Prime Minister Jacinda Ardern says she wants to ensure first home buyers can get into the market after it was revealed this morning that house prices have increased nearly 20 percent.
House prices have increased 19.8 percent year-on-year with the median now at $725,000.
Ardern this afternoon said figures show an increase in first-time buyers in the market since 2017, but that investors in the market had remained the same.
“Obviously we want to ensure our first home buyers can get into the market that is something that is top of mind for us…”
“It just cannot keep increasing at the rate that is,” she said about the rising prices.
And the Greens also realise this but want the Government to go further. From Craig McCulloch at Radio New Zealand:
Greens co-leader James Shaw has lashed out at Labour over rising house prices, labelling it “irresponsible” for refusing to entertain a tax on capital gains.
Labour leveraged the housing crisis to great effect while in opposition, but prices have continued to soar since it took power.
In the past year alone, New Zealand’s median house price has rocketed, climbing almost 20 percent to reach a record high $725,000.
Speaking to RNZ, Shaw said the steep climb was being driven by the Covid-19 response and yet Labour had not done anything to mitigate it.
“It incenses me,” Shaw said.
“You’re getting these massive capital gains occurring as a result of the stimulus package and yet there’s no action from government to try recover any of that or to mitigate it in any way.”
This requires urgent action. Dare I say it but Labour needs to reconsider the introduction of a capital gains tax. LVRs for everyone but first home buyers need to be introduced. And favourable tax treatment needs to be further reviewed.
And get on and build new houses. Lots and lots of new houses, good quality affordable houses that people can raise families in, just like in the good old days.
Otherwise we are going to further enrich Australian banks and their shareholders by borrowing more and more money from them to buy the same houses from each other at higher and higher costs. And we will be an interest rate increase away from devastation for the young who have had to borrow large amounts to buy modest houses in a white hot housing market. And live in a country where there will be a clear class distinction between those who own land and those who do not.
Great, Micky. You can criticise your party when it comes to their housing policy and even say they got it wrong with the CGT. But the cost of housing being capitalism's end game?
Pray tell, where have you been in all the recent discussions here about Labour's total inaction on benefit rates? Not a peep out of you, so clearly, people unable to get on the housing ladder is more important than people unable to eat or pay the bills. THAT is capitalism's end game.
I have been busy Kay. If you check you will notice that I do not comment much. Writing posts takes a great deal of time.
For what it is worth I believe an immediate increase to benefits is appropriate and important.
Good, glad to hear it.
You need to think before you leap sometimes Kay. Mickysavage has done a huge amount to help keep this site ticking over and maintaining good standards. He is also chairman of his local board which is a time consuming job. He also runs a legal practice and no doubt is involved in various community projects.
There's only so many hours in the day.
Most people don't give a fuck about benefit rates.
Then most people are arseholes.
Maybe, dunno. If there's truth in the saying 'you can judge the health of a society by the way it treats its poor' then at the very least we've got our values wrong.
People, and arseholes are both necessat=ry and useful.
Until, like now they end up relying on them.
There will be a lot of pressure from formerly well off, who now find themselves suddenly unemployed.
We can already see the demands for more welfare for business. Ironically the same people who oppose any rise in taxes.
"We can already see the demands for more welfare for business. Ironically the same people who oppose any rise in taxes."
Precisely, and most people will still not give a fuck about beneficiaries.
Housing costs are a huge part of poverty in New Zealand.
I think Mickey is right to address them.
MS. Yep. Those neolibs incl bloody "labour/act" and nats completely screwed NZ. For literally Generations. NOW is the time to Reset NZ. Trade Training/Apprentices. Build Factories to Build Houses…Just Do It and get on with it !!
A capital gains tax won't do anything to cool an overheated property market. See Sydney, or San Francisco, or London, or any number of other places with ludicrous property prices and capital gains taxes apply.
That is, maybe unless it applies to property only, to all property (including family homes), and isn't easily avoided like the brightline test is easily avoided. In this case, the property capital gains tax would be specifically designed to depress the property market and privilege other forms of investment that it is trying to divert funds towards. And if the goal is specifically cooling the property market, then other tools or taxes would probably do a better job.
The argument for a capital gains tax should be based in equity – the idea that all forms of income should contribute back to the society that made the income possible. Hence it should apply to all forms of investment, whether that be property, or shares, or bonds, or building a company, or whatever else that results in a gain of value between the time of acquisition and time of sale.
The corner dairy shop makes their money by buying stuff then reselling it at a later time at a higher price, and they pay income tax on that gain in value. Why should those who do the same with houses or shares or anything else got off scot-free, simply because they trade in a different kind of goods to the corner dairy?
There is something of a nudge effect from capital gains taxes.
NZ's tax structure has, intentionally or not, encouraged investment in non-productive sectors that only yield inflation. This is exceptionally bad for productivity in the long term.
So it's not merely social justice, but also the long term best interest of society as a whole, not to take an anomalous tax position on capital compared to the rest of the world.
NZ's tax structure has, intentionally or not, encouraged investment in non-productive sectors
This is exactly right, and part of the reason why the fear of large scale property devaluation is misplaced. We don't have an irrational or 'bubble' housing market in NZ. We have a market that is responding rationally to the policy settings and supply & demand factors it has faced into for the better part of three decades.
A CGT may knock he peak of a housing bubble but agreed will not by itself solve the price inflation. However a dollar made through capital gains should be taxed as it's a dollar made. If needs be just apply it to housing, anything in addition to one home gets taxed if it makes a capital gain.
We always get the "It's the economy. stupid" excuse for why the government doesn't enact sensible reform – but on the CGT that's a blatant lie. It's good economics and it's more socially just than the status quo.
They could phase it in, if they're too timorous to contemplate the whole step at once, but I fear that, as with the slave workers, the prospect of actually doing their job is just too much for most MPs.
If you have cash, or equity, you are in the middle of boom times as you can leverage it with cheap loans to buy assets (property).
If you are a small business owner or wage earner and renting your accommodation, you are in the middle of a global recession and going backwards.
This is what you would expect under a National government.
What the fuck is happening????
[What is an Aotearoean? That’s pretty mangled Te Reo]
What I think is happening is we have had decades of wunches of bankers persuading governments and a lot of people that there's only a few specific tools in the economic toolkit for fighting economic problems. Those tools being mainly interest rates, and making money available for businesses.
For a while, those few tools sorta kinda worked as governments desired, so there wasn't serious argument for expanding the toolkit.
But exclusive use of those few tools have pushed the system far outside the range where things were when they first got popular, blunting their effectiveness, at the same time as a qualitatively different kind of crisis has hit that would need different tools even at the best of times.
Unfortunately, the decades of limiting the economic tools to just those few means there's no imagination, appetite, or expertise for using new and different economic tools to find a better path out of this crisis.
Also part of what is happening is we are asking landlords to legislate against their interests.
Without the counterfactual control, of those same places without a CGT, we cannot know for sure if price rises would have changed without it.
There is evidence, in the NZ context, of the effect of changes to CGT.
That is not the only reason for CGT though.
Treating all income the same and slowing wealth inequality, is another. As is redirecting investment to something more productive.
and they pay income tax on that gain in value.
There is no gain in value. The shopkeeper's mark-up is simply his "wage" for operating an emporium, and it is proper that that "wage" should attract income tax.
Yesterday the PM seemed to be saying house prices were Reserve Bank territory not hers!
Non interventionist “Blairism NZ style” is so entrenched with her, Robbo, and most of the NZ Labour Caucus that even 50.1% of the vote, and 3 years unencumbered free reign of Parliament, has not given them the courage to signal and do something meaningful for the homeless and exploited renters.
There are obvious steps that can be taken, that together over a number of years would deflate housing prices and gouging rents.
1. Income–Fair Pay Agreements, more Sick Leave, Living Wage extended, more power for unions
But they won’t do that…no they won’t, which is why it is worth looking at the “50 NGOs” who wrote to the PM this week suggesting benefits be raised. That group could become an Alliance, an unofficial opposition and community organising focus to put pressure on the Labour Caucus. The way things are heading with this “Blairism NZ style” paralysis, even groups like the NZCTU are likely to discover that Fair Pay Agreements are not just going to be enacted–they will have to be fought for.
Covid has excused a lot of “one off” special pleading by Employers large and small, there are literally thousands of cases being bought by unions and employment Lawyers related to bailout cash that never reached workers, and stolen annual leave. It is about time the working class got a hearing and some action too!
Housing, needs a multifaceted approach. But no Labour or National Government will ever have the guts to do it. Especially when so many MP's are on the housing gravy train.
The goal should be to pause land and rent price increases. And allow wages to more than catch up. Too much downwards pressure too fast is counterproductive.
The situation requires the PM to deal with an emerging crisis. Since she has a track record of being good at that, we can be confident that all it takes is for her to see the crisis emerging. Greens & media will combine to raise her consciousness.
Then what to do? Your suggestion may suffice, but others ought to be on their table too. Focus on methods likely to work in practice would be good. Framing implementation as the start of a shift away from neoliberalism would be even better!
It's a crisis that's been in place for the better part of twenty years so, no, its not an emerging crisis.
Its a systemic condition of capitalism.
And the PM is on record as having said that capitalism has failed. Doesn't seem to be doing anything about it though.
I think it is now safe to say that the PM has no intention of doing anything about it either.
There is no Winston hand brake anymore, yet there seems to be no change in course indicated
Its a systemic condition of capitalism.
Orthodox economics frowns on monopolies, and the most intransigent monopoly of all is land ownership since its supply cannot be easily increased. It's time we re-introduced land taxes and made them a substantial part of our tax system.
Incidentally, taxes based on the value of land picks up any capital gain on land as the land increases in value.
This report is really interesting
Homeownershipin New Zealand:Trends over time and generations
https://population.org.nz/app/uploads/2019/07/3d-HomeOwnAge_Bentley2019_session3d.pdf
The graphs are pretty interesting (but they have been style-ised way too much, leading too lots of information being removed.).
The only upside is that the number of houses being built is enough to meet new demand and get ahead but this level of house building will need to be maintained for several years before the under supply is met and that migration doesn't increase.
I'd make an investor LVR even higher than 60% – maybe something like 80% .
The banks could also do interest only for a few years for new buyers.
And I would definitely put rules in so that the banks continue to lend interest only to owner occupiers- interest for a lot of people would be less than rents – and the last thing we need is to push people into mortgagee sales over principal repayments. Plus it would keep accommodation supplements down which support landlords.
Plus maybe some form of tax surcharge related to gross rental incomes.
On the slight glimpse of hope side rents have apparently stabilised in Wellington and there is a large amount of building going on mainly out the Hutt both state and private
Why not 180% – effectively force them to sell two in order to buy one?
Why not indeed. There I was trapped in conventional thinking. But I have a fair commitment for not allowing mortgage default for owner occupiers who can manage the interest only
Yeah – you have to protect owner-occupiers. But my point was how these piss-weak, blunt tools like LVR ratios skirt around, and only gesture obliquely at, the underlying ethical problem that nobody will say out loud. That what we are witnessing is a sort of financial terrorism waged by one part of the community on another.
AB
I think you misunderstand how to measure an LVR. If it is 60% you need 40% deposit. Increasing it to 80% means you only need 20% deposit, while making it 180% means that you can borrow the full value of the property and get an extra 80% on top to do what you like with.
Or the government could make first home buyer loans as 0% down, 0% interest and repayments at an agreed rate or 25% income – whichever is the lesser.
The government would have to finance the whole purchase since the banks are unlikely to go along with such an arrangement.
I don't have a problem with that.
I do have a problem with the banks creating money and then charging interest on it.
A bit of a correction. less than 60% of boomers own their own home. An unknown but conceivably large proportion of those will still have a mortgage on retirement. Often to help their kids.
The later in the boomer generation the less likely they are to own a home. Many got caught in the job loses, house price inflation and high interest and deposits required, in the 80's and 90's. I know many working class boomers who have never owned a house, and many who have never recovered from the 80’s and 90’s, “better future”.
Well off University educated boomers, and their offspring, often make the mistake of thinking they are typical of their cohort. See it often on here.
Teddy Roosevelt was the Republican who was antitrust anti monopoly.
We need a govt that doesn't white wash with white papers and actually breaks monopolistic capitalism.
Yep … in fact, more broadly, they delude themselves that they're typical of all Pakeha as well … hence the massively self-indulgent (& really quite callous) insistence that only people with Brown skin are Poor.
Great for affluent virtue-signallers who want to hold on to their wealth while advertising themselves as uniquely morally good … lots of Prestige-enhancement to be had across social media … bad for the woefully neglected interests of all those on a Low Income who don't happen to be Polynesian. Indeed, it's beginning to look more & more like the latter have been designated the informal Scapegoats for the contemporary fallout from Colonisation.
The impeccably Woke grandchildren of wealthy establishment farmers (eg Stephanie Rodgers) ostentatiously proclaim Pakeha guilt to enhance their own social prestige, the elderly poor like my Parents do all the Penance.
At times I find some people patronising and irritating.
But. It is still admirable that some children of wealthy backgrounds take the time and have the empathy, to fight for those less fortunate.
Brown people are disproportionately represented in the poor and working class. A result of both systemic racism and different priorities.
Reducing inequality, and increasing equality of opportunity, lift all the less well off. Of any background.
In the end we are all better off as a society if everyone has a part and a stake in it.
The motivation behind JA Lees. "Welfare enough to be a part of society".
There's only one Stephanie Rodgers I am aware of in the public realm and she is not a farmer.
It's really weird how you profess to delve with pointillist precision into electoral statistics, but when it comes to commenting on anyone younger than you, you're quite happy to to slag them off with nothing but the merest anecdotal housebrush.
Back yourself up with the same facts you process elsewhere.
Do keep up.
None of Stephanie Rodgers' grandparents were farmers.
Provide evidence for your statements.
If you must demonstrate your obvious disdain for certain white woke women of wealthy farming backgrounds who say things that you seem to associate somehow (…) with the perilous financial (?) situation of your parents then you should have the decency to back it up with some evidence. Particularly, when you feel the obvious need to single out one particular person who happens to be a former Author here. Did you ever cross swords with her, swordfish, or is it more a general stereotypical antipathy of yours? You have written here about your parents’ dire situation but it is a bit of a stretch of the imagination to lay part of the responsibility for that at the doorstep of a group of or a single woke person. Perhaps you could connect the dots for us?
Certainly intend to in the very near future … will lay it out in no uncertain terms …. but don't have time at the moment. There's a hypocritical Luvvie segment (purportedly) of "the Left" who really could do with hearing some Home Truths.
(In the context of my broader point, Rodgers is of fairly minor relevance … just one of many possible egs I could’ve given in a paragraph added as an afterthought in the dying moments of the 10 min edit)
That will be of interest swordfish.
Rodgers is of fairly minor relevance
Yes I've noticed the bad habit here of attacking minor points instead of addressing the substance of a comment. Sometimes the clarification is useful, but to then pretend that it's somehow dismissed the main point just leads to obduracy.
If a “clarification” fails/falls over then they have done a poor job and ought to do better. Often, the originator refuses, for whatever reason, and obduracy ensues (AKA a boring old shit fight and a huge distraction and turn-off for others).
If they exemplify their main point or substance by pulling in specific individuals, they run a huge risk of it being perceived as a personal attack. I think it is best avoided unless they can construct and articulate their argument really well and with clear unambiguous evidence and even then I think it is best avoided. A finger-pointing assertion without any supporting evidence easily reads as an accusation and does not constitute a well-made argument.
Fair and constructive criticism can be hard to take but even harder to dole out in an even-handed way; the recipient has to be open to it too.
For the record, not all is well at and with “the Left” and their discourse. Of course, this raises the first question …
less than 60% of boomers own their own home.
Citation?
A lot of boomers are now in their 70's and many will have have downsized property, or moved into rest home facilities, or taken out reverse equity mortgages for cashflow, or moved in to homes with/owned by their children…
Many got caught in the job loses, house price inflation and high interest and deposits required, in the 80's and 90's.
Take care if you're conflating those two decades. House prices ran rampant up to and through the share market crash of '87. But, for most of the 1990's house prices didn't move at all. There was a bit of a jump in '94-'96 that I don't have a good sense of, but otherwise house price inflation ran at 2% during that decade and up until mid-'01 when the housing boom really started.
The house we had in Auckland, increased by over 40% from 1987 to 91.
Averages can be deceptive.
Numbers were from Interest co
Which is paywalled. But some other relevant references, below.
But more importantly, of the next generation coming up to retirement (those in the 50-64 age bracket) less than four in ten (38 percent) has kicked the mortgage. The rosy retirement nest egg is evaporating.
Salvation Army.
The problem was most acute among younger baby boomers, who did not benefit from earlier state-funded home ownership programmes, Mrs Hay said.
At the 1996 Census, about 81 percent of 65-79 year olds owned their home with or without a mortgage (Statistics New Zealand, 1997).
CSS
As you can see, there has been a increasing decline in the number off retirees owning a freehold home, since the 1996 census..
I get the feeling that there are a number who could pay off the mortgage if they wanted too but are investing elsewhere. So it may be a measurement that is a little skewed.
Yes. I'm one who borrowed on it into a business. However that is planned to be zero by retirement. Toes crossed.
The oldest boomers are now 70 – 1950 was when the boom really started. The rest homes are looking at a few lean years as the smaller generations of the 1930's and 1940's get into their late 80's and 90's and require more care.
There is nothing new about this crisis. Its been one since we had people sleep in vans years ago, and despite voting for a different government somehow nothing changed other then the amount the Government is giving to Landlords via the Accomodation Benefit.
Maybe its Government that is fucking up. Even the current lot.
Sabine subsidising landlords every time the govt increases rent relief landlords put prices up.Jim Bolger started this idea now its ingrained it hasn't solved the problem more likely it has made it more profitable cutting home ownership creating a longterm poverty trap.
The last thing Government should do is increase accommodation subsidies. Which just end up paying the mortgages of housing speculators.
Ramp up training builders and building State rentals.
One Labour policy which meets my whole-hearted approval is paying for apprenticeship training.
it will unless we are happy to have a few thousand more living in a ditch or van near a public toilet block.
My friend – on a benefit – received a $ 45 NZD rent increase. She lost all of her income streams thanks to Covid. Unless Winz is upping her accom bene she will end up in a ditch or on my sofa. Cause there is nothing she can 'cut' to make that increase in rent, she got nothing to cut out to begin with.
Edit: I would go so far to stipulate that even the ‘wage subsidy’ was mainly a boon to landlords cause that is what was paid with that subsidy.
edit2: And labour has ruled out any increases in benefits, so go figure. Its the kinder and gentler bullshit we so love.
Housing speculation – and rentier incomes – has ben the main form of wealth accumulation in NZ since colonial times, with the end game until very recently being wealth extraction allowing a comfortable retirement anywhere but here – the winners circle usually consisting of a nice country pile in the bucolic home counties of England.
It is impossible to come up with a politically viable quick fix for an endemic structural issue that in it's current form has been forty years in the making, especially when there is such a massive cultural preference to "safe as houses" wealth accumulation – a view reinforced by the number of people who lost their shirts to the shysters of the 1980s NZ business scene and the on-going sharp practice and incompetence of NZ's business class like South Canterbury Finance.
The current global crisis of a massive property bubble is largely a result of the inherent contradictions of a capitalist system in crisis – the GFC was "fixed" not by structural reform of the global financial capitalist system but instead by flooding the world with money. In capitalism, money seeks the best vehicle for profit and if the costs of production are going up while profits that can be extracted from, say, manufacturing good for a consumers with static incomes are stagnating then all that GFC stimulus cash given to banks is going to look instead for other income, which leads to bubbles like housing.
Typically capitalism gets around these issues by either destroying assets via a global, massively destructive war requiring lots of rebuilding or exploiting new resources to drive down the cost of production. Nuclear weapons closed off the first option, and we've run out of new continents and resources to discover for the second. Hence, our current system is in chronic crisis and housing in NZ is simply one symptom of that.
The only way you will get sensible housing prices back is by removing the excess cash that private banks keep pumping into the housing sector & creating sufficient housing stock to ensure there is no shortage of good quality housing of all types available. That implies removing the right of private banks to offer housing finance and making that an entirely a function of the state and using the state to build large numbers of houses.
The current neoliberal consensus in our ruling elites makes the chances of that happening impossible.
Agree re the GFC having money thrown at it in 2009 from reserve banks all over the world.
So it's pretty amazing to see our bank doing the same in 2020, and not expecting another asset bubble to keep expanding as it is.
Capital will flow to the least risk position: in our case that's houses.
Still it keeps the tradies and architects and consultants and whiteware suppliers in biscuits.
I would say the only worse thing economically than house price inflation would be house price deflation, because you'd wipe out huge swaths of the middle classes primary retirement asset and plunge the most politically powerful group in the country into an economic crisis. Any moves to drive down the cost of housing would be seen (rightly) by many New Zealanders as an existential threat to their future economic well being and they would react accordingly.
The only real political solution would be to somehow engineer a situation where house prices stabilise followed by at least a decade long period of engineered mild inflation and general wage increases reducing the relative cost. Given the neoliberal hatred of inflation and the deliberately weak state of worker organising, it is hard to see how even that could be done.
I agree.
But so much of our wealth going to banks, to trade in existing land cannot continue either. It leaves little for other more essential investment.
To me the alternative solution is to both keep building houses, but also make investing in businesses far more attractive than investing in houses.
Some of that is in how tax between categories is treated.
Some of that is in how R&D is both taxed and encouraged, and in how sharemarket listings are encouraged and treated.
Some of that is the Reserve Bank tagging where all this fresh debt can go. They really don't have to be this neutral.
Some of that is the government using other levers to pressure banks to target businesses with loans – just as the government itself is.
It sure ain't like the government is out of options if they want to tilt the private economy away from investing in housing.
Neo-liberals love asset-price inflation.
But prefer to keep it out of indices and out of sight generally.
Trading existing house doesn't do a lot for tradies.
Though the mass immigration of cashed up retirees from Auckland, admittedly, has helped many of us in Northland. Many new houses started.
Offset by the fact that our kids have lately been priced out of the housing market in Northland. also. Aucklanders crossing the border should have to build?? LOL.
Good to see one of the bright sides of covid. Local youngsters suddenly getting work for a change. Work that has been done by backpackers, overseas students and temporary visa workers, until recently. Even some firms taking on apprentices!
You should try getting any kind of tradie right now.
All those rentals getting gutted, all those work-from-homes getting rebuilds, all those preparing to capitalise some of that equity with upgrades … it's like every second vehicle leaving from my suburb from 6 to 8am is a tradie.
Agree lots of young people are being taken on – plenty of smaller civil infrastructure companies really pulling them out of cradles to get to work.
Good when you are a tradie. Or sell to tradies!
This is a hugely damaging for Ardern's government. If they don't repair the damage they will rightly be gone after this term.
You can’t just build, build, build either without ways of getting people to and from work. Means of commute must come first.
It's bigger than Covid. Returnees are worse than the virus itself.
It would be nice to have a government that would actively work to get work to the regions where housing is not htat a problem yet, but underemployment to no employment is hte reason for people to leave and go to a town were housing is a huge problem.
Yes some serious carrot and stick to get jobs that can be shifted out of Auckland and spread provincially would have a huge number of benefits both financial and otherwise as well as housing.
A couple of years ago, while sitting in a Christchurch Burger Fuel late one night and rapidly developing a hangover, I started idly flipping through an NZ Property Investor magazine sitting on a table. They had a few pages dedicated to profiles and puff pieces of property investors.
It started mildly enough; a young immigrant couple with kids, saved hard and just bought their first investment property – a real nice 'kiwi dream' story, you know?
Then there were a couple of people with 3 or 5 or so investment properties, grinning from the glossy magazine confidently asserting that they were eager to add more to their portfolio.
I felt slightly queasy at the point they got to an ex-accountant who quit the rate race and now managed her 10+ properties full time and "loved the life and flexibility her new career afforded her".
The queasyness turned to full blown rage at the last profile: An investor with over one hundred homes under her ownership, talking about how very hard it was to find good people to work for her and manage the properties on her behalf.
80% lvr
Remove rental subsidies and make landlords eat the difference, (labour cut farming subsidies to farming in the 80s ,it killed a few sent some broke but it was the right thing)
Build houses .
Did interesting calc
Bought house 1980, for 45k ish, 60% loan and interest 15% cost 4050$ or ca 22% of salary
Now house worth 1m, so 600k at 2.5% is 15,000$ or about 19% of similar salary.
SO today the cost is slightly less in % of out goings.
Bought house in 80's for 85k. Would have been a 40k house a few years before. Interest up to 25%. Well over half of salary, even though on well over average income.. Only 20 year loans, and minimum 30% deposit also.
My entire pay was going in mortgage and taxes. We lived on my wifes income.
That house is now around 750k. In Auckland.
Glossing over the fact that in your example 1980 deposit was 1x annual salary and today's deposit 5x annual salary
In fact our house back then required a deposit of 2 x annual salary. About the same as someone buying the same house, with the same job, now.
Bernard Hickey is doing some brilliant critical analysis of this issue. Follow him on twitter if you don't already
His information is good. But he has too much of a finance and anti boomer bias to get at the real issue.
Which is accumulating wealth in a few hands. Class, Not generational.
The inheritors of their wealthy parents wealth, will be the richest Kiwi's, ever.
Maybe to get money into more productive businesses we could get perhaps the NZ Super fund to issue short term annuities. As boomers retire they are going to be looking at the cash in the kiwisaver account and wondering what to do with it. At the current bank term deposit rates you'd better off buying an "allotment" and growing fruit and veg plus eggs for the whole family rather than living off interest. Or sticking in solar panels to get the power bill down
But a short term annuity say 10 years – providing it had a degree of government guarantee tied to the super fund return – might attract enough set and forget money to steer some of it away from real property.
How to find who you are, and what you could be and end the present tendency to cosset yourself with 'shopping-therapy' – for those who can afford it? How to stop capitalism strangling you with strong silk threads that are invisible?
Chris Trotter has written a wide-ranging think piece. This is part.
https://bowalleyroad.blogspot.com/2020/11/jacinda-20-is-licenced-to-govern-but.html
Nowhere is this phenomenon better described than in Ariel Dorfman’s seminal book on cultural imperialism – The Empire’s Old Clothes. In the first chapter of the book, Dorfman recalls being approached by a young woman from one of the shanty-towns that encircled Chile’s capital city, Santiago. Professor Dorfman, and some of his students, had come to help the shanty-dwellers repair the damage wrought by a recent flood.
“She came up to me and asked quite frankly if it was true that I thought people shouldn’t read photo-novels”, Dorfman writes – alluding to his crusade against the “industrial products of fiction.” Comics, soap operas, westerns, radio and TV sitcoms, love songs, films of violence: “you name it”, quipped Dorfman, “I had it under scrutiny.”
“So I stopped digging and answered her. It was true. I thought that photo-novels were a hazard to her health and her future.*
“She did not seem to feel any special need for purification. ‘Don’t do that to us, companerito,’ she said in a familiar, almost tender way. ‘Don’t take my dreams away from me.”
A few years later, about the same time David Frost was interviewing Norman Kirk, Dorfman was in the same shanty-town for the opening of a new community centre – one of the many thousands of collective initiatives funded by the socialist government of Salvador Allende – when he encountered the same woman:
“I didn’t recognize her at first, but she remembered me. She came up to me, just like that, and announced that I was right, that she didn’t read ‘trash’ anymore. Then she added a phrase which still haunts me. ‘Now, companero, we are dreaming reality.’”
I gave up watching lolly-coloured television when it changed to digital. I don't care about the talking heads. I have the whole world to watch, and books to read; the author tells me the story direct to my mind which forms the pictures I want to see. I have the time from watching television to think, ponder, and check the wording of my text to see if I understood right.
Perhaps that little word 'ponder' should get to be common; it means I think to assess something, perhaps think a 'what-if'. Is Chris's assessment of Labour right. Is it a one-hit wonder? I was surprised to find that a duet who came out with a hit tune mid last century never had another hit after In the year 2525 by Zager and Evans.
9https://www.youtube.com/watch?v=izQB2-Kmiic
IIRC, National did the same thing. As I say, both National and Labour seem to like the house price hyper-inflation and aren't willing to do anything about it.
Although correct in you conclusion it needs to be stated that we do not borrow money from the banks. They create the money when the loan is made.
That creation of money is what's kept the economy going for the last twenty years or more. With the pandemic and the loss of tourism and other 'export earners' the government had to create even more money to keep the economy going.
Now the government's in a real pickle.
If they want to stop the house price hyper-inflation then they need to stop the private banks from creating so much money for the speculation on housing but if they do that then they're going to have create even more money and spend it into the economy to keep it afloat and that will have the economists, especially bank economists who know which side their bread buttered on, and the right-wing shrieking to the high-heavens about the borrowing that the government is doing.
Time for the government to simply tell people that they're creating the money that they need and that they're not borrowing at all. And then to stop selling bonds even to the RBNZ and put in a complete ban on the private banks creating money.
I won't hold my breath about the government coming clean on how the monetary system really works though.
It used to be that printing money was attached to reality by the 'invisible hand' where money loaned was for the creation of physical goods e.g. a house. In this manner inflation was checked.
If we're printing money and practically giving it to landlords, and houses are not being built to the tune of the billions of excess funds doled out, and house inflation is off the charts – it stands to reason everything else will inflate so all those trying to pay the rent via selling bottle tops will raise the price of bottle tops, etc, just to try and get by.
It's a big mess from where I'm sitting. We can't afford inflation across the board but we've seen it in food, power, fuel, rent… every need of your life more expensive but hey, Pepsi suggests a can will refresh.
Printed money must have a physical manifestation e.g. a bridge repair, a suburb built, a power plant… or hyperinflation will screw the economy. This is old wisdom. Are the new neo-libs too smart to heed the precautionary tales of economies fallen before them.
Or is it worse than that. Riding the imaginary windfall while imagining it goes on forever?
Not really. Adam Smith was working in a Gold Standard environment not a Fiat Currency environment. He was also working with severely limited production of production and a Labour Theory of Value all of which is mostly wrong in today's environment.
Actually, the restriction to created money must be that it is done solely by government to provide the government services and infrastructure necessary to maintain the nation. That spending is then spent by government employees into the private sector.
But that won't produce full employment of 40+ hours/week each nor massive profits for shareholders.
It even removes the need for rich people.
Older is Better?
But, then, I suspect that's why greed is one of the Seven Deadly Sins. Such knowledge has been around for awhile and we always see the civilisation that it arose to prominence in destroy itself.
And, yet, here we are again telling ourselves that greed will save us. Even the supposedly most devout tell us that Greed is Good.
The latter which is why they keep telling us that we need more growth on a limited economy.
If you have 100 items and 100 dollars representing those items, each item is worth $1.
When you print another hundred dollars, and make 100 items with the money. No inflation.
Now, guess what happens when you print another hundred dollars but neglect to produce anything with it?
The invisible hand was to tether the economy to reality.
A government, paying it's employees printed money get's nothing back. Each week the pool of money grows and material goods do not increase so all material goods are subject to inflation.
Whoever, and there's a few here, thinks printing money can just be proscribed and everything will be hunky dory is dreaming of a time money issues was backed by gold, or backed by goods.
Just printing it will cause everything to go up. Just watch. It's a slightly slower march off a cliff than some Autocrat printing wages for their army. Not that much more sensible though.
You seem to imply it is ok to print money to match an increase in goods. Printing money is bad full stop.
If joe average sets ap a printer and starts pumping out $20 notes he is branded a criminal and thrown in jail.
Yest when banks do it the govt is happy as it creates the inflation they need to subtly steal your savings.
Printing money is a destroyer of free markets.
Setting intrest rates artifically low is another destroyer, it is anti capitalist.
Think what would happen if the govt fixed the cost of potatoes at $1 per 10kg bag. Great for the people who go to buy spuds that day, but it financially harms the farmer who has a half grown field of spuds. And how many spuds will be grown next year?
Same applies to interest rates and savings. Interst on savings are so low we dumped our savings into real estate and are now building a holiday home to let out on NZBatches.
We were looking at building a rental in town, but were put off due to the tennant friendly laws with threats of tenant for life and rent controls, and recent changes that keep getting worse for the landlords.
The photo at the top "housing is a right" shows the mentality problem, entitlement mentality.
We raised our children in a battered non towable caravan and a 40ft shipping container for 4 years while we saved and started building, moved in to our house without sewage or power and slowly finished as we had money.
Now at school my eldest daughter is disgusted with the socialist mindset of so many schoolmates, and has been entertaining me with her stories of converting fellow students away from socialism.
My wife used to be a staunch labor voter….. no longer…..
I'm not advocating printing money. I am saying if they are to do it, at least use the 'invisible hand' to avoid hyperinflation.
I have one of those (many actually) hard working stories where I lived on a couch typing out a business plan while cycling 20 k to work every day at a dump. Then, following that, in a garage, my own (rented) space… wearing fingerless gloves in order to type in the cold as my business began to work and grow. 80 – 100 hour weeks were the norm.
But the business didn't succeed. It was fantastic for 18 months growing in opportunities and offers then imploded when I took on a dodgy character as a partner. I went from the couch to the garage to sharing a rental house – oh lucky stars. I didn't get to buy a house, and today the same houses I may have coveted are worth double.
Should I do double the work? 160 – 200 hour weeks and defy the whole laws of time thing. Is your hard work more relevant than mine?
I suggest you don't allow for stories beyond your own. You accuse 'socialists' of entitlement as if they're not working just as hard as you who happened upon a house when graft could actually get you there.
But there's always been the grifters too, and now it's the only game in town. Use the house to leverage the next house. Or diversify in some stocks. Hell, so long as you're sat on your ass doing nothing and money rolls in. Those leeches.
They say the money's working for them. Some think they're the only hard workers in town. They sniff disdainfully as if we're all idiots.
Money for nothing. And when you try turn the tap off via CGT or wealth tax they scream blue murder from boardrooms and 'think-tanks' to their fellow media moochers. Socialism! They cry.
Get a grip. Your daughter is disgusted with her friends, and needs to convert them? That's truly warped and sad.
Any printing of money is bad. It is simply stealing value off others. Historically fiat currencies fail, as the people in charge of the rate of printing cannot control themselves.
There is always some excuse to print just a little….
Twice business I was involved with others in starting businesses that have failed despite the long unpaid hours I put in.
Currently batteling with another business that took the IP I developed ( and they tout so highly ) without paying me ( I developed the IP under an agreement where I get shares for the IP. ) One of the directors is Rob Fyfe (ex CEO of air nz. )
My own business of agrigcultural maintenance ( I am the only worker ) has kept food on the table but I spend segements of the year doing insane hours.
I do this as under capatalisim I get to keep any excess I make.
In a system where my hard work rewards someone else, well why would I bother? You too I suspect, after all you tried to start your own business.
My hard work is more relavent than yours IF it ends up providing goods that people want to buy. Dont give up. Try and be more carefull with finding business partners. My past record has not been good, but I am trying to learn from history. Look at above, even 'reputable' big business names can screw you over….
Socialism and entitlement.
Housing is a right.
Entitlement attitude to the nuts…
Positive 'rights' are dangerous to a prosperous society.
If you belive a house is a right, where to you get the house from. Take it from me? The govt you say. Well where do they get it from….
Look at the histroy of the first european setlers in the US. The governor's diray spells out the reasons behind the initial near failure due to starvarion was caused by them running under socialism, and how once a capitalist aproach was used there was food on the table.
Not the only lesson from history on the failure of socialism.
There are no easy answers to poverty, and those who belive there are are delusional.
IQ is one of the major predictors of economic prosperity. On average low IQ people are on the lower end of the economic prosperity scale. How do you change that? Just give them more money? From where?
I dont have a problem with the very small percentage of people who deliberatly choose not to work, I am ok with contributing tax $ to give them enough to live, But I would strenuously object if they were given enough to live as well as me….
I read a lot of history.
My daughters schoolmates are the ones she is converting. Her friends did not need converting…( my use of schoolmates here is that of the other children at her school)
If I sacrifice and save enough so I could build rental, why would I if i got nothing for renting it out. Hell you would rent it off me so I could sit around and not work. After all you could choose to not rent it and live in a tent and save, but you choose to live more comfortably at a cost of forgoing savings.
I have been fortunate in some ways, unfortunate in others.
Not every one can do what I can do, and that is my gift. I get to use my gift the the way I see fit, to benefit who I choose.
Slaves make poor workers.
Scocialism works well untill you run out of other peoples money….
Look at Sweden's history.
I don't advocate socialism at all, rather, capitalism with proper checks and balances. Those who work hard and those who work smart can both make a living. But the extremes warrant attention.
A statement like 'people deserve housing' may sound like someone wants to be given a house – but maybe they're just looking for affordable accommodation, or a place off the streets for our homeless. Maybe they work just as hard as you, and can't find a shed with running water.
It's not just those in the safety net being undermined by skyrocketing real-estate. It's all the working people, the one's who do the jobs keeping the lights on for everyone else. The essential worker barely stands a chance.
Proper checks and balances on capitalism would rightly tax the money for nothing crowd just the same as they tax all the little guys, running or working within businesses having not yet learned the art of smoke and mirrors in which one rests on their laurels and rakes it in (financially independent they call it, and salivate at the thought).
I got no problem with people doing well except where it impinges on others and the environment. A business that doesn't serve, rather extracts from, a place… what good are they really. If workers can't pay the rent capitalism has failed before we consider 'socialist' methods to prop the worker up. And that become corporate socialism as landlords soak it up.
Like it's their right to be that way, parasitising and yet crying parasite.
So have all the Gold Standard currencies. In fact, they failed far faster than the fiat currencies.
It seems to me you are not a particularly good businessman. Perhaps you would be better off employed by someone. But if hundreds of thousands of workers were unemployed because insufficient money was being created to employ them and you were one of them, perhaps you would think differently.
You don't seem to know what the invisible hand is.
Its the free, unregulated, market which is what has brought all the problems that we have.
Upon checking it appears I've been led astray by another economist – who claimed the invisible hand was the Feds way of tying loans to material goods.
Raising total value of all the things at the same time as raising total value of all the money in circulation made perfect sense as I heard it described.
Anyways, that was my point. That printed money, if they must print it, should be for material creation of things required by society. So that, the balance I describe, is met.
I am also not a fan of an unregulated market aka wild west. It will be the death of us all.
Without printing money to cover the increase in goods and to cover the loss of money to savings (profits) then we'd see deflation and the economy would grind to a halt.
Savings are a problem as they take money out of circulation thus slowing the economy.
Free-markets are the destroyer of society. Always have been.
Having interest rates destroys the economy/society and so does capitalism.
Why should we keep that which is detrimental to us?
What if the government was directly hiring the farmer to produce the spuds?
Would the farmer still not produce spuds?
And such is happening now as Queen Street Farmers hire farm managers.
So, you've shifted from one form of bludging to another.
Entitlement mentality is a problem but its your entitlement mentality as you continue to insist that you have a right to bludge off of others.
So, you've taught your daughter that your bludging is worth more.
This lurid anti-capitalist shtick you've been on since forever is dull and predictable. It goes nowhere. The simple undeniable truth is that in the era of capitalism, the world has become in total far more prosperous, healthy and peaceful than it ever has been.
That this wealth is poorly distributed is not a the consquence of capitalism per se, but is a common feature of all but the poorest societies … regardless of their economic system.
There really are two general paths forward from here; one is to accept that capitalism is a remarkable wealth and progress generating mechanism that needs to be evolved in order to meet reasonable expectations around fairness.
The other is to destroy capitalism in order that we can all be equally poor scrabbling among the rubble.
If someone could identify an 'evolving capitalism' path that shared wealth more evenly, then I'd be all for it – for example I'm in favour of a wealth tax, and there may be other, better ways of addressing grossly uneven and deteriorating wealth distributions while sustaining ‘our‘ environment.
If the wealthiest 2% of NZers could be 'persuaded' to annually 'gift' 1% of their wealth to the poorest 20% of NZers, this would make a negligible difference to the material quality of life of the gifters, and would (over time) lift one million NZers out of poverty.
Such redistribution would be one way of sustaining capitalism, but it's not going to happen – with a few high profile exceptions, it's not in the wealthy's DNA. "I didn't get where I am today…"
https://www.rnz.co.nz/national/programmes/thepanel/audio/2018743986/the-salvation-army-says-covid-19-will-create-a-new-underclass
And no one has proved that it was capitalism that brought about that prosperity. All we have is correlation and not causation.
I’m pretty sure that the aristocrats could have made a similar claim as you just did and it would be just as valid.
Mankind has always been innovative even when wandering the plains as anarchistic nomads.
Wrong. Wealth being maldistributed has always been the result of capitalism in every single civilisation going back to Ancient Sumer.
Why accept that which is false?
Capitalists don't produce anything – they just bludge off what others produce. We don't need the capitalists to fund businesses or do R&D.
Why would we be poor?
People would still be working to produce stuff and getting paid for that work.
All we have is correlation and not causation.
Given that we don't get to run the experiment double blind controlled, I'd suggest we have to go with the remarkable correlation.
Wealth being maldistributed has always been the result of capitalism in every single civilisation going back to Ancient Sumer.
If you're going to stretch the definition of capitalism that broadly the term ceases to have any useful meaning. It's generally accepted that the economic system we're talking about first appeared in Europe in the 16th and 17th century.
Why accept that which is false?
That's just an assertion on your part that is completely devoid of any support. Are you going to argue for instance that the world is poorer than ever before? On exactly what basis are you making that claim?
Why would we be poor?
Because every single fucking time we do something different to capitalism that's pretty much what happens.
How long do you reckon will a Guinea pig pup last in a snake pit?
That's a necessary feature of all evolution, that any new innovation (such as a better economic system) has to have a competitive advantage over the existing order.
Keep in mind that probably 95% of all new ideas or innovations are either bad ones, or poorly timed. Weeding them out is a vital function.
PS. Did you know kookaburras eat snakes?
🙂
I think (biological) evolution is a lot more complex and a lot less well understood than we like to admit and that the last word about evolution hasn’t been said yet.
Unless capitalism adapts by growing/incorporating self-control, self-constraint, and moderation, it could self-destruct and become an evolutionary cul-de-sac.
Didn’t know about the diet of the Kookaburra.
Expanding on the thoughts above; there is a third factor that is also happening right now. For the first time in human history we are seeing the demographic pyramids invert; ie we have more older adults than young ones.
This has massive economic implications, in that young adults are all about consumption and growth, while older adults are about investment and sustainability.
This means that the ground is shifting under the capitalist model that has served so well to deliver growth and prosperity … and it will have to evolve in response to something that delivers for the new demographic realities. I suspect many people intuitively understand this, even if they don’t explicitly frame the reason why in these terms.
Just to be clear on this, in no sense am I advocating for a capitalist model that is just the old BAU growth at all costs version; I'm advocating for necessary change as much as anyone on the left. The pivotal question I'm interested in is how do we retain the innovative impulses and generative capacity of capitalism as we know it, while layering on more sophisticated motivations around reducing the extremes of wealth and poverty, and sustainable resource use.
Get this right, and there is your competitive evolutionary advantage that will clean out the snake pit.
I think this is poorly worded on your behalf. Capitalism is a human construct, a socio-economic and political system with its associated ideology. I used “associated” instead of something like “underpinning” because the ideology doesn’t create “the innovative impulses and generative capacity”, for example, but it encourages and enhances them. These are intrinsic human traits, deeply rooted in human evolution and human psyche, which are utilised and given free rein under capitalism. This is one reason why capitalism has been as successful as it is, not just because of the prosperity and economic progress, which are really side effects, but because it aligns so well with core aspects of human nature.
The upshot of this is that any other system that could and would accomplish the same benefits in terms of human psychological needs in a socio-cultural framework different from capitalism would be a viable alternative. This is where human curiosity, imagination, and intelligence (both rational/intellectual and emotional intelligence) come in. There’s another very important factor/driver in this evolution of humanity, but I won’t mention it here and now. Suffice to say, I believe things are changing constantly (i.e. evolution is occurring) but much of it goes ‘undetected’ by the ‘human eye’ until something new and ‘unexpected’ emerges, like a bolt out of the blue – some like to call this a paradigm shift.
Unless capitalism adapts by growing/incorporating self-control, self-constraint, and moderation, it could self-destruct and become an evolutionary cul-de-sac.
Yes it's entirely possible that capitalism will prove to be a local optimum only, and that there is no smooth evolutionary path from where we are now to something better. In which case the system, and the creatures (us) who depend on it will likely go extinct at some point. I don't think anyone can rule that out.
Nonetheless I choose to be a rational optimist, therefore I'm willing to bet on the idea that since capitalism has already evolved considerably over the past 400 odd years, therefore it's capable of continuing to do so. There is no real evidence that it's reached some kind of stasis.
A basic problem is the irrational sense of entitlement to an improved standard of living ad infinitum – for example the dismissive attitude of some to prudent behavioural constraints for COVID containment.
It might not be too late for extant civilisations if a majority of ‘the golden billion‘ learned to say 'enough'; maybe even to be content with less. In this regard I'm a rational pessimist – too many will continue to urgently demand 'more', imposing unsustainable pressures on an already depleted and diminished natural world.
while older adults are about investment and sustainability.
Yeh that's right, boomers are all about sustainability. Oh wait.
@DMK
It might not be too late for extant civilisations if a majority of ‘the golden billion‘ learned to say 'enough';
Given that this golden billion are going to be barely 10% of the human race, even if they were to vanish from the face of the earth tomorrow, it would make relatively little difference to net resource consumption.
More interestingly it also says to the other 9b or so humans (I'm roughly projecting toward a total human population of 10b this century), that they have to remain poor forever. I'd suggest you go and ask them what they think of this.
@Redlogix – maybe the 'golden billion' and the projected nine billion could meet somewhere in the midde on 'lifestyle and entitlement'. Too scary? "I didn't get where I am today" by meeting in the middle!
Given the current plight of the natural world, I'd suggest that 'we' are not a good role model for sustainable practices and stewardship. We simply must be less about fouling our 'nest' – it's a matter of some urgency, as the previous link [ http://www.resilience.org ] indicates.
We can agree to disagree about the most realistic paths towards a more sustainable human civilisation on spaceship Earth.
https://genless.govt.nz/
maybe the 'golden billion' and the projected nine billion could meet somewhere in the midde of 'lifestyle and entitlement'.
Which sounds nice (and I've absolutely nothing against adopting more efficient, safe and sustainable methods) … but when you do the simple arithmetic, there are roughly 9 people in the developing world to every 1 of the 'golden billion', then the problem is quite stark. De-powering simply doesn't add up.
And this is a problem that must be solved on a global basis or not at all.
The problem is the number of humans and what they want cf. need. We (the 'golden billion') have much more than we need. We could set the example of wanting less, but lack the will – not 'our' problem.
@Incognito
but because it aligns so well with core aspects of human nature.
Now that has to be about the most thoughtful and encouraging response I've had here in what feels like ages. (And I'm not being mean to many other fine contributions in saying this.)
Excuse me if I don't unpick everything you said there, just take it a read that I agree with it. Now let me ask the next question; what if 'human nature' is not the fixed and immutable thing we often treat it as?
Certainly we come with plenty of instinctive and emotional default wiring. As long as we inhabit these biological bodies, we will never erase them. Yet remarkably, and unlike any other creature, we seem to have evolved the capacity to overlay these biological proclivities with more sophisticated social narratives that enable us to function in very large societies. At far wider scales than any other primate.
And for much of our known history it was religion that was the primary vehicle for conveying these narratives. So for the sake of argument, let's set aside all our preconceptions about what religion used to look like in the past, and ask ourselves the question, what would a faith need to be if it were to convey the updated, refreshed and relevant narratives we need to make our societies something we could believe in again?
You’re getting very warm there, my fellow human!
Human nature, for want of a better descriptor, is not fixed and immutable and thinking it is is part of the problem. That said, (human) evolution does not mean we start with a ‘clean sheet’ each time, as it builds on the pre-existing and it transforms and transcends it, i.e. emergence.
Whatever we construct for and as our next step, it has to be less reductionist and fragmented than before and more holistic and integrated, at all levels, from the single individual to the global human society and our interactions with the rest of the planet, all of it – we’re even polluting Earth’s orbit with space junk.
That’s my new narrative-faith there, incubating-gestating, and I’m convinced many share this and are incubating-gestating the same narrative-faith synchronously because it is/will be a shared-joint narrative-faith as all the powerful previous narrative-faiths have been, funnily enough.
Tempting as it is, I’ll leave it at that, for now.
Nope.
If people were innovative before capitalism then it wasn't capitalism that caused innovation.
And that's just wrong. If you talked to Plato c500BC and described capitalism to him he would tell you that is how Athens worked as well. They had the rich owners and then everyone else.
I'm not using a broad definition. I'm just looking at where and when the definition also applied.
As I've said before, our property laws originated in Ancient Rome.
There is still no proof that capitalism brought about benefits to society as you assert. Meanwhile, we do have research that suggests that capitalism brings about the destruction of society.
Nope. I'm just not accepting the correlation as proof of your assertion that it was all due to capitalism.
Actually, its not whereas every time that capitalism has arisen in a society it has destroyed that society.
If you can imagine how we could run say the required several hundred randomly selected earth planets, and do a double blind, placebo controlled gold standard study where only some are ‘given capitalism’ so that we can prove to your required standard the cause and effect we are talking about … the Nobel Prize committee wants your contact details. Or to put it bluntly, you are demanding an impossible standard of evidence simply to avoid conceding the obvious.
Like all innovations, capitalism in the modern form I linked to did not arise out of nowhere. It has many components, such as property laws that have precedence elsewhere. And I'm pretty sure the Romans didn't invent the concept of property, they would have leaned on their own historic context and understanding of that era.
All known successful economic systems have proven to be hierarchical. This arises from a simple hard truth that the moment you improve anything, you immediately get differentiation, and someone has a competitive advantage. That's the raw motivation that has driven tens of thousands of years of progress out of pre-history.
(Now as it happens I can conceive of a society where this competitive instinct is modified, or directed if you will, by a higher ideal of 'service to others' … but that's an ethical leap few people here seem to be personally willing to embrace.)
Nor is innovation unique to the capitalist period of the past 400 years; that would be an idiotic argument. Humans have a natural capacity for creativity and adaptation to changing circumstance. But there is absolutely no quibble that this same period has seen a truly quantum leap, and explosion of innovation never before seen in all of human history.
I would argue that modern capitalism is a tool that has enabled innovation to flourish because it rather cleverly de-risked the process. In all prior ages if someone tried out a new idea, and like most new ideas it proved to be a bad one, then if they had invested deeply into it, the consequences would be fatal. Capitalism through it's concept of the company greatly reduced this risk (although by design it never eliminated it). And because the person with the idea and the person with the capital necessary to make it happen are rarely the same individual, the concept of banking and stock finance arose to make the process far more efficient.
The consequence of this explosion of innovation (again capitalism is not the cause of this, merely an enabling tool) has also been an amplification of economic hierarchy. As I've repeatedly pointed out, capitalism may well have helped solve the absolute poverty problem during the massive growth phase of the past 400 years, but it was never intended or required to solve the relative poverty problem. (Which is a problem of a completely different nature.)
I repeat, total human prosperity and welfare is at all all time historic high, but we all understand that it is very imperfectly distributed. Part of why is simply that globally we are still in transition, the project is still being rolled out as it were, and many have still to be reached. The other as I've outlined elsewhere, is that the system is currently adapted to a highly growth oriented, competitive phase of human development. But both of these conditions are no longer the dominant consideration and the model will have to adapt … which so far it's shown a remarkable capacity to do so.
When I read your argument it reduces down to saying that all known historic economic systems are capitalist and hierarchical in nature, therefore lets burn everything down and see what happens. (And no you don't offer any proven alternative to replace it.) Honestly this is no more interesting an argument than what a clever four year old might make.
You "Actually, its not whereas every time that capitalism has arisen in a society it has destroyed that society."
20th century events seem to show that it is scocialism that destroys economies….
Most recently Venezuela.
"Given that this golden billion are going to be barely 10% of the human race, even if they were to vanish from the face of the earth tomorrow, it would make relatively little difference to net resource consumption."
WTF?….you can not possibly believe such inherent nonsense
And surely you have noticed that the developing world is … well developing?
And surely you can do the simple arithmetic involved?
"capitalist model that has served so well to deliver growth and prosperity … "
You always repeat that that underlying assumption, as if repeating something often enough makes it true. It is rubbish. Being a self serving justification for excessive stealing from the commons, by those who have too much.
Human co-operation and innovation, more often driven by mutual interdependence than the desire to get ahead of others, has been the main driver of human advancement.
Poverty in the third world decreased, because the first world made a decision to allow them some share in the worlds resources. "Capitalism" was simply taking them.
Even the main characteristic of modern day capitalism. Shareholder corporations under a management class, depends on mutual co-operation and interdependence.
The "Growth and prosperity" was delivered by the hard work of many people, very often without the expectation of gain. If we had waited for the greedy to advance "human prosperity" we would still be in the dark ages.
You always repeat that that underlying assumption, as if repeating something often enough makes it true. It is rubbish.
https://ourworldindata.org/economic-growth
Human co-operation and innovation, more often driven by mutual interdependence than the desire to get ahead of others, has been the main driver of human advancement.
Humans co-operate within groups, but compete between them. There is no doubt both modes of social interaction play a big role in our lives. Interestingly capitalism harnesses both modes as you say, businesses are essentially co-operating collectives, but they also compete intensely between each other.
When we did something different in the 30's to 50's we became the most well off country in the world.
That was a period when a generation having learned the hard lessons of WW2 were a little more accustomed to the idea of personal sacrifice than we are.
Now as it happens I can conceive of a society where this competitive instinct is modified, or directed if you will, by a higher ideal of 'service to others' … but that's an ethical leap few people here seem to be personally willing to embrace.
You obviously live in different circles to me.
I work with craftspeople whose main satisfaction is building a boat or a house for someone.
Teachers who want their students to do well.
Small business owners who take satisfaction in providing an service, and a good living for their staff.
Sailors who like being fine seafarers.
Doctors who put their patients first.
Grocery store workers, fruit pickers, cooks and cleaners who turn up to work every day with little recompense.
Of course we all want to make a living, and have some of the better things in life.
But most peoples main motivation is not getting something more than others.
Something that those whose primary motivation is money and/or power do not understand. Even though, as Covid showed, it is the people who have intrinsic motivations that are essential to their survival.
The "wealth creators" had no wealth without all these people going to work.
As i've said before "Capitalism" at the level of buying seeds for your land, training in a trade, buying tools, is an essential part of society. "Capitalism" when someone gets money without earning it, from being a rentier from society, or a "thief" of the commons, is not!
It is not the people who have changed. It is the people with power, that has changed.
Except that I have in the form of coops which have proven themselves quite successful.
A market system without the capitalists.
Maaayte… Earth already looks like a scene from a disaster movie with the regular “once in a 100 years” fires and floods, and melting Greenland etc. and methane starting to release from perma frozen landscapes. Forced migration due to climate change adds to the general apocalyptic vibe.
Only the thickest, or necessary deniers, will not accept the link in the last 200 years between humans increasing Co2 levels and Capitalism and Finance Capital raping and pillaging.
I grew out of that argument sometime in the 80's.
Because the past 400 years of human growth and progress has been an unprecedented development, two things have happened. One is that we've had to innovate new technologies, each layering onto the existing ones in an evolutionary process; the other is that the human population has expanded dramatically during this phase.
The important concept to understand here is that the use of various forms of fossil fuels for instance, are in the big picture merely a transitional stage. As soon as we migrate fully to renewables, storage or nuclear, the use of fossil carbon can end. But we could never have made the technological leap direct from burning wood for fuel in medieval times, to solar cells or nuclear fusion.
The second critical concept is that if you look at the population of all the developed nations, it is now either static or declining. (A really useful data source.) The quickest way to stabilise human population and total impact on the planet is to get us all engaged in the fully modern developed world. Indeed most people will be able to leap frog the slow process of innovation we've undertake the past 400 years, directly to new non-fossil, abundant energy economic systems.
And the proven economic mechanism that generates the necessary innovation and development is capitalism.
You “Without printing money to cover the increase in goods and to cover the loss of money to savings (profits) then we'd see deflation and the economy would grind to a halt. “
The device you are on would argue otherwise…. electronics keep getting cheaper and better.
A similar strawman argument is made for opposing using gold, silver and copper coins as money , as there is not enough gold and silver to fulfill the need. To which one can pose the question, how much gold is needed per person for the economy to function, 1mg ? 1 g? 1 kg ? A ton ?
That is no different from the question of how many dollars per person do we need in circulation. 1 cent ? $1 ? $1000 $100,000,000 ?
Funny how economies that have so much money per person that an egg costs $10,000 don't seem to do well….
Quote from net
"”Jörg Guido Hülsmann points out that the quantity of money is irrelevant. Any quantity of money provides all the services that indirect exchange can possibly provide, both in the long run and in the short run. A change in the money supply – inflation or deflation – does not affect the aggregate wealth of society. Our tools, our machines, the streets, the cars and trucks, our crops and our food supplies — all this is still in place — but both phenomena radically modify the structure of ownership. The consequence of a century of inflation were financial crises, dominance of banks and firms financed by credit over the economy, and massively increased debt on all levels. “”
You “Savings are a problem as they take money out of circulation thus slowing the economy. “
But as it is taken out, there is less in circulation so its purchasing power will increase, and then a saver might chose to spend….
I am a saver, so I am a problem, according to you. I like having savings so I don't feel financial pressure to go to work when sick ( and infect others… ) or if a recession happens I can use savings to maintain my standard of living, spending and stimulating the economy….. oops
And I don't want to hit retirement and have nothing but the government pension….
Do you plan to depend entirely on the Govt pension when you retire?
You “Free-markets are the destroyer of society. Always have been “
Tell that to the working people of Russia once government control was enacted. Opps you can't as so many died of starvation, oops Mao's China…. oops North Korea….. History is repleat with examples of Govt control causing starvation.
The first colony of European settlers in the US nearly died of starvation until they adopted a capitalist free market. Hmmm
During the first two years the colony lived under rules by where each received a 'share' of what was produced and each person was expected to do their part working towards the common good.
It did not work well….
William Bradford wrote in his diary "For in this instance, community of property (so far as it went) was found to breed much confusion and discontent, and retard much employment which would have been to the general benefit and comfort. For the young men who were most able and fit for service objected to being forced to spend their time and strength in working for other mens wives and children, without any recompense. The strong man or the resourceful man had no more share of food, clothes, etc., than the weak man who was not able to do a quarter the other could. This was thought injustice.
After the second winter, realizing that the colony had survived only through the friendship and largesse of the native Americans, and would soon perish if changes were not made, Bradford tore up the Mayflower Compact. He instead assigned each family a plot of land to be their property, to be worked as the family saw fit, and with the fruits of that land to be their own. It was the beginning of private property rights in the New World.
The result? Again, from his diary: "It made all hands very industrious, so that much more corn was planted than otherwise would have been by any means the Governor or any other could devise, and saved him a great deal of trouble, and gave far better satisfaction.
Hmmmm
You “Having interest rates destroys the economy/society “
Well here I am somewhat in agreement with you….from a monetry standpoint, Interest on loans is a mathematical basis that will cause the failure of the currency. Read that analysis over 15 years ago and could not see any fault in the logic, but old links broken, But on the maths basis I agreed that interest was bad. It takes a while for the effect to build, as exponentials do, and when curiencies fail, so does the economy.
That said, artificially setting the interest rates induces all sorts of distortions that are ineficient from an economic standpoint… house prices shooting up is one. At 10% you cant afford a big morgage, but at 1% you can afford a much larger mortgage, so house prices go up…
You “What if the government was directly hiring the farmer to produce the spuds?
Would the farmer still not produce spuds?”
If the Govt paid enough….. but where do they get the money from…. oh yes the people who buy the spuds….. and it costs money to pay the buerocrats to do all that taxing and paying…. a drag on the economy so economy ends up smaller
you “And such is happening now as Queen Street Farmers hire farm managers. “
Somehow I don't think those Queen street farmers would tolerate a manager who operates at a loss for long.
You “So, you've shifted from one form of bludging to another. “
So building something that others happily pay me to use is bludging?
Funny, growing up Bludging was a term used for those who were able do work, and jobs that the could do were available, bit they chose to sit on the dole…..
Some people did not like that so now days if you turn down a job you could do for no good reason you will get stood down from the jub seekers benefit……
Please give your definition of bludging, as the only definition I know is expecting something for noting..
Well I guess you when you go on holiday you only stay at freedom camping sites… as you are so against paying someone to use their house/hotel…. or aeroplane….
You “Entitlement mentality is a problem but its your entitlement mentality as you continue to insist that you have a right to bludge off of others. “
By my definition I do not want to be a bludger, rather support myself and family by my own effort
And by my definition, making something that others are willing to pay me for the use of is not bludging….
you “So, you've taught your daughter that your bludging is worth more. “
Iam teaching my children to be self reliant and to think for themselves, and to critically analyse what they are told.
My daughter worked out for her self that in English, if she sent a lot of time researching and writing a well structured gramatically correct logical essay on a subject that is not politically correct, she gets a poor mark, but speed writing a gramaticaly messy poorly structured essay singing the praises of femanism she would get an Excellance. And she thinks modern feminism is a load of bovine fecal mater….
(Ps I am a poor speller and the spell check on this site does not work properly )
That's an outright lie.
The government paying its employees gets productive work done.
The economy isn't just material goods.
Not necessarily. Or, to put it another way, it depends upon where its spent.
ATM almost all of the money creation is being spent on houses causing hyper-inflation in house prices which leads to greater poverty for the majority of people. As such this money printing and spending needs to stop.
But the government creating money to spend on producing government services and infrastructure isn't going to produce any inflation at all.
That money spending would then flow into the rest of the economy and thus empowering it.
There are limits but unless there is no unemployment then those limits don't apply.
Thanks for the clarity DTB & Brigid.
@ Draco T Bastard +1, looks like NZ Labour is conforming perfectly to it's liberal laise a faire free market ideology…which I might also point out will mean that they will never be the political party that will deal with climate change in a serious, transformative and long term way…sadly.
"A government, paying it's employees printed money get's nothing back."
If that employee is building houses, infrastructure the country gains. Result of course is houses and infrastructure.
If it so happens that inflation starts to increase the solution is to increase taxes thus taking money out of circulation.
A smart government will adjust the creation of money to the work available.
+100
The problem is that everything we do to help people afford houses just pushes up the price. QE is a big part of the problem, and the stimulus money that the RB is giving to banks at near zero rates, just goes into buying houses and shares.
It is not just a NZ problem and if the NZ RB stopped doing it then money would flow in from overseas anyway.
You seem to imply it is ok to print money to match an increase in goods. Printing money is bad full stop.
If joe average sets ap a printer and starts pumping out $20 notes he is branded a criminal and thrown in jail.
Yest when banks do it the govt is happy as it creates the inflation they need to subtly steal your savings.
Printing money is a destroyer of free markets.
Setting intrest rates artifically low is another destroyer, it is anti capitalist.
Think what would happen if the govt fixed the cost of potatoes at $1 per 10kg bag. Great for the people who go to buy spuds that day, but it financially harms the farmer who has a half grown field of spuds. And how many spuds will be grown next year?
Same applies to interest rates and savings. Interst on savings are so low we dumped our savings into real estate and are now building a holiday home to let out on NZBatches.
We were looking at building a rental in town, but were put off due to the tennant friendly laws with threats of tenant for life and rent controls, and recent changes that keep getting worse for the landlords.
The photo at the top "housing is a right" shows the mentality problem, entitlement mentality.
We raised our children in a battered non towable caravan and a 40ft shipping container for 4 years while we saved and started building, moved in to our house without sewage or power and slowly finished as we had money.
Now at school my eldest daughter is disgusted with the socialist mindset of so many schoolmates, and has been entertaining me with her stories of converting fellow students away from socialism.
My wife used to be a staunch labor voter….. no longer…..she dropped out of school at 15 , yet can see that rent controls and other anti lanlord rules intended to help tennants actulally end up harming them.
Printing money is bad full stop.
Nonsense – as long as sufficient value is created to cover it, there's nothing wrong with it. Problem is, presently that value is not being created.
Printing money is a destroyer of free markets.
'Free Markets' destroy themselves without any help – if you'd read a little history you'd know that.
You're so right GGl. In your choice of name that is!
Given this nickname for my innovative engineering skills.
Stuart. Do read a lot of history. Probably morr accurate claim would be that capitalism distorted and corrupted by govt destroys that which is left.
Fun name GGL: "He's known for being good-natured towards others."
History?
You mean the history of the labour government, specifically the first labour government?
" Responsible for the realisation of a wide range of progressive social reforms[1] during its time in office, it set the tone of New Zealand's economic and welfare policies until the 1980s, establishing a welfare state, a system of Keynesian economic management, and high levels of state intervention."
"The Reserve Bank of New Zealand was immediately nationalised, transferring control from private bankers to the Minister of Finance.
A State Advances Corporation Act was set up which stimulated house-building and provided cheap loans to farmers.
The top rate of income tax was significantly increased, from 42.9% (and 57% for 'unearned income' such as rent, interest or dividends) in 1939 to 76.5% by 1949.
The 1942 budget, which raised taxes, marked the beginnings of Keynesian thinking being explicitly followed in New Zealand."
etc.
https://en.wikipedia.org/wiki/First_Labour_Government_of_New_Zealand#Economic
Probably morr accurate claim would be that capitalism distorted and corrupted by govt destroys that which is left.
Nonsense – capitalism, left unregulated, is little better than banditry – it has no intrinsic value worth preserving. Only when it is scrupulously regulated can it provide any social benefits whatsoever.
The horrors of free markets in the form of unrestricted real estate speculation have impoverished NZ for a generation, and left to itself will reduce the country to social unrest right when our energies as a society should be directed away from the failed market model towards something sustainable, using less carbon, and robust against threats like global warming.
The best thing that could've happened to NZ in the last 100 years would have been if Roger Douglas had been strangled at birth.
Amen.
"Biden (you could enter Ardern here) has neither the temperament nor the political manoeuvre room to take on these mammoth challenges and solve them. Inequality is going to increase during his term. The technocrats are again going to be exposed once again as impotent – or complicit – as plutocracy entrenches. The ecological crisis is not going to be dealt with beyond largely empty promises and posturing."
https://www.jonathan-cook.net/blog/2020-11-12/biden-trump-left-populism/
Although a U.S. centric view (remembering the U.S. is hegemonic) this is an excellent article which lays out both the simplicity and difficulty of the problem.
Needs a Socialist….Sanders? AOC?…anyway, as they are portrayed as Commies by media,oppostion,etc…that was never going to happen.
America is a screwed up place.Even if NZ is not perfect it is still so lucky….