Over the last decade there has been an increasing trend in New Zealand towards ‘welfare debt’, where welfare recipients borrow, or are given, money from the government due to mismanagement of their welfare entitlements. With New Zealander’s being among the developed world’s poorest savers the last thing the country needs is a parallel ‘debt culture’ among its welfare recipients.
As someone who generally takes a fairly centrist stance on economic issues I have tended to assume that New Zealand’s post 1990 welfare system is 'firm but fair'.
Unemployment benefit for example, is related to prices not wages, so anyone on unemployment benefit receives a modest basis living allowance that takes care of basics such as food and accommodation costs. In contrast, in some European countries unemployment rates are related to previous wages, so many unemployed people receive benefits far above the minimum wage- a factor which can't be helping Europe's high unemployment rate.
However, today welfare recipients are routinely given additional money for living costs already covered by benefits. While a single mother might need to borrow money for a second hand fridge there is no reason why a single person should need to obtain extra money for things like food, clothing and accommodation for which they are already given money in their basic benefit- in many cases though, this is exactly what is happening.
A common area of abuse is the Sickness Benefit. For example, I know of an able bodied, reasonably intelligent 21 year male on the Sickness Benefit with an anxiety disorder caused by excessive use of sleeping pills. The sleeping pills were taken for insomnia and other minor problems caused by excessive smoking of cannabis (why his doctor was so stupid as to give him so many sleeping pills I have no idea). This guy receives enough money for food, accommodation and basic living costs yet he managed to get hold of 700 dollars from Work and Income Support to pay for unpaid rent, 250 dollars of which were lost when another slacker, who he stupidly gave his bank card pin number to, promptly raided his account. Naturally he’s got the money back through insurance of course. This individual also regularly violates his doctor’s orders by taking other substances such as hash and alcohol.
If welfare recipients in New Zealand are going to be the freedom to manage the money that is given to them they should also have to suffer the consequences of mismanaging that money. If they are given money for rent and waste it, then they should not be given more money for rent. If this ultimately means a few nights on the street then so be it. Repeat offenders should have the freedom to manage their money taken off them with rent money paid directly to landlords and food vouchers and bus passes instead of cash. Similarly, those on sickness benefits from self-inflicted drug abuse should have to sit blood and fitness tests to prove they are not violating doctor’s orders. If they are, then they should be put onto unemployment benefit instead.
Although these ideas may horrify many on the left I consider them to be reasonable centrist policies. The difference between my position and that advocated by the libertarian right (slash all benefits) is that I wish to discriminate between responsible and irresponsible welfare recipients in a way that most people would find reasonable. Such a distinction is essential in combating the pervasive culture of debt and irresponsibility in today’s society.
Monday, May 29, 2006
Monday, May 15, 2006
Creativity and Competition in N.Z
New Zealand’s brain drain of scientist, engineers and technicians is strongly related to the Government’s lack of investment in research and development and its excessive reliance on free trade policies. According to the National Party the main reason for New Zealand ‘brain drain’ to Australia and Britain is higher wages. However, for many scientists and engineers the primary problem is not high wages but lack of job opportunities. Since 1984 New Zealand has slashed its spending on research and development while Australia has steadily increased its spending in this area. For example, Australia allows tax writes offs for R and D and has a protected motor industry that employs a significant number of engineers. It is not so much high wages that is attracting New Zealand graduates but a wider range of interesting jobs that don’t exist back home.
New Zealand has one of the most open economies in the world. Subsequently, N.Z companies cannot afford to devote as much spending to research and development as its overseas competitors who receive more government assistance. This has been reflected in the limited growth of productive new companies and products in N.Z over the last two decades. In contrast the number of managerial professionals employed in areas like accounting is very large compared with many other developed countries. The New Zealand economy is over focused on efficiency at the expense of long-term growth.
In the 1930s the Austrian economist Joseph Shumpeter pointed out that if there is too much domestic and international competition in an economy, there will be little growth because companies cannot afford the luxury of investing in R and D. Subsequently, the government needs to step in to provide protection for emerging industries and assist with research and development. This provides a partially sheltered breeding ground for developing new products and services. In Europe and America the heavily protected arms industry has been the nucleus for many new products such as radar, G.P.S. the Internet and the silicon chip – none of these products could have been developed without government assistance.
In Arts and Culture the Labour government has already acknowledged that domestic producers need some protection from overseas competitors. For example, it has introduced quotas for New Zealand music on radio and this has proved to be relatively successful. It has also set up a new agency, Creative New Zealand, for promoting the Arts. However, it has been much slower at helping emerging industries in farming and manufacturing, with Jim Anderton practically a one- man show in the unfashionable field of economic development.
Admittedly in some areas wage rates are the primary factor for the exodus of New Zealand graduates. Doctors, dentist and nurses have incurred large student debts and can pay off their debts much more quickly overseas. However, Labour has started to address this problem by introducing an interest right-off for students that stay in the country- this kind of national interest thinking is well overdue. Another reason why workers are emigrating is the increasing gap between wages and house prices. If the Government did more to address this problem by slowing immigration and introducing a capital gains tax, then there would less incentive for young people to leave the country. High land prices benefit aging landowners at the expense of young productive workers and the national economy.
If New Zealand continues to put free market ideology over pragmatic development it will continue to lose highly skilled workers overseas.
New Zealand has one of the most open economies in the world. Subsequently, N.Z companies cannot afford to devote as much spending to research and development as its overseas competitors who receive more government assistance. This has been reflected in the limited growth of productive new companies and products in N.Z over the last two decades. In contrast the number of managerial professionals employed in areas like accounting is very large compared with many other developed countries. The New Zealand economy is over focused on efficiency at the expense of long-term growth.
In the 1930s the Austrian economist Joseph Shumpeter pointed out that if there is too much domestic and international competition in an economy, there will be little growth because companies cannot afford the luxury of investing in R and D. Subsequently, the government needs to step in to provide protection for emerging industries and assist with research and development. This provides a partially sheltered breeding ground for developing new products and services. In Europe and America the heavily protected arms industry has been the nucleus for many new products such as radar, G.P.S. the Internet and the silicon chip – none of these products could have been developed without government assistance.
In Arts and Culture the Labour government has already acknowledged that domestic producers need some protection from overseas competitors. For example, it has introduced quotas for New Zealand music on radio and this has proved to be relatively successful. It has also set up a new agency, Creative New Zealand, for promoting the Arts. However, it has been much slower at helping emerging industries in farming and manufacturing, with Jim Anderton practically a one- man show in the unfashionable field of economic development.
Admittedly in some areas wage rates are the primary factor for the exodus of New Zealand graduates. Doctors, dentist and nurses have incurred large student debts and can pay off their debts much more quickly overseas. However, Labour has started to address this problem by introducing an interest right-off for students that stay in the country- this kind of national interest thinking is well overdue. Another reason why workers are emigrating is the increasing gap between wages and house prices. If the Government did more to address this problem by slowing immigration and introducing a capital gains tax, then there would less incentive for young people to leave the country. High land prices benefit aging landowners at the expense of young productive workers and the national economy.
If New Zealand continues to put free market ideology over pragmatic development it will continue to lose highly skilled workers overseas.
Tuesday, May 09, 2006
The Problems with Keynesian Policies.
It has become fashionable for Keynesian economists, such as Tim Hazledine of Auckland University, to criticise proposals for compulsory saving schemes on the grounds that credit driven economic growth makes saving unnecessary. However, Keynesian economics is a hedonistic economic system which is highly unsuitable for an age of decadence and deindustrialisation. What is needed today is a return to the cuture of thrift and investment which charaterised Western economies from the late 1930s to the mid 1960s
The Keynesian, full employment programmes of the 1950s and 1960s were successful at the time because of-
1. the pent up demand for goods and services that existed following the Second World War.
2. the high savings culture which existed at the time
3. the industrialised nature of Western economies at that time and the huge potential for productivity increases in farming, manufacturing, fishing and mining.
4. tight regulation of the finance and property markets following Bretton Woods.
It is clearly apparent, today that economic conditions are very different. Contemporary Western Economies have been profounded restructured so as to promote consumption and penalise savings and production. People are now consuming more than they produce, not producing more than they consume, as they did when Keynesian policies were first introduced. Keynesian policies came unstuck in the 1970s because of high oil prices and industrial decline due to increasing Asian competition. If Keynesian policies were followed today there would be massive inflation with little job growth and even lower rates of savings.
Most of the West's industrial production has now been moved offshore to Asia, so there is now, in many respects, no real economy left to stimulate. Although this is good for inflation, because many Asian goods are being produced very cheaply, is cuts off the option of stimulating the economy with low interest rates. Low interest rates (even if they can be achieved) will simply encourage more consumer spending on overseas goods and property speculation, resulting in unsustainable trade imbalances and boom/bust cycles.
Although a lot of labour intensive manufacturing has been moved offshore the West still has some productive industries worth holding onto than can compete in a global economy. Industries which the West should be promoting include:
1. Farming- the more Asia industrialises, the more expensive food will become. Hence land and water rich Western countries should be looking to get more money from farming and not surrendering good land to urban sprawl.
2. Wood, Metal, Paper Processing and advanced production of chemicals and plastics- these industries depend on efficient use of energy not cheap labour and China, India and Vietnam are increasingly energy poor.
3. Alternative energy- the less oil and gas a country imports the easier it is to compensate for indutrial decline (Britain has already demonstrated this in the 1980s and 1990s). Local bio-fuel production can also help ease trade imbalances in land/water rich coutries like New Zealand and Argentina.
4. Arms manufacturing- the West should not outsource arms manufacturing- this is a mistake from an economic and security perspective.
5. Energy conservation technology- a huge growth area with many opportunities for creating customised products and services. Energy conservative will increasingly become a significant factor in economic competitiveness.
6. Pharmaceuticals and medical equipment- again, the West should protect these industries from third world competition for economic and security reasons.
These industries don't rely on Keynesian measures to stimulate consumption but instead rely on venture capital and govenment assistance, especially in the area of research and development. Subsequently, Western governments need to stimulate savings and develop an entreprenerial culture in the public service. To achieve this they need to combine traditional neo-classical economics, along with the developmental and institutional economics of the likes of Schumpeter and Veblen, plus new thinking from environmental economics.
The Neo-Keynesian idea of government sponsored consumption is a policy for a by-gone era. The problems of de-industrialisation, overpopulation and cultural decadence, require a return to traditional Western values of thrift and investment in the future.
The Keynesian, full employment programmes of the 1950s and 1960s were successful at the time because of-
1. the pent up demand for goods and services that existed following the Second World War.
2. the high savings culture which existed at the time
3. the industrialised nature of Western economies at that time and the huge potential for productivity increases in farming, manufacturing, fishing and mining.
4. tight regulation of the finance and property markets following Bretton Woods.
It is clearly apparent, today that economic conditions are very different. Contemporary Western Economies have been profounded restructured so as to promote consumption and penalise savings and production. People are now consuming more than they produce, not producing more than they consume, as they did when Keynesian policies were first introduced. Keynesian policies came unstuck in the 1970s because of high oil prices and industrial decline due to increasing Asian competition. If Keynesian policies were followed today there would be massive inflation with little job growth and even lower rates of savings.
Most of the West's industrial production has now been moved offshore to Asia, so there is now, in many respects, no real economy left to stimulate. Although this is good for inflation, because many Asian goods are being produced very cheaply, is cuts off the option of stimulating the economy with low interest rates. Low interest rates (even if they can be achieved) will simply encourage more consumer spending on overseas goods and property speculation, resulting in unsustainable trade imbalances and boom/bust cycles.
Although a lot of labour intensive manufacturing has been moved offshore the West still has some productive industries worth holding onto than can compete in a global economy. Industries which the West should be promoting include:
1. Farming- the more Asia industrialises, the more expensive food will become. Hence land and water rich Western countries should be looking to get more money from farming and not surrendering good land to urban sprawl.
2. Wood, Metal, Paper Processing and advanced production of chemicals and plastics- these industries depend on efficient use of energy not cheap labour and China, India and Vietnam are increasingly energy poor.
3. Alternative energy- the less oil and gas a country imports the easier it is to compensate for indutrial decline (Britain has already demonstrated this in the 1980s and 1990s). Local bio-fuel production can also help ease trade imbalances in land/water rich coutries like New Zealand and Argentina.
4. Arms manufacturing- the West should not outsource arms manufacturing- this is a mistake from an economic and security perspective.
5. Energy conservation technology- a huge growth area with many opportunities for creating customised products and services. Energy conservative will increasingly become a significant factor in economic competitiveness.
6. Pharmaceuticals and medical equipment- again, the West should protect these industries from third world competition for economic and security reasons.
These industries don't rely on Keynesian measures to stimulate consumption but instead rely on venture capital and govenment assistance, especially in the area of research and development. Subsequently, Western governments need to stimulate savings and develop an entreprenerial culture in the public service. To achieve this they need to combine traditional neo-classical economics, along with the developmental and institutional economics of the likes of Schumpeter and Veblen, plus new thinking from environmental economics.
The Neo-Keynesian idea of government sponsored consumption is a policy for a by-gone era. The problems of de-industrialisation, overpopulation and cultural decadence, require a return to traditional Western values of thrift and investment in the future.
Anti-Semitism and Right-Wing Populism
With right-wing populist groups of various persausions currently on the rise there is an increasing interest in anti-Semitic conspiracy theories. However, the argument that Western conservative populism is deliberately undermined by Jews is deeply flawed. By promoting Jewish conspiracy theories and holocaust denial, right-wing populists alienate the very mainstream conservative support which they are trying to court.
The argument that Jews are consciously anti- populist is suspect for a number of reasons-
1. The spread of anti-conservative liberalism does not correlate with the geographic distribution of Jews. Scandinavia and New Zealand have relatively small Jewish populations but have a strong history of liberalism and socialism. New Zealand for example, was the first country to grant universal suffrage while Sweden is well known for its generous welfare state.
2. Jews have been disproportionately active in anti-conservative Marxist and Libertarian movements (largely because they are disproportionately well educated). However, such movements have gained little support from the wider population in most Western Countries. If the Jews really wanted to undermine traditional conservatism they would be better off supporting mainstream social liberalism.
3. There is little evidence that Jews in general are less Conservative than Westerners of European origin. However, Conservative Jews are less conspicious than Liberal Jews, who have are highly visible through their involvement in the Media industry. Conservative Jews in contrast are more likely to be found in small businesses and religious organisations.
4. Significant numbers of Jews did fight for Germany in the First World War. However, most Jews fought on the Eastern front. In the early 20th Century anti-semitism was stronger in Russia than in Western Europe, hence the Jews had a greater interest in fighting the Russians rather than the French. Hitler saw few Jews on the Western Front and presumed that few Jews were fighting for Germany per se.
5. It was the Germans that put the communists in power in Russia. This was a desperate attempt to get Russia out of the war, not a carefully thought out Jewish conspiracy.
6. Prior to the First World War there was relatively little anti-semitism in Germany compared with many other European countries. The sudden rise in anti-semitism in the 1920s was strongly related to the extraordinary inflation of 1923. Jews traditionally, had a lot of their money, invested in precious metals, shops and foreign currency, while middle class Germans preferred stocks and savings. Subsequently many Jews got richer while many Germans became impoverished. This was in large part due to the misguided actions of Woodrow Wilson rather than any fault of the Jews or the Germans.
7. The Holocaust is an historical fact. The Germans were excellent record keepers and left copious material and documentary evidence of their activities. The only real points of dispute are the connections of particular individuals, like Hitler, to the genocide and how much ordinary Germans knew about what was going on. This is because much of the high level correspondence was destroyed.
In the United States Jewish lobby groups, such as the Hubrew Immigration Aid Society, have been advocates of large-scale immigration. However supporters of limited immigration should focus their criticisms of Jews at these organisations and not attack Jews in general. It is alos interesting to note that in other Western countries there is no noticeable Jewish support for large scale immigration.
One point I will concede to anti-semite intellectuals is that communist crimes have been downplayed relative to Nazi crimes. More people have died at the hands of Stalin, Lenin, Paul Pot and Mao Tse-Tung than Hitler, yet the media overwelmingly focuses on Nazi atrocities. The Holocaust should not necessarily be downplayed but it should be put in a wider context.
With right-wing populist groups of various persausions currently on the rise there is an increasing interest in anti-Semitic conspiracy theories. However, the argument that Western conservative populism is deliberately undermined by Jews is deeply flawed. By promoting Jewish conspiracy theories and holocaust denial, right-wing populists alienate the very mainstream conservative support which they are trying to court.
The argument that Jews are consciously anti- populist is suspect for a number of reasons-
1. The spread of anti-conservative liberalism does not correlate with the geographic distribution of Jews. Scandinavia and New Zealand have relatively small Jewish populations but have a strong history of liberalism and socialism. New Zealand for example, was the first country to grant universal suffrage while Sweden is well known for its generous welfare state.
2. Jews have been disproportionately active in anti-conservative Marxist and Libertarian movements (largely because they are disproportionately well educated). However, such movements have gained little support from the wider population in most Western Countries. If the Jews really wanted to undermine traditional conservatism they would be better off supporting mainstream social liberalism.
3. There is little evidence that Jews in general are less Conservative than Westerners of European origin. However, Conservative Jews are less conspicious than Liberal Jews, who have are highly visible through their involvement in the Media industry. Conservative Jews in contrast are more likely to be found in small businesses and religious organisations.
4. Significant numbers of Jews did fight for Germany in the First World War. However, most Jews fought on the Eastern front. In the early 20th Century anti-semitism was stronger in Russia than in Western Europe, hence the Jews had a greater interest in fighting the Russians rather than the French. Hitler saw few Jews on the Western Front and presumed that few Jews were fighting for Germany per se.
5. It was the Germans that put the communists in power in Russia. This was a desperate attempt to get Russia out of the war, not a carefully thought out Jewish conspiracy.
6. Prior to the First World War there was relatively little anti-semitism in Germany compared with many other European countries. The sudden rise in anti-semitism in the 1920s was strongly related to the extraordinary inflation of 1923. Jews traditionally, had a lot of their money, invested in precious metals, shops and foreign currency, while middle class Germans preferred stocks and savings. Subsequently many Jews got richer while many Germans became impoverished. This was in large part due to the misguided actions of Woodrow Wilson rather than any fault of the Jews or the Germans.
7. The Holocaust is an historical fact. The Germans were excellent record keepers and left copious material and documentary evidence of their activities. The only real points of dispute are the connections of particular individuals, like Hitler, to the genocide and how much ordinary Germans knew about what was going on. This is because much of the high level correspondence was destroyed.
In the United States Jewish lobby groups, such as the Hubrew Immigration Aid Society, have been advocates of large-scale immigration. However supporters of limited immigration should focus their criticisms of Jews at these organisations and not attack Jews in general. It is alos interesting to note that in other Western countries there is no noticeable Jewish support for large scale immigration.
One point I will concede to anti-semite intellectuals is that communist crimes have been downplayed relative to Nazi crimes. More people have died at the hands of Stalin, Lenin, Paul Pot and Mao Tse-Tung than Hitler, yet the media overwelmingly focuses on Nazi atrocities. The Holocaust should not necessarily be downplayed but it should be put in a wider context.
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