Economic ideology destroys us all

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and-we-told-them-the-wealth-would-trickle-down

The OECD’s latest report says

“The biggest factor for the impact of inequality on growth is the gap between lower income households and the rest of the population. The negative effect is not just for the poorest income decile but all of those in the bottom four deciles of the income distribution. These findings imply that policy must not (just) be about tackling poverty, it also needs to be about addressing lower incomes more generally.”

Let’s hope at least some MPs, our elected representatives, take the findings of the OECD report seriously.  ‘Trickle down’ has not happened, and the top elite have captured all the benefits of any economic upturn and appropriated massive amounts of unearned income to themselves. Forget about low growth, mega millions at the top that the rich don’t know how to spend  and utter misery at the bottom is a recipe for societal disaster.

The OECD vindicates what CPAG has been saying for the last 20 years.  The saddest part is that children have been the victims of the failed trickle down policies.

The same ideology that underpins trickle down theory has decreed that in order for parents are on benefits to have an incentive to get work, their children’s lives should be made miserable. The fact that paid work may not be there doesn’t count because the ideology denies that is ever impossible to find work in a market economy. The unpaid work of parenting, especially of young children, as usual, is completely invisible and unvalued.

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I know it is like a cracked record but it needs to be shouted out loud. Since 1996 family policy has increasingly emphasised that access to tax-payer support for low income children is conditional on parents working in the market economy.  This policy approach was intensified  with Working for Families under Labour, when 230,000 children were excluded from the full package of support because their parents did not fulfil the hours of paid work required.

As a result, many billions of dollars (more than a cumulative $6 billion) has been denied to the very poorest families.  Along with failed housing policy that has delivered immense wealth to speculators, poorly designed  family incomes policy has ensured there is a large underclass of families dependent on foodbanks  and private charity to survive.

The OECD says that it is not appropriate now to concentrate on just the lowest 10%, but that policies for the bottom 40% have to be more generous.  Bill English needs to pay attention.  His government’s belated interest in child poverty concentrates on finding and fixing only the highly vulnerable and worst off children,  while ignoring preventive measures of adequate incomes for all.   Here, surely, is Labour’s chance to shine and make up for buying into failed ideology when it introduced  Working for Families.

Families have not gotten lazier and so need more sticks and carrots as policy directions imply. The best way for government to start the process of active redistribution is to immediately extend the full Working for Families package to all low income families and to properly adjust these payments for wage growth in the economy.  Then urgent attention must be paid to housing and education policy as vehicles of redistribution.  Higher tax from those who already have more than enough is a very, very small price to pay for a better and happier society.

117 COMMENTS

  1. Wealth doesn’t trickle down. It trickles UP from the back of workers and the middle class to the vampires at the top. We need a Comprehensive Tax on Capital Income to generate the 9.4 billiondollarsof tax revenue that go unclaimed every year in New Zealand. That money should be enough to fund a Universal Basic Income for every afadult citizens in the nation as well as free health and education services.

  2. thanks Susan – so clearly and well put. Yes we need to shout it out loud – and those promulgating outdated, overused and useless policies need to acknowledge – it hasn’t worked.. By its own standards, neoliberalism hasn’t worked. Stop looking to failed ideology to fix things.

    • Julz, those who support this failed policy don’t care about fixing anything all they care about is lining their own pockets, and to hell with the cost to others.

  3. Susan…can you please explain where you get this idea about ‘trickle down’ economics. In fact can you name a single economist of note who advocates this ‘theory’? It is certainly not something that is taught or adhered to in any conventional economics I have been involved with, and the more I read about it the more I sense it is a construct of the left. Also, I’d be interested in your view of the OECD report that states that there is a limit to the amount of redistribution any economy can undertake before hampering growth. The OECD suggests that number is about 13 gini points. For the record, NZ currently redistributes around 12.5 gini points.

    • Nehemia…’trickle down’ is pretty much synonymous with supply side economics, and can be viewed as a political take on the suggestion of J. B. Say that ‘supply creates its own demand’.

      Supply side is the notion that, say (no pun intended), reducing my wages and conditions will increase economic activity, which in turn increases everyone’s income. And while the greatest rewards tend to the owners of capital, and, more recently, the managerial class, wage earners will receive an income increase from that trickle down effect. (Personal addendum: pass me a Tui!)

      There are lots of supply side economists. Indeed, most economists will argue for some supply side economic policies. The difference is between those (e.g. Hayek) who believe that is all that is required to ensure plenty for all, and others (e.g. Keynes) who understand that demand (i.e. the ability to buy the goods capital produces) matters too – if not more.

      I hope this helps.

      • Not only have you absolutely butchered the definition of supply side economics, you haven’t come close to answering my question. Can you name a single economist who has advocates ‘trickle down’ economic theory?

        • …or, to make it easier, perhaps you could name a supply side economist who specifically argues that supply side economics will result in a ‘trickle down’.

          I’m yet to find one, which just makes me think the term is a perjorative, a construct of the left that has somehow gained a life of it’s own.

          • So you don’t believe in the concept of “trickle down” either?

            Many were sceptical about it in the late 1980s as well.

            It looks like it’s a concept the Right are keen to disavow all knowledge of. And yet, it was a fundamental dogma of Rogernomics.

            • It’s hard to disavow a concept that doesn’t exist. And that is my point. Can you name a single economist who advocates ‘trickle down’ economics? No-one else seems to be able to, and that just supports my view that it is simply a construct (and a straw man) of the left.

              • Nehemia, you’ve pointedly ignored what I wrote above; that “trickle down” was one of the constant memes used in the late ’80s and early ’90s when neo-liberal reforms were introduced. Any references to what Douglas, Prebble, Doug Myers (Business Roundtable), Ruth Richardson, et al, said is not accessible on-line. I guess anyone with a couple of days to spare could look through old microfiche copies of the Evening Post, Dominion, NZ Herald, etc, to search for relevant press reports.

                To what end? Even if I found the comments, you and your right wing fellow-travellers would gloss over it. You’d deflect onto something else. I’ve seen Gosman, Intrinsicvalue, and others of your ilk argue white-is-black, even when presented with proof to the contrary.

                You’re not interested in evidence. You’re interested in maintaining your own neo-liberal worldview. (Though god knows why. You’re not one of the 1% I’m guessing, so what does it benefit you to support an ideology that benefits your Masters, whilst slowly impoverishing you and others.)

                As another example, I can recall a comment by then Minister, Bill Birch, in an Evening Post story, stating that NZ was a good place to invest because of our low wages. (Shades of Bill English, twenty years later!) The remark was made at the time the Employment Contracts Bill/Act was enacted.

                But you won’t find Birch’s vile comment on-line. It’s pre-internet.

                I can certainly recall the “trickle down” arguments being used in the ’80s and ’90s and the justification for implementing neo-liberal policies that – even then – were benefitting the wealthiest and disadvantaging the poor and low-paid. Douglas and Richardson certainly never resiled from the “trickle down” mantra. Never.

                So, well you may try to disavow any ownership of “trickle down”. It is a piece of bullshit propaganda that people didn’t believe then – and has been proven to be a hoax now.

                Because when you think about it, allowing the rich to get richer doesn’t benefit the poor one iota. It just accumulates wealth in the hands of fewer and fewer rich families.

                Which, it seems, you agree with?

                  • What I find surprising, Nehemia, is that you’re attempting to peddle a version of history and current socio-economic status that is absolute rubbish.

                    It’s interesting though, that as Douglas’s trickle-down (or, more accurately, supply-side ) economics has been discredited due to growing poverty and income/wealth inequality, apologist like you are now arguing over who-said-what.

                    What we really should be focusing on is that since 1984,

                    * wages have stagnated, whilst Australia’s has risen,

                    * inequality has increased,

                    * poverty has risen,

                    * house affordability has worsened

                    * home ownership has dropped

                    * unemployment has worsened

                    * under-employment has increased

                    You can argue any of that till the cows come home. But they happen to be true. You ACT/National supporters need to get your thick heads around that rather than wasting time trying to prove the opposite.

                    It’s a sad attempt to re-write history and replace it with something less critical of your ideology. Sanitising history? Mis-representing data? Outright bullshit?

                    Even Key had to admit a couple of years ago,

                    Prime Minister John Key has acknowledged that the “growing underclass” he promised to tackle in 2008 has probably grown further – rather than decreased – during his first term in government.

                    Mr Key made the concession yesterday when asked about progress with the underclass, saying it depended what measures were used but recessions tended to disproportionately affect low income earners and young people.

                    He said he had visited a number of budgeting services and food banks “and I think it’s fair to say they’ve seen an increase in people accessing their services. So that situation is there.”

                    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10759869

                    You seem more interested in splitting hairs than the impact caused by 30 years of failed right wing “reforms”.

                • No, I don’t. But neither do I believe you make the poor richer by making the rich poorer. Income redistribution in NZ runs into billions of dollars already, and yet you seem to advocate for more. I don’t. Your own cited have identified technology and glosbilisation as key drivers of increasing inequality. Instead of taking money off the CEO to give to the cleaner, we have to provide the cleaner with the opportunities to up skill, to adapt to the changing world. Then there will be a shortage of cleaners, and the market rate will rise. That’s how it works in the real world.

                  • So let’s pick apart your statement, Nehemia;

                    But neither do I believe you make the poor richer by making the rich poorer.

                    So, what happens when the rich increase their wealth, by increased dividends, profits, speculation, whatever? How does that improve the lot of the poor?

                    • You have avoided the question. Never mind your neighbour – as far as we know, your mythical “neighbour” could be making his income through selling P or ripping of investors in a finance company.

                      Try again; how does someone earning ten times his lowest paid employee benefit that employee? I think it’s a fairly straight forward question.

                  • “Income redistribution in NZ runs into billions of dollars already, and yet you seem to advocate for more…”

                    Indeed I do.

                    Income redistristribution helped reduce inequality from 2004 to 2009 – as you own data shows here; http://www.stats.govt.nz/browse_for_stats/snapshots-of-nz/nz-social-indicators/Home/Standard%20of%20living/income-inequality.aspx

                    So clearly, income redistribution does work.

                    Your own greed and ideology simply blinds you to this.

                    • Yes, it works. Until it doesn’t. As per the IMF report I cited later in this thread. Remember Frank that redistribution is simply taking money from someone who earned it and giving it to someone who didn’t. I’m ok with that to a point, and we’ve reached that point.

                    • People trapped on low incomes have earned cdecent wages.

                      They simply haven’t been paid accordingly as wages are suppressed to create higher profits to pay shareholders. That is the problem.

                      As The New York Times showed in an infographic a few years back, productivity has increased, but wages have not. The remuneration, instead, has gone to shareholders; https://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday

                      So please knock of the parroted rhetoric that the poor aren’t “working hard to earn higher wages”. That might be comforting to you to back up your world view – but it is garbage nevertheless.

                  • “Then there will be a shortage of cleaners, and the market rate will rise. That’s how it works in the real world. ”

                    No, Mr Wall, that’s how it works in your world. A very crappy, elitist world that few of us would want to live in.

                    But you’re welcome to it.

                  • Bastiat – despite your attempt to rewrite history (which you never lived through, by the way), the “trickle down” concept was very much in vogue and referrenced in the 1980s and 90s.

                    To be honest, I don’t give a toss what Sowell wrote. Being an American, he wasn’t living in New Zealand at the time.

                    I did.

                    If you’re really interested, instead of quoting professors in right wing ivory towers, go through the media periodicals and Hansards of the era. It may give you greater insights than relying on apologists who weren’t even here.

              • You didn’t answer the question Mr Wall: DO YOU ACCEPT THE PREMISE OF TRICKLE DOWN THEORY?

                If not, why not.

                Fucking simple really to answer, if you weren’t so busy avoiding questions you don’t like.

              • Bill English is an advocate of “trickle down” theory. (I know he’s not an economist, he is our finance minister). It’s right wing politicians who advocate trickle down theory, not economists.

                He believes giving tax cuts to the well off and tax cuts and subsidies to corporations will make everyone better off. This is a myth, as demonstrated by the stagnant incomes of those on the lower rungs in the last 30 years.

                So you’re right though in regards to finding any economists who advocate it. No credible economist believes or supports the Laffer curve theory(The basis for trickle down theory). The trouble is that many right wing politicians (Like Bill English) think that it works, despite there being zero evidence to support this.

        • Nehemia, I lived through the Rogernomics revolution of the 1980s, and Ruthenasia of the early 1990s. I can tell you it was a common phrase used at the time.

          However, it’s interesting that you resile from the concept. I take it you don’t believe in the fallacy of “trickle down”?

          • It was indeed a common phrase, but not of any economists, at least that I can find. I too lived through those periods in NZ, and I find the idea of trickle down absurd. I’m just of the view that no-one outside of perhaps a political beltway actually supported the idea.

            • It doesn’t matter what you find absurd, Mr wall. Fact is the term was in common usage. Trying to change history because it’s embarrassing is so last-century Stalinist.

              Grow up, mate.

        • “Can you name a single economist who has advocates ‘trickle down’ economic theory? ”

          Why should we have to? It’s been commonly accepted as the rationale for neo-liberalism; make more profits for the rich and corporations, and those on the bottom would benefit. That’s “trickle down”.

          Perhaps you’re trying to be a bit of a clever boy and just looking a tad not-clever in the process?

    • OECD Focus on Inequality and Growth
      © OECD
      December 2014

      Key findings:
      The gap between rich and poor is now at its highest level in 30 years
      in most OECD countries.

      This long term trend increase in income inequality has curbed economic growth
      significantly.

      While the overall increase in income inequality is also driven by the very rich 1%
      pulling away, what matters most for growth are families with lower incomes slipping behind.

      This negative effect of inequality on growth is determined not just by the poorest
      income decile but actually by the bottom 40% of income earners.

      This is because inter alia people from disadvantaged social backgrounds under invest
      in their education.

      Tackling inequality through tax and transfer policies does not harm growth, provided these policies are well designed and implemented.

      In particular, redistribution efforts should focus on families with children and youth,
      as this is where key decisions on human capital investment are made and should
      promote skills development and learning across people’s lives.
      http://www.oecd.org/els/soc/Focus-Inequality-and-Growth-2014.pdf

      I cannot find any reference to “the OECD report that states that there is a limit to the amount of redistribution any economy can undertake before hampering growth ” in this report, Can you cite this?
      Could you also explain what you mean by ” The OECD suggests that number is about 13 gini points. For the record, NZ currently redistributes around 12.5 gini points.”, when the gini coefficient ranges from 0 to 1

      • First of all, you speak of income inequality as if it is a bad thing. That is not necessarily the case. If my neighbour works more hours and get’s paid more than me that creates inequality, but so what? NZ already performs a significant amount of income and wealth redistribution, and there is a tipping point at which wealth simply flies offshore. That is why your comment “Tackling inequality through tax and transfer policies does not harm growth, provided these policies are well designed and implemented” is essentially meaningless.

        Second, I wrote about Gini ‘points’. Like interest rate points. So 12.5 Gini points is .125 on the coefficient.

        • First of all, you speak of income inequality as if it is a bad thing.

          It is if you’re at the bottom of the scrap heap or one of the working poor. Even Treasury admitted as such in the document you quoted from;

          Most OECD countries, including New Zealand, experienced longer term declines in inequality from the 1920s, which reversed after the late 1980s. Since then inequality has increased largely because average to high incomes grew faster than lower incomes. In New Zealand, people on low incomes did not experience falling incomes since the 1980s over the period as a whole, but their income failed to rise as fast as the average income. Technological change, globalisation, and household structure have been identified as the major causes of these changes both in New Zealand and around the world.

          http://www.treasury.govt.nz/abouttreasury/higherlivingstandards/hls-bg-equity-jan13.pdf

          The rest of your comment is parrotted neo-liberal dogma. Heard it all before.

          • Frank if I am one of the working poor and my neighbour get’s richer and I stay the same how is that a problem for me?

            Income inequality has actually reduced slightly over the past 6 years, remarkably, due in part to the redistributive impacts of the 2010 tax cuts (particularly around the tougher treatment of investment property claims).

            I’m yet to see a valid argument why income inequality is a necessarily bad thing.

            • The 2010 tax cuts did not re-distribute income. You are hopelessly deluded if you believe that. Not only did those on higher incomes benefiot from the 2010 taxcuts, but also;

              * the 2009 tax cuts benefitted only those earning over $48,000

              * the rise in GST from 12.5% to 15% adversely impacted on poor families worse than wealthier households

              Surely you cannot be oblivious to this?

              Or are you deliberately misrepresenting what has occurred?

              • The 2010 tax cuts were introduced along with a tightening of tax law around investment properties that disproportionately hit higher earners. The 2009/10 tax cuts were broadly distributionally neutral. Not only that, but they provided a far softer landing for the NZ economy than many of our trading partners enjoyed.

                • “Higher income earners get the biggest gain from these income tax cuts, but on the other hand bear the brunt of the other measures like depreciation changes (either directly or because they own shares in a company).
                  The overall tax package has a broadly distributionally-neutral impact across household groups as a proportion of income.
                  The cost of the personal tax cuts (excluding those on NZ Superannuation payments, which are included in the compensation package) is $2.46 billion in 2010/11 rising to $4.26 billion in 2013/14. These form part of a package of changes that overall are broadly fiscally neutral.”

                  http://www.beehive.govt.nz/release/fact-sheet-personal-tax-cuts

                  • Higher income earners get the biggest gain from these income tax cuts…

                    Ahhhh, did you notice that bit, Nehemia?

                    It seems to contradict what you wrote earlier;

                    “Income inequality has actually reduced slightly over the past 6 years, remarkably, due in part to the redistributive impacts of the 2010 tax cuts “

                    Now you’re contradicting your own right wing BS?!

                    *shakes head*

                    As for this bit of jargonistic crap from you,

                    ” The overall tax package has a broadly distributionally-neutral impact across household groups as a proportion of income.”

                    I suggest to you that your verbal gymnastics is meaningless when income inequality and povertyy are still affecting 250,000+ children in this country and according to the OECD,

                    “The OECD has called for higher taxes and more redistribution of wealth to combat inequality, which it found was damaging the economic performance of most developed nations.

                    New Zealand’s economy should have grown by nearly 44 per cent between 1990 and 2010, but a widening gap between the haves and have-nots saw it grow by only 28 per cent, according to the report.

                    The 15.5 percentage points New Zealand lost to inequality was the highest in the developed world.”

                    http://www.stuff.co.nz/business/industries/64000371/NZ-economy-hard-hit-by-inequality-OECD

                    Your selective (mis)-use of various figures does not mitigate the BS you are trying to put over us.

                    I repeat, who are you trying to convince? Yourself?

                    • Frank you need to take the time to read the cited fully. The quote about higher income earners in no way contradicted my claims. Higher income earners did benefit from the tax cuts in isolation, before the impact of the investment changes. Please look at the whole picture, not just at the part that suits your argument. The other posts you cited are irrelevant to the subject of the tax cut package. You seem to struggle staying on topic, so I ask you to refer to original fact sheet and Herald article I cited that directly address the topic. Please address the data cited in those.

                    • I did read the relevant data and it’s fairly conclusive; higher income earners benefitted from the ’09 and ’10 tax cuts.

                      When the GST increase is put into the mix, low income earners have suffered badly. (And when you add rises in government charges and user pays such as prescriptions, the results are even worse.)

                      You are simply to fixated on your belief in neo-liberalism to understand this. You are a fanatic.

                • Absolute rubbish. Now you’re making up shit.

                  The 2009/10 tax cuts were not ” broadly distributionally neutral”. They gave hundreds of dollars extra into the hands of higher paid, whilst the low paid lost out after GST was increased (which you pointedly ignore).

                  The “soft landing” you referred to was fine if you were highly paid. But not so great if you were on minimum wage.

                  Do you not get this, Nehemia?

                  • You’re just repeating yourself without addressing the evidence. Please read my cites and you’ll see the calculations include the GST impact. Perhaps you were forgetting the impact of the changes to property investments?

                    • Whether the poor “understand it or not” is moot. What is critical is how it affects the poor. Both the ’09 and ’10 tax cuts befitted the highly-paid and (with the rise in GST) was in effect a transfer of wealth upward – trickle-up in this case. (Or gushing up, to be more accurate.)

                      The reports and analysis at the time were quite succinct in this case and all agreed that the high income earners benefitted more than low income earners.

                    • “The reports and analysis at the time were quite succinct in this case and all agreed that the high income earners benefitted more than low income earners. ”

                      Cites? I’ve provided a cite to analysis that your claim is quite wrong.

                • “The 2009/10 tax cuts were broadly distributionally neutral. ”

                  What the hell does that even mean in simple english?? Are you seriously telling us that the poorest got tax cuts equivalent to what the rich received??

                  Do you really thing we’re so stupid as to believe your garbage??

                  So this is where ACT trolls come to have on on-line wank, I guess.

            • I’m yet to see a valid argument why income inequality is a necessarily bad thing.

              It might not be for you because you’re wilffully blind to the effects of income inequality and poverty. However, to those at the bottom of the heap, it most certainly is a problem. For one thing, an economy cannot grow if half the population cannot buy the services and products on offer. Secondly, it creates social stresses as people see goods and services on offer – but cannot afford them. Thirdly, it is unfair on generations to come who find themselves locked into a growing underclass.

              If it’s not a problem, Nehemia, why is poverty considered a problem by every rational person? Even the Nats acknowledge it as a social problem.

              What makes you so blind to income inequality and poverty?

              Making statements that are at variance with reality is either verging on trolling – or you really are out of touch.

              • You are conflating poverty and income inequality. The two are not axiomatic. If my neighbour gets richer, I don’t necessarily get poorer.

                “For one thing, an economy cannot grow if half the population cannot buy the services and products on offer.”
                That is simply irrational. There will always be products and services on offer that half the population cannot buy.

                “Secondly, it creates social stresses as people see goods and services on offer – but cannot afford them.”
                Huh? That has always been the case. I can’t afford a porsche. I suck it up. Again you are conflating poverty and inequality.

                “Thirdly, it is unfair on generations to come who find themselves locked into a growing underclass.”
                Only if it is essentials that one class cannot afford to purchase.

                Yes Frank we have poverty in NZ, at last relative poverty. But income inequality has very little, if anything, to do with it.

                • Income inequality has a helluva lot to do with poverty, Nehemia.

                  You can’t be that thick, surely?!

                  If it didn’t, why do people always want to earn more money?!?! Why are American CEOs paid tens of millions of dollars, instead of the minimum wage of their workers? Because, the higher the income the further away from poverty you move.

                  Fairly bloody obvious, I would’ve thought?!

                  No, you’re being disingenuous to the point of willful ideological blindness. Or stupidity. I can’t tell which.

                  • Rather than spew invective at me, please address the points and the evidence I am citing. This is not personal, and I am not trolling, but you are making claims that I do believe are sustainable.

                    If my neighbour is paid 5 times what I’m paid, how does that put me in poverty? CEO’s are paid more than many workers because of the value the market places on their job. Simple. But if a CEO is paid 1000 times what his cleaner is paid, how does that consign the cleaner to poverty? The cleaner will be paid what the cleaner is paid where ever they work, because the market sets the price for that job. If they are in poverty it has nothing to do with what the CEO is paid, it has everything to do with their own skills, abilities, drive, education etc etc.

                    • That is ACT ideology, Nehemia, which has created more poverty than ever. You can repeat it as much as you like, the end result is unchanged. A wider gap in incomes leading to more poverty.

                      The reality is as I pointed out; lower incomes do not benefit the economy and create more social problems.

                    • It depends how you define poverty. For your suggestion to be correct, you must define anyone earning below 60% of the median wage as being in poverty. But that measurement is batty, as I’m sure you will agree.

                    • Poverty is fairly well defined as having an income (or none at all) insufficient to participate in the society you live in. Thus, your income is not as important as what that income purchases. If you earn a million dollars a week, but goods and services cost 1,000 times that amount (as happened in Weimar Gemermany with hyper-inflation) then you’ll understand that being a “millionaire” is a pointless exercise.

                      If your income precludes you from buying healthy food; living in decent housing; being able to afford education and healthcare (which once upon a time were free, before madness this country in 1984); using transport; buying clothes; then that is poverty. It’s not an easy concept for the middle classes such as you to fully understand until you’ve experienced it firsthand (or have strong empathy).

                      In the 1990s, then National Minister Jenny Shipley was going to undertake a very public experiment to live on the dole for a period of time.

                      She called it off when she got sick.

                      Which, as many pointed out at the time, was precisely the point.

                • Huh? That has always been the case. I can’t afford a porsche. I suck it up. Again you are conflating poverty and inequality.

                  Now you’re engaging in stupid hyperbole. No one is talking porsches. We’re talking about families able to afford decent housing, food, clothing, and all the other things we used to take for granted in this country.

                  Only an ideologically-driven right winger could possibly conflate good wages with buying expensive sports cars. Is that how your thought processes work, Nehemia?

                  • Repetitive comment deleted. Nehemia Wall, please do not repeat the same points over and over again. You filling up this discussion with multiple posts and thus bordering on trolling. – ScarletMod

                    • My apologies…there were several similar responses, and I was doing the courtesy of responding to them all. I get it now.

                  • This is what you said, Frank:

                    “Secondly, it creates social stresses as people see goods and services on offer – but cannot afford them.”

                    I responded to that comment. Poverty is not a ‘social stress’. And since when were food and clothing ‘services’?

                    • And since when were food and clothing ‘services’?

                      Are you for real? Your comments are becoming more bizarre.

                      Poverty is not a ‘social stress’.

                      Ah, so you are an ACT/National troll after all. Only a sociopath could arrive at such a rabid viewpoint. I doubt very much if your real name is “Nehemia Wall”, and more likely some self-centered, deluded prat from ACT or National.

                      You’re not here to discuss issues. You’re simply ridiculous comments to undermine this issue.

                    • “I responded to that comment. Poverty is not a ‘social stress’. And since when were food and clothing ‘services’? ”

                      Right wing troll.

                      That has to be the stupidest thing I’ve read here for a while.

                    • Food and clothing are goods, Frank. Not services. If resorting to labelling me makes you feel better Frank, so be it, but it isn’t helping the discussion.

                    • Food and clothing are goods, Frank. Not services.

                      You are splitting hairs. Whether goods or services, if incomes are insufficient to purchase goods (or services), that others on higher incomes/wealth can afford, then that’s inequality.

                      I’m surprised I have to spell this out to you.

                    • On that basis we have always had inequality, and…as has been my point, always will have. It’s just a question of degrees. Socialism didn’t fix this (indeed it could be argued it made it worse), and most certainly the unfettered free market won’t. But to continue to argue for further redistribution without being able to define why the current level of inequality is bad is just plain silly.

            • “Frank if I am one of the working poor and my neighbour get’s richer and I stay the same how is that a problem for me? ”

              It’s a problem for those on low wages if those wages are deliberately depressed to provide a pool of cheap labour.

              It’s a problem if those on low wages can’t afford the goods and services that are available.

              It’s a problem when halfwits like you don’t understand this.

        • The comment “Tackling inequality through tax and transfer policies does not harm growth, provided these policies are well designed and implemented” is not mine. It is a quote from the OECD report.

          I reiterate, I cannot find any reference to “the OECD report that states that there is a limit to the amount of redistribution any economy can undertake before hampering growth ” in this report, Can you cite this?

          • Sorry, my mistake. It wasn’t from the OECD report, it was from an IMF report about at http://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf.

            Page 23 reads:

            “Turning to redistribution, we find (also in column 1 of Table 5) that when redistribution is
            already high (above the 75th percentile), there is evidence that further redistribution is indeed
            harmful to growth, as the Okun “big trade-off” hypothesis would suggest. When it is below
            that level, however, there is no evidence that further redistribution has any effect on growth. Figure 7 shows redistribution for selected countries; further redistribution seems to start having
            a negative direct effect when it exceeds about 13 Gini points”

            • It ‘s not the only “mistake” you’ve made.

              Try your biggest stuff-up to date, supporting neo liberalism.

        • “So 12.5 Gini points is .125 on the coefficient.” That just does not make sense. I think it would be in your interests to read the OECD report.
          Gini coefficients of income inequality for New Zealand from mid
          1980s and 2011/12 were .27 and .32. If you can’t understand the graph ask someone to explain it to you.

          • It does make sense. If you want an example of references to whole Gini points refer to the IMF report I cited above, and to my quote from that report, where they refer to “13 Gini points”. You see I did read the report. And many others.

        • “NZ already performs a significant amount of income and wealth redistribution”

          Can you give us some examples of this significant wealth redistribution???

          We should be taxing wealth, not income. That way, people are not taxed for their hard work, instead taxed on the unproductive making more and more money simply from having money rather than from productive enterprise.

      • There is some interesting data from http://www.treasury.govt.nz/abouttreasury/higherlivingstandards/hls-bg-equity-jan13.pdf, including the following:

        “A recent review of over 400 studies showed there is no simple relationship between levels of
        inequality and economic growth (De Dominicis et al, 2008). There are studies that do find a
        link, and others that do not.”

        and

        “Regardless of how “low income” is measured, the proportion of people on low incomes has not risen in the last decade”

        I find this entire discussion somewhat of a beat up. NZ has an about average level of income inequality, and a relatively low proportional difference between our highest and lowest income earners. The level of income redistribution in NZ (particularly via WFF) is significant.

        • You left out this quote from the same article, Nehemia;

          Most OECD countries, including New Zealand, experienced longer term declines in inequality from the 1920s, which reversed after the late 1980s. Since then inequality has increased largely because average to high incomes grew faster than lower incomes. In New Zealand, people on low incomes did not experience falling incomes since the 1980s over the period as a whole, but their income failed to rise as fast as the average income. Technological change, globalisation, and household structure have been identified as the major causes of these changes both in New Zealand and around the world.

          There’s probably more, but it’s late…

          • You’re using far too broad a time period Frank. Since the 1980’s income inequality has indeed increased, but over the past 6 years it has reduced. And as the major changes have been identified as “Technological change, globalisation, and household structure”, I await your ideas as to how we win the clock back on those, particularly when we consider the benefits NZ as a whole has enjoyed from the first two.

                • Now you’re playing with figures , Nehemia – and not in an honest way.

                  The slight drop in BEFORE Housing Costs (BHC) is attributable directly to the global financial crisis; drop in mortgage rates; and drop in mortgage repayments. Ie, it became cheaper to pay off your house mortgage.

                  This is evidenced because the AFTER Housing Costs, show bugger all drop in Income Inequality. The line is flat.

                  FLAT.

                  So you’re being somewhat dishonest in the “evidence” you’re referring to.

                  It seems to be a common trait with right wingers.

                  And by the way, Income Inequality and Wealth Inequality are not always one and the same. The number of reports over the last few years (including the recent OECD report) show you to be self-deluded in your assertions.

                  I’m not sure why you insist on running counter to ever report on this problem, to the extent of mis-representing data.

                  Why, exactly, are you trying to convince?

                  • Frank you’re better than that. I didn’t even mention the BHC line, and if you look carefully the AHC line intersects at 3 around 2010 and then drops with a space clearly obvious. Look again please Frank. Also, I’m not sure what you mean by ‘every report on this problem’. I have cited a report that very clearly proves my claim. Finally, This dialogue has always been about income inequality, not wealth inequality. Please don’t confuse the issues.

                    • Perhaps you should have been a bit more honest about the data you were quoting? When you mis-represent data, anything you present becomes questionable.

                      The last right winger who indulged in that kind of bullshitting didn’t last long here.

                    • I didn’t misrepresent any data. You certainly misread the graph, confuse the BHC and AHC lines and confuse income and wealth inequality. It seems a bit disingenuous to then suggest I erred.

                    • You most certainly have misrepresented that graph.

                      You stated “Refer figure 1, which shows AHC income inequality declining since 2011”.

                      The AHC line is near-level – not declining.

                      It is the BHC costs which show a marginal drop.

                      The greatest drop in both lines is from 2004 to around 2009 – the effects of Labour’s “Working for Families” policy.

                      By the way, the rise in the inequality gap appears to be greatest from ’86 to ’94 – when Rogernomics and Ruthenasia were at their worst. As an ACT/National supporter, you may wish to consider taking responsibility for that horrendous result.

                      The next rise was in ’98 to around 2000 – courtesy of Shipley’s governance and a tax cut at the time which benefitted the most well off.

                      Thank you for the data – it shows the bullshit which rightwingers like you try to pass off as evidence of neo-liberal “sucesses”.

                    • Hey there Mr wall. I checked out that graph and frankie boy is right – you’re fudging what the data shows.

                      So he’s right and you’re wrong, the AHC line is -level – and NOT declining.

                      Did you hope no one would notice??

                    • Frank if the line is ‘near level’, then it is not level. The line has dipped. Inequality is sitting at about the same level as 1993, after peaking between 2000 and 2005. During a Labour Govt.

                    • Did you not take cognisance of what I wrote about “Working for Families”? That started in 2004. Until then, inequality was growing – as the graphline shows.

                      Working for families is a redistribution mechanism and the graphline shows a drop in inequality from 2004 to 2009.

                      So your comments are patently dishonest, as anyone can judge for him/herself who views the data.

                      And, to refresh your memory, even John Key admitted that the underclass in New Zealand has grown. That was in 2012;

                      Prime Minister John Key has acknowledged that the “growing underclass” he promised to tackle in 2008 has probably grown further – rather than decreased – during his first term in government.

                      Mr Key made the concession yesterday when asked about progress with the underclass, saying it depended what measures were used but recessions tended to disproportionately affect low income earners and young people.

                      He said he had visited a number of budgeting services and food banks “and I think it’s fair to say they’ve seen an increase in people accessing their services. So that situation is there.”

                      He did not believe the government had not acted on its promise to tackle the issue.

                      “It’s a long, slow job and there’s a lot more to be done. I don’t accept there’s nothing that can be done, but it will take a long time to make those changes.”

                      Key admits underclass still growing

                      Key was right; Household incomes dropped and inequality rose to its highest level ever in New Zealand in 2011, as a MSD report revealed.

                      NZ inequality at highest level

                      And as the Reserve Bank said in September, just this year,

                      ” For the first time, over $13.5 billion of student debt was included in the figures to bring New Zealand household net wealth calculations into line with those of other countries.

                      The effect is significant: our collective net financial wealth as a proportion of disposable income fell to 35 per cent at the end of 2013 from just over 45 per cent. “

                      We are poorer

                      Ain’t it a bugger when facts trip you up, Nehemia?

                      One day you’ll wake up to the lie that your ideology is. (Or not. Some people go to the grave believing all manner of bullshit, like you do.)

                    • “Frank you’re better than that. I didn’t even mention the BHC line ”

                      So you only pick and choose the bits that suit you Wallsy??

                      I guess you can “prove” anything if you cherry pick only the bits that you think support your case.

                      Epic Epic Fail

                    • Even if it did (which it doesn’t), it’s out of date.

                      The more recent and accurate OECD report trumps it hands down.

                      Try again.

              • I’m not having any problem at all, and honestly I don’t think Frank needs any cheerleaders. Now run away and learn to read a graph.

                • Not only can’t you read you own graph, Wallsy, but the recent OECD report supercedes that MSD report.

                  Damned inconvenient having the OECD coming to the conclusion that 30 years of “trickle down” has been a nonsense and has benefitted the rich at the expense of the rest of us.

                  Not just the OECD, but almost every other report has come to the same conclusion.

            • Income inequality dipped briefly due to the financial crisis but the overall trend is exponentially increasing inequality.

        • Wall , Wall , Wall….how can this be put in simple terms you will understand?….

          How about an analogy ?

          Lets say you , as an employer , decided one day …”The workers are revolting !!! ”…..not only that …”I want more for a cushy lifestyle…and , and , and…also to show that rival Jones a thing or two”….

          So you slash wages …and conditions because they can cost as well,…. and then you join up with your mates and lobby your buddy politicians to draw up plans to get rid of those pesky union people.

          Not only that…some other mates from your old economics class have dreamed up an economic policy gauranteed to make you even richer.

          Then you suggest a slogan that encapsulates all the ‘great’ things about this new economic dream that hides the fact that most of the new wealth will go to you and your buddies ,- yet sounds sooo philanthropic with humanities best interests at heart.

          You call it the ‘Trickle down effect’ .

          You get your politician mates to sell it to the public.You lace it with guilt phrases that talk about govt ‘waste’…

          You then realise even more wealth can be gotten by suggesting to your politician buddies as part of this economic dream , and due to previous govt ‘waste’..state assets that were paid for by all the population can be sold off.

          So you need to invent a concoction about national debt. Never mind that its mainly private debt, not govt debt ,…just tell the plebs ” the nation’s in dire straits and we gotta sell them assets !!! ”

          Voila !!..grumbling ..the people begrudgingly go along with it. A lot dont. But you and your mates get richer. Fabulously rich. So rich that most of all the nations, then the worlds wealth is in you and your mates hands.

          You feel great. You feel powerful . You feel important and that you are some sort of born – again Caesar. Youve made it.

          But a strange thing happens on the way to all your accumulation of all your wealth. Instead of actually enjoying it,…you notice that with the paltry wages you are now paying your workers,…

          People cant afford to buy you or your mates produce.

          Your production suffers. Your other mates who bought up house after house now find people are starting to live in garages. Then cars. Then tents.

          The food company you invested in suffers because as less people can afford to buy the food, you earn less passive income. So to recoup lost returns, …you have prices put up.

          It fails.

          You grow increasingly concerned about angry , hungry , violent destructive protests beginning to occur in major centres. The workers are truly ‘ revolting ‘ now.

          The effect has a knock on effect as it spreads globally and more and more violent and destructive demonstrations occur, a state of arnachy starts to permeate once peaceful nations, ….

          Then an unthinkable revolution in a formerly stable country breaks out…you and your buddies are aghast. You had major holdings in that country….and now its been nationalised ,…youve lost it all.

          You are now like many of the wretches you used to sneer at roaring past in your limo…but now your on foot…you pull your collar up to avoid being recognised.

          Too late!!… the mobs seen you . You !! who had contempt for the common person . You !! …who with all your mates influenced politics to enrich you at the expense of these people. You!!…who disempowered these formerly good people.

          But now they see you . You cannot get away. You failed to outrun them .

          You are now a memory. A hated memory. There will be no monuments to your name. Not even a marker. And why?

          All because YOU wanted to be King. YOU wanted control over others. YOU had contempt for your fellow countrymen and women.

          YOU wanted to be God.

          And the name of that economic ‘dream’ your buddies slapped together one lunchtime before the next economics class they called ‘ neo liberalism ‘ .

          And that was the last thing you ever remembered.

    • Economists might not, but many politicians do and have. Roger Douglas is the prime example in NZ, and he got his ideas from Margaret Thatcher. I can remember hearing Douglas extoll precisely this theory back in the 1980s, and little has changed since then, except the rich have got richer, and the poor have become even poorer.

    • “Trickle down” was what was sold to us in 1984 and since. Roger Douglas et al insisted that by cutting taxes for the rich and business, would create a “trickle down” effect.

      History. This word has been used to describe the direction NZ has been taken in since 1984.

      It may not be a word taught as an economic theory, its how the theory has repeatedly been described to the NZ population.

  4. up until 1984 I had been a happy foot slogging lp supporter.

    post 1984 and roger I was a stunned mullet.

    post 1987 I never renewed my lp membership.

    I doubt anyone in the current parliamentary lp want to comprehend what the oecd report is actually telling them.

    the lp betrayed their supporters.

    economics is not a scientfically based occupation, it is more akin to philosophy where ideas and hypotheses are discussed.

    the “study” of economics is at best hypothetical.

    the trickle down idea is barely university 101 level.

    as a policy base it is bull shit

    I would be very surprised if any parliamentrian understands that, ( they would not want to).

    governments bullshit the electorate to favour their mates.

    • Current economists and politicians insist on growth. We must have growth. Without it our economies stagnate, unemployment rises and people feel the pain. So apparently we must have growth.

      Perpetual growth in a finite space is a physical impossibility. Now, some of this growth may be in increased efficiency, some may be in intellectual endeavour which uses no physical resources. Not all of it will be though. Some of it will be and is in a growth in resource use.

      Growth of any % rate, any at all is exponential. And the biggest problem with exponential growth is right before the last doubling, right before you reach the limit, you’re only halfway there. A growth rate of only 2% has a doubling time of 35 years. And 2% is lauded as a “sustainable” rate.

      I do not think economists nor politicians have a good grasp on this simple math. I do not think that the word “sustainable” means what they seem to think it means.

      • “I do not think economists nor politicians have a good grasp on this simple math.”

        It would seem they have no grasp, let alone a good grasp Lara. As you’ve stated, a simple understanding of the exponential function reveals where our current monetary and economic system is headed – total collapse. That is a mathematical certainty under our current system.

        Just for fun, if the average inflation rate for the next 50 years is the same as for the last 50 years then an average 3 bedroom house in Auckland will cost nearly 20 million dollars. This is within many of our lifetimes! And this doesn’t allow for the fact that house price inflation is massively more than overall inflation.

        So if my grandkids want to buy a house in 40 or 50 years time then they’d better hope the minimum wage is at least $150 an hour. (which is what it will be if it keeps up with inflation)

        Economic growth is based entirely upon exponentially increasing consumption. Exponentially increasing consumption in a world of finite resources is unsustainable. Therefore, economic growth is unsustainable.

        To repeat that for all the economic growth worshippers out there. – Economic growth is unsustainable.

  5. Do we have any disincentives for companies and enterprises to be trading while expecting the tax payers of this country to top up the wages of their workers?

    WFF is a sticking plaster over incompetence. Always has been. And ‘extending’ it to very low income families is going to do nothing for single people in poverty, or the parlous state of employment and innovation in this middle of the bell curve country.

    Nor will it do anything to slow, halt, or reverse the ever-rising costs cranked out by people (I think they’re people?) who expect someone else to pay for their aspirations and undeserved lifestyles. (Thickos masquerading as CEOs, for example. And pests in parliament. And those ever so comfy people in local government.)

    The system, as such, is anachronistic in the extreme. Nearly a hundred years past its use by date. If it isn’t fixed then whatever is handed over to struggling parents will be hoovered up by the system before the end of the first pay day.

    (Up she rises! Rents, rates, phone costs, power, transport, etc. All the ‘overheads’; long before we get to shoes, clothes, books, food, decent bedding, health care. Long, long before.)

    Punitive and inventive taxes are no remedy at all. This is a problem caused by the system and a time of transitions between the old Industrial Age and whatever is emerging now.

    Alleviate the misery, by all means – BUT we must also create and build systems for this time, not tweak old stuff that was formed for boom years after much destruction and death. They cannot deliver what is needed now.

  6. Nice enough article I guess, …but just a little bit too polite.

    Are we REALLY going to rely on the Double Dipper from Dipton to deliver ANYTHING fair and equitable?….let alone some kind of fair and decent redistribution of wealth ???!!!!!

    ( what was it?….around $750.00 per week he was claiming every week for housing and only came clean when exposed?……More than twice the bloody weekly wage of many low paid workers!!!!!!!!!!!!!! )

    From the man who once quoted a few year’s back :…… ” We should be glad we have a LOW WAGE ECONOMY because it encourages foriegn investment”…….

    !!!!!!!!!??????????!!!!!!!!!!!!!!

    And his latest reckoning that the John XkeySCORE govt is the least corrupt govt this country has ever known?????!!!!!!!!

    Straight after John XkeySCORE was caught out deliberately lying in parliament????!!!!!!!

    Pulllll -lease!!!!!

    I sense a Tui billboard quote is needed right about now , in fact ,….

    Dozens of ’em.

  7. what else did you expect to result from The Market Board Game? This is just an outgrowth of the inherent Gaming Stategy that exists at every level of life organisation. How else would the game work at this point?

    all of these “theories” and “reforms” proposed all sound very nice and hopeful etc., but we can’t just keep “assuming Planets into existence” now, can we? We need another 26 of them by 2050 – which is only 35 years away, so we’re obviously going to have to be needing to start possibly maybe thinking about ordering another one right away, Don’t You Think? what would you suggest? Mars? Venus? We’re going to have to make them Habitable first – if we want to keep playing this Ridiculous Oudated Destructive Unhealthy Board Game Infinite Consumption Machine that everyone has fooled themselves into believing actually means something in our Physical Reality. When does the Game go back in the Box?

    We need to think on a different level now.

    The sheer “Gravity” of this Absolutely Infantile Stupidity and Monumental Failures of Relationship/Understanding is forcing its hand, and we’re all still just Playing a Game?

    The Structural Violence imposed on us today is an Assault. And in form, a Civil Human Rights Violation.

    “There are certain things in our nation and in the world which I am proud to be maladjusted and which I hope all men of good-will will be maladjusted until the good societies realise.”
    – MLK Junior

    A Crazy Schizophrenic Morality: The System Worship Masked as “The Free Market” :
    http://synergyshift.nz/2014/12/10/a-crazy-morality-the-fanatic-system-worship-masked-as-the-free-market/

  8. the trickle down theory is marketing imagery, it doesnt describe the actuality – the vacuum up all your stuff theory would be more accurate in real terms

  9. I think profits are falling not just because people on low incomes can’t afford the goods. Here’s another reason. Profits depend on exploiting human labour (and the environment). The capitalist uses technology to cut the labour costs , and to increase profits. This works temporarily, but in the long run (and with all the competitors doing the same) the profits will fall, because there is less human labour to exploit. This is why capitalism creates cyclical financial crises. When profits are falling, capitalists will try to recoup them through lower wages, less taxes for the 1%, less social welfare, asset sales, financial speculations, increasing exploitation of the environment, and all the other neo- liberal reforms and practices we are seeing. Capitalists may even “go on strike” themselves , and stop production altogether, and ultimately go to war to save their profits. That’s why we need to to end this system of exploitation, and replace it with one based on meeting social needs and respecting the environment.

    • Yes, or more simply “Darn, robots can buy things!” .

      and “If only the human workers weren’t consumers too* sigh*”

    • Profits are’t falling. Many corporations are realising record profits. It used to be that those profits were shared more equally with the workers who produced them. Since the 80’s, business owners have kept the increasing profits for themselves, hence real wages remaining static and rising inequality

    • Thanks Who Gnu
      and thanks all to all for the great debate. Of course it not an academic debate but one about a clash of values..
      I grew up in postwar egalitarian New Zealand when poor people lived overseas, not here. Yes there were some poor old but poor old people were lifted out of poverty with a generous universal unconditional pension in the mid 1970s.
      I was saddened to see the huge line of desperate families outside the Auckland City Mission this week.The line of homeless and hungry and despairing in a land of plenty is proof of the failure of contemporary economic policy whatever name we give it. In the same week the 2 directors of a KiwiSaver company set up with taxpayer subsidies sold out for a cool untaxed $20 million. Might be a new house or boat for them in that perhaps? But we need to look no further than the property market for daily examples of riches that arrive through no effort or merit.
      “To those that hath it shall be given. To those that hath not it shall be taken away” should replace the mantra and illusion of trickle down

      • I grew up pretty much the same NZ. Protected by the economy of mother England and the wider Commonwealth. Times have changed Susan, and we have had to change with it. We need to reward thinkers and entrepreneurs, risk takers and those who can make a living for NZ in a tough world. And yes we need to take care of the genuinely in need. It’s a question of balance, and one that I believe as a nation we have about right.

        • How can it be even remotely “about right” when child poverty and inequality are on the rise?! And please don\t bother with your crappy government graphs that you interpret in a way no one else does.

          When every recent report – including the OECD – state that poverty and inequality are on the increase in this country, only unrpentant ideologues can possibily argue that “as a nation we have about right”.

          As for this right wing piece of garbage,

          We need to reward thinkers and entrepreneurs, risk takers and those who can make a living for NZ in a tough world.

          We don’t need to “reward” them at all. Their efforts will yield their own rewards, thank you very much.

          New Zealand made it’s way in the world long before your insane ideology became fashionable. An ideology, I might add, that is intrinsically untenable, unstable, and six years ago required hundreds of billions of dollars of taxpayer’s money to bail out.

          So don’t come your parotted right wing rhetoric with us, Nehemia. It’s rubbish. And you’re not convincing anyone.

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