Celebrate the Rich Listers

The NBR Rich List will again draw hate and vitriol from the political left.

There was a time, at the height of Thatcherism and Reaganism, when economic success was applauded and Mao Zedong’s successor Deng Xiaoping was attributed as saying that to get rich is glorious.

He was right.  By the early 1990s, there was no doubt which general economic approach lifted all boats: the one based on aspiration and celebrating success, not envy and redistribution.  The shift to capitalism in China, India, South East Asia and Eastern Europe in the 1980s and 1990s lifted more people out of poverty than ever before in the history of the world.

However, just as capitalism’s late 20^th century triumph began in 1970s’ think tanks, and the new political language they created, the left has fought back over the last 20 years.

An early sign in New Zealand was Helen Clark bringing “fair” to the fore of political language, a word devoid of meaning other than “what will win me votes” and used to justify multi-billion dollar transfers.

It has worsened since the global financial and Eurozone crises.

These, the left tells us, were caused by the greed of the wealthiest 1% and not – as is the reality – by the Clinton Administration’s “affordable housing” policies and the welfarism, sloth and unionism endemic in Mediterranean Europe.

Since then, activists and academics have emphasised inequality. 

In New Zealand, the Child Poverty Action Group says 270,000 children – half of them Maori or Pasifika – live in poverty, around a quarter of the total.

Otago University says 400,000 New Zealanders suffer fuel poverty.

Depending on the measure, the welfare industry tells us that around 760,000 New Zealanders live in poverty.  Our income inequality is said to be a bit better than the hellhole of Canada but a bit worse than the paradise of Greece.

Statistical constructs
In reality, all these measures are mere statistical constructs.

If every New Zealander’s income immediately doubled (ignore for the sake of argument any inflation effect) so-called poverty in New Zealand would remain unchanged.

If dairy farmers and tourism operators have a good year, more children would be said to live in poverty because the median income would rise.

Similarly, cut middle-class salaries, or slash the value of the Rich List’s portfolios, and child poverty apparently falls.

This is nonsense and confirms Margaret Thatcher’s famous assertion that the left would rather have the poor poorer provided the rich were less rich.

That case was made just last week by Dr Geoff Bertram – the architect of the Labour/Green electricity nationalisation to combat “fuel poverty” – when he proposed chief executive salaries should be no more than three times that of a company’s lowest-paid worker.

If Fonterra employed even one factory hand on, say, $20/hour, its chief executive would be limited to a salary of about $125,000 a year.  It is impossible to see how that would help even one of the 760,000 New Zealanders apparently living in poverty.  It is a proposal solely motivated by the politics of hate.

Massive redistribution
There is an argument that, at a certain point, inequality can become harmful because it can become a barrier to economic growth.

In a system of pure feudalism, where all new wealth that is created is confiscated by the rich, or a system of pure communism where all wealth is redistributed, no one would have an incentive to do anything, with economic collapse following.

The question, though, is whether there is the slightest evidence that New Zealand is remotely approaching either extreme.  If there is, it would surely be towards the latter.

Under the current tax system, including Working for Families which John Key rightly described as “communism by stealth” but has kept in place, the top 3% of New Zealand households pay a third of all net income tax.

The top 5% of households pay half and the top 12% pay three-quarters.

In net terms, the 44% of households earning under $50,000 pay no income tax at all.  Their true net tax rates are below zero.

Even when taking into account GST, fuel taxes and tobacco and alcohol excise, the redistributive effects of the current system are overwhelming.  Just 12% of indirect taxes are paid by the poorest 20% of households and a third by the wealthiest 20% of households.

The current economy is one that is growing, where unemployment is falling, wages are rising, inflation is below 1% and even the constructed measure of inequality is marginally narrowing.

It is also a country where someone like Rod Drury can turn an idea into a $2 billion company, including quite a few hundred million for himself.

We should return to the values of the 1980s and celebrate him and all those who have made it honestly onto this year’s list.

They create wealth and opportunities for New Zealanders.  It is a lie to say they make children poor.