Envirologue by Dave Hansford

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Envirologue: What has Neoliberalism Done for You Lately?

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  • Rob Stowell,

    A quick look at German tax rates – income tax is progressive – from 0 – 45% (There’s also a ‘solidarity tax’ that rises to 5.5% – not quite sure what this is.) Plus VAT, capital gains tax of 25% (including on any property sold before being owned for 10 years) and (local) property sales tax (like stamp duty) on property sales which varies from 3.5% – 6.5%. Not a lot of property speculation – accommodation is quite cheap – and money pushed into productive economy.
    All this under a conservative government. If higher taxes kill an economy, you’d expect Germany to be a basket-case, with low wages and a poor standard of living.

    Whakaraupo • Since Nov 2006 • 2110 posts Report Reply

  • BenWilson,

    Can I suggest that this become a go-to thread for this entire topic, and we shoot for a record number of comments? This is a major and open issue, and it's constantly being raised.

    I've no time right now to comment at length, got to go avail myself of one of the last standing excellent bastions against neoliberalism, the public health system. My son's badly smashed arm gets free care. The probable cause of it (his multiple disabilities) also does, via the ACC system, one of the best systems of its kind anywhere in the world. Unfortunately it's predicated around identifiable accidents rather than just general misfortune, so other disabled people get nowhere near the standard.

    But a couple of little things jump out at me:

    I need to imagine, then create, a better life. The enormity of that, and the uncertainty of the outcome, would freeze me to the spot if it weren’t for the galvanising realisation that this must not continue. Neoliberal policy has delivered us to a poorer, greedier, uglier and unjust place.

    This is the greatest dilemma of all. We can mostly agree that neoliberalism has not done us very well economically, although there's a great deal of firming up of any definitions to get that into useful territory. But our big problem is a lack of viable alternatives that are inspiring in it's place. I don't think it's a coincidence that the huge rise in neoliberalism was simultaneous with the collaspse of Soviet communism. Do we need a new -ism? Or are all solutions piecemeal, different for every time, place, issue? I think that a piecemeal approach is very rational, but in face of an aggressive ideology, it can and has been easily divided and conquered.

    If you voted for a tax cut you are to blame.

    I think this is hanging on to massive ideological baggage too. The dichotomy of tax-and-spend vs drop-tax-and-let-consumers-spend pits an older ideology against the super-predator, and really, the population of the older ideology is just crashing. Fortunately, tax-and-spend is not the only alternative.

    To me, if we are at a capitalist crisis, perhaps we should soberly evaluate whether the solution we came up with last time really is as good as it could be. We now have a welfare state to compare with. We have 80-odd years of history to see how it went. As many note, it wasn't all peaches even before neoliberalism. Also, the world has changed, particularly technologically.

    We need to face a question that becomes more urgent every year - should the entire basis of our economic well-being always be predicated on human work? Is taxing workers and companies really the only possible way that things could be organized?

    I found it interesting that Bruce Beetham's election was mentioned in the initial post as almost a pivotal moment for Dave Hansford in ideologically committing to neoliberalism. Since Beetham was not a neoliberal, I'm not sure I see the connection. Social Credit has all but entirely disappeared since the 1980s, and with it one of the major economic alternatives.

    In it's place (but probably not with the same people) we have the Green Party as the new third party of the left, who also have an alternative vision, in which it is not work and profit that is taxed, but a holistic appraisal of the full true cost of businesses and services especially at the environmental level. This has to be at least considered as a viable economic alternative.

    So, in summary, the really big question here is not "Has neoliberalism failed us?", but "What would be better?".

    Gotta go...cuz later.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Ian Dalziel,

    The large print giveth...
    and then of course there is this:
    http://www.stuff.co.nz/national/politics/67908476/free-gp-visits-dont-cover-all-children--greens
    National campaigns on all kids under 13 getting free doctor's visits and prescriptions - but now they reckon 90% is okay...

    Not all children will receive free GP visits as promised by the Government, according to documents revealed by the Greens.
    ACC Minister Nikki Kaye has set the funding level at a rate that will only cover an estimated 90 per cent of doctors' visits for children who are injured, Radio NZ has reported.
    At last year's election the Government campaigned on making doctors' visits and prescriptions free for all children under 13 from July this year.

    Christchurch • Since Dec 2006 • 7950 posts Report Reply

  • Rich of Observationz, in reply to Rob Stowell,

    a ‘solidarity tax’ that rises to 5.5% – not quite sure what this is

    It was introduced to pay for the cost of unification - surprised it's still there, but the Germans were happy to pay the vast costs of integrating the East German economy into the BRD (with East Germans being able to convert their OstMarken at 1:1).

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Russell Brown, in reply to Rob Stowell,

    Not sure why this is considered so vile and impossible. To a great degree it’s where the ability to pay for public services came from.

    New Zealand government revenue as a proportion of GDP isn't markedly different now to what it was in in 1980. The difference between that and expenditure was the stupendous quantities of money we had started borrowing to run the country.

    Auckland • Since Nov 2006 • 22848 posts Report Reply

  • Marc C, in reply to Rob Stowell,

    Germany introduced a so-called “solidarity surcharge” after reunification, which was meant to generate extra tax income to facilitate the redevelopment of infrastructure and other projects in former East Germany (the new regional states that joined former West Germany). It seems that it is today also used to raise funds to invest in some other structurally and economically weak regions.

    See Wikipedia for details of the German tax system:
    http://en.wikipedia.org/wiki/Taxation_in_Germany

    That surcharge has been controversial, and some called for it to be abolished. See also this for further info:
    http://www.spiegel.de/international/germany/paying-for-german-reunification-court-rules-solidarity-tax-is-unconstitutional-a-663476.html

    http://www.reuters.com/article/2014/09/09/us-germany-tax-schaeuble-east-idUSKBN0H40GY20140909

    Auckland • Since Oct 2012 • 437 posts Report Reply

  • Dave Hansford,

    Hi Ben Wilson: Loved your post, but gulped when I saw this: "I found it interesting that Bruce Beetham’s election was mentioned in the initial post as almost a pivotal moment for Dave Hansford in ideologically committing to neoliberalism. Since Beetham was not a neoliberal, I’m not sure I see the connection. Social Credit has all but entirely disappeared since the 1980s, and with it one of the major economic alternatives."

    Seems I made it sound like I committed to neoliberalism (the very thought...), when in fact, it was Social Credit's ideas that turned me into a political animal. Beetham was most certainly not a neoliberal (although he veered quite wildly off-track towards the end), and that was the primary appeal for me. At the time, I thought I was committing to a third way....

    Loving where this thread is going... excellent comments and interesting perspectives. Thanks everybody...

    Nelson • Since Apr 2008 • 28 posts Report Reply

  • Tinakori, in reply to Rob Stowell,

    Well the definition of plenty was not exactly something Warren Buffet would recognise. Anyone working long hours at a pretty standard labouring or semiskilled job soon found themselves paying tax at the 60% rate. Then, as now, the only way a high tax economy will raise the required revenue, is for the high taxes to cut in at relatively low levels of income.

    Wellington • Since Jul 2013 • 118 posts Report Reply

  • John Farrell, in reply to Tinakori,

    "Anyone working long hours at a pretty standard labouring or semiskilled job soon found themselves paying tax at the 60% rate."

    You will, of course, be able to give a reference for this.

    Dunedin • Since Nov 2006 • 499 posts Report Reply

  • Rob Stowell, in reply to Tinakori,

    Then, as now, the only way a high tax economy will raise the required revenue, is for the high taxes to cut in at relatively low levels of income.

    Except we’re still raising about the same % of GDP, but with much flatter taxation? Cutting the top rate, eliminating estate duties, and adding GST at 15% for everything but accommodation, savings, or overseas holidays.
    (While googling in an attempt to find a history of ‘stamp duty’ in NZ, this came up Why Invest in New Zealand Real Estate. World! We is for sale!)

    Whakaraupo • Since Nov 2006 • 2110 posts Report Reply

  • Sacha, in reply to Rob Stowell,

    Yes, all that has changed over the years is who is paying the tax. GST is regressive and hard to avoid. IRD reviews the top 200 wealthiest NZers and has found only half of them pay the top personal tax rate. The others arrange their affairs to minimise what counts as income, while still living a life of opulence.

    Ak • Since May 2008 • 19740 posts Report Reply

  • Bart Janssen, in reply to BenWilson,

    dichotomy of tax-and-spend vs drop-tax-and-let-consumers-spend

    It is absolutely NOT a binary option.

    There is no question that the Soviet system failed, but that should never be evidence that the opposite must succeed.

    The ideal is to do what works, to hell with ideology and ideologues, just do what works. Find a balance.

    And if something does not work stop doing it.

    Honestly it isn't complicated BUT it requires people and politicians in particular but also bureaucrats to accept that something they may personally have suggested is not working. And hence we should try something else, which might also not work.

    Fortunately we don't exist in a tiny bubble of New Zealand - we can look at other countries and decide what might actually work for us.

    Hence ACC essentially prevents the appalling US system of health insurance and sue or die. ACC works, not perfectly, but pretty damn well.

    Equally privately run prisons are a disaster - lets not do that, oh crap.

    But most obviously, there are a number of things that are best done when they are done by a government, to do that the government needs taxation. Not so much taxation that there is no incentive to succeed but pretty obviously more than we have now.

    Auckland • Since Nov 2006 • 4460 posts Report Reply

  • Bart Janssen, in reply to Ian Dalziel,

    National campaigns on all kids under 13 getting free doctor’s visits and prescriptions – but now they reckon 90% is okay…

    To which my response is - oh didn't we give you enough of our money to make that happen? Well damn - here, why don't you tax us a bit more because that is a worthwhile policy.

    Auckland • Since Nov 2006 • 4460 posts Report Reply

  • Bart Janssen, in reply to John Farrell,

    “Anyone working long hours at a pretty standard labouring or semiskilled job soon found themselves paying tax at the 60% rate.”

    You will, of course, be able to give a reference for this.

    It was possible when you worked multiple jobs and especially if you did overtime in your secondary income.

    But it's worth noting that you only paid 60% on a tiny portion of your income. That 60% number gets waved around as some scary boogy man when in fact the people paying that were generally pretty damn wealthy by most measures.

    Auckland • Since Nov 2006 • 4460 posts Report Reply

  • Sacha, in reply to Bart Janssen,

    And hence we should try something else, which might also not work.

    Our advantage is being small enough to change direction quickly. We do not seem to use that, and instead import foreign plans which can be far too over-engineered.

    Ak • Since May 2008 • 19740 posts Report Reply

  • Kumara Republic, in reply to Sacha,

    Our advantage is being small enough to change direction quickly. We do not seem to use that, and instead import foreign plans which can be far too over-engineered.

    Otherwise known as 'cargo cultism'. The cargo cult we've imported right now is straight out of Wall Street and London's Square Mile.

    The southernmost capital … • Since Nov 2006 • 5441 posts Report Reply

  • Ian Dalziel, in reply to Bart Janssen,

    Equally privately run prisons are a disaster – lets not do that, oh crap

    G4S are a fine upstanding company though...
    see:
    http://www.alternativenews.org/english/index.php/activism/bds/680-20-south-african-businesses-join-g4s-boycott

    Over 20 South African businesses have terminated their contracts with G4S Security over its involvement in Israeli prisons and human rights abuses. The SA businesses terminated their contracts, totaling more than R7 million ($500,000) per year, after approached by representatives of the human rights and Palestine solidarity organisation BDS South Africa as well as the KZN Palestine Solidarity Forum. BDS South Africa makes this announcement on the eve of the international Palestine prisoners day due to be commemorated on 17 April.

    http://www.mirror.co.uk/news/uk-news/g4s-security-guards-handed-redundancy-5540968

    Union bosses have slammed 'disgraceful' G4S bosses after security guards were given redundancy notices – while handcuffed to dangerous prisoners.
    The stunned workers were escorting cons on visits to hospitals when bosses broke the news that their contracts were being ripped up.
    Union leaders said they were given the choice of redundancy or cuts to pay and hours that would cost more than £4000 a year.
    They said 56 guards got the letters, and at least 10 of them were cuffed to prisoners at the time.

    http://www.cityam.com/214112/g4s-scraps-quarterly-reporting-ease-barrage-financials

    SECURITY group G4S has scrapped quarterly reporting of its financials, taking advantage of rules which came into force last year to reduce the frequency of its publications.
    The firm said that its contracts and income flows tend to be relatively predictable.
    Instead, it plans to report its financial results every six months, and fill the market in with updates on its strategy and specific projects as and when it is required.

    oh and this little gem:
    http://www.ft.com/cms/s/0/cb14b056-e4da-11e4-bb4b-00144feab7de.html#axzz3XuYDC21F
    The chief executive of G4S,, has been given a 73 per cent pay increase for returning the outsourcing giant to profit ...

    Christchurch • Since Dec 2006 • 7950 posts Report Reply

  • Roger Lacey,

    Whatakataka Bay Surf Club… • Since Apr 2008 • 148 posts Report Reply

  • andin,

    The fourth Labour Government of David Lange and Roger Douglas lashed out, hurling decades of regulation to the floor and smashing the welfare state

    Muldoon had accumulated a lot of debt before he was defeated I hear.
    So I'm kinda wondering if the neo liberal ideas then doctrine at the IMF and World Bank had any and what influence on the incoming Labour govt?

    raglan • Since Mar 2007 • 1890 posts Report Reply

  • Sacha, in reply to andin,

    Worth a watch if you've never seen it - Alister Barry's doco about the history.

    Ak • Since May 2008 • 19740 posts Report Reply

  • Joe Wylie, in reply to andin,

    Muldoon had accumulated a lot of debt before he was defeated I hear.
    So I’m kinda wondering if the neo liberal ideas then doctrine at the IMF and World Bank had any and what influence on the incoming Labour govt?

    The “incoming Labour govt” only did what National Party figures such as Derek Quigley had been advocating since at least 1981. There was a certain amount of carping from the then opposition about Labour having stolen National policies. The irony was that a number of those complaining had been diehard Muldoonist inteventionists when it had been politically expedient. As Denis Welch noted at the time, much of what Lange-Douglas were implementing was National's policy, even if they’d kept it garaged apart from the occasional sedate Sunday drive.

    flat earth • Since Jan 2007 • 4593 posts Report Reply

  • Tinakori, in reply to Bart Janssen,

    Well as a young journalist on an evening paper working lots of hours outside of the standard working hours it took a very high proportion of all that extra money. The change in take-home income was very,very noticeable when the tax reforms of the mid 80s kicked in. In previous jobs like the freezing works the effect was just as noticeable. I suspect this was why the appeal of the Douglas tax changes reached deep down into the working population.

    Wellington • Since Jul 2013 • 118 posts Report Reply

  • Rich of Observationz,

    I’d recommend reading David Graeber's new book, The Utopia Of Rules.

    One argument he makes is that neo-liberalism isn’t more efficient than socialism (or indeed Muldoonism), it’s just differently inefficient.

    A canonical example of Muldoonist inefficiency was compulsory rail freight. That cost businesses and (mostly wealthier) consumers, with the proceeds maintaining railway workers in secure employment.

    Compare this with a prime example of neo-liberal inefficiency, the electricity pseudo-market. The costs of that mostly fall on consumers, who pay a higher price for power. The proceeds go to corporations and to the cohort of middle class workers who are kept in (insecure) jobs “selling” and marketing electricity.

    The last 30 years has seen substantial technological progress which was expected to, and should really have, seen workers able to produce more in less time and see the fruits of that in increased leisure hours. Instead, several things have happened:
    - corporate profits have increased
    - productive work in manufacturing has been replaced by an ever larger amount of administrative work, converting working class jobs into middle class ones (some of which are better paid – others, like call centre agents , are not)
    - technological progress has been diverted from the automation of “real” work into other areas (such as ever more sophisticated marketing) that don’t reduce, and often increase, the volume of (non-productive) work required from society
    - developed world workers have been replaced by cheap foreign semi-slave labour, reducing the need for automation (why buy an expensive machine when you can use slave labour for a dollar an hour?)

    We do have an alternative to neo-liberalism. Technology has the potential to vastly improve productivity (Why have call centre workers when a website can handle all transactions? Why have delivery drivers when self-driving vans become available?). The ruling classes will try and channel this into higher profits, reduced wages and an ever more insecure labour force. Is this what we want – there are alternatives?

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • John Farrell, in reply to Tinakori,

    So what you're saying, Tinakori, is that a sample of one is adequate to base your sweeping statement on.

    Dunedin • Since Nov 2006 • 499 posts Report Reply

  • BenWilson, in reply to Dave Hansford,

    Loved your post, but gulped when I saw this:

    Sorry about that, I wasn't really sure what you meant, glad you've clarified.

    It is absolutely NOT a binary option.

    Agreed, Bart. And I totally agree with:

    And hence we should try something else, which might also not work.

    Although I'd say that we have already tried raising taxes as a way of raising money for government expenditure. There are other ways to achieve the same thing, so it's not all in that basket. One of the most obvious other ways is what National has been doing, borrowing money. That is clearly unsustainable. Another way is to sell off assets. That's a one time thing for each asset, and so also unsustainable. Another is to squeeze more profit out of state owned assets. Tried it by turning them into SOEs...didn't work, which is why they're selling them. Another is for the government to invest in more business itself, buy more assets that have cash flows. We haven't really tried that much since Muldoon, even though the things he built have in the long run made handsome profits. Another is to do the whole Green thing of charging for pollution.

    Then there is the untouched virgin territory of using the money supply itself. An old, old idea, that never quite made it into practice in any stable sovereign nation. Practically everywhere this is outsourced to banks via loans now. The natural endgame of doing it like this is that the banks and the super rich own everything. This would seem to be a cycle that's repeated many times in history going back into the ancient world. It almost always ends very badly, with a decline into massive disorder follow by a resetting, usually violently. This was never more poignantly so than the last time, when the geopolitical makeup of the world was radically reorganized. From that springboard we had a period of fantastic prosperity, even for the conquered. But, as always happens, the iron law of oligarchy seems to apply to money and it eventually concentrates.

    Now a violent resetting of the world order really isn't an option. We almost don't have any other option than to find a better way. We've never before been at a time when it was more obvious how much less we need to do to create genuine human happiness than before, and yet we insist on making human slog or blind luck the only path to it, and so people have to compete with each other to slog harder than the rest for less money, when the world is literally awash with it, just in far too few hands, typically the lucky rather than the sloggers.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

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