Written By:
Marty G - Date published:
11:45 am, January 25th, 2011 - 49 comments
Categories: Economy -
Tags: international ratings, legatum prosperity index, prosperity
The Legatum Prosperity Index looks beyond GDP, a failed measure that counts rebuilding after an earthquake and building prisons as gains. The Index is a broad measure of nations’ prosperity comprising 88 components. It shows that New Zealand is a relatively prosperous nation. It also shows that relative prosperity is falling under National.
In 2009, New Zealand was ranked the third-most prosperous nation in the world, behind only Norway and Denmark. In 2010, using the same methodology, we’ve fallen behind Finland and Australia as well.
It’s notable, as you look at the 2009 vs 2010 scores, that the all declines among the top 10 are countries led by right-wing governments. We’re down from 3 to 5, Canada from 6 to 7, Ireland from 9 to 11 – vastly different experiences of the recession but all mismanaged.
I dug into the sub-components of the Index to see what makes the more properous countries better off than us:
There’s heaps of measures where we’re tops though:
Interestingly, we’re also the most religious of the top five with 27% of people attending church weekly vs 12% in Finland. I’m not putting that as good or bad, just interesting 🙂
For me, the message is clear: if we want to be a more prosperous country we need a fairer distribution of wealth which improves the economy but also encourages people on lower incomes to believe in the system and discourages crimes; we need to control our economic destiny by saving ourselves and not borrowing from abroad; we need to invest more, especially in high-tech R&D.
The server will be getting hardware changes this evening starting at 10pm NZDT.
The site will be off line for some hours.
You mean we arn’t catching up with Australia?
but that nice man, Mr Key, promised…
The first is also caused by the second as foreign ownership “exports” the surplus wealth out of NZ.
We have less savings, and absent landlords, and the local elites rig the system to short change the economy.
A capital gains tax would mean that capital gains farming would not be so easy, this is where you get
your hands on other peoples savings, earnings, property, and speculate up the price and then pocket
the profit without paying tax. NZ is rigged to lessen saving and pay foreign landlords profits.
Property transaction stamp duty please. If a property is sold after being owned for less than 24m, a 5% stamp duty applies. Less than 12m, a 7.5% stamp duty applies. Less than 6m, a 10% stamp duty applies. Less than 3m, a 15% stamp duty applies.
One stamp duty free trade every 5 years, to compensate for unexpected personal circumstances.
This should push the hard core speculation and asset flippers out of the market.
Glad you qualified the stamp duty for property CV as I had to sell and buy houses twice in a six year period, one of the sales downsizing to lower the mortgage.
I think that no sweet deals should be allowed for landlords either in the form of deductions because they are getting someone else to pay off a house for them and capital gains should be imposed on all dwellings apart from the family home.
You’re welcome, M. To me, Govt should be about helping ordinary people live easier not harder just so the few can get even further ahead more easily.
And I agree with you, although Goff made some moves to refocus the tax system on assets, much more needs to be done.
However LAB desperately need to keep communicating a vision for the future that people can believe in, not just present boring old managerialism around the tax system.
2 words that will not be going together again ‘capital’ and ‘gains’. Peak home prices are in the past.
There are lots of ‘mums and dads’ who are just trying to survive and have some form of ‘life’ when they retire, or have to send their kids to Uni, Wainuiomata is a suburb that has lots of M & Ds who own a second home/mortgage, and I bet most are heading for negative equity (as will everyone), Saying labor is going to tax capital gain would be like saying they are going to tax swimming in the Manawatu river.
When things finally go tits up, finding people on 100,000k may be a stretch. This is the year we may see the rubber hit The Road. 😀
27% attending church weekly was a clue….the US no.1 for health confirmed it.
Garbage in, pretentious garbage out.
um. you think the entire Index is flawed? Or you think the Gallup poll on weekly church attendence is wrong?
You should have a look at the sub-components of the health index to see why the US rates highly – they spend the most in the world for one.
And you obviously don’t live in south auckland if you think no-one goes to church anymore.
And how’s that working out for South Auckland?
Pretty well. There’s a lot of cheerful folk enjoying their lives there, even if they don’t always have as much monetarily.
Of course, life could be better with a government on their side, but don’t believe everything you see on TV.
The US gets a high score on health outcomes because they’re only looking at health outcomes from hospital. If you go to hospital in the US, generally you will come out the other side having had the best treatment in the world. It also cost you a hell of a lot, and evidently they aren’t counting people who can’t afford to go to hospital. But if you do get treatment, it is very very good.
So how does that make them no.1 when it doesn’t take into account all of the population??
Utterly discrediting.
that’s one sub-element that may not work well for one country.
How about addressing the points Marty has raised, rather than this desperate attempt at distraction?
Uh, no, it’s a small gap in a measure that has a lot of other factors in it. I agree that this biases the health measure in favour of the USA and other countries with low access to hospitals, but it doesn’t make the whole thing completely flawed.
Go watch Sicko and you won’t be quite as enamoured of the US health system.
US number one for health… wtf?! They have, without a shadow of a doubt, the most inefficient health system in the world, absolutely terrible results when compared to the amount of money spent (that is they spend crap loads of money to get pretty ordinary returns).
Actually they spend ludicrous amounts to get very good returns on actual hospital admissions. The problem with their health system in general is that it is the ambulance at the bottom of the cliff – very little is done in preventative health care. But that ambulance has all the latest bells and whistles!
The healthcare that those on the most expensive top tier health insurance plans get is no doubt the absolute best in the world.
Everyone else, meh.
Those not covered by insurance – you’ll get a few hours in ED then be put back out on the street.
And those few hours in ED will bankrupt you.
Well yeah, but we are talking about a country which respects military service above just about all else in society and politics, but still lets a homeless veterans problem persist.
Perhaps you are correct, but my point is that their return on actual dollars spent is crappy – not that their success rate on hospital admissions is poor.
If you get into hospital your chances are probably the best in the world… if you have the right insurance – largely because they will throw ridiculous amounts of money at you…
But if you boil it all down to how “efficient” it is – that is what is the return for each dollar spent on each patient – I think you’ll find it falls well behind most “public” systems.
Because of their insurance system, coupled with the litigious culture, the US health system is incredibly risk adverse. Removing risk costs money and once you’re in hospital, with the right insurance, they will spend copious amounts of money removing all risk – even past the point where the return on the dollars spent is no longer reasonably justifiable.
This might sound great but it is horribly inefficient and why most well run public systems are much better value.
Never mind the fact that the US insurance companies spend a huge amount each year trying not to pay out on the insurance claims that they do get.
Oh but you overlook the good they generate in doing this. If they didn’t fight then not only would the US have a homeless veterans problem but also a homeless lawyers problem. The last thing anyone needs is hordes of hungry lawyers roaming the streets…
lololololololololol Makes me think of a super evil version of Left 4 Dead 😀
Yep. Spending $50K or more on lawyers, medical opinions etc to get out of paying for a $100K procedure for a patient is a great return on investment. Uh, for the insurance company that is, not for the patient.
Other tactic is that even if you know that you will probably be forced to pay for the procedure in the end, you can try and stall proceedings until the patient dies. Woooo-hoooo watch the performance bonus pool grow.
Haha… $50K?! Me thinks you have been living in wonderland too long…
Spending $200K to get out of paying for a $100K procedure is actually a good investment as it generates more jobs (lawyers, doctors, other leeches.. I mean professionals) and generates more wealth for the shareholders, it is also economically more efficient.
How does it generate more wealth? Simple. I pay out more than I receive, I then complain that we must raise premiums to cover the rising cost of healthcare. As our profit is derived as a percentage of premiums received the higher the premium the more profit we make in absolute dollar terms. The more pressure that goes on hospitals to reduce costs the more money we need to spend in order to justify raising premiums.
Why is it economically efficient? Simple. To be efficient you simply have to ensure that the majority of the product goes to those who value it most, ergo, those who are willing to pay the most for it. As we have limited health services we have to keep the price at a point that ensures those who value it most are able to get it, if it becomes too cheap the system will get flooded with people who don’t value it and those who want it wont be able to get it. All this is underpinned by the maxims that all men are created equal and America is the land of opportunity – which means that the only reason you can’t afford it is because you are lazy and the country is better off if you are dead… or join the marines.
Investing more in R&D alone is not going to increase high-tech exports, this just the easy cop out that successive governments roll out. I’m not saying we shouldn’t invest in R&D but where NZ is lacking is in our ability to take the ideas we have and actually create an export business from them. We need to develop a culture where we celebrate success and are not afraid to learn from our mistakes.
If we want more high-tech exports we need more high-tech exporters. We need to keep our high-tech companies in NZ and create an environment which helps them grow while staying here. Unfortunately successive governments have focussed on short term gains and belief that agriculture is where the future is at.
Yeah, +1.
Same with educating and training our young people up to be the best that they can be. Great political pitch, but no good if they all decide to then move to Australia to help the Australian economy.
Mind you Goff also said that Government is going to be much more active in the economy in general so lets hope LAB have something good in mind to address your concerns.
Every country wants high-tech exports (they bring in huge amounts of cash after all) but if every country did this (and every country should because it helps develop and improve their society) then, due to the massive over production, exports would decline.
The big problem with the “free-market” is that it exports all the jobs overseas. A viable society, on the other hand, needs to keep all the jobs but also set production so that it only produces what needed for that society. This means reducing working hours as productivity increases, dropping hourly rates for a salary type regime and a change from the consumerist led market while still encouraging people to do R&D.
Not that I want to disagree with your underlying message but a free market does not technically export all jobs overseas.
Those jobs must go somewhere so somewhere in the world jobs are imported. In a theoretical world, the long term effect of this is wealth is redistributed to the poorest (cheapest) nations who then become wealthy, at which point their jobs are exported to the new poorest nations, and so on. Over time the richer nations lose their wealth (after all they have no productive jobs to support their higher industries and underlying consumption) and they become poor and cheap, so can import jobs again.
The problem is the greatest proponents of a free market pay little more than lip service to it. What they really mean by free is a lack of responsibility and culpability for their actions, with a desire for short term gratification.
If we define our society as a global one then the theoretical “free-market” isn’t such a bad thing and with a little tweaking probably the best for everyone. To make it work we’d probably need a global, democratically elected and fully representative government to ensure no-one is abusing the system and that it remains fair to all.
The other option is we accept the notion of a global village is bullcrap and embrace our nationalistic roots. Its us or them comrade whether we like it or not!
Yeah, it’s a money go round for the rich.
A global government won’t work as it’s too big. What could be done is some broad based universal rules/standards that every country must meet (Labour, environment, etc). This would make labour and externalities approximately the same price everywhere then the “free-market” might actually work in equally dispersing the jobs. Massive productivity would still leave a massive amount of unemployment though and so you’d still end up with poverty which is where reducing working hours and going to a salary system comes in. Then we’d just have the problem of capitalist ownership to confront
Your suggestion, although elegant, wouldn’t work unless the underlying cost of that labour was the same… and thats a complex equation (tax rates, compliance costs, social services, etc…). I’m also not convinced capitalist ownership is that much worse than any other form of ownership. I guess the USSR proved you could make a system work without capitalist ownership, but even that didnt solve the problem of ending up with corruption and a class system.
I am however sure there is a solution, its just the current underlying solution relies on exploitation of one for the gain of another. We might not like it but even in non-capitalist countries you still see the same pattern (USSR, North Korea, China) – an elite that benefit from the exploitation of the masses.
To me the solution is to stop measuring ourselves on meaningless comparative scales. The whole notion of this just invites discontent and a feeling of “I want what they’ve got”. We need to learn how to enjoy and value our lives with whatever we’ve got. Measure success on overall happiness and values.
I must now return to my dream world with the nice soft walls and lovely huggy PJs!
You don’t necessarily need to have capitalist ownership or central ownership as your only options. You could have what a lot of high tech start ups have – a small group of founders who each have an ownership stake and each have an ownership say in the company. Look back at HP, Apple, Google, it always looks like this.
In other words, communally or co-op owned enterprises. Often in these enterprises the first 50-100 workers will have meaningful ownership stakes and say in the business.
The trick is to increase the scope of this concept, but we know through various privately held co-ops which have been successful in NZ that it can certainly be done and done well.
Yeah I like the idea and worked for a company like that once. My only concern is that at what point do those foundation members stop becoming “one of the team” and they themselves become the elite owners? What if you join a company after it has made it big, can you still have a say? Or are you just another proletariat? How do you break into the ownership-circle without having to take the risk of working for a bunch of start-ups? How do you distribute the wealth the company generates? Does the CEO get the same share as the line working?
Although if you made it as simple as equal profit sharing with all employees having an equal share in the company with an open book on salaries then I think you could create something quite exciting! 🙂
Set up the rules so that they can’t.
Of course.
What ownership circle?
Democratically.
Pretty much. In Mike Moores Capitalism: A Love Story there’s a cooperative bakery in there and they all vote on how the profit will be spent. Everyone gets about $60k/year – only about double the average wage. Sure, the CEO could get more by working in a “traditional” capitalist business but then everyone else would get less.
The business would have to be “ownerless” or, possibly, self-owned with the workers giving direction. If anyone had ownership of the business then you’re right back with the problems that capitalist ownership causes – mostly poverty and an economy that doesn’t benefit the society in the long run making it unsustainable.
And what makes you think that they should be different? An average person will require, throughout their lives, the same amount of food as every other average person, they’ll require the same amount of medical care etc etc. The environment will also also require the same amount of safe guards around the world and workers need the same protections and safety rules. These really aren’t optional although I’m sure that the RWNJs will say that they are (plenty have been on here saying that environmental protections will cost us but the reality is that countries without those protections are costing us more).
This would all seem to indicate that tax rates, compliance costs and social services should all be about the same.
Comparatively we need to have an equivalent lifestyle globally as it best for everyone if we do.
I’ve worked in high-tech for most of the last few decades. It depends on what you’re looking at.
Sure there are ‘products’ – ie physical goods in some of what I write (about half). Sometimes that is manufactured locally from imported components and sometimes manufactured offshore. The BOM for those is not that high a proportion of the cost.
The largest component is always in the intellectual property that the engineers and programmers put into the ‘product’. Reason – there are no tech companies that I know of here who produce millions of units. With hardware the max I’ve ever had my code in is a few 10’s of thousands of units going to a very niche global market at a high price per unit (USD1000+). With pure software the best has been a few 100’s of thousands of units shipped over the net at a low price (USD40) with no physical objects made by us.
But in both cases the biggest single cost has been intellectual R&D input and that has been completely done in NZ. Even the sales and marketing cost has been bloody low. That also applies to friends in biotech and other tech areas.
That is what you’re looking for in an high tech economy. It is constrained by the people you can hire and the capital to do the development.
The problem is that you have to have the people capable of doing it. But across almost every high-tech area I’m aware of, the usual ration of kiwi born to immigrant/resident in the programming and engineering has always been well less than half. In a couple of cases it has been less than a 10%.
Similarly, less than half have raised their capital locally. Those that have raised it locally have been severely constrained many times by what money could be raised to the point that it affects their business. That is also why they frequently sell their businesses to offshore interests and why the businesses often migrate offshore to better capital markets.
Those two factors diminish what could be done here. I don’t see much sign of it changing now that National dumped pretty much all of the required backing (a decades long process) over the last two years.
Labour made a good start on the decade level changes required to R&D tax, development grants, getting more and better tech grads, and just simply providing a better environment to build tech businesses in. But it was only a start….
Gawd… now you’ve got me started… I’m also in my third decade in the high-tech industry so hopefully I can comment on this with some authority.
The point I was weakly making earlier is that its more complex than just throwing money (or people) at the problem. Giving more money to R&D and increasing skilled immigration by itself can’t lift high-tech exports. But thats what governments seem to think will ‘fix the problem’.
In order to export you need a product, you create and use intellectual property to generate a product. By itself IP has no inherent value.
All those things (skilled people doing R&D creating good ideas) need to be fed by and feed into successful businesses with solid business models who understand their underlying global markets. No point researching a product no one will buy, or making a great product but getting no where because you had crappy sales people. You also need top notch sales and marketing people in there too. The example I use is Apple, they are not successful because they have the best engineers or best technology, they simply have a marketing genius at the head and execute on their plans very well.
Where the funding for all this comes from is also important, whether its private equity, public equity, venture capital, state funding, debt funded or self funded. For me foreign venture capital is the worst for kiwi high-tech exporters, although arguably its the only one they can get. A VC will always have an exit strategy and deadline. You have to run your business to deliver on your VC expectations, which are usually based on some unrealistic sales pitch you gave the guy two years earlier in order to get your business off the ground. Anyway up shot is you have to make money fast, that usually means selling up, selling out or doing as much offshore as you can where its frankly easier.
When you get the mix right you create the opportunity for high-tech exports. It then takes a mix of luck and support to turn opportunities into success. The question then turns to how do you generate maximum long term return for NZ. Is it in intangible products, like licensing, or in tangible products, like cell phones. The current assumption is that you can’t do tangible competitively from NZ, I’m not convinced of this or of the sustainability of a intangible economy. But that’s a different problem.
Its all damn complicated and the mistake the government makes is looking at each element in isolation. It needs a cohesive approach, not simply tax credits or immigration policies. Business in NZ often says it wants less regulation but in my experience what exporters are saying is they need expert help, funding and lower costs.
BTW, there is one NZ company making in the millions, I recall the crystal guys Rakon saying something about doing 5 or 10 million units a month. Put that aside though as there are very few companies anywhere in the world doing that outside of Asia.
Neither Labour nor National led governments have any interest in having domestic wealth or prosperity measures increasing in comparison to the wealth or prosperity measures of other countries. Such a focus would be ‘bad for business’ and would ensure ‘our’ corporate controlled media buried them.
Both Labour and National led governments are primarily and or ‘pragmatically’ interested in promoting the competitiveness of NZ elites (as expressed through business) in relation to the foreign elites they are in competition with.
One way to procure an advantage for ‘our’ elites is by having a more exploited or exploitable domestic population. So both Labour and National drag the chain, after their respective fashions on policies that would tend to increase general levels of prosperity across society. As such, both amount to being no more than business managers presiding over an inexorable and deliberately engineered drift towards ever increasing levels of societal poverty. Their main job will become (increasingly) to ‘keep a lid on things’ as we wake up and smell the coffee.
Right now, internationally orientated business elites are the modern day pipers and governments, of whatever professed persuasion it seems, can’t help but dance to their tune.
NZ falling in world prosperity rankings is good news. It’s only bad news for you and me, but that’s okay, because we don’t matter in the current scheme of things.
As long as we continue to measure our success in terms of financial wealth (or things dependent on financial wealth) those who have the most wealth will continue to pull the strings. Given our size this means we will always be beholden to overseas interests.
It’s not overseas interests that constitute NZ’s business elites. They are New Zealand citizens or permanent residents. And it is they (not overseas interests) who benefit from dampened wage demands and lower tax rates in NZ.
The only trick, from what I can ascertain, is to move downwards at a fast enough rate to satisfy those elites, but not so fast as to outpace the possibility for increasing poverty to continue allowing for the comparable purchasing of cheaper and shoddier import consumables such as shoes, clothes etc, that used to be produced here.
Food prices, in case you haven’t noticed, are becoming problematic in NZ. Not only do many people not buy cheese any more because it’s too expensive, but butter is now being packaged in smaller blocks, presumably to maintain the illusion of affordability.
This shrinking of packaging or portions is a sure mark of decreasing wealth. At an extreme, it exhibits in the ability of a person to buy 5l of veg oil and sell it off in 100ml or 50ml portions as happens in many of the world’s poorer communities.
“This shrinking of packaging or portions is a sure mark of decreasing wealth.”
Perhaps it could be part of a global philanthropical movement to fight obesity!
I’m not sure Labour is quite as concerned with the elites as you seem to think it is, but it’s definitely very concerned with business when it ties both elites and their base (which is increasingly middle-class workers with families) together.