Ideas shape nations. Many big ideas are borne out of a country’s history and tradition. New Zealand’s pioneering heritage gave us our number 8 fencing wire “we can do it” approach to life that defines our Kiwi attitude.
One of New Zealand’s virtues is that anyone can succeed – irrespective of humble beginnings or disadvantage in life. It is a tribute to the strength of our character and the power of determination that people from all walks of life are able to seize opportunities and achieve their goals and dreams.
Individual freedom has been described as the wellspring of human progress. It is the role of government to set in place the conditions that enable freedom and enterprise to flourish. Whether in education, science, the arts, sport, business, or any other field of endeavour, encouraging achievement and success should be a vital part of our national psyche.
And that’s where think tanks like the New Zealand Centre for Political Research come in. Our stock in trade is ideas, and an important aspect of our work is to search out and promote good ideas that we believe will make our country stronger and give our citizens a better life.
In election year our politicians inevitably direct our thoughts to the future, and how much better it would be if they were in charge! It is therefore appropriate that we too look to the future and to ideas that would be of benefit to New Zealand.
It is stating the obvious to say that the private sector creates wealth and the government consumes it. Imagine how much wealthier New Zealanders would be if our political leaders had the courage to limit government spending to the level that propelled two impoverished countries, Hong Kong and Singapore, to become amongst the world’s richest within a generation. Both Singapore and Hong Kong have had enlightened leadership prepared to restrict public spending to around 20 percent of their gross domestic product (GDP) to ensure their progress and prosperity.
A 2011 report by the Economist looked at Singapore as a model of success.[1] It concluded it had better schools and hospitals, and safer streets than most Western countries—and all with a state that consumed only 19 percent of GDP. It explained how Singapore had opened its arms to global enterprise, building an environment that is attractive to business with excellent infrastructure, a well-educated workforce, open trade routes, the rule of law, a flexible labour market, and low taxes – a top income tax rate of 20 percent and a corporate rate of 17 percent.
As a comparison, core public spending in New Zealand is around 33 percent of GDP, our top tax rate is 33 percent, and our corporate tax rate is 28 percent. Since big governments get in the way of a nation’s social and economic progress, is it any wonder that Singapore is rich, while we are relatively poor?
For New Zealand to emulate Singapore’s success, core government spending would need to be dramatically reduced from the present $70 billion. According to a former Secretary of the Treasury, John Whitehead, that shouldn’t be too difficult. In 2009 he estimated that around 60 percent of all government spending was of poor quality: “We have also focussed too much on new spending and not enough on the huge base of existing spending… on policies introduced five, or 15 years ago, that may no longer be as effective or fit Government objectives. Across government… there is about $40 billion of public money that could be used differently and better.”[2]
Imagine if the government did an audit of every single government department with a view to cutting waste and ineffective government programmes. A real spring clean of government spending could save tens of billions of dollars. That would enable taxes to fall.
Imagine the economic boost if New Zealand moved closer to Singapore’s tax regime with a low flat tax of, say, 20 percent. A low flat tax would incentivise hard work and enterprise – values which drive economic success – and it would give all kiwi businesses operating internationally a huge competitive advantage. It would act as a magnet for businesses around the world that are looking for low tax stable countries in which to operate. The end result would be rising living standards, better social services, and a country that would attract back home many entrepreneurial Kiwis who have taken flight to places with more opportunity.
Given its election year, why not challenge your MPs and candidates about their party’s spending promises. Use a rule of thumb: if they are proposing a big spending spree (no matter what reasons they give), ask them why they are planning to make the country poor. Any political party that wants to introduce costly new policies and programmes should be required to find the funding by redirecting existing spending, not by adding new costs and taxes.
Imagine if, as part of that spring clean, the government had the courage to cull all regulations that are stifling the economy – starting first with those introduced for purely political reasons. The Emissions Trading Scheme would be first in line. It was political from its inception. Introduced by Helen Clark’s government to ostensibly meet our Kyoto Protocol obligations, it was modelled on the European Union’s scheme for heavy industrial economies – not an agricultural nation like New Zealand where half of our greenhouse gas emissions are caused, not by factories, but by cows and sheep!
With the Kyoto Protocol having ended in 2012, the ETS now has no purpose. While it has no impact on the climate, it has become a major impediment on the economy, costing an average family of four around $750 a year and businesses $350 million a year. Once the subsidies are removed by the next Green-Labour government, these charges will double to $1500 for households and $700 million a year for businesses.
No-one is saying that removing major government programmes and regulations is easy. The bureaucrats running them will fight to keep them going, and opposition parties, who want to use them to impose greater controls and penalties on citizens, will campaign against closure by threatening all sorts of dire consequences. As President Ronald Reagan once said, “The nearest thing to eternal life we will ever see on this earth is a government program.” But if our government is serious about economic progress then wealth-destroying impediments must be removed.
Returning to the remarkable transformation of Singapore, while good economic management is essential, enlightened leadership is more so.
This week’s NZCPR Guest Commentator is Dr Calestous Juma, Professor of the Practice of International Development at Harvard University. Professor Juma’s specialty is assisting developing countries and in his article, Learning from Lee Kuan Yew, he provides some important guidance. He firstly explains the quantum of Lee Kuan Yew’s remarkable achievement – when he took over as Prime Minister in 1959, Singapore’s annual per capita income was $400. It is now estimated to be around $60,000. In comparison, New Zealand’s annual per capita income is half Singapore’s at around $30,000!
Professor Juma explains that according to Lee Kuan Yew, the driving force behind Singapore’s success is simple: “The quality of a nation’s manpower resources is the single most important factor determining national competitiveness. It is the people’s innovativeness, entrepreneurship, team work, and their work ethic that gives them that sharp keen edge in competitiveness.
“He emphasizes the importance of knowledge in economic transformation but also rejects the classical separation between scholarship and entrepreneurship. Those with good minds to be scholars should also be inventors, innovators, venture capitalists, and entrepreneurs; they must bring new products and services to the market to enrich the lives of people everywhere.”
If New Zealand wants to follow the lead of Singapore, improving educational outcomes has to be a priority. A well-educated workforce is a key prerequisite of any successful economy and while National has introduced many positive changes to lift educational achievement, they have failed to open up primary and secondary schooling to the same levels of parental choice that operates at pre-school and tertiary level.
Parents of pre-schoolers are free to pick an education provider that that best meets the needs of their child and their government funding follows the child to their provider of choice. It is the same at tertiary level – parents of school-leavers help select the tertiary training facility that best suits their teenager’s needs. Whether it’s a polytechnic, university, or a private training establishment, funding follows the student to their provider of choice.
That’s how it should be at primary and secondary school level – parents should be able to choose the school that best meets their child’s needs and the funding should follow the child to the provider of choice. Instead, under the current system, many parents are forced to send their children to schools where they are destined to fail. This must be changed. The government must free up the system so that parents have the same choice of provider at every level of education in this country.
It is also the role of think tanks to challenge populist ideas that are based on false or dishonest premises.
For instance, the bizarre claim by the Children’s Commissioner that 260,000 New Zealand children live in poverty is based on a measure of ‘relative’ poverty that is a political construct. It asserts that anyone earning less than 60 percent of the median wage –after taking out the cost of housing – lives in poverty. This is clearly nonsense, as no matter how high wages climb in New Zealand, according to this measure, poverty will never reduce.
The living wage is another great piece of propaganda. It is designed to lift the minimum wage by 33 percent from $13.75 to $18.40. The strategy of the promoters is to pick off ‘soft’ options to get the scheme rolling – councils and government agencies where ratepayers and taxpayers foot the bill, and where councillors or chief executive decision-makers want to be seen as ‘caring’. What the promoters ignore is the downside: the higher unemployment that always results when the minimum wage is increased, and the fact that the chief victims are the most vulnerable workers – including those who become locked out of employment as struggling businesses are forced to close under the pressure of higher wage bills.
The only sustainable way to raise wages is through growth, not government mandate: less government spending, lower taxes, a more productive workforce, bigger markets through improved international competitiveness, less regulation, better infrastructure and so on … a message that the left-wing promoters of the living wage do not want to hear.
In the area of race relations, claims by iwi leaders that they are in partnership with the Crown, with shared sovereignty, have no foundation in law and should be strongly rejected. Similarly, any move to adopt the bizarre anti-democratic model of co-governance that is being promoted by tribal corporations – whereby half the representatives are Maori and the other half non-Maori – is totally unacceptable and should be disputed.
In the run up to the election, it is crucial that the NZCPR continues on with our key campaigns. These include the campaign for equal rights and an end to preferential treatment based on race; the campaign against including the Treaty of Waitangi in our constitution; the campaign for on-going welfare reform; the direct democracy campaign to empower citizens through binding referenda and the power of veto.
2014 is going to be a big year for the NZCPR. The stronger our backing, the stronger our voice, and the more effective we will be in helping to shape the future direction of New Zealand. If you did not have the opportunity to support our fundraising appeal before Christmas, but would like to do so now, please click HERE – we will be very grateful for whatever help you feel able to give.
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Footnotes:
1. Economist, Go east, young bureaucrat
2. John Whitehead, Public Sector Performance