READER REPORT:

Fixing the economy: NZ at a crossroads

AARON SPENCER
Last updated 05:00 19/05/2013
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MO' MONEY, MO' PROBLEMS?: Higher incomes can mean increased responsibility, writes Aaron Spencer.

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New Zealand is at a crossroads as a nation, and to move forward we need to become more united and more aspirational.

We need to shrug off the dated dogmas and the green-eyed monster, chip-on-the-collective-shoulder, and recognise that the best societies are those where individuals are allowed to excel and fulfil their potential, while everyone is elevated from the trap of poverty and disenchantment.

For example, there is often a cartoonish aspect to the depiction of 'rich' people in New Zealand, typically the portrayal is of greedy, selfish people intent on pillaging the country and downtrodden workers for every last dollar. It brings to mind the top-hatted tycoon, smoking cigars lit by $100 bills while workers save away out in the factory. It's a simplistic and naive vision that isn't relevant is this day and age.

For most people that Sir Michael Cullen would label "rich" (although the definition of "rich" is not qualified), higher incomes mean increased responsibility. For instance, a small business owner/employer has to ensure that rent on buildings is paid, that there is a buyer for the businesses goods or services, that staff wages are paid on time, that ACC levies are paid, that occupational health and safety requirements are being met, that relationships with suppliers and customers are being met, and so on it goes.

A dairy farmer has to ensure that stock levels are managed, that the cows are milked on time, that their plant and equipment is kept clean, that fences, farm buildings and farm machinery are maintained, that sick animals are made well, that calves are reared and eventually incorporated into the herd as older animals are culled out and 1001 responsibilities besides these.

A CEO will have overall responsibility for the organisation they are leading and all the employees within it and they will need to present themselves professionally and credibly to internal stakeholders and external parties.

People on higher incomes may also have the responsibility to support large families, or pay higher rates, poor more tax and so forth. They will also support a whole strata of businesses within our economy, such as travel agents, boat builders, luxury car dealers, coastal property real estate agents, lawyers and solicitors, share brokers etc.

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New Zealand does have a well developed social welfare system, but this does not seem to be acknowledged in the national discourse. The various planks include free hospital care, free primary and secondary school education, a support system of benefits covering invalids, sickness, domestic purposes and unemployment, Working For Families payments, interest free student loans, KiwiSaver, state housing and so forth. No matter the government of the day, these planks which make up the framework of this system are now entrenched.

I am sure that people on higher incomes recognise that there is no benefit in having sections of society living in depravation through unemployment and critically low incomes. True poverty brings with it health problems which compromise the nations strength and put a drain on the countries finances. Poverty brings other social problems such as increased crime, which has an impact on all of us. Anyone can be a victim of crime, regardless of how much they earn.

On the other hand, we do seem to have a problem today where many are basically unemployable. Put simply, they do not have the attitude or mentality to pursue and maintain employment. They are sabotaged by alcohol and drug use, or by the strong message that all life's cards have been dealt against them.

The realistic but unpalatable truth is that if someone has been unemployed for a prolonged period of time then the problem lies with them. Either their expectations are too high, or they won't broaden the type of roles they will consider, or they don't present themselves professionally for interviews, or they fail drug tests. 

It is dangerous to put forth a view of the world that higher income earners, or people that have secured good jobs or own businesses, or who live in 'a nice part of town' - are "silver spooners" who have had unfair advantages in life and are now living a life of unbridled pleasure at the cost of wider society.

Our economic system and system of government is flawed and imperfect, but New Zealand is competing in a global environment and we have the choice to buy-in and seek to improve our standard of living as a nation, or opt out and languish. No matter what system we use to govern ourselves and the way our economy works, no one will be 100 per cent satisfied, but this is not a battle of good versus evil. If we adopted different systems we would still not be able to avoid the biggest issues in life, such as our own mortality. Utopia is a pipe-dream that exists for dreamers and dissenters.

The Scandanavian countries - with Sweden being a prime example - mix business-friendly policies with well developed social welfare systems. The policies that would seem to work best are lifting the poorest sections of society out of poverty and increasing their standard of living, while allowing enterprising and talented people to retain the bulk of the wealth that they are creating. This wealth is naturally going to be returned to the economy through spending and through job creation. In Sweden, since 1990 taxes as a percentage of GDP have dropped, with the tax rates of high income earners dropping the most. 'The Economist' magazine stated this year that Nordic countries are 'probably the best governed countries in the world', and ranked Sweden in first place.

If we could get rid of the nastiness and the bitterness stemming from dated ideologies, and remove the simplistic reasoning that underpins the 'politics of envy', I'm sure that the country could move forward and become more aspirational and prosperous as a whole.

Using the Scandavian countries as an example, we must acknowledge that increased wealth is the way to elevate our nations fortunes. Equally we must acknowledge that with this increased wealth we will need to address the critical social problems that plague us.


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