The world’s next big welfare state

editor's insight

Nevil Gibson

President Obama’s convincing win is widely attributed to his smart targeting of voting groups that are easily upset by a conservative candidate.

Specifically these were: single women (abortion rights), the socially liberal (gay marriage), various racial minorities (immigration policy), students (education fees), government workers and unionists (employment entitlements).

It was then just a matter of boosting these so-called identity issues and demonising the rival candidate – usually in the form of what the media call a “gaffe.”

Mitt Romney provided the biggest one by mentioning, in his quiet chat to some wealthy campaign donors, the fact that 47% of voters were on government payments and transfers of some sort, and therefore were not likely to support a candidate preaching fiscal responsibility and maintaining lower taxes for the rich.

The polls vindicated the Obama strategy and some commentators picked up on the demographic changes that favoured the Democrats – the Latino and African American vote exceeding that of European-origin Americans, for example.

Of course, these minorities are not always going to be poor or hurt by immigration limits, and the Republicans can count on their votes in future as they prosper.

Non-conservative commentators also noted Americans were also becoming more secular and favouring social freedom (as opposed to being more individually responsible). 

As a result, and this is not emphasised by commentators, the US has become more of a welfare state and less of an entrepreneurial one.

One of the biggest election issues for Americans was the extent to which the government should pay for healthcare – an issue that is viewed as irrelevant to foreigners, even though public funding of healthcare is fast becoming unsustainable everywhere in the developed world.

In fact, I would suggest the US economy is more likely to head in the direction of Europe’s, rather than Asia’s, due to the growing number who now get their income from the state. Politicians love welfare states and deficits as they guarantee voter dependence and know that most people take little notice of “fiscal cliffs” and the like if they are not paying much or any income tax.

The Obama campaign has its parallels here, too, with Labour, the Greens, Maori parties and New Zealand First all heavily dependent on Mr Romney’s “47 percenters.” In fact, when the number crunchers tried to rebut Mr Romney, they found evidence that figure should be higher, depending on what is included.

Embedding the safety message
It goes without saying that every major industrial disaster needs an independent full-scale inquiry, such as a royal commission.

In the case of the Pike River coalmine tragedy, the commission rightly put blame everywhere, though the knee-jerk reactions focused only on corporate culpability and the reduction in government regulation.

Critics of business generally were given a big stick to drum their cause, though the commission included in its criticism the fact that safety rules were being flouted right up to those at the coalface.

The best outcome might be an independent health and safety commission, though another government agency is unlikely to prevent future occurrences.

Before that occurs, business should be given credit for what is already being done through the Business Leaders’ Health & Safety Forum, whose members do not put profit ahead of safety factors, as the ill-informed critics like to say.

As a result, many hazardous industries have an admirable safety record – just because this doesn’t make the news doesn’t mean it isn’t happening.

Few, for example, would know that thousands of shipping movements and several decades of oil and gas production and refining have occurred without any major incidents.

Yet if you believe the Greens and the media, “fracking” and deepsea drilling are about to deliver disaster. The scare tactics have even persuaded the Parliamentary Commissioner for the Environment to get involved in a non-existent problem.

Todd Energy

weighed in this week with a submission that goes well beyond the specific issue to a history of the entire industry and its record.

Unlike some, such as Pattrick Smellie, I wouldn’t attempt to summarise a 177-page report that covers all the bases. It deserves to be read in full and it can be downloaded from the link mentioned or, better still, ask Todd for a copy.

By the way, I’m told fracking is also useful for tapping artesian water by combing aquifers, reducing the need for drilling and enabling the resource to be better measured and managed.

Where jobs really come from
The rise in unemployment figures also brought out the government’s critics and heaps more uninformed comment on how jobs are created.

It is not the government’s role to create jobs. But it should do its best to create an environment where people can invest their capital, start businesses and nurture a climate where the economy can flourish.

Economic Development Minister Steven Joyce, defending the government’s record, has mentioned there are “hundreds” of initiatives that are doing this – though no one’s interested in listening.

It seems even the government has given up trying to persuade anyone that this is how the world works. An initiative I can mention is one of Mr Joyce’s as minister for science and innovation.

In Auckland this week, he opened a two-day forum of six small advanced economies (the others were Denmark, Finland, Ireland, Israel and Singapore) on commercialising R&D. Each country sent experts from their chief scientist offices.

I spoke to representatives from Israel, which has a 40-year record of encouraging startup businesses and has the world’s largest venture capital industry outside the US.

Irit Ben-Abba, of the ministry of foreign affairs, says Israel is now focused on adapting technology that developing countries can afford rather than selling more high-tech stuff to Europe and North America.

This includes advances in agriculture (drip-feed irrigation), water management, energy (solar power), healthcare and food security.

“We want to work with countries such as China and India to develop affordable technology,” she said, giving the example of Canada’s Grand Challenges project, which is pioneering healthcare innovation as an aid programme.

Chief science adviser Sir Peter Gluckman is to be congratulated for the Small Advanced Economies initiative and one can only hope it will lead to New Zealand doing better in venture capital.

It was mentioned at the briefing that one immediate step could be lifting the restriction that all New Zealand government R&D funding be spent here. By expanding it to other countries, such as those in the six-nation forum, the amount would soon be dwarfed by reciprocal funding from offshore.

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43 Comments & Questions

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Ugh what nonsense. Why not tackle the true issue of Government welfare to the super Rich who manage to warp the system to their advantage. Romney claimed a tax rate of 15% when normal middle class people had to pay three times that amount. Oh but when it is to the benefit of your rich backers you love the Government gravy train.

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Rubbish. Romney paid around $2 million in taxes last year. I doubt that many 'middle class' people, as you call them, even earn that much.

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You fail to understand, most business profits are driven by slave labour. The demise of the unions, and lack of peoples rights in china has seen high profits and salaries to the selective few.

Government taxes, if for anything, should redress this inequality in wages. The should be a progressive tax on the wealth, as in most cases their wealth is created by exploitation.

No one person salary is worth the equivalent of 100 person wages. It might be different if they were risking capital, but in most cases they are not. This current system cant work much longer, as there will be no one who can afford the chinas products let alone lifes basics shortly.

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Great post Richard S. The only exception to it I'll take is that many of the super-rich have risked capital but not their own, and - perversely - have had their failures underwritten by the tax payer. Similarly, if a private UK company (and possibly one elsewhere) were to sell Hawk jets to Indonesia only for the country to fail to honour its debt do you think the company would suffer a significant financial loss? Fat chance! It wouldn't be so bad if capitalism truly rewarded those from whose toils society benefits the most.

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No wonder the top earners need to be paid more! I can think of nothing more obscene that the govt's right to tax high earners at a higher rate. That is when taxation becomes theft. High earners have more because they are worth more. If one worker pays 10% then all workers should. pay 10%.

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"High earners have more because they are worth more." JHC on an effing stick!! And the sea is wet because it contains water! I'd love to know how you define worth - if you think people attempting to deliver commercially viable nuclear fusion technology to save the human race or researching into cures for dreadful, currently incurable diseases to save individuals (sometimes I wonder why they bother) are "worth" less than CEOs who've presided over dreadful slumps in share price resulting from incompetence then don't bother responding.

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You think its obscene because you are greedy mate. Have you got a corkscrew shaped bed? How can you sleep straight at night knowing the rich play while the children of the poor die of starvation?

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Greedy? I'm not the one who wants others to pay my share. I'm more than happy to pay, on a percentage basis, the same as everyone else. Our system means that high earners don't just pay more because they earn more dollars, they also pay a higher percentage. Those who believe that is fair, who are content to live off the earnings of others, are the greedy ones.

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So what are you going to do? Pass a law making Mick Jagger reduce ticket prices? Insist companies pay lesws and lose the employee they want? Shut down silicon valley? Send brain surgeons on holiday for 10 months a year? Or raise the cleaners' wages by 100 times? What on earth do you think wages are, if not an incentive!

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If the spirit of capitalism and the dreaded beacon of faux enlightenment that is entrepreneurship had poked their materialistic snouts into academia the way they do these days, there'd be no silicon valley as we know it because research into and the development of quantum mechanics didn't turn a fast buck! I think I'm nailing this, by the way.

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I have never had a problem with people rising due to ability. However the dirty little secret of capitalism is most people rise due to the connections they inherit from birth. The most successful free markets are not those dominated by Oligarchic families but those than have genuine social mobility.

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"However the dirty little secret of capitalism is most people rise due to the connections they inherit from birth."

Absolutely right SM - I'd vote it up multiple times if I could (perhaps I can - let's see!). Why should society favour individuals because of the achievements / actions of others in this way?

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If a cleaners wage is so low and means they cannot live, then yes, someone has to stick up for the little people, and the old, " They need to get an education" doesn't cut it either. Incentives to educate themselves are big, but how when the right is cutting education, health etc.

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Well, what we could do is encourage people to be guided by values like sharing, love, fairness and justice. Many people are incentivised by the drive to achieve excellence for its own sake. Secondly, a collective abhorence of gross consumption needs to continue to be encouraged. Share. Its good.

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Have you a residual ability to do mathematics? I said a percentage not a total amount and as a billionaire his income obviously is greater than middle-class people but he should pay the same percentage.. Your dissembling would suggest a natural career as a banker or politician.

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Have you an inability to understand the English language? Read your initial post, in which you claim Romnet paid 15% tax while other paid 3 timers that amount; in other words 45% That is pure nonsense.

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The problem with Romney's economic policy was that economists all said it couldn't work. That's a pretty basic and major flaw.

Apart from that, silver spoon all the way, and always paying much less in tax than most citizens.

Ah...there was also the dishonesty too, such that even some hardened conservatives were seen saying things such as "There is no issue on which he hasn't taken both positions.

This guy had more flip-flops than a Havianas factory.

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" .... smart targeting of voting groups that are easily upset by a conservative candidate".

Spot on. Obama ran a smear campaign against Romney based on sustained and deliberate misrepresentation of his opponent's views, policies and personality.

Any minority clinging onto grievances and entlements (real or imaginary) would fall for this and he knew it. Bind a few minorities together by generating fear and confusion and - hey presto - you get a small majority in the popular vote, the effect of which can be magnified by skilful targetting of the few swing states.

Hardly the resounding triumph or mandate his fans in the US media are claiming.

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Funnily enough the Economist ended up backing Obama simply because Romney wasn't credible:

http://www.economist.com/news/leaders/21565623-america-could-do-better-b...

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Are you a Nelson Horse by any chance?

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Nah. Definitely a Trojan.

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Different motives come into play and different standards are applied when Obama's policies and record are analysed.

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Entrepreneurs don't drive the economy, working consumers do. Obama won, in an environment that is truly bleak. He won, by nearly as big a margin as he did in 2008. The turnout was huge. If Republicans don't make a game change there will never be another Republican President. Next election, it will be Hillary with a Latino VP. The GOP will be marginalised into a thin strip up the center of America, representing red America. How much longer until Texas and Georgia are swing states? 2016? Definitely by 2020. Look at the demographics. When Texas swings, There is no more GOP. What we are starting to see is the ethnics taking power back from underneath the feet of Status Quo. Bring in some big Union Movements, its about time for the Pendulum to TRULY swing Left.

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I don't think the turnout was huge. The "winner" of the the PV vote was the non voters ( ie. at least a third of the eligible voters did not turn out).

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It was pretty good considering the weather, the Hurricane, the 6 hour queues, the 10 page ballots, the more and more blatant attempts at putting voters off.
What is of note, is not total turnout, but is the turnout by Party; the Republicans had a turn out of 80% of their voters, and the Democrats had about 30% of what you could call their "traditional" base.

If the people of the US that could vote, did vote, there would be an OVERWHELMING majority for the Dems across all areas.

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Your figure of 30% is rubbish. I think you should check the basic arithmetic. ( hint : look at the number of eligible voters & how many voted for the Dems)

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Show me your numbers then. Its easy to sit and shout. Also look at the non-enrolled voters. Yes I know to you they don't count, but they do. They had a huge turnout in these numbers, but it was still low over all. The middle class, white, male vote was pretty much entirely wrung out for the Repubs, and they still didn't take the office. They didn't expect that, thats why there was such a surprise. Now the Left is able to mobilise so much more, it will be a hard road to climb, because they will only get more mobilised not less. Hope someone from NZ is taking notes, and starts to election mobilise like this.

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The Dems got about a third of the eligible voters.
33% divided by your 30% = 110% of the eligible voters. That does not make sense. ( NB. if the figure for the Dems is higher than 33% and it maybe a couple of % higher then it makes it worse)

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When Texas swings thats a good one! Texas will become its own country before it swings. What most people along with many Americans don't get is that the USA did not vote for Obama's hope and change statement. They voted for either compromise or gridlock with the house being controlled by the Republicans and a big say in the Senate. If you look back in modern US history you will see that it goes Democrat, Republican, Democrat, Republican etc. so I actually believe they can put just about anyone in charge if it is there time they will win. I will bet you $100 right now the next President of the U.S will be a Republican.

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The once Almighty White Man Vote, taken for granted is no longer effective....most of the White Voters were too busy enjoying themselves at the various football games. Any lession learned yet, eh?

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Well written,Nevil.
The US is about to reap the whirlwind caused by their wrong decisions;Greece is not far off!
liberte

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A good article fairly stated.
Pity all your left wing commentators can't see the truth of the matter.
WG

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I think that those who are happy to 'take it' rather than 'make it', and the politicians (usually the Left) who cynically exploit their dependency to buy elections and/ or bribe their way into power pose by far the greatest moral and financial hazard Western democratic nations face in the years ahead. Unless a way is somehow found to break the cycle of the cynical exploitation of the welfare classes by the Left's elites for their own political gain, a method that will stop them from pushing more and more welfare onto users who can never get or have enough, then the heavy burden that already falls on the minority of citizens who pay the most tax will get greater and greater until something snaps.

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Take it rather than make it? Like Wall Street, and the Banks? Like all the tax payer funded subsidies for business? Yes I agree, they do take a lot.

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The only truth I see is of what is coming, and of course it's bad for the Right, I'd hazard to say It will be the worst time possible. The last bastion of capitalism is starting to crumble. Rotten from the inside out. maybe once the head is removed the whole thing will die, and we can start something new that doesn't have greed and divisiveness as it's blood.

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And if you are right and you think you will be able to sit on sidelines as an unaffected spectator --well don't hold your breath .

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I won't be on the sidelines.

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The problem is the State and its monopoly on violence, I would rather have someone mug me over income taxes at least thats being honest.

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It will now all end in tears in the US. Probably very worse.

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Secession is always an option for the small-government, right, white voters, the USA is a Federation of States, not a country as such ... likely candidates will be for Texas, Arizona, Idaho and New Hampshire.

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That went well the last time.

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Single women (abortion rights), the socially liberal (gay marriage), various racial minorities (immigration policy), students (education fees), government workers and unionists (employment entitlements) all have the right to vote as they see fit. That Mr Gibson is how democracy works.

Labels of right wing and left wing are too simplistic, but too much of either is unsustainable, and the GOP was too far right.

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Not so. You have just listed the left's replacement constituency for the white male. Pure Frankfurt School.

In the 20s and 30s the Frankfurt School tried to radicalise the German worker. It backfired. Instead of the cultural marxist revolution of Internationalists...Germany opted for National Socialists (Nazis). Given the lion share of Frankfurt School social theorists were Jews they fled Hitler's Reich and headed off to the US where they were given academic tenure at the University of Columbia.

There mission was to "make the West so corrupt it stinks" (Munzenberg). Durring WW2 they were concentrated on beating their heretic children the National Socialists. After WW2 half of them went back to Frankfurt...the others stayed at Columbia where they tried - and failed - to radicalise the US worker. Because the 50s were a boom/growth period for the US the social therories of cultural marxism fell on barren earth ergo after two recent failures they determined that the white working worker was 'objectively counter revolutionary' ...and needed to be undermined.

Their own texts refer to the need to undermine the white worker by destroying the basis for his security and continuance - the family. Please refer to Herbert Marcuse's 'Theory of Polymorphic Perversity'....used to kick start the hippy generation.

Next the press and academia neede to be controlled...to effect cultural takeover re: replacement of 'norms' - please refer to Marcuse's 'Theory of Repressive Tolerance'.

Next a replacement for the white workers was required as a voter base - enter the grievance industry...Saul Alinsky....and the deliberate targeting of women, homosexuals and minorities as the new voter base/privileged by academia/media class of 'vicitims' of the white male...with the collective numbers required to take on the 'objectively counter revolutionary'.

Enter unlimited immigration...and ergo...welcome to the vibrant, multicultural society where the 'Pale, male and stale' no longer represent a power blocker.

...and if you don't 'celebrate' your replacement...you're a "raaaacccciissstt".

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