OPINION
JD
In the 18th century, economist Adam Smith advanced a theory often considered to be the basis of capitalism. When people work in pursuit of their own betterment and personal profit, the ‘invisible hand’ of the market creates the greatest good for the greatest number.
Since then socialist economists from Marx and Engels onwards have tried to deny this fundamental truth and advance the alternative idea that the state alone should drive the economy and level the playing field to the benefit of all.
Socialism is built on this assumption – that all are equal and, if some suffer inequality, it follows that society, in the form of the government that represents society, should do something about it.
But all are not equal. Being of different shapes and sizes, should we instead conform to some ideal stature, cut or stretched to fit the Procustean iron bed of the Greek myths?
Of course not. But this idea of pressing all people into the same mould is exactly what a socialist government attempts to do in an economic sense. Attempting to achieve equality of outcomes by depressing those who are ‘bigger’ with punitive taxes and inflating those who are ‘smaller’ with handouts from the public purse.
Further to this equality-of-outcomes fallacy, another flaw in the socialist argument is the assumption that the state is some benevolent, far-sighted organisation that is able to make accurate judgements on what is best for the people.
Sadly, reality differs, with governments the world over mostly comprised of venal, inwardly focused individuals whose horizons never stretch beyond their need to win the next election to keep their hands on the levers of power to their own advantage.
And so we come to the seemingly immutable cycle of NZ politics. A left-leaning government, believing they know best how to manage the country, spends up large on social policies and funds them by taxing that mythical tribe known as ‘the rich’; printing and borrowing money to backfill any shortfalls.
Eventually too many snouts poke into the trough, excess spending leads to devaluation of the currency and inflation surges. Interest rates rise in response, the economy contracts, prices drop, asset values fall, businesses fail and unemployment increases.
Voters then seek a correction by installing a right-leaning, economically conservative government and spending is curtailed, but then, of course, times get tougher before they get better and no one likes that.
Finally, having lived through the necessary austerity as the books are balanced, Joe Public, tired of scrimping and saving and wanting to believe again in the siren song that free money can be created, picks a new spend-up-large socialist government and the cycle continues.
This left-right swing happened in 2023, and the new National-led Government inherited a poisoned chalice, with the profligacy of the last six years forcing them to now adopt a raft of unpopular fiscal measures to address the problems created by the last Labour/Green Government.
By 2026 there’s every chance we’ll have forgotten it was Labour’s lax, money-printing, fiscal policies that caused the crisis and Luxon will simply cop the blame for not fixing it.
This then opens the door for a resurgence of socialist claims that the answer must involve more central controls and more government handouts funded by more taxes, with the only question being: taxes from where?
A capital gains tax scares people because too many ordinary Kiwis, with an investment property or a few thousand shares in their retirement fund, think they’ll have to pay it, but a wealth tax is a different matter.
Provided the initial threshold is set high enough for most people to say it doesn’t apply to me, then a wealth tax on Michael Cullen’s “rich pricks” sounds like a good idea.
Let’s not worry about future governments lowering that threshold and casting the net ever wider to include anyone who owns more than the clothes they stand up in…the initial idea has populist appeal.
The Greens, realising this in the recent election, pinched a swag of Labour’s socialist-leveller votes, but if Chippy, or whoever succeeds him, puts wealth tax back on his table, he’ll very likely get these voters back.
Additionally, expect Labour to forget the Māori seats. Their MPs were the prime contributors to a caucus overweight with Māori radicals driving co-governance and other racially divisive notions from He Puapua, which effectively caused the downfall of the Ardern/Hipkins Government.
The few per cent of Māori voters who support Te Pāti Māori can have their grievance-driven MPs in the back benches of parliament ineffectively spouting their racist invective, whilst Labour shakes off this part of the woke yoke and drags itself back to the traditional working-class policies on which the party was founded.
Having survived the party leadership vote so far, essentially as the best of a bad lot, expect Hipkins to spend the next three years doing what Labour does best: criticising the government from the opposition benches.
This of course is so much more fun, and so much easier than actually delivering whilst in government, especially with the leftist journalists of the MSM on your side whilst you’re picking the nits.
And so it unfolds. Luxon won’t be able to properly fix the inflation crisis in three years, but whilst he’s trying, the necessary austerity measures will be unpopular.
And herein lies the risk of schism within the new tripartite coalition Government. When the austerity measures really bite, who will break ranks first is the question. And my pick is Winston, ever the populist: I can’t see him staying the course with Luxon and Seymour given that his prime constituency group – the older Kiwis – are those most likely to suffer most when times get really hard.
The end result, sadly, will probably be a re-election of Labour in 2026 and the re-introduction of more tax, borrow and spend policies, which will then drive NZ into a terminal economic spiral.
As Churchill said, “The inherent vice of capitalism is the unequal sharing of blessings; the inherent vice of socialism is the equal sharing of miseries.”
Please switch off the lights as you leave.
