Take this scenario. A rich man, John, who owns half the supermarkets in New Zealand is in despair, because his Australian counterpart, Harry, is still far richer than he is and it's making him feel inadequate.
John then comes up with an idea. He donates $10m each to the National, Act, Labour and Green parties, to ensure all parties are incentivised to do his bidding.
John then has some friendly talks with the leaders of the parties, to ensure they understand what he expects of them. Warm smiles within the club. All is well.
The result, is that immigration policy becomes discretely modified. It becomes very easy for John to import visa workers on a minimum wage, who will stock his shelves throughout the painful hours of the night.
Before the policy change, John had to employ Kiwi's in a relatively tight job market. He prior had to pay $32 per-hour for his graveyard workers, which cut deep into his profit margin. Now he only has to pay $20 per-hour, due to the freshly modified visa system.
With quadrupled profits, his wealth looks to be more in line with his Australian counterpart, Harry. He feels a little better, but alas not for long. He soon starts comparing himself to Elon Musk so he's back to losing sleep.
John then gets another idea to help him feel better. He grabs a soapbox, a powerful megaphone, and demands admiration and respect from his workers with a speech. The speech goes something like this....
"Behold! 80% of the governments tax-take comes from my wallet and people like me, because I'm the biggest income earner. I'm the reason you have free healthcare and an accommodation supplement. You guys pay virtually nothing in tax. I'm your Santa Claus - I'm your superman."
Most of the workers buy it, and weep with appreciation for John. Except one worker, Mike, who took a basic economics course when he was in school. He was hiding behind a counter praying for a better world. Mike understood that yes, of course, John and all the other big income earners were paying most of the tax. But he also understood who was making John's money in the first place - overwhelmingly, the low-paid workers underneath him.
The morals of the story:
1. To think straight on economic realities you must first observe raw production, and only second 'monies received'. That is, you need to think in terms of the "real economy" to avoid confusion.
No one gets rich on their own. You need an army beneath you, to do the bulk of the heavy lifting (producing).
So should we respect and incentivise the entrepreneur? Absolutely. Intelligent investment is fundamental to economic development. Should we worship them, for their apparently grand contribution? Give me a break. Every cog in the machine makes it go.
2. Crony capitalism (which is what the story highlights, in part) is the friend of socialism. It creates the very problem that justifies government intervention for wealth distribution (tax), ultimately leading to [virtual] socialism. It puts big government in the centre of our lives when it otherwise never had to be there, leading to dangerous concentrations of political power.
The truth is, if our economy were correctly balanced so markets were not irresponsibly manipulated, and we got rid of dis-optimised regulations, anti-competitive practices, irrational professional licencing, and every other bit of junk long driven into politics via the forever efforts of special interests, then over time we would hardly need to tax the populace at all. And we would all--from the bottom to the top of our society--be much more prosperous and progressive to the end of it.
The real solution?
Political decentralisation. Government needs to be close, and small, and on the peoples highly transparent leash. Otherwise, the slow-burning evolution to a bought-and-paid-for political machine becomes inevitable. And alas, it's already happened of course, in New Zealand and most of the Western world today.
-Andrew Atkin, May, 2023
