark described this effect authoritatively in one of his seminal works, "Regional and Urban Location", 1982).

"Infill development" closer to the city centre requires expensive upgrades of old and inadequate infrastructure; while the beneficiaries of this development are invariably wealthier people. If the political fashionability of infill development results in special levies not being made, or minimised, this too throws a disproportionate cost burden onto the land taxes paid by young households closer to the urban fringes. Monocentric urban form itself, which planners are attempting to perpetuate, results in greater inequality. William Wheaton, in "Commuting, Ricardian Rent, and House Price Appreciation in Cities With Dispersed Employment and Mixed Land Use", points out that in the cities he is describing, there is much less of a range of land prices from lowest to highest; jobs and amenities are much more dispersed, and the "premium" price of property conveniently located, is very, very much lower than in monocentric cities where job concentration occurs in one centralised location. This is one reason why dispersed cities like Atlanta and Houston have such low "maximum" prices of real estate.

Increases in regulatory expense and the costs of obtaining licenses for commercial activity and the like, tend to inequality. A major food canning business began a few decades ago in its founder's garage. These "rags to riches" stories, are no longer possible, except perhaps in the entertainment industry. In a hard-hitting open letter, successful Silicon Valley entrepreneur T. J. Rodgers argues that California has now destroyed the conditions under which Silicon Valley was able to begin, especially cheap land and cheap small business premises.

Low land prices enable maximum participation in agglomeration efficiencies such as those represented by Silicon Valley. High land prices, on the other hand, represent barriers to entry, and advantages to incumbents.

This phenomenon, and the other barriers to entry into business that I mentioned above, is also covered in the book “The Mystery of Capital” by Hernando DeSoto. Interestingly, well-established larger businesses are often supporters of this phenomenon, as it keeps competition to a minimum, hence the little-publicised support of many wealthy people for regulatory, socialist politics.

More recommended reading: “Intellectual Class Wars”, by David Horowitz, "Freedom of Opportunity, Not Equality of Opportunity" by George Reisman, and “Scratching By: How Government Creates Poverty as We Know it”, By Charles Johnson:

California is probably the outstanding illustration of all these effects of misguided policy of "Liberal Left" government on poorer people, which the same government and politicians claim to care about more deeply than "free market" politicians. A recent article made this comment:

"....As recently as the 1980s, Californians generally got richer faster than other Americans did. Now, median household income growth trails the national average while the already large divide between the social classes—often bemoaned by the state’s political left—grows faster than in the rest of the country....."

The trend towards greater levels of immigration, and relaxed criteria for language, qualifications, and wealth of immigrants; causes increased inequality. Immigrants in the past tended to be fewer in number, of high qualification, and socially mobile. Our political culture now demands less discrimination, and what is more, does not require the immigrant to assimilate. Large numbers of modern day immigrants merely swell the ranks of the immobile underclass.

The subsidy of tertiary education with public money, causes inequality. Tertiary education itself, tends to increase inequality, due to the higher incomes commanded by graduates. To use taxes, which remain unnecessarily high on low income earners, to subsidise this, only worsens the situation. An outright free market situation with all students paying fees, and a broader use of direct student-based “scholarships”, would actually produce less inequality than the system we have now, and would produce much better results in terms of relevant qualifications. I suggest that many of the poorer folk who do make it to Uni under the current system, could be tending to make poorer choices of qualification, which would be eliminated by better guidance under a scholarship-based system especially scholarships funded by private enterprise which best knows of its needs for people with certain qualifications.

The fully socialised public schooling system, actually increases inequality because the numbers of people who can afford to pay taxes AND pay private school fees is obviously going to be low; in contrast to any system where parental choice is at least partly subsidised with tax breaks or "vouchers". This is why 3 times as many Australian schoolchildren, proportionally, go to private schools, than in NZ.

Breakdown in traditional marriage is THE single cause of inequality of which our cultural elites are most in denial about. The obvious thing is the disadvantage to children brought up without a father, or with a string of perverse male role models in their lives. But also, marriage across socio-economic boundaries, and subsequent “inheritance”, were powerful reducers of inequality. Declining religious observance and churchgoing is also a factor in a lower rate of marriage occurring across socio-economic boundaries.

There is an obvious contrast between single parent families and double income families. In previous eras, there were less of both these things. Obviously, if we progress from a societal model where most families have 2 parents, with ONE working; to another model where there are a large proportion of double income families and a large proportion of solo mothers, either working or not, we will experience an increase in inequality.

The trend for wealthier people to have "planned families", and the poorer not, obviously causes inequality.

There are now more selfish attitudes, the "me" generation, with more childless "singles", who are relatively well off, than at any other time in history.


With all this stuff I have covered, is it any wonder we have "inequality"? If we constantly turn on higher income earners and present them with "the bill" for society's own Darwinism, how long can this last?

As I said before, if we were to analyse the amount of "income redistribution" that is already taking place in all first world nations, the question would have to be asked, how much more could the economy stand without killing the goose that lays the golden eggs? It is not just a matter of cash transfers via social welfare; every one of us carries a price tag of millions of dollars in State spending from birth to death; most of us will never pay back in tax, what has been spent on our health, education, public safety, infrastructure and amenities. Even those of us who never earn their own income and never pay tax, are millions of dollars ahead of around 50% of humanity.

It is quite audacious to say that actual transfers of cash ON TOP OF THIS (in welfare payments) are “inadequate” and that the highest income earners are being “greedy”. The amounts already paid disproportionally by the higher income earner, are already massive long before actual cash payments to the “less well off” are considered.

Refer back to the Roger Douglas solution I covered above. Stop blowing billions of dollars on State provided services of extremely low value - let the market provide the roads, the schooling, the health services, the housing. Give "the poor" the MONEY, not the $1 of services that cost "the wealthy" $3 already.

Jees Phill...thats not a Wednesday post....more of your Sunday morning...ah well I'll have a read kinda thingy.....

Still I'll save it n give it a read....timing Phill...timing.

You gotta be in awe of the speed of Phil's typing ! ....... a great loss to the secretarial pool ......

....... do they still have those , Count , " secretarial pools "  ? ......

Imagine that , .. hot chicks typing 60 words  to the minute , in their bikinis ..... in the pool ,....  wet & steamy .. ooh la la !

Yes they do...just had one recently when I had to ...well you know...and there were a fountain.....I don't like secretarial pools. there was no steam.

Unless you're a eunuch , or a male member of the Labour Party , ...  the steam will be on your goggles ....... yeah , baby !

Goggles..? you were planning a big night in then ....! cudos ma man...silicone of course rubber is just so yesterday.

Well it would be male wouldn't it Gummy!

... well spotted , Wolly ..... the sisters would labour to keep their glasses from steaming over , too !

Gives new meaning to the Members of Parliament Gummy....we need a cartoon!

The only typists I ever got to dictate to were so old that their nipples hung below their dress.

I take it you found that out after lifting the dress?

Were You checking out their kneecaps then David....come on matey fess up.

I kept dropping my pen.

Yeah it's all about gravity and putting it to work for us...your a scientist I appreciate that.

... yer reckon it's a slow day on the financial markets when all we got to talk about is a bunch of saggy titted old typists .......

C'mon Bernard .... you ought to be able excite us with something better than that ! ....

... you got a " mankini " ... big boy ?

You need a blogpost/website Phil - Iain P shows the way - great clips in his slideshow too.

Blogsite...mate he's batting for a diused library. I think the Magna Carta may have been shorter.

Roger Douglas's view is that they are extremely low value....most of society on the other hand dont concur as they choose to keep it and not vote ACT.   The US has already proved that Public healthcare is a better system, so low value it is not.

This is the second gilded age (where up to the crash of 1929 was the first), it will end as the first, great destruction and it will end with ppl voting for democracy and fairness again.

"how much more could the economy stand without killing the goose that lays the golden eggs?"

Wrong Q as usual, it should be, how much more can the planet stand without its eco-systems collapsing and we are forced in-voluntary into the correction we didnt make less painfully from choice earlier".


The USA has NOT proved that public healthcare is a better system. That is typical of what passes for "informed judgement" in this country of numbskulls.

Politicians, activist judges, and lawyers, have killed the US health care system.

NZ's Private system is at least twice as efficient as the NZ public system. The US private system is probably around twice as efficient too, but COSTS twice as much because it is DELIVERING LITERALLY FOUR TIMES THE ACTUAL SERVICES.

Where in the US private system, are the waiting lists? Where is the rationing? Where are the people with debilitating conditions like Fibromyalgia, going completely untreated? Where are the people going blind with undiagnosed diabetes because of a cheapie "test"? Where are the people who get an X ray only and no further scans because they cost too much?

Where, in NZ, are the people who have been paid out millions in compensation for medical misadventure? Where are the Fibromyalgia victims who get a free weekly massage and hydrotherapy, and a home spa pool paid for? Where are the hip replacement cases in the operating theatre 1 week after seeing their GP? Where is the expensive "defensive medicine" being practised, including free THOROUGH annual checkups?


Like duh...

The US healthcare system has been killed by its administrative costs and greed.

Waiting lists, if you have no money you are not on a waiting list as there is none.

Rationing is done via your wallet, no money you get zero ration.

Again, annual checkup assume you can pay the monthly $$~600USD ish fee....and Im assuming those checkups are in that basic fee....they may not be. 

You can go to your GP and get a annual check for the most likely things to be checked on your age, bllood tetss are free.....want more, you can pay for a full checkup....

NZ private system is subsised by the public one, all you do (mostly) when you pay is allow queue jumping. Its setup for throughput of simple one off things like a hip operation, no wonder at that point its efficient....trouble is of course your annual fees rise so fast past 50 that in effect you are paying for that hip op anyway and possibly its costing you more...

NZ, canada and UK  have better life expectancy, than the USA at half the cost....thats a pretty damning statistic.

Medical mis-adventure, not sure what you are aiming at here. 

"Fibromyalgia" Is this the best you can come up with?

"The goal of treatment is to help relieve pain and other symptoms, and to help a person cope with the symptoms.

The first type of treatment may involve:

  • Physical therapy

  • Exercise and fitness program

  • Stress-relief methods, including light massage and relaxation techniques

If these treatments do not work, your doctor may prescribe an antidepressant or muscle relaxant. The goal of medication is to improve sleep and pain tolerance. Medicine should be used along with exercise and behavior therapy"

So mostly it seems self help....go to a GP and often he tells you to exercise more, eat less and find ways to de-stress. Hardly life threatening.....NZ's public system is limited....and prey how in the US system do you get treated for this if you are not paying? and once you start such long term treatment what happens to your monthly bill?  what happens if you lose of change jobs? you cant get re-insurance so you are un-treated or pay yourself. 

Then there are the cases where ppl in the US have been paying fees in good faith only to find that the insurance company has found a minor mistake in yur forms / application and negates your there is a big and growing Q on your guarantee of cover when you need it.

Whether you think the US system is better or not you can also look at the cost growth in terms of GDP....the private system is growing at 2 or 3 times the rate of a public system...that means approximately every 10 to 12 years the cost of US healthcare doubles in terms of the GDP it consumes....that cant be sustained, even a moron should be able to see that.

Yes I can agree with PDK, really its just another illogical Rant...



For the sakeof our more casual visitors, I'll precis the above posts

        R A N T .

Madman's rant actually....he isnt mentally balanced that one...


Touche' !!!


I don't think we are allowed to say that know wer'e not supposed to say that......oh now I've got to fight the urges...and it's all gonna go pear shaped...n Bernards gonna get mad again......

Your not supposed to say that.

Bernie only gets mad if we use the " F  " word , and the " M  " word ... . And the " C " word , of course . ... And if we call him Bernie , instead of Bernard , he hates that ......

........ geeeez , grumpy old fart , isn't he .

I Forgot U Could Keep Insults Guised u KNOW 

The nub of the problem is that Bernard is a Frigging Unfettered Capitalism Kill-joy !

peeing now.... hey, gotta duck off for a bit...enjoy.

And the joke is that he has yet to formally acknowledge the problem.

Someone once told an old Chinese proverb.

"In the kingdom of blind men, the one-eyed man is king".

And someone replied, "nah, in the kingdom of blind men, no-one will believe the one-eyed man".

Has anyone actually read my thesis above, and can you kindly engage with it?

Pack of baying fools. Pity help NZ. You remind me of what happened to anyone with any brains, under Mao or Lenin.

And THIS is NZ's premier intellectual economics / finance blog.......? What a joke.

PhilB...I told you I would save n read it and I will.....but fair to say.. to mock your potential audience prior to their evaluation (if capable) is to invite criticism warranted or not.

I think the point some of us were making is that the dissertation may involve a laborious amount of reading with some re-reading to digest on a Wednesday.

Leemee see if ole Gummy has this correct : NZ has a long history of progressive taxation , slug the rich , bleeding the productive sector dry ........

..... and then using those monies , through a myriad of government departments , programmes & packages ...... to even out the income , for all Kiwis ..... the egalitarian society , where no one can be unfettered , and rise too far above the clamouring hoards , seeking their " entitlements " ......

And the upshot of all this is , today , a massively inequal distribution of income & wealth in New Zealand .......

....... meebee it's high time that NZ gave unfettered capitalism a go , 'cos socialism hasn't done the job it was designed for .


fiddle dee dee.......even if it had just a couple of relief spots in it or something.

Inequality of outcome doesn't - by itself - prove lack or inequality of opportunity.  Inequality of outcome may also be - in fact, inevitably is - the result of equality of opportunity. 

The information that we really need, to assess whether inequality of outcome is the result of a lack of opportunity, is the extent to which the people in the poorest deciles are the same people as were there one, five, ten years ago. 

Over to you Bernard, is that information available?

For my mind the gap seems to be generational, and based mostly round trusts and property. The difference in wealth between my parents and myself (and my partner) is almost embarrassing, even though only my father worked and they had 3 children. We earn considerably more than them, have become very frugal with our money and yet will never attain anything like the kind of wealth they have ammassed through cheap property, borrowing and spending. We're too busy paying off student loans and a house that cost way too much! All of our friends who earn ok money are in the same situation - taxable income seems to have very little to do with it.

The system in NZ is designed to make the rich richer.  They are by far the best placed to make the lion's share of the gains from appreciating assets.  Unlike all other OECD countries, we fail to have a CGT, land tax, estate tax, or any other relevant tax on assets.  There is a CGT-by-another-name that is easily avoidable by the asset rich. 

So our Gini coefficient score, already higher than most other OECD countries, will inevitably get higher.

This will eventually lead to riots a la UK and other social unrest.  It cannot be the pathway to a unified and progressive society. 


Cheers to all

Yeah, I'm sure all those rioting 14 and 15 year olds are doing it because of their high minded principles around social justice and inequality in the UK.

What a load of socialist twaddle.

They're just another messenger, DavidB.

Light years from me and my angle, but we both mean the same thing to you.

Shooting messengers, never changed the message.

It does say something about the shortcomings of the shooter.

PDK did you see that link to George Friedman I posted on the news at 9? Obviously David didn't.

If you mean they are doing it because they feek alienated from, and alienated by, their leaders, and feel they haven't got much to lose, then I suppose you could indeed call that high minded principles.

David:  Suggesting than continual polarisation of wealth is unhealthy for a country is hardly "socialist twaddle".

But then I guess its not Dickensian either, is it David, so it must be reprehensible and to needs be shouted down.


Actually Philly, if incomes were equal, if the Burger flipper were paid what the surgeon received, who would want to take on the stressful jobs..who would be prepared to invest the years in study and carry the debts..think about that Philly.

Polarisation of wealth has merit in a modern economy Philly.

80 years of social-welfarism has utterly failed in Godzone ..... the gap between the " rich " and the " poor " is as wide as ever .

...... time to give capitalism a fair run ? ... It can't do any worse for the country & for the individual citizen than socialism has .

the gap is wider than ever thanks to rogernomics and ruthenasia not social-welfarism.  But I agree with you rogernomics and ruthenasia has utterly failed (around the world), and it is time to give something better a run.

Wolly:  My concern stated above is at the considerable and increasing polarisation of wealth in our society.

How my posting can be construed as a wish to see burger flippers paid the same as a surgeon is a mystery to me. 

Please don't deliberately misrepresent and demonise my points.  It would be better to discuss them in a mature way. 


Oh alright's got more polarised...what amount of polarisation is little is bad?

Wolly:  obviously depends on societal influences etc. 

However, extreme levels of inequality is correlated with civil unrest (China) or crime (US and Brazil).

Less polarised societies such as Nordic ones are more stable.

There is no magic tipping point I am aware of.  I'm certainly no sociologist. 

However, if we continue to ignore the continuing increase in polarisation, in a society with an already high Gini Coefficient, we will wear the consequences.

Its our choice.


Wolly:  For those who promote increasing polarisation of wealth as beneficial:

"Unrest inevitable, NZ just as bad - academic"

Cheers to all.


Is that how you would excuse the thugs in the UK Philly...?

Wolly warping wots said again. How do you excuse this:

"Young people's suffering was not expressed on New Zealand streets but in the fact that New Zealand consistently had the world's highest rate of youth suicide, she said."

You ok with NZ having the world's highest youth suicide rate?

How do you excuse that?


You really are clutching at straws need to go take a rest...are you really saying the high youth suicide rate in NZ is caused by wealth inequality?'s been high ever since I can remember and the causes range from drugs to parenting problems to bullying and these days includes sick web sites. A multitude of causes Les...think about it.

Fair points Wolly, in other words the causation is complex. My layman's understanding is depression is a major cause and that is exacerbated by stresses bought on by wealth inequality, but more importantly inequality in opportunity and inability to take advantage of what opportunity is available. Just because other valid and relevant causes exist does not mean those associated with inequality in wealth and opportunity can be denied. I guess the other point is, some causes are interrelated in more complex ways than is easy to fathom and 'Spirit Level' supporters seem to be able to point to more and more evidence to support their point, hence I've started to listen, rather than write things off to poor discipline in sections of todays youth. Their resultant behaviour cannot and should not be excused, but I think it does all us potential victims a disservice if we don't look a little deeper at the issue. It's too costly to keep ignoring the complexity of it.

Cheers, Les.

It's not as simple as you or I might believe, Wolly:

'The competing arguments used to explain the riots'

Perhaps we are both right. It looks like there are enough possible causes to easily ignore those that don't suit particular agendas. I doubt we'll make the same mistakes in NZ. Of course not. 

Cheers, Les.

I never said it was simple Les..I criticised you for doing that.

The underlying cause if you are looking for one is to be found in the development of a persons capacity for rational thought. Teenagers have to make that transition from being children to being adults. During that time they are easily lead up the garden path by bloody shits pushing political and religious agenda. That is why it has been easy for the filth in societies to talk kids into becoming human bombs.

On top of this you will have a multitude of matters any one of which can be the trigger point for a person to kill themselves and being told by shit politicians that they are unfairly treated by society is but one.

For you to claim wealth inequality is at the heart of youth suicide is utter bollocks.


Wolly, your capacity to warp and misrepresent an opposing position in debate never ceases to amaze and entertain, it's quite amusing.


Wolly: since when did I excuse them?

The Police can drop-kick them twice around the block for all I care. 

However, if you think cracking down removes the underlying societal problems then you're very naive.


I am sure we'd all agree that the burger flipper should, if he's willing and able to put in the hard yards, be able to increase his own wealth and move up in the world.  The data have not been provided to demonstrate that that is not the case.  How many of today's low-paid flippers were low-paid flippers five years ago, or will still be low-paid flippers in five years' time?

For some, that's enough.  Others feel that the government's job should be not only to ensure that the flipper can move forward if he wants (equality of opportunity), but also to ensure that the farmer is not allowed to move forward faster (less inequality of outcome). 

That can be done either by ensuring that the farmer moves forward slower than the burger flipper does, or by ensuring that the flipper moves forward faster than the farmer does. Both involve major interventions in personal decision making, distortions of incentives and price signals, and a reduction in total wealth creation. Again, some would think that good ...

re: Polarisation of wealth has merit in a modern economy Philly.


No really it doesn't. The US has become poorer and poorer as inequality has become greater and greater.

You may think you are rich and will be OK, But actually you will be down here with the rest of us. The actual rich, people you do not know , have never met and probably have never heard of live complete separate existances far removed from the lives nearly everyone else. We are fast moving back to an earlier age. The great estates of Britain are progressively being taken over by some of the richest people on the planet. They live like the rich of old, only even richer. And even more hidden from view.

Why do people have to equate reducing inequality with everyone earning exactly the same. This is not what is being discussed at all.

In a very few years all of the current crop of wealth creators will be dead, their fortunes will probably pass onto their children. Sam Walton died and pretty much left it all to his children, they did not invent Walmart or create or builfd anything. What use are they really. Inherited wealth is a drain on society. The Russians buying up Britain basically stole the assets to fund it  with the help of a Kiwi- NZ richest man still- not sure?, same with the Suadi's what use are these people. they are parasites preying on society. They did not invent, grow or create anything, why do reletively impoverished people such as yourself continue to prop them up

 "The US has become poorer and poorer as inequality has become greater and greater."

 and you say one caused the other..oh that must therefore be true...bollocks.

Great wealth inequality has always..repeat always been a part of the American how come the USA exploded in wealth creation for 100 years or more PlanB...explain that!


The UK riots are definitely related to wealth inequality...large swathes of UK wealth is tied up in their hereditary class system, and just gets pass down through the mobility is limited.

Oh must be so...14 years olds looting burning and's a fact that they are suffering from wealth inequality....doh

yes they are. this is what you get if you want a very few people to have nearly all the wealth of a country a small middle class of basically high class butlers and a great mass of an under worked underclass. Britain is a great example of what not to do, how not to tax, educate, play rugby, pretty much anything you can think of. Take the Pom out of Britain and you will end up with a good bloke, leave them there and they are not worth much.

I get the feeling that these kids are doing this because they can, Students did it this year as well, now we have had several days of what the BBC called 'Violent Cosumerism" The rest (excluding the actual rich) are so load up with debt that they cannot breath. They have so much rage in them it is frightening , but they cannot do anything. They are trapped debt slaves and they know it.

It is such a strange thing that is happening , is it looting is it protest or protest as looting or is it nothing at all. I think it says something about UK society that isn't nice and not something that we want for New Zealand. So when the next expert from Britain turns up wanting to sell off our assets or restructure us or tell us how to live, tell him to piss off, they really have nothing to offer.



 "I get the feeling that these kids are doing this because they can"...and you are right the answer is to make bloody sure they can't...

The UK has had too many years of hanky wringing policing driven by gutless politicians.

I would agree with your closing statement Wolly..but not just the's  endemic amoung PC reform societies continually promoted by PR fascinated with the notion we as a species are somehow so sophisticated we can deal with almost anything without the returning to our primal instincts...............cork it...cap it...lock it down and relabel it for's still shit in a bottle with the gas leaking past the stinks for sure but just look at the pretty picture on the front.

Just one of the problems with the Western world's Holier than thou attitudes when tossing rocks at foreign glasshouses....being too distracted to see the weeds growing in their own.

Your data and sources, please, and the same for New Zealand.

Until the mid-nineties, the government's British Crime Survey only asked ethnic minority groups whether they had been the victim of a crime which was racially motivated. Since then, all victims are asked and the picture has changed dramatically. 

The most recent analysis shows that in 2004, 87,000 people from black or minority ethnic communities (BME) said they had been a victim of a racially motivated crime. In the same period, 92,000 white people said they had also fallen victim. 

Focusing on violent racial attacks, 49,000 BME were victims. Among whites, the number was 77,000. 
Of those that involved wounding 4,000 were BME. Among the white population it was 20,000".
Those last figures are particularly amazing. In the most serious categories of racist assault the 13% of England's population who are not white committ 80% of the most violent racist attacks!!!.......Unbelievable.......better sweep this under the carpet quickly otherwise people might not think of blacks as innocent victims!

You racist AJ...thems racist numbers made by racists...and it's a racist carpet in all.

Im insensitive, sorry if I hurt your feeling, shall we hold hands and sing a song?

Thank you for your trouble Andrewj, but (I agree is not at all clear above) I was actually asking for data in support of the assertion that there's not much social mobility in the UK -and for anything which tells us whether that's also the case in New Zealand.

However, since the point's raised - How is it determined whether a crime is "racially motivated"?  Is it assumed to be the case if the victim and perpetrator are of different races?  Or is there a requirement that the assailant should exclaim "take that, you differently-coloured individual" as s/he lands the blow?


I Think if they are yelling die you white M**** F***R die as they stab you its considered racial, if its just take that you rich honkey  bastard isn't enough   ;-) thats just robbery, justified by the fact you have money they dont and  they want a cut,  they use a knife instead of the tax departments much more cunning ways, the ird get more out of you to and they keep you alive so you get to pay next year too.

I believe MAFO is the street vernacular Andrew.........and there has been a lot of this over the years and you'd still get a warm welcome in Harlem even today...St Louis lots of places you don't go...conversely still a lot of the other side of the coin down Arkansaw....  Texas..lots o'll find crackers with equaly violent intention toward his brother of another mother.


The BBC Newsnight described the riots as Violent Consumerism

Looks like the UK has a few issues, when they start robbing people in restaurants and on the street with impunity then its a big problem. The question I ask myself is this what the underprivilaged have been waiting for, the chance to take from the ones who got of their butts and did some work. Loved to see them try it in the States with all the concealed carry and you no longer have to be backing down to use force.

Israel is getting in on the act

Race based?

"the chance to take from the ones who got of their butts and did some work."

That  is a bit um not correct...IMHO....I think you can break that down to its simply taking of others who have something because the others have nothing.  That fact that these victims are little better off in real terms than the robbers belies tha fact that the "rich" dont seem to do a lot of work to earn their money, but are insualted. Also the wealth is migrating that way (up) and has done for 30 years, that I think is the problem.  When you look at the last 'gilded age" it was post WW1 and by 1929 we had the same sysptoms/problems we see expect the same outcome, and if we get democracy back some considerable re-balancing....relatively.


What an arrogant attitude you have. 

Steven that sounds a little like you feel he deck has been stacked. I guess mist42nz has not read the paper below linked giving a an intro into how the deck is stacked against the masses & democratic process.

Hear is a free ebook

The Conservative Nanny State

How the Wealthy Use the Government to Stay Rich and Get Richer

by Dean Baker, published May 2006

Economist Dean Baker debunks the myth that conservatives favor the market over government intervention. In fact, conservatives rely on a range of “nanny state” policies that ensure the rich get richer while leaving most Americans worse off. It’s time for the rules to change. Sound economic policy should harness the market in ways that produce desirable social outcomes – decent wages, good jobs and affordable health care.

Dean Baker (b. July 13, 1958) is an American macroeconomist and co-founder of the Center for Economic and Policy Research, with Mark Weisbrot. He previously was a senior economist at the Economic Policy Institute and an assistant professor of economics at Bucknell University. He has a Ph.D. in economics from the University of Michigan.

Excellent point. An altogether too rare "constructive" post amid a pile of ignorance.

I covered this among others in my posts above, that got the crowd of braying fools going as usual.

There are numerous social changes and "progressive" policies that actually CAUSE inequality to increase.

All the braying fools can do at every stage, is come clamouring for "higher income earners" to be sent the bill - yet again - for the consequences of these changes.

Western democracy is in the "end game" stage of this process right now.

The presence of crowds of braying fools on sites like this is merely confirmation. This is similar to what happened to anyone with any brains when Mao and Lenin were rousing THEIR ignorant rabbles.

Well, hell, PB - you don't have to be here.

And we've never thought of you as a crowd, anyway.       :)

Yep, exactly what the Maoist rabble would have said about the intellectuals they murdered. "You don't HAVE to be here. You don't HAVE to be more intelligent than us. You don't HAVE to speak your mind......."

Actually, many extremely wealthy people, ESPECIALLY those who inherit it, are not "conservative" at all in a "liberal left versus conservative" sense.

What we need is not "Private Enterprise" per se, but "Free Enterprise". There is a difference.

I recommend:

"Intellectual Class War" by David Horowitz


"The Paradox of the Statist Businessman" by Theodore Forstmann.

Also good reads:

"Scratching By: How Government Creates Poverty as We Know It" By Charles Johnson

"What About the Poor"? by Barry Loberfeld

As I said in my earlier posts, it is the State's misguided policies that are the biggest cause of lack of social mobility, and usually the State's "generosity" is captured by people who are NOT poor. One suspects that "liberal" left politicians are more anxious about maintaining voter constituencies for themselves, than they are about actually making people socially mobile.

For any true intellectuals still following this site:

Here is a fascinating discussion of "inequality" by the amazing "Systems Analyst" Jesse Ausubel:

".........What causes the surprisingly persistent inequality of skewness and obstacle to
the crowning success of a top income? The engineer and co-inventor of the transistor,
William Shockley (1910–1989) described crowning success in science in a way
that explains the skewness of incomes as well as scientific achievement.
Many achievements require successfully connecting the links of a chain. In 1957,
Shockley [9] noted that publishing a technical paper requires connecting links to (1)
choose a good problem; (2) workon it; (3) recognize a worthwhile result; (4) decide
when to stop; (5) draft a report adequately; (6) profit constructively from criticism;
(7) submit the paper; and (8) survive referees’ objections. One might separate the
chain of achievement into more or different links, but the chain clearly has several
links. Critically, failure in any link means failure to reach the top. Crowning
success requires success with every link, and if the probability of success in each of
Shockley’s eight links is 50%, a crowning success is as rare as eight straight heads
in a coin toss. The probabilities at each step do not add to success, they multiply.
Raising the probability of succeeding at each of the essential, separate links by
the slender distance from 50% to 55% doubles the chance of final publication. And
raising the probability of success of each linkby half, to 75%, lifts productivity
2500%. The 2500% difference between 4 and 100 papers is a career, the difference
between publishing to earn a doctorate and a life’s work........

"..........When the logarithms of income rather than incomes themselves
are normally distributed, the distribution is called lognormal. When probabilities
multiply rather than add, they make a power of difference.
Physicists Elliott Montroll and Wade Badger used anecdotes to contrast the
additive or linear events that cause symmetrical distributions against the multiplicative
or nonlinear events that cause skewed ones to be fit by logarithmic transformation
[13]. They illustrated the additive with ‘‘The shin bone is connected to
the knee bone, the knee bone is connected to the thigh bone, the thigh bone is
connected to the hip bone....’’ The addition of bones makes a bell-shaped normal
distribution of heights with roughly as many individuals taller as shorter than the
crowd of people in the middle. Among adults, the chance of meeting someone
whose bones add to a height 50% taller than yours is finite and tiny, while the
chance of meeting someone 10 times your height is certainly zero.
In contrast, Montroll and Badger illustrated multiplication of links that skew
distributions by ‘‘For want of a nail, a shoe was lost; for want of a shoe, the horse
was lost; for want of a horse, a knight was lost; for want of a knight, a battle was
lost; for want of a battle, a kingdom was lost. All because of a nail.’’ A skewed
distribution with a long tail fits kingdoms won.
For producing wealth and living like top consumers, consider eight other links:
(1) adequate brain, (2) essential education, (3) ambition for wealth, (4) determination,
(5) communication and networking skills, (6) willingness to take risks, (7)
being in the right place, and (8) working at the right time. The chance of meeting
someone with 10 times your income is not zero. The lognormal distribution of
logarithms of income normally distributed in a bell-shape may fit the skewed
frequency of crowning successes at the end of links.
Although the lognormal can fit some skewness, even it may not reach high
enough because people at the very top operate differently [14]. While most earn
wages that multiply as they succeed along the links, those at the very top frequently
lever their income through speculation in commodity futures on margins.
At the top of small businesses, bosses organize laborers to lever their income. In
laboratories, graduate students and post-doctoral associates slavishly lever publications
for the lab head.
Although charity and transfer payments may temper the skewness of income
distribution, the linked tasks whose probabilities multiply persistently lift only a
few to the highest income........"

Ausubel is another author who is guaranteed to get the crypto-Maoists / crypto-Stalinists wanting to throw people who quote him (and indeed, actually understand him), into a gulag. George Reisman has the same effect.

No mention of the second law of thermodynamics, then?

SO, you think THIS guy doesn't know about the second law of thermodynamics - you sneering fool?

Oh, just in case you can't follow the link from Jesse Ausubel's web page to his "list of publications":

Does that list of works LOOK like it would have come from someone who wouldn't know about the second law of thermodynamics?

Depending on the context of what you are saying....Its more than just the Second Law....its expotential growth which is maths....oil geology, a different science disapline, project management etc etc. The failure to look at a high enough level to realise that say this particular area of expertese is ultimately flawed if its not looking at Peak oil effects  and limits to growth.

interesting that you deny some scientists that do AGW but flaunt the paperwork of another.....

" The first institution in the United States devoted solely to biomedical research."

the Rockefeller University Press publishes the Journal of Experimental Medicine, the Journal of Cell Biology, and The Journal of General Physiology.


So he's doing biomedical research?  or the short answer could well be, yes.


Just READ the guy, for Pete's sake, and LEARN something.

Jesse Ausubel would have to be one of the brightest minds on the planet today. I KNOW your Kunstlers and your Erlichs and your Lester Browns are celebrities. So is Jordan and Paris Hilton. There are no intelligent celebrities. Humanity has a tragic tendency to follow idiots who have either the right shape body, or the right kind of rhetoric.

Ausubel is not a celebrity. But a guy with his intellect who writes papers and articles and book chapters with titles like the following - is / is not worth a look.....? Be an idiot, and say "is not".

Big green energy machines
The Industrial Physicist, Oct/Nov 2004, pp. 20-24.

A Framework for Sustainability Science: A Renovoted IPAT Identity
P.E. Waggoner, and J. H. Ausubel
Proceedings of the National Academy of Sciences USA, 99(12):7860-7865 (June 2002).

Resources Are Elastic
Earth Matters, a magazine published by the Earth Institute at Columbia University, pp. 46-47, Winter 1999/2000.




Industrial Ecology: Some Directions for Research
I. K. Wernick and J. H. Ausubel with the Vishnu Group, Lawrence Livermore National Laboratory
71pp., May 1997 (available on-line from the Program for the Human Environment at

Materialization and Dematerialization: Measures and Trends
I. K. Wernick, R. Herman, S. Govind, and J. H. Ausubel
Technological Trajectories and the Human Environment, J.H. Ausubel and H.D. Langford, eds., National Academy, Washington DC, 1997, pp. 141-164; also appeared in Daedalus 125(3):171-198, 1996; published in Portuguese, Materialização e Desmaterialização: Limites e Tendências, Tecbahia 12(3):12-26, 1997.

National Materials Flows and the Environment
I.K. Wernick and J.H. Ausubel
Annual Review of Energy and the Environment 20:463-492, 1995.

The Future Environment for the Energy Business (PDF)

Jesse H. Ausubel

APPEA Journal (Part 2): 487-495, 2007

Determinants of the future environment for the energy business include the substitution of technologies and products, long-term trend toward decarbonization, rise of methane, dominance of India and China in new demand, diffusion of compact very powerful zero emission power plants (ZEEPs) for electricity and mini-ZEPPS for cars, increasing offshore operations, growing hydrogen business sometimes in alliance with nuclear power generators, and a benign attitude toward the ill-starred renewables which on scales that matter are in practice not green. The true green strategy is a compact energy system that harms neither land nor sea.


Renewable and Nuclear Heresies (PDF)

Jesse H. Ausubel

Int. J. Nuclear Governance, Economy and Ecology 1(3):229-243, 2007.

Renewables are not green. To reach the scale at which they would contribute importantly to meeting global energy demand, renewable sources of energy, such as wind, water and biomass, cause serious environmental harm. Measuring renewables in watts per square metre that each source could produce smashes these environmental idols. Nuclear energy is green. However, in order to grow, the nuclear industry must extend out of its niche in baseload electric power generation, form alliances with the methane industry to introduce more hydrogen into energy markets, and start making hydrogen itself. Technologies succeed when economies of scale form part of their conditions of evolution. Like computers, to grow larger, the energy system must now shrink in size and cost. Considered in watts per square metre, nuclear has astronomical advantages over its competitors.

Which is the point about me/others warning about Peak Oil.  "fancy green technology would make us bankrupt"  Indeed, why do you think "we" say we will need a global project on the scale of WW2? The costs of doing that are horrendious and the scale and the time.   The issue is there is no choice....hence why PhilBest etc (Libertariians) blow a fuse....and why he so blindly believes in technolgy will save us/him.....because the other option is simply too obnoxious to him/them ie organisation or control.....

There are two main aspects here if you ignore AGW.  1) There is no sizable, scalable or workable green tech for transport energy, none, period.  2) There is no sizable, scalable or workable any other tech for transport energy, none, period.   So once its blindingly obvious that we ned to move to something else that doesnt exist, we will go to both the above because we have no other options. It will indeed probably bankrupt at least the consumer aspect of our economy.....this happned in WW2....and its taht serious a "fight".

"Nuclear is not green!!!" of course also relies on a highly complex society to look after safely and we cant even do that from where we are now! Its also a project that takes too long, 20 or 30 years, we should have been building them constantly for decades, we have not so its not a possible option, plus of course it isnt transportable.



Ive read enough of "Resources Are Elastic" to realise he doesnt get it, just like you....resources are not just find another way to kick the can down the road a bit. He's a "believer" in technolgy will solve the problems as they emerge.....but I dont think he understands that isnt true. 

If you want to play this game I can throw similar cards down on the table each one with an academic of considerable standing on it.

Lets start here,

This is by a Professor Bartlett, Dept of Physics, Colorado.


Steven - there are none so blind as those who already know what they'll see before they look.  Might be worth going easy on it though - this recent outpouring is a bit manic, I suspect there's some stress somewhere in there driving it. There's going to be more of it as time goes on. Maybe they'll need councelling etc, although I must admit it won't be from me - I prefer what we do here, having groups come through the place, learning and questioning. Bit more positive all round.

go well




Your comment is laughable because this is my Engineering Degree speciality, (Thermodynamics, especially combustion, and energy efficiency)

Nope, you dont get it...

Getting Energy is a matter of using energy not money. Once it "costs" 1 barrel of oil to get 1 barrel of oil its game over, it doesnt matter if that 1 barrel is $100USD or $ cost is immaterial.

Futher, our entire economy needs about 10 barrels extracted for every one barrel spent, so once we get to that 10 to 1 (maybe 8 to 1) our society cant survive in its current form.

On top of that there are more of us and wanting more and from above we cant grow if we dont have excess energy....therefore we have to there has to be less of us, ad  or a simpler society which means a lower technology base. Which potentially has a neg feedback, its known as the oldouvia theory.

"The Olduvai theory states that industrial civilization (as defined by per capita energy production) will have a lifetime of less than or equal to 100 years ...

Im very hopeful its wrong, I suspect its not.


Improving technology is where you are wrong and have no idea. Example insulation, this is a function of area, temperature difference and the resistance to heat transfer....So 75mm wall insualtion makes a lot of economic sense for most of NZ, 100mm is ideal minimum. You could go to 150mm but that 50mm extra's cost is better put in a bank earning interest, it pays more than the energy saved, so you use the interest to pay the extra energy cost and pocket the difference.  Now yes areas like Otago may well use 150mm effectively because they get to say -15Deg C, but most of NZ doesnt. Now its quite probable that say with improvements we get to use less materials to make 150mm worthwhile, but 200mm will never be worthwhile doing.

Petrol and deisel engines, the thermodynamic limit is the materials ability to withstand the thermal and mechanical limits from the combustion process. That is simply pretty much a hard limit for any metal so we are about at it.  So we can look at special cermanics, they can take higher temperatures but not mechanical stresses but the biggest no no is their cost. They also cost a lot of effort, technology as well as energy relative to metal pistons and cylinder heads to make, the difference is better off in the bank earning interest.  Ie the costs are never paid back...

This is payback it should be accoutancy 101....its not even engineering.

For the combustion process itself it has a limit even with perfect burning of the right number of oxygen atoms to carbon and hydrogen once there thats it. Now consider how small an oxygen atom is and how small a carbon atom is and consider how big an emgines combustion chamber is in to get perfect combustion each and every oxygen atom has to be in the same place as each and every carbon and hydrogen atom in order to burn, thats never happening, ever. So there will always be some wasted fuel....we are about there for that process as well.

Its a Q of diminishing returns.



Fuel cells?



You Malthusians are just spoilers and wreckers using any old nonsense that stupid people will believe, to destroy freedom. You have been wrong again and again and again but that never bothers you. Paul Ehrlich, Lester Brown. Bah, spit.

Even the technology we have NOW would enable us to conserve energy by an order of magnitude if we had to. Most of the "consumption" you idiots stress about is "discretionary", and "rebound effect".

And what about tele-commuting and tele-conferencing: instead of driving a car to work or flying to a conference? Is that exponential technology substitution for energy or WHAT?

FFS, I wish somebody paid me to "counter troll" on here all day, I'd destroy the Malthusian idiots for good and we could get on with sensible discussions of economics.

mist 42 too true..

I wonder ..if you pooled all the "wealth" in NZ and then divided it up evenly among all those over long would it take for the spread of wealth to resemble its current state?

5 years  or ten? .. not much longer than that i reckon..

you hear stories of bennificiary families winning lotto "blowing it all" and then back on the benefit within a remarkably short space of time..

education,sacrifice,and doing the hard yards will "Trump" Govt handouts every time..

in NZ we all have relatively an Equal opportunity to succeed but that doesnt mean all outcomes have to be equal...they never are

Graeme Hart left school at 15 , and was a tow-truck driver for some time ; just one step amongst many that have carried him to billionaire status . And he doesn't specifically target  being rich . His goal is to  do successful deals .

.... anyone know how much time he has spent in WINZ , or connected to any government department , seeking an " entitlement " for himself , or squealing that he needs a bail-out , or a hand-out , or a hand-up , interest-free loan , a tax break .... ?

Amazing really , given the attempts of governments in NZ to stifle entrepreneurship , and to tax the guts out of productive success , that Hart has achieved so much .

Indeed he is a rare bird Gummy.....that said some of our other illustrious elite (Faye Ritchwhite) found other ways to relieve the populous of their moneys.

Some success stories are better not told eh..?

 ..and look at you Gummy. You write so much nonsense sometimes at the age of 64, but nevertheless you own at least 2 large properties in two countries worth millions.

Are you a member of the “Destiny Church” Roger ? I was listening to him a few days ago. It is nothing wrong with owning millions under any circumstances – it is called success.

Frankly , Walter , I am appalled . Nay , insulted ! .... Appalled and insulted .. You have hurt me , by claiming that I write so much nonsense sometimes .... hurt by that remark  Walter , really hurt ..

... I was aiming to be credited for writing so much nonsense 100 % of the time , not just " sometimes ! "

Must  try harder .

Indeed Walter...never underestimate a man with a sense of humour regardless you might find it bizarre.....sometimes you gotta hurt an awful lot to see whats funny about it.

In due course Graeme Hart will be bust. He has been a very succesful player of the shell game for a number of years but he simply presides over an empire of debt. He was busy raising more debt today. Just make sure you dont have any exposure to the junk paper that his companies have issued and continue to issue.

Meebee so ... or maybe not . But he currently has a net equity running into the billions . And can lead the lifestyle you & me can only dream of ..

... not just a wee tadge green-eyed are we , andyh ..... hmmm ..... just a little ?

 And can lead the lifestyle you & me can only dream of ..

Please, tell me about Roger ? What's going on in you mind ? More money buys more lifstyle - absolutely crazy !!!

A great lifestyle in today's world for a 60 years old is the posibility of a daily one hour happy walk along the clean, sandy Kaikoura beach watching the dolphins.

Ah, I've got to give you a thumbs up for that last sentence Walter (despite you putting me in the "heavy weight 90kg plus" category, still laughing about that one lol). Although you don't have to limit it to 60 years old - I reckon it'd be a great lifestyle at any age.

Agree......and interestingly I think thats going to come least I hope so.....

Also bit two faced to say a woman is a uh a little over-weight after bearing 5? children......dangerous actually.....



Chuckle. More gold-eyed these days GBH.

Just you stay clear of any of his junk paper GBH - its bad enough you losing your shirt on the share market, I would hate for you to find other ways to make yourself poorer......

Too true Gummy. And one of the things I like about Heart’ story is how it belies the utter BS of the conspiracy theorist’s delusional fantasies of  wealthy and powerful elites forming exclusive clubs of puppet masters manipulating governments and global markets behind the scenes.

Can you please tell me how the hell a Kiwi tow truck driver from Mt Roskill who left high school at 15 gets to join this elite club to the extent that he’s now worth more than they are, yet the sole purpose of this rich cabal of elites is to exclude and protect its wealth from all others and to keep everybody else poor? If this cabal of wealthy elites actually existed, then Graeme Heart should still be driving tow trucks, right?

The problem with a lot of welfare beneficiaries and the ‘poor’, and I use that word advisedly in the NZ context, is that many of them don’t want to take responsibility for their welfare dependency and ‘poverty’ and don’t want to front to the fact that in many cases, their attitude sucks.

And the Labour Party just wants to throw more and more taxpayers money at them.

And for those of you who just can’t wait to lecture me on poverty and the poor in New Zealand, work with welfare beneficiaries as I once did for 6 years before you do.

 David, you just cooked us up another of your capitalistic ratatouille’s.



Looking into current developments on many fronts – the world will never recover again, simply because among the powerful in societies ethic and moral requirements and standards don’t prevail.

 I don’t know Mr Hart personally, so I cannot judge. We shouldn’t value people higher, the more money they made. This is ugly stupid. - certainly a great New Zealand story.

Yes, and I put one of your Swiss cheeses in it. The one that's like your arguments, full of holes.

David, as a cheesemaker I would charge you just for the holes only - $25.- p/cm3

And I would gladly pay it, Kunst, if it resulted in my avoiding having to eat your moldy cheese.  

David - you must be capitalistic stupid then. Okay, how much to you need of the "Swiss Cheese holes". We sell 10cm3, 25cm3 and on special now -  20 x 5 mm3 round "Swisstinky" chocolate coated  for NZ$ 65. - in a giftbox.

Ah - 15% GST incl. in all prices.

David B I would probably agree in Harts case  you are correct...but he is probably despised even more so by the old money vanguard....for being ..muck with money as they refer to it.

As to elite conspiracies it would be fair to say there have been those who have influenced political outcomes...and to suggest that is not so is naive to say the least you would see that as a conspiracy  I don't's a fact of life based  on simple leverage.

There have been those who have influenced the course of justice even when that case was a Governmental concern.

Go back do some reading on why the case against Faye Ritchwhite was dropped.....we  ...the people did not have enough funds to pursue it.....end of story.

In the U.S. wealthy interests determine Presidential Nominations...and sure the people choose...but nontheless the candidates are more often than not determined by the ammount of interested money thrown at them.  

Well the point that I am ultimately making there is that the political process is actually open to all, it’s not just subject to being influenced or captured by those with money. Unions of course have tremendous influence in Labour Parties all around the world and a strong influence on government policy when those parties are in power. Of course you never hear any complaints about backroom deals and undue/inappropriate influence on the political process from the left when that is the case. Conspiracy theories oddly only ever seem to happen to the right or those with money.

Are you cooking more for us ? What kind of bloody dish is that - David ? A Swiss Fondue ? Mixed up most everything even the holes to a sticky sauce - ohh no !!!!

Stick to that one and you are about right:

 Looking into current developments on many fronts – the world will never recover again, simply because among the powerful in societies ethic and moral requirements and standards don’t prevail.

Walter , you're 60 years of age , and yet you keep repeating that the world will never recover again . Either you have been asleep , oblivious to serious recessions and stockmarket melt-downs in the past ....... or you have an idealistic view of how the world ought to be ..

... socialists have this idealism  too , they reckon that they can centrally plan a successful economy , even plan your shower heads , folate consumption , and light-bulbs ... if you let them .

Gummy reckons that the world has always been unpredictable , good in some ways , a bloody hotch-potch in others ......

.. wouldn't have it any other way , Kunzie !

No it wouldn't be a Swiss Fondue, Kunst. That's far too much like Socialism and Green Party politics. Highly unhealthy, leaves a bad aftertaste, and gives one very bad indigestion.  I wouldn’t recommend it at all.

Now if it was a beefy meaty capitalist stew……………..yum!

Oh deer, oh deer - you two Roger and David make great candidates for Master chef – a propaganda festival - cooking up things and mixing up ingredients.

 David/ Roger - my comment/ phrase (I'm using a lot) below has nothing to do with capitalistic societies only, but is a phenomenon all over the world. So, please don’t mix up things and make the wrong conclusion. The massive worldwide problem isn’t because of a specific political system, but certain human beings, not behaving within. This needs to be serioulsy addressed - will it ?

E.g. Worlwide environmetal degradation/ Inequality  David/ Roger explain how ?


Looking into current developments on many fronts – the world will never recover again, simply because among the powerful in societies ethic and moral requirements and standards don’t prevail.


I think you made the point better this time David...yes the process is open to ..all...parties who as a collective gain leverage.

In the case of conspiracy theory surrounding left wing organisations however..I would not agree in the past  I have found them to be as subversive as their so called counterpart.

Not surprising when you come to realise their interests become agendas reliant on maintaining power to see through that that point the whole left becomes something else altogether just as the right does at the same's called corrupt...they like to call it justifably concerned.......the rules become blurred as the agenda becomes paramount.

So perhaps David you may not be so prone to hearing of leftist conspiracies...because when the line is blurred it's hard to tell or you just were'nt looking for it.

IMO..despite all of Clarkes outward policies there was always underlying agendas that deserved the term conspiracy....because they were covert agendas that had to await the right people on the "Team" to become enacted.

Excellent, well said David B. But it will be a bitter medicine for some around here to swallow.

Hart is not one of the elite David B. It's like saying that 65k per year makes you a "rich prick". He has no influence globally in any real terms.
Political process is not open for all , any more than the legal process is. If you believe that then you don't know what you're talking about.
Oh & Harts wife paid for his MBA & funded his purchase of Whitcoulls Queen St.

This will help:

Even if/when they lose, I can't see em' dropping it, so it's just a matter of time before NZ implements a CGT.

Cheers, Les.


Yep, a CGT will come, all income profit has to be taxed equally.....and yes its looking like 2014.....2011 will be fasinating to watch, I still dont know who to vote for all of them are not very good, so its least worst.


"Gain" which is income.


How many people have watched Sir Paul Callaghan's presentations on how to increase national wealth? What you need, is new jobs at higher average pay than the current average.

I have just noticed that the economies that have "equality", that are picked as role models by the "pro equality" people, all happen to have a LOT of "added value" industry.

There are plenty of countries that have high equality, but everyone is poor.

Perhaps we are wasting our time looking at "inequality" when we don't have Toyota and SONY, or SAAB and Bofors. If we try and get ourselves "equality" without having Japan's or Sweden's industry, the result MIGHT NOT look like Japan or Sweden? It might look like, oh, Bolivia, or Pakistan, or Cuba?

Another thing that I notice about lefties who love Sweden - they are ALWAYS silent on Sweden's nuclear energy, and the fact that it is one of the world's major arms exporters. Our lefties think we should shut RAKON down in Auckland because they supply GPS's to militaries around the world, but they love the welfare State paid for by SAAB fighter jets and missiles, and Bofors cannons and munitions, and Dynamit Nobel explosives. And the tanks and APC's, and the gunboats and naval vessels.

Lefties are always hypocrites. The few who are not pig ignorant, have extreme bad faith.

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